Leighton hopes it can leave the bad news behind
SHARES in construction giant Leighton Holdings have had their biggest one-day gain in more than four years, in a sign its long-suffering shareholders finally believe the company may have put the worst of its troubles behind it.
Leighton reported a $450 million full-year profit on Wednesday, reversing a net loss of $285.5 million the previous year.
A string of profit downgrades over the past two years due to hefty cost blowouts on Brisbane's Airport Link and the Victorian desalination plant wiped out the contractor's profits on about 400 other projects.
Both projects have since been completed and handed over in the past six months and the chief executive, Hamish Tyrwhitt, said the company was keen to demonstrate to investors that it had resolved its legacy issues and was rebuilding for the future.
"Last year was always about Airport Link and [the Victorian desalination plant]," Mr Tyrwhitt told Fairfax Media. "It's really great that people are asking about the future."
The profit result came in at the top of the company's guidance for the year, which is now based on the calendar year to bring Leighton in line with its German majority shareholder, Hochtief, and its Spanish parent, Grupo ACS.
Leighton provided guidance of underlying net profit between $520 million and $600 million for the present year, optimistic the Chinese economy would continue to stabilise and help buttress mining activity.
Shares in Leighton rose $2.33, or 11.2 per cent, to $23.14 on Wednesday but remain well below their 2010 peak, before the write-downs.
It declared a final dividend of 60¢ per share, 50 per cent franked, payable on March 28. Taking into account the unfranked interim dividend of 20¢ per share, the dividend payout of 80¢ per share represents a payout ratio of 60 per cent of underlying profits.
In an investor and analyst briefing, Mr Tyrwhitt and the chief financial officer, Peter Gregg, reiterated it was taking on a more cautious approach and was no longer chasing "growth for growth's sake", in contrast to the heady days under the leadership of former company stalwart Wal King.
But another "legacy" issue dogging Leighton is its cash-burning joint venture in the Middle East with Al Habtoor Group.
The contractor wrote down the carrying value of its investment in Habtoor Leighton by another $82 million due to operating losses and a $20 million impairment.
Leighton's total exposure is $1.1 billion, including $298 million in carrying value and $807 million in loans.
Habtoor Leighton has had trouble collecting its debts after the downturn of the property market, particularly in Dubai. It has since refocused its growth on the more financially robust economies of oil-rich Saudi Arabia and Qatar.
"We're receiving piecemeal payments," Mr Gregg said.
Mr Tyrwhitt said the management of the group's exposure to Habtoor Leighton was a "work in progress" and it remained focused on readying the joint venture for an initial public offering by 2016.