Report from the Leighton Holdings Limited Annual General Meeting

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06//07 Report from the Annual General Meeting November 2002Projects clockwise from top leftQAL Stationary Calciner ProjectQueensland – ThiessNo.1 Margaret StreetNew South Wales – Leighton PropertiesAlice Springs – Darwin RailwayNorthern Territory – John HollandPhilip Morris Manufacturing FacilityPhilippines – Leighton Asia (Northern)Future Growth (continued)
Leighton Contractors is a member of the recently announcedpreferred consortium for the first of these major new projects,the $1.5 billion Western Sydney Orbital (WSO). The WSO is acritical component of Western Sydney’s transportinfrastructure linking with the M5 at Prestons, the M4 nearMinchinbury and the M2 at West Baulkham Hills. Nearly40Km in length, it will have a fully automated tolling systemresulting in significantly improved traffic flows. The WesternSydney Orbital brings $750 million worth of work in hand overthe next four years and involves a 10 percent equity stake.Some $6 billion of road projects are likely to proceed over thenext few years. The final link in the orbital road networkaround Sydney is the $850 million Lane Cove Tunnel which iscurrently being bid and is expected to be awarded in the firsthalf of next year. Both Leighton Contractors and Thiess are inconsortiums bidding for this project.In Sydney, two other major road projects are currentlybeing evaluated by government. These projects are the F3connector to the Sydney Orbital, providing freeway accessfrom Sydney to Newcastle, and the M4 City Link, which willcomplete the link from Western Sydney to the city. Theseprojects will both be in excess of $1 billion.In Melbourne, projects being progressed include the$1.8 billion Mitcham-Frankston (Scoresby) Motorway, and thePakenham and Craigeburn bypasses.Rail InfrastructureAfter decades of inertia we are seeing a sustained resurgencein spending on rail infrastructure. The development of newintercity and interstate lines, the privatisation of parts ofAustralia’s interstate track network, and the upgrading of theexisting network is fuelling a mini-boom in the railinfrastructure sector. Expenditure on rail construction isexpected to increase by more than 200 percent over the nextfive years.After 100 years on the drawing board, construction of the1,420Km Alice Springs to Darwin rail line is underway andJohn Holland has a lead role in this project. Track layingstarted in April and is now proceeding at a rate of over4Km a day with some 500Km of track laid.In Sydney, a consortium led by Thiess is designing andconstructing the first leg of the $1.6 billion Parramatta RailLink, a 28Km extension to the Sydney metropolitan railnetwork. The project involves the tunnelling, excavation ofstation caverns, laying of track, signalling and communicationssystems between Chatswood and Epping.The Victorian Government is currently investing $550 millionto provide fast rail links for commuters between Melbourneand four regional centres. Both Thiess and John Holland wereawarded work on these routes, which will terminate at theredeveloped Southern Cross Station in Spencer Street,currently being upgraded by Leighton Contractors.A number of other new rail initiatives are in planning aroundthe country including construction of the Perth to Mandurahrail line in Western Australia, the development of the GoldCoast light rail project, the Epping to Castle Hill link in Sydney,the second stage of the Parramatta Rail Link, and upgrading ofthe Sydney to Newcastle line.While rail construction is experiencing a strong upturn,maintenance and refurbishment of the existing network is alsoproviding good opportunities. John Holland is now the largestrail maintenance contractor in Australia and currentlymaintains over 5,600Km of track in Western Australia, and800Km of track in South Australia and the Northern Territory.Privatisation of Melbourne’s train and tram network hasprovided long-term maintenance work for Thiess Infraco.Also, the Australian Rail Track Corporation has recentlyearmarked $500 million for upgrading of rail infrastructure overthe next five years and the Group is keen to undertake someof this work.Building and PropertyThe Australian non-residential building and property marketappears set to experience a period of growth, with acombination of low interest rates and a strong domesticeconomy expected to stimulate activity. The recovery iscentred on CBD office developments along the easternseaboard, redevelopment of shopping centres and somemajor hotels, as well as continued spending in health,education and defence.The Group has a strong presence in the building and propertysector, recently boosted by Leighton Contractors’ acquisitionof Broad Construction and John Holland’s acquisition ofFletcher Construction. The potential acquisition of WalterConstruction Group would also add to John Holland’sbuilding capability.Leighton Properties is currently developing some selectedoffice projects including the MacArthur Chambersdevelopment in Brisbane and 700 Collins Street in Melbourne.Both have leasing pre-commitments.Other office prospects being progressed by LeightonProperties include the KENS site in Sydney’s CBD and the100 Pacific Highway site in North Sydney. DevelopmentApplications have been lodged for both of these projects.Also, we have developed a strategic partnership with theJames Fielding Group and we are exploring joint developmentopportunities. We have sold one of our completed propertydevelopments, the Mulgrave e-park, into their retailinvestment vehicle.The retail and hotel sectors are providing some goodopportunities. Leighton Contractors has recently commencedwork on the $167 million refurbishment of the Hilton Hotel inSydney’s CBD and John Holland has two shopping centreprojects in New South Wales.Around $6 billion worth of private and public projects areplanned for the health and education sectors. Most of thisactivity is set to occur in New South Wales and Queensland,with some major projects such as a $400 millionredevelopment of Sydney’s Royal North Shore Hospital.Expenditure on defence facilities is expected to continue.Leighton Contractors and Thiess are working at threedefence bases in Townsville and John Holland has a longtermmaintenance contract for defence facilities in NewSouth Wales.AsiaTurning now to our Asian markets, the outlook remainspositive with most markets forecast to recover over the nextfew years. We have recently restructured Leighton Asia toposition it to profit from this recovery.Over the past five years, Leighton Asia, led by John Faulkner,has doubled in size and gained a far broader footprint acrossthe region. We have separated the current operations ofLeighton Asia into two companies.Leighton Asia (Northern), under the leadership of WillHamilton, will be responsible for operations in Hong Kong,the Philippines, Thailand, Vietnam, Taiwan and China.Leighton Asia (Southern), under David Savage, will beresponsible for operations in Malaysia, Indonesia, Singapore,Sri Lanka and India. I congratulate both Will and David ontheir appointments.The key objective of this restructure is to provide greatermanagement strength to enable the business to continuegrowing.Indonesia remains the largest contributor from Asia withwork in hand in excess of $1 billion. Of course, the recenttragedy in Bali has created some concern about ouroperations. Indonesia is a complex country with its ownsocial and political issues. There has been no disruption toour projects and, whilst we continue to closely monitor thesituation, we remain committed to Indonesia.Thiess’ contract mining activities in Kalimantan continue toperform well. Leighton Asia has also developed a solidpresence in Indonesia with contract mining operations inKalimantan and a rail project in West Java. We will continueto review a number of resources opportunities in Indonesia.In Hong Kong, Leighton Asia’s workload has improved withthe award of some major new projects such as the refuellingfacility at the airport in addition to four current rail contracts.The Hong Kong government’s investment in the developmentof rail and other civil engineering infrastructure shouldcontinue to generate work in the future.Leighton Asia’s operations in Malaysia have performedstrongly over the last couple of years on the back of somelarge projects. Whilst new work has been secured, activitylevels in Malaysia have now come off recent highs.Opportunities are being pursued in power generation,telecommunications and general construction.Elsewhere in the region, Leighton Asia has some goodprospects. Construction of the Philip Morris manufacturingfacility has progressed well, boosting activity levels in thePhilippines and some preparatory works have been carriedout on the North Luzon Expressway in Manila.In Vietnam, an improved investment climate is providingopportunities such as a new power station near Ho Chi MinhCity for Siemens. Leighton Asia is now working in Taiwan andis hopeful of securing further work on the High Speed RailLink currently under construction.We have a strong position across much of Asia and theregion remains a fundamental element of our diversitystrategy.ConclusionThe Group has successfully navigated the downturn inAustralian construction markets. Work in hand is at an alltimerecord level of $9.3 billion with a diverse range of majorprojects in hand, and an upswing in activity ahead.However, the continued growth of the Group is not withoutits challenges. Our focus will remain firmly on the profitableexecution of current projects and on managing our exposureto Nextgen Networks given the flat telecommunicationsoutlook. We must also successfully manage our humanresources and continue to win replacement work.The next few years should be a period of strong growth andwe are confident that we have the management, thefinancial strength and the market opportunities tosuccessfully deliver for shareholders.
Page 1 and 2: Projects from left to rightRoyal No
Page 3 and 4: IntroductionOn behalf of the Board
Page 5: Future GrowthA Presentation to the

Report from the Leighton Holdings Limited Annual General Meeting

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