Slide 1: Downer Group 2011 Full Year Results
For personal use only Downer Group 2011 Full Year Results 24 August 2011 1
Slide 2: Disclaimer
For personal use only Disclaimer 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
Slide 3: A year of rebuilding and transformation
For personal use only A year of rebuilding and transformation • New project management team appointed • Revised production and delivery schedule introduced • Improved manufacturing processes in China and Cardiff Waratah • Set 1 in passenger service since 1 July 2011 and performing well • Set 2 prese
Slide 4: A year of rebuilding and transformation
For personal use only A year of rebuilding and transformation Building • Talent identification and succession in tight market management • Training and development capability • Performance management • Fit 4 Business program Cost efficiency • Margin improvement • Shared services Return on capital •
Slide 5: Key contract wins
For personal use only Key contract wins Downer Mining Downer Rail Downer Engineering Downer Works • Fortescue Metals • Locomotive contracts • Xstrata coal handling & • Downer-Mouchel Group, Christmas Creek including 29 standard preparation plant, ISAs with Main (WA): $3.0b gauge, 59 narrow Ravenswor
Slide 6: Financial overview
For personal use only Financial overview • Total revenue1 up 15.2% to $7.0 billion Revenue • Growth in Mining, Rail and Engineering businesses, decline in Works NZ • Underlying2 EBIT3 $292.2 million, down 8.1% Earnings and cash flow • Underlying net cash flow4 $324.9 million (111% of underlying EBIT
Slide 7: Mining
For personal use only Mining Total revenue $m EBIT $m 1,466 973 119.6 68.2 • Strong result, driven by successful ramp-ups at Christmas Creek, Goonyella and Norwich Park • Revenue up 51%; EBIT up 75% • Result achieved despite wet weather impact in FY11 FY10 FY11 FY10 NSW, QLD and WA • Focus on consol
Slide 8: Rail
For personal use only Rail Total revenue $m1 EBIT $m • Strong demand for locomotives driven by 1,129 1,047 75.0 77.9 coal and iron ore expansion projects. 200 Contracts secured with QR, Pacific National 273 and BHP. 929 273 774 • Full capacity in both passenger and freight during the year FY11 FY10
Slide 9: Engineering
For personal use only Engineering Total revenue $m EBIT $m • Good revenue growth across the business 2,299 1,894 72.0 112.5 • Lower EBIT due to: ― Underperforming contracts, particularly Curragh CHPP ― Costs of project delays and maintaining FY11 FY10 FY11 FY10 capacity for substantial pending deman
Slide 10: Works
For personal use only Works Australia Total revenue $m EBIT $m • Extreme wet weather in 1H delayed project starts and increased operating costs 2,070 2,081 54.0 102.9 • Stronger performance in 2H, returning to more traditional margins • Awarded three Integrated Service Arrangements (ISA) in WA; valu
Slide 11: Zero Harm
For personal use only Zero Harm Downer safety performance • Included in Carbon Disclosure (12-month rolling frequency rates) Leaders Index (Aust/NZ) two years running 2.1 9 8.13 • Minimal direct exposure to 1.8 Environment Government’s carbon price 8 1.5 7.17 • Assisting customers to develop 7 LTIFR
Slide 12: Group Financials
For personal use only Group Financials 12
Slide 13: Underlying financial performance
For personal use only Underlying financial performance $m FY11 FY10 Change (%) Total revenue 6,975.1 6,055.9 15.2 EBITDA1 502.7 478.0 5.2 EBIT1 292.2 317.8 (8.1) Net interest expense (64.3) (54.2)2 (18.6) Tax expense1 (61.5) (66.3) 7.2 Net profit after tax1 166.4 197.3 (15.7) Effective tax rate1 27.
Slide 14: Reconciliation to statutory result
For personal use only Reconciliation to statutory result $m FY11 EBIT FY11 NPAT Underlying result 292.2 166.4 Individually Significant Items • Waratah train provision (250.0) (175.0) • Works UK impairment (8.8) (11.3) • CPG NZ impairment (7.8) (7.8) Sub-total (266.6) (194.1) Statutory result 25.7 (2
Slide 15: Summary of earnings
For personal use only Summary of earnings $m Total Engineering Works Works Mining Rail Corporate AU NZ Underlying EBIT 292.2 72.0 43.0 11.0 119.6 75.0 (28.4) Add back unfavourable items: • Wet weather 24.3 6.8 7.6 2.4 7.3 0.2 • Curragh CHPP contract 41.1 41.1 • NZ State Highway 20-1 contract 9.5 9.5
Slide 16: Operating cash flow
For personal use only Operating cash flow $m FY11 FY10 EBITDA1 502.7 478.0 Net interest paid2 (59.1) (50.9) Tax paid (18.4) (24.8) Movement in working capital3 (241.3) (145.3) Other 1.7 (52.7) Operating cash flow 185.6 204.3 Add: Waratah train project net cash outflow 139.3 172.8 Underlying operatin
Slide 17: Cash flow
For personal use only Cash flow $m FY11 FY10 Total operating 185.6 204.3 Total investing (319.6) (144.4) Total financing 50.4 25.3 Net (decrease)/increase in cash held (83.6) 85.1 Cash at 30 June1 288.6 385.1 1 Cash excludes bank overdrafts of $6.3 million (2010: $6.7 million) which are included in
Slide 18: Balance sheet and capital management
For personal use only Balance sheet and capital management $m Jun 11 Jun 10 Total assets 3,710.7 3,456.0 Total shareholders’ equity 1,442.4 1,242.9 Net debt1 492.5 530.7 Gearing: net debt to net debt plus equity 25.5% 29.9% Gearing (including off balance sheet debt)2 33.7% 36.4% Adjusted net debt /
Slide 19: Capital outlook
For personal use only Capital outlook $m FY12 Mining Committed capital expenditure: • Boggabri 62 • Christmas Creek 73 Maintenance and other growth 175 Sub-total (Mining) 310 Other Divisions • Maintenance and other growth 90 Total 400 19
Slide 20: Debt and bonding facilities
For personal use only Debt and bonding facilities Debt facilities $m Debt facilities by type % Total facilities 1,408 Syndicated bank facilities 36 Drawn1 781 Bilateral bank facilities 17 Available facilities 627 Capital markets: bonds 19 Cash 289 Capital markets: USPP 8 Total liquidity 916 Export c
Slide 21: Debt maturity profile
For personal use only Debt maturity profile Weighted average debt duration of 2.4 years (FY10: 2.1 years) Finance Leases 500 Syndicated Facilities 400 Capital Markets - Bonds A$ million Equivalent Capital Markets - US Pte Placements 300 Export Credit Finance 200 Bilateral Facilities 100 0 Dec-11 Jun
Slide 22: Fit Business program - FY11
For personal use only Fit 4 Business program - FY11 Over $55 million in cost savings achieved in FY11 (one-off and sustainable) Downer Mining Downer Rail Downer Engineering Downer Works • Overhead economies • Locomotive cost down • Property rationalisation • ‘RAP’ usage of scale project • Supply cha
Slide 23: Fit Business program - FY12
For personal use only Fit 4 Business program - FY12 Over $60 million in gross benefits budgeted to maintain/improve competitiveness Downer Mining Downer Rail Downer Australia Downer NZ • Energy efficiency • Loco cost reduction • Re-organisation • Labour productivity • Maintenance process & synergies
Slide 24: WTP: Forecast cost at completion (FCAC)
For personal use only WTP: Forecast cost at completion (FCAC) $m Feb 11 Change Current FCAC Materials & Sub-Contracted Components 1,019 15 1,034 Labour 324 (24) 300 Engineering Services 131 17 148 Transport, Logistics & Procurement 175 (3) 172 Project Management 143 (17) 126 Insurance, Bonding & Fin
Slide 25: WTP: Impact of termination of WTP
For personal use only WTP: Impact of termination of WTP • Current view of Downer that Reliance Rail will continue as the operating entity of the WTP $m P&L impact Cash impact Write-off of WIP on Downer B/S 30 June 2011 328 - Write-back of B/S provision at 30 June 2011 (255) - Estimated cash payments
Slide 26: Waratah Train Project
For personal use only Waratah Train Project 26
Slide 27: Project update
For personal use only Project update • Set 1 in passenger service 1 July 2011 and performing well • Set 2 presented to RailCorp for Practical Completion on 28 July Sets 1 and 2 • Set 1 has achieved 20,000km in passenger service with 1 delay incident • Value Engineering processes delivering improved
Slide 28: Production plan – Stage 1
For personal use only Production plan – Stage 1 Stage 1: Trains 1 to 10 Objective • Ensure the trains are completed to design and quality standards Approach • Rework in Cardiff: Sets being reworked and brought up to the correct configuration in Cardiff; all within FCAC budget ― Design of trains made
Slide 29: Production plan – Stage 2
For personal use only Production plan – Stage 2 Stage 2: Trains 11 to 15 Objective • Identify whether the scope transfer from CRC to Cardiff needs to take place Approach • Bodyshell: Non-conformances on all bodyshells rectified by CRC prior to the vehicles entering the interior fit-out process • Val
Slide 30: Production plan – Stage 3
For personal use only Production plan – Stage 3 Stage 3: Trains 16 to 25 Objective • Stabilise output quality and rate of manufacture Approach • Value Engineering: Improved bodyshell processes implemented from train 19 onwards; eases workload in the fit-out shop • Production processes: Build process
Slide 31: CRC Flow Line Station
For personal use only CRC Flow Line Station 1 Before 11 August 2011 31
Slide 32: Production plan – Stage 4
For personal use only Production plan – Stage 4 Stage 4: Trains 26 to 78 Objective • Increase rate of manufacture Approach • Configuration Freeze 2: Production baseline with improved manufacturability in progress for Set 26 onwards • Production processes: Value Engineering will continue to drive imp
Slide 33: Through life support (TLS)
For personal use only Through life support (TLS) • TLS team successfully maintained the test trains for over 12 months • Train set 1 in passenger service and being maintained at Auburn as part of TLS contract • Initial performance and reliability of sets 1-2 has exceeded expectations • Expectation o
Slide 34: Summary
For personal use only Summary • Set 1 in passenger service 1 July 2011 and performing well • Set 2 presented to RailCorp for Practical Completion on 28 July • Set 3 Practical Completion delayed by 4 weeks to allow for more Reliability Growth Running to support achievement of the Set 7 reliability be
Slide 35: Outlook
For personal use only Outlook 35
Slide 36: Divisional update: Downer Australia
For personal use only Divisional update Downer Australia Divisional priorities • Integrate Works and Engineering • Invest in people and systems • Build capability in WA • Strengthen east coast business platform • Build mechanical capabilities • Complete Curragh and other projects Outlook • WA expect
Slide 37: Divisional update: Downer New Zealand
For personal use only Divisional update Downer New Zealand Divisional priorities • Operating within continued tough market environment • Christchurch City earthquake – participation in infrastructure rebuild Alliance • Optimise management structure, cost base and overheads • Building civil projects
Slide 38: Divisional update: Downer Mining
For personal use only Divisional update Downer Mining Downer Mining Divisional priorities • Continued strong focus on Zero Harm • Safely deliver current projects on time, on budget • Manage start-up / ramp-up of new projects and project expansions • Expand mining services • Return on investment • Co
Slide 39: Divisional update: Downer Rail
For personal use only Divisional update Downer Rail Divisional priorities • Supporting passenger customer growth demands • Expanding passenger and freight maintenance capability • Delivering Tilt Train and locomotive orders • Cost reduction program Outlook • Locomotive demand returning to more susta
Slide 40: Work-in-hand: $20 billion
For personal use only Work-in-hand: $20 billion Work-in-hand by division1 Work-in-hand by type1 Mining $7.5 billion 37% Alliance $0.8 billion 4% Rail $5.2 billion 26% Cost plus $0.8 billion 4% Downer Aus $4.8 billion 24% Fixed price $5.9 billion 29% Downer NZ $2.6 billion 13% Schedule of rates $8.5
Slide 41: Work-in-hand
For personal use only Work-in-hand Work-in-hand by type1 Fixed price projects Total value % Profitable (approx) complete2 Waratah Waratah – TLS $1,970 million <2% 14% Fixed price Waratah – RSM $1,650 million 48% x 29% KDR – Yarra Trams $1,400 million 19% 15% Locomotive orders (x6) $580 million 6
Slide 42: Group outlook
For personal use only Group outlook • Downer has work-in-hand of around $20 billion, is strongly aligned to the resources and energy sectors and is well placed to capitalise on the pipeline of opportunities driven by those markets. Tendering activity has been very high over the past six months parti
Slide 43: Supplementary information
For personal use only Supplementary information 43
Slide 44: Market outlook – engineering construction
Market outlook – engineering construction For personal use only • Record committed capex in resources and oil & gas • Mining-related work positive on back of strong investment, high commodity prices / company profits $b 2008‐09 120 Other Mining & Heavy Industry 100 Telco Recreation 80 Pipelines Elec
Slide 45: Market outlook – maintenance
Market outlook – maintenance For personal use only $b 2007‐08 22 Non‐Residential Buildings 20 Defence 18 Light Manufacturing 16 Heavy Manufacturing 14 Mining 12 Telco 10 Gas Pipelines 8 Electricity Supply 6 Water & Wastewater 4 Ports Railways 2 Roads 0 2010 2011F 2012F 2013F 2014F 2015F 45 Source: B
Slide 46: Summary income statement
For personal use only Summary income statement $m FY11 FY10 Change % Revenue from ordinary activities 6,633.2 5,796.6 836.6 14.4 Interest revenue 14.2 18.1 (3.9) (21.5) Other revenue 8.7 30.1 (21.4) (71.1) Total revenue 6,656.0 5,844.8 811.2 13.9 Employee benefits expense (2,218.5) (1,944.3) (274.3)
Slide 47: Summary balance sheet – assets
For personal use only Summary balance sheet – assets $m Jun 11 Jun 10 Change % Current assets Cash and cash equivalents 288.6 385.1 (96.5) (25.1) Inventories 192.6 193.1 (0.5) (0.3) Trade and other receivables 1,313.0 1,183.9 129.1 10.9 Other current assets1 61.4 55.3 6.1 11.0 Total current assets 1
Slide 48: Summary balance sheet – liabilities
For personal use only Summary balance sheet – liabilities $m Jun 11 Jun 10 Change % Current liabilities Trade and other payables 1,117.7 987.3 130.4 13.2 Borrowings 165.1 272.2 (107.1) (39.3) Provisions 239.7 199.4 40.2 20.2 Other current liabilities1 78.5 46.5 32.0 68.8 Total current liabilities 1,
Slide 49: Summary balance sheet
For personal use only Summary balance sheet $m Jun 11 Jun 10 Change % Total assets 3,710.7 3,456.0 254.7 7.4 Total liabilities (2,268.3) (2,213.1) (55.1) (2.5) Net assets 1,442.4 1,242.9 199.5 16.1 Issued capital 1,423.9 1,118.7 305.2 27.3 Reserves (121.6) (107.9) (13.7) (12.7) Retained earnings 140
Slide 50: Waratah train project
For personal use only Waratah train project • Design, build and commission Auburn Maintenance Centre Maintenance facility • Total revenue $220 million (fixed price lump sum) • Practical completion achieved in June 2010 • Design, build and commission 78 eight-car sets (626 carriages) • Joint venture
Slide 51: Reliance Rail
For personal use only Reliance Rail • Special purpose vehicle (SPV) established to fund Waratah Train project • $1.9 billion bonds outstanding Reliance Rail (RR) • $357 million committed bank debt to be drawn • Funding arrangements non-recourse to Downer • $357 million bank debt to be drawn down fro
Slide 52: Risk management framework
For personal use only Risk management framework Execution Post Tender & Completion Monitoring • Approval to prepare bid • Approval of contract • Project reviews formation • Approval to submit bid • Key learnings • Mobilisation and – >A$250m – TCC and Board • Update risk processes commercial set-up a
Slide 53: New Divisional structure: Historical financial summaries
For personal use only New Divisional structure Historical financial summaries 53
Slide 54: Downer Australia
For personal use only Downer Australia1 $m 1H09 2H09 FY09 1H10 2H10 FY10 1H11 2H11 FY11 Total revenue 1,348.5 1,368.1 2,716.6 1,297.1 1,466.2 2,763.3 1,572.5 1,664.0 3,236.4 EBIT 72.7 90.3 163.0 71.2 78.9 150.2 60.4 48.7 109.1 EBIT margin2 5.4% 6.6% 6.0% 5.5% 5.4% 5.4% 3.8% 2.9% 3.4% ROFE3 25.1% 26.
Slide 55: Downer New Zealand
For personal use only Downer New Zealand1 $m 1H09 2H09 FY09 1H10 2H10 FY10 1H11 2H11 FY11 Total revenue 435.1 475.0 910.1 414.4 473.3 887.6 414.7 437.7 852.4 EBIT 28.0 40.7 68.6 24.6 36.5 61.1 8.9 5.3 14.3 EBIT margin2 6.4% 8.6% 7.5% 5.9% 7.7% 6.9% 2.1% 1.2% 1.7% ROFE3 32.6% 40.3% 40.3% 38.0% 35.1%
Slide 56: Downer Mining
For personal use only Downer Mining $m 1H09 2H09 FY09 1H10 2H10 FY10 1H11 2H11 FY11 Total revenue 501.6 526.4 1,028.0 483.5 490.0 973.5 634.2 831.7 1,465.9 EBIT 21.3 25.2 46.5 37.0 31.2 68.2 50.8 68.7 119.6 EBIT margin1 4.3% 4.8% 4.5% 7.7% 6.4% 7.0% 8.0% 8.3% 8.2% ROFE2 10.8% 10.4% 10.4% 12.2% 13.0%
Slide 57: Downer Rail
For personal use only Downer Rail $m 1H09 2H09 FY09 1H10 2H10 FY10 1H11 2H11 FY11 Revenue – Rail 324.2 301.6 625.9 320.8 453.5 774.3 480.2 448.4 928.6 (ex Waratah PPP) Revenue – Waratah 116.1 146.9 263.1 137.2 135.2 272.5 187.4 13.1 200.5 PPP Total revenue 440.4 448.6 888.9 458.0 588.7 1,046.8 667.5