Lend Lease construction returns to profit after UK boost

Lend-leaseLend Lease’s European construction arm has bounced back into profit following a strong performance in the UK.

Strong half-year results saw the Australia-based construction group’s Europe division post a nine-fold increase in pre-tax profit of A$75.3m (£38.1m) for the six months to December 2014, up from A$8.2m (£4.2m) the previous year.

The firm’s performance was boosted by Lancashire County Council and Blackpool Borough Council taking over ownership of the 25-year Global Renewables Project waste PFI.

Lend Lease also revealed it is advanced talks with tenants for the first two office projects at its £1.3bn International Quarter commercial district in Stratford, east London.

Overall Lend Lease posted a 25 per cent increase in after-tax profit to A$315.6m (£159.7m), up A$251.6m (£127.3m) the previous year.

Lend Lease chief executive Steve McCann told investors the group had been boosted by residential markets in the UK and Australia, which “have remained strong”.

Residential pre-sales rose over 300 per cent to £560m driven by strong progress at Elephant & Castle, Wandsworth and The International Quarter

Dan Labbad, CEO of international operations, said: “London-based urban regeneration sites will be a key driver of earnings in the next few years.

“At Elephant & Castle we currently have three stages or around 900 homes in delivery and have received planning approval for the next stage West Grove at Elephant park which will add further 593 homes to production schedule.

“We are also close to announcing a partnership with one of the UK’s leading housing associations for the progressive acquisition and management of a further 550 affordable homes at the site.”

Labbad said the UK business was set for strong growth as the firm looked forward to moving ahead with several large projects where it is preferred bidder.

He said: “UK contracting market is a tough operating environment mainly coming out of the global financial crisis and the way work was won during that period for high risk work at very low margins.

“We stopped bidding at very low margin work and that meant the revenues in the business dropped over those years.

“What we are seeing now is that clients are looking for contractors that can stand the test of time.

“Our backlog is increasing and we are preferred on a number of positions at the moment in a two-stage process so we expected that backlog to increase further in the next 12 months.”

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