Financial strength

CIMIC Group announced on 19 October 2016 a solid result for the nine months to 30 September 2016, continuing to deliver sustainable, cash-backed profits.

Highlights of the result were:

  • Cash flow from operating activities:
    • In 3Q16 $532.9 million, up 7.3% YOY, an EBITDA conversion rate of 192%; and
    • In LTM, which adjusts for seasonality, $1.2 billion, an EBITDA conversion rate of 107%.
  • Free operating cash flow1 generation of $851.5 million in LTM; $404.0 million in 3Q16.
  • 9M16 NPAT up 5.9% YOY to $413.7 million; NPAT margin2 up 170 basis points to 5.4%.
  • Net cash, excluding operating leases3 , of $769.2 million4 at 30 September 2016; almost $1.3 billion if adjusted for the net cash invested in the share buyback program and the purchase of shares in Sedgman and Devine5.
  • Net contract debtors6 down $213 million from 30 June 2016 to $1.7 billion at 30 September 2016. The $675 million contract debtors portfolio provision remains unchanged.
  • 3Q16 revenue7 up 8.1% on 2Q16 to $2.7 billion, second consecutive quarterly increase.
  • Work in hand8 of $29.0 billion and robust project pipeline.
  • Guidance confirmed for 2016 NPAT in the range of $520 million to $580 million, subject to market conditions.

CIMIC Executive Chairman and Chief Executive Officer Marcelino Fernández Verdes said: “CIMIC’s strong cash flow performance is evident in this result. Measured over the last 12 months, which takes into account the seasonality of our operations, the Group generated cash flow from operating activities of $1.2 billion, resulting in an EBITDA conversion rate of 107%, and free cash flow generation of more than $850 million.

“Overall, CIMIC generated a solid result with revenue growth accelerating in the third quarter and net profit after tax and margins increasing in the nine month period, year-on-year.

“The balance sheet also strengthened further, with net cash of approximately $770 million providing the flexibility to pursue future growth opportunities.”

On October 10, CIMIC announced it owned 13.84% of UGL and intends to make an offer to acquire the remaining shares in UGL through an off-market takeover at a price of $3.15 per share.

During 3Q16, CIMIC announced several major new projects including construction of the Tseung Kwan O - Lam Tin Tunnel in Hong Kong (to generate revenue to CIMIC of $805 million); an underground decline project at the Oyu Tolgoi copper and gold project in Mongolia ($104 million); and coal handling and preparation plant-related works in Queensland ($105 million).

The Group, through Thiess, also expanded into North America, securing new work in Canada and establishing a joint venture that will generate potential revenue of up to approximately $430 million to CIMIC.

Mr Fernández Verdes said: “Our strategy of exporting our skills is starting to pay off, with project wins in mining in North America and construction in Asia providing the most recent examples. Diversification, combined with our disciplined approach to risk management, is key to our focus on delivering sustained returns, enhancing our resilience and building our competitive position.”

Looking forward, the Group has a robust project pipeline and expanding market opportunities. More than $6 billion of tenders have been submitted and are pending award, and we are preparing tenders on an additional $16 billion of projects for submission during the fourth quarter. A further $70 billion of projects, relevant to CIMIC, have been identified as coming to the market in 2017 and more than $200 billion in 2018 and beyond.

Refer to ‘Analyst and Investor Presentation’ for further information.

Read the media release.

1Free operating cash flow is defined as net cash from operating activities after gross capital expenditure.
2Margins are calculated on revenue which excludes revenue from joint ventures and associates and interest income.
3Operating leases of $472.9 million.
4Nextgen divestment proceeds expected in 4Q16.
5$426 million invested in share buy-back during 9M16. As at 30 September 2016 14,249,466 shares (representing 4.2% of total CIMIC shares outstanding) had been bought back. Shares subject to buy back are cancelled on a daily basis. Purchase of shares in Sedgman and Devine, less cash acquired from the consolidation of Sedgman, was $77 million.
6Net contract debtors represents the net of amounts due from customers and amounts due to customers.
7Revenue excluding revenue from joint ventures and associates and interest income.
8Work in hand includes CIMIC’s share of work in hand from joint ventures and associates.

DEFINITIONS

 

2Q16

Three months to 30 June 2016

3Q16 or 3Q

Three months to 30 September 2016

4Q16

Three months to 31 December 2016

9M16

Nine months to 30 September 2016

EBIT

Earnings before interest and tax

EBITDA

Earnings before interest, tax, depreciation and amortisation

LTM or last 12 months

Twelve months to 30 September 2016

NPAT

Net profit after tax

PBT

Profit before tax

YOY

Year on year

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