Lendlease Group · ASX:LLC
Lendlease — J P Morgan Australasian Conference 2002
30 slides from Lendlease's conference presentation, October 2002
Slide 1: J P Morgan Australasian Conference, Edinburgh - October 2002
J P Morgan Australasian Conference Edinburgh - October 2002 1 • This presentation will recap on the achievements of the Lend Lease businesses over the past year and give you a sense for their outlook. • The market has been disproportionately focused on the US REI business so, to balance the ledger,
Slide 2: June 2002 Full Year Results
June 2002 Full Year Results • Profit after tax A$226.3M ¢ per share Earnings per share (eps) June June 2001 2002 Increase Reported eps 33.5 52.4 56.4% Pre-amortisation eps 54.2 73.7 36.0% 2 • We recently announced our 2002 results, which were in line with our expectations, and in fact were above the
Slide 3: Real Estate Investments Profit After Tax
Real Estate Investments Profit After Tax June 2001 June 2002 160 140.8 140 116.9 31.9 120 17.9 100 19.3 30.6 80 A$M 60 89.9 84.9 40 20 0 -20 -10.2 -6.6 North America Australia/Pacific Asia Europe 3 • Global REI profit was up 20% in 2002. • The Global REI business consists of the well established bus
Slide 4: 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)% – HCI 8.6B 7.9B 8.9% – Commercial Credit 12.7B 11.3B 12.4% – Total 38.4B 38.8B (1.0)% 4 • In the face of very difficult conditions
Slide 5: 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 • Continuing US economic uncertainty • On-going focus on US REI: – Access to capital – Shareholder returns
Slide 6: Real Estate Investments - US Housing & Community Investing (HCI)
Real Estate Investments - US Housing & Community Investing (HCI) • Strong performance in 2002 • Assets Under Management up 9% to US$8.6B • Business on track for increased transactions and revenue in 2003 Waterford Square, US 6 • HCI, our US multi-family tax credit business, has continued its strong
Slide 7: Real Estate Investments - US Debt Businesses
Real Estate Investments - US Debt Businesses Contribution to US REI profit US interest rates % Debt 8 32% 6 4 2 Equity 0 68% 1999 2000 2001 2002 • Commercial Credit profit up 12% despite low US interest rates • Investment in Holliday Fenoglio Fowler (HFF) for growth 7 • Our Debt businesses include C
Slide 8: Real Estate Investments - Australia
Real Estate Investments - Australia A$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 8 • We have had continued strong pe
Slide 9: 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) APIC investment: Parkway Parade, • Potential to launch second Singapore IDDF and APIC II 9 • We are still in the early stage o
Slide 10: Real Estate Investments - Europe
Real Estate Investments - Europe • Progressing • Profit after tax A$31.9M • Global Fund investment cycle largely completed • GLL Real Estate Partners building momentum • Continued strong performance by UK Retail Partnership • Strong growth opportunities Messeturm, Frankfurt 10 • Europe is also still
Slide 11: Real Estate Solutions Profit After Tax
Real Estate Solutions Profit After Tax 180 153.3 160 140 33.9 121.2 120 100 30.9 A$M 80 60 119.4 40 90.3 20 0 June 2001 June 2002 Bovis Lend Lease Integrated Development 11 • The Real Estate Solutions business has continued its strong performance, with 2002 profit up 26%. • One of the features in th
Slide 12: Real Estate Solutions
Real Estate Solutions Managed Funds Managed Funds Third Party Capital Hickson Rd Retail (Solihull, Norwich) Managed Funds Development Delfin Lend Lease Greenwich Peninsula Land Management/ Victoria Harbour Urban Regeneration Debut Services Lend Lease Actus Military Housing Catalyst Healthcare Focus
Slide 13: Real Estate Solutions Bovis Lend Lease
Real Estate Solutions Bovis Lend Lease Profit After Tax A$M 150 $119M 100 $90M $56M 50 $31M $37M 0 97/98 98/99 99/00 00/01 01/02 1st Half 2nd Half 13 • Bovis Lend Lease has continued to perform well for us and has delivered an excellent result of a 32% increase in profits in 2002 in the face of a to
Slide 14: Real Estate Solutions Bovis Lend Lease
Real Estate Solutions Bovis Lend Lease A$M 700 35% 30% 600 26% 30% 22% 500 25% 400 20% 300 $482M $518M $596M 15% 200 10% 100 0 5% June 2000 June 2001 June 2002 Backlog GPM Profitability Ratio 14 • Two of the key drivers of Bovis Lend Lease’s profitability are the growth in Backlog Gross Profit Margi
Slide 15: Real Estate Solutions UK Privatisations (PFIs)
Real Estate Solutions UK Privatisations (PFIs) Construction Current Status Contract Revenue A$M length years Health Calderdale 212 Operational 33 Worcester 211 Operational 33 Hexham 68 Under construction 32 Roehampton 62 Preferred bidder 30 Havering 433 Preferred bidder 33 Manchester 743 Preferred b
Slide 16: Real Estate Solutions UK Privatisations (PFIs)
Real Estate Solutions UK Privatisations (PFIs) Project Management Design & Services Construction Financing Services Facilities Modernisation/ Management Extensions Calderdale Hospital, UK 16 • The benefit of a PFI business to Lend Lease is clear. • A large degree of the benefits flow to us from the
Slide 17: Real Estate Solutions UK Privatisations (PPPs)
Real Estate Solutions UK Privatisations (PPPs) Single Living Accommodation Modernisation (SLAM) 17 • Our focus on UK military privatisation bids is also beginning to pay off, with our recent announcement that we had achieved preferred bidder status on the UK Ministry of Defence’s SLAM project. • Thi
Slide 18: Real Estate Solutions Actus Lend Lease
Real Estate Solutions Actus Lend Lease Fort Hood, Texas 18 • In the US the Fort Hood project has now been under way for almost a year and is proceeding well. • Actus Lend Lease reached preferred bidder status for a second military housing project during the year – a joint Navy and Marine base in Sou
Slide 19: Real Estate Solutions Fort Hood
Real Estate Solutions Fort Hood Earnings in First Five Years Asset Management Fee Development Management Finance Fee 8% 8% 20% Guarantee Fee 8% Incentive Fee 8% 48% Design & Construction 19 • The US military housing projects are an important component in the RES strategy. • The slide indicates the v
Slide 20: 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 20 • Delfin, which was acquired in August last year, has been integrated into Lend Lease and produced a profit i
Slide 21: Real Estate Solutions Urban Regeneration
Real Estate Solutions Urban Regeneration Victoria Harbour, Melbourne 21 • In Australia our 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 Melbourne is progressing with the c
Slide 22: Real Estate Solutions Urban Regeneration
Real Estate Solutions Urban Regeneration Greenwich Peninsula, London 22 • We are looking to establish an Urban Communities business in the UK, with Greenwich Peninsula being the foundation project. • After winning preferred bidder status last December, we achieved a contracted status in May, which n
Slide 23: Real Estate Solutions Other Development Projects
Real Estate Solutions Other Development Projects • Solihull completed during year – Profit after tax A$24.1M • TresAguas on track to open in September 2002 – Expected sale in FY’03 • Hickson Road pre-sold to Deutsche Office Trust – Expect sale to complete on opening in December ’03 • Norwich pre-sol
Slide 24: Financials
Financials 24 • Let’s now turn to some of the financial issues affecting Lend Lease. 24
Slide 25: Capital Strength Maintained
Capital Strength Maintained June 2002 June 2001 A$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 25 • Despite the extensive investment programme of the past 2 to 3 years, Lend Lease remains in a very s
Slide 26: 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 ü Reduce capital intensity On-going Reduce cost of capital On-going 26 • Whilst our strong financial position is clear, we accept that Len
Slide 27: 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 dividends not attractive to most shareholders • No share buy-back – Preserve flexibility given global market and economic uncertain
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-REIT/J-REIT expenses in Asia in 2003 • Benefits of prior investments in platform coming through in Asia and
Slide 30: 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 30 • So, in summary, we have delivered on our forecast for 2002 despite some very challenging economic