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Leighton lifts profit but debt is up

Leighton has moved to reassure investors that its bottom line is okay after debt levels rose in the March quarter.

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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More about: AAP, ACS, BHP, BHP Billiton, Morningstar
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