Australia’s largest construction firm, Leighton Holdings has posted yet another record profit result with strong earnings from the construction activity underpinning a 28% increase in net profit after tax to $276 million for the year ending June 30, 2006.
Yesterday, Leighton’s chief Executive Wal King AO said the major contributors to the group’s results have been construction activity for a number of large Australian infrastructure projects, contract mining in Australia and Asia, and another strong property development performance.
Yesterday, King also took a swipe at the Victorian State Government, who earlier this month in a bid to avoid further publicity over the Public-Private-Partnership before the November election, cost Victorian taxpayers $33 million to settle a contractual dispute with Leighton.
King said the Spencer Street project was well and truly behind the company and will not impact Leighton any further in the future.
“It was an experience we didn’t need,” he added.
On a positive note, in the year to June 30, 2006, Leighton’s total operating revenue, including joint ventures, was up 32% to $10.0 billion compared to $7.7 billion last year, whilst revenue from joint ventures increased by 13% to $1.5 billion.
The group’s principal revenue sources were engineering and infrastructure $4.2 billion, mining and resources $2.6 billion, building and property development $1.8 billion and operations & maintenance $1.4 billion.
King said the group now has a record $16 billion of work in hand, boosted by the HWE acquisition, and the award of a number of large infrastructure and contract mining projects. The group also has strong prospects for an additional $3 billion worth of major projects, which King expects will be awarded by the end of December 2006.
“The outlook for the group remains very positive, driven by a record level of work, an extended construction and resources upswing in Australia, greater geographic diversity in Asia, and our very strong balance sheet,” he added.
Meanwhile, operating revenue from Leighton’s building and property development division have fallen 9% from $2 billion last year to $1.82 billion. In Australia and Asia Pacific, the division contributed 16% less revenue this year at $1.53 billion compared to $1.83 billion last year.
Leighton’s property development revenue increased from $274.8 million to $365.3 million.
The building and property development division work in hand was down by 9% to $1.0 billion, which King said was due to the group remaining selective in pursuing building work.
King said building and property activity levels should remain similar to last year, driven in part by Leighton Properties’ property portfolio, which is now its best ever in terms of quality and size.
“The portfolio underwrites property development activities for the next few years and should continue to generate good levels of construction work for the Group.
“An increased contribution is expected from the Asian operations, based primarily on a number of large infrastructure and building projects in Hong Kong, construction of casinos in Macau, coal mining in Indonesia, and new work in the emerging markets of India and the Gulf Region,” King said.
He added the group is also in the final round of negotiations to manage the construction of PBL/Melco’s City of Dreams project in Macau, expected to be worth more than $US 1 billion.
“PBL/Melco’s decision should be finalised in the next week.
“India’s economy is growing extremely strongly and the Group is targeting tollroad, industrial building, contract mining and resources related infrastructure opportunities. The oil induced boom in the Gulf States is fuelling substantial investment in property and infrastructure, which should also provide a number of selected opportunities,” he added.
King said the group has a record level of work in hand and the prospect of maintaining work at similar levels given the construction and resources opportunities still emerging in Australia, and the broad range of prospects in Asia.
“This workload is expected to translate into revenue of more than $11 billion in 2006/07 and the directors are confident of reporting a strong profit increase for the year,” he added.
Currently, Leighton’s balance sheet remains very strong with total assets of $3.8 billion, net assets of $1.1 billion and cash net of borrowings of $618 million
Over the 12 months, the return on shareholders’ funds averaged 27.7% for the year compared to 24.8% last year.
In the year ahead, Leighton expects to increase its profit by at least 15%.
Leighton has declared a final dividend of 41 cents per share, franked to 50%. The directors will also bring the full year ordinary dividend to a total of 66 cents per share up 32% from 50 cents per share last year.
Leighton shares closed 54 cents higher at $17.95.
By Adam Parsons
