Lend Lease confident on earnings

30 Aug 2012, 4:39 pm   -   Source: AAP

Developer Lend Lease says work and income from existing projects is so stable it has little new business to bring for another year of solid earnings

Global property developer Lend Lease is so confident of its existing pipeline of projects, it doesn't have to win any new business to deliver a projected earnings growth this fiscal year.

The builder on Thursday said it would deliver an earnings growth in 2013 because it had strong pre-sales from upcoming construction projects, Asian demand for infrastructure, and profits from the sale of its Greenwich Peninsula in the UK and from leases at two commercial towers in Barangaroo in Sydney's CBD.

It unveiled a net profit of $501.4 million for the year to June 30, up from $492.8 million in the previous year.

Chief executive Steve McCann on Thursday said while the company was "not in the practice of giving earnings guidance", he was confident its current pipeline of projects would drive earnings in the medium to long term.

He said the value of projects under management made sure of that.

"There is a circa $200 million per annum of development profit over a 10-year period embedded in our existing global pipeline of urban regeneration opportunities," he said during a teleconference on Thursday.

"Based on our construction backlog revenue, there are several hundreds of million dollars of earnings which will be realised over a two- to two-and-a-half year period."

Mr McCann said when combining those earnings with its $14 billion in funds under management; rental income on $1.3 billion of investments; earnings from its communities, retirement and aged care, infrastructure and development businesses, it would have to do very little in terms of new business to realise that forecast.

"Lend Lease Group can generate a significant level of earnings, without needing to win any new projects or pipeline," he said.

"This provides us with a very significant level of earnings visibility over the coming years...all predicated on ensuring we execute well."

But Mr McCann said weak consumer confidence would continue to hurt Lend Lease's residential business.

He said the builder would focus on finishing existing residential projects, maintaining margins and concentrate on cost bases.

The builder will also continue to invest in its infrastructure business, which has flourished with a healthy $6.7 billion of backlog revenue.

"Our focus there will be in key areas of specialisation including ports, rail, roads, and energy transmission," Mr McCann said.

Infrastructure projects in Australia under its belt include the $383 million in regional rail link work in Melbourne, a $211 million earthworks contract for the Caval Ridge mine project in central Queensland, and a $316 million project to widen Sydney's M5 Motorway.

Mr McCann said the company's profit growth would be underpinned by projects in the education, telecommunications, pharmaceutical sectors in Asia.

"We will continue to recycle capital to pursue higher yielding development opportunities (there) and our focus is on securing and delivering mixed use integrated projects," he said.

Shares in the company closed 21 cents stronger at $8.40.

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