Australia's construction giant Leighton Holdings (ASX:LEI) has announced a 39 per cent increase in annual profit and foresees further expansion as the economic environment improves.

The company has reported $611.9 million in net profit for the year to June 30, a rise from $440 million in the previous corresponding period.

Group revenue in the year to June climbed 2 percent to $18.6 billion.

The group declared a fully franked final dividend of 85 cents per share, from 55 cents in 2008-09, bringing the full-year payout to $1.50.

On its outlook for fiscal 2011, Leighton said its forecasts to deliver stronger revenue and operating profit amid high levels of work in hand and gradually improving economic conditions in the country and offshore.

"However, the road ahead may be rocky as governments, corporations and markets work their way through the residual effects of the global financial crisis," the company admitted.

Leighton said the Australian construction market may be hurt by a reduction in federal government stimulus spending primarily at the smaller end of the scale. It predicts private sector investment in infrastructure and resources to grow as economic conditions improve.

Meanwhile, commercial and industrial property construction activities remain frail and is likely to plunge further in 2011, the company said.

"The company's long-term outlook remains positive due to record work in hand and continuing economic recovery in its major markets.''

''Based on current market projections, the group's five-year aspirational goals of $50 billion work in hand, $30 billion of revenue and $900 million of profit after tax can be achieved through internally generated funds,'' Leighton said.

Leighton shares gained $1.02 or 3.5 per cent to reach $29.92 in early trade.