Leighton facing write-downs class action
Law firm Maurice Blackburn served a legal letter notifying the construction group of its proposal to begin a class action, which has been about 18 months in the making.
"We are ready to file a class action against Leighton and confirm that we have sent a draft statement of claim to Leighton," said Rebecca Gilsenan, principal class action lawyer at Maurice Blackburn.
The claim will allege Leighton misled the market about its true financial position from at least August 16, 2010, until the disclosure on April 11, 2011.
As late as February 2011, Leighton had forecast a full-year net profit of $480 million, before stunning investors with a projected $427 million loss just two weeks later, driven by more than $1.1 billion in write-downs relating to cost blowouts on the Victorian desalination plant and Brisbane Airport Link projects.
"The 11 April 2011 announcement signalled the worst annual loss in the company's history," Ms Gilsenan said. "The participants in the claim will allege that Leighton misled the market about its true financial position."
A statement from Leighton to the stock exchange on Friday denied there was any "proper basis" for a claim and that the company would "vigorously defend" a class action.
The Australian Securities and Investments Commission launched a separate investigation following the controversial write-downs and fined the company $300,000 in March last year and told Leighton to improve its corporate governance.
But corporate governance remains a chief concern among Leighton investors, exacerbated by the mass show of dissent from then chairman Stephen Johns and four independent directors.
Mr Johns resigned as chairman, along with directors Wayne Osborn and Ian Macfarlane in protest over what they saw as interference in the board's independent operation by Leighton's German majority shareholder Hochtief (which in turn had been taken over by Spanish construction giant Grupo ACS).
Bob Humphris, who is now chairman, and Paula Dwyer, who is chairing a committee to find three new directors, also expressed concerns but decided to stay with the company.
Frequently Asked Questions about this Article…
The proposed class action relates to more than $1 billion in profit write-downs and alleges Leighton misled the market about its true financial position between at least 16 August 2010 and the disclosure on 11 April 2011. Law firm Maurice Blackburn served a legal letter notifying Leighton of its intention to begin a class action, has prepared a draft statement of claim and says it is ready to file.
The write-downs totalled more than $1.1 billion and were driven by cost blowouts on major projects, specifically the Victorian desalination plant and the Brisbane Airport Link.
According to the article, as late as February 2011 Leighton forecast a full-year net profit of $480 million, but shortly afterwards the company reported a projected $427 million loss—an announcement on 11 April 2011 that signalled the company’s worst annual loss and stunned investors.
Leighton told the stock exchange it believed there was no 'proper basis' for the claim and stated the company would 'vigorously defend' any class action.
Yes. The Australian Securities and Investments Commission launched a separate investigation into the write-downs, fined Leighton $300,000 in March of the previous year, and instructed the company to improve its corporate governance.
Corporate governance concerns were heightened by a mass show of dissent from then-chairman Stephen Johns and four independent directors. Johns, along with directors Wayne Osborn and Ian Macfarlane, resigned in protest over what they saw as interference in the board’s independent operation by majority shareholder Hochtief (which had been taken over by Grupo ACS).
Bob Humphris is now chairman, and Paula Dwyer is chairing a committee tasked with finding three new directors to fill vacancies created during the governance dispute.
Everyday investors should be aware that the combination of large write-downs, an ASIC investigation and director resignations highlights past disclosure and governance issues at Leighton. These events can create legal, reputational and financial uncertainty for the company—factors investors often consider when assessing risk.
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