SOUTHERN CROSS ELECTRICAL ENGINEERING LTD — Interim / Quarterly Report 2019

Feb 26, 2019

Half Year ended 31 December 2018 results

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27 February 2019

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

Our Values

Safety

It’s in everything we do.

Quality

Established in 1978 in Western Australia, the combination in 2016 with Datatel Communications Pty Limited (established 1998) and in 2017 with East Coast-based Heyday5 Pty Limited (business established 1978) has created a diversified national electrical contractor

Exceeding customer expectations through continuous improvement.

Reliability

We are dependable and consistently deliver high-quality services.

Trust

Entrust and empower our team to take ownership.

Loyalty

We believe in harmonious relationships and building these through integrity and mutual respect.

Half Year Results to 31 December 2018

Financial

Revenue $181.8m, EBITDA $9.0m and NPAT of $4.5m

EBITDA up 5%, EBIT up 30% and NPAT up 66% on prior corresponding period, due to improved trading and reducing amortisation of acquired intangible assets

Balance sheet remains strong with total cash of $56.2m (including $11.6m in restricted term deposit) at 31 December 2018 and no debt

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

Operational

Significant wins included Westconnex M4 and M5 motorway tunnels, multiple commercial building and fitout awards at Parramatta Square and at Wynyard Place

Demobilised at Rio Tinto Amrun and University of Canberra Hospital. Demobilising at Chevron Wheatstone LNG plant

Ongoing activity at RAAF Tindal, Ergon Energy, Northlink WA, Wodgina Lithium Project, NBN roll-out, and ATP Building 1 and 100 Mount Street, Sydney

Mobilising at Westmead Hospital

Focus on second half commercial close-out of recently completed contracts

Continuing integration of support functions across Group

Outlook

Stronger second half expected as certain major projects ramped up slower than anticipated in first half

Expecting FY19 revenues over $400m

Order book of over $480m at 31 December 2018 includes work already secured of over $200m for FY19 and over $280m for FY20

Visibility of infrastructure and resources projects growing - submitted tenders and BD pipeline now exceed $2.5bn

Commercial and infrastructure very strong and expected to overtake resources as largest revenue contributors in second half

Continuing to consider acquisition opportunities to achieve further sector and geographic diversity

Half Year Results to 31 December 2018

	HY19	HY18
	$m	$m
Revenue	181.8	176.2
Gross Profit	21.3	19.6
Gross Margin	11.7%	11.1%
Overheads	12.8	12.3
EBITDA	9.0	8.6
EBIT	6.9	5.3
NPAT	4.5	2.7

Significant revenue contributors included Rio Tinto Amrun, Westconnex, ATP Building 1, Wheatstone LNG and NBN roll-out

EBITDA up 5%, EBIT up 30% and NPAT up 66% on prior corresponding period, due to improved trading and reducing amortisation of acquired intangible assets

Overheads as a percentage of revenue consistent at 7.0% over both periods

Half Year Results to 31 December 2018

Infrastructure grown significantly. No significant datacentre construction projects in period

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HY18 HY19
$176m $182m
$12m
$7m
$61m
$63m
$52m
$53m
$12m
$14m $35m $49m
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Resources Telecommunications and datacentres Public infrastructure and defence Commercial Industrials, energy & utilities

Half Year Results to 31 December 2018

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New South Wales and ACT continues as largest geography
HY 18 HY 19
$176m $182m
$1m $2m
$14m $7m $9m $60m WA
NSW & ACT
$66m
$31m
QLD
NT
VIC
$88m
$80m
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Half Year Results to 31 December 2018

	Dec 18	Jun 18
	$m	$m
Current assets	150.9	139.0
Non current assets	90.1	90.9
Total assets	241.0	229.9
Current liabilities	96.1	77.0
Non current liabilities	5.7	11.8
Total liabilities	101.8	88.8
Equity	139.2	141.1

Balance sheet remains strong with total cash of $56.2m (including $11.6m in restricted term deposit) at 31 December 2018 and no debt

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

Franking account balance at $18.5m following payment of dividends in October

Half Year Results to 31 December 2018

Total cash consistent over period with $56.2m (including $11.6m in restricted term deposit) at 31 December 2018 Cash outflows included $6.5m paid to Heyday vendors in September and $7.0m dividends to shareholders in October

Capex low at $1.3m for the period and forecast to remain low

Half Year Results to 31 December 2018

Workforce currently 1,500 employees

Original SCEE business in fifteenth year LTI free in Australia

Frank Tomasi, founder of SCEE, retired from the Board in October

Half Year Results to 31 December 2018

NT

WA

Wheatstone LNG Rio Tinto Various BHP Billiton Various Sino Iron Boddington Gold NorthLink Central Section Health and education maintenance NBN construction Wireless networks construction Carrier networks construction Minor commercial works and services Woodman Point Waste Water Treatment

Wireless networks construction RAAF Tindal

QLD

Commercial

Rio Tinto Amrun Bauxite Project Arrow MSA NBN construction Carrier networks construction Ergon Energy Service Agreement

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

NSW & ACT

Multiple construction and fit out projects including: Paramatta Square – multiple projects Australian Technology Park Building 1 Duo Central Park Insurance Australia Group Wynyard Place 100 Mount Street Westmead Hospital Westconnex M4 and M5

VIC & TAS

NBN construction

Half Year Results to 31 December 2018

Tendering still at a high level with nearly $900m of submitted tenders with clients pending decision. Business development pipeline strong and, combined with submitted tenders, now exceeds $2.5bn. Order book includes over $280m of work already secured for FY20

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Jun 18 Dec 18
$450m $480m
$20m $55m $10m $30m
$30m
$25m Resources
Telecommunications and data centres
Public infrastructure and defence
Commercial
Industrials, energy & utilities
$205m $135m
$275m
$145m
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Half Year Results to 31 December 2018 11
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Bulk of order book secured in New South Wales reflecting strong commercial and infrastructure markets

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Jun 18 Dec 18
$450m $480m
$5m $5m
$60m
$80m
$20m $15m
$30m WA
$20m
NSW & ACT
QLD
NT
VIC
$380m
$315m
Half Year Results to 31 December 2018 12
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13

Strategy and sector outlooks

SCEE primarily sees itself as an electrical contractor. From early 2016 we have implemented a strategy to add to our historic resources business by diversifying into adjacent and complementary sectors through organic initiatives and the acquisitions of Datatel and Heyday. SCEE now operates across five sectors:

• Resources

• Commercial

• Public infrastructure and defence

• Telecommunications and datacentres

• Industrial, energy and utilities

Growth strategy continues so as to realise further sector and geographic diversity. SCEE’s expansion will be undertaken through a combination of organic and acquisition activity. Organic growth will primarily be achieved through:

• further penetration into upcoming East Coast and West Coast large-scale infrastructure projects

• leveraging the combined Group’s customer relationships and skills into new states

• rising activity levels in various sectors

Half Year Results to 31 December 2018

Sector primarily driven by government expenditure

Australia has infrastructure gap as forecasting 3rd highest population growth in OECD but ranked 28th for global infrastructure quality

Results in significant investment in road, rail, education, health and aged care, and defence with longevity to pipeline

Completed at University of Canberra Hospital in ACT and commenced Westmead Hospital in Sydney

Positioning for other hospital projects in NSW

Continuing at RAAF Tindal in Northern Territory

Multiple road projects include Westconnex M4 and M5 in NSW and Northlink in WA

Other transport infrastructure opportunities presenting in NSW and Metronet rail projects in WA

Half Year Results to 31 December 2018

Commercial largest component of SCEE order book

January 2019 Sydney CBD recorded vacancy rate of 4.6 per cent, lowest rate in almost 10 years

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

Contract wins included multiple projects at Parramatta Square and fit-out at Wynyard Place

SCEE leveraging combined Group’s customer relationships and skills into new geographies

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Property Council of Australia
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Half Year Results to 31 December 2018

Commodity prices holding up well and exporting record volumes

Pursuing replacement tonnage projects in iron-ore

Iron-ore sustaining capital expenditure continuing to increase

Pursuing opportunities in other commodities

In period demobilised at Rio Tinto Amrun and demobilising at Wheatstone LNG plant

Ongoing upstream CSG works in Queensland

Australian iron production by company

Australian Department of Industry, Innovation and Science

Half Year Results to 31 December 2018

NBN construction roll-out peaking and technology mix has stabilised

Positioning for NBN maintenance and upgrading

NBN works variously in Fibre To The Node, Curb and HFC continued in WA, QLD and VIC

Upgrading capacity ongoing in wireless sector and 5G commercial deployment expected 2020 onwards

Continued projects in wireless sector including construction of mobile towers in WA and NT

Activated premises forecast

NBN Co Corporate Plan 2019-2022

Half Year Results to 31 December 2018

Industrial and utilities sectors stable and provide flow of opportunities

Energy generation and distribution to meet demand remains a challenge for east coast with ongoing investment in renewables

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

Ergon Energy Service Agreement in northern QLD and works at Woodman Point Waste Water Treatment plant in WA ongoing

Half Year Results to 31 December 2018

• Revenue $181.8m, EBITDA $9.0m and NPAT of $4.5m

• EBITDA up 5%, EBIT up 30% and NPAT up 66% on prior corresponding period

• Balance sheet strong with total cash of $56.2m (including $11.6m in restricted term deposit) and no debt

• Total bonding capacity increased to $100m

• Significant wins at Westconnex M4 and M5, Parramatta Square and Wynyard Place

• Stronger second half expected and expecting FY19 revenues over $400m

• Order book of over $480m at 31 December 2018

• Includes work already secured of over $280m for FY20

• Submitted tenders and BD pipeline now exceed $2.5bn

• Commercial and infrastructure expected to overtake resources as largest revenue contributors in second half

• Continuing to consider acquisition opportunities to achieve further sector and geographic diversity

Half Year Results to 31 December 2018

Capital Structure	Capital Structure
ASX Code	SXE
Share Price(25 February2019)	$0.625
No. of ordinaryshares	234.1m
Market Capitalisation(25 February2019)	$146.3m
Number ofperformance rights	3.6m
Total Cash(31 December 2018)	$56.2m
Debt(31 December 2018)	Nil
Enterprise Value(25 February2019)	$90.1m

Shareholders at 1 February 2019	Shareholders at 1 February 2019
Shareholder	%
Frank Tomasi	20.0%
Thorney Investments	13.0%
Heyday Vendors	11.7%
Colonial First State	8.3%
Westoz Funds Management	5.6%
Other Institutions in Top 20 Shareholders	20.6%
Others	20.8%
Total	100.0%

Half Year Results to 31 December 2018

Some of the information contained in this presentation contains “forwardlooking 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.

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.

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.

Half Year Results to 31 December 2018