Construction giant Leighton Holdings has bounced back, lifting underlying profits by 30 percent and as cost reduction strategies drove margin improvements and gains in work on LNG projects contracts helped offset declining work in mining.
In its latest announcement, the company said its underlying net profit after tax for the twelve months ended December 31 rose by 30 percent compared with the previous year to come in at $584 million, whilst its statutory net profit after tax (including significant one-off items) of $509 million was up 13 percent.
Driving the result was a surge in work on LNG projects, which largely offset a drop back in mining related work and saw revenue for the group’s construction activities (which represents two-thirds of total revenue) increase by $1.8 billion or 13 percent.
Various subsidiaries within Leighton are working on projects throughout the country including the Gorgon and Wheatstone LNG projects in Western Australia, the Ichthys project in Darwin and the APLNG and QCLNG projects in Queensland.
The group’s major projects also include rail developments both domestically and in Hong Kong and the Wynn Cotai resort development in Macau.
As well, cost savings associated with the company’s ‘stabilise, rebase and then grow’ strategy have seen profit margins on a NPAT basis expand from 1.9 percent to 2.4 percent.
Company Chief Executive Officer Hamish Tyrwhitt says Leighton had established a separate entity to manage the Group’s portfolio of equipment and was focusing on areas such as procurement, global business services and management structures to further drive efficiency – areas in which the company hopes to realise a further $260 million in savings this year.
Going forward, Tyrwhitt says little improvement in profit is expected in 2014 as negligible top line growth amid challenging market conditions offsets margin improvements from efficiency initiatives and continued higher levels of discipline in tendering practices.
He says the board expects underlying net profit after tax to fall within a range of $540 million to $620 million whilst gearing levels (currently 29 percent) will remain at between 20 and 35 percent.
“Once rebasing is complete, we will be well-placed to leverage our footprint across Asia, expanding in the region that is poised to provide the greatest share of the world’s economic growth over the next 20 years” he added.
In another development, Leighton has also announced it has secured a $453 million contract to construct tunnel buildings, systems and fitting out works associated with the Central – Wanchai Bypass tunnel in Hong Kong.
Upon its completion in 2018, the new tunnel will allow traffic travelling along the Bypass – an essential strategic East-West highway route between the Central Business District and the population centre in the Eastern part of Hong Kong Island – to avoid heavily congested existing roads along Hong Kong Island’s north shore Wanchai and Causeway Bay area.