COFFEY INTERNATIONAL LIMITED Results - 12 months ended 30 June 2008 - - PowerPoint PPT Presentation

COFFEY INTERNATIONAL LIMITED Results - 12 months ended 30 June 2008 28 August 2008

Agenda

• Key highlights
• Financial performance
• Operational review
• Strategy & outlook

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• Q&A

Key highlights

Roger Olds, Managing Director Roger Olds, Managing Director

Business highlights

• Strong organic and acquisition growth
• Strong operating cash flow
• Grown our specialist business model – size, geographies, markets,

client base – successfully acquired & integrated businesses in Brazil (Geoexplore), USA (MSI) and Canada (Shaheen & Peaker)

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(Geoexplore), USA (MSI) and Canada (Shaheen & Peaker) – expanded into rail, infrastructure transaction advisory, sporting infrastructure and mining

• Finance system and controls resolved
• Strong balance sheet and new debt facility
• Current operating performance in line with 3 year plan from 2005

Results highlights

• Total revenue up 54.0% to $558.6m
• Fee revenue up 33.6% to $376.6m
• Operating EBITA* up 70.1% to $43.2m
• NPAT* up 59.0% to $22.9m
• EPS* up 30.0% to 20.8 cents per share

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• EPS* up 30.0% to 20.8 cents per share
• DPS up from 15cps to 16cps fully franked
• Operating cashflow up from $6.2m to $58.6m

* Pre vendor earn-out & share-based payment expense (“pre VEO & SBP”)

Financial performance

Debbie Goodin, Acting Chief Financial Officer Debbie Goodin, Acting Chief Financial Officer

Financial management overview

• Finance system and controls resolved
• The accounts are fully reconciled

– FY07 and 1HFY08 accounts restated as outlined in appendix

• Improved financial management

– Working capital improvement – Strengthened finance team; corporate and in businesses

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– Strengthened finance team; corporate and in businesses – Continued finance training in the businesses

• New auditor appointed:

– Tender process to appoint auditor undertaken September 2007 – KPMG appointed in November 2007 – Extended audit scope this year to increase level of assurance

Financial results overview

12 months to 30 June ($m) 2008 2007 change Revenue from continuing operations 558.6 362.7 ↑ 54.0% Fee revenue 376.6 281.9 ↑ 33.6% Operating EBITA (pre VEO & SBP) 43.2 25.4 ↑ 70.1% Vendor earn-out & share-based payment expense 4.9 3.8 ↑ 28.9% Operating EBITA (post VEO & SBP) 38.3 21.6 ↑ 78.6%

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Operating EBITA (post VEO & SBP) 38.3 21.6 ↑ 78.6% Net interest 7.9 4.9 ↑ 61.2% Amortisation 3.3 3.2 ↑ 3.1% PBT 27.2 13.5 ↑ 101.5% Income tax expense & minority interests 11.9 5.1 ↑ 133.3% NPAT (post VEO & SBP) 15.3 8.4 ↑ 82.1% NPAT (pre VEO & SBP) 22.9 14.4 ↑ 59.0% Earnings per share (basic) (NPAT (pre Amort, VEO & SBP)) 20.8 16.0 ↑ 30.0%

Change in NPAT

10 15 20 25 30 35 40 $m 8.4 6.0 14.4 12.2 (5.1) (3.0) (6.8) 22.9 (7.6) 15.3 11.2

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*Less minority interest in Duncan Rhodes $0.6m

Revenue up 54.0% to $558.6m

• 54.0% revenue growth

– 27.7% organic growth – 26.3% acquisition growth

• Strong growth in all divisions
• CAGR over past 3 years of

Total revenue 362.0 100.5 96.1 400 500 600 CAGR 48.7% 558.6

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• CAGR over past 3 years of

48.7%

251.9 170.0 131.3 362.0 100 200 300 FY04 FY05 FY06 FY07 FY08 $m

Organic Growth Non Organic Growth

Operating EBITA* up 70.1% to $43.2m

• 70.1% EBITA* growth

– 36.4% organic growth – 33.7% acquisition growth

• Growth in margins achieved by:

– Improved contribution from

Operating EBITA* 25.4 22.4 9.3 8.5

25 30 35 40 45 50 $m

CAGR 38.3%

43.2 11

Coffey International Development – Improved pricing – Increased efficiency

• CAGR over past 3 years of

38.3%

22.4 16.3 11.5 25.4

5 10 15 20 25 FY04 FY05 FY06 FY07 FY08 $m Organic Growth Non Organic Growth

* Pre VEO & SBP

Operating EBITA to cash flow reconciliation

40 50 60 70 80 90 100 $m

43.2 9.6 0.9 29.8 7.2 (4.6) (27.5) 58.6

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10 20 30 40

Operating EBITA Increased Creditors from $100.5m

• rganic

revenue growth @34.9 days Improvement in creditor days 34.9 to 35.8 days WIP + Debtor improvement ex acquisitions from 100 to 79 days (Jun 07 - Jun 08) Increased Creditors from acquisitions Increased WIP+Debtors from acquisiitons Increased WIP+Debtors from $100.5m

• rganic

revenue growth at 100 days (Jun 07) Operating cash flow

Strong growth in operating cash flows

• Significant increase in
• perating cash flow
• Improvement in working

capital by 21.9 days

• Increase in debt due to

acquisition funding

• Net cash of $2.6 million

12 months to 30 June ($m) 2008 2007 change Cash flow from operating activities: Operating cash flow 58.6 6.2 ↑ 52.4 Interest and tax (22.9) (13.6) ↑ 9.3 Net cash (outflow) inflow from operating activities 35.7 (7.4) ↑ 43.1 Cash flow from investing activities:

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• Net cash of $2.6 million

returned from acquired balance sheet due to improved cash management

Acquisitions (53.0) (40.7) ↑ 12.3 Property, plant & equipment / other (13.2) (9.1) ↑ 4.1 Net cash (outflow) from investing activities (66.2) (49.8) ↑ 16.4 Cash flow from financing activities: Share issues 1.2 76.9 ↓ 75.7 Dividends (15.6) (10.3) ↑ 5.3 Net change in debt 84.8 (5.6) ↑ 90.4 Net cash inflow (outflow) from financing activities 70.4 61.0 ↑ 9.4 Net increase in cash held 40.0 3.7 ↑ 36.3

Strong balance sheet

• Gearing remains at conservative

levels

• New debt facilities put in place in

February 2008 increased facility size from $115m to $200m

As at 30 June ($m) 2008 2007 Total Cash 52.4 14.6 Foreign currency denominated debt (A$ equivalent) 35.2

• A$ denominated debt

111.1 60.7 Total Debt 146.3 60.7 Net Debt 93.9 46.1

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Net Debt 93.9 46.1 Debt Facilities undrawn 44.5 54.3 Equity 196.1 177.6 Debt Facilities: % of debt at fixed rate 70%

• % of debt at floating rate

30% 100% Net Debt to Equity 47.9% 26.0% Net Debt to Capital 32.4% 20.6% Interest Cover (EBITA pre VEO & SBP) 5.5 5.2

Dividends

Dividends per share

2.6 3.5 5.0 7.0 7.0 6.2 7.0 8.0 8.0 9.0 2 4 6 8 10 12 14 16 18 04 05 06 07 08 cps

• Total dividend paid has

consistently grown over the past 5 years to $19.1m

• Average dividend payout ratio

FY07 to FY08 – 85.3%

• Average dividend payout ratio

FY04 to FY06 – 65.3%

8.8 10.5 13.0 15.0 16.0

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FY04 FY05 FY06 FY07 FY08

Interim Dividend Final Dividend FY04 FY05 FY06 FY07 FY08 Total annual dividend paid ($m)*** 9.0 9.0 9.9 16.5 19.1 Dividend payout ratio* (interim + final)** 67.2% 60.5% 68.3% 93.7% 77.0% Average payout ratio or period 65.3% 85.3% *60-80% of NPAT (pre amortisation, vendor earn-out and share-based payment expense) **Special dividends which have not been included in the above were paid in FY04 (6 cps) & FY05 (2 cps) *** The dividend reinvestment plan was activated for FY04, FY05, FY06 & FY07

FY04 to FY06 – 65.3%

Summary – financial performance

• Finance system and controls resolved
• Improved fee margins with EBITA/fee revenue up from 9.0% to

11.5%

• Strong growth in operating EBITA, up 70.1%

– (CAGR 38.3% over past 3 years)

• Strong operating cash flow

59.0%

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• Strong growth in NPAT (pre amortisation, VEO & SBP), up 59.0%

– (CAGR 27.1% over past 3 years)

• Strong balance sheet
• Final dividend 9cps; full year 16cps (100% franked)

– Payout ratio over the past 2 years of 85.3% of operating NPAT (pre amortisation & SBP)

Operational review

Roger Olds, Managing Director Roger Olds, Managing Director

Divisional analysis

Operating EBITA (pre vendor earn-out & share based payments) Fee Revenue Fee Margin 12 months to 30 June ($m) 2008 2007 change 2008 2007 2008 2007

Consulting 45.7 30.3 ↑ 50.8% 251.3 159.1 18.2% 19.0% International Development 8.1 1.5 ↑ 440% 65.5 68.7 12.3% 2.2%

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Projects 10.0 8.0 ↑ 25.0% 59.8 54.1 16.7% 14.8% Corporate (20.6) (14.4) ↑ 43.1%

• Total

43.2 25.4 ↑ 70.1% 376.6 281.9 11.5% 9.0%

Consulting – key highlights

• Coffey Environments

– Expansion of capabilities across waste management, hazardous material services, US remediation engineering, energy and greenhouse gas management

• Coffey Natural Systems

– Became a national company in February 2008 – Significant projects from clients including Tarong Energy, Exxon Mobil, Teck Cominco,

Operating EBITA* 20.8 30.2 45.7 25 30 35 40 45 50

$m

Another year of strong growth. Consulting EBITA up 50.8% to $45.7m

CAGR 47.3%

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Tarong Energy, Exxon Mobil, Teck Cominco, Atlas Iron, Marengo Mining

• Coffey Geotechnics

– Key wins across land & marine geotechnical and hydrogeological studies (Rio Tinto – Weipa & Hunter Valley), testing (Ballina bypass) and geotechnical design (M80 - Glasgow, UK) – Acquisition in Canada (Shaheen & Peaker)

• Coffey Mining

– Acquisition in Brazil (Geoexplore) – Significant projects from clients including BHP Billiton, Newcrest and Votorantim

9.5 14.3 20.8 5 10 15 20 FY04 FY05 FY06 FY07 FY08

* Pre VEO & SBP

Consulting – key highlights (cont.)

• APR

– VicTrack level crossings upgrade – Recruitment of new staff to extend and broaden capabilities

• Stratcorp

– Further growth and long-term contracts with the AFL & clubs, A-league, AJC, NSW & Vic Govt.’s

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AJC, NSW & Vic Govt.’s

• Peron

– Major projects work with Vic & QLD Govt.’s

International development – key highlights

• Key wins in FY08 include:

– Asia /Pacific: Enterprise challenge fund, USAID – Europe / Africa / Middle East: Iraq technical support initiative and UAE challenge fund – Americas: CIMIENTOS (Columbia), USAID (Sudan)

• Acquisition of MSI in USA advanced our

Operating EBITA* 4.6 3.8 8.1 4 5 6 7 8 9

$m

An exceptional year. International development EBITA up 440% to $8.1m

CAGR 28.5%

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• Acquisition of MSI in USA advanced our

globalisation and added to EBITA growth

• All geographies have increased profit

contribution over the past year

• New 5 year training contracts in the

Middle East will be cash positive from the start

• Future growth in Coffey International

Development EBITA to be supported by Middle East contracts and a full year of MSI

3.8 3.0 1.5 1 2 3 4 FY04 FY05 FY06 FY07 FY08

$m

* Pre VEO & SBP

Project management – key highlights

• Key wins in FY08 include:

– Department of Justice state coronial services centre (Australia) – Geelong Football Club Skilled Stadium redevelopment – Woodside, BHP & Rio Tinto projects – Australian Jockey Club master planning for Randwick and Warwick farm racecourse

Operating EBITA*

8.0 10.0 6 8 10 12

$m

A strong performance. Project management EBITA up 25.0% to $10.0m

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farm racecourse – SBSA Samrand Standard Bank (South Africa) – Nedbank phase II (South Africa) – Marina Bay Sands (Singapore)

• Coffey Projects now fully integrated
• Acquisition of John Wertheimer Consultants
• Opened office in Singapore
• Good contributions from Middle East, South

Africa & New Zealand

2.6 2 4 6 FY06 FY07 FY08

$m

* Pre VEO & SBP

Strategy & outlook

Roger Olds Roger Olds Managing Director

Global presence

Europe employees 110 North America employees 680

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Africa / Middle East employees 160 Asia / Pacific employees 2,800 South America employees 440

Note: Our people as at 30 June 08 Total 4,200 (2,500 in 07)

We operate in high demand sectors

• Group revenue split in FY08

approximately: – Infrastructure (45%) – Resources (30%) – International development (15%) – Property (10%)

• The acquisitions during FY08

increased our exposures in:

Coffey group revenue by sector 45% 15% 10% Infrastructure Resources International development

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increased our exposures in: – Infrastructure (APR, Stratcorp, Peron, Teal Management Services, Shaheen & Peaker) – Resources (Geoexplore, NS Consultancy) – International Development (MSI) – Property (JWC)

30% development Property

We operate in markets with attractive fundamentals

• Our specialist sectors are seeing continued strong investment
• Recessionary pressures impacting consumer spending patterns, but

not impacting our sectors

• Resources expenditure is still being driven by high demand
• Increased infrastructure spend globally

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• Increased infrastructure spend globally
• International development sector experiencing increased

expenditure

We have excellent growth prospects

• Organic

– Increasing demand for our specialist services – Staff attracted to the specialist model – Expanding clients and staff numbers with global spread – Increasing focus on servicing clients with our multi-specialist services

• Acquisition

– Strategic acquisitions will continue to support expansion and diversification – Pipeline of acquisitions in place – Cautious of the cost of equity and supply of debt

• Transformational – One Coffey: aligning our global culture & capabilities

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• Transformational – One Coffey: aligning our global culture & capabilities

– Platform for Growth; a global transformation strategy

• Aligning vision, strategy, culture and operational excellence through all of

Coffey

• 7 programmes designed to drive short-term performance and long-term

growth – Coffey Institute launched: an advanced education provider to our industries – Financial excellence program: training our people – Leadership program: embedding the Coffey way – One Coffey Safe and Healthy programme launched

Looking forward

• A new global management structure – 6 new executive positions
• Continued strong growth in revenues

– Leveraging global footprint, resources and clients – Full year from FY08 acquisitions – Cross selling opportunities for larger clients

• Further fee margin improvements

– Cost efficiencies; eg insurance; travel; purchasing – Prices increase with salary increases – Larger clients and larger projects improve utilisations

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– Larger clients and larger projects improve utilisations – Financial management and controls and common systems – Less integration compared to past years

• Continued investment to support sustainable growth
• 3 year goal set in June 05 met in Q4 FY08

– Operating EBITA (pre VEO & SBP) of $6m per month – Challenge to now deliver over full 12 months, given historical seasonality – July 08 is significantly better than past few years

• Strong cashflow will support ongoing growth plans

Summary

• FY08 has delivered strong growth
• The key markets we operate in have very attractive fundamentals
• Our multi-specialist model is a key differentiator – for clients and

staff

• Our diversification strategy–geography, sector and service–positions

us for strong growth whilst reducing risk

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us for strong growth whilst reducing risk

• Our strong balance sheet allows us to pursue attractive acquisition
• pportunities as they arise (10 in FY08 and 27 over the past 3

years)

• We are well positioned to grow shareholder value

Questions and answers

Appendix

Restatement of FY07 earnings

• Adjustment to Consulting relates

to the Australian environments (80%), geotechnics (15%) and mining (5%) businesses

• International development

adjustment due to non recovery under a sale agreement

12 months to 30 June $m 2007 (Restated) 2007 (Previous) change Revenue Consulting 213.7 219.3 ↓5.6 Projects 55.6 55.6

• International Development

92.9 92.9

• Inter Segment Eliminations

0.5 0.5

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under a sale agreement

• Cause of adjustment was:

– Not related to projects or overseas businesses – Concurrent integration of acquired businesses & finance systems

Inter Segment Eliminations 0.5 0.5

• Total

362.7 368.3 ↓6.3 EBITA (pre SBP) Consulting 30.2 36.3 ↓6.1 Projects 8.1 8.1

• International Development

1.5 2.0 ↓0.5 Corporate (14.4) (14.4)

• Total

25.4 32.0 ↓6.6

Restatement of 1H08 earnings

As at 31 December 2007 A$m 2007 (Restated) 2007 (Previous) change Current assets 152.6 153.4 ↓ 0.8 Non-current assets 206.2 206.4 ↓ 0.2 Total assets 358.8 359.8 ↓ 1.0 6 months to 31 December 2007 A$m 2007 (Restated) 2007 (Previous) change Revenue 237.6 237.4 ↓ 0.2 Other income 0.3 0.3

• Raw materials, subcontractor

costs & consumables (88.3) (87.2) ↑ 1.1 Employee benefits expense (103.8) (103.8)

• Consolidated income statement

Consolidated balance sheet

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Current liabilities 138.9 139.2 ↓ 0.3 Non-current liabilities 4.3 4.3

• Total liabilities

143.2 143.5 ↓ 0.3 Net assets 215.6 216.3 ↓ 0.7 Total equity 215.6 216.3 ↓ 0.7 Employee benefits expense (103.8) (103.8)

• Depreciation and amortisation

expenses (3.5) (3.8) ↓ 0.3 Occupancy costs (7.4) (7.4)

• Other expenses

(20.1) (19.6) ↑ 0.5 Finance costs (2.9) (2.9)

• Profit before income tax

(12.0) (13.0) ↓ 1.0 Income tax expense (3.8) (4.1) ↓ 0.3 Minority interest (0.1) (0.1)

• Profit attributable to CIL

8.1 8.8 ↓ 0.7

High level balance sheet

As at 30 June (A$m) 2008 2007 Cash & equivalents 52.4 14.6 Trade & other receivables 129.7 96.0 Current assets 203.1 114.4 Intangible assets 205.0 143.6 Non-current assets 240.6 167.7 Total assets 443.7 282.1

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Trade and other payables 72.7 34.6 Borrowings 1.7

• Current liabilities

94.7 41.2 Borrowings 144.7 60.5 Non-current liabilities 153.0 63.4 Total liabilities 247.7 104.6 Net assets 196.1 177.5 Total equity 196.1 177.5

A snapshot of Coffey over past 5 years

Metrics ($m) unless otherwise stated FY04 FY05 FY06 FY07 FY08 Revenue 131.3 170.0 251.9 362.7 558.6 Fee revenue 115.1 141.0 210.9 281.9 376.6 Operating EBITA (pre VEO & SBP) 11.5 16.3 22.4 25.4 43.2 NPAT (pre VEO & SBP) 7.7 11.2 13.4 14.4 22.9 NPAT (post VEO & SBP) 7.0 10.2 11.6 8.4 15.3 Operating EBITA (pre VEO & SBP) (revenue) Margin 8.7% 9.6% 8.9% 7.0% 7.7%

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Operating EBITA (pre VEO & SBP) (fee revenue) Margin 10.0% 11.6% 10.6% 9.0% 11.5% EPS (basic) (NPAT pre VEO & SBP) 13.1cps 17.3cps 19.0cps 16.0cps 20.8cps Net Debt 4.7 3.1 54.8 46.1 93.9 Equity 25.3 34.2 67.0 177.6 196.1 Net debt/equity 18.7% 9.2% 81.8% 26.0% 47.9% Interest cover (EBITA per VEO & SBP) 29.8x 18.2x 7.0x 5.2x 5.5x Number of acquisitions 2 2 8 9 10

Disclaimer

The material in this presentation is a summary of the results of Coffey International Limited (Coffey) for the 12 months ended 30 June 2008 and an update on Coffey’s activities and is current at the date of preparation, 28 August 2008. Further details are provided in the Company’s full year accounts and results announcement released on 28 August 2008. No representation, express or implied, is made as to the fairness, accuracy, completeness or correctness of information contained in this presentation, including the accuracy, likelihood of achievement or reasonableness of any forecasts, prospects, returns or statements in relation to future matters contained in the presentation (“forward-looking statements”). Such forward-looking statements are by their nature subject to significant uncertainties and contingencies and are based on a number of estimates and assumptions that are subject to change (and in many cases are outside the control of Coffey and its Directors) which may cause the actual results or performance of Coffey to be materially different from any future results or performance expressed or implied by such forward-looking statements.

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different from any future results or performance expressed or implied by such forward-looking statements. This presentation provides information in summary form only and is not intended to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. Due care and consideration should be undertaken when considering and analysing Coffey’s financial performance. All references to dollars are to Australian Dollars unless otherwise stated. To the maximum extent permitted by law, neither Coffey nor its related corporations, Directors, employees or agents, nor any other person, accepts any liability, including, without limitation, any liability arising from fault or negligence, for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it. This presentation should be read in conjunction with other publicly available material. Further information including historical results and a description of the activities of Coffey is available on our website, www.coffey.com