Slide 1: Downer
Downer Relationships creating success
Slide 2: Agenda and presenters
Grant Fenn (CEO) ▪ Update on Downer’s Utilities contract ▪ Results summary ▪ Outlook Michael Ferguson (CFO) ▪ Financial results Peter Tompkins (incoming CEO) ▪ Strategies to realise value for shareholders ▪ Queensland Train Manufacturing Program (QTMP) update ▪ Immediate priorities 2
Slide 3: Update on Downer's Utilities contract
Update on Downer’s Utilities contract ▪ External lawyers and forensic accountants have now completed a confidential and privileged investigation ▪ Downer has determined ̶ “root cause” and contributing factors ̶ through broader workbook review that the issue is isolated to one contract ▪ Post tax ear
Slide 4: Results summary
Results summary Grant Fenn
Slide 5: Summary of HY23 financial results
Summary of HY23 financial results Profit after tax and EPS Operational performance Balance sheet and dividend Statutory Underlying $68.1m NPAT $133.6m EBITA1,3 2.3x Net Debt to EBITDA4 20.6% 24.5% 1.7x at June 2022 Statutory EBIT of $129.8m Statutory EBITA $142.9m Underlying Adjusted $68.0m NPAT
Slide 6: 1H23 has been very challenging
1H23 has been very challenging Issue Impact and experience ▪ 40% increase in lost shifts and reduced product volumes within Road Services (Transport) Unprecedented ▪ Site closures, delays and productivity impacts in Water projects weather impacts ▪ Lower worker utilisation across all outdoor activit
Slide 7: Weather & labour pressures impacting costs and productivity
Weather & labour pressures impacting costs and productivity Sydney and Brisbane lost shifts – Road Services Outsourced labour usage elevated1 62% 600 >40% increase in lost shifts on 61% 500 2020/2021 avg 60% 400 59% Lost shifts 58% 300 57% 200 56% ` 100 55% 54% 0 2H20 1H21 2H21 1H22 2H22 1H23 CY20 C
Slide 8: Transport
Transport ▪ Preferred applicant for multi-billion dollar Queensland Train Manufacturing Program 28% Roads (QTMP) 44% of 51% Rail & Transit Systems ▪ Continued wet weather materially impacted the performance of the Roads business in 1H23 HY23 revenue 21% Projects ▪ Contracts signed for the sale of Tr
Slide 9: Utilities
Utilities ▪ Disappointing result for the half, impacted by: ̶ Power maintenance contract (8 Dec ASX 27% Power & Gas release) ($17m) ̶ NSW Water construction project ($12m) 18% of 44% Water ̶ NZ renewable wind farm project ($6m) HY23 revenue Telco 29% ̶ Meter reading productivity and labour availabil
Slide 10: Facilities
Facilities ▪ Performance above expectations 20% Govt / H&E ▪ Royal Adelaide Hospital and Bendigo Hospital performing to plan 38% of 37% Defence ▪ Contract win – South Australian Housing HY23 revenue1 23% P&E / I&M Authority Maintenance Contract (~27,000 social 20% Building and public housing dwellin
Slide 11: $38.8bn of work-in-hand
$38.8bn of work-in-hand ~90% Government / ✓ Long-dated ✓ Government related ✓ Diversified by industry ✓ 85% Services2 Work-in-hand by segment1 ($38.8bn) Work-in-hand profile1 ($bn) Utilities 14 $4.7bn 12 12% 10 8 Transport 6 $18.1bn Facilities 47% $16.0bn 4 41% 2 0 2H23 FY24 FY25 FY26 FY27 FY28+ Tra
Slide 12: Group financials
Group financials Michael Ferguson
Slide 13: Group underlying financial performance
Group underlying financial performance ▪ Total revenue3 2.9% higher to $6.1bn $m1 HY23 HY222 Change ▪ Group underlying EBITA margin 2.2%, impacted by: Total revenue3 6,144.7 5,970.3 2.9% ̶ Unprecedented weather impact EBITDA 281.3 341.1 (17.5%) ̶ Labour shortages (147.7) (164.1) Depreciation and amo
Slide 14: Segment underlying performance overview
Segment underlying performance overview Transport Utilities Facilities1 ▪ Revenue of $2.7bn (1.2%) ▪ Revenue of $1.1bn (12.3%) ▪ Revenue of $2.3bn (16.6%) ▪ EBITA of $88.7m (14.5%) ▪ EBITA of ($5.2m) (>100%) ▪ EBITA of $99.0m (11.1%) ▪ EBITA margin of 3.3% (0.6pp) ▪ EBITA margin of (0.5%) (4
Slide 15: Reconciliation of underlying to statutory results
Reconciliation of underlying to statutory results Amortisation of Net interest acquired $m EBITA1 Tax expense 2 NPATA1 NPAT expense intangibles (post-tax) Underlying3 results 133.6 (40.3) (25.3) 68.0 (9.2) 58.8 Fair value on Downer Contingent Share Options 9.3 - - 9.3 - 9.3 (DCSO)4 Total items outsi
Slide 16: Operating cash flow
Operating cash flow ▪ Operating cash conversion of 8.5%. Key variances $m HY23 HY221 Change explained by: Underlying2 EBIT 120.5 162.8 (26.0%) 1. $78m – supplier payments on completion of SGT Add: Amortisation of acquired intangibles 13.1 14.2 (7.7%) project (timing, with inflow accumulated over pri
Slide 17: Cash flow
Cash flow ▪ Cash balance of $450.4m and total liquidity of $m HY23 HY22 Change $1,635.4m ▪ Strong focus in 2H23 to return to traditional Total operating cash flow (35.4) 270.4 (>100.0%) operating cash flow conversion Net Capex (Core) (70.1) (65.2) 7.5% ▪ Capex consistent with prior periods Net Capex
Slide 18: Group debt profile
Group debt profile ▪ Weighted average debt duration of 3.4 years1 Debt maturity profile (A$m) (3.9 years at 30 June 2022) ▪ Net Debt to EBITDA2 of 2.3x, within the capital A$m allocation framework target range of 800 2-2.5x, but above current optimal level ▪ Downer remains in compliance with all fin
Slide 19: Outlook
Outlook Grant Fenn
Slide 20: Outlook
Outlook FY23 has proven difficult to provide accurate guidance given weather and changing economic conditions: ▪ 17 August 2022 – Guidance for FY23 ̶ 10-20% underlying NPATA growth subject to COVID-19, weather, labour, and other disruptions ▪ 3 November 2022 – AGM ̶ Forecasts continue to support gui
Slide 21: Change in guidance
Change in guidance 8 December Excluding any prior period impact of the accounting irregularities, Downer now expects underlying FY23 $210-230m NPATA to be between $210 million – $230 million assuming no further material COVID-19, weather, labour 2022 shortages or other disruptions Utilities Power ▪
Slide 22: Strategic priorities
Strategic priorities Peter Tompkins
Slide 23: Strategies to realise value for shareholders
Strategies to realise value for shareholders Operational excellence and risk Reset operating Continue to simplify management model and cost base current portfolio Management Merge AU & NZ accountability and Maximise divestment operations to be sector led application of The Downer value for assets to
Slide 24: Reset operating model and cost base
Reset operating model and cost base Merger of AU & NZ operating units Project leader and team appointed, Improves scale, Improves Targeting with scope & focus areas: technical customer benefits of ▪ Merge AU & NZ operating units to capability & innovation and at least establish sector led, stand-alo
Slide 25: Continue to simplify current portfolio
Continue to simplify current portfolio We have a portfolio of outstanding assets, and the Australian Transport Projects divestment proves that Transport Projects signed Ongoing strategic review ▪ Announced 22 February 2023 with an enterprise value of $212m Merger of Divestment ▪ Completion expected
Slide 26: Operational excellence and risk management
Operational excellence and risk management Downer has exceptional businesses, market leading positions with scale and exposure to energy transition, industrialisation, defence and government outsourcing driving high growth potential ▪ The Downer Standard to drive New sector led businesses better pro
Slide 27: Timeline and what to expect from here
Timeline and what to expect from here 1 July 2023 New operating model 20 February 2023 Targeting the new operating model Trans-Tasman integration to be effective at the beginning of Announced the merged Australian FY24 Transformation and New Zealand operating model benefits and the new Executive tea
Slide 28: Preferred applicant for QTMP
Preferred applicant for QTMP ▪ Preferred applicant on Queensland Train Manufacturing Program (QTMP) – announced 6 February 2023 ▪ Largest investment in new rollingstock in Queensland history ▪ Target contract close and mobilisation in Q4 FY23 ▪ Downer will deliver: ̶ 65 six-car passenger trains ̶ tw
Slide 29: Immediate priorities
Immediate priorities ▪ Particular focus on: ̶ value for shareholders ̶ risk management ̶ mobilisation of QTMP ̶ target EBITA margin ̶ new structures and leadership team for success ▪ The Transformation Program is mobilised and restructuring costs to be incurred from 2H ▪ Update at Investor Day in Ap
Slide 30: Supplementary information
Supplementary information
Slide 31: Transport
Transport Road Services WIH profile 1 ($bn) Top 5 Contracts Remaining (ex QTMP) 6.0 Rail & Transit Systems 5.0 1. Maintaining Waratah trains until 2044 Projects 4.0 2. Maintaining HCMTs until 2053 3.0 2.0 3. Maintaining Sydney Growth Trains until 2044 1.0 0.0 4. Operating Yarra Trams until 2024 (Keo
Slide 32: Utilities
Utilities Telecommunications WIH profile ($bn) Top 5 Contracts Remaining 2.0 Water 1. Sydney Water until 2030 (Confluence Water JV) 1.5 Power and Gas 2. AusNet (power) until 2024 (plus two 3-year 1.0 extensions) 0.5 3. City of Gold Coast (water) until 2032 0.0 4. AusNet (gas) until 2026 2H23 FY24 FY
Slide 33: Facilities
Facilities Government WIH profile ($bn) Top 5 Contracts Remaining Health & Education 7.0 1. New Royal Adelaide Hospital PPP until 2046 6.0 Defence 5.0 (contract reset 30 June 2022) Power & Energy 4.0 2. Bendigo Hospital PPP until 2042 Industrial & Marine 3.0 (contract reset 30 June 2022) 2.0 Buildin
Slide 34: HY23 revenue composition
HY23 revenue composition Revenue diversified across Transport, Utilities and Facilities markets Revenue growth of 3% on prior period (9% excluding Mining and Hospitality in comparative period) 1 P&E / I&M is the abbrev iation of Power & Energy and Industrial & Marine businesses and also includes Min
Slide 35: Business unit performance
Business unit performance ▪ Refer to slide 14 for commentary on segment $m HY23 HY221 Change performance Transport 88.7 103.8 (14.5%) Utilities (5.2) 40.5 (>100.0%) Facilities 99.0 89.1 11.1% Urban Services Businesses 182.5 233.4 (21.8%) Mining - 8.1 (100.0%) Hospitality - (12.5) 100.0% Non-core bus
Slide 36: Capital expenditure and D&A
Capital expenditure and D&A ▪ Maintenance capex broadly in-line with PP&E $m HY23 HY22 Change depreciation and IT amortisation expense Net Capital expenditure – core 70.1 65.2 7.5% Net Capital expenditure – non-core - 8.1 (100.0%) IT 14.4 22.8 (36.8%) Capital expenditure / IT 84.5 96.1 (12.1%) $m HY