Statutory EBIT after individually significant items,
including the previously announced write off of the
Reliance Rail hedge reserve of $72.5 million, was $264.2
million. Statutory NPAT was $112.9 million1. A
reconciliation of the underlying result to the statutory
result is provided in the Investor Presentation and Full
Year Report, both lodged with the Australian Securities
Exchange and available on the Downer website.
Total revenue rose by 22.5% to $8.5 billion, including $0.5
billion of contributions from joint ventures. All
businesses recorded revenue growth with Downer Mining up
67.9% to $2.5 billion, Downer Rail up 14.0% to $1.3 billion
and Downer Infrastructure up 11.7% to $4.6 billion
(Australia up 13.6% to $3.7 billion and New Zealand up 4.6%
to $0.9 billion).
Operating cash flow was strong at $364.5 million. At 30
June 2012, Downer's gearing was 18.6% with liquidity of
$890.2 million.
The Chief Executive Officer of Downer, Grant Fenn, said the
company had delivered on its promises and was capable of
much more.
"The strength of the business is clear in this
result," Mr Fenn said. "Despite closing out a
number of legacy issues, the result is strong, particularly
our cash performance. Our work-in-hand remains high at
about $20 billion and we are improving our win rates in the
right areas.
"Importantly, the Waratah Train Project has passed a
number of significant milestones during the year and, while
still a challenging project, it now represents a
substantially lower risk to the Group. We now have a good
handle on our input costs at the required rates of
production. Manufacturing in Changchun is consistently
meeting quality standards and the production rate is at the
required three trains per month. At Cardiff, we are
successfully pulsing the manufacturing flow line every four
days and will move to three days in February 2013," Mr
Fenn said.
"The trains in passenger service are performing
well."
Further information on the Waratah Train Project is
provided in the Annual Report (Appendix 4E) and Full Year
Report, both lodged with the Australian Securities Exchange
and available on the Downer website.
Downer's portfolio structure is now well defined with
the creation of Downer Infrastructure and the sale of CPG
Asia for $147 million. Downer's three divisions -
Mining, Infrastructure and Rail - are leaders in their
sectors.
"Our risk and project management processes have
strengthened further and a number of legacy underperforming
contracts were completed during the year. This included the
Curragh coal handling preparation plant achieving Practical
Completion in June 2012," Mr Fenn said.
Mr Fenn said Downer Mining performed particularly well
during the year, with EBIT up 45.1% to $173.5 million.
Growth was driven by new and expanded open cut mining
contracts and record levels of work in the blasting and
tyre management businesses.
"Downer Mining has done a great job minimising the
growing pains normally associated with ramping up on such a
scale. There has been a lot of investment over the past two
years and the Mining business is delivering," Mr Fenn
said. "We continue to win new contracts and our full
service offering with blasting services and tyre management
is an advantage."
In Australia, Downer Infrastructure's EBIT rose by
38.2% to $150.7 million despite the impact of
underperforming contracts and wet weather. The Eastern
region was particularly strong driven by road
infrastructure services and the benefits of blending our
engineering services and construction capabilities for
resources based projects.
In New Zealand, Downer Infrastructure delivered a much
improved performance in the second half of the year,
achieving full year EBIT of $29.6 million, more than double
last year's EBIT of $11.0 million. The efficiency
improvements that have been introduced over the past two
years are now starting to show up in the New Zealand
results.
"There is a significant pipeline of opportunities for
Downer Infrastructure in both Australia and New Zealand.
The newly integrated business is already seeing the
benefits of scale, increased management depth and technical
expertise. This is having a real impact on the
opportunities available and our success rate," Mr Fenn
said.
Downer Rail's EBIT rose by 1.8% to $76.4 million, in
part driven by the close-out of locomotive and passenger
build contracts that were completed during the year. On 26
June 2012, Downer announced a new five year agreement with
Electro-Motive Diesel that will provide customers with more
competitive pricing and improved lead times.
A profoundly disappointing aspect of Downer's
performance during the year was the two workplace
fatalities on road maintenance sites. Downer has
implemented a number of initiatives to address the hazards
involved with reversing vehicles.
Downer's Lost Time Injury Frequency Rate of 0.93
remained below one incident per million hours worked for
the year and Total Recordable Injury Frequency reduced from
7.17 to 6.21 per million hours worked.
The Downer Board has decided not to declare a final
dividend. Downer will continue to pay dividends on its
Redeemable Optionally Adjustable Distributing Securities
(ROADS).
Outlook
There is, at the current time, an increasing level of
uncertainty around the level and timing of Government and
private sector investment in infrastructure in both
Australia and New Zealand.
That said, Downer is well positioned in terms of the
percentage of work already secured that will impact on the
year ahead.
Accordingly, Downer expects to deliver EBIT of around $370
million and NPAT of around $210 million for the 2013
financial year.
1 Underlying EBIT and NPAT are considered a more
appropriate measure of Downer's performance than
'statutory' results, because the statutory results
include several Individually Significant Items
("ISIs") that are unlikely to be recurrent. Of
these ISIs, the major item relates to the transfer of the
equity accounted Reliance Rail hedge reserve via the income
statement to retained earnings. This transfer has had no
impact on cash, equity, net assets or underlying earnings.
A reconciliation of the underlying result to the statutory
result is provided in the Investor Presentation and Full
Year Report, both lodged with the Australian Securities
Exchange and available on the Downer website.
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