preliminary final report & june quarterly update - Leighton Holdings

The Company raised $758 million in equity via an
accelerated renounceable entitlement offer at an offer price
of $22.50 per share. Following the completion of the
institutional and retail offers in May 2011, 33,684,297 new
shares were issued. In addition, 2,144,000 options were
exercised during the year bringing the total number of
ordinary shares on issue to 336,515,596.
At year end, the Group had a strong capital base with
shareholder’s equity of $2.3 billion, total assets of $9.8
billion and debt and finance lease facilities on balance
sheet of $1.8 billion.
Cash remained high at $1.4 billion. Cash generated from
operating activities was $1.7 billion. Primary uses of cash
during the year were dividends of $437 million, loan
repayments totalling $207 million, shareholder loans to the
Habtoor Leighton Group (HLG) of $301 million, and plant
and equipment purchases of $1.4 billion.
Gross debt, including recourse and non-recourse loans,
stood at $1.8 billion at 30 June 2011. The average interest
rate for the year was 6.4%. The Group’s debt maturity
profile remains relatively long-term in nature with $271
million of loans falling due in the next 12 months.
In July 2010, the Group completed a US$350 million
private placement and, in December 2010, the Group’s
syndicated working capital facility was increased from $520
million to $600 million and the maturity date extended to
December 2013. In May 2011, the 5-year US$110 million
Indonesian Note was redeemed and, subsequent to year
end, a new US$113 million finance lease facility was put in
place in July 2011 to fund expansionary capex in our
Mongolia operations.
Bonds and guarantees at financial year end totalled $3.96
billion, up 12% and in line with increased levels of
construction work. Of the total, $436 million was undrawn
which provides substantial headroom.
The consolidation of Devine Limited, Hamilton Harbour and
Townsville joint ventures resulted in an increase in cash by
$23 million, debt by $255 million and total assets by $683
million.
Plant and equipment remained a significant area of
expenditure. A major focus on plant purchases and plant
utilisation by operating companies commenced during the
year and is expected to deliver results over the next 12
month period.
During the year, new plant worth $1.1 billion was
purchased with an additional $310 million for major
component parts. Depreciation for plant and equipment
was $848 million including $324 million for major
component parts.
The Group’s combined fleet is now worth approximately
$3.3 billion, with $2.1 billion owned, an additional $344
million under finance leases and $870 million under
operating leases.
Gearing, including operating leases, decreased from 38%
at 30 June 2010 to 35% at 30 June 2011.
The Group targets a gearing range between 35 and 45%,
including operating leases. This is a management target
designed to maintain a balance between the Group’s
various operations, some of which are more capital
intensive than others. From time to time the Company
expects to temporarily exceed the limits of this range. It is
important to note that this gearing target does not reflect
the overall capacity of the balance sheet or the Group’s
banking covenants, which has additional borrowing
capacity and headroom.
The Company’s credit rating from Standard & Poor’s is
BBB with the rating on credit watch with negative
implications. Moody’s has recently reaffirmed the
company’s Baa1 rating with a negative outlook.
Investments, Acquisitions and Sales
During the year, the Group announced it would undertake a
review of all listed and unlisted investments and determine
their strategic value to the Group. This review has been
substantially completed and already some asset sales
have been concluded.
The sale of 35% of Leighton India to the Welspun Group in
December 2010 realised a pre-tax one-off gain of $259
million and included US$105 million in cash. The after tax
impact was $202 million. The Group’s stakes in the Indore
and Agra toll-roads in India were sold to our joint venture
partner, Oriental Structural Engineers, for approximately
US$40 million which was in line with book value.
Thiess and John Holland sold their 3.3% stake in
ConnectEast on market in December 2010 for a profit of
$16 million.
As part of the wind down of JF Infrastructure, 50% of the
shares it held in RiverCity Motorway were transferred to
Leighton Contractors increasing its share from 8.4% to
13.7%. In February 2011, voluntary administrators were
appointed to RiverCity Motorway. Leighton Contractors
investment in RiverCity has been written down to zero.
The Group’s 45% investment in the Habtoor Leighton
Group was affected by impairments totalling $287 million,
exchange rate movements and operating losses. During
the year, the carrying value of this investment was
progressively reduced from US$973 million to US$508
million.
Thiess sold its 5% stake in Burton coal to Peabody Energy
for $35 million in June 2011 which realised a pre-tax gain
of $27 million.
Leighton increased its stake in Devine from 49.7% to
50.06% and consolidated the subsidiary at 30 June 2011.
This resulted in a one-off gain of $101 million pre-tax.
Governance
David Stewart was appointed CEO on 1 January 2011
following Wal King’s retirement from the position. In
November 2010, Stephen Sasse was appointed General
Manager Organisational Strategy. In April 2011, Deputy
CEO Bill Wild announced his retirement from the company
and in June 2011, Craig van der Laan was appointed Chief
Risk Officer and Group General Counsel. As at 30 June
2011, the Senior Executive Team comprised David
Stewart, Chief Executive Officer; Peter Gregg, Chief
Financial Officer; Craig van der Laan, Chief Risk Officer
and Group General Counsel; and Stephen Sasse, General
Manager Organisational Strategy.
Leighton Holdings Limited JUNE 2011 QUARTERLY UPDATE Page 32