Lendlease Group · ASX:LLC
Lendlease — Debt Investor Presentation (1999)
35 slides from Lendlease's debt investor presentation, 1999
Slide 1: www.lendlease.com.au
www.lendlease.com.au 1
Slide 2: Multi-Issuer Debt Issuance Programme
MULTI-ISSUER DEBT ISSUANCE PROGRAMME Arranged by: 2
Slide 3: Overview
OVERVIEW Ø Established in 1958 and listed in 1962 Ø Top 20 Listed Australian Company Ø Diversified operations in Australia, New Zealand, North America, Europe, Asia and South America Ø “AA” long term rating from Standard & Poor’s* and “A3” (positive outlook) from Moody’s* Ø Core businesses – Financi
Slide 4: Overview (cont.)
OVERVIEW (cont.) Ø Market leader in its two core businesses with a clearly defined business strategy Ø Well established track record of sustainable profit growth Ø Funds Under Management & Administration of A$85.6 billion Ø Earnings per share are targeted to increase at least 10% per annum over the
Slide 5: Market Leadership
MARKET LEADERSHIP BUSINESS AREA MARKET POSITION Ø Financial Services Ø No. 4 Total Market Ø No. 3 Retail Market Segment (Growth Segment) Ø Low cost provider Ø Real Estate Investment Ø Market Leader Ø Lend Lease Projects (formerly Ø Market Leader Civil & Civic) 5
Slide 6: Sustainable Profit Growth
SUSTAINABLE PROFIT GROWTH 24 CONSECUTIVE YEARS OF PROFIT GROWTH Profit after Tax A$m 450.00 420.4 400.00 350.00 300.00 250.00 200.00 150.00 100.00 50.00 0.00 '75 '76' '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 6
Slide 7: Funds Under Management & Administration
FUNDS UNDER MANAGEMENT & ADMINISTRATION Including A$bn Boston Financial 86 90 75 74 67 75 60 45 32 34 29 30 15 - Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-99 Pro Forma Since 1994 Lend Lease has tripled its FUM & A Real Estate Investments providing a strong stable Financial Services earnings prof
Slide 8: Financial Services Highlights
FINANCIAL SERVICES HIGHLIGHTS Ø Financial Services Business activities comprise: • Funds Management (Retail and Wholesale) • Life Insurance, Wealth and Income Protection • Funds Administration • Investment Management Ø A$30.1 billion FUM and A, up 55% since June 1995 Ø Over 1 million policy and unit
Slide 9: Strategy Financial Services
STRATEGY FINANCIAL SERVICES Ø VALUE PROPOSITION FOR CUSTOMERS - Wealth Creation and Protection Ø ORGANIC GROWTH - The rapidly growing Australian Financial Services market provides real potential for organic growth (>10% p.a.) Ø DISTRIBUTION The key to continued success in the growing Australian mark
Slide 10: Market Environment - Managed Funds
STRATEGY FINANCIAL SERVICES MARKET ENVIRONMENT - MANAGED FUNDS $571bn Australian Financial Services growth AUSTRALIAN FUNDS MARKET 48 Plum + 1997 - 2002 AdvantEdge prospects are excellent due to government- 47 Your Prosperity mandated retirement $352bn savings and growing Workplace distribution Flex
Slide 11: Strategy Financial Services Distribution
STRATEGY FINANCIAL SERVICES DISTRIBUTION Lend Lease has a Your Private Independent market leading, Advant Prosperity MLCFP Garvan LLFP Client Godfrey Advisors multi distribution Edge Internet Services Pembroke strategy to access the growing 10 Nil 450 150 400 30 130 Australian market - No. of Adviso
Slide 12: Third Largest Manager of Retail Funds
THIRD LARGEST MANAGER OF RETAIL FUNDS A$b 18 16.6 16 15.3 15.1 14 11.8 11.6 12 11.1 10 9.1 8.9 8 6 4 2 0 ANZ CFS LEASE AMP Westpac Colonial BT Funds Macquarie LEND Source: Assirt Market Share Report (June 1999) 12
Slide 13: Low Cost Operator
LOW COST OPERATOR MLC Objective – Simplification and a 40% reduction in overhead expenses over 3 years June 99 June 96 Funds Management 43.6% Expenses/FUM reduction 0.80% p.a. 1.42% p.a. June 99 June 96 FUM & A Expenses/ FUM & A 0.93% 1.42% 13
Slide 14: CEF Life (Recent Acquisition)
CEF LIFE (Recent Acquisition) Ø 55% interest in Hong Kong based Canadian Eastern Life Assurance Limited Ø Acquisition cost of A$250.0 million Ø Attracts 5% of all new life sales in Hong Kong Ø Premium income of A$123.0 million Ø Over 1,500 agents selling CEF products throughout Hong Kong 14
Slide 15: Real Estate
REAL ESTATE Real Estate business activities comprise: Ø Real Estate Investments Ø Project Management & Construction Ø Property Development 15
Slide 16: Global Real Estate Business Development
GLOBAL REAL ESTATE BUSINESS DEVELOPMENT US Europe Australia Asia Real Estate Investments (recurring income stream) Property Development Lend Lease Projects Business Fully in Place Business being developed Embryonic 16
Slide 17: Real Estate Investments
REAL ESTATE INVESTMENTS Ø Full range of property services for clients including: • acquisition, management and sale of investments • portfolio management • commercial co-investment in funds • mortgage services • management of property investment funds, limited partnerships and trusts • shopping cent
Slide 18: Boston Financial Group (Recent Acquisition)
BOSTON FINANCIAL GROUP (Recent Acquisition) Ø Privately owned institutional manager Ø Acquisition cost of US$138.0 million with additional payments of up to US$31.0 million Ø Specialises in management of multi family portfolios (apartment units), asset management, capital markets, senior housing and
Slide 19: Project Management and Construction
PROJECT MANAGEMENT AND CONSTRUCTION Ø Activities comprise project management, design, finance and construction services Ø Forward workload underpins future profit and cashflow Ø Acquisition of Bovis creates a truly global business in Project Management and Construction 19
Slide 20: Bovis Acquisition Summary
BOVIS ACQUISITION SUMMARY Ø Acquisition cost £285m (A$710m) Ø Net Cash Balance acquired, £90m Ø Profit before tax, year end December 1998, £33.5m Ø Bovis strongly complements existing Lend Lease’s Projects business 20
Slide 21: Strategic Rationale for Acquisition
STRATEGIC RATIONALE FOR ACQUISITION Ø Truly global business, a world leader, operates in 38 countries – No. 1 in UK management construction – Ranked No. 1 construction management provider (fee based) and No. 2 general contractor in Americas Ø Bovis is client focussed Ø Organisations geographically c
Slide 22: Low Risk Profile
LOW RISK PROFILE Bovis’ overall risk Analysis of 1998 Gross Contract Profit Expectation is to profile is less than maintain Fee the Lend Lease Fee Service Profit at Services approximately 50% Projects business £57.4m due to higher 56.7% £43.8m proportion of fee 43.3% service earnings Construction Se
Slide 23: Property Development
PROPERTY DEVELOPMENT Ø Property development selectively undertaken where a clear value proposition exists Ø Exploit current skill base eg, residential retail Ø Property exposures are being systematically and successfully reduced Ø The majority of inventories are in a late stage of development, ready
Slide 24: Financial Strength
FINANCIAL STRENGTH Fiscal Year Ended 30 June 1996 1997 1998 1999 A$m EBITDA 322.1 386.3 483.6 616.3 Coverage Ratios EBITDA / Interest Expense 15.8x 22.1x 9.7x 8.4x Ø EBITDA interest coverage ratio is expected to be maintained at approximately 7 to 8 times(1) Ø Board is committed to maintaining a str
Slide 25: Significant Recurrent Earnings Streams
SIGNIFICANT RECURRENT EARNINGS STREAMS EBITDA 1999 1998 1997 1996 1995 Average Operational (1) Transactional % 40.0 7.0 (3.4) (7.6) 15.6 14.2 (1)(2) Recurring (Fee based) % 57.6 68.7 78.7 80.6 78.8 70.4 Other Investment (2) % 10.0 35.3 35.3 27.0 5.4 22.1 (4) Group % (7.6) (11.0) (10.6) (0.0) (0.2) (
Slide 26: Gross Debt/Capital Employed
GROSS DEBT/CAPITAL EMPLOYED 35.0% 32.3% 30.0% 25.9% 25.0% 21.6% 18.1% 20.0% 15.9% 15.0% 14.2% 10.0% 8.7% 5.0% 0.0% Jun-93 Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Gearing ratios not relevant for Lend Lease given significant undervaluation of Lend Lease Balance Sheet Capital Employed = Debt + Equity
Slide 27: Financial Strength: Undervalued Balance Sheet
FINANCIAL STRENGTH UNDERVALUED BALANCE SHEET $Am Book Value Market Appraisal/Value Life Insurance Business 2,010 2,721 (1) Management Agreements 404 925 Equity Investments - Westpac 149 402 - Mirvac 27 43.5 (sold) Bluewater 30% 555 841 IBM Global Services 41 Significantly greater (2) Property Invent
Slide 28: Capital Allocation Process
CAPITAL ALLOCATION PROCESS Ø Investments are made in line with strategy for core business Ø Rigorous analysis performed by business units prior to entering “pipeline” Ø “Pipeline” process ensures: - Financial integrity - All risks identified and reflected in analysis - Impartiality - Includes sign o
Slide 29: Capital Allocation Process (Cont'd)
CAPITAL ALLOCATION PROCESS (CONT’D) Ø Review by Lend Lease Corporation Board Ø Value Based Management culture and reward system will ensure critical approach to new and existing business Ø Strong corporate and capital markets finance skills within Lend Lease - Robert Tsenin - Ex Goldman Sachs - Davi
Slide 30: Impact of New Accounting Standard AASB 1038
IMPACT OF NEW ACCOUNTING STANDARD AASB 1038 Ø Applicable to Lend Lease from December 1999 Ø Requires consolidation of MLC Statutory Funds Ø Significant impact on disclosures in Financial Statements Ø No impact on Lend Lease’s operating performance Ø Major disclosure impacts(1) (Proforma based on Jun
Slide 31: Summary
SUMMARY Ø A very strong financial position • Strong Balance Sheet • Strong Interest Coverage ratios • Continued 10% earnings per share growth with significant recurrent income streams Ø Strongly performing and geographically diversified businesses Ø Strategically well positioned businesses • Funds M
Slide 32: A$1.5 Billion Multi-Issuer Debt Issuance Programme
A$1.5 BILLION MULTI-ISSUER DEBT ISSUANCE PROGRAMME ISSUERS Australia: Lend Lease Finance Limited United States: Lend Lease (US) Finance, Inc GUARANTOR Lend Lease Corporation Limited Joint Programme Arrangers & Managers Commonwealth Bank of Australia Merrill Lynch International (Australia) Limited 32
Slide 33: Programme Issuance Goals
PROGRAMME ISSUANCE GOALS Ø Benchmark issuance - liquid tradeable securities Ø Repeat issuance through the various issuers Ø Establish a Lend Lease yield curve Ø Replicate our strong performance in the equity market in the Australian capital market Ø Structure and timing of trade with investor appeti
Slide 34: Lend Lease Funding Goals
LEND LEASE FUNDING GOALS Ø Domestic MTNs and Kangaroo Bonds to be a core part of global funding Ø Cost effective funding diversification Ø Access a new investor base and new markets Ø Develop and maintain good relationships with debt investors (just as with equity investors) 34
Slide 35: www.lendlease.com.au
www.lendlease.com.au 35