The housing boom will continue to drive earnings in the medium term, says global construction group Lend Lease.
Strong demand for apartments, particularly in Australia, has helped the company lift its profit by 25 per cent. And, chief executive Steve McCann says, the outlook is positive.
“Macro conditions in residential markets are supporting growth in our Australian and UK development operations,” Mr McCann said.
“We have 21 major apartment buildings in delivery which will be a large driver of our earnings between FY16 and FY18 (fiscal 2016 and 2018).”
But, acknowledging that some aspects of the Australian economy were not going as strongly as they had been, Lend Lease said it would look to expand further in international markets over the long term to provide better geographic earnings diversity and to retain growth.
Lend Lease’s profit rose to $315.6 million in the six months to December 31, from $251.6 million a year earlier, with increased earnings from Australia and Europe offsetting falls in Asia and the Americas.
The company said it was comfortable with market expectations of a drop in full year profit to between $604 million and $628 million, from $822.9 million in 2013/14.
The 2013/14 result was bolstered by a $485 million profit from the sale of the company’s 30 per cent stake in the Bluewater shopping centre in England.
Mr McCann said this year’s first half had been strong.
Pre-sold residential revenue had lifted 156 per cent to $3.6 billion with much of the residential sector growth coming from major urban regeneration projects which comprise 66 per cent of Lend Lease’s $40.4 billion pipeline of development work.
Mr McCann said Lend Lease continued to meet or exceed its target of about 700 apartments settling each year.
Its residential developments include The Yards at Brisbane Showgrounds, 888 and 889 Collins Street in Melbourne and Darling Square in Sydney.
In the next 12 months, Lend Lease expects further residential launches at Barangaroo South, in Sydney, and at Elephant & Castle and Deptford in London.
Lend Lease’s Australian operations lifted operating profit by a third to $297.6 million, and its European business posted a nine-fold increase to $75.3 million.
However, its Asian operations profit fell by 72 per cent to $19.1 million, and its Americas business was down 22.7 per cent at $37.2 million.
DEMAND FOR APARTMENTS BOOSTS LEND LEASE
- First half net profit of $315.6m, up 25.4pct, from $251.6m in 2013/14
- Revenue of $5.9b, down 9.4pct, from $6.5b
- Interim distribution of 27 cents per stapled security, up five cents from 22 cents