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No place like home for Lend Lease

19 Feb 2013 THE AGE - CAROLYN CUMMINS


GLOBAL construction company Lend Lease will focus on its Australian developments for improved earnings after the division produced the lion's share of the 39 per cent jump in half-year net profit.

Some of the $302.3 million in earnings came from initial funding generated at the $6 billion Barangaroo South project in Sydney, which includes a hotel and casino to be run by James Packer's Crown.

Lend Lease secured the contract for a second office tower at Barangaroo South and the Sunshine Coast University Hospital, which contributed to the backlog of about $17.8 billion worth of projects. During the half it was also appointed the preferred bidder for the $1 billion Sydney international convention, exhibition and entertainment precinct, while work continues on the $5 billion redevelopment at Victoria Harbour, Melbourne.

In its other Victorian projects, Lend Lease said that it was resubmitting a tender for the Bendigo Hospital site, but declined to comment on the legal issues on bidding for projects with the Victorian government.

Since its takeover of the Valemus operations, Lend Lease has four main operations of development, construction, investment management and infrastructure development in Australia, Asia, Europe and North America.

Profit after tax in the Australian construction business fell to $94 million from $105.4 million a year earlier - due to timing issues, and to $13.2 million from $27 million in the previous corresponding period in its investment management division.

The overall results were in line with market expectations of about $300 million, although some analysts were surprised by a high corporate expense of about $50 million.

An interim dividend of 22¢ will be paid on March 27, which was up on the 16¢ in the previous corresponding period, with the payout ratio unchanged at 41 per cent.

The company never issues specific full-year earnings guidance but reaffirmed its target of a 15 per cent return on equity.

Simon Wheatley at Goldman Sachs said the Australian earnings before interest, depreciation and amortisation result was better than he expected, while the result in Britain was weaker, which included the sale of the interest in Greenwich.

The US construction result improved slightly more than he anticipated.

Lend Lease chief executive Steven McCann said the results were positive given that conditions in key markets remain mixed. "The Australian economy is fairly challenging but is stronger compared with other markets. Our core regions are also showing signs of improvement and we have ongoing support for the public-private partnership model," Mr McCann said.

"Commercial office construction remains subdued, while in residential developments, New South Wales and Western Australia are stronger, Queensland is recovering at particular price points, while Victoria is soft."

He said mixed-use developments in Singapore and Japan were on track and more joint-venture developments would be pursued.