Australian woes delay Fulton Hogan share buyback
BUSINESSDESK: Privately-owned construction company Fulton Hogan has delayed its share buyback plan as problems on an Australian project and a potential acquisition loom over its annual share valuation.
The Christchurch-based firm told shareholders last month it has formally revoked its October offer to buy back small share parcels while it conducts its annual valuation.
"We realise this notice is earlier than normal, but fixing some difficult trading and project issues in Australia and considering a potential acquisition opportunity, prudence dictates we take this step," chairman Ed Johnson said in a letter to shareholders.
"A new share buyback offer will be released to shareholders upon the conclusion of the valuation process."
The delay comes amid Australian media reports that a $A700 million joint venture with Leighton Holdings to upgrade the Sapphire-to-Woolgoolga upgrade of the Pacific Highway in New South Wales is in financial trouble.
Bad weather and poor planning have been cited as causing the project's woes.
Fulton Hogan declined to comment.
The construction company gets more than 50% its revenue from across the Tasman after acquiring the half of Australia’s Pioneer Road Services it didn't already own.
That acquisition helped lift annual sales to $2.44 billion in the 12 months ended June 30, 2011, from $2.14 billion a year earlier.
Still, net profit dropped to $73.9 million from $79.5 million on bigger finance costs to fund the acquisition and as it spent more buying back Shell New Zealand's stake in the business.
Fulton Hogan ended the 2011 financial year with a forward order book of $3.2 billion, up 10% from a year earlier.
Orders were helped by the company winning a share of the government’s roads of national significance programme, which made major roadways a funding priority.
Last year, its Australian operations were impacted by drought, with just 70% of budget delivered.