Leighton rocks revenue, propels profit for Q1

Leighton Group (ASX: LEI) announced its Q1 2013 earnings today, and sales and earnings are up.

On the top line, the holding company’s sales clocked in at $5.4 billion, 5.9% above 2012’s first quarter. But Leighton’s bottom line is where the company truly shined, hoisting itself out of a Q1 2012 $80 million loss to pull $123 million in after-tax net profit.

CEO Hamish Tyrwhitt gave a nod to the company’s diversification as the primary reason for success despite tough economic times.

“This result reflects the advantages of the Group’s diverse business portfolio, benefitting from both our geographic spread and the range of sectors in which we operate. It was delivered against the backdrop of a challenging macroeconomic environment especially in contract mining and some adverse weather conditions in Queensland and Western Australia.”

Even though Leighton grew revenue this quarter compared to last year, Q1 2012 sales dropped $1.3 billion from Q4 2012. According to Tyrwhitt, this falls in line with the company’s new strategy to focus on margins over top line growth.

Leighton enjoyed closing project margin-in-hand of over 10% and a Q1 after-tax net profit of 2.3%, compared to 1.9% for fiscal 2012.

A key aspect of the company’s quarterly boost came from its telecom infrastructure asset sale. With an $885 million enterprise value, Leighton freed up significant funds while maintain sector exposure through a 30% stake in the newly arranged joint venture. This helped boost net tangible assets up 14.7% to $7.40 per share.

Looking ahead, Tyrwhitt reaffirmed Leighton’s full year after-tax net profit guidance range of $520 million to $600 million, adding:

“Throughout the remainder of the year, we will continue to rebuild our operating model and progress net margin expansion and cash flow initiatives, in order to realise further improvements in 2014 and beyond. Rebased, we will have the right platform to leverage long-term growth domestically and internationally and to deliver sustainable returns to our shareholders.”

Foolish takeaway

Leighton suffered a setback last month when an internal dispute threatened management’s ability to manage, but Leighton seems to (finally) let bygones be bygones.

Not only is Leighton delivering positive results, but it’s doing so sustainably. Growing sales are never inherently bad, but bigger margins means more bang for investors’ bucks – regardless of revenue. With volatile markets worldwide, Leighton’s geographic diversity will protect it from national economic crises, and its asset growth signals more book strength for investors’ stocks.

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The Motley Fool’s purpose is to help the world invest, better.  Click here now  for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.  Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter  @TMFJLo .

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