Infrastructure development company Aveng on Monday pointed to a continued "tough operating environment" in the local construction sector, with a pick-up in activity still up to 18 months away.

The group announced headline earnings per share of 98.2 cents for the six months ended December 2010, from 147.7 cents previously.

Revenue remained stable at R16.892 billion, from R16.832 billion before, but operating profit declined 25% to R513 million, from R684 million previously.

Operating profit before depreciation and amortisation declined by 14% to R1.05 billion, the group said.

By lunch on Monday, shares in the group declined 90 cents or 2.43% to R36.10.

In an interview with I-Net Bridge/BusinessLIVE, Roger Jardine, the CEO of Aveng Group, said: "Challenging conditions are expected to continue into 2012.

"The tipping point is infrastructure spend. The sooner that happens the better for us and the industry, and jobs in this sector.

"Infrastructure is right at the core of job creation and economic growth. I firmly believe that it will come, I would say in 12-18 months. But it certainly is a big issue in this industry currently."

Jardine noted that Aveng had enforced 278 job losses in the past six months.

Aveng said an order book of R30.7 billion revealed a marginal decrease from R31.1 billion at the end of June 2010.

The group's two-year order book by sector pointed to a 78%-22% split between private and public sector work respectively.

"The group's balance sheet and order book remain strong and we are seeing positive results from group-wide efficiency programmes, despite a slowdown of project awards and increased competitive pressures," Jardine said.

"Challenging operating conditions aside, the group has won key projects during the period including a more than R2 billion McConnell Dowell joint venture project in Australia for the engineering, procurement and construction of a natural gas transmission pipeline network.

"This pipeline is a key component of the Queensland Curtis LNG project, which will convert coal seam gas in Queensland into liquefied natural gas for export," said Jardine.

Other project wins during the period included expansions of water treatment projects for mining clients, as well as significant mining and rail projects in Africa.

The Aveng Group said it continued to focus on value creation throughout the infrastructure value chain.

"This includes expansion into water, power and concessions in the short to medium term. Having significantly advanced its expertise in water treatment, the group has launched a new division called Aveng Water to focus on the opportunities within the water treatment arena," it said.

Commenting on the group's outlook in the short to medium term, Jardine said: "Despite the tough operating conditions we find ourselves in, an encouraging number of projects have been secured in various industries and locations in the past six months.

"The rate of recovery in the domestic infrastructure market will largely be driven by public sector spend, specifically, the timing of the government's 808 billion rand infrastructure spend.

"Our estimates reveal that 25% of this committed value relates to civil engineering projects for which Aveng Group will compete once tender processes begin.

"Aveng Group continues to reinforce its leadership position in the infrastructure value chain aimed at ensuring we realise shareholder value in the long term."

On competition issues in SA, Jardine said the Aveng Group continued to work with the Competition Commission to ensure that the investigation into the construction sector remained transparent and concluded as soon as possible.

"This is in line with the Aveng Group's extensive programme aimed at eradicating anticompetitive behaviour which, it seems, had found its way into business practices across many sectors of the South African economy.

"We have no desire for a cat-and-mouse game and have taken a very mature and open-matter approach," he said at the group's presentation in Sandton, Johannesburg, adding that the task was a "memory challenge" as many people had left the group over the years.

Aveng's steel company, Steeledale, recorded an operating loss of R24 million following a settlement agreement with the Competition Commission of R129 million.

Aveng (Africa) Limited entered into a settlement agreement with the Competition Commission to settle the two complaints against Steeledale.

Both complaints involved historical anti-competitive conduct. Aveng (Africa) Limited agreed to pay an administrative penalty of R128.9 million, or 8% of Steeledale's annual turnover for the financial year ending June 30 2008.

Jardine said that Aveng had not set aside any reserves should any further fines arise from the current investigation into collusion within the construction industry.

Looking ahead on a segmented basis, the group said the identified total project pipeline based on projects being targeted had remained constant at about R100 billion.

Grinaker-LTA had a two-year order book of R9 billion, a decrease of 7% since June 2010.

"This indicates that revenue pressure will persist in the second half of the year," it said.

McConnell Dowell's two-year order book increased by 16% to R15.6 billion in line with the buoyant, albeit highly competitive, market in its target geographies and should support a better second half, Aveng said.

"The outlook for the manufacturing and processing segment is more positive as a result of successive steel price increases since the beginning of 2011.

"While landscaping and building activity remains muted, local and international demand for cementitious products in the rail sector is increasing," it added.

Although Moolman's order book declined by 7% to R6.5 billion, Aveng said the outlook for the second half remained positive but could be affected by exchange-rate fluctuations.

"The group anticipates that the challenging domestic construction market will continue to limit overall revenue growth, although this will be partially mitigated by the diversity of its operations.

"Since the beginning of 2011, local steel prices have increased to support a more positive outlook for the second half of the year in the manufacturing and processing part of our business.

"We are confident that we will continue to deliver improved returns to our shareholders over the medium term," the Aveng Group concluded.