Lendlease Group · ASX:LLC
Lendlease — FY2002 Earnings Presentation
34 slides from Lendlease's earnings presentation, June 2002
Slide 1: Full Year Results June 2002
FULL YEAR RESULTS June 2002 1
Slide 2: June 2002 Full Year Results
June 2002 Full Year Results • Profit after tax A$226.3M • Final dividend 9 cents fully franked • 2003 outlook unchanged 2 • Let me first say that the Board is pleased with last year’s result, which was achieved despite turbulent global economic conditions. • The profit of $226.3 million after tax si
Slide 3: Earnings per Share Growth
Earnings per Share Growth ¢ per share Earnings per share (eps) June June 2001 2002 Increase Reported eps 33.5 52.4 56.4% Pre-amortisation eps 54.2 73.7 36.0% 3 • The economic conditions over this last year have certainly been challenging, and in that context I am pleased with our result for 2002. •
Slide 4: Real Estate Investments Profit After Tax
Real Estate Investments Profit After Tax June 2001 June 2002 1 60 140. 8 1 40 116. 9 31.9 1 20 17.9 1 00 19.3 30.6 80 A$M 60 89.9 84.9 40 20 0 -20 -10.2 -6.6 North America Australia/Pacific Asia Europe 4 • Global REI profit was up 20% for the year. • Australia performed well, and Europe and Asia als
Slide 5: Real Estate Investments Assets under Management
Real Estate Investments Assets under Management June June Growth/ 2002 2001 (Decline) North America US$B 38.4 38.8 (1.0)% Australia A$B 11.8 11.0 7.3% Asia US$B 1.0 0.8 25.0% Europe £B 2.0 1.8 11.1% 5 • Worldwide Assets Under M anagement were A$86 billion at June 2002. • In the absence of currency m
Slide 6: Real Estate Investments - US
Real Estate Investments - US June June Growth/ 2002 2001 (Decline) • PAT contribution A$84.9M A$89.9M (5.6%) • Assets Under Management (US$) – Equity 17.1B 19.6B (12.8)% – Housing and Community Investing 8.6B 7.9B 8.9% – Commercial Credit 12.7B 11.3B 12.4% – Total 38.4B 38.8B (1.0)% 6 • In the face
Slide 7: Real Estate Investments - US Equity
Real Estate Investments - US Equity Recent AUM highlights: VEF V +US$260M New York State Teachers’ mandate +US$240M LL US Office Trust Miami acquisition +US$140M Acquisition of LL Rosen +US500M First Union Financial Cen ter, Miami 7 • The Equity AUM decline was a net US$2.5 billion over the year aft
Slide 8: Real Estate Investments - US Equity
Real Estate Investments - US Equity • Continuing US economic uncertainty • On-going focus on US REI: – Access to capital – Shareholder returns 8 • So, while these transactions indicate some improvement compared to conditions in ‘02, on-going economic uncertainty in the US calls for caution about sho
Slide 9: Real Estate Investments - US Housing & Community Investing (HCI)
Real Estate Investments - US Housing & Community Investing (HCI) • Strong performance over the year • Assets Under Management up 9% to US$8.6B • Business on track for increased transactions and revenue in 2003 9 • HCI has continued its strong performance with a 20% increase in acquisition volumes in
Slide 10: Real Estate Investments - US Debt Businesses
Real Estate Investments - US Debt Businesses Contribution to US REI profit US interest rates % Debt 8 32% 6 4 2 Equity 0 68% 1999 2000 2001 2002 • Commercial Credit profit up 12% despite low US interest rates • Investment in Holliday Fenoglio Fowler (HFF) for growth 10 • Our Debt businesses include
Slide 11: Real Estate Investments - Australia
Real Estate Investments - Australia A$B Assets Under Management A$M Profit After Tax 14 35 12 30 10 25 8 20 6 15 4 10 2 5 0 0 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 • Strong performance • Good market to raise capital for domestic and offshore investment 11 • We have had continued strong p
Slide 12: Real Estate Investments - Asia
Real Estate Investments - Asia • Still in early establishment phase • Cautious – delayed entry to REIT markets • Good progress with International Distressed Debt Fund (IDDF) • Potential to launch second IDDF and APIC II 12 • M oving now to the REI businesses that we are still establishing, starting
Slide 13: Real Estate Investments - Europe
Real Estate Investments - Europe • Progressing • Profit after tax A$31.9M • Global Fund on track • GLL Real Estate Partners building momentum • Continued strong performance by UK Retail Partnership • Strong growth opportunities Messeturm, Frankfurt 13 • Europe is also still in the establishment phas
Slide 14: Real Estate Solutions Profit After Tax
Real Estate Solutions Profit After Tax 180 153.3 160 140 33.9 121.2 120 100 30.9 A$M 80 60 119.4 40 90.3 20 0 June 2001 June 2002 Bovis Lend Lease Integrated Development 14 • The Real Estate Solutions business has continued its strong performance, with profit after tax up 26% on last year. • One of
Slide 15: Real Estate Solutions Bovis Lend Lease
Real Estate Solutions Bovis Lend Lease A$M Profit After Tax 150 $119M $90M 100 $56M 50 $31M $37M 0 97/98 98/99 99/00 00/01 01/02 1st Half 2nd Half 15 • Bovis Lend Lease has continued to perform well for us and has delivered an excellent result of a 32% increase in profits over last year in the face
Slide 16: Real Estate Solutions Bovis Lend Lease
Real Estate Solutions Bovis Lend Lease A$M 700 35% 600 30% 30% 26% 500 22% 25% 400 20% 300 $482M $518M $596M $482M $518M $596M 15% 200 100 10% 0 5% Ju ne 2000 June 2001 Jun e 2002 Backlog GPM Profitability Rati o 16 • Two of the key drivers of Bovis Lend Lease’s profitability are the growth in Backl
Slide 17: Real Estate Solutions UK Privatisations (PFIs)
Real Estate Solutions UK Privatisations (PFIs) Construction Current Status Contract Revenue A$M length years Healt h Calderdale 212 Operational 33 Worces ter 211 Operational 33 Hex ham 68 Under c onst ruction 32 Roehampton 62 Pref erred bidder 30 Havering 433 Pref erred bidder 33 Manchester 743 Pref
Slide 18: Real Estate Solutions Actus Lend Lease
Real Estate Solutions Actus Lend Lease Fort Hood, Texas Fort Hood, Texas 18 • The Fort Hood project has now been under way for around 9 months and is proceeding well, providing us with a good track record for future bids. • Actus Lend Lease reached preferred bidder status for a second military housi
Slide 19: Real Estate Solutions Delfin Lend Lease
Real Estate Solutions Delfin Lend Lease June June 2002 2001 No. of Projects 21 6 No. of lots sold in the year 4,758 624 Sales Backlog (no. of lots) 42,900 15,600 Varsity Lakes, Queensland 19 • Delfin, which was acquired in August last year, has been integrated into Lend Lease and produced a profit a
Slide 20: Real Estate Solutions Urban Regeneration
Real Estate Solutions Urban Regeneration Victoria Harbour, Melbourne Greenwich Peninsula, London 20 • In Australia the Urban Regeneration business generated an after profit of $21 million in 2002, principally from the Jacksons Landing and Newington projects. • The Victoria Harbour project in M elbou
Slide 21: Real Estate Solutions Other Development Projects
Real Estate Solutions Other Development Projects • Solihull completed during year – Profit after tax A$24.1M • TresAguas on track to open in September 2002 – Ex pected sale in FY’03 • Hickson Road pre-sold to Deutsche Office Trust – Ex pect sale to complete on opening in December ’03 • Norwich pre-s
Slide 22: Financials
FINANCIALS 22 • So a good result in ’02. • Very pleasing progress with RES, which is performing to plan. • And while we need to lift returns from parts of the REI business, there have been some very good performances in this business platform as well.
Slide 23: Improved Quality of Earnings
Improved Quality of Earnings Profit After Tax A$M June 2002 June 2001 Real Estate Investments 127.5 116.9 • Sale of Arrábida and Kiw i 13.3 - • Restructuring Provision - (30.3) Real Estate Solutions 129.2 106.4 • Sale of Solihull 24.1 - • Sale of Bluewater - 60.2 • Sale of Aurora Place - 19.6 • Fox
Slide 24: Capital Strength Maintained
Capital Strength Maintained June 2002 June 2001 A$M A$M Group Debt 939 1,119 Group Cash 904 1,081 Net Debt 35 38 Interest Coverage Ratio 7.6X 5.4X EBITDA A$593M A$339M Gross Capex A$1,237M A$855M 24 • Despite the extensive investment programme of the past 2 to 3 years, Lend Lease remains in a very s
Slide 25: Capital Management
Capital Management June 2002 June 2001 • Pre-amortisation ROE 8.0% 6.4% • Commitment to increasing shareholder value Initiative Status Improve operating earnings 9 Reduce capital intensity On-going Reduce cost of capital On-going 25 • Whilst our strong financial position is clear, we accept that Len
Slide 26: Capital Management (cont)
Capital Management (cont) • Process of releveraging Balance Sheet to decrease cost of capital incomplete • Options to return capital to shareholders limited – Unfranked div idends not attractive to most shareholders • No share buy-back – Preserve flexibility given global market and economic uncertai
Slide 27: Capital Management (cont)
Capital Management (cont) • Dividend policy unchanged – 18 cents per share fully franked in 2002 – Increased dividend expected in 2003 27 • Our total dividend for 2002 is 18 cents per share fully franked – exactly as foreshadowed this time last year. • Based on our current projections, we expect to
Slide 28: Business Repositioning Project
Business Repositioning Project • Initiative to improve operating efficiency • Not a cost cutting exercise, but has reduced costs by 10%+ • Outcomes: – All costs expensed in 2002 – Good progress at Corporate level – Bovis Lend Lease has increased its profitability ratio from 26% in 2001 to 30% in 200
Slide 29: Outlook – Profit After Tax 2003
Outlook – Profit After Tax 2003 • Budgeting increased profit after tax in 2003 • Increase based on: – Continued growth in RES – Continued growth in REI: • Improvement in US • No “ drag” from S -RE IT/J-REIT ex penses in Asia in 2003 • Benefits of prior invest ments in platform c oming through in Asi
Slide 30: 2003 budget assumptions
• It is also important to note that the 2003 budget: • Assumes no major asset sales; and • Continued amortisation of intangibles, which is approximately A$92 million per annum. • The bottom line is that while the uncertainty in world economies presents risks to growth, we are positioned to achieve o
Slide 31: Focus on REI
Focus on REI • Board focused on better returns from REI 30 • There are two points I would like to raise before we close the presentation and take questions. • First, I want to make it clear that we are not waiting for either the new CEO or the recovery of US markets to resolve the issues facing us.
Slide 32: Restructure of Lend Lease Board
Restructure of Lend Lease Board • Reduction to 7 members • Full Board across all key activities/events 31 • The second point I want to cover is the matter of the Board’s size and membership. • The current Board size and diversity was built up as we developed our plans for global expansion. • With th
Slide 33: Summary
Summary • Delivered 2002 result as predicted • Expecting growth in operating earnings in 2003 • Focused on improving shareholder returns from US REI • Other parts of REI doing well • RES doing well 32 • So, in summary, we have delivered on our forecast for 2002 despite some very challenging economic
Slide 34: Full Year Results June 2002
FULL YEAR RESULTS June 2002 33