Construction giant Leighton Holdings has announced a significant increase in underlying profit for the first half of 2014, albeit with the group recording a fall in headline profit as the previous comparative period was artificially inflated by gains on asset sales.
Announcing its results on Monday for the six months to June 30, Leighton said its earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $843 million whilst its net profit after tax was $291 million – down from $943 million and $366 million in first half of 2013 respectively.
Such comparisons, however, are misleading as the 2013 first half result was artificially inflated by a one-off gain from the sale of the Group’s Telco assets, whilst the latest results were impacted by $28 million in property write-downs and restructuring costs.
Stripping out these effects, comparative EBITDA rose two percent and underlying profit after tax rose from $255 million to $319 million.
Revenue increased by three percent on the back of five percent growth in construction revenue.
The Group also secured $7.8 billion in new contracts during the period, with major wins including the Passenger Clearance Building through which passengers entering and leaving Hong Kong SAR via the Hong Kong-Zhuhai-Macao Bridge will clear customs and immigration (part of consortium) and the New Orbital Highway project in Qatar.
A number of Leighton subsidiaries were also part of the consortium which has been chosen as the preferred bidder to operate the North West Rail Link in Sydney.
However, gearing levels (36.5 percent) remain above the Group’s end-of-year target of between 25 percent and 35 percent.
Leighton Chief Executive Officer Marcelino Fernández welcomed the result, saying further increases in margins were expected as the Group’s structure was simplified.
He says long term opportunities for the company should not be understated.
“Some $125 billion in new infrastructure project spending is expected by the end of the decade in Australia, including Federal Government commitments and the private and state investment that is expected to follow,” Fernández said.
“Similarly, in our markets in Asia and the Middle East, governments continue spending on infrastructure. This expenditure will be underpinned by the emergence of new, more attractive PPP models, in which we will seek to take on roles as an equity participant, contractor and asset manager.”
Leighton will pay an interim dividend of 57 cents per share (25 percent franked), up from 45 cents (50 percent franked) last year.
The Group reiterated full year guidance for underlying profit after tax of between $540 million and $620 million.