Investor Teleconference Transcript, Scott Charlton, 3 September 2007

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Leighton Holdings Investor Teleconference, September 2007Transcriptcommercial and financial acumen which is a bit different for a business of that scale ofwhere he wants it to be and so it’s just a very good fit between the two.Question: Simon Thackray, ABN AmroMorning guys. Just on the financing of the subordinated debt, I think you made it prettyclear you’re effectively quarantining the risk with the Group is that the way to understandthat?Speaker: Scott CharltonThat’s the way to understand that. So there’s a ………..vehicle if you will that has theequity investment from Leighton and that vehicle has raised the debt and its onlyrecourse is to our investment into Al Habtoor.Question: Simon Thackray, ABN AmroYou made the comment obviously that it’s not the end of the growth phase, this is onepart of the offshore development in particularly but presumably also continuingdevelopment in areas like residential in Australia. Just what should we be looking for interms of balance sheet in terms of capacity, it’s hard with you guys but a target gearingrange if you like to say how much additional capacity you’ve got left.Speaker: Scott CharltonSimon I think I mean Wal has talked previously about in the order of $2bn of capacitywithout having to do anything spectacular, I think we still have more than a largecomponent of that because that was on the basis raising it directly off the balance sheetand clearly the 500 of this while it will sit on our balance sheet in an accounting sense,from a risk perspective that will sit off the balance sheet and the Al Habtoor investmentpays for all the interest costs and all the costs associated with that debt plus the return onour equity investment so it has decreased some of our capability through using up thatcash but there’s still substantialQuestion: Simon Thackray, ABN AmroNo exactly I was just starting to think the $2bn as you say is a pretty conservative figurethrough this type of structured financing and I’m now looking to India and other places, Imean you’ve obviously got the JV there but is that where we turn our attention to afterthis?Speaker: Scott CharltonWell I think we’ve got a good management structure, and the management of LeightonInternational is in the process of moving from KL headquarters to Dubai and they’ll bebased there and obviously servicing India is quite easy out of Dubai. So really betweenthe Emaar JV and Al Habtoor management now really has to bed those things down andso I think the issue if you go back to that second slide that we provided growth initiativesand I think you can at least give us a tick for a year around the Gulf expansion and we’llbe looking at the other parts of the Asian businesses maybe back towards the east andsome of the other things down the list like residential property as you said, services,defence and then if other opportunistic things come up in Australia or elsewhere. But Ithink we have to be careful with our management resources the guys have a bigchallenge and a fantastic opportunity now with Al Habtoor and Emaar JV so I think theyLeighton Holdings Limited ABN 57 004 482 982 Page 6 of 15
Leighton Holdings Investor Teleconference, September 2007Transcripthave enough to bed those things down and work through them. And go back to that liston and continue to go through those things.Speaker: Bill WildI’ll add to that when we’re looking at acquisitions and growth and expanding thebusiness, one part of it is our financial capacity but obviously an equally important part isour ability to take on new businesses all around the globe and I think that’s playing anever increasing part in our decision making as to how we do these businesses, it’s onething to get hold of them and to buy them and to have the money to do so but it’s anotherthing to be able to successfully integrate them into our whole operation and I think as youlook at the money side, you’ve also got to look at management capability capacity totake on more businesses. So I think as Scott said you won’t see too much more in theMiddle East for a while until we bed all this down but in other parts of our business we dohave as well as financial capacity we have some management capacity to expand aswell so that will play a fair part in our decision making.Question: Simon Thackray, ABN AmroAnd Bill on that point does it take a long time to implement the systems I mean are wetalking a matter of years or months. How long do you reckon it will take to overlay andbring them into the new Group.Speaker: Bill WildI think if you look at it from a point of view and we’ve probably done a few of these nowand we think we know our way around them, if you look at distressed companies whichwe’ve brought a couple of I think you’ve got to say it takes something like three years tobring it into the culture and bring it into the system. Al Habtoor is by no means adistressed company, Al Habtoor is a company that’s grown as a private business and asScott said it has actually quite good systems but those systems as you start to move intothe turnover we’re talking about need changing so it will be significantly less than threeyears, I’d say off the top of my head I think you’d be looking at 12 months time we’d havemost of our systems in there and 12-18 months time I think we’d be feeling prettycomfortable that it reports and manages its business in the same way that the rest of ourGroup does. One thing about Al Habtoor that really stands out is that they are extremelycapable contractors and builders, they do fantastic work so when you look at integratingthem it’s not a case where you need to worry about that side of it that side is very goodwe just need to integrate the systems and make them fit with a bigger scale business.12 months is my sort of view of where we’re looking at.Question: Simon Thackray, ABN AmroDoes that mean on that basis you don’t necessarily get any margin uplift from theimplementation of those systems, it’s just a question about scaling up.Speaker: Bill WildI don’t see systems as so much margin uplift as risk management, they do the jobsextremely well so I think the issue on margin uplift is how we handle the growth in theMiddle East and that sort of thing more than systems. Inflation is a big issue in theMiddle East and how we manage that is more important in terms of margin than whatsystem we use I think. I think we will improve margins over time, I don’t think there’s anyLeighton Holdings Limited ABN 57 004 482 982 Page 7 of 15
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Investor Teleconference Transcript, Scott Charlton, 3 September 2007

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