McConnell Dowell 38 Directors' Report for the year ended 30 June 2022 The Directors present their report on the company consisting of McConnell Dowell Corporation Limited (the Company) and its controlled entities for the year ended 30 June 2022. 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 company is infrastructure construction. There were no significant changes in the principal activities of the company during the year. CONSOLIDATED RESULT The Group reports improved financial results for year ended 30 June 2022 on the back of a solid order book and good operational performances from the business in Australia and New Zealand. The Group continues the positive momentum displayed in the 2021 financial year and recorded the highest revenue levels during the last six years. The McConnell Dowell team continues to effectively navigate the complexities and challenges imposed by the COVID-19 pandemic, price escalation risk, resource constraints and supply chain disruptions with robust management responses that are in place and working effectively. KEY FINANCIAL HIGHLIGHTS IN FY22 • Revenue grew by over 17% to $1.7 billion (2021: $1.5 billion) • Increase in profit after tax by 36% to $31 million (2021:$23 million) • Annualised Return on shareholders’ funds of 18% and continue to pay shareholder dividends • Work in hand up to $2.5 billion with over $2.3 billion new work won in the period • Strong liquidity position and cash conversion with $210 million available cash and minimal debt • Bonding & bank facilities available of $676 million ($407 million utilised) with strong support from our financial partners • Preferred positions on prospects worth over $2.5 billion plus a further $3.6 billion live tenders outstanding • Clear pathway to revenue & profit growth for the FY23 and beyond OPERATIONAL PERFORMANCE Disciplined and consistent project delivery, coupled with a strong opportunity pipeline, facilitating strategic selection of suitable McConnell Dowell prospects, continues to underpin McConnell Dowell’s strong results with the portfolio overall delivering on the majority of budgeted financial metrics. The business has reported double digit growth in revenue, profit after tax, work in hand and finished the year in a strong liquidity position. McConnell Dowell’s proactive approach to cost and risk management, coupled with its strong revenue growth has seen the Company’s profit after tax trend upwards in the last two financial years as economies of scale are realised. The Australian business unit continues to be the main contributor of McConnell Dowell’s growth in FY22 representing 66% of the Group’s revenue. Significant awards post year-end (including Bridgewater Bridge in Tasmania and Epping Road in Victoria) positions the business well for FY23. Revenue in New Zealand was impacted by delayed government investment as a result of the COVID-19 pandemic during the first half of the year. Pleasingly new work won and work in hand increased toward the latter part of FY22 on the back of renewed momentum in the market. The South East Asia region remains a very competitive market and was heavily impacted by COVID-19 related challenges which significantly impacted the results for FY22. Tendering activity has now recommenced and the longer-term addressable market in the region remains strong with opportunities emerging in the more nuanced multi-disciplinary type of projects which bodes well for the future pipeline. Revenue in Built Environs grew by 20% underpinned by the business units focus on the health and social building projects, which are seeing ongoing strong investments from governments in Australia and New Zealand. The business unit continue to expand its footprint in Australia along with continued growth in the New Zealand market. The Group's work in hand grew by 34% from June 2021 to $2.5 billion and we are well positioned to achieve the budgeted revenue for FY23 with 91% of budgeted revenue secured, subsequent to July awards. At balance sheet date the business also had $2.5 billion of preferred tender positions under negotiation, including over $1 billion on track to be converted to work in hand in the first quarter of FY23. DIVIDENDS A dividend of $12.5 million (2021 – $5.0 million) was declared and paid during the year ended 30 June 2022 to the parent company shareholder. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There were no significant changes in the state of affairs of the company other than that referred to in the financial statements and notes following. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS During the financial year the company indemnified and paid an insurance premium in respect of a D&O policy insuring the directors and officers of the group companies for certain liabilities and legal costs and expenses that may be incurred by those individuals in their capacity as directors or officers, to the extent permitted by law. The contract of insurance prohibits disclosure of the amount of the premium paid by the company. APPOINTMENT OF AUDITORS KPMG Australia was appointed as the auditor of the company 19 November 2021, resulting in Ernst & Young being removed as the auditor of the company SAFETY AND ENVIRONMENTAL REGULATIONS The company is committed to the highest standard of environmental and workplace safety performance reasonably practicable. The company’s performance in respect to its compliance with its policies and operating procedures to ensure its obligations in this regard are met is reported to the Executive Committee (Exco). The company is subject to various environmental and safety regulations under either Commonwealth, State or other international legislation. The Board believes the company has adequate systems in place for the management of its environmental and workplace safety compliance and operational risks and is not aware of any material breach of relevant legal and regulatory requirements as they apply to the company other than those already disclosed in this report.
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