McConnell Dowell Group Annual Review 2021 1 Making a better life for our people 2 A n n u a l R e v i e w 2021
INTRODUCTION Contents Introduction 01 Message from our CEO 02 Group Highlights 05 The McConnell Dowell Group 06 Group Structure 07 ESG Framework 08 Community Engagement 10 What is Creative Construction? 12 60 Years of Creative Construction 14 Creative Construction Today 16 2021 Project Highlights 18 Kidston Pumped Storage Hydro 20 Mordialloc Freeway 22 Regency to Pym St 23 Puhinui Station Interchange 24 Modbury Hospital Upgrade 26 Beaumaris Secondary College 27 Echuca Moama Bridge 28 St Marys Bay Outfall 30 Old Mangere Bridge Replacement 31 Batangas LNG Terminal 32 Jurong Regional Line - J108 33 Financial Statements 34 Portfolio breakdown 36 Directors' report 38 Financial statements 41 Contact Us 99 *All values are in AUD unless otherwise stated ** All images displayed in this document were taken in accordance with relevant COVID-Safe guidelines at the time the photo was taken.
McConnell Dowell Group Annual Review 2021 1 1961 Jim Dowell and Malcolm McConnell, two talented, creative individuals with a powerful drive to make things better and so began the construction company, McConnell Dowell. When two young entrepreneurial engineers began work on their first project in New Zealand 60 years ago this year, they were armed with a small cache of tools and a big vision. As they laid those first drains, footpaths and roads, Malcolm McConnell and Jim Dowell may not have realised it at the time, but they were also laying the foundations of what would become a multi-national, multi-disciplinary contracting organisation - and a six-decade journey of innovation, growth and success. Today, McConnell Dowell has a network of offices across more than 15 countries, employs over 3500 people, and has capabilities in building, civil, fabrication, marine, mechanical, pipelines, rail, and tunnelling construction. Celebrating 60 years of Creative Construction Click the play button to watch our founders’ story.
INTRODUCTION 2 Message from our CEO • Revenue grew by over 50% to $1.47 billion • Underlying operational earnings of $28 million and EBITDA $54 million • Return on shareholders funds of 14.5% and a return to paying shareholder dividends • Work in hand up to $1.87 billion with over $1.5 billion new work won in the period. • Strong liquidity position and cash conversion with $172 million in the bank and minimal debt • Bonding & bank facilities $560 million with strong support from our financial partners • Preferred positions on prospects worth over $1.7 billion plus $1.8 billion submitted tenders outstanding (as at 30 August 2021) • Clear pathway to revenue and profit growth in FY22 Key Highlights Operational Performance The June 2021 financial year was a successful one for the McConnell Dowell Group with the business delivering an operational profit for the fourth consecutive year. The Group continues to effectively navigate the complexities and challenges imposed by the COVID-19 pandemic and the underlying market opportunity across its footprint remains strong. Australia continued to be the primary driver of the McConnell Dowell Group’s growth in FY21, with revenue more than doubling compared to the prior period. Revenue in South East Asia grew in FY21 and increased work in hand will drive continued revenue growth. Revenue for Built Environs decreased in FY21 due to a lack of new work won previously, however momentum for the business is growing and the business has secured new work in Victoria for the first time. New work won and revenue were lower than expected in New Zealand, primarily due to impacts of the COVID-19 pandemic. The proactive approach to overhead management, coupled with strong revenue growth has seen the Group’s EBIT trend upwards as economies of scale are realised. The diversity of the Group’s technical capability and market sector participation continues to benefit the organisation, and judicious business development and disciplined tendering resulted in new contract awards amounting to $1.5 billion. This was despite the delays in the awarding of some projects as a result of uncertainty surrounding COVID-19. 1972 In 1972 the reticulation of gas in the City of Geelong gives McConnell Dowell a springboard into Australia.
McConnell Dowell Group Annual Review 2021 3 Australia The Australian construction sector remained operational despite various state-based COVID-19 lockdowns. Revenue and operating earnings for the Australian business unit both increased by more than 100%, with revenue growing to $981 million. Collaborative contracting approaches, such as alliances and early contractor involvements, continued to be preferred by many customers, reducing the overall risk profile for the business in Australia. The business was awarded projects in all regions across Australia and in all its specialist capabilities, highlighting the diversity of the business unit. Additional water and energy sector opportunities began to emerge, and this trend is expected to continue as climate change and energy diversification becomes more pressing and prevalent. Contracts awarded include the Kidston Pumped Hydro Storage and BMA’s Hay Point Coal Terminal projects in Queensland; the Lake Way, Karlawinda and Murrin Murrin gas pipeline projects in Western Australia; the Overseas Passenger Terminal in New South Wales; and the Granite Island Causeway Renewal in South Australia. In addition to the above, the business secured additional works packages on the Western Program Alliance in Victoria, Public Transport Program Alliance and the SA Water Frameworks in South Australia. South East Asia Revenue in South East Asia increased by 24% to $165 million despite the uncertain market conditions and COVID-19 related lockdowns across the region. The business unit secured the full scope of work on the Jurong Regional Line (J108) project for Singapore’s Land Business Unit Overview Transport Authority. The Batangas LNG Gas Importation Terminal was secured in the Philippines, as was additional works on the Palembang Wastewater Treatment Plant in Indonesia. Despite its excellent growth and strong financial positioning for FY22, McConnell Dowell’s South East Asian business unit has restructured its organisation as it anticipates on-going market volatility and uncertainty throughout the region due to potential COVID-19 outbreaks and ongoing international travel restrictions. For the next 12 months, the South East Asian team will focus on safe and profitable delivery of its work in hand while continuing to be highly selective in its bidding. New Zealand and Pacific Islands Revenue for the New Zealand and Pacific Islands business unit decreased by 18% to $206 million, primarily due to COVID-19 delaying several key targets. Despite this, the business improved its profitability and liquidity. The business successfully delivered highly complex pipe-jacking projects at St Marys Bay and Snells-Algies, cementing earlier successes at Army Bay, and confirming the Group’s status as a pre-eminent tunnelling contractor in New Zealand. The on-time completion of the landmark Wynyard Edge redevelopment ahead of the successful 2021 America’s Cup defence by Team New Zealand was another highlight. New project awards included the early works packages of the strategically important Papakura to Pukekohe Rail Electrification project for state-owned KiwiRail; preferred status on Northern Pathway, a major pedestrian/cycleway in Auckland (with final contract award due early 2022); re-establishment of the fuel line works at Auckland International Airport; and the ASPA asphalt works and Futiga Concrete Road in American Samoa. Repeat work was also secured with Watercare with the award of the Scott Cummins CEO
INTRODUCTION 4 Mangere Tarp and Warkworth to Snells Pipeline Transfer projects. The commencement of the second three-year operations and maintenance contract supporting the Waterview Tunnel was also confirmed. Built Environs The commercial building arm of the Group maintained operating earnings for the year despite a reduction in revenue to $119 million. This was due to strong delivery performance on projects including the Oval Hotel, Modbury Hospital upgrade and Auckland City Mission HomeGround project. Under Michael Clemenger's leadership (appointed managing director in mid-2020), the business has been restructured into regional reporting with new state general managers appointed in South Australia and Victoria to provide a greater focus on new business. Built Environs’ positive entry into New Zealand continued with the upcoming completion of its first project, the Puhinui Station upgrade in Auckland in joint venture with McConnell Dowell. The business also secured the Otahuhu logistics project in Auckland and has several promising upcoming tender opportunities. Built Environs also entered the Victorian market during FY21, obtaining state government contractor registration and securing its first project for the Victorian School Building Authority at Beaumaris Secondary College. Health, Safety and Environmental Performance McConnell Dowell recorded an LTIFR of 0.30 with a 20% reduction in the number of LTIs across the business. McConnell Dowell’s PHAIR continues to increase due to all business units conducting hazard reporting and finding better ways to manage safety on work sites. The result was a PHAIR of 248.79 compared to 182.55 last year. A successful step up to the new health and safety standard ISO45001 was also achieved during the year, and internal and external auditing continues to show good compliance with safety systems. A targeted approach to the close out of actions raised from hazard reporting and audits has resulted in 100% of actions completed and closed within the permitted timeframes across all areas of the business. COVID-19 remains a factor in all areas of operation and McConnell Dowell continues to provide support to staff and communities throughout the pandemic. A number of online support services have been provided to employees and regular COVID-19 toolbox talks are held on all projects. A COVID-19 Pandemic Response Plan is in place across the business to ensure a full and compliant response to COVID-19 restrictions and protocols. There were no serious environmental incidents recorded across the operations, the result of consistent application of the McConnell Dowell Management System and a strong focus on environmental awareness. People and Leadership McConnell Dowell continues to benefit from strong and stable executive and senior leadership teams across the Group. Michael Clemenger has settled in well as the Managing Director of Built Environs and plans are underway to further strengthen the leadership teams in South East Asia and New Zealand to drive growth in those regions. The Australian business unit has continued to embed its new regional operating structure, with regional General Managers now in place in all four geographic regions and the recent appointment of Kyle Mortimer to lead the national rail division in Australia. Industry leader James Glastonbury will join the organisation in early FY22 as Executive General Manager - Engineering, Technology, and Innovation. James’ appointment presents an exciting opportunity to further enhance McConnell Dowell’s strong brand and to build on the foundations of creative construction and engineering innovation. Looking ahead The Group enters the 2022 financial year in a very strong position but will remain vigilant to the ongoing impacts of the COVID-19 pandemic across our operating regions. Core market sectors, especially in Australia, show good signs for growth, driven largely by government infrastructure investment. Increased activity also anticipated in the private sector due to low interest rates, strong commodity markets, and climate change driven energy transition. As we complete our 60th year of continuous operations, we can look back upon FY21 with a sense of pride in delivering upon our purpose of “Providing a Better Life”. We have created value for our shareholder, opportunities for employees, and provided a legacy of new, modern infrastructure for our customers and communities. As we complete our 60th year of continuous operations, we can look back upon FY21 with a sense of pride in delivering upon our purpose of 'Providing a Better Life'.
McConnell Dowell Group Annual Review 2021 5 Group Highlights $172 million $1.9 billion $1.7 billion Cash Balance Work in Hand Preferred Status As of 30 June 2021 As of 30 June 2021 As at 30 August 2021 1978 Projects such as these gas pipelines across Hong Kong Harbour, helped establish the Company name across South East Asia.
INTRODUCTION 6 The McConnell Dowell Group We are the creative construction company building better communities through safe, smart, efficient infrastructure. We constantly challenge ourselves and our partners to find the best solution for every project. We work on projects throughout Australia, New Zealand and South East Asia, where we combine our local people on the ground and international experience to deliver excellence Progressive culture Creative construction Local people, international expertise McConnell Dowell’s business model brings value to customers through a strong culture, technical expertise in the specialist disciplines and geographical diversity. Our culture is founded on expertise, creativity and progressive thinking. This attitude, along with our safe, high-quality, systematic and structured approach, has earned us the trust and loyalty of our customers.
McConnell Dowell Group Annual Review 2021 7 Rail Civil Marine Tunnelling & Underground Pipelines Fabrication Mechanical Building Specialist Capabilities Infrastructure Power Water & Waste Water Transport Mining & Metals Oil & Gas Petrochemical Government Commercial & Private Social & Residential Market Sectors Resources Building Group Structure Business Units Australia South East Asia New Zealand & Pacific Islands Built Environs Group Functions Commercial Engineering, Technology & Innovation Finance & Information Technology Health, Safety, Environment & Quality People & Group Strategy Legal & Compliance Risk & Advisory
INTRODUCTION 8 ESG Framework Environment SAFETY & CARE HONESTY & INTEGRITY CUSTOMER FOCUS WORKING TOGETHER PERFORMANCE EXCELLENCE Home without harm, everyone every day. The health, safety and wellbeing of our people, the community and the environment is paramount We do what is right – consistently and transparently We build relationships by collaborating and delivering on our promises with excellence We respect and cooperate with each other and leverage our rich knowledge and diversity We hold ourselves and each other accountable and always strive to exceed expectations Carbon & Our Environment Carbon Emission Reduce carbon intensity and outline roadmap to carbon neutrality Environment Awareness Environmental education and reporting transparency Climate Change Engineering and design considers climate change and adaptation measures Resource Depletion Partnerships with all stakeholders to reduce consumption and improve resource efficiency Waste & Pollution Reducing waste, diverting waste from landfill and increasing recycling. Identify and remediate sources of pollution Our environmental, social, and governance (ESG) framework guides our organisational decision making and focus, aligned with our Values and Purpose of Providing a Better Life. underpin everything we do Our Values
McConnell Dowell Group Annual Review 2021 9 Social Governance Our Community & People Conduct & Compliance Home Without Harm Consistently improving our lead indicator performance Decision Making Sustainability forms part of all decision making processes Supply Chain Commitment and partnership with our supply chain for sustainable practices Corporate Governance Financial transparency and compliance to standards and regulations Customer Relations Innovation through strong and effective customer relationships Risk Management Clear and effective risk management framework and controls Community Direct economic value generated by community investments Internal Procedure Governance Delivering compliant projects in accordance with governing policies, operating standards and procedures People & Development Diversity and inclusion. Learning & Development commitment to all employees Ethical Conduct All business performed in accordance with the Code of Conduct and verified by annual Pledge
INTRODUCTION 10 Providing a better life Pioneering the use of recycled plastic noise walls on a major freeway project, re-purposing the equivalent of 25,000 households’ plastic waste for a year. Providing training and development opportunities for indigenous employees. On the Cranbourne Line Upgrade in Victoria, Skye (pictured) has completed several training courses and is moving up through the ranks. Recycled Plastic Noise Walls Indigenous Employees Using alternate energy solutions to power our sites across the business. On the Tuas C1A project in Singapore there are 100 solar lights installed along designated walkways. Use of Alternative Energy Embracing mobile technology to enhance our community engagement. Site Podium, a smart-phone application available to the community, is being used on our South Australian transport projects - a verified Australian first. Community Engagement
McConnell Dowell Group Annual Review 2021 11 Partnering with Akina, Amotai, Ngā Puna Pūkenga to connect with Maori and Pacifika-owned businesses Working with Pasifika Businesses Upholding and promoting the ten principles of the UN Global Compact, including taking all reasonable steps to prevent modern slavery in our supply chains. Modern Slavery Statement 1988 In 1988 McConnell Dowell introduced Australia to the New Austrian Tunneling methodology (NATM)
INTRODUCTION 12 What is Creative Construction? Creative Construction at McConnell Dowell is about solving problems, overcoming challenges, and delivering positive and impactful outcomes for the customers we serve and communities we work within. We encourage and empower our people to think creatively, apply innovation where it adds value, and maintain a safe and conservative risk profile in all that we do. Creative Construction is more than a marketing slogan to McConnell Dowell. It’s the essence of our company, demonstrated time and time again by the McConnell Dowell team over the last 60 years. Marina Bay Floating Retail Store, Singapore
McConnell Dowell Group Annual Review 2021 13 2020
INTRODUCTION 14 60 years of Creative Construction A long and proud history of creative excellence 1965 1971 1987 1994 Marsden Point Power Station, New Zealand Bukit Timah, Singapore Gas to Gisbourne, New Zealand Skyrail Rainforest Cableway, Australia
McConnell Dowell Group Annual Review 2021 15 1995 2004 2007 2009 2014 2012 Ballera to Mt Isa Pipeline, Australia Sepon Gold Mine Expansion, Laos Bogong Hydro Power Project, Australia Waterview, New Zealand Adelaide Desalination Plant, Australia Vale Manufacturing Project, Malaysia
INTRODUCTION 16 20 Creative Construction today Using drones/UAV and software to safely and accurately survey, monitor and communicate our projects’ progress to our customers and the community. Adopting new trenchless technology to install a world record 2021 m long, 1220 mm diameter pipe without the disruption and environmental impact of a trench. The elegant Oval Hotel wraps seamlessly around the eastern façade of the historic Adelaide Oval and is the first of its kind in Australia and a one of a kind accommodation experience anywhere in the world. Use of drone technology Trenchless technology An Australian First!
McConnell Dowell Group Annual Review 2021 17 021 Regency Road to Pym Street alliance. SPMTs Driving the bridge into place using a self propelled modular transporter (SMPT). The bridge was fabricated offsite and driven in to place. With LineTech Consulting we provided 4m horizontal and vertical clearances to the 110kV lines at various combinations of wind speed and operating temperatures. McConnell Dowell developed this data into a Minimum Approach Distance (MAD) zone Using modularised wharf construction to speed up marine projects and reduce product timeto-market for leading resource companies. A bridge on the move Overhead Powerline MAD Management Modularised Jetty Decking
PROJECT HIGHLIGHTS 18 The Oval Hotel in Adelaide The new hotel wraps around the existing stadium with 1340 m2 of external glazing and 7600 m2 of cladding, much of it curved, used to achieve seamless visual integration.
McConnell Dowell Group Annual Review 2021 19 Project Highlights 2021
PROJECT HIGHLIGHTS 20 Kidston Pumped Storage Hydro Project
McConnell Dowell Group Annual Review 2021 21 McConnell Dowell is to deliver the Kidston Pumped Storage Hydro Project in Far North Queensland, an innovative project that involves the world-first conversion of a disused gold mine into a pumped storage hydroelectric power generation facility. With delivery partners John Holland, McConnell Dowell will work on the first-of-itskind natural battery storage facility that has the potential to generate up to 250 MW of rapid response (less than 30 seconds), flexible power to Australia’s National Electricity Market. Location Queensland, Australia Customer Genex Power
PROJECT HIGHLIGHTS 22 Mordialloc Freeway The McConnell Dowell Decmil Joint Venture is currently delivering the Mordialloc Freeway in Melbourne’s south east. The 9-kilometre Freeway will link the Mornington Peninsula Freeway at Springvale Road in Aspendale Gardens to the Dingley Bypass in Dingley Village, creating a continuous freeway from Frankston To Clayton. Location Victoria, Australia Customer Major Road Projects Victoria
McConnell Dowell Group Annual Review 2021 23 Regency to Pym Street In 2018, the Australian and South Australian Governments committed $354.3 million to deliver the Regency Road to Pym Street (R2P) Project, which connects the South Road Superway and Torrens Road to River Torrens Motorway, providing a continuous 47-kilometre Motorway along the NorthSouth Corridor. Located approximately five kilometres to the west of the Adelaide’s central business district, this initiative proposes a new six-lane, 1.8-kilometre non-stop Motorway, along the South Road corridor, between Regency Road and Pym Street. When compete, it will form part of the future 78-kilometre North-South Corridor. Location South Australia, Australia Customer Department of Infrastructure & Transport
PROJECT HIGHLIGHTS 24 Puhinui Rail Station Interchange McConnell Dowell and Built Environs working together for the first time in New Zealand in joint venture (MCDBE), was awarded the early works contract for the Puhinui Interchange Project by Auckland Transport in May 2019. The project includes demolishing part of the existing Puhinui Station footbridge and constructing a new multimodal interchange. Additionally, the station will incorporate an at-grade bus area, ‘kiss and ride’ parking, cycle facilities and landscaping. Along with modifications to the existing central island train platform, an elevated concourse that will feature stairs, lifts and escalators, a HOP ticket gate line, and staff and retail facilities will be constructed. Location Auckland, New Zealand Customer Waka Kotahi NZTA
McConnell Dowell Group Annual Review 2021 25
PROJECT HIGHLIGHTS 26 Modbury Hospital Upgrade Built Environs was awarded the Managing Contractor position for the pre-construction services for the Modbury Hospital Upgrade Project in South Australia. The project is driven by the Department of Planning, Transport and Infrastructure (DPTI) and SA Health and is a community improvement program of work enhancing the design of the hospital and improving access to patient care. Location South Australia, Australia Customer Department of Infrastructure & Transport
McConnell Dowell Group Annual Review 2021 27 Beaumaris Secondary College Built Environs is delivering the Beaumaris Secondary College Stage 2 project within their busy College campus. The scope includes the design and construction of new school buildings and the refurbishment of existing spaces along with associated external works and services. Location Victoria, Australia Customer Victorian School Building Authority
PROJECT HIGHLIGHTS 28 Echuca-Moama Bridge Project An innovative bridge solution saw McConnell Dowell secure the design and delivery of this important new river crossing for the Victorian and NSW state governments. Construction of this vital second river crossing between Victoria and New South Wales at Echuca and Moama includes new bridges over the Murray and Campaspe rivers, and two new flood relief bridges. The project also includes a new 4.5 km pathway for walking and cycling. The new bridges will have a single lane in each direction, meeting traffic demands for at least 30 years. The design allows for additional lanes to be added in the future. To secure the project McConnell Dowell challenged the design (an extradosed bridge) and developed an alternate main bridge solution which included a number of enhancements to streamline construction and reduce costs. Location Victoria/NSW, Australia Customer Major Road Projects Victoria
McConnell Dowell Group Annual Review 2021 29
PROJECT HIGHLIGHTS 30 St Marys Bay Outfall The St Marys Bay Area Water Quality Improvement Project is driven by Auckland Council’s Healthy Waters department and funded by the Water Quality Targeted Rate. The new pipeline will reduce wastewater overflows to St Marys Bay and Masefield Beach by 95 per cent. The high flows after rain events will be stored in the new larger capacity pipeline and pumped back into the sewer network when there is capacity As well as reducing overflows, once complete the new marine outfall will discharge to an outfall far away from places where people swim. Location Auckland, New Zealand Customer Auckland Council Healthy Waters
McConnell Dowell Group Annual Review 2021 31 Old Mangere Bridge Replacement McConnell Dowell was awarded the contract for the Waka Kotahi NZ Transport Agency project to deconstruct the 105-year-old bridge (the Old Māngere Bridge) and construct a new and improved replacement bridge to connect the communities of Onehunga and Māngere Bridge. The demolition of the old bridge and work to construct the new bridge will occur simultaneously from both the North and South sides of the harbour. The project is scheduled to be completed in 2022. Location Auckland, New Zealand Customer Waka Kotahi NZTA
PROJECT HIGHLIGHTS 32 Batangas LNG Terminal McConnell Dowell has been awarded by FGEN LNG Corporation (FGEN), a whollyowned subsidiary of First Gen Corporation (First Gen), to build and deliver the Interim Offshore Terminal Project (“IOT Project”) at the latter’s Batangas LNG Terminal located in the First Gen Clean Energy Complex in Batangas, Philippines. Once completed, the IOT Project will allow First Gen to accelerate the introduction of LNG into the country and serve the natural gas requirements of existing and future gas-fired power plants in the Philippines. Location Batangas, Philippines Customer First Gen
McConnell Dowell Group Annual Review 2021 33 Jurong Regional Line - J108 The project is part of the new Jurong Regional Line MRT development and consists of three elevated stations at Tengah Plantation, Tengah Park and Bukit Batok West. The stations are linked by 2.3km of segmental precast twin track viaducts. The 24-kilometre long Jurong Region Line (JRL) will add 24 stations to the existing Singapore rail network to serve residents of Choa Chu Kang, Boon Lay, Jurong and future developments in the Tengah area. Opening in stages between 2026 and 2028, the JRL development will provide key transport links to the Jurong Industrial Estate, Jurong Innovation District, and the Nanyang Technological University (NTU) in western Singapore. Location Singapore, Singapore Customer Land Transport Authority of Singapore
INTRODUCTION 34 Echuca-Moama Bridge Project Our partnership with the local Yorta Yorta Nation Aboriginal Corporation is strong and we’ve achieved 8% Aboriginal participation across the project. Recognised by the client for the project teams efforts in social procurement, indigenous employment and local content. This included the engagement of a local indigenous owned earth moving contractor, the employment of local people, training of cadets in their first job moving into the construction industry and the employment of others with disabilities in meaningful work contributing to and being a part of the project team.
McConnell Dowell Group Annual Review 2021 35 Financial Statements 2021
FINANCIAL STATEMENTS 36 Portfolio Breakdown Business Unit Revenue Australia New Zealand South East Asia Built Environs 67% 14% 11% 8% Australia South East Asia New Zealand Built Environs 61% 25% 8% 6% Business Unit Work in Hand Consistent project execution performance, diversity and technical capability continues to position the company well.
McConnell Dowell Group Annual Review 2021 37 Revenue Type Revenue Revenue Type Work in Hand 37% 32% 27% 4% Alliance Construct Only Design & Construct Services 19% 34% 44% 3% Alliance Construct Only Design & Construct Services 1992 The Kutubu oil pipeline contract in Papua New Guinea, consolidated the company’s reputation as an international expert in remote location projects.
FINANCIAL STATEMENTS 38 The Directors present their report on the consolidated entity consisting of McConnell Dowell Corporation Limited (the Company) and its controlled entities for the year ended 30 June 2021. Directors and company secretary The following persons were Directors of McConnell Dowell Corporation Limited during the financial year and up to the date of this report: Directors S.J. Flanagan (Chair), S.V. Cummins, D.J. Morrison, I Luck, A.H. Macartney, C.D. Lock. Company Secretary D.J. Morrison Principal activities The principal activity of the consolidated entity is infrastructure construction. There were no significant changes in the principal activities of the consolidated entity during the year. Consolidated result The June 2021 financial year was a successful year for McConnell Dowell with the business delivering an operational profit for the fourth consecutive year. The McConnell Dowell team continues to effectively navigate the complexities and challenges imposed by the COVID-19 pandemic and the underlying market opportunity across our footprint remains strong. Disciplined and consistent project delivery continues to underpin McConnell Dowell’s strong results with the portfolio overall returning on budget results. The business has reported significant growth in revenue, profit and cash position. Australia continues to be the primary driver of McConnell Dowell’s growth in FY21, with revenue more than doubling compared to the prior period on the back of work secured in FY20. Revenue in South East Asia grew 30% in FY21 and increased work in hand will drive continued revenue growth. Revenue for Built Environs decreased in FY21 due to a lack of new work previously won however momentum for the business is growing and new work has been won in Victoria for the first time. New work won and revenue were lower than expected in New Zealand, primarily due to delayed government investment as a result of the COVID-19 pandemic. McConnell Dowell’s proactive approach to cost management, coupled with its strong revenue growth has seen the company’s EBIT trend upwards as economies of scale are realised. The diversity of McConnell Dowell’s technical capability and market sector participation continues to benefit the organisation, and judicious business development and disciplined tendering resulted in new contract awards amounting to $1.5 billion, despite the delays in the award of some projects as a result of COVID-19 uncertainty. Dividends A dividend of $5 million (2020 – nil) was declared and paid during the year ended 30 June 2021 to the parent company shareholder. Significant changes in the state of affairs There were no significant changes in the state of affairs of the consolidated entity other than that referred to in the financial statements and notes following. Indemnification and insurance of directors and officers McConnell Dowell Corporation Limited, to the extent permitted by law, indemnifies each Director and Company Secretary of the entity and its subsidiaries against certain liabilities and legal costs incurred in the performance of their roles as directors and officers. The directors listed above, individuals who act as Director or Company Secretary of the Company’s subsidiaries and certain individuals who formerly held any of these roles also have the benefit of the indemnity, to the extent permitted by law. During the financial year the company paid an insurance premium insuring directors and officers of the consolidated entity for certain liabilities, legal costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the entity and/or one of its subsidiaries. The directors and officers of the consolidated entity covered by the insurance policy, to the extent permitted by law, included the directors listed in this report and all other directors and company secretaries of the entity and its subsidiaries. The contract of insurance prohibits disclosure of the amount of the premium. Indemnification of auditors To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young Australia, as part of the terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young Australia during or since the financial year. Safety and environmental regulations The consolidated entity is committed to the highest standard of environmental and workplace safety performance reasonably practicable. The consolidated entity’s performance in respect to its policies and procedures to ensure its obligations are met is reported to the Executive Committee (Exco). Directors' Report
McConnell Dowell Group Annual Review 2021 39 The consolidated entity is subject to various environmental and safety regulations under either Commonwealth, State or other international legislation. The Board believes the consolidated entity has adequate systems in place for the management of its environmental and safety risks and is not aware of any material breach of these requirements as they apply to the consolidated entity other than those already disclosed in this report. Likely developments and expected results of consolidated entity In the opinion of the directors, it would prejudice the interests of the consolidated entity if any further information on likely reasonable and material developments in the operations of the consolidated entity and the expected results of operations were included herein, and the omission of such information is hereby disclosed. Events subsequent to balance date No significant events have occurred subsequent to balance date. Rounding The amounts contained in this report and in the financial report have been rounded to the nearest thousand dollars (where rounding is applicable) and where noted ($’000’s) under the option available to the company under ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191. The company is an entity to which the Corporations Instrument applies. Non-audit services The following non-audit services as disclosed in note 26 Auditors remuneration were provided by the entity’s auditor, Ernst & Young Australia. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. Ernst & Young Australia has not received or are not due to receive the any amounts for the provision of non-audit services. Auditor independence declaration The company has obtained an Auditor’s Independence Declaration from Ernst & Young Australia. The Auditor’s Independence Declaration is located on the following page. The annual financial statements which appear on pages 41 to 95 were approved by the directors by resolution dated 30th August 2021 and are signed on their behalf. Going concern and liquidity In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. The Company enters FY22 with increased levels of work in hand of $1.87 billion following significant project wins in Australia and South East Asia. At the date of this report, the company also has more than $1.7 billion of opportunities (based on current contract value) that are in sole source negotiations or in Early Contractor Involvement stage and therefore it is probable these will be converted into contracted projects. In addition, there are a further $1.8 billion of other outstanding tenders and a further $7 billion tenders expected in FY22 which will provide a solid base for future growth. The Directors have reviewed business plans and detailed financial budgets for the year ending 30 June 2022 and beyond which indicate significant construction opportunities ahead. With additional government investment likely to be injected into infrastructure projects the construction markets of Australia, New Zealand and South East Asia remain healthy, and the Company expects to continue winning work in the coming years to further grow the order book. The detailed financial budgets and business plans that are being implemented by management indicate that the Group will have sufficient liquidity resources for the foreseeable future. The Company has met its banking covenants for 30 June 2021 and current forecasts do not indicate any breaches in the upcoming financial quarters. The Group retains the support of its lenders, guarantee providers, and insurance bonding providers. The Directors have considered the business plans and detailed financial budgets, including all available information, and whilst significant estimates and judgements including the impacts of the wider economic environment (including COVID-19 specifically) are always and will continue to be required, the Directors are of the opinion that the going concern assumption is appropriate in the preparation of the financial statements. S. V. Cummins Director 30th August 2021 D. J. Morrison Director 30th August 2021
FINANCIAL STATEMENTS 40 Auditor's Independence Declaration A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Auditor’s Independence Declaration to the Directors of McConnell Dowell Corporation Limited As lead auditor for the audit of the financial report of McConnell Dowell Corporation Limited for the financial year ended 30 June 2021, I declare to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of McConnell Dowell Corporation Limited and the entities it controlled during the financial year. Ernst & Young David Shewring Partner 30 August 2021
McConnell Dowell Group Annual Review 2021 41 Statement of Profit or Loss for the year ended 30 June 2021 All figures are in A$000's Note 2021 2020 Revenue 2 1,473,718 997,743 Less: revenue impact relating to non-cash impairment 2 - (19,169) Net revenue 1,473,718 978,574 Other income 2 8,675 15,256 Total income 1,482,393 993,830 Operating expenses 3 (1,427,396) (975,629) Depreciation 9(a), 9(b) (26,287) (26,255) Share of loss of an associate 10 (584) (1,216) Finance income 4 477 482 Finance costs 4 (3,430) (4,296) Profit / (Loss) before tax 25,173 (13,084) Income tax expense 5 (2,139) (3,410) Profit / (Loss) after tax for the year 23,034 (16,494) Attributable to: Members of the parent entity 22,852 (16,503) Non-controlling interest 23 182 9 Profit / (Loss) after tax for the year 23,034 (16,494) Consolidated The above Statement of Comprehensive Income is to be read in conjunction with the accompanying notes.
FINANCIAL STATEMENTS 42 Statement of Comprehensive Income for the year ended 30 June 2021 All figures are in A$000's Note 2021 2020 Profit / (Loss) after tax for the year 23,034 (16,494) Other comprehensive income Items that may be reclassified subsequently to profit or loss in subsequent period (net of tax) Foreign currency translation 22 (2,729) (1,272) Other comprehensive loss for the year, net of tax (2,729) (1,272) Total comprehensive profit / (loss) for the year, net of tax 20,305 (17,766) Attributable to: Members of the parent entity 20,164 (17,769) Non-controlling interest 23 141 3 Total comprehensive profit / (loss) for the year, net of tax 20,305 (17,766) Consolidated The above Statement of Comprehensive Income is to be read in conjunction with the accompanying notes.
McConnell Dowell Group Annual Review 2021 43 Statement of Financial Position as at 30 June 2021 All figures are in A$000's Note 2021 2020 Assets Current assets Cash & cash equivalents 8 172,316 139,204 Inventories 6 1,341 1,295 Asset held for sale 9(a) 615 - Trade and other receivables 7 296,411 194,748 Prepayments 1,909 776 Income tax receivable 2,351 3,208 Total current assets 474,943 339,231 Non-current assets Property, plant and equipment 9 (a) 47,023 47,531 Right of use assets 9 (b) 18,526 22,421 Investment in and loans to associates and others 10 - - Deferred tax assets 12 52,391 52,590 Total non-current assets 117,940 122,542 Total assets 592,883 461,773 Liabilities Current liabilities Trade and other payables 13 359,631 240,351 Interest bearing loans and borrowings 15 2,961 6,090 Lease liabilities 18 8,852 8,300 Provisions 16 35,544 30,130 Total current liabilities 406,988 284,871 Non-current liabilities Interest bearing loans and borrowings 15 1,334 4,330 Lease liabilities 18 13,581 17,755 Provisions 16 4,031 3,436 Total non-current liabilities 18,946 25,521 Total liabilities 425,934 310,392 Net assets 166,949 151,381 Equity Issued capital 21 267,765 267,765 Reserves 22 1,864 4,289 Retained earnings (102,972) (120,824) Parent interests 166,657 151,230 Non-controlling interests 23 292 151 Total equity 166,949 151,381 Consolidated The above Statement of Financial Position is to be read in conjunction with the accompanying notes.
FINANCIAL STATEMENTS 44 Statement of Changes in Equity for the year ended 30 June 2021 All figures are in A$000's Ordinary shares Preference shares Foreign currency translation reserve Asset revaluation reserve Capital and other reserves Non- controlling interest Retained earnings Total equity Balance as at 1 July 2019 227,765 40,000 2,365 385 2,811 148 (104,321) 169,153 Loss for the period - - - - - 9 (16,503) (16,494) Other comprehensive income - - (1,272) - - (6) - (1,278) Total comprehensive loss for the period - - (1,272) - - 3 (16,503) (17,772) Balance as at 1 July 2020 227,765 40,000 1,093 385 2,811 151 (120,824) 151,381 Profit for the period - - - - - 182 22,852 23,034 Other comprehensive loss - - (2,729) - - (41) - (2,770) Total comprehensive income for the period - - (2,729) - - 141 22,852 20,264 Conversion of preference share to ordinary share 40,000 (40,000) - - - - - - Share based payment - - - - 304 - - 304 Dividend paid - - - - - - (5,000) (5,000) Balance as at 30 June 2021 267,765 - (1,636) 385 3,115 292 (102,972) 166,949 The above Statement of Changes in Equity is to be read in conjunction with the accompanying notes.
McConnell Dowell Group Annual Review 2021 45 Statement of Cash Flows for the year ended 30 June 2021 All figures are in A$000's Note 2021 2020 Cash flows from operating activities Receipts from customers 1,378,982 1,034,557 Payments to suppliers and employees (1,303,486) (977,176) Interest received 477 482 Finance costs 4 (3,430) (4,296) Income tax and other taxes paid (1,083) (2,673) Net cash inflows from operating activities 8 71,460 50,894 Cash flows from investing activities Purchase of property, plant and equipment 9(a) (15,849) (12,015) Proceeds from the disposal of property, plant and equipment 3,760 9,887 Net cash used in investing activities (12,089) (2,128) Cash flows from financing activities Proceeds from borrowings - 15,340 Repayment of borrowings (6,125) (22,954) Payment of principal portion of lease liabilites (14,954) (4,249) Dividends paid to the equity holders of the parent (5,000) - Net cash used in financing activities (26,079) (11,863) Net increase in cash and cash equivalents 33,292 36,903 Cash and cash equivalents at the beginning of the period 139,204 102,843 Exchange movements on cash (180) (542) Cash and cash equivalents at the end of the period 8 172,316 139,204 Consolidated The above Statement of Cash Flows is to be read in conjunction with the accompanying notes.
FINANCIAL STATEMENTS 46 Notes to the annual financial statements for the year ended 30 June 2021 Company details McConnell Dowell Corporation Limited (the Company) is a public unlisted for-profit company incorporated and domiciled in Australia. The Company’s registered place of business is Level 3, 109 Burwood Road, Hawthorn, Victoria, Australia. The ultimate Australian parent is Aveng Australia Holdings Pty Ltd. The ultimate parent is Aveng Limited (a company incorporated in South Africa). Basis of preparation The financial report is a general-purpose financial report, which has been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board (AASB). The financial report has also been prepared on a historical cost basis, except for certain financial instruments (when applicable) which have been measured at fair value. Where necessary, comparative figures have been reclassified and repositioned for consistency with current year disclosures. The financial report is presented in Australian dollars and all values are rounded to the nearest thousand ($000’s) except when otherwise indicated in accordance with ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191. The financial report was approved by a resolution of the Directors of the Company on 30th August 2021. Going Concern In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. The Company enters FY22 with increased levels of work in hand of $1,87 billion, following significant project wins in Australia, and South East Asia. At the date of this report the Company also has more than $1.5 billion of opportunities (based on current contract value) that are in sole source negotiations or in Early Contractor involvement stage and therefore it is probable these will be converted into contracted projects. In addition, there are a further $1.8 billion of other outstanding tenders and a further $7 billion tenders expected in FY22 which will provide a solid base for future growth. The Directors have reviewed business plans and detailed financial budgets for the year ending 30 June 2022 and beyond which indicate significant construction opportunities ahead. The construction markets of Australia, New Zealand and South East Asia are healthy, and the Company expects to continue winning work in the coming years to further grow the order book. These detailed financial budgets and business plans that are being implemented by management indicate that the Group will have sufficient liquidity resources for the foreseeable future. The Company has met its banking covenants for 30 June 2021 resulting in no breaches at year-end and current forecasts do not indicate any breaches in the upcoming financial quarters. The Group retains the support of its lenders, guarantee providers, and insurance bonding providers. The Directors have considered the business plans and detailed financial budgets, including all available information, and whilst significant estimates and judgements including the impacts of the wider economic environment (including COVID-19 specifically) are always and will continue to be required the Directors are of the opinion that the going concern assumption is appropriate in the preparation of the financial statements. Statement of compliance The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Basis of consolidation The consolidated financial statements include the financial statements of McConnell Dowell Corporation Limited and its subsidiaries as at 30 June each year (the Group). Control over a subsidiary is achieved when the Group is exposed or has the rights to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Specifically, the Group deems it controls a subsidiary if and only if the Group has: • Power over the subsidiary (i.e. existing rights that give it the current ability to direct the relevant activities of the subsidiary) • Exposure, or rights, to variable returns from its involvement with the subsidiary, and • The ability to use its power over the subsidiary to affect its returns When the Group has less than a majority of the voting or similar rights of a subsidiary, the Group considers all relevant facts and circumstances in assessing whether it has power over a subsidiary, including; 1. Accounting policies
McConnell Dowell Group Annual Review 2021 47 • The contractual arrangement with the other vote holders of the subsidiary • Rights arising from the other contractual arrangements • The Group’s voting rights and potential voting rights The Group reassess whether or not it controls a subsidiary if facts and circumstances indicate that there are changes to one or more of the three elements of control. Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group. The parent's investments in controlled entities are initially recognised at cost and subsequently measured at cost, less any impairment charges. Non-controlling interests not held by the Group are allocated their share of net profit after tax and each component of other comprehensive income and are presented within equity in the consolidated statement of financial position, separately from parent shareholders’ equity. All intercompany transactions and balances, income and expenses, and profits and losses resulting from intragroup transactions are eliminated on consolidation. Business combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether it measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition costs incurred are expensed and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured at fair value as at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance with AASB 9 either in profit or loss or in other comprehensive income. If the contingent consideration is classified as equity, it shall not be remeasured. Foreign currency translation Functional and presentation currency Both the functional and presentation currency of McConnell Dowell Corporation Limited and its Australian subsidiaries is Australian dollars ($). Where a subsidiary’s functional currency is a different denomination it is translated to the presentation currency (see below). Transactions and balances Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date. All differences arising on settlement or translation of monetary items are taken to the statement of profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation of group companies functional currency to group presentation currency On consolidation the assets and liabilities of foreign entities are translated into Australian dollars at rates of exchange prevailing at the reporting date. Income, expenditure and cash flow items are translated into Australian dollars at weighted average rates. Exchange variations arising on translation for consolidation are recognised in the foreign currency translation reserve in equity, through other comprehensive income. If a subsidiary were sold, such translation differences are recognised in the statement of profit or loss as part of the cumulative gain or loss on disposal. Financial instruments Financial Assets Initial recognition and measurement The Group initially recognises financial assets when the Group becomes a party to the contractual provisions of the instrument.
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