By Ian Verrender
How much worse could it get?
Leighton Holdings, once the darling of the stockmarket, has had a fall from grace during the past two years that is every bit as remarkable as its previous 23 year rise to global construction powerhouse.
And for Spanish group ACS, now Leighton's major shareholder with a 54 per cent stake, this morning's confirmation of yet another disastrous earnings downgrade, strikes a further blow to its heart.
The Spanish group, led by former politician Florentino Perez, has spent the past three years extending its control over German builder Hochtief for the sole purpose of gaining control over the jewel in the the German group's crown, Leighton.
Ever since it became involved, it has been rewarded with a littany of losses, disappointments and scandals.
A fortnight ago, Leighton was chided by the corporate regulator and agreed to a modest fine for its tardy disclosure practices.
It faces a class action from angry shareholders over that very issue, when it witheld information last year over problems on some of its projects that later resulted in an earnings downgrade of almost $900 million.
Two months earlier it had assured investors it was on track for a $480 million pre-tax profit.
While the $300,000 fine it received a few weeks back was little more than a slap on the wrist, it clearly has been stung by the incident which it fears will provide ammunition for the civil case it now faces from investors.
Hence the trading suspension two days ago and this morning's announcement of further massive downgrades.
But this latest $254 million hit to pre tax earnings has far greater ramifications and has hit the company where it hurts the most: its reputation.
Once renowned for its relentless earnings growth, it now has become famous for unexpected grenades exploding in unfamiliar places, which has raised its profile among investors as a risk proposition and an organisation that no longer can be trusted.
After three years of management and board upheavals, resulting in open warfare at one stage, it most recently has become embroiled in a corruption scandal in the Middle East.
Chief executive Hamish Tyrwhitt - the third chief executive in three years - yesterday blamed weather and poor productivitiy at two key projects, the Brisbane Airport Link tunnel and the Victorian desalination plant. for the latest hit to earnings.
That has forced it to increase the number of employees on site in order to avoid penalty payments for late delivery.
ACS chief Florentino Perez, who also heads football club Real Madrid, is one of Europe's most powerful businessmen. He was also a close friend of deposed Leighton boss Wal King, and both shared a common interest in their mutual dislike of Hochtief and its management.
With Spain, and most of Europe, heading into recession, Perez spearheaded the Spanish group's attack on Hochtief.
The German group, once a global construction giant had performed poorly for years, saved only by its majority holding in the Australian group which with its expansion through Asia and the Middle East provided the vast bulk of Hochtief's earnings.
Just days ago, ACS managed to obtain another board seat at Hochtief. It has been rewarded with another exploding bombshell. It is likely to respond by taking a firmer grip on its Antipodean outpost.