MACMAHON HOLDINGS LIMITED Audio Webcast

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MACMAHON HOLDINGS LIMITED (MAH)

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MACMAHON HOLDINGS LIMITED (MAH) Events

Company (Stock Code)	Date/Time	Event	Timezone: Australia/Sydney
MACMAHON HOLDINGS LIMITED (MAH)	Tue, 16 Feb 2010 11:00am	Macmahon 2010 Half Year Results - Mr Nick Bowen, CEO and Mr Ross Carroll, CFO
MACMAHON HOLDINGS LIMITED (MAH) Meeting Held at 10am WST, 27th of November 2009 at the Perth Convention Centre	Mon, 30 Nov 2009 4:45pm	2009 Annual General Meeting - Mr Richard J Carter, Chairman and Mr Nick Bowen, Managing Director, CEO
MACMAHON HOLDINGS LIMITED (MAH)	Thu, 24 Sep 2009 10:00am	Full Year Results
MACMAHON HOLDINGS LIMITED (MAH)	Wed, 18 Feb 2009 10:00am	MAH - Half Year Results Dec 2008 - Mr Nick Bowen, CEO and Mr Ross Carroll, CFO
MACMAHON HOLDINGS LIMITED (MAH)	Fri, 19 Dec 2008 3:30pm	MAH - McMahon Market Update - Mr Nick Bowen, CEO and Mr Ross Carroll, CFO
MACMAHON HOLDINGS LIMITED (MAH)	Fri, 7 Nov 2008 11:00am	MAH - 2008 Annual General Meeting - Mr Nick Bowen, Managing Director, CEO
MACMAHON HOLDINGS LIMITED (MAH)	Wed, 20 Aug 2008 10:00am	MAH - Macmahon Holdings 2008 Full Year Results - Mr Nick Bowen, CEO and Mr Ross Carroll, CFO
MACMAHON HOLDINGS LIMITED (MAH)	Tue, 19 Aug 2008 10:00am	MAH - Macmahon Holdings 2009 Full Year Results - Mr Nick Bowen, CEO and Mr Ross Carroll, CFO
MACMAHON HOLDINGS LIMITED (MAH)	Wed, 16 Apr 2008 2:30pm	MAH - Queensland Rail Additional Work - Mr Ross Carroll, Chief Financial Officer
MACMAHON HOLDINGS LIMITED (MAH)	Wed, 20 Feb 2008 10:00am	MAH - 2008 Half Year Results - Mr Nick Bowen, CEO and Mr Ross Carroll, CFO
MACMAHON HOLDINGS LIMITED (MAH)	Fri, 9 Nov 2007 5:00pm	MAH - 2007 Annual General Meeting - Mr Richard Carter, Chairman & Mr Nick Bowen, CEO
MACMAHON HOLDINGS LIMITED (MAH)	Tue, 21 Aug 2007 10:00am 08:00am Australia/Perth	MAH - 2007 Full Year Results - Mr Nick Bowen, CEO
MACMAHON HOLDINGS LIMITED (MAH)	Mon, 13 Nov 2006 1:00pm	MAH - Annual General Meeting - Mr Richard Carter, Chairman and Mr Nick Bowen, CEO
MACMAHON HOLDINGS LIMITED (MAH)	Mon, 21 Aug 2006 4:10pm	MAH - Full Year Results for 2006 - Mr Nick Bowen, Managing Director, CEO and Mr Rick Blair, CFO
MACMAHON HOLDINGS LIMITED (MAH)	Tue, 16 Feb 2010	Interim Results
MACMAHON HOLDINGS LIMITED (MAH)	Fri, 27 Nov 2009 12:00pm 10:00am Australia/Perth	Annual General Meeting The Perth Convention Exhibition Centre, 21 Mounts Bay Road, Perth, WA
MACMAHON HOLDINGS LIMITED (MAH)	Tue, 7 Apr 2009	Date Payable
MACMAHON HOLDINGS LIMITED (MAH)	Sun, 22 Mar 2009 11:00pm	Record Date
MACMAHON HOLDINGS LIMITED (MAH)	Mon, 16 Mar 2009 11:00pm	Ex Div Date
MACMAHON HOLDINGS LIMITED (MAH)	Tue, 17 Feb 2009 11:00pm	Interim Results
MACMAHON HOLDINGS LIMITED (MAH)	Tue, 17 Feb 2009 11:00pm	MAH - 2009 Half Year Results - Mr Nick Bowen, CEO and Mr Ross Carroll, CFO
MACMAHON HOLDINGS LIMITED (MAH)	Fri, 7 Nov 2008 12:00pm 10:00am Australia/Perth	Annual General Meeting The Sheraton Perth Hotel, 207 Adelaide Terrace, Perth, WA
MACMAHON HOLDINGS LIMITED (MAH)	Thu, 9 Oct 2008 11:00pm	Date Payable
MACMAHON HOLDINGS LIMITED (MAH)	Fri, 12 Sep 2008	Record Date
MACMAHON HOLDINGS LIMITED (MAH)	Mon, 8 Sep 2008	Ex Div Date
MACMAHON HOLDINGS LIMITED (MAH)	Wed, 20 Aug 2008	Full Year Results
MACMAHON HOLDINGS LIMITED (MAH)	Thu, 3 Apr 2008 11:00pm	Date Payable
MACMAHON HOLDINGS LIMITED (MAH)	Wed, 19 Mar 2008 11:00pm	Record Date
MACMAHON HOLDINGS LIMITED (MAH)	Thu, 13 Mar 2008 11:00pm	Ex Div Date
MACMAHON HOLDINGS LIMITED (MAH)	Tue, 19 Feb 2008 11:00pm	Interim Results
MACMAHON HOLDINGS LIMITED (MAH)	Fri, 9 Nov 2007 9:00am	Annual General Meeting Hyatt Regency, 99 Adelaide Terrace Perth WA
MACMAHON HOLDINGS LIMITED (MAH)	Tue, 9 Oct 2007	Date Payable
MACMAHON HOLDINGS LIMITED (MAH)	Tue, 11 Sep 2007	Record Date
MACMAHON HOLDINGS LIMITED (MAH)	Tue, 4 Sep 2007	Ex Div Date
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MACMAHON HOLDINGS LIMITED (MAH)

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NICK BOWEN, CHIEF EXECUTIVE OFFICER, AND ROSS CARROLL, CHIEF FINANCE OFFICER OF MACMAHON HOLDINGS LIMITED (MAH)

“2008 Full Year Results”

http://www.brr.com.au/event/49364

 

WEDNESDAY, August 20, 2008, 10:00 AM.

 

            MAH     Thank you and good morning and welcome to our shareholders, employees, and analysts that are on the line.

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                        The plan this morning is that I’ll begin by sort of giving an overview covering some of the highlights. I’ll then hand over to Ross who’ll go through the financials and he’ll flick back to me and I’ll sort of wrap up with progress going forward.

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                        As we run through the slides, we’ll mention the slide number each time; it’s in the bottom right-hand corner so you can keep track of us. We’ll try and wrap the actual presentation up in about 40 minutes which will leave 15 or 20 minutes for questions. We want to wrap the whole thing up by 11 o’clock and

20                    look at -- so it’s a fairly large slide pack. So some of the slides are fairly self-explanatory and we’ll probably flick through those very quickly.

 

                        So I’m starting on Slide 3 with the -- hitting up the top record performance and certainly the high level we think the results outstanding. We’ve now delivered

25                    seven years of continuous improvement in our financial results and this year is a record in our 45-year history.

 

                        On the revenue line, it was a record 1.25 billion and we’ve also delivered a record profit after tax of almost 49 million. I think the key point to note with the

30                    financials is that significant increase in profit has come without the need to raise additional equity. And in fact if you look at it, there’s almost a direct correlation between the growth in our profits and the growth in earnings per share which is a key driver for us.

 

35                    Also, you know, a recognition of our improved performance. We’ve delivered a significantly dividend and the total dividend for the year is 5.5 cents per share which is 93% increase on last year. And the last sort of financial measure is the order book which is also at a record of almost 2.2 billion.

 

40                    So overall, we think, you know, an excellent set of numbers, you know, following a very good year across the company.

 

                        Moving on to Slide 4, which just covers some of the key performance indicators for the business, if I just run down those. I mean, the first was that

45                    we obviously want to meet our financial targets. We’ve been saying all year long that we would deliver something like a 40% profit growth. We have delivered plus 45%, and from our view of it, we’d exceeded all market expectations with the profit numbers.

 

                        In terms of the business, we had a plan to win a significant number of contract extensions and through the year we’ve picked up over 500 million worth of contract extensions, and probably most importantly there, every contract that’s come up for renewal, we’ve been able to renegotiate. So we

5                      haven’t lost any of their existing work.

 

                        We also had a big focus this year to expand our presence in the coal area and we’ve done that by winning some more coal contracts and also we’ve picked up some additional work for Queensland Rail. So that’s by an

10                    excellent outcome for us.

 

                        In terms of delivering per shareholders, we think the 30% plus total shareholder returns for the year is a very good outcome, especially considering market conditions. Again, considering where everything is at the

15                    moment. The strength of our balance sheet, and as Ross will cover later, the low gearing levels really positions us very well for growth. And probably the only flat area for the year has been our safety performance which I’ll cover next.

 

20                    So moving on to Slide 6, so jump one and go straight to Slide 6. Covering off on our group employee numbers and our group safety performance. And certainly, our people are our single most important asset. It’s their talents and skills which is driving the success of MacMahon.

 

25                    As you can see from the graph on the left there, despite the current labor challenges across Australia, we’ve continued to increase our workforce numbers and we’ve added something like 500 new employees to the group over the past year and our workforce numbers currently stand just in excess of 3,600.

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                        Certainly across the group, we’ve got a number of innovative strategies and initiatives in place to ensure we not only maintain sufficient numbers for our current growth plans but we’re also building for our future needs.

 

35                    The past year has certainly seen a very high influx of new workers to the company, and as with all new employees, we’re very focused on training and that’s particularly important as we are now sourcing workers from industries outside of mining and constructions. So we’re having to bring new people in.

 

40                    And that’s probably the one big challenge for us in that as we brought new people in, we actually have unfortunately seen our safety performance leveled out. It’s not deteriorating, it’s just levelled out. And our total recordable injury frequency rate which is the number of recordable injuries per million man-hours worked has flattened out of 12.9 and although it’s not an

45                    improvement on 2007, it’s still certainly top quartile industry performance.

 

                        We’re certainly confident though that going forward with our focus on more training and additional safety programs that we can continue to deliver improvement in our safety performance.

 

                        So after covering those couple of highlights, I’ll now hand over to Ross who’ll go through the financial suite.

 

5          MAH     Thanks, Nick.

 

                        We’re on Slide 8 everybody. Financially, we’ve had another stellar year as Nick’s stated.

 

10                    Revenues up almost 29% to 1.24 billion. EBIT is growing 25% which is large and long with the revenue growth. Net interest expense has decreased as a result of debt levels and I’ll talk about that a bit more later on.

 

                        And inline with having tax earnings, increased earnings, tax expenses

15                    increased. So the effective tax rate has decreased to 26.5%, down from 31.3% last year. The reductions are due to research and development tax concessions and some previously unrecognized income tax losses relating to our overseas operations which we’ve been able to utilize.

 

20                    In 2009, we may see effective tax rate to be in the range of 28% to 29%. Profit of $48.8 million is slightly above market expectations and we’ve managed to improve our NPAT margin from 3.5% to 3.9%.

 

                        Now, as Nick has already mentioned, we’ve had large increases in earnings

25                    per share and dividends per share which is obviously very pleasing. And finally, we’ve managed to increase our profitability while reducing our capital requirements which is a result of an increase in return on equity up to 98.4%. So we’re obviously very pleased about that.

 

30                    Moving to Slide 9, (inaudible) (00:07:05) it’s reasonably self-explanatory that you see from this graph that construction has been the star performer with a big increase in volume of work and also our margins. Pleasingly, this has come with a very large capital expansion of around $5 million for the year.

 

35                    Mining has had a solid year with a small increase in volume, it was partially offset by lower margins. And moving to the right, you can see that we’ve removed the impact of Allplant which is sold last year so that’s deducted about 5.4 million of EBIT from the group’s results.

 

40                    And now as we also seek to increase the organization’s capability, corporation costs have increased. Now these costs have been impacted by higher rent, higher IT, and higher salary cost. That’s really a necessary part of us growing to a bigger and better company.

 

45                    You can see the impact of interest from tax which was covered on the previous slides. Following is minority interests. These have increased in line with the improved performance of our 60% earnings subsidiary in DM Rail.

 

                        Now moving to Slide 10, which covers revenue and EBIT margin growth. As I mentioned earlier, revenues increased to 1.244 billion and as far as the compound annual growth rate, it stands at 24%.

 

5                      Now, this shows a continuing improvement on our operating performance and a growth of the company at that time. EBIT margins going along with expectations at 6% despite increased industry-wide cost pressures and some minor impacts to our mining business which I’ll talk a bit about later.

 

10                    Now we expect margins to continue at similar levels in the future. However, with the business moving towards operating and leasing for the majority of their equipment financing, EBIT margins will become a less meaningful caveat. Now as a result, we will focus on impact margins moving forward.

 

15                    Moving across to Slide 11, as mentioned earlier, profit has grown to $48.8 million which is a 46% increase on the underlying results of 33.4 million last year, and importantly, this growth having come with the expansive margin and the margins have grown from 3.5% up to 3.9%. Now, perhaps in the operating performance, this has been aided by the reduced interest payments

20                    and lower effective tax rate. And moving forward, we expect margins to stabilize at around about 4% in the future.

 

                        Slide 12 covers cash flow. I think pleasingly, as well as the improved profit performance, cash from operations has increased significantly during the year

25                    up to 88.7 million which is an improvement from the 68.7 million recorded last year. And this occurred again due to higher profitability and lower interest finance offset by increased tax finance.

 

                        Turning on the graph here, growth from investment capital totalled 47 million

30                    for the year with an additional 22.2 million of equipment finance operating those facility. Now the majority of this expansion was on equipment to mining projects including the project startup at Saraji. Importantly, operating cash flow has increased by nearly 27%. We’ve got a 129 million of cash at hand at the end of the year. So strong position in cash flow for us.

35

                        Slide 13 covers on gearing and debt and the balance sheet generally. Balance sheet management is an area that the company has been extremely focused on over the last two years. And given the current state of debt and equity markets, we’re very pleased with where we’re at. The balance sheet is

40                    in a strong position. The company is gearing in a new lower 11.6%. This compares to 25.9% of June last year and 18.8% at the half year just gone. So there’s strong and continued improvement there.

 

                        The lower debt level is an increased cash from operations that resulted in an

45                    increased coverage, almost doubling from 5.4 times at June 2007 up to 9.9 times the current year. This strong and constantly improving balance sheet demonstrates the company’s ability to grow the business organically without the need to raise additional equity on materially increased dent levels.

 

                        Construction business has been a crucial element of this balance sheet strength. There’s only a (inaudible) (00:11:23) as some of our peers have focused purely in the more capital intensive mining activities. Overall, this leads the company ideally placed to future organic growth, potential

5                      acquisitions or returning excess funds for shareholders.

 

                        Now moving to Slide 14 which covers the EPS and DPS and return on equity. I don’t think I really need to talk too much here. But the EPS has been in line with profit growth which demonstrates the company’s ability to grow without

10                    raising additional equity and diluting shareholder returns. I guess, the shareholders will be very happy to see that dividends are up by 83% to 5.5 cents per share and this is a far cry from the 0.5 cent per share price back in 2004. Now the 5.5 cents per share represents a payout ratio just under 60% and as I mentioned earlier, return on equities improved to 98.4% which has

15                    been a major focus for the group.

 

                        Moving on to Slide 15, continue with the measures of shareholder returns. This slide shows the MacMahon PSR performance of one year and five years compared to FPs. And as you can see, MacMahon has significantly

20                    performed almost all FPs of about the short and extended period of time. Total shareholder returns are a much critical performance measure and we’re going to continually strive to be a long-term investment of choice for our shareholders.

 

25                    Moving to Slide 16, we’ll look at the business units now starting with the construction business. Construction business is built on an excellent first half performance delivering 628 million of revenue for the year, up actually 56% from 2007. Revenue growth was underpinned by ongoing federal and state government investments in infrastructure. And the business is also benefiting

30                    from numerous resource infrastructure contracts and offer in WA’s Pilbara region as a result of BHP Billiton and Rio Tinto’s rapid expansion plans in both their iron ore businesses.

 

                        The EBIT was up a very impressive 138.1% to $38.1 million. The margins

35                    have increased by 53.5%, up from 4% last year to 6.1% this year. These margin results are attributable to a successful and profitable completion of a number of contracts.

 

                        Now additionally, the business has continued to focus on growing its market

40                    share in a booming infrastructure states of WA in Queensland. The east coast of Australia remains an important focus with several key projects including the Logan River Catchment and the Jilalan Rail Yard upgrade commencing during the year.

 

45                    Now despite the prevailing tight labor market conditions, the construction business has been able to grow its employee numbers by almost 40% ensuring growth is not hampered by labor constraints.

 

                        Now to Slide 17, the mining business has experienced solid growth through the year with revenue up by 10.2% to 616.4 million. EBITDA has increased by 7.5% when compared to the comparative period. Now mining margins were 8.8%, slightly down than the previous year.

5

                        Next slide, the half year results, margins were affected by the unusually heavy rain in Queensland and production constraints at the Eaglefield project in the Bowen Basin. Importantly, though, mining margins showed a significant improvement from the first half of 2008 that we recorded a 7.5% margin with

10                    second-half margins being approximately 10%. So it’s very pleasing to see the improvement in the business during the second half. CAPEX was down on the prior period with lower CAPEX requirements and the effective equipment being financed by our operating lease facility. And the order book stands at 1.1 billion which is up 8.4%, but excludes the $1.1 billion Moly

15                    Mines contract which is still subject to Moly obtaining their own project financing.

 

                        So I now hand it back to Nick to talk about the order books.

 

20        MAH    Yeah, thanks, Ross.

 

                        I will just skip over Slide 18 and move on to Slide 19 so we can keep this all going.

 

25                    So just in terms of the work we won in the year, I think the important point to take away here is that not only did we secure new contracts worth 800 million, but as I mentioned earlier, we also extended contracts with a total value of about 570 million. And as I said, we were successful in renewing every single contract that came up for an extension during the year. And this does

30                    highlight one of our major strengths which is our relationship with our customers and our ability to partner with them to deliver long-term outcomes on projects.

 

                        If you look across to different contracts, the sort of big wins for the year, if I

35                    take them by region, up in the Pilbara, we won the Newman Hub and the Satellite Orebody Rail contract for BHP Billiton. And nearby for Rio Tinto, we picked up the Merseyrail and more work at both the Dampier and Cape Lambert ports. And if you add all that work up in the Pilbara, I think we won some 200 million of new work during the year.

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                        The other very important area for us was crossing Queensland in the Bowen Basin. We picked up two new coal contracts both with BMA which is BHP Billiton Mitsubishi Alliance at the Saraji and at the Goonyella mines. And in addition to that, we were successful in adding a very significant expansion to

45                    our alliance with Queensland Rail. So, not only do we now have the Jilalan Rail Yard but we’ve also won the Goonyella to have a point extension project. So very significant wins up there in the coal.

 

                        Our mining business was also successful on winning a couple of more new projects. We won the Szklary Nickel Project for XStrata which gives us some more work with them. And up in Asia, we won a new contract for Lafarge down in Indonesia. So that’s our second contract with them. And all up

5                                  through the year, new contracts and contract extensions totalled about 1.4 billion which we’re pretty happy with.

 

                        Across on Slide 20 which is just showing the buildup in the order book and the run-off for the next few years, I don’t need to dwell on it too much, but the

10                    total order book is just below 2.2 billion at the moment. As it has been the case to date, we have not yet included the $1.1 billion Moly Mines Spinfex Ridge contract in our order book. We’ll wait until they complete project financing before we bring that on.

 

15                    And in terms of the order book run-off, we’ve already got 1.2 billion of revenue locked away for 2009 which is a very strong position for us. In addition, we’d expect to add about 100 million of work in 2009 from contract extensions. So in reality, the secured at work is more like 1.3 billion already, which is putting us on track to deliver further growth in the 2009 year.

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                        Moving over to Slide 29 which gives a couple of pie charts which breaks up the order book, bottom left-hand corner which is probably the one that’s most important for us, we’ve maintained a very high quality of our customer base with the combination of governments around Australia, BHP Billiton and Rio

25                    Tinto now accounting for 75% of that $2.2 billion order book. One of the important things looking forward is that those three customers are all increasing the level of work which is good for us.

 

                        If you look in that top right-hand corner, to reduce our exposure to cost

30                    increases, we’ve maintained a very low percentage of fixed price contracts and then focused during the last 12 months to increase the amount of alliance contracts with Hub. And we’re very pleased with the balance of the order book at the moment.

 

35                    And again, if you look at the top left-hand corner, certainly, the long-term nature of many of our contracts, particularly on the mining side contributes to a reduction in what we call order book volatility with some 50% of our order book now on contracts which have a duration of three years or more. So overall, it’s not just a large order book; it’s a real quality order book which

40                    paints a good picture of looking forward.

 

                         Over on Slide 22, we’ve just tried to sort of put a bit of a picture there of the areas that we’re focusing on at the moment. If I start over in the West, certainly the Pilbara region with their two major customers over there, BHP

45                     Billiton and Rio Tinto, they’re both rapidly expanding production, which is requiring a lot of infrastructure work and further contract mining. And we anticipate sort of $300 million to $400 million a year of work out of the Pilbara ion ore.

 

                         In WA, bottom left-hand corner, the government infrastructure has been a very long-term business for us. It’s one of our backbones of our construction business. And we expect with the booming WI economy to continue to see a good flow of work from there. And I think you have all seen that last week we

5                       picked up an $80 million road contract in Perth.

 

                         Moving over to the right-hand side in Queensland, certainly the Bowen Basin at the moment is proving to be a real powerhouse for us. We’ve got three mining projects up there at the moment and two construction contracts. And

10                     we expect that in the 2009 year we’ll generate some 400 million of revenue out of the Bowen Basin.

 

                         Bottom right-hand corner, what we call the East Coast infrastructure market for government, it’s still our biggest growth area in the longer term. Certainly,

15                     at the moment, Queensland is booming. But we would have to say that New South Wales is slow to deliver. We do, however, currently have some six contracts across the three East Coast states for construction. And we would expect that to grow in the next 12 months. And we’re also targeting a number of projects in joint venture with Leighton under our memorandum of

20                     understanding.

 

                        Across the rest of Australia, certainly there is quite a few opportunities on the mining side. And we’re seeing further growth in a lot of our existing contracts like at Olympic Dam and Argo.

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                        And probably the newest area for us is our sort of increased focus on overseas. And we’re starting to see some traction there. We’ve got our existing contract in Malaysia, the new contracts starting in Indonesia, and we’ve got further work in the next 6 to 12 months starting up in Vietnam and

30                    Hong Kong. So, you will see us starting to have further success in those areas.

 

                        Just moving off the order book then onto Slide 23, and I won’t dwell on it for long, but it’s just a couple of finance projects. Probably following on from the

35                    previous comment about BHP Billiton, that top left-hand corner is Newman Hub, that’s a big construction contract we have as part of BHP Billiton’s. RPG4 expansion. It’s a large concrete project with the workforce of about 300.

 

40                    Bottom left-hand corner is the House Street Bridge. I think most of you will be aware that that project has now got full approval and construction is underway, and we’ll be ramping up that over the next 12 months. Certainly, a landmark project for us; very, very high profile.

 

45                    And if you look in the right-hand side of that slide, it’s a photo of our major road project in WA which is the Mitchell Freeway. It’s the major freeway heading north, four-lane freeway. And it also incorporates the movement where we had to relocate the existing railway line.

 

                        So, construction projects right across the country are all running well.

 

                        Moving over to Slide 24, again, a couple of quick shots. Left-hand side, that’s our iron ore contract for BHP Billiton at Orebody 18, which also incorporates

5                      the (inaudible) (00:23:54) mine just next door and currently running at sort of 12 to 15 million tons a year of production. But once the RPG4 expansion is completed in the first half of calendar 2009, we would see those two mines increase capacity. And I think just to give you a bit of a scale of the amount of work we’ve got in the Pilbara, I think our current workforce up there between

10                    mining and construction is nearly 800 people.

 

                        Top right-hand side, the Tarago project, it’s our a largest underground project, four-year contract with Rio Tinto to develop a new block cave mine now well underway. And we’ve got a workforce in excess of 300 there.

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                        And bottom right-hand side is the major contract we have for BHP Billiton, Olympic Dam. It’s been there since 2004. It’s a long-term contract and again, a workforce of about 300. And with the planned expansions at Olympic Dam, we would expect that the volume of work we’ve got there to increase in the

20                    next 12 months.

 

                        Moving onto industry outlook which just flip over Slide 25, but, you know, really as an introduction. It’s probably fair to say but not withstanding what’s going on in world economies and share markets and, you know, some states

25                    of Australia seeing a slowing of growth, certainly the two key areas we operate in are not seeing any slowing. The resources industry continues to grow, not withstanding some reduction in commodity prices. And on the infrastructure, there’s certainly no sign of government slowing down. So we seem to be fairly well insulated from problems that some parts of the

30                    economy are seeing.

 

                        So on Slide 26, I mean there’s many, many titles of this infrastructure pipeline or infrastructure expenditure. But certainly what we’re seeing is continual planned investment across resources, mainly to do with increasing the supply

35                    chain capacity, so it’s rail and port work, and then for government, a lot of investment in rail, road and water. And around the Australia now there’s certainly in the hundreds of millions being invested, so plenty of work to see us grow.

 

40                    Moving onto Slide 27, and this is really about resources and notwithstanding, as I said, the drop-off in some of the commodity prices we’re seeing no reduction in the requirement for volumes. Certainly in the areas of ion ore and coal, all the major producers are wanting to ramp up. And for a lot of the base metal operation certainly for the very large companies, they are still extremely

45                    profitable even with some drop-off in commodity prices. And again, they’re all pushing for more productions.

 

                        So that table there shows the increase forecast, the contract mining and it’s obviously very, very significant from a number of around 6 billion per annum in 2008, you know, getting towards 10 or 12 billion by 2013. So, very, very rapid growth in contract mining. And I think that reinforces that it’s not just the growth in commodities but we are seeing at the moment that the major mining houses will and truly wanting to use contractors. It’s a good outlook for us.

5

                        Just moving onto Slide 28, and I’ve got a couple of slides here. I just want to cover off on some of the challenges that we are seeing around the industry at the moment and how we’re handling it. And really the four main areas are, you know, equipment, supply, cost pressures, credit crisis and people.

10

                        So if you flip forward onto Slide 29, and this one is really about equipment lead times and tire supply. And certainly, both of those remain a significant challenge for the industry. Certainly on the tire side, we’ve addressed it by entering into a very large long-term tire supply contract with the Chinese

15                    manufacturer. And that contract also involves a lot of input on technology to manufacture tires to suit our requirements in Australia. And that contract will supplement the existing long-term supply contract we have with Goodyear and between those two, we now have sufficient supply of tires to meet not only our current requirements but our forecast growth.

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                        On the equipment side, we’ve seen, you know, lead time slipped out from, you know, one to two years where it’s now two to three years out. And what we’ve done there is we’ve placed significant put orders for equipment. And those orders sort of go out three to four years now. And basically we’ve put

25                    orders in place to meet most of the requirements we have to meet our growth targets. So, at the moment, we think we’ve got sort of the issues of the tires and equipment pretty well covered.

 

                        Moving onto Slide 30, and certainly the industry is very challenged at the

30                    moment with cost pressures. I’m going to give you some idea. In the last 12 months we have seen still reinforcing prices go up by some 60%, tire prices up by 15%, our concrete products up by 10% or 15%, and certainly labor increasing by up to 10%, in some areas more than 10%. So very, very significant cost increases.

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                        And we’ve got a number of measures in place to overcome and mitigate this. I mean certainly we’re using our growing size to get some buying power in place. We are starting to do a lot more direct overseas sourcing and direct supply from China is now becoming a major source of consumable for us.

40                    And we’re also putting a lot of time and effort into discussions with our customers and ensuring that our contractual arrangements allow us to pass through cost increases if they’re outside our control. And I think they are testament to our capacity to manage these area risks that we have been able to maintain our margins over the last 12 months. So we’ve been able to do

45                    this with very rapid cost increases. It probably says we have got under control.

 

                        Onto Slide 31 which is really just all about the credit crisis. And I think, you know, Ross has probably pretty well covered this. But there’s probably three key points I’d like to sort of outline.

 

5                      Certainly, first off, we have the debt and operating lease facilities locked away in a sufficient size to meet our growth plans over the next few years. So we’re not out having to renegotiate with banks.

 

                        Our balance sheet is in the strongest position ever.

10

                        And thirdly, if you look at our customer base, we have very, very low credit risk with any of our customers. So we think we’ve got that area pretty well under control.

 

15                    Across to Slide 32 which is just about labor, and certainly, labor remains probably our biggest challenge. But with the strategies that we have in place and the focus we have on recruitment and retention, we think we are making good progress. Certainly in the last 12 months, we have significantly reduced our turnover rate which improves our retention. And a lot of focus on our key

20                    programs for apprentices, indigenous employment, graduates, and professional recruitment from overseas. So, again, we think we’ve got that pretty well in hand.

 

                        Just moving across to Slide 33 and I’ve just got two quick slides here on

25                    Ausdrill. For those of you that have been out of way through all that presentation this morning, you will be aware that we have announced an increase in our offer for Ausdrill. So back in May, you recall that we made an offer of 1.45 MacMahon shares for each Ausdrill share. We have this morning increased that offer now to 1.65 MacMahon shares for each Ausdrill share.

30                    So that’s a sum 13.8% increase in the script consideration. And our original offer provided almost a 33% premium to Ausdrill’s pre-bid price.        So by putting them together, we are now roughly offering now 50% premium for Ausdrill. We think that that is a very attractive premium for Ausdrill shareholders and is certainly at the higher end of any takeover premiums this year.

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                        In terms of our offer, we are now saying the price is final subject only to a competing proposal emerging and a determination in relation to Ausdrill’s final dividend. And if you ask what I mean by that, what we’ve actually said with our increased offer is that Ausdrill shareholders will be entitled to keep the

40                    final 2008 Ausdrill dividend of at least 5 cents a share. And what we’ll do is wait until we see what dividend they do declare over the next week and a half, and then we’ll make a decision on what amount we’re going to allow them to keep. But certainly, we’ve now got a final offer on the table. We’ve put in place an institutional acceptance facility, which we’ll hope get the wholesale

45                    shareholders on board. And we think it is a very, very attractive offer. And I suppose just repeating what we’ve said before on Slide 34, the offer is very compelling for Ausdrill shareholders. There is certainly no alternative bid on the table. Ausdrill’s board has filed to and continues to file to deliver our independent experts report. The takeover premium is certainly well above the average for this year. And what we’re saying to the Ausdrill shareholders is that it both gives you a significant premium upfront, but you also get the opportunity to joining with MacMahon which is a much larger (inaudible) (00:34:34) company and has delivered greater earnings per share.

5

                        For MacMahon shareholders, what does it deliver us? Well certainly, it gives us increased scale in contract mining, it gives us an entry into exploration drilling, expands our reach into Africa, and makes us overall a much, much substantial organization. Currently, the offer is due to close on 16th of

10                    September. So it’s really now back in the hands of Ausdrill shareholders, and we’ll see how that progresses over the next couple of weeks.

 

                        Moving onto Slide 36 which is really just a very quick summation of our strategy in the short, medium and long term. Short term, which is really what

15                    we’re doing right now, and that’s to grow our presence in the ion ore and expand our opportunities in coal, and to grow our East Coast infrastructure portfolio. So no change there.

 

                        The medium term which is really, you know, from now out to the next two

20                    years, we want to get more and more into these large infrastructure projects. And our main avenue there will be the MOU we have with Leighton. We do want to grow our presence overseas. We’re making some real inroads in Asia and we’re starting to look further our field including Africa. And we do want to deliver acquisitions, and obviously Ausdrill is the number one acquisition on

25                    the table at the moment. And the longer term which is sort of giving out from now to five years, we want to certainly establish our position as a leading contractor throughout Australia and to be able to deliver profitable overseas operations with blue-chip customers. So a fairly simple strategy but consistent with what we’ve been doing for the last three years.

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                        Then over to Slide 37 which is really the wrap-up. We see that we are well positioned for growth. I mean the outlook in the sectors we’re operating is strong. There are some very good emerging overseas opportunities and we do have the balance sheet capacity to both grow and to pursue acquisitions.

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                        So our guidance hasn’t changed. Not withstanding what’s going on in markets we still see that for financial year 2009 that we will get profit growth in the range of 20% to 30%. We’ve already got 1.2 billion of revenue secured, as Ross mentioned earlier. We expect to be able to maintain a profit after-tax

40                    margin of around 4%.

 

                        And really, the only issue for us this year is the timing of new work. I mean our growth will be in the 20% to 30% range. But if we can bring the new work on earlier, we’re likely to get closer to the 30% than the 20. And when you pull

45                    all that together, you’re looking at an organization that will go from $48 million, $49 million profit this year to around 60 next year, which is a pretty healthy level of growth and that’s without acquisitions.

 

                        So, in summary, business is going very well. Outlook is good. We see more years of good growth ahead of us. And that concludes the formal presentation. Thanks everyone for attending. I mean obviously if you come up with questions later, you know how to contact us and we’ll be happy to take

5                      them.

 

                        So, thank you for your attendance.

 

INTERVIEW CONCLUDED

 

 

 

 

Contact brr@brr.com.au for more information

 

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