This article is from the Australian Property Journal archive
THE market had a sense of déjà vu yesterday when Greg Clarke announced his retirement. The last time Lend Lease changed leaders in 2002 it was turbulent times – like now. But the difference Clarke points out – Lend Lease in 2008 is not a broken down corporation.
Clarke yesterday announced he was stepping as chief executive of Lend Lease after more than six years at the job.
He said the decision was made more than a year ago to give Lend Lease time to transition into the new CEO.
“My job was to rebuild Lend Lease.
“After more than five or six years at the job you start to feel like a mouse running around inside the wheel,” he added.
Clarke whoever succeeds will be inheriting a strong company.
“The new CEO will not be taking a broken down corporation like I did,” he continued.
Clarke said Lend Lease’s strong financial position is due to the group’s conservative approach.
“A lot of people criticised us, for not getting out there, for not increasing our gearing (and getting into more debt)… the sun doesn’t shine all the time and you have to run a conservative company when the market is up and down.
“This is not an ego driven business,”
Clarke said Lend Lease would like to add to its diversified portfolio but it is not targeting a company similar size to Lend Lease to “double” the group’s size.
Whoever Lend Lease’s finds as the successor, they will have their work cut out for them.
Lend Lease yesterday forecast profits in FY09 will be 10-15% below the net operating FY08 profit result of $447.1 million.
But the group’s statutory profit after tax for the 12 months to June 30 was $265.4 million – which includes the $121.5 million writedown associated with the United Kingdom communities business, Crosby Lend Lease, and negative property revaluations of $60.2 million.
The group’s full year dividend is 77 cents per share, in line with the prior year.
Lend Lease has maintained a strong financial position with gross borrowings to total tangible assets at 14.4% and interest coverage was 7.2 times, comfortably in excess of the group’s internal target of a minimum 6 times. 84% of the group’s debt is at fixed rates with long term maturity.
Retail operating was $130.7 million and EBITDA was $79.4 million, accounting for 12.6% of the group’s profit – down 6.5%.
Communities operating revenue was $969.5 million and EBITDA was $124 million – representing 19.2% of total profit – down 20.1%.
Investment management contributions were also down, falling 27.4% to $127.3 million in revenue and $151.2 million in EBITDA.
But the group’s project management and construction division was buoyant, up 240% to contribute $12.46 billion in revenue and EBITDA of $198.9 million.
Lend Lease’s PPP division was also up 27.4% contributing revenue of $962.7 million and EBITDA of $60 million.
As at June 30, Lend Lease had $842.8 million of cash – up from $550.1 million.
Lend Lease’s group finance director Steve McCann said the group will be looking to recycle assets in the future.
But he added the group does not have to sell assets to raise capacity to look at opportunities.
McCann said if the price is not right, then there is no sale.
Meanwhile he added the group is looking at potential merger and acquisition opportunities.
In regards to Lend Lease’s approach to FKP, McCann said the ball is in FKP’s court.
“We remain open to discussions with FKP but we haven’t been in discussion with FKP for some time,”
He added that group’s purchase of interest in Babcock & Brown Communities is a just strategic investment in the retirement sector.
“There is currently a strategic review underway and we believe we have bought a seat at that table.” McCann added.
Looking ahead, Clarke expects the current property market volatility to remain for the foreseeable future with the timing of recovery in property markets in the US and UK dependent on the recovery of liquidity in the financial markets.
“The US and UK residential markets continue to suffer from lack of liquidity and inventory overhang. In comparison, the Australian market is stronger and, while slowing, should not see the same level of impact.
“Lend Lease is in a solid position, because of its diversified earnings business model and financial strength, to manage its way through these market headwinds. Our strong positive cashflow, combined with capital recycling, has provided cash on hand of $A842.8 million, allowing us to continue to fund our investment pipeline while exploring growth opportunities.
“In the current market our priority is to manage our business efficiently, while continuing to build a portfolio of superior long term property projects to ensure we will be in a leading position when the market recovers,” he concluded.
Lend Lease shares rose 9 cents to close at $9.09.
Australian Property Journal
