AVENG , the international infrastructure group, saw headline earnings plummet 34% in the six months to December, even as revenue rose 13,4% and its two-year order book growth shot up 24%.

But the poor state of SA’s construction sector dragged down the balance sheet, despite healthy growth in regional and offshore mining markets, an uptick in its steel and manufacturing businesses, and the group’s strong R4,8bn net cash position.

"These results have been achieved against challenging market conditions," CEO Roger Jardine said yesterday, citing global economic uncertainty and the continuing downturn in South African infrastructure markets.

"We are particularly pleased with the growth in our two-year order book, which increased by 24% from June 2011 to R46bn," Mr Jardine said.

Improved profitability in its mining contracting and manufacturing and processing divisions partially offset lower margins and project losses in the construction and engineering segments.

However, a few poorly performing South African and Australian projects helped operating profit drop 35% in the period.
The group also faces possible penalties over alleged collusive practices in the South African construction industry, and is continuing to mitigate fallout from problems at the Medupi and Kusile power projects.

Aveng said in a trading statement last month that unresolved claims on the subcontracted steel fabrication projects for the Medupi and Kusile power plants continued to adversely affect profitability.

But while the South African construction sector order book fell 24%, the group said its Australian construction order book rocketed 62% to R31bn.
Government promises of R1-trillion in infrastructure spend in SA over the next three years remained elusive. "We trained many (people) for the (soccer) World Cup, but have not had projects (since then) to deploy them to," Mr Jardine said.

Abdul Davids, head of research at Kagiso Asset Management, said yesterday: "The difficulty in these results is calculating what once-off costs were, and what execution issues are likely to carry on in the near term.

"Aveng has taken significant provisions, has minimal uncertified revenue, and management provides substantial assurance that they are conservative around these issues," he said.

"The risk remains, however, that (poorly performing) projects remain a headwind for Aveng’s earnings over the next 12 to 18 months," Mr Davids said.