Leighton class action

Leighton class action
Shareholders of Leighton Holdings Limited (Leighton) are proposing to commence a class action to recover losses suffered as a result of alleged non-disclosure and misleading or deceptive conduct by Leighton during the period 16 August 2010 and 11 April 2011.
Background
On Monday 11 April 2011, Leighton announced a projected $427 million full year loss for the 2011 financial year (FY11) driven by more than $1.1 billion in write-downs relating to the Brisbane Airport Link project (BAL Project), the Victorian Desalination Plant project (VDP Project) and a Dubai based joint venture, the Al Habtoor Leighton Group (AHL Group).  The 11 April 2011 announcement signalled the worst annual loss in the company's history.  Only two months earlier, on 14 February 2011, Leighton had forecast a FY11 full year net profit after tax (NPAT) of $480 million.  Therefore, the result announced on 11 April 2011 was $907 million less than what was forecast two months earlier.  On the first trading day after the 11 April 2011 profit write-down Leighton's share price fell by about 13.9%.
Leighton share price - August 2010 to May 2011
ASIC Investigation
The Australian Securities and Investment Commission (ASIC) investigated the 11 April 2011 profit write-down and in March 2012 ASIC fined Leighton a record amount of $300,000 in relation to alleged disclosure breaches during the period 18 March 2011 to 11 April 2011. Leighton was also required to provide an enforceable undertaking regarding steps the company would take to improve corporate governance policies and procedures.
Proposed Class Action
Maurice Blackburn is preparing to commence a class action against Leighton on behalf of shareholders who purchased shares between 16 August 2010 and 11 April 2011.
Leighton was forecasting FY11 NPAT of in excess of $610 million by 16 August 2010.  It will be claimed that by at least 16 August 2010, Leighton knew that there were substantial cost increases on the BAL project and a likely impairment loss in respect of the AHL Group which would substantially reduce Leighton's forecasted FY11 NPAT.  It will also be claimed that by at least 18 March 2011 Leighton knew that substantial cost increases on the VDP Project would also have a substantial impact on Leighton's FY11 NPAT.
BAL Project and VDP Project claims
The design and construction contracts for the $4.1 billion BAL Project and the $3.48 billion VDP Project were both fixed-price, fixed-term contracts for large infrastructure projects in which Leighton entities bore substantial risks of cost blow-outs and project delay.  These two projects are reportedly amongst the worst loss making or under-performing fixed-price construction contracts in Australian corporate history.  By March 2012, Leighton's cumulative profit write-down on the BAL Project and VDP Project was $1.965 billion.  In May 2012 Leighton's Chief Executive Officer, Hamish Tyrwhitt, said (in the context of the poor outcome on these projects) that Leighton had 'sacrificed discipline for growth'.
The proposed class action will allege that Leighton's poor tendering and corporate governance procedures resulted in Leighton vastly underestimating the complexity and cost for these two projects.  It will be alleged that Leighton's knew about material issues in relation to the BAL Project from as early as April 2009.  While Leighton disclosed some deterioration in the BAL Project on 2 November 2010, the market was not informed that there were any substantial issues on either the BAL Project or the VDP Project until 11 April 2011 when Leighton disclosed that these two projects were being written down by over $1 billion (BAL Project by $837million and the VDP Project by $282 million).
Al Habtoor Leighton Group claim
In 2007 Leighton acquired a 45% interest in the AHL Group, a construction contractor based in Dubai.  By 16 August 2010 Leighton's interest in the AHL Group was valued at $1.4 billion.  After the global financial crisis, commercial property values and construction activity levels declined substantially in Dubai.  By 16 January 2011 AHL Group was owed more than $1 billion in respect of work that had been performed.
Throughout 2010 Leighton stated the AHL Group investment was not impaired.  On 2 November 2010 Leighton stated the AHL Group was 'even producing a small profit'.  Throughout 2010 Leighton failed to disclose that it was providing substantial interest free loans to AHL Group.  By 30 June 2010 Leighton had provided $39 million in interest free loans to AHL Group which had increased to $183 million by 14 February 2011.
On 14 February 2011 Leighton announced a $100 million impairment to the carrying value of AHL Group and made an adjustment to the forecast FY11 NPAT of $510 million down to $480 million.  However, it was not until 11 April 2011 that Leighton finally announced that AHL Group would have a negative pre-tax impact of $320 million on Leighton's forecast profit, which together with the BAL Project and VDP Project write-downs were substantially responsible for the $1.1 billion pre-tax profit write-down on 11 April 2011.  The claim will allege Leighton knew from at least 16 August 2011 that AHL Group would have a significant adverse impact on Leighton's FY11 profits.
FY11 Profit Forecasts
The class action will allege that Leighton had no reasonable basis for the FY11 NPAT forecasts of in excess of $612 million (made between 16 August 2010 and 1 November 2010) of $510 million (made between 2 November 2010 and 13 February 2011) or of $480 million (made between 14 February 2011 and 11 April 2011) because of;  the company's poor tendering systems and processes, the significant issues in the BAL Project and VDP Project and because it was likely that the AHL Group investment would be substantially impaired.
How to register
If you are interested in registering to participate in the Leighton class action, fill in the Leighton class action contact form or contact a member of the Leighton Class Action team via leightonclassaction@mauriceblackburn.com.au or on (02) 9261 1488.
Our investigations reveal that if you purchased shares in Leighton between 16 August 2010 and 11 April 2011, you may be able to recover losses suffered as a result of the conduct of Leighton.
Registration is free and without obligation.  You are not retaining Maurice Blackburn as your lawyer by registering.  However, it will ensure that you will be provided with further information regarding how you can participate in the claim.

On 30 October 2013 Maurice Blackburn filed a class action in the Federal Court of Australia on behalf of shareholders of Leighton Holdings Limited (Leighton) to recover losses suffered as a result of alleged non-disclosure and misleading or deceptive conduct by Leighton during the period 16 August 2010 and 11 April 2011.

On Monday 11 April 2011, Leighton announced a projected $427 million full year loss for the 2011 financial year (FY11) driven by more than $1.1 billion in write-downs relating to two major construction projects, the Brisbane Airport Link project (BAL Project) and the Victorian Desalination Plant project (VDP Project), and a Dubai based property construction joint venture, the Al Habtoor Leighton LLC (Habtoor Leighton). 

On 14 February 2011, Leighton had forecast a FY11 full year net profit after tax (NPAT) of $480 million. Therefore, the result announced on 11 April 2011 was $907 million less than had been forecast two months earlier.  On the first trading day after the 11 April 2011 profit write-down Leighton's share price fell by about 13.9%. 

The class action alleges that in the period 16 August 2010 to 11 April 2011, Leighton had:

(a)failed to disclose that there were material matters arising either individually or collectively from the BAL Project and VDP Project and likely impairments on the Habtoor Leighton investment which made it likely that Leighton would not achieve its profit forecasts for the 2011 financial year; and

(b)made statements that misled or deceived shareholders about the profit forecasts and performance for the 2011 financial year and performance.

The Applicant claims that this conduct was in contravention of the continuous disclosure rules of the Australian Securities Exchange (ASX), the Corporations Act 2001 (Cth), the Australian Securities and Investments Commission Act 2001 (Cth) and the Australian Consumer Law.  

Litigation funder International Litigation Funding Pte Ltd is supporting the class action.

Group members are defined as those who acquired an interest in ordinary shares in Leighton between 16 August 2010 and 11 April 2011 and who suffered loss and damage by or resulting from the alleged conduct of Leighton.

For more information contact a member of the Leighton class action team via LeightonClassAction@mauriceblackburn.com.au or on (02) 9261 1488.

 

Leighton share price - August 2010 to May 2011

Leighton graph