Construction Week reported that Al Habtoor Leighton has been cited as a key reason for Leighton Holding to raise AUD 757 million from shareholders and inject AED 1 billion into the UAE venture as the Australian company confirms a loss of around AUD 427 million this year.
The St Leonards, New South Wales based contracting giant said that the JV with Al Habtoor in the UAE added to the falling profits expected from key infrastructure projects in its home country, leading to expectations that earnings will be AUD 907 million below the previous forecast of USD 80 million after tax.
Mr David Stewart CEO of Al Habtoor said that “We are acting decisively to deal with write backs on these two problem projects and with the investment in the Middle East. While it is very frustrating to have to deal with the financial consequences, it does now leave Leighton well positioned to return to more normalized growth and earnings in 2011 to 2012 and beyond.”
He said that normally we would not review the carrying value of HLG until June but due to deteriorating cash flow from legacy projects and the requirement for the injection of AED 1 billion in additional shareholder loans we believe it prudent to review the carrying value of HLG. Conditions for our business in the Middle East are still proving to be volatile recovery of receivables has not improved and the winning of new projects remains slow.
Mr Stewart said that we believe there are no systemic issues in the business, but a rigorous review is being undertaken to investigate the cause of poor project performance. While some new work has been awarded recently, including JV to build the USD 585 million Al Mafraq Hospital in Abu Dhabi and the USD 105 million Abu Dhabi Islamic Bank’s new headquarters in Abu Dhabi, other opportunities remain slow to come through.
He said that we have revised down our estimates of the contribution to be booked from the HLG business for the remainder of the year due to provisioning, including receivables. Leighton’s equity accounted share of this expense is worth USD 120 million. However, the additional provisioning and shareholder funding required in the current year impacts the carrying value of the asset.
Mr Stewart said that we have written down the book value of investment in HLG by a further USD 200 million reflecting our revised expectation of future earnings from that business. This combination of the provisioning and increased impairment results in a revised book value for HLG of USD 525 million.
He said that we have been waiting] for more than a year and a half. This is not just money that’s owed from UAE companies it’s the whole of the GCC for Habtoor Leighton.
(Sourced from www.constructionweekonline.com)
