Building boom boosts Lendlease profit

Lendlease has posted a 13pc rise in annual net profit, as low interest rates continue to support city construction.

Exterior of Lendlease's The Gauge in Melbourne.

Property and infrastructure company Lendlease has posted a 13 per cent rise in annual net profit, as record-low interest rates continue to support construction in cities such as Sydney and Melbourne.

Lendlease (LLC) said its net profit totalled $698.2 million in the year through June, compared to $618.6 million a year earlier.

Directors declared a final dividend of 30 cents a share, bringing the full-year payout to 60 cents.

Lendlease builds everything from apartments to high-rise office towers, including leading construction of the multibillion-dollar Barangaroo waterside project in Sydney’s central business district.

Last year, the company agreed commercial terms with Crown Resorts for a high-end casino and hotel at Barangaroo South.

Barangaroo reflects Lendlease’s increased focus on urban regeneration projects in recent years, including in countries ranging from Singapore and Malaysia to the US. Such regeneration projects account for a significant chunk of the company’s $48.8 billion pipeline of development work.

Lendlease today said global settlements within its residential division rose 7 per cent to 4,790 units in the 2016 financial year. The company said that presales for new residential projects hit a record $5.9 billion, up 13 per cent.

“The forward sale of three major commercial buildings, two at International Quarter London and one at Darling Square in Sydney, has further de-risked our development exposure,” said Chief Executive Steve McCann.

Australia’s housing sector is being supported by low interest rates, although economists continue to worry about a glut of apartments in some inner-city locations. At its policy meeting earlier this year, the Reserve Bank of Australia cut interest rates to a record low 1.50 per cent from 1.75 per cent.

The rate cut was the second this year and comes as inflation has dropped well below the desired 2 per cent to 3 per cent target band. The RBA is currently forecasting inflation will stay below, or at the lower end of, the target band until the end of 2018.

“Despite a mixed external operating environment, we are well placed heading into FY17 with financial strength and diversity, and visibility of earnings,” said Mr McCann.

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