| Norfolk’s Electrical & Communications division is the market leader in the Australian electrical services market. The division designs, installs, commissions and maintains electrical and communications systems and products and also designs and manufactures energy control and measuring technology.
Through a portfolio of four market leading brands, spread across 28 branches throughout Australia and New Zealand – O’Donnell Griffin, Diverse Data Communications, WF Energy Controls and Newpower Electrical – this division has earned a reputation for its ability to resource and complete a wide range of sophisticated and complex electrical engineering and communications projects.
In terms of earnings, the Electrical & Communications division is the largest of the three Norfolk divisions and continues to contribute significant returns to the Group. In the year ended 31 March 2008, the Electrical & Communications division delivered pro-forma EBIT growth of 21.1%, from a year earlier, with pro-forma EBIT of $19.5 million and EBIT margin of 5.0%.
In total, more than $415 million of new Electrical & Communications contracts were awarded to the business over this period, demonstrating the breadth of the offering and the diversity of customer relationships.
It is clear then that the spread of divisional revenue from contracts and maintenance services across a wide range of diversified end-markets, not only strengthens the earnings of Norfolk today, but will support and ensure the continued growth and development of the business into the future.
Highlighting this point, O’Donnell Griffin has won the contract for BHP Billiton’s expansion of its Rapid Growth Programme (RGP) in the Pilbara, and continues to secure other significant contracts, such as the redevelopment of the Dalrymple Bay coal terminal and key transport infrastructure work around the Fortescue Metals Group iron ore uploading feasibility project.
Through developing significant expertise in the provision of value-added services, particularly in the resources sector, we are positioned to capitalise on fast-growing opportunities in that sector and are now working on longer term projects with many of our customers to help further expand O’Donnell Griffin’s revenue base and add to longer term earnings capacity.
This is at a time when increased demand for iron ore and coal is bringing more opportunities across the resources sector. The price of coal itself has increased markedly over the past 12 months and as demand for coal intensifies we are extremely well placed to continue to assist customers to transport the commodity from mine to market.
Similarly, O’Donnell Griffin is rapidly expanding its electrical instrumentation and materials handling capabilities for coal export, helping us to secure long-term contracts at Dalrymple Bay and the Abbotts Point coal export terminals in Queensland.
O’Donnell Griffin has become increasingly active in both rail and power distribution infrastructure sectors, leveraging the experience it has gained through the delivery of some of Australia’s highest profile projects.
In July 2007, a specialised rail business was established to capitalise on our existing strengths in that sector. This new business stream is already showing significant development and growth with securing a strategic relationship with Siemens Transport, being short listed for the Sydney automatic train protection system upgrade programme and the ongoing alliance work with the Australian Rail Track Corporation in relation to the upgrading of the Sydney to Melbourne train infrastructure. This Southern Improvement Alliance (SIA), which is in its third year, is receiving strong accolades for delivering significant technological improvements to the ARTC infrastructure.
Currently the sector is very positive, with both state and federal governments prioritising rail infrastructure growth and improvements for passenger and freight rail services. O’Donnell Griffin is well positioned to capitalise on this public expenditure, and has already been successful in expanding beyond traditional hard dollar contracting works to longer term alliance and relationship approach contracts. This is proving to be very cost-effective and schedule-effective for the asset owners.
In the wake of this new wave of rail investment, O’Donnell Griffin is working closely with technology organisations such as Siemens and Connell Wagner to cement long-term strategic relationships. The focus is to improve our service offering to include design, engineering and commissioning capability and position ourselves as total solutions provider in rail signalling and controls.
To support this increased activity, Norfolk’s Electrical & Communications division has increased the training and development of its workforce, including assistance for staff in upgrading their technical post-graduate qualifications in engineering and other areas.
Targeting the rail business is a perfect example of our strategy to grow the services we offer so as to become a true ‘value-add’ solutions provider. The net return to the Norfolk business is that this approach and these types of longer term, solutions-based contracts (e.g. the BHP Billiton RPG programme is now in its fourth phase) tend to provide a higher value-add service, carry higher margins and have an increasing focus on shared risk. It provides the best opportunity for long-term customer relationships with higher barriers to entry for competitors.
During the last financial year, we have more than doubled the volume of ‘alliance’ contract work within the division as a percentage of pro-forma gross profit to 20%, which is a notable outcome.
The Electrical & Communications division is also extremely well positioned to capitalise on government initiatives for the expansion and upgrade of energy and water infrastructure by leveraging our well-established expertise in the power generation industry. The division continues to service the Sydney Water and the Sydney Catchment Authority by being the prime electrical contractor for the Warragamba Dam infrastructure upgrade programme.
Meanwhile, Electrical & Communications division has also recently invested in upgrading our capabilities and capacity across the increasingly busy service and maintenance part of our business. The recent introduction of a state-of-the-art wireless ‘field automation’ system has helped to provide faster response times to our customers. This is just one in an expanding portfolio of value-add services across a range of industry sectors that we are looking to deliver to our customer base.
With a focus on the service and maintenance environment and securing longer term customer mandates, the Electrical & Communications division is increasingly well positioned to support the continued economic growth of Australia across a range of industries, including resources and the government sponsored upgrades of essential infrastructure in transport, power and water. |
