Leighton swings back to black

Leighton Holdings will wait until the company's annual meeting in a fortnight to update shareholders on its search for three replacement directors after a heated disagreement led to a mass exodus.

Updating investors at the release of its first-quarter result on Monday, Peter Gregg, in his new capacity as deputy chief executive, declined to comment on the process other than to say that it was on track.

"Really this is a board issue, but the latest update that I've had is that the committee that's charged with it, under [deputy chairwoman] Paula Dwyer is well-progressed," he said. "There's technical issues as to why we won't appoint anyone ahead of the AGM; I'd watch this space and see what's said there."

Stephen Johns quit as chairman in March, with independent directors Ian Macfarlane and Wayne Osborn, in protest over what they felt was interference from its German majority shareholder Hochtief - which in turn has had an extensive management clean-out since being taken over by Spanish construction giant Grupo ACS.

Monday's briefing was moved forward by a day to cater for Hochtief's own quarterly result and annual meeting on Tuesday, which Leighton chief executive Hamish Tyrwhitt is attending.

Leighton swung back to a net profit of $123 million for the three months to March, compared with a loss of $80 million in the previous corresponding quarter - a time when the group was still working through problem contracts, including Brisbane's Airport Link and Victoria's desalination plant. The group provided net profit guidance of $520 million to $600 million for the year, with $42.2 billion worth of contracts on its order book.

Mr Gregg said the quarterly result was a solid outcome given the backdrop of a "challenging macroeconomic environment, especially in contract mining".

Some analysts voiced concern that the group's gearing ratio blew out from 35 per cent to 48 per cent in the quarter, driven by the payment of its final dividend and increased project underclaims.

But Mr Gregg said gearing typically blew out in the first quarter due to seasonal reasons. He said he was disclosing it for the sake of completeness.

"We don't think we have anything to hide," he said. "It will be back within the [preferred band of 25 to 35 per cent] by year-end."

Leighton was keen to emphasise it was not focused on increasing its contract book for growth's sake, but was focused on quality projects with healthy profit margins.

Leighton's board, now chaired by veteran director Bob Humphris, endorsed "governance protocols" from Hochtief last month, reiterating that Australia's largest construction contractor would be allowed to be managed independently.