SOUTHERN CROSS ELECTRICAL ENGINEERING LTD — Annual Report 2011

Aug 25, 2011

Full year results 2011

26 August 2011

Presentation overview

• 2011 full year results highlights

• Financial overview

• Operational overview

• Safety & people

• Strategy & outlook

• Summary

1

Group highlights

Strong turnaround in H2 providing base for earnings growth

Financial

• FY11 revenue of $102m (H1 $47m, H2 $55m), up 5% on FY10  H2 up 17% on H1

• FY11 gross profit of $16.2m (H1 $2.3m, H2 $13.9m)

• FY11 statutory net loss after tax of $1.7m (H1 $(4.8)m, H2 $3.1m)

• Order Book stands at $75m, up $48m compared to 30 June 2010

Operational

• Successful completion of Pluto contract

• Seventh consecutive LTI‐free year

• Momentum building with fifth Sino contract awarded in August

Strategic

• Operation, Support & Maintenance business is growing and providing a re‐current revenue base

• Acquisitions now fully integrated

• increasing potential tender pipeline

• Long term construction contracts being tendered

2

Order book – the return to growth Significant uplift in order book – solid lead indicator

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$m
80 $75m
70
Oil & Gas
60
50 Infrastructure
40
Operations Support
$27m
30
Mining International
20
Mining Aust
10
0
30‐Jun‐10 Current
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3

Financial overview – stron turnaround in H2 g

6 months to	6 months to			12 months to	12 months to
June 2011	Dec 2010	Change	($m)	June 2011	June 2010	Change
54.5	47.3		Sales Revenue	101.8	97.4
13.9	2.3		Gross profit	16.2	30.6
6.1	(5.4)		EBITDA	0.6	16.4
3.1	(4.8)		Statutory NPAT	(1.7)	8.7
5.7%	(10.1)%		Statutory NPAT Margin	(1.6)%	8.9%
			Earnings per share (cps)	(1.3)	7.1
‐	‐		Dividend (cps)	‐	6.5
4.6%	(12.9)%		Return on Equity	(2.3)%	18.3%
4.6	(4.4)		Operating Cash Flow	0.2	0.2
‐	‐		Capital Expenditure	1.8	20.9
Net cash	21.9%		Gearing (net debt / equity)	Net cash	Net cash

4

Financials – 2011 has formed the base Full year performance masks strong H2 turnaround

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Revenue
$m
120
100
80
60
40
20
0
FY07 FY08 FY09 FY10 FY11
EBITDA
$m
30 30%
25 25%
20 20%
15 15%
10 10%
5 5%
0 0%
FY07 FY08 FY09 FY10 FY11
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$m Gross profit & GP margin
40 40%
30 30%
20 20%
10 10%
0 0%
FY07 FY08 FY09 FY10 FY11
$m NPAT & NPAT margin
20 20%
15 15%
10 10%
5 5%
0 0%
FY07 FY08 FY09 FY10 FY11
(5) ‐5%
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5

Cash flow – a story of two halves

($m) 6 months to	June 2011	December 2010		($m) 12 months to 30 Jun	2011	2010
Operating cash flows	4.6	(4.4)		Operating cash flows	0.2	0.2
Investing cash flows	(1.1)	(0.7)		Investing cash flows	(1.8)	(20.9)
Financing cash flows	31.0	(6.0)		Financing cash flows	25.0	(3.1)
Net movement in cash	34.5	(11.1)		Net movement in cash	23.4	(23.9)
Opening cash balance	(3.6)	7.5		Opening cash balance	7.5	31.3
FX movement	0.4	0.0		FX movement	0.4	0.1
Closing cash balance	31.3	(3.6)		Closing cash balance	31.3	7.5

• Operating cash flows boosted by the completion of Pluto and the conversion of WIP into cash received

• Investing cash outflows down in FY11 with acquisition investments reflected in FY10

• Financing cash flows up following the successfully completed capital raising in April 2011

6

Financials – balance sheet

($m)	30 Jun 2011	31 Dec 2010	30 Jun 2010
Current assets	59.8	23.3	37.0
Non‐current assets	26.8	30.1	30.4
Total assets	86.6	53.4	67.3
Current liabilities	13.7	14.0	14.0
Non‐current liabilities	0.2	2.3	5.9
Total liabilities	13.9	16.3	19.9
Shareholders equity	72.7	37.1	47.4

Improved cash position by $23.8m due largely to the completed capital raising in April 2011

Non‐current assets down following the reclassification of the Bayswater property to current assets (asset now held for sale)

Increased CBA bonding facility and strong working capital position

 company is well positioned for growth

7

Financials – contribution analysis

FY10 revenue $97.4 million

Line of business	$
Mining Australia	25,468,483
Mining International	1,930,279
Operations Support	20,171,325
Infrastructure	18,297,909
Oil & Gas	31,507,798

	FY11 revenue $101.8 million
	Line of business $
	Mining Australia 36,524,885 Mining International 7,508,263 Operations Support 17,625,391 Infrastructure 6,789,184 Oil & Gas 33,324,123

8

Five lines of business

Australian Minerals and Processing

Oil & Gas – Australia

International Minerals and Processing

Infrastructure – Australia

Operation, Support & Maintenance

9

Australian Minerals Processing

Iron ore to drive the business over the next 5 years

• Revenue of $36.5m (FY10: $25.5m)

Major upcoming opportunities

• Bidding for long term framework agreements

Current major projects

Sino Iron Rio Tinto expansion projects BHP RGP6 Fortescue Mining Group Roy Hill

• Cadia East, Mt Keith and Sino Iron – all key current contracts

• on‐site and work continuing in FY12

• strong relationship built with Sino

• Mt Keith close to completion

10

Oil & Gas

Established credibility; strong contention for CSG projects

• Revenue of $33.3m (FY10: $31.5m)

• Successful completion of Pluto project achieving a satisfactory commercial result

  • credibility established

• Oceanic Industries acquisition positions SCEE nicely to participate in upcoming CSG projects

Major upcoming opportunities

CSG east coast Pluto 2/3 Wheatstone Scarborough Macedon Ichthys Browse PNG LNG QGC APLNG

Current major projects

• Origin contract

• QGC LNG early works

• APLNG early works

11

Infrastructure

Strong bounce‐back in performance in H2

• Revenue of $6.8m (FY10: $18.3m)

• Substantial growth expected in FY12 off the back of increased mining investment

• East coast CSG is a new target market

Major upcoming opportunities

Rio Tinto BHP Sino Iron CSG east coast

Current major projects

• Sino

• BHP Area C

12

International Minerals & Processing

Tale of two halves

• Revenue of $7.5m (FY10: $1.9m)

• Activity in Peru expected to increase following elections

Major upcoming opportunities

Minas Congas

• Pueblo Viejo project tracking in line with expectations

Current major projects

• Pueblo Viejo gold project

• Yanacocha power line

• Antapaccaya power line

13

Operation, Support & Maintenance

Building re‐current revenues

• Revenue of $17.6m (FY10: $20.2m)

• Assistance with major shutdowns and minor plant upgrades

• Growing a re‐current revenue base to provide a level of stability in revenues

• Entry into this segment driven largely by acquisition of Oceanic Industries and Hindle Group

Major upcoming opportunities

• Expansion of RTIO agreement

• • Expansion of BP framework agreement

• Expansion of Caltex framework agreement

• A growing focus for management

Current major clients

14

Safety performance

Maintaining exceptional safety record

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SCEE TRCFR FY04 ‐ FY11
50
40
30
20
10
0
FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11
TRCFR / Million hours
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• Completed seventh consecutive LTI‐free year

• Received AS 4801 and ISO 14001 accreditation for safety and environmental management systems

• Awarded Regional Managing Director's Contractors HSE Excellence Award (Australia & New Zealand) by Worley Parsons

• Awarded NECA Excellence award for safety for 2011 for SCEE’s safety performance at Pluto

Average Frequency and Incidence Rates 2006‐07 to 2008‐09 (preliminary)

	Frequency Rate Average	Incidence Rate Average
SCEE	0.0	0.0
Mining industry	7.3	1.7
Construction industry	14.9	3.2

• Source Department of Commerce; Worksafe.

15

Industry positioning

H1 was the trough for E&I industry; lead indicators trending up

• Order book of $27m as at 30 June 2010

• H1 revenue of $47m

• H2 revenue of $55m

• Current order book of $75m

• Lead indicator companies are achieving improved results

• Monadelphous

• NRW Holdings

• Lycopodium

• RCR Tomlinson

E & I (SCEE) industry is here

Construction industry is here

• Forge Group

• Decmil

16

Outlook – FY12

FY12 to be a year of transition

• FY12 building towards record levels of activity

• mix of legacy lower margin contract and recent higher‐margin contract revenues

• Strong growth in forward order book expected in H1 2012

• Forecast revenue growth expected to be double‐digit

• Margin improvement compared to FY11

• Opportunity to leverage overhead cost base

• Internal capacity for growth

17

Summary

A story of two halves; positioned for growth in FY12 and beyond

• Successful completion of Pluto contract

• Seventh consecutive LTI‐free year

• Positioned well with a strong order book

• momentum building with fifth Sino contract awarded in August

• Internal capability strengthened

• Industry lead indicators showing positive signs

• Well positioned for growth and to capitalise on improving market fundamentals

18

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 Southern Cross Electrical Engineering Limited’s current intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside the control of Southern Cross Electrical Engineering Limited.

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 Southern Cross Electrical Engineering Limited’s current intentions, plans, expectations, assumptions and beliefs about the future, you are urged to view all forward‐looking statements contained herein with caution.

19

Full year results 2011

26 August 2011