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16 August 2006
Lend Lease Operating Profit Up 24%
Statutory Profit Up 84%
Lend Lease Corporation Limited (“Lend Lease”) posted a 24% increase in operating profit after tax to A$354.2 million in its first full year result under AIFRS, compared with A$285.7 million after tax for the year to June 2005 (restated for AIFRS).
This result is ahead of market consensus expectations.
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| Profit After Tax | June 2006 A$m | June 2005 A$m | % change |
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| OPERATING PROFIT | 354.2 | 285.7 | 24 |
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Property Investment Revaluations
One-off Items | 61.0
- | 39.5
(99.7) | 54
n/m |
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| STATUTORY PROFIT | 415.2 | 225.5 | 84 |
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Statutory profit for the 12 months to June 2006 was A$415.2 million after tax, up 84% on the June 2005 result of A$225.5 million after tax (restated for AIFRS). This includes property investment revaluations of A$61.0 million for the year, compared with A$39.5 million for the year to June 2005.
Lend Lease has announced a final dividend of 31 cents per share fully franked, bringing total dividends for the 2006 financial year to 61 cents per share compared to 57 cents per share for the year to June 2005. Both the interim and final dividends for the period are fully franked, with the total dividend payout ratio at 69% of full year operating profit.
Business Performance
Lend Lease Managing Director and CEO Greg Clarke said the result underscored the value of being an international, diversified property group.
“Our focus on the retail and communities property sectors, together with construction management and investment management continues to deliver steady earnings growth,” Mr Clarke said.
The Retail & Communities business delivered a 78% increase in operating profit to A$167.5 million after tax, compared with A$94 million for 2005.
“We saw good contributions from each of the regional operations in that business and the Group’s retail investments also performed very strongly,” Mr Clarke said.
As expected, profit contributed by the Project Management, Construction & PFI business was flat compared to 2005 at A$134.6 million after tax. This was as a result of provisions against projects in the UK operations in the first half, offset by a strong second half and good performances in the US and Asia Pacific.
“We have not changed our view for overall flat global earnings from Construction & PFI from 2005 to 2007, as the UK operations need time to regain the earnings momentum interrupted by the provisions in the first half of the 2006 year,” Mr Clarke said.
The Investment Management business saw growth in profit after tax of 11% for the year to June 2006. The A$205 million Lend Lease Core Plus Fund was launched during the year and the Group’s flagship Australian wholesale fund, APPF Retail, maintained its market-leading returns, with Lend Lease earning performance incentive fees.
Post balance date, the Group launched the A$120 million Lend Lease Communities Fund 1. The two new Funds have together around A$500 million in investment capacity and have begun to deliver synergies through investment in retail, retirement and residential communities projects from the Lend Lease pipeline.
“We are confident about the prospects for the Investment Management business and its contribution to our overall strategy,” Mr Clarke said.
“Shareholders can expect to see Lend Lease regularly sell down maturing investments, take profits and reinvest the capital released to grow the Company’s invested capital base as we achieve more synergies across the three businesses.
“We will actively manage capital invested to take advantage of opportunities and changing markets,” he said.
Chief Financial Officer, Roger Burrows, said Lend Lease had continued to improve against key shareholder return criteria during the year.
“Earnings per share grew 24% to 88.7 cents. Operating cashflow was also very strong at A$660 million for the year and our interest cover, at 7.8 times, remains comfortably above our minimum target of 6 times interest expense”, Mr Burrows said.
“In line with its strategy, the Group realised A$2 billion of capital, including the sale of the Chapelfield, Norwich retail centre. We reinvested A$2.5 billion principally in new and existing Retail & Communities operations such as Crosby Homes and the Chelmsford redevelopment. The reinvestment programme also included co-investments in APPF Retail and the new Core Plus Fund.
“Notwithstanding the significant investment activity during the year, gross borrowing at 30 June 2006 was only 14.4% of tangible assets, providing the Group with substantial capacity to invest in future opportunities,” Mr Burrows said.
Given the proportion of earnings from overseas operations, Lend Lease expects dividends for the 2007 financial year to be between 30 and 50% franked.
Outlook
The Retail & Communities business continued to build a very strong pipeline of retail development projects. Lend Lease had a backlog of more than 93,000 residential sales lots in Asia Pacific and the UK and a further 27,700 residential units in its US military housing privatisation projects at June 2006.
The Project Management, Construction & PFI business has maintained a healthy Backlog Gross Profit Margin of A$710 million at June 2006 (including PFI projects at preferred bidder stage), which should underpin a return to earnings growth in the 2008 financial year.
The investment management platform in Australia now offers a suite of wholesale funds across the risk return spectrum. Internationally, over the medium term the Group will invest in developing its funds management platform in the UK and South East Asia to build its earnings base and deliver further synergies with the Group’s other businesses.
In terms of outlook, while there is increased uncertainty concerning the interest rate environment and the global economic impact of continued high oil prices, the fundamentals for the Company’s core businesses and chosen market sectors are still strong.
Notwithstanding these uncertainties, Lend Lease remains well positioned to achieve earnings growth from operations over the short to medium term.
Further information:
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Ron Cutler
Lend Lease Corporation
Tel: 02 9277 2242 | John Frey
Cosway Australia
Tel: 0411 361 361 |
Attachments:
Financial Reports:
Consolidated Financial Statements [1.53m]
Five Year Profile [31k]
Management Discussion and Analysis [190k]
Porfolio Report [130k]
Appendix 4e [25k]
Directors' Report [694k]
Concise Financial Report [2.45m]
Investor Briefing Presentation [770k]media | stock exchange
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