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Lend Lease European construction profits rise 28%

Lend Lease’s European construction profits rose by nearly 28 per cent in the year it completed the Olympic Athletes’ Village.

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Posting results for the year to June 2012, the construction firm and developer said pre-tax profits in European construction rose from £14.2 million to £18.2m as revenue fell 14 per cent from £835m to £718m. Profits had fallen 56 per cent a year earlier.

Lend Lease highlighted the successful handover of the Athletes’ Village – which housed 17,000 athletes and support staff during the London 2012 Olympics - to the Olympic Delivery Authority.

The group said it is focusing on the delivery of major projects in UK, while positioning the construction business into “market recovery”.

Total pre-tax profits for the European division as a whole, which encompasses infrastructure investment and PFI assets, fell 22 per cent, from £70.3m to £54.9m.

The firm said the previous year had included the sale of 11 Public Private Partnership (PPP) assets to the Lend Lease UK Infrastructure Fund (UKIF) and the sale of the group’s interest in the Lend Lease Overgate Partnership. It sold five assets in the 2012 year.

Infrastructure development profits dropped from £59.6m to £34.3m, despite the sale of equity in five PPP assets to the Lend Lease Infrastructure Fund.

The contractor said major construction projects have included the Athletes’ Village for the London 2012 Olympic and Paralympic Games, and the Birmingham Building Schools for the Future scheme.

New work secured includes the seventh stage of the Chiswick Park commercial development, Strathclyde University Technology and Information Centre, and 14 schools within the Birmingham BSF programme.

Group chief executive officer and managing director Steve McCann said that market conditions in Europe, the Middle East and Africa “are expected to remain challenging”, adding that London residential work “is in the early stages of recovery, which sits well with the timing of our major urban regeneration projects”.

Development pre-tax profits fell from £2.7m to £0.2m, though the year saw the planning application lodged for Lend Lease’s flagship Elephant & Castle development in London. Lend Lease said it also made further progress at The International Quarter, Stratford City.

Its shareholders also approved the conditional sale of its interest in Greenwich Peninsula to Quintain Estates and Development PLC (Quintain) in July 2012.

Investment management profits were up from from £25.5m to £29m.

  • The company highlighted the appointment of its new EMEA regional chief executive Simon Hipperson. He replaces Dan Labbad, who will become group chief operating officer. Mr Hipperson is Skanska’s former head of infrastructure investment.
  • It expects a “robust and strong performance in construction to continue in challenging market conditions”, with a focus on execution of major urban regeneration projects and capital recycling.
  • The wider Lend Lease group saw a 4.5 per cent increase in post-tax profits to £331m as revenue grew 29 per cent to £7.54 billion. It said £4.3bn was from Australian construction.

Mr McCann said Lend Lease delivered operating profit growth above market consensus earnings.

“Financial year 2012 has been a very successful year for Lend Lease,” he said. “The group has made significant progress on executing its strategy, in particular focusing on the delivery and conversion of its significant global development pipeline.

“We also made progress in putting in place the people, systems and processes to successfully execute our projects.”

Lend Lease outside the UK

Total pre-tax construction profits rose nearly 79 per cent in the year, from £152.3m to £271.9m.

Pre-tax construction profits rose by 108 per cent in Australia to £200m, and by 67 per cent to £25.9m in Asia. Profits in the Americas were up slightly, to £27.4m.

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