SOUTHERN CROSS ELECTRICAL ENGINEERING LTD — AGM Information 2019

Oct 28, 2019

Annual General Meeting 2019

29 October 2019

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About SCEE

E&I Contractor Southern Cross Electrical Engineering (SCEE) is an ASX listed electrical, instrumentation, communication and maintenance services company recognised for our industry leading capabilities

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Combination Established in 1978 in WA, the combination in 2016 with Datatel Communications (established 1998) and in 2017 with East Coast-based Heyday5 (business established 1978) has created a national group

Markets

SCEE now operates across five sectors: Resources, Commercial, Public infrastructure and defence, Telecommunications and datacentres, and Industrial, energy and utilities

People

1,350 employees including engagement of 148 electrical apprentices and telecommunications trainees

Safety Original SCEE business 14.6 million man-hours and 15 years Lost Time Injury free in Australia

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Highlights

Financial

Full year revenue of $386.0m up 11%, EBITDA of $23.6m up 13% and NPAT of $12.7m up 51% on prior year primarily due to growth in public infrastructure activity

Strong second half with EBITDA up 62% on first half

Balance sheet remains strong with total cash of $53.3m and no debt and term deposits restricted at 31 December 2018 released

Fully franked 3 cents per share dividend declared and Dividend Reinvestment Plan established

Operational

Outlook

Commercial and infrastructure Targeting FY20 revenues over overtook resources as largest revenue $420m contributors Order book of $450m includes over Significant wins included Westconnex $360m of work secured for FY20 M4 and M5 motorway tunnels, representing over 80% of FY20 multiple commercial building and fitrevenue target out awards at Parramatta Square and at Strong business development Wynyard Place pipeline exceeding $2.7bn including Commenced first WA Metronet and over $600m of submitted tenders NBN maintenance projects NSW commercial and infrastructure Completed at Rio Tinto Amrun, pipeline strong including tendering University of Canberra Hospital and on Sydney Metro Chevron Wheatstone LNG plant Resources bidding very active across Anticipating commercial resolution of multiple commodities resources projects completed earlier in Foreseeing significant acquisition year in upcoming period opportunities presenting in short to medium term

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Strong second half

H2 revenue $204.2m v H1 revenue $181.8m and H2 EBITDA $14.6m v H1 EBITDA $9.0m

Full year revenue of $386m slightly behind “over $400m” forecast as M4 Westconnex demobilised earlier than expected

However EBITDA ahead of consensus

All financial measures improved on prior year, primarily due to growth in infrastructure activity

Overheads as a percentage of revenue improved further from 6.9% in FY18 to 6.7% in FY19

Significant and diverse revenue contributors ($20m+) included Rio Tinto Amrun, Westconnex M4 and M5, ATP Building 1, RAAF Tindal, Westmead Hospital and NBN roll-out

Summary financials:

	FY19	FY18	Chg. %
	$m	$m
Revenue	386.0	347.9	11.0%
Gross Profit	47.6	41.6	14.4%
Gross Margin %	_12.3% _	11.9%	-
Overheads	25.7	24.1	6.6%
EBITDA	23.6	20.9	12.9%
EBITDA %	6.1%	6.0%	-
EBIT	19.4	14.2	36.6%
EBIT %	5.0%	4.1%	-
NPAT	12.7	8.4	51.1%
NPAT %	3.3%	2.4%	-

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Infrastructure & commercial overtake resources

Revenue by sector:

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FY18 FY19
$348m $386m
$49m $18m
$13m $115m
$112m $27m
Commercial
Public infrastructure & defence
$88m
Resources
Telecommunications & data centres
Industrials, energy & utilities
$44m
$125m
$143m
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East Coast growth continues

Revenue by geography:

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FY 18 FY 19
$348m $386m
$3m $5m
$16m
$21m
$39m
$43m
$211m
$161m
$129m
$106m
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New South Wales & ACT Western Australia Queensland Northern Territory Victoria & Tasmania

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Strong balance sheet and debt-free

Cash remains strong at $53.3m at 30 June 2019 versus $58.1m at 30 June 2018 and no debt

Balance sheet summary:

Restricted term deposits at 31 December 2018 all released in second half

Significant cash inflows anticipated on resolution of resources projects completed earlier in year

Banking and bonding facilities negotiated to increase total bonding capacity from $60m to $100m

Franking account balance at $17.2m

	Jun 19	Jun 18
	$m	$m
Current assets 161.2 139.0
Non current assets 88.6 90.9
TOTAL ASSETS 249.8 229.9
Current liabilities 93.4 77.0
Non current liabilities 8.7 11.8
TOTAL LIABILITIES 102.1 88.8
EQUITY 147.7 141.1

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Operating cash inflows

Operating cash inflow of 10.7m

Cash outflows of $6.5m paid to Heyday vendors and $7.0m dividends in first half Capex of $2.1m for the year and forecast to remain similar

Fully franked 3 cents per share dividend declared and Dividend Reinvestment Plan established

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Integration ongoing

Integration across group businesses delivering significant synergies and cost efficiencies

Benefits realised in both internal and external activities

Generating economies of scale through sharing insurance, banking and bonding programs

Merging of various processes across IT, finance, commercial, HR and IR functions

Winning and execution of NSW motorway projects has combined Heyday local presence with SCEE large-scale industrial project experience

Major infrastructure tenders based around input from across group businesses

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Bulk of FY20 work already secured

Order book of $450m remains strong at similar levels to last year Includes over $360m of work secured for FY20 representing over 80% of FY20 revenue target Largest component in New South Wales reflecting strong commercial and infrastructure markets

Order book by sector:

Order book by geography:

Jun 19 $450m

Jun 19 $450m

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$10m
$30m
$60m
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$90m
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$260m
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$5m
$10m
$40m
$55m
Commercial NSW & ACT
Public infrastructure & defence WA
Resources QLD
Telecommunications & data centres NT
Industrials, energy & utilities VIC
$340m
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Strategy and sector outlooks

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Leading national diversified electrical contractor

WA

Rio Tinto - Cape Lambert, Dampier EIR, Tom Price, Paraburdoo, Brockman 2, Yandi BHP – Newman, Port Hedland, Mt Whaleback, South Flank Sino Iron Wheatstone LNG Boddington Gold Mineral Resources Wodgina NorthLink Central Section UWA, City of Belmont, Casuarina Prison maintenance Woodman Point Waste Water Treatment NBN construction Wireless networks construction Carrier networks construction Minor commercial works and services

NT

Wireless networks construction RAAF Tindal

VIC & TAS

NBN construction

QLD

Commercial

Rio Tinto Amrun Arrow MSA NBN construction Carrier networks construction RAAF Townsville Ergon Energy Agreement

Resources

Public Infrastructure & defence Telecommunications & data centres Industrials, energy & utilities

NSW & ACT

Parramatta Square 3 & 4 and fit-outs Australian Technology Park Building 1 Duo Central Park

Insurance Australia Group 151 Clarence Street ISKIA Sovereign Resort Expansion Edmonson Park Wynyard Place 100 Mount Street 32 Smith Street Bank of China Westmead Hospital Westconnex M4 and M5 Metronode Unanderra RU Data Centre

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Strategy

SCEE primarily sees itself as an electrical contractor

Historically focussed in resources, over the last four years we implemented a strategy to diversify organically and acquisitively into commercial, infrastructure, defence, telecommunications, industrial, energy and utilities work

This successful diversification has meant the resources sector is now our third largest revenue generator after infrastructure and commercial and over 70% of revenues originate from the East Coast

Our growth strategy continues so as to realise further sector and geographic diversity through a combination of organic and acquisition activities

Organic growth will be achieved through our strong commercial and infrastructure pipelines and resources activity is increasing across multiple commodities

We foresee significant acquisition opportunities presenting in the short to medium term which offer both sector and geographic diversity

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Australia infrastructure gap

Australia forecasting 3rd highest population growth in OECD but ranked 28th for global infrastructure quality Significant investment sanctioned, with peak activity to come and electrical work generally later in cycle

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Macromonitor Australian Construction Outlook Overview, August 2019

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Public infrastructure and defence

Infrastructure SCEE’s largest revenue sector

Sector primarily driven by government expenditure. Federal budget March 2019 committed over $100 billion to land transport projects over next 10 years

Significant other federal, state and private infrastructure investment in defence, airports, ports, education, health and aged care

Work continuing at RAAF Tindal in Northern Territory and RAAF Townsville in Queensland. Minor works completed at Campbell Barracks and HMAS Stirling in WA. Significant pipeline of defence base work

Ongoing road projects at Westconnex M5 in NSW and in WA at Northlink. Completed at Westconnex M4. Won first award on Metronet rail program in WA at Forrestfield Airport Link. Multiple opportunities presenting at Sydney Metro both station infrastructure and associated commercial development

Completed at University of Canberra Hospital in ACT and ongoing at Westmead Hospital in Sydney. Positioning for other NSW hospital projects Works at Woodman Point Waste Water Treatment plant in WA almost complete

Ongoing maintenance programs at Curtin University and UWA

Infrastructure revenue:

	FY19	FY18
	$m	$m
Revenue	143.4	44.1

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Commercial

Commercial largest component of SCEE order book

Multiple base-build and fit-out projects in Sydney and Canberra. Significant ongoing works include:

• Parramatta Square 3 & 4 base-builds and fit-outs

• Australian Technology Park Building 1

Commercial revenue:

	FY19	FY18
	$m	$m
Revenue	114.5	111.9

• Duo Central Park

• Insurance Australia Group

• 151 Clarence Street

• Sovereign Resort Expansion

• Edmonson Park

• Wynyard Place

• 100 Mount Street

• 32 Smith Street

• Bank of China

NSW commercial activity at high level and continuing for some years to come

Public infrastructure developments will lead to further wave of commercial development when completed

NSW Office and Other Commercial – Value of work done

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4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
$m
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YEAR
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ACIF Australian Construction Market Report, May 2019

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Resources

Resources revenue reduced in FY19 as Wheatstone LNG completed early H2. No foreseeable LNG construction work in near-term although ongoing upstream CSG works in Queensland. Visibility of LNG developments in medium-term

Over $20 billion committed capital expenditure on WA resources projects in 2019-2021

Completed two projects at Rio Tinto Amrun in H1. In lithium completed works for Mineral Resources Wodgina and at Tianqi Lithium Kwinana Plant

Actively pursuing opportunities in iron ore, zinc, bauxite and lithium construction

Ongoing sustaining capital and maintenance projects at multiple Rio Tinto and BHP facilities and mine sites

Continuing MSA work at Boddington Gold and Sino Iron

Resources revenue:

	FY19	FY18
	$m	$m
Revenue	88.2	125.3

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Telecommunications and data centres

Sector revenue declined as no significant data centre projects in year.

First two stages of RUData SYD53 Data Centre awarded in May 2019 and range of new data centres currently being tendered

NBN construction roll-out at peak and various NBN works continued in WA, QLD and VIC

Awarded first NBN maintenance and upgrading contracts in WA and nationally

5G commercial deployment beginning but delivery model still uncertain

Completed first mobile tower builds in wireless sector in WA and NT

Telco revenue:

	FY19	FY18
	$m	$m
Revenue	27.0	49.2

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Industrials, energy & utilities

Sector stable and provides flow of opportunities.

Currently tendering fuel terminal, power station and brickworks projects

Renewable energy project pipeline subdued compared to prior periods

Recently awarded Agnew wind farm electrical works in WA

Still pipeline of opportunities for SCEE for electrical construction portion of renewables projects

Ergon Energy Service Agreement in northern QLD ongoing

Industrials revenue:

	FY19	FY18
	$m	$m
Revenue	12.9	17.4

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Conclusion and outlook

• Full year revenue of $386.0m up 11%, EBITDA of $23.6m up 13% and NPAT of 12.7m up 51% on prior year

• Strong second half with EBITDA up 62% on first half

• Balance sheet remains strong with total cash of $53.3m and no debt

• Fully franked 3 cents per share dividend declared and Dividend Reinvestment Plan established

• Targeting FY20 revenues over $420m

• Order book of $450m includes over 80% of FY20 revenue target already secured

• Strong business development pipeline exceeding $2.7bn including over $600m of submitted tenders

• Commercial and infrastructure pipeline strong

• Resources bidding very active across multiple commodities

• Foreseeing significant acquisition opportunities presenting in short to medium term

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Corporate summary

Capital Structure	Capital Structure
ASX Code	SXE
Share Price(16 September 2019)	62.0c
No. of ordinaryshares	234.7m
Market Capitalisation(16 September 2019)	$145.5m
Number ofperformance rights	2.3m
Total Cash(30 June 2019)	$53.3m
Debt(30 June 2019)	Nil
Enterprise Value(26 August 2019)	$92.2m

Shareholders at 11 October 2019	Shareholders at 11 October 2019
ThorneyInvestments	18.5%
First Sentier Investors	8.4%
Other Institutions	31.1%
Frank Tomasi	18.9%
Others(Retail,Private,Employees,Directors)	23.1%
Total	100.0%

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Disclaimer

Some of the information contained in this presentation contains “forward-looking statements” which may not directly or exclusively relate to historical facts. These forward-looking statements reflect the current intentions, plans, expectations, assumptions and beliefs of Southern Cross Electrical Engineering Limited (“SCEE”) about future events and are subject to risks, uncertainties and other factors, many of which are outside the control of SCEE.

Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks. Because actual results could differ materially from SCEE's current intentions, plans, expectations, assumptions and beliefs about the future, you are urged to view all forward-looking statements contained in this presentation with caution and not to place undue reliance on them. No representation is made or will be made that any forward looking statements will be achieved or will prove to be correct.

SCEE does not undertake to update or revise any forward looking statement, whether as a result of new information, future events or otherwise. Past performance information

given in this presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.

This presentation is for information purposes only. It is not financial product or investment advice or a recommendation, offer or invitation by SCEE or any other person to subscribe for or acquire SCEE shares or other securities. The presentation has been prepared without taking into account the objectives, financial situation or needs of the reader. Before making an investment decision, prospective investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and seek the appropriate professional advice.

Statements made in this presentation are made as at the date of the presentation unless otherwise stated. The information in this presentation is of a general background nature and does not purport to be complete. It should be read in conjunction with SCEE's other periodic and continuous disclosure announcements.

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