DOWNER EDI LIMITED — Annual Report 2003

Aug 25, 2003

Downer EDI Limited ACN 003 872 848 Level 3 190 George Street Sydney NSW 2000 Tel: 61 2 9251 9899 Fax: 61 2 9251 1987

26 August 2003

Company Announcements Office Australian Stock Exchange Limited Level 4 20 Bridge Street SYDNEY NSW 2000

Dear Sir

Please find attached the Preliminary Final Report - Appendix 4E for the twelve months ended 30 June 2003, including media release.

Please also note that the directors have declared a final dividend of 2.4 cents per ordinary share, franked to 50%, payable on 10 October 2003. The record date for determining entitlement is 5 September 2003. The last date for receipt of election notices for participation in the Dividend Reinvestment Plan is 10 September 2003. Following payment of the 2003 final dividend, the company's dividend reinvestment plan will be suspended.

Yours faithfully

Geoffrey Bruce Company Secretary

This facsimile is intended only for the use of the person to whom it is addressed and may contain confidential information. If you have received this transmission in error, please notify us immediately by telephone and then destroy the original. Thank you.

manaanan manaanan m

For immediate release

Tuesday, 26 August 2003

Downer EDI posts strong 2003 result - profit up 18%

Positive outlook for 2004

Downer EDI Limited (Downer EDI) today announced record levels of revenue and profit for the year ended 30 June 2003, its sixth successive year of increase. The company lifted profit after tax by 18% to \$66.6 million (2002) \$56.4 million).

Revenue for the year was \$2.7 billion (2002 \$2.4 billion), a 10% increase, and included a contribution from CPG Corporation Pte Ltd (CPG) of \$78 million gross revenue for the first three months of ownership.

Commenting on the result, Downer EDI Managing Director Stephen Gillies said the increase in revenue and profit was achieved despite redundancies and downsizing costs associated with a scale back in capital works activities, land drilling and general fabrication engineering. A number of businesses were either sold or reduced in scale, reflecting an ongoing focus on core versus noncore business.

"Stripping out the effect of planned downsizing, our core businesses delivered around \$500 million of incremental revenue, of which approximately 70% was organic, clearly demonstrating the healthy markets in which Downer EDI participates." Mr Gillies said.

This is the first year the company has been in a position to pay a franked dividend. An interim dividend of 0.5 cents unfranked was paid on 30 April 2003 and a final dividend of 2.4 cents (franked to 50%), payable 10 October 2003 (7 weeks earlier than last year), was declared by the Directors, making up a full year dividend of 2.9 cents per share. This year's total dividends of \$33.5 million represent a pay out ratio of 50.3% of Downer EDI's net profit after tax.

Shareholders are advised that the last date for receipt of election notices for participation in the Dividend Reinvestment Plan (DRP) is 10 September 2003. Following payment of the 2003 final dividend, the company's DRP will be suspended.

A A A A A A A A A A A A A A A A A A A

At year-end, the forward order book reached a record high of \$5.5 billion, up 22% on the same time last year. The figure excludes contracts of over \$500 million where the company has reached preferred bidder status and where we are moving to financial close.

Mr Gillies said Downer EDI's financial performance for the year was ahead of the half-year forecast level and was considered robust in a period of mixed economic performance in the region.

"Net profit after tax equates to a basic earnings per share of 6.3 cents, a healthy improvement over the previous year of 5.8 cents per share. Net debt was reduced by \$150.8 million to \$296.2 million, a 34% decrease on the previous year.

"Overall, our core businesses performed well with increases in revenue from Engineering (16% increase to \$837 million), Mining and resources (6% increase to \$955 million) and Infrastructure services (37% increase to \$572 million).

"While Rail (rollingstock) revenue decreased 8% to \$334 million, its EBITA contribution to the Group increased by \$6.4 million. Discontinued businesses and inter-segment eliminations accounted for the balance of Group revenue.

"The operating cash flow for the year was \$225.0 million, up \$177.6 million over the prior year. This increase in cash flow from operations reflects strong cash flow levels driven by all divisions, including an improvement in the management of working capital.

"A decrease in funds committed to working capital is also pleasing taking into account the increase in the level of operating activity across the Group." Mr Gillies said.

Downer EDI's balance sheet is the strongest it has ever been, a product of existing and ongoing focus. Total assets now stand at \$2.0 billion, total cash at bank and on deposit was \$206.7 million, and net borrowings totalled \$296.2 million. The company's gearing (net debt to shareholder funds) was a record low at 39%, down from 63%.

Millennium train

There has been significant negative political and media comment about Sydney's Millennium train, as part of a wider political debate about the state of rail infrastructure in New South Wales, and Downer EDI's press release of 14 August 2003 provided some balance to the information publicly available on the commissioning of this technologically advanced product.

Mr Gillies said Downer EDI prides itself on its preparedness to invest in new technology where this can deliver improved service levels and product satisfaction for both its clients and their customers

"We firmly believe that the State Rail Authority of NSW (StateRail) has chosen a quality product and that the Millennium train will deliver greatly improved safety, comfort and ride to its paying customers, as well as vastly enhanced asset management for StateRail," Mr Gillies said.

"The commissioning of the Millennium trains has not been problem-free, but our experienced team of engineers and product suppliers have contributed to a task force to ensure an increased level of proactive management for ongoing product enhancement.

"Operating systems will continue to be improved as the task force and software engineers overcome service interruptions.

"We note that no incidents regarding the performance of the trains have been reported on the StateRail website for two weeks, which is a significant improvement and reinforces our view that the learning curve for use of new technology will deliver value to Sydney rail commuters."

Outlook

Mr Gillies said the outlook for Downer EDI continues to be positive for 2004. "We expect another strong year and have targeted increases in gross revenue and EBITA of over 15%, with the prospects for growth particularly encouraging in the power and infrastructure sectors.

"Earnings per share will continue to improve given our strengthening capital base and the lack of new capital required to support further growth initiatives.

"We will continue to maintain our ongoing focus on a strong balance sheet and will be vigilant in managing our capital spend with a focus on value creation and increasing our market share in target industry sectors (i.e. facilities management of public and private infrastructure, including road, rail, power. telecommunications and mining).

"The full year benefits of the acquisition of CPG will apply for the 2004 financial year and we see continuing benefits in the years ahead as their design, master planning and facilities management capabilities are utilised across the total group.

"The CPG activities in Singapore will be expanded into Australia and New Zealand, and over time will provide a beach-head for infrastructure facilities management and investment.

"Overall, we expect to see steady growth come from the company's ability to provide clients in the government and private sectors with turnkey service delivery in our target markets."

Summary results table

For year ended 30 June 2003

	2003 \$M	2002 \$M
Revenue	2,697.0	2,442.4
Turnover* Earnings before interest, tax and	2,867.9	2,585.6
amortisation of intangibles (EBITA)	140.4	128.7
Profit before tax	94.7	79.3
Net profit after tax	66.6	56.4
Net profit (before goodwill amortisation)	82.6	70.7
Total capital & reserves	760.2	709.6
Total assets	2,032.7	1,829.7
Cash at Bank and on deposit	206.7	106.3
Undrawn facilities	502.7	322.6
Value of work on hand	5,500.0	4,500.0

* Turnover is defined as total revenue, plus our share of the sales revenues of joint venture activities

Analysis of turnover - 2003

By major division	Engineering	30.3%
	Infrastructure	20.1%
	Mining and resources	38.0%
	Rail	11.6%
By location	Australia	70%
	New Zealand/Pacific	24%
	Asia	6%

Contact: John Shuey, Group Corporate Affairs Manager (02) 9251 9899 or 0413 705 491

Rules 4.3 A

Appendix 4E

Preliminary final report

Name of entity

			DOWNER EDI LIMITED
ABN							Financial year ended ('current period')
97 003 872 848								30 June 2003
Details of the reporting period Current period:		from	01 July 2002		to		30 June 2003
Previous corresponding period:		from	01 July 2001		to		30 June 2002
Results for announcement to the market								\$A'000
Revenues from ordinary activities (item 1.1)				UD		10.3%	to	2,679,930
Profit (loss) from ordinary activities after tax attributable to members (item 1.22)				up		18.0%	to	66,572
Profit (loss) from significant items after tax attributable to members (item 2.5)				gain (loss) ٥f
Net profit (loss) for the period attributable to members $($ item 1.11 $)$				up		18.0%	to	66,572
Dividend Payments (see items 10.1 - 10.13)							Amount per security	Franked amount per security at 30% tax
Final dividend:	Prior year - Ordinary	Current year - Ordinary Current year - Preference Prior year - Preference					2.4 c \$40.00 1.9c \$40.00	1.2c Đ. 0.0 o 0
Interim dividend:	Prior year - Ordinary	Current year - Ordinary Current year - Preference Prior year - Preference					0.5 c \$40.00 0.5¢ \$40.00	0.0c \$0.00 $0.0\phi$ \$0.00
Record date for determining entitiements to the dividend						5 September 2003
Commentary on the results for the period (Para 14 ASX)
Refer separate media release attached.

Consolidated statement of financial performance

			Previous
		Current period -	corresponding period -
		\$A'000	\$A'000
1.1	Revenues from ordinary activities (see items
	$1.23 - 1.25$	2,679,930	2,430,390
1.2	Expenses from ordinary activities (see items
	$1.26$ & $1.27$	2,565,080	2,323,230
1,3	Borrowing costs	37,200	39,918
1.4	Share of net profits (losses) of associates
	and joint venture entities (see item 11.7)	17,093	12,059
1.5	Profit (loss) from ordinary activities
	before tax	94,743	79,301
1.6	Income tax on ordinary activities	28,171	22,870
1,7	Profit (loss) from ordinary activities after
	tax	66,572	56,431
1.8	Profit (loss) from extraordinary items after
	tax (see item 2.5)		$\blacksquare$
1.9	Net profit (loss)	66,572	56,431
1.10	Net profit (loss) attributable to outside
	equity interests
1.11	Net profit (loss) for the period attributable
	to members	66,572	56,431
	Non-owner transaction changes in equity
1.12	Increase (decrease) in revaluation reserves
1.13	Net exchange differences recognised in equity	(12, 553)	(16, 783)
1.14	Other revenue, expense and initial adjustments
	recognised directly in equity (attach details)
1.15	Initial adjustments from UIG transitional
	provisions
1.16	Total transactions and adjustments
	recognised directly in equity (items 1.12 to 1.15)	(12, 553)	(16, 783)
1.17	Total changes in equity not resulting
	from transactions with owners as owners	54,019	39,648

Earnings per security (EPS)	Current period (cents)	Previous corresponding period (cents)
1.18 Basic EPS	6.3	5.8
1.19 Diluted EPS	6.	5.5

$\sim$

$\overline{\phantom{a}}$

$\bar{z}$

Notes to the consolidated statement of financial performance

Profit (loss) from ordinary activities attributable to members

			Previous
		Current period -	corresponding period -
		\$A'000	\$A'000
1.20	Profit (loss) from ordinary activities after
	tax ( item $1.7$ )	66.572	56,431
1.21	Less (plus) outside equity interests	$\mathbf{H}$
1.22	Profit (loss) from ordinary activities
	after tax, attributable to members	66,572	56,431

Revenue and expenses from ordinary activities

		Current period - \$A'000	Previous corresponding period - \$A'000
1.23	Revenue from sales or services (For details refer to Appendix 1)	2,573,534	2.350,865
1.24	Interest revenue	7,127	4,324
1.25	(For details refer to Appendix 1) Other relevant revenue	99,269	75,201
	(For details refer to Appendix 1)
1.26	Details of relevant expenses (For details refer to Appendix 1)	2.462.672	2.230,557
1.27	Depreciation and amortisation excluding	102.408	92,673
	amortisation of intangibles (see item 2.3) (For details refer to Appendix 1)

Consolidated statement of retained earnings

			Previous
		Current period - \$A'000	corresponding period - \$A'000
1.28	Retained profits (accumulated losses) at the beginning of the financial period	101,480	72,857
1.29	Net profit (loss) attributable to members $(i$ tem 1.11)	66,572	56.431
1.30	Net transfers from (to) reserves		622
1.31	Net effect of changes in accounting policies (item 1.34)	18,386
1.32	Dividends and other equity distributions
	paid or payable	(28,435)	(28, 430)
1.33	Retained profits (accumulated losses)
	at end of financial period	158.003	101,480
1.34	Prior year adjustment in accordance with revised accounting
	standard AASB 1044 - Provisions, in respect of 2002 final
	dividend in Statement of Financial Performance for the
	year ended 30 June 2002	18,386

Notes to the consolidated statement of financial performance

Intangible and significant items

		Consolidated - current period
		Before tax	Related	Related	Amount
		\$A'000	tax.	outside	(after tax)
			\$A'000	equity	attributable
				interests	to members
				\$A'000	\$A'000
		(a)	(b)	$\langle c \rangle$	(d)
2.1	Amortisation of goodwill	16,031			16,031
2.2	Amortisation of other intangibles	845	$\ddot{}$	$\bullet$	845
2.3	Total amortisation of intangibles	16,876	₩		16,876
2.4	Total significant items		$\blacksquare$	$\bullet$
2.5	Total extraordinary items		٠

Basis of Preparation

This preliminary final report has been prepared in accordance with ASX Listing Rule 4.3A and the disclosure requirements of ASX Appendix 4E.

Details of changes in accounting policies are disclosed below. Except for these changes, the accounting policies adopted in the preparation of the preliminary final report are consistent with those adopted and disclosed in the 2002 annual financial report.

Changes in accounting policies:

In accordance with AASB 1028 'Employee Benefits' on 1 July 2002 the entity changed its policy for recognising provision for annual leave. The amount of the provision has been calculated using the remuneration rate expected to apply at the time of payment, rather than the remuneration rate that applies at reporting date. This change in accounting policy had no material affect.

In accordance with AASB 1044 'Provisions, Contingent Liabilities and Contingent Assets' the consolidated entity changed its policy for recognising provisions. Under AASB 1044, a provision for dividend is recognised when the directors have declared, determined or publicly recommended the dividend. Accordingly, the 2003 final dividend declared by the directors in August 2003 has not been provided for in the financial statements. Item 1.34 reflects the effect this change in accounting policy had on retained profits.

The entity has adopted the revised Accounting Standard AASB 1012 'Foreign Currency Translation', applicable to annual reporting periods beginning on or after 1 January 2002. In accordance with the revised Standard, the entity has recognised foreign currency contracts that are hedges in the Statement of Financial Position. This change in accounting policy had no material affect.

Comparative Information

Where necessary comparative amounts have been reclassified and repositioned for consistency with current year accounting policies and disclosures.

Consolidated statement of financial position

		As at end of	As at end of previous
		current period	corresponding period
		A\$'000	A\$'000
	Current assets
3.1	Cash assets	206,746	106,298
3.2	Receivables	736,564	678,240
3.3	Other financial assets	14,195	20,385
3.4	Inventories	125,396	112,054
3.5	Tax assets	12,880	12,111
3.6	Other	14,663	7,999
3.7	Total current assets	1,110,444	937,087
	Non-current assets
3.8	Receivables	32,018	19,737
3.9	Investments (equity accounted)	24,294	26,367
3.10	Other financial assets	16,574	7,958
3.11	Inventories
3.12	Other property, plant and equipment (net)	484,024	530,819
3.13	Intangibles (net)	328,875	278,525
3.14	Deferred tax assets	33,768	26,325
3.15	Other	2,749	2,848
3.16	Total non-current assets	922,302	892,579
3.17	Total assets	2,032,746	1,829,666
	Current liabilities
3.18	Payables	551,514	387,909
3.19	Interest-bearing liabilities	96,204	24,063
3.20	Tax liabilities	37,320	5,784
3.21	Provisions	89,358	94,010
3.22	Other
3.23	Total current liabilities	774,396	511,766
	Non-current liabilities
3.24	Payables	1,503	2,162
3.25	Interest-bearing liabilities	406,747	529,212
3.26	Deferred tax liabilities	66,083	60,433
3.27	Provisions	23,826	16,528
3.28	Other
3.29	Total non-current liabilities	498,159	608,335
3.30	Total liabilities	1,272,555	1,120,101
3.31	Net assets	760,191	709,565
	Equity
3.32	Contributed equity	614,361	607,705
3.33	Reserves
		(12, 173)	380
3.34	Retained profits	158,003	101,480
3.35 3.36	Equity attributable to members of the parent entity Outside equity interests in controlled entities	760,191	709,565
3.37	Total equity	760,191	709,565
3.38	Preference capital included as part of 3.32	60,732	60,732

Consolidated statement of cash flows

			Previous
		Current period -	corresponding period -
		\$A'000	\$A'000
	Cash flows from operating activities
4.1	Receipts from customers	2,967,818	2,391,234
4.2	Payments to suppliers and employees	(2,730,734)	(2,307,139)
4.3	Distributions received from joint ventures	19,457	13,879
4.4	Other dividends received
4,5	Interest received	6,275	3,956
4.6	Interest and other costs of finance paid	(37, 792)	(40, 333)
4.7	Income taxes paid	(21)	(14, 244)
4.8	Other (provide details if material)
4.9	Net cash provided by / (used in) operating activities	225,003	47,353
	Cash flows from investing activities
4.10	Payment for property, plant and equipment	(87, 021)	(90, 898)
4.11	Proceeds from sale of property, plant	76,364	62,226
	and equipment
4.12	Payment for investment securities	(5,987)	(10, 773)
4.13	Proceeds from sale of investment securities	11,258	105
4.14	Receipts from other advances	297	3,000
4.15 4.16	Receipt of joint ventures advances	26,566	2,002
4.17	Advances to joint ventures	(12, 885)	(6,906)
	Proceeds from sale of business (item 9.60)	7,254	25,504
4.18	Payment of obligations acquired under business acquisitions	(30, 121)
4.19	Payment for businesses acquired (item 9.36)	(19, 608)	(59,980)
4.20	Net cash used in investing activities	(33, 883)	(75, 720)
	Cash flows from financing activities
4.21	Proceeds from issues of equity securities		51,271
4.22	Proceeds from borrowings	167,217	367,480
4.23	Repayment of borrowings	(229, 942)	(336, 738)
4.24	Dividends paid	(21, 778)	(11, 242)
4.25	Payment for other borrowing costs		(285)
4.26	Net cash provided by / (used in) financing activities	(84, 503)	70,486
4.27	Net increase / (decrease) in cash held	106,617	42,119
4.28	Cash at the beginning of the financial year	105,836	63,953
	(see Reconciliation of cash item 5.5)
4.29	Exchange rate adjustments to item 4.28	(6,728)	(236)
4.30	Cash at the end of financial year
	(see Reconciliation of cash item 5.5)	205,725	105,836

Non-cash financing and investing activities

Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows are as follows:

During the current financial year, \$6,656,202 in equity was issued in respect of dividend reinvestment plan elections.

During the previous financial year, \$62,816,213 in equity was issued in respect of:

• i. Part consideration for the purchase of businesses (\$16,353,328);
• ii. Dividend reinvestment plan elections (\$11,462,885); and
• iii. Conversion of convertible notes (\$35,000,000).

Reconciliation of cash

Reconciliation of cash at the end of the period (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.		Current period - \$A'000	Previous corresponding period - \$A'000
5.1 5.2 5.3 5.4	Cash on hand and at bank Deposits at call Bank overdraft Other (provide details)	115.537 91,209 (1,021)	91,400 14,898 (462)
5.5	Total cash at end of period (item 4.30)	205,725	105,836

Reconciliation of profit from ordinary activities

after related income tax to net cash flows from operating activities:		Current period - \$A'000	Previous corresponding period - SA'000
5.6 5.7 5.8 5.9 5.10 5.11 5.12 5.13 5.14	Profit from ordinary activities after income tax (item 1.7) Profit on sale of non-current assets Share of joint ventures profits net of distributions Depreciation and amortisation of non-current assets Amortisation of deferred costs Profit on sale of investments Unrealised exchange gains/(losses) Increase/(decrease) in income tax payable Increase/(decrease) in income tax balances	66,572 (5, 514) (2,365) 119,284 1,147 (724) (926) 47,966 (12,014)	56,431 (3,991) 1,820 107,993 (3,083) (466) (8,764) 16,981
	Changes in net assets and liabilities, net of effects from acquisition and disposal of businesses:
5.15 5.16 5.17 5.18 5.19 5.20 5.21 5.22	(Increase)/decrease in assets: Current receivables Current inventories Current tax assets Other financial assets Other current assets Non-current receivables Other non-current financial assets Other non-current assets	(88,066) 72,843 (10, 371) (5,259) (17, 261)	(127, 499) 3,756 (5,311) (10,777) (10,090) (812) (7,958) (2,470)
5.23 5.24 5.25 5.26	Increase/(decrease) in liabilities: Current trade payables Current provisions Non-current payables Non-current provisions	13,165 8,194 41,678 (3,346)	30,348 14,644 (1, 303) (2,096)
5.27	Net cash from operating activities (item 4.9)	225,003	47,353

Ratios

		Current period	Previous corresponding period
	Profit before tax / revenue
6.1	Consolidated profit (loss) from ordinary activities before tax (item 1.5) as a percentage	3.5%	3.3%
	of revenue ( item 1.1 )
	Profit after tax / equity interests
6.2	Consolidated net profit (loss) from ordinary
	activities after tax attributable to members	8.8%	8.0%
	( item 1.11 ) as a percentage of equity (similarly
	attributable) at the end of the period (item 3.35)

r

Earnings per security (EPS)

Details of basic and diluted EPS are as follows: $\overline{7}$

CURRENT PERIOD	Net Profit	Less: preference share dividends/convertible note interest	Earnings for calculation of earnings per share	Weighted average number of ordinary shares	Earnings per share (cents)
Basic earnings per share	66,572,000	5,200,000	61,372,000	967,915,149	6.3
Diluted earnings per share	66,572,000		66,572,000	1,097,915,149	6.1
PREVIOUS CORRESPONDING PERIOD
Basic earnings per share	56,431,000	5,200,000	51,231,000	878,693,898	5.8
Diluted earnings per share	56,431,000	986,040	57,417,040	1,035,916,352	5.5

Net tangible assets per security

			Previous
		Current period	corresponding
		(cents)	period (cents)
8.1	Net tangible asset backing per ordinary security	38	38

$\mathbf{r}$

Businesses / entities acquired and disposed

Control gained over entities during the period having material effect

9.1	Name of Businesses Acquired	Principal Activity	Date of Acquisition	Proportion of Shares Acquired %	Cost of Acquisition \$'000
	Controlled Entities
	Dean Adams Consulting Pty Ltd	Road Maintenance and Construction	1 May 2003	100%	3.004
	RPC Roads Pty Ltd	Road Maintenance and Construction	1 January 2003	100%	9,111
	Primary Producers Improvers Pty Limited	Road Maintenance and Construction	1 July 2002	100%	4.284
	CPG Corporation Pte Ltd (Note 1)	Architecture, Engineering Consulting Services and Facilities Management	1 April 2003	100%	127,518
	Note 1	Contribution of CPG to net profit after tax from ordinary operations, during the period of ownership was \$3,224,000.

Businesses:

ABB	Electrical and Facilities Management	1 June 2003		2.189.
-----	--------------------------------------	------------------------	--	--------

$\overline{\phantom{a}}$

$\sim$

Businesses acquired

9.2	During the financial year, businesses were		Previous
	acquired. Details of the acquisitions are as	Current period -	corresponding period -
	as follows:	\$A'000	\$A'000
	Considerations:
9.3	Cash	142,629	59,980
9,4	Deferred purchase consideration	3,477
9.5	Issue of ordinary shares		16,354
9.6	Total consideration paid	146,106	76,334
	Fair value of net assets acquired:
	Current assets
9.7	Cash	123,021
9.8	Receivables	100,753	53,863
9.9	Inventories	821	4,752
9.10	Other	5,046	192
9.11	Total current assets	229,641	58,807
	Non-current assets
9.12	Investments accounted for using the equity method	5,921
9.13	Property, plant and equipment	22,163	16,795
9.14	Intangibles	632
9.15	Deferred tax assets	3,781
9.16	Other	2,409	378
9.17	Total non-current assets	34,906	17,173
9.18	Total assets	264,547	75,980
	Current liabilities
9.19	Payables	145,306	16,319
9.20	Interest bearing liabilities	306	2,562
9.21	Current tax liabilities	7,775
9.22	Provisions	16,425	4,625
9.23	Other	2,289	417
9.24	Total current liabilities	172,101	23,923
	Non-current liabilities
9.25	Interest bearing liabilities	2,615	5,063
9.26	Deferred tax liabilities	335
9.27	Provisions	1,318	1,111
9.28	Other	256
9.29	Total non-current liabilities	4,524	6,174
9.30	Total liabilities	176,625	30,097
9.31	Net assets acquired	87,922	45,883
9.32	Goodwill on acquisition	58,184	30,451
9.33	Total consideration paid	146,106	76,334
	Net cash outflow on acquisition:
9.34	Cash consideration	142,629	59,980
9.35	Less net cash balances acquired	123,021
9.36	Payment for business acquired (Item 4.19)	19,608	59,980

à.

Businesses disposed

9.37 During the financial year, businesses were disposed. The businesses are not considered individually material.

			Previous
	Details of the disposals are as follow:	Current period -	corresponding period -
		\$A'000	\$A'000
	Considerations:
9.38	Cash	469	25,504
9.39	Receivables	4,450	15,937
9.40	Total consideration received	4,919	41,441
	Fair value of net assets disposed:
	Current Assets
9.41	Receivables	$\qquad \qquad \blacksquare$	700
9.42	Inventories	÷	17,661
9.43	Other	$\overline{\phantom{a}}$	292
9.44	Total current assets	$\tilde{\phantom{a}}$	18,653
	Non-current assets
9.45	Inventories	334
9.46	Property, plant and equipment	840	31,216
9.47	Intangibles		1,662
9.48	Total non-current assets	1,174	32,878
9.49	Total assets	1,174	51,531
	Current liabilities
9.50	Payables	$\blacksquare$	10,956
9.51	Interest bearing liabilities		36
9.52	Provisions	250	4,295
9.53	Total current liabilities	250	15,287
9.54	Total liabilities	250	15,287
9.55	Net assets disposed	924	36,244
9.56	Profit on disposal	3,995	5,197
9.57	Total consideration received	4,919	41,441
	Net cash inflow on disposal
9.58	Cash consideration	469	25,504
9.59	Cash received - prior year deferred purchase
	consideration	6,785
9.60	Proceeds from sale of business (item 4.17)	7.254	25.504

\$80.00*

Previous

corresponding period -

\$A'000

Previous

corresponding period -

\$A'000

18,386

2,600

20.986

5,016

2.600

7,616

Dividend (distribution) payments

$10.1$ Date the dividend is payable

10.2 If it is a final dividend, has it been declared?

Total dividend per security (interim plus final)

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,
ヘロピ

\$80.00*

Current period -

\$A'000

Current period -

\$A'000

23,413

2,600

26,013

4,849

2,600

7,449

10 October 2003

Current year Previous year $10.3$ Ordinary securities $2.9_¢$ $2.4_c$

10.4 Preference securities

Represents dividends paid or provided in respect of the unlisted 65,000 8% converting preference shares of \$1,000 each.

Final dividend on all securities

10.5	Ordinary securities (2003 declared but not recognised)
	(refer basis of preparation)

10.6 Preference securities (each class separately)

$10.7$ Total

Interim dividend on all securities

10.8	Ordinary securities (each class separately)

10.9 Preference securities (each class separately)

10.10 Total

Total dividend on all securities		Current period - \$A'000	Previous corresponding period - \$A'000
	10.11 Ordinary securities (each class separately) 10.12 Preference securities (each class separately)	28,262 5.200	23,402 5,200
	10.13 Total	33,462	28,602

Dividend reinvestment plans

The dividend or distribution plans shown below are in operation.

Dividend reinvestment plan, no change in rules from prior year.

The last date(s) for receipt of election notices for the dividend or distribution plans

10 September 2003

Associates and joint venture entities

Details of aggregate share of profits (losses) of associates and joint venture entities

Group's share of associates' and joint venture entities':		Current period - \$A'000	Previous corresponding period - \$A'000
11.1	Profit (loss) from ordinary activities before tax	17,559	12,739
11.2	Income tax on ordinary activities	466	680
11.3	Profit (loss) from ordinary activities after tax	17,093	12,059
11.4	Extraordinary items net of tax
11.5 11.6	Net profit (loss) Adjustments	17,093	12,059
11.7	Share of net profit (loss) of associates and joint venture entities	17,093	12,059

Interests in entities which are not controlled entities

The economic entity has an interest in the following entities.

	Name of entity
--	----------------	--

Name of entity		Percentage of ownership		Contribution to net profit (loss)
		interest held at end of period		(item 1.9)
			or date of disposal
		Current	Previous	Current	Previous
		period	corresponding period	period- \$A'000	corresponding period - SA'000
12.1	Equity accounted associates and
	joint venture entities
	John Holland EDI JV	40%	40%
	Allied Asphalts Ltd	50%	50%
	Bitumen Supplies Ltd	50%	50%
	EDI Rail Bombardier Transportation P/L EDI Rail - Bombardier Transportation	50%	50%
	(Maintenance) Pty Ltd	50%	50%
	Sasol Roche Blasting Services JV	50%	50%
	Roche Carey JV	50%	50%
	Roche Eltin JV	50%	50%
	Roche Thiess Linfox JV	44%	44%
	Clyde Babcock Hitachi (Aust) Pty Ltd	27%	27%
	Cantown.com Pte Ltd	21%	$\tilde{\phantom{a}}$
	Manufacturera 3M SA deC.V		49%
	Pavement Salvage Pty Ltd	50%
	Western Lee Joint Venture	50%	50%
	Synthexis Architectural Design
	Consultants Co Ltd	50%
	Suzhou Industry Park Wanyang
	Facilities Management Co. Ltd SIP Jiacheng Property Development	50%
	Co., Ltd	50%
	Shanghai ShangFang CPG Facilities
	Management Co. Ltd	50%
	MPE Facilities Management Sdn Bhd	50%
	Xin Gin Wa (Shaanxi) Property
	Management Co Ltd	50%
	Singa Facility Management Pte Ltd	50%
12.2	Total			17,093	12,059
12.3	Other material interests	$\blacksquare$		$\overline{a}$
12.4	Total			17,093	12,059

Issued and quoted securities at end of current period

Category of securities

13.1 Preference securities Converting preference shares convert to ordinary shares in Downer EDI Ltd on a two thousand to one basis and are due for conversion no later than 25 March 2004. 65.000 \$1,000 Fully paid 13.2 Changes during current period (a) Increases through issues (b) Decreases through returns of capital, buybacks, redemptions 13.3 Ordinary securities 975,525,926 970.269.258 Various Fully paid 13.4 Changes during current period (a) Increases through issues (dividend reinvestment plan) 12,573,403 12,573,403 Fully paid Various (b) Issues on exercise of options (c) Issues on conversion of convertible notes (d) Transferred from unquoted to quoted 1,186,667 Fully paid Fully paid 13.5 Convertible debt securities (description and conversion factor) NI 13.6 Changes during current period (a) Increases through issues (b) Decreases through securities converted (1:1) 13.7 Options Exercise Expiry (description and conversion factor) NII date price (if any) 13.8 Issued during current period 13.9 Exercised during current period: Unlisted Options (1:1) 13.10 Expired during current period 13.11 Debentures (description) Nil 13.12 Changes during current period 13.13 Unsecured notes (description) Nil 13.14 Changes during current period		Total	Number	issue price рег	Amount paid up per
		number	quoted	security	security

Contingent Liabilities

• The consolidated entity has bank guarantees, bid $\mathbf{i}$ bonds and performance bonds, issued in respect of contract performance, in the normal course of business for:
• Wholly-owned controlled entities
• ii) Contract dispute with subcontractor, which is recoverable from customer if subcontractor claim proves successful
• iii) Termination benefits under service agreements.
• Joint venture entities owned by the consolidated entity iv) have non-cancellable operating lease commitments for which, should the joint venture entity not be able to meet those obligations, the consolidated entity may become liable.
• V) Claim in respect of legal costs associated with contract arbitration

Total consolidated contingent liabilities

Current period - \$A'000	Previous corresponding period - \$A'000
308,055	260,619
574	6,581 719
7,747	33,070
1,600
317,976	300,989

In the ordinary course of business:

• vi) The company and certain controlled entities are called upon to give guarantees and indemnities in respect of the performance by counter parties including controlled entities and related parties of their contractual and financial obligations. Other than as noted above, these guarantees and indemnities are indeterminable in amount.
• vii) There exists in some members of the consolidated entity the normal design liability in relation to completed design and construction projects. The Directors are of the opinion that there is adequate insurance cover for this liability.
• viii) Controlled entities have entered into various partnerships and joint ventures under which the controlled entity could ultimately be jointly and severally liable for the obligations of the partnership or joint venture.
• Controlled entities are subject to claims and counter claims with respect to contracting. $ix)$

Annual meeting

			The annual meeting will be held as follows:
--	--	--	---------------------------------------------	--	--	--	--

Place

Date

Time

Approximate date the annual report will be available

The Heritage Ballroom, The Westin Hotel
1 Martin Place, Sydney 2000
27 October 2003
$10:00$ am
27 September 2003

Compliance statement

This report is based on accounts which have been audited.

This report does give a true and fair view of the matters disclosed.

The entity has a formally constituted audit committee.

Sign here:

(Company Secretary)

Date: 26 August 2003

Print name: Geoffrey Bruce

-************************************

Appendix I - DETAILS OF REVENUE AND EXPENSES

	2003	2002
	\$'000	\$'000
Operating revenue
Sales revenue:
Sale of goods	91,406	100,052
Rendering of services	1,475,207	1,334,189
Engineering services revenue	1,006,921	916,624
Dividends:
Other entities
Interest revenue:
Other entities	7,127	4,324
Equity share of joint venture partnerships' profits	17,093	12,059
Rental income	46	399
Net foreign exchange gain	172	1,388
Other	8,077	2,406
Total operating revenue	2,606,049	2,371,441
Non operating revenue
Proceeds from the sale of non-current assets:
Property, plant and equipment	76,471	67,925
Investments	14,503	3,083
Total non-operating revenue	90,974	71,008
Total revenue	2,697,023	2,442,449
Net share of sales revenue in joint venture entities	170,835	143,187
Total turnover	2,867,858	2,585,636

$\hat{\mathcal{A}}$

$\mathcal{L}^{\pm}$

Appendix I - DETAILS OF REVENUE AND EXPENSES (continued)

	2003	2002
Expenses	\$'000	\$'000
Changes in inventories of finished goods and work in progress	130,586	(133, 804)
Raw materials and consumables used	864,336	1,002,469
Employee benefits expense	670,311	585,810
Subcontractors	410,007	378,571
Plant & equipment costs	358,265	343,434
Communication expenses	19,526	14,422
Travel & accommodation	19,085	16,250
Professional fees	18,786	17,454
Occupancy	19,557	16,201
Other expenses from ordinary activities	54,621	82,423
Total expenses from ordinary activities	2,565,080	2,323,230
Other Expense Disclosures:
Cost of sales	48,205	73,051
Interest expense:
Other entities	34,404	35,917
Finance lease charges	1,549	2,520
Depreciation of non-current assets:
Plant and equipment	97,763	84,038
Buildings	902	1,700
Quarries	121	115
Amortisation of non-current assets:
Leased assets	3,622	6,820
Goodwill	16,031	14,258
Drilling licence	210	212
Intellectual property	635	850
Net transfers to/(from) provisions:
Doubtful debts	9,732	(5, 755)
Operating lease rental expenses	68,558	45,859
Other borrowing costs	1,247	1,481
Sales of Assets
Profit from ordinary activities before
income tax expense includes the following specifc net gains on disposal:
Net gains
Investments	724	3,083
Property, plant and equipment	5,514	3,991
Total net gains from sales of assets	6,238	7,074

Appendix II- SEGMENT INFORMATION

Information on Business Segments

	External		Inter-segment		Total
Segment Revenue	2003	2002	2003	2002	2003	2002
	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
Engineering	835,421	719,477	1,561	687	836,982	720,164
Mining & Resources	950,729	900,336	4,372	5,348	955,101	905,684
Infrastructure Services	566,381	415,484	5,792	3,356	572,173	418,840
Rail	299,407	314,496	34,102	47,833	333,509	362,329
Discontinuing businesses	30,829	90,751	655	6,145	31,484	96,896
					2,729,249	2,503,913
Eliminations					(46, 482)	(63, 369)
Unallocated					14,256	1,905
Total revenue					2,697,023	2,442,449
Share of sales revenue in joint venture entities net of distributions:
Engineering					32,488	20,988
Mining & Resources					133,983	115,569
Infrastructure Services					4,364	6,630
Total turnover					2,867,858	2,585,636
					Results
Segment Results					2003	2002
					\$'000	\$'000
Engineering					29,667	28,608
Mining & Resources					50,208	40,022
Infrastructure Services					25,349	14,750
Rail					20,417	13,989
Discontinuing businesses					(6, 112)	3,185
Unallocated					(24, 786)	(22, 412)
Income tax expense relating to ordinary activities					(28, 171)	(21, 711)
Net Profit					66,572	56,431

$\bar{z}$

		Assets		Liabilities
Segment Assets & Liabilities	2003 \$'000	2002 \$'000	2003 \$'000	2002 \$'000
Engineering	705,775	427,145	275.157	152,725
Mining & resources	672.297	683.228	148.310	153,074
Infrastructure Services	302,525	243,333	108,740	72,952
Rail	287,526	387.257	99,825	87,143
Discontinuing businesses	7.531	20.212	620	2,823
	1,975,654	1,761,175	632,652	468.717
Unallocated	57,092	68,491	639,903	651,384
	2,032,746	1,829,666	1,272,555	1,120,101

$\sim$

$\ddot{\phantom{0}}$

l,

Appendix II-SEGMENT INFORMATION (continued)

	Engineering 2003 \$'000	Mining & resources 2003 \$'000	Infrastructure Services 2003 \$'000	Rail 2003 \$'000	Discontinued 2003 \$'000
Carrying value of investments
accounted for using the equity method	8,368	10,567	5,359	÷.
Share of net profit/(loss) of
associates and joint venture entities accounted for under the equity method	2.785	13.380	928
Acquisition of segment assets	86,548	143,845	42,761	23,226
Depreciation and amortisation of
segment assets	13,681	78.505	15.126	11,102	545
Number of employees	6,599	2.599	2.601	1,421

$\overline{\phantom{a}}$

i,

	Engineering 2002 \$'000	Mining & resources 2002 \$'000	infrastructure Services 2002 \$'000	Rail 2002 \$'000	Discontinued 2002 \$'000
Carrying value of investments
accounted for using the equity method	4,171	12,072	5,029	5.095
Share of net profit/(loss) of
associates and joint venture entities accounted for under the equity method	2,137	8.937	1.015	(30)
Acquisition of segment assets	11.361	72.842	14.662	4,805
Depreciation and amortisation of
segment assets	12,212	68,507	13,114	10,881	3,125
Number of employees	3,600	2.500	2.570	1,500

The economic entity operated predominantly in five business segments:

Rail –	provides rolling stock and associated maintenance services including the design, manufacture, refurbish, overhaul and maintenance of diesel electric locomotives, electric locomotives, electric and diesel multiple units, rail wagons, traction motors and rolling stock generally. Also provides specialist engineered manufacturing services.
Engineering -	provides engineering services (design, construct and maintain) specialising in telecommunications, capital works, power and process engineering.
Mining & resources -	including mine planning and management, drilling and blasting, bulk excavation, crushing and processing, haulage of ores/waste, tailings management and mine restoration, oil, gas, geothermal and mineral drilling and drill and blast activities.
Infrastructure Services –	including the performance of maintenance and construction of roads and highways, construction and maintenance of rail infrastructure including tracks, signals and overhead electrification and infrastructure maintenance services including utilities, water supply, sewage and waste water treatment, refuse disposal, street cleaning and the tending of parks and gardens.
Unallocated –	results include financing and corporate costs for continuing businesses, net of other income.

$\frac{1}{2}$

Appendix II-SEGMENT INFORMATION (continued)

	Revenue from		Segment Assets		Acquisition of
		External Customers				Segment Assets
	2003	2002	2003	2002	2003	2002
Geographic	\$'000	\$'000	\$'000	\$'000	\$'000	\$'000
Australia	1.850.262	1.725.340	1,306,638	1,337,337	221,762	87.757
Pacific	686,278	608,561	339,414	324,417	16.947	15,580
South East Asia	113,252	12.266	363,205	64.139	57.559	117
North East Asia	47.231	96,282	23.489	103.773	112	216
	2,697,023	2,442,449	2,032,746	1,829,666	296,380	103,670

The economic entity operated in four geographical areas - Australia, Pacific (including New Zealand, Papua New Guinea and Fiji), South East Asia (Singapore, Malaysia, Thailand, Indonesia and the Philippines) and North East Asia (Hong Kong and China).