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Investor Day
21 May 2013
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GraemeHuntMD & CEO
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Resources | Energy | Industrial | Infrastructure | Property | Defence Transfield Services (Australia) Pty. Limited
This presentation is for information purposes only and is a summary only. It should be read in conjunction with the most recent financial report. The content
of this presentation is provided as at the date of this presentation (unless otherwise stated) and remains subject to change without notice. Reliance should
not be placed on information or opinions contained in this presentation and, subject only to any legal obligation to do so the Company does not have any
obligation to correct or update content.
This presentation does not and does not purport to contain all information necessary to an investment decision, is not intended as investment or financial
advice and must not be relied upon as such. Any decision to buy or sell securities or other products should be made only after seeking appropriate financial
advice.
This presentation is of a general nature and does not take into consideration the investment objectives, financial situation or particular needs of any particular
investor. Any investment decision should be made solely on the basis of your own enquiries. Before making an investment in Transfield Services, you should
consider whether such an investment is appropriate to your particular investment objectives, financial situation or needs.
To the maximum extent permitted by law, the Company disclaims all liability (including, without limitation, any liability arising from fault, negligence ornegligent misstatement) for any loss arising from this presentation or reliance on anything contained in or omitted from it or otherwise arising in connection
with this.
All amounts are in Australian Dollars, unless otherwise stated. Certain statements in this presentation relate to the future, including forward looking
statements relating to Transfield Services financial position and strategy. These forward looking statements involve known and unknown risks, uncertainties,
assumptions and other important factors that could cause the actual results, performance or achievements of Transfield Services to be materially different
from the future results, performance or achievements expressed or implied by such statements.
Throughout this document non-IFRS financial indicators are included to assist with understanding the Groups performance. The primary non-IFRS information
is proportionately consolidated financial information; net profit after tax; pre-amortisation (NPAT pre-amortisation); earnings before interest, tax,depreciation and amortisation (EBITDA); earnings before interest and tax (EBIT); and cash conversion (operating cash flow excluding interest and tax divided
by EBITDA). Management believe proportionately consolidated information is a more accurate reflection of operational results due to the magnitude of joint
venture arrangements in place. Proportionately consolidated results reflect the Groups entitlement to the joint venture revenues and earnings. Management
deems
NPAT pre-amortisation to be an appropriate measure of underlying cash NPAT after adjusting for amortisation of acquired intangibles. EBITDA, EBIT and cash
conversion measures are useful in understanding the Groups core operational performance. A reconciliation of non-IFRS to IFRS information is provided in
this document. This document has not been subject to review or audit by the Groups external auditors. All comparisons are to the previous corresponding
period of FY12, the 12 months ended 30 June 2012, unless otherwise indicated.
Disclaimer
3
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Format for the morning
Breakfast: 7.45 8.15am
Plenary sessions: 8.15 9.15am Graeme Hunt, Introduction & overview
Nick Yates, Infrastructure
Site tour: 9.15 9.45am
Morning tea: 9.45 10.15am
Group sessions: 10.15 12.15p
Split into 3 groups and presenters will rotate through stations :
Resources and Energy (Joe Sofra)
Business Development Case Studies (Ian Maxted)
Risk and Process (Kate Munnings, Jim McGreevy and Elizabeth Hunter)
Lunch: 12.15 1.30p
Ferry to Circular Quay 1.30 - 1.45p
4
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Introduction
TSE a well positioned business with a sound strategy
Integrated with clients operations and production Provides critical services if we stop, they stop
Enables clients to operate more productively and optimise assets
We have favourable exposures in the current market
Hydrocarbons: CSG, LNG, Cooper basin
Government outsourcing / infrastructure
O&M focus
Key focus for our management team is improving execution of the strategy
Changing and up-skilling people
Improving processes, taking out costs and improving effectiveness
Refining the portfolio, non-core assets being divested
Focus on cash generation
Responding proactively to opportunities in the current market environment catalyst for change
5
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Market environment
Growth and strong activity in sectors including: Coal seam gas, upstream oil & gas,defence,
Infrastructure operations and maintenance seeing some weakness but only at the
margins as these are essential services power, road and rail
Mining and process industries slowdown continues
Customers showing increasing cost and capital discipline across all sectors andgeographies
6
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Guidance
Net profit after tax before amortisation FY13 $62-65m
7
Previous guidance $85-90m
Restructuring costs increase to initial estimate (post-tax) ($3.1m)1
Restructuring costs further savings (post-tax) ($2.8m)2
Reduced NPAT noncore businesses (to be divested)3 ($3.4m)
Reduced NPAT core business units due to market conditions ($8.5m)
Reduced NPATcore business units due to other factors ($2.6m)
Revised guidance $62-65m
1 Initial estimate of restructuring costs in previous guidance was $9.2m, updated estimate of $12.3m2 Restructuring costs associated with accelerated cost savings3 Includes Easternwell Minerals Exploration and Middle East/Asia business4 The range of $62-65m is pre amortisation and pre $263.3m of post-tax impairment charges included in the 1H FY13 results
4
Cost savings of $26.1m brought forward
Further reduction of 113 positionsIntegration of Easternwell into ANZ R&E business
Centralisation of procurement and asset management
Operational support functions reorganised
Further back office outsourcing
Key focus for FY14 is reduction in ANZ site overheads and reducing bid value leakage
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Debt reduction Plan Update
Specific action plans and strategies in place by Region
Analysis of excess Debtors and WIP identified key customer accounts
20% reduction in Debtors days targeted over 2 years on track
Surplus assets identified to be sold, asset management centralised
Exit of non-core businesses at measured pace through FY14 15
Engagement with interested parties commenced
Discussions with JV parties ongoing (ME&A)
Gearing reduction & capital management plan
8
Capital expenditure FY14 vs FY13
1H FY13 2H FY13 FY13 FY14A$m A$m
Group maintenance capex 42.0 12.6 54.6 50*
Easternwell growth 12.8 14.7 27.5 0
Other growth capex 9.6 6.2 15.8 15
ERP system 25.6 26.5 52.1 15
$90m $60m $150m $80m
Share buy back 19.8 - 19.8 -
Cash dividends paid 46.3 15.4 61.7 TBN
Capex on-track for significant reduction in
FY14
Future Easternwell growth to be funded off
balance sheet and non-recourse, legal documents
being finalised, expect by 30 June
Capex to be brought back to historical levels
* Under review
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Business performance - execution & accountability
Changing people
Direct reports and key hires
Changing the culture, strengthening accountability
Improving talent across the board
Changing processes & enhanced systems
Risk management processes strengthened
Improved reporting internally, client facing (working capital benefits), external
Procurement centralisation to control and reduce costs
Focus on cash generation
Opportunities to assist customers in the current market
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Score card of business initiatives
Feb. 2013 Line of sight to an additional $25m in cost savings
Focus area
Integrate Easternwell
Procurement and asset management centralisation
Back office outsourcing
New models for operational supports functions and BD
Outcomes
Avoided hiring new positions staff releases to
operational roles
Implementation underway
$26.1m in cost savings
113 head count reduction
Look ahead
Sharpening bid execution
Stream line contract overhead
Value leakage reduction, with benefit
scope ~$20m EBITDA
Site level overheads in ANZ of $465m
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Technology Project Quantum
Quantum is replacing multiple fragmented processes and systems with
simplified/standardised processes and a single global technology platform Completed scope of rollout in US, 3 businesses migrated , focus now on ANZ with deployments
already underway
Progressing to overall schedule with completion due 2nd quarter 2014
Tracking materially to planned spend, benefits baked in forward forecasts/budget
Benefits relate to Speed of implementing new contracts/change to existing : Steier implementation less than 50% of
time taken previously
Significant improvement of underlying business dynamics : invoicing quicker than payment to
employees/sub-contractors (Steier)
Prevention of revenue leakage : R&E (US) equipment billing
Reduction of rework : Payroll off cycle payments in US reduced from up to 10% to less than 1%
Earlier visibility of information for commercial management
Foundation for value-add smarts for clients : in-field mobility for Gippsland Water (Infrastructure)
Direct reduction of roles previously compensating for fragmented information flows/platforms
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Nick YatesChief Executive,Infrastructure
Global Sponsor HSE
Joe SofraChief Executive,
Resources & Energy TSANZ
Global Sponsor OE&Q
Phil WrattPresident, Americas
Tiernan ORourkeChief Financial Officer
Chief Executive ME & A
Kate MunningsChief Risk, Legal Officer& Company Secretary
Elizabeth HunterChief Executive,
Human Resources
Stephen PhillipsChief InformationOfficer & Business
Services
Steven MacDonaldProject Director,
Portfolio & Investments
Graeme Hunt
Transfield ServicesManaging Director andChief Executive Officer
TSE Board of DirectorsAnthony ShepherdGraeme Hunt
Roy McKelvie
Steven CraneDoug Snedden
Diane Smith-Gander
Ian MaxtedChief Development
Officer
Organisational structure
http://localhost/var/www/apps/conversion/tmp/2000/TMD-2000-HR-9001.ppshttp://localhost/var/www/apps/conversion/tmp/2000/TMD-2000-HR-9001.ppshttp://localhost/var/www/apps/conversion/tmp/2000/TMD-2000-HR-9001.ppshttp://localhost/var/www/apps/conversion/tmp/2000/TMD-2000-HR-9001.ppshttp://localhost/var/www/apps/conversion/tmp/2000/TMD-2000-HR-9001.ppshttp://localhost/var/www/apps/conversion/tmp/8020/TMD-8020-HR-9001.ppshttp://localhost/var/www/apps/conversion/tmp/8020/TMD-8020-HR-9001.ppshttp://localhost/var/www/apps/conversion/tmp/8020/TMD-8020-HR-9001.ppshttp://localhost/var/www/apps/conversion/tmp/8020/TMD-8020-HR-9001.ppshttp://localhost/var/www/apps/conversion/tmp/8020/TMD-8020-HR-9001.ppshttp://localhost/var/www/apps/conversion/tmp/8200/TMD-8200-HR-0005.ppshttp://localhost/var/www/apps/conversion/tmp/8200/TMD-8200-HR-0005.ppshttp://localhost/var/www/apps/conversion/tmp/8200/TMD-8200-HR-0005.ppshttp://localhost/var/www/apps/conversion/tmp/8200/TMD-8200-HR-0005.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9008.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9008.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9008.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9008.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9004.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9004.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9004.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9004.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9012.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9012.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9012.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9012.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9016.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9016.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9016.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9016.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9016.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9037.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9037.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9037.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9037.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9037.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9037.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9037.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9037.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9037.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9037.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9037.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9016.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9012.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9004.ppshttp://localhost/var/www/apps/conversion/tmp/scratch_15/TMD-0000-HR-9008.ppshttp://localhost/var/www/apps/conversion/tmp/8200/TMD-8200-HR-0005.ppshttp://localhost/var/www/apps/conversion/tmp/8020/TMD-8020-HR-9001.ppshttp://localhost/var/www/apps/conversion/tmp/2000/TMD-2000-HR-9001.pps7/30/2019 01410538
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The TSE Operating Model
Enhancing shareholder value1. Shareholder Value creation Pursuing and Winning the rightopportunities
Proactive / Pre-Market Business Development
Customer needs focussed
Getting the proposal right(Solution and Price)
Potential Shareholder value destruction issues identified and
mitigated
Right people/capability and sound understanding of assumptions
and value drivers
Deliver to Planby operating with discipline, and Continually optimiseperformance
Operating Safely, strive for zero incidents
Deliver planned performance as a minimum
Incremental optimisation as part of how we operate (e.g.
Procurement)
Do it Better, Deliver More: Constantly ask "Is there a better solution or
more we can do for Customers"
Turn Win-Lose into Win-Win (renegotiate scope/model)
What else can we do for our customers (step out, leverage,
adjacent services) Enabling Systems and Behaviours
Reliable business Information (Quantum)
Safety and accountability culture
13
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Revenue and earnings by key sectors
FY12 Revenue, $3,859m by region
78%
19%
3%
ANZ
Americas
MEA
FY12 ANZ Revenue by Sector
FY12 Revenue, $3,859m by sector
FY12 EBITDA, $236m by sector
60%
30%
10% Infrastructure & property
Hydrocarbons
Mining
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$9.2bn of Group contracted revenue as at 31/12/12, plus
$2.4bn of potential contract extensions $0.9bn of new contracts announced since 31/12/12
$1.4bn of new work currently preferred or under negotiation
Dec-12 $ Dec-12 %
Alliance/cost plus/KPI based 2.0bn 22%
Schedule of Rates 4.0bn 43%Fixed Fee 3.1bn 34%
Lump Sum (D&C) 0.1bn 1%
$9.2bn 100%
Contracted revenue
15
$0.8bn
$0.6bn$0.5bn
$0.5bn
$1.2bn
$0.3bn $0.3bn$0.2bn
$0.1bn
$0.0bn
$0.5bn
$0.2bn$0.1bn
$0.0bn $0.0bn$0.0bn
$0.2bn
$0.4bn
$0.6bn
$0.8bn
$1.0bn
$1.2bn
$1.4bn
FY14 FY15 FY16 FY17 FY18+
ANZ Contracted Revenue - Dec 2012
Infrastructure Services Resources & Energy Property & Facilities Management
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Nicholas YatesChief Executive Infrastructure ANZ
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Overview
Who are we, what do we do
What is the market doing?
The outsourcing lifecycle and what are we doing to maximise profitability and market share
How are we different and why is this good
The buildings blocks for delivery and growth
Case study Harbour City Ferries
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Infrastructure ANZ financial overview
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INFRASTRUCTURE BUSINESS 2012 PERCENTAGE OF REVENUE
Total Revenue = $1,934m(proportionately consolidated basis)
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Asset Life Cycle Infrastructure ANZ
19
We have a presence across all areas of the asset life cycle
Ability to provide end to end asset management solutions
Good service portfolio mix
Source: internal analysis (based on FY13 forecasted performance)
19
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Profit & Loss FY2011 to FY2013
20
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Outsource market alive & well & likely to prosper
21
1st generation government outsourcing
Ferries Railcorp
Queensland response to audit
Roads east coast
Industrial 1st generation driven by cost pressures
Example - Aurizon
Cost pressure and competition in mature markets but room for innovation in productivity
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66% 63%
46%
37% 38%
100%
82%
67%62%
44%39%
43%
18%
34%33%38%
56%61%
37%
54%57%
63% 62%
440 6,406
593
1,969
1,028
2,660 2,611
431
3,660 5,655 5,856 3,581
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Source: BIS Shrapnel Maintenance Report 2012, internal analysis, AER (PTRMs), Annual Reports
Roads
Non-residential buildings
Mining
Heavy manufacturing
Light manufacturing
Electricity (T&D)
Rail infrastructure
Ports
Water & wastewater
Gas pipelines supply
Telecommunications
Defence
Contract
In House
Transfield Infrastructure presence
Transfield already has a presence in key markets
22
100% =$ 33bn
MAINTENANCE EXPENDITURE 2012-13 $ MILLIONS (2009/10 PRICES); PERCENT
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Generational Outsourcing
1st Generation
understanding cost base and operation model
2nd Generation
innovation and cost reduction
3rd Generation can go two ways
(a)
maturity of relationship, target mutually aligned incentives
KPI focus and flexibility to respond to business needs broadening of input across asset lifecycle
removal of check the checkers
focus on monitoring of relationship
(b)
asset and cost position clear and under control
push for cost reduction leads to price, margin pressure and increased risk transfer
commoditisation wins out over value add (seen as a nice to have)
the Oscar Wilde factor
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Margin pressure addressed through innovation &productivity
Commodity hell
Productivity
Solutions NirvanaHigh
Low
Margin
Cost focus Value focused
What leads the buying?
Innovation
Technology
Work methodologies
Preparedness to engage
Whole of business outlook
Qualitative skills e.g. IR
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What makes us different
25
Qualitative as well as technical skills
Technical skills a must but only table stakes
Good up front skills in advisory, project management, design foot in the door servicing
Exceptional project management and complex labour and logistical skills, example - HISP, NBN, Nauru
Strong focus on qualitative skills:
Commercial
Stakeholder Management / Political understanding
Focus on innovative labour and technology solutions to minimise cost not margin
Going out of our way to understand how the clients business works rather than just how ourcontract works
Example Boral
Agility and structure to deliver non-siloed packaged services
So What
These are the skills and attributes which will allow us to maximise the potential of the market that isemerging
These are the skills and attributes that position us well to deal with the commoditised slippery slope
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Infrastructure ANZ
26
End to End
Asset
Management
Revenue
Leakage/
Cross Sell
TechnologyPartners
New Service
Markets
People
Cost
Reduction
Discipline -
Implementation
Delivery Growth
Building Blocks for Delivery Certainty & Growth
We have a plan
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Infrastructure ANZ
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People Upgrade gene pool
80% of everything in business is to do with people
Example E&C New leader
New management team
Direct financial result turnaround and growth
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Infrastructure ANZ
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Discipline - Implementation
Bidding / Estimating
Commercial
Financial Management Reporting / Forecasting
Performance Improvement Flying Squad
On the ground Supervision
Example FMG Diesel Terminal, Pilbara
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Infrastructure ANZ
29
Cost Reduction
Business overhead review layer removal
Site overhead review E&Y
Example HSEQ restructure, business line to geographic
More effective model
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Infrastructure ANZ
30
End to End Asset Management Lack of silos allows bundling of service provision
Example QGC
BP
Asset management planning Harbour City Ferries
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Infrastructure ANZ
31
Revenue Leakage / Cross Sell Restructuring along industry and services lines
Example Electrical Contracting Services into:
FM
QGCWater
Example Traffic management
Water
Rail
Telco
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Infrastructure ANZ
32
Telco Water Transport
Project Management/IV
Electrical
E&C
Project Electrical E&C Telco Water Transport
Management
Now
Then
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Infrastructure ANZ
33
Technology Partners
Use of data streams
WIPRO
CSIRO
NICTA
Example Water Industry failure data, predictive maintenance algorithm development WA Watercorp
Example Development and rollout of new field mobility solutions Gippsland Water
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Infrastructure ANZ
34
New Service Markets
Core skills large workforce management
logistics
innovative delivery models
IR management skills
Example Railcorp - cleaners
LMM new labour model
Example land management advisory
Mornington Shire
Department of Housing NSW
Asset management advisory Boral
Health outsourcing
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Summary
Division Infrastructure
Client NSW Government
Partner Veolia Transdev 50/50 JV
Contract duration 7 yrs to 2019, plus extensions
Total revenue $800m over life, plus extensions
Maintenance and operation of Sydneys ferries under a
7 year $800m contract with potential for extensions
1st generation contract where Transfield Services has a
strong track record of managing multiple stakeholder needs
Government Relations, Industrial relations, customer
delivery while delivering operationally
JV offering delivers client a compelling set of local and
international skills and knowledge
Reductions in - Sick Leave
- LTIFR
- Asset Management / Maintenance Costs
Increases in - On time running
- Patronage
- Fleet reliability
- Efficiency
Qualitative - No bad press
- Stakeholders happy
- Winner of IPA National award for Operator
& Service Provide Excellence
Case study: Harbour City Ferries
S
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Summary
We are a strong stable business
Market tight but hard going for our clients does not necessarily mean the same downside for us
We have the capability
We have the market knowledge and understanding
We are well positioned
We have a plan that specifically addresses the current market dynamics
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Joe SofraChief Executive, Resources & Energy
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Hydrocarbons
64%
Mining
17%
Other
19%
Revenue (prop cons.)
Hydrocarbons
72%
Mining
18%
Other
10%
Operating EBITDA
Strategy
High aggregation of service per client
Service delivery integral to client operations
Value through improved productivity & asset
optimisation
Two operational engines
End markets/sectors with sustainable returns & growth
Well development and service O&M, asset and production support
O&G, CSG, LNG, lesser extent iron ore and coal
Key Metrics
Revenue $1.1b
Backlog $2.1b
5,000+ staff
Overview Resources & Energy ANZ
Asset Support Services (FY12 to FY13E)
35% YoY growth across portfolio
40% YoY growth in hydrocarbons
Easternwell(FY12 to FY13E)
85 - 90% EBITDA contribution hydrocarbons
25% YoY growth in hydrocarbons
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Common customers, two operational engines
2 service engines, different operating model,common customers
100% commonality in focus sectors
60% of customer portfolio common, 75% byEBITDA
Immediate cost out, integrated CSG
10% OH reduction recognised, more to come
Increasing delivery efficiency
Characteristics Asset Support Services Easternwell
Service Type Labour Based Specialist
Operating Margins 5 to 15% 20 to 30%
Capital Intensity Low Medium
Revenue split 70% 30%
Margin split 45% 55%
IntegratedService
CommonCustomer
EasternwellAsset
SupportServices
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Established presence in growth regions
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Fit for a cost constrained environment
People
Management capability 80% new to roles, 60% new to Transfield
Contract & business management level capability upgrade
Restructured to heighten customer focus, delivery clarity
Layer removed
Delivery focus - operational performance, risk management. & accelerate cost out
Customer sector focus improving customer selectivity & engagement
Cost constrained environment
Cost efficiency & productivity service aggregation
Focus on cash generation, profitability, capital utilisation
Non core asset/facility rationalisation
Improve returns
Maximise return from contracted, performance improvement Productivity gain share (revised commercial models)
Increased market share through adjacent services
New contracts in key growth sectors
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Service Delivery Configured to Client Critical
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Supporting project development & setting up for operation contracted services for QGC
Well completions & servicing Construction of well site, field compression & flowlines
Upstream field maintenance
Camp management
Supply chain management & fabrication
Logistics human, equipment & material
1,850 Transfield personnel
(estimate at peak)
LNG A t S i O t iti t 4
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LNG Asset Service Opportunities next 4 yearsApproximately $200Bn of committed assets into Operation
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Project Sector/Region Capacity First LNG Capex
Chevron Gorgon Conventional O&G / WA 15MTA (3 trains) 2015 $50B
Chevron Wheatstone Conventional O&G / WA 8.9MTA (2 trains) 2016 $30B
Shell Prelude Floating LNG / WA 3.6MTA (1 train) 2016 $12B
Inpex Ichthys Conventional O&G / NT 8.4MTA (2 trains) 2016 $34B
Queensland Curtis LNG
(QCLNG)
CSG / QLD 8.5MTA (2 trains with 3rd
expected to be sanctioned)
2014-2015 $20B
Gladstone LNG (GLNG) CSG / QLD 7.8MTA (2 trains) 2015-2016 $18B
Australian Pacific LNG
(APLNG)
CSG / QLD 9.0MTA (1 train) 2nd train will
be sanctioned 2Q 2012
2015 $ 20B
Arrow Energy LNG CSG / QLD 8.0MTA (2 trains with 3rdexpected to be sanctioned)
>2017 $15B
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Ian MaxtedChief Development Officer
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New Defence Contract
Land Materiel & Maintenance
Contract signed 3rd May 2013
CASE STUDY -
Growing Profitable Revenue
Through Early Client Engagement
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Background
What We Currently Do for Defence
Land Materiel Contract
Joint Logistics Units
Other Examples of Recent Wins
Key Themes of Wins and Our New Approach
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Background
The TSE Operating Model
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The TSE Operating Model
Goal:
Shareholder Value creation
How?Pursuing and Winning the rightopportunities
1. Proactive / Pre-Market Business Development
2. Customer needs focussed
Key Points
We want to market our services in value terms not as a
commodity cost item.
By engaging with clients (existing and new) prior to market
who recognise this value we can better influence and
help define the brief.
This makes the commission successful for clients as effective
and efficient with cost savings whilst making sustainable andprofitable for TSE.
The following will demonstrate where we have done this to
date. The plan is to broaden across all of TSE which will
demand a change of approach and personnel in some
instances.
Some of what we do
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Some of what we dofor the Defence Force - $200M per annum
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Refuel fighter jets
3 million meals/annum
Maintain aircraft arrestor systems that allowUS Navy F-16 fighter aircraft to land at RAAFWilliamtown
Maintain power supply and life supportsystems for ATC East & Afghanistan
Deploy fully-compliant airfield fire fightingand rescue teams to remote bases
Maintain Defence ranges and training areasacross a land area greater than the size ofEngland
Run a pub, TAB, bank, bowling alley, postoffice and general store
Conduct battle runs, remotely controllingtargets from the rear of an Abrams tank
Integrated management of security, stores,accommodation and services
Naval vessel maintenance
d l
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Land Materiel Maintenance Contract
The Department of Defence, Joint Logistics Command (JLC) entered into
a Land Materiel Maintenance (LMM) Services contract with TransfieldServices (Australia) on 3 May 2013
The contract is for an initial term of six years, expiring on 30 June 2019,
with options for five 1 year extensions. Approximate annual revenue
$40M per annum
It is a new model of delivery, splitting warehousing and distribution &
maintenance into two separate contracts
This new model was trialled with TSE on a small scale on the Singleton
site before Defence went to market
Joint Logistics Command is the capability part of Defence. A vital new
part of Defence for TSE
d i l i C
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Land Materiel Maintenance Contract
The role is to work in collaboration with Defence to optimise themaintenance of key parts of Defence capability including:
Armoured vehicles; light, medium and
heavy general transport vehicles
Fire fighting vehicles and equipment
Engineering plant equipment
General equipment
Aerial delivery equipment
Weapons- including direct and indirect
fire weapons and small arms
Ground based air defence equipment
Electronic instrument, radio and test
equipment (EIR), and
Limited range of maritime materiel (i.e.Army watercraft and marine
equipment)
L i f J i L i i C d B f LMM
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Location of Joint Logistics Command Bases for LMM
OTHER EXAMPLES
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OTHER EXAMPLES
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Warmum (Indigenous Camp) - Rapid mobilisation in response to Natural Disaster
in a culturally sensitive and remote
location to operate a temporary camp facility
within ten days of notification (2500 NE Perth/
1200KM SW Darwin)
Boral/Amcor - Work with a new procurement department
to help develop a first generation outsourcingmodel. Improved risk, compliance and systems
in addition to a more cost effective delivery.
OTHER EXAMPLES
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OTHER EXAMPLES
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Nauru Processing Centre - Rapid response, proven logistic capability,
culturally sensitive, proven ability to interface
with Defence
Ferries - As presented today
Railcorp (NSW) Cleaning Contract - Assist in cultural change to upgrade quality of
stations and trains safety, large workforce,
environment
Mornington Peninsula Shire Council - Long term client where we upgraded services
levels and models
KEY THEMES
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KEY THEMES
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Prior to opportunities going to market defining our services with existing and potential clients in
value and risk mitigation terms and not as a commodity.
The value proposition exists within TSE. We need to better identify and market this to clients. Not
sell the task (commodity) but the value.
To focus on those clients that are mature enough to recognise the value proposition.
The models while clearly defining the contractors responsibilities are built on a collaborative joint
approach, recognising the clients business/policy objectives.
This demands a change of approach and personnel. Less reactive to tender and more proactive to
clients pre-market.
The plan is to build upon the recent successes that had higher yield and better client outcomes
across all of TSE.
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Elizabeth HunterChief Human Resources Officer
I i d li i bilit
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Improving and aligning capability
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To deliver our strategy & client requirements we have changed our
professional, management & leadership profile
Clear improvement in aptitude scores of new hires
relative to external benchmarks
2009 2010 2011 2012
Average
Percentile
We are shifting culture through an innovative
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program directly aligned to business imperatives
Top 200 change program +
Follow-up coaching and interventions
Phase 1: Build the foundation
Jul 2011 Oct 2012
Phase 2: Accelerate the change
Oct 2012 - ongoing
Expectations of leaders articulated
Common language and tools
Shifts in behaviours and mindsets
Aligned people management systems and processes
Technical
Outcomes Tackling real business challenges
Leaders accelerate shifting the limiting patterns,
mindsets and behaviours in the organisation
Systems and Processes e.g.
Adaptive
Key interventions to tackle must win business challenges
Revised incentive scheme
Quantum
Shared Services Performance expectations
Embed new capabilities, systems and processes e.g. Quantum
Governance and Assurance Targeted capability reviews and change outs
What we doand how
Mindset andbehaviour shifts
BusinessImperative
ChangeJourney
Commercial mindset:
Profitably efficient use of human
and physical assets
Risk management changed
customer demands
Discipline and accountability:
Clear roles and responsibilities
Consequence management
Customer and Shareholder delivery: Measures: Financial, Safety,
Customer, Development
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Our program is achieving results mindsets &
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We also extend this innovation to assist development of our client businesses
5959
p g gbehaviors are shifting
2013 Rating given by Senior Leaders2011 Rating given by Senior Leaders
Strategic Growth OrientationCommercial thinking, Profitable
growth, Higher margin, Customer focus,
Integrated solutions
DisciplineProcesses, systems,
procedures, right people, right role
Performance OrientationBusy work , urgency/speed,
Hard work, Expertise
Performance OrientationValue-add, Execution, Accountability,
Deliver on Promises , Smart work
(not busy work), Expertise
2011 2013
Low
Performance
High
PerformanceStrategic Growth Orientation
More of the same,
Customer only focus,
Top-line growth
DisciplineLoose processes,
some compliance with
systems, procedures,
manual process solutions
Low
Performance
Low
Performance
High
Performance
HighPerformance
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Jim McGreevyExecutive General ManagerEngineering and Construction
Engineering & Construction turn around achieved
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Significant change in people, process and risk approach Business unit moved from loss to profit making in less than 18 months
Cash generation matching profit generation
People majority of senior team replaced Accountability
Relevant experience
Risk management allocation and pricing Understand the risk, its quantum and who is best placed to manage
Sub-contractors, e.g. for civils
JV partners, e.g. Clough for QGC upstream
Pricing and sensible discussions with clients
Sensible people
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Engineering & Construction turn around achieved
Case study QGC upstream in JV with Clough
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Case study QGC upstream in JV with Clough
Transfield Services in 50:50 JV with Clough LimitedRisk
Management
Commenced October 2012
$80m estimated value, with significant potential follow on work
Early site civil works and front end planning work for the construction phase of
compression facilities in central Queensland for QGCs Queensland Curtis Liquefied Natural
Gas (QCLNG) Project
Subject to mutual agreement work may extend to include construction and fabrication of 8field compression stations and 2 central processing plants.
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Kate MunningsChief Risk and Legal Officer
Shareholder Value Creation and Protection New OpportunityG
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Key Principles:
Focus :Ensure we focus our resources and energy to ensure we pursue the right opportunities and get thereally important stuff right.
Performance Accountability Culture: Visible and predictable performance management consequences forpatterns of out/underperformance.
Risk Based Financial modelling& pricing: Consider both the expectedfinancial outcomes and their certaintyby analysing the credible envelope of alternative financial outcomes.
Value Drivers: Deepened analysis and understanding of the Commercial Model of the opportunity andquantification of TSE exposure to key value drivers.
Capability: Objective assessment of our proposed team experience and TSE Group performance record withsimilar Scope, Commercial Model and Delivery Solution.
Quality/Consistency: Estimate builds based upon standardised inputs, methodologies and valid
benchmarking.
Assurance Review: Robust and ongoing independent review & challenge during proposaldevelopment/negotiation, and verification during Transition into operations.
Value Leakage: Track & report any leakage of Value or deterioration of commercial risk controls from bidapproval>signing>transition>operations.
Governance process
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Risk Based approach to Value Drivers &Financial Modelling
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What is the problem?
The commercial models have changed in markets that traditionally used cost reimbursablemodels.
Proposal P&L and Balance Sheet alone dont indicate how certain the expected financialperformance is.
Commercial Models are not always what they seem....
E.g. Schedule of Rates contracts butwith no fixed payments and no volume guarantees, or Contractorrequired to provide fixed price estimates for work packages based on unit rates.
E.g. Fixed price construction contracts butwith 80%+ of direct cost/schedule risk exposure passedthrough to competent subcontractors on back to back head contract terms.
What is the solution? Define / explain Commercial model in terms ofTSE exposures to key value drivers
Ensure Base Case, upside and downside assumptions underpinning the key value drivers arecredible and supported by data/benchmarking or contractual terms which limit exposure
Quantify impact of this uncertainty range on expected (Base Case) financial performance i.e.How wrong might our key assumptions credibly be and what is the financial impact of this?
> Tornado Chart
Financial Modelling
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Tornado Chart - How wrong might our assumptions be andwhat is the resulting financial impact
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what is the resulting financial impact
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New Assurance Function - Purpose
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With changing commercial models, a change in approach to the assessment oftenders is required.
The Assurance function will assist Managements decision making during thetender process by:
Providing an appropriately robust and independent review and analysis of newopportunities and ensuring material issues are referred to the Business Manager;
Ensuring that the information presented to the Business Manager is clear and concise,is supported by facts and provides a reasonable reflection of key material risk/rewardissues and value driver sensitivities;
Provide independent and unfiltered advice/opinion to Business Manager to assist withhis/her decision making;
Maintain traceability record of commercial & legal issues raised during RFP/contractreview, the assessment of the materiality of risks, and recommendedresponse/rationale.
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Thank you
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