22 September Australian Securities Exchange Attention: Companies Department BY ELECTRONIC LODGEMENT. Dear Sir / Madam

Transcription

1 22 September 2016 Australian Securities Exchange Attention: Companies Department BY ELECTRONIC LODGEMENT Dear Sir / Madam Please find attached a presentation and additional comments to be presented to analysts today regarding Brickworks Limited s financial results for the year ended 31 July 2016, for immediate release to the market. Yours faithfully BRICKWORKS LIMITED Susan Leppinus Company Secretary

2 1

3 [Picture: Lucent Apartments, North Sydney, featuring Austral Precast.] Good Afternoon Ladies and Gentlemen and welcome to the Brickworks analyst briefing for the year ended 31 July Today I will provide an overview of the Brickworks results, before providing more detail on the performance of each of our divisions. Alex Payne, our Chief Financial Officer is also here for the final time to answer any questions at the conclusion of the presentation. As we have previously announced Alex is currently handing-over to Robert Bakewell who is also here today. 2

4 Brickworks corporate structure has provided diversity and stability of earnings over the long term. There are three main parts to the Brickworks business model: The Building Products Group, Land & Development and Investments. The Building Products Group consists of Austral Bricks, Austral Masonry, Bristile Roofing, Austral Precast, Auswest Timbers and Specialised Building Systems. The Land & Development business exists to maximise the value of surplus land created by the Building Products business. The 42.7% interest in Washington H. Soul Pattinson provides a stable earnings stream and a superior return. 3

5 The underlying Net Profit After Tax increased by 22% to a new record of $147 million for the year. After four consecutive years of growth, underlying earnings are now almost double the result achieved in After including the impact of significant items, the statutory Net Profit After Tax was $78 million, marginally higher than the prior year. Underlying Earnings Per Share increased by 22% to 99 cents per share. Statutory Earnings Per Share was 53 cents per share. 4

6 The Directors have resolved to increase the final dividend by 2 cents per share to 32 cents fully franked. This follows an increase in the interim dividend by 1 cent per share and takes the full year dividend to 48 cents fully franked. The chart on the screen shows our dividend history going back 20 years. We are proud of the fact that we have not decreased ordinary dividends throughout this period. This puts Brickworks amongst a prestigious group of only 8 companies on the ASX who have not reduced dividends in the past 15 years. 5

7 Brickworks continues to outperform the All Ordinaries Accumulation Index in terms of total shareholder return over most time horizons. Over 15 years, Brickworks has delivered returns of 8.7% per annum, compared to index returns of 8.1% per annum. 6

8 [Picture: Horbury Hunt Residential and Grand Prix Prize Winner. Applecross House in Perth, featuring Elements range by Austral Bricks] Looking now at our results in more detail. 7

9 A feature of the result was the diversified earnings contribution, with Building Products, Land and Development and Investments all delivering an uplift in underlying earnings compared to the prior year. Building Products earnings before interest, tax and significant items was $75 million, up 34% on the prior year. The improved earnings were driven by a combination of continued sales growth and increased margins. Land and Development EBIT was up 14% to $73 million, driven primarily by a strong revaluation profit in the Property Trust. Investment EBIT was up 9% to $60 million. Total borrowing costs were $14 million, including the mark to market valuation of swaps. As I previously mentioned, the underlying net profit after tax was $147 million, up 22% on the prior period, to a new record level. 8

10 Significant items reduced statutory NPAT by $69 million for the full year, primarily due to a non-cash impairment of goodwill held within Austral Bricks WA, totalling $47 million. This follows the asset impairment assessment in accordance with accounting standards, and reflects the cyclical decline in building activity in that state. In addition, the entrance of a new competitor a number of years ago has significantly changed the industry structure and led to increased competition in this market. In response to these conditions a restructuring program well underway. One-off costs of $5 million after tax were incurred in relation to these initiatives. This includes a $4 million non-cash write-down of plant and equipment due to the closure of the Malaga plant. Production will be transferred to the lower cost Cardup plant, allowing the sale of the valuable Malaga site. Restructuring activities are also underway in Auswest Timbers operations in Western Australia. One-off costs of $8 million after tax were incurred as a result of this restructure, including a $6 million non-cash write-down of plant and equipment following the closure of the Deanmill site. 9

11 The charts on screen show the underlying EBIT history of the Building Products, Land and Development and Investment Groups. Since the cyclical low point in 2012, Building Products EBIT has increased by 165% and is now at the highest level in a decade. The Land and Development Group has also delivered increasing earnings over the same period, as we have grown the Industrial Property Trust. In addition, capitalisation rate compression and land sales have further boosted results, as they did in The contribution from Investments has now increased for two consecutive years. Just as importantly, since 2012 Brickworks stake in WHSP has delivered $676 million in value not recognised on the income statement. This includes a $437 million increase in the market value of our shares and $239 million in dividends received. 10

12 Looking at our Key Financial Indicators. Net tangible assets per share was up 4% to $ Shareholders equity increased to over $1.8 billion at the end of the year which represents $12.37 per share. Underlying return on shareholders equity was up to 8.0% as a result of the improved earnings. Total net cash flow from operating activities was $149 million, up from $133 million in the prior year. Net debt declined to $269 million with net debt to capital employed at 13% at the end of the period. Interest cover increased to a conservative 14 times. 11

13 Building Products spend on capital expenditure and acquisitions was $53 million in financial year Stay in business capital expenditure was $24 million, 86% of depreciation. Spend on major growth projects totalled $21 million, primarily consisting of upgrades to the Rochedale plant in Queensland and the Cardup plant in Western Australia. Spending on growth projects and acquisitions totalled $9 million for the year, including the purchase of three metal roofing and fascia and gutter installation businesses based in New South Wales and Queensland, and a sawmill in Western Australia. In addition, $5 million was spent on property related capital items. 12

14 [Picture: Horbury Hunt Landscape Prize Winner. Kensington Street Sydney, featuring Hamlet Blue pavers by Bowral Bricks.] Looking now to the Building Products result in more detail. 13

15 Revenue for the year was up 7% to a record $748 million. EBIT was $75 million, up 34% on the prior year, and EBITDA was $103 million. Unit margins were significantly higher for the year, supported by the growth of premium, higher priced products across most divisions. Following four consecutive years of earnings growth, Building Products Return on Net Tangible Assets is now 12.2%. Full time equivalent employees increased by 22 during the year, taking the total number to 1,490. This includes the addition of 20 people through business acquisitions. There were 5 Lost Time Injuries during the year, representing a Lost Time Injury Frequency Rate of 1.6 injuries per million hours worked, a new record low. 14

16 Looking now at market conditions. The chart on screen shows Australian dwelling approvals by month for the past 30 years. The orange line shows detached houses, the green line shows other residential and the blue line shows the total. As can be seen by the blue line, overall residential approvals were at record levels during the year, and still remain elevated. The sharp increase in approvals over the past three years has been driven primarily by other residential developments, in particular high rise in the major capital of Sydney, Melbourne, Brisbane and Perth. The convergence of the green and orange lines on screen shows that other residential approvals now make up 50% of total approvals, compared to less than 30% just six years ago. By contrast the growth in detached housing from near record lows in 2012 has been more modest. At around 10,000 approvals per month, the level of detached house building approvals still remains well below prior peaks that reached up to 12,000 approvals per month. 15

17 Looking across the states now, the chart on screen shows historical detached housing approvals for the four major states. This shows a clear divide across the country with continued buoyancy on the east coast contrasting with a sharp decline in Western Australia. As shown by the green line on the chart, Victoria has firmly established its position as the largest detached housing market in the country, with sustained growth over the past three years. This is underpinned by strong immigration and interstate migration to this state due to some of the most affordable housing in the country. Conditions in New South Wales have shown strong growth over the past four years after an extended period of extremely low housing activity. This extended downturn resulted in a significant undersupply of housing in New South Wales. Despite strong population growth, detached house approvals in this state remain well below previous peaks, indicating potential for further growth over the medium term. Despite the recent recovery in Queensland, detached housing approvals remain below the 30 year average. As shown by the red line, detached house building approvals are still trending upwards, albeit they have plateaued in the last twelve months. After reaching record levels 2015, detached housing approvals in Western Australia have declined sharply over the past twelve months, exacerbated by negative net migration. This has created very challenging conditions for operations in that state. 16

18 The chart on screen shows quarterly dollars spend on Australian housing, going back to 1985, with a logarithmic trendline. This shows a 4% per annum long term growth rate in housing spend during the period between 1985 and Whilst the upswing in Australian housing activity has been strong over the past few years, the surge in activity follows a decade long period of underbuild between 2003 and 2013, meaning that we still remain below the historic trend in housing spend. Looking more closely at the period, the chart in the bottom right hand corner overlays BIS Shrapnel s analysis of underlying housing demand and supply. This analysis estimates that housing undersupply peaked at 116,000 homes in 2014 and remains at 58,000 today. On this basis a further two years at the current level of building would be required to build out demand. The undersupply is greatest in New South Wales, with the BIS Shrapnel analysis estimating that in this state there was 15 months of unsatisfied demand at June 2016, even at the current record rate of building. With interest rates expected to remain low for the forseeable future, it is possible that the pent-up underlying demand for housing will be built out, resulting in an extended period of high activity. 17

19 The chart on screen shows a breakdown of Building Products key profit impacts for year. Sales and administration costs increased slightly, up by $2 million, but were significantly lower as a percentage of revenue. This outcome was particularly pleasing given the continued investment in marketing and an increased spend on information technology to better support our customer requirements. Earnings included a $7 million adverse impact due primarily to lower clay receipts from building sites, and to a lesser extent the costs associated with launching the new Specialised Building Systems division and a range of other minor items. As shown on the chart, the earnings uplift was primarily due to increased margins, contributing an additional $24 million to the Building Products EBIT. Manufacturing costs were well controlled during the year, due to the higher output and prior period plant upgrades. In addition, unit margins were supported by price increases and the growth in sales of premium products. Improved volumes delivered a positive EBIT impact of $5 million, with increases on the east coast partially offset by declines in Western Australia. 18

20 [Picture: Horbury Hunt Commercial Prize Winner. Antica Pizzeria, featuring Bowral Bricks] Austral Bricks delivered a 22% increase in earnings for the year, with sales revenue up 7% to $406 million on sales volume of over 670 million bricks. Performance on the east coast was particularly strong, driven primarily by the major markets of New South Wales and Victoria. Earnings in Queensland were also ahead of the prior year and gathered momentum in the second half. This follows the completion of the first phase of the Rochedale plant upgrades, resulting in much improved product quality and lower unit production costs. The final phase of the refurbishment program, comprising upgrades to the kiln, kiln cars and packaging plant, is planned for financial year A comprehensive restructuring plan is underway in Western Australia. Work is progressing on a major refit at the Cardup plant to fit advanced automation and deliver improved product quality and significantly lower production costs. This work will be completed early in calendar year 2017, allowing the transfer of production from the less efficient Malaga plant. The Malaga plant will then be closed and made available to the Property Group for sale. 19

21 The company s sustained investment in style and branding has contributed to the renaissance of face brick over the past few years. Together with a focus on building strong and collaborative relationships with key influencers, this has resulted in Austral Bricks products being specified in many land-mark projects across the country. In New South Wales alone, Austral Bricks products were specified in over 50 high rise developments during financial year The long construction timeline of these projects means that product supply will extend over the next 3 to 5 years, with further new project wins continually adding to the pipeline of work. Some examples are shown on screen. On the left is a 26 storey mixed use tower in Sussex Street, Sydney. In the middle is the Arc development by Crown Group, a 25 storey residential development and on the right is the 20 storey Lend Lease development at Darling Quarter, also in Sydney. Many of these projects utilise high end bricks from our Bowral plant in New South Wales, resulting in this plant reaching capacity. As such the company is considering an investment in a new kiln to increase capacity and reduce production costs. 20

22 [Picture: Wylde Street Apartments, Potts Point. Featuring Solitary Smooth Blocks by Austral Masonry] Austral Masonry delivered another increase in earnings on sales revenue of $91 million, up 4% on the prior year. Total sales volume increased to over 475,000 tonnes for the year, driven by strong growth in south east Queensland and New South Wales. In these markets, grey block sales were significantly higher, buoyed by the increase in multi-residential building activity. The improved earnings were also supported by a sustained focus on premium products in both the commercial and residential sectors that delivered improved pricing outcomes. 21

23 [Picture: Curvado Roof Tiles, La Escandella] Bristile Roofing earnings increased on the prior year, with revenue up 11% to $124 million, on sales volume of almost 3.7 million square metres of tiles. Premium imported La Escandella ceramic roof tiles continue to gain market traction, with sales volume increasing by a further 24% on the prior year and are now firmly established as the premium roofing product in the market. Despite the difficult conditions in Western Australia, earnings in this state were held relatively steady, due to a range of cost control initiatives and an increased focus on securing higher margin sales. Over the past 12 months, Bristile Roofing has expanded its product offer, through the acquisition of two metal roofing and fascia and gutter installers in New South Wales and one in Queensland. These acquisitions provide diversification and earnings growth opportunities, allowing Bristile to offer an all inclusive product range that includes locally manufactured concrete and ceramic roof tiles, premium imported ceramic roof tiles, metal roofing, re-roofing and fascia and guttering. 22

24 [Picture: Whole of Structure concept (artistic impression), Austral Precast] Austral Precast delivered a strong turn-around in performance with earnings significantly higher than the prior year and sales volume in excess of 20,000 panels for the year. Sales revenue of $74 million was up 11%, with strong sales growth in New South Wales and Victoria offset by weakness in Western Australia. An increased focus on the growing high rise market, through developing whole of structure solutions is progressing well, with over 50% of sales now generated from this segment. A range of process improvements and low cost capital initiatives resulted in improved operational efficiency across all plants. Another key focus during the period was the creation of a unified national approach to back office functions such as estimating, drafting and quoting. 23

25 [Picture: Venice Biennale 2016 Australian Pavilion. Swiftdeck by Auswest Timbers] Auswest Timbers revenue for the year was down 6% to $53 million on sales volume of 62,300 cubic metres. In February Auswest completed the purchase of a previously shut down timber mill at Greenbushes, in the southwest of Western Australia. This low cost modern mill was purpose built to process smaller sized Jarrah resource, in line with expected future supply. Since the purchase, the mill has been recommissioned, with production volume being transferred from the now closed Deanmill site. Operational performance is ahead of expectation with the mill delivering almost 25% lower costs and greater throughput. Further rationalisation of the Western Australian production facilities are planned over the coming months to deliver significantly lower costs and much improved prospects for these operations over the long term. After many years of negotiation, the Victorian government continues to frustrate our efforts to make the required investments in our East Gippsland mills, by denying certainty of log supply. These operations now have only 9 months supply contracted, with no clarity being provided beyond that term. As such if an acceptable log contract is unable to be secured, the East Gippsland facilities will be forced to close. 24

26 [Picture: STAR Sydney, Terracade façade system] During the year Specialised Building Systems was established, with a focus on distributing high quality, market leading products to meet the evolving demands of the building industry. Pronto panel has been well accepted by the market as a lightweight, durable, non-load bearing walling solution, with significant interest from our vast network of residential and commercial customers. INEX boards, a range of lightweight cementitious sheets that can be used in a wide range of flooring and walling applications, are also proving extremely popular. Production capacity is currently being increased to meet the large pipeline of orders and strong demand for this product. Terracade, a high-end terracotta façade system also continues to gain traction with increasing sales volume, particularly in commercial and high rise residential applications. 25

27 [Picture: Prefabricated housing, utilising INEX floors and walls] I will now provide an overview of the strategy and outlook for the Building Products Group. 26

28 We believe in making beautiful products that last forever. To achieve this, our goal is to become the best building products company in Australia. Our Building Products strategy consists of three key pillars: strengthening our core business, building new growth businesses and sustaining our strong culture. I will discuss the strengthen the core and build growth businesses pillars on the following slides. Before I do so I will also make the point that we are proud of our strong culture and recognise this is a key differentiator from competitors and a fundamental component of our success. As such, sustaining this strong culture and embedding it across the organisation as we continue to grow is critical, and forms an integral part of the Building Products strategy. 27

29 Looking first at strengthening the core Operational excellence activities are focussed on achieving the lowest cost position in each of our markets. Restructuring and productivity improvements are a fundamental requirement in achieving this. As such the company will always take a pro-active approach and act decisively when required, as illustrated by initiatives underway in our Western Australian operations. In addition we are ready and willing to invest capital in facilities in order to replace outdated equipment or make significant cost improvements. Brickworks is also committed to market consolidation and growth opportunities within our core business. For example market consolidating acquisitions in Austral Masonry have delivered a much improved industry structure, resulting in increased scale and profitability in recent years. For more than 30 years, the company has been investing in customer relationships through industry leading incentive programs that now extend across the entire customer base. And over the past 12 months, our CBD design studios have hosted hundreds of events and attracted thousands of customers, architects and other key influencers. This has resulted in the increasing penetration of Brickworks products in a number of key markets such as high rise and commercial developments, as outlined earlier. The company has continued its sustained investment in style and product leadership. This strategy starts with the creation of desirable products, but is ultimately aimed at consumers, to drive demand. For our customers this provides greater product choice, versatility in design and ultimately a better end product. For Brickworks, our leadership in style and our premium products allows us to differentiate from our competitors, penetrate new markets and secure higher margins. 28

30 Just over a decade ago, the Building Products Group was a two state brick manufacturer with operations in New South Wales and Queensland. Since that time the company has invested in affiliated businesses to become a diversified national building products business. Acquisitions in masonry, precast concrete and timber have provided increased end-market exposure and geographic diversification. Brickworks will continue to maintain a diligent approach to assessing acquisition opportunities beyond the existing core businesses. The company is well placed to leverage its strong relationships and channels to market to distribute a range of new market leading products. The launch of Specialised Building Systems during the year is an example of this. This business utilises a low capital cost model, through establishing manufacturing and distribution partnerships with best in class suppliers and leveraging Brickworks market leading customer relationships. During the year the company executed a distribution agreement with INEX boards. This follows the success of our exclusive distribution arrangements in place for premium La Escandella roof tiles and specialised bricks from Spain. The Building Products Group is continually developing new and innovative products and building solutions to meet our customers needs. During the year the Pronto panel lightweight cladding system was launched, Auswest Timbers introduced Swiftdeck, an easy to install timber decking system, whilst in Austral Precast the development of whole of structure solutions is progressing well. 29

31 Turning now to the outlook. As mentioned earlier, current residential building activity is at the highest level on record, and remain at elevated levels. However conditions vary significantly across the country. On the east coast, conditions remain buoyant and this is reflected in an extremely strong order book, particularly in Sydney and Melbourne. In Austral Precast, work in hand extends by over 9 months, fuelled by numerous large scale projects in the commercial and multi-residential high rise sector. By contrast, conditions in Western Australia are challenging with restructuring initiatives well underway in Austral Bricks and Auswest Timbers operations in this state. These initiatives will deliver significantly lower costs and much improved prospects for these operations over the long term; however earnings will be impacted in the short term. Brickworks products continue to be very popular, with increasing penetration into key market segments. The company has also made investments during the year in additional products to further expand our range and provide additional growth opportunities. On balance, the short term outlook for Building Products remains positive, with a full order book and a long pipeline of work at higher margins in our major east coast markets set to support earnings in

32 [Picture: Beaumont Tiles facility at the Rochedale Estate] I will now go through our Property results. 31

33 Land and Development delivered an EBIT of $73 million for the year ended 31 July 2016, 14% higher than the previous corresponding period. Land Sales contributed an EBIT of just over $1 million. Transactions included the sale of 16 houses and 2 blocks of land at Pemberton, in Western Australia. Waste Management also contributed a profit of around $1 million for the year, down from the prior year due to the completion of the Horsley Park landfill royalty in February Property administration costs were up on the prior year, due to an increase in rates and taxes. I will now work through the Property Trust result in detail, before outlining the property pipeline and outlook. 32

34 The Property Trust delivered an EBIT for the full year of $75 million, up 23% from $61 million in the prior year. The Net Trust Income of $15 million was even with the prior year, with the loss of rent following the sale of Coles CDC made up through lower borrowing costs, rent increases on other facilities and the completion of new assets. Property revaluations contributed an EBIT of $42 million. This was made up of the revaluation profit on established properties of more than $33 million due to compression in capitalisation rates, and an EBIT of over $8 million through a revaluation of land that is now ready for development at Oakdale Central. In addition, a development profit of $18 million was achieved as a result of the completion of two facilities for DHL at Oakdale Central and Beaumont Tiles at Rochedale. 33

35 The total value of assets held within the Property Trust Assets was just over $1 billion at 31 July With borrowings of $347 million this gives a total net value of $664 million. Therefore Brickworks 50% share of the Trust s net asset value was $332 million. Although this net asset value is marginally lower than one year earlier, since the settlement of the Coles CDC sale in August 2015, Brickworks share of net asset value has increased by $54 million. The Coles CDC sale proceeds were partially used to repay debt and reduce gearing within the Property Trust. The Property Trust gearing level was 34% at 31 July 2016, down from 38% a year earlier. The return on the developed properties in the Trust, excluding the revaluation profit, increased slightly to 7%. Including the strong revaluation profit on established properties during the year, the total return on leased properties was 22%. 34

36 [Picture: Artistic impression of the Oakdale West Estate] I will now go through the Land and Development strategy and outlook. Before I do so, I highlight the picture on screen that shows an artistic impression of the future vision for our Oakdale West site, which I will discuss in more detail in a moment. 35

37 The Land and Development Group aims to maximise the value of the legacy assets from the Building Products business. Operational land that becomes surplus to the business needs is transferred to the Land and Development Group as development land where it is assessed for optimum land use. Where appropriate, land is rezoned residential and sold. Alternatively the land is rezoned industrial and transferred into the Property Trust and developed, creating a stable, growing annuity style income stream. Once within the Property Trust, assets may be sold if and when appropriate and when capitalisation rates justify. 36

38 Looking at the short term pipeline for the Property Trust. Development activity in the Property Trust in financial year 2017 will be extremely strong, with a number of new developments at both the Oakdale Central and Rochedale estates. At Oakdale Central in New South Wales, a total of 83,945 square metres of new developments will be commenced during financial year 2017, whilst at Rochedale in Queensland 63,000 square metres will be commenced. These developments will have a total combined asset value of over $250 million once complete. Along with other developments completed in 2016, they will deliver a strong uplift in net rental income in the next two years 37

39 Over the medium and longer term growth is expected to remain strong, driven by further precommitments on the remaining 7 hectares at Rochedale and the release of land for development at Oakdale South. The Oakdale South site is owned by the Trust but is undeveloped. At this site, 28 hectares of land sales were secured in financial year 2016 that will generate sales to the Property Trust of around $90 million. These proceeds will underpin the commencement of infrastructure to the entire 70 hectare estate, opening up 43 hectares of land to meet the pre-commitment market. Development of this land is likely to extend for around 5 years. Looking further ahead, additional growth will be generated through the Oakdale West site. This site is still owned by Brickworks, and is currently classified as development land, surplus to operational requirements. A state significant development application will shortly be lodged for the development of this site. The first section of this property is expected to be sold into the Property Trust in financial year 2017, generating a land sale profit to Brickworks. Subsequent to this sale, development of this site within the Trust will then likely extend for up to a decade from 2020 onwards. 38

40 [Picture: Innova roof tiles, by Bristile Roofing] I will now go through our Investment results. 39

41 Brickworks Investments Group consist primarily of a 43% stake in Washington H Soul Pattinson, a core asset of Brickworks that has brought diversity and reliable earnings to the company. WHSP is a diversified investment house with interests in a wide range of companies, including a 27% stake in TPG Telecom and a 60% interest in New Hope Corporation. The underlying EBIT from total investments was $60 million, up by 9%. Brickworks received fully franked dividends totaling $52 million from WHSP during the period. The market value of Brickworks investment in WHSP was almost $1.8 billion at 31 st July 2016, up $381 million during the year. 40

42 WHSP has delivered outstanding returns to its shareholders over all time periods. Fifteen year returns of 12.6% per annum to 31 July 2016 are 4.5% ahead of the All Ordinaries Accumulation Index returns of 8.1% per annum. The one year return of 31.4% is 27.4% above the Index. 41

43 [Picture: Brickworks style ambassador Kate Waterhouse] Turning to the Brickworks Group outlook. 42

44 Building Products earnings for the 2017 financial year will be underpinned by the strong order book and higher margins in major east coast divisions. Land and Development earnings will be supported by the sale of Oakdale West into the Property Trust, and an unprecedented level of development activity within the Trust. Investments earnings are expected to steadily increase over the long term. 43

45 [Picture: La Paloma range, by Austral Bricks] I will now take any questions. 44

46 45

47 Total net cash flow from operating activities was $149 million, up from $133 million in the previous corresponding period. This is despite a higher level of working capital, due in part to an increase in inventory as a result of stock builds in Austral Bricks WA and the launch period of the new Specialised Building Systems division. After taking into account the capital expenditure and acquisitions, free cash flow was $98 million, significantly higher than the prior year. 46

48 At the end of the year the company had total debt facilities of $450 million, providing around $180 million headroom above current net debt levels. The average interest rate on debt facilities is around 4%. In August, the company successfully refinanced its $100 million maturing working capital facility for a 2 year period. 47

49 48