Following the group’s JSE Sens announcement on Tuesday afternoon regarding the settlement of an uncertified claim in Australia and its update on external debt repayments, Aveng shares increased for a second day on Wednesday, closing more than 6.6 percent higher at R15.20.
The group’s share price increased 5.68 percent (R15.06) on Tuesday, helped in part by information about the development of its plan to sell non-core asset Trident Steel.
Aveng stated that it has settled a long-standing claim that has been the subject of protracted legal proceedings and received payment of R282 million.
It claimed that the claim was detailed in its results for the six months ending in December 2021 under the heading “Amounts Due from/to Contract Customers.” Aveng reported R1.67 billion as the net amounts owed by contract customers in these results.
Read about the settlement of a multimillion-rand civil damages claim between Stefanutti, WBHO, and Aveng.
However, Aveng did not specify Tuesday by how much this settlement will lower this sum. The group only mentioned that the settlement reduces ongoing legal expenses, eliminates litigation uncertainty, and yields a modest profit to the previously reported position.
Prior to March 2016, when Aveng’s Australian subsidiary McConnell Dowell filed a lawsuit against a client to recoup previously incurred costs, this dispute existed.
Despite having its liquidity constrained by this dispute, McConnell Dowell has significantly increased its business over the course of the protracted litigation and delays, according to Aveng.
The statement continued, “The settlement of the dispute is a significant accomplishment, and the additional liquidity resulting therefrom has currently been retained in McConnell Dowell and is reserved for future investment opportunities that incrementally enhance the group’s growth and performance.
reduction of debt
Additionally, Aveng disclosed that it kept up its debt-reduction plan through June 2022.
In order to reduce its external debt, the group made a scheduled repayment of R275 million in June 2022. This was followed by cumulative repayments of R350 million in the fiscal year that ended in June 2022.
“It is expected that the proceeds will be used to settle the outstanding debt in South Africa, create additional liquidity, and strengthen the financial position of Aveng,” the statement read. “Should the Trident Steel transaction be successfully completed.”
Trident Steel was sold in accordance with Aveng’s 2018 strategy of selling off assets it deemed non-core. Aveng has already realized more than R1 billion in total proceeds from the sale of non-core assets.
In terms of the strategy, Trident Steel is the only material asset that has not yet been sold.
Aveng: Trading and operational updates are “factually accurate and aligned.”
Aveng expects a consolidation of shares by the middle of December Aveng appears to be on the road to recovery
postponed disposal
Trident Steel has recently posted impressive financial results, but the group has had trouble finding a buyer.
Because the criteria to disclose Trident Steel as held for sale and discontinued operations at the end of December 2021 were not satisfied, Aveng was forced to reclassify Trident Steel as a continuing operation in accordance with International Financial Reporting Standards 5 (IFRS 5).
Due in part to this reclassification, Aveng’s normalised earnings per share fell from 151 cents in the prior period to 67 cents in the six months ending in December 2021, a 55.6 percent decline.
On Tuesday, Aveng reaffirmed that discussions regarding the intended sale of Trident Steel are still ongoing.
The group stated in its previous report that it was in advanced talks with a reliable buyer to sell this company as a going concern.
It added that the transaction is subject to the conclusion of black economic empowerment (BEE) participation in the transaction and the completion of legal agreements, adding that the due diligence is well advanced and will be finished as soon as possible.
Aveng noted that in the group’s 2022 interim results, the transaction’s value is anticipated to be greater than Trident Steel’s reported net asset value.
According to Chronux Research analyst Rowan Goeller, Aveng is receiving some compensation from the Australian claim, but the company is still in “quite big debt.”
“As always with these projects, it’s many years later, it’s less than they hoped for, and all the legal costs and other costs associated with defending that claim are likely amassing on the other side. However, there is some money in the bank.
When that sale occurs, Trident Steel will also make some money, according to Goeller, who also noted that Aveng is still not out of the woods.
The claim settlement for Aveng, according to a different analyst who wished to remain unnamed, is advantageous because it allows the company to move on.
However, the analyst claimed that, regrettably, claims—whether they be Covid-19- or “scope creep”-related—are currently the main focus of construction companies.
The analyst responded, “Let’s [wait and] see,” in reference to the sale of Trident Steel that was intended. Talk is cheap at the end of the day. Let’s see what they come up with when the deal is completed.
