Investor Presentation (PDF - 1.1 MB) - Leighton Holdings
Investor Presentation (PDF - 1.1 MB) - Leighton Holdings
Investor Presentation (PDF - 1.1 MB) - Leighton Holdings
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<strong>Investor</strong> <strong>Presentation</strong><br />
March 2008<br />
1
The <strong>Leighton</strong> Group<br />
- Australia’s largest project development<br />
and contracting group<br />
- World’s 27th largest contractor*<br />
- World’s largest contract miner<br />
- Australia's most profitable constructor<br />
- Top 25 Australian company ~A$13bn<br />
market cap<br />
2<br />
*Source: ENR
Operating structure<br />
HOCHTIEF<br />
is Majority<br />
Shareholder in<br />
<strong>Leighton</strong> <strong>Holdings</strong><br />
(55%)<br />
Thiess Pty Ltd<br />
John Holland<br />
Group<br />
Pty Ltd<br />
<strong>Leighton</strong><br />
Contractors<br />
Pty Limited<br />
<strong>Leighton</strong> Asia<br />
Limited<br />
<strong>Leighton</strong><br />
International<br />
FZ LLC<br />
<strong>Leighton</strong><br />
Properties<br />
Pty Limited<br />
MD<br />
Operating Revenue*<br />
Work in Hand #<br />
No. of Employees*<br />
Established<br />
Subsidiaries and<br />
Associates<br />
3<br />
100% owned 100% owned 100% owned 100% owned 100% owned 100% owned<br />
David Saxelby<br />
A$4,752m<br />
A$9,869m<br />
11,642<br />
1933<br />
PT Thiess Indonesia<br />
Thiess Services<br />
HVE<br />
Silcar<br />
Swan Water<br />
Sedgman<br />
*As at 30 June 2007<br />
# As at 31 Dec 2007<br />
David Stewart<br />
A$2,409m<br />
A$4,427m<br />
3,332<br />
1949<br />
Lucon<br />
Infratek Networks<br />
Gridcomm:<br />
• Quantum<br />
Peter McMorrow<br />
A$3,202m<br />
A$8,828m<br />
6,645<br />
1949<br />
HWE<br />
<strong>Leighton</strong> Services:<br />
• Visionstream<br />
• LSE Technology<br />
• Nextgen Networks<br />
• Mayfield<br />
Broad<br />
Hamish Tyrwhitt<br />
A$325m<br />
A$569m<br />
1,518<br />
1975<br />
David Savage<br />
A$816m<br />
A$2,964m<br />
3,981<br />
1975<br />
Al Habtoor<br />
Mark Gray<br />
A$387m<br />
38<br />
1972<br />
Devine
Operate in markets that are<br />
growing very strongly<br />
Kuwait<br />
Qatar<br />
UAE – 10.7%<br />
Sri Lanka<br />
Macau<br />
Taiwan<br />
Laos<br />
Hong Kong - 5%<br />
Thailand<br />
Vietnam<br />
Philippines<br />
Singapore Malaysia<br />
India – 8.0%<br />
Mongolia<br />
China – 9.6%<br />
Indonesia – 6.2%<br />
Korea<br />
Versus<br />
Euro area - 2.3%<br />
USA - 2.6%<br />
Pacific<br />
Australia – 3.3%<br />
New Zealand<br />
4<br />
# Based on 2008 GDP forecasts from The Economist<br />
* UAE 2008 GDP forecast based on IMF
Our core values<br />
- Act with integrity and fairness<br />
- Create a safe, challenging and fun workplace<br />
- Recognise the needs of the community<br />
- Protect the environment<br />
- Be commercially competitive<br />
- Foster a performance driven culture<br />
- Encourage innovation and technological<br />
leadership<br />
5
Work in hand now at record<br />
$26.7 billion<br />
A$m<br />
30,000<br />
25,000<br />
20,000<br />
15,000<br />
10,000<br />
5,000<br />
0<br />
98/9 99/0 00/1 01/2 02/3 03/4 04/5 05/6 06/7 07/8<br />
At 31 December<br />
At 30 June<br />
6
Profit after tax of $190 million<br />
for the first half<br />
A$m<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
98/9 99/0 00/1 01/2 02/3 03/4 04/5 05/6 06/7 07/8<br />
At 31 December<br />
At 30 June<br />
7
Margin trend showing<br />
improvement<br />
%<br />
7<br />
6<br />
5<br />
4<br />
3<br />
2<br />
1<br />
0<br />
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 HY<br />
2008<br />
EBIT Margin<br />
NPAT Margin<br />
F2008<br />
8
Average return on shareholders<br />
funds of 36.7% in 2006/07<br />
%<br />
40<br />
35<br />
30<br />
25<br />
20<br />
15<br />
10<br />
5<br />
0<br />
96/7 97/8 98/9 99/0 00/1 01/2 02/3 03/4 04/5 05/6 06/7<br />
At 30 June<br />
9
Wilpinjong Coal Mine, NSW, Thiess<br />
10
Half Year financial highlights<br />
Dec 07<br />
$m<br />
Dec 06<br />
$m<br />
%<br />
change<br />
Total revenue 6,536 5,725 14%<br />
New contracts,<br />
extensions & variations 12,347 9,630 28%<br />
Value of work in hand 26,657 20,096 33%<br />
Profit before tax 321.7 246.1 31%<br />
Profit after tax 250.3 190.0 32%<br />
Dividends per ord share 60¢ 45¢ 33%<br />
11
Total revenue up by 14% with<br />
joint ventures up by 118%<br />
A$m<br />
7,000<br />
6,000<br />
5,000<br />
4,000<br />
3,000<br />
2,000<br />
1,000<br />
0<br />
2006 2007<br />
Other<br />
JV’s<br />
Group<br />
12
Revenue and Work in Hand split<br />
by Market and Geography<br />
Revenue and Work in Hand<br />
by Market (2007, A$m)<br />
Revenue and Work in Hand<br />
by Region (2007, A$m)<br />
12,228<br />
3,610<br />
1,198<br />
1,703<br />
11,366<br />
Revenue*<br />
Total = A$6,511m<br />
21,674<br />
5,448 1,063<br />
4,983<br />
3,063<br />
Infrastructure<br />
Resources<br />
Work in Hand #<br />
Total = A$26,657m<br />
Australia/Pacific<br />
Property<br />
Overseas<br />
13<br />
* For 6 months to 31 Dec 2007 # As at 31 Dec 2007
Substantial increase in profit<br />
before and after tax<br />
Dec 2006<br />
A$m<br />
Dec 2007<br />
A$m<br />
400<br />
400<br />
300<br />
300<br />
200<br />
200<br />
100<br />
100<br />
0<br />
EBIT<br />
Finance<br />
costs<br />
Tax<br />
NPAT<br />
0<br />
EBIT<br />
Finance<br />
costs<br />
Tax<br />
NPAT<br />
14
Balance sheet – assets<br />
increased by $1 billion<br />
A$m<br />
7,000<br />
6,000<br />
5,000<br />
4,000<br />
3,000<br />
2,000<br />
1,000<br />
0<br />
5,830<br />
4,745<br />
'June 2007' 'Dec 2007'<br />
Other<br />
Property, plant & equip<br />
Investments (other)<br />
Investments (equity)<br />
Inventories<br />
Trade & receivables<br />
Cash & equivalents<br />
15
Balance sheet – liabilities<br />
similarly increased<br />
A$m<br />
5,000<br />
4,000<br />
3,000<br />
2,000<br />
3,391<br />
4,396<br />
<strong>Leighton</strong> Notes<br />
Limited recourse debt<br />
Interest-bearings liab’s<br />
Provisions<br />
Current tax liabilities<br />
1,000<br />
Trade & payables<br />
0<br />
'June 2007' 'Dec 2007'<br />
16
Cash flow impacted by<br />
accelerated construction<br />
A$m<br />
1,800<br />
1,600<br />
1,400<br />
1,200<br />
1,000<br />
800<br />
600<br />
400<br />
200<br />
0<br />
Opening<br />
cash<br />
Operating<br />
cash<br />
PP&E<br />
Investment<br />
Proceeds<br />
from sale<br />
Borrowings Al Al Habtoor Devine Macmahon Dividends Closing<br />
cash<br />
17
Depreciation similar to<br />
previous year<br />
A$m<br />
250<br />
230 225<br />
200<br />
150<br />
100<br />
50<br />
Other<br />
Plant and equipment<br />
- components<br />
Plant and equipment<br />
0<br />
2006 2007<br />
18
Improved contribution from<br />
both Australia and Asia<br />
Revenue<br />
A$m<br />
Profit before tax<br />
A$m<br />
8,000<br />
400<br />
6,000<br />
300<br />
4,000<br />
200<br />
2,000<br />
100<br />
0<br />
2006 2007<br />
0<br />
2006 2007<br />
19<br />
Australia<br />
Asia
We manage an active capital<br />
planning program<br />
- Balance sheet a source of competitive<br />
advantage<br />
- Active capital planning program<br />
- Innovative funding:<br />
• <strong>Leighton</strong> Notes<br />
• Operating leases<br />
• Indonesian Notes<br />
• Non-recourse debt for Al Habtoor<br />
20
Capital planning<br />
“Standard & Poor’s considers that<br />
<strong>Leighton</strong>’s standalone credit quality<br />
remains unchanged and robust.”<br />
“Standard & Poor’s expects that <strong>Leighton</strong>’s<br />
solid work in hand and growth in future<br />
earnings will be sufficient to maintain the<br />
robust credit metrics and support the rating.”<br />
Source: S&P Press Release 29 Jan 2008<br />
21
City of Dreams, Macau, <strong>Leighton</strong> Asia/John Holland<br />
22
The strategic framework<br />
provides a model for growth<br />
Thiess<br />
John Holland<br />
<strong>Leighton</strong> Contractors<br />
<strong>Leighton</strong> Asia<br />
<strong>Leighton</strong> International<br />
<strong>Leighton</strong> Properties<br />
Mining & Resources<br />
Engineering &<br />
Infrastructure<br />
Building & Property<br />
Services<br />
Markets/<br />
Products<br />
Geography<br />
Brands<br />
Delivery<br />
Systems<br />
Australia<br />
Asia/Pacific<br />
Gulf region<br />
Hard Dollar<br />
Design & Construction<br />
Project Management<br />
Alliancing<br />
Negotiated<br />
Development<br />
Privatised Projects/PPP<br />
23
The strategic framework<br />
includes seven key initiatives<br />
Taking core skills to new geographies<br />
1. Expand our Asian/Gulf businesses<br />
2. Expand international contract mining<br />
Strengthen development businesses<br />
3. Become a leading infrastructure/resources<br />
developer in Australia and Asia<br />
4. Move into residential property development<br />
24
The strategic framework (cont)<br />
Build and diversify the core Australian<br />
contracting businesses<br />
5. Grow our Services businesses<br />
6. Undertake a defence acquisition<br />
7. Continue an acquisition program generally<br />
25
1) Expand in Asia and the Gulf<br />
Construction Projects Announced<br />
in the GCC Region<br />
US$bn<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
26<br />
0<br />
UAE<br />
Saudi<br />
Arabia<br />
Sources: MEED, ENR 2006<br />
Kuwait Qatar Oman Bahrain<br />
Annual International Revenue Growth Rate<br />
by Global Top 225 Contractors (2002-2005)<br />
45%<br />
40%<br />
35%<br />
30%<br />
25%<br />
20%<br />
15%<br />
10%<br />
5%<br />
0%<br />
Gulf<br />
Region<br />
Europe<br />
Australia/<br />
Asia<br />
Canada<br />
US
Acquisition of Al Habtoor<br />
Engineering<br />
- <strong>Leighton</strong> to merge Gulf operations with<br />
Al Habtoor Engineering<br />
- <strong>Leighton</strong> to acquire 45% stake in Al<br />
Habtoor-<strong>Leighton</strong> for $860m<br />
- <strong>Leighton</strong> has equal Board representation<br />
and option to acquire further equity<br />
- Transaction immediately EPS accretive<br />
27
JAFZA Convention Centre, Abu Dhabi, <strong>Leighton</strong> International<br />
28
The financial structure is<br />
beneficial to shareholders<br />
- Total <strong>Leighton</strong> investment A$860 m<br />
• Cash (40%) A$345 m<br />
• Non-recourse debt (60%) A$515 m<br />
- Debt funding provided by:<br />
• Abu Dhabi Commercial Bank<br />
• EFIC<br />
• HSBC<br />
• Mashreqbank<br />
• Royal Bank of Scotland<br />
29
2) There are few global<br />
contract miners<br />
World contract miners (A$bn revenue pa, various recent years as available)<br />
LHL<br />
Downer/ Roche<br />
Pama (Indonesia)<br />
Bukit Makmur (Indonesia)<br />
Moolman (Africa)<br />
MacMahon<br />
Kiewit (USA)<br />
Washington (USA)<br />
0 0.5 1 1.5 2 2.5 3<br />
30
Typical roles of contractor in the<br />
mining sector<br />
Owner Operator<br />
Traditional<br />
Contract Miner<br />
Full Services Contracting<br />
Contractor<br />
Activity<br />
- Limited to<br />
infrastructure<br />
set-up<br />
- Pre-strip<br />
- Mining<br />
- Rehabilitation<br />
- Infrastructure set-up<br />
- Mine planning<br />
- Pre-strip<br />
- Mining<br />
- Processing & load out<br />
- Rehabilitation<br />
Delivery<br />
System<br />
- Design &<br />
construct<br />
- Lump sum<br />
- Schedule of rates<br />
- Lump sum<br />
- Alliancing<br />
- Schedule of rates per tonne delivered<br />
- Schedule of rates for some components<br />
Investment<br />
by<br />
Contractor<br />
- Nil<br />
- Plant & equipment<br />
- Working capital<br />
- Plant & equipment<br />
- Working capital<br />
- Investment stake in mine<br />
Skills<br />
Required<br />
by<br />
Contractor<br />
- Construction<br />
- Earthmoving/Mining<br />
skills<br />
- Construction<br />
- Mine planning<br />
- Earthmoving/Mining skills<br />
- O&M<br />
31
Wilpinjong Coal Mine, NSW, Thiess<br />
32
Contract miners bring benefits<br />
to the mine owners<br />
- Reduced requirement for capital<br />
• Contractors provide plant & equipment and working capital<br />
• Leads to improved return on funds employed for owner<br />
- Reduced operating risk<br />
• Contractors manage workplace relations<br />
• Contractors provide cost certainty, ie fixed price per tonne<br />
- Improved performance and efficiency<br />
• Contractors are absolutely cost competitive<br />
• Have access to large modern fleet<br />
• Bring industry leading knowledge and expertise<br />
• Bring purchasing power with suppliers<br />
• Have access to experienced resources and training<br />
• Can benchmark across numerous mine sites<br />
33
We are targeting India and China<br />
as emerging markets<br />
World mineral* reserves US$ trillions<br />
Indonesia<br />
South America<br />
Africa<br />
India<br />
Australia<br />
Eastern Europe<br />
China<br />
Russia<br />
North America<br />
Recent world mineral growth set to continue<br />
Need to keep<br />
improving<br />
competitiveness,<br />
position<br />
(including via<br />
acquisitions)<br />
Core Markets<br />
Emerging Markets<br />
• Australia<br />
• Indonesia<br />
Make successful<br />
entry, consolidate<br />
position over the<br />
next ~ 5 years<br />
Possible Eventual Markets<br />
• India<br />
• China<br />
For Example:<br />
• Africa (Thiess<br />
presence<br />
through<br />
Sedgman,<br />
Promet)<br />
• Canada<br />
0 5 10 15<br />
Time<br />
34<br />
*Includes Coal, Iron Ore, Copper, Gold, Lead, Nickel, Silver, Tin, Zinc, Bauxite<br />
Source:USGS
The resource projects pipeline<br />
continues to remain strong<br />
$bn<br />
160<br />
140<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
0<br />
Completed projects<br />
Advanced projects (committed<br />
or under construction)<br />
Less advanced projects<br />
(undergoing feasibility)<br />
Oct-05 Apr-06 Oct-06 Apr-07 Oct-07<br />
35<br />
Source: ABARE
3) Becoming a leading<br />
infrastructure developer<br />
Portfolio of Investments<br />
Built a significant portfolio of infrastructure<br />
investments worth ~$500m:<br />
- EastLink<br />
- West Link M7<br />
- Lane Cove Tunnel<br />
- River City Motorway<br />
- Defence HQ<br />
- North Luzon Expressway<br />
- Indian tollroads<br />
36
North-South Bypass Tunnel, Qld, <strong>Leighton</strong> Contractors<br />
37
The outlook for Australian<br />
construction is bouyant<br />
$bn<br />
80<br />
70<br />
60<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
1996 1996<br />
1997 1997<br />
1998 1998<br />
1999 1999<br />
2000 2000<br />
2001 2001<br />
2002 2002<br />
2003 2003<br />
2004 2004<br />
2005 2005<br />
2006 2006<br />
2007 2007<br />
2008f 2008f<br />
2009 2009<br />
2010 2010<br />
2011 2011<br />
2012 2012<br />
Transport<br />
Other Engineering Construction<br />
Residential Building<br />
Mining and Heavy Industry<br />
Non-Residential Building<br />
38<br />
f=forecast<br />
Source: BIS Shrapnel, total private sector work done 05/06 dollars
4) Moved into residential<br />
property with Devine stake<br />
- Taken a 40% stake in Devine<br />
- First step in residential property strategy<br />
- Option to step up stake when standstill<br />
agreement expires in Nov 2010<br />
- Creating mixed-use opportunities<br />
- Objective is to have residential business<br />
similar in size to no-residential business<br />
39
Lakeside Caprice, SA, Devine<br />
40
Residential construction set for<br />
an upswing<br />
$bn<br />
50<br />
40<br />
30<br />
20<br />
10<br />
0<br />
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11<br />
Houses<br />
Apartments/ Other Dwellings<br />
41<br />
f=forecast<br />
Source: BIS Shrapnel, work done 05/06 dollars
5) Keen to grow services, both<br />
organically and by acquisitions<br />
- Thiess Services re-structured as “stand alone”<br />
entity over time with a strengthened Board<br />
- Thiess committed to both organic growth and<br />
to merge or acquire businesses as<br />
opportunities arise<br />
- Both LCPL and JHG will continue to grow their<br />
respective services businesses<br />
42
John Holland Aviation Services, Vic, John Holland<br />
43
Outsourcing trend continues in<br />
the maintenance markets<br />
$bn<br />
6<br />
50%<br />
5<br />
45%<br />
40%<br />
4<br />
3<br />
35%<br />
30%<br />
25%<br />
2<br />
20%<br />
15%<br />
1<br />
0<br />
10%<br />
5%<br />
0%<br />
1995 1995<br />
1996 1996<br />
1997 1997<br />
1998 1998<br />
1999 1999<br />
2000 2000<br />
2001 2001<br />
2002 2002<br />
2003 2003<br />
2004 2004<br />
2005 2005<br />
2006 2006<br />
2007e 2007e<br />
2008 2008<br />
2009 2009<br />
2010 2010<br />
2011 2011<br />
2012 2012<br />
Maintenance perfomed by Government Contract maintenance % contracted out<br />
44<br />
e=estimate f=forecast<br />
Source: BIS Shrapnel, June 06
6) Undertake a defence<br />
acquisition<br />
- Undertook due diligence on Tenix<br />
- Withdrew from sale process<br />
- Monitoring ASC<br />
45
7) Continue an acquisition<br />
program generally<br />
- Acquired 15% of Macmahon<br />
- Investment formalises a ‘Partner of Choice’<br />
relationship<br />
- Will joint venture on large infrastructure and<br />
resources construction projects<br />
- Current market uncertainty likely to create<br />
opportunities<br />
46
Acquisitions have been a<br />
significant contributor to growth<br />
Revenue A$ billion<br />
14,000<br />
12,000<br />
38% of revenue<br />
from acquisitions<br />
10,000<br />
8,000<br />
29% of revenue<br />
from acquisitions<br />
6,000<br />
4,000<br />
2,000<br />
0<br />
'03 '04 '05 '06 '07<br />
Rest of Business JHG LCPL Other Acquisitions<br />
47
Summary<br />
- Outlook remains positive<br />
- Strong competitive position and capital<br />
management supports outlook<br />
- Work in hand to be maintained<br />
- Revenue forecast to be over $14.5bn<br />
- On track for solid profit increase<br />
48
<strong>Investor</strong> <strong>Presentation</strong><br />
March 2008<br />
49
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