This article is from the Australian Property Journal archive
LEND Lease has achieved a 37% increase in operating profit for the half year to $302.3 million, underpinned by development projects such as the Barangaroo South project.
The statutory profit after tax was $A302.3 million for the half year compared to $217.8 million in the previous corresponding period.
Lend Lease declared an interim distribution of 22.0 cents per security, unfranked.
CEO Steve McCann said Lend Lease had a very successful first half result, with highlights including progress on the Barangaroo South project and being awarded two major projects in Australia, the $A2.0 billion Sunshine Coast University Hospital and the $A2.5 billion Sydney International Convention, Exhibition and Entertainment Precinct.
Growth in the Australian business skyrocketed by 46.9% to $304.3 million; followed a 40.7% increase in the Europe business to $60.5 million and the Americas was up by 43.6% to $26 million, which offset a 15.6% decline in Asia to $24.3 million.
The operating profit in Australia increased by 46.9% primarily due to the performance of the development business, which takes into account Barangaroo South. During the half year, Lend Lease entered into an exclusive agreement with James Packers’ Crown Limited for the development of a hotel and high rollers room at the precinct.
Despite the positive news, Lend Lease’s share price traded 2.5% lower, down 27 cents to close at $10.42 yesterday.
The construction business continues to have record work in hand with backlog revenue of $A10.3 billion with a further $A1.5 billion at preferred bidder stage. Although Lend Lease did not mention or discuss the reported four-year ban by Victorian state government from bidding on PPP projects.
The positive result overshadowed the poor performance of Lend Lease’s residential business. McCann said market conditions continue to be impacted by low consumer confidence and uncertainty in the labour market.
Residential land settlements were flat for the first half and average prices were down due to product mix and pre-sales were down 10% reflecting market conditions.
Funds under management grew by 6.8% to $A9.4 billion following the launch of Lend Lease International Towers Sydney Trust.
As at December 31 the group had cash reserves of $A985.7 million and undrawn committed bank facilities of $A1,178.8 million. Gearing is at 6.7%, but it will increase towards the 15% level over the next two years.
McCann said the company is in a strong position despite a challenging external environment.
“We have good visibility of earnings in the 2013 financial year and have continued to win new projects that will underpin future earnings growth,” he added.
However one analyst, Morningstar’s Tony Sherlock doubts whether Lend Lease could continue to maintain growth in its Australian infrastructure and construction business because he points out that there will not be another Barangaroo (Sydney) or Docklands (Melbourne).
Meanwhile Lend Lease has completed a review of the remuneration structure for McCann for FY13, to further align his interests with those of securityholders and to reflect the long term nature of some of Lend Lease’s projects.
The cash amount of any short term incentive award will be limited to $A800,000 and any balance will be awarded in shares with the vesting period extended so that the balance will vest equally over 1, 2 and 3 years.
Lend Lease also made changes to its senior management with the promotion of David Saxelby to CEO of Construction & Infrastructure, Australia. He is currently chief operating officer of Construction & Infrastructure Australia and head of Abigroup.
Dale Connor, previously managing director of project management & construction, Americas has been appointed to the role of chief operating officer of construction & infrastructure,
Australia.
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