Aveng (AEG) – A nearly new Aveng

Aveng recovered well in 1H23, producing strong revenue growth over the period due to McConnell Dowell and aided by a favourable AUD/ZAR exchange rate. However, the company struggled with two underperforming projects and delays due to flooding in KZN, all of which eroded the business’ profitability.


The group order book increased significantly during the period, driven by the McConnell Dowell division, which secured 100% of its FY23 revenue. Post-year-end, Moolmans secured a significant contract renewal which is expected to improve profitability over time but requires a large investment in new equipment.


Aveng is not ‘chasing order book’ and is instead looking to secure a 2-3 year book with plans to increase GPM. It does not take on projects with a value greater than A$600m, nor does it participate in JVs where it holds a minority stake. Along with the contract protection on a large portion of its contracts, this gives Aveng’s order book a lower risk factor than some of its SA competitors.


SA construction companies, however, may not be good comparators for Aveng as it is not involved in SA construction, with the majority of its business in Australasia. Aveng is still considering a primary listing in Australia, but to do so, it will need to gain critical mass. It has been looking for bolt-on acquisitions but has been unsuccessful to date. Once the sale of Trident Steel is finalised and debt repaid, Aveng is expected to use the available cash for strategic acquisitions in Australia, Asia or the US.


The outlook for Aveng is positive, but operating profit is expected to be lower in FY23 as it brings to a close its loss-making projects and completes the turnaround strategy. We believe that FY24 could provide improved profitability.