Transfield Services Limited ACN 000 484 417 Annual report – 30 June 2008 Contents Page Corporate directory 2 Directors’ report (including remuneration report) 3 Auditor’s Independence Declaration 29 Financial report 30 Directors’ declaration 117 Independent Audit Report to the members 118 For personal use only 1 Transfield Services Limited and controlled entities Corporate Directory Directors Anthony Shepherd - Chairman Mel Ward AO Peter Watson - Managing Director and Chief Executive Officer Guido Belgiorno-Nettis AM Luca Belgiorno-Nettis Professor Steve Burdon Steve Crane David Sutherland Company Secretary and General Counsel Kate Munnings Lee de Vryer - Chief Strategy Officer Elizabeth Hunter – Chief Human Resources Officer Matthew Irwin - Chief Financial Officer Bruce James - Chief Executive Officer – Australia Paul McCarthy – Chief Executive Officer – Major Projects and Programs Joseph Sadatmehr - Chief Executive Officer/President – North America Graeme Sumner - Chief Executive Officer – New Zealand Notice of annual general meeting The annual general meeting of Transfield Services Limited will be held at The Theatre, Australian National Maritime Museum, 2 Murray Street, Darling Harbour, Sydney time 10.00 am date 23 October 2008 A formal notice of meeting is enclosed. Principal registered office in Australia Level 10, 111 Pacific Highway NORTH SYDNEY NSW 2060 Share and debenture registers Computershare Investor Services Pty Limited Level 3, 60 Carrington St SYDNEY NSW 2000 Auditors PricewaterhouseCoopers Chartered Accountants Darling Park Tower 2 201 Sussex Street, SYDNEY NSW 2000 Bankers Australia and New Zealand Westpac Banking Corporation Banking Group Limited 255 Elizabeth St 20 Martin Place SYDNEY NSW 2000 SYDNEY NSW 2000 Stock exchange listing Transfield Services Limited shares are listed on the Australian Securities Exchange. Website address www.transfieldservices.com For personal use only 2 Transfield Services Limited and controlled entities Directors’ Report Your Directors present their report on the consolidated entity consisting of Transfield Services Limited and the entities it controlled at the end of, or during, the year ended 30 June 2008. Directors The following persons were Directors of Transfield Services Limited during the whole of the financial year and up to the date of this report: Anthony Shepherd (Chairman) Mel Ward AO Guido Belgiorno-Nettis AM Luca Belgiorno-Nettis Professor Steve Burdon Peter Watson (Managing Director and CEO) Denis Cleary and Bernard Wheelahan were Directors until their retirements on 24 October 2007 and 11 April 2008 respectively. Steve Crane and David Sutherland were appointed as Directors on 12 February 2008 and 11 April 2008 respectively and continue in office at the date of the report. Principal activities During the year the principal continuing activities of the consolidated entity consisted of: (a) provision of operations and maintenance outsourcing services; and (b) continued investment in and management of the Transfield Services Infrastructure Fund. During the year, the consolidated entity expanded the operations of these activities through: (a) acquiring 100% of the share capital of Whelan’s International Co Inc, a company which provides operations and maintenance services across North America; (b) acquisition of the business and assets of Horizon National Services group; (c) acquiring 100% of the share capital of McBreen and Jenkins Construction Ltd and its subsidiaries, which provide operations and maintenance services across New Zealand. (d) acquiring a portfolio of wind farm projects for future development Dividends Dividends paid to members during the financial year were as follows: 2008 2007 $'000 $'000 Final ordinary dividend for the year ended 30 June 2007 paid on 10 October 2007 35,631 21,068 Interim ordinary dividend paid on 8 April 2008 35,646 25,750 71,277 46,818 cents cents Final ordinary dividend 18 13 Interim ordinary dividend 18 13 For personal use only In addition to the above dividends, since the end of the financial year the Directors have recommended the payment of a final ordinary dividend of 18 cents per fully paid share, being $35,651,439 to be paid on 13 October 2008 out of retained profits at 30 June 2008. 3 Transfield Services Limited and controlled entities Directors’ Report Review of operations The detailed review of operations is set out in the main body of the annual report. A summary of consolidated revenues and results by significant business segments is set out below: Segment Revenue Segment Result 2008 2007 2008 2007 $’000 $’000 $’000 $’000 Operations and maintenance outsourcing services (continuing operations) Australia 1,598,666 1,449,536 81,145 63,570 North America 848,021 428,295 9,383 7,962 New Zealand 487,865 368,567 3,157 4,403 Other regions 61,962 47,966 3,304 200 Australia (discontinued operations) - 142,450 - 106,797 Total segment revenue 2,996,514 2,436,814 Profit before income tax expense 96,989 182,932 Income tax expense (14,613) (72,485) Profit after income tax expense 82,376 110,447 (Profit)/loss attributable to minority interests (203) (28) Profit attributable to members of Transfield Services Limited 82,173 110,419 Earnings per Share 2008 2007 Cents Cents Basic earnings per share 41.49 58.15 Diluted earnings per share 41.49 58.15 Significant changes in the state of affairs During the year, the Group continued with the expansion of its business in North America. This has included:- • the growth of the Flint Transfield Services joint venture providing asset management services to the oil sands industry in Canada; • the acquisition of the business of Horizon National Contracting Services LLC (Horizon) and 100% of the share capital of Whelan’s International Co. Inc. (Whelan) which provide facilities management services primarily in the retail sector of the United States; • the acquisition of VMS Inc. which provides operations and maintenance services to the road sector in the United States. This growth has led to a significant increase in foreign currency earnings, assets, liabilities and cashflows, whilst the Group looks to match its offshore assets with corresponding liabilities, the impact is increased volatility of the consolidated earnings of the Group to movements in exchange rates. For personal use only Matters subsequent to the end of the financial year No significant matters have arisen between balance sheet date and the date of this report. 4 Transfield Services Limited and controlled entities Directors’ Report Other than the above, there have been no matters or circumstances that have arisen since 30 June 2008 that have significantly affected, or may significantly affect: the consolidated entity’s operations in future financial years; or the results of those operations in future financial years; or the consolidated entity’s state of affairs in future financial years. Likely developments and expected results of operations Information on likely developments in the operations of the consolidated entity and the expected results of operations have not been included in this report because the Directors believe it would be likely to result in unreasonable prejudice to the consolidated entity. Environmental regulation and greenhouse gas and energy data reporting requirements The Group is subject to the reporting requirements of the National Greenhouse and Energy Reporting Act 2007. However, it does not currently trigger the requirements of the Energy Efficiency Opportunities Act 2006.The National Greenhouse and Energy Reporting Act 2007 requires the Group to report its annual greenhouse gas emissions and energy use. The first measurement period for this Act runs from 1 July 2008 until 30 June 2009. The Group has implemented systems and processes for the collection and calculation of the data required to enable it to prepare and submit its initial report to the Greenhouse and Energy Data Officer ('GEDO') by 31 October 2009. The Group will register with the GEDO before the deadline of 31 August 2009. In addition, to manage risk and to ensure protection of the environment, Transfield Services has developed and implemented an Environmental Management System based on the International Standard: AS/NZS ISO 14001:1996 for environmental management systems. Meetings of Directors Full Board Extra RACC HR HSSC NOMC monthly Sub - ordinary (formerly meeting of committee Board REMOD) Directors meetings available to held attend No. of meetings held: 9 1 19* 4 5 5 3 Anthony Shepherd 9 - 18 1+ - - 3 Guido Belgiorno-Nettis 8 - 11 - 5 - 3 AM Luca Belgiorno-Nettis 9 - 15 4 - 4 - Professor Steve Burdon 9 - 15 3 - 2 - Denis Cleary 4** - 2** 1** - 1** - Mel Ward AO 7 1 19 3 5 1+ 2 Peter Watson 9 1 18 3 5 3 2 Bernard Wheelahan 7** 1 15** - 3** 4 1** Steve Crane 4** 1** 2** 2** - 1+ David Sutherland 2** - 1** - - - - Notes: * As Extraordinary Board Meetings were called at short notice, not all Directors were available to attend. For personal use only ** Due to Director’s retirement/appointment attendance was only during the period of their Directorship. + Directors are invited to attend as non-core members. RACC = Risk, Audit and Compliance Committee HR = Human Resources Committee (formerly Remuneration and Organisational Development Committee) HSSC = Health, Safety and Sustainability Committee NOMC = Nomination Committee 5 Transfield Services Limited and controlled entities Directors’ Report Information on Directors Details of the Directors’ responsibilities and shareholdings are set out below. Indirect interest in Particulars of Transfield