Downer Edi Limited · ASX:DOW
Downer Edi — Investor Day (May 2014)
42 slides from Downer Edi's investor day presentation, May 6, 2014
Slide 1: ASX cover letter: Downer EDI 2014 Investor Day
6 May 2014 For personal use only Company Announcements Office ASX Limited Exchange Centre Level 4, 20 Bridge Street SYDNEY NSW 2000 Dear Sir/Madam RE: Downer EDI 2014 Investor Day Please find attached a copy of the presentation to be made to investors today at the company’s annual Investor Day. Your
Slide 2: Downer Group Investor Day: Challenges and Opportunities
For personal use only Downer Group Investor Day Challenges and Opportunities 6 May 2014
Slide 3: CEO Presentation
For personal use only CEO Presentation
Slide 4: Challenges and opportunities
Challenges and opportunities For personal use only • Underlying markets are subdued and navigating the cycle will be difficult for all in the sector • There is a clear opportunity for Downer to emerge as the strongest and best investment choice • To achieve this we must continue to build on our stre
Slide 5: Engineering construction spend
Engineering construction spend For personal use only BIS Shrapnel 5 year outlook $b (constant $2011/12) 140 Other engineering construction 120 Resource-related associated infrastructure 100 Mining and heavy industry 80 60 40 20 0 2002 2004 2006 2008 2010 2012 2014 2016 2018 Year ended June Source: A
Slide 6: Commodity prices
Commodity prices For personal use only Source: Bloomberg 5
Slide 7: Investment choice
Investment choice For personal use only • Balance sheet strength / capacity • Consistent and predictable returns • Strong cash flow • Growth opportunities 6
Slide 8: Build on our strengths
Build on our strengths For personal use only • Market leading positions • Balance sheet capacity • Strong cash conversion • High level of secured work (work-in-hand) • Best people • Costs and productivity 7
Slide 9: Balance sheet
Balance sheet For personal use only 1 On-balance sheet gearing = net debt / net debt plus equity. 2 Off-balance sheet debt includes the present value of plant and equipment operating leases. 8
Slide 10: Cash flow
For personal use only Cash flow 9
Slide 11: Work-in-Hand
For personal use only Work-in-Hand 10
Slide 12: Our customers' success is our core goal
Our customers’ success is our core goal For personal use only • Major strategic initiative to develop a highly customer focused organisation • Top 50 customers have provided detailed feedback • We can improve dramatically in this area 11
Slide 13: How our customers see us
How our customers see us Current position: How we need to be perceived by For personal use only our customers to outperform: • Safe • Innovative/ new ideas • Deliver a quality project/ don’t give • Technology leaders up • Offering proactive customer • Technically proficient solutions • Honest/ trans
Slide 14: Opportunities will arise
Opportunities will arise For personal use only We will take advantage of the right M&A opportunities • Robust risk and opportunity assessment • Watching market developments closely • Must be strategic, the right price and grow our capability There is opportunity to grow the business offshore in key
Slide 15: Full year guidance maintained
Full year guidance maintained For personal use only Full year guidance of NPAT of around $215 million 14
Slide 16: Downer Infrastructure - Australia
For personal use only Downer Infrastructure - Australia
Slide 17: Business mix
Business mix For personal use only Based on revenue for 1H 2014 16
Slide 18: Major contracts
Major contracts For personal use only Proportion of Business Description Examples of current major contracts Divisional revenue (approx.)1 Name Value Duration 22% Road Asphalt manufacture & surfacing, WA Integrated Services $660m 2011-16 Infrastructure surface rejuvenation, pavement Arrangements (IS
Slide 19: Major contracts
Major contracts For personal use only Proportion of Business Description Examples of current major contracts Divisional revenue (approx.)1 Name Value Duration 17% Structural Steel & pipework erection, Santos GLNG $650m 2011-15 Mechanical & Piping equipment installation, (SMP) scaffolding, rigging se
Slide 20: Downer Infrastructure - New Zealand
For personal use only Downer Infrastructure – New Zealand
Slide 21: Current market
Current market For personal use only • Conditions are improving, but remain challenging due to changing customer requirements • Downer is well positioned with long term contracts in key markets: • New infrastructure maintenance contracts with Auckland Transport, NZTA, Hamilton City and others • Stro
Slide 22: Business mix
For personal use only Business mix 21
Slide 23: Cost reduction and productivity
Cost reduction and productivity For personal use only In this market, we must reduce our costs and improve productivity: • Fit 4 Business initiatives • Rationalisation of business structures • Achieving a sensible balance between insourcing and outsourcing • Rationalisation of plant, particularly li
Slide 24: Transport (road, rail, airports, ports)
Transport (road, rail, airports, ports) For personal use only • Downer is a market leader – challenges due to The Transport Agency continuing to tender its remodelled NOC contracts • Constrained Central Government funding for Local Authority infrastructure will lead to further reduction in minor con
Slide 25: Telecommunications
Telecommunications For personal use only • Downer is a market leader – the service provider of choice to Vodafone and Telecom mobile and one of three Chorus service providers • Growth opportunities have been created due to delivery of the UFB project and investment in technology • Next Generation Ac
Slide 26: Water and Irrigation
Water and Irrigation For personal use only Water (reticulation and treatment): • Local Authority budget constraints • Downer is a significant player, regarded as a one-stop shop with good experience in both operations and maintenance • Many Local Authorities still in-source this work so there are op
Slide 27: Energy (oil and gas, power, renewables)
Energy (oil and gas, power, renewables) For personal use only • Revenue growth constrained by an oversupply of power generation capacity • There is expected to be further strong investment in the transmission network over the next 3 to 5 years • Transmission infrastructure maintenance and constructi
Slide 28: Major contracts
Major contracts Proportion of Business Description Examples of major contracts Divisional For personal use only revenue (approx.) Name Value Duration 52% Road Infrastructure Asphalt manufacture & surfacing, Auckland Transport Maintenance surface rejuvenation, pavement Contracts: stablisation, recycl
Slide 29: Downer Mining
For personal use only Downer Mining
Slide 30: Recent highlights
Recent Ongoinghighlights improvement in Zero Harm Project wins: For personal use only • Roy Hill (iron ore) - $500 million over 4.5 years • Cosmo Deeps (gold) - $70 million over 2 years • Commodore (coal) - $200-250 million over 5 years • Boggabri (coal) – one-year extension to Nov 2017 Otraco (tyre
Slide 31: Ongoing improvement in Zero Harm
Ongoing improvement Ongoing improvement in Zero in Zero HarmHarm For personal use only • 21% YOY improvement in TRIFR1 Total Recordable Injury Frequency Rate 18 • LTIFR2 <1 16 14 • Focus on High Potential Risks 12 10 • Collision avoidance – SafeMINE 8 now in place at Commodore 6 and Boggabri, being
Slide 32: Cost reduction strategies - plant
Cost reduction Cost-reduction strategies strategies - plant – Plant For personal use only • Standardising fleet/ fleet matching/ ultra class machines • Reduction in hired gear/ relocation plan FY12 FY12 FY11 • Disposal of aged fleet • Back to Basics maintenance • Strengthening critical spares • FY12
Slide 33: Cost reduction strategies - operations
Cost reduction strategies - operations For personal use only • Operational excellence and business improvement • Strategic partners Focus on peopleFY12 • FY12 and FY11 training • Procurement and sourcing FY12 FY11 FY12 FY11 32
Slide 34: Major contracts
Major contracts For personal use only Proportion of Business Description Major contracts Divisional revenue (approx.)1 Name Value Duration 85% Open cut Mine engineering, scheduling and Christmas Creek - Fortescue $3.1b 2010-16 planning, load and haul operations, dozer push operations, Goonyella, Dau
Slide 35: Downer Rail
For personal use only Downer Rail
Slide 36: Operating divisions
Operating divisions For personal use only Maintenance and Services Components and Overhauls After Market Parts - passenger trains - engines - spare parts - light rail/trams - wheels - new build and - passenger operations - bogies rotable parts with Keolis Downer - traction motors - service kits - fr
Slide 37: Capabilities
Capabilities KEY CUSTOMERS • Over 25 operations and maintenance depots for public and For personal use only private sector customers across Australia Freight • Pacific National • Operations and maintenance of public transport systems • BHP Billiton through the Keolis Downer JV (Yarra Trams, Melbourn
Slide 38: Locations
For personal use only Locations 37
Slide 39: Current focus
Current focus For personal use only • Complete Waratah Train Project (RSM) – last train due to be delivered to Sydney Trains in May 2014 • Complete business restructure • Become a 365 days a year, 24/7 service provider for rolling stock across Australia and New Zealand 38
Slide 40: Pathway to Success
Pathway to Success Customers depend on Downer Rail for reliable and available rolling stock, For personal use only associated equipment, maintenance and technical support Dedicated, experienced, highly skilled workforce Global brand Innovative technology partners technology through ‘Downer Productio
Slide 41: Strategy
Strategy • Integrate our service/maintenance business with our customers For personal use only • Provide new rolling stock, overhauls and refurbishment packages and technical support, with investment in key component overhaul depots • Supply what operators want • Innovative solutions • Centralised c
Slide 42: Disclaimer
Disclaimer For personal use only Reliance on third party information This Presentation may contain information that has been derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the