Despite tough conditions in building and construction, property developer Lend Lease says it expects a modest rise in operating profit for the year just passed.
In its latest update to investors, the company says that excluding any profits from the Barangaroo South development, it expects to achieve operating profit after tax of between $A485 million and $A505 million for the year ending June 2012, up slightly from the $458.3 million achieved last year.
Lend Lease Group chief operating officer and managing director Steve McCann says the expected result reflects continued success achieved by the group through a focused execution of the group’s strategy and the successful integration of infrastructure business during the year.
“The Group has a clear strategy to achieve a balanced and diversified portfolio and to continue to recycle capital from property assets and non-core businesses to invest in higher yielding opportunities,” McCann says. “We are very pleased with a strong expected result in such a difficult market environment.”
McCann says that since Lend Lease’s investor day on May 16, significant announcements made by the company include lease agreements with tenants for the first two commercial buildings at Barangaroo South, a number of wins on construction project bids, the launch of new funds and the successful recycling of capital.
Set against a backdrop of difficult building conditions, the company’s anticipated increase in earnings is likely to be well received by investors, especially in light of the travails of rival Leighton Holdings.
Still, not all has gone well for the company in recent times.
In April, the company was forced to pay $56 million in penalties after acknowledging fraudulent practices in its US business including overbilling of public sector clients and misrepresenting the amount of work performed by minority business enterprise partners over a period of more than 10 years.
In May, the Construction, Forestry, Mining and Energy Union claimed that use of sham contracting arrangements – the practice of hiring workers as contractors when the nature of the relationship is really akin to that of an employer and employee – is rife at construction sites operated by the company.
Furthermore, just last week, the company came under fire from unions as work was halted at its key Barangaroo project last week following yet another asbestos discovery at the site by union officials, the latest in a number of incidents in which the deadly material has been discovered at the site.