Release Date: February 18, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Aveng Ltd (STU:UG8K, Financial) maintained a strong cash position with $256.1 million, up from $227.7 million at the end of June.
- The building segment performed exceptionally well, with 100% of projects being profitable and over 90% above tendered margin.
- The mining segment secured a new 60-month contract at Hamsburg, expected to deliver greater volumes, increased revenue, and improved profitability.
- The infrastructure portfolio, excluding the two loss-making projects, operated at an improved margin in excess of 4%.
- The company has made steady progress in its separation strategy to create two independent entities, which remains a key focus for the year.
Negative Points
- Aveng Ltd (STU:UG8K) reported a headline loss of $34.4 million, significantly impacted by losses on two projects, J108 and Kidston, totaling $76.7 million.
- Revenue decreased to $1.4 billion, slightly below the comparable period of the previous year.
- The infrastructure segment incurred an operating loss of $26.5 million, including the losses from the two major projects.
- The order book has declined due to a reduction in transport capital investment and slower-than-expected shifts towards other sectors.
- The company faces ongoing challenges with project delays and cost escalations, particularly in the Kidston and J108 projects, which are expected to impact cash flow over the next 18 months.
Q & A Highlights
Q: How can investors be assured that new risk assessment strategies will prevent similar issues in the future?
A: Scott Cummins, CEO, explained that significant risk management measures were introduced in 2023. These measures would prevent the company from taking on projects with high risk in a lump sum contract form, which was a factor in the current issues. The company now prefers contract forms like cost-plus or incentivized target cost models for complex projects.
Q: What is the expected additional future cash outflow for the two loss-making projects over the next 18 months?
A: Adrian McCartney, CFO, stated that the cash outflow will be similar to the loss incurred. A portion will flow out by June 2025, with the majority occurring in the fiscal year 2026.
Q: How close is Aveng to selling the Moormans business?
A: Adrian McCartney noted that while the strategy was announced in August of the previous year, the company has been actively engaging with potential buyers. Although no concrete deal is ready to be announced, progress is being made, and they hope to have something more definitive in the coming months.
Q: How confident is Aveng in the cost to complete and risk provisions for the two loss-making projects?
A: Scott Cummins expressed confidence in the cost estimates for J108, given the current progress and understanding of the project environment. For Kidston, international experts have been engaged to ensure best practices, and the project will be closely monitored as it progresses.
Q: Do you expect the order book to grow in the next period given the current tenders and preferred bidder status?
A: Scott Cummins does not expect the order book to grow in the next period due to market factors affecting the timeline for converting preferred projects into awarded contracts. Clients need to revalidate financial decisions and secure additional funding due to cost escalations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
