DOWNER HALF YEAR RESULTS
Investor presentation | 2 February 2017
OVERVIEW
Total revenue1 $3,603.0 million, up 1.7%
Operating cash flow $243.6 million,
EBITDA conversion 102.6%
Earnings Before Interest and Tax (EBIT) $120.8 million,
up 6.7%
Net debt3 $22.2 million,
down from $87.4 million at 30 June 2016
Net Profit After Tax (NPAT) $78.2 million,
up 8.5%
Gearing4 1.0%, (6.4% including off-balance sheet debt)
Interim dividend declared: 12.0 cps,
100% franked no Dividend Reinvestment Plan
Return on Funds Employed (ROFE) 13.0%,
up from 12.5%
LTIFR5 of 0.55, down from 0.84 at 31 December 2015
TRIFR6 of 3.61, down from 3.67 at 31 December 2015
Work in hand2 $21.1 billion,
up from $18.6 billion at 30 June 2016
Full year NPAT outlook increased from $163
million to around $175 million
1
Total revenue is a non-statutory disclosure and includes revenue from joint ventures and other
alliances and other income.
4
Gearing = Net debt / net debt + equity. Gearing including off-balance sheet debt based on present
value of plant and equipment operating leases discounted at 10% pa: $122.5m (June 2016: $128.5m).
2
Work-in-hand numbers are unaudited.
5
Lost Time Injury Frequency Rate - the number of lost time injuries (LTIs) per million hours worked.
3
Adjusted for the mark-to-market of derivatives and deferred finance charges.
6
Total Recordable Injury Frequency Rate – the number of LTIs and medically treated injuries per million
hours worked.
2
TRANSPORT SERVICES
Total revenue1 $m
EBIT $m
50
911.2
1,000
802.9
41.4
600
30
400
20
200
10
ROFE2
6.0%
25%
5.0%
40
800
EBIT margin
31.6
4.5%
3.9%
4.0%
21.0%
20%
16.1%
15%
3.0%
HY17
HY16
5%
1.0%
0
0
10%
2.0%
0.0%
HY17
HY16
0%
HY17
HY16
HY17
HY16
OPPORTUNITIES






Revenue increase of 13% driven by new projects, road maintenance and RPQ acquisition
Continuing strong performance for customers on existing contracts
Contribution from new projects including Newcastle Light Rail, NSW Transport Access Program
Acquisition of RPQ provides further geographical presence and capability mix
Numerous contract wins in Australia and New Zealand
Performance in the previous corresponding period affected by inclement weather
1 Total revenue includes joint ventures and other income.
2 ROFE = EBIT divided by average funds employed (AFE). AFE = Average Opening and Closing Net Debt + Equity.
3
TECHNOLOGY AND COMMUNICATIONS SERVICES
Total revenue1 $m
300
245.9
EBIT $m
249.9
30
250
25
200
20
150
15
100
10
50
5
EBIT margin
ROFE2
10%
200%
157.3%
8%
21.7
14.1
HY17
HY16
150%
5.6%
6%
100%
4%
58.9%
50%
2%
0
0
8.8%
0%
HY17
HY16
0%
HY17
HY16
HY17
HY16
 Improved earnings performance despite reduced revenue
 Strong contribution from nbnTM contracts with increased volumes
 A number of new contracts awarded including Telstra Wideband
1 Total revenue includes joint ventures and other income.
2 ROFE = EBIT divided by average funds employed (AFE). AFE = Average Opening and Closing Net Debt + Equity.
4
UTILITIES SERVICES
Total revenue1 $m
500
EBIT $m
25
442.3
376.5
400
20.8
22.8
20
300
15
200
10
100
5
0
0
HY17






HY16
HY17
ROFE2
EBIT margin
7%
6%
5%
4%
3%
2%
1%
0%
HY16
6.1%
4.7%
HY17
HY16
14%
12%
10%
8%
6%
4%
2%
0%
13.2%
10.8%
HY17
HY16
Revenue increase of 18% driven by new and existing contracts
EBIT reduced by completion of major gas and power projects in the previous corresponding period
Good performance across Power and Gas distribution, stronger performance by Water business
Awarded Clare Solar Farm contract (December 2016); well positioned for the large pipeline of renewable projects
Advisory role with Ausgrid
Positioned well for services to privatised and Government owned power assets
1 Total revenue includes joint ventures and other income.
2 ROFE = EBIT divided by average funds employed (AFE). AFE = Average Opening and Closing Net Debt + Equity.
5
RAIL
Total revenue1 $m
500
399.7
EBIT $m
420.1
400
300
200
100
0
HY17




HY16
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
14.0
EBIT margin
ROFE2
4%
6%
3.5%
5%
3%
3%
2%
1.1%
1%
2%
1%
0%
HY16
3.6%
4%
4.5
HY17
5.4%
0%
HY17
HY16
HY17
HY16
Continuing strong performance on maintenance contracts e.g. Waratah TLS and Millennium
Improved performance by joint ventures
Improved depot performance driven by restructuring in the previous corresponding period
Awarded three major contracts: High Capacity Metro Trains in Victoria; Sydney Growth Trains in NSW;
Transport for Newcastle (Keolis Downer)
1 Total revenue includes joint ventures and other income.
2 ROFE = EBIT divided by average funds employed (AFE). AFE = Average Opening and Closing Net Debt + Equity.
6
ENGINEERING, CONSTRUCTION & MAINTENANCE
Total revenue1 $m
EBIT $m
30
1200
973.4
1000
927.8
27.1
25
800
20
600
15
20.6
ROFE2
5%
30%
4%
25%
3%
200
5
1%
0
0
0%
HY17




HY16
HY17
HY16
25.1%
21.2%
20%
2.8%
2.2%
2%
10
400
EBIT margin
15%
10%
5%
0%
HY17
HY16
HY17
HY16
Continuing strong performance at Gorgon and Wheatstone
EBIT result benefited from restructuring in FY16
Improved result from consultancies (QCC and MT)
Expansion of Defence footprint through acquisition of AGIS
1 Total revenue includes joint ventures and other income.
2 ROFE = EBIT divided by average funds employed (AFE). AFE = Average Opening and Closing Net Debt + Equity.
7
MINING
Total revenue1 $m
EBIT $m
1,000
781.6
800
635.4
600
400
200
0
HY17




HY16
80
70
60
50
40
30
20
10
0
ROFE2
EBIT margin
67.7
10%
8%
44.4
8.7%
7.0%
20%
18.6%
16.3%
15%
6%
10%
4%
5%
2%
0%
HY17
HY16
0%
HY17
HY16
HY17
HY16
Expiry of Christmas Creek contract
Two year extension to Meandu Mine contract (to June 2020)
Four year extension to Karara Mining contract (to March 2022)
Several mining services contract wins (blasting and underground)
1 Total revenue includes joint ventures and other income.
2 ROFE = EBIT divided by average funds employed (AFE). AFE = Average Opening and Closing Net Debt + Equity.
8
FINANCIAL PERFORMANCE
$m
HY17
HY16
Change (%)
3,603.0
3,543.4
1.7
EBITDA
225.8
241.2
(6.4)
EBIT
120.8
113.2
6.7
Net interest expense
(13.7)
(15.8)
13.3
Tax expense
(28.9)
(25.3)
(14.2)
Net profit after tax
78.2
72.1
8.5
EBIT margin
3.4%
3.2%
0.2
Effective tax rate
27.0%
26.0%
1.0
ROFE2
13.0%
12.5%
0.5
12.0
12.0
-
69.0%
76.5%
(7.5)
Total revenue1
Dividend declared
(cents per share)
Ordinary Dividend payout ratio
1
Total revenue includes joint ventures and other income.
2
ROFE = EBIT divided by average funds employed (AFE); AFE = Average Opening and Closing Net Debt + Equity.
10
SUMMARY OF EARNINGS
$m
Statutory EBIT
New Intercity Fleet bid costs
Settlement of contractual
claims
Contract closure
Adjusted EBIT (approx)
Total
Transport
120.8
41.4
Tech & Comm
21.7
Utilities
20.8
Rail
14.0
EC&M
27.1
Mining
44.4
Corp
(48.6)
10.0
10.0
5.0
5.0
(6.5)
129.3
(6.5)
41.4
21.7
20.8
14.0
27.1
37.9
(33.6)
11
UNALLOCATED COSTS (CORPORATE COSTS)
$m
HY17
HY16
4.2
5.0
(10.0)
-
-
(13.0)
Settlement of contractual claims
(5.0)
-
Corporate costs
(37.8)
(40.1)
Total unallocated
(48.6)
(48.1)
R&D incentives
New Intercity Fleet bid costs
Capital Metro bid costs
12
OPERATING CASH FLOW
$m
HY17
HY16
EBIT
120.8
113.2
Add: depreciation & amortisation
105.0
128.0
EBITDA
225.8
241.2
Operating cash flow
243.6
178.1
Add: Net interest paid1
13.2
11.2
Tax received
(25.1)
(34.2)
231.7
155.1
102.6%
64.3%
-
65.0
Underlying operating cash flow
231.7
220.1
Normalised EBITDA conversion
102.6%
91.3%
Adjusted operating cash flow
EBITDA conversion
Add back project claims
1
Interest and other costs of finance paid minus interest received.
13
CASH FLOW
$m
HY17
HY16
Total operating
243.6
178.1
Net capital expenditure
(54.4)
(100.0)
AGIS and RPQ acquisitions
(52.6)
-
IT Transformation and Other
(16.4)
(23.5)
Total investing
(123.4)
(123.5)
-
(6.4)
Net (repayment)/ proceeds of borrowings
(32.8)
124.1
Dividends paid
(55.3)
(56.7)
Total financing
(88.1)
61.0
Net increase in cash held
32.1
115.6
Cash at 31 December
602.1
489.5
1,087.1
1,017.5
On-market share buy-back1
Total liquidity2
1
As at 31 December 2015, Downer had bought back 1.8 million shares, reducing the total number of shares outstanding to 430.9 million.
2
Refer to slide 24 for details.
14
DEBT MATURITY PROFILE
By Limit (at 31 Dec 2016)
300
200
A$m Equivalent
USPP
Finance leases
ECA finance
100
A$MTN
Syndicated bank facility
1
Bilateral bank facilities 1
Dec-25
Jun-25
Dec-24
Jun-24
Dec-23
Jun-23
Dec-22
Jun-22
Dec-21
Jun-21
Dec-20
Jun-20
Dec-19
Jun-19
Dec-18
Jun-18
Dec-17
Jun-17
0
Weighted average debt duration
(Dec 2016) = 3.96 years (Jun 2016) = 4.25 years
1. Undrawn $485m. June 2016 undrawn facility was $525m with $40m re-allocated to bonding facilities
15
BALANCE SHEET AND CAPITAL MANAGEMENT
$m
Dec 16
Jun 16
Total assets
4,125.7
4,200.3
Total shareholders’ equity
2,118.4
2,088.5
Net debt1
22.2
87.4
Gearing: net debt to net debt plus equity
1.0%
4.0%
Gearing (including off balance sheet debt)2
6.4%
9.4%
Debtor days
20.8
23.6
WIP days
30.5
34.1
Creditor days
31.6
37.2
Interest cover
9.5 x
8.8 x
Net Debt / EBITDA
0.04
0.2
Adjusted Net Debt / adjusted EBITDAR3
1.5 x
1.6 x
1
2
3
Adjusted for the mark-to-market of derivatives and deferred finance charges.
Includes the present value of plant and equipment operating leases discounted at 10% pa: $122.5m (2016: $128.5m).
Adjusted Net Debt Includes Net Debt plus 6x operating lease expenses in the year. Adjusted EBITDAR equals underlying earnings before interest, tax, depreciation, amortisation and
operating lease expense (on a rolling 12 month basis).
16
DOWNER REVENUE BASE
7%
11%
27%
42%
25%
58%
18%
12%
Rail
Public
Transport Services
Private
Utilities Services
Mining
EC&M
Technology & Communications Services
18
WORK-IN-HAND: $21.1 BILLION
By Service Line – December 2016
By Contract Type – December 2016
3%
2%
7%
25%
35%
34%
40%
17%
10%
7%
20%
Transport Services
Schedule of Rates
Utilities Services
Recurring
EC&M
Lump Sum / Fixed Price
Mining
Alliance / Target Cost
Rail
Cost Plus
Technology & Communications Services
19
WORK-IN-HAND: BOOSTED BY RECENT RAIL WINS
$m
25,000
20,000
15,000
10,000
5,000
0
FY14
FY15
FY16
Dec-16
20
WORK-IN-HAND BY SERVICE LINE
$m
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Transport
Utilities
EC&M
Jun-16
Mining
Rail
T&C
Dec-16
21
OUTLOOK
Downer is targeting NPAT of around $175 million for the 2017 financial year.
22
DEBT AND BONDING FACILITIES
Debt facilities
$m
Debt facilities by type
%
Total facilities
1,109.3
Syndicated bank facility
36
Drawn
(624.3)
A$MTN
36
15
Available facilities
485.0
USPP
Cash
602.1
Bilateral bank facilities
8
ECA finance
3
Finance leases & other
2
Total liquidity
1,087.1
100
Bonding facilities
$m
Debt facilities by geography
%
Total facilities
1,629.1
Australia / NZ
50
Drawn
(805.5)
North America
23
Asia1
22
Europe1
5
Available facilities
823.6
100
1
1 Including A$ Medium Term Notes sold to Asian and European domiciled investors measured at financial close of the transaction.
24
SEGMENT REPORTING
HY17
$m
Segment revenue
Share of sales from JVs and Associates1
Total revenue1
Transport
Services
885.5
25.7
Technology and
Communications
Services
245.9
-
Utilities
Services
442.3
-
EC&M
Rail
Mining
Unallocated
202.0
951.6
612.2
(4.9)
197.7
21.8
23.2
-
Total
3,334.6
268.4
911.2
245.9
442.3
399.7
973.4
635.4
(4.9)
3,603.0
EBIT
41.4
21.7
20.8
14.0
27.1
44.4
(48.6)
120.8
EBIT margin
4.5%
8.8%
4.7%
3.5%
2.8%
7.0%
-
3.4%
HY16
$m
Segment revenue
Share of sales from JVs and Associates1
Total revenue1
Transport
Services
771.8
31.1
Technology and
Communications
Services
249.9
-
Utilities
Services
376.5
-
EC&M
Rail
Mining
211.5
912.1
758.2
208.6
15.7
23.4
Unallocated
(15.4)
-
Total
3,264.6
278.8
802.9
249.9
376.5
420.1
927.8
781.6
(15.4)
3,543.4
EBIT
31.6
14.1
22.8
4.5
20.6
67.7
(48.1)
113.2
EBIT margin
3.9%
5.6%
6.1%
1.1%
2.2%
8.7%
-
3.2%
1 This is a non-statutory disclosure as it relates to/includes Downer’s share of revenue from equity accounted joint ventures and associates.
25