Saturday, November 17, 2007

Lend Lease eyes India and China's boom

Lend Lease Corp is the latest property and construction giant eying India and China for retail and community development opportunities.

The property giant says it expects growth from its development pipeline to drive earnings.

Lend Lease chief executive Greg Clarke said at the company's annual general meeting in Sydney on Thursday it was targeting countries such as China and India because they had an expanding middle class looking for better-quality homes and an enhanced shopping experience.

Mr Clarke said Lend Lease was under-represented in China and India.

"We are looking at potential strategies for entering those regions," Mr Clarke said.

"We are looking at retail and community opportunities ... particularly in India.

"We are trying to find out what China and India would look like in five to 10 years' time so we can generate longer-term earnings from longer-term growth in those economies."

While Lend Lease did not have expansion plans in the Middle East, the company was interested in that region also.

Other companies with increasing interest in Asia and the Middle East, include Macquarie Group's real estate arm and construction giants such as Multiplex Group and Leighton Holdings.

Mr Clarke said Lend Lease's future earnings were viable and long term.

"We have a very good base of secured, major projects in the Asia Pacific, the UK, Europe, the Middle East and USA, which will deliver profits out to 2020."

Lend Lease was preparing for major United Kingdom work including the STG5.5 billion ($A12.62 billion) Stratford City project for the 2012 London Olympic Games and the STG1.5 billion ($A3.44 billion) redevelopment of Elephant and Castle in London, and STG700 million ($A1.61 billion) town centre redevelopment at Preston.

Profits, before overheads, yet to be realised on construction work underway or in the redevelopment pipeline was at record levels of $793 million.

The retail development pipeline of work secured but not yet started was at $5.3 billion.

The company planned to invest more than $5 billion, mainly on new development projects, over the next three years.

Mr Clarke said the company had taken several steps to address problems that led to the $199 million provisions being made for some UK construction projects in the first half of fiscal 2007, mainly relating to the Manchester Hospital.

"We are now comfortable with the program and outlook for the Manchester Hospitals project.

"The other UK projects on which losses had been incurred are now either complete, or well advanced."

Company chairman David Crawford said the group's gearing level remained conservative.

"Given the upheaval in debt markets over recent months, that conservatism has proven to be a distinct advantage," he said.

"With 84 per cent of debt at fixed rates, an average maturity of 12 years and interest cover at 7.9 times, Lend Lease has substantial debt capacity to fund its development pipeline and expansion plans."

He said gearing was expected to increase over the next three years to fund new business.

"As a result, we expect gearing to increase to over 30 per cent over the next three years," he said.

"This would put us at the lower end of the board's target gearing range of 30 per cent to 40 per cent, excluding any material, strategic acquisitions."

Lend Lease reported a net operating profit of $413.7 million for the year ended June 30, up 17 per cent from the previous corresponding period.


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