Lendlease goes into loss on restructuring

Lendlease, which in Australia targets wealthy buyers with luxury apartments as well as more moderate-income buyers with its planned community land and homes products, said higher rates were affecting its different types of customers differently. .

“If one were to look at the high-end luxury residential apartment market in Australia, then clearly it is less sensitive to interest rates,” said chief financial officer Simon Dixon. The Australian Financial Review.

While Lendlease had sales of 3,100 lots in the last year, community business customers were pausing as they waited to see how high the Reserve Bank would raise borrowing costs and this had slowed sales in the trading period. current, Dixon said.

“There has been a slowdown, a modest slowdown compared to the plan. But we expect it to be temporary, and then sales pick up again as we move into the second half.”

Lendlease did not publish forecasts for sales or liquidations in any of its residential businesses.

Investors took a mostly neutral view on Monday, leaving the stock little changed after the company said it posted an after-tax loss of $99 million in the year to June as revenue fell and it paid nearly $500 million. dollars in restructuring costs as part of Lombardo’s strategy. change plane

Diversified developer, builder and investor revenue declined 2 percent to $8.96 billion in the year through June. Restructuring costs included $289 million in project impairments, $129 million in lease impairments and $56 million in redundancy costs. That reduced net earnings by $222 million from the previous year.

After many years of criticism that it was a difficult-to-understand and underperforming business – a message that institutional shareholder Tanarra Capital publicly reinforced in April when it laid out additional steps Lendlease could take to improve its performance – the costs were necessary to make the necessary changes. Mr. Lombardo said.

Much of the pain occurred in the first half, when the company incurred an after-tax net loss of $264 million, and Lendlease said on Monday that after improvement in the six months to June, it had “solid momentum” at enter the current fiscal year. .

The so-called main profit jumped to $248 million in the second half from $28 million in the first half and the value of development starts increased to $4.4 billion from $1.5 billion.

The process of change Lombardo embarked on after assuming leadership of the company last year will take time and Lendlease said it would not reach its 8-11 percent target group return on equity target until FY24. .

For the current year, Lendlease said the return on capital invested in its investment division would be in the 6-7.5 percent range, including a $73 million pre-tax contribution from the sale of its 13 percent management US Military Housing Assets Income Stream.

ROIC for its development arm would be below target in the range of 4 to 6 percent this year and ROIC for its construction business would fall below the company’s target of 2 to 3 percent in the range 1.5 to 2.5 percent, because of the COVID disruption, cost pressures, and supply chain constraints.

“These risks have been well managed to date, but their persistence, coupled with low activity in the Americas, is likely to weigh on performance in FY23,” the company said.