Leighton lifts profit but debt is up

CONSTRUCTION and mining services giant Leighton has assured investors its finances are okay despite debt levels rising sharply in the March quarter.

While the company posted a strong net profit of $123 million for the period, the gloss was taken from it when it revealed that gearing - a measure of its borrowed money to shareholders funds - was uncomfortably high.

Gearing went back up to 48 per cent from 35 per cent after it was reduced last year, with net debt possibly as high as $1.5 billion from $900 million at the start of the year.

It has had to pay $200 million equity in the collapsed BrisConnections company behind the airport toll road and $200 million on dividends while its working capital slumped during the traditionally quiet summer holiday period.

Another problem was an increased level of net project underclaims (unsettled bills).

Leighton's deputy chief executive and chief financial officer Peter Gregg told AAP that Leighton was still on track to meet guidance of a full year profit of $520 million to $600 million and a gearing range of 25 to 35 per cent.

Its leverage will be helped when it receives about $620 million for the sale of 70 per cent of its telecommunication assets to Canada's Ontario Teachers' Pension Plan.

It also announced the $435 million sale of a Perth office development to Dexus Property on Monday.

"The ability to settle a number of claims in that Christmas period is limited by time and availability circumstances, we typically see that ramp up through the remainder of the year," Mr Gregg said.

However the company wouldn't want to let its gearing get too out of hand given a troubled recent history, Options xPress analyst Ben Le Brun said.

The company made a loss of $80 million in the March quarter last year, when it was reeling from $1 billion-plus loss in blowouts at the Brisbane AirportLink and Victorian desalination plant projects.

On Monday it announced a net profit of $123 million in the three months to the end of March.

That came during a tumultuous time when three directors, including chairman Stephen Johns, and general counsel and secretary Richard Willcock quit amid worries about greater interference from Spain's ACS, which controls the company.

Mr Gregg said while it was disappointing to see those internal issues being played out publicly, management was getting on with its job delivering profits.

He said while life was tough in the current economy, he pointed to the company still having a solid $42 billion work in hand.

Two key issues are a slowdown in the mining sector with costs soaring and cash-strapped state governments not investing in infrastructure.

Leighton lost mining contracts with Xstrata and BHP Billiton during the quarter as the miners slashed costs.

Mr Gregg said he was confident that environment would turn around and that Leighton was driving down costs by better utilising its plant and equipment assets.

Its net profit margin in the quarter rising to 2.3 per cent from 1.9 per cent for the full 2012 year, which indicates more money is being earned per dollar of sales.

Morningstar analyst Ross MacMillan said there were major concerns about how the mining slowdown would affect contractors such as Leighton.

Leighton shares were up 42 cents, or 2.21 per cent, to $19.43.

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Leighton appoints new chairman

LEIGHTON Holdings has appointed Bob Humphris as the construction giant's new chairman.

Mr Humphris says the board "totally" supports Leighton chief executive Hamish Tyrwhitt and his management team and was committed to the company's strategic objectives.

Leighton said on Monday Paula Dwyer was appointed deputy chairman.

The board appointments come after Leighton announced on Friday Stephen Johns has stepped down as chairman and left the company.

Directors Wayne Osborn and Ian Macfarlane, a former Reserve Bank of Australia governor, had also tendered their resignations following a breakdown in relations with German construction company Hochtief, which owns a 40 per cent stake in Leighton.

"Their view is that Hochtief no longer supports an independent board at Leighton," the company said in a statement on Friday.

Hochtief, which is majority owned by Spanish Group ACS, has two representatives on what was the company's 10-person board.

In a letter to Leighton, Hochtief Australia said it was disappointed by the resignations.

"We do not consider Hochtief has done anything to undermine the independence of the Leighton board or threatened any such action," Hochtief said in the letter dated March 23.

"For several decades, Leighton and Hochtief have chosen to follow a set of informal and non-binding governance principles which include a board and a management structure in which the majority of directors are non Hochtief-associated directors.

"Hochtief has at no time given the Leighton independent directors any cause to believe that it intends to depart from these principles."

Mr Humphris said Hochtief letter confirmed the current governance arrangements relating to Leighton's independence.

"The board are committed to Leighton's strategic objectives and totally support the CEO, Mr Hamish Tyrwhitt, and his management team," Mr Humphris said.

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'Interference': Leighton board walks

Source: Bloomberg

THE chairman and two other board members of construction and mining group Leighton Holdings have walked out, citing interference and lack of independence from major shareholder the Spanish-controlled Hochtief.

Chairman Stephen Johns and directors Wayne Osborn and former Reserve Bank of Australia governor Ian Macfarlane resigned Friday morning.

The walk out takes the vacancies on the Leighton Holdings board to five out of 12 seats, following one unrelated resignation last year and another existing vacancy.

A statement from Leighton company secretary Richard Willcock  said the men had "resigned following what they perceived to be a breakdown in relations with the major shareholder Hochtief and their view that Hochtief no longer supports an independent board at Leighton".

"Leighton operates under an independent board and management. Leighton believes these governance arrangements, which have been in place for a long period, have contributed substantially to the value created for all of Leighton's 57,000 shareholders," Mr Willcock said.

In the meantime the company was "absolutely focused on managing the business in the best interests of all shareholders", Mr Willcock said.

Company analysts described the shock resignations as a case of “back to the future” after a similar change of guard at Leighton just 18 months ago.

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Major board changes at Leighton

THREE board members at construction giant Leighton have stood down because of a breakdown in relations with its major shareholder.

Chairman Stephen Johns and non-executive directors Wayne Osborn and Ian Macfarlane, a former Reserve Bank of Australia governor, had tendered their resignations, the company said.

"They have resigned following what they perceive to be a breakdown in relations with the major shareholder Hochtief and their view that Hochtief no longer supports an independent board at Leighton," the company said in a statement on Friday.

German construction company Hochtief holds a majority interest in Leighton, and has two representatives on what was the company's 10-person board.

Leighton said its independent board structure had been a substantial contributor to the company's growing value, and the current arrangements with Hochtief were expected to continue.

"We believe this is well understood by the market," Leighton said.

A board meeting will be held as soon as possible to elect a new chairman, it said.

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