“This is the Asian Century, with growth forecast for the foreseeable future from economic development and urbanisation,” company chief executive Hamish Tyrwhitt told shareholders at the company’s annual general meeting in Sydney. “What this means for Leighton is that once we’ve dealt with the immediate issues and reshaped the way we do business and manage risk, we will have before us a unique set of opportunities.”
Leighton’s focus on the future comes as problems associated with cost overruns and delays continue to impact operating performance. In the March quarter, the company recorded an $80 million loss after tax and minorities following significant write-downs on the Brisbane Airport Link project and the Victoria Desalination Plant project.
These write-downs came on top of earlier massive write-downs on these projects and the group’s Middle Eastern operations which turned a $615 million after-tax profit in 2009/10 to a $407 million loss the following year.
Company chairman Stephen Jones acknowledges shareholder frustration about the write-downs, but says the company is changing the way the group manages risk on large projects.
“These changes are transformational and fundamental to our company’s future and the board is confident that Hamish and his team will deliver them for the benefit of all shareholders,” he says.
Tyrwhitt says the group is redesigning its operations with a focus around restructuring its operating model, strengthening its balance sheet, and delivering net margin improvement.
He says that, along with improvements to capital allocation, management’s focus going forward will revolve around better risk management early in projects, refocusing on core competencies and markets and using the group’s buying power to drive cost savings.
“We will not chase growth at the expense of sustainable returns, particularly where this growth is accompanied by a heightened risk profile,” Tyrwhitt says.
Tyrwhitt says the company is moving ahead with its strategy of recycling capital. He cites as an example the sale of the Thiess Waste business, on which he says a number of interested parties are currently in the process of doing their due diligence on the business.