Slide 1: Downer Group Investor Presentation Half Year Results
Downer Group Investor Presentation Half Year Results 12 February 12 2020 February 2020
Slide 2: Construction losses drive disappointing HY20 result
Construction losses drive disappointing HY20 result Earnings Cash flow Margin Outlook Total revenue3 of $6.8bn, HY cash conversion 4.5% Group EBITA1 margin of $300 million NPATA1 for up $215.5m 3.1%, down 0.7pp v HY192 2020 financial year Significantly impacted by NPATA1 of $115.5m down Murra Warra
Slide 3: Work-in-hand (WIH) increased to $46.4 billion
Work-in-hand (WIH) increased to $46.4 billion 89% Urban Services 6.0% 4.6% 6% Mining 11% Mining, Energy & Industrials { 4% Asset Services 1% Engineering & Construction Mining EC&M Work-in-hand $bn 46.4 38.8% 44.3 43.5 Transport 42.0 Facilities 35.5% Utilities Dec-19 Jun-19 Dec-18 Jun-18 15.1% 3
Slide 4: Group work-in-hand ($46.4bn) by Service Line
Group work-in-hand ($46.4bn) by Service Line 11,000 ECM 10,000 Mining 9,000 Utilities 8,000 Transport 7,000 AUD Million Facilities 6,000 5,000 4,000 3,000 2,000 1,000 - Financial Years 4
Slide 5: Construction WIH $5.7bn, 12% of Group WIH ($46.4bn)
Construction WIH $5.7bn, 12% of Group WIH ($46.4bn) $2.1 billion (37%) $3.6 billion (63%) Schedule of Rates Alliances Design and Construct Cost Reimbursable EPC Fee Based Long Term Panels • $580m of <$15m projects • $1bn of <$50m projects Two projects >$200m • Parramatta Light Rail • W
Slide 6: Services businesses continue to perform well
Services businesses continue to perform well Urban Services Mining, Energy and Industrial Services Transport Mining Mining Utilities EC&M EC&M Transport Facilities Utilities 6
Slide 7: Opportunity pipeline: >$200bn over next decade
Opportunity pipeline: >$200bn over next decade 60.0 50.0 40.0 Mining ECM $ billion 30.0 Facilities Utilities Transport 20.0 10.0 0.0 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 7
Slide 8: Group financials
Group financials 8
Slide 9: Financial performance
Financial performance Pro forma HY20 AASB 16 Change HY20 includes adoption of $m Pre HY192 reported impact (%) AASB16 AASB16 – no material impact on Total revenue 6,838.5 - 6,838.5 6,623.0 3.3 NPATA EBITDA 429.3 (77.9) 351.4 396.0 (11.3) Revenue up 3.3% to $6.8bn Depreciation and amortisation (2
Slide 10: Summary of earnings
Summary of earnings $m Transport Utilities Facilities EC&M Mining Unallocated Total EBITA1 112.5 63.0 75.9 (37.4) 43.7 (42.9) 214.8 Spotless legacy issues - - (10.9) - - - (10.9) Restructuring costs - - 2.7 - - - 2.7 Portfolio review costs - - 2.7 - - 3.2 5.9 - - (5.5) - - 3.2 (2.3) Adjusted EBITA 1
Slide 11: Unallocated Costs (Corporate Costs)
Unallocated Costs (Corporate Costs) $m HY20 HY19 Corporate costs (42.9) (42.2) Amortisation of acquired intangible assets (23.9) (23.5) FV gain on revaluation of existing interests in Downer Mouchel JV - 17.0 Total unallocated (66.8) (48.7) 11
Slide 12: Operating cash flow
Operating cash flow A number of significant items affected operating $m HY201 HY19 Change (%) cash flow performance in HY20: EBIT 180.4 219.6 (17.9) ̶ Murra Warra wind farm: $71.7m ̶ prior period losses and outstanding claims: Add: depreciation and 248.9 176.4 41.1 $36.7m amortisation2 ̶ Renewable
Slide 13: Cash flow
Cash flow Net capital expenditure reduction of $m HY20 HY19 Change 14.1% (%) Total operating (4.5) 355.3 (101.3) Mining and Laundries represent 59.3% of total capital expenditure Net capital expenditure1 (164.7) (191.7) 14.1 Other acquisitions represent Other acquisitions (19.3) (46.0) 58.0 de
Slide 14: Balance sheet and capital management
Balance sheet and capital management Gearing increase due to lower $m Dec-19 Jun-19 operating cash flow Current assets 3,200.6 3,164.7 Reduction in net assets a result of Non-current assets 5,455.2 4,843.3 adoption of AASB 16 Leases - Goodwill 2,449.9 2,454.5 Focus on debt reduction and reduce
Slide 15: Group debt profile
Group debt profile Weighted average debt duration A$m of 3.7 years1 (3.6 years at 30 800 June 19) 700 Maturity profile and diversification 30% TRMP 600 enhanced by refinance of Spotless Syndicated Facilities 500 and Downer MTN issuance 400 Debt facilities DOW SPO Group 300 $m Total limit 2 2,002
Slide 16: Grant Fenn
Grant Fenn 16
Slide 17: Portfolio review
Portfolio review Portfolio review announced in August 2019. Review concluded Downer should exit both Mining and Laundries to increase returns to shareholders and reduce debt. A number of bids for Mining received last week, ranging in price and conditionality. These bids will be assessed along
Slide 18: Focus on lifecycle asset services
Focus on lifecycle asset services Downer is focused on winning and delivering secure, long term contractual service revenue and leveraging its expertise to drive margin expansion over time Margin Revenue Operating Engineering Maintenance Procurement Servicing Construction Supply 2 years 5 years 10 y
Slide 19: Driving value for shareholders
Driving value for shareholders Aligned to growing Increased exposure to Business markets and serving low capital, service Strategic acquisitions quality customers oriented businesses growth Leveraged to buoyant Growing exposure to Selective acquisitions in economic and social Urban Services Urban Se
Slide 20: Outlook
Outlook Downer issued revised guidance on 23 January 2020 and is targeting NPATA of around $300 million before minority interests for the 2020 financial year. 20
Slide 21: Supplementary information
Supplementary information 21
Slide 22: Transport Utilities
Transport Revenue $m EBITA $m EBITA margin ROFE 120 112.5 7% 30% 26.4% 2,500 2,178.0 5.6% 2,061.0 100 87.9 6% 5.2% 25% 21.9% 2,000 5% 4.3% 80 20% 1,500 4% 60 15% 3% 1,000 40 10% 2% 500 20 1% 5% 0 0% 0% 0 HY20 HY19 HY20 FY19 HY19 HY20 HY19 HY20 HY19 5.7% v HY19 28.0% v HY19 0.9pp v HY19 4.5pp v HY19
Slide 23: Facilities Mining
Facilities Revenue $m EBITA $m EBITA margin ROFE 2,000 100 5.0% 4.9% 1,757.4 81.3 5% 14.8% 15.0% 1,667.0 4.3% 16% 75.9 80 1,500 4% 14% 60 12% 3% 10% 1,000 40 8% 2% 500 20 6% 1% 4% 0 0 2% HY20 HY19 0% HY20 HY19 0% HY20 FY19 HY19 HY20 HY19 5.4% v HY19 (6.6%) v HY19 (0.6pp) v HY19 (0.2pp) v HY19 Mining
Slide 24: EC&M
EC&M Revenue $m EBITA $m EBITA margin ROFE 1,000 945.1 30 25% 22.4 4% 21.4% 3% 2.0% 2.4% 20 20% 800 706.4 2% 10 15% 1% 600 0 10% 0% -10 HY20 HY19 -1% HY20 FY19 HY19 5% 400 -20 -2% 0% 200 -30 -3% HY20 HY19 -5% -4% 0 -40 -5% -10% (37.4) HY20 HY19 -50 -6% -15% (9.9%) (5.3%) (25.3%) v HY19 (>100%) v HY1
Slide 25: Segment reporting
Segment reporting HY20 Transport Utilities Facilities EC&M Mining Unallocated Total $m Segment revenue 1,876.6 1,416.1 1,752.8 706.4 753.8 3.2 6,508.9 Share of sales from JVs and 301.4 - 4.6 - 23.6 - 329.6 Associates Total revenue1 2,178.0 1,416.1 1,757.4 706.4 777.4 3.2 6,838.5 EBITDA 175.3 78.6 12
Slide 26: Reconciliation of Facilities to Spotless result
Reconciliation of Facilities to Spotless result Less: Add: HY19 HY20 Facilities Hawkins Spotless Spotless3 Spotless $m segment Building Utilities Total Revenue1 1,757.4 (247.6) 81.4 1,591.2 1,461.3 EBITA2 75.9 (6.3) 6.3 75.9 82.2 EBIT 71.0 (5.7) 6.3 71.6 76.8 Net Interest (19.6) (20.3) Expense Tax E
Slide 27: AASB 16 – Leases
AASB 16 – Leases Adoption Balance sheet As at at $m 31 Dec19 Adopted from 1 July 2019 1 Jul 19 Significant impact on balance sheet with Right-of-use asset 570.6 589.0 $589.0m ROU asset and $748.3m lease Lease liabilities (727.8) (748.3) liability at 31 December 2019 Other balances1 91.2 Openin
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