Half-Year Results Presentation - Watpac

watpac.com.au

Half-Year Results Presentation - Watpac

Watpac Limited

31 December 2011

HalfYear Results Presentation

22 February 2012


Disclaimer

This presentation contains summary information about Watpac Limited and its subsidiaries (“Watpac”), and

should be read in conjunction with other periodic and continuous disclosure announcements. While this

results presentation is unaudited, it contains disclosures which are extracted or derived from Watpac’s

Interim Financial Report for the half‐year ended 31 December 2011 which has been reviewed by the Group’s

independent auditor.

Information contained within this presentation is not financial product or investment advice and is not a

recommendation to acquire or sell Watpac shares. It has been prepared without taking into account the

objectives, financial situation or needs of individuals. Before making an investment decision investors or

potential investors should consider the appropriateness of the information having regard to their own

objectives, financial situation and needs, and seek their own independent professional advice.

Forward looking statements, opinions and estimates are based on assumptions which are subject to

change. Past performance information in this presentation is given for illustrative purposes only and should

not be relied upon as (and is not) an indication of future performance.

All dollar values are in Australian dollars, unless otherwise stated.


Overview

Results summary

• Capital management

• Work in hand

• Human resources

• Outlook

• Appendices

• The Watpac story


Results summary


Key highlights

• NPAT $4.9M above guidance and 15% improvement on

previous corresponding period

• Result delivered despite growing competition and tightening

margins in construction sector

• Investment in civil and mining being realised

• Share buy‐back program commenced, delivering enhanced

value to investors

• Total work in hand of $2.2B (as at 31 December 2011)

• On track to deliver expected earnings in FY12.


Financial highlights

Profitability • Turnover $639.5M (1H FY11 ‐ $640.5M)

• NPAT $4.9M (1H FY11 ‐ $4.3M)

• EBITDA $26.7M (1H FY 11 ‐ $14.7M)

Shareholder

returns

• EPS 2.65 cents (1H FY11 ‐ 2.34 cents)

• DPS 1.50 cents (1H FY11 ‐ 1.50 cents)

Financial capacity • Strong cash position $118.4M (YE FY11 ‐ $114.7M)

• Net debt to equity 19.6% (YE FY11 ‐ 21.3%)

• Substantial undrawn financing facilities


Group financial performance

• Revenue slightly impacted by project

programs – particularly NSW (wet

weather)

• Gross margin improvement despite

competitive environment

• Significant reduction in property

inventory write‐down –debt

reduction

• Growth in overheads reflective of

civil and mining expansion

• Increase in finance expenses reflects

debt capital reallocation –property

to civil and mining

• 25% effective tax rate –R& D

concessions (technical work).

1H FY12 1H FY11

$M $M

Revenue 639.5 640.4

Cost of sales (595.1) (599.8)

Gross margin 44.4 40.6

Net property asset income 1.5 2.4

Other income 0.1 0.2

Property inventory write down (3.0) (6.3)

Total group overheads (33.0) (29.7)

Net financing expenses (3.5) (1.5)

Net profit before tax 6.5 5.7

Tax expense (1.6) (1.4)

Net profit after tax 4.9 4.3

EPS (cents) 2.65 2.34


Divisional financial performance

Segment

Contracting Civil and Mining Property

Half Year 1H FY12 1H FY11 1H FY12 1H FY11 1H FY12 1H FY11

Revenue 447.4M 462.8M 197.6M 150.6M 0.3M 13.5M

Profit before tax 14.8M 26.7M 3.2M (7.1)M (3.8)M (7.1)M

Results of contracting segment impacted by project programs –1H / 2H skew

• Significant turnaround in performance of civil and mining division

• Reduction in holding costs has led to decrease in property division loss by 46%.


Balance sheet

• Strong liquidity maintained – cash

$118M at balance date

• PP&E increase reflective of

investment in civil and mining

operations –majority mining projects

• Debt levels static – composition more

highly weighted to equipment

finance

• Current ratio 1.25.

31 December 2011 30 June 2011

$M $M

Assets

Cash at bank 118.4 114.7

Receivables 73.4 77.1

Inventory 380.3 375.1

Property, plant and equipment 138.6 115.5

Intangible assets 27.7 27.7

Other assets 14.9 11.6

Total assets 753.3 721.7

Liabilities

Creditors & payables 259.3 224.1

Total Interest bearing liabilities 177.4 179.3

Provisions 15.5 15.9

Total liabilities 452.2 419.3

Net assets 301.1 302.4

Equity

Issued capital 236.0 234.2

Reserves 8.0 7.8

Retained earnings 57.1 60.4

Total equity 301.1 302.4


Capital management


On market share buy‐back

• Market capitalisation fell below what Directors deemed to be

a fair representation of company value

• Share buy‐back announced in December 2011

• Funded by surplus liquidity reserves

• Could result in 10% of total shares on issue being bought back

and cancelled

• Reducing the number of shares on offer at current prices will

create value for shareholders.


On market share buy‐back

• Current status (Monday 20/2/12):

• Shares able to be acquired: 18,334,138

• Shares acquired: 778,447

• Total cost: $889,502

• Average acquisition cost: $1.135

Buy‐back status

4%

Purchased to date

‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐

778,447

Shares remaining for

acquisition

‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐

17,555,691

96%


Debt funding capacity

Facility limits Drawn Undrawn

Facility

Property $185M* $88.9M $96.1M

Equipment Finance $160M $88.5M $71.5M

Guarantee / Bonds $260M $164.5M $95.5M

*Subject to typical terms and conditions applicable to property debt facilities.

• Equipment Finance limits increased $30M in 31 December 2011 half year

• Advanced stages of negotiation for additional increase of $10M

• Debt capital structure in place to support continued growth.


Dividend policy

• Prior year dividend payout ratio 65%

• Expansion into civil and mining has changed balance sheet

composition

• Ongoing capital investment required to support growth

• Other value adding capital management initiatives currently in

place –share buy‐back

• Dividend payout ratio therefore reduced ‐ more effective use

of capital.


Work in hand


Work in hand (as at 31 December 2011)

Work in hand by product type

34%

Contracting

Civil and Mining

66%

Work in hand by region

2%

27%

14%

29%

28%

QLD

NSW

VIC

SA

WA


Work in hand (as at 31 December 2011)

Segment

1 st Half Turnover

Work in hand

31 Dec 11

To be delivered

2 nd Half

Forecast FY13 and

beyond

By segment $M $M $M $M

Contracting 450 1450 650 800

Civil and Mining 200 750 250 500

Total 650 2200 900 1300

By region

QLD 300 610 380 230

NSW 100 650 250 400

VIC 130 300 145 155

SA 30 40 25 15

WA 90 600 100 500


Human resources


Human resources

• Safety our number one priority

• 1200 employees at 31 December 2011

• Enhanced back‐office support (systems and processes)

• Focus on strong organisational culture

• Desire to be an employer of choice.


Outlook


Construction outlook

• Strong forward order book maintained (despite tightening

market)

• Number of projects contributed positively to half year results

• Solid first half result expected to be followed by a strong

second half, particularly in NSW

• Number of tender opportunities currently in advanced stages.


Civil and Mining outlook

• FY11 adversely affected by floods in Queensland and Victoria,

particularly 1H FY11

• Underlying trading result in 1H FY12 a strong turnaround from

prior year performance

• Western Australia business performing well

• Investment in civil and mining starting to pay off

• Well positioned to take advantage of future earnings potential

in the resources sector

• Future growth to be measured –conscious of rapid expansion

of business over past two years.


Specialty Services outlook

• Business redefined in first half of FY12

• Focus now specifically on refurbishments, food processing

and mine infrastructure services

• New entrant in mine infrastructure sector – leveraged entry

through established civil and mining business

• Opportunity to participate in forecast $165B capital spend in

Queensland over next five to seven years.


Property outlook

• Significant reduction in holding costs

• Construction underway on Rue de Chapel (Melbourne)

• Two new projects (Brisbane and Melbourne) currently being

marketed for sale

• Board to initiate a full strategic review of property portfolio in

second half FY12.


Property sales outlook

Property Development Inventory Composition

For sale/under construction

$88M

Short term developments

$48M

Long term developments

$163M


Questions


Appendices


The Watpac story


About us

• Established in 1983; listed in 1985

• Leading national construction and civil and mining contracting

group

• Offices in Brisbane, Townsville, Sydney, Melbourne, Adelaide

and Perth

• Reputation for delivering large scale infrastructure on time

and on budget

• More than 1200 employees nationally

• Aggregate work in hand $2.2B (as at 31 December 2011).


Shareholders –top 50% (as at 31 December 2011)

Total shares issued to top 50% 92.5M

Institutions 50%

Corporate 43%

Private investors 7%


Management


Scale of business

Watpac Limited

Construction Civil Mining Specialty Services Property

Commercial

Roads

Surface Mining

Refurbishment

Development

Residential

Bridges

Crushing &

Screening

Food Processing

Design

Industrial

Dams/Reservoirs

Open Cut

Mine

Infrastructure

Stadiums

Rail & Ports

Drill & Blast

Hospitals

Bulk Earthworks


Office locations

Townsville

• Construction

• Civil Infrastructure

• Mining

Perth

• Civil Infrastructure

• Mining

Adelaide

• Construction

• Mining

Melbourne

• Construction

• Civil Infrastructure

• Civil Landscape

• Mining

• Property

Sydney

• Construction

• Property

Brisbane

• Construction

• Civil Infrastructure

• Mining

• Specialty Services

• Property

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