Leighton reiterates need to cut costs, change structure

In his first shareholder address, new Leighton Holdings’ CEO Marcelino Fernandez Verdes said cutting costs and accelerating change at the company was a top priority.

At the company’s annual general meeting held in Sydney on Monday, Verdes reiterated that a complete review of Leighton’s operating model was being undertaken.

The shake-up comes as Hochtief, which Verdes also heads, increased its stake in Leighton to almost 70 per cent and overhauled the board of directors.

Soon after, a general review of Leighton and its business arms Leighton Contractors, Thiess, John Holland, Leighton Asia, India and Offshore and Leighton Properties was announced.

Verdes said there were opportunities to accelerate the pace of change at Leighton, with efforts to centre around cutting costs, recovering outstanding monies, and strengthening the balance sheet.

“This review is about simplifying the company’s operations,” he said.

The company has previously said the review could lead to a change in ''the number and functions of employees'' as divestments of assets and businesses are looked in to.

"What we want to do is simplify and streamline the business, ensuring that we have the most appropriate and efficient structure in place to deliver our services to our clients,” Verdes said.

Any changes as a result of the review are expected to be implemented this year.

Verdes said Leighton is still expecting to make an underlying profit of between $540 million and $620 million in its 2014/15 fiscal year.

The company saw a 24 per cent increase in net profit to $152 million for the three months to December.

Revenue rose seven per cent to $5.7 billion, however work in hand fell three per cent to $40.9 billion.

The company said it secured $4.4 billion in new work during the quarter.

Verdes said demand from Asian markets would underpin growth opportunities for the company.

“The urbanisation and industrialisation of Asia will continue to underpin demand for resources and energy,” he said.

“Production and export volumes of iron ore and coal are now growing steadily. With our buying power and scale, we have a contract mining value proposition that is hard to match.”

Chairman of the company for the last nine years, Robert Humphries indicated his intention to retire.

Australian Shareholders Association spokesman Stephen Mayne told the AGM there were concerns over payouts to departing executives, with outgoing chief amish Tyrwhitt and chief financial officer Peter Gregg set to divvy up $23 million in termination payouts.

There were also questions raised about wages paid to executives, including Verde, who serves on both Leighton and Hochtief boards.

Image: SMH

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