Leighton releases its 2002 Annual Report

Issue Date:  30 September 2002
Issued By:  Leighton Holdings Limited

Leighton Holdings Limited today released its Annual Report for the 2001/02 financial year.

Chairman, Mr John Morschel, said the company had delivered shareholders a strong result despite tight market conditions.

Operating profit before tax was up 15% to $227 million with after tax profit up 8% to $169 million. Dividends increased 8% to 42 cents per share. This high payout ratio is expected to be maintained.

“The Group finished the year in a very strong position with work in hand of $8.4 billion and net cash of $524 million,” said Mr Morschel.

“Work won since 30 June has pushed work in hand to a record $9.3 billion at 31 August 2002. Also, employee numbers have increased by 20% over the year to 15,228.

“Leighton has strived to provide superior shareholder returns,” said Mr Morschel. “Our total shareholder return (dividends and share price movement) over the past 10 years has exceeded returns provided by the All Ordinaries Accumulation Index by more than 3 times.

“I would like to take this opportunity to thank management and staff for their outstanding contribution during the year,” he said.

“The Leighton Group prides itself on an experienced and loyal management team spread across its operations in Australia and Asia.

“Retaining key people is of paramount importance, particularly given the large work load already secured and the emerging upswing in our traditional construction markets in Australia,” said Mr Morschel.

Mr Morschel said the Group had a long running annual incentive scheme for employees and a deferred incentive scheme for executive directors and senior executives. All costs of employment including the two incentive schemes are charged against profit annually.

“In establishing remuneration packages for the senior management team, the Board’s Remuneration Committee was mindful of the importance of retaining the strong leadership team of the Chief Executive, Wal King, and his deputy and CFO, Dieter Adamsas,” said Mr Morschel.

“Since Wal was appointed CEO in 1987, profit after tax has increased by 25 times whilst revenue has increased by a factor of 4,” he said and “the number of employees has grown from 5,000 to over 15,000 in this time.

“Building the company to this new size and level of profitability has been reflected in the share price which has gone up by 12 times since 1987, taking the market capitalisation from around $100 million to some $2.9 billion. Earnings per share have also risen 10 times,” said Mr Morschel.

Disclosed in the Directors’ Statutory Report are details of the directors and senior executives emoluments. The total benefits include the fixed component or remuneration package, an annual bonus which rewards both individual and company performance, and a deferred incentive which both rewards performance and assists in retention.

The highest paid executive, Chief Executive Wal King, has received an annual remuneration package of $4.14 million which includes his salary, annual bonus and superannuation.

In addition, a deferred incentive of $4.9 million has been paid into a deferred bonus account which will only be payable on certain conditions. Mr King’s current contract which includes a performance based formula for the deferred bonus was negotiated in 1999 and expires in December 2005. His contract provides for substantially cash only remuneration rather than equity based schemes including share option or preferential share incentives used by a number of other major companies.

“Given the huge workload, the Board wanted to ensure that the very best leadership team stayed in place to guide the company through the next few years,” said Mr Morschel.

“The Group has some very major construction projects starting up in Australia and the management team will be focused on achieving good returns for shareholders from this work,” he said.

The Group remains in an excellent position going forward with a record workload and a strong balance sheet.

For further information:    
MS PENNY BINGHAM-HALL    
Executive General Manager, Corporate
Ph:  (02) 9925 6641