SOUTHERN CROSS ELECTRICAL ENGINEERING LTD — Investor Presentation 2012

Oct 28, 2012

SOUTHERN CROSS ELECTRICAL ENGINEERING AGM Presentation - 29 October 2012 Simon High – Managing Director/CEO

One of Australia’s leading providers of specialised E&I services

Focused on oil & gas and resource sectors Founded in Western Australia in 1978

2012 revenue $220 million

800 employees worldwide (700 based in Australia)

Eight years LTI free in Australia Listed on the ASX under code SXE

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Our key clients:
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Delivering life-of-project support through our three operating divisions

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SCEE INFRASTRUCTURE

Activities

Design and construction of high voltage power line distribution, switchyards and substations

Key Sectors: CSG/LNG, Minerals and Metals, Coal

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SCEE CONSTRUCTION

Activities

E & I installation and commissioning of Greenfield and major Brownfield upgrade projects

Key Sectors: LNG/CSG, Minerals and Metals, Coal

SCEE SERVICES

Activities

Operations support, maintenance and sustaining capital management; Brownfield Design & Construct services

Key Sectors: CSG/LNG, Minerals and Metals, Oil & Gas Refining, Offshore Support

FY12 –YEAR IN REVIEW

Peak workforce – 250 Status – ongoing

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Peak workforce – 38 Status – wrap-up phase

Peak workforce – 143 Status – complete

Peak workforce – 95 Status – wrap-up phase

Peak workforce – 120 Status – wrap-up phase

Peak workforce – 254 Status – wrap-up phase

Peak workforce – 310 Status – complete

Peak workforce – 25 Status – on-going

Peak workforce – 18 Status – on-going

CAPE LAMBERT OVERHEAD LINES - WA

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• Revenue increased 116% to $220.0m (2011 - $101.8m)

• Profit after tax of $13.7m (2011 – loss of $1.7m)

• Earnings per share 8.5cps (2011 – loss of 1.3cps)

• Dividend declared of 2.25c per share fully franked (2011 - no dividend)

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• Cash at 30 June 2012 $31.5m (30 June 2011 - $26.3m)

• Banking and bonding capacity increased to $60m (2011 - $30m)

• Eight years LTI-free in Australia, two LTIs in overseas operations

• 30 June 2012 order book of $79m secured orders and $140m of preferred contractor status orders for Rio Tinto 353 and Yandi were in negotiations. Rio Tinto 353 and Yandi now awarded plus a further >$40m on Tropicana.

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SCEE’s Australian operations are eight years LTI free

Numerous H&S certificates and awards:

• 2011 Worley Parsons Regional Managing Directors

• HSE Excellence Award, Australia and New Zealand (Pluto Project)

• 2010 & 2011 State NECA award winner for the Pluto LNG Project

• 2009 National NECA award winner for excellence in safety

• 2007 National NECA award winner for excellence in safety

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• 2010: 7 Woodside Safety Awards for Woodside Pluto LNG Project

Growth and return to profitability

		Year ending 30 June 2012 $m		Year ending 30 June 2011 $m				% Change
Revenue		220.0		101.8				116%
EBIT		19.4		(1.1)				NA
Profit after tax		13.7		(1.7)				NA
Earnings per share		8.50 cps		(1.28) cps				NA
Dividends per share declared		2.25 cps		Nil				NA
Cash		31.5		26.3				20%
Net assets		86.9		72.7				20%

Growth trajectory

rowth trajectory
	6 months to
	Dec 2010 $m	Jun 2011 $m	Dec 2011 $m	Jun 2012 $m
Revenue	47.3	54.5	84.2	135.8
Gross profit	2.3	13.9	17.8	25.6
Gross profit margin	4.9%	25.5%	21.1%	18.9%
Profit after tax	(4.8)	3.1	5.1	8.6
Profit after tax margin	(10.1)%	5.7%	6.1%	6.3%

Return to cash generation

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60
5.0
5.0
50
(11.0) Highlights:
(11.3)
• Returned to net cash inflow
40 22.4 (6.2) in FY 2012
22.2 (6.0) (0.9)
(2.9)
(0.9) • Cash spend of $9.7m on
$m 30 assets, mainly project plant
and equipment
•
Offset by proceeds from sale
20
26.3 31.5 of property of $3.7m
26.3 • Restricted deposit of $5m
10
released and bank
borrowings repaid
0
Opening EBITDA Release of Working Capex Tax, Repayment FX on Cash Closing
Cash July Restricted Capital Interest, of Cash June
2011 Cash Other Borrowings 2012
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• Returned to net cash inflow in FY 2012

• Cash spend of $9.7m on assets, mainly project plant and equipment

• Offset by proceeds from sale of property of $3.7m

LOOKING FORWARD WITH SCEE

SCEE objectives

Be recognised as a Tier 1 Electrical and Installation construction and operational support contractor in selected resources sectors:

• Minerals and metals (gold, copper, uranium, etc.)

• Iron Ore

• CSG

• LNG

• Coal

Full life cycle focus :

• Early works (SCEE Construction and SCEE Infrastructure)

• Construction (SCEE Construction and SCEE Infrastructure)

• Operations support (SCEE Services)

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Market Outlook

• Gold continues to provide steady workload

• Tropicana

Pipeline of Work

• Cadia Extension, Boddington Expansion

• Opportunities in Africa

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Market Outlook

• Strong base from existing and new projects

• Rio Tinto 353 mtpa

• Sino Iron

• Scope for further growth from current projects and tenders

Pipeline of Work

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• Rio Tinto Expansion, BHP Billiton Sustaining Capital, Sino Iron, Roy Hill, MAGJV Southdown

Market Outlook

• Well positioned for future work in the sector having completed QGC Early Works

• Expect the market to have a long life cycle

• Long term strategic objective to be leading CSG E&I contractor

Pipeline of Work

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• QCLNG Upstream Facilities

• Arrow Upstream Facilities

• Gladstone LNG Upstream Facilities

• APLNG Upstream Facilities

Market Outlook

• From 2013 and onwards onshore LNG projects will provide unprecedented growth

• SCEE positioning itself to capitalise on these opportunities

Pipeline of Work

• Projects with FID:

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• Wheatstone/Ichthys/QCLNG/GLNG/APLNG/Gorgon (1,2&3)

• Projects in FEED:

• Browse/Arrow LNG/Pluto (2&3)/Gorgon (4&5)

Market Outlook

• Successfully entered the market, completing first project

• Sector subdued in the short term

• Well positioned for future coal price recovery

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Pipeline of Work

• BMA Caval Ridge, Whitehaven Maules Creek, Xstrata Wandoan

Order book now $220m

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250
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200
60
150
$m
100
140
50
79 FY13
executed
to date 20
0
30 June 2012 Current
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Orders secured since 30 June 2012 for FY14 Orders secured since 30 June 2012 for FY13 Orders secured at 30 June 2012 for FY13

Ongoing Works:

• MCCM - Sino Iron

• Rio - Cape Lambert 33kv overhead line

• Rio - Yandi transmission lines

• Rio - Coastal Waters transmission lines

Contracts awarded post 30 June 2012 as expected:

• Rio – Yandi transmission lines second portion $29m

• • Tropicana Gold Project > $40m

• Rio 353 mtpa - Cape Lambert Port B Scope ~$100m

Order book excludes work under recurring framework agreements typically $2m/month

Work continuing on further significant tenders

Second half performance expected to be significantly stronger than first half performance for both revenue and profit

Rio Tinto – 353 mtpa expansion

• Cape Lambert Port B Scope

• Contract value of approximately $100m

• Awarded under existing framework agreement

• Preferred contractor status for 5 years

• Work to commence immediately and conclude September 2013

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Tropicana gold project

• Joint venture between Anglogold and Independence

• Electrical, instrumentation, communication and process control plant infrastructure package

• Contract value in excess of $40m

• Forecast completion date May 2013

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Rio Tinto – Yandi Transmission Lines

• Second portion of the Yandi sustaining project

• Design, supply and construct 330kV distribution overhead lines

• Second phase value in excess of $29m

• Forecast completion date January 2014

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FOUNDATIONS FOR GROWTH

Poised to continue sustainable growth

• Negligible debt

• Strong cash position and balance sheet

• Increased plant and equipment investment

• Banking and bonding capacity increased to $60m

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Staffing for success

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1500
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Employee numbers

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914
412 447
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2010 2011 2012 2013 forecast
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70
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Apprentice numbers

• Workforce more than doubled in 2012

• Continue to increase in line with growth strategy

• Recruitment and training are key focus

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• Apprentice program has high retention rates

• Valuable part of company growth and development

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2010 2011 2012 2013 forecast
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Training and Development

• Dedicated training managers, facilities and training management systems

• Leadership and mentoring program

• Purpose built training facilities

• • High long-term skilled staff retention enables greater on the job mentoring support

Indigenous traineeships program

• Aim to provide meaningful and long term employment opportunities for Indigenous Australians

• Structured career pathways include warehousing, business administration and electrical apprenticeships

• Program commenced in 2010

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• 37 trainees inducted to date, rising to 62 in 2013

• Cultural Awareness training for all SCEE Staff

• Close relationships with the Aboriginal Development Corporation, Wirrpanda Foundation and Kooya Enterprises

Business intelligence

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Building recurring revenues

• Assistance with shutdowns and plant upgrades

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

• A growing focus for management – dedicated management team now in place

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Efficiencies for projects and mobilisations

• Established a Rockhampton regional operation

• Considering other regional locations

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• Solid progress in a transformational year

• Return to dividend payments on the back of healthy financial result and outlook

• Softening in current market conditions but three to five year outlook extremely positive

• Continue to build internal capacity to support ongoing growth

• Key focus on growing long term recurring workload

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.

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