Lend Lease's Operating Profit Drops

SYDNEY, AUSTRALIA-Lend Lease reported its earnings Wednesday afternoon and soon followed that with two major announcements; the resignation of Greg Clarke and the decision not to sell shares to retail investors through a strategic purchase plan.

The company’s net operating profit after tax at the end of December 2008 was $120.5 million, down from last year’s operating profit of $165.2 million. According to company executives, “This represents a decline of 27% from the corresponding prior year period primarily due to lower profit from capital recycling and tough market conditions in our communities businesses.” Lend Lease’s earning report looks at the past 6 months, rather than by quarter.

Lend Lease’s statutory loss after tax totaled $387.7 million. According to the earnings report, this is due in large part to “deteriorating economic and market conditions.” “There is no doubt that 2009 is challenging as the effects of the global financial crisis continue to be felt,” says Lend Lease Group CEO, Steve McCann. “Lend Lease is not immune to these factors, but the Group’s strong financial position, focus on cash flow management and the maintenance of its significant liquidity buffer provides a strong foundation to withstand these pressures.”

McCann goes on to say, “We expect the current market volatility to remain for the foreseeable future with the timing of recovery dependent on the recovery of liquidity in the financial markets. Our strategy is to preserve our strong cash position, resize overhead in light of market conditions and to consolidate our pipeline of projects to ensure we will be in a leading position when financial markets recover.”

Today, Lend Lease has told potential investors that the proposed Share Purchase Plan, which would give retail investors in Australia and New Zealand a chance to purchase shares of the company, will no longer move forward. The plan was initially made public at the beginning of February. But now executives say, in a release, “Lend Lease has decided not to proceed with the Share Purchase Plan due to the current market value of its securities remaining below the A$6.05 institutional placement price and a deterioration in equity market conditions.”

Simultaneous to this decision not to move forward with the Share Purchase Plan and the past 6 month’s earnings report, Greg Clarke has stepped down from his position as managing director. CEO McCann, who was just appointed to the position in the middle of December, will take over as managing director and become a member of the Lend Lease board.