Leighton: More impairments

Leighton Holdings Limited (ASX: LEI) has today announced that it has identified further deterioration in financial performance of two projects. Brisbane’s Airport Link (APL) and the Victorian Desalination Project (VDP) are expected to cost the company a further $148m and $106m before tax respectively.

The total reduction in forecast profit of $254m before tax will be reflected in the current financial year to 31 December 2012.

For the first half to 30 June 2012, the company is now forecasting underlying net profit after tax in a range of $100-$150m (that excludes impairments), and guidance for the full year to 31 December 2012, is for underlying net profit to be in a range from $400-$450m (again excluding impairments).

The company blamed wet weather in Brisbane, productivity below expectations at both sites combined with the complexity the integrated systems at the Airport Link (APL). The company has had to significantly increase the size of the workforce at APL to deliver the project.

Finish up and move on

The company now expects the Brisbane Airport Link to be completed by the middle of this year and the Victorian Desalination Plant is expected to be finished by the end of 2012.

CEO, Mr Hamish Tyrwhitt, said he was deeply disappointed with the results and completion of these two projects will allow the company to move on.

Cost blow outs and design problems have dogged the Airport Link ever since Leighton’s bid for the project. The company also announced an additional charge of $192m for the Victorian Desalination Plant back in October 2011. This comes on top of the $907m write down announced in April 2011 for these two projects and the company’s stake in Habtoor Leighton Group.

Revolving door

Leighton’s has had a tumultuous 15 months, with Hamish Tyrwhitt, appointed in August 2011, the second CEO since Wal King left at the end of 2010. Former CEO David Stewart lasted just eight months. Chairman David Mortimer also resigned from Leighton in August 2011.

Shareholders in Leighton (including myself), will be very happy to see the back of 2011 and 2012. We can only hope the company has learned something from these issues.

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Motley Fool contributor Mike King owns shares in Leighton’s. The Motley Fool ’s purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.  Click here  to be enlightened by The Motley Fool’s disclosure policy

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