SOUTHERN CROSS ELECTRICAL ENGINEERING LTD — Interim / Quarterly Report 2012

Feb 26, 2012

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Results for Announcement to the Market – Half Year ended 31 December 2011

	Half Year Ended Half Year Ended Change 31 Dec 2011 $’000 31 Dec 2010 $’000 $ %	Half Year Ended Half Year Ended Change 31 Dec 2011 $’000 31 Dec 2010 $’000 $ %
Revenue and Net Profit Revenue from ordinary activities Profit/(Loss) from ordinary activities after tax attributable to members Net profit/(loss) attributable to members *Company has moved from loss to profit	84,180 47,267 36,913 78% 5,122 (4,786) 9,908 NA 5,122 (4,786) 9,908 NA
		Amount per security Franked amount per security
Dividends Interim dividend Record date for determining entitlements to the dividend Date the interim dividend is payable The Company does not operate a dividend re- investment plan		0.0 cps 0.0 cps NA NA
NTA Backing		Half Year Ended 31 Dec 2011 Half Year Ended 31 Dec 2010
Net tangible asset backing per security (cents per share)		37.6 cps 15.5 cps

Details of entities over which control has been gained or lost during the period

During the period there was no change to controlled entities of Southern Cross Electrical Engineering Ltd (“the Group” or “SCEE”).

Details of associates and joint venture entities

The company has no interest in any associates or joint ventures.

Previous Corresponding Reporting Period

The previous corresponding reporting period is the half year ended 31 December 2010.

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Commentary on the Results for the Period

In the six months ended 31 December 2011 the volume of work executed grew significantly. All parts of the group experienced growth with an increase in revenues of 78% across the group compared to the corresponding prior interim period.

During the period SCEE commenced works at the Antapaccay Copper Project for Xstrata in Peru, at Sino Iron Area F for MCC, and on the Cape Lambert 33kV Overhead Power Line for Rio Tinto. SCEE was also awarded and commenced mobilisation on the electrical and instrumentation contracts for Early Works on the QGCLNG project for Thiess and with the Thiess Sedgman Joint Venture for the Lake Vermont Coal Expansion Project.

The most significant revenue contributors during the period were:

Cadia

This contract was awarded in December 2010 and the forecast completion date is June 2012. There has been significant growth in the project from work that was performed before the original scope commenced.

Sino Iron Concentrator and Area F

SCEE was awarded the Concentrator Number 1 contract in April 2011 and then the Area F works in this period. The projects have required a significant and accelerated deployment of resources.

SCEE’s overhead costs, excluding share based payments but including employee bonus accruals, for the six months ended 31 December 2011, have increased by 19% (or $1.6m) but as a percentage of revenue have decreased from 18% in the corresponding prior interim period to 12% in this period.

Good progress continues to be made with the development and rollout of our upgraded project management systems and processes into the Company. During the period we have also significantly increased or upgraded our equipment fleet with new plant and equipment.

Our focus on working safely in all parts of our business is and will remain our highest priority. We are proud of our continuing outstanding long term safety record.

SCEE has seen a consistently high level of tendering activity across the period as some of the early Australian resource projects start to award E&I construction contracts. We expect this high level to continue.

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Southern Cross Electrical Engineering Limited

Interim Financial Report for the Half Year Ended 31 December 2011

Southern Cross Electrical Engineering Limited

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CONTENTS

DIRECTORS’ REPORT	3
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	5
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION	6
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	7
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS	8
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS	9
DIRECTORS’ DECLARATION	12
REVIEW REPORT	13
LEAD AUDITOR’S INDEPENDENCE DECLARATION	15

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Southern Cross Electrical Engineering Limited

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Directors’ report

The directors present their report together with the consolidated interim financial report for the six months ended 31 December 2011 and the independent review report thereon.

Directors

The directors of the Southern Cross Electrical Engineering Limited (“SCEE” or “the Company”) at any time during or since the end of the interim period are:

Name	Period of directorship
Non-executive
Mr John Cooper (Chairman)	Director since 2007
Mr Gianfranco Tomasi	Director since 1978
Mr Derek Parkin	Director since 31 March 2011
Mr Peter Forbes	Director since 1 October 2011
Dr Jack Hamilton	Director since 1 October 2011
Executive
Mr Simon High (Managing Director)	Director since 2 August 2010

Review of operations

In the six months ended 31 December 2011 the volume of work executed grew significantly. All parts of the group experienced growth with an increase in revenues of 78% across the group compared to the corresponding prior interim period.

During the period SCEE commenced works at the Antapaccay Copper Project for Xstrata in Peru, at Sino Iron Area F for MCC, and on the Cape Lambert 33kV Overhead Power Line for Rio Tinto. SCEE was also awarded and commenced mobilisation on the electrical and instrumentation contracts for Early Works on the QGCLNG project for Thiess and with the Thiess Sedgman Joint Venture for the Lake Vermont Coal Expansion Project.

The most significant revenue contributors during the period were:

Cadia

This contract was awarded in December 2010 and the forecast completion date is June 2012. There has been significant growth in the project from work that was performed before the original scope commenced.

Sino Iron Concentrator and Area F

SCEE was awarded the Concentrator Number 1 contract in April 2011 and then the Area F works in this period. The projects have required a significant and accelerated deployment of resources.

SCEE’s overhead costs, excluding share based payments but including employee bonus accruals, for the six months ended 31 December 2011, have increased by 19% (or $1.6m) but as a percentage of revenue have decreased from 18% in the corresponding prior interim period to 12% in this period.

Good progress continues to be made with the development and rollout of our upgraded project management systems and processes into the Company. During the period we have also significantly increased or upgraded our equipment fleet with new plant and equipment.

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Southern Cross Electrical Engineering Limited

Our focus on working safely in all parts of our business is and will remain our highest priority. We are proud of our continuing outstanding long term safety record.

SCEE has seen a consistently high level of tendering activity across the period as some of the early Australian resource projects start to award E&I construction contracts. We expect this high level to continue.

Dividend

The directors have not declared an interim dividend for the six months ended 31 December 2011. At this time the Company is reserving cash resources in order to fund expansion of its operations.

Rounding off

The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amounts in the condensed consolidated interim financial report and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated.

Lead auditor’s independence declaration

The lead auditor’s independence declaration is set out on page 15 and forms part of the directors’ report for the six months ended 31 December 2011.

Dated at Brisbane, this 24[th] day of February 2012.

Signed in accordance with a resolution of the directors:

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John Cooper

Chairman

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Southern Cross Electrical Engineering Limited

Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Comprehensive Income
	31 Dec 2011 31 Dec 2010 $’000 $’000
Contract revenue Contract expenses Gross profit Other income Employee benefits expenses Occupancy expenses Administration expenses Other expenses Business combination expenses Depreciation expense Amortisation of customer contract intangibles Profit/(Loss) from operating activities Finance income Finance expense Net finance income/(expense) Profit/(Loss) before income tax Income tax (expense)/benefit Profit/(Loss) after income tax for the period Other comprehensive income/(loss) Foreign currency translation losses for foreign operations Income tax on other comprehensive income Other comprehensive income/(loss) net of income tax Total comprehensive income/(loss) for the period Attributed to Owners of the Company Earnings/(loss) per share - Basic earnings/(loss) per share (cents per share) - Diluted earnings/(loss) per share (cents per share)	84,180 47,267 (66,406) (44,994)
	17,774 2,273 221 (54) (6,469) (5,136) (620) (365) (1,890) (1,653) (720) (387) - (95) (912) (769) (75) (75)
	7,309 (6,261) 673 64 (352) (433)
	321 (369)
	7,630 (6,630) (2,508) 1,844
	5,122 (4,786)
	(13) (146) - -
	(13) (146)
	5,109 (4,932)
	5,109 (4,932)
	3.2 (3.9) 3.2 (3.9)

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Southern Cross Electrical Engineering Limited

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Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Financial Position
Notes		31 Dec 2011	30 Jun 2011 $’000
		$’000
Assets Cash and cash equivalents Term deposits Trade and other receivables Tax receivable Inventories Construction work in progress Prepayments Assets held for sale Total current assets Property, plant and equipment 7 Intangible assets and goodwill Total non-current assets Total assets Liabilities Trade and other payables Loans and borrowings 8 Unearned income Employee entitlements/provisions Total current liabilities Employee entitlements Deferred tax liability Total non-current liabilities Total liabilities Net assets
		17,106
		8,000
		23,920
		325
		1,309
		15,074
		774
		-
		66,508	59,803
		12,484
		17,626
		30,110	26,785
		96,618	86,588
		12,070
		326
		186
		3,097
		15,679	13,710
		571
		2,082
		2,653	210
		18,332	13,920
	78,286 72,668
Equity Share capital Reserves Retained earnings Total equity

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Southern Cross Electrical Engineering Limited

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Condensed Consolidated Statement of Changes in Equity

	Share	Retained	Options	Translation	Total
	Capital	Earnings	Reserve	Reserve	Equity
Balance as at 1 July 2011	56,984	15,344	432	(92)	72,668
Total comprehensive income for
the period
Profit for the period	-	5,122	-	-	5,122
Foreign currency translation	-	-	-	(13)	(13)
Total comprehensive Income	-	5,122	-	(13)	5,109
Transactions with owners,
recorded directly in equity
Cost of share based payment	-	-	(61)	-	(61)
Issue of new shares	570	-	-	-	570
Dividends	-	-	-	-	-
Total transactions with owners	570	-	(61)	-	509
Balance as at 31 December 2011	57,554	20,466	371	(105)	78,286
	Share	Retained	Options	Translation	Total
	Capital	Earnings	Reserve	Reserve	Equity
Balance as at 1 July 2010	24,964	22,584	321	(450)	47,419
Total comprehensive income for
the period
Profit for the period	-	(4,786)	-	-	(4,786)
Foreign currency translation	-	-	-	(146)	(146)
Total comprehensive Income	-	(4,786)	-	(146)	(4,932)
Transactions with owners,
recorded directly in equity
Cost of share based payment	-	-	189	-	189
Issue of new shares	-	-	-	-	-
Dividends	-	(5,588)	-	-	(5,588)
Total transactions with owners	-	(5,588)	189	-	(5,399)
Balance as at 31 December 2010	24,964	12,210	510	(596)	37,088

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Southern Cross Electrical Engineering Limited

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Condensed Consolidated Statement of Cash Flows

Condensed Consolidated Statement of Cash Flows
Notes	31 Dec 2011
	$’000
Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees Interest received Interest paid Income taxes received/(paid) Net cash (used in) operating activities 9 Cash flows from investing activities Acquisition of property, plant and equipment Disposal of property, plant and equipment Net cash (used in) investing activities Cash flows from financing activities Repayment of borrowings Payment for term deposit Dividends paid Net cash (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at 1 July Effect of exchange rate fluctuations on cash held Cash and cash equivalents at 31 December

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Southern Cross Electrical Engineering Limited

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Notes to the condensed consolidated interim financial statements

1. Reporting entity

Southern Cross Electrical Engineering Limited (the “Company”) is a company domiciled in Australia. The consolidated interim financial report of the Company as at and for the six months ended 31 December 2011 comprises the Company and its subsidiaries (together referred to as the “Group”).

The consolidated annual financial report of the Group as at and for the year ended 30 June 2011 is available upon request from the Company’s registered office at 41 Macedonia Street Naval Base Western Australia 6165 or at www.scee.com.au.

2. Statement of compliance

The consolidated interim financial report is a general purpose financial report which has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001.

The consolidated interim financial report does not include all of the information required for a full annual financial report, and should be read in conjunction with the consolidated annual financial report of the Group as at and for the year ended 30 June 2011.

The consolidated interim financial report was approved by the Board of Directors on 24th February 2011.

3. Estimates

The preparation of the interim financial report requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

In preparing this consolidated interim financial report, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial report as at and for the year ended 30 June 2011.

4. Significant accounting policies

The accounting policies applied by the Group in this consolidated interim financial report are the same as those applied by the Group in its consolidated financial report as at and for the year ended 30 June 2011.

5. Financial risk management

During the six months ended 31 December 2011 the Group’s financial risk management objectives and policies were consistent with that disclosed in the consolidated financial report as at and for the year ended 30 June 2011.

6. Segment reporting

Revenue is principally derived by the Group from the provision of electrical and instrumentation services to the resources, energy and infrastructure sectors. The Group therefore operates within one operating segment.

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Southern Cross Electrical Engineering Limited

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Notes to the condensed consolidated interim financial statements

7. Property, plant and equipment and Assets held for sale

In the period the Company spent $4,312,000 for the acquisition of plant and equipment to support the growth in activity.

8. Loans and borrowings

Bank facilities continue to be in place on the same basis as at 30 June 2011. Under the terms of these facilities there are three financial covenants being interest cover ratio, gearing ratio and leverage ratio. At 31 December 2011 the Group was compliant with all of these covenants. As a consequence of this compliance the term deposit of $8 million which the Group is required to maintain per these banking facilities was reduced to $5 million on 9 February 2012.

The outstanding balance of the cash advance facility of $5 million drawn on 26 February 2010 to fund the acquisition of Oceanic Industries Pty Ltd was repaid on 22 December 2011. The multi-option facility, which was drawn to $12,285,210 at 31 December 2011, comprised bank guarantees and no debt.

9. Reconciliation of cash flows from operating activities

9. Reconciliation of cash flows from operating activities
	31 Dec 2011 31 Dec 2010 $’000 $’000
Cash flows from operating activities Profit/(loss) after income tax for the period Adjustments for: Depreciation and amortisation (Gain)/Loss on sale of property, plant and equipment Equity-settled share-based payment transactions (Increase)/decrease in assets Change in trade and other receivables Change in work in progress Change in inventories Change in prepayments Increase/(decrease) in liabilities Change in trade and other payables Change in unearned revenue Change in provisions and employee benefits Change in income tax payable Change in deferred income tax Net cash (used in) operating activities	5,122 (4,786) 986 844 (2) (7) 509 189 (6,724) (5,267) (9,143) 5,968 (8) (41) (601) (208) 5,069 (1,058) (414) 1,637 840 (103) (12) 285 2,078 (1,843)
	(2,300) (4,390)

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Southern Cross Electrical Engineering Limited

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Notes to the condensed consolidated interim financial statements

10. Share based payment

During the six months ended 31 December 2011 there were no employee share options issued. On 29 November 2011 the Company issued 750,000 fully paid ordinary shares at no consideration to Mr Simon High as approved by shareholder resolution at Annual General Meeting on 28 November 2011. The fair value of $570,000 was recognised as an expense in the statement of comprehensive income.

11. Related parties

The 250,742 vested share options and 55,191 non-vested performance rights held by Mr Stephen Fewster and the 48,890 non-vested performance rights held by Mr Gerard Moody at 1 July 2011 were forfeited on the cessation of their employment in the period.

On 8 November 2011 the Company entered into a lease for premises at 12 Trade Street, Lytton, Queensland for a term of 5 years at an annual rent of $205,000 with an entity controlled by Mr Jorn Granger, the General Manager Eastern Region. The rental payments are set at commercial rates on an arm’s length basis and were reviewed by an independent valuer in November 2011.

Other arrangements with related parties continue to be in place on the same basis as at 30 June 2011. For full disclosure on these transactions refer to the 30 June 2011 annual financial report.

12. Events after the balance sheet date

There are no matters or circumstances that have arisen since 31 December 2011 which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in subsequent reporting periods.

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Southern Cross Electrical Engineering Limited

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Directors’ declaration

In the opinion of the directors of Southern Cross Electrical Engineering Limited (“the Company”):

1. the financial statements and notes set out on pages 5 to 11, are in accordance with the Corporations Act 2001 including:

2. a. giving a true and fair view of the Group’s financial position as at 31 December 2011 and of its performance for the six month period ended on that date; and

3. b. complying with Australian Accounting Standard AASB134 Interim Financial Reporting and the Corporations Regulations 2001; and

4. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Dated at Brisbane, this 24th day of February 2012

Signed in accordance with a resolution of the directors

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John Cooper

Chairman

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Southern Cross Electrical Engineering Limited

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Southern Cross Electrical Engineering Limited

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Southern Cross Electrical Engineering Limited

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