Lend Lease Warns of Sharp Drop in Profits

Australian property developer Lend Lease said on Monday net operating profit was likely to fall as much as 15 percent next year as UK property prices slid. Its shares tumbled 10 percent.

Austrailia, Austrailian Flag
Austrailia, Austrailian Flag

Lend Lease, also a contractor and property manager, said its net operating profit would likely fall 10 to 15 percent in 2009 after an expected 8.1 percent rise to A$447.1 million (US$417.9 million) in fiscal 2008.

Analysts had expected A$445 million in 2008 and A$452.6 million in 2009, according to Reuters Estimates.

"Given continuing volatility in global credit and property markets, it is difficult to give earnings guidance for FY09 with a high degree of confidence," Lend Lease said.

It said it would hold the 2007/08 dividend at 77 cents a share, level with 2006/07, but short of market expectations for a payout of almost 82 cents, according to Thomson Reuters data.

This year, reported profit after tax would almost halve, Lend Lease said, falling to A$265.4 million in the year ended June 2008, from A$497.5 million the previous year, after it wrote down inventory value.

"In light of continuing difficult market conditions, which could see further pressure on residential sales prices and volumes, Lend Lease has taken the prudent step of writing down the carrying value of inventory in its UK Communities business, Crosby Lend Lease, by A$121.5 million pre-tax," the company said.

Lend Lease had previously warned that earnings from its Crosby residential development arm in Britain would be "significantly softer in the second half" due to the weaker UK property market, following a slight fall in the first half.

The UK business made up about 6 percent of earnings in the first half. The company will announce full-year earnings on Aug. 21.

In February, Lend Lease had said that without a major asset sale, earnings-per-share growth this year would dip just below its five-year average target of 10 percent as it faced a U.S. slowdown and a softer UK housing market.