Watpac Limited : 31 December 2012 Appendix 4D and Interim Financial Report

ASX RELEASE

26 February 2013

ASX Market Announcements

20 Bridge Street

SYDNEY NSW 2000

Dear Sir / Madam

Results for Announcement to the Market -

Watpac Limited 31 December 2012 Appendix 4D Disclosures

1. Details of reporting period Half year ended 31 December 2012

2. Key Items

2.1 Revenue from ordinary activities Up 47.59% to $943.9 million

2.2 Profit / (loss) from ordinary activities after tax Down 74.17% to $1,264k attributable to members

2.3 Profit / (loss) for the period after tax attributable Down 74.17% to $1,264k to members

2.4 Interim dividend amount per security Nil Franked amount per security N/A Conduit foreign income N/A

2.5 Record date for determining dividend N/A

entitlements

3. Income Statement, Statement of Comprehensive Refer attached

Income and notes

4. Statement of financial position and notes Refer attached

5. Statement of cash flows and notes Refer attached

6. Statement of changes in equity Refer attached

7. Total dividend distribution Nil

Dividend distribution date N/A

8. Dividend reinvestment plan N/A

9. Net tangible assets per security $1.17 per share

10. Details of entities over which control has No changes from the 30 June 2012 financial statements been gained or lost

11. Details of associates and joint ventures Refer 30 June 2012 financial statements.

During the reporting period, the Group has taken a

50 per cent interest in the Watpac National Buildplan

Port Macquarie Base Hospital Main Works Project

Joint Venture.

12. Other significant information

12.1 Reconciliation of underlying net profit after tax Statutory net profit after tax $1,264k

Adjusting items

Net impairment $6,354k

Tax at 30% $(1,906)k $4,448k

Underlying net profit after tax $5,712k

12.2 Any other significant information Refer attached

13. Accounting Standards Australian Accounting Standards & International

Financial Reporting Standards

14. Commentary on results for the period Refer attached

15. The financial statements have been reviewed and are not the subject of dispute or qualification. Yours sincerely,

WATPAC LIMITED

Mark Baker

COMPANY SECRETARY

WATPAC LIMITED

INTERIM FINANCIAL REPORT

31 DECEMBER 2012

Contents

Page
Directors' Report 2
Lead Auditor's Independence Declaration 7
Consolidated Income Statement 8
Consolidated Statement of Comprehensive Income 9
Consolidated Balance Sheet 10
Consolidated Statement of Changes in Equity 11
Consolidated Statement of Cash Flows 12
Condensed Notes to the Consolidated Financial Statements 13
Directors' Declaration 19
Independent Auditor's Review Report 20

Watpac Limited and its Controlled Entities

1 of 21

Directors' Report

The Directors present their report, together with the consolidated financial report of Watpac Limited ("Watpac" or "Company") and its consolidated entities ("Group") for the half year ended 31 December 2012 and the Auditor's review report thereon.

Directors

The Directors of the Company (the "Board") at any time during or since the end of the half-year are:

Name Period of directorship

Mr Chris R Freeman (Chair) Director since 2011
Mr Richard B McGruther (Deputy Chair) Director since 1993
Mr Kevin W Seymour Director since 1996
Mr Robert J Lette Director since 1996
Mr David M Little Director since 1985
Mr Kevin A Mooney Director since 2011

Review of operations

The Group recorded a profit after tax of $1.264M for the half year ended 31 December 2012 (2011: $4.893M). The decrease is mainly a result of impairment charges recognised in relation to:
• two of the Group's property development inventory assets currently subject to conditional sale agreements at below carrying value ($5.577M pre-tax);
• one of the Group's property development inventory assets which settled subsequent to 31 December at above carrying value ($0.443M pre-tax reversal of prior impairment charge); and
• a land & buildings asset that was previously used as a regional office but which is now subject to an unconditional sales contract at below written down value ($1.220M pre-tax).
Excluding the effect of the impairment charges, underlying operating net profit after tax for the Group is $5.712M
reflecting a 16.7% improvement from the prior corresponding period.
A reconciliation of the underlying operating net profit after tax to the statutory result is provided below:

In millions of AUD Statutory profit / (los s ) after tax	1H FY13 1.264	1H FY12 % change 4.893 -74.2%
Adjus t for:
Net im pairm ent of property developm ent inventory	5.134	- N/A
Im pairm ent of land & buildings	1.220	- N/A
Tax on im pairm ents at 30%	(1.906)	- N/A
Underlying profit / (los s ) after tax	5.712	4.893 16.7%
Underlying earnings per s hare (cents )	3.10	2.65 16.7%

Watpac Limited and its Controlled Entities

2 of 21

Directors' Report

A review of the results recorded for each reporting segment in the Group for the half year is included below.

Contracting

The Contracting segment, which includes results from the Group's Construction and Specialty Services businesses, reported a pre-tax profit for the half year of $15.001M (2011: $14.773M pre-tax profit). This represents a slight increase from the prior corresponding period and an annualised pre-tax return on equity (after adjusting for $5.447M in unallocated corporate overheads) of 19.2%; a solid result in light of market conditions.
As reported at 30 June 2012, the composition of the Construction business's forward order book is reasonably well spread from a geographical perspective. The business continues to deliver quality construction services across a number of high profile projects across Queensland, New South Wales, Victoria and South Australia.
Despite growing competition in the sector, the Group's contracting business remains relatively strong with construction work in hand levels of almost $800M nationally at 31 December 2012.
Watpac continued to secure several major projects in the first half of FY13 including the:
• $65M Port Macquarie Base Hospital Expansion (NSW), a 50% joint venture project with the National
Buildplan Group;
• $55M Municipal Building development for the City of Greater Dandenong (VIC); and
• $32M Mayfair Hotel development in Adelaide (SA).
The Group also secured its first construction contract in the Northern Territory with the $40M Darwin International
Airport expansion project.
Watpac's construction business continues to identify and participate in a number of tendering activities, which are expected to contribute positively to future earnings.

Civil & Mining

Financial results

The Civil & Mining segment reported a pre-tax profit for the half year of $0.203M (2011: $3.223M pre-tax profit).
While a reduction from the previous corresponding period, the result includes pre-tax losses recorded on civil projects in the eastern states of Australia totalling $6.102M. Excluding these losses, the result for the segment for the first half of the financial year was $6.305M. After adjusting for $1.160M in unallocated corporate overheads, this reflects a pre-tax return on equity of 14.4% and is attributable to the Group's core and profitable national mining and WA civil business, which continued the success recorded in FY12. The positive financial performance of this business is due in large part to its selective and sustainable business model, which focuses on long-term projects with established
clients.

Watpac Limited and its Controlled Entities

3 of 21

Directors' Report

As at 31 December 2012, the Group's national mining and WA civil business comprised more than 50% of Watpac's workforce and had work in hand value of $585M. This business is well positioned to take advantage of future earnings potential in the resources sector.

Restructure

During the first half of FY13 the Board and senior executive team commenced an analysis of the Group's operations and capital management initiatives as part of a strategic business review. A key focus was the Group's civil businesses along the eastern seaboard of Australia, following poor financial performance in previous financial years.
After careful consideration, and as reported at the Annual General Meeting in November 2012, the Group made a decision early in the first half of the financial year to close the Civil Landscaping business in Victoria. This was in response to poor historical financial returns, changing market conditions and tightening competition.
The Group's civil engineering capabilities in Victoria were also restructured during the first half of the financial year. The Victorian Civil business has recently been assimilated within the Construction business in that state, allowing for a more integrated service offering and enhancing the Group's capabilities in the core activity of construction in Victoria.
In November 2012, the Group decided to close its Townsville-based civil operation and reduced the number of Brisbane-based Civil office staff to a more appropriate level. In light of continuing market challenges, and following a thorough review of the Queensland business's performance, the Board and senior executives have in February 2013 commenced a further restructure of the Queensland Civil business to better align its capabilities with the Group's core activities.
The Group will continue to offer civil capabilities in Queensland, however delivery will occur on a different scale and under a revised business model. Watpac will be preserving its accreditation and licensing so that, in due course, it can create a truly integrated service offering consistent with its core business activities. This action in Queensland is consistent with the restructure of the Victorian Civil business.

Property

The Property segment recorded a pre-tax loss of $6.804M for the half year (2011: $3.847M pre-tax loss). The movement from the comparative period mainly reflects a pre-tax net impairment charge of $5.577M recorded on two of the Group's property development inventory assets, partially offset by a $0.443M impairment provision reversal and $2.383M in profit recorded on residential settlements at the Rue de Chapel development in Melbourne.
As reported at 30 June 2012, an outcome of the strategic review of the Group's property portfolio is that a number of the Group's non-core property assets were brought to market during the 2013 financial year. This followed a change in strategy and corresponding reassessment in carrying value at 30 June 2012 for a number of properties previously
earmarked for development.

Watpac Limited and its Controlled Entities

4 of 21

Directors' Report

While market conditions remain difficult, progress has been made in executing this strategy with approximately
$36.500M in assets sold and settled in the reporting period. These include the Newstead Circle development site (Brisbane) and a 9.69ha development site at the Kingston Industrial Estate (Brisbane). In addition, the significant majority of residential settlements at the Rue de Chapel development project in Chapel Street (Melbourne) settled during the first half, contributing an additional $35.300M in gross property sales value during the reporting period.
Negotiations are continuing with a number of potential buyers for other property assets. Two contracted but still conditional sale transactions have resulted in an impairment expense of $5.577M being recognised in the first half result. Should the contracts progress, settlement will occur in the second half of the financial year and, together with the property recently settling at $0.443M above carrying value, is expected to substantially further reduce property debt.
Active marketing campaigns are ongoing for Addison Quays (Brisbane) and The Luxton Apartments (Melbourne) projects. Should appropriate pre-sales levels be attained, the Board will consider proceeding to develop these projects.

Capital Management and Liquidity

The Group's cash position remains strong, with $147.935M in cash and term deposits at 31 December 2012. Notwithstanding the repayment of $59.269M in net property debt in the first half of the financial year from asset sales
and continued execution issues in the Group's eastern seaboard Civil operations, total cash reserves increased by
$13.187M during the reporting period. This demonstrates the Group's core business operations of Construction, national mining and WA Civil are performing well and have inherently strong cash management disciplines.
Gross debt at 31 December 2012 totals $148.019M, comprising $34.000M in property debt and $114.019M in equipment finance borrowings. In light of the reducing property debt and with further property asset sales expected in the second half of the financial year, the Group expects to review its financing structure over the near term to more appropriately align underlying debt facilities with its long term continuing operations.

Lead auditor's independence declaration

The lead auditor's independence declaration is set out on page 7 and forms part of the Directors' report for the half year ended 31 December 2012.

Watpac Limited and its Controlled Entities

5 of 21

Directors' Report

Rounding

..

The Company is of a kind referred to in ASlC Class Order 98/100 dated 1O July 1998 and in accordance with that

Class Order, amounts in the consolidated financial report and Directors' report have been rounded off to the nearest thousand dollars, unless otherwise stated.

Dated at Brisbane this 261 day of February 2013. Signed in accordance with a resolution of the Directors.

C R Freeman

Chair

Watpac Limited and its Controlled Entities

6ofZL

ABCD

Lead Auditor's Independence Declaration under Section 307C of the Corporations Act 2001

To: the directors of Watpac Limited

I declare that, to the best of my knowledge and belief, in relation to the review for the half-year ended 31 December 2012 there have been:

(a) no contraventions of the auditor independence requirements as set out in the Corporations

Act 2001 in relation to the review; and

(b) no contraventions of any applicable code of professional conduct in relation to the review.

KPMG

Simon Crane

Partner

Brisbane

26 February 2013

7 of 21

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.

Liability limited by a scheme approved under

Professional Standards Legislation.

Consolidated Income Statement

For the six months ended 31 December 2012

Note 2012

2011

$'000 $'000

Revenue
Cost of sales

Gross profit

Property asset income
Property asset expenses
Other income
Property development holding costs expensed 7
Impairment expense 8
Operating business unit administration expenses
Corporate administration expenses

Results from operating activities

Finance income 9
Finance expense 9

Net finance costs

Profit before tax

Income tax expense 5

Profit for the period attributable to equity holders of the parent

Earnings per share

Basic earnings per share attributable to ordinary equity holders
Diluted earnings per share attributable to ordinary equity holders

Watpac Limited and its Controlled Entities

8 of 21