2016 Half-Year Report. Opus International Consultants

Transcription

1 2016 Half-Year Report Opus International Consultants

2 Highlights OPERATING EBIT $2.5M REVENUE $236.8M ADJUSTED NPAT $0.9M 79% 7% 88% 2 cents HALF-YEAR DIVIDEND 2.0 cents per share, fully imputed 2

3 OPUS HALF-YEAR REPORT / 2016 Overview The half-year result was affected by continuing difficult economic conditions, particularly in Canada and Australia, and weaker margins in New Zealand. In the half year ending 30 June, revenue was $236.8m, down 7.4%, operating earnings before interest and tax (EBIT) were $2.5m, down 78.7%, and adjusted net profit after tax (NPAT) was $0.9m, down 88.2%. The pattern of recent years has been a weaker first half and a stronger second half. Implementation of the new strategy is going well and there is an intense focus on a wide range of performance improvement measures, targeting costs, productivity, and market development generally. But global markets are expected to remain difficult and there is no clear recovery path from the global financial crisis. The UK business continued to perform strongly, generating $35.3m in revenue and $1.3m in operating EBIT, and was named Company of the Year by New Civil Engineer (NCE) at the NCE100 Awards. As signalled earlier this year, market conditions in Australia and Canada continue to be difficult, with losses reported for both operations. Management has responded quickly to reduce costs and balance short term profitability with long term sustainability. Australia reported $24.8m revenue and New Zealand delivered $139.1m in revenue and $14.9m in operating EBIT, despite being adversely affected by changes to roading contract procurement models. The UK business continued to perform strongly. 3

4 We are focusing on the transportation, buildings, and water market sectors, with strong global growth expectations in all three. an operating EBIT loss of $1.7m. Canada reported $37.2m revenue and an operating EBIT loss of $6.5m. Given the changed business conditions, we reassessed the value of our operations and impaired the carrying value of Australian assets by AU$4.2m and Canadian assets by CA$17.8m. Despite the above challenges, our cash position is strong with operating cash ahead of last year and the Board has declared a fully imputed dividend of 2 cents at the half year. The new global growth strategy has been developed to drive sustainable and profitable growth in all of our target market sectors and geographies. We are focusing on the transportation, buildings, and water market sectors, with strong global growth expectations in all three, as well as wholeof-life asset management, environment, and innovation capabilities. The new strategy emphasises joined-up solutions linking state-of-the-art engineering, a people-centric focus, and data. 4

5 New Zealand New Zealand delivered $139.1m in revenue (a 4% decrease), and $14.9m in operating EBIT (a 22% decrease). It had a solid start to the year but was negatively impacted by reductions in roading contract margins through the retendered New Zealand Transport Agency s Network Outcome Contracts. We continue to win a significant number of new contracts including the new Central Otago Network Outcome Contract under the revised procurement model, a seven year water supply, wastewater and stormwater infrastructure development contract with Wellington Water, a nine year property acquisition and disposal contract with the New Zealand Transport Agency, and a $3.5m contract with the New Plymouth District Council for transportation, water, buildings and solid waste management. Fiji continues to serve as a good base for asset management and development opportunities in the Pacific, particularly in the water and transportation sectors and we continue to deliver on a number of substantial contracts for the Water Authority of Fiji as well as roading and materials testing contracts for the Fiji Roads Authority. Fiji continues to serve as a good base for asset management and development opportunities in the Pacific. OPUS HALF-YEAR REPORT /

6 Canada & USA Canada reported $37.2m in revenue (a decrease of 27.9%) and an operating EBIT loss of $6.5m ($5.3m behind the prior year). Opus Stewart Weir (OSW), our engineering, environmental and geomatics business in Canada, continues to be impacted by low oil and gas prices and sharply reduced investment, and changes to federal and provincial governments which have slowed the emergence of increased infrastructure spending. As a result of the continued economic consequences, we impaired the carrying value of the OSW assets by CA$17.8m. In addition, the impact of the Fort McMurray wildfires in June caused further problems and project delays. The business took early action to align capacity with demand, including a reduction in headcount by 33% at a one-off cost of $1.1m, a reduction in the cost of labour and other cost saving measures. While a sharp focus on cost savings and efficiencies was essential, we also continued to drive business development and diversification, including utilising the expertise of our Canadian-based staff on projects around the world. This has provided round-the-clock support to clients such as Network Rail in the United Kingdom and has strengthened our offering to clients in Canada, resulting in a CA$1m transportation asset management contract in British Columbia. OSW has long and trusted relationships with many First Nations people across British Columbia and is positioned well to partner with other organisations who have a legal obligation to consult prior to starting work on projects in the province. Our Water team in Canada, through Opus DaytonKnight, is growing as the North American water sector provides opportunities for a risk management approach to treatment and distribution of water. The Canadian Government s March budget targeted water, wastewater and green projects as a priority along with public transportation. In the USA, our transportation asset management portfolio continues to grow, with contracts in Michigan, North Carolina, Tennessee and most recently Texas. Its new Building Canada plan also pledged CA$70bn for public infrastructure over the next decade. In the USA, our transportation asset management portfolio continues to grow, with contracts in Michigan, North Carolina, Tennessee and most recently Texas a strategically important win for the business as the State looks to invest US$8bn in roading through to The US Department of Transportation estimates a minimum annual spend of US$124bn to keep its road and bridge assets in good condition. 6

7 OPUS HALF-YEAR REPORT / 2016 United Kingdom The United Kingdom generated $35.3m revenue (an increase of 4.9% on ) and $1.3m in operating EBIT (a decrease of 12.3%). The business was awarded Company of the Year by New Civil Engineer (NCE) at this year s NCE100 Awards in London, beating engineering s leading global companies to the prize. The judges chose Opus as the winner after scoring the company highly across all of the competition s core themes of Engineering Equality, Future Engineer, World View, Future Tech and Technical Excellence. Judges also awarded a high commendation in the International Impact category for the ground-breaking new approaches to contemporary civil engineering challenges the company has developed and embedded globally. The business continues to grow and we successfully recruited 28 full-time equivalent employees to tackle the number of contract wins in the first half of the year, despite tighter business conditions in the lead up to the Brexit vote. We were named as one of eight consultants on a team that will work with Transport for Greater Manchester to improve the future of public transport across the region. Our rail expertise continues to be recognised, with the business securing a further 4.8m in Network Rail contracts for asset management framework design and inspections. We have also secured a The business was awarded Company of the Year by New Civil Engineer at this year s NCE100 Awards in London. 1.1m station refurbishment contract with MTR Crossrail. Our Cardiff office secured Building Information Modelling (BIM) Level 2 certification, which helps us meet the United Kingdom s strict compliance for bidding and winning new work. 7

8 Australia Australia reported revenue of $24.8m (a 3.4% decrease) and an operating EBIT loss of $1.7m (a 19.1% deterioration). As signalled earlier this year, we continue to encounter difficult market conditions in Australia. We responded accordingly and have driven further cost savings including closure of our office in Darwin. The weak level of demand in the resources sector and the newly elected federal government continue to subdue infrastructure spending. As a result of the continuing low trading and sustained low levels of work in hand, we have impaired the carrying value of assets by AU$4.2m. There is AU$50bn budgeted for national infrastructure projects as well as AU$2.9bn for essential roading infrastructure across Australia. Key wins at the start of the year include asset management and water services contracts on Sydney s WestConnex transportation corridor, the largest transport and urban renewal project in Australia at this time. The business also secured architecture and engineering service contracts in the aged care sector. The business continues to work closely with trusted partners to deliver important work and secure future opportunities such as the upcoming state-wide highways asset management contract for Main Roads Western Australia. The business also secured architecture and engineering service contracts in the aged care sector. 8

9 OPUS HALF-YEAR REPORT / 2016 Health & Safety We continue to advance our health and safety culture and results across the business. Key successes include: Total recordable injury frequency rate of 2.8 injuries per 1 million hours worked (reduced from 3.2 in ) Worked 2,100,275 hours with zero lost time injuries Current rolling lost time injury rate of 0.8 (reduced from 0.9 in ) Successful maintenance of our highlevel, audited status against New Zealand and international standards Summary The New Zealand and UK businesses continue to show resilience, despite subdued global trading conditions, and have underpinned the Group performance. Our new global growth strategy is now focusing on enhanced capability in proven areas of expertise and driving better collaboration across key global growth sectors. We will continue to drive business improvement and carefully balance short term performance with long term sustainability. Our leadership model has been realigned to target significant opportunities and facilitate the movement of resources where needed. This will position Opus as a stronger, smarter and more agile organisation, enabling us to better navigate economic impacts that may arise in any of our markets. We continue to build a globally connected workforce that is passionate about making a real difference to how people live. We are confident that in partnership with our clients and strategic partners, we will continue to innovate and create value through our humancentric focus to build resilience in the communities we serve and to solve our clients increasingly complex challenges. 9

10 Financials Interim Financial Statements 30 June 2016 Contents Income statement 11 Statement of comprehensive income 12 Statement of changes in equity 13 Statement of financial position 14 Statement of cash flows 15 Notes to the interim financial statements

11 Consolidated income statement For the period ended 30 June 2016 (unaudited) Note Six Months Ended 30 June 2016 Six Months Ended 30 June (Audited) Year Ended 31 December Operating revenue 236, , ,230 Operating expenses 1 (229,044) (238,136) (462,431) Operating surplus 7,747 17,607 42,799 Equity accounted share of surplus/(deficit) of joint ventures 73 (985) (1,654) EBITDA 7,820 16,622 41,145 Depreciation and amortisation (5,289) (4,734) (10,214) Operating EBIT 2 2,531 11,888 30,931 Deferred consideration release - 8,142 8,142 Impairment expense 5,6 (23,973) - (12,642) EBIT (21,442) 20,030 26,431 Interest revenue 955 1,134 2,600 Interest expense (1,696) (2,044) (3,896) Operating (deficit)/surplus before tax (22,183) 19,120 25,135 Less tax expense 3 (873) (3,232) (8,387) Net (deficit)/surplus after tax (23,056) 15,888 16,748 OPUS HALF-YEAR REPORT / 2016 (Losses)/ earnings per share (cents) Basic (losses)/earnings per share (0.16) Diluted (losses)/earnings per share (0.16) The accompanying Notes on pages 16 to 26 form part of and should be read in conjunction with this statement. 11

12 Consolidated statement of comprehensive income For the period ended 30 June 2016 (unaudited) Note Six Months Ended 30 June 2016 Six Months Ended 30 June (Audited) Year Ended 31 December Net (deficit)/surplus after tax for the period (23,056) 15,888 16,748 Other comprehensive income: Items that will never be reclassified to profit or loss in subsequent periods: Actuarial (loss) on defined benefit plan - - (814) Income tax benefit relating to items that will never be reclassified to profit or loss Items that may be reclassified to profit or loss in subsequent periods: Exchange gain/(loss) on translation of international subsidiaries Income tax effect of translation of international subsidiaries - - (651) 1,441 12,297 (2,360) (501) (832) 485 Net (loss)/gain on hedge of net investment (1,123) (5,445) 3,916 Income tax effect of hedge of net investment 317 1,633 (1,096) 134 7, Other comprehensive income for the period, net of tax 134 7, Total comprehensive income for the period (22,922) 23,541 17,042 The accompanying Notes on pages 16 to 26 form part of and should be read in conjunction with this statement. 12

13 Consolidated statement of changes in equity For the period ended 30 June 2016 (unaudited) Note Ordinary shares Employee benefits Foreign currency translation reserve Retained earnings Total equity At 1 January 55,514 1,281 1,418 92, ,334 Other comprehensive income - - 7,653-7,653 Net surplus for the period ,888 15,888 Total comprehensive income for the period Equity transactions: Shares issued (net of transaction costs) - - 7,653 15,888 23, Share-based payment Dividend paid (7,308) (7,308) Tax credits on supplementary dividend At 30 June 55,532 1,301 9, , ,653 OPUS HALF-YEAR REPORT / 2016 At 1 January , ,363 92, ,950 Other comprehensive income Net surplus for the period (23,056) (23,056) Total comprehensive income for the period Equity transactions: Shares issued (net of transaction costs) (23,056) (22,922) Share-based payment Dividend paid (7,287) (7,287) Tax credits on supplementary dividend At 30 June , ,497 62, ,795 The accompanying notes on pages 16 to 26 form part of and should be read in conjunction with this statement. 13

14 Consolidated statement of financial position For the period ended 30 June 2016 (unaudited) For and on behalf of the Board, who authorised the issue of these interim financial statements on 16 August Chairman Managing Director 30 June June (Audited) 31 December Note Non-current assets Property, plant and equipment 30,367 29,116 29,544 Investments in joint ventures and joint operations ,463 1,543 Goodwill 5 64, ,844 86,018 Other intangible assets 3,421 4,501 3,801 Defined benefit pension asset Deferred tax asset 14,343 12,489 13,084 Derivative financial instruments asset Total non-current assets 113, , ,045 Current assets Cash and cash equivalents 63,644 63,653 65,878 Receivables and prepayments 60,368 75,497 69,227 Loans to joint ventures 7 6,303 3,949 6,798 Work in progress 54,222 54,780 41,281 Tax receivable 1,927 2, Derivative financial instruments asset 3,377 2,462 4,303 Total current assets 189, , ,172 Total assets 303, , ,217 Non-current liabilities Provisions for employee entitlements 5,732 7,295 6,183 Long term bank borrowings 91,926 76,041 89,388 Finance leases 2,553 2,532 2,187 Deferred tax liability Derivative financial instruments liability Total non-current liabilities 100,322 85,938 98,308 Current liabilities Short term bank borrowings 12,402 15,590 6,081 Finance lease 2,071 2,102 2,075 Creditors, accruals and provisions 23,048 37,171 27,415 Tax payable ,851 Revenue in advance 21,111 26,212 14,521 Provisions for employee entitlements 23,096 25,879 20,653 Derivative financial instruments liability 429 1, Total current liabilities 82, ,217 72,959 Total liabilities 182, , ,267 Net assets 120, , ,950 Equity Ordinary share capital 4 55,573 55,532 55,561 Employee benefits 451 1, Retained earnings 62, ,749 92,575 Foreign currency translation reserve 2,497 9,071 2,363 Total equity 120, , ,950 The accompanying Notes on pages 16 to 26 form part of and should be read in conjunction with this statement. 14

15 Consolidated statement of cash flows For the period ended 30 June 2016 (unaudited) Six Months Ended 30 June 2016 Six Months Ended 30 June (Audited) Year Ended 31 December Note Cash flows from operating activities Receipts from customers 231, , ,349 Interest received 1,067 1,189 2,489 Payments to suppliers and employees (224,733) (247,731) (466,197) Interest paid (1,587) (1,727) (3,697) Taxation paid (5,745) (5,531) (9,593) Net cash flows from operating activities ,351 Cash flows from investing activities Sale of property, plant and equipment Purchase of property, plant and equipment and (4,096) (2,570) (8,287) intangible assets Dividends from joint ventures ,146 Repayment from / (loan to) joint ventures 606 (2,634) (5,580) Purchase of investments - - (8,638) Gains from forward contracts 453 1,280 1,658 Net cash flows from investing activities (2,857) (3,694) (19,652) Cash flows from financing activities Dividends paid 4 (7,287) (7,308) (16,409) Repayment of finance lease obligations (1,249) (1,181) (2,228) Repayment of long term borrowings (5,200) (13,256) (20,235) Drawdown of long term borrowings 7,053 9,918 38,156 Net cash flows from financing activities (6,683) (11,827) (716) Net decrease In cash held (8,709) (15,489) (2,017) Reclassification from long term borrowings to - (10,145) (10,134) short term borrowings Foreign exchange adjustment (981) Cash at beginning of the period 59,797 72,929 72,929 Cash at the end of the period 51,242 48,063 59,797 Comprising: Cash at bank 63,644 63,653 65,878 Short term bank borrowings (12,402) (15,590) (6,081) 51,242 48,063 59,797 OPUS HALF-YEAR REPORT / 2016 The accompanying Notes on pages 16 to 26 form part of and should be read in conjunction with this statement. 15

16 Notes to the interim financial statements (unaudited) Presentation and Accounting Policies The interim financial statements of Opus International Consultants Limited (the Company ) together with its subsidiaries (the Group ) have been prepared in accordance with New Zealand Equivalent to International Accounting Standard ( NZ IAS ) 34 Interim Financial Reporting, issued by the External Reporting Board. The Company is an FMC Reporting Entity for the purposes of the Financial Markets Conduct Act 2013 and the Financial Reporting Act Significant Accounting Judgements, Estimates and Assumptions The same methodology or approach to deriving significant judgements, estimates and assumptions included in the notes to the Financial Statements in the Group s Annual Report for the year ended 31 December have been applied to these Interim Financial Statements. The functional and presentational currency of Opus International Consultants Limited is the New Zealand Dollar and the financial statements are expressed in New Zealand Dollars. The interim financial statements of the Group for the six months ended 30 June 2016 have been prepared using the same accounting policies and methods of computation as, and should be read in conjunction with, the financial statements and related notes included in the Group s Annual Report for the year ended 31 December. There are a number of amendments to accounting standards planned as part of the ongoing improvement process; none of these changes are expected to significantly impact on the Group. 16

17 1. Operating Expenses OPUS HALF-YEAR REPORT / 2016 Included in operating expenses are the following items: Six Months Ended 30 June 2016 Six Months Ended 30 June (Audited) Year Ended 31 December Employee remuneration expenses 141, , ,023 Consultant and sub-contractor expenses 29,733 39,613 63,679 Project materials and services expenses 10,875 11,315 20,791 Premises lease and other rental expenses 12,573 12,062 23,701 Other premises expenses 2,220 2,156 4,581 Travel related expenses 8,783 9,411 20,548 Training and other employee related expenses 3,994 3,953 7,210 Communication and office administration expenses 5,789 4,848 9,218 Information technology expenses 3,260 2,879 5,148 Insurance 1,517 1,685 3,556 Advertising and promotion expenses 1,176 1,015 2,072 Group auditors audit fees Group auditors other assurance services Directors fees Directors expenses Legal and other consultants fees 2,614 1,801 3,769 Bad debts expense ,003 Change in provision for doubtful debts (Gain)/loss on foreign exchange transactions (95) (Gain)/loss on sale of property, plant & equipment (40) Fair value loss/(gain) (84) Other operating expenses 4,479 4,790 8,489 Total Operating Expenses 229, , ,431 17

18 Notes to the interim financial statements (unaudited) 2. Segmental Reporting Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision maker (Executive Leadership Team). Management allocates resources and assesses the operating performance of the four geographical segments with unallocated corporate costs being included within Other. The Group measures and evaluates the reporting segments based on operating earnings before interest and tax ( Operating EBIT ). Geographic Segment Information For the six months ended 30 June 2016 (unaudited) New Zealand United Kingdom Australia Canada Other* Total Operating revenue: External customers 139,052 35,264 24,800 37, ,740 Intersegment revenue (1,517) - Government grants Segment result (Operating EBIT) 14,897 1,260 (1,652) (6,521) (5,453) 2,531 Segment total assets 76,353 43,758 30,309 74,273 78, ,360 *includes unallocated corporate costs, inter-company eliminations, consolidation entries and joint venture losses of $174k relating to Middle Eastern entities. 18

19 OPUS HALF-YEAR REPORT / 2016 For the six months ended 30 June (unaudited) New Zealand United Kingdom Australia Canada Other* Total Operating revenue: External customers 144,793 33,612 25,680 51, ,743 Intersegment revenue (803) - Government grants Segment result (Operating EBIT) 19,090 1,436 (2,042) (1,192) (5,404) 11,888 Segment total assets 72,906 47,340 37, ,381 72, ,808 *includes unallocated corporate costs, inter-company eliminations, consolidation entries and joint venture losses of $376k relating to Middle Eastern entities. The segment analysis for June has been restated for the reclassification of unallocated corporate costs from the Other to New Zealand segment. For the year ended 31 December (audited) New Zealand United Kingdom Australia Canada Other* Total Operating revenue: External customers 276,628 64,300 50, ,434 1, ,137 Intersegment revenue , (2,591) - Government grants Segment result (Operating EBIT) 36,840 2,660 (2,612) 1,462 (7,419) 30,931 Segment total assets 67,561 41,590 33, ,933 78, ,217 *includes unallocated corporate costs, inter-company eliminations, consolidation entries and joint venture losses of $535k relating to Middle Eastern entities. 19

20 Notes to the interim financial statements (unaudited) 3. Taxation The effective tax rate of (3.9%) (June : 16.9%; December : 33.3%) is low due to the effect of impairment expense which is treated as non-deductible and the distribution of profit/ loss over the jurisdictions including the effect of permanent differences. The underlying tax rate of profit companies is 30.0%, and the underlying tax rate of loss companies is 26.6%. 4. Equity - Ordinary Share Capital During the period ended 30 June 2016, the Company had the following movements in ordinary share capital. Ordinary Share Capital No.of Shares Accumulated No. of Shares As at 1 January , ,875, ,875,752 Shares issued as part of 12 9, ,884,935 executive performance payment As at 30 June , ,884, ,884,935 As at 30 June 2016 the Company holds 2,220,253 Treasury Shares (30 June : 939,267; 31 December : 2,929,023) and no shares (30 June : 2,013,390; 31 December : no shares) are held in trust for the Employee Share Ownership Plan. In February 2016, 699,587 Treasury shares were cancelled. Dividends of $7.3 million were declared and paid during the period ended 30 June 2016 (30 June : $7.3 million; year ended 31 December : $16.4 million) representing 4.9 cents per ordinary share (30 June : 4.9 cents per ordinary share; year ended 31 December : 11.0 cents per ordinary share). 20

21 OPUS HALF-YEAR REPORT / Goodwill Goodwill is allocated and monitored by management across the following cash generating units (CGU): United Kingdom Canada Other Canada Opus Stewart Weir Australia New Zealand Total As at 30 June ,840 16,737 26,724 8, ,946 As at 30 June 14,452 17,975 62,418 13, ,844 As at 31 December 13,682 16,037 43,045 12, ,018 Significant judgement, estimate and assumptions Impairment is determined by assessing the value in use of the cash generating unit to which the goodwill relates. This is calculated using a discounted cash flow methodology. Where the value in use of the cash generating unit is less than the carrying amount, an impairment loss is recognised in the Income Statement. The value in use is determined by discounting future cash flows over a five year period including a terminal value. The future cash flows are based on management s business plans, discounted as appropriate for market conditions, which is the best estimate of immediate future performance. Management consider these forecasts to be realistic and prudent. Impairments totalling $22.6 million were identified relating to the Opus Stewart Weir and Australian CGUs for the period ended 30 June 2016 (30 June : nil; 31 December : $12.6 million identified in the Opus Stewart Weir CGU). The following describes the key assumptions and management s approach to determining the value in use for each of the above cash generating units. 21

22 Notes to the interim financial statements (unaudited) 5. Goodwill (continued) Australia The value in use of the Australian CGU is based on management s five year business plan, discounted as appropriate for market conditions, with the following key assumptions: 1. The unit aims to achieve a trading profit in 2017 following losses to be incurred in This reflects realignment of the business toward its core sector capabilities and management s assessment of growth based on current and anticipated market opportunities. 2. The future cash flows have been extrapolated beyond the five year period using a growth rate of 2.5% (31 December : 2.5%) and discounted at a pre-tax rate of 15.7% (31 December : 15.7%). The discount rate is based on independent advice received in December on appropriate discount rates for Australia. As a result of the above assumptions the carrying value of the CGU exceeds the value in use and an impairment of AUD$4.2 million (NZD$4.4 million) is required (30 June : nil; 31 December : nil). Opus Stewart Weir The value in use of the Opus Stewart Weir CGU is based on management s five year business plan, discounted as appropriate for market conditions, with the following key assumptions: 1. The unit has been adversely impacted by the fall in the price of oil, which has resulted in a reduction in oil and gas investment in the sector and reduced work in hand for the unit. As such the entity traded at a loss for the first six months; substantial reductions to the cost structure were made but an appropriate operational capability has been maintained in anticipation of a recovery of the sector commencing over the next 12 to 24 months. 2. The future cash flows have been extrapolated beyond the five year period using a growth rate of 1.5% (31 December : 2.5%) and discounted at a pre-tax rate of 12.1% (31 December : 12.1%) The discount rate is based on independent advice received in December on appropriate discount rates for Canada. The above key assumptions are based on management s assessment of the current and anticipated future economic environment of the Canadian market and the oil sector in particular, coupled with an assessment of the unit s trading capabilities and prospects. As a result of the above assumptions the carrying value of the CGU s assets exceed the value in use and an impairment of CAD$16.6 million (NZD $18.2 million) is required (30 June : nil; 31 December : CAD$12.0 million/nzd$12.6 million). 22

23 OPUS HALF-YEAR REPORT / 2016 Canada and United Kingdom The value in use of the Canada and United Kingdom CGU is based on management s five year business plan, discounted as appropriate for market conditions. At this stage there are no indicators impairment noted for these CGUs. New Zealand The goodwill value of the New Zealand CGU is immaterial relative to the high value in use and the strong financial performance of the unit. 6. Investments in Joint Ventures and Joint Operations Six Months Ended 30 June 2016 Six Months Ended 30 June (Audited) Year Ended 31 December Carrying amount at beginning of period 1,543 4,407 4,407 Share of surplus/(deficit) 73 (985) (1,654) Distributions received (158) (225) (1,146) Impairment expense (1,373) - - Foreign exchange adjustment (64) Carrying amount at end of period 182 3,463 1,543 Due to continued losses incurred and downturn in the oil and gas sector in Canada, an impairment of the full asset has been recognised relating to Athabaskan Resource Company LP (ARC) of CAD$1.2 million (NZD$1.4 million). 23

24 Notes to the interim financial statements (unaudited) 7. Related Party Transactions Opus International Consultants Limited is a New Zealand incorporated company. The immediate holding company of the majority shareholder (Opus International (NZ) Limited) is Opus Group Bhd, a company incorporated in Malaysia. The ultimate holding company of Opus Group Bhd, and controlling entity, is Khazanah Nasional Berhad, a company incorporated in Malaysia. Opus International Consultants Limited provides consultancy services to Opus Group Bhd and joint ventures and operations with NZ Water and Environment Training Academy, Total Bridge Services, Opus Consultants DMCC, Opus Middle East LLC, Opus Al-Dauliyyah LLC, Marlborough Roads JV, Capital Journeys JV, Jacobs Opus Huntly JV, Bay of Plenty West One Network Maintenance Contract and Central Waikato Network Outcomes Contract. Opus International Consultants Limited provides funding to Opus Consultants DMCC. Opus International Consultants (UK) Limited provides consultancy services to the HCC joint operation with Arup, which provides consultancy services to Hertfordshire County Council (HCC). Opus Stewart Weir Limited provides consultancy services and funding to the joint venture Athabaskan Resource Company LP. The Group entered into the following arm's length transactions with related parties: Six Months Ended 30 June 2016 Six Months Ended 30 June (Audited) Year Ended 31 December Operating revenue/(expense) Opus Group Bhd Consultancy services to joint ventures and joint operations 22,952 11,727 30,542 Consultancy services from joint ventures (422) (108) (582) Interest income Loans to joint ventures Debtors and loans/(creditors) Opus Group Bhd (20) (42) 136 Joint ventures and joint operations debtors 1,068 4, Loans to joint ventures 6,303 3,949 6,798 24

25 OPUS HALF-YEAR REPORT / Reconciliation of Net Surplus after Tax with Net Cash Flows from Operating Activities Six Months Ended 30 June 2016 Six Months Ended 30 June (Audited) Year Ended 31 December Reported net (deficit)/surplus for the period (23,056) 15,888 16,748 Add/(less) non-cash items and non-operating items: Depreciation and amortisation 5,289 4,734 10,214 Bad debts written off ,003 Fair value of employee equity benefits - 18 (179) Doubtful debts Accommodation fit-out incentive (324) (248) (563) Foreign exchange (gain)/loss (20) (Gain)/loss on sale of property, plant and equipment (40) Share of (surplus)/loss of joint ventures (73) 985 1,654 Deferred taxation (2,041) (804) (991) Defined benefit pension obligation Impairment expense 23,973-12,642 Fair value loss/(gain) (84) Deferred consideration release - (8,142) (8,142) Movement in working capital: Decrease in receivables and prepayments 8,512 4,763 5,954 (Decrease)/increase in taxation receivable/ payable (2,981) (2,454) 681 (Increase)/decrease in work in progress (13,199) (10,718) 423 (Decrease)/increase in creditors, accruals and provisions (4,295) (8,611) (8,572) Increase/(decrease) in revenue in advance 6,622 2,451 (9,128) Increase/(decrease) in provisions for employee entitlements 2,020 1,210 (4,098) Net cash flows from operating activities ,351 25

26 Notes to the interim financial statements (unaudited) 9. Commitments and Contingencies There are various capital expenditure items contracted for at balance date totalling $0.3 million (30 June : $3.8 million; 31 December : $1.5 million). Contingent Liabilities Provisions have been made to cover probable professional indemnity liabilities. The Group has professional indemnity insurance with a maximum excess of $250,000 per claim. Our insurers have been notified of any potential claims against the Group. The provisions include claims for weather tightness, which are not covered by professional indemnity insurance. There are additional notifications and claims against the Group that the Directors consider to have a remote chance of resulting in any liability. These have not been provided for. Contingent Assets As at 30 June 2016 the Group has fee claims outstanding for additional services. As negotiations are not in an advanced stage and written evidence of acceptability and amount has not been received, no assets have been recognised in the financial statements (30 June : nil; 31 December : nil). 10. Significant Events after Balance Date On 16 August 2016 the Board of Directors approved an interim dividend payment of 2.0 cents per share ($3.0 million) to be paid on 30 September

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