GR ENGINEERING SERVICES LIMITED — Investor Presentation 2013

Aug 21, 2013

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FY13 Financial Results Investor Presentation

August 2013

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Disclaimer
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This document has been prepared by GR Engineering Services Limited ACN 121 542 738 ( GR Engineering ) to provide an overview and update of GR Engineering’s activities and FY13 financial performance.

Any statements, opinions, projections or other material contained in this document do not constitute any commitments, representations or warranties by GR Engineering and associated entities or its directors, agents and employees. Except as required by law, and only to the extent so required, directors, agents and employees of GR Engineering shall in no way be liable to any person or body for any loss, claim, demand, damages, costs or expenses of whatsoever nature arising in any way out of, or in connection with, the information contained in the document.

This document includes certain statements, opinions, projections and other material, which reflect various assumptions. The assumptions may or may not prove to be correct. Recipients of the document must make their own independent investigations, consideration and evaluation of the opportunity to participate in any investment. By accepting this document the recipient agrees that if it proceeds further with its investigations, consideration or evaluation of the opportunity to participate in any investment it shall make and rely solely upon its own investigations and inquiries and will not in any way rely upon the document.

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Index
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1	FY13 Results Summary
2	Health, Safety & Environment
3	Operational Performance
4	FY13 Results Analysis
5	Outlook

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FY13 Results Summary
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• Revenue Revenue $114.7 million

• EBITDA $11.0 million

• PBT $11.5 million

• Earnings NPAT $7.5 million  EPS 5.0 cents

• 2H13 PBT $9.2 million (in line with guidance of $8.5 million - $9.5 million)

• Cash flow from operations $5.5 million

Cash Flow

• Supports final dividend of 3cps, fully franked (interim and final dividends totalling 5cps for FY13)

• Cash $34.5 million[1 ]

• Debt $0.9 million

• Balance Sheet  Net cash $33.6 million[1 ]

• Balance sheet further strengthened from 1H13

1. Including cash held to secure contingent liabilities under the Company’s bonding facilities

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FY13 Results Summary
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• Action taken to respond to changed market conditions

• Professional and support staff numbers reduced to suit anticipated workload

• Brisbane office retaining only core staff to service reduced work flow

• Company wide reductions in overheads implemented

• Robust project execution maintained across all business units

Operational

• Primary revenue contributions made from greenfields and brownfields gold projects in WA and West Africa (Andy Well, Telfer, Syama)

• Medium term revenue secured through award of Hemerdon Tungsten & Tin Project EPC contract (£75 million over approximately 2 years)

• Positive contribution from Whyalla brownfields upgrade in 2H13, continuing into 1H14

• Study activity subdued, in line with market conditions

• Board & senior management restructure implemented, effective FY14

Corporate

• Joe Ricciardo appointed Executive Chairman

• Geoff Jones appointed Managing Director

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Health, Safety & Environment
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• Continued strong safety performance

• Record 1099 LTI free days as at 30 June 2013, continuing into FY14

• Safety is a key element of GR Engineering’s operating ethos - our people are our greatest asset

• Committed to the protection of the natural environment, and actively playing a constructive role in communities

LTIFR – Lost Time Injury Frequency Rate TRIFR – Total Recordable Injury Frequency Rate

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LTIFR
3
2.5
2
1.5
1
0.5
0
2008 2009 2010 2011 2012 2013
TRIFR
30
25
20
15
10
5
0
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
TRIFR (per million hrs)
LTIFR (per million hrs)
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Operational Performance
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Design & Construction

• Positive outcomes achieved on all completed projects – on time / on budget delivery

• Activity levels impacted by ongoing deferrals, scope reductions and project cancellations

• Gold price decline in 2H13 has compounded challenges for opportunities in the gold sector

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• Focus on brownfields upgrade and optimisation work – industry participants seeking to extract maximum value from existing operations

• Successfully delivered Andy Well project on budget and ahead of schedule

• Completed significant design & EPCM engagements in West Africa – Bonikro, Sissingue & Obotan

• Whyalla & Syama upgrades progressing well

• Commencement of design and procurement works on £75 million Hemerdon Tungsten & Tin Project

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Operational Performance
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Studies & Consulting

FY13 Revenue Mix

• 16% contribution to revenue

• Study work predominantly undertaken on Australian and international gold projects

• Continued conversion of studies into design & construction engagements:

• Andy Well Gold Project

• Telfer, Whyalla upgrades (EPC)

• Syama upgrade (EPCM)

• Access to funding by junior explorers has adversely impacted study and consulting work volumes and revenue

• Action taken to maintain competitiveness and continue securing studies, engineering & design engagements

• Priority on retaining and developing IP and execution capability

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1%
13%
Precious Metals
13%
Base Metals
Iron Ore
Other
72%
16%
Design &
Construction
Studies &
Consulting
83%
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FY13 Results Analysis
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		FY13	FY12	Comment	Comment
Revenue from operations	$m	114.7	152.8		Revenue decline experienced across all business units – impacted by broad downturn
					in mining investment in Australia and overseas
EBITDA	$m	11.0	18.4
					2H13 margins improved to reflect strong
EBITDA Margin	%	9.6%	12.1%		contract performance and reduced corporate overhead
EBIT	$m	10.0	17.8		Action taken to increase business efficiency
EBIT Margin	%	8.7%	11.6%
PBT	$m	11.5	19.9		PBT guidance achieved
					Tax rate normalised at 34.3% to reflect
Tax	$m	3.9	6.7		domestically recognised earnings
NPAT	$m	7.5	13.1
NPAT Margin	%	6.6%	8.6%
Basic EPS	cps	5.0	8.7
Net operating cashflow	$m	5.5	16.2		Cashflow generation supports payment of 3cps final divided (fully franked)
		HY13	FY12	Comment
Net Cash1	$m	33.6	38.4		Balance sheet strength preserved – no material debt
Total Equity	$m	41.2	42.2		$35 million of bonding facilities in place to secure project performance and delivery

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1. Including cash held to secure contingent liabilities under the Company’s bonding facilities

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FY13 Results Analysis
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Revenue

EBIT

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$160m $152.8m
$114.7m
$120m
2H13
$80m
($58.1m)
$40m
1H13
($56.6m)
$0m
FY12 FY13
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$20m
$17.8m
$15m
$10.0m
$10m
2H13
$5m ($8.4m)
1H13 ($1.6m)
$0m
FY12 FY13
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PBT

NPAT

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$25m
$19.9m
$20m
$15m
$11.5m
$10m
2H13
$5m ($9.2m)
1H13 ($2.3m)
$0m
FY12 FY13
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$15m
$13.1m
$10m
$7.5m
$5m 2H13
($6.2m)
1H13 ($1.3m)
$0m
FY12 FY13
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Outlook
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• Positive contributions expected to be made in 1H14 from existing projects

• Expectation that core markets will remain challenging, with headwinds prevailing into FY14

• A return to growth in core markets will require:

• sustained increases in commodity prices;

• reduced operating costs for miners, particularly in gold; and

• improved capital market conditions for junior explorers and developers

• Strategy is to remain focused on:

• securing FY14 revenue base by targeting current opportunities in Australia and West Africa;

• continuing to reduce costs whilst maintaining execution capability;

• generating strong performance on existing projects; and

• balance sheet and cash flow preservation

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Contact
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Geoff Jones

Managing Director

Australian Office Details

179 Great Eastern Highway Belmont WA 6104

Level 3, 99 Melbourne Street South Brisbane QLD 4101

• +61 8 6272 6000

• geoff.jones@gres.com.au

• PO Box 258  +61 7 3838 8000 Belmont WA 6984

• +61 8 6272 6000

Joe Totaro

CFO & Company Secretary

• +61 8 6272 6000

• joe.totaro@gres.com.au

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