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Bank of America Merrill Lynch Global Industrials Conference

December 6, 2011 2:30 p.m. ET


John Dionisio - CEO

Mike Burke - President


John Dionisio

Good afternoon everyone, and thank you for attending AECOM’s presentation. What I’ll do first is give you a high-level overview of AECOM and describe our diversified business growth strategy, which is focused along geographies, markets, as well as services. I will also try to explain how this diversified global strategy has really helped us throughout the past several years from the global recession to what we see now, the softness in some of the economies around the world.

I’ll turn it over to Mike Burke, who will go into a deeper dive in terms of diversification model, but focus in on funding sources. So let me just begin. For those of you who may not be familiar with AECOM, AECOM is a global provider of professional technical and management support services. What that means is we’re engineers, planners, architects, builders, who plan infrastructure projects, facilities, water waste, water projects, commercial buildings around the world.

To give you background on the success that we’ve had, over the past five years, we’ve doubled our revenue. We’re in 125 countries around the world. At any one time, we have about 30,000 projects and we have a staff globally of 45,000 people.

The vision of AECOM is to be the industry leader in each of our markets and geographies, providing exceptional integrated services to all our clients, and be recognized as a consultant of choice as well as the employer of choice to our staff. We are ranked number one in the United States as a top designer, and in Asia we’re also ranked number one among international designers.

Historically, we’ve maintained a conservative risk profile. We do not do self-performing construction. We do construction management, construction management of risk, and operation and maintenance.

This diversification strategy, as I mentioned, has served us well over the past several years. The model has helped us navigate through the global recession and now some of the softness we see in some of the economies like Europe and it has positioned us well for our continued growth.

This slide tells the entire story of our diversification model. It’s broken up into three pieces: our end market diversification, our services diversification, and our geographies. Our end markets - we’re primarily in five end markets: facilities, transportation, environment which is water and wastewater, power and energy, mining, and government services.

The facilities market, which is about 38% of our business, is our largest market. It includes work in sports and leisure, healthcare, education, commercial development, and we work for both public and private clients, many multinational clients around the world.

I’ll just take two examples of what we do in the facilities market and the opportunities. Sports, for instance. And this is something that I was amazed as we got into this several years ago. In any one four-year period there are about 20 major events: World Cup games, Olympic games. There’s a capital expenditure of about $20 billion a year, and of that, 10% is related to sports, 90% is related to infrastructure improvement. So we did the master planning for the London Olympics, and if you think about it, 90% of the cost for that program was in developing highways, rail, water, and wastewater.

The other market is our corporate clients. Right now we see a movement from public sector spending into private sector, and when we look at some of the world’s largest corporate clients, they have a capex of about $10 billion a year. And what we’re doing is we’re targeting the top 50 of those clients in terms of providing them services, people like GE, IBM, Microsoft.

Transportation is our second largest end market, which constitutes about 26% of our business. We do highway and bridge, transit and rail, marine, aviation. And as we see today, much of the funding coming into that market comes from dedicated funds as well as public-private partnerships. So there has been a shift from the public side into the private side.

On the environmental side, about 20% of our business, as I said, is water, wastewater, and environmental management. And our smallest piece, but growing, is our power, energy, and mining. Currently it’s about 6% of our revenue, and we’re focused on the energy and power on hydroelectric transmission distribution, solar, and wind.

Mining, however, provides a really significant growth opportunity. Mining in 2012, which is around the world, the capex is $80 billion, and the five top companies, Vale, Rio Tinto, BHP, Billiton, and Xtrada, make up $56 billion. So these are clients that we’re working for, or positioning ourselves to work for. And basically, again, about 90% of it has nothing to with the mine itself. We don’t do the drilling in the mine, but what we do is from the “pit to port,” that’s the terminology, which is the infrastructure around the mine, the port facilities, the plant facilities, utilities, and the rail.

And our last market is our government services segment, which is about 11% of our business, and in that, we work primarily for the US government. One of the major clients is the Department of Defense, but we also work for the Department of Justice, Department of State. But here we don’t do major hardware. We’re not involved in aircraft, in missiles, or vessels. What we provide is cybersecurity, intelligence, and environmental remediation.

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