For personal use only 2013 Annual Report Cover image Lower Hatea River Crossing Project, New Zealand Project delivered by Transfield Services McConnell Dowell Joint Venture Architect — Knight Architects Bridge constructed by McConnell Dowell Constructors Limited Photograph by Patrick Reynolds All financials are in Australian dollars unless otherwise stated. The financial figures provided in the front section of the report (pages 6 to 47) 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 2013 Annual General Meeting of Transfield Services will be held on Friday, 25 October 2013 at 10.00am (AEDT), at the AGL Theatre, Museum of Sydney, 37 Philip Street For personal use only (Corner Bridge Street), Sydney, New South Wales. Transfield Services Limited ABN 69 000 484 417 2 TRANSFIELD SERVICES 2013 “In just nine months, we have made major changes to the way Transfield Services is both structured and operated. Those changes have touched almost every aspect of our organisation.” Graeme Hunt Managing Director and Chief Executive Officer CONTENTS Business snapshot 4 Performance overview 6 Chairman’s report 8 MD and CEO’s report 12 Board of Directors 14 Senior executive team 16 Review of operations 19 Infrastructure, 20 Australia and New Zealand Resources and Energy, 22 Australia and New Zealand Americas 24 Middle East and Asia 25 Sustainable business 27 Corporate governance report 39 Financial report 47 (Remuneration report pages 61 to 94) For personal use only Corporate directory 180 2013 TRANSFIELD SERVICES 3 BUSINESS SNAPSHOT Infrastructure Transmission Water Public Rail Telecommunications Roads Maritime and Transport Distribution Property and Asset Services Commercial Defence Health Education Housing Resources and Energy For personal use only Hydrocarbons Renewable Mining Chemical Manufacturing Power Energy Processing Generation 4 TRANSFIELD SERVICES 2013 ransfield Services is a global provider of Toperations, maintenance and construction services to the infrastructure, and resources and energy industries. CONSULTING Asset planning, feasibility and development UPGRADES ENGINEERING Brownfield Design and upgrades and project modifications management ASSET MANAGEMENT MAINTENANCE Maintenance strategy, CONSTRUCTION management Greenfield and For personal use only and execution brownfield construction OPERATIONS Operational strategy, management and execution 2013 TRANSFIELD SERVICES 5 PERFORMANCE OVERVIEW PROGRESS AGAINST STRATEGIC PLAN Global portfolio review completed, divestments underway, impairments booked New commercial governance process in place Procurement and asset management functions centralised Easternwell integrated with Resources and Energy business CAPEX reduced by 25 per cent A$29 million per annum in cost savings Reduction of 359 roles, offices closed RECORD SAFETY PERFORMANCE Frequency rate of injuries per million hours worked Total hours in millions Lost Time Injury 90 Frequency Rate (LTIFR) 45 down 31 per cent 40 TRIFR 80 LTIFR 35 70 Total exposure hours Total Recordable Injury 30 60 Frequency Rate (TRIFR) 25 50 down 25 per cent 20 40 15 30 Both statistics are the lowest ever recorded by 10 20 the Company 5 10 0 0 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Year CONTRACT WINS July 2012 October 2012 November 2012 December 2012 February 2013 March 2013 May 2013 June 2013 US$100m 34-year $80m coal $200m CSG operations $45m oil and gas contract with the seam gas and maintenance services maintenance services California Department of (CSG) to contract with QGC contract with Woodside Transportation liquefied Asset integrity and $20m CSG wellhead NZ$67m in contracts natural maintenance LNG contract gas (LNG) installation contract with Northland District with INPEX (Transfield with QGC Council in New Zealand construction Worley JV) contract with $20m cleaning services $65m one-year design $50m three-year facilities QGC (joint contract* and construct contract venture (JV) management contract with with Rio Tinto with Clough) Boral $30m five-year maintenance and capital $35m one-year design US$32m one-year refinery and construct contract maintenance contract in works contract with with Fortescue Metals the US* Gippsland Water Group For personal use only $12m three-year mine $25m two-year design maintenance services and construct contract contract in Chile (InserTS)* with Mackay Regional Council Three-year facilities management contract with Tornado Tower in Qatar *Client name and/or contract value not disclosed. (Transfield Mannai Facilities All values referenced in the above diagram are Management Services JV) Australian dollars unless otherwise stated. 6 TRANSFIELD SERVICES 2013 PERFORMANCE OVERVIEW FINANCIAL PERFORMANCE Revenue up 9.8 per cent to A$3,451.5 million Operating cash flow up 72 per cent to A$210.5 million Cash conversion rate up to 121 per cent from 76 per cent in prior year Reported net profit after tax (NPAT) post impairments A$(250.0) million NPAT pre-amortisation and impairments A$62.5 million, in line with revised guidance No final dividend due to focus on strengthening balance sheet Net debt to EBITDA* decreased from 2.8 times at 31 December 2012 to 2.3 times at 30 June 2013 A$ million EBITDA* SEGMENT PERFORMANCE 270 7.7 (29.8) 250 28.9 230 (8.3) 218.8 (5.2) 0.3 (5.1) 210 207.3 Strong performance from core Australia and 190 New Zealand (ANZ) operations and Easternwell Energy Group ANZ Easternwell Easternwell Americas MEA Corporate RACL Group FY13 170 FY12 Energy Minerals * Earnings before interest tax, depreciation and amortisation July 2012 October 2012 November 2012 December 2012 February 2013 March 2013 May 2013 June 2013 $175m facilities $90m one-year $240m six-year Land $300m two- management maintenance services Materiel Maintenance year design and operational contract with Australia’s Services contract with and construct services Land and Housing Australia’s Department of contract with contract with Corporation Defence NBN Co the Australian $30m two-year heavy Department of $39m three-year service $66m two-year upgrade contract workover services contract construction Immigration and with Santos (Easternwell) Citizenship in on Goulburn-Murray contract with Nauru Water’s irrigation project Seven-year operations and NBN Co (TransCom Connect JV) maintenance power contract with BHP Billiton (Transfield $30m one-year Garrison Worley Power Services JV)* Support Services contract with Australia’s Three-year maintenance Department of Defence contract with SP AusNet* For personal use only $190m 10-year NZ$76m 18-month project maintenance services management, engineering, contract with Mornington procurement and construction contract with Peninsula Shire Todd Energy in New Zealand $170m design and (Transfield Worley JV) construct contract with NBN Co 2013 TRANSFIELD SERVICES 7 CHAIRMAN’S REPORT We have exceeded our targets in some areas, with strong cash conversion at 121 per cent, up 45 percentage point year on year, and gearing has been reduced. In this year’s annual report, Given market conditions, a The Company’s Resources market volatility and softness strengthened balance sheet and Energy business has in many local sectors and is a top priority for your seen growth in its key global markets, which your Board. Therefore, we have market of oil and gas, with Company services, continue elected not to pay a final significant work flowing to be significant themes and dividend for 2013. from Easternwell’s CSG may be for some time. clients in Australia, and the An unfranked interim promise of further shale gas Despite these conditions, dividend of three cents per work and a bright future Transfield Services has met its share was paid on 1 May 2013. for investment in new CSG revised guidance, delivering energy production rigs. One NPAT pre-amortisation and The Company’s client alone has 6,000 wells imparments of A$62.5 million Resources and still to be drilled to meet its for the 2013 financial year. We Energy business has export commitments. have exceeded our targets in seen growth in its key some areas, with strong cash There has been good conversion at 121 per cent, up market of oil and gas. growth in the Company’s 45 percentage points year on Infrastructure business We have reduced capital year, and gearing has been across several sectors. expenditure and put in place reduced, with net debt A$75 Telecommunications has a salary freeze. million lower than it was at 31 contributed with contracts December 2012. We have successfully won on Australia’s National refinanced a A$259 million Broadband Network, and Net debt to EBITDA was tranche of debt with New Zealand’s Ultra-Fast 2.3 times at 30 June 2013, A$143 million extended for Broadband rollout. We significantly lower than at two years and voluntarily announced a Roads Plus the same time last year. cancelled US$100 million strategic joint venture For personal use only This result was achieved as it was excess to our with British engineering after absorbing restructuring requirements. multinational Balfour Beatty costs of A$23.1 million, which to bid on upcoming road will underpin the future maintenance opportunities profitability, competitiveness on Australia’s eastern and growth of the Company. seaboard. 8 TRANSFIELD SERVICES 2013 CHAIRMAN’S REPORT Our Property and Asset As announced during the These write-downs are Services business rapidly year, the Middle East and non-cash, do not affect mobilised a highly complex Asia businesses are being our banking agreements logistics operation at short sold with interested parties and have no impact on notice to establish and run actively engaged. While operations. the Regional Processing good businesses, they are The appointment of our new Centre on the Pacific Island not aligned with our future Managing Director and Chief of Nauru for the Australian strategy and as such are Executive Officer, Graeme Department of Immigration being divested. Hunt, has put the right man and Citizenship.