preliminary final report & june quarterly update - Leighton Holdings

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coal mines in Queensland was affected by the heavy rains between November and January. In Queensland, work commenced on stage 2 of the Poitrel coal mine for BHP Mitsui Coal in Queensland worth $225 million over 3 years, and phase 1 of the Dawson coal mine for Anglo Coal worth $155 million over two years. The high price of gold has stimulated mining activity in that sector and two new projects were secured - a $206 million contract for Newcrest at Telfer gold mine near Port Hedland in Western Australia and a $122 million contract for Crocodile Gold at Cosmo Deep in the Northern Territory. Since year end, the potential sale of the HWE Iron Ore entities and assets in Western Australia, wholly owned by Leighton Contractors, to BHP Billiton Iron Ore was announced. The purchase price, subject to working capital adjustments and final documentation, is expected to be around $705 million. Subject to due diligence, definitive agreements and relevant internal and regulatory approvals, the sale is expected to close during the fourth quarter of the 2011 calendar year. Commercial building opportunities remained limited due to market conditions. Work progressed well on the Queensland University of Technology’s new Science and Technology Precinct and Community Hub project, and the 111 Eagle Street development is nearing completion. In New Zealand, the Manukau Motorway project was completed and the Newmarket Viaduct is nearing completion. Work continued on the $48 million contract to refurbish the Wellington Tunnels. Thiess Thiess’ financial results were heavily impacted by the poor financial performance of the Airport Link and Victorian Desalination projects, and extreme weather conditions in Queensland, Victoria and Indonesia. Thiess reported a segment loss for the year to 30 June 2011 of $318 million, compared to a $425 million segment profit reported in June 2010. Segment revenue for the full year was steady at $6.6 billion. Thiess’ work in hand rose by 1% to $16.5 billion at 30 June 2011 versus $16.3 billion for the previous year. At 30 June 2011, Thiess had reportable segment assets of $1.5 billion compared with $2 billion for the previous year. The Thiess John Holland Joint Venture constructing the Airport Link project made good progress working through the access, design and engineering challenges facing the $4.1 billion PPP project. Tunnel boring machine (TBM) operations are now 100% complete and the remaining design issues have been finalised. The mechanical and electrical fit-out is well underway and overall the project is now around 80% complete. Discussions with the Queensland government on arrangements for the tunnel opening have been productive, and the Thiess John Holland Joint Venture is confident of having traffic on the road by the contractual date of 30 June 2012. The project’s gross loss has been reduced from $730 million to $520 million as a result of no longer needing to provide for liquidated damages and time related costs that would have applied for late completion. The Joint Venture is currently pursuing a substantial number of claims, resolution of which is expected to occur over 2012-2014. The performance of Thiess’ other major PPP project, the Victorian Desalination Plant, a $3.5 billion joint venture, deteriorated further in the period from April to June 2011. The project lost a significant amount of time on the critical path due to poor weather and productivity issues. As a result, the overall timeframe is under pressure and the 30 June 2012 completion target is at risk. Provisions have been made and actions taken to mitigate the potential late completion. Thiess has reforecast their project result from a profit of $6 million to a projected loss of $278 million. Thiess has also appointed a new project director and senior human resources and industrial relations staff. All other major construction projects in Thiess’ portfolio were performing to expectations and remained profitable. Transport projects, such as the $583 million M80 Ring Road upgrade in Victoria and the $757 million Hunter Expressway alliance in New South Wales made good progress, as did the $214 million Seaford to Adelaide rail link. Telecommunications projects continued to emerge and Silcar, a 50:50 joint venture between Thiess Services and Siemens, secured the first major rollout contract under the Federal Government’s National Broadband Network (NBN) program. The contract is worth $373 million over the next two years with $279 million attributable to Thiess Services, with an option of a further two years at an additional value of approximately $740 million. Silcar is also providing network integrity and facilities management services to Telstra for five years under a $350 million contract with $175 million attributable to Thiess Services. Renewal of power transmission networks across eastern Australia has created a number of long-term alliance opportunities. A Thiess-led alliance secured a five-year $202 million contract with Ausgrid in New South Wales for the rollout of a new transmission cable. Earlier in the year, Thiess Services secured a number of maintenance contracts for Ergon and Energex in Queensland. The global demand for commodities and energy continued to produce contract mining opportunities and resourcesrelated infrastructure work both in Australia and offshore. Thiess secured six major mining contracts during the year worth over $7.7 billion, including a $1.3 billion extension at the Burton coal mine for Peabody Energy, a $182 million variation at the Collinsville coal mine for Xstrata, and a $145 million joint venture at Lake Vermont in Queensland. In New South Wales, the company was awarded a $1 billion contract at Mt Owen coal mine for Xstrata and a $220 million extension at the Wilpinjong coal mine for Peabody Energy. In India, the Thiess-Minecs joint venture (90% Thiess) secured a landmark $4.9 billion contract over 22 years at the Pakri Barwadih coal mine for NTPC. Revenue over the first five years is estimated at $354 million. Leighton Holdings Limited JUNE 2011 QUARTERLY UPDATE Page 35
Production at existing mines in Queensland and Indonesia was affected by extremely high rainfall between November 2010 and January 2011. Resources-related infrastructure was a major source of revenue and new work. Progress on the Gorgon village and site preparation projects for Chevron in Western Australia was slower than expected, due to a range of factors outside Thiess’ control. Thiess has since negotiated variations and extensions of time for both contracts and project performance is within these new parameters. Also in Western Australia, Thiess won a $210 million contract to provide bulk earthworks and selected infrastructure for BHP Billiton Iron Ore’s Jimblebar mine as part of their RGP6 expansion. In Queensland, Thiess was awarded a $147 million contract for upstream coal seam gas infrastructure works for QGC. This is a significant contract as it represents a firm foothold in a fast growing sector of the LNG industry. No significant new building projects were secured during the year, but work proceeded to schedule on the $736 million Royal North Shore Hospital redevelopment in Sydney, with some buildings handed over, and the $97 million Townsville Hospital Expansion. The $123 million King George Central development for Leighton Properties made good progress, despite interruptions from the Brisbane floods in January, and the $376 million Lotus Glen correctional centre in Queensland is nearing completion. Waste management services suffered a setback in January as the Queensland floods inundated the Rocklea Transfer Station transfer pit, offices and workshops. The facility was quickly reopened for business and the offices have since been rebuilt. In June, Thiess Services announced $203 million in new waste contracts along Australia’s east coast. John Holland The poor financial performance of the Airport Link project severely impacted John Holland’s profit contribution for the full year. However, the company has secured a strong level of new work and work in hand is at historically high levels. John Holland recorded a segment loss of $255 million for the full year to June 2011, versus $180 million profit in the year to June 2010. Full year segment revenue remained steady at $3.7 billion. John Holland’s work in hand increased by 45% to $7.7 billion at June 2011 versus $5.3 billion at June 2010. The company had reportable segment assets of $848 million at 30 June 2011 compared with $877 million for the previous year. Whilst the financial performance of the Airport Link project in Brisbane has been unacceptable, the travelling public will benefit from a world class piece of infrastructure. The final stretch of the 15 kilometre tunnel system, the 5.1 kilometres of twin bored tunnels, was successfully completed in July 2011. The tunnel boring machines were entombed in a specially constructed chamber giving full and immediate access to the tunnels for the mechanical and electrical fitout. The Thiess John Holland Joint Venture is confident of having traffic on the road by the contractual completion date of 30 June 2012. Tunnelling work remained a key part of John Holland’s civil engineering capabilities. New tunnelling projects included the Sungei Road Station and Associated Tunnels in Singapore, a US$122 million joint venture with Leighton Asia, and the US$237 million Lei Tung and South Horizon Stations and Tunnels in Hong Kong, also a joint venture with Leighton Asia. The $282 million Northern Sewage Project Stage 1 and the $166 million sewer replacement project in Melbourne all progressed well during the year. Rail construction and maintenance continued to be one of the major revenue sources for John Holland. During the year, the company was awarded a contract estimated at $1.5 billion over 10 years to operate and maintain the New South Wales Country Regional Network and the first five years has been valued at $598 million. Also in New South Wales, John Holland won a $568 million contract to design and construct the Glenfield to Leppington rail link (South West Rail Link). In Western Australia, the $339 million Perth City Link rail project was awarded to a John Hollandled alliance, and the company secured $102 million in contracts for the Midwest Rail Upgrade and the Kalgoorlie to Esperance Track Upgrade projects. The $281 million alliance contract for rail works between Maitland and Whittingham, New South Wales, made good progress, as did the $261 million South Morang Rail Extension project in Victoria. The financial and operational performance of Metro Trains Melbourne, which has a $7 billion contract to operate and maintain Melbourne’s metropolitan passenger train franchise, has achieved financial results forecast at time of tender. Performance is now at a level not experienced since 2005, and new timetable structures and services have been introduced. John Holland was also successful in securing a number of opportunities in other sectors, particularly health, water, roads and defence. In health, highlights include the $105 million Sunshine Coast Private Hospital in Queensland, the management contract for the $800 million New Children’s Hospital in Perth, and $152 million to design and construct the Albany Health Campus, also in Western Australia. Major water-related projects secured during the year include the $97 million upgrade of the Murrumbidgee Irrigation Network in New South Wales, and a US$561 million joint venture with Leighton Asia and Veolia to construct a sludge treatment facility in Hong Kong. The $488 million joint venture to construct water infrastructure in Canberra remained on schedule. Work commenced on a $545 million contract to deliver a new 4.8 kilometre highway corridor in South Australia, including 2.8 kilometres of elevated roadway, and a $110 million contract to construct facilities and supporting infrastructure at Singleton, New South Wales, for the Department of Defence. A wide variety of energy and resources related infrastructure contracts were won including the $299 million Cape Lambert Marine Facility for Hamersley Iron in Western Australia, four contracts worth a total of $375 million to construct marine offloading and LNG export jetty facilities for both Santos’ GLNG and BG’s QCLNG projects in Gladstone, and a $183 million contract to design and construct the permanent buildings on the Chevronoperated Gorgon project in Western Australia, which is due to commence in late 2011. Leighton Holdings Limited JUNE 2011 QUARTERLY UPDATE Page 36
Page 1 and 2: 2010/11 PRELIMINARY FINAL REPORT &
Page 3 and 4: Results for Announcement to the Mar
Page 5 and 6: Commentary on the Results continued
Page 7 and 8: Consolidated Statement of Comprehen
Page 9 and 10: Consolidated Statement of Changes i
Page 11 and 12: Notes to the Consolidated Prelimina
Page 13 and 14: Notes continued for the year ended
Page 31 and 32: Financial Highlights 30 June 2011 3
Page 33 and 34: The Company raised $758 million in
Page 35: The poor financial performance of t
Page 39 and 40: invested in the offshore constructi
Page 41 and 42: construction work done is expected
Page 43 and 44: Operational Analysis Operating Reve
Page 45 and 46: • $541m for contract mining servi
Page 47 and 48: • $75m for construction of a prod
Page 49: • Deer Park: Leighton Properties

preliminary final report & june quarterly update - Leighton Holdings

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