Leighton Holdings is confident of turning a $1 billion full year profit within five years after having its tail feathers “bloody well burnt” to the tune of $400 million in fiscal 2011.
Shares in Australia’s biggest construction company jumped more than eight per cent on Monday after it reiterated a net profit forecast for financial 2012 of $600 million to $650 million, broadly in line with a year earlier.
It came after the company reported a loss of $408.8 million for the 12 months to June 30, down from a $612 million profit a year earlier.
Chief executive David Stewart said it was an “extremely disappointing result” brought about by problems with the Queensland airport link and the Victorian desalination projects.
“It’s been a very tough and challenging year, but… while some issues remain, Leighton, with $46 billion of work in hand and most of our major markets booming everywhere, we see that as very positive,” he told analysts on Monday.
Leighton shares gained $1.64, or 8.26 per cent, to $21.49, while the broader market was about 2.6 per cent higher.
The company’s guidance does not include the potential impact of the sale of the HWE Mining iron ore business.
Mr Stewart said Leighton’s long-term outlook remained positive, based on its work in hand, a strong competitive position and strong economic activity in major markets.
“In the longer term, I’m focused on our aspirational goals for 2015/16 of $60 billion worth of work in hand, $30 billion worth of revenue and $1 billion of profit,” he said.
“I’m driven to lift our returns on capital to the sorts of levels we’ve had in the past.”
Aside from the airport link and desalination projects, Leighton Group’s underlying results across the core contracting business were “solid” during the year, with good performances from markets such as Asia, telecommunications and oil and gas-related construction, he said.
Revenue increased four per cent to $19.4 billion and the board decided not to offer a dividend for financial 2011.
Still, the company says growth is secondary to profitable performance as it aims to diversify its overseas operations and increase earnings by 30 per cent, up from 20 per cent.
Analysts sought assurances that cost blowouts would not reoccur, while chief financial officer Peter Gregg said the company had more than its tail feathers singed in the 2011 financial year.
“We had them bloody well burnt really bad last year,” he told analysts.
City Index analyst Peter Esho says the company’s $600 million to $650 million guidance could even be beaten with a “high degree of earnings” based on the structure of already secured contracts.
“Leighton boasts around $46.2 billion worth of work in hand, but, as this year showed, it only takes a few problem contracts to completely wipe out one year of earnings across the group,” Mr Esho said.
