Lendlease Half Year Result -LLC strong development pipeline on transportation growth

CommSec

Lendlease Group’s (LLC) half year revenue for the 2017 financial year increased 8% to $7.95 billion with a 12% lift in profit, in-line with market expectations. The result was boosted by strong commercial development growth and on time delivery of key projects. The company has been managing its exposure to the top heavy residential property markets in Australia by diversifying its Aussie and global holdings which led to growth in its funds under management and construction profit over the last year.

The result was also boosted by selling down its majority interest in the Circular Quay Tower development and the proceeds from the groups NZ retirement unit sale which was completed in the prior year. Lendlease has had success with its Barangaroo South office, Tower 1, close to reaching completion. All three towers are fully now operational.

Lendlease's construction margin improved by 70 basis points to 2.7% as construction revenue lifted. Funds Under Management (FUM) grew by 12% to $24.7 billion thanks to strong growth on its Australian fund platform, including One International Towers Sydney Trust and the Australian Prime Property Fund.

LLC total assets increased by 2% as the value of its investment properties grew by 8%.

Return on equity (ROE) increased slightly, to a better than expected 13.7% from 13.4%. This came in at the upper end of LLC’s 10% – 14% target range. LLC’s gearing also improved by 5.1% on reduced debt.

LLC’s pipeline is strong as total residential presales within the group hit $5.7 billion, strong US development executions underway and London’s Haringley urbanisation project on plan. The group’s pipeline grew to $49 billion after adding commercial development with an estimated end value of $9 billion. LLC said it continues to target ROE of 10-14% and gearing of 10-15%.

Lendlease said it will pay an interim dividend to shareholders of $0.33 on 24 March 2017.

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