SOUTHERN CROSS ELECTRICAL ENGINEERING LTD — Investor Presentation 2012

Aug 27, 2012

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Southern Cross Electrical Engineering

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www.scee.com.au
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1. Highlights

2. SCEE Businesses

3. Financial Performance

4. Strategic Objectives

5. Sustainability

6. Outlook

7. Conclusions

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Page 1

Southern Cross Electrical Engineering

www.scee.com.au

• 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 final dividend)

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

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

• Eighth year LTI-free in Australia; two LTIs in overseas operations

• Order book at 30 June 2012 of $79m secured orders and $140m of preferred contractor status orders in negotiations

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Page 2

Southern Cross Electrical Engineering

www.scee.com.au

SCEE Infrastructure SCEE Construction SCEE Services

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Description

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

Electrical & instrumentation installation and

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

commissioning of Greenfield and major Brownfield upgrade projects

Activity

Iron Ore, Coal, LNG, Minerals and Metals, Utilities

Iron Ore, Coal, LNG, Minerals and Metals, Heavy Industry

Iron Ore, CSG, Oil & Gas Refining, Offshore Support

Current Clients

Rio Tinto, BHP Billiton, Citic Pacific, SKM, Calibre, Newcrest, Barrick Gold

Rio Tinto, BHP Billiton, Citic Pacific, Newcrest Mining, Barrick Gold, Thiess, SKM

Rio Tinto, BHP Billiton, BP, Santos, Silverlake Resources

K.J. Johnson & Co rebranded SCEE Infrastructure

From 1 July 2012: Hindles combined with our West Coast operations support business and rebranded SCEE Services

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Southern Cross Electrical Engineering

www.scee.com.au

Summary

Growth and return to profitability

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				20%
Dividends per share declared		2.25 cps		Nil				NA
Cash		31.5		26.3				20%
Net assets		86.9		72.7				20%

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Southern Cross Electrical Engineering

www.scee.com.au

Project Performance

Growth trajectory

Growth 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%

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Southern Cross Electrical Engineering

www.scee.com.au

Cash Flow

Cash generation

Cash generation
		Year ending 30 June 2012 $m		Year ending 30 June 2011 $m
Operating cash flows		10.0		0.2
Investing cash flows		(6.0)		(1.8)
Financing cash flows		2.1		20.0
Net movement in cash		6.1		18.4
Opening cash balance		26.3		7.5
FX movement		(0.9)		0.4
Closing cash balance		31.5		26.3

Operating cash - inflow

• Return to cash inflow in H2

• Working capital requirements

• Systems expenditure

• Recruitment costs

Investing cash - outflow

• Added $10.7m of assets, mainly project plant and equipment

• • Sold property for $3.6m

Financing cash - inflow

• Repaid bank borrowings

• • Restricted deposit of $5m released

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Southern Cross Electrical Engineering

www.scee.com.au

Cash Generation

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60
5.0
50 5.0
(11.3)
(11.0)
40 22.2 22.4 (6.0) (6.2) (0.9) (2.9)
(0.9)
30
$m
20
31.5 31.5
26.3 26.3
10
0
Opening Cash EBITDA Release of Working Capex Tax, Interest, Repayment of FX on Cash Closing Cash
July 2011 Restricted Capital Other Borrowings June 2012
Cash
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Page 7

Southern Cross Electrical Engineering

www.scee.com.au

Balance Sheet

Investment and growth

		Year ending 30 June 2012 $m		Year ending 30 June 2011 $m
Current assets		91.9		59.8
Non-current assets		34.8		26.8
Total assets		126.7		86.6
Current liabilities		33.4		13.7
Non-current liabilities		6.4		0.2
Total liabilities		39.8		13.9
Shareholders equity		86.9		72.7

• Strong cash position with negligible debt

• Increased plant and equipment investment

• Renegotiated banking facilities

• Increased banking and bonding capacity to $60m - $16m used and $44m available for future growth

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Southern Cross Electrical Engineering

www.scee.com.au

SCEE Objectives

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

• Iron Ore

• LNG

• Coal

• CSG

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

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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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Southern Cross Electrical Engineering

www.scee.com.au

SCEE Employees

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1000
International
129
800 Australia
600
115
400 785
200 362
0
As at 30 June 2011 As at 30 June 2012
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• Continuous recruitment of key people to support growth: • Project Managers • Construction Managers • Commercial Teams

• • Project Finance Teams

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Southern Cross Electrical Engineering

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Apprenticeship Program

• SCEE has a 98% completion rate and 90% retention rate for apprentices.

• Over the past ten years the company has graduated 51 apprentices of which 46 have been retained as tradespeople, supervisors and project managers.

• The apprenticeship program growth strategy is aligned to the anticipated labour shortage of electricians on future SCEE projects.

Apprentices

21 23 21[33 55 66 ]

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Southern Cross Electrical Engineering

www.scee.com.au

Systems Developments

Business intelligence

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On track and
on budget
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Southern Cross Electrical Engineering

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Market

• Growth expected in 2013 and beyond for at least a three to five year period

• Iron Ore, Coal and CSG current sectors for growth

• 2014 and onwards onshore LNG projects will provide unprecedented growth

• Current conditions are competitive but still supportive of growth

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Southern Cross Electrical Engineering

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Order Book

Ongoing Works:

• MCCM - Sino Iron

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200
160
140
120
80
40 79
75
27
0
30th June 2010 30th June 2011 30th June 2012
Final stages of negotiations
Confirmed
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• Rio - Cape Lambert 33kv overhead line

• Rio - Yandi transmission lines

• Rio - Coastal Waters transmission lines

• Thiess Sedgman JV - Lake Vermont Coal Expansion

• Thiess - QGCLNG Early Works

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

Approx. $140m of new work in final stages of contract negotiations “Preferred Contractor Basis”

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Southern Cross Electrical Engineering

www.scee.com.au

Pipeline of Work

SCEE is experiencing a high level of tendering in Australia across different resources sectors:

LNG

• Ichthys, Wheatstone, Gorgon, Offshore support services

Iron Ore

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

Coal Seam Gas

• QCLNG Upstream facilities, Arrow Upstream facilities

Minerals and Metals

• Tropicana Gold, Cadia Expansion, Boddington Expansion

Coal

• BMA Caval Ridge, Whitehaven Maules Creek, Xstrata Wandoan

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Southern Cross Electrical Engineering

www.scee.com.au

Summary

• 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

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Southern Cross Electrical Engineering

www.scee.com.au

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, 140 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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Southern Cross Electrical Engineering

www.scee.com.au