Construction group faces big challenge

Aveng hurt by economic slowdown

Construction and engineering group Aveng (AEG) yesterday said that in line with the economic slowdown experienced in the group’s key markets the company continued to experience difficult trading conditions.

“The headwinds experienced in the first half of 2014 continued to constrain the construction market in the second half of the year,” Aveng chief executive Kobus Verster said.

“Increased competition in the Australian and Asian markets‚ coupled with lower commodity prices globally, resulted in declining opportunities.”

Aveng‚ which has the biggest turnover among construction groups on the JSE‚ said headline earnings per share (HEPS) for the six months ended December fell 58% to 34.5c compared with the year-earlier period.

Revenue fell by 14% to R23.9-billion while the company’s two-year order book‚ excluding Electrix‚ remained flat at R32.5-billion.

“South Africa and the rest of Africa operating segments’ order book of R8-billion remained flat against the comparative December 2013 position‚ though 8% up against June 2014‚ due to the awarding of infrastructure contracts‚ and rehabilitation contracts for South African National Roads Agency (Sanral) and the construction of two major hospitals,” it said.

“The public sector work contribution in the order book increased from 20% to 37%. A strong focus exists to diversify into the cross-border markets and to grow further into Africa.”

Verster said he was reasonably comfortable with the progress the company had made in the face of extremely challenging market environments.

“Our short-term focus remains the stabilisation and recovery of the business,” he said.

“Management has been strengthened across the business‚ resulting in notable improvements in project execution and operational excellence.

“We are focusing on opportunities that allow us to deliver multi-disciplinary solutions across the infrastructure value chain‚ pursuing growth through expansion in sub-Saharan Africa and South-East Asia.”

Anchor Capital analysts said in a note that earnings in the construction and engineering sector would remain low in the coming year.

“A spate of less than impressive results by WBHO‚ Group Five and Aveng shows market conditions might be worse than investors initially perceived and has condemned the construction and materials index to sixyear lows‚” analysts said.

-Colleen Goko

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