Aveng, the group with infrastructure and engineering operations in Australasia and a mining contracting unit in South Africa, is happy with the progress it has made to split into two separate companies, but no decision has been made whether to eventually keep its JSE listing, CEO Scott Cummins said.
The group on Tuesday reported a loss caused principally by two key projects, but the rest of the group and its construction and engineering portfolio performed “admirably and in line with expectations,” Cummins said Tuesday in an interview.
Preparatory work, including legal, tax, statutory, and financial due diligence for the separation, has proceeded in accordance with plans. A range of implementation options for the separation are being assessed to deliver shareholder value and will be pursued in the coming 12 months, he said.
The share price gained 4.35% to R9 on the JSE Tuesday morning, bringing the relatively volatile share price 17.6% higher over 12 months. He said also that risk management measures were put in place in December 2023 that should ensure the group did not take on as much lump-sum risk on single contracts, as it had been taken on in the two loss-making contracts, the tenders for which were awarded in around 2020, he said.
He said negotiations for the sale of the South Africa contract mining group Moolmans were underway, but it was at this stage impossible to predict when or what the outcome might be. “We are satisfied with the progress to date,” he said.
Cash on hand increased to A$256.1m (R3 billion) compared with A$227.7m (R2.8bn) at the last year end, but the interim loss would reduce this over 12 to 18 months. The group’s market capitalisation on the JSE is around R1.14bn.
The headline loss came to A$34.4m (R399m) on December 31, from earnings of R137m at the same time a year before, after the two projects caused losses of R885m. One problematical project is the Kidston project in Queensland, which involves the world's first conversion of a disused gold mine into a pumped storage hydroelectric power generation facility.
There were also delays and disruptions at the Jurong Region line project in Singapore, which has resulted in commercial claims and increased cost. This project involves building mass rapid transit stations and associated elevated rail viaducts.
Operating earnings improved in the Building segment. The group’s Mining segment continued to focus on steadily improving production performance, better commercial outcomes, and the pursuit of new work.
Aveng's infrastructure segment, branded McConnell Dowell, operates in Australia, New Zealand & Pacific Islands, and Southeast Asia. The building segment, Built Environs, operates in New Zealand and the Victoria and South Australia states in Australia. Combined work in hand came to A$2.6bn, down from A$3.1bn.
Cummins said there may be a slowdown in state-led infrastructure spending in Australia due to elections in some states, which tended to slow infrastructure project approvals processes, and he was also concerned about cost escalations.
At Built Environs, markets in Australia remain strong, with government spending in healthcare, education, and recreation sectors growing in line with the population growth. While there was a recent slowdown in activity in New Zealand, a clear longer-term demand was expected, given the aging healthcare infrastructure.
Moolmans has concluded a new 60-month contract at higher volumes at the Gamsberg zinc mine in the Northern Cape. The separation strategy remained the key focus for the calendar year.