COFFEY INTERNATIONAL LIMITED Company Announcements Office
Australian Securities Exchange - ASX Limited
Exchange Centre
Level 4, 20 Bridge Street
Sydney NSW 2000
1 May 2015
Via e-lodgements: Sequence #763
Dear Sir / Madam
Letter to ShareholdersPlease find attached Letter to Coffey Shareholders for release to the market. Yours faithfully
John DouglasManaging Director
Coffey International Limited
ABN 16 003 835 112
Level 19, Tower B
799 Pacific Highway
Chatswood NSW 2067
Australia
t: +61 2 9406 1000 f: +61 2 9406 1002
coffey.com
1 May 2015
Dear Coffey Shareholder
On 29 April 2015, Coffey announced a strategic update as we reposition our Geoservices business and respond to challenging market conditions in the Energy and Resources sector.
Our business has experienced significant client market volatility since November 2014. The Board is committed to ensuring the responsive management of the company to build the value of your investment.
As you know, the company has worked extensively to improve the fundamentals of the business. We have diversified our debt profile. Business disciplines have been improved. And the Board remains committed to a diversified portfolio, spanning five target industries, to ensure long term sustainability for our shareholders.
Our International Development and Project Management businesses continue to perform well and deliver consistent results. International Development now makes up more than half of our business, delivering long term contracts for three government clients. Project Management continues to build profitability.
The Transport Infrastructure industry is improving, as the Australian political environment provides a clearer outlook. Property markets are also strong. We are focused on exploiting the opportunities in this sector by drawing on our reputation for managing geotechnical risk and creating value for our clients.
It will come as no surprise to you that the Energy and Resources sector is experiencing ongoing pressure. The sharp decline of oil and iron ore prices has impacted the oil and gas and mining industries. Fortunately, our diversified revenue focus means only 15% of our business is exposed to this sector.
Our strategic update responds to the challenges facing the Energy and Resources sector:
we are reducing our exposure to high cost oil and gas projects - in particular the oil sands industry in Canada
we are refocusing our mining strategy on the operations phase of the asset lifecycle, targeting mid-tier and major miners
we are further matching capacity to markets and introducing a streamlined management team
we are maximising our investment in spatial data infrastructure
These changes are decisive actions to ensure our Geoservices business is well positioned to exploit opportunities for growth, particularly in Australia, New Zealand and the UK where transport infrastructure is prospective.
We expect the implementation of these initiatives will result in restructuring costs between $6-8 million. We will also record a $12 million non-cash goodwill impairment as part of the restructure. These changes will result in an immediate uplift in profitability for our Geoservices business,
delivering an annualized benefit of $7-9 million.
Coffey International Limited ABN 16 003 835 112
The company's underlying EBITDA is expected to be in the range of $18-$20 million for the full year. Following restructuring costs and non-cash goodwill impairments, the company expects to report a net loss after tax of $16-18 million for FY2015. As a result, the Board will not pay a final dividend for FY2015.
The changes we've announced today will manage current market challenges and support Coffey's growth in areas where we have good industry knowledge and technical strength. The Board is committed to delivering shareholder value for you, and believes these measures will support a strong and sustainable business.
Yours sincerely
Attachments:
ASX Announcement: Coffey International Limited (ASX:COF) - Q3 FY2015 Trading Update
ASX Announcement: Coffey International Limited (ASX:COF) - Strategic Update
Coffey International Limited ABN 16 003 835 112
For immediate release - ASX announcement 29 April 2015 Coffey International Limited (ASX: COF) - Q3 FY2015 Trading Update Summary Net debt remains tightly controlled at $61 million.
International Development total revenue of $75 million for the quarter, compared to $82 million for the prior corresponding period. The business has a strong pipeline of work, with 12 month forward contracted revenue up 19% on the prior corresponding period.
Project Management continues to build profitability.
Geoservices fee revenue of $43 million, down from $46 million on the prior corresponding period. Strong property revenue and prospective transport infrastructure industry highlighting opportunity for growth of the order book.
Coffey International Limited (ASX:COF) (Coffey) today announced its Q3 Trading Update for the three months to 31 March 2015.
Managing Director John Douglas said International Development and Project Management continued to perform well. Stronger property revenue offset the effect on Geoservices of challenging conditions in the Energy and Resources sectors.
"While client market volatility remains in energy and resources, the transport and property infrastructure industries are improving," Mr Douglas said.
"Our diversified industry focus means we can respond to market challenges and position for growth in our more prospective industries."
Net debt at $61 million was consistent with the prior corresponding period as the company continues to tightly manage its debt profile. The devaluation of the Australian dollar resulted in increased total debt. However, the lower Australian dollar continues to improve profitability for the company, both as a net exporter of Australian talent and as profits from International Development are repatriated.
Net debt by quarter$151m $155m
$30m $32m
$115m
$107m $104m $104m $109m
$92m $89m $93m $87m
$93m
$37m $29m
$38m
$29m
$51m $23m
$83m
$77m
$82m
$91m
$121m $123m
$78m $78m $75m
$66m
$58m
$69m
$31m $32m $26m $22m
$58m $61m $61m $61m
$29m
$48m
$18m $30m $32m
$25m $21m $21m
$40m $40m $40m
Net debt
$61m
Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15
Corporate bonds Net bank debt Cash - Held largely in International Development
Coffey International Limited ABN 16 003 835 112
Strong pipeline of work for International Development
International Development continues to perform well, with revenue for the quarter of $75 million. The
fall in revenue from Q3 FY2014 followed
the sale o
the STA business and the completion of a
number of larger government aid projects in the US, with replacement projects in the early start-up phase.
The business maintains a strong pipeline of work, with 12 month contracted revenue increasing to
$206 million as at 31 March 2015. There also remains a high value of contracts currently shortlisted or in negotiation.
$222m
$168m $167m
$165m
$178m
$213m
$173m
$231m
$213m
$198m $206m
Jun 12 Dec 12 Mar 13
Jun 13 Sep 13 Dec 13
Mar 14 Jun 14 Sep 14
Dec 14 Mar 5
Coffey International Limited ABN 16 003 835 112
Project Management building profitabilityProject Management continues to build profitability, and is performing in line with expectations.
Project Management revenue$12m $12m
$11m
$12m
$10m
$8m
$7m $8m $7m
$8m
$6m $6m
$7m
$6m $6m
17%
83%
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
Private Government
Geoservices growth potential in transport and property infrastructureWhile fee revenue declined to $43 million for the quarter, the business' diversified portfolio has offset some of the effects of the ongoing downturn of the Mining and Oil and Gas industries. Property revenue is strong and Transport Infrastructure remains prospective, particularly on the east coast of Australia, New Zealand and the UK.
Geoservices fee revenue by industry$67m $66m
$62m
$71m $68m $70m
$60m $60m $58m
$53m
$46m
$52m $53m
$49m
$43m
26%
30%
22%
Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015
Transport infrastructure Property Infrastructure Oil & Gas Mining Other
14%
8%
Coffey International Limited ABN 16 003 835 112
Geoservices 12 month contracted fee revenue was $80 million as at 31 March 2015. This was impacted by the removal of $3 million contracted fee revenue for the now terminated East West Link project.
$101m
$108m
$117m
$100m
$94m
$101m $98m
$90m $93m
$86m
$80m
Jun 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15
Strategy updateCoffey has also announced a strategic update today, outlining its response to market conditions and providing earnings guidance for FY2015.
Future updatesCoffey will announce its Full Year Results on 10 August 2015.
- Ends -For further information contact:
Investor contact: Media contact:Chris Bowen
Investor Relations Consultant
+61 418 144 860
Joeley Pettit
Corporate Affairs Manager
+61 407 061 421
About Coffey International LtdEvery Coffey relationship is built on trust.
Trust that's hard-earned through our proven expertise, our depth of global experience and our commitment to stay one step ahead.
Our specialists in geoservices, international development and project management work in partnership with our clients across the globe.
We create value throughout the project lifecycle in the mining; oil and gas; transport infrastructure and property industries.
We deliver vital international aid projects for our clients.
Our united group of specialists take enormous pride in collaborating with our project partners. By digging deeper. Thinking smarter. And seeing further.
All so we can deliver the smartest solutions, every time. Visit coffey.com
Coffey International Limited ABN 16 003 835 112
For immediate release - ASX announcement 29 April 2015 Coffey International Limited (ASX:COF) - Strategic Update Summary Geoservices restructure to match capacity to markets and exploit opportunities in Transport and Property Infrastructure
Reducing exposure to high cost oil and gas projects
Refocused mining strategy on operations
Restructure costs in the range of $6 million to $8 million for FY2015
Non-cash goodwill impairment of $12 million
Annualised benefit of restructure of $7 million to $9 million
Earnings guidance for FY2015 - underlying EBITDA1 before restructuring costs and impairment in the range of $18-20 million with net loss after tax in the range of $16-18 million
A final dividend will not be paid for FY2015
Coffey International Limited (ASX:COF) (Coffey) today announced a Strategic Update as it repositions its Geoservices business, while responding to ongoing pressure in the Energy and Resources sector.
Managing Director John Douglas said the company had responded to significant client market volatility experienced since November 2014 and would exploit new opportunities in the prospective Transport and Property Infrastructure sector.
"Our International Development and Project Management businesses continue to perform well, and our diversified business model has limited the impacts of tough conditions in the Energy and Resources sector," Mr Douglas said.
"The outlook for Transport Infrastructure in Australia has improved. We will exploit opportunities on the east coast of Australia, in New Zealand and in the UK, drawing on our reputation for managing geotechnical risk and creating value. We'll also continue to focus on Property, which remains strong in the jurisdictions where we operate.
"Our strategy will leverage these opportunities while we respond to challenging market conditions elsewhere."
As the oil price continues to remain at low levels and the investment cycle in gas in Australia comes to an end, Coffey will reduce its exposure to high cost oil - in particular oil sands in Calgary.
The company will continue to work with Oil and Gas clients globally to support their efforts to maximise efficiencies and manage risk in a competitive market.
1 EBITDA - Earnings before interest, taxation, depreciation and amortisation
Coffey International Limited ABN 16 003 835 112
Coffey is also refocusing its mining strategy on the operations phase of the asset lifecycle, targeting mid-tier and major miners.
Mr Douglas said this aligned with current economic cycles that are resulting in pressure on early stage mining services, as well as cost pressures associated with the falling price of iron ore - which has impacted Coffey's operations in Western Australia and Brazil.
The company would also maximise its investment in spatial data infrastructure. This supports its mining strategy to refocus on the operations phase of the asset cycle. This expertise also has much broader application.
The Geoservices business would further match capacity to markets, restructuring underperforming business units under a streamlined management structure.
The implementation of the company's strategy will result in restructuring costs in the range of $6 million - $8 million, incurred in FY2015.
The company will also record $12 million in non-cash goodwill impairment as part of the restructure, associated with reducing its exposure to high cost oil and its refocused mining strategy.
It's expected an immediate uplift in profitability will be achieved for the Geoservices business as a result of this repositioning. They will deliver an annualised benefit of $7 million to $9 million, as the company reaps the benefits of a structure strongly aligned to its growth industries.
EBITDA Restructure Annualised run rate¹ cost benefit $m $m $m | Proforma EBITDA $m | |||
Geoservices ANZ | 12 | 2 - 3 | 2 - 3 | 14 - 15 |
Geoservices International | (6.2) | 4 - 5 | 5 - 6 | breakeven |
Total Geoservices | 5.8 | 6 - 8 | 7 - 9 | 14 - 15 |
1 EBITDA run rate is calculated at H1 FY2015 EBITDA x 2
Earnings guidance
The company's underlying EBITDA is expected to be in the range of $18-$20 million for the full year. Following restructuring costs and non-cash goodwill impairments, the company expects to report a net loss after tax of $16-18 million for FY2015.
As a result, a final dividend will not be paid for FY2015.
Coffey will provide a further update on its strategy as part of its Full Year Results on 10 August
2015.
For further information contact:
Investor contact: Media contact:Chris Bowen
Investor Relations Consultant
+61 418 144 860
Joeley Pettit
Corporate Affairs Manager
+61 407 061 421
Coffey International Limited ABN 16 003 835 112
About Coffey International LtdEvery Coffey relationship is built on trust.
Trust that's hard-earned through our proven expertise, our depth of global experience and our commitment to stay one step ahead.
Our specialists in geoservices, international development and project management work in partnership with our clients across the globe.
We create value throughout the project lifecycle in the mining; oil and gas; transport infrastructure and property industries.
We deliver vital international aid projects for our clients.
Our united group of specialists take enormous pride in collaborating with our project partners. By digging deeper. Thinking smarter. And seeing further.
All so we can deliver the smartest solutions, every time. Visit coffey.com
Coffey International Limited ABN 16 003 835 112
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