1

Gresham Mining Services Quarterly

Chris Branston

cbranston@gresham.com.au

We are pleased to present Edition 14 of the Gresham Mining Services Quarterly (GMSQ), a snapshot of the performance, news and trends across the resources (including oil & gas) services sector.

The Gresham Mining Services Index (GMSI)(1) finished down 14% for the September 2015 quarter, driven by broader market volatility which saw prices across most sectors decline. The value of 35 constituents fell during the period, and unlike the June quarter, the major players were not immune. Of the 10 largest constituents, 8 suffered double digit share price declines, equating to a loss of $2.7 billion in equity market value.

There were no major surprises coming out of reporting season, with sector revenue falling, margins contracting for a third consecutive year and outlook commentary remaining cautious. Median consensus revenue for GMSI companies is forecast to be flat to FY17, but with some improvement in margins expected as the benefits of cost-out initiatives are realised.

Valuation multiples have followed the market lower, with the GMSI’s forward looking P/E ratio of 9.2x now slightly below the long-term average of 9.4x.

M&A activity in the sector remained relatively subdued for most of the period, but there have been two public deals announced in recent weeks, being Crescent’s proportional bid for Cardno and Tetra Tech’s recommended offer for Coffey. There was also an increase in capital raising activity relative to previous quarters, as a number of companies issued equity to improve their balance sheets.

In our Quarterly Focus we continue our review of how companies have been responding to the downturn, this time looking at expenditure trends across the sector. Our analysis of reported employee costs shows that most companies have materially reduced spending in order to right-size businesses and mitigate margin erosion. Employee costs across the GMSI constituents have fallen by 8%, or $2.8 billion relative to FY13.

Editorial Team

Gresham Advisory Partners Ltd is a leading Australian mergers and acquisitions/corporate advisory business and one of Australia’s largest and highest ranking independent corporate advisors.

Edition 14

October 2015

(1) The Gresham Mining Services Index is a market capitalisation weighted index comprising 50 mining services companies selected by Gresham at the date of this report.

Brad Hancock

bhancock@gresham.com.au

Tom Waddell

twaddell@gresham.com.au

2

Share Price Movements

GRESHAM MINING SERVICES INDEX CONSTITUENTS (JUN 15 – SEP 15)

LEADERS & LAGGERS (SHARE PRICE) (JUN 15 – SEP 15)

PERFORMANCE OVER TIME

PERFORMANCE RELATIVE TO S&P 200 INDICES (JUN 15 – SEP 15)

Source: FactSet, IRESS.

2

Leaders Laggers Ranks

Sep Jun 30 Sep 15 30 Jun 15

1 1 CIMIC Group Ltd. (ASX:CIM) 7,955 7,362 8%

2 3 ALS Ltd. (ASX:ALQ) 1,873 2,382 -21%

3 4 Downer EDI Ltd. (ASX:DOW) 1,445 2,068 -30%

4 2 WorleyParsons Ltd. (ASX:WOR) 1,445 2,544 -43%

5 5 Mineral Resources Ltd. (ASX:MIN) 773 1,238 -38%

6 6 Monadelphous Group Ltd. (ASX:MND) 572 873 -34%

7 7 Transfield Services Ltd. (ASX:TSE) 541 730 -26%

8 8 Cardno Ltd. (ASX:CDD) 481 535 -11%

9 10 SKILLED Group Ltd. (ASX:SKE) 403 401 1%

10 9 Tox Free Solutions Ltd. (ASX:TOX) 347 405 -15%

11 12 Programmed Maintenance Services Ltd. (ASX:PRG) 315 342 -8%

12 11 UGL Ltd. (ASX:UGL) 313 353 -11%

13 14 RCR Tomlinson Ltd. (ASX:RCR) 301 239 25%

14 17 MACA Ltd. (ASX:MLD) 205 176 17%

15 15 MMA Offshore Ltd. (ASX:MRM) 191 199 -4%

16 18 Sedgman Ltd. (ASX:SDM) 191 156 23%

17 13 Bradken Ltd. (ASX:BKN) 171 245 -30%

18 16 Decmil Group Ltd. (ASX:DCG) 155 194 -20%

19 19 Pacific Energy Ltd. (ASX:PEA) 148 153 -4%

20 20 GR Engineering Services Ltd. (ASX:GNG) 133 135 -3%

21 24 RungePincockMinarco Ltd. (ASX:RUL) 98 99 -2%

22 25 Fleetwood Corp. Ltd. (ASX:FWD) 95 84 13%

23 21 Ausdrill Ltd. (ASX:ASL) 94 122 -23%

24 22 AJ Lucas Group Ltd. (ASX:AJL) 88 104 -15%

25 26 Macmahon Holdings Ltd. (ASX:MAH) 82 83 -2%

26 36 Austin Engineering Ltd. (ASX:ANG) 63 44 -15%

27 23 Boart Longyear Ltd. (ASX:BLY) 57 102 -45%

28 27 Neptune Marine Services Ltd. (ASX:NMS) 56 80 -30%

29 40 Ausenco Ltd. (ASX:AAX) 54 42 16%

30 39 Alliance Aviation Services Ltd. (ASX:AQZ) 53 43 25%

31 34 Southern Cross Electrical Engineering Ltd. (ASX:SXE) 51 47 7%

32 32 Lycopodium Ltd. (ASX:LYL) 50 51 -1%

33 35 LogiCamms Ltd. (ASX:LCM) 49 47 4%

34 29 Boom Logistics Ltd. (ASX:BOL) 47 57 -17%

35 28 Imdex Ltd. (ASX:IMD) 46 65 -38%

36 41 Coffey International Ltd. (ASX:COF) 42 36 18%

37 38 Matrix Composites & Engineering Ltd. (ASX:MCE) 42 43 -3%

38 30 Calibre Group Ltd. (ASX:CGH) 39 53 -27%

39 47 VDM Group Ltd. (ASX:VMG) 39 24 60%

40 48 LWP Technologies Ltd. (ASX:LWP) 35 24 -18%

41 33 Emeco Holdings Ltd. (ASX:EHL) 34 49 -30%

42 50 OTOC Ltd. (ASX:OTC) 32 19 69%

43 42 Nomad Building Solutions Ltd. (ASX:NOD) 31 31 -

44 37 Brierty Ltd. (ASX:BYL) 30 44 -30%

45 45 McAleese Ltd. (ASX:MCS) 27 28 -5%

46 31 NRW Holdings Ltd. (ASX:NWH) 26 52 -49%

47 46 XRF Scientific Ltd. (ASX:XRF) 25 27 -7%

48 43 Swick Mining Services Ltd. (ASX:SWK) 22 29 -27%

49 51 Mastermyne Group Ltd. (ASX:MYE) 19 15 31%

50 44 PPK Group Ltd. (ASX:PPK) 15 29 -50%

Market Cap (A$m) Share

price chg

%

Company

20

40

60

80

100

120

Sep12 Mar13 Sep13 Mar14 Sep14 Mar15 Sep15

Gresham Mining ServicesIndex (GMSI)

S&P/ASX 200

S&P/ASX 200 Resources

GMSI (excl. top 5)

69%60%

31%25% 25%

-38% -43% -45% -49% -50%

OT

OC

VD

M

Mas

term

yne

Alli

an

ce A

via

tio

n

RC

R

Imd

ex

Wo

rley

Pa

rso

ns

Bo

art

Lon

gye

ar

NR

W

PP

K

-7%-8%

2%1%0%

-1%-1%-2%-6%-7%

-11%-13%-14%

-18%

-26%

All

Ord

inar

ies

S&P

/ASX

20

0

Ind

ust

ria

ls

Uti

litie

s

A-R

EIT

Co

ns.

Dis

c.

Co

ns.

Sta

ple

s

Hea

lth

Car

eIT

Telc

o S

erv

ice

s

Fin

anci

al-x

-A-R

EIT

Mat

eri

als

Gre

sha

m M

inin

g Se

rvic

es

Re

sou

rce

s

Ener

gy

3 Notes: (1) Only companies with consensus earnings forecasts are included in charts; (2) Share prices are as at 30 Sep 2015; (3) Earnings multiples are not calendarised; (4) Companies exhibiting negative multiples have been excluded from the above analysis. Source: FactSet.

Valuation Multiples

PE ratios across the sector fell marginally during the September quarter, as share price falls were partially offset by further reductions to analyst earnings forecasts. The FY16 sector median PE multiple of 9.2x is slightly below the long term average of 9.4x.

1 YEAR FORWARD PRICE EARNINGS RATIO OVER TIME

PRICE EARNINGS RATIO (FY16F)

3

Large Cap (>$1bn) Mid Cap (between $200m and $1bn) Small Cap (<$200m)

DIVIDEND YIELD (FY16F)

2x

4x

6x

8x

10x

12x

14x

16x

18x

Mar 08 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11 Mar 12 Sep 12 Mar 13 Sep 13 Mar 14 Sep 14 Mar 15 Sep 15

Gresham Mining Services PER

All Ordinaries Index PER

Gresham Mining Services Average

Gresham Mining Services Average: 9.4x

-

2x

4x

6x

8x

10x

12x

14x

16x

18x

20x

AN

G

SXE

CIM

MA

H

ALQ

TOX

RU

L

MIN

FWD

MC

E

IMD

CD

D

CO

F

SDM

PEA

PR

G

SKE

TSE

UG

L

WO

R

GN

G

DO

W

XR

F

RC

R

MN

D

DC

G

ASL

MR

M

LCM

MLD

BKN

AQ

Z

BYL

CG

H

Median: 9.2x

1-yr fwd median as at: Jun 14: 8.9x (FY15) Sep 14: 10.8x (FY15) Dec 14: 8.8x (FY15) Mar 15: 9.1x (FY15) Jun 15: 9.5x (FY16)

0%

2%

4%

6%

8%

10%

12%

14%

CG

H

SDM

MLD

DC

G

MN

D

GN

G

SXE

LCM

WO

R

BYL

NW

H

XR

F

PR

G

DO

W

SKE

PEA

MR

M

AQ

Z

RC

R

TSE

CD

D

MIN

MC

E

CIM

ALQ

TOX

FWD

ASL

Median: 6.7%

1-yr fwd median as at: Jun 14: 6.0% (FY15) Sep 14: 5.0% (FY15) Dec 14: 5.3% (FY15) Mar 15: 5.8% (FY15) Jun 15: 6.0% (FY16)

4

Notes: (1) Only companies with consensus earnings forecasts are included in charts; (2) Share prices are as at 30 Sep 2015; (3) Earnings multiples are not calendarised; (4) Enterprise Value is based on market capitalisation plus minority interests and last reported net debt adjusted for capital raisings and acquisitions. (5) Companies exhibiting negative multiples have been excluded from the above analysis. Source: FactSet.

Valuation Multiples

Median FY16 EBIT and EBITDA multiples for the sector also fell during the quarter, currently sitting at 6.8x and 3.9x respectively. A large number of GMSI constituents continue to trade below reported NTA.

EV/EBIT (FY16F)

EV/EBITDA (FY16F)

4

Large Cap (>$1bn) Mid Cap (between $200m and $1bn) Small Cap (<$200m)

PRICE/NTA

-

2x

4x

6x

8x

10x

12x

14x

MC

S

AN

G

FWD

NW

H

ALQ

CD

D

TOX

CIM ASL

MR

M

SKE

IMD

MIN

BKN RU

L

PEA

WO

R

CO

F

TSE

PR

G

MC

E

AQ

Z

DO

W

RC

R

BYL

UG

L

XR

F

MN

D

SDM

GN

G

DC

G

LCM

MLD SX

E

CG

H

MA

H

Median: 6.8x

v1-yr fwd median as at:

Jun 14: 7.1x (FY15) Sep 14: 8.1x (FY15) Dec 14: 6.8x (FY15) Mar 15: 6.7x (FY15) Jun 15: 7.5x (FY16)

0%

100%

200%

300%

400%

CD

D

SKE

OTC

LWP

VM

G

TOX

UG

L

RU

L

NO

D

GN

G

RC

R

AA

X

CIM

CO

F

PR

G

TSE

LCM

XR

F

MN

D

DO

W

SDM

PEA AJL

AN

G

LYL

MLD

NM

S

MIN

FWD

SXE

DC

G

PP

K

BKN BYL

AQ

Z

IMD

MYE

MA

H

MC

E

SWK

MR

M

BO

L

NW

H

MC

S

ASL

EHL

Median: 108% Companies trading at a discount to NTA

-

1x

2x

3x

4x

5x

6x

7x

8x

9x

10x

BLY

AA

X

ALQ

AN

G

CD

D

SKE

EHL

RU

L

BO

L

TOX

CIM

PR

G

WO

R

PEA

FWD

CO

F

BKN TS

E

RC

R

MC

S

ASL

IMD

XR

F

MR

M

MIN

AQ

Z

DO

W

UG

L

GN

G

MN

D

NW

H

BYL

SDM

LCM

DC

G

MC

E

MLD

CG

H

SXE

MA

H

Median: 3.9x

v1-yr fwd median as at:

Jun 14: 4.2x (FY15) Sep 14: 4.8x (FY15) Dec 14: 4.4x (FY15) Mar 15: 4.4x (FY15) Jun 15: 4.2x (FY16)

5

Profitability

Roughly half of the GMSI constituents saw their revenue fall in FY15 as the sector transitioned from construction to production related activity. Median forecast revenue is relatively flat to FY17, but a large number of companies are expected to see continued falls over that period. EBITDA margins are forecast to improve in FY16 following three consecutive years of contraction.

5

ACTUAL REVENUE GROWTH (FY14-15A)

FORECAST REVENUE GROWTH (FY15-17F CAGR)

EBITDA MARGINS (FY15A)

Large Cap (>$1bn) Mid Cap (between $200m and $1bn) Small Cap (<$200m)

Notes: (1) Only companies with consensus earnings forecasts are included in charts. Source: FactSet.

MEDIAN EBITDA MARGINS OVER TIME

6%

8%

10%

12%

14%

16%

FY08A FY09A FY10A FY11A FY12A FY13A FY14A FY15A FY16F

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

NO

D

GN

G

PP

K

MR

M

BYL

RU

L

SWK

UG

L

SDM

TOX

SKE

SXE

CD

D

DC

G

LCM

IMD

TSE

MYE

MLD

EHL

PR

G

AN

G

AQ

Z

PEA

DO

W

ALQ XR

F

BLY

ASL

WO

R

MC

E

CO

F

RC

R

BKN

MC

S

CIM

FWD

MN

D

CG

H

AA

X

LYL

BO

L

MIN

NW

H

MA

H

AJL

OTC

VM

G

Median: -5%

-15%

-10%

-5%

0%

5%

10%

15%

RU

L

EHL

AN

G

UG

L

PEA

IMD

BLY

XR

F

SDM

RC

R

TOX

CO

F

AA

X

DO

W

PR

G

FWD

ALQ

CD

D

AQ

Z

MC

S

BK

N

ASL

TSE

BYL

CIM

MIN

LCM

GN

G

CG

H

SKE

BO

L

MC

E

SXE

DC

G

MN

D

MLD

MR

M

WO

R

NW

H

MA

H

Median: 0%

0%

10%

20%

30%

PEA

MR

M

AQ

Z

ALQ XR

F

MLD

MIN

TOX

MC

E

EHL

ASL

FWD

BKN

SWK

MC

S

GN

G

DC

G

MN

D

LCM

DO

W

SDM

BO

L

TSE

CD

D

AN

G

OTC

CIM

MA

H

SXE

WO

R

CG

H

SKE

BYL

RC

R

MYE

PR

G

RU

L

CO

F

UG

L

BLY

IMD

AJL

Median: 7%

6

Financial Position

Gearing levels across the sector vary considerably, reflecting the relative asset and contract-backing of the participants. Median gearing levels reduced from 23% in the June quarter to 17% in the September quarter, consistent with a number of equity capital raisings during the period to pay down debt.

6

NET DEBT / BOOK EQUITY

NET DEBT / ENTERPRISE VALUE

NET DEBT / EBITDA (FY15)

Large Cap (>$1bn) Mid Cap (between $200m and $1bn) Small Cap (<$200m)

Source: FactSet.

EBIT INTEREST COVERAGE (FY15 EBIT / INTEREST EXPENSE)

-100%

-50%

0%

50%

100%

BLY

EHL

MC

S

NW

H

ASL

BKN

MR

M

AQ

Z

BO

L

AN

G

CO

F

BYL

AA

X

TSE

SWK

IMD

AJL

CD

D

WO

R

FWD

MYE

PP

K

SKE

ALQ

TOX

OTC

PEA

DO

W

RC

R

PR

G

CIM

LWP

VM

G

UG

L

MIN

MC

E

CG

H

NO

D

MLD

RU

L

XR

F

NM

S

MN

D

DC

G

LCM

GN

G

SDM LYL

SXE

MA

H

Median: 17%

-100%

-50%

0%

50%

100%

BLY

EHL

MC

S

NW

H

AQ

Z

AJL

AN

G

BKN BYL

TSE

ASL

ALQ

CO

F

CD

D

WO

R

MR

M

SKE

BO

L

TOX

AA

X

FWD

PP

K

SWK

IMD

OTC

PEA

MYE

DO

W

RC

R

PR

G

MC

E

UG

L

CIM

CG

H

MIN

MLD

DC

G

NM

S

XR

F

LCM

MA

H

NO

D

RU

L

SXE

MN

D

LYL

SDM

VM

G

LWP

GN

G

Median: 17%

(4x)

(2x)

-

2x

4x

6x

8x

BLY AJL

EHL

IMD

LYL

AN

G

BO

L

NO

D

BKN ASL

CD

D

CO

F

MC

S

BYL

ALQ TS

E

WO

R

AQ

Z

SKE

SWK

FWD

MR

M

OTC

MYE

TOX

LWP

PEA

VM

G

DO

W

RC

R

PR

G

CG

H

MC

E

CIM

MLD

MIN

PP

K

UG

L

DC

G

MN

D

NW

H

XR

F

MA

H

LCM

GN

G

SDM

SXE

RU

L

AA

X

Median: 1.1x

0x

3x

6x

9x

12x

15x

LCM

GN

G

DC

G

MN

D

MIN

MLD

MC

E

SDM

PEA

DO

W

RC

R

SKE

TOX

ALQ

WO

R

CD

D

MR

M

AQ

Z

SXE

FWD

CIM TS

E

CG

H

CO

F

BYL

BKN

MC

S

ASL

UG

L

AN

G

Median: 5.4x

7

Contract Awards

7

MAJOR CONTRACT AWARDS

The major contract awards during the period were dominated by the larger players, with CIMIC securing three contracts across different commodities and Downer announcing a further $225m of mining services and maintenance work at the BHP Mitsubishi Alliance (BMA) owned Blackwater coal mine.

NRW was also awarded a 2 year, $140 million contract for contract mining and ore haulage at the Nammuldi mine for Rio Tinto.

Source: Company announcements.

Date

Announced Company Client Project/Facility Location Services Value (A$m) Commodity

29 Sep 15 CIMIC Australia Pacific LNG Surat Basin QLD Well development 300 Oil & Gas

24 Sep 15 Sedgman BHP Jimblebar mine WA EPC&C 145 Iron Ore

22 Sep 15 SCEE Tecnicas Reunidas Burrup Project WA Commissioning n/a Fertiliser

21 Sep 15 Alliance Aviation BHP Olympic Dam SA Transport n/a Copper

27 Aug 15 Ausenco BMA Blackwater mine QLD EPC for tailings facility 33 Coal

25 Aug 15 Ausenco Unknown Gold processing asset North Africa EPCM 12 Gold

21 Aug 15 Nomad Chevron Wheatstone WA Modular housing 25 Oil & Gas

20 Aug 15 Ausenco Hudbay Minerals Rosemont Project USA EPCM n/a Copper

20 Aug 15 Pacific Energy Metals X Bluebird mine WA Power station restart n/a Gold

20 Aug 15 Downer BMA Blackwater mine QLD Mining and maintenance 225 Coal

19 Aug 15 Pacific Energy OM Manganese Bootu Creek WA Power generation n/a Manganese

17 Aug 15 Monadelphous Chevron Barrow Island WA Facilities maintenance n/a Oil & Gas

10 Aug 15 CIMIC (Thiess) BHP Nickel West Rocky’s Reward mine WA Mining services 160 Nickel

5 Aug 15 Ausenco (JV) Royal Nickel Dumont Project Canada EPC n/a Nickel

28 Jul 15 NRW Rio Tinto Nammuldi mine WA Mining and haulage 140 Iron Ore

20 Jul 15 GR Engineering Western Areas Forrestania mine WA EPC for mill 22 Nickel

16 Jul 15 GR Engineering Sirius Resources Nova mine WA EPC for non-process

infrastructure 12 Nickel

15 Jul 15 OTOC Sandfire DeGrussa WA Solar power station build 40 Copper/Gold

1 Jul 15 CIMIC (Thiess) Antofagasta Encuentro mine Chile Mining services 137 Copper

8

Corporate Activity

8

M&A activity remained subdued, with the sectors’ most significant deal being Crescent Capital Partners’ unsolicited, proportional takeover offer for Cardno. This offer has now been recommended by the target board following an increase in the offer price. Programmed also received shareholder approval for its merger with Skilled during the period whilst merger discussions between Bradken and a consortium of CHAMP and Sigdo Koppers were terminated. Shortly after the end of the quarter, Coffey also announced a recommended takeover offer by US based Tetra Tech.

The September quarter saw an increase in equity capital market activity, but a majority of the capital raised was used to replace debt rather than to pursue growth initiatives. At the other end of the capital management spectrum, a number companies are also undertaking share buyback programs, with two initiated during the quarter.

Date Announced

Status Target Business Target

HQ Seller Acquirer

Value (A$m) Forum

Interest (%)

Cons.

14 Sept 15 Announced Cardno Geotechnical and

engineering consulting services

QLD n/a Crescent Capital

Partners 842 Public 41 Cash

27 Aug 15 Completed Force Corporation Equipment hiring services QLD Helmsman

Capital Coates Hire 45 Private 100 Cash

14 Aug 15 Completed Water

Corporation

Engineering and construction services for

water utilities WA WA Gov’t RCR Tomlinson 10 Private 100 Cash

12 Aug 15 Completed LDE Corporation Explosives manufacturing

and services QLD n/a Hanwha Corp 46 Private 100 Cash

7 Aug 15 Completed Blast Movement

Technologies Ore loss and dilution minimisation services

QLD Thornton

family Resource Capital

Funds n/a Private n/a Cash

23 Jul 15 Completed ICS Industries Manufacturing, installation and maintenance services

WA n/a EnerSys Inc n/a Private 100 Cash

2 Jul 15 Completed Austral

Construction

Piling and construction services for the mining and

civil sectors WA n/a Keller Group 42 Private 100 Cash

MERGERS & ACQUISITIONS

CAPITAL RAISINGS

Date Announced

Status Company Type Amount Raised

(A$m)

Discount / (Premium) to Last Price (%)

Purpose Underwritten

18 Aug 15 Completed VDM Placement 18.0 (275%)1 Business development No

21 Aug 15 Completed Imdex Placement 6.52 16.7% Repay debt and working capital No

21 Jul 15 Completed Ausenco Placement 10.7 (15%) Repay debt and working capital No

20 Jul 15 Completed Austin Engineering Entitlement Offer 31.6 11% Pay down senior debt Yes

1 Jul 15 Completed Bradken Placement3 70.0 n/a Refinance debt No

Notes: (1) Placement to a strategic shareholder taking them to 19.9%; (2) Originally a $28m, two-stage equity raise, however scaled back following an alternative refinance deal emerging; (3) Issue of Redeemable Convertible Preference Shares. Source: Mergermarket, company announcements.

ACTIVE SHARE BUYBACKS

Date Announced Company Type Size Purpose

6 Oct 15 MacMahon On-market Up to 126m shares Capital management

20 Aug 15 Downer On-market Up to 43m shares Capital management

18 Feb 15 Matrix On-market Up to 9.4m shares Capital management

17 Dec 14 SCEE On-market Up to 10% of share capital Capital management

5 Dec 14 RCR On-market Up to 2m shares Capital management

4 Dec 14 Decmil On-market Up to 10% of share capital Capital management

9

Quarterly Focus: Cost-out

9

Given current conditions in the sector, participants are moving to leaner operating structures to mitigate margin erosion. Employee expenses comprise a significant portion of the sectors’ cost base, particularly for the more labour intensive players, and are therefore a key target of restructuring programmes.

Over the period FY13 to FY15, aggregate sector revenue fell by ~$8.8b (13%) whilst aggregate sector employee expenses fell ~$2.8b (8%). 30 of the 50 GSMI constituents reduced employee expenses during that time. Of the companies that increased employee expenses, most also recorded increases in revenue over the period.

Source: Company reports and announcements, FactSet

CHANGE IN REVENUE & EMPLOYEE EXPENSE (FY13 – FY15) SELECTED COMPANIES

REVENUE VS EMPLOYEE EXPENSES - CHANGE

Comments

MND - Initiated a company wide cost reduction program in FY13

- Included realignment of staff levels, function consolidation, lease renegotiation, improved project management

- $100m annualised cost savings; workforce decreased 15% in FY15

BLY - Decreased workforce by ~3,100 employees (38%) since the start of CY13

MAH - Undergone a recent restructure following the loss of its largest contract

- Reduced employee expenses by $277m since FY13; looking to cut overheads including relocating its head office from West Perth to Perth Airport precinct

AJL - Significant operational restructure in FY14

- Streamlined operations and reviewed business process

- Workforce reduced by 25% in FY15; employee expense halved since FY13

AAX - Sourced $29m cost savings in CY14; expecting ~$20m in CY15

- Channelling more work through its more cost efficient Asian offices

- Reduced employee expense by 37% since FY13

ASL - Established an Executive Committee to look at operating efficiency

- Targeting savings of $45m pa - Reduced employee expenses by $101m

(28%) since FY13

(3.5%)

(9.4%)

(1.2%)

(6.9%)

(10.0%)

(8.0%)

(6.0%)

(4.0%)

(2.0%)

0.0%

2.0%

FY13-14 FY14-15

Revenue Employee Expense

FY2013 FY2015

Company A$m % A$m % % %

CIMIC Group Ltd.(CIM) (842) (9%) (4,288) (21%) 43% 50%

ALS Ltd.(ALQ) 90 15% (62) (4%) 40% 48%

Downer EDI Ltd.(DOW) (729) (15%) (1,372) (16%) 59% 60%

WorleyParsons Ltd.(WOR) (139) (3%) (65) (1%) 60% 59%

Mineral Resources Ltd.(MIN) 66 22% 202 18% 27% 28%

Monadelphous Group Ltd.(MND) (368) (30%) (749) (29%) 47% 46%

Transfield Services Ltd.(TSE) 48 3% 381 11% 49% 45%

Cardno Ltd.(CDD) 121 16% 230 19% 64% 62%

SKILLED Group Ltd.(SKE) 0 0% 178 10% 90% 83%

Tox Free Solutions Ltd.(TOX) 63 56% 123 43% 39% 43%

Programmed (PRG) (6) (0%) (60) (4%) 82% 85%

UGL Ltd.(UGL) 41 4% 108 6% 57% 56%

RCR Tomlinson Ltd.(RCR) 191 43% 254 29% 50% 56%

MACA Ltd.(MLD) 41 35% 124 26% 25% 27%

MMA Offshore Ltd.(MRM) 70 40% 414 108% 46% 31%

Sedgman Ltd.(SDM) (32) (25%) (98) (22%) 28% 27%

Bradken Ltd.(BKN) (65) (16%) (347) (26%) 32% 36%

Decmil Group Ltd.(DCG) (28) (19%) 138 26% 28% 18%

Pacific Energy Ltd.(PEA) 1 20% 2 5% 15% 17%

GR Engineering Services Ltd.(GNG) 13 33% 102 89% 34% 24%

RungePincockMinarco Ltd.(RUL) (9) (16%) (5) (7%) 74% 67%

Fleetwood Corp. Ltd.(FWD) (28) (18%) (31) (9%) 46% 42%

Ausdrill Ltd.(ASL) (101) (28%) (363) (32%) 33% 35%

AJ Lucas Group Ltd.(AJL) (91) (50%) (150) (51%) 61% 61%

Macmahon Holdings Ltd.(MAH) (277) (47%) (505) (43%) 51% 47%

Austin Engineering Ltd.(ANG) (8) (7%) (80) (28%) 38% 49%

Boart Longyear Ltd.(BLY) (163) (29%) (808) (35%) 24% 27%

Neptune Marine Services Ltd.(NMS) 22 63% 14 12% 29% 42%

Ausenco Ltd.(AAX) (127) (37%) (220) (41%) 63% 66%

Alliance Aviation Services Ltd.(AQZ) 2 3% (24) (11%) 26% 31%

Southern Cross Electrical (SXE) (6) (27%) (40) (14%) 7% 6%

Lycopodium Ltd.(LYL) (98) (53%) (124) (51%) 76% 73%

LogiCamms Ltd.(LCM) 1 1% 4 3% 66% 64%

Boom Logistics Ltd.(BOL) (56) (35%) (133) (40%) 48% 52%

Imdex Ltd.(IMD) 5 10% (45) (19%) 22% 30%

Coffey International Ltd.(COF) (63) (19%) (130) (19%) 49% 49%

Matrix Composites (MCE) (5) (13%) (1) (1%) 26% 23%

Calibre Group Ltd.(CGH) (27) (35%) (144) (20%) 11% 9%

VDM Group Ltd.(VMG) (44) (90%) (204) (100%) 24% 476%

LWP Technologies Ltd.(LWP) (0) (16%) n/a n/a nmf nmf

Emeco Holdings Ltd.(EHL) (2) (4%) (198) (45%) 10% 18%

OTOC Ltd.(OTC) n/a n/a (45) (40%) nmf nmf

Nomad Building Solutions Ltd.(NOD) (1) (13%) 1 2% 8% 7%

Brierty Ltd.(BYL) 2 2% (1) (0%) 24% 25%

McAleese Ltd.(MCS) (23) (8%) (109) (15%) 36% 39%

NRW Holdings Ltd.(NWH) (162) (22%) (598) (44%) 53% 72%

XRF Scientific Ltd.(XRF) 1 24% (2) (9%) 10% 14%

Swick Mining Services Ltd.(SWK) (4) (6%) (14) (10%) 53% 55%

Mastermyne Group Ltd.(MYE) (40) (24%) (75) (30%) 67% 72%

PPK Group Ltd.(PPK) 10 441% 21 205% 23% 41%

Total (2,752) (8%) (8,791) (13%) 49% 51%

Change (FY13-FY15)

Employee Expense Employee Expense % RevRevenue

Change (FY13-FY15)

10 Note: (1) Excludes alternate appointments; (2) Internal appointment. Source: Company announcements.

Executive Movements

EXECUTIVE & DIRECTOR APPOINTMENTS1

Date Announced Company Name Role Date Effective

30 Sep 15 Boart Longyear Deborah O’Toole Non-Executive Director 1 Oct 15

30 Sep 15 Boart Longyear Jeffrey Long Non-Executive Director 1 Oct 15

29 Sep 15 Bradken Phil Amall Chairman2 10 Nov 15

15 Sep 15 Mastermyne Gabriel Meena Non-Executive Director 15 Sep 15

20 Aug 15 Emeco Ian Testrow CEO & MD2 20 Aug 15

20 Aug 15 Emeco Greg Hawkins Executive Director2 20 Aug 15

18 Aug 15 Austin Engineering John Nicholls Non-Executive Director 1 Sep 15

18 Aug 15 Maca Robert Ryan Non-Executive Director 18 Aug 15

10 Aug 15 UGL Robert Kaye Non-Executive Director Unknown

10 Aug 15 UGL Jane Harvey Non-Executive Director Unknown

6 Aug 15 Calibre Max Bomben MD (Consulting)2 Unknown

31 Jul 15 ALS Bruce Phillips Non-Executive Director 1 Aug 15

23 Jul 15 CIMIC Angel Muriel CFO2 23 Jul 15

13 Jul 15 MacMahon Sybrandt van Dyk CEO & MD2 13 Jul 15

6 Jul 15 Imdex Ivan Gustavino Non-Executive Director 3 Jul 15

1 Jul 15 Decmil Ric Buratto CEO (Constr. & Engineering) Unknown

10

EXECUTIVE & DIRECTOR RESIGNATIONS / RETIREMENTS

Date Announced Company Name Role Date Effective

30 Sep 15 Boart Longyear Conor Tochilin Non-Executive Director 1 Oct 15

29 Sep 15 Bradken Nick Greiner Director/Chairman 10 Nov 15

28 Sep 15 Austin Engineering Paul Reading Chairman Unknown

22 Sep 15 LWP Technologies Ross Henden Non-Executive Director 20 Sep 15

1 Sep 15 Cardno Trevor Johnson Executive Director Unknown

24 Aug 15 Boart Longyear Richard O’Brien CEO Unknown

20 Aug 15 Emeco Ken Lewsey CEO 20 Aug 15

10 Aug 15 UGL Doug McTaggart Non-Executive Director 3 Aug 15

30 Jul 15 ALS Ray Hill Non-Executive Director 30 Jul 15

30 Jul 15 ALS Bruce Brown Non-Executive Director 30 Jul 15

29 Jul 15 Cardno Graham Yerbury CFO 23 Oct 15

17 Jul 15 MacMahon Chris Brown Company Secretary Unknown

11

Gresham’s Credentials

LANDMARK MERGERS & ACQUISITIONS

TAKEOVER DEFENCE

STRATEGIC ADVISORY, JOINT VENTURES AND CAPITAL MARKETS

Advised Little World Beverages on its acquisition

by Lion

Advised Magma

Metals in relation to the

unsolicited takeover offer

from Panoramic Resources

Advised David

Jones in relation to acquisition by

Woolworths

Advised LinQ Capital on its acquisition by IMC Resources

Holdings

Advised BHP Billiton on its proposed iron ore production joint venture with Rio Tinto

Introduced

Denham Capital to Trans Tasman

Resources resulting in NZ

iron sands investment

Advised BHP Billiton on the disposal of the Yabulu Nickel

refinery

Advised

Bannerman Resources on its

financing with Resource Capital

Funds

Advised Iluka on its institutional placement and

accelerated rights issue

Advised Boral on its joint venture

with USG Corporation

AWARDS & ACCOLADES

2011 M&A Deal of the Year

SABMiller’s

acquisition of Foster’s Group

2009 Most

Innovative Deal

Babcock & Brown

Infrastructure’s recapitalisation

Secondary Market Equity Raising of

the Year

Wesfarmers’ $2.6bn equity

raising

2007 Best M&A

Deal

Wesfarmers’ acquisition of

Coles

Best M&A Deal

in Australia

Wesfarmers’ acquisition of

Coles

Advised Foster’s on the demerger

of its wine business

2011

Joint lead adviser to Japan Post on the acquisition of

Toll Holdings

2015

2012

Advising Coffey in relation to a recommended

takeover offer by Tetra Tech

2014

Advised Clough

in relation to acquisition by

Murray & Roberts

2013 2012

2010 2010 2009 2008 2009/08 2013

2013

Advised Platinum Equity in relation to the acquisition of a 70% stake in

the Sensis directories

business from Telstra

2014

Advised Wesfarmers on the sale of its

underwriting and insurance broking

businesses

2014

Advised Bank of Queensland on

the acquisition of loan portfolio from Investec

2014

Excellence in Corporate

Advisory - 2012

Boutique / Independent

Lead

Independent financial adviser to the Board of BHP Billiton on

the demerger of South32

2015

Current

12

Contact Details

Gresham Advisory Partners Limited ABN 88 093 611 413

Level 17, 167 Macquarie Street

Sydney NSW 2000

Telephone: +61 2 9221 5133

Facsimile: +61 2 9221 6814

Level 39, 120 Collins Street

Melbourne VIC 2000

Telephone: +61 3 9664 0300

Facsimile: +61 3 9650 7722

Level 3, 28 The Esplanade

Perth WA 6000

Telephone: +61 8 9486 7077

Facsimile: +61 8 9486 7024

www.gresham.com.au

Michael Lishman Managing Director, Perth E: mlishman@gresham.com.au T: +61 8 9213 0289

Terms and Conditions Information contained in this publication The opinions, advice, recommendations and other information contained in this publication, whether express or implied, are published or made by Gresham Advisory Partners Limited (ABN 88 093 611 413), Australian financial services license (247113), and by its officers and employees (collectively “Gresham Advisory Partners”) in good faith in relation to the facts known to it at the time of preparation. Gresham Advisory Partners has prepared this publication without consideration of the investment objectives, financial situation or particular needs of any individual investor, and you should not rely on the publication for the purpose of making a financial decision. To whom this information is provided This publication is only made available to persons who are wholesale clients within the meaning of section 761G of the Corporations Act 2001. This publication is supplied on the condition that it is not passed on to any person who is a retail client within the meaning of section 761G of the Corporations Act 2001. Disclaimer and limitation of liability To the maximum extent permitted by law, Gresham Advisory Partners will not be liable in any way for any loss or damage suffered by you through use or reliance on this information. Gresham Advisory Partners’ liability for negligence, breach of contract or contravention of any law, which cannot be lawfully excluded, is limited, at Gresham Advisory Partners’ option and to the maximum extent permitted by law, to resupplying this information or any part of it to you, or to paying for the resupply of this information or any part of it to you. No warranties made as to content Gresham Advisory Partners makes no warranty, express or implied, concerning this publication. The publication provided by us on an “AS IS” basis at your sole risk. Gresham Advisory Partners expressly disclaims, to the maximum extent permitted by law, any implied warranty of merchantability or fitness for a particular purpose, including any warranty for the use or the results of the use of the publication with respect to its correctness, quality, accuracy, completeness, or reliability. Copyright Copyright in this publication is owned by Gresham Advisory Partners. You may use the information in this publication for your own personal use, but you must not (without Gresham Advisory Partners’ consent) alter, reproduce or distribute any part of this publication, transmit it to any other person or incorporate the information into any other document. General matters These Terms and Conditions are governed by the law in force in the State of Victoria, and the parties irrevocably submit to the non-exclusive jurisdiction of the courts of Victoria and courts of appeal from them for determining any disputes concerning the Terms and Conditions. If the whole or any part of a provision of these Terms and Conditions are void, unenforceable or illegal in a jurisdiction it is severed for that jurisdiction. The remainder of the Terms and Conditions have full force and effect and the validity or enforceability of that provision in any other jurisdiction is not affected. This clause has no effect if the severance alters the basic nature of the Terms and Conditions or is contrary to public policy. If Gresham Advisory Partners do not act in relation to a breach by you of these Terms and Conditions, this does not waive Gresham Advisory Partners’ right to act with respect to subsequent or similar breaches.

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