GR ENGINEERING SERVICES LIMITED — Interim / Quarterly Report 2018

Feb 25, 2018

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ASX RELEASE

26 February 2018

For immediate release to the market

HY18 FINANCIAL RESULTS

HY18 Results Highlights

• Sales revenue $177.2 million (HY17 $105.9 million)

• EBITDA $12.1 million (HY17 $10.8 million)

• PBT $11.6 million (HY17 $10.5 million)

• Interim dividend of 6.0cps (fully franked) (HY17 5.0cps)

GR Engineering Services Limited (ASX:GNG) ( GR Engineering or Company ) today announced its financial results for the half year ended 31 December 2017 ( HY18 ).

GR Engineering reported HY18 sales revenue of $177.2 million, EBITDA of $12.1 million and PBT of $11.6 million, demonstrating increased earnings off a materially larger revenue base.

The Board has resolved to declare an interim dividend of 6.0 cents per share, fully franked in light of the Company’s strong operating cash flow and balance sheet, which carried net cash of $44.6 million as at HY18.

Commenting on the Company’s HY18 financial performance, GR Engineering’s Managing Director, Mr Geoff Jones, said:

“The first half of FY18 was characterised by heightened construction and operations and maintenance activity across our minerals processing and oil and gas services businesses. As at 31 December 2017, approximately 730 site based personnel were engaged in project delivery activities on the group’s design and construction projects and operations and maintenance engagements.

Increased levels of delivery phase activity across our businesses have driven revenue growth and cash generation in the half. Modest improvements in pre-tax earnings on a materially higher revenue base reflect the impact a highly competitive landscape that prevails in the market for our services. Importantly, GR Engineering has demonstrated its capability to win new work, execute successfully, generate earnings and deliver returns in this environment.”

Mineral Processing Design & Construction

GR Engineering’s HY18 financial outcomes were mainly driven by domestic design and construction works on the Mt Morgans Gold Project and Dalgaranga Gold Project, both of which comprise the turnkey design and construction of 2.5Mtpa processing plants and associated infrastructure. Upgrade and enhancement works at Sunrise Dam and Cosmic Boy operations also contributed to earnings.

In October 2017, the Company entered into an Early Works Agreement with Sheffield Resources Limited for the design and construction of the Thunderbird Mineral Sands Project. GR Engineering has

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GR ENGINEERING SERVICES LIMITED ABN 12 121 542 738 Tel: +61 8 6272 6000 Fax: +61 8 6272 6001 Email: gres@gres.com.au Website: www.gres.com.au PO Box 258, Belmont WA 6984 71 Daly Street, Ascot WA 6104

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commenced early engineering and long lead procurement activities in anticipation of entering into a lump sum design and construction contract. GR Engineering continues to work with Sheffield as it progresses its development, financing and approval activities.

GR Engineering completed its work on the Cosmic Boy Mill Recovery Enhancement Project in HY18 and was also active on new engagements for the provision of engineering and construction management services for OK Tedi Mining and Boral, both associated with brownfields upgrades of crushing plant facilities.

During HY18, GR Engineering relocated all Perth based personnel to redeveloped premises in Ascot, Western Australia which has seen its Perth based process engineering design, project management and project support teams integrate with its senior management, corporate and administrative functions in a centralised office location. It is evident that this move will generate cost reductions, positive operational outcomes and efficiencies for the business.

On 24 August 2017, the Company updated the market in relation to its ongoing dealings with Wolf Minerals in relation to the Hemerdon Tungsten & Tin Project. GR Engineering continues to engage with Wolf in respect of these matters on a confidential basis.

Oil and Gas Services

GR Engineering’s oil and gas services business, Upstream Production Solutions ( Upstream PS ) achieved strong revenue growth of 30% in HY18 (against prior corresponding period) and PBT of $1.8 million. Improved revenue in HY18 was achieved primarily from the provision of CSG maintenance services in Queensland and operations and maintenance services offshore Timor Sea and in the Perth Basin.

Upstream PS is transitioning out of its long term role as registered operator of the Cliff Head production facilities. Upstream PS will be assisting the Cliff Head JV operator, Triangle Energy, transition into this role as Upstream PS’ operations and maintenance engagement term comes to an end.

HY18 Results Summary

A summary of the HY18 financial results follow:

			HY18	HY17
	Revenue from operations	$m	177.2	105.9
	EBITDA	$m	12.1	10.8
	PBT	$m	11.6	10.5
	Tax	$m	4.1	2.6
	NPAT	$m	7.5	7.9
	Basic EPS	cps	4.9	5.2
	Net operating cashflow	$m	12.6	-15.3
			HY18	FY17
	Net Cash	$m	44.6	34.2
	Total Equity	$m	57.0	48.9

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Safety

In HY18, the group’s total reportable injury frequency rate (TRIFR) was 8.34. GR Engineering is seeking to continuously improve its safety outcomes and reaffirms its commitment to a zero harm workplace environment.

Dividend

An interim dividend of 6.0cps (fully franked) has been declared. The ex-dividend date is 13 March 2018 and the record date is 14 March 2018. The interim dividend is payable on 28 March 2018.

Outlook

During HY18, GR Engineering completed 17 studies and as at 31 December 2017 was engaged on a further 30 studies for projects at various feasibility and pre-development stages, representing a typical project pipeline mix by commodity and geography. The Company remains focused on converting this high level of study activity into near term design and construction opportunities.

In the oil and gas sector, Upstream PS will continue to consolidate and grow its relationship with existing clients and strive to convert near term opportunities into contracted engagements.

The second half of FY18 will see GR Engineering progress its major design and construction projects into commissioning and testing phases. The Company will also focus on finalising design and construction contracts on projects for which it has been nominated as preferred tenderer. In relation to these opportunities, the Company notes that due to project delays beyond its control, FY18 revenue is now expected to be in the range $270 million to $300 million.

Further Information

Please refer to GR Engineering’s HY18 Reviewed Financial Report for further information.

Ends.

For further information contact:

Geoff Jones Joe Totaro Managing Director Chief Financial Officer  +61 8 6272 6000  +61 6272 6000  geoff.jones@gres.com.au  joe.totaro@gres.com.au

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GR Engineering Services Limited (ASX:GNG) is an ASX listed engineering design and construction contractor specialising in fixed price engineering design and construction services to the resources and mineral processing industry.

GR Engineering has successfully completed the engineering design and construction of projects for a diverse range of clients, including global mining houses, mid-tier miners and junior developers undertaking their first project. Traditionally an EPC contractor, GR Engineering also has the ability to contract through a variety of models, including EPCM and hybrid contracting arrangements.

GR Engineering also has a long history of providing a diverse range of process engineering consulting services, including feasibility study preparation and management, process design and peer review engagements. These services have been delivered for projects globally and play a key role in delivering organic growth opportunities through design and construction project execution.

The Company also has a presence in the hydrocarbons industry via its wholly owned subsidiary, Upstream Production Solutions. Upstream Production Solutions is a leading provider of operations and maintenance and well management services to the Australian and South East Asian oil and gas industry.

As a group, GR Engineering employs more than 450 professional and support staff throughout Australia and internationally, in addition to a direct construction workforce and subcontracted personnel.

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