LEIGHTON HOLDINGS has shown the first tangible signs of putting its annus horribilis behind it after flagging stronger profit for the half year just ended because of an improvement in earnings from its Australian and Asian operations.
The profit upgrade provided investors with 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 after-tax profit by $20 million to $270 million for the six months to the end of December.
Leighton has made further writedowns of $49 million after tax on its investment in BrisConnections, which is building Brisbane's Airport Link roadway, and of $50 million on its Al Habtoor joint venture in the Middle East.
The latest guidance translates into a net profit after tax of $340 million for the half, which will be the first it makes since changing its reporting calendar to align it with German parent Hochtief, which in turn is controlled by Spanish giant Grupo ACS. Its financial year will now end on June 30, rather than the end of December.
Leighton's chief executive, Hamish Tyrwhitt, said the construction of the problem-plagued Victorian 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 on the desalination plant of more than $750 million, which its subsidiary Theiss 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 writedowns.
Nomura analyst Simon Thackray said it was positive to see Leighton taking the opportunity to deal with issues, such as Airport Link, which had beset the company during 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.
Mr Thackray said he expected Leighton's cash position to be reasonably strong this year, helping allay concerns of another capital raising.