Leighton Holdings, Australia’s biggest construction company, announced on Monday that its profit for the first half of the year was US$276m, a 20% fall compared with the US$343m recorded in the same period the previous year.
Despite this abrupt decline, Leighton raised its dividend 27% to 57 cents a share. This meant that Hochtief received US$126m for its 70% holding in the company. On the other hand, the firm’s share price fell 3.7% on news of the results, which will have reduced the net total that Hochtief and ACS gained from its holding.
The decision to increase the pay out to shareholders raised eyebrows in the Australian financial community. Nicholas Robison, an analyst at Morgan Stanley in Sydney, issued a note to clients that said: "Dividends have been paid from borrowings. The sustainability of reported profits is questionable, given negative operating cash flows."
Other commentators noted that the results showed that Leighton appeared to have stabilised after a difficult four years in which its share price has almost halved.
The firm has suffered from a fall in activity in the Gulf and the Australian mining sector, a corruption scandal and a great deal of management turmoil after Hochtief’s hostile takeover in 2011.Â
It now appears that a focus on major construction contracts such as airports and Asian casinos such as the Wynn Palace supercasino in Macau (pictured), together with a revival of demand in the Gulf, has improved Leighton’s longer term prospects.Â
The firm said that once one-off restructuring costs and writedowns were excluded, underlying profit rose 25% and the company reaffirmed its guidance for a full year profit of between $540m and $620m.
However, the firm is continuing to struggle to collect its debts: the sum for money owed rose from US$4.7bn to US$5.2bn.
Leighton is looking for buyers for its property and services arms, as well as its John Holland contracting subsidiary. The firm has said that it is "having discussions" with potential investors in these units, which together make up about a third of Leighton’s operations.