Investor Teleconference Transcript, Scott Charlton, 3 September 2007

More documents

Recommendations

Info

Leighton Holdings Investor Teleconference, September 2007Transcriptdoubt about that, but I think that will really be a case of managing the market more thananything else.Speaker: Scott CharltonBut Simon I think one of the important aspects to point out is while we’re implementingthose systems over the next 12-18 months and one of the reasons we’ve done the dealwith the founders to underwrite all the existing jobs is so as we bring on the new jobsthey’ll effectively be in the Leighton systems and so we’ve got guarantees on their profitfrom the existing job which is really securing the business for the next 18 months whilstwe’re putting in our systems. Even though we have been given full access we’ve beenworking on it for about 4 months now, full access to all the jobs, all the management veryfriendly deal and it’s been quite a goo process for us, quite a good cultural fit as well.The management is from all over the globe, obviously quite a lot of locals, but quite a lotof expats already involved in the Al Habtoor business and got fantastic clients in most ofthe government entities seems a very good fit.Question: Simon Thackray, ABN AmroThe transaction costs Scott I guess on a financial point are they likely to be material thisyear in F08?Speaker: Scott CharltonNo they’re not going to be material Simon.Question: Simon Thackray, ABN AmroSo we’re not going to see them as an abnormal or something.Speaker: Scott CharltonNo, no excuse for reduced profit.Question: Brendan Wong, AusfieldJust in terms of margins, just wondering how the margins of Al Habtoor how does thepipeline in the Middle East compare to Leighton’s existing pipeline in the Middle East.Speaker: Scott CharltonI think the margins are fairly similar although I’d say that the margins of both areimproving because of the situation in the Middle East and lack of capacity both Groups….Speaker: Bill WildYes I think that’s more noticeable, is not so margins that exist between Al Habtoor andLeighton if you like, the newer jobs are at higher margins and we’re noticing that at bothin Al Habtoor and at Leighton so the jobs that are a couple of years old are generally a bitlower margin and are generally copped a bit of a hiding from inflation over the time butnow we’re seeing quite good margins in terms of what we see in Australia, we’d saythey’re very good margins.Leighton Holdings Limited ABN 57 004 482 982 Page 8 of 15
Leighton Holdings Investor Teleconference, September 2007TranscriptQuestion: Brendan Wong, AusfieldWhat sort of scale would you be talking about when you say the newer projects in theMiddle East have better margins than the older ones?Speaker: Bill WildBy a couple of percent.Question: Brendan Wong, AusfieldThe last question I have is you mentioned that you’ve got options to acquire furthershares in the future, just wondering what the timing of those options might be and alsothe scale of the share percentage?Speaker: Scott CharltonObviously the existing owners of the business are in their 60’s now and are looking for along term exit strategy, we’re keen to tie them into the business for a period of time, wehave under the arrangements the right to acquire 6% within 5 years and obviously underthese shareholders arrangements as well there’s pre-emptive rights and otherarrangements if they choose to exit part of the business beforehand, but we’ve alsolocked them into the business for 5 years, we think it’s important for the health of thebusiness and our prospects, they’ve done such a fantastic job, their relationships and thekey management so we have arrangements we’ve been putting in place to not only lockthem in as key shareholders but lock some of the management in and look at how othersmay exit the business over time but clearly we’re looking to control within that 5 yeartimeframe.Question: John Purtell, Macquarie BankJust a few questions, just confirming that the acquisition is going to be equity accountedjust how that works, obviously conscious there’s a merger as well. Secondly justconcerning on the tax situation that there’s zero tax in relation to Al Habtoor’s profit anddoes that mean there’s no tax reduction on the non-recourse debt.Speaker: Scott CharltonWe wouldn’t do that John. The first question will be an associate on our books, soeffectively we’ll have an investment in the order of $870m on the balance sheet and onthe other side of the balance sheet there will be a liability of roughly $520m of debt andthose two could offset each other, most offset each other on a disaster type scenario, butthat’s how the balance sheet will be accounted and then we’ll just get the dividends anddistributions through associate the Al Habtoor investment. The structure of the finance isit’s actually an Australian vehicle that owns and conducts business in Australia that ownsthe Al Habtoor investment and that’s where the funding is raised although the funding isin US$ to match as everyone may or may not know the AED dirham is pegged to theUS$ funding is in US% and that is in Australia and that will be tax deductible, the interestwill be tax deductible in Australia for the investment in Habtoor with the tax situation,under the arrangements in the UAE there are no taxes paid but in Qatar you pay taxaccording to the amount of foreign ownership that you have, so there will be a smallamount of tax for activities in Qatar but for the UAE there will be no tax.Leighton Holdings Limited ABN 57 004 482 982 Page 9 of 15
Page 1 and 2: Leighton Holdings Investor Teleconf
Page 7: Leighton Holdings Investor Teleconf
Page 15: Leighton Holdings Investor Teleconf

Investor Teleconference Transcript, Scott Charlton, 3 September 2007

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?