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CIMIC Group Limited Annual Report 2016 |
Operating and Financial Review
OPERATING ENVIRONMENT OUTLOOK
In the markets where CIMIC operates, public and private clients continue to invest (including through PPP models), providing a robust
pipeline of projects and opportunities for CIMIC to contribute its financial strength, civil, mining, and mechanical, and electrical
engineering capabilities, and project and operational experience.
CONSTRUCTION MARKET
Australia’s 26-year run of GDP growth
22
is expected to be maintained with 2% and 3% real growth forecast in FY16/17 and FY17/18
respectively.
23
This outlook, combined with robust population growth of 1% to 2%
24
and the Australian Government’s continued delivery
on its 2013-2020 $50 billion road, rail and air transport infrastructure investment plan,
25,26
underpin continued infrastructure investment.
Private sector financing of numerous major projects under PPP models complements such public infrastructure funding. Combined, these
factors support a good level of construction, operations and maintenance, and PPP opportunities for the Group.
Transport infrastructure, a core capability of the Group, has a particularly strong growth outlook driven by a forecast increase in
government expenditure and private sector funding.
The Australian Industry Group Construction Outlook Survey reported in November 2016 that: “The total value of turnover from all major
construction work is expected to recover by 4.6% in 2016/17. Engineering construction is expected to rise by 3.6% through the year ….
The value of infrastructure-related engineering work (a sub-set of engineering construction in this data) is expected to rise by 13.5%,
driven by strong growth in road (+17.9%) and rail (+16.1%) projects. This is in line with a range of large-scale Government transport
projects that are either underway or are in the pipeline.”
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CIMIC’s international operations also have a positive outlook, offering growth opportunities in construction and, in the longer term,
operation and maintenance services.
PPP MARKET
Australia has one of the world’s most well-developed PPP markets, having procured numerous transport and social infrastructure PPP
projects over the past two decades in the road, rail, health, education, defence, justice, correctional, water, convention centre, social
housing and student accommodation sectors.
The current PPP market includes several large rail projects. PPP opportunities are continuing to emerge to deliver varying combinations of
design, construction, finance and operations and maintenance of track, stations, rolling stock, and rail systems.
There is also a stable pipeline of social infrastructure PPPs in terms of schools, prisons with scope to provide non-custodial services, and
hospitals. In the coming years there is also expected to be a return of some major road projects as PPPs. The recent wave of government
asset sales in New South Wales (i.e. the sale of the electricity assets) and in Victoria (i.e. the Port of Melbourne sale), mean these states
are in terms of the number of PPP projects coming to the markets.
Expected PPP projects in procurement during 2017 include:
Transport infrastructure:
•
Melbourne Metro Rail in Victoria;
•
Melbourne Outer Suburban Arterial Roads Network in Victoria;
•
Parramatta Light Rail Project in New South Wales; and
•
Canberra Light Rail - Stage 2 in Australian Capital Territory.
Social infrastructure expected to be procured in 2017 include:
•
Partnerships with Hospital Operators in New South Wales; and
•
New Western Australia Prison in Western Australia.
22
The Hon Scott Morrison MP,
Budget Strategy and Outlook: Budget Paper No. 1
, 2-3.
23
The Hon Scott Morrison MP,
Mid-Year Economic and Fiscal Outlook 2016-17
, December 2016, p. 7.
24
Australian Bureau of Statistics,
Annual Population Change – Year Ending 30 June 2016, 3101.0 Australian Demographic Statistics, Jun
2016 – ABS.
25
Australian Government,
The Australian Government’s Response to Infrastructure Australia’s Australian Infrastructure Plan
, November
2016, p.3.
26
Australian Government, ‘Jobs and growth: investing in infrastructure’,
Budget 2016-17
,
.
27
Construction Outlook, AI Group/Australian Construction Association, November 2016.
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