Building materials maker Boral and developer Lend Lease have both boosted profits on a residential construction boom.
Boral’s result was particularly impressive, with the company swinging from a $212.1 million loss last year to a $173.3 million profit this financial year.
The companies underlying profit, excluding the impact of one-off costs and benefits, rose 64.2 per cent to $171.4 million, allowing the final dividend to rise by a third to 8 cents per share, bringing total payments to shareholders for the financial year to 15 cents.
While total revenue fell 1.6 per cent, due to the sale of a 50 per cent stake in its gypsum business, revenue from continuing operations was up 7 per cent to $4.46 billion.
The sale of that business, combined with better cash flows, allowed Boral to more than halve its net debt to $718 million as at June 30.
The company’s shares reacted very favourably to the results, jumping 6.5 per cent to $5.74 by 11:13am (AEST).
Boral’s chief executive Mike Kane says the rate of US housing recovery has been a little slower than expected, but strong housing construction in New South Wales, Queensland and Western Australia has boosted its building products profits.
“Our focus on improving the underlying performance of Boral’s businesses through restructuring and portfolio realignment is delivering clear benefits to the business,” he noted in the report.
“Together with the ongoing housing market recovery in the USA, improved housing activity in Australia and continued growth in Boral’s markets in Asia, these benefits contributed to Boral’s stronger result.”
However, the company says there continues to be pressure on pricing that its preventing it from boosting average selling prices in some key segments, such as construction materials and cement.
On the outlook, Mike Kane says overseas markets should continue to grow, but a reduction in infrastructure activity domestically will probably offset continued improvements in the housing and commercial construction markets.
Lend Lease profits rise
Developer Lend Lease has lifted profits by 50 per cent, largely due to the sale of a major UK shopping centre and strong apartment pre-sales.
The ASX-listed firm made an after-tax net profit of $822.9 million, paying an unfranked 49 cent per share final dividend to bring its total distributions for the year to 71 cents, up from 42 cents last financial year.
Lend Lease booked a large rise in European profits, but this was entirely due to the sale of its interest in the Bluewater Shopping Centre in the UK generating an after-tax profit of $485 million, while construction recorded a $24 million loss.
The key Australian division posted a 12 per cent fall in profit, but this was largely due to prior year earnings being boosted by earnings related to the first two commercial towers at Barangaroo South.
Although, Lend Lease did have to book a cost of over $6 million relating to a serious fire at one of its Barangaroo construction sites.
The $446 million profit benefited from a 32 per cent jump in residential property sales, with Barangaroo South achieving 100 per cent pre-sales for its residential offerings.
Overall, the company’s residential division had a record year of activity with 3,425 settlements and pre-sale revenue of around $2.5 billion.
The firm’s US profits rose on military housing work for the defence department, while Asian profits eased by more than a third.
The company says it has more than $37 billion of work in the pipeline, which chief executive Steve McCann says will underpin profits in the current financial year and beyond.
“Forward pre-sales in our residential development business and embedded returns in our existing pipeline clearly underpin our earnings viability over the next three years,” he noted in the report.
“We remain comfortable with consensus net profit after tax expectation of $604 million to $622 million for financial year 2015.”
Lend Lease investors also appear to be comfortable with the results and the outlook, pushing the stock up 1.8 per cent to $14.00.