Leighton Holdings is raising $700 million from shareholders and the market to finance expansion here, in India and Indonesia as the company’s business order book hits a record $34 billion.
Leighton announced the issue and went into a trading halt to allow a book build to be carried on the same day as reporting a 35% jump in net profit to $607.8 million, around $6 million under some market forecasts.
The company says the money raised from the issue will also go to redeeming the company’s listed Notes, worth $200 million.
It will be be a 1 for 14 accelerated pro-rata issue that will involve around 6% of the company current market cap of just under $12 billion.
Hochtief, the German construction group, will take up its full entitlement of around 55% of the offer, or around $385 million.
The shares fell 5.3% on Wednesday ahead of the profit announcement as reports of the share issue spread in the market.
Leighton will sell shares to existing investors at $35.35 a share, or 17% less than to the Wednesday close of $42.36.
The company will concentrate on using the funds to grow its contract mining business, but the funds will also help support the growing order book, especially in India and the Middle East.
Leighton said it will use the money to invest in plant and equipment in Indonesia, Australia and India.
Indonesia is the second biggest coal exporter after Australia. India is the No. 3 iron exporter behind Brazil and Australia.
"Strong demand for global commodities, particularly iron ore and coal, continues to support contract mining activity and resources-related opportunities for the group,” the company said in the statement to the exchange.
The company said mining and resources generated 25% of Leighton’s sales in the June 30 year, behind engineering and infrastructure’s 42%.
Revenues jumped 22% to $14.5 billion in 2008, it said and the company sees 2009 sales growing at least 15% and 2010’s by at least 10%.
Leighton’s order book was $30.3 billion at June 30, compared with $21.1 billion a year earlier. It hit more than $34 billion this week with the awarding of a series of new contracts since balance date.
A fully franked final dividend of 85c a share will be paid, making the full year ordinary dividend 145c a share, up 32% from 110c a share last year.
Chief Executive, Wal King, said in a statement to the ASX that he was very pleased to report such a strong profit result which was based on the Group’s diversity, momentum and strategic initiatives.
“The Group’s result reflected good contributions from a number of large construction projects in Australia and the Gulf, another solid property development performance and the contract mining of iron ore and coal in Australia and Indonesia,” said Mr King.
“Total revenue, including joint ventures and associates, was up 22% for 2008 to $14.5bn ($11.9bn last year) with revenue from joint ventures and associates increasing by 124% to $4.2bn. The Group’s major markets generating revenue were infrastructure $8.2bn, resources $3.7bn and property $2.7bn.
“The Group’s work in hand has increased to $30.3bn as at 30 June 2008 compared with $21.1bn at 30 June 2007 and around 90% of this year’s expected revenue is already contracted. Since 30 June, the award of the $4bn Airport Link project in Brisbane and other new projects has increased work in hand to an all time high of $34.5bn.
“Major infrastructure projects awarded included the $1bn Sydney desalination project, the $625m Sugarloaf water pipeline project in Victoria, the $552m Ipswich Motorway Upgrade in Brisbane, the $490m Ballina Bypass in New South Wales, the $609m Saadiyat Island highway in Abu Dhabi and a $812m offshore pipeline project in India,” said Mr King.
New resources related contracts includes the Tarong, Sonoma and Lake Vermont coal mines in Queensland, and the Group’s first major project in India. Significant extensions were also awarded at the Yandi and Area C iron ore mines in Western Australia, the South Walker Creek coal mine in Queensland, the Challenger gold mine in South Australia and at the MSJ coal mine in Indonesia.
"Major new property related work includes a number of new projects in Qatar, Abu Dhabi and Dubai such as the new $826m Trump Tower. In Australia, new property construction work includes a $336m office tower in Brisbane and a number of defence related projects," Mr King said.
“The Group’s outlook remains strong for the 2009 financial year sustained by a record level of work in hand. This workload should be maintained at similar levels given the opportunities that are likely to emerge in the Group’s core markets over the next year.
“Infrastructure investment is forecast to stay at historically high levels fuelled by major funding commitments from the Federal and State Governments. Spending on transport and water projects in the capital cities, such as the $3bn desalination plant in Victoria, and on a number of major hospitals will provide a solid base for increased activity levels in the years ahead.
“The resources market is expected to remain strong for the Group fuelled by international demand for iron ore and coal. Export volumes are likely to continue to expand and increased work in hand, from new work awarded to the Group over the last 12 months, should see contract mining revenues continue to increase.
“Fuelled by petrodollars, the Gulf is enjoying a construction boom which should continue to offer the Habtoor Leighton Group numerous opportunities while another strong contribution is expected from Indonesia on the back of the Group&r
