National law firm Maurice Blackburn will commence a class action against construction giant Leighton Holdings following a series of profit downgrades and concerns that the company failed to disclose to investors the problems it faced on key infrastructure projects.
On 14 February 2011, Leighton announced an estimated a full year profit of $480 million. Then on 11 April this had turned into a $427 million loss. As a result, Leighton's share price dropped 14 percent from a close of $28.94 on 8 April 2011 to $24.93 when trading commenced after the 11 April announcement.
In its 11 April announcement Leighton pinpointed three matters as the source of its problems: the Brisbane Airport Link, the Victorian Desalination Plant, and Al Habtoor Leighton Group.
Andrew Watson, principal and head of the class actions department at Maurice Blackburn, said it was alleged that Leighton Holdings had breached the continuous disclosure provisions of the Corporations Act in failing to tell investors information regarding the material cost increases and delays on Airport Link and the Desalination Project, and the need for further writedowns on Al Habtoor Leighton Group before April 2011.
"We will allege that by 2 November 2010 and certainly by 14 February 2011 Leighton should have told the market of the need for these massive writedowns," Mr Watson said.
"Shareholders expect a company like Leighton to have proper risk management and internal reporting systems to ensure timely announcements are made when there are difficulties.
"The Brisbane Airport Link has been subjected to a dramatically revised profit forecast to a pre tax loss of $470 million. Various factors were blamed for this, 'design, access, weather, engineering, planning and coordination difficulties.'
"Our investigations have confirmed that as early as April 2009 Leighton was seeking approval for design changes because adverse geological conditions were causing unexpected delays and cost overruns for tunneling works in the Airport Link project."
With respect to the Victorian Desalination Plant, Leighton had on five separate occasions between November 2010 and March 2011 advised the market that the project was on time and on schedule for delivery of first water by the end of 2011.
Mr Watson added, "It is difficult to understand how Leighton can justify these statements in light of its sudden announcement on 11 April 2011 that the project was suffering serious delays and costs overruns.
In addition to the problems with Australian infrastructure projects, Leighton International revealed difficulties with the Dubai based construction company Al Habtoor Leighton Group. Leighton International owns a 45% share of the company and twice in 2011 it announced write-downs totalling $619 million in the book value of its investment due to 'deteriorating cashflow from legacy projects'.
Maurice Blackburn last settled year settled a major shareholder class action against Multiplex, another construction company, for $110 million. This case was also based on the construction company's failure to disclose cost over-runs and profit downgrades on major infrastructure projects.
Litigation funder International Litigation Funding Partners Pte Ltd (which also funded the Multiplex action) is funding the Leighton class action.
How to register
Shareholders who purchased shares in Leighton between 2 November 2010 and 11 April 2011, may be able to recover losses suffered as a result of the conduct of Leighton.
Shareholders interested in registering to participate in the Leighton class action, contact email@example.com or call 1800 810 856. Website information
Maurice Blackburn's other class actions
Maurice Blackburn's class actions practice is the largest in Australia having secured more than $700 million in settlements for shareholders, businesses and consumers over the past 13 years.
In 2010 Maurice Blackburn settled two major shareholder class actions against AWB and Multiplex. Maurice Blackburn is the only class action law firm to have achieved settlements over $100m including against Aristocrat ($144.5m), GIO ($112m) and Multiplex ($110m). The firm is currently acting in a series of other shareholder class actions including claims against NAB, Centro, Gunns and Nufarm. In March 2011 the firm settled a massive cartel claim against Amcor and Visy for $120m - the largest cartel settlement in Australian corporate history. It is also conducting a series of class actions against banks over bank exception fees. Class actions for victims of faulty products and price fixing cartels are also being conducted by Maurice Blackburn.