European construction business outperforms rest of Australian-based infrastructure giant
Lendlease Europe’s construction managing director Neil Martin has hailed the firm’s “safe passage” through a difficult two years for the contracting market, after the division posted a return to profit and a 10% upswing in revenue in results for the year to June.
Martin told Building a “disciplined approach” to bidding in the past two years had helped the firm improve its performance and avoid the potential pitfalls of “problem jobs” by taking on jobs at low unsustainable prices.
Lendlease reported a 10% rise in revenue to £667m for the firm’s European construction business, as the divison outperformed the rest of the Australia-based group business.
LendLease Europe’s construction business also returned to the black, posting a circa £12m operating profit as measured by earnings before interest, depreciation and appreciation (EBITDA), compared to a circa £13m EBITDA loss the previous year.
Martin said: “Yes, I’ve got a big smile on my face […] We’ve been making sure we have the right cost base, the right profit and the right risk profile. We took the decisions and avoided [major problem jobs] and have found a safe passage.”
Martin said a key current priority for the firm was attracting apprentices and graduates and “making sure we have got the right skills”.
He did not forsee a significant impact on the business from the planned introduction of a living wage, but said the firm will “constantly talk to our supply chain about it”, adding: “We’re committed to making sure everybody gets paid and decent wage and [firms] make a profit.”
In its full-year results, Lendlease also confirmed new contract wins of £830m at the European division in the 12 months to June 30, up 120% on 2014.
Contract wins include the £200m Rathbone Square, off Oxford Street, the £160m North Wales Prison in Wrexham and the £50m first phase of Stanhope’s Ruskin Square development in Croydon.
The success of the Eurpoean side however masked a drop in revenue and pre-tax profits for the Lendlease group as a whole – following last year’s one-off profit event, Lendlease’s sale of Bluewater. Overall results for this year met market expectations.
Total revenue for the group fell 5% to A$13.3bn (£6.1bn) from A$14bn (£6.4bn) in 2014. Group pre-tax profit fell to A$618m (£281.7m), from A$822.9m (£375.1m). The group was dragged down by a weakness in the Australian construction sector, with lower revenues in engineering and sevices cutting overall construction profit by 14%.