Having been through a torrid experience over recent years, Australian building and construction giant Leighton Holdings has bounced back, achieving a full year return to profit at the upper end of guidance and significantly reducing its debt load.
On Wednesday, the company announced Net Profit After Tax (NPAT) of $450 million and underlying net profit after tax (UNPAT) of $448 million for the full year in calendar 2012.
The result was at the upper end of previous guidance (NPAT: $400-$450 million), albeit with that guidance having been revised downward from $600-$650 million as a result of further write-downs in March on the Airport Link project in Brisbane and the Victoria Desalination Plant project.
The company also said it has reduced its debt burden, with gearing ratio’s falling from 46 percent to 35 percent between June and December as a result of strong cash flow and capital management initiatives including the sale of the non-core Thiess Waste Management business.
During the year, Leighton also completed two troubled projects, Brisbane’s Airport Link and Victoria Desalination Plant, both of which had caused substantial problems regarding cost blowouts and asset write-downs and the completion of which removes significant weight of the shoulders of company management.
Still, the company continues to experience challenges.
It’s exposure to the troubled Habtoor Leighton Group remains a ‘work in progress’, and the company is hoping to offload this exposure through an initial public offering in 2016.
And whilst the Airport Link project may be finished, the project continues to cause problems for the company as traffic volumes have come in lower than expected, impacting the company’s deferred equity stake in tunnel operator BrisConnections.
That’s not to mention revelations late last year that a Brisbane based manager had funnelled $20.7 million worth of funds from the company to a dummy consultancy over a twelve year period – activity only discovered by accident during a cost management review.
Despite this, Leighton Chief Executive Officer Hamish Tyrwhitt says the results are pleasing.
“This result reflects the strength and diversity of our underlying business” Tyrwhitt says.
“It was delivered in a year when we completed APL and VDP, consolidated our balance sheet, and made progress on stabilising and rebasing the business.
“Looking at 2013, we will continue to reshape our operations, leading to net margin expansion and lower gearing, while managing our exposure to the Habtoor Leighton Group (HLG) and continuing to work proactively to create value for all our shareholders.”
Going forward, the company says it anticipates higher profit levels of $520-$600 UNPAT this year, followed by a completion of the ‘stabilise and rebase’ phases of company strategy in 2014 and a movement back into the ‘growth’ phase.