BUSINESS NEWS - There appears to be little light at the end of the tunnel for South Africa’s beleaguered construction industry, with many major listed construction companies still fighting for their survival.
Basil Read, Group Five, Esor Construction and Liviero Group are in business rescue while others, such as Aveng, have been forced to downscale their operations to strengthen their balance sheets and improve their liquidity.
“What this essentially means is that listed construction has lost almost 75% of their value or ‘size’ since 2008,” it said.
The business rescue practitioners reported they were continuing to engage in many sale processes related to subsidiary companies, operating divisions, properties and/or shareholdings that may be disposed of to relieve the burden of the secured debt owed by the company as well as to provide working capital for the business rescue proceedings.
Aveng has been active in selling identified non-core assets to improve its financial position.
This month it agreed to sell its Rand Roads business as a going concern plus the value of inventory for R30 million to Ultra Asphalt; its Aveng Grinaker-LTA Engineering (GEL) geotechnical contracting business to a newly formed investment special purpose vehicle for R7.5 million; and Aveng Dynamic Fluid Control (DFC) to wholly black-owned investment company Copaflo for R165 million.
Aveng last month also reported the conclusion of the sale of its water business to wholly black-owned Infinity Partners for R85 million.
David Metelerkamp, the senior economist at Industry Insight, said the amount received for Aveng Water was a reduction to the original selling price of R95 million and seemed a small sum of money given Aveng’s financial difficulties.
Metelerkamp said Aveng’s share price continued to flat line and hovered between 2c and 3c, which was a far cry from over R40 a share in 2007/8 and also down by almost 80% over the last year when the share price was at 10c a share.
Contracts
The majority of the more than 20 construction contracts Basil Read had at the commencement of business rescue had either been completed or terminated.
The company’s business rescue practitioners reported last month that three of the remaining contracts were continuing to completion, five contracts were in the process of being descoped or ceded to other contracts and three had been handed over to the clients and the company was engaged in a defects remediation process.
They added that performance guarantees had been reduced from R1.1 billion at the outset of business rescue proceedings to about R744 million and the company continued to pursue a number of contractual claims valued at more than R200 million.
With the exception of the employees required to assist with the completion of the contracts, including the various Medupi power station contracts and the remaining staff at head office, all other employees had been retrenched.
Basil Read has relocated it head office to reduce costs, has continued to sell surplus plant and equipment, and is pursuing expressions of interest from a number of parties for its remaining non-core assets.
The group said the business rescue practitioners remained of the view that a full implementation of the plan would achieve a better result than a liquidation.
