Aug. 23 (Bloomberg) -- Lend Lease Group, Australia’s largest listed property developer, reported a 10 percent rise in full-year profit driven by its central Sydney Barangaroo redevelopment and fees from infrastructure projects.
Net income rose to A$551.6 million ($497.6 million) in the 12 months ended June 30 from A$501.4 million a year earlier, the Sydney-based company said in a statement to the Australian stock exchange. Operating earnings climbed to A$553 million from A$507.2 million.
The company said in June it would restructure its construction and infrastructure businesses, consolidating them from Aug. 1 to form a more competitive business. Lend Lease said then that weakness at home and in Europe would lead to reduced earnings from construction, and analysts forecast further softness was likely in fiscal year 2014.
“The London market is tough and we don’t expect that to turn around anytime soon,” Chief Executive Officer Steve McCann said today in a telephone interview. “In Australia, there has been a tough environment in the commercial building space and we expect that to continue. But we have a very big pipeline of our own development projects.”
Profit after tax in Europe fell 2.4 percent to A$99.5 million in the year to June 30, as some construction projects underperformed, the company said. The 18 percent increase in Australian profit was driven by its development business, while construction was hit by weaker conditions, Lend Lease said.
Lend Lease shares gained 1.2 percent to A$9.13 at the close of trading in Sydney, while the benchmark S&P/ASX 200 index rose 0.9 percent.
Lend Lease’s planned developments globally have an end value of A$37 billion, the largest in its history, it said today. It has A$17.2 billion in expected construction revenue and funds under management of A$15 billion, it said.
“There’s still a number of projects that we’ve got our eye on in Australia and offshore,” McCann said. “But the amount of embedded earnings in our pipeline means that we don’t need to pursue projects aggressively from here.”
Profit after tax from developments jumped to A$403.2 million from A$166.1 million a year ago, largely due to earnings from the first two commercial towers at its A$6 billion Barangaroo financial precinct redevelopment, Lend Lease said. Infrastructure development profit rose 61 percent to A$104.5 million on fees from four projects, it said. Construction profit tumbled by almost a third to A$192.8 million.
With two office towers at Barangaroo 77 percent leased, Lend Lease is “well down the path with a couple of tenants” on leases for a third building, McCann said.
“We haven’t made a decision yet on timing but we will make a decision on that tower over the next year or so as to what the right structure to put it in is and when we kick it off,” he said.
The company’s full-year dividend will be 42 Australian cents, up from 38 cents for the previous 12 months, it said today.
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