According to Engineering News, Aveng expects to conclude an empowerment transaction within months to further transform its Aveng Grinaker-LTA business, which is on the cusp of moving into the black for the first time since 2011.
CEO Kobus Verster believes the transaction to be necessary to improve the competitive position of a unit that has already undergone far-reaching restructuring in a bid to return it to profitability.
Aveng Grinaker-LTA reported a 21% fall in revenue to R7.3-billion in the year to June 30, 2016, but a far smaller operating loss of R187-million when compared with the R697-million loss of 2015. Verster even expressed optimism that the company could return to profitability during the 2017 financial year.
However, its two-year order book contracted 11% to R6.5-billion, with its civil engineering and mechanical and electrical businesses having surplus capacity, with building comprising more than half of the unit’s backlog.
The transaction was not driven by ConstructionCharter or Broad-Based Black Economic Empowerment (BBBEE) Code imperatives, with Aveng already meeting charter and BBBEE thresholds, with a Level 2 rating.
The deal, which is “months not years” away, is likely to include a strategic equity partner, as well as management and other stakeholders.
The Aveng Grinaker-LTA ‘transformational’ transaction is also but one component of a broader clean-up of Aveng, which claims to have completed the recovery and stabilisation phase of a three-stage turnaround.