Shares in Aveng lost a quarter of its value on Friday after the group said it expected to report a loss at the halfway stage of the financial year, after delays and disruptions in two projects in its Southeast Asia business.
Aveng’s shares closed down 25% at R9 on the JSE on Friday, after touching an intraday low of R8.36 at one stage.
The group expected a headline loss per share of between 26 Australian cents and 27c for the six months to end-December after headline earnings per share (HEPS) of 8.8c in the year-earlier period, it said in a statement on Friday.
It expects to report a loss per share of 25.3c-25.4c from earnings per share (EPS) of 0.6c a year ago.
The group, which is valued at $1.14bn on the JSE, delivers its projects through three operating brands in three distinct segments.
The infrastructure segment, McConnell Dowell, operates in three geographical regions — Australia, New Zealand and Pacific islands, and Southeast Asia, while the building segment, Built Environs, operates in New Zealand and the states of Victoria and South Australia in Australia. The mining segment, Moolmans, operates in SA.
The New Zealand and Pacific islands business unit continued to deliver a strong performance and margins were at similar levels to the comparable period, the group said.
The Australia and Southeast Asia business units have previously reported on underperformance associated with certain projects awarded before the Covid-19 period. Most of these projects had been managed to a satisfactory outcome and, while not contributing profit to the group, represented a reducing proportion of revenue as they moved towards completion.
The remainder of the project portfolio had performed well and contributed to an improving margin.
The Australia business unit reflects improving margins across its portfolio of projects, excluding the Kidston Pumped Hydro loss-making project.
“The Kidston project in Queensland has not achieved expected productivities, resulting in an increased forecast cost to complete and a reported loss in the period,” it said.
Consequently, the Australia business unit would report a break-even result for the period.
In Southeast Asia, while the new projects are profitable, the Jurong Region Line project for the Land Transport Authority in Singapore has experienced delays and disruptions.
The delays had resulted in commercial claims and increased forecast cost to complete. The commercial negotiations continued with the client, and the project would report a significant loss in the period, Aveng said.
As a result, the Southeast Asia business would report a loss for the period.
These two projects would report losses of A$77m (R899m), which would result in the infrastructure segment reporting an overall operating loss for the six months to end-December 2024.
Other than these loss-making projects, the infrastructure project portfolio delivered a strong performance that was ahead of both budget and the prior year, contributing a profit of A$50m (R583m).
While additional costs in the forecast cost to complete had been recognised in the current period, the cash flow effect would largely materialise over the next 18 months as the projects moved towards being completed, Aveng said.
Aveng will report a healthy cash balance of A$252m (R2.94bn) for the period for the infrastructure and building segments, supported by continued strong cash generation. The cash outflow relating to the two loss-making projects will be funded through existing cash resources, supplemented by ongoing profitability.
Built Environs is expected to report improved operating earnings, while mining unit Moolmans is expected to report positive operating earnings.
Moolmans is in advanced negotiations to conclude a new 60-month contract at the Gamsberg zinc mine in the Northern Cape.
Aveng expects to release its results on February 18.
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