Our opinion on the current state of AEG

Aveng, once a towering presence in the construction sector, experienced a dramatic decline, transforming from a stock valued at R69 a share in 2008 to a penny stock. This downturn was influenced by several critical factors, including reduced construction spending following the sub-prime crisis and the subsequent cessation of government infrastructure development post-2010 World Cup. Further exacerbating the company's challenges were the R1.4 billion fines levied by the competition commission on the construction industry and significant losses on various construction contracts necessitating considerable write-downs and impairments.

In a strategic pivot, Aveng focused on bolstering its profitable entities, McConnell Dowell in Australia and the mining contractor Moolmans, steering the company towards a more sustainable path. A pivotal moment in its restructuring efforts was the announcement on 26th January 2021 of a fully underwritten rights issue aimed at raising R300 million by issuing approximately 20 billion shares at 1.5c each, resulting in substantial dilution for existing shareholders.

On 12th October 2021, Aveng undertook a 500-for-1 share consolidation, which saw its share price adjust to around R28, marking a significant restructuring of its share capital. The sale of Trident Steel for R1.2 billion, announced on 3rd May 2023, significantly bolstered the company's financial position, rendering it effectively debt-free.

For the fiscal year ending on 30th June 2023, Aveng reported a 28% increase in revenue but acknowledged a "disappointing operational performance," culminating in a headline loss per share of 753c, a stark contrast to the profit of 252c reported in the previous year. The trading statement for the six months ending on 31st December 2023, however, projected an increase in headline earnings per share (HEPS) of between 65.4% and 75%, signaling a potential turnaround in its financial health.

In a strategic move reflecting its operational focus, Aveng announced its decision to switch its reporting currency to Australian dollars, given that 91% of its income is now generated in that currency. Despite these efforts, the company's share price has continued to experience downward pressure. Investors are advised to exercise caution and consider waiting for a decisive upward breach of the long-term downward trendline before committing to the stock, indicating a potential shift in investor sentiment and the company's market performance.