Lendlease Group · ASX:LLC
Lendlease — H1 FY2003 Earnings Presentation
26 slides from Lendlease's earnings presentation, February 2003
Slide 1: Half Year Results December 2002
Half Year Results December 2002 1 • Today I want to take you through some of the details behind our financial result, as well as discuss the outlook for the businesses in light of the expected economic conditions. • I also want to discuss the three areas of close focus for the management team in the
Slide 2: December 2002 Half Year Result
December 2002 Half Year Result • Operating profit after tax A$113.1M • Interim dividend 10 cents fully franked – up 11% on June 2002 • 2003 outlook unchanged – excluding US REI write-down 2 • Operating profit after tax for the six months was A$113 million. • This is a good result given the continued
Slide 3: Profit After Tax
December 2002 Half Year Result Profit After Tax A$M Dec 2002 Dec 2001 Real Estate Solutions 59.1 83.3 Real Estate Investments 85.8 86.7 Westpac - 28.2 Non Core 8.6 9.4 Group Services & Treasury 3.4 (40.8) Amortisation (43.8) (40.4) Operating Profit 113.1 126.4 Write-down of US REI businesses (482.5)
Slide 4: Real Estate Investments Profit After Tax
Real Estate Investments Profit After Tax Dec 2001 Dec 2002 100 86.7 85.8 80 22.5 21.7 2.1 60 14.1 17.7 A$M 40 48.8 50.8 20 0 -2.7 -2.5 -20 North America Australia/Pacific Asia Europe Global Management 4 • Let’s start with the REI businesses. • The Australian business had a strong result, and the US
Slide 5: Real Estate Investments Assets Under Management
Real Estate Investments Assets Under Management Dec June Growth 2002 2002 North America US$B 39.2 38.4 2.1% Australia A$B 12.5 11.8 5.9% Asia US$B 1.0 1.0 - Europe £B 2.8 2.0 40.0% Total AUM A$B 90.9 86.1 5.6% 5 • Assets Under Management globally were A$91 billion at December 2002, up 5.6% from June
Slide 6: Real Estate Investments - US
Real Estate Investments - US • Profit after tax up 4.1% to A$50.8M Dec June Growth/ 2002 2002 (Decline) US$B US$B • Assets Under Management – Equity 16.8 17.1 (1.8%) – HCI 9.3 8.6 8.1% – Commercial Credit 13.1 12.7 3.1% – Total 39.2 38.4 2.1% 6 • The US REI business produced a credible result given
Slide 7: Real Estate Investments – US Equity
Real Estate Investments – US Equity • Operating revenue down 17% • Costs down slightly • Investment income impacted by US$4.9 million loss on YCP II co-investment • Business focused on investment performance – Prime Property Fund improved performance – Lend Lease Rosen continues to exceed benchmark
Slide 8: Real Estate Investments - US Housing & Community Investing (HCI)
Real Estate Investments - US Housing & Community Investing (HCI) • Continued strong performance: – Operating revenue up 30% – Assets under management up 8% • Acquisition fees skewed to first half as usual Chatham Court, Philadelphia 8 • HCI had a strong first half. Both operating revenue and profit
Slide 9: Real Estate Investments - US Debt Businesses
Real Estate Investments - US Debt Businesses • Commercial Credit impacted US interest rates % by continued low US interest 8 rates 6 4 • Strong performance by 2 0 Holliday Fenoglio Fowler 1999 2000 2001 2002 (HFF) 9 • The Commercial Credit business had a slight reduction in its profit for the period
Slide 10: US REI Write-down
US REI Write-down Write-down after Tax US$M A$M Goodwill 113.5 199.1 Management agreements 127.5 223.7 Future income tax benefits 20.0 35.1 Other assets 14.0 24.6 Total booked at December 2002 275.0 482.5 Expected to be booked at June 2003 25.0 43.8 Total expected write-down 300.0 526.3 10 • A$482 m
Slide 11: US REI Book Value following write-down
US REI Book Value following write-down at 31 December 2002 A$M Goodwill and Management Agreements 691 Enterprise IT System 22 Mortgage Servicing Rights 58 Co-investments 228 CapMark Advances and Mortgage Loans 179 Tax Credit Properties and Developer Loans 194 King of Prussia Investment 237 Net Worki
Slide 12: Real Estate Investments - Australia
Real Estate Investments - Australia A$B Assets Under Management A$M Profit After Tax 14 20 12 10 15 8 10 6 4 5 2 0 0 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 • Continued strong performance • GPT management fee restructured to maintain market competitiveness • Continued positive outlook for
Slide 13: Real Estate Investments - Asia
Real Estate Investments - Asia • December 2002 result impacted by loss on IDDF co-investment • APIC II established • Asian Equity business earned profit in December 2002 period Financial News building, Seoul, S Korea Jointly owned by LL Global Fund/Asia Properties; renovated by Bovis Lend Lease 13 •
Slide 14: Real Estate Investments - Europe
Real Estate Investments - Europe • Total profit after tax up 3.7% to A$22.5M • Global Fund fully invested • GLL Real Estate Partners continues to build momentum • First Islamic Investment Bank relationship established • Continued strong performance of Bluewater and UK Retail Partnership • Incentive
Slide 15: Real Estate Solutions Profit After Tax
Real Estate Solutions Profit After Tax 90 83.3 80 70 34.0 59.1 60 50 A$M 40 30 49.3 59.7 20 10 0 -0.6 -10 Dec 2001 Dec 2002 Bovis Lend Lease Integrated Development 15 • At A$59.1 million for the half year, the RES result was down on the comparative period due to the timing of some development profit
Slide 16: Real Estate Solutions Bovis Lend Lease
Real Estate Solutions Bovis Lend Lease Profit After Tax A$M 120 $113M 100 $90M 80 $56M $59.7M 60 $37M 40 20 0 98/99 99/00 00/01 01/02 02/03 1st Half 2nd Half 16 • Bovis Lend Lease delivered another strong result, with a 21% increase in profit after tax for the six months. • This is a quality result
Slide 17: Real Estate Solutions Bovis Lend Lease
Real Estate Solutions Bovis Lend Lease A$M 700 33% 35% 600 30% 30% 26% 500 22% 25% 400 20% 300 $482M $485M $504M $647M 15% 200 100 10% 0 5% June 2000 June 2001 June 2002 Dec 2002 Backlog GPM Profitability Ratio 17 • The key drivers determining Bovis Lend Lease’s profitability have continued to impro
Slide 18: Real Estate Solutions Integrated Development Businesses
Real Estate Solutions Integrated Development Businesses • December 2002 loss after tax of A$0.6M compared to a profit of A$34.0M in December 2001 • Sale of North Lakes for $11M PAT • December 2002 result impacted by: – Bid costs for military housing and PFI projects After – A$10.5M after tax provisi
Slide 19: Real Estate Solutions Integrated Development Businesses
Real Estate Solutions Integrated Development Businesses • Strong PFI and military housing bid pipeline in UK • Greenwich Peninsula planning consent lodged • Other Development projects: – TresAguas expected to be sold - with profit in FY 2003 – Norwich on track for 2005 completion – Hickson Road to b
Slide 20: Immediate Focus and Action
Immediate Focus and Action • Reduce cost base • Capital management • REI review 20 • What I have found in the first two months on the job is that Lend Lease is a company which might have some strategic challenges at present, but which is unquestionably in a strong financial position. • We have the w
Slide 21: Focus on Costs
Focus on Costs • Lend Lease cost structure unsustainably large • Regional management structure introduced • Significant overhead reduction targeted 21 • A critical area of focus will be to rationalise the cost base. • We need to take some immediate actions in the context of a tough market that we ex
Slide 22: Management Structure
Management Structure • Embracing performance culture focused on earnings delivery • Focus on development of management team as well as recruitment to bolster strength • Managed regionally, with global capability 22 • I will not tolerate underperformance and, as such, I am very focused on our busines
Slide 23: Capital Strength
Capital Strength A$M Dec 2002 June 2002 Group Cash 988 904 Group Debt 939 939 Net Cash/(Debt) 49 (35) Interest Coverage Ratio 7.3X 7.6X 23 • A second focus will be on improving the efficiency of the Balance Sheet. • Whilst we must achieve a significant reduction in costs, one of Lend Lease’s great s
Slide 24: Capital Management
Capital Management Dec 2002 Dec 2001 • Pre-amortisation ROE 3.9% 4.4% • Focus on reducing capital intensity – continuing to exit non-core assets • Intention to announce on-market share buyback of up to 10% of issued shares following REI review • Share buyback a component of a broader capital managem
Slide 25: REI Review
REI Review • REI review an essential process • Review prompted by: – Weakening US economy – Intensified competition – Limitations in distribution capability – Disappointing performance by some businesses – Significant co-investment capital requirements – Investment performance • Differing outcomes f
Slide 26: Summary
Summary • Good half year result • On track to achieve FY 2003 earnings in accordance with previous guidance (excluding US REI write-down) • REI review continues, but nearing completion • Lend Lease in strong financial shape and positioned for tough economic outlook – Focus on reducing costs • Good f