Lendlease unveils double-digit growth

Lend Lease new offices at Barangaroo tower 3,in Sydney, Australia. Photo: Anthony JohnsonGlobal developer and infrastructure group Lendlease has unveiled a 13 per cent rise in net profit to $698.2 million, based on high residential settlements, the current construction boom and rising forward construction contracts.

With its cranes dotting the skyline of most capital cities, the group has said it is well placed heading into the 2017 fiscal year with “financial strength and diversity, and visibility of earnings”.

Lendlease’s most visible development, the $6 billion Barangaroo project at Sydney’s Darling Harbour, was a major contributor to the residential settlements, which were up 7 per cent to 4,790 units.

Work has also started on the new Crown resort at Barangaroo, which sits near the three commercial towers and apartments on the site. Lendlease has also recently moved into its new offices at Barangaroo which still has some space to lease in the last office tower, still under construction.

Lendlease never give earnings forecasts, but analysts said, based on the figures released for the full year and the forward contracts, they are predicting about 7 per cent earnings growth for the 2017 financial year.

Chief executive, Steve McCann said Lendlease settled over 1,200 apartments with non-settlements at less than 1 per cent versus the historical average of closer to 3 per cent.

“The forward sale of three major commercial buildings, two at International Quarter London and one at Darling Square in Sydney, has further de-risked our development exposure,” he said.

The Australian construction result was robust with earnings before interest tax, depreciation and amortisation (EBITDA) margins up by more than 1 percentage point to 3.7 per cent. The Investments segment, representing 37 per cent of operating EBITDA, continues to deliver solid recurring style earnings.

The construction backlog revenue of $20.7 billion was up 20 per cent and the funds under management of $23.6 billion, up 11 per cent.

During the year Lendlease boosted its unlisted funds business with a new $400 million managed investment vehicle.

The group’s overseas business results were mixed, reflecting the different speeds of the world’s economies.

In Europe, the EBITDA increased to $180.1 million from $129.5m, up 39 per cent on the previous corresponding period.

Brokers said positively contributing to 2016 growth was a 110 per cent increase in property development EBITDA from $66.3 million in June 2015 to $139.5 million in June 2016 due to the international quarter sell-down. This however was offset by reduction in EBITDA across infrastructure development, construction and investment management business units.

In the  Americas, EBITDA of $104.5 million was down about 33 per cent from the 2015 year of $155.4 million due to a material fall in construction earnings from $116.9 million to $56.4 million as a result of the roll-off of work in the military housing sector.

​Macquarie Equities analysts said operating cashflow of $853 million compares to negative $166.6 million in 2015 which is a good outcome and should go some way to alleviating concerns on settlement risk of apartment product. Cash flow has been a negative for Lendlease for the last few years given the high amount of production capital.

“Whilst enjoying a better re-rating of late, the Lendlease share price has lagged in the last 12 months reflecting fears of significant apartment defaults which will derail an otherwise very strong earnings and cash flow profile in our view. With today’s result indicating the cash is coming in and the stock still trading on about 11 times earnings,” the analysts said.

A final distribution of 30¢ per stapled security was declared, taking the full year distribution to 60¢ per stapled security, payable on September 14.

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Glebe Island must remain a working port, industry says

The NSW government plans to dramatically transform the Glebe Island precinct. Photo: Robert PearceGlebe Island should continue to operate as a working port even as the government develops the harbourside land around it, industry leaders said on Friday.

The commercial future of Glebe Island, which is Sydney’s major berth for more than 1 million tonnes of construction materials each year, has been unclear since the government released its plans to transform the Bays Precinct into an innovation district in October 2015.

At a business forum on the future of Sydney Harbour, industry leaders were especially frank with their concerns that the government had failed to appreciate the economic value of the port to the city’s commercial infrastructure.

“We must keep port land in Sydney Harbour for working-harbour activities. It is the lifeblood of the city,” Grant Gilfillan, chief executive of the Port Authority of NSW, told the forum.

“There have been various statements made by ministers that it [Glebe Island] is derelict land. That it is ready for urban regeneration, urban renewal.”

UrbanGrowth NSW, the government development agency, has not said it wants to end Glebe Island as a working point, but is resistant to the idea of apartments existing within an operational wharf precinct, the conference heard.

“Our challenge is that Urban Growth have listed a range of assumptions around this which they say are incompatible. We simply need to see that tested and challenged,” Mr Gilfillan said.

Arthur Psaltis​, finance director at Metro Environmental Logistics, which wants to ship sand from Tasmania into the port, slammed the prospect of closing the port as “ludicrous”.

Mr Psaltis said Glebe Island was an entry point into the “heart of the market” for construction because 80 per cent of Sydney’s demand for concrete existed within a 20-kilometre radius of the CBD.

Shifting commodities to Port Kembla and trucking them into the CBD would add at least 160,000 return truck movements to Sydney’s roads, he said.

“If you think the roads are bad now, it will be catastrophic in terms of what will happen to traffic on our roads. The M1 is already gridlocked.”

Rather than closing the port and relocating freighting and imports to Port Kembla near Wollongong, Mr Gilfillan said the government should pursue a mixed-use model where residential and offices are built on top of the port.

“We believe there is a way to build a port that sits underneath in a subterranean environment, with appropriate sort of urban renewal on top.”

This model has already been successfully implemented in cities abroad, such as London, the conference heard.

Lucy Owen, from the Port of London Authority, said the prospect of living above a commercial wharf had been embraced by Londoners.

“In London there are some very interesting places to live and I imagine there are some people who are quite excited about living above an operational wharf.”

Mr Psaltis said the approach of favouring multi-storey apartments over commercial development was based on a short-sighted premise of financial gain.

“The reality is, future generations will condemn us if we close this port.”

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Woolworths tipped to report heavy loss on back of restructuring, Masters exit

Analysts says Woolworths’ turnaround under CEO Brad Banducci will take longer and cost more than expected. Photo: Louie DouvisWhen Woolworths reports its full-year results on Thursday, expect to see a loss of about $1 billion, analysts say, after restructuring costs and its exit from the disastrous Masters hardware business.

Credit Suisse analysts say that with a restructuring charge of $960 million and its exit from the Masters Home Improvement business being treated as a “discontinued operation”, total impairments could hit $2.7 billion. That could leave Woolies with a statutory loss of around $1 billion.

Woolworths’ major shareholders have been impatient for Australia’s biggest supermarket chain to stitch up a deal for the disposal of its hardware assets. The company is expected to make some sort of announcement as part of its full-year results.

Woolworths chief executive Brad Banducci in May unveiled a strategic review to turn around the company’s declining supermarket sales and stop it falling further behind rival Coles.

On Wednesday, Coles’ parent company Wesfarmers reports its results. Meat sales over the past 12 months have played a significant role in supporting the company’s broader fresh sales results but recent stock shortages will potentially hurt comparable sales growth in the first quarter of the new financial year.

Coles had been battling to get fresh food back on the shelves after more than 640 workers walked off the job at its stores earlier this month.

For both major retailers, the bigger threat is Aldi’s aggressive expansion. The German supermarket giant has managed to reduce Coles and Woolworths’ share of the lucrative grocery market from 75 per cent to closer to 70 per cent.

All up, 87 major companies are due to report this week – the biggest of the August profit season. Fortescue reports on Monday, Oil Search, Scentre Group and Healthscope on Tuesday, while on Wednesday Wesfarmers is joined by Boral and Westfield in giving result updates.

On Thursday, apart from Woolworths, expect profit figures from Amcor, Perpetual and S32, and on Friday the highlights are Harvey Norman and Coca-Cola Amatil.

AMP Capital head of investment strategy Shane Oliver said overall profits look to have fallen 8 per cent in financial year 2015-16 thanks to weakness in resource profits following a tough period for commodities markets.

But Mr Oliver was more optimistic on the coming financial year, saying the listed corporate sector was “on track for a return to growth in 2016-17 as the slump in resources profits reverses and non-resource stocks see growth”.

Investors will also likely continue to ponder the resilience of the Australian dollar, which eased last week but looks well supported by the global search for yield – Australia’s cash rate of 1.5 per cent, while historically low, remains relatively high across developed economies.

A key influence is the expected pace of monetary tightening in the world’s largest economy.

Over the past few weeks US Fed members have been talking up the odds of a rate hike, but thus far foreign exchange traders “remain unimpressed”, BK Asset Management currency strategist Boris Schlossberg said. “Few players [are] factoring a hike in December, much less September.”

Commonwealth Bank of Australia chief currency strategist Richard Grace believes the Aussie dollar, which fetched 76.25 US cents on Saturday, could lift as high as 78.4 US cents in the coming weeks, thanks to a “benign” Australian economic environment and as the terms of trade stabilises.

“However, by year-end another RBA rate cut and another Fed rate hike should bring [the dollar] back to 73 US cents,” Mr Grace said. 

Economists will begin piecing together the puzzle of how the domestic economy has performed over the three months to June, with quarterly construction work data due late Wednesday morning.

The June quarter national accounts are due on September 7. “Residential building approvals and commencements data suggest housing investment is likely to have pushed higher to a new record level,” over the three months, ANZ economist Daniel Gradwell said. But continued weakness in mining-related engineering construction is expected to drag overall activity lower again.

On Wednesday morning skilled vacancies figures are also released.

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UFC 202: Conor McGregor v Nate Diaz is just entertainment

All show: Nate Diaz will fight Conor McGregor in UFC 202. Photo: Ethan MillerThere is a fine, fine line between sport and entertainment. In fact, it could be argued the two concepts are so intrinsically linked that one could not exist without the other.

But perhaps the biggest culprit of sport’s dependence on entertainment is the fight game.

Boxing, and now mixed martial arts with the rise of the UFC, have glorified in the subtle mix between sport and show.

Think back to the Don King mega-bouts that still live in folklore today: the Thrilla in Manila, the Rumble in the Jungle. These fights matched the best of the best in the ring, linked hand-in-hand with the promotion of a major Hollywood studio production.

And while Muhammad Ali may have set an unreachable bar for press conferences, those that follow in his footsteps have continued the tradition of trash talking their opponents to entice fans to buy tickets, or watch on pay-per-view, in the hopes of lining their wallets in this most brutal of professions.

And who can blame them for that?

The problem is when the event no longer becomes about the sport, but rather is only about the show. And herein lies the fundamental problem with the UFC’s much-billed rematch between Conor McGregor and Nate Diaz.

Back in March, Diaz shocked the fighting world when he dealt the brash Irishman his first loss in the Octagon. McGregor – who was lined up to fight lightweight champion Rafael dos Anjos before he succumbed to injury 11 days out – was paired against Diaz, who took the fight on eight days’ notice.

Back then, it made sense for the fight to go ahead. There had been much promotion around McGregor’s move up in weight divisions (he was the featherweight champion) after his spectacular knockout of decade-long champion Jose Aldo, and with UFC196 ready to go, a stand-in fighter was desperately needed to save the day.

Diaz did just that, but then went off-script when he won by submission in the second round.

A rematch was talked up immediately after that non-title fight and, despite a McGregor feud with UFC president Dana White escalating, the bout was locked in for UFC202.

Now, McGregor is facing Diaz again, but this time, there is very little logic behind the fight.

They are not fighting for a title. They are not fighting to earn the right to a title fight. If anything, they are just fighting.

The McGregor-Diaz II fight hurdles over that thin line separating the sport from entertainment, and is now just the latter.

If McGregor wins, then what? Has he proven himself at welterweight so he is worthy of a title bout?

You would argue that he hasn’t. He has fought a good fighter (who is traditionally a lightweight), but he is not fighting a champion or former champion. He has only proven he can win a fight in the division.

The growing feeling is this is the UFC’s attempt at a do-over. McGregor, one of their most marketable athletes, needs to regain his attraction and pull by besting his new nemesis. There is no consideration what will happen should he lose.

Meanwhile, Diaz only has a pay cheque to gain. He has already beaten the Irishman. And despite suffering an early round of shots, he was comfortable in that fight. What more can he prove?

If he wins, it doesn’t represent anything in the wider context of the lightweight or welterweight divisions and, if he loses, it hurts any future prospects at a title fight in his division.

There is enough anger – feigned or genuine – between the pair that this should be a good fight. But it is just that, a fight.

It would seem the UFC are choosing the show over the sporting relevance.

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GWS Giants forward Jonathon Patton emerges as AFL star against Fremantle Dockers

Jonathon Patton reached the light at the end of a horrific injury tunnel after booting a career-best six goals for the Giants in Saturday’s thumping win over Fremantle.

And co-captain Phil Davis warns the future will only continue to brighten for Patton as the two reconstructions it took to repair the anterior cruciate ligament in his right knee fade to a distant memory.

Saturday’s game was Patton’s 52nd at AFL level after being drafted at No.1 in 2011 and easily his best, with the 23-year-old kicking more goals off his own boot than Fremantle managed the entire game.

He’s played all but one game this year after completing an entire pre-season for the first time and the scars on his knee are all that remains of the seemingly endless months he spent shrouded in the darkness of long-term injury.

“Everyone has bad thoughts whenever they get injured,” Davis said.

“It’s obviously an extremely challenging aspect of footy, long-term injuries. The great thing about Jonny was how he attacked it, in particular that second one, it was amazing.

“He’s pretty special in terms of how he went about it. You’ve got to talk to him, I’ve had a few long-term injuries as well and lent advice during that time.

“[Quitting] wouldn’t have crossed his mind. One thing about Jonny is he’s extremely competitive and he’s really driven.”

Patton has had to draw on every scrap of that competitive spirit to haul him back from the depths.

Before his AFL career even began, Patton was sent to Stockholm requiring treatment for patellar tendonitis in his left knee.

He debuted in round 12 of 2012, but three weeks into season 2013 Patton went down with the first of his ACL injuries, writing off the rest of that year.

The second torn ACL followed in round 21 of 2014, and part of Patton’s rehabilitation sent him to the USA to work with Bill Knowles who had previously helped the likes of Tiger Woods and Frank Lampard.

“He’s had an unfortunate run of luck with his injuries but at the end of the day he’s just starting to get going in his career,” Davis said.

“Last night was a big step to kick six and how he kicked six, they were really impressive goals and impressive marks.

“He’s got an enormous future and it’s pretty exciting when you can just put it down his throat and he can make it happen.”

Patton started slowly against Fremantle before kicking a couple of goals in the second quarter and exploding to life roughly eight minutes after half time.

Up until then the Dockers had restricted the Giants’ rapid ball movement for lengthy periods, but a strong Patton mark and goal sparked an 11-goal-to-nil second half for GWS.

“I didn’t have a good start to the game at all and then after quarter time the delivery was really good and there’s not too much defenders can do when there’s connection between a forward and a mid like that,” Patton said.

“When your midfield’s playing well, your backs aren’t getting beat, it’s very hard for the opposition to score and I’m not sure if there was one player out there tonight that didn’t play their role.”

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