JSE-listed construction and engineering group Aveng continues to explore the possibility of obtaining an international listing, possibly in Australia.
However, Abeng Group finance director Adrian McCartney said on Tuesday that the group would list in Australia either through a dual listing or secondary listing in Australia, or a primary listing in Australia and a dual listing in South Africa. He said he has no immediate plans.
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Abeng reported last week that it had chosen to change its reporting currency from the South African rand to the Australian dollar.
The changes were implemented in the company's interim financial results for the six months to December 2023, which were released this week.
Aveng has developed into a business with two operating subsidiaries.
- Australian-based infrastructure construction company McConnell Dowell;and
- Moormans is an African open pit mining contractor based in South Africa.
However, 91% of the group's revenue comes from outside South Africa.
CEO change
In November 2023, Avenge announced that Group CEO Sean Flanagan will step down as CEO on March 1, 2024, at which point Scott Cummins, CEO of Avengue's largest subsidiary, McConnell Dowell, will be his successor. It was announced that
With Mr Cummins' appointment, Abeng Group's management team will be based in Australia.
McCartney will continue in his role, but will relocate from Johannesburg to Melbourne, Australia, the paper said.
“My move to Australia has been planned for some time, consistent with our long-term strategy to seek an international listing in the market that best recognizes the value of our assets,” McCartney said at the time. Stated.
Mr McCartney said on Tuesday that the change of Abeng's reporting currency to the Australian dollar “has nothing to do with the international listing itself”.
“It was about what makes sense for us as a reporting currency in terms of the majority of our transactions, the majority of our assets, etc., and the way we operate our business.
“So it doesn't necessarily have anything to do with that.” [international listing] In fact, it is a currency that has more meaning to us.
“Regarding updates, [international listing] The company has been clear for some time that it is considering other capital markets, whether the plans involve a dual listing in South Africa and Australia.
“Australia will be a natural home for the group and the majority of its assets,” he said.
Governance and control “remains in SA”
Cummins said on Tuesday that Abeng is entering a new phase in its strategic journey, with the center of operations moving to Australia but governance and management remaining in South Africa, with Abeng remaining headquartered in South Africa and on the JSE. He said it was listed.
Aven first discussed the possibility of obtaining an international listing in March 2022, when Mr Flanagan said the group continues to develop international listing opportunities to drive the group's growth. .
Mr McCartney then said the group was considering listing on two specific stock exchanges: Singapore and the Australian Stock Exchange.
“From a South African perspective, there are significant regulatory requirements and tax considerations. We are busy addressing those challenges as well,” he said.
Cronax Research analyst Rowan Geller said Tuesday that Abeng doesn't necessarily appear to be considering an international listing in the near term.
Mr Geller said the group had doubts about moving the listing due to the costs involved and the fact that it did not want to raise a large amount of capital.
“From a financial perspective, listing in Australia will have no impact on Abeng in the short to medium term, especially as the company will take time to stabilize,” he said.
Flanagan said that despite Aven's difficulties with contracts in the Philippines in the second half of last year, the group quickly returned to profitability and succeeded in generating positive cash in the six months to the end of December. Ta.
numbers
Revenue from continuing operations increased by 39% to A$1.5 billion (R18.6 billion) from A$1.1 billion (R12.8 billion) in December 2022.
Operating profit improved by 99% from A$7.8 million (R91 million) to A$15.5 million (R192 million).
Gross profit margin reached 5.5%, which was a decrease of 1.1% compared to the previous comparative period. This is primarily due to the impact of hyper-escalation of project costs in Australia.
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Total earnings per share increased 69% from A$5.2 (61 cents) to A$8.8 (106 cents Rand).
Jobs at hand fell by 14% from A$4.2 billion (R52.2 billion) to A$3.6 billion (R44.5 billion).
Cummins said Abeng's interim results demonstrate the group's commitment to profitability and cash generation.
He said that from an operations perspective, McConnell Dowell has demonstrated strong operating performance across the majority of its portfolio, with 74% of its projects operating at or above bid margin.
concentration
Cummins said the focus going forward will be on improving this performance to reduce project risk and maximize opportunities on specific projects.
He said Moolmans remains focused on project execution, with a focus on expanding its current customer, product and geographic footprint, and increasing production levels across all sites.
“The business currently operates only in South Africa and the majority of its commodity exposure is in manganese and iron ore mining.
“Future projects within the SADC region have been identified along with further opportunities with existing customers in existing projects,” he said.
Cummins said Abeng remains well-positioned and well-equipped to continue to grow sustainably and profitably.
“The Group entered the second half of the 2024 financial year on a strong note, with total work on hand reaching A$3.6 million (R44.5 million).
“This will support 100% of full-year revenue in 2024 and more than 60% of revenue in 2025,” he said.
Cummins added that his absolute priorities will be focused on ensuring operational performance as well as increasing the group's profitability.
He said Abeng currently had no strategic plans to re-enter the South African infrastructure construction market.
He said Abeng's current focus is clearly on its own market, segment and brand.
Mr. Geller said Abeng's financial results were “decent, but the profit margins are very low.”
But he said at least Abeng was able to complete what could have been a costly project without much damage.
He said this is always a good thing because from a balance sheet perspective, it depends on a company's ability to withstand one large loss-making project.
risk and reward
Aben reported an operating loss of R1.06 billion for the year ended June 2023, mainly due to high losses at McConnell Dowell's Southeast Asia business unit from the Batangas liquefied natural gas (LNG) terminal project. was.
Geller said construction companies have a risk-reward relationship with everything, and in an effort to improve profit margins, they may take on contracts with increased contractual risk.
“This has been a problem for those who have tried this in the Australian region, including South Africa and many other companies,” he said.
Abeng's share price rose by 5.08% on Tuesday to close at R7.65 per share.
