Full Year 2015 Results Presentation Monday, 24 August 2015
FY15 overview What we said we would do What we delivered Revenue $2.3b Revenue $2.3b Underlying EBIT $47m (ex DTZ) EBIT $47.5m Net debt $30-50m at 30 June 2015 Net cash $33.7m Right size overheads Overhead savings of $33m per annum from FY16 Recovery of long dated WIP WIP at 30 June 2015 $163m down $94m during H2 Review operating structure New operating structure developed to drive greater Strong order book for FY16 FY15 Cash received in H2 FY15 $66m management focus and clarity FY15 results reported under new structure FY16 revenue 79% sold at 30 June 2
Safety 12 month rolling 3
Update on Ichthys CCPP and SMP Projects Ross Taylor
Ichthys CCPP project status Overall project 75% complete at consortium level UGL & CH2M HILL JV project scope 60% complete Design 98% complete Procurement 90% complete Construction 36% complete Project continues to track to revised program and in line with revised cost to complete 2H15 cash outflow was $56m Remain confident in the adequacy of $175 million provision Commercial negotiations with client continue in parallel with formal progression of claims Commercial resolution likely before December 2015 5
Ichthys SMP project status Construction 18% complete No margin will be recognised until project is 30% complete in accordance with JV revenue recognition policy expected to occur around December 2015 Site productivity tracking in line with targets Slippage in early milestones due to delays in site access and client procurement EOT claim submitted with indication by client they will pursue a process to resolve the EOT and mitigate current schedule slippage Continue to submit claims and variations in accordance with contract terms Commercial resolution likely before December 2015 6
FY2015 Results Ross Taylor
Results overview Underlying Results $m FY15 FY14 Change 3,048.6 4,511.5 (32%) 75.3 185.8 (59%) 2.5% (25.5) (15.5) 4.1% (37.4) (30.2) 32% 49% Minority interest (4.0) (6.4) 37% NPAT 30.3 111.7 (73%) 1.0% 2.5% 18.2 67.1 Operating revenue EBIT EBIT margin Interest Tax NPAT margin EPS (73%) 8
Operating revenue Underlying ($m) UGL Total Revenue FY15 Engineering Revenue $2.3b 9
Results excluding DTZ New UGL (Underlying) Using the previous corporate cost overhead model ($m) Revenue FY15 FY14 Change 2,320.5 2,261.7 3% 69.5 84.1 (17%) (22.0) (22.2) 0% EBIT 47.5 61.9 (23%) EBIT % 2.0% 2.7% (25%) Engineering Operating Profit Corporate Costs 10
Normalising overhead historically to align with future reporting Historical New ~$33m per annum saving Group Overhead Engineering Group Overhead Divisional Overhead Group Overhead Divisional Overhead ~$40m or 1.7% of revenue Varies by division 11
Results excluding DTZ New UGL (Underlying) Engineering earnings based on new overhead model Corporate costs 1.7% of revenue Reflects combined group and engineering overheads with increased cost accountability at the divisional level ($m) Revenue FY15 FY14 Change 2,320.5 2,261.7 3% 87.4 100.8 (13%) (39.9) (38.9) 3% EBIT 47.5 61.9 (23%) EBIT % 2.0% 2.7% (25%) Engineering Operating Profit Corporate Costs (at 1.7%) 12
Asset Services Technology Systems Engineering & Construction International EGM Alan Beacham Shane Kimpton David MacKenzie Mark Chilcote Alan Beacham Passenger build and maintenance Freight build and maintenance GE parts sales & distribution Supply chain services Component manufacture Naval ship maintenance Power, water and resources sector: - Engineering - Procurement - Construction - Commissioning Engineering design, procurement, construction and commissioning of water treatment plants O&G pipeline EPC capability Divisions Rail & Defence Operations Reporting under our new operating structure Maintenance services Shutdowns and turnarounds Sectors: - LNG - Minerals processing - Petroleum - Power - Water Road tunnel signaling and communications systems Train signaling and control systems Wireless communications 13
Rail & Defence FY15 FY14 Change 986.3 971.1 2% EBIT - $m 32.4 45.8 (29%) EBIT margin 3.3% 4.7% 2.4 2.6 Revenue - $m Order book - $b Revenue $m EBIT $m (6%) FY15 Overview EBIT impacted by reduced coal freight locomotive sales and associated underutilisation of rail facilities Strong performance across MTM and UGL Unipart contracts Solid order book with 95% recurring Key opportunities secured : Sydney Metro Northwest Tangara technology upgrade (not in FY15 order book) Outlook FY16 revenue in line with FY15 Freight locomotive market remains subdued offset by continuing strength in maintenance and upgrade markets Profitability expected to improve in FY16 following rationalisation of under-utilised rail facilities 14
Asset Services Revenue - $m EBIT - $m EBIT margin Order book - $b Revenue $m FY15 FY14 Change 463.2 455.8 2% 8.5 11.4 (25%) 1.8% 2.5% 1.0 1.0 EBIT $m 1% FY15 Overview Revenue increase driven by Stanwell and Chevron contracts secured in FY14 EBIT impacted by margin pressure in coal maintenance and low work volumes in WA design business WA design business closed in June 2015 Strong order book predominantly recurring Key opportunities secured: APLNG and GLNG BP fuel terminal network Outlook Revenue expected to grow in FY16 driven by contracts secured in FY15 and ramp up of Chevron maintenance Shutdown revenue expected to increase significantly in FY17 as LNG plants enter first shut down cycle FY16 profitability expected to improve with close of WA design business and coal sector now reset to new base 15
Technology Systems FY15 FY14 Change 231.3 301.3 (23%) EBIT - $m 10.3 21.1 (51%) EBIT margin 4.4% 7.0% 0.6 0.3 Revenue - $m Order book - $b Revenue $m EBIT $m 102% FY15 Overview Revenue contraction driven by completion of Regional Rail Link and Solomon Spur during FY15 and reduced revenue from DTRS as project moves to later stages of the contract EBIT impacted by the ongoing dispute on DTRS offset in part by a strong contribution from Regional Rail Link Secured Sydney Metro Northwest Outlook FY16 revenue expected to be flat with Sydney Metro Northwest replacing completed projects in FY15 Medium term outlook supported by large secured contracts delivering substantial revenue growth in FY17 as projects move from design to delivery phase Expect to close NorthConnex in coming weeks 16
Engineering & Construction FY15 FY14 Change 636.3 525.4 21% EBIT - $m 42.0 27.5 53% EBIT margin 6.6% 5.2% 0.7 1.0 Revenue - $m Order book - $b Revenue $m EBIT $m (35%) FY15 Overview Revenue growth driven by ramp up of Ichthys CCPP and SMP projects although nil margin recognised Strong revenue and EBIT contribution from Roy Hill and West Angelas power projects Solid performance in power systems and power transmission Outlook FY16 revenue is expected to grow due to full year contribution of Ichthys SMP with margin recognition to commence once project is 30% complete FY16 EBIT margin will continue to be impacted by nil margin revenue recognised on Ichthys CCPP 17
International FY15 FY14 Change Revenue - $m 11.3 22.8 (50%) EBIT - $m (5.9) (5.1) 16% EBIT margin Order book - $b Revenue $m (52.1)% (22.4)% 0.04 0.01 EBIT $m 161% FY15 Overview Revenue decline driven by reduced levels of secured infrastructure projects in South East Asia Overhead costs not recovered due to low activity Cost base right-sized to support scale of operations in FY16 EBIT also impacted by reduced throughput volumes in Indian locomotive fabrication facility Texmaco JV currently being exited (previously provisioned) Outlook Strong near to medium term prospects in tunneling, water and oil & gas pipelines in South East Asia Continued investment in the region contingent on securing identified key opportunities in FY16 18
Financial Analysis Ray Church
Results overview Underlying Results $m FY15 FY14 Change 3,048.6 4,511.5 (32%) 75.3 185.8 (59%) EBIT margin 2.5% 4.1% Interest (25.5) (37.4) 32% Tax (15.5) (30.2) 49% Non controlling interest (4.0) (6.4) 37% Net profit after tax 30.3 111.7 (73%) 1.0% 2.5% 18.2 67.1 Effective tax rate 31.0% 20.4% ROFE 14.0% 11.4% 16.8 23.2 Operating revenue EBIT (DTZ FY15 $28m FY14 $124m ) NPAT margin EPS Engineering CAPEX 20
DTZ overview $m Trading Profit on sale 729.1-729.1 27.8-27.8 Sales Costs - (17.3) (17.3) Accounting Profit on Sale - 83.4 83.4 Reported EBIT 27.8 66.1 93.9 Interest (6.3) - (6.3) Tax (4.1) (17.2) (21.3) 0.1-0.1 Operating revenue EBIT Non-Controlling Interest Profit from Discontinued Operations 17.5 48.9 FY15 66.4 21
Business reset One-Off items impacting FY2015 * Excluding Ichthys CCPP 22
Goodwill impairment Pre restructure Post restructure Impairment 186.7 134.5 (52.2) Technology systems 46.1 35.3 (10.8) Infra E&C 70.7 70.7 Asset Services 55.2 55.2 Total Goodwill 358.8 295.8 Rail & defence (63.0) 23
Reconciliation to statutory $m Underlying Revenue EBIT JV's (Equity method)* 3,048.6 (319.9) 75.3 (6.9) Net interest (25.5) Tax (15.4) Non-controlling interests (4.0) NPAT 30.3 6.9 Claims Provision for Resources Goodwill Tender costs Restructure Discontinued Continuing resolution & contract loss slowdown impairment written off costs operations operations settlement (717.5) (175.0) 52.5 (122.5) (39.8) 11.9 (27.8) (84.9) 22.6 (62.4) (63.0) 0.0 (63.0) Profit attributable to discontinued operations (18.9) 5.7 (13.2) (38.1) 11.4 (26.7) 2,011.1 (27.8) (379.1) 6.2 (19.3) 4.1 99.6 0.1 (3.9) (17.4) (302.7) 66.3 (236.4) Statutory Loss * Includes $11m DTZ Revenue for details refer to note 3 and Note 26 of the financial statements 24
Operating Cash Flow ($m) 25
Balance Sheet - WIP reduction Progress on WIP WIP Movement Good level of cash conversion in June Gross WIP reduced from $257m at 31 December to $163m at 30 June WIP days at 30 June: 30 days 26
Balance Sheet - Change in accounting for unincorporated joint ventures (UJVs) Balance Sheet 30 June 2015 ($m) Cash and cash equivalents Trade and other receivables Inventories Investments Property, plant and equipment Trade and other payables Provisions Other Net assets Excl UJV impact 74 214 227 (5) 48 (265) (61) 202 435 Incl UJVs - Statutory 165 233 245 17 52 (416) (63) 202 435 Impact 91 19 18 22 3 (151) (2) - Background UJV s proportionally consolidated 2015 First year of material UJV impacts previously equity accounted Aligns with AASB 11 and industry peers Impact on Balance Sheet Increase of cash $91m Decrease in net working capital balance of ($113m) 27
Balance Sheet - Material items impacting net debt in H2 2015 Cash impact of material one-off items $m Net (Debt) 31 Dec 2014 (63.0) DTZ Sale Costs (25.3) DTZ Final Proceeds DTZ Exit Costs 60.7 (12.4) Claims Resolved 66.0 Working Capital Movement (8.4) Ichthys CCPP (56.0) Restructure Costs (12.3) CAPEX (6.1) UJV cash 90.5 Net Movement 96.7 33.7 Net Cash 30 June 2015 28
Debt structure post refinancing Maturity profile by years - $m Credit* metrics FY15 FY14 (Net cash)/net debt ($m) (34) 567 Net debt / (net debt + equity) - 32.4% Net debt / EBITDA - 2.4x 4.0 5.2x Interest Cover Debt* and bonding facilities $m Total facilities 381 Drawn 131 Cash 165 (Net cash) (34) Available Facilities 250 Total Liquidity 415 Bonding facilities $m Total facilities 543 Drawn 336 Available facilities 207 * Includes UJVs cash 29
Progress against FY16 priorities Priorities Progress 1 Maintain lean overhead cost base Leaner and more focused Corporate centre established with increased functional responsibilities in Divisions On track to realise $33m in annual overhead savings 2 Embed consistent standardised commercial and project management disciplines Enhanced risk and governance framework Commenced implementation of the UGL Way Modules rolled out over next 18 months Priority on project management focused work streams 3 Execute well to maintain gross margin Consolidated execution of higher risk projects within a single division under experienced leadership Standardised project management reporting Financial delegations aligned to skills and capability Focus on strengthening project management capabilities Alignment of project team incentives to performance 4 Disciplined portfolio management of businesses driving capital allocation decisions Balance sheet distributed to Divisions Responsibility for cash flow management now with the Divisions and down to the projects FY16 KPIs to measure return on capital as well as sales and earnings performance 30
Order Book & Pipeline Ross Taylor 31
Order Book Order Book Over Time ($m) Order Book By Year ($m) 32
Order Book recurring/project mix All Years FY16 33
Pipeline Renewals & Preferred ($m)1 By Division2 Order book excludes maintenance contract renewal & extension options as well as preferred opportunities Status2 1. Full potential contract value 2. Weighted & qualified 34
Outlook Ross Taylor
Market outlook Diversity in revenue continues to provide balance against contraction in resources sector Overall markets remain competitive driven by excess capacity of service providers Subdued resources infrastructure and operations investment expected to continue in the medium term as resources clients retain strong focus on cost reduction and improved efficiencies Strong transport infrastructure opportunities supported by Government investment Leading player in passenger rail maintenance Proven O&M capability for privatised/franchised networks Market leader in transport technology systems Strong international OEM partners Growth in LNG maintenance as capex projects reach operational phase Tier 1 maintenance services provider Core base of LNG maintenance and shutdown work flow Sufficient scale to maintain a permanent shut down crew providing competitive advantage Opportunities in adjacent markets such as distribution and renewables Market leader in power systems with solid win rate Steady growth in waste water sector driven by conservation initiatives Strong design capabilities and project delivery track record 36
Repositioned for improved performance from FY16 Description FY15 Step 1: Reset Complete project reviews and implement new initiatives Complete restructure of divisional and corporate overheads to right size the business Focus on and reduce WIP balance Completed Improve project gross margin delivery Convert identified pipeline opportunities FY16 Step 2: Turnaround FY17 Step 3: Step change FY18 + beyond Step 4: Growth Realise full run-rate of cost reduction initiatives implemented in FY15 Revenue $2.3 billion and EBIT margin increase to 3% On Track Deliver average cash flow conversion of 100% of NPAT excluding Ichthys CCPP Revenue step change by at least $300m driven by exposure to transport infrastructure and LNG maintenance Commencement of major contracts within Technology Systems and Asset Services divisions Improvement in margin due to replacement of nil margin revenue with new profitable contracts Profitable top line growth combined with lean overhead structure will see a further EBIT margin improvement towards 4% Sustainable enterprise and industry leader Continue to seek opportunities for growth and value enhancement 37
Appendices
The new UGL Vision and strategic priorities UGL VISION UGL VISION PRIORITIES An industry disruptor that dominates the Australian market throughstrategic the application of world leading technology and execution capabilities taking the smartest solutions to our clients and sectors globally LEAD IN SAFETY AND SUSTAINABILITY UGL VISION BUILD A WORLD CLASS TALENT BASE An industry disruptor that dominates the Australian market through the application of world leading technology and execution capabilities taking the smartest solutions to our clients and sectors globally CONSISTENTLY DELIVER BUILD OUR PORTFOLIO STRENGTHS THROUGH INNOVATION BE THE PARTNER An industry disruptor that dominates the Australian market through the applicationof ofchoice world leading technology and execution capabilities taking the smartest solutions to our clients and sectors globally DELIVER STRONG ECONOMIC RETURNS FOR SHAREHOLDERS 40
Major Contracts Remaining contract value > $100 million Name Description Division Original Value ($m) UGL Unipart In JV with Unipart Rail, heavy maintenance and logistics management services on 1,050 passenger cars in Sydney s passenger car fleet for Sydney Trains & Transport for NSW Rail 1,400 Metro Trains Melbourne Operations and maintenance of Melbourne s passenger train franchise Rail North West Rail Link Design, build, finance and operate the new rapid transit service as a member of the NRT consortium Freightliner +$900m extension option 1,300 excluding capital works Duration Contract type 2012-2019 Schedule of + 5 year rates extension option 2009-2017 Schedule of + 7 year rates extension option Total consortium contract $3.7bn Design and deliver the tunnel systems, rolling stock, Technology rail signalling and overall control systems in JV with Solutions MTR Corporation 2015-2019 Lump sum Operations and maintenance of the service in JV with MTR & John Holland 2019-2034 Schedule of rates Maintenance of locomotives and wagons operated by Freightliner Australia in the Hunter Valley Rail Rail 115 2010-2020 Schedule of rates 41
Major Contracts Remaining contract value > $100 million Name Description Division Pacific National Upgrade and maintenance for a portion of the Pacific Rail National Rail locomotive fleet Original Value ($m) Duration 540 Maintenance: Contract type Upgrade: Schedule of rates Lump sum 2013-2020 2012-2016 Ichthys SMP In JV with Kentz Corporation structural, mechanical and piping construction package for the Ichthys LNG Project E&C 370 2014-2017 Lump sum Stanwell Facilities maintenance and management, overhauls and project works across Stanwell s coal, gas and hydro energy assets in Queensland Asset Services 280 2014-2018 Cost plus Ichthys CCPP Power Station Design, supply of the balance of plant and the E&C construction of a combined cycle power plant for the Ichthys LNG project 275 2012-2016 Lump sum BP Operation and maintenance of BP s 17 fuel terminals across Australia through a JV between UGL and BP Asset Services 190 2015-2018 Schedule of rates Chevron Maintenance Maintenance services for the operational phase of Chevron s Western Australian assets Asset Services NA 2014-2019 Schedule of rates + potential for extension to 5 years + 3 year extension option + extension options 42
Major Contracts Remaining contract value > $100 million Original Value ($m) Duration Asset Services NA 2015-2019 Schedule of rates Maintenance, shutdown, engineering and project services for Santos GLNG s Curtis Island LNG facility Asset Services 120 2015-2018 Schedule of rates In joint venture with Unipart Rail, technology upgrade of fleet of 446 Tangara passenger railcars Rail 131 2015-2018 Schedule of rates Name Description Division APLNG Downstream maintenance, shutdown and modification project services for the operational phase of the Curtis Island LNG Facility GLNG Tangara Technology Upgrade + extension options up to 4 years Contract type 43
New Contract Wins and Extensions $2.1 billion in contract wins and renewals: Sydney Metro Northwest: $3.7bn operations contract to be delivered by UGL as part of the Northwest Rapid Transit Consortium [check name of consortium?] APLNG: Multi-million dollar 4 year downstream maintenance services contract GLNG: $120m 3 year downstream maintenance services contract BP: 3 year $190m operations and maintenance contract across 17 BP fuel terminals Post 30 June 2015 win: Tangara Technology Upgrade: $131m contract undertaken by UGL Unipart Rail for technology upgrade of Tangara passenger rail fleet in Sydney 44
Order Book & Pipeline By Division Order Book ($m) Pipeline ($m) 45
Order Book By delivery structure ($m) By contract type ($m) 46