letter to shareholders
29 October 2012
FY2012 financial results
responding to external factors by improving operational focus
Dear Shareholders,
The last year was marked by significant restructuring and
setting a sound platform for the future of your Company. The
result for the year ending 30 June 2012 has been
unsatisfactory. An after tax loss of $5.9 million was
incurred, which included an after tax loss of $4.6 million
from discontinued operations, largely the closure of
commercial construction.
Revenues from continuing operations were $226.4 million, an
increase of 14% on the previous year. The result, while
supported by growth in the mining and related sectors, was
significantly affected by the high Australian dollar, lower
commodity prices, and weakening conditions in the industrial
sectors. This was emphasised early in 2012 by the termination
of a major contract due to the closure of an aluminium
smelter in the Hunter Valley, as well as significant negative
economic impact on the steel and aluminium industries.
At last year's Annual General Meeting (AGM), we announced a
shift in the company's strategic direction by withdrawing
from the high-risk and low-return commercial construction
market and focussing the business on maintenance, engineering
and project management services with construction restricted
primarily to mining infrastructure and selected utilities.
This strategy has achieved a lower risk profile for the
company that we expect to result in a more sustainable income
stream going forward.
The Board and management team is resolutely committed to
Thomas & Coffey providing maintenance services to existing
and new customers. In particular, this includes servicing
operation-critical equipment for our mining and industrial
customers and offering practical solutions to their
operational problems.
We understand that Shareholders are disappointed. We too are
disappointed and acknowledge these results are unacceptable.
We believe the company's strategic shift, improved
operational focus, tight controls on support cost and
improved risk/return profile have gone a long way to
establishing a sound platform for the future.
FY2012 was characterised by difficult external economic
conditions and market changes. The strong Australian dollar,
lower commodity prices and weakening operating conditions in
the industrial sectors, particularly steel and aluminium,
have resulted in reduced business activity for heavy
industries.
• ZERO HARM
• INTEGRITY
• CONTINUOUS IMPROVEMENT
• INDIVIDUAL ACCOUNTABILITY
• TEAMWORK
• OUR CUSTOMERS
long-term, value adding relationships with our customers
our people - united to face challenges
safety - journey to achieving
'Zero Harm'
Our withdrawal from the commercial construction market saw
the closure of construction units in Sydney, Newcastle,
Perth, Darwin, Brisbane and the prefabricated building
business (also located in Brisbane) and, sadly, the loss of
many talented and capable people. We have, where possible,
redeployed operations people - based on their skills and
expertise - to areas of the company where they can deliver
maximum benefit.
Under our One Company strategy, we enhanced cooperation among
the regions, working together to offer customers in all
regions our broad range of expertise and experience. In the
field and in our workshops, our people's team spirit has led
to more inter-regional projects and the provision of
consolidated services for new and existing customers.
We are concentrating on providing a wider range of services
to our customers. Delivery of maintenance services based on
our core competencies to our customer base enables us to grow
long-term relationships built on trust and shared values.
Complementary project work, together with maintenance
services, further strengthens relationships with our key
customers. Understanding our customers' needs and consistent
delivery of high quality value-added solutions are crucial to
establishing our future as a business.
As a service-based business, people remain our most valuable
asset. Rapidly changing external market conditions and the
necessary responses made FY2012 a challenging year as we
restructured the company to better carry out our strategy
whilst retaining as many of our loyal, committed and
highly-skilled team as possible.
Our management team has also been strengthened with the
appointment of additional experienced managers who are
complementing our excellent longer term team members.
The focus for our people in FY2013 continues to be on the
basics - performance management, supervisory skills
development and addressing competency gaps inhibiting
employees from performing to their maximum potential, which
should lead to further productivity gains.
All of these need to be supported by a very mean and lean "no
frills" support structure, in Head Office and within each
Region, with tight cost controls, and with particular
emphasis on constantly achieving higher productivity levels
in every corner of our business. This is also an area of high
focus.
Thomas & Coffey continues to hold the safety of our people,
customers and contractors as a core value. Zero Harm is the
standard to which we strive and our customers expect.
• ZERO HARM
• INTEGRITY
• CONTINUOUS IMPROVEMENT
• INDIVIDUAL ACCOUNTABILITY
• TEAMWORK
• OUR CUSTOMERS
It is pleasing to report we achieved a 35% reduction in lost
time injury frequency rates
(LTIFR) and a 35% reduction in total recordable injury
frequency rates (TRIFR) in FY2012. These results can be
largely attributed to a consistent focus on safety at all
levels.
Lost Time Injury Frequency Rate
(LTIFR) in million hours
Total Recordable Injury Frequency Rate
(TRIFR) in million hours
resilience and adapting to change
outlook
Despite these achievements and improvements in safety
outcomes, we still have more work to do in order to totally
eliminate injuries.
In FY2013, our focus is to continually improve safety
performance through the refinement and simplification of our
systems and further improvement of training and communication
methods.
This commitment has to be driven from the top, and will only
be of value if all our people
"walk the talk" when it comes to safety!
Thomas & Coffey is a resilient company. During FY2012, we
have seen our people 'get on with it', determined to keep
doing better notwithstanding trying conditions. This culture
enables us to collectively take stock of our strengths and
overcome the ongoing challenges and changes - both internally
and externally.
This resilience stems from our values of teamwork and
continuous improvement as well as our commitment to achieve
the optimum outcome for our customers. This is manifested in
the disciplined approach we have towards our operations.
To achieve this, we will ensure that economies of scale are
achieved in supporting our operations and combine back office
services wherever possible. Keeping support costs very low as
we improve business efficiency and maintain our vigour is
critical to success.
The Board and Executive Team are committed to leading Thomas
& Coffey to restored profitability and a position where we
can recommence paying dividends soon.
The next six months will be challenging. The company and our
customers face a multitude of external challenges including
the volatility of mining commodity prices, a strong
Australian
• ZERO HARM
• INTEGRITY
• CONTINUOUS IMPROVEMENT
• INDIVIDUAL ACCOUNTABILITY
• TEAMWORK
• OUR CUSTOMERS
dollar and variable demand for coal, steel and aluminium in
the countries to which we export. In the short term, these
are impacting activity levels, including key customers'
maintenance expenditure.
We are confident that, in the medium term, our customers will
increase their activity levels, strengthening ongoing demand
for our specialised maintenance services. The growth
prospects for the company in the long-term are strong.
We look forward to providing a market update at the AGM on 22
November.
In conclusion, we'd like to acknowledge and thank you, our
Shareholders, for your continuing support and patience
through a very tough period. We acknowledge that we have let
you down and we are committed to restore the company to
profitability.
We would also like to recognise the determination and
commitment of the Board, Executive Team and all our wonderful
employees and thank them for their ongoing support. We
commend their hard work and dedication as well as their
unwavering resolve to build a better Thomas & Coffey.
Yours faithfully
Robert Critchley Rex Comb
Chairman Managing Director
who we are
Thomas & Coffey is an ASX-listed company that employs around 1000 people in key industrial and mining centres throughout New South Wales and Queensland. We provide specialised maintenance and project delivery services to the mining, heavy industry, manufacturing and utilities sectors.
what we do
Our highly-skilled and competent workforce understand customers' operational needs and offer targeted solutions in the following areas:
• Industrial maintenance and trade services - including asset management and optimisation as well as preventative
maintenance activities such as shutdowns / down days, equipment servicing, machinery repair and inspection.
• Workshop services - including plant and equipment rebuild / repair, production of spares and consumables, fabrication, machining, welding, air-conditioning & refrigeration and electrical work.
• Project management and execution - including infrastructure, plant and facility construction, relocation and upgrade, civil and building works, major repair / installation and plant outages.
• ZERO HARM
• INTEGRITY
• CONTINUOUS IMPROVEMENT
• INDIVIDUAL ACCOUNTABILITY
• TEAMWORK
• OUR CUSTOMERS
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