Leighton: Interim result 2012

Leighton's result was in line with expectations. Debt, however, remains too high as the company was forced to borrow to fund project losses.

Leighton Holdings reported an underlying net profit after tax of $115m from $9bn of completed work for the half year ending 30 June (it has a calendar year end). While this is an improvement on the $626m loss realised in the same period last year, it highlights the industry's razor thin margins. The directors declared an unfranked interim dividend of 20 cents per share, but we'd prefer the company reduced its debt. Over the half, gearing (measured by debt to equity) increased to 48% as more debt was required to complete the loss making Airport Link Road project in Brisbane and continue work on the costly Victorian Desalination Plant. The Airport Link Road is now, thankfully, complete and the Victorian Desalination Plant will be by late 2012, but Leighton is a highly cyclical business that should have much lower debt levels.

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