Lendlease Group · ASX:LLC
Lendlease — Investor Day (March 2008)
68 slides from Lendlease's investor day presentation, Mar 19, 2008
Slide 1: Stock Exchange Announcement: Bovis Lend Lease Investor Day
For personal use only 19 March 2008 The Manager The Manager Companies Section Companies Section Australian Stock Exchange Limited New Zealand Stock Exchange Limited Pages: Sixty-eight (68) pages Dear Sir Stock Exchange Announcement Bovis Lend Lease Investor Day – Update on Operations With reference
Slide 2: Bovis Lend Lease Investor Day
For personal use only Bovis Lend Lease Investor Day March 2008 Overview Appropriate photo Mark Menhinnitt Global CEO
Slide 3: Today's Agenda
Today's Agenda For personal use only 1. Mark Menhinnitt (Global CEO) Welcome Global Business Overview Americas & EMEA overview 2. Andrew Council Our Risk Management Processes 3. Sergio Casari Update on Asia Pacific 4. Tony Costantino Update on Australia Pricing a Project (Commercial Of
Slide 4: Global Business Overview
Global Business Overview For personal use only 1 Who We Are 2 What We Do 3 How We Create Value 4 Our Plan For Growth 5 Progress to Date 3
Slide 5: Who We Are
1 Who We Are For personal use only Global general construction group with leading positions Region Headcount Backlog Key Sectors Dec 07 GPM HY08 Americas 3,100 A$255.0m Multi-family (33%) Healthcare Education Europe 3,400 A$293.6m Commercial (37%) Retail Healthcare Government / Civic
Slide 6: Global Management Team
1 Who We Are For personal use only Global Management Team Mark Menhinnitt Global CEO Global Team Regional CEOs Charles Bates Pete Marchetto COO CEO Americas Paul Walsh Murray Coleman CFO CEO UK Andrew Council Mark Fletcher Commercial Director CEO CEMEA Chris Lamb Sergio Casari Head of HR CEO Asia Pa
Slide 7: What We Do: For customers
2 What We Do For personal use only For customers Main Construction Process Bovis Lend Lease Our service offerings include Advice Management Execution … and vary according to geography, property sector, customer requirements 6
Slide 8: What We Do: Across markets
2 What We Do For personal use only Across markets Mix of Realised GPM (Dec 07) Other Office Fee Americas Asia Pacific Risk Healthcare Govt / Civic Residential Europe Education Retail Geography Risk Type Sector 7
Slide 9: How We Create Value: For customers
3 How We Create Value For personal use only For customers Project Delivery Process Value Bovis Lend Lease Brings Customers Project management Feasibility Predictability of cost Product intellectual property Value engineering Certainty of delivery Cost Time Quality 8
Slide 10: How We Create Value: For Lend Lease
3 How We Create Value For personal use only For Lend Lease Source of Value Description ‘In-house’ builder Creates point of difference from competitors who rely on external construction capabilities Enables single source of accountability for Lend Lease’s investor / fund clients Carries a stron
Slide 11: How We Create Value: For shareholders
3 How We Create Value For personal use only For shareholders Key Areas for Management Focus New work secured Volumes Mix by sector & geography GPM Margin by risk type Sold Margin Backlog GPM Delivered Project program Cashflow Margin Project profit plans Variance Overhead productivity O
Slide 12: Our Plan for Growth: Opportunities
4 Our Plan for Growth For personal use only Opportunities Eliminate major volatility in earnings Extract maximum value from our current global ‘footprint’ / A$12b+ revenues Selective expansion in geographies & services Enhanced product development to support Lend Lease in targeted sectors In
Slide 13: Our Plan for Growth: Priorities & approach
4 Our Plan for Growth For personal use only Priorities & approach 3. Expansion New sectors & / or segments New products & / or geographies 2. Operational Excellence Secure work Deliver work 1. Basic Governance Manage people Leadership (including Health & Safety) Risk management Manag
Slide 14: Progress to Date: Leadership
5 Progress to Date For personal use only Leadership Global Head Office moved to Sydney New COO, Commercial, HR & Safety leaders UK New leadership in place CEO with significant experience of ‘At Risk’ contracts; COO; Head of Risk; UK South & UK North managers with D&C experience; CFO, senior
Slide 15: Progress to Date: Risk management
5 Progress to Date For personal use only Risk management Global Re-engineering risk management processes across business (Andrew Council to provide detail) Realigning all geographies’ policies, Limits of Authority, processes to this US Planned West Coast acquisition in 2007 delayed until 2009
Slide 16: Progress to Date: Profitability
5 Progress to Date For personal use only Profitability Volumes Very strong pipeline of new work secured Setting priorities by sector & geography Margins Minimum margins set by risk type in all geographies Rigorous risk management program being put in place to ensure delivered margins increas
Slide 17: Project Wins / Backlog Growth
Project Wins / Backlog Growth For personal use only New Work Secured Backlog GPM A$m A$m 400 800 700 300 600 500 200 400 273 232 265 285 196 387 522 681 625 717 786 100 300 Jun 05 Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 Jun 04 Jun 05 Jun 06 Jun 07 Dec 07 16
Slide 18: Safety
For personal use only Safety 17
Slide 19: Bovis Lend Lease Americas
For personal use only Bovis Lend Lease Americas
Slide 20: December 2007 GPM Analysis
December 2007 GPM Analysis Profitability Diversified by Sector & Geography For personal use only GPM by Sector GPM by Region 8% Commercial / Office 19% 14% East 9% Education 29% South & Healthcare Government / Civic 2% 1% 3% Mid Atlantic 2% Healthcare 4% 12% Industrial / Technology 11% West Pharmace
Slide 21: Bovis Lend Lease Americas
Bovis Lend Lease Americas For personal use only Type of work undertaken 95% of work is negotiated with clients Guarantee time, price and quality of the work but do not take design risk in the United States Enter into contracts directly with subcontractors Backlog GPM of A$255m Driven by
Slide 22: Bovis Lend Lease UK / CEMEA
For personal use only Bovis Lend Lease UK / CEMEA
Slide 23: December 2007 GPM Analysis
December 2007 GPM Analysis Profitability Diversified by Sector & Service Type For personal use only GPM by Sector GPM by Service Type 3% 3% Commercial/Office 28% Communications 21% 20% Education Government/Civic Healthcare 42% Industrial/Technology 3% 11% 1% Mixed use 3% Pharmaceutical/R&D 6% Reside
Slide 24: Bovis Lend Lease UK / CEMEA
Bovis Lend Lease UK / CEMEA For personal use only UK on track for return to growth over medium term Manchester Joint Hospitals – on track New business is being written at better margin Main focus continues to be commercial and retail, although activity in both is softening Strong pipeline
Slide 25: Risk Management Processes
For personal use only Bovis Lend Lease Investor Day March 2008 Risk Management Processes Andrew Council Global Commercial Director
Slide 26: Risk Management Framework
Risk Management Framework For personal use only 1. Define Project Risks 2. Price Risk or Carve 3. Control with Process Out of Contract Discipline Key Elements Contract Type Key Processes Design Fee work Secure work Costs Risk work Deliver work Timing People management Quality Bus
Slide 27: Define Project Risks
1 Define Project Risks For personal use only Delivery Process Description 1 Developing functional briefs and specifications that define Brief / Scope the building while also meeting commercial parameters and user requirements 2 Translation of the brief/scope requirements into technical Design dr
Slide 28: Define Project Risks: Typical Risks
1 Define Project Risks For personal use only Typical Risks for Bovis Lend Lease in Delivery Process Design process Functionality / fit for purpose Statutory Compliance Construction cost Subcontract trade cost Market escalation Builders preliminaries and supervision cost Time to complete
Slide 29: Price Risk − Carve Out of Contract
2 Price Risk − Carve Out of Contract For personal use only The service offering allocates project risks between Bovis Lend Lease and the client Bovis Lend Lease classifies its service offering into ‘fee’ or ‘risk’ services Fee Services Risk Services 2 Price Risk - Carve Out of Contract Consult
Slide 30: Service Offering − Fee
Price Risk − Carve Out of Contract 2 Service Offering − Fee For personal use only Service Offering Description Typical Risks Taken Level of Risk Consultancy/ Typically project management work that is Internal cost of – Agency (PM) performed for a fee. No sub-contracting management involved. reso
Slide 31: Service Offering − Risk
Price Risk − Carve Out of Contract 2 Service Offering − Risk For personal use only Service Offering Description Typical Risks Taken Level of Risk Construction A fee is paid to undertake the procurement of services management at and trades required for the construction of the project. – risk (CM@ri
Slide 32: Scope of Service Offer
Price Risk − Carve Out of Contract 2 Scope of Service Offer For personal use only Fee Work Risk Work Construct PM CM EPCM CM@risk Only D&C 2 Stage D&C 1 Stage 1 Brief / Scope Phase 1 Fee work 2 Design Phase 1 3 Fee work Construct Phase 2 Risk work 4 Phase 2 Risk work Commission 31
Slide 33: Service Offer by Business Unit − Dec 2007
Price Risk − Carve Out of Contract 2 Service Offer by Business Unit − Dec 2007 For personal use only Global By Geography Fee / Risk Split Main Types of Work Asia Ö Design & Construction 42 58 Ö Project Management Pacific Fee Ö EPCM / CM 37 Ö Construction Management at Risk Americas 19 81 Ö Construct
Slide 34: Key Risk Management Process
3 Control with Process Discipline For personal use only Key Risk Management Process Secure Work Deliver Work Manage People Manage Business 33
Slide 35: Control with Process Discipline: Secure Work
3 Control with Process Discipline For personal use only Secure Work Conversion Process Pipeline Report Submit Pipeline Project Go / Conversion Commitment Execute Construction Proposal to Report No Go Process Review Contract Authorisation Client Business Tools Limits of Authority Global Minimum P
Slide 36: APAC Global Pipeline Report - Jan 2008
3 Control with Process Discipline For personal use only APAC Global Pipeline Report - Jan 2008 Executed: Feb 07, 2008 - 22:39 PM by APAC\smim441 Project Descriptors Contract / Commmercial Information Contract Schedule Negotiated or Office Construction Sector SBU Project Name Project Location Project
Slide 37: Control with Process Discipline: Deliver Work
3 Control with Process Discipline For personal use only Deliver Work Project Report Construction Procurement Construction Contract Commission Completion Authorisation Administration Business Tools Limits of Authority Global Minimum Project Standards Regional Operations & Procedures Projects
Slide 38: Projects in Delivery Report
3 Control with Process Discipline For personal use only Projects in Delivery Report Template Version 1.50 Region APAC Period Jan-08 Currency AUD s s ng e n ge or cha d ch a d S ch m en t S c h c tio n e U sa n cy e t e trac sco pprov Wa le Sco regat le C on m s E e nt tri k a ls ng ge IE) e du C on
Slide 39: Other Processes
3 Control with Process Discipline For personal use only Other Processes Secure Work Deliver Work Manage People Match to workload in quality & quantity Manage Business Business Plan – Finance Reporting Risk Matrix Reporting Audit Reporting 38
Slide 40: Bovis Lend Lease Asia Pacific Business Overview
For personal use only Bovis Lend Lease Investor Day March 2008 Bovis Lend Lease Asia Pacific Business Overview Sergio Casari CEO − Asia Pacific
Slide 41: Business Overview
Business Overview For personal use only JAPAN Tokyo 2,300 people in 8 countries CHINA Osaka Beijing Backlog GPM of A$237.3m (Dec 07) Shanghai TAIWAN Operating in Australia since 1951 and Taipei INDIA THAILAND Asia since 1973 Bangalore Australia’s largest commercial and Kuala Lumpur MALAYSIA
Slide 42: Our Value Proposition
Our Value Proposition For personal use only We deliver projects of outstanding quality and value by Integrating design and construction Applying front end project management capabilities Working hand in hand with our clients Benefiting from early supply chain engagement Xilinx, Singapore L
Slide 43: End to end property delivery solution
We are fully aligned with our clients’ objectives and provide an end to end property delivery solution For personal use only Traditional Contracting Feasibility Design and and Procurement Construction Completion Asset and Capital authority and contracts (some design and Facility development) Structu
Slide 44: Our Service Offering: Design & Construction
Our Service Offering Design & Construction For personal use only Product and value driven solution Design, procurement and construction occur concurrently, driving shorter delivery programmes 30 The Bond, NSW Pre-planning focus to minimise on-site risks Integration of tenants and user needs
Slide 45: Our Service Offering: EPCM / Construction Management
Our Service Offering EPCM* / Construction Management For personal use only Maximum flexibility in design development procurement construction to accommodate client requirements Full alignment with client interests Lonza Mammalian Cell Culture Plant 2, Singapore Single point of responsibi
Slide 46: Our Services Offering: Project Management / Consulting
Our Services Offering Project Management / Consulting For personal use only Full alignment of interests Engaging and managing consultants and contractors on behalf of the client Monitoring and control of construction outcomes to ensure achievement of pre-agreed outcomes Port Botany, NSW Acti
Slide 47: Asia Pacific delivered 30% of Global Backlog GPM
Bovis Lend Lease Asia Pacific delivered 30% of Global Backlog GPM December 2007 For personal use only Source of core competencies Asia Pacific 30% Provides senior management talent Generates cash De-risks integrated projects Remainder 70% Creates portfolio balance 46
Slide 48: Asia Pacific Realised GPM by Service Type
Asia Pacific Realised GPM by Service Type December 2007 For personal use only Asia Pacific Australia Construction Management 16% EPCM 10% Construction Multisites Management 13% 11% D&C Project 68% Management Multisites D&C 10% 3% 62% Consulting & Project Management 7% Asia EPCM 37% PM/CM 52% D&C 11%
Slide 49: Asia Pacific Backlog GPM by Sectors
Asia Pacific Backlog GPM by Sectors December 2007 For personal use only Other 7% Transport/Aviation Commercial/Office 7% 19% Commonwealth Bank, NSW Retail 17% Healthcare 34% Australian Taxation Office, ACT Pharmaceutical/Industrial 16% Sealed Air Qingpu, China 48
Slide 50: Key Asia Pacific Current Projects
Key Asia Pacific Current Projects For personal use only Key Projects Location Value FY2007 FY2008 FY2009 FY2010 Royal Children’s Hospital Melbourne, Vic A$1,064m ANZ, 833 Collins Street Melbourne, Vic A$377m Top Ryde Retail Sydney, NSW A$470m Brisbane International Airport Brisbane, QLD A$292m Mulwa
Slide 51: Strategy Overview
Strategy Overview For personal use only Australia Balance of “Private / Public” portfolio Continue to lead and innovate in Safety & Sustainability Singapore Continue to focus on Pharma / Industrial Pharma Support / deliver Lend Lease’s developments Royal Children’s Hospital, VIC Thailand /
Slide 52: Bovis Lend Lease Australian Business Overview
For personal use only Bovis Lend Lease Investor Day March 2008 Bovis Lend Lease Australian Business Overview Tony Costantino Managing Director − Australia
Slide 53: The Australian Construction Market
The Australian Construction Market For personal use only Strong growth in non residential construction market over the last 2 years Continued strong level of activity in the short to medium term University of NSW, NSW Significant government spend on health and social infrastructure Water sho
Slide 54: Strategy Overview
Strategy Overview For personal use only We are a creator of product Leverage project management and in-house design capability (Lend Lease design) R&D investment on new initiatives Continued focus on Commercial and Retail Diversification into Government sectors including Healthcare and Wat
Slide 55: Commercial
Commercial For personal use only Backlog GPM Commercial Creators of leading property and workspace solutions 17% Australia Clients Investa, Macquarie Office Trust, GPT, Colonial, Challenger, NAB, ANZ, Freehills, Santos, Ericsson, Fortius, Lend Lease Development, Telstra, Tenix Current projects in de
Slide 56: Retail
Retail For personal use only Backlog GPM Specialist retail project management Australia Clients Retail QIC, The GPT Group, APPF, Fortius, Lend Lease Retail, 16% The Beville Group, Delfin Lend Lease Current projects in delivery Top Ryde City 420 George St / Mid City Centre Robina Town Centre
Slide 57: Healthcare & Medical Research
Healthcare & Medical Research For personal use only D&C solutions that maximise Whole of Life (WOL) value Backlog GPM Australia for major hospitals and medical research facilities Clients State Governments, Private health operators, Universities & Institutes Current projects in delivery Royal Chil
Slide 58: Water & Industrial
Water & Industrial For personal use only Backlog GPM Specialist delivery of water, wastewater, pipeline Australia and industrial infrastructures Water / Industrial Clients 11% Sydney Water Corporation, Department of Defence Current projects in delivery & preferred position Networks Alliance (Sydne
Slide 59: MultiSites
MultiSites For personal use only Backlog GPM Project management, design, procurement and Australia construction management services at a state Multisites and national level 6% Clients CBA, Telstra, ANZ, NAB, McDonald’s, Suncorp, Queensland Government Sectors Financial, Retail, Commercial, Insurance,
Slide 60: Pricing a Project
For personal use only Bovis Lend Lease Investor Day March 2008 Pricing a Project Tony Costantino Managing Director − Australia
Slide 61: How to Price a Commercial High-Rise Office Building
How to Price a ‘Commercial High-Rise Office Building’ For personal use only Sample Illustration: Project ‘Tenant Square’ Location: Sydney CBD Contract Type: 2 Stage Design & Construct Project Value: $250m Schedule: Overall Duration = 36 months − Design Period = 10 months − Construction Period = 26 m
Slide 62: Conversion Process
Conversion Process For personal use only Sample illustration of Tenant Square – A$250m Commercial Office Tower Fee Phase of Project = 10 Months Prepare Client & Project Update Market Develop Develop Prepare Refine Design Schedule, Opportunity Pricing From Design Brief Design Budget Price & Cost Plan
Slide 63: Project Pricing – Organisation Chart
Project Pricing – Bovis Lend Lease Organisation Chart For personal use only Client Senior Cost Project Director Planner Project Manager Project Manager Construction Structure Building Services Manager Design BLL Cost Building Services Cost Commercial Site Senior Site Consultants Planner Consultant P
Slide 64: Design & Cost Planning
Design & Cost Planning For personal use only Bovis Lend Lease Project Managers will manage the creation of the design solution including the preparation of the Design Brief Design drawings are produced by a consultant team in accordance with the Design Brief The design is reviewed internally b
Slide 65: Design Development − Value Engineering
Design Development − Value Engineering For personal use only Client budget = If indicative Cost Plan prepared = based on the current design development drawings, then the design needs to be value engineered Example solutions: 9 Change facade material = facade cost reduced by A$100 / m2 9 Increase bu
Slide 66: Subcontractor Pricing
Subcontractor Pricing For personal use only The design documentation is issued to Bovis Lend Lease supply chain & subcontract market for pricing The project team prepares the GMP based on market pricing from subcontractors for typically 60 – 80% of subcontract trade value Lump sum prices are s
Slide 67: Benchmarks
Benchmarks For personal use only The GMP is prepared and reviewed at levels within Bovis Lend Lease as required by the Limits of Authority Elements of the pricing are benchmarked against similar projects undertaken as well as being reviewed from first principles Building Efficiency Builder Preli
Slide 68: The Schedule
The Schedule For personal use only Production rates that are used to determine construction activity durations and delay allowances are benchmarked against existing projects The time to design and construct the tower is documented in detail. A summary of an overall project schedule for Tenant Sq