Leighton Holdings has shown the first tangible signs of putting its bad year behind.
LEIGHTON Holdings has shown the first tangible signs of putting its bad year behind it after flagging stronger profits for the half-year due to an improvement in earnings from its Australian and Asian operations.
The profit upgrade gave investors some relief yesterday after a year in which Leighton endured board and management upheaval, profit downgrades, cost blowouts on projects such as Victoria's desalination plant and a fall of more than a third in its share price.
Shares in the construction giant surged more than 4 per cent to $21.44 yesterday, after it lifted guidance for underlying profit after tax by $20 million to $270 million for the six months to December 31.
Leighton has made further write-downs of $49 million after tax on its investment in BrisConnections, which is building Brisbane's Airport Link roadway, and $50 million on its joint venture in the Middle East.
The latest guidance equates to a net profit after tax of $340 million for the ''transitional'' half year. It is changing its reporting calendar to align it with German parent Hochtief, which in turn is controlled by Spanish giant Grupo ACS. Leighton's financial year will now end on December 30, rather than the end of June.
Leighton chief executive Hamish Tyrwhitt said the construction of the problem-plagued desalination plant and Airport Link projects had ''stabilised''. ''We are making good progress in bringing them to completion,'' he said yesterday.
The forecast for a net profit of $340 million for the half includes a pre-tax capital gain of $232 million from the sale of the HWE Mining iron ore business to BHP Billiton last year.
Leighton expects to open the Airport Link to traffic in June, while the desalination plant will be pumping out water by July. The company has previously booked total write-downs of more than $750 million on the desalination plant, which its subsidiary, Thiess, is building as part of a joint venture with Degremont.
Leighton also maintained yesterday its guidance for the full year of between $600 million and $650 million in underlying profit after tax. That forecast excludes the HWE sale and the latest write-downs.
A Nomura analyst, Simon Thackray, said it was positive to see Leighton taking the opportunity to deal with issues that had beset the company over the past year.
''It has cost shareholders a lot of money in the last 12 months in having to deal with these problems, but they are showing that these major projects are under control,'' he said. ''People will take more comfort in the outlook and the risk.''
Mr Thackray said he expected Leighton's cash position to be reasonably strong this year, which would allay concerns that the company would need another capital raising.
''In essence what we are lining up for in calendar year 2012 is a cleaner year where at least our known surprises have been largely dealt with.''
Frequently Asked Questions about this Article…
What is the recent Leighton Holdings profit upgrade and what numbers should investors note?
Leighton lifted its underlying profit after tax guidance by $20 million to $270 million for the six months to December 31. The company also forecasts a net profit after tax of $340 million for the 'transitional' half, which includes a pre-tax capital gain of $232 million from the sale of the HWE Mining business to BHP Billiton.
Why did Leighton Holdings' share price jump and how big was the move?
Investors reacted to the profit upgrade and signs that major project issues are stabilising. Shares surged more than 4% to $21.44 after the company lifted its earnings guidance and reported progress on problem projects.
What write-downs and project cost blowouts have affected Leighton's earnings?
Leighton took further write-downs of $49 million after tax on its investment in BrisConnections and $50 million on a Middle East joint venture. The company has previously booked more than $750 million in total write-downs on the Victoria desalination plant.
When will Leighton open the Airport Link and get the desalination plant running?
Leighton expects to open the Airport Link to traffic in June and have the desalination plant pumping water by July, according to the company's update.
How does the HWE Mining sale to BHP Billiton affect Leighton's reported profit?
The HWE Mining sale generated a pre-tax capital gain of $232 million that is included in the net profit forecast of $340 million for the transitional half. Leighton’s full-year underlying profit guidance excludes the HWE sale and the latest write-downs.
What is Leighton’s full-year guidance for underlying profit after tax?
Leighton maintained full-year guidance for underlying profit after tax in a range of $600 million to $650 million. That forecast is stated to exclude the HWE sale and the recent write-downs.
What did management and analysts say about Leighton's recovery and cash position?
CEO Hamish Tyrwhitt said the problem-plagued desalination plant and Airport Link have 'stabilised' and are making good progress toward completion. Nomura analyst Simon Thackray described the company’s actions as positive, saying Leighton appears to be dealing with past issues, that investors should take more comfort in the outlook and risk, and that cash is expected to be reasonably strong this year—reducing the likelihood of another capital raising.
Why is Leighton changing its reporting calendar and what is the new financial year end?
Leighton is aligning its reporting calendar with its German parent Hochtief (controlled by Spain's Grupo ACS). As a result, the company's financial year will now end on December 30 instead of the end of June.
Call 1300 880 160
Start a chat
Schedule a call
