Australia and
New Zealand

During the last financial year the Australia and New Zealand business was restructured into two key sectors of Resources and Energy, and Infrastructure.

Proportionately consolidated revenue (including our share of revenue from joint venture operations) grew by 3.3 per cent to $2.6 billion, supported by a strong infrastructure services sector and a six-month contribution from Easternwell.

The business secured a significant volume of new work during the period, including major contracts with the South Australian and New South Wales governments. This momentum is expected to continue as our renewed business development function pursues a growing pipeline of opportunities.

The acquisition and integration of Easternwell is consistent with our strategy to expand our services and capabilities into adjacent sectors to pursue higher value work.

Excluding Easternwell, the revenue for the Australia and New Zealand region declined modestly by one per cent compared with last year, mostly due to a reduction in work volumes as government stimulus packages concluded. However, a strong cost and operational focus ensured that despite this, and the continuing subdued macroeconomic environment, EBITDA margins for the region, excluding Easternwell, grew to 5.8 per cent.

Resources and Industrial

The resources and industrial segment saw revenue growth of four per cent (excluding Easternwell) compared with the same period last year. Margins were steady as a number of new projects commenced, including BHP Westcliff Mine Raw Coal and Reliability Improvement Project, the Caltex Port Hedland construction contract, the Alcoa maintenance contract at its Pinjarra alumina refinery in Western Australia and our contract with Aurora Cogen.

The business continues to pursue opportunities in the upstream oil and gas sectors as well as expanding niche services across other sectors. In April, we expanded our relationship with plastics and rubber manufacturer Qenos in Victoria to deliver significant capacity growth and plant modernisation to its Altona facility. We also commenced a pilot program with Australia Pacific LNG to develop in-field inspection and maintenance solutions for existing coal seam gas assets.

The businesses outlook is positive with increased activity expected in the next 12 months, particularly in projects and shutdowns in the hydrocarbons sector. The Company’s position as a global liquified natural gas operations and maintenance service provider, together with synergies from the acquisition of Easternwell, place us well to secure opportunities as projects progress and plants come on line.

The acquisition and integration of Easternwell has allowed earlier engagement with clients in the asset lifecycle. It deepens our exposure to growth in the iron ore, conventional oil and gas, and coal seam gas markets at a time when Australia’s expanding resources sector is entering a period of converging up-cycles across a broad range of resource commodities.

Once in a 100-year flooding across Australia’s eastern seaboard and Western Australia led to operational delays for Easternwell and impacted its earnings contribution in the second half of the financial year. Importantly, there was no loss or damage to equipment from these events.

Easternwell’s Energy division delivered to expectations. It continued to grow and secure key opportunities during the period. A highlight from the period was the award of a new contract with BG’s QGC in Queensland’s burgeoning coal seam gas region.

Easternwell’s mineral drilling operations secured a contract with Fortescue Metals Group for drilling services and associated equipment at its mining operations in Western Australia. Drilling operations at BHP’s Olympic Dam site in South Australia recorded good volumes during the period, positioning the Company to provide additional equipment and resources as demand increases.

Easternwell also began drilling for the coal mining sector in the Bowen Basin of Queensland by securing long-term contracts with Anglo Coal and BMA, with interest from other major operators in the region. The business is well placed to participate in the increased activity in this region as demand for coal exports continues.

A strong pipeline of opportunities exists in the industrial and manufacturing sector for long-term maintenance services, building on our strong track record in this market of long-term relationships with blue-chip clients. Our presence in the power generation market continues to grow with successful tenders for boiler overhaul services for Delta Electricity at Vales Point and Munmorah power stations.

Infrastructure Services

The rail business experienced a significant increase in activity through our client Australian Rail Track Corporation as the Federal Government’s productivity improvement program began. Upgrade work on rail infrastructure in South Australia and the eastern rail corridor between Melbourne and Sydney will increase the efficiency of rail infrastructure, allowing increased freight loads. Adverse weather also delayed some work volumes.

A highlight during the financial year was a new eight-year $567-million contract with the South Australia Department for Transport, Energy and Infrastructure to operate and maintain Adelaide’s bus transportation network across two of the city’s six public bus regions.

Easternwell is a leading Australian well services and well construction business. It provides services including well servicing and maintenance activities, coal seam gas drilling, production-related iron ore mine dewatering, backfill drilling and near-shore geotechnical drilling services. Easternwell employs more than 900 people across Australia and operates 75 rigs, with blue-chip customers such as BHP Billiton, Cameco, Chevron, Fortescue Metals Group, Rio Tinto, Santos, QGC and Woodside.

The water business continued to deliver strong organic growth from existing long-term contracts and new business wins. These included a new contract with South Australia Water totalling $1.1 billion through a 50 per cent joint venture with Degremont and Suez Environnement, which began operation in July 2011. The business also secured an $80 million extension of our Sydney Water contract for a further two years.

The roads business provides asset management services to Lane Cove Tunnel in Sydney, CityLink and EastLink toll roads in Melbourne and significant highways in New Zealand for the NZ Transport Agency. Road activity in New Zealand has shown little growth due to the NZ Transport Agency’s temporary reduction in capital expenditure.

The power business provides transmission and distribution services as well as brownfield capital upgrades to key clients across Australia and New Zealand. It saw healthy revenue growth from new contracts, such as Aurora Cogen in Victoria, and improved operating leverage from previously underperforming contracts.

Work volumes for the power business in New Zealand continued to be strong. The electrical services New Zealand business is the largest high-voltage service provider in New Zealand and provides services to Transpower, the national transmission grid asset owner. Activities associated with the backlog of capital projects continued to provide sustained work volumes and are expected to continue for some time.

Our long-term presence in the telecommunications sector in New Zealand was reinforced by securing two major contracts with network providers. A 10-year NZ$260-million contract was secured to provide telecommunications services to Enable Networks. It forms part of the New Zealand Government’s commitment to invest NZ$1.5 billion over 10 years to rollout the Ultra Fast Broadband (UFB) network to 75 per cent of the population. Further to this, a 10-year NZ$202-million contract was won to provide telecommunications services to UltraFast Fibre Limited (UFL) – a subsidiary of WEL Networks.

The re-build process following the Christchurch earthquake is currently focused on critical services such as sewers, water reticulation, retaining structures and road repairs. The New Zealand business has an existing presence and capability in Christchurch and is positioned well to participate in the re-build program.

Property and Facilities Management

During the year, we were successful in securing two new defence industry contracts including a six-year $35-million contract with ASC on behalf of the Air Warfare Destroyer (AWD) Alliance and a three-year $33-million contract with the Department of Defence to provide Comprehensive Maintenance Services (CMS) in central Northern New South Wales. The business also renewed a contract with the Western Australia Department of Transport, extending the existing 15-year relationship for a further six years.

In February, we secured a five-year $540-million contract with long-term client NSW Department of Services, Technology and Administration. Transfield Services will provide facilities management and cleaning services to public schools, TAFE colleges and government buildings across an expanded footprint that now includes the Hunter/Central Coast, North and Western Sydney regions.

We strengthened our presence with local government and industrial sectors, securing work with the City of Melbourne and Amcor. In March, the business combined the capabilities of Transfield Services and APP to win a contract with the Federal Department of Climate Change and Energy Efficiency to inspect 50,000 homes nationally under the Home Insulation Safety Program.

Strategically, the business has established a corporate real estate offering with APP to utilise joint capabilities to provide an integrated service approach to the market and build on our offering to existing clients.

Our long-term relationships with local, state and federal government agencies provide enduring, reliable revenue streams through the full economic cycle.

The effect of the conclusion of government stimulus packages on the Property and Facilities Management business is expected to be offset in FY12 by significant wins during the FY11 period. The business also has a healthy pipeline of opportunities that positions it well for future growth.