UPDATE 2-Lend Lease H1 strong; growth may slip below target

(Adds details, analyst, CEO comments)

By Sonali Paul

MELBOURNE, Feb 28 (Reuters) - Australian developer Lend Lease Group Ltd (LLC.AX) topped forecasts with a 61 percent rise in first-half operating profit, boosted by its U.S. military housing business and the sale of a stake in a property fund it runs.

Lend Lease, which is also a contractor and property manager, said that without a major asset sale, earnings-per-share growth this year would dip just below its five-year average target of 10 percent as it faced a U.S. slowdown and a softer UK housing market.

Analysts had projected 2008 EPS growth of about 10 percent, according to Reuters Estimates.

Lend Lease shares rose as much as 5 percent after the result as investors were relieved there were no big charges for project hiccups such as those that marred results in the previous two years.

"The market would have been pleased to see no repeat of the write-offs," said UBS analyst John Freedman.

July-December net operating profit rose to A$262.8 million ($247.9 million) from A$163.5 million a year earlier, when it was hit by a provision for its UK construction business. Four analysts on average had expected net profit of A$240 million.

Armed with A$1 billion in cash and A$1 billion in bank facilities, Lend Lease executives said they saw opportunities to buy retail and housing development businesses in Australia, Britain and the United States in the next 18-24 months.

"There are certainly opportunities for earnings accretive acquisitions both in Australia and offshore," Finance Director Steve McCann told reporters. "And you shouldn't be surprised to see us make a significant acquisition over the next 18 months to two years."

The company is in a strong financial position to chase acquisitions in contrast to groups such as Centro Properties Group (CNP.AX) that went on buying sprees loaded with debt over the past two years.

"We've kept our powder dry," Lend Lease Chief Executive Greg Clarke told reporters.

SALE ON HOLD

Lend Lease flagged that because property prices were falling it might put on hold plans to sell its King of Prussia shopping mall in Pennsylvania and the Bluewater mall outside London, which it had counted on to boost its earnings.

"However, we are in the fortunate position of not being a forced seller of assets," Clarke said in a statement.

Lend Lease shares last traded down 0.5 percent at A$14.63 after touching a one-month high of A$15.42, outperforming a 2 percent fall in the broader market .AXJO.

Before Thursday, Lend Lease shares had fallen 15 percent this year against a 9 percent drop in the market, amid worries about its exposure to the softer UK property market.

Statutory profit, including property revaluations, rose 49 percent to A$259.6 million.

As expected by investors, Lend Lease warned that earnings from its Crosby residential development arm in Britain would be "significantly softer in the second half" due to the weaker UK property market, following a slight fall in the first half.

The UK business made up about 6 percent of earnings in the first half. Clarke said some of the decline in the UK would be offset by a stronger performance in its Asia Pacific busines. ($1=A$1.06) (Editing by Valerie Lee)