JSE-listed Aveng has reported revenue of A$2.3-billion, or R26.4-billion, for the year ended June 30, which was 12.4% lower than the prior year, reflecting the anticipated softening of infrastructure markets in Australia and New Zealand.

Group interim CEO David Simpson noted, however, that the group returned to an operating profit with improved performance across the portfolio of projects while maintaining a robust work-in-hand position.

He said that, while significant progress had been made in stabilising the business, improving gross margins and derisking the project portfolio, further work remained to realise the group's full potential, with a keen focus on restoring the fundamentals.

Simpson noted that the company’s priorities included improving consistency, growing the order book while maintaining tender discipline, rebuilding the balance sheet through focused cash management, completing the Kidston Pumped Storage Hydro project, exiting Southeast Asia and resolving remaining commercial disputes and historical matters in Aveng Africa.

The group reported gross earnings of A$150.6-million, or R1.7-billion, for the period, representing a gross margin of 6.5%, with all operating segments returning to gross profitability.

Gross earnings included losses of A$65.2-million relating to the remaining loss-making projects in the Infrastructure Southeast Asia business unit and the Kidston project in Infrastructure Australia.

Additional anticipated costs to complete Kidston were recognised during the year, with associated cash outflows expected to continue into the 2027 financial year.

The company noted that these were expected to be funded through existing healthy cash balances and ongoing cash generation from the Infrastructure and Building segments.

Additionally, a commercial settlement with the J108 client was concluded during the second half of the 2026 financial year, substantially reducing project risk. Costs to complete were reassessed as part of the process, resulting in a further loss recognised during the year.

Additionally, Aveng’s operating earnings before capital items improved to A$19.3-million, or R221-million, compared with an operating loss of A$60.4-million, or R693-million, in the 2025 financial year.

The improvement was driven by continued strong performance from Infrastructure New Zealand and Pacific Islands and the Building segment. Infrastructure Australia and Southeast Asia remained loss-making.

Further, the company noted that the Mining segment reported operating earnings before capital items of A$12.9-million, or R149-million, up from A$200 000, or R1.8-million, in the 2025 financial year.

The Gamsberg zinc mine continued to perform strongly, while inefficiencies persisted at the Tshipi manganese mine.

Following an in-principle commercial agreement with the client, contractual claims were recognised during the year.

Despite improved operating earnings, the group recorded an operating free cash outflow of A$51.1-million, or R599-million, compared with an inflow of A$23.2-million, or R257-million, in financial year 2025.

RESTORING THE FUNDAMENTALS
Meanwhile, the company reported that McConnell Dowell, Built Environs and Moolmans remained fundamentally sound businesses with strong engineering and delivery capability focused on the group's key markets and sectors.

The company said project impacts remained, although being mitigated.

Aveng explained that most underperforming projects awarded before the introduction of enhanced risk management processes in 2023 had now been managed to satisfactory outcomes and represented less than 10% of group revenue.

The group continues to face challenges associated with the long duration and complexity of these projects, where scope, costs, schedules and risk profiles evolve throughout the project lifecycle.

This has been amplified by inflation, supply chain disruptions, labour constraints, geopolitical uncertainty and changing client requirements.

In some cases, the company said these projects were secured under contractual arrangements that did not provide an appropriate balance between contingency and risk, resulting in adverse financial and cash flow outcomes.

The company noted that these projects were steadily being worked out of the portfolio.

Aveng CFO Adrian Macartney told Mining Weekly that the company was focused on its operational performance.

“It's about removing and dealing with those contracts that are problematic for us, both in Southeast Asia and in Australia, and as we reduce the extent and the impact of those contracts, slowly but surely, we will improve our margins and we do have an expectation that through financial year 2027 we will continue to deliver a better result with a strong focus on operational delivery,” he said.

PROGRESS
Further, Aveng noted that the group continued refining its risk appetite and strengthening its risk management framework, with increased focus on tender-stage risk assessment and greater scrutiny of pursue/no pursue decisions.

Risk governance was further strengthened through enhanced project management office oversight and implementation of updated risk management processes.

During the year, the group completed a comprehensive organisational review that realigned engineering functions more closely with business units, embedded engineering-led thinking across project delivery and tendering, streamlined Australian and corporate functions, improved efficiency and reduced overhead costs.

In Southeast Asia, the group ceased bidding for new work, began an orderly wind-down of operations, reduced overhead costs and successfully concluded the J108 commercial settlement.

The group also made significant progress in resolving historical Aveng Africa liabilities, including advancement of the voluntary rebuilding programme with the South African government and conclusion of the Leonardo arbitration, with no further liability expected.

“We've made some progress, but the reality is, there's still some significant work to do to make sure that that discipline is permanently embedded in the organisation,” Simpson said during a presentation on August 24.

OUTLOOK
Simpson said the group's strategy remained centred on the long-term infrastructure and building markets of Australia and New Zealand, supported by resilient economies, skilled workforces, supportive government policies and ongoing investment in major projects.

In the Infrastructure segment, McConnell Dowell enters the 2027 financial year with A$1.7-billion of work-in-hand.

The company said opportunities remained healthy across transport, ports and coastal, water and wastewater and energy and resources markets in Australia, New Zealand and the Pacific Islands. Although project award timing in Australia continued to be influenced by funding and approvals processes, underlying demand remained strong.

The segment has A$972-million of preferred-status opportunities and A$1-billion of submitted competitive tenders due for award in the 2027 financial year.

In Building, the company noted that Built Environs enters the 2027 financial year with a reduced but sustainable work in hand position of A$517-million.

The company explained that Australian market conditions remained generally positive, supported by government investment in healthcare, education and recreation infrastructure, while New Zealand market conditions remained subdued.

Aveng said growth opportunities were being supported through the business's expansion into Queensland.

Macartney explained that the company had appointed a new state GM for Queensland, Chris Meade.

He noted opportunities in the Queensland and South Australia market, highlighting the opportunity for the Australia-US-UK Defence Pact, or AUKUS, to drive infrastructure and construction spend in South Australia, as well as the upcoming Brisbane Olympics which could drive activity in the market as well.

“We're quite excited about the opportunities that it'll bring,” he said.

Built Environs has A$55-million of preferred-status opportunities and A$500-million of submitted competitive tenders due for award in the 2027 financial year.

In Mining, geopolitical fragmentation, inflationary pressures and logistics constraints in South Africa continue to affect mining sentiment, although longer-term opportunities exist in the Southern African Development Community region.

Macartney explained that the company was seeing positive movements in Namibia, as well as opportunities in Botswana.

“We've operated in both historically and we're quite comfortable operating in both Namibia and Botswana, and we see them as good, stable and successful mining regions. So we're looking quite actively at those opportunities,” he noted.

Moolmans remains focused on operational performance and cash generation. Gamsberg performance remains critical, while Tshipi continues to weigh on results. Material contractual claims relating to restrictive mining conditions, regression, weather and power failures have largely been resolved.

Post year-end, a term sheet was executed with the client that acknowledged historical claims and reset contractual rates. It is expected that an addendum to the contract will be concluded in the near term.

The company has also announced the appointment of Fraser Wyllie as CEO designate.

Wyllie joined McConnell Dowell as MD New Zealand and Pacific Islands in July 2017 following similar roles at other New Zealand-based civil contractors.

On joining, he undertook a significant turnaround of underperforming projects. The company said he had since that time grown the business into a highly effective and profitable business.

Wyllie will assume his role as CEO and will be appointed as a director of the company with effect from October 1.