Australia’s biggest property developer Lend Lease expects the residential market to weaken further as consumers worry about the state of the local economy.
The company on Monday said its net profit fell 3.8 per cent to $217.8 million in the six months to December 31, from $226.5 million in the previous corresponding period.
The group blamed the fall partly on negative property investment revaluations of $3.0 million after tax.
Chief executive Steve McCann said market conditions remained challenging across the country due in large part to weak consumer confidence.
“Despite our strong financial position, Lend Lease does remain cautious about the medium-term outlook given the uncertainty in global markets (and) continuing euro zone issues and their potential impact on the availability of funding and project timings,” he told analysts on Monday.
Mr McCann said it was now taking buyers more than 12 weeks to commit to purchasing a residential property, from the time of their initial enquiry – twice as long as it did during better economic times.
“In terms of outlook for the rest of the financial year, we expect continued tightening in the time period from enquiry to conversion on residential land,” he said.
Market conditions in Queensland and South Australia were particularly soft, while Victoria was also starting to slow, he said.
Mr McCann said the outlook was more positive in Asia for its project management and construction businesses and there were signs of a recovery in the US economy.
“The group’s significant backlog, development pipeline and access to capital provide a strong platform for future earnings,” Mr McCann said.
Lend Lease also said it had appointed Wesfarmers director and AFL Geelong Football Club chairman Colin Carter to its board.
Mr Carter will join Lend Lease in April.
Operating profit at Lend Lease’s Australian businesses rose 51.5 per cent to $207.1 million in the first half, while it leapt 82.3 per cent to $28.8 million at the group’s Asia arm.
However, the European business suffered a 55 per cent slide in operating profit to $43 million, while in the US it fell 37.4 per cent to $18.1 million.
Lend Lease attributed the higher earnings in Australia to better profits in the construction business and contributions from the infrastructure business it bought in March 2011.
On its Barangaroo South development in Sydney’s central business district, Lend Lease said it was in detailed talks with capital partners about funding and development of the commercial towers, retail areas and other commercial buildings.
“The investors are engaged in exclusive due diligence before entering into binding commitments,” Mr McCann said.
Chief financial officer Tony Lombardo said that while gearing was low at 3.4 per cent, that was expected to rise in the medium term as a result of investing in various projects.
Lend Lease declared an interim distribution of 16 cents a security, unfranked, down from 20 cents a year earlier.
The company’s shares rose two cents to $7.31 on Monday.
