Leighton Holdings is having a challenging time in the Middle East, facing a possible breach of its ethics code surrounding payments connected to work at a project related to oil exports in Iraq.
In addition, the Australian construction company's joint venture, Habtoor Leighton Group (HLG), based in the UAE, has struggled to collect payments and its book value has been written down, resulting in Leighton suffering an A$153.9 million (Dh608.6m) loss in the Middle East and Africa in the six months to the end of December.
The possible ethics breach is related to Leighton's subsidiary company, Leighton Offshore, "in connection with work to expand offshore loading facilities for Iraq's crude oil exports", the company said.
The matter is being investigated by the Australian Federal Police.
In the meantime, HLG is proving a problem for the company. The group has requested Dh500 million (US$136.1m) of additional funding, Leighton said. It is also expecting to collect only half of its unpaid legacy receivables over the next two years.
"This is what keeps me awake," said Hamish Tyrwhitt, the chief executive of Leighton Holdings. "Not all of it is in our control."
The issues in the Middle East "are legacy issues with regard to payment, certification of claims, et cetera … [and] are all to do with our ability to secure profitable work that generates cash", he said.
These issues were "getting a lot of management focus", he added.
Despite these difficulties, the company is still keen on pursuing opportunities in the region.
"The Middle East market has experienced mixed results over recent years but is still providing a number of opportunities for the HLG," the company announced. "The level of bidding remains high and HLG has over US$7 billion in live bids.
"HLG has refocused its business away from traditional building and property development exposure to a broader base including civil, rail, water, oil and gas and services. The geographic footprint of the business is also diversifying away from Dubai into other Emirates, nearby countries in the region and North Africa."
The company is hoping it may also be able to generate more business from infrastructure projects in Abu Dhabi.