Downer EDI Limited
Engineered for Success
Presentation
by:-STEPHEN GILLIES Chief Executive Officer
Downer EDI – Snapshot
ASX Listed – top 150 company by market capitalisation
Leading provider of outsourced engineering services – design, project
management, installation, operations and maintenance
Comprised of five business platforms – all leaders in their chosen fields
Operate in over 8 countries – 14,000 + employees (>25% professionally qualified)
High level of engineering capability – with strong intellectual property (IP) focus
Major customers – Government
Downer EDI – Vision
DOW aims to be the leading provider of outsourced engineering services in the
Australasian and selected Asian regions
Outsourcing is a major growth industry and DOW intends being a strong
participant in this emerging sector
DOW’s leading market positions provide a robust platform to tackle these markets
and deliver on these key financial objectives:
¾ ROIC > 14% pa
¾ Long Term Sustainable EBIT Margin > 5%
Downer EDI – What We Do
Mining and Mine Infrastructure Services
Transport Infrastructure Services Energy & Communication
Infrastructure Services
Design, Project Management & FM
Manufactured Products & Services
Market Leadership Client Relationships
Modern Plant & Equipment Capable People
IP & Technology
Products & Services
Linkage
Strengths
Downer EDI – Financial Overview
FY'03 H1'04
Operating Revenue 2680 +10% 1542 +27%
NPAT 67 +18% 25 +16%
Total Assets 2033 +11% 1991 +12%
Downer EDI – Business Drivers
MINING & MINE INFRASTRUCTURE SERVICES
INCREASE TREND TO OUTSOURCING
Downer EDI – Business Drivers
INFRASTRUCTURE SECTORS: #1
SHIFTING TECHNOLOGY eg 3G Networks 4th Generation Train Electronic Ticketing SHIFTING TECHNOLOGY eg 3G Networks 4thGeneration Train Electronic Ticketing SHIFTING TECHNOLOGY eg 3G Networks 4thGeneration Train Electronic Ticketing GOVERNMENT SPEND POPULATION GROWTH PUBLIC DEMANDSDowner EDI – Business Drivers
INFRASTRUCTURE SECTORS: #2
DEMAND FOR MODERNISATION eg Efficiencies New Technologies AGEING & RUNDOWN INFRASTRUCTURES OUTSOURCINGeg Changing Client Focus Shrinking Civil Service Redefined Govt. Roles
Downer EDI – What Are Our Strategies?
Develop and Leverage IP
Selling Integrated Solutions
Capitalise on Outsourcing
Financial Discipline
Downer EDI – What Is Our IP?
Testing Laboratories
Sealing Techniques and Product Patents
Simulators
Traffic System Management
FM Management Tools
Cogeneration System Design
Instrumentation and Controls
Infrastructure Mapping Software
Proprietary Job Management Software
FM Management Tools
Explosive Patents
Minerals Separation, Design and Manufacture
Patented Rollingstock Design
Design Time Sold to EMD - GM
Train Operating Systems
Freight Locomotive Design Patents
Crash and Anti-roll Designs
Process Design Patents
FM Management Tools
Master Planning Design
Diagnostic Testing
Downer EDI – Selling Integrated Solutions
Increased penetration rate for client disposable spend
Partnering / Alliancing
Downer EDI – Financial Discipline
Maintain Strong Balance Sheet
Improve ROE / ROIC
Reinvest Free Cash Flow in:
¾ R&D Investment eg Innovonics IP
¾ Business Development
¾ Strategic Positioning
¾ Growth Options
Downer EDI – Achieve Strong Market Share
Organic
M & A
Downer EDI – How Have We Developed?
(All figures: A$ Millions) FY01 FY02 FY03 FY04E
Engineering 213 362 70% 568 57% 1080 90%
Mining & Resources 624 1036 66% 1104 7% 1040 (6%)
Infrastructure 426 425 - 577 36% 630 9%
Rail 240 362 51% 319 (12%) 370 16%
Continuing Business 1503 2185 45% 2568 18% 3120 21%
Discontinued & Other 215 401 300 180
Total Revenue 1718 2586 51% 2868 11% 3300 15%
Division PBT 78.7 100.6 119.5
Downer EDI – Where To?
FY'02 FY'03 H1'03 H1'04 EPS* 22.16c 24.24c +9.4% 7.96c 9.12c +14.6% DPS** 10.80c 12.10c +11.3% 2.00c 4.00c + 100.0% Franking 0% 41.4%** + 41.4pts 0% 50.0% + 50.0pts ROIC*** 11.5% 12.7% +120bps 11.1% 13.1% +200bps (Rolling 12 months)* Fully Diluted ** Final Dividend FY03 50% Franked *** EBITA / Avg (Net Debt + Equity)
Downer EDI – Leverage Strong Foundations
Gearing (Net Debt/Equity)
30% 40% 50% 60% 70% 80% 90% 100% 110% 120%
Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Jun-04E
Actual Preferred Target Maximum Target Minimum
GEARING Vs REVENUE OUTLOOK
Order Book 0 1 2 3 4 5 6 7
Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03
(A
$ billions)
Downer EDI – Committed Sales Profile
Order Book as at 30 June 1999
0 500 1,000 1,500 2,000 2,500 3,000 3,500
FY'00 FY01 FY02 FY03 FY04 Beyond
A$
Millio
n
s
Forward Orders
Order Book as at 31 December 2003
0 500 1,000 1,500 2,000 2,500 3,000 3,500
FY04 FY05 FY06 FY07 FY08 Beyond
A$ Millions
Downer EDI – Summary #1
Increasing ROIC
and ROE
Outlook for FY05 and beyond is very positive
Expected sales growth well ahead of CPI
No requirement for new share capital to fund expansion
via continuing businesses and “bolt-on” acquisitions
Continued strong focus on:
¾Improving Group EBIT Margin
Downer EDI – Summary #2
Founding shareholder stakes placed to institutions in late 2003
to improve free float – now 73%
Management took advantage of opportunity to invest.
Self-funded entry into DOW. Holding 6% relevant interest