Leighton proposes US$ 823 million capital raise

Australian contractor Leighton has announced a review of its business together with plans to raise AU$ 757 million (US$ 823 million) to recapitalise its balance sheet in the wake of project overruns and poor returns from its Middle East business.

The news comes after Leighton - a subsidiary of Germany-based Hochtief - announced in April that it expected to report a loss of AU$ 427 million (US$ 450.4 million) for the 2011 financial year, rather than the net profit of AU$ 480 million (US$ 506.3 million ) it had previously predicted.

Leighton said the revised forecast was down to losses on two major projects that have run over budget - an airport link project in Queensland and a desalination plant project in Victoria - as well as impairment on its investment in its Middle East business group, Al Habtoor Leighton Group (HLG).

Leighton said it was pushing to improve productivity on the two projects and bring them to a close as soon as possible, and while it did not mention specific action in relation to its investment in HLG, the company said it would perform a "strategic review of underperforming assets".

Leighton said it had taken a further AU$ 200 million (US$ 217 million) impairment in April on its 45% ownership investment in HLG, on top of AU$ 100 million (US$ 108 million) impairment it recorded at the end of December last year. The company also said it had received a request for a further AED 1 billion (US$ 272 million) in funding from HLG.

Nevertheless, Leighton said its outlook remained "very positive", adding that it had AU$ 46 billion (US$ 50 billion) worth of work in hand on its books and expected to report net profit of between AU$ 600 million to AU$ 650 million (US$ 651 million to US$ 706 million) for 2012.

The company said its recapitalisation would improve its gearing and support its pursuit of fresh growth opportunities. It highlighted North Africa and South Africa and the United Arab Emirates as potential new markets.