This article is from the Australian Property Journal archive
GREG Clarke's conservative approach and belief of never betting the company steered the $7 billion Lend Lease Corporation to break profit expectations for the 2007 financial year.
Lend Lease notched up a statutory profit of $497.5 million after tax for the year ended June 30 2007, an increase of 20% over the previous year’s $415.2 million result.
The result includes $32.2 million after tax in interest from the Australian Taxation Office following the resolution of a long running dispute and net gains from property investment revaluations of $51.6 million after tax.
The company’s net operating profit was $413.7 million after tax, up 17% over the prior year. This exceeds market consensus and is well ahead of management’s objective of achieving an average growth in earnings per share of 10% per annum over a five-year period.
Yesterday Clarke said the company exceeded market expectations despite the provision made in the United Kingdom construction operations during the first half and the tough residential market in Australia.
“This demonstrates the resilience of the group’s diversified operations. Actus Lend Lease in the United States, the investment management business and Bovis Lend Lease in Asia Pacific all made stand-out contributions and our retail & communities business secured a number of major new projects.
“The company continued to recycle its capital, realising approximately $1.1 billion in proceeds while re-investing around $1.3 billion in its pipeline to secure future earnings growth opportunities. Importantly, at June 2007 Lend Lease had increased its invested capital base to $4.4 billion from $4.1 billion at June 2006.
“Lend Lease enjoys very strong operating cash flows and is well placed to deliver continued earnings and dividend growth to drive shareholder value over the medium to long term,” Clarke said.
Chief operating officer Ross Taylor said Lend Lease maintained strong momentum in building its pipeline of development, construction and investment management opportunities.
As at June 2006, Lend Lease’s retail & residential development divisions has $45 billion of works in the pipeline.
“We continue to identify and deliver investment opportunities for our clients in the Investment Management business in Asia Pacific such as Somerset Central in Singapore and 420 George Street in Sydney, and we are well placed to create new opportunities for investors around development assets in the UK over the next two to three years.” Taylor said.
Post the year end, Lend Lease continued to add to its pipeline in the UK with the recently announced £$1.5 billion mixed-use, inner urban regeneration project at Elephant & Castle in London and a 50% interest in the £600 million retail and residential urban regeneration project at Preston.
Lend Lease’s finance director Steve McCann said Lend Lease maintains a very robust financial position, with significant capacity to fund growth opportunities.
Gross Debt to Total Tangible Assets stood at 15.6% at June 30 2007.
“Our target gearing range is 30-40%, but the strong cash flows from recycling capital have meant we were able to expand the development pipeline and increase the Group’s invested capital base during the year, without significantly increasing debt.
“However, the group’s current three year business plan envisages an increase in debt. We expect to reach the lower end of our target gearing range by the end of the plan period. This takes into account investment in our current development pipeline and continued capital recycling.” McCann said.
Looking ahead, Clarke said while the Australian residential market remained patchy, the company’s US and UK retail & communities businesses maintained a good outlook and global construction markets were buoyant.
“We have an excellent platform in each of the businesses in each of our regional markets, and increasingly the three businesses are working together to secure longer term projects that will deliver multiple earnings streams for Lend Lease.
“Lend Lease is well placed to deliver ongoing growth in shareholder value,” Clarke said.
Reflecting its strong performance, Lend Lease declared a final dividend of 42 cents per share franked to 50%, bringing total dividends for the year ended June 2007 to 77 cents per share, 26% higher than the previous full year dividend.
Lend Lease closed 64 cents lower at $17.22.
Australian Property Journal
