Carillion in the Middle East Business Overview and Strategy for Growth Business Overview May 2007
Welcome & Introductions Welcome & Introduction John McDonough Middle East team - Nick Down Regional Director, Middle East - Glenn Saunders Finance Director - Paul Woodman Regional Development Dir., AFC - Dave Skinner Regional Manager, Carillion Alawi - Pat Sweeney Managing Director, Emrill
Dubai itinerary Wednesday 2 May 09.30 Presentation Carillion in the Middle East 10.30 Site Visit: Dubai Festival City 13.00 Lunch including HSBC presentation 15.00 Al Futtaim Presentation 16.00 Return to hotel 19:00 Depart hotel for dinner
Dubai itinerary Thursday 3 May 09.00 Collect from hotel 09.30 Site visit: Union Properties Motor City Development 10.30 Site visit: Emrill Operations (Dubai Marina & Burj Dubai Developments) 12:00 Lunch 13:30 Depart Airport (for those returning to UK) 15:20 Depart Airport (for those traveling to Oman)
Oman itinerary Friday 4 May 09.00 Collect from hotel and drive to Barr Al Jissah Hotel complex, via other Carillion projects 10.00 Tour of BAJ resort followed by presentation on projects and prospects in Oman 11.30 Depart Barr Al Jissah 12.00 Lunch 13.30 Close
Middle East 274m (8%) Carillion plc Canada and Caribbean 163m (5%) UK 3,157m (87%) Total 2006 Group revenue 3,594m Middle East has delivered strong growth High quality partners, good margins, strong cash position Outlook is for major further growth
Nick Down Regional Director Middle East
Safety Message Don t Walk By th!nk Safe don t walk by th!nk Safe Target Zero
Three business units: Carillion Middle East Dubai; Abu Dhabi; Egypt (under formation) Oman
Markets Markets
Al-Futtaim Carillion Construction business established in UAE over 35 years ago Ownership 51% Al-Futtaim, 49% Carillion Carillion has full management responsibility Total revenue in 2006 462m Carillion share 226m Over 16,000 employees, 8 major languages Reputation as one of the region s leading quality contractors Market leader in Health & Safety and Sustainability
Emrill FM and Services established 2002 as 50:50 JV with Emaar Since December 2006 JV comprises Carillion, Emaar and Al- Futtaim, each 33% Total revenue in 2006 12m and growing strongly Preferred supplier to Emaar and Al-Futtaim 1,600 employees Provides wide range of services to over 3.2m sqm of builtup area, 200km of roads and 25m sqm of other infrastructure
Carillion Alawi Construction business established in Oman in 1965 Carillion 49% Alawi Enterprises 51%, but treated as a subsidiary with 100% consolidation Total revenue in 2006 42m 4,000 employees Reputation as Oman s leading quality contractor Portfolio of high profile projects for key clients in public and private sectors
Al-Futtaim Our Partners One of the foremost trading houses in the Middle East Array of businesses including UAE exclusive dealerships for Toyota, Honda, Volvo, Lexus and Chrysler Jeep Increasingly a major property developer in the region Emaar One of the world s largest property developers Key construction client for Al-Futtaim Carillion Alawi Enterprises Prominent group in Oman with a variety of interests Provide local support but no management influence
What we do in the Middle East Facilities Management 3% Infrastructure (Development related) 27% 70% Building Aligned with Carillion strategy and business model Selectivity work/risks we understand and can deliver Focus on long-term strategic relationships with key clients
And What We Don t Do... Major civil engineering projects Projects with process risk attached Work for customers that our local partner has not endorsed Agree to unacceptable commercial conditions
Key Clients
Festival City, Dubai Project Value multi billion Mixed-use scheme covering 1600 acres adjacent to Dubai Creek 2.5m sqft retail & entertainment space 4 hotels, conference facilities and 12 office buildings Business parks and automotive showrooms 19,000 residential units and 14 apartment blocks 18-hole championship golf course Harbour Plaza
Marsa Plaza 100m
Festival Centre 350m
Hotels & Office Building 240m
Four Seasons 150m W-Hotel 80m
Grand Mosque, Oman Built by Carillion for the Diwan of the Royal Court One of most remarkable and revered places in the Sultanate Main prayer hall dome is at a height of 45m, main minaret reaches up to 92m Built to exacting standards with imported stone cladding, marble and other high quality finishing Extensive external landscaping
Shangri-La Barr Al Jissah Resort & Spa Exclusive Shangri-La resort complex located 12km south of Muscat 100m project for Zubair Consists of three 5* hotels with a total of 680 luxurious rooms Set in 124 acres of spectacular scenery between the mountains and the sea At the start of the project the site was only accessible by sea Phase 1 opened in December 2005
Sustainability Employee welfare Working in the Community Health & Safety Employee Relations Strategy Labour Charter Supplier Charter
Strong margins Business established 35 years understand the market Partnering with key suppliers and subcontractors Focus on high quality projects Investment in people and process Innovation in project procurement ZERO DEFECTS
Strong growth at good margins 2006 Alawi 20m 2002 Alawi 42m Emrill 12m AFC 462m AFC 69m Total JV revenue c 90m PBT Margin c5% Total JV revenue c 516m PBT Margin c6%
Cash, dividends and tax Business operates with negative working capital Strong cash position Dividends now six monthly instead of annually Corporation tax rate zero in UAE - tax paid on dividends in UK Corporation tax rate in Oman 12%
The Potential for Future Growth...
Market Outlook Regional construction boom set to continue with oil revenues predicted to remain at historically high levels Economic and political reform continuing, private sector participation being encouraged Al-Futtaim spreading its development wings Emrill partners seeking geographic expansion Expect to at least maintain current levels of activity in Dubai for next 3-5 years Most prolific growth over medium term expected from Abu Dhabi Oman also looking very positive Major opportunities in Egypt and Morocco
The Al-Futtaim Factor Al-Futtaim growing its development business throughout Gulf and North Africa. US$2 billion bond with JP Morgan. Given Al-Futtaim s regional aspirations and the strength of our relationship, a major strategic opportunity has been captured Region-wide relationship with Al-Futtaim for its future developments Significant negotiated workload for AFC and Emrill Tailored role to suit project requirements, local market conditions and risk profile
Key Growth Areas Key areas for growth and diversification are therefore: Geographic expansion into new territories with our partner e.g. Abu Dhabi and Egypt particularly by Broadening of our strategic alliance with the Al Futtaim Group
Abu Dhabi Phenomenal wealth - controls 95% of UAE s oil wealth Proximity to Dubai provides a logistical advantage Major building and infrastructure projects being released Focus areas are real estate, education, healthcare, tourism, industrial and transportation infrastructure More sophisticated and contractor-friendly procurement routes being adopted Key private sector clients identified and relationships being developed
Target Clients Strategic alliances are being developed with
Potential Scale of Activities in Abu Dhabi Client Building Infra- Services structure TDIC Al Futtaim Aldar Dubai/Mubadala
Saadiyat Island
Al-Futtaim Prospects Developments at the design and planning stage include: Reem Island, Abu Dhabi - 2.5m sqm mixed use scheme worth circa 2bn New Cairo City, Egypt - Mixed-use development valued at around 1bn Madinat Unfa, Morocco - 3.5m sqm mixed-use development worth 3bn Opportunities being researched in other Middle East/North Africa countries
Future growth 5 to 10 years Construction Dubai at least maintain current high volumes, with potential for modest growth Oman major growth potential Abu Dhabi major growth potential from 2007 North Africa major growth potential from 2008 Support Services Major growth potential - development related
Sustainable future growth Opportunities to more than double total JV revenue over next 5 years to over 1bn Potential for support services to grow to over 10% of total revenue Carillion s share of total JV revenue growing to c. 550m over next 5 years Expect to maintain current margins Outlook positive for next 10 years
Managing the Risks Alignment with key clients Strict project selectivity criteria - work we understand and can deliver - acceptable contractual terms - manageable project risks - self-financing / positive cash The right resources throughout the process Carillion s robust policies/procedures rigorously applied
Summary Proven ability to deliver substantial sustainable profitable growth Major opportunities for further growth Developing the Al Futtaim and Carillion relationship through a region-wide alliance Focused approach to ensure balanced portfolio of work/geographic spread with low-risk profile Selectivity - resources and effective risk management remain key to success Strong margins and cash management
John McDonough Questions & Answers