Downer Edi Limited · ASX:DOW
Downer Edi — FY2021 Earnings Presentation
30 slides from Downer Edi's earnings presentation, 2021
Slide 1: Downer: Relationships creating success
Downer r Relationships creating success
Slide 2: FY21 Highlights
FY21 Highlights Underlying NPATA1,2 of $261.2m, up 21.4% ($230.0m statutory) Underlying EBITA1,2 of $467.3m, up 12.3% ($401.0m statutory) Statutory NPAT of $183.7m (statutory EBIT of $334.8m) Underlying EBITA Margin improvement of 0.7 percentage points Cash conversion of 100.8% (92.0% stat
Slide 3: Delivering on priorities
Delivering on priorities Deliver strong FY21 earnings and cash result Capital Management High underlying cash conversion of 101% Reset optimal capital structure at Net Debt / EBITDA of 2.0-2.5x (Gearing 19%) Increased dividend payout ratio to 57% (21cps full year) $400m share buy-back commenced Unde
Slide 4: Urban Services transformation
Urban Services transformation Leveraged to long-term trends of expanding population, urbanisation, increased government spending and government outsourcing High proportion of revenue related to Federal, State and Local Government services Market leader across Australia and NZ Transport Scale
Slide 5: Strength through market position and diversity
Strength through market position and diversity Transport Utilities Facilities2 51% FY21 revenue1 20% FY21 revenue1 29% FY21 revenue1 Largest non-government Road Balanced portfolio servicing Power & Largest integrated facilities manager Services business in Australia and NZ Gas, Water and Telec
Slide 6: Strong macro outlook
Strong macro outlook Australia - Road, Rail and Power work done & forecast Urban Services markets of Transport, (A$bn) Utilities and Facilities look strong: 60 ̶ Bigger Government at all levels 50 spending more 40 30 ̶ Commonwealth Government has 20 committed $110bn in 10yr infrastructure 10 spend
Slide 7: Work-in-hand
Work-in-hand Core WIH1 by segment ($35.4bn) Core WIH1 by contract type Long-dated 1% Fixed Price / Lump Sum Facilities $13.7bn (39%) Transport Diversified 3% Alliance / Target Cost $16.3bn (46%) 90% Government or Services 91% Construction2 9% 2% Schedule of Rates / Government regulated Cost Pl
Slide 8: Limited contractual exposure to cost escalation
Limited contractual exposure to cost escalation Transport Utilities Facilities1 Long term road maintenance contracts Telco construction cost risk largely Substantial portfolio of long-term PPP ̶ Rise and fall mechanisms for costs borne by delivery partners (sub- contracts which include specifi
Slide 9: Limited COVID-19 impact
Limited COVID-19 impact Lack of mobility for skilled labour and management across National, State and LGA boundaries causing Group pockets of industry skill shortage and competition for experienced blue and white-collar employees Transport Utilities Facilities1 Roads Services Limited impact Faci
Slide 10: Sustainability at Downer
Sustainability at Downer At Downer Sustainability means Sustainable and profitable growth Providing value to our customers Delivering our services in a safe and environmentally responsible manner Helping our people to be better Advancing the communities in which we operate Downer contribut
Slide 11: Sustainability achievements
Sustainability achievements S&P Global Sustainability Yearbook Member and Industry Mover in 2021 Establishment of $1.4bn syndicated sustainability linked loan facility Environment Signatory to the Science Based Target Initiative (SBTi), committed to Net Zero by 2050 in line with the 1.5OC busi
Slide 12: Sustainability opportunities
Sustainability opportunities Sustainability linked finance Support indigenous education and cultural awareness Group Support Mental Health in Downer and the community Support diversity within Downer and the community Provide staff with opportunity for workplace giving Transport Utilities F
Slide 13: Group financials
| sf G 4 Group financials
Slide 14: Underlying financial performance
Underlying financial performance Revenue decline of 8.8%, primarily due to declines Change $m FY203 FY213 in non-core revenue segments (%) Group Underlying EBITA margin 3.8%, up 0.7pp Total revenue1 13,417.9 12,234.2 (8.8) EBITDA 862.0 899.1 4.3 Interest expense savings from reduction in debt
Slide 15: Business unit performance overview
Business unit performance overview Underlying EBITA of $467.3m, up 12.3% $m FY20 Change FY21 and Underlying EBITA margin up 0.7pp to (%) 3.8% Transport 235.6 250.2 6.2 Utilities 114.6 115.1 0.4 Diversity of Core Urban Services portfolio Facilities3 124.9 140.0 12.1 delivered growth Asset Service
Slide 16: Summary of significant items
Summary of significant items Deduct: Net Tax Amortisation of $m EBITA1 interest NPATA1 NPAT expense2 acquired intangibles expense (post-tax) Underlying3 results 467.3 (100.6) (105.5) 261.2 (46.3) 214.9 Non-cash fair value movement on the Spotless minority acquisition Downer (16.6) - - (16.6) - (16.6
Slide 17: Operating cash flow
Operating cash flow Change Core Urban Services business delivering $m FY204 FY21 (%) strong cash flows across the portfolio Underlying1 EBIT 344.7 401.1 16.4 Underlying EBITDA conversion of 100.8% Add: depreciation and amortisation2 517.3 498.0 (3.7) (statutory 92.0%) after adjusting for items r
Slide 18: Cash flow
Cash flow Funds from operations of $251.1m Change $m FY201 FY21 (%) ̶ Strong operating cash flow Total operating cash flow 158.6 708.7 >100 ̶ Reduction in capital expenditure Payment of principal lease liabilities (Core) (126.8) (148.7) (17.3) driven by divestment of capital- Payment of principal
Slide 19: Capital expenditure
Capital expenditure Core capital expenditure of $154m, $m FY20 FY21 Change including growth capital projects such as: (%) ̶ Investment in new Roads facilities and Net Capital expenditure – core 113.5 154.0 35.7 equipment Net Capital expenditure – non-core 189.3 74.3 (60.8) ̶ City Rail Link (CRL) J
Slide 20: Balance sheet
Balance sheet Significant improvement in gearing $m Jun-204 Jun-21 and Net debt / EBITDA due to Current assets 3,404.7 3,403.2 completed capital raising, divestments and strong underlying cash Non-current assets 5,242.3 4,668.9 performance - Goodwill 2,281.3 2,280.8 - Acquired intangible assets 34
Slide 21: Group debt profile
Group debt profile Weighted average debt duration of 3.8 years1 (3.4 years at 30 June 20) Debt maturity profile (A$m) 1H21 refinancing has extended debt A$m duration and achieved a more balanced debt 1200 maturity profile 1000 Current borrowings include $250m of Medium-Term Note maturing in Ma
Slide 22: Pro-forma metrics and capital management
Pro-forma metrics and capital management Net debt / EBITDA of 1.5x at 30 June 2021 $m Jun-21 Pro-forma Net debt / EBITDA of 1.6x3 at completion of current Net debt 1,371.0 divestments, comfortably ahead of target range of 2.0-2.5x EBITDA1 899.1 On-market share buyback of up to 70.1m shares (~1
Slide 23: Key messages and outlook
Key messages and outlook The Downer business has again proved its resilience – solid earnings, strong cash conversion and high levels of work-in-hand Our end markets are essential services in Transport, Utilities and Facilities. Our position in those markets and their diversity gives us strength
Slide 24: Supplementary information
Supplementary information 24
Slide 25: Transport: WIH profile and top contracts
WIH profile ($bn) 5.0 Top 5 Contracts Remaining 4.0 1. Maintaining Waratah trains until 2044 3.0 2.0 2. Operating Yarra Trams until 2024 (Keolis Downer) 1.0 3. Maintaining HCMT until 2053 0.0 FY22 FY23 FY24 FY25 FY26 FY27+ 4. Maintaining Sydney Growth Trains until 2044 Total WIH of $16.3bn 5. Oper
Slide 26: Utilities: WIH profile and top contracts
WIH profile ($bn) 2.0 Top 5 Contracts Remaining 1.5 1. Sydney Water until 2030 (Confluence Water JV) 1.0 2. AusNet (power) until 2024 (plus extensions for 6 years) 0.5 3. Logan City Council until 2025 (plus 2x2yrs extensions) 0.0 FY22 FY23 FY24 FY25 FY26 FY27+ 4. AusNet (gas) until 2026 Total WIH
Slide 27: Facilities: WIH profile and top contracts
WIH profile ($bn) 6.0 Top 5 Contracts Remaining 5.0 1. New Royal Adelaide Hospital PPP until 2046 (contract 4.0 reset 30 June 2022) 3.0 2. Dept of Defence Estate Maintenance and Operations 2.0 until August 2024 1.0 3. Sunshine Coast University Hospital PPP until 2042 0.0 FY22 FY23 FY24 FY25 FY26 FY2
Slide 28: Mining: WIH profile and top contracts
WIH profile ($bn) 0.4 Top 5 Contracts Remaining 0.3 1. Chevron infrastructure maintenance until 2024 0.2 2. BHP Maintenance services in Port Hedland until 2023 0.1 3. CS Energy’s Callide Power Station until 2025 0.0 FY22 FY23 FY24 FY25 FY26 FY27+ 4. Santos Upstream Development Services until 2026
Slide 29: Pro-forma metrics – estimated proceeds
Pro-forma metrics – estimated proceeds Net debt / underlying EBITDA Net Net debt EBITDA $m Debt3 / EBITDA 30 June 2021 reported 1,371.0 899.1 1.52x Otraco1 (79.0) (13.0) (0.07x) Open Cut West2 (38.5) (44.1) 0.03x Blasting - (7.7) 0.01x Underground – Carrapateena - (5.2) 0.01x Laundries - (44.7) 0.09
Slide 30: Reconciliation to segment financials
Reconciliation to segment financials Underlying EBITA1,2 ($m) FY20 FY21 Asset Services (EC&M) 27.1 18.3 Engineering & Construction (EC&M) (69.2) (5.1) EC&M Segment EBITA (42.1) 13.2 Facilities (core) 124.9 140.0 Laundries (Facilities) 9.1 5.0 Hospitality (Facilities) (19.7) 0.4 Facilities Segment EB