Norfolk Group Ltd : Norfolk Group - HY2012 Results Announcement

24 November 2011

Norfolk Group Limited 1H 2012 Financial Results Key highlights:

? Strong 1H 2012 revenue of $443.7 million1

?10.5% increase in earnings before interest and tax (EBIT)1 from previous corresponding period (pcp)
?Net Profit After Tax (NPAT)1 increased to $9.3 million from $8.0 million pcp
?Earnings per share (EPS)1 up 16.3% to 5.85 cents from pcp

? Strong order book of $788 million, which has since increased to $864 million

? Interim unfranked dividend declared of 1.5 cents

Norfolk Group Limited (ASX:NFK) ("Norfolk" or "The Group"), a leading provider of integrated engineering solutions, today announced strong revenue of $443.7 million for the six months to 30 September 2011 from continuing operations, delivering Group Earnings Before Interest and Tax (EBIT)1 of $14.7 million, up 10.5 per cent from the previous corresponding period ($13.3 million pcp).

NPAT from continuing operations increased from 8.0 million in the first half of 2011 to $9.3 million for the six months to 30 September 2011.
EPS1 improved by 16.3 per cent to 5.85 cents (5.03 cents pcp).
The Group reported a significant order book of $788 million and maintained its strong balance sheet, again reporting no net debt. Since the end of the first half, the Group's order book has strengthened further to
$864 million.
Norfolk Managing Director, Glenn Wallace, said the positive first half result reinforced the Group's focus on strategically important market sectors across its three operating businesses, O'Donnell Griffin, Haden and Resolve FM.
"The Norfolk Group is well positioned for sustainable growth as we draw on our specialist expertise to target major growth sectors of the economy."
"O'Donnell Griffin has delivered excellent results, particularly in the resources, power and rail sectors, while Resolve FM's record first half revenue figure was largely driven by its ongoing growth in the custodial market."
"Although Haden remains subdued due to the low levels of commercial development and a reduction in service volumes, we have begun to see success with our strategy of targeting the industrial, health and green retro-fit building markets. We expect the business to have a stronger second half of the year."
"The Group is investing in its technical capabilities to ensure we continue to grow into these strategically important market sectors, while driving productivity and efficiency from our ongoing operations," said Mr Wallace.

1 From continuing operations

Divisional performance

? O'Donnell Griffin

O'Donnell Griffin reported a 5.3 per cent increase in first half revenue to $287.5 million ($273.1 million pcp).
EBIT remained at similar levels as 1H 2011 at $17.7 million ($17.9 million pcp) due to the timing of some larger projects.
The division continued to perform well in the resources, power and rail sectors. O'Donnell Griffin's activity on BHP Billiton's Jimblebar Project and the Pilbara Underground Power Project progressed well, while BHP Billiton's Rapid Growth Project 5 continued to make a solid contribution to the division's performance.
Recent resource sector contract wins, such as projects at Rio Tinto's Argyle Diamond Mine Underground Project in the Kimberley, Rio Tinto Coal Australia's Kestrel Mine Extension Project in the Bowen Basin and a number of other wins in iron ore and coal, will underpin O'Donnell Griffin's second half performance, along with a significant order book of $649 million.
O'Donnell Griffin's project pipeline is very healthy and continues to grow with more than $1.5 billion in submitted tenders and another $1 billion in identified prospects.

? Haden

Haden reported reduced revenue1 from the previous corresponding period, softening 11.0 per cent to $125.3 million ($140.8 million pcp) as it continued to be impacted by a stagnant commercial construction market, project delays and reduced service volumes. EBIT1 for the first half of 2012 was
$0.06 million.
In response to Haden's difficult operating conditions, the company is continuing its drive into the health, industrial and green building retro-fit markets. It has taken longer than anticipated to make significant inroads into these growth areas, but Haden is now developing a strong record of performance in these markets.
Haden is forecasting a stronger full year result than FY2011, as service volumes increase through the summer and recent contract wins in infrastructure and health drive construction revenue.

? Resolve FM

Resolve FM reported a record half year performance in 1H 2012, with revenue of $37.7 million, up
15.3 per cent from $32.7 million in the previous corresponding period.
EBIT increased significantly on the previous corresponding period to $2.5 million ($0.5 million pcp). This result was built on continued strength in the custodial sector, as demand for specialist services
increased maintenance and capital works volumes.
The business has good prospects in the delivery of technical facility management solutions such as facility lifecycle costing and energy consumption reduction strategies.

1 From continuing operations

Safety Performance

Safety remains a high priority across the Norfolk Group, with the Company continuing to reduce both its Lost
Time Injury Frequency Rate (LTIFR) and Total Reportable Injury Frequency Rate (TRIFR).
The Company continues to target a 20 per cent reduction in LTIFR and TRIFR annually, and has introduced safety performance into the incentive program for key management personnel.

Cash Flow and Capital Expenditure

The Company's reduction in operational cash flow is attributed to the timing of cash flows associated with a number of large-scale projects.
Capital expenditure increased to $5.1 million (from $4.0 million pcp) due to ongoing investments in research and development, including rail signaling and control software.
Norfolk is also investing in a comprehensive business reengineering project to introduce consistent operating processes across Group companies to drive productivity growth.

Balance Sheet, Capital Structure and Dividend Policy

Norfolk has continued its focus on strengthening its balance sheet in order to support its anticipated growth, through a capital structure policy focused on term debt repayment whilst also recognising the need to provide
returns to shareholders.
The Board has declared an unfranked interim dividend of 1.5 cents per share, in line with Norfolk's current dividend policy of paying out 25% of NPAT.

Outlook

Norfolk forecasts continued sustainable growth, particularly within the O'Donnell Griffin business, with its focus on growth market sectors delivering a strong pipeline and increasing order book.
The Company is also mindful that the recovery of Haden could be slower than anticipated and that project delays could have an impact on the second half of the year.
Norfolk remains on track to deliver full year NPAT growth of between 5 - 10 per cent.

-ENDS- For further information please contact: Analysts/Investors: Flavia Fernandes Norfolk Group Limited

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Media:

John Gardner / Garry Nickson
MAGNUS Investor Relations + Corporate Communication
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Norfolk Group Limited

Norfolk is a leading provider of integrated engineering services in the electrical, HVAC (heating, ventilation and air conditioning) and facilities management markets.
Norfolk employs more than 3,300 people, including highly skilled engineers, electricians, air conditioning technicians and apprentices, across more than 120 sites throughout Australia, New Zealand and Asia. Norfolk has more than 19,500 customers across a range of sectors including infrastructure, industrial, commercial, resources, retail, government and communications.
For further information on Norfolk, please visit www.norfolkgl.com.