Downer Edi Limited · ASX:DOW
Downer Edi — H1 2006 Earnings Presentation
29 slides from Downer Edi's earnings presentation, Feb 23, 2006
Slide 1: Half Year Financial Results
Half Year Financial Results
Slide 2: Managing Director
Managing Director
Slide 3: Overview
Overview Demand for outsourcing is strong across all sectors. Our leading market positions, full pipeline of infrastructure and refurbishment projects will sustain current revenue and deliver a positive outlook for the next few years. Downer EDI Limited 2606 Half Year Financial Results
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Slide 5: Group Overview
Group Overview «Turnover $2.28b, up 23% pcp; moving closer to 50/50 split « EBIT $99m, up 35% pep, substantially organic growth » Group EBIT/Turnover margin improved on both pcp (4.0% to 4.4%) and rolling 12 month bases (4.8% to 4.9%) «PBT at $78.1m, up 40% pep, and a record for H1 « NPAT of $69.6m,
Slide 6: Group Overview
Group Overview «Sales growth more evenly spread of business through the year, owing to growth in consulting & long term maintenance « Significant wins confirm DOW’s strong market position ~ BHP locomotives ~ further orders ~ QR — further locomotive orders ~ Australand — infrastructure consulting - R
Slide 7: Management Highlights
Management Highlights Wider acceptance of strength & longevity of resource & infrastructure spend and DOW’s strong position Admission to S&P/ASX100 (Sep 05) and MSCI (Jun 05) resulting in increasing investor interest Management team expanded in preparation for future growth Improving financial perfo
Slide 8: Management Highlights
Management Highlights DWK (NZ) and Coomes Consulting (Aust.) bolt-on acquisitions reflect continued focus on consulting & FEED Emoleum acquisition consistent with our goal of participating in industry consolidation. Delivers national road maintenance footprint in Australia FY07 with full year contri
Slide 9: Financial Performance
FINANCIAL PERFORMANCE Geoff Bruce Chief Financial Officer
Slide 10: Reported Earnings Up 50%
Reported Earnings Up 50% Half Year Ended 31 December pees anal | % Revenue ** 2251.0 1767.9 27 Turnover 2279.5 1851.9 23 EBIT 99.2 73.4 35 Net Interest 21.1 17,7 19 Profit Before Tax (AIFRS) 78.1 55.7 40 Taxation 8.5 9.3 -9 Net Profit After Tax (AIFRS) 69.6 46.4 50 EPS (basic) cps 23.8 16.4 45 12.0
Slide 11: Financials — Key Points
Financials — Key Points H1’04 restated to add back amortisation of goodwill under AIFRS Revenue and Turnover up strongly with Mining, Engineering and Infrastructure being highlights Net interest expense up $3.4m on pcp due to higher working capital position associated with increased turnover and the
Slide 12: Financials — Key Points
Financials — Key Points « — Interim dividend up 100% pcp to 12.0 cps «Dividend 70% franked and DRP available * Continued improvement in return to shareholders with Rolling 12 month NPAT/Equity (ie Reported Shareholders’ Funds Adjusted for Goodwill since 1998) increasing from 13.2% (June 2005) to 15.
Slide 13: Financials — Key Points
Financials — Key Points « Ongoing focus on working capital to release surplus funds and internally fund growth/reduce debt « Turnover becoming less skewed to H2 but expect H2’06 to better H2’05 ($2.1bn) » Work continuing to quantify value of potential R&D tax benefits. Downer EDI Limited 2606 Half Y
Slide 14: Financials — Key Points
Financials — Key Points « AIFRS — an immaterial impact overall * Key adjustments include: — Net Assets under AIFRS at 30 June 2005 are $900.6m, which is $7.4m (<1%) lower than the previous AGAAP net assets of $908.0. Details are noted in Appendix 4D ~- For the 6 months ended 31 Dec 2004 restated AIF
Slide 15: Financials — Key Points — Cash Flow
Financials — Key Points — Cash Flow Cash flow conversion is ahead of pcp Receipts from Customers Net Distributions from JVs Payments to Suppliers & Employees Net Operating Cash Flow Conversion EBITDA to NOCF 6 months to 31-Dec-05 31-Dec-04 $m $m 2486.6 1903.5 5.6 (3.8) (2396.4) (1827.1) 95.8 72.5 0.
Slide 16: Financials — Key Points — Cash Flow
Financials — Key Points — Cash Flow 6 months to 31-Dec-05 31-Dec-04 Change $m $m EBITDA 156.2 127.0 23% Net PP&E 93.6 55.9 67% Net Acquisitions 26.9 22.1 22% Net Investments 24.3 76 218% Capex 144.8 85.7 69% Tax Paid 20.7 14.3 45% Borrowing Costs Net of Interest Received 19.6 17.8 10% Dividends Paid
Slide 17: Financials — Key Points — Cash Flow
Financials — Key Points — Cash Flow = Major movements in cash relate to: PP&E: primarily Resource Services refurbishment of rigs going into service and in preparation for tender (>$20m) and accelerated equipment replacement for WI NZ Acquisitions: DWK, Coomes, other small bolt-ons $27m Investments:
Slide 18: Divisional EBIT Overview
Divisional EBIT Overview Half Year to 31 December ($m) 2005 | 2004 Mining & Resources 41.2 27.6 49 Engineering 24.5 26.1 (6) Works Infrastructure 21.0 14.8 42 Rail 16.6 11.0 51 Total Divisional EBIT* 103.3 | 79.5 30 Corporate / Unallocated (4.1) (6.1) Total Group EBIT 99.2 73.4 35 ** Bofore allocati
Slide 19: Mining — Highlights
Mining — Highlights* Half Year ended 31 December ($m) 2005 | 2004 | Turnover 760 590 29% EBIT 37.7 25.1 50% Margin 5.0% 4.3% | 0.7% » An excellent result in terms of turnover and margin contribution « New alliance contracts with RIO on Argyle Diamond mine and Anglogold on Sunrise Dam and commencemen
Slide 20: Engineering — Highlights
Engineering — Highlights Half Year ended 31 December ($m) 2005 | 2004 | Bf Turnover 809 621 30% EBIT 245 | 26.1 | (6)% Margin 3.0% 4.2% |(1.2)% « Weak spend by Telstra continued as previously foreshadowed » Work with Telstra on restructuring & extending contract ongoing & encouraging « Strong growth
Slide 21: Infrastructure — Highlights
nfrastructure — Highlights Half Year ended 31 December ($m) 2005 | 2004 | Turnover 453 405 12% EBIT 21.0 14.8 42% Margin 4.6% 3.6% | 1.0% » Excellent result with both NZ and Australia showing benefits of continuous improvement programs and strong end market demand in roading and rail track «Australi
Slide 22: Rail — Highlights
Rail — Highlights Half Year ended 31 December ($m) 2005 | 2004 | B Turnover 191 192 0% EBIT 16.6 11.0 51% Margin 8.7% 5.8% | 2.9% «Continued focus on maintenance and spares delivering better margins and greater stability in present & future revenue streams = Good forward orders means our focus is no
Slide 23: Returns on Equity and Funds Employed
Returns on Equity and Funds Employed 17 16 15 14 13 12 returns % 11 10 9 Dec 01 June 02 Dec02 June 03 DecO3 Jun04 Dec04 Jun05 Dec05 ommijem ROPE oem ROE ROE = NPAT Rolling 12mth pre-goodwill/Equity pre-gcodwill ROFE = EBIT/AFE; AFE = Avg Net Debt + Equity last 3 half years Downer EDI Limited 2006 Ha
Slide 24: Dividends Per Share
Dividends Per Share — Bf 100% pcp 154 ~~ Qo cents per share 2002 2003 2004 2005 2006 Downer EDI Limited 2006 Half Year
Slide 25: Managing Director
Managing Director
Slide 26: Summary
Summary « Sales revenue exceeded expectations « Reflects momentum in underlying businesses: ie not one-off «Continued focus on bolt-ons in key sectors, several opportunities under review » Expansion of corporate team reflects focus on integration & positions DOW for future growth «Continued focus on
Slide 27: Guidance & Assumptions — FY06
Guidance & Assumptions — FY06 Guidance Intact Sales revenue FY05 8%; FY06 circa 20% NPAT growth in line with market expectations *” EPS, # ROE No Change to Underlying Assumptions AM EBITA/AFE (715%) Interest cover > 5.0 times Gearing (Net Debt/Equity <50%) Downer EDI Limited 2606 Half Year Financial
Slide 28: Questions & Answers
QUESTIONS & ANSWERS
Slide 29: Yyy
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