Preliminary Final Report - Financial Review

December 2011 UpdateExplanatory NoteIn the 2011 Concise Annual Report, Leighton HoldingsLimited (the Company) reported its intention to change itsfinancial year end from 30 June to 31 December. Thischange was approved by ASIC and the Company isreporting a six month transitional financial year ending 31December 2011. According to current regulations, this sixmonth transitional financial year must be compared to theprevious 12 month financial year ending 30 June 2011. Thenext 12 month financial year will end on 31 December2012. In summary:• Financial Year 2010/11 was a 12 month period ending30 June 2011;• Transitional Financial Year 2011 was a six monthperiod ending 31 December 2011; and• Financial Year 2012 will be a 12 month period ending31 December 2012.To ensure meaningful data comparisons on a like for likebasis, the commentary below compares the transitionalfinancial year to 31 December 2011 to the six month halfyear to 31 December 2010 unless otherwise stated.Financial PerformanceFor the transitional financial year to 31 December 2011, theLeighton Group (comprising the Company and itscontrolled entities (“the Group”)) reported a net profit aftertax and minority interests of $340 million. This represents asignificant turnaround from the $409 million net loss aftertax and minority interests reported for the financial yearending 30 June 2011, and was a 57% improvement overthe $217 million net profit after tax and minority interestsreported for the half year to 31 December 2010.The Group’s operations generated EBITDA of $1,112million for the transitional financial year, compared with$865 million for half year to December 2010. EBIT was$566 million (versus $417 million at 31 December 2010)and profit before tax was $475 million (versus $325 millionat 31 December 2010).Total revenue for the transitional financial year to 31December 2011 was $12.2 billion, a 25% increase over thehalf year to 31 December 2010. Revenue from jointventures and associates decreased by 14% to $2 billionover the same period, primarily due to the VictorianDesalination Project moving closer towards completion.The main factors contributing to the positive result were:• Underlying profit after tax of $272 million, largelydriven by improved earnings from the Group’soperations in Australia and Asia;• An after tax gain of $167 million from the sale of HWEMining’s iron ore operation in the Pilbara, WA, to BHPBilliton Iron Ore; and• After tax impairments of $49 million for the Group’sinvestment in BrisConnections and $50 million for theGroup’s investment in Habtoor Leighton Group.• Resulting in a total profit after tax and minorities of$340 million.In addition, operating performance at the two loss makingprojects, the $4.1 billion Airport Link and the $3.5 billionVictorian Desalination Project, has stabilised.CurrencyThe value of the Australian dollar remained high relative tothe US dollar over the period. The rate used for the sixmonths to 31 December 2011 was $1.00 compared to$1.00 at 31 December 2010, and $1.07 at 30 June 2011.TaxThe Group recorded a tax expense for the year of $131million. This equates to a 27.45% effective tax rate. Whilstno tax benefit arises from the impairment of the investmentor segment loss in relation to the Habtoor Leighton Group,this is largely offset by benefits from the Group’s claimsunder the Research and Development concession. For thesix month transitional financial year to 31 December 2011,the total income tax paid was $51 million.DividendAn unfranked final dividend of 60 cents per share wasannounced by the Directors for the six month transitionalfinancial year to 31 December 2011. This compares with60 cents per share fully franked for the half year toDecember 2010.Work in HandWork in hand for the Group at 31 December 2011decreased by 2% to $44.6 billion, largely due to the sale ofthe HWE Mining iron ore business which reduced the totalby approximately $1.2 billion. This compares with $46.2billion at 30 June 2011 and $45.6 billion at 31 December2010. Australia Pacific comprised 64% of work in hand with36% in offshore markets. The depreciation of the Australiandollar positively impacted the value of work in hand at 31December 2011 by approximately $1.0 billion versus 30June 2011.During the six months to 31 December 2011, the Groupwas awarded new contracts to the value of $6.2 billion and$3.9 billion in extensions and variations. Based on currentrevenue levels, the burn rate for work in hand stands atapproximately $2.0 billion per month. The value of contractmining and services contracts beyond five years that arenot included in work in hand currently stand at $12.4 billion.In addition, contracts worth $1.7 billion have been securedsince 1 January 2012 and Leighton Group companies havepreferred tenderer status on projects worth approximately$6 billion that are highly likely to be awarded within the next6 to 12 months.The margin in the Group’s work in hand remains in excessof 10% at the project level. The pipeline for new workremains strong and the Group is currently tendering some$30 billion worth of work as at 31 January 2012.Leighton Holdings Limited DECEMBER 2011 UPDATE Page 35