For personal use only COFFEY INTERNATIONAL LIMITED COFFEY - - PowerPoint PPT Presentation

COFFEY INTERNATIONAL LIMITED FY2011 Results Presentation

10 August FY2011

Photo by James Ball ‐ www.dlscape.com

COFFEY INTERNATIONAL LIMITED

2011 Annual General Meeting 24 November 2011

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Welcome John Mulcahy, Chairman

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John Mulcahy

Chairman

John Douglas

Managing Director

Stuart Black

Chair – Audit Committee

Charles Jamieson AM

Non-executive Director

Susan Oliver

Chair – Remuneration Committee

Our Board

Stephen Williams

Chair – Risk Committee

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Proceedings

• Chairman’s Address
• Managing Director’s Address
• General Questions
• Business of the Meeting - Formal Resolutions
• Close

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Chairman’s Address John Mulcahy

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Strategic and Operational Improvements Executed

December 2010 Board instigates management review and cost reduction program $18 million annual cost base improvement by FY2012 March 2011 John Douglas commences as Managing Director Business / strategy review initiated June 2011 1st stage review completed Financial update to market August 2011 Reported FY2011 results October 2011 Capital Raising

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FY2011 Financial Results Overview

Note: includes business classified as both continuing and discontinuing in the financial statements of the group ¹ EBITDA before impairment and restructure costs

12 months to 30 June FY2010 ($m) FY2011 ($m) Change Fee revenue 475.7 423.6 (11)% Underlying EBITDA¹ 47.9 32.3 (34%) Restructuring costs (3.9) (9.1)

• Impairment
• (62.9)
• EBITDA

44.0 (39.7)

• NPAT

13.8 (69.7)

• EPS (basic – cents per share)

11.9 (57.0)

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• Strategic Review outcome to prioritise debt reduction and strengthen balance sheet
• $40 million capital raising to reduce gearing and strengthen balance sheet
• Management can finalise implementation of Strategic Review initiatives
• More focus on improving profitability of key businesses
• Greater certainty for shareholders, employees and clients
• Flexibility for business going forward – increased covenant headroom
• Reduced funding costs
• Improved balance sheet strength and the finalisation of the Strategic Review outcomes will position

Coffey well for the future Balance Sheet Strengthening to Support the Refocused Business

Capital Raising

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Safety and Diversity

• Safety

– Primary corporate value – Improvement in safety performance in FY2011 – Committed to continued improvement

• Diversity

– Committed to an inclusive workplace that embraces and promotes diversity – Board approved policies to foster diversity

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Board Renewal

September 2009 John Mulcahy appointed Director October 2010 Susan Oliver appointed Director November 2010 John Mulcahy appointed Chairman March 2011 John Douglas commenced as Managing Director June 2011 Deferred until strategic review outcomes implemented & capital raising completed Pre July 2012 Appoint at least one new Non-executive Director to fill casual vacancy

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Executive Remuneration

• Aim: to align Board and management remuneration to shareholder returns.
• Link to company performance:

– No short-term incentives earned or paid in FY2011 – All long-term incentive performance shares granted in November 2008 forfeited – John Douglas voluntarily forfeited contractual performance payment – Non-executive Director fees to remain unchanged from October 2008

• Strategic review of executive incentives by independent remuneration consultant, Guerdon

Associates

• Revised performance-based incentive scheme implemented for FY2012

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Resolutions - Long-term Incentive Scheme

• Grant of Shares to John Douglas

– Part of 2012 remuneration package – Subject to achievement of performance hurdles prior to any vesting – Aligns John’s remuneration and key objectives with other senior managers

• Coffey Rewards Share Plan

– No legal requirement to approve employee share plan – Not the intention to issue significant number of shares under the plan – Large pool of forfeited shares available in the plan – Plan deed allows for shares to be acquired on market

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Conclusion

• Disappointing financial performance
• Strategic review outcomes implemented
• Significant improvement in profitability in FY2012

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Managing Director’s Address John Douglas

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Key Points

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• Safety
• Financial Results FY2011
• Progress of Strategic Review
• Outlook and Guidance FY2012

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Safety - A Key Priority

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Safety - Performance Improving

Safety is an indicator of improving discipline within the business

*LTIFR = Lost Time Injury Frequency Rate.

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FY2011 Results Summary

Note: includes business classified as both continuing and discontinuing in the financial statements of the group ¹EBITDA before impairment and restructure costs

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FY2011 Results - Significant Impairment and Restructuring Costs

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1. Key businesses identified 2. Non-core businesses resolved 3. Management restructure 4. Debt Reduced

• Refocused on Geosciences, International

Development and Project Management

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June 2011 Outcome Progress to Date

Strategic Review – Key Businesses Identified

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1 Based on underlying EBITDA, before impairment and restructure costs, and before corporate costs.

Geosciences 70% International Development Projects 3% Other 6% 21 %

FY2011 Segment Performance ¹

• Geotechnics
• Environments
• Information
• Mining

Strategic Review - Key Business Contribution

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Geosciences – a Well Integrated Offering

A very strong Australian brand in a discipline where Australia itself, is strong

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Geosciences – 4,000 Active Projects, 2,000 Active Clients

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Coffey Geotechnics - North West Rail Link, New South Wales

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Coffey Environments - Wafi-Golpu Copper Gold Project, Papua New Guinea

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Coffey Information - Hunter Expressway Alliance, New South Wales

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Coffey Mining - Economic Assessment, Manganese Los Pumas Project , Chile

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Geosciences – Exposure to Strong Sectors

Outlook

• Exposed to key growth sectors –

Infrastructure, Mining & Resources, and Oil & Gas

• Continue to see client demand increasing
• Project investment pipeline remains

buoyant

Major Project Investment in Australia

Chart Source: ANZ Economics & Global Markets Research – Australian Major Project Update: Q2 2011 (14 September 2011)*

Infrastructure 34% Mining & Resources 32% Oil & Gas 24% Commercial Property 7% Other 2% Government 1%

by Sector

ANZ 83 %% AMERICA 12% EUROPE 2% AFRICA 3%

by Geography

Fee Revenue Breakdown FY2011

2008A 2009A 2010A 2011A 2012E 2013E 2014E 20 40 60 80 100 120 140

Infrastructure Oil & Gas Mining & Resources * Updated by ANZ on 19 September 2011 $bn

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Geosciences – Improving Fee Revenue Trend

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International Development – Wide-ranging Geographic Exposure and Deep Capability

 Plans, coordinates and executes programs and projects in the developing world  Operates out of three hubs: Australia, USA and UK  Approximately 1,600 employees  Four decades of experience in the market  Clients comprise government and international bodies  Key areas of activity include: – promoting economic growth – developing governance and public sector skills and processes – implementing security and justice frameworks

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AusAID – Sub-National Strategy Project, Papua New Guinea

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USAID - Assistance for Afghanistan’s Anti-Corruption Authority Project

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UK’s Department for International Development (DFID) - Strengthening Transparency, Accountability and Responsiveness in Ghana

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ANZ 26% AMERICA 55% EUROPE 19%

International Development – Quality Clients and Significant Barriers to Entry

Outlook

• Australian Government spending more on

international development

• UK market very favourable given DFID’s

increased expenditure

• USA reduced expenditure foreshowed,

however Coffey is still winning new contracts Fee Revenue Breakdown FY2011 Clients include

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Key Observations

• Strong global brand in international

development contracting

• Scale business with diversification across key

donor groups and regions – lowers localised policy risk – providing stable and consistent earnings (longer term contracts, typically 1-3 years)

• High barriers to market entry

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Project Management – Profitable at a low point in the Property Cycle

Fee Revenue Breakdown 2011

by Geography

Outlook

• Low point in non-residential property cycle

with potential upside on increase in property development activity Key Observations

• Experienced management team operating

rescaled and refocused business

• Competitive market but delivering positive

profits and cash flow after absorbing significant corporate overheads Clients include:

• Australian Government – Department of

Defence

• Australian Government – Department of

Education, Employment and Workplace Relations

• Christchurch International Airport
• Stockland

Commercial Property 48% Government 47% Infrastructure 5% ANZ 83% EUROPE 10% AFRICA 7%

by Sector

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1. Key businesses identified 2. Non-core businesses resolved 3. Management restructure 4. Debt Reduced

• Non-core businesses addressed:

– Commercial Advisory closed – LA Environments divested – Middle East Projects closed – Future for the Rail business is under review

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June 2011 Outcome Progress to Date

Strategic Review – Non Core Business Resolved

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1. Key businesses identified 2. Non-core businesses resolved 3. Management restructure 4. Debt Reduced

• Successful restructure:

– Increased clarity in reporting lines and accountability, and authority – Full benefit of cost reduction ($18 million) expected in FY2012 – New performance-based rewards scheme – Increasing stability and morale – Right team for right roles

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June 2011 Outcome Progress to Date

Strategic Review – Management Restructure

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Management Restructure – Previous

(Business Unit Managers)

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Now only one layer between the MD and Business Unit Managers

Management Restructure – Current

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Management Restructure - Reduction in Overheads, Turnover Reducing, % Chargeable Time Increasing

Australian Non-Chargeable Salary

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X

Australian Chargeable Salary

October 2010 to October 2011

Chargeable Salary %

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Management Restructure – The Right People in the Right Roles

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1. Key businesses identified 2. Non-core businesses resolved 3. Management restructure 4. Debt Reduced

• Debt reduced:

– Increased cash flow from operations – Some cash release from portfolio review – Improved working capital management – Capital Raising

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June 2011 Outcome Progress to Date

Strategic Review – Debt Reduced

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1. Key businesses identified 2. Non-core businesses resolved 3. Management restructure 4. Debt Reduced

• Refocused on Geosciences, International

Development and Project Management

• Non-core businesses addressed:

– Commercial Advisory closed – LA Environments divested – Middle East Projects closed – Future for the Rail business is under review

• Successful restructure:

– Increased clarity in reporting lines and accountability, and authority – Full benefit of cost reduction ($18 million) expected in FY2012 – New performance-based rewards scheme – Increasing stability and morale – Right team for right roles

• Debt reduced:

– Increased cash flow from operations – Some cash release from portfolio review – Improved working capital management – Capital Raising

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June 2011 Outcome Progress to Date

Strategic Review – Significant Progress

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Coffey Outlook

 Business fundamentals strong and positive outlook in core markets  Infrastructure, Mining & Resources and Oil & Gas sectors are expected to be the key drivers of growth in the short to medium term and outlook is positive in these core markets  Focus on discipline and margins to drive profitability  Confirm FY2012 EBITDA guidance of $45 million. The second half result of FY2012 will be stronger than the first.

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Key Points

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¹EBITDA — Earnings before interest, tax, depreciation and amortisation ²Underlying EBITDA - Earnings before interest, tax, depreciation and amortisation before restructure and impairment costs

Safety

Safety is a key priority – performance is improving

FY2011 Results

Reported FY2011 EBITDA¹ loss of $39.7 million, impacted by impairment and restructuring costs of $72 million, within range forecast in June 2011 Underlying² FY2011 EBITDA of $32.3 million, ahead of June market guidance ($29 million-$32 million)

Progress on Strategic Review

Significant progress with Strategic Review announced in June 2011: 1. Refocused on 3 key businesses that are well positioned for future growth with exposure to strong market sectors and that offer diversified revenue streams 2. Future for non-core businesses resolved 3. Management restructure is driving lower costs and increased accountability

• Full benefit of cost reduction ($18 million) expected in FY2012
• New performance based rewards scheme implemented
• Right team for the right roles

4. Debt reduced

• Continued focus on working capital management
• Some cash release from portfolio review
• $40 million Capital Raising to reduce gearing and strengthen the balance sheet

Outlook

Confirm FY2012 EBITDA guidance of $45 million – the second half result of FY2012 expected to be stronger than the first.

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General Questions

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1. Show your blue voting card or green non-voting card 2. Wait for the attendant to bring the microphone 3. State your name 4. Ask your questions

How to Ask Questions

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Business of the Meeting

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Voting procedure

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Ordinary Business

Item 1. Receipt of Financial Report To receive and consider the Financial Report, Directors’ Report and Auditor’s Report

• f the Company and the consolidated entity for the year ended 30 June 2011.

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Ordinary Business

Item 2. Adoption of Remuneration Report To consider and, if thought fit, to pass as an ordinary resolution: “That the Remuneration Report for the financial year ended 30 June 2011, as set out in the Directors’ Report section of the Annual Report, be adopted.”

(Note – the vote on this resolution is advisory only and does not bind the Directors or the Company).

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Ordinary Business

Item 2 : Adoption of Remuneration Report Proxies have been received in respect of this resolution as follows: * Includes 980,809 votes directed to the Chairman and deemed to be voted in favour of Item 2

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% Number 91.54 For* 103,011,243 0.67 Open 756,832 7.79 Against 8,770,872 Abstain 2,870,230

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Ordinary Business

Item 3. Election of Directors

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Ordinary Business

Item 3a. Re-election of Stephen Williams To consider and, if thought fit, to pass the following as an ordinary resolution: “That Mr Stephen Williams, a Director who retires at the close of the Meeting in accordance with the Company’s corporate governance policy and being eligible, is re- elected as a Director of the Company”.

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Ordinary Business

Stephen Williams LLB Age 58 Joined Board – November 1994 Former Chairman (November 1994 until November 2010) Committees:

• Chairman - Risk Management Committee
• Member - Nomination Committee

Experience: Stephen is a senior partner with Sydney law firm Kemp Strang Lawyers and has extensive legal and commercial expertise gained over 30 years practising as a corporate lawyer in the areas of commercial and corporate law, and in commercial property development, structuring and financing.

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Ordinary Business

Item 3a : Re-election of Stephen Williams Proxies have been received in respect of this resolution as follows: * Includes 1,307,910 votes directed to the Chairman

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% Number 92.74 For 107,117,748 1.79 Open* 2,068,742 5.47 Against 6,314,561 Abstain 532,590

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Ordinary Business

Item 3b. Re-election of John Mulcahy To consider and, if thought fit, to pass the following as an ordinary resolution: “That Dr John Mulcahy, a Director who retires at the close of the Meeting in accordance with article 12.3 of the Company’s constitution and being eligible, is re-elected as a Director of the Company”.

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John Mulcahy PhD, BE (Civil Eng) (Hons), FIEAust Chairman, Age 61 Joined Board - September 2009 Committees:

• Chairman - Nomination Committee.
• Member - Audit Committee, Risk Management Committee & Remuneration Committee.

Experience: John has more than 27 years of management experience in financial services and property investment and is the former Managing Director and Chief Executive Officer of Suncorp-Metway

• Limited. Prior to joining Suncorp, he held a number of senior executive roles at Commonwealth

Bank, including Group Executive – Investment and Insurance Services. He also held a number of senior roles during his 14 years at Lend Lease Corporation, including Chief Executive Officer – Lend Lease Property Investment and Chief Executive Officer - Civil and Civic.

Ordinary Business

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Ordinary Business

Item 3b : Re-election of John Mulcahy Proxies have been received in respect of this resolution as follows: * Includes 1,392,726 votes directed to the Chairman

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% Number 96.21 For 111,066,608 1.87 Open* 2,155,558 1.92 Against 2,212,592 Abstain 598,883

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Ordinary Business

Item 3c. Re-election of Charles Jamieson AM To consider and, if thought fit, to pass the following as an ordinary resolution: “That Mr Charles Jamieson AM, a Director who retires at the close of the Meeting in accordance with article 12.3 of the Company’s constitution and being eligible, is re- elected as a Director of the Company”.

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Ordinary Business

Mr Charles Jamieson AM BA, DipEd, Hon. FAIEx Age 67 Joined Board - June 2005 Committees:

• Member - Audit Committee.

Experience: Charles has an extensive career in international business including his former role as Managing Director of Austrade from 1996 to 2002. He also held senior trade and diplomatic positions in a wide range of global market regions and is a former Special Trade Envoy to the Middle East for the Victorian Government. He was appointed as a Member of the Order of Australia in 2004 for his services to trade and investment.

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Ordinary Business

Item 3c : Re-election of Charles Jamieson Proxies have been received in respect of this resolution as follows: * Includes 1,406,662 votes directed to the Chairman

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% Number 89.04 For 102,845,933 1.87 Open* 2,164,494 9.09 Against 10,499,946 Abstain 523,268

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Special Business

Item 4. Grant of Shares under the Coffey Rewards Share Plan to Mr John Douglas, Managing Director To consider and, if thought fit, to pass the following as an ordinary resolution: “That, in accordance with ASX Listing Rule 10.14 and for all other purposes, approval be given for the grant of 667,780 fully paid ordinary shares to the trustee of the Coffey Rewards Share Plan for the benefit of Mr John Douglas, Managing Director on the terms described in the Explanatory Notes to the Notice convening the Meeting”.

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Special Business

Item 4: Grant of shares to John Douglas under the Coffey Rewards Share Plan Proxies have been received in respect of this resolution as follows: * Includes 1,465,270 votes directed to the Chairman

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% Number 90.34 For 102,204,067 1.96 Open* 2,216,892 7.70 Against 8,716,520 Abstain 2,896,162

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Special Business

Item 5. Approval of the Coffey Rewards Share Plan To consider and, if thought fit, to pass: “That, in accordance with Exception 9(b) of ASX Listing Rule 7.2 and Section 260C(4)

• f the Corporations Act 2001 (Cth) and for all other purposes, approval be given for the

issue or acquisition of fully paid ordinary shares to or by the trustee of the Coffey Rewards Share Plan for the benefit of participants in the Coffey Rewards Share Plan”.

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Special Business

Item 5: Approval of the Coffey Rewards Share Plan Proxies have been received in respect of this resolution as follows: * Includes 1,474,510 votes directed to the Chairman

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% Number 90.28 For 101,619,683 1.98 Open* 2,234,132 7.74 Against 8,708,403 Abstain 3,471,423

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Poll Voting Procedure John Mulcahy, Chairman

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Voting procedure

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Mark your voting card

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Resolution 2 To adopt the Remuneration Report

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Mark your voting card

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Resolution 4 Grant of Shares under the Coffey Rewards Share Plan to Mr John Douglas

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Mark your voting card

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Resolution 5 Approval of the Coffey Rewards Share Plan

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Please deposit voting cards In ballot boxes

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The poll has now closed

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Close of the Meeting

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Disclaimer

The material in this presentation is a summary of the results of Coffey International Limited (Coffey) for the 12 months ended 30 June 2011 and an update on Coffey’s activities and is current at the date of preparation, 24 November 2011. Further details are provided in the Company’s Annual Report released on 20 October 2011. 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. 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, coffey.com

Photos owned by Coffey or Coffey employees and permission is provided. Hunter Expressway image provided with approval from NSW Government – Roads and Maritime Services who own the image.

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