Lend Lease to build on home strengths

THE global construction and infrastructure developer Lend Lease will focus on its Australian projects for improved earnings after the division produced the lion's share of the 39 per cent increase in its half-year net profit.

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

The pre-leasing of the first two office towers at Barangaroo South, and the Sunshine Coast University Hospital, contributed to a backlog of about $17.8 billion worth of projects.

During the half, Lend Lease was appointed as 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 in Melbourne.

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

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

Its profit after tax in the Australian construction business fell to $94 million from $105.4 million a year earlier, due to timing issues. In its investment management division's profit after tax fell to $13.2 million from $27 million.

The overall results matched market expectations of about $300 million, although some analysts were surprised by a high corporate expense, which had a negative impact of about $50 million.

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

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

A Goldman Sachs analyst, Simon Wheatley, said the result for Australian earnings before interest, depreciation and amortisation was better than he had expected, but the British operation's result, which included the sale of its stake in Greenwich Peninsula Regeneration, was weaker.

The US construction result had improved slightly more than he had anticipated, he said.

Lend Lease's chief executive Steven McCann, said the results were positive, given that conditions in key markets remained mixed.

"The Australian economy is fairly challenging but is stronger compared with other markets," he said. "Our core regions are also showing signs of improvement and we have ongoing support for the public-private partnership model.

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

Mr McCann said mixed-use developments in Singapore and Japan were on track.