annual review 2015 - coffey · pursue disruptive digital technologies to boost client engagement...

Annual Review2015

Smartsolutions areuncoveredwhen paceand purposecome together

2 | Coffey Annual Review 2015Coffey International Limited ACN 003 835 112

Every Coffey relationship is built on trust.

Trust that’s hard-earned through our proven expertise, our depth of global experience and our commitment to stay one step ahead.

Our specialists in geoservices, international development and project management work in partnership with our clients across the globe.

We create value throughout the asset lifecycle in the transport and property infrastructure, and energy and resources, sectors.

We deliver vital international aid projects for our clients.

Our united group of specialists take enormous pride in collaborating with our project partners. By digging deeper. Thinking smarter. And seeing further.

All so we can deliver the smartest solutions, every time.

Financial calendar

10 August 2015 15 October 2015 31 December 2015 8 February 2016* 11 March 2016* 25 March 2016* 30 June 2016 8 August 2016* 9 September 2016* 23 September 2016* 12 October 2016*

FY2015 full year results announcement Annual General Meeting Half year end FY2016 half year results announcement Record date FY2016 interim dividend Interim dividend for FY2016 payable Financial year end FY2016 full year results announcement Record date FY2016 final dividend Final dividend for FY2016 payable Annual General Meeting

* Dates subject to change

Coffey Annual Review 2015 | 1

Contents

Letter from Chairman and Managing Director

Financial performance

Our people and safety

2

6

9

IngenuityEncourage and explore new thinking,

ask yourself ‘have I provided the smartest solution here?’

DeliveryDo what you say you will; our actions always speak

louder than words

IntegrityTake responsibility for your

own actions; do the right thing (even if nobody is looking).

Intelligent RiskThink differently; make informed decisions to ensure we’re one step ahead of the competition.

RespectValue and constructively engage with the contributions of others;

be mindful of your criticisms.

CollaborationShare our ideas and knowledge with

clients – and each other – with an open- minded and real generosity of spirit.

Safety

Our operations

Our sectors

Investing in our future

12

16

20

Our behaviours

2 | Coffey Annual Review 2015

The 2015 Financial Year saw an encouraging first half before changing markets rapidly affected our target industries. We’ve taken decisive action, implemented quickly and effectively, to respond. With profitable continuing operations, we’re now well positioned to exploit emerging opportunities in the infrastructure sector.

Our reported net loss after tax of $18.1 million was in line with guidance, and reflected the impact of restructuring our Geoservices business in response to market conditions, and associated non-cash impairments. Importantly, our continuing operations recorded a net profit after tax of $5.3 million.

Our Geoservices business is now aligned strongly to our target markets, with a flexible workforce to respond to client demands.

Our Project Management and International Development businesses increased their order book for forward contracted work, with long term project wins supporting our sustainability.

With the infrastructure sector beginning to grow, we are well positioned to draw on our technical core to win and deliver key projects.


Managing Director John Douglas and Chairman John Mulcahy


Safety

We continued to deliver a strong safety performance with a Lost Time Injury Frequency Rate of 0.9 as at 30 June. While slightly up on the previous corresponding period (0.64), the result was below our external industry benchmark and reflected consistently strong safety performance across our operations.


Our underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was $18.5 million, 29% lower than the previous year. However, our underlying EBITDA for continuing businesses was higher at $23.5 million. Our reported EBITDA was ($1.6 million), affected by restructuring costs, non-cash impairments and discontinued operations.

We were pleased to report that our continuing operations delivered profitable results this year. This reflected the strength of our ongoing business as we focus on growth markets in the infrastructure sector in particular.

The strong disciplines already embedded across our operations allowed the company to absorb a range of non-recurring costs, including those associated with our restructure, the depreciating Australian dollar and our corporate bond issue during the year. Our net debt remained tightly controlled at $62.4 million, despite the impact of these costs. In addition, our working capital days remained at an industry leading level. Our ability to maintain this performance throughout a period of market and internal changes reflected the hard work to deliver the fundamentals of the business over the last four years.

Repositioning our Geoservices operations

Our strategy update in April outlined a plan to reposition our Geoservices business to respond to changing market conditions and further match capacity to markets. Your Board and Management Team recognised the need to move quickly and take decisive action to position the company for long term success. We are pleased to report that we have acted, and our restructure is already substantially complete.

We now have a consolidated and refocused management team to support emerging opportunities in transport and property infrastructure. This gives us the right focus to grow our Geoservices business, particularly in Australia.

We have refocused our mining strategy on the later stages of the asset lifecycle, moving from exploration work with junior operators to supporting mid-cap and major miners as they optimise existing operations. Our ability to manage risk in challenging environments ensures we have strong credentials to deliver this high value work to support our key mining clients. This refocused strategy led to the exit of our exploration management and resource delineation practices in Western Australia, South America and Ghana.

The rapid fall in the price of oil saw the company reduce our exposure to high cost oil and gas projects, particularly in Canada, where the Alberta oil sands industry had been significantly affected by market conditions. This decision led to our exit from a permanent presence in Canada more broadly, where our relatively small presence in Toronto did not have the scale to exist on its own. We continue to work with our partners on a major LNG project in British Columbia and will consider new opportunities in the Americas on a project by project basis.

Operational performance

The first half of the year saw the company continue to deliver profitable results, despite some signs of market changes beginning to emerge. By February, significant client market volatility impacted our work in the energy and resources sector, while transport infrastructure projects were slower to begin than expected on the east coast of Australia. The subsequent repositioning of our Geoservices operations saw the business deliver lower margins, off reduced revenue, for the full year. Pleasingly, recent state government elections on the east coast of Australia have resolved many of the issues causing project delays, and new projects are starting in this prospective market.

Our Project Management business continued to deliver a strong result, albeit on slightly lower revenue than the previous year, remaining a small but important part of the business. Key project wins saw its forward order book both strengthened and lengthened. This has allowed us to retain capability between projects and build our reputation for project management in the infrastructure sector.

International Development continued to deliver consistent returns throughout the year. Slightly lower revenue was the result of some key projects coming to an end, before new projects had begun. However, contracted work – and particularly contracted work beyond 12 months – has increased, providing a strong base on which to build our business in FY2016. International Development is firmly focused on delivering effective programs for our clients, with an emphasis on value for money outcomes.


Maintaining a strong client focus

Delivering on our clients’ expectations is vital to our success. We understand our clients’ opinions of us reflect the value we deliver and the likelihood of continuing strong relationships.

We were delighted to win again this year at the 2015 Financial Review Client Choice Awards. Coffey won the Best Provider to the Construction & Infrastructure Sector and the Best Queensland firm. These awards recognised our commitment to building the technical excellence for which we’re known, as well as developing a strong sales culture among our consulting staff. It was particularly pleasing to win for our work in the infrastructure sector given the strong opportunities for new work that exist within the Australian market. These wins followed our success in 2014, when we also won two awards for the Best Consulting Engineering Firm with revenue greater than $200 million and Best Provider to the Primary Industry Sector.

Our dedicated sales capability program has further enhanced this success. We’ve implemented new systems, processes and tools to support our technical staff in building lasting, productive client relationships. The program has seen good progress in building sales conversations throughout the business and creating a shared approach to winning work at Coffey. In addition, we’ve introduced a new client and project feedback program, improving response rates and providing stronger case management disciplines to better understand and improve our clients’ experience of us.

Dividend

The Board remains committed to delivering shareholder value and a return to the payment of dividends. However, at this time, we are focused on returning to profitability and continuing to reduce debt. We strongly believe this will support long term shareholder value as we work to exploit new market opportunities and build on our Geoservices operations.

Board changes

Stuart Black AM retired from the Board at our 2014 Annual General Meeting, after a 12 year tenure. Stuart chaired the Board Audit Committee until the formation of the combined Risk and Audit Committee in 2012. We would like to sincerely thank Stuart for his knowledge, advice and expertise during his time on the Board.

We have not sought to replace Stuart’s position. We believe the Board is currently the right size for Coffey, and our Directors have an appropriate combination of skills and experience to lead our strategy as we continue to manage changing markets.

Remuneration

Our remuneration policy seeks to ensure we attract and retain the right people to drive performance and deliver shareholder value. One Group Executive received a market adjustment to their fixed remuneration in October as part of this approach.

The Board decided that no Key Management Personnel would receive short term incentives this year due to the company’s performance not reaching minimum levels to trigger payments. This reflected the need to support our sustainable and profitable growth in changing market conditions.

The Board also undertook a review of Non-executive Directors’ fees during the year, taking into consideration the company’s current market capitalisation. As a result, we reduced Non-executive Directors’ fees by 20% as of 1 July 2015 to better align with our current market position. These changes, in addition to the reduction of the Board’s size this year, will see a 30% decrease in Directors’ fees in FY2016, relative to FY2014.




We continue to operate in a rapidly changing and competitive environment. So we’ve proactively invested in our future to support our long term success. We’ve recently created a digital innovation hub as the next step in our digital transformation. The hub will pursue disruptive digital technologies to boost client engagement and innovation.

We’ve also continued to invest in sales and marketing, strengthening our market positioning and building business development effectiveness. This is providing quality market intelligence at the early stages of project planning to support a more agile approach to responding to market conditions. These are essential capabilities to support our growth as we work closely with our clients across our five target industries.

Our people

We’d like to thank all of our people for their hard work and dedication throughout the year. Our strength is our people – and we rely on our staff to deliver smart solutions with agility in a competitive environment. We look forward to seeing the outcomes of their drive and initiative as we exploit new opportunities to win work on major projects with our clients over the year ahead.

Standing (left to right): Leeanne Bond, John Mulcahy and John DouglasSeated (left to right): Urs Meyerhans, Susan Oliver and Guy Cowan Coffey Annual Review 2013 05

All of our businesses have schedules of contracted work for FY2014. The declining value of the Australian dollar, relative to the US dollar, is likely to work in our favour in winning new offshore work.

During the year just ended, we refreshed the Coffey brand, retiring the nine separate brands that existed earlier. Now there is one Coffey brand, with the exception of MSI, one of our International Development units, which has high recognition in the US market.

We have backed the brand refresh with six behaviours – effectively a shift in the Company’s culture – which are aimed at ensuring we deliver value for clients, and maintain safety and security as top priorities.

We anticipate this brand overhaul will be well-received by our clients in the coming months.

Undoubtedly, the global economy continues to be sluggish. The Australian economy is undergoing a substantial transition from the boom years of the early 2000s. Under such conditions, no one can provide certainty about future returns.

However, business opportunities continue to exist, particularly offshore.

We have won some of those opportunities. We are pursuing others.

We are confident the Company is on a stronger financial footing. And it is positioned for the current market, and for an upturn in the business cycle when it comes.

Recognising the contribution of staffWe recognise and acknowledge the contribution of Coffey’s staff during the year. The tough trading conditions have tested all of us.

Our performance, in these circumstances, is a credit to the commitment and effort of all our employees.

John Mulcahy John DouglasChairman Managing Director

International Development provides about 45% of total revenue, and about 30% of fee revenue. The sources of revenue are diversified, with about 70% of fee revenue earned from sources offshore (i.e. sources other than Australia).

International Development enjoyed a good year. The US-based business performed well in a tough market. The UK-based business recovered steadily. The Australian unit continued performing well.

More detail on the respective businesses is on pages 08 – 13 of this report.

Looking ahead to 2014Overall, the Company ends the year in a sound position relative to tough trading conditions.

Our fixed costs and net debt are lower. Our cost of borrowing is lower, and it will fall further in FY2014 when fixed interest debt arrangements entered into in 2008 come to an end.

Urs MeyerhansFinance Director

Rebelle MoriartyGroup Executive Human Resources

Chantalle MeijerGroup Executive Marketing & Communications

Group Management

John DouglasManaging Director

Coffey Annual Review 2013 05

All of our businesses have schedules of contracted work for FY2014. The declining value of the Australian dollar, relative to the US dollar, is likely to work in our favour in winning new offshore work.

During the year just ended, we refreshed the Coffey brand, retiring the nine separate brands that existed earlier. Now there is one Coffey brand, with the exception of MSI, one of our International Development units, which has high recognition in the US market.

We have backed the brand refresh with six behaviours – effectively a shift in the Company’s culture – which are aimed at ensuring we deliver value for clients, and maintain safety and security as top priorities.

We anticipate this brand overhaul will be well-received by our clients in the coming months.

Undoubtedly, the global economy continues to be sluggish. The Australian economy is undergoing a substantial transition from the boom years of the early 2000s. Under such conditions, no one can provide certainty about future returns.

However, business opportunities continue to exist, particularly offshore.

We have won some of those opportunities. We are pursuing others.

We are confident the Company is on a stronger financial footing. And it is positioned for the current market, and for an upturn in the business cycle when it comes.

Recognising the contribution of staffWe recognise and acknowledge the contribution of Coffey’s staff during the year. The tough trading conditions have tested all of us.

Our performance, in these circumstances, is a credit to the commitment and effort of all our employees.

John Mulcahy John DouglasChairman Managing Director

International Development provides about 45% of total revenue, and about 30% of fee revenue. The sources of revenue are diversified, with about 70% of fee revenue earned from sources offshore (i.e. sources other than Australia).

International Development enjoyed a good year. The US-based business performed well in a tough market. The UK-based business recovered steadily. The Australian unit continued performing well.

More detail on the respective businesses is on pages 08 – 13 of this report.

Looking ahead to 2014Overall, the Company ends the year in a sound position relative to tough trading conditions.

Our fixed costs and net debt are lower. Our cost of borrowing is lower, and it will fall further in FY2014 when fixed interest debt arrangements entered into in 2008 come to an end.

Urs MeyerhansFinance Director

Rebelle MoriartyGroup Executive Human Resources

Chantalle MeijerGroup Executive Marketing & Communications

Group Management

John DouglasManaging Director

John Mulcahy Chairman

John Douglas Managing Director



We’ve made important changes to the business to drive growth in FY2016, and responded to changing market conditions to support our long term success.

Our revenue

Our total revenue was $579.1 million, down 8% on the previous year. Significant client market volatility saw project delays or cancellations in the energy and resources sector, while new infrastructure projects were slower to start than expected. Revenue for our continuing operations was $559.2 million.

Earnings performance

Our underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was $18.5 million. This compared to $26.2 million for FY2014. Underlying EBITDA for continuing operations was higher at $23.5 million, reflecting the stronger performance of the continuing business. Reported EBITDA, after restructuring and non-cash impairment costs, was ($1.6 million), in line with guidance.

The company’s restructure led to a net loss after tax of $18.1 million. This was in line with guidance and compared to a net profit after tax of $4.4 million in FY2014. Importantly, continuing operations were profitable, recording a net profit after tax of $5.3 million.

Diversified revenue

Our three businesses continued to deliver services to five target industries, supporting a diversified revenue base. In FY2015, International Development accounted for 55% of our revenue, characterised by longer term projects delivering stable and consistent margins. The infrastructure sector grew during the year to make up 30% of our total revenue, while the energy and resources sector contributed 13%.

* EBITDA - Earnings before interest, tax, depreciation and amortisation** Underlying EBITDA - Earnings before interest, tax, depreciation and amortisation, before vendor earn-out, restructuring costs and asset impairment. A reconciliation of underlying EBITDA to reported net profits is provided in the Directors’ Report - Review of Operations.

$ million unless otherwise stated FY09 FY10 FY11 FY12 FY13 FY14 FY15

Total revenue 808.7 769.8 680.6 678.1 688.4 628.1 579.1

Fee revenue 510.4 475.7 423.6 421.5 411.0 381.0 373.0

EBITDA * 53.3 44.0 (39.7) (0.5) 18.6 23.7 (1.6)

Underlying EBITDA ** 55.4 47.9 32.3 39.7 28.8 26.2 18.5

Earnings before interest and tax 41.1 33.7 (50.0) (9.6) 9.2 14.5 (10.8)

Net profit after tax 16.4 13.8 (69.7) (34.5) (1.0) 4.4 (18.1)

EPS – cents per share 14.5 11.9 (52.9) (16.3) (0.4) 1.8 (7.8)

Net debt 92.8 100.5 121.2 66.0 58.0 48.1 62.4

Equity 191.1 198.2 122.4 133.4 137.2 140.3 123.8

Net debt / equity 48.6% 50.7% 99.0% 49.5% 42.3% 34.3% 50.4%

Net debt / capital (equity + net debt) 32.7% 33.6% 49.6% 33.1% 29.7% 25.5% 33.5%

Seven year performance summary

Urs Meyerhans Finance Director

Total Revenue ($m)

808.

7

769.

8

680.

6

678.

1

688.

4

628.

1

579.

1

FY

11

FY

12

FY

13

FY

14

FY

15

FY

10

FY

09

Underlying EBITDA** ($m)

39.7

28.8

26.2

18.5

36.8

28.8 31

.2

23.5

29.5

17.1

11.3

5.0

(0.3

)

(1.8

)

0.8 2.

0 14.8

18.3 19

.1

16.3

FY

12

FY

12

FY

12

FY

12

FY

12

FY

13

FY

13

FY

13

FY

13

FY

13

FY

14

FY

15

FY

14

FY

15

FY

14

FY

15

FY

14 FY

15

FY

14

FY

15

Coffey Coffey Continuing Businesses

Geoservices Project Management

International Development

Total Revenue

Geoservices 41%

Project Management 4%

International Development 55%

Transport Infrastructure 19%

Property Infrastructure 11%

Oil and Gas 8%

Mining 5%

Other 2%

International Development 55%

Net Profit ($m)

16.4

13.8 4.

4

(18.

1)

FY

11(6

9.7)

(34.

5)

(1.0

)

FY

12

FY

13

FY

14

FY

15

FY

10

FY

09




Diversified, longer term debt

We completed a $40 million unsecured corporate bond offering in September to diversify our debt and increase its tenure. The offer was fully subscribed for a five year term, maturing in September 2019. At the same time, our bank facilities were extended to September 2017. The success of the bond offering was a strong endorsement of our strategy and has provided a more balanced debt profile over an extended period.

Our debt was tightly managed during the year, with net debt at $62.4 million at 30 June 2015. Total debt was $90.8 million. The work done to drive down debt in FY2014 allowed the company to absorb the impact of a number of non-recurring costs during the year. This included restructuring costs of $5 million in the second half, while EBITDA loss for discontinued operations also totalled $5 million. The depreciating Australian dollar increased total debt by $8.1 million, and bond issue refinancing and other costs were $2.4 million. Despite these costs, we maintained a positive net operating cash flow of

$0.9 million. We’re now focused on continuing our debt reduction focus to support the fundamentals of the business.

Our working capital days remained at industry leading levels, at just 53 days at 30 June 2015. Our continued ability to manage our working capital reflected strong disciplines within the business as we tightly managed work in progress and follow up on outstanding payments.

Risk management

As market conditions change, the Board and Management Team recognise the importance of managing financial, project and safety risks. The Board’s Risk and Audit Committee met four times during the year.

Our Risk Management Framework provides a structured and consistent process for identifying, assessing and managing risks to the achievement of our business outcomes. We review this annually to ensure it remains relevant, both to our business and in relation to external factors that might impact the company.

In FY2015, we managed financial and project risk through the repositioning of our Geoservices business to support our long term future. This included discontinuing operations that presented short term risks due to lack of client market demand. Our continuing operations represent a more focused, profitable business that is well positioned to capitalise on growth markets.

We’ve also maintained a diversified industry focus to ensure market conditions affecting specific sectors or geographies do not significantly impact our business. This has seen the company balance shorter term Geoservices work with the potential to deliver higher margins, with longer term work delivered by our International Development business.

Our HSSE framework has continued to be embedded in the business to maintain a strong approach to managing safety risk – and our safety performance remains at industry leading levels.

Operating Cash Flow ($m)

$0.9m

34.2

15.9

21.8

18.1

20.9

0.9

FY

11(4

.9)

FY

12

FY

13

FY

14

FY

15

FY

10

FY

09

Net Debt ($m)

$62.4m

92.8 10

0.5

121.

2

66.0

58.0

48.1

62.4

FY

11

FY

12

FY

13

FY

14

FY

15

FY

10

FY

09


Business 30 June 2014 30 June 2015 Variance

Geoservices 1570 1170* 400

Project Management 120 120 —

International Development 1970 1850** 120

Corporate and functions 170 160 10

TOTAL 3830 3300 530


Our people

A streamlined management team and more agile workforce has positioned Coffey to capitalise on new opportunities in the infrastructure sector. We had 3300 employees at 30 June.

Creating an agile workforce

Staff numbers declined during the year as we reduced our exposure to early stage mining and high cost oil and gas projects. A total of 210 employees were affected by the restructure of our Geoservices business. A further 150 non-transferrable Geoservices staff in our continuing operations were also affected as we took steps to match capacity to markets in the second half.

We’ve improved staff mobility, relocating key people to support the delivery of transport infrastructure work in New South Wales. An increased use of casual and contracted employees also created a more flexible Geoservices team – drawing on a model successfully used by our International Development business. We’ve better leveraged our industry experts, mobilising key senior technical staff to consult and add value to local teams on major projects.

This more agile workforce is providing the flexibility to direct our expertise to where it’s needed most. This is improving our client focus and supporting a responsive, market driven resourcing model.

Building internal capability

We implemented a new program to improve internal sales capability during the year. The program introduced new tools, processes and systems to support consulting staff in better understanding our clients’ needs and delivering client value. The program is now embedded in the organisation and will be further developed in FY2016.

Our innovation culture was also strengthened with innovation training for our senior leaders in November. The training showed how to apply rapid innovation and iterative design techniques to build a culture of innovation, and further leverage the technical excellence for which we are known, to help differentiate Coffey with our clients.

An improved performance planning and review process provided a stronger focus on our organisational capabilities. The new process is supporting more targeted, meaningful conversations about individual performance and strengthening development plans for our people.

Rebelle Moriarty Group Executive Human Resources

*Geoservices headcount includes 170 casual or contracted employees**International Development headcount includes 1500 contracted employees, compared to 1600 at June 2014


Safety remains at the core of what we do – and we continue to deliver a strong safety performance. We recorded a Lost Time Injury Frequency Rate (LTIFR) of 0.9 for FY2015, up slightly from 0.64 on the previous year.

Our International Development and Project Management businesses remained LTI free for the year, reflecting a strong focus on continuous safety improvement. In Western Australia, the Industrial Foundation of Accident Prevention Safeway Awards saw our local Environments team win the platinum award, and our Testing and Geomechanics teams win the gold

award. The awards recognised the safety performance of WA businesses that achieved an improved LTIFR or at least six months LTI free. In Queensland, we won BP’s High Achievement Award for Security, Health, Safety and Environmental Management for the FY2015 year.

Our safety focus this year included injury prevention, with new initiatives implemented to reduce the likelihood and severity of injuries. We introduced improved Backsafe training to target instruction on office ergonomics and workstation set up, and improved the workers’ compensation claims management process. We’ve also provided a strong focus on fatigue management as part of injury prevention. This has supported our safety performance and helped identify and remove potential hazards before incidents have occurred.

Our safety performance

7.0

6.0

5.0

4.0

0.9

3.0

2.0

1.0

0

LTIFR

LTIFR External Safety Benchmark

Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15


Scott Myles Group Manager Health, Safety, Environment and QualityScott joined Coffey in 2009. He’s led the HSSE team to drive safety improvements and implement a single HSSE management system across the business. Scott spent 20 years in the Royal Australian Engineers (Army), holding several command and operational positions, including on the UN Landmine Clearance Program in Mozambique and as the Chief Engineer North Queensland. In 1993, he was awarded the Conspicuous Service Medal in the Australia Day Honours List. Since leaving the military, he’s held a range of senior executive roles.


Recognising our talents

Principal Contaminant Hydrogeologist Casey O’Farrell was appointed Principal Adjunct Research Fellow at RMIT University. The appointment recognised Casey’s ongoing collaboration with RMIT as part of her work in the field of environmental site assessment and remediation.

Auckland Geotechnical Manager Chris Armstrong won the Asian Association of Management Organisations scholarship to represent New Zealand at its Young Managers Programme. Chris travelled to Macau and China in November as part of the scholarship to develop his leadership skills with other recipients from across Asia and Australia.

Team Leader for the Coffey-managed STAR-Ghana program Ibrahim-Tanko Amidu was awarded the GPSA Award for Leadership in Social Accountability for the Africa Region. The award is operated by the World Bank and the Global Partnership for Social Accountability, and recognises individuals for their contributions in the field of social accountability as a means to eradicate poverty.

MSI President Emeritus and Senior Advisor Larry Cooley was appointed to a three year term on the editorial board of the Public Administration Review. The board oversees the flagship journal of the American Society for Public Administration.

Managing Principal and Business Development Manager Sinead Magill won the Women of the Future business category award. The awards recognise the achievements of women working across a range of sectors in the UK. Sinead’s win highlighted her extensive work in the International Development industry, as well as her strong business acumen.

Sinead Magill

Casey O’Farrell Ibrahim-Tanko Amidu

Chris Armstrong Larry Cooley

General Manager Geomechanics Vic/SA Richard McKenna joined the Roads Australia Fellowship Program in recognition of his work in the transport infrastructure industry.

Richard McKenna


Geoservices and Project Management

We took swift action to respond to market changes and exploit emerging opportunities in the infrastructure sector. State elections on the east coast of Australia provided a clear transport infrastructure agenda, while operators in the energy and resources sector focused on driving value on existing projects.

While the prospective transport infrastructure industry provided signs of growth, new projects were slow to begin. Significant client market volatility in energy and resources also affected the business, as oil and commodity prices fell. Total revenue for the Geoservices business was $239.6 million, 10% lower than the previous year.

Margin pressure associated with market conditions and the restructuring of the business saw a Geoservices full year margin of 3%. However, margins for continuing operations were higher, at 6% for the full year.

Project Management continued to deliver profitably, despite revenue contracting slightly to $24.1 million for the year. The business retained capability as projects were completed in the second half to support major projects that have since been secured. This impacted EBITDA for the second half, but supported the growth of the order book.

Refocused management team

Our refocused management team created stronger alignment with our industry market positioning.

Rhett Duncan was appointed Group Executive Transport Infrastructure, expanding on his previous role overseeing our Testing operations. Rhett joined Coffey in August, and this expanded role reflected his track record for driving business improvement and supporting a winning work focus. He is now responsible for most of our Australian and New Zealand Geomechanics teams, in addition to our Testing operations. This will help drive the natural synergies between these service offerings in the Transport Infrastructure industry.

Rob Morris expanded his role overseeing our Environments services to become the Group Executive Energy and Resources. This also includes responsibility for integrated Geoservices teams in Western Australia and the Middle East, which are key geographies for our work in this sector. Rob’s immediate focus was on responding to market conditions as we repositioned the business.

Richard Biesheuvel was named Group Executive Property Infrastructure, building on his existing role overseeing our Project Management business. The role follows Richard’s success in returning the Project Management

business to profitability, and will ensure a strong focus on Property Infrastructure.

Transport Infrastructure opportunities

New transport infrastructure projects were slow to begin, with the cancellation of the East West Link in Victoria and a change of government in Queensland delaying the start of key projects. Victoria has since emerged as a growth market, as funds earmarked for the East West Link were reallocated to new projects.

The re-election of the New South Wales Government saw the endorsement of its State Infrastructure Strategy, with significant investment expected over the next four years. We’re well positioned to capitalise on this, with 50 years’ experience working on NSW road and rail projects.

In New Zealand, we worked on the SH16 Causeway Upgrade and Transmission Gully Motorway during the year, drawing on our expertise to manage New Zealand’s unique geological conditions. With continued transport infrastructure investment expected over the next four years, these projects are building our reputation on major road projects. Similarly, in the UK a strong transport agenda is emerging, with a commitment for significant investment in the country’s rail network over the next five years.

Ouroperations

Business FY2014 revenue FY2015 revenue FY2015 continuing operations

Geoservices $264.6 million $239.6 million $219.7 million

Project Management $27.1 million $24.1 million $24.1 million

International Development $336.4 million $315.4 million $315.4 million

TOTAL $628.1 million $579.1 million $559.2 million

Our businesses


Opportunities in urban renewal

The strong infrastructure focus in Australia, New Zealand and Africa has seen growing opportunities for urban renewal. Key upcoming urban development projects in Australia will include Bays Precinct in New South Wales and the Fishermans Bend Precinct Development in Victoria. These significant projects show the strong potential for the Property Infrastructure industry in Australia.

We’ve strengthened our Geoservices presence in Africa to leverage our infrastructure capability in the region. In New Zealand, the first phase of the Christchurch earthquake recovery work started to decline, as we continued to work on major projects such as the Christchurch Bus Interchange to support the rebuild. This highlighted our ability to work on complex projects in built environments.

Reducing our exposure to high cost oil and gas projects

The sharp fall in the price of oil saw our oil and gas clients defer or cancel new projects, as they sought to drive efficiencies on existing operations. With the Australian industry’s construction phase coming to an end, we worked with our clients to optimise their operations and develop health and safety programs to improve project outcomes. We also continued to deliver projects in the Middle East, where the softening Australian dollar has increased our competitiveness.

The decision to reduce our exposure to high cost oil and gas projects, and further match capacity to markets, also saw the company exit our permanent presence in Canada. This followed the significant impact of the falling oil price on the Alberta oil sands industry. As we responded with the closure of our Calgary office, our Toronto operations did not have the scale to operate independently and were also closed. We continue to work with our

partners to deliver a major LNG project in British Columbia.

We’ve also continued to actively target the oil and gas market in Papua New Guinea, drawing on our wealth of experience working on environmental impact assessment projects in the country. And we’ve started work to further develop our presence in the emerging Myanmar market.

A refocused mining strategy

We refocused our mining strategy on the later stages of the asset lifecycle, exiting our exploration management and resource delineation practices in Western Australia, South America and Ghana. We remain committed to continuing our mining presence in the operations phase of the lifecycle, supporting mid-cap and major operators on existing projects. Our work is helping optimise these projects at a time when commodity price pressure is affecting many operators.

Our Brazil operations continued to deliver geospatial technologies, including virtual reality, to our clients. We’ve taken steps to improve skills transfer between the Brazil team and our Australian operations to further leverage these skills in the resources sector.

Contracted revenue

With infrastructure projects still in their early stages, total contracted fee revenue for the Geoservices business was $83 million, compared to $114 million for the prior period. The restructure did not have a significant impact on contracted revenue, with $3.2 million taken out of the order book.

Project Management contracted revenue remained strong, with a strengthening and lengthening order book. Total contracted revenue was $35 million at 30 June 2015, which included $19 million contracted beyond the FY2016 year.

(Left to right): Group Executive Transport Infrastructure Rhett Duncan, Group Executive Energy and Resources Rob Morris, Group Executive Property Infrastructure Richard Biesheuvel


Ouroperations


As the International Development industry moved beyond the Millenium Development Goals and began new projects, we continued to work closely with our three key clients. The year saw a management transition for our American subsidiary MSI, while in Australia we repositioned our management team to support our business development priorities.

Some key projects came to an end during the year, leading to total revenue of $315.4 million. However, key project wins saw contracted revenue rise, as we worked closely with our clients to drive value for money outcomes.

International Development is now 57% of our continuing business (55% of total revenue), providing consistent and stable margins on longer-term projects. This is providing a strong and sustainable base as we implement critical projects across the globe.

Working closely with our clients

Our geographic diversification was maintained with a continued focus on our three key clients in the US, Australia and the UK during the year.

In the US, aid funding has reduced, although there has been increased commitment to health and food security programs. Our work with the US Agency for International Development continued in the governance, security and justice practice areas, as well as in research, monitoring and evaluation. Key project wins in Pakistan, Mexico and Columbia boosted our order book and provided a strong pipeline of work over the medium term.

In Australia, the transition of the aid budget to the Department of Foreign Affairs and Trade in FY2014 led to a shift in focus of aid priorities being implemented during the year. New development projects were more closely aligned with Australia’s national interest, with a strong emphasis on economic growth and gender equality. And as value for money continued to be an important area of focus, our research, monitoring and evaluation practice area has supported informed decision making on aid priorities.

In the UK, the national election in May confirmed bipartisan support for the foreign aid funding target of 0.7% of Gross National Income. The Department for International Development maintained its focus on effectiveness and value for money as it implemented its aid program.

Leadership transition

Our American subsidiary MSI undertook a key leadership transition in March, with founder and President Larry Cooley retiring from his role. Larry has taken on a new challenge as President Emeritus and Senior Advisor, providing valuable advisory support to both MSI staff and the broader International Development business. Larry founded MSI in 1981 and has pioneered the innovative Scaling Up methodology in the International Development industry. He’s now working across the business, supporting our teams on key projects worldwide.

Keith Brown succeeded Larry as President, building on the company’s history of having a highly respected technical expert leading MSI. Keith has held a range of positions with MSI over more than 10 years, and was Senior Vice President for the past four years. His appointment supports the company’s long term strategy as it continues the legacy set by Larry and Executive Vice President for Operations Marina Fanning.

Glen Simpson Group Executive International Development


Investing in business development capability

International Development’s Asia Pacific business saw its general manager seconded to a key country manager role during the year. Sam Spurrett’s new role, based in Papua New Guinea (PNG), is supporting the business’ winning work focus. Sam’s business development background and previous experience in PNG ensures he is well positioned to take on this role at an important time in the development funding agenda for the country.

Ben Ward was appointed Acting General Manager during Sam’s secondment. Having led our successful research, monitoring and evaluation practice area, Ben is ideally suited to take on the role to support our Asia Pacific operations.

Contracted revenue

Key project wins during the year saw total contracted revenue increase significantly. This strong, predictive pipeline provides a solid foundation for the business, both in the next 12 months and beyond. Total contracted revenue as at 30 June 2015 was $546 million, including $235 million for FY2016.

Larry Cooley President Emeritus and Senior Advisor US subsidiary MSI

Sam Spurrett General Manager (currently seconded to PNG) Asia Pacific

Kit Black General Manager Europe

Keith Brown President US subsidiary MSIKeith was appointed to his new role in March and is helping steer MSI’s focus on research, monitoring and evaluation. With more than 30 years of experience in the industry, he’s worked in Latin America, Eastern Europe, Southeast Asia, the Near East and the Balkans. Keith is focused on partnering with our clients to offer practical, effective and sustainable solutions to development problems.

Ben Ward Acting General Manager Asia PacificBen previously led our research, monitoring and evaluation practice in the Asia Pacific, and has also worked for our UK team, leading a team of more than 30 consultants. He’s completed more than 40 evaluation and research assignments including the Evaluation of DFID’s Girls’ Education Challenge and the European Union’s Health Program.


Our sectors

Infrastructure

Urban development is driving growth in the transport and property infrastructure sector, and is an increasing focus in our target geographies. Projects need to consider ground conditions, remediation requirements and the risks of development in a built environment to succeed.

We’ve invested $4 million in targeted sales capability in the transport and property infrastructure sector.

Transport Infrastructure

With a growing transport agenda in Australia, New Zealand and the UK, we’re currently pursuing a range of major projects with a total capex spend of $250 billion over the next five years. The available market for consultants is more than $2.5 billion, highlighting the strong potential in these markets for a company that can deliver real value on large and complex projects.

Australia and New Zealand

Infrastructure investment in Australia is rising. New South Wales is leading the charge, with the State Government allocating $68.6 billion over the next four years for infrastructure projects, including $38 billion for transport. And in New Zealand, major road projects currently underway are just the beginning, as the country improves its national transport network.

UK

The UK Government’s commitment to spend £38 billion on railways in the five years to 2019 will modernise its rail network. Our track record on previous rail projects means we’re well positioned to add value during this time of significant investment.

Network Rail Control Period 5

Projects listed do not amount to total Capex values and represent a selection of major projects only

*Multiple project opportunities

1 project with >$50b total project capex

Sydney Metro

WestConnex Sydney

Melbourne Metro

Western Distributor Melbourne

NZ Roads of National Significance

Multi Modal Connectivity Auckland

6 projects ranging from $10-20b total project capex


Energy and resources

We’ve shifted our focus in mining to the later stages of the asset lifecycle. It’s here we can draw on our expertise, including in geospatial technologies and virtual reality, to improve project outcomes. We’re continuing to target mid-cap and major operators that have the scale to continue developing the efficiencies of their existing operations, particularly in Australia and Africa where we have an established presence and strong client networks.

In the oil and gas industry, our strong local relationships with key clients in Australia and the Middle East have been maintained. As Australia transitions from the construction to operations phase, we’re supporting our clients to save costs and improve safety.

There are strong opportunities across the energy and resources sector in Papua New Guinea, where we have 40 years’ experience working with the local resources sector. Combined with our international development presence, we’re well positioned to support our clients as they establish their social licence to operate.

And in Myanmar, the relatively new local oil and gas industry represents new opportunities. We’re working with existing clients to identify new opportunities in this emerging market.

Papua New Guinea

While both the mining and oil and gas industries have been impacted by market conditions, there remains opportunities for consultants that deliver cost savings and minimise project risk.

Property Infrastructure

Major developments will lead the urban renewal of city centres and create new destinations in their own right. We’re currently pursuing property infrastructure projects across the globe. Projects with a total capex of $166 billion over the next year will provide an available market for consultants of about $1.75 billion.

Australia

Major property projects will transform city landscapes and create new destination locations as the Australian property industry grows. Property development is expected to be most prevalent on the east coast of Australia, where major projects will lead this industry trend.

New Zealand

With 60% of New Zealand’s population growth centred on Auckland, urban development is a major focus. Understanding the city’s unique geological conditions will be important, and developers may need to remediate once industrial land as it’s transformed to create new housing.

Africa

South Africa is the gateway to Africa, where demand for property development is growing. We’re strengthening our Geoservices capability to support our work in the infrastructure sector.

Auckland Council Seismic Upgrade Program

Lincoln University Redevelopment, Christchurch

Long Bay Residential Subdivision, Auckland

Avon River Precinct re-development, Christchurch*

Housing New Zealand Corporation Repair Program*

Christchurch Council Sports Facilities Portfolio, Christchurch*

Ormiston Town Centre, residential and mixed used land development project, Auckland*

Modderfontein*

$17b total project capex in Nigeria and South Africa

Federation Square East

Aquis Great Barrier Reef Resort

The Bays Precinct Development*

Fishermans Bend Precinct Development*

$122b total project capex in Australia

$26b total project capex in NZ


Our sectors

US

In the US, aid funding reduced during the year, although there has been growing commitments for health and food security projects. Our American subsidiary MSI is working closely with USAID to deliver on their development objectives.

Australia

UK / Europe

America

Overlap

International development office

Active in-country projects

The Millennium Development Goals come to an end in 2015, having been the world’s overarching development framework for the last 15 years. And there have been many successes during this time.

As the development community sets its post-2015 development agenda, contractors who can manage risk, deliver on expectations and provide value for money will have an important role to play. Our long term work with key clients in Australia, the UK and the US ensure we understand our clients’ needs as they implement these important programs.



Australia

In Australia, aid funding has been further aligned to the national interest, with a stronger focus on economic growth and value for money. Our work across the Asia Pacific is supporting this focus.

UK

Bipartisan support for aid funding was confirmed before the May 2015 UK election. We’re working closely with the Department for International Development, particularly in the areas of research, monitoring and evaluation and security and justice.


The market is demanding that businesses rapidly adjust to the dramatic advances in our industries, brought about by emerging technologies and shifting business models.

Investing in robust, scalable digital platforms for new, repeatable products and services will result in self-sustaining business transformation. Our commitment to building an end-to-end digital business that connects our data and expertise to our clients will deliver innovation, efficiencies and profit.

Digital Innovation Hub

In FY2015, our Board approved the establishment of Coffey’s Digital Innovation Hub. Partnering with digital specialists and our clients, the team will research and pursue disruptive digital technologies and processes aimed at unlocking untapped valuable data. This client-led approach to innovation is structured to boost client engagement and deliver mutually beneficial profit growth and efficiency gains.

Integrated geospatial, design management and visual technologies

Coffey is recognised for its well established geospatial technologies, virtual reality, and Building Information Modelling (BIM) capabilities. In Brazil we’ve worked extensively with the local mining industry for global key clients to provide virtual reality services that support mine planning and optimisation, and enhance safety practices. In FY2015, we mobilised key resources to transfer these skills to our Australian business as we refocused on the later stages of the mining asset lifecycle.

We’ve also further developed our focus on BIM as the technology is increasingly applied across the property and transport infrastructure sector. And our spatial data infrastructure solutions are also delivering results. This year we worked with the Environment Secretariat of Sao Paulo State to provide access to state-wide environmental data from one, web-based source.

Building industry capability

Our market positioning continues to take a strong industry focus to deliver client value across the asset lifecycle. As part of our restructure, we’ve refocused key resources on the growing infrastructure sector and invested in boosting sales capability to support our global industry positioning. These resources are spearheading our winning work focus for key global projects, connecting our business lines to provide an integrated client-led service offering across the whole asset lifecycle.


Chantalle Meijer Group Executive Markets

coffey.com

Registered office

Level 19, Tower B – Citadel Tower 799 Pacific Highway Chatswood NSW 2067 Australia

t: +61 2 9406 1000 f: +61 2 9406 1002 e: [email protected]

Share registry

Link Market Services Limited Level 12 680 George Street Sydney NSW 2000 Australia

t: 1300 365 798 (within Australia) +61 1300 365 798 (outside Australia) w: linkmarketservices.com.au

annual review 2015 - coffey · pursue disruptive digital technologies to boost client engagement...

Documents