Leighton shares jump with profit

Australia's largest construction company has reported a 39 per cent rise in annual profit.

Sam McGrath

SHARES in Leighton Holdings Ltd jumped more than five per cent after Australia's largest construction company reported a 39 per cent rise in annual profit and forecast further growth as economic conditions improve.

By 1215 AEST, Leighton shares had climbed $1.52, or 5.26 per cent, to $30.42 after the company said net profit for the year to June 30 was $611.9 million, up from $440 million in the previous year.

Revenue for the year rose two per cent to $18.6 billion.

Macquarie Equities analyst John Purtell said it was a solid result, with work in hand stronger than earlier guidance had suggested.

"It is a solid result, with stronger work in hand and a strong cash flow that provides a good platform for growth in 2011," he said.

"It is a reasonably positive outlook in a market where there has been a growing lack of confidence in fiscal 2011."

On its outlook for fiscal 2011, Leighton said it expects to deliver increased revenue and operating profit on the back of high levels of work in hand and gradually improving economic conditions in Australia and offshore.

"However, the road ahead may be rocky as governments, corporations and markets work their way through the residual effects of the global financial crisis," the company said in a statement.

The company said a reduction in federal government stimulus spending may impact the Australian construction market, primarily at the smaller end of the scale.

Private sector investment in infrastructure and resources is expected to increase as economic conditions improve, it said.

Activity in Australian commercial and industrial property construction remains weak and is likely to bottom in 2011, Leighton said.

A gradual improvement in credit market conditions and underlying demand may see commercial property recovering towards the end of 2010 but the outlook for industrial property is not expected to improve substantially until 2012.

In resources, demand for iron ore, coal, oil and gas, and gold will continue to increase, with China and India continuing solid economic growth, Leighton said.

"The company's long-term outlook remains positive due to record work in hand and continuing economic recovery in its major markets," it said.

"Based on current market projections, the group's five-year aspirational goals of $50 billion work in hand, $30 billion of revenue and $900 million of profit after tax can be achieved through internally generated funds," Leighton said.

Leighton had $41.5 billion in work in hand at June 30.

Breaking down its segmented revenue for the year, infrastructure activities raised $10.4 billion, resources accounted for $6.4 billion and property saw $1.8 billion of revenue.

All businesses and subsidiaries posted stronger results than the previous year, with the exception being Leighton Properties, which posted a $73.4 million loss.

The group's gearing reduced from 48 per cent at June 30, 2009 to 38 per cent at June 30, 2010.

Leighton declared a fully franked final dividend of 85 cents per share, up from 55 cents in 2008/09, taking the full year payout to $1.50.