News of a big fat, near half billion dollar profit from the sale of a 30% interest in a huge UK shopping centre failed to spark any life into the share price of Lend Lease (LLC) yesterday.
The company’s shares ended the day off nearly 4% at $13.12 in a wider market that was down 0.6%.
That was after it had told the ASX that the sale of the 30% interest in the Bluewater Shopping Centre in southern England would gross $1.19 billion (or £656 million) with a further $70 million plus for the management rights and sundry land interest at the centre. The buyer is the huge British property group, Land Securities Group PLC.
The net profit from the deal is expected to be around $480 to $500 million.
Lend Lease will still own a small interest in Bluewater through its minority interest in a 25% stake in the shopping centre held by the Lend Lease retail partnership fund. Prudential and Prudential Property Investment Managers Limited own 35% of Bluewater with Hermes holding 10%.
The sale has been expected for months as Lend Lease has sorted through a long list of possible buyers of the stake in Bluewater, which opened in 1999 after four years of construction.
LLC 1Y – Lend lease shares sold off despite big price for Bluewater
Opened in 1999, Bluewater is anchored by three department stores and over 300 retailing, catering and leisure units.
"The cash proceeds of the sale will initially be used to pay down debt and subsequently support investment in our significant global development pipeline of over A$38 billion, including our large urban regeneration projects in London at Elephant & Castle and The International Quarter," Lend Lease CEO Steve McCann said in yesterday’s statement
Lend Lease said its interest in the Bluewater Shopping Centre is held at inventory value for accounting purposes ($507 million as at 31 December 2013).
"After transaction costs, associated provisions and tax, the expected profit on sale of Lend Lease’s interest in Bluewater, its management rights and sundry land is expected to be approximately A$480 million," the company said.
Lend Lease said that after the sale it expects the 2013-14 net after tax profit to be in the range of $810 million – $830 million, and an anticipated unfranked dividend at a payout ratio of 50% of Net Profit After Tax.
The company said the result would include provisions of $85 million after tax raised in relation to UK and Australian Communities Projects and a UK investment.
"Lend Lease remains comfortable with FY15 consensus expectations of A$600 million – A$620 million," directors said in yesterday’s statement.
Lend lease earned $551 million in 2012-13, so on the face of it the profit this year will be higher – but that’s due to the boost (one-off) from the Bluewater sale.
Just from what the company said in the statement yesterday, the underlying result might not be all that solid if you deduct the $480 million Bluewater contribution.
And on top of that the expected 2014-14 profit isn’t much of an increase on the 2012-13 result as well – up to $70 million, which is on the light side and not all that encouraging for shareholders expecting growth in the share price.
