Infrastructure and resources company Aveng's share price on the JSE rose by 50% on Wednesday, after it announced that it was making progress with its balance sheet restructuring and recapitalisation plans and that it expected to report improved financial results for the financial year ended June 30.
The company noted in a trading statement that it had reached an in-principle agreement on a restructure that will result in the introduction of at least R300-million of new capital by way of a rights offer; the restructuring of Aveng's South African lender debt into a restructured term and with overdraft facilities of R1.1-billion, as well as the settlement of the remaining debt by way of a cash settlement of 31c on the rand or a specific issuance of new ordinary shares at 5c apiece; and the settlement of the notes debt, issued through iNguza Investments, by way of an election of an early cash settlement at 31c in the rand or the participation in the restructuring of the South African lender debt on the same basis as set out above.
"Following a multiyear journey, this transaction will allow the group to reset its capital structure, deleveraging the balance sheet by more than R1-billion, extending the group’s maturity profile to three years and, simultaneously, materially improving the group’s South African liquidity pool.
"Following this transformational event, Aveng believes the remaining debt is sustainable and the reinstated balance is forecast to be repaid over the next three years.
"Importantly, this transaction not only provides Aveng with the capital structure flexibility to complete its noncore asset sale programme and to wind down its remaining exposure to discontinued businesses, but also sets the group on a path to pursue its strategy around the group’s core businesses, McConnell Dowell and Moolmans, which have returned to profitability and where Aveng sees further business improvement prospects and growth opportunities," the company stated.
Meanwhile, the company expects to report a basic loss of between R1.09-billion and R1.15-billion, representing a year-on-year improvement of between 32% and 35% on the loss of R1.68-billion reported for the 2019 financial year.
Further, its headline loss is expected to narrow by 37% to 40% to between R939-million and R979-million.
Aveng states that it was able to restore operational profitability for its core businesses in the first half of the year.
"The Covid-19 pandemic resulted in lockdowns to various degrees in different sectors and jurisdictions, disrupting operational performance across the group and reducing operating profit by about R380-million in the second half of the year," it pointed out.
Despite the Covid-19-related challenges, McConnell Dowell's underlying operational performance for the second half of the year was "satisfactory in the circumstances".
The business increased its revenues and underlying profits, while its order book increased by 60% to A$1.8-billion.
Further, despite the impact of the Covid-19 related shutdown in South Africa, Moolmans is expected to report a small operating profit for the year, representing a significant turnaround from the 2019 financial year.
Aveng will publish its results on November 30.