Pretoria - Aveng reduced its permanent staff complement by about 2 000 people in the year to June as it attempted to match its overhead cost structure with the continued weak construction market conditions.
The listed construction and engineering group incurred R189 million in once-off restructuring costs during the year to further right size the group’s overhead structure.
Chief executive, Kobus Verster, said yesterday that these once-off restructuring costs were people related and mainly for the payment of packages and retrenchments.
Verster said the retrenchments occurred across all divisions. Aveng in 2014 embarked on a three-pronged process. The first phase involved recovery and stabilisation, which was now largely complete.
Positioning
The second phase from this year until 2019 involves improving and positioning the group for profitable, with the third phase from 2019 onwards focused on realising growth and sustaining profitability.
Verster said the group had made progress on the second phase, as evidenced by the strengthening of its business in key domestic markets in South Africa and Australia.
He said a number of actions had been implemented to optimise the group’s portfolio, including closing Aveng Engineering and Aveng Fascades, rationalising the business of Aveng Steel Fabrication and amalgamating it with Aveng Trident Steel, repositioning Aveng Water and reprioritising the group’s Africa strategy.
Read also: Aveng sells major interests
Aveng earlier this month reported the sale of Aveng Capital Partners’ equity interests in four major infrastructure investments for R860m cash to Royal Bafokeng Holdings and the sale of a 70 percent interest in Aveng Steeldale, the group’s steel reinforcing and mesh business, to black woman-owned Kutana Steel for about R252m.
In October, it sold 70 percent of its property portfolio to the Collins Property Group for R1.13 billion. Aveng reported an improved financial performance for the year to June.
The headline loss a share improved by 48 percent to a loss of 75c from the 144.3c loss in the previous year.
Net operating earnings improved to a profit of R146m from the R288m loss in the previous year, with the group gross margin improving to 7.4 percent from 5.4 percent.
Revenue declined by 23 percent to R33.8bn from R43.9bn.
Verster attributed the revenue decline primarily to difficult trading conditions in most of the markets in which the group operated and contract cancellations and scope reductions in the mining business and reduced steel volumes.
Cash generated by operations grew by almost 137 percent to R949m from R401m. Aveng’s two-year order book was almost unchanged at R28.2bn at end-June.
But Verster said the order book included a 42 percent or R4.9bn increase in McConnell Dowells order book.
Verster said the South African construction industry remained influenced by low levels of public sector expenditure on major projects and the impact of the depressed mining and steel markets but the group saw growth opportunities in the Australian market in the medium term.
Improved
He said the performance of Aveng Grinaker-LTA had improved, with loss-making contracts resolved and improvement in the ratio of projects executed at or better than tender margins, resulting in an 88 percent reduction in the loss to R69m from R575m.
Verster said the challenging economic conditions were expected to continue in the short term. “We are starting to see the positive effects of substantial interventions implemented over the past two years and this should result in a strong improvement in Aveng’s operational performance in the 2017 financial year.”
Shares dropped 10.76 percent yesterday to close at R5.31.
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