JSE-listed engineering-led contractor Aveng has reported an 8.1% decline in revenue to R16.6-billion for the six months ended December 31, 2024, down from R18.6-billion in the prior period.

The decrease follows an expected slowdown in infrastructure markets in Australia and New Zealand.

Aveng reported in a results statement, published on February 17, that it had recorded gross earnings of R467-million, with a gross margin of 2.7%, compared with 5.5% for the six months ended December 31, 2023.

The decline was primarily attributed to significant losses from the Jurong Region Line J108 project under the Infrastructure Southeast Asia business and the Kidston Pumped Storage Hydro project under the Infrastructure Australia business.

These two projects collectively accounted for a loss of R885-million in the period, with the cash flow impact expected over the next 18 months as they near completion.

As a result, Aveng posted an operating loss before capital items of R356-million, a reversal from the R192-million in operating earnings recorded in December 2023.

However, the company highlighted that the remainder of its infrastructure projects remained profitable and cash-generative. The Building segment showed improved earnings owing to strong project execution, while the Mining segment continued to pursue improved production performance and new contracts.

Despite the challenges, Aveng generated an operating free cash inflow of A$16.1-million, albeit lower than the A$52.6-million inflow reported for the prior comparable six-month period.

The company closed the period with an improved cash balance of R3-billion, up from R2.8-billion as at June 30, 2024, and a net cash position of R2.2-billion, compared with R2.1-billion as at June 30, 2024.

Liquidity remained stable across both its South African and Australian operations.

Aveng noted that R877-million of the cash balance is held within joint arrangements under McConnell Dowell. Aveng’s debt is now primarily asset-backed financing related to property, plant and equipment within the Mining and Infrastructure segments.

WORK-IN-HAND AND MARKET OUTLOOK

Aveng will enter the second half of the 2025 financial year with combined work-in-hand of R30.1-billion, down from R37.2-billion as at June 30, 2024.

The Infrastructure segment’s work-in-hand has declined to A$1.7-billion from A$2.2-billion owing to reduced state government spending in Victoria and New South Wales. However, the segment remains focused on opportunities in defence, energy, water, marine and resources.

Meanwhile, the Building segment’s work-in-hand increased to A$515-million from A$443-million, following new project awards in healthcare, recreation and education. Additionally, the Mining segment secured a new 60-month contract at the Gamsberg zinc mine, in South Africa’s Northern Cape, which is expected to drive higher volumes, increased revenue, and improved profitability.

PERFORMANCE ACROSS BUSINESS SEGMENTS

The McConnell Dowell-branded segment reported revenue of A$1.1-billion, a decrease from A$1.2-billion for the six months ended December 31, 2023.

The New Zealand and Pacific Islands unit delivered strong performance, with revenue of A$157-million and operating earnings of A$13.4-million. However, the Australian unit faced challenges, particularly with the Kidston project, which resulted in increased forecast costs.

Built Environs, the Building segment, posted revenue of A$203-million, down from A$224-million in the prior period. However, operating earnings improved to A$9.2-million from A$5.2-million, reflecting disciplined project execution and targeted market focus.

Moolmans, Aveng’s contract mining division, recorded a 7.1% year-on-year decrease in revenue to R1.4-billion, mainly owing to the early completion of two contracts.

Operating earnings fell to R15-million from R25-million. While the Gamsberg project showed improved profitability, margins for the Tshipi manganese contract remained under pressure.

STRATEGIC OUTLOOK

Aveng said it remained committed to its strategy of creating two independent entities, McConnell Dowell and Moolmans, to maximise shareholder value.

Moreover, the company continues to conduct legal, tax, statutory and financial due diligence in preparation for the separation, with various implementation options under consideration.

Aveng said it would continue to work on improving operational performance, securing new opportunities and optimising its capital structure to support future growth.