Releasing its preliminary final results for 2013, the company said it achieved an underlying NPAT margin of 2.4% of revenue, up from 1.9% in the 12 months to December 31, 2012. NPAT stood at $509 million, up 13% on 2012 results.
These welcomed results come as Leighton made record revenue of $24 billion, up 6% on the last corresponding period.
“In light of the tough macroeconomic conditions, the 6% increase in revenue was a positive and reflects the resilience provided to our business through its diversification by brand, sector, geography, client, contract type and contract size,” Leighton Holdings CEO Hamish Tyrwhitt said.
The board declared a final dividend of 60c per share, 50% franked, for the second half of last year. This brings the total dividends declared for 2013 to $1.05 per share, an increase of 31% on 2012.
Work in hand was $42 billion at year-end, up 5% on June 30, 2013.
“Better tendering focus and discipline produced a higher win rate for the Group in 2013, with 27% of tenders successful, up from 19% in 2012,” Tyrwhitt said.
“New projects were subject to our tightened risk controls, progressively regenerating and de-risking the portfolio.”
Infrastructure construction work in hand rose by $2 billion and property development work by $1 billion, partially offsetting a $4 billion decline in contract mining.
The standout result was produced by Thiess, which increased its 2013 underlying profit before tax by 101% on the strength of its domestic construction and mining divisions. John Holland and Leighton Properties also improved, with each more than doubling its 2012 contributions.
Leighton Contractors was negatively affected by both headwinds in the mining sector and the completion of some difficult infrastructure projects. Leighton Asia, India and Offshore was affected by weaker performance in its offshore, mining and Indian divisions.
Focused on lowering its cost structure through its ‘stabilise, rebase, and then grow’ business development strategy, Leighton Holdings said it would work towards a sustained decrease in gearing, which stood at 29% by year end. However, while several of the top receivables were successfully settled during the year, gearing level is likely to remain elevated until the current domestic oil and gas projects are completed and final agreements negotiated.
As such, Tyrwhitt said 2014 would be a year of savings for the group, as focus is being placed on improving margins in a tough macroeconomic environment.
“In 2014, improved profitability will be driven by margin expansion initiatives, as top line growth is not anticipated amid the current tough market conditions,” he said.
“At this early stage of the year, we expect 2014 underlying NPAT to be within the range of $540 million to $620 million and gearing to be within the board-approved range of 20% to 35% at the end of FY14, subject to market conditions and/or unfavourable developments,” he said.
Savings were already made during the past year, with the group continuing with its ‘stabilise, rebase, and then grow strategy’
Focus is on rebasing operations, with initiatives taken to improve efficiency and reduce costs. In particular, the 5FT strategy – which consists on improving working capital; strategic procurement; global business services; group asset management; and management structures – generated $215 million in savings during 2013.
“A highlight during the year was the establishment of FleetCo to improve capital management of the group’s portfolio of equipment,” Tyrwhitt said.
“In the fourth quarter we transferred the first $500 million of mining fleet into the company and a further $500 million of fleet transfers are targeted for the current year.”
Progress continues on other elements of the 5FT strategy, including in the strategic procurement, global business services and management structures initiatives. The group will target an additional $260 million of savings this year across the 5FTs.
“Our priorities are to generate balance sheet improvement through better cash collection and to leverage the benefits of Leighton’s size and scale to deliver cost savings,” Tyrwhitt said.
“Doing so will improve our capacity to deliver and ensure we are positioned for the next growth cycle.
“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.”
Leighton shares jumped 6.3% to $17.44 yesterday.
