By Elizabeth Broomhall
Chairman of Aus contracting giant admits Leighton "should never have gone into" Al Habtoor deal
The chairman of Australian contracting giant Leighton Holdings said yesterday his firm should never have signed a partnership with Dubai’s Al Habtoor Group.
In an interview with The Australian Financial Review, Stephen Johns said he was unhappy with how the joint venture company Al Habtoor Leighton was faring in the wake of the financial crisis.
"With hindsight, no, we're not happy with [Al Habtoor Leighton], we should never have gone into it,” he was reported as saying.
“Are we happy with where it is post-[global financial crisis] and what's happening in Dubai? No."
The New South Wales-based company established the JV with Dubai’s Al Habtoor Group in 2007 in a bid to tap the booming UAE construction market.
Leighton paid AU$870m (US$857.2m) for a 45 percent stake in the firm’s building arm Al Habtoor Engineering, which boasted US$4.4bn of total work in hand with predicted earnings of US$2.75bn for 2007-2008.
But in the wake of the global financial crisis, which saw Dubai property prices plummet 60 percent and more than half of the emirate’s projects cancelled, the JV proved to be a drag on the rest of the company.
In January 2011, Khalaf Al Habtoor, chairman of the Al Habtoor Group, said HLG was owed more than AED4bn (US$1.08bn) in payments from clients, while other executives said winning new projects was also proving difficult.
Leighton Holdings last year reported an annual net loss of AU$408.8m at the end of June, which it blamed partly on its Middle East investment after the company was forced to raise AU$757m (US$800m) from shareholders and inject AED1bn (US$272m) into the UAE venture.
The company had hoped to boost investor sentiment at the end of the year when it reported profits of AU$340m for the six months to December (a 57 percent profit rise compared with a year earlier), but its hopes were shattered when it became embroiled in a bribery scandal in the Middle East.
In a February statement it confirmed that the Australian Federal Police were investigating its subsidiary Leighton Offshore over potentially improper payments related to a US$1.2bn oil project in Iraq. Leighton shares dropped almost 2 percent in one day.
Media reports at the time said the firm’s executives remained positive, but the market was concerned about the ongoing strain of the group's Middle East ventures.
Chairman of the Al Habtoor Group, Khalaf Al Habtoor, and the CEO of Habtoor Leighton Group, Laurie Voyer, declined to comment when contacted by Arabian Business.For all the latest construction news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
No wonder the much lauded Dubai Pearl development is moving at snails pace. Would be interesting to learn whether Dubai Pearl are among the many defaulting Leighton clients that makes Mr. Johns so unhappy and Mr. Habtoor so quiet.
Dubai Pearl clearly remains a flagship for Habtoor Leighton in the region, however I alongside many other investors and contractors remain unpaid and tied up in legal battles with Dubai Pearl. If you go and check activity at the Dubai Pearl site it does not seem like they enjoy the full support of Habtoor Leighton as their master developer.....
Why is it that such latecomers to a boom seem to think they are cleverer than a self-made local billionaire? They have only themselves to blame... Still that means Mr Al Habtoor can afford to build a new hotel and give them a job!
what use for being sorry ?
Being sorry and unhappy is not the solution, the solution is to quit now before it is too late !
Al Habtoor Engineering was a better company then, without Leighton!! There are lots of project in the UAE right now but HLG cannot compete with the local contractors because of high bids due to the very high salaries of Leighton personnels. The truth is Leighton is sucking the life out of Al Habtoor Group!!! This is a fact, most of the managers from Leighton are only skilled workers in their home country and because of their nationality they are getting high positions even if they are not qualified!!!
I find it amazing taht the very same people who 4 years ago were singing praises are today lamenting funeral wakes.
Business is a risk and about decision making, once a decision is made go forward and make another to rise above the Lament.
I presonally admire the achievements of Mr.Khalaf Al Habtoor and I am sure he will rise victorious through these times.
Amazing, that they now cry "wolf" when I interviewed some of the guys from Leightons some years ago these guy were on packets .....3 times more than what they were on "back home"......of course they cannot compete as so many other "international" contracting firms cant! Get with the times..these companies abused the salaries and now they blame other people/companies for it!!!
That my good friend is a fact of life . HLG is one of the most professional construction companies operating in The Gulf , it's operatinf quite well here in Qatar and i see some major projects being awarded for the group here.
Your comment about salaries has a bearing on your own insecruities and personal outlook , That in itself doesn't belong in these comments.
The HLG is owed an awful lot of money from major clients throughout the region , it's these clients that have caused the problem , jobs have been completed and signed off but millions are still owed and contracts signed and jobs halted.
If 75% of your client base owes you money you're going to be in big trouble and that doesn't matter who you are and whatever field you're in .
There is a lot of changes in the corporate sytem when the leighton holdings comes in. almost all the changes came up with having a lot of unnecessary departments with unnecessary managerial positions. its like a mushroom popping out anytime everytime without having any difference from what is already the company have. An ordinary employee now dont know which is which and who is doing what, these unnecessary thing are just the tip of the iceberg causing a lot of overhead cost with out even coming up with new projects.
I hope that Mr. Khalaf will do something about what is happening before it too late.
if it would be old Al habtoor Engineering they must have come out from crisis. Firing of old experienced by HLG new regime brought to HLG in this condition. Well experienced guy who had capability to win new projects are no more in HLG. New staffs are on two or three times more salaries then old. Still its not too late to change revise leighton policies. its Gulf not Australia.