Management reviews > Review of operations

 

1: Pilbara Iron Ore Infrastructure – Phase A and B, Western Australia, Australia, 2: Sentosa Seawall and Reclamation Works, Sentosa Island, Singapore, 3: Bogong Hydro Power Project, Bogong, Victoria, Australia, 4: Adelaide Desalination Plant, Adelaide, Australia.

     
  2009  
Rm  
2008  
Rm  
Revenue   12 080,8   9 457,8  
Capital expenditure   505,9   493,8  
Major markets   Australasia and Pacific   Australasia and Pacific  
Employees   6 468   4 685  

  • Revenue increased by 28% to R12,1 billion.
  • Excellent operating cash flow.
  • Operating profit of R788,8 million, up 22%.
  • Maintained operating margins while peers’ trended down.
  • R13,1 billion two year secured order book.
  • Drive opportunities in transport, water and power.

Operating environment

The 2009 financial year has been characterised by tumultuous market conditions and a number of project cancellations midway through the construction phase as well as further postponements and deferrals of projects throughout McConnell Dowell’s operating regions.

In Australia, a number of key projects were cancelled while they were under negotiation. However, the long-term outlook for the region remains positive, with investments planned in the mining, oil and gas, and water sectors. The challenge remains the timing of many of these projects. The demand for services by the power distribution sector is good and the need for increased investment in the generation, transmission and distribution sectors will continue to present good opportunities in this power sector.

The construction market in New Zealand was affected by the combined effects of the recession and a change of government which resulted in reduced construction opportunities in the last 12 months. However, new government initiatives have been launched which will boost infrastructure spending over the next three years.

Construction opportunities in the Pacific region were limited while work in Laos and Indonesia has declined sharply as a consequence of the downturn in commodity prices. Despite the difficult market conditions, the outlook in Singapore remains positive with a number of major public and private developments planned in 2010.

Industry fundamentals for 2010 in the Middle East region are positive with the governments dramatically increasing their infrastructure spending in the coming years.

Despite the slow down in civil and marine activity associated with the export of iron ore in the Western Australian Pilbara region, the projects McConnell Dowell has been involved in continued and there are opportunities for similar-sized developments in the first half of the new financial year. In New South Wales and Western Australia, investments in road and rail infrastructure are expected to gain momentum.

The demand for underground space utilisation continues to increase despite the downturn in the economy, which is supporting demand in the tunnelling and underground sector. Although mining development in South East Asia has slowed considerably, pockets of opportunities are expected to materialise in the year ahead.

Safety

McConnell Dowell experienced a considerable improvement in its overall safety performance in 2009, measured both by lead and lag indicators, which is the direct result of its ongoing safety improvement programme which has been in place for three years.

Tragically, three employees were fatally injured on projects during the year. Detailed internal and external investigations were completed and improvements were made to systems and operating methods in response. The operating group achieved a 45% reduction in its DIFR over the previous year to 0,26.