SYDNEY-- Leighton Holdings Ltd.'s first-half net profit fell
20%, though the company signaled progress in weathering a
global-mining slowdown by sharpening focus on major construction
contracts, including airports and Asian casinos.
Australia's biggest construction company cited restructuring
costs and the absence of one-off gains from the sale of telecoms
assets that had boosted earnings a year earlier for its drop in
profit for the six months through June. On other measures, Leighton
said business was improving, with net margins strengthening and net
debt declining.
Sydney-based Leighton has been working to rebuild its balance
sheet and bolster its flagging share price after problematic
infrastructure projects in Australia led the company to report its
first annual loss in decades in 2011. Its order book increasingly
has been filled by deals to build projects from casinos in Macau to
airports in the Middle East, as contracts to move earth at mine
sites such as Australia's vast coal pits moderate.
On Monday, the company reported an underlying net
profit--stripping out one-time charges--of 319 million Australian
dollars (US$299.7 million) for the six months through June, up 25%
from the corresponding period a year earlier. Leighton said its net
margin lifted to 2.7% from 2.2% in the year earlier period and just
1% in the first half of 2012.
Management reiterated expectations the group would record an
underlying profit of A$540 million to A$620 million this calendar
year, underpinned by a strengthening pipeline of construction work
in Asia and oil-and-gas projects in Australia.
Underscoring Leighton's confidence in its outlook, the company
lifted its interim dividend 27% to 57 cents a share.
Leighton said a lift in revenue from construction work during
the half offset a decline in turnover from its mining business,
which has suffered as Australia's mining companies have closed
pits, delayed projects and laid off workers to protect profits from
falling commodity prices and a strong Australian dollar.
Construction revenue rose 5% on year to A$7.7 billion, while
contract mining revenue fell 11% to A$2.1 billion.
Australian-based Leighton is controlled by Germany's Hochtief
AG, which has been run for the past four years by Spain's
Actividades de Construccion y Servicios SA, or Grupo ACS. Earlier
this year, Hochtief increased its controlling stake in the company
to 70% and ousted Leighton's top management, including its chairman
and chief executive.
Marcelino Fernandez Verdes, Leighton's new chief executive, said
he was focused on strengthening the company's balance sheet amid a
continuing strategic review aimed at cutting debt, trimming working
capital and further bolstering profit margins. Leighton's shares
have roughly halved in value since early 2008, giving it a current
market value of A$7.51 billion.
Leighton last month announced it may sell assets--including John
Holland, a business that generates a fifth of its revenue--in a
drive to halve the group's gearing, or debt-to-equity level, to 20%
by the end of the year. Mr. Fernandez Verdes didn't provide an
update on plans to unload some parts of the group, except to say
negotiations with possible investors were in progress.
"We expect to further increase net margins as we simplify the
structure of the group," he said.
With the primary focus on repairing its balance sheet, the
company also has been chasing money it is owed for construction
work, particularly at its Habtoor Leighton Group joint venture in
the Middle East, which has previously faced substantial
write-downs.
The company said receivables rose to A$5.5 billion at June 30,
compared with A$5.0 billion six months earlier, although attributed
this in part to lengthy payment cycles on major liquefied natural
gas projects in Australia. Analysts previously have raised concerns
that a rise in overdue payments would hamper the company's cash
flow when management has been looking to bolster payouts and cut
debt.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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