Monadelphous : 2021 AGM Address to Shareholders

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23 November 2021

Company Announcements

Australian Securities Exchange Limited

Level 4, 20 Bridge Street

SYDNEY NSW 2000

AUSTRALIA

Dear Sir / Madam

RE: 2021 ANNUAL GENERAL MEETING ADDRESS TO SHAREHOLDERS

Please find attached a copy of the address to shareholders by Deputy Chair and Lead Independent Non-Executive Director Sue Murphy AO on behalf of Chairman John Rubino, and Managing Director Rob Velletri at the Annual General Meeting held today, online and at The University Club in Perth, Western Australia.

Authorised by

Philip Trueman

Company Secretary

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ASX RELEASE

23 November 2021

2021 ANNUAL GENERAL MEETING ADDRESS TO SHAREHOLDERS

Deputy Chair and Lead Independent Non-Executive Director Sue Murphy AO on behalf of Chairman John Rubino

Good morning everyone. I am delighted to have been afforded the opportunity to talk to you this morning.

On behalf of our Chairman, John Rubino, I would like to thank you for joining us today, either in person or online, and I extend a warm welcome to you all.

Next year will mark 50 years since Monadelphous' inception. Over that time, we have developed a terrific reputation for consistently delivering high-quality, safe and cost-effective service solutions for our customers. Our commitment to delivering what we promise has led to the development of many enduring and mutually beneficial relationships with our stakeholders, and we have a track record that is widely respected across the industry.

While life as we know it has changed significantly over the last couple of years especially, I am pleased to report that we have continued to strengthen our position as a leader in our markets, and are well placed to build on the strong foundations that have been developed over the last five decades.

Through the efforts and commitment of our dedicated group of people we have established ourselves both as the preeminent construction contractor to the resources and energy sector, and as a leader in the provision of maintenance and industrial services, which provides us with a strong recurring revenue base to support our long-term sustainability.

In more recent times, we have focused on diversifying the business, broadening our service offering and expanding our footprint into other industry sectors and geographical markets.

Over the last few years, we had added a variety of other services to our repertoire, including offering rail, civil construction and bespoke heavy lift services to our customers. Through our strategic joint venture with Lycopodium we have developed a highly regarded presence in the engineering, procurement and construction market to the resources sector. Our other joint venture, Zenviron, has earned a leading reputation for the provision of balance-of-plant EPC services to the growing renewable energy market. We have also expanded the Company internationally into the buoyant copper sector in Chile and Mongolia, which we believe will provide further opportunities for us.

As we grow and diversify the business, the safety of our people will continue to be our number one priority. Pleasingly, we have seen a big improvement this year in our safety performance, and we will continue to focus our efforts on the implementation of initiatives that reinforce that at Monadelphous 'The safe way is the only way'.

Our people are our greatest strength, and the attraction and retention of the right people who live our values will continue to be one of our key areas of focus. Over the past year we have experienced an unprecedented shortfall of available skilled resources with industry activity levels at extremely high levels, particularly in Western Australia where border restrictions have significantly impacted the availability of labour. Activity levels across Australia are predicted to remain at these levels for some time yet, with labour pressures to persist.

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Industry forecasts indicate a strong pipeline of opportunities for Monadelphous, both within our core sectors, such as iron ore and oil and gas, as well as within the fast developing market segments which support decarbonisation, including renewable energy and battery metals, as well as the rapidly emerging hydrogen sector. Our long-standing reputation as a leader in our chosen markets and as an employer of choice, ensures we are well placed to capitalise on these market opportunities, as well as to deal with the challenges ahead.

Before I hand over to Rob, John has asked me to extend a warm welcome to our newest Board member, Ric Buratto, who was appointed as a Non-Executive Director last month. By way of introduction, Ric is a civil engineer with more than 45 years of experience in the resources and infrastructure sectors. He has enjoyed a distinguished career at a number of ASX listed companies, including Cimic, Decmil and, most recently, NRW. Ric brings an abundance of industry knowledge, experience and relationships, which strongly complement the existing capabilities of our Board.

John has also asked me to acknowledge outgoing Non-Executive Director, Chris Michelmore, for his loyalty and hard work over the last 14 years. Chris has been a highly valued member of the Board and its subcommittees and has played a key role in the Company's success over that time. We would like to take this opportunity to wish him the very best in his retirement and sincerely thank him for the wonderful contribution he has made to Monadelphous.

In conclusion, on behalf of John and the Board, I would like to take this opportunity to sincerely thank our loyal and dedicated team for their continued efforts - we truly have a very talented group of people at Monadelphous. I would also like to extend our appreciation to all our shareholders, our customers and our other stakeholders for their ongoing support.

I will now hand over to Rob who will provide you with a more detailed insight into our 2021 performance.

Managing Director Rob Velletri

Thanks Sue and good morning everyone.

Firstly, I would like to reiterate John's comments regarding the outstanding contribution made by Chris over the many years he's been with us. Monadelphous has seen significant growth throughout your tenure, and I wish you all the best for the future.

Moving now to our financial highlights (slide 12).

The 2020/21 financial year was a busy one. After the previous year, where sales revenues were stalled by the initial impact of the COVID-19 pandemic, the 2020/21 year saw a rapid progressive recovery in demand, resulting in an 18.3 per cent increase in sales revenue to $1.95 billion.

Our Engineering Construction division's revenue surged almost 60 per cent to $979 million, on the back of significant progress made on our large portfolio of major construction projects, while our Maintenance and Industrial Services division reported revenue of $977 million. Demand for maintenance services within the iron ore sector was particularly strong, with reduced levels of activity in oil and gas.

Net profit after tax for the period was $47.1 million, an increase of 29 per cent, representing earnings per share of 49.7 cents.

The Board declared a final dividend of 21 cents per share fully franked, taking the total full year dividend to 45 cents per share.

We ended the year with a strong cash balance of around $176 million.

Since the beginning of the financial year, we have been awarded over $1.2 billion of new work, including around $460 million since 30 June.

This slide (slide 13) highlights the size and location of each of our new contracts. As you can see, a large portion of this work is in the buoyant iron ore sector, with our major, long-term customers, BHP and Rio Tinto. Around 20 per cent of this work was secured in the copper sector in both Chile and Australia, and we secured our largest wind farm contract to date, via our joint venture, Zenviron.

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Further information about our new contracts can be found in the appendix.

Now to our safety performance (slide 14).

In a year where more than 2,000 new employees joined our team, I am particularly pleased to report a 39 per cent improvement to our total recordable injury frequency rate, down to 2.26 incidents per million hours worked.

Driven by our core value of safety and wellbeing, our unwavering focus on safety improvement saw us continue to strengthen safety leadership throughout our business. We introduced a new Fatal Risk Standard and Life Saving Rule relating to the use of mobile plant and equipment, we released a revised and updated supervisor safety leadership program and completed the roll out of our Delivering the Safe Way behaviour framework.

We also continued to focus on the mental health and wellbeing of our employees, implementing and participating in a range of initiatives relating to resilience development and improvements in mental health awareness.

Our safety culture is focused on finding better and safer ways of doing things.

One example I have of this comes from our Heavy Lift team. The team was tasked with moving and installing gas pipeline sections weighing up to eight tonnes each on unusually steep terrain and near another live gas pipeline at the Woodside-operated Pluto Liquefied Natural Gas Plant in Karratha.

Conventional cranage and equipment couldn't be used, so our team developed a unique solution, the Self-Propelled Modular Transporter Davit Frame, which is what's being shown here on this slide (slide 15).

The solution significantly reduced manual handling risks, reduced exposure to pinch points and crush injuries as well as reducing property damage risks. The solution also delivered significant savings in cost and time. The innovation was subsequently nominated for the 2021 Managing Director's Safety Innovation Award, for which it received a special commendation.

It was also a finalist in the 2021 Western Australian Work Health and Safety Excellence Awards.

Well done to our Heavy Lift team for developing such a unique solution, and for continuing to make our workplace safe.

Turning now to our people highlights (slide 16).

We ended the year with a total workforce, including subcontractors, of around 7,800, up 37 per cent. During the year, we achieved our largest employee-base since May 2013, with our direct employee numbers peaking at over 7,600.

As Sue mentioned, high levels of industry activity in an already tight labour market, combined with COVID-19 related travel restrictions and border closures, placed significant pressure on our ability to attract and retain labour. In response, we undertook a number of initiatives to bolster employee engagement and attract new employees. I'll touch on some of these initiatives now.

Our people have always been our biggest strength and there's no question, employee retention and development are vital to our ongoing success.

With this, we continue to focus our efforts on what makes Monadelphous a great place to work. This includes building on our already strong culture, identifying and facilitating challenging and rewarding career opportunities for our employees, supporting employee growth and development, creating an inclusive and flexible work environment and constantly reviewing and updating our benefit and reward programs to ensure we remain competitive.

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During the year, we strengthened our employee development programs with a focus on performance management and succession planning, and we formally established a Workplace Flexibility Policy to support work/life balance and enhanced our existing Parental Leave Policy.

We also progressed a number of strategic attraction initiatives. This included streamlining our internal processes to ensure application and onboarding is as easy as possible, updating our employer branding program, which now clearly articulates why our employees choose to work with us and what's on offer to prospective employees, and having the right entry-level programs in place to help get the right people in the door from the get-go.

Importantly, we have also continued to invest in a range of technology to support our attraction strategy, including our new and improved recruitment, onboarding and talent management system, which will help ensure we are set up to efficiently and effectively source, select and mobilise the right people at the right time.

We have spent a significant amount of time this year reviewing and refreshing our code of conduct, and supporting policies, with the aim of reinforcing acceptable workplace behaviour. As part of this, we recently rolled out our 'It's Up to Us' campaign across our worksites. The campaign aims to reinforce the important role every employee at Monadelphous plays in creating a safe, respectful and inclusive work environment - one free of sexual harassment and sexual assault - while also reminding employees of appropriate behaviours and how to manage associated situations. This slide (slide 18) shows some of the posters displayed at our worksites and offices as part of the campaign.

Moving now to our operational highlights (slide 19).

This year, our Engineering Construction division achieved significant revenue growth, recording its highest revenue since 2015. On the back of our long-term track record and strong relationships with our customers, the division secured new contracts totalling approximately $620 million, including $200 million since 30 June. As you can see, a lot of our work during the year was undertaken in the iron ore sector, as well as in battery metals and renewable energy sectors.

This slide outlines some of the division's key highlights from the year. Over the next few slides, I will take you through some of these in a bit more detail.

We have now completed all three of our packages of work at BHP's South Flank Project, including the construction of the project's inflow and outflow infrastructure, as well as the installation and construction of the world's largest rail mounted stockyard machines. The project's inflow infrastructure is what's pictured here (slide 20).

In what was a significant milestone for our customer, as well as our own team involved in this major construction project, BHP officially opened its South Flank mine last month, after achieving first production in May.

Our major construction contract at Rio Tinto's West Angelas Deposits C and D Project, valued at in excess of $100 million, has now been completed. Our work included the supply and installation of structural, mechanical, piping and electrical and instrumentation works associated with the construction of new iron ore facilities, as well as modifications to existing plant.

This image (slide 21) is of some of our employees on the newly constructed primary crusher, an integral part of the project.

Last month, a number of the directors and I visited the Kemerton lithium hydroxide plant, in the southwest of Western Australia, where our team is completing the structural, mechanical and piping package of work associated with the pyromet plant. The project continues to progress well, and we expect to finish our scope of work over the coming months.

Our solid performance on this project demonstrates our growing capability in the lithium sector, which is important given further opportunities on, not only this project, but more broadly in the lithium sector as the demand for battery metals grows.