Relief might have been the best way to describe the reaction yesterday to the annual figures from Leighton Holdings, Australia’s major mining and construction contractor.
As forecast twice this year, the company slid into the red in the June 30 financial year, but like many other company, sees better times ahead.
Leighton shocked markets earlier in the year with a loss forecast after problems on its two biggest projects in Australia and write-downs in the Middle East.
So the more than 8% jump in the shares to end the day at $21.491, had all the signs of investors not believing those forecasts about the loss and the forecast improvement for the next 12 months, until they had been actually reported to the ASX.
The actual rise was $1.64, or 8.3%, a much stronger performance than the solid 2.6% jump in the overall market
Leighton confirmed its forecast at the start of the month of a net loss of $408.8 million for the year to June 30, a billion dollar turnaround from the $612 million net profit in 2010.
And, it repeated its forecast in its ASX filing yesterday that it still expects a net profit of between $600 million and $650 million for the financial year to June 30, 2012.
Analysts are expecting a net profit of $606.2 million in the year ahead, according to Reuters.
And that estimate doesn’t include an expected profit of $705 million sale of its HWE contract mining business to its biggest customer, BHP Billiton, announced last week.
Analysts later estimated the profit to Leighton from this deal could be of the order of $300 million, but offsetting that will be the future earnings on a revenue loss of around $1.1 billion a year.
As a result of the loss forecasts, directors had announced earlier this year that no final dividend would be paid (85 cents a share, fully franked last year).
A fully franked interim dividend of 60 cents a share was declared at the December half year (65 cents a share fully franked last year).
Total revenue including joint ventures and associates increased by 4% to $19.4 billion.
The revenue generating markets for the Group were infrastructure $10.7 billion; resources $7.4 billion; and property $1.3 billion.
The Group’s work in hand was $46.2 billion. New work won, including variations and extensions to existing contracts, totalled $26.0 billion.
Leighton’s shares, majority-owned by German construction group Hochtief , have dropped 34% on management concerns and fears about earnings up till last Friday. That has been trimmed to a 26% slump.
That’s still well above the 10% fall in the wider market.
Hochtief, which is now majority controlled by the cash short Spanish construction giant, ACS, reported its latest results overnight.
The Leighton’s loss saw Hochtief plunge into the red as well.
Footnote: Leighton told the ASX later that it is changing its balance date from June 30 to December 31, which means the current financial year will be very short, just six months.
That will bring it into line with both Hochtief and ACS, both of which have calendar financial years.
No forecast was made for the new, short financial year from July 1 to December 31 this year.
