Construction, engineering and mining group Aveng says it is bracing for a bumper season of projects after it secured a string of contracts that have shored up its order book and ensured a significant portion of group revenue for its 2023 financial year.
After presenting the full-year results for 2022 on Tuesday, Aveng CEO Sean Flanagan said the group was excited about projects in the pipeline.
In the year to end-June work in hand climbed 21.7% to R30.8bn, with Aveng saying its Australian subsidiary McConnell Dowell is expected to continue its growth trajectory, while Moolmans in SA and the rest of Africa is expected to deliver a steady profit as it focuses on new business and upgrading its fleet.
McConnell Dowell — which specialises in rail, marine and other infrastructure construction — is working on a pipeline worth A$3.2bn (R37.63bn).
The group said it was a preferred bidder in another A$1.7bn of contracts and had submitted tenders worth A$2.5bn.
“We don’t expect to win all of those but we are expecting to secure a significant portion,” said Flanagan. The company is also preparing another A$1.3bn in new tender applications to be submitted in the coming weeks, giving the company an estimated total pipeline of A$8.7bn.
“It’s a pretty significant pipeline of work and that forms the backbone of our future revenue growth,” the CEO said.
In SA, the pipeline is smaller than that in Australasia but is still quite “substantial”, with the company’s sights set on a total value of R55bn in projects.
“We fully expect to be awarded a new five-year contract at Tshipi é Ntle mine over the next week or two,” Flanagan said.
“So there are no doubts that there are prospects out there. We just have to make sure we secure the right ones ... we want a quality order book that attracts the right kind of customers.”
With 73% of revenue generated in its Australian business and about 13% in SA, the group has been on a bid to restructure and dispose of its noncore assets, Aveng Manufacturing and Trident Steel.
In February, news that the group had to reclassify Germiston-based Trident Steel as a continuing operation due to a slow sales process rattled the market, sending Aveng’s shares down more than a fifth.
This required reclassification weighed on earnings for its half-year to end-December, requiring recognition of depreciation of R155m, partially offset by a reversal of already recognised writedowns of R103m. This compares to a R611m fair-value gain for the previous prior year.
Aveng said on Tuesday it was in advanced negotiations with a credible buyer for Trident, saying it is “highly probable” that a sale would be finalised within the next 12 months. This is the last remaining noncore business of the group, which is now valued at R2bn on the JSE after a fall of its share price of nearly 40% in the year to date.
Headline earnings fell almost 60% to R308m for the year, though revenue rose about 2% to R26.18bn, with the group taking a hit from heavy rains in SA which affected both Trident Steel and Moolmans.
Aveng still booked a second consecutive year of profit and is one of the few JSE-listed survivors of a downturn in SA’s construction market that claimed the likes of Group Five and Basil Read.
McConnell Dowell grew revenue 17% to A$1.7bn, its highest in six years, with the group saying the Australian construction sector remains strong with all levels of government eyeing infrastructure spending as a means to drive a post-pandemic recovery.
Moolmans saw revenue fall 17.5% to R3.3bn amid the completion of four projects during the year, though the group has been focusing on better-quality contracts and profit margins improved. Aveng also said that post-year-end it had secured a new R576m three-year coal rehabilitation project at Seriti Resource’s Klipspruit colliery.
The share price fell 4.44% to R16.15 on Tuesday.
Update: August 23 2022
This story has been updated with additional information.
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