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TRANSFIELD SERVICES ANNUAL REPORT For personal use only Working on tomorrow today ANNUAL REPORT 2011 Challenge | Collaboration | Ingenuity | Integrity All financials are in Australian dollars unless otherwise specified. For personal use only The financial figures provided in the front section of the report (pages 1 to 38) have been rounded. In some cases, totals and percentages have been calculated from financial figures that have not been rounded, hence some financials and percentages may not add up exactly. Notice of Annual General Meeting Shareholders are advised that the 2012 Annual General Meeting of Transfield Services will be held on Thursday, 1 November at 10.00am (AEDST), at the AGL Theatre, Museum of Sydney, 37 Philip Street (Corner Bridge Street), Sydney, New South Wales. CONTENTS 004 Business snapshot 006 Financial highlights 008 Chairman’s report 010 Managing Director and CEO’s report 014 Board of Directors 016 Senior executive team 018 Review of operations 020 Australia and New Zealand 024 Americas 026 Middle East and Asia 028 Sustainable business 034 Corporate governance 039 Financial report Index 140 For personal use only 141 Corporate directory 142 Office locations 2012 TRANSFIELD SERVICES 3 BUSINESS SNAPSHOT MIDDLE EAST AND ASIA • Hydrocarbons • Manufacturing • Power Generation • Facilities Management * • Minerals Processing • Process Industries Our global workforce of 24,000+ • Chemicals • Power FAST FACT Hofincons supports the employees provides operations, generation of power for more than maintenance and construction 33 million people in India per year. services in the Resources, Energy, 6,734 Contract highlights • The region secured more than $37 million in new Industrial, Infrastructure, contracts and $20 million in renewed contracts. • Transfield Mannai Facilities Management Services now provides an end-to-end offering for the provision of heating, ventilation, Property and Defence sectors. air-conditioning and cooling (HVAC) services. • Successfully completed five shutdowns in the hydrocarbons and minerals processing industries. • Hofincons expanded into operations and maintenance for high capacity power We operate in 20 industries generation facilities and facilities management for malls and retail. providing services to over 200 clients. * Figure excludes Joint Ventures OUR NEW LOOK…. To help bring our vision and brand promise to For personal use only life, we created a new look. It includes a vibrant graphic device and colour palette, complemented by a modern style of photography. THE GRAPHIC DEVICE The spherical shape (left) represents the industrial nature of our work, the diversity and layers of knowledge within our business and our global presence. 4 TRANSFIELD SERVICES 2012 AMERICAS • Mining • Chemicals • Minerals Processing • Roads • Hydrocarbons • Transmission and • Power Generation Distribution FAST FACT We provide operations and maintenance services to 12,000 lane miles across the Americas. 4,161 Contract highlights • Secured more than US$306 million with four US Department of Transportation contracts. • Awarded US$150 million in Resources and Energy contracts with various clients. • Flint Transfield Services joint venture successfully renegotiated, allowing growth in key North American markets. • Acquired control of InserTS in Chile to accelerate growth in Mining and Power. AUSTRALIA AND NEW ZEALAND • Hydrocarbons • Telecommunications • Mining • Roads and Rail • Process Industries • Public Transport • Power Generation • Property and • Transmission and Maintenance Distribution • Defence • Water • Social Infrastructure FAST FACT We’ve reduced the carbon footprint of Sydney’s Lane Cove tunnel by 17,800 tonnes of CO2-emissions per year by improving the ventilation systems. 13,691 (Includes Easternwell) Contract highlights • Telecommunications business bolstered by $362 million in contracts. • Defence contract wins of $200 million and extensions across three significant contracts. • Awarded $133 million in construction contracts for NBN Co in Victoria. • Rio Tinto and Fortescue Metals contracts to construct two bulk diesel tank farms worth $100 million. Our brand is at the centre of everything we do and They are: everything we say. Integrity - Do what’s right It reflects our core beliefs and the values that drive Collaboration - Achieve more together ourFor personal use only vision ‘To be the knowledge leader in asset Challenge - Drive to succeed management services’. Ingenuity - Create better ways. The device signals a change in the way we see ourselves and will help our clients define what Our commitment to our clients is to leverage our it is about us that differentiates us from our global knowledge and expertise to think differently, competitors. innovate and deliver optimal asset productivity. New values support and guide our behaviours and We are dedicated to listening, understanding and decisions, no matter where we are or what we do. challenging ourselves. 2012 TRANSFIELD SERVICES 5 FINANCIAL HIGHLIGHTS Full year statutory Net Profit after Tax of $84.8 million Operating cash flow of $123 million, up 49 per cent Cash conversion of 76 per cent Total FY12 dividend of 14 cents per share Earnings per share of 15.6 cents Order book of $11 billion Revenue of $4.3 billion (including joint ventures) CASH CONVERSION PIPELINE OF OPPORTUNITIES $30.3 billion up six per cent Property and FM Property Maintenance Resources and % Defence Energy 15% Social Infrastructure Hydrocarbons 27% Mining 76 Process Industries For personal use only Infrastructure Services Power Water 58% Telecommunications Road and Rail Public Transport 6 TRANSFIELD SERVICES 2012 “Global economic conditions are volatile, but we remain confident that with a more efficient business, a healthy balance sheet, strong footholds in growth markets and a new focus on providing higher value services to our clients, we are well placed.” GROWTH IN REVENUE DIVIDEND PER SHARE (cents per share) 36 27 22 20 16 % 14 14 14 7 12 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 FY12 GEARING* SHARE BUYBACK * Net debt / Net debt + Equity 61% 60% 57% 47% 33% 33% 32% 27.8 25% 18% For personal use only million shares acquired at a ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 FY12 cost of $62 million 2012 TRANSFIELD SERVICES 7 CHAIRMAN’S REPORT Despite the unprecedented The Company must continue Our Australian infrastructure With the rapid growth in global economic to reduce costs and become and services businesses the unconventional oil and uncertainty and turbulent leaner and more efficient maintained strong positions gas market in the region, markets, your Company has to lift our margins and in the public transport, our Americas resources delivered on its guidance. profitability and to improve water, telecommunications and energy business is We declared a pre- our competitiveness. These and defence industries positioning to capitalise amortisation Net Profit after initiatives are discussed in with turnover of $1.3 billion on increasing demand for Tax (NPAT) of $106 million. more detail in the Managing and won work totalling upstream oilfield services in We delivered strong cash Director and Chief Executive $1.74 billion. In New the Williston shale gas basin conversion of 76 per cent Officer’s report commencing Zealand, we retained and in North Dakota. and an operating cash flow on page 10. won work totalling $270 We acquired a further of $123 million, up 49 per million in the electricity Our focus on long-term 40 per cent in our mining cent on the previous year. and telecommunications operations and maintenance services joint venture In these markets, cash is industries. was proven during the last in Chile, bringing our vital and a true measure of quarter when the Australian The Middle East and Asia ownership to 90 per cent. business performance. mining industry experienced region remains profitable We believe the Chilean Your final dividend for the a cooling off in capital despite subdued activity minerals industry will 2012 financial year of nine expenditure. Our strategy and experienced a rebound continue to grow and cents per share is unfranked means we are not dependent in margins and growth we are exploring new and payable on 24 October on the construction of new with approval granted opportunities to exploit 2012, bringing the total plant or the expansion of for a number of major greater leverage. dividend for the year to existing mines. infrastructure projects in the The focus on upstream 14 cents per share. Emirates. Our resources and energy oil and gas services At a macro level, revenue business, with a turnover of In North America, while and greater expansion and margins softened, but $1.5 billion supported by a recessionary economic into minerals services throughout the business strong performance from conditions prevailed, our accelerates the fundamental your management team Easternwell, commissions, roads business enjoyed strategic change we is executing our plan to operates or maintains the another good year, winning embarked on three years further drive down costs hundreds of billions of notable contracts in Canada ago in the Americas. In while expanding into dollars of resources assets and the United States. combination with the higher margin services. The already built, being built or ongoing streamlining and Our Flint Transfield Services reduction of overheads firmly committed to. These cost reduction, we are (FTS) joint venture in and operating costs will be assets have operational lives confident your Company is Canada continued to an important