Construction giant Leighton Holdings yesterday reported a 39% rise in annual profit and higher dividend, as it attempted to convince the market that it was over any problems it the Middle East.
Leighton said net profit for the year to June 30 was $611.9 million, up from $440 million in the previous year.
The company had told the market on May 17 that it was expected to earn "in excess of $600 million" profit for the year.
The day before, the company’s share price finished trading at $34.64; on May 17 the shares fell sharply after the guidance was issued, to close at $32.16.
Yesterday, Leighton shares rose $1.70, or 5.8%, to $30.60, so they are still well behind where they were when the guidance and $600 million profit forecast was issued.
That leaves Leighton shares still down just on 20% so far this year, hardly a star performer, for all the optimism of the board and CEO, Wal King.
Leighton declared a fully franked final dividend of 85c per share, up from 55c in 2008-09, taking the full year payout to a record $1.50 a share.
The company said group revenue in the year to June was $18.6 billion, up 2% on the 2009 financial year.
Leighton reached a new record level of work in hand of $41.5 billion, which was at the high end of its May guidance range of $40 billion to $42 billion.
New work won, including variations and extensions to existing contracts, totalled $23.5 billion.
An $825 million road contract in the NSW Hunter Valley was also announced separately by the company’s Thiess subsidiary.
"The results of Group operating companies Thiess, Leighton Contractors, John Holland and Leighton Asia were higher compared to the prior year. Leighton International, excluding the reduced contribution from the operations in the Middle East, also had an improved result compared to the prior year," the company said in commentary yesterday.
"Leighton Properties however, continued to be affected by the weak property market and recorded a loss for the year," the company said in the statement to the ASX.
Leighton opted out of giving any firm earnings guidance, saying the long-term outlook was positive and it expects to deliver an increased revenue and operating profit.
"The group expects to deliver increased revenue and operating profit on the back of high levels of work in hand and gradually improving economic conditions in Australia and offshore," Leighton said on its outlook for fiscal 2011.
"However, the road ahead may be rocky as governments, corporations and markets work their way through the residual effects of the global financial crisis."
The company said a reduction in federal government stimulus spending may impact the Australian construction market, primarily at the smaller end of the scale. Private sector investment in infrastructure and resources is expected to increase as economic conditions improve, it said.
Activity in Australian commercial and industrial property construction remains weak and is likely to bottom in 2011, Leighton said.
A gradual improvement in credit market conditions and underlying demand may see commercial property recovering towards the end of 2010, but the outlook for industrial property is not expected to improve substantially until 2012.
Leighton said that it saw demand for iron ore, coal, oil and gas, and gold will be increasing, with China and India continuing solid economic growth.
Profit before tax of $843 million was up 44% on the previous year (which was impacted by investment impairments).
"A solid contribution from Australia was driven by transport infrastructure, the contract mining of coal and iron ore, telecommunications and operation and maintenance. This helped offset a poor year in property markets," Leighton said in its results.
"Offshore markets, with the exception of the Middle East, made increased contributions to the result.
"During the year, the Australian dollar rose against the US dollar.
"The average rate used at 30 June 2009 was 0.81 cents compared with 0.85 cents at 30 June 2010.
"On an equivalent exchange rate basis for the full year comparison, profit after tax and minority interests and total revenue would have been higher at $15 million and $300 million respectively.
In contrast, Lend Lease, the country’s largest property developer, had a more cautious tale to tell.
Looking at the Leighton result and outlook, it’s clear that Leighton doesn’t see much in the way of growth in the commercial property sector for a year or two.
Lend Lease was also cautious, forecasting, as Leighton did, a further slide in the local construction sector into 2011.
Despite that, the shares rose 3c to $7.12, a more subdued reaction than that accorded to Leighton.
Lend Lease shares actually hit a 52 week intra-day low last Friday of $6.97, before bouncing.
The shares are down 27% so far in 2010, so they have underperformed Leighton and the market considerably.
Obviously Lend Lease doesn’t have the non-construction earnings areas that Leighton has, so the 2010 result was of necessity, more subdued.
Lend Lease sa
