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- FY08 Highlights
- Chairman's Letter to Shareholders
- Managing Directors Report
- Board of Directors
- Enterprise Structure - An Evolution
- Coote Industrial Limited
- Business Operations
- 09 Direction and Strategy
- Financial Statements
- » Directors’ report
- » Remuneration report
- » Directors’ declaration
- » External auditor’s statement of
independence - » Independent audit report
- » Corporate governance
statement - » Income statement
- » Balance sheet
- » Statement of changes in equity
- » Consolidated Cash flow
statements - » Notes to the accounts
- » Shareholder information
- » Corporate directory
Financial Statements
Directors Report
The Directors of Coote Industrial present their report on the consolidated entity which includes its controlled entities (Group) for the financial year ended 30 June 2008
The names of directors in office at anytime during or since the end of the year are:
Name of Directors
Donald Hector BE (Chem), PhD, FAICD, FIEAust, FIChemE
Non-Executive Director (Chairman)
Appointed: 02/11/2006 Age: 58
Donald has 15 years experience in senior executive management and CEO positions with industrial companies. He was Managing Director of Dow Corning Australia Pty Ltd, the Australian subsidiary of Dow Corning Corporation and was Managing Director of Asia Pacific Specialty Chemicals Ltd, an ASX-listed chemical company. Don is a non-executive director of SEMF Pty Ltd, a multidisciplinary engineering consulting firm, and a Non-executive Director of Quantum Technology Pty Ltd, a manufacturer of products for the blind and vision-impaired. He is also on the board of Engineering Sydney at the University of Sydney and is a Council member of one of Sydney’s leading independent schools.
Summary of current equity holdings
Shares 51,368
Options 300,000
Michael Coote BE (Mech), MAICD
Managing Director
Appointed: 28/06/2006 Age: 45
In the early years Mike worked in the family transport business, delivering houses around the state and assisting with administration. After completing his Mechanical Engineering Degree in 1985 he was involved in heavy mining equipment, waste crushing, conveying projects and locomotive maintenance for Mt. Newman Mining (BHP). In mid 1989 he founded Globe Turbocharger Specialties Australia, providing large diesel engine operators with quality aftermarket spares. Utilising his experience in heavy vehicle design, diesel engines and projects management, Mike developed the business across a broad platform, re-badging it as GTSA Engineering to better represent the company’s activities. Over the ensuing years the company has continued to evolve as Coote Industrial Limited
Summary of current equity holdings
Shares 42,089,075
Options -
Don Patterson BBus, MAICD
Director and Chief Executive Officer
Appointed: 28/06/2006 Age: 50
Don held a senior accounting role with Wesfarmers for five years before taking up senior management positions in the finance, retailing and hospitality industries and most recently five years in commercial property development, before joining Coote Engineering in 2002. Don initially assumed the role of Financial Controller and then included the role of General Manager GTSA Engineering. Over the past five years Don has implemented considerable structural reform, planning and other improvements supporting Coote Industrial Limited’s historical growth and fulfilling future expectations.
Summary of current equity holdings
Shares 1,757,787
Options 2,000,000
Glenn Parrett BCom (Finance & Economics), MAICD
Executive Director
Appointed: 28/06/2006 Age: 43
Glenn has more than 15 years experience delivering against total business plan responsibility, including as General Manager and Managing Director of engineering sales and service businesses. Underpinned by Certificate studies in Mechanical Engineering, Glenn built experience in application engineering, technical sales and subsequently project and business management in the power and propulsion segment. Having completed a degree in Finance and Economics with High Distinction average, Glenn was awarded life membership of the Golden Key National Honour Society and has undertaken postgraduate studies in Business Law at Sydney University. After delivering key projects and acquisitions for Coote Industrial at corporate level, Glenn’s focus from FY09 is the integration, performance and development of the group’s power and propulsion businesses.
Summary of current equity holdings
Shares 247,507
Options 250,000
Peter Wilson GAICD
Executive Director
Appointed: 02/11/2006 Age: 61
Peter is a qualified Master Mariner and has extensive management experience in the shipping, stevedoring and logistics fields both in the United Kingdom and Australia. Prior to joining Coote Industrial Peter worked for Patrick Corporation’s Auto and General Division in a business development role. Prior to his time at Patrick, Peter was adviser to the Federal Minister for Workplace Relations and Small Business based in Canberra. Peter is experienced in the areas of materials handling, shipping and in the major logistics and transport processes of mining and resources.
Summary of current equity holdings
Shares 224,737
Options 250,000
Mustapha Darwish BCom (Accounting & Finance) ASA Company Secretary Appointed: 02/11/2006
Mustapha Darwish worked for 2 years in public practice before joining Coote Industrial in 2004. He has worked for the past four years in various management roles in corporate accounting before being appointed the Group Chief Financial Officer in early 2007.
Summary of current equity holdings
Shares 13,500
Options 100,000
Principal Activities
The principal activities of the group during the financial year were:
Technically Based Sales & Service
- Project Management
- Engineering Services
- Manufacturing & Fabrication
- Repair & Maintenance Services
- Plant, Equipment and Component Sales
- Rail Infrastructure Services
- Rail Operations
- Freight Logistics
- Personnel Services
Significant Events
There were a number of significant changes to the Group during this year of operations including:
- Acquisition of FCD Container Logistics
- Acquisition of Gemco Rail and its controlled entity
- Acquisition of Industrial Powertrain
- Acquisition of Drivetrain Australia and its controlled entities, located in Philippines, New Zealand and Singapore Completed a capital raising of $70m at $2.40 per share on the 30 November 2007
- Acquired a significant volume of locomotive and wagons inventory for refurbishment and future sale, a number of which were refurbished and sold in this financial year to Greentrains Pty Ltd.
Additional details on these transactions can be found in Notes 3, 10, 22 and 26 of the accounts.
Operating Results
The consolidated profit for the Group after providing for income tax amounted to $22.012m.
Dividends Paid or Recommended
Dividends paid or declared for payment are as follows
- Ordinary Interim Dividend paid of 3.50 cents per share fully franked paid on the 31 March 2008
- Final ordinary Dividend of 5.0 cents per share recommended by the Directors and payable on the 31 October 2008
Result Overview
The Directors are pleased to announce a full year Net Profit after Tax (NPAT) of $22.012m. The result is up 169% on the FY07 NPAT of $8.174m.
This strong FY08 profit result was derived from revenue for the year of $347.893m (FY07 $69.416m).
Earnings per share (EPS) increased by 20% from 17.22 cents per share to 20.58 cents per share on a fully diluted basis.
The Directors of Coote Industrial have declared a final, fully-franked dividend of 5 cents per share, payable on 31 October to shareholders on the register at 15 October 2008. This takes total dividends for the year to 8.5 cents, an increase of 44% on FY07.
Results Summary
Year in Review
1H FY08
During the first half of FY08 Coote Industrial completed four significant acquisitions: Industrial Powertrain, FCD Logistics, Gemco Rail, and Drivetrain.
These key strategic acquisitions followed the Group’s first post-listing acquisition; rail group South Spur Rail Services, which included track maintenance and rail labour hire business Momentum, and specialist rail training business CERT.
In December 2007 Coote Industrial subsidiary Gemco Rail purchased a significant quantity of locomotives and wagons for capital asset inventory to support their rail services expansion plans.
2H FY08
The second half of the year focused on integrating the businesses. This included the progressive roll out of a single Business Management System, divesting non-core businesses, restructuring underperforming business units and simplifying the Group’s market presence. The company also began consolidating its core technical service offerings, corporate identity and brands. The divisional structure was replaced with emphasis on key businesses, building upon key brand recognition to deliver growth. The number of business units has condensed to 8 from 22.
Coote Industrial also entered into a Put and Call Option over Rail Technical Support Group, an established rolling stock maintenance services business. This performance-based acquisition agreement will expand Gemco Rail’s locomotive and wagon maintenance, rebuild and refurbishment, and rail technical services to five locations operating in WA, SA, NSW and VIC.
Gemco Rail completed the refurbishment and sale of a number of locomotives during the year. This was a significant event for the Group and signaled progress toward its objective of becoming a significant participant in the rolling stock services market.
Hedemora, Coote Industrial’s diesel engine business, expanded its large diesel engine capacity by moving to a significantly larger workshop in Sydney and restructuring the Maddington, WA engine overhaul facilities. New diesel engine power and propulsion capability is being established in Hedemora Henderson, WA facility with focus on defence and maritime service capabilities.
Operational Performance
Of particular note is the continued strong growth of our rail services business. Demand for locomotive, wagon and track maintenance equipment and services has been very buoyant, with revenue at Gemco Rail more than doubling last year. Momentum’s rail welding, labour hire, training and rail services business made a significant contribution to the Group’s FY08 result and continues to expand.South Spur Rail Services has been restructured and refocused as a short haul operator with emphasis on port shuttles, infrastructure projects, hook & pull, short haul and sub-contract services to the major rail operators.Convair, Industrial Powertrain and Drivetrain all delivered record results.
The Swedish Hedemora business again performed very well.
Further consolidation of key businesses is planned for FY09 increasing concentration of core capabilities and technical service offerings within our target markets – Defence, Rail, Resources, Maritime and Power Generation.
Cash Flow
The full year operating cash outflows amounted to $73.4m, due largely to strategic capital investment in substantial locomotive and wagon inventories. This key investment will underpin the company’s capacity to lever off strong demand for refurbished and remanufactured locomotives in the continually expanding rail haulage market. Importantly, a core of the inventory will become the platform for delivery of Progress Rail, Caterpillar engine driven locomotives.
A large locomotive refurbishment and maintenance project was delivered in the FY08 second half and strongly influenced cash outflows during that period.
By the end of Q2 FY09, the company has planned to reduce debts by $68m from receipts of more than $100m due from business completed to 30 June 2008.
Total debt is expected to reduce to $70m, and is anticipated that the Debt/Equity ratio will revert to 48%, in line with the Board’s objectives. The reset debt position supports expectations that FY09 EBITDA Interest Cover will exceed the 7x achieved in FY08.
Coote Industrial is well positioned for growth in its target market sectors with further expansion opportunities emerging in South East Asia and Europe. In FY09 greater concentration on delivering synergetic engineering technical services offerings through Drivetrain, Hedemora and Energy is expected to capitalize on those opportunities and drive continued growth from the Australian based business.
Major rail and resources infrastructure projects continue to provide service opportunities across the country and continued high demand for labour, recruitment and training services is expected to underpin a strong growth contribution from Momentum in FY09.
2009 Outlook
Notwithstanding the uncertain economic backdrop in FY09 Coote Industrial still anticipates delivering a solid increase in Net Profit after Tax.
Forecast revenue for FY09 is $358m, with forecast NPAT of $25m.
Future Developments, Prospects and Business Strategies:
Key to delivering the expected result in FY09 will be completing a number of key objectives:
- Ongoing integration of all businesses; extracting synergy benefits in both costs and sales
- Continued rollout of a single Business Management System platform
- Simplification of the business and market positioning with further brand consolidation and likely further divestment unlocking opportunities for debt reduction
- Achievement of targeted revenue of $358m
- Double digit growth underpinned by existing orders of over $200m
During the year Coote Industrial Limited will continue to restructure the Group, evolving from a divisional structure and concentrating on a number of nominated key brands, simplifying understanding of the Group key capabilities and delivery path.
After Balance Date Events
There have been no significant events subsequent to balance date.
Environmental Issues
Groups operations are subject to significant environmental regulation under the law of the Commonwealth and States, including noise, air emissions and the use, handling, haulage and disposal of dangerous goods and wastes.
The Group is focused on being environmentally proactive, adopting practices that minimize adverse environmental impacts and providing appropriate feedback on the Group’s environmental performance to ensure compliance.
Based upon results of inquiries made, the Board is not aware of any significant breaches during the periods covered by this report nor does it consider the Group is subject to any material environmental liabilities.
