Aveng warns of expected loss

Aveng's share price continue its free fall as the construction group warns that it expect to swing into a loss.

Australia’s struggling construction sector, a weak global steel market and continued pressure on commodity prices were listed as the main reasons for the loss.

The company, whose shares have plummeted more than 80% since January, said on Friday it expected to report a loss in the six months to December from a profit of R138m in the same period last year.

The expected headline loss would not be more than R300m, the company said.

The stock fell 10.2% on Friday to a close of R2.20, giving it a market value of about R917m.

“The board is concerned with the current market valuation of the company which it feels does not reflect the intrinsic value of businesses within the group as well as the upside potential resulting from the various performance improvement and restructuring initiatives that are under way,” Aveng said.

“Management are in the process of completing a strategic review to unlock shareholder value in a timely manner,” it said in a statement.

Jan Mouton, portfolio manager at PSG Asset Management, said Aveng had tremendous upside potential to unlock value for shareholders still hopeful the construction sector would turn the corner.

A lack of government spending on infrastructure, the scaling back of mining projects amid low commodity prices and weak business confidence have squeezed profits in the construction sector.

“The share price is trading about 92% below net asset value. There is a lot of opportunity for management to unlock share holder value,” Mr Mouton said.

Meanwhile, Basil Read said on Friday it expected to at least wipe out last year’s losses when it reported full-year results to December in March next year.