HALF YEAR RESULTS 30 JUNE 2012 - Cloud Object Storages3-us-west-2.amazonaws.com/brr-streamguys/files/LEI... · HALF YEAR RESULTS 30 JUNE 2012 PRESENTATION BY HAMISH TYRWHITT & PETER

HALF YEAR RESULTS30 JUNE 2012 PRESENTATION BY HAMISH TYRWHITT & PETER GREGG, 7 AUGUST 2012

The Leighton Group is a leading international contractor. We aim to be renowned for excellence, delivering through our operating brands and the empowerment of our people.

LEIGHTON HOLDINGS2 | DISCIPLINE | INTEGRITY | SAFETY | SUCCESS |

LAST 12 MONTHS

INTERIM RESULTS HALF YEAR ENDED 30 JUNE 2012

REBASE GROW

o APL completeo VDP end of year o HLG recovery strategyo Gorgon renegotiated

o LHL as SMCo Restoring disciplineo Vision & valueso Capital management

focus

o Higher quality businesso Driving improved marginso Better capital returnso Grow from existing capital

base

STABILISE


HIGHLIGHTS OF HALF YEAR RESULTS


Revenue

Work in Hand

Earnings

Balance Sheet

Outlook o NPAT forecast of $400-$450m reconfirmed

o 2 new facilities and 2 extensionso $0.8bn of undrawn debt facilitieso Ample room with financial covenants

o 1H NPAT $115m in line with forecast rangeo Strong result from balance of portfolio, outside of APL and VDPo Good operating performances e.g. Thiess and Leighton Contractors

o $47bn Work in Hando Demonstrates strength of addressable market

o Total revenue of $11bn o 450 projectso Diversified by geography, markets and activities

o Gearing to reduce in 2Ho Capital recycled with July TWM sale

Repositioning the Group



LHL Strategic Management Companyo Strategic Leadership and Directiono Control and co-ordinationo Managing capital across the Groupo Building management capabilitieso Shared vision and values

OpCoso Preserve brands o Diversity key to successo Position to make most of core competencies

SUSTAINABLE GROWTH WITHIN SPAN OF CONTROL




Improve controls over winning and delivering work

o Management of risk already embedded in our activities

o Identify key projects for LHL and Board oversight

o Retain ultimate decision rights based on risk

o Coordinate single solution to key projects

o Undertake whole of business approach to risk

RESETTING THE DIAL ON RISK MANAGEMENT




Improve quality of business reportingo Provide consistent reporting across diverse portfolio with

more timely informationo Strengthen lines of accountability

Improve governance and assurance

o New Code of Business Conduct

o Increased focus on Environmental, Social, Governance, Diversity

o Review of Group Health and Safety Standards

o New head of Internal Audit appointed

RESETTING THE DIAL ON RISK MANAGEMENT




All data based on calendar year.* For 6 months to 30 June 2012. 2012 12 month projection for million hrs worked based on 6 months to 30 June 2012.^ Lost Time Injury Frequency Rate per million hrs worked ‐ 12 month rolling average.

SAFETY IS AN ABSOLUTE PRIORITY


0

50

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150

200

250

0

1

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2005 2006 2007 2008 2009 2010 2011 2012*

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n hr

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Fatalities - Australia Fatalities - International LTIFR - Australia^ LTIFR - International^ Million hrs worked



Redesign remuneration structure o Shareholder alignmento Better balance between: fixed/variable, long/short, cash/equity

o Strong performance orientation

Calibrate key performance indicatorso Blend of financial, strategic and operational

o OpCo incentives include significant portion of Group performance

Cascade remuneration and KPIs to top line management

DRIVING A CULTURAL CHANGE




Develop skills and capabilities to deliver long term growtho Assess executive ranks and develop succession plans for key roleso Design and deliver bespoke training programs to address executive

capability gaps o Identify and design succession planning

Ensure cross-business cooperationo Identify areas of collaboration for optimum synergies o Ensure skills sharing to provide best solutions for clients and lower

project costs and risks

Foster workplace environment to optimise productivity and retention

DRIVING A CULTURAL CHANGE




Drive balance sheet improvementso Improve the management of working capital and capital spendo Improve contract cash flows Recycle capital to support growtho ~$1bn capital recycled over 12 months from HWE and TWM saleso Progressive review of non-core assetsProvide tools for accountabilityo Implement economic profit measureso Assign virtual balance sheets to Operating Companies

CAPITAL MANAGEMENT AND RECYCLING




Focus on NPAT margino Long-term focus on margin expansiono Exert discipline in tenders

Leverage purchasing strength and overhead reductiono Travel & IT savings achievedo Targeting key supplies: mining fleet, fuel, steel, explosives

Provide framework for exporting skillso Leveraging JHG tunnelling and waste water management in Hong Kongo Alignment of Leighton Africa with Leighton Contractors

STABILISE, RESHAPE AND REBASE


Progressive Resolution on APL, VDP & HLG



o Certificate of Completion on 23 Julyo Opened on 24 Julyo Longest tunnel in Australiao 25 bridges, 15 km of tunnels/ramps,

and 7 km of new road o Only 3½ weeks beyond contractual

timeframeo March accelerated commissioning

achievedo Reduced LD’s negotiated

AIRPORT LINK: DELIVERED ONE OF THE MOST COMPLEX ENGINEERING FEATS




o Construction of plant almost completed

o Accelerated commissioning underway of all 3 streams

o First reverse osmosis water produced June 2012 on target

o On-going commissioning meeting critical pathways

o On track for end of the year

VICTORIAN DESALINATION PROJECT: CONSTRUCTION COMPLETE




Al Shaqab o Equestrian Centre openo Riding school in progresso Additional variations of QR36m

agreed ono Extension of time granted until August

and risk of LDs eliminatedo Facilitating progress payment of

QR78m

PROGRESSING ON OLD HLG




Other Qatar-based projects o Dareen, Faisal, Arwa Towers settled,

in line with our valuation levelso Phase 2 Doha City Centre Expansion

offer psm doubledDubai Civil Aviation Authorityo Agreement to decouple claims paves

way for settlemento Positions not far apart

PROGRESSING ON OLD HLG




Green shoots of recovery from old HLG

“IPO ready” by 2016 as sustainable, diversified company o Group share of HLG loss of $32mo Strong support from LHLo Diversifying by client, geography & marketo Group collaboration in tendering e.g. JHG

on Doha Metro

o Addressable market is good e.g.2022 Soccer World Cup, Arab Spring

FOUR YEAR TURN-AROUND FOR NEW HLG


Financial Delivery


Financial Delivery

1 Revenue includes $2.0bn from JVs and associates2. UNPAT (Underlying NPAT before net gain on sale and after minorities)3. Gain on sale of HWE net of BrisConnections and HLG impairments

SUMMARY OF PERFORMANCE


6 months June 12 Dec 11 June 11

Revenue 1 ($’m) 11,068 12,177 9,667EBITDA ($’m) 752 1,112 (330)UNPAT 2 ($’m) 115 272 (626)Net gain on sale3 - 68 -NPAT ($’m) 115 340 (626)Dividend (cents) 20 60 -EPS (cents) 34.0 101.0 (203.7)

Salient points:o Revenue $11bn on 450 active projects. Dec & June 11 include HWE revenue o NPAT in line with reforecast, strong result from balance of portfolio outside of APL and VDPo Effective tax rate of 20% due to R&D credits and impact of blended tax rateso Dividend declared of 20 cps and payout ratio of 59%


Financial Delivery

* 6 mths to 31 December 2011

DIVERSITY OF REVENUE

Salient points:o Diversification of revenue within portfolio of 450 active projects o Analysed by market, resources revenue growing with strong pipeline especially offshore gas & LNGo Analysed by activity, construction is growing from resource-related construction while contract

mining has reduced with sale of HWE in 2011

Market ActivityGeography

18%

82%

18%

82%

Overseas Australia NZ

2012 2011*


55%36%

7%2%

52%40%

6% 2%

Infrastructure ResourcesProperty Corporate

2012 2011*60%

26%

8%6%

63%

24%

9%4%

Construction Contract miningServices Development/Corporate

2012 2011*


Financial Delivery

Source Note: ASX Report and 4D 1 Commercial and residential includes Leighton Properties and Devine

OPERATING COMPANY PERFORMANCE


6 months LCPL Thiess JHG LAIO LMEACommercial &

Residential1

Revenue ($’m) 3,364 3,489 2,217 1,261 285 190

Segment result ($’m) 134 78 (33) 63 (43) (17)

Margin % 4.0% 2.2% n/a 5.0% n/a n/a

Work in Hand 11,669 16,612 7,140 8,403 2,325 1,178

Good operating performances from:o Thiess and John Holland, outside of APL and VDPo Leighton Contractors especially miningo Leighton Asia from Indonesia, Hong Kong and Mongolia

HLG four-year recovery strategy in place


Financial Delivery

1 includes present value of P&E operating leases. June 2012 adjusted for anticipated completion of Thiess Waste Management sale, announced 9 July. As at 30 June gearing was 48%

BALANCE SHEET


$m June 12 Dec 11 June 11

Total assets 10,593 9,900 9,800

Total capital & reserves 2,654 2,767 2,320

Cash and cash equivalents 1,169 1,503 1,415

Interest bearing liabilities 2,938 2,143 1,826

Gearing1 46% 32% 35%

Salient points:o Assets increased due to timing on project receiptso Interest bearing liabilities include $329m drawn on $425m finance lease facilityo Gearing above range. Expected to reduce in 2H. Headroom on financial covenants. $0.8bn of undrawn debt facilities


Financial DeliveryOPERATING CASH FLOW


Salient points:o Operating cash flow impacted by costs on APL & VDP and timing of receivableso PP&E includes $565m payments for plant & equipmento Net borrowings include $522m proceeds from new financings and $329m receipts from sale and leasebacko $202m payment of 2011 dividend

1,5031,169

714

(206)(37)

(501)

(100)

(204)

200400600800

1,0001,2001,4001,600

December 2011 Operating cash Finance & tax PP&E Invests/S'holdrloans

Net borrowings Divis/Dists Jun-12

$m

Cash Flow Reconciliation


Financial Delivery

Drivers of increased gearing

o Cash outflow APL & VDP

o Timing of project receipts

Solution

o APL finished, VDP lesser cash impact

o Stronger 2H operating performance (forecasting +~3 points)

o Working capital initiatives including reduction in receivables

o Overhead & cost savings

GEARING UPDATE



Financial DeliveryFINANCING UPDATE


Successfully closed two new debt facilitieso $425m 5yr finance lease facility o $125m bilateral debt facility

Extended two bilateral facilitieso $100m working capital facility o $110m term debt facility in July

Debt refinancing requirements to June 2013o LMENA US$299m loan (term sheet being finalised)o $350m bilateral working capital and finance lease facilitieso $176m Devine bank loan


Financial DeliveryDEBT MATURITY PROFILE


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Billateral Loan Devine Finance Lease MTN Term Loan US PP WC Loan


Financial DeliveryFINANCING UPDATE


Funding initiatives are a key focus

New capex approvals procedures in place

Increasing use of insurance bonds

Evaluating debt bond market opportunities

o Diversifying funding sources o Extending maturity profile

Robust Addressable Market



o Work in hand at record levelso Margin in hand in line with historic highs

– Notwithstanding focus away from top-line growtho Pipeline includes $9.7bn of preferred bidder positions and $29.9bn of tenders

– Leighton exercising discipline within this pipeline

ADDRESSABLE MARKETS DEMONSTRATE STRONG GROWTH


44.6 47.3 68.1

4.2 9.5

11.1 9.7

(11.0)

1020304050607080

Opening WiH Revenuedelivered

Increases inscope andvariations

New contracts Closing WiH Contractedbeyond 5

years

Preferredbidder position

WiH andpreferred

$bn

Work in Hand and Preferred Bidder Positions



Asian centuryo Era of growth in Asia despite subdued outlook in advanced economieso Drive to urbanisation and industrialisationo Supports long term commodity demand and investment

Leightono 35+ years experienceo Established presence in key growth markets e.g. Mongoliao Broadest footprint of international contractors in Asia and Middle East o Construction and mining skills to service region’s needs

THE ASIAN CENTURY



Robust Addressable MarketMAP OF LEIGHTON’S OPERATIONS

Botswana

Iraq

Qatar

OmanSaudi Arabia

United ArabEmirates

BahrainKuwait

Mongolia

China

IndiaHong Kong

Macau Taiwan

VietnamThailandCambodia

Laos

Sri Lanka

Indonesia

Philippines

Papua New Guinea

Australia

New Zealand

Malaysia

SingaporeBrunei



Resources investment key driver for next 5 yearso Record offshore gas-fields and CSG to LNG spendo Strong iron ore demand in Pilbara and emerging mid-westo Incremental coal investment including Galilee Basino Port and rail infrastructure to support export facilities

Modest rise in infrastructure investmento Transport especially rail investmento Electricity spend from increased generation requiremento Growth in NBN-driven telecommunications investmento Social investment e.g. hospitals

Acknowledged challenges around bottlenecks and productivity

DOMESTIC MARKET PIPELINE REMAINS STRONG


Clear Set of Priorities



o Deliver on VDP and recovery strategy for HLG

o Transition LHL to a Strategic Management Company

o Initiate refocus and repositioning of the portfolio

o Complete risk management system enhancement

o Embed performance culture

o Strengthen and deleverage balance sheet

2012 & 2013




o Deliver net margin expansion

o Invest and grow within existing capital base

o Export skills to attractive markets

o Develop and execute long term strategy

o Promote culture of excellence

2014 AND BEYOND




Short termStabilise, reshape and rebase combining best of our traditional values, capabilities and strengths with strategic & cultural initiatives

Medium termPosition the Group as one of world’s leading providers of integrated services to resources, infrastructure and property sectors and deliver sustainable returns to shareholders


HALF YEAR RESULTS30 JUNE 2012 PRESENTATION BY HAMISH TYRWHITT & PETER GREGG, 7 AUGUST 2012

The Leighton Group is a leading international contractor. We aim to be renowned for excellence, delivering through our operating brands and the empowerment of our people.

Documents

HALF YEAR RESULTS 30 JUNE 2012 - Cloud Object Storages3-us-west-2.amazonaws.com/brr-streamguys/files/LEI... · HALF YEAR RESULTS 30 JUNE 2012 PRESENTATION BY HAMISH TYRWHITT & PETER