This article is from the Australian Property Journal archive
PROPERTY giant Lendlease has swung to a $1.5 billion loss, as it navigates the exit of its international operations and furthers a substantial asset divestment program. At the same time, the group has noticed a pick up in supplier insolvencies, requiring it to re-tender.
The statutory loss after tax included $1.384 billion of impairments and charges to implement its new strategy, and takes in $513 million of goodwill primarily from its 1999 acquisition of Bovis Construction which it is currently selling, as well as $260 million in property revaluations to the downside, representing a circa 10% reduction.
“Our results for FY24 reflected challenging business conditions and the early actions from our refreshed strategy,” said Lendlease group CEO Tony Lombardo.
Some $1.9 billion of sales from a asset recycling program of $2.8 billion in FY25 have been progressed, and it has also removed regional management structures, which Lombardo said had realised further cost savings.
“Our priorities remain strengthening our balance sheet, returning capital to securityholders, investing in our high return Australian operations and growing our international investments platform,” he said.
Lendlease had been under heavy pressure from shareholders for some time to revamp its business and, in late May announced a $4.5 billion divestment program of its troubled overseas operations. That coincided with the $147 million sale of its Asia life sciences real estate interests into a joint venture with Warburg Pincus.
Lendlease quickly followed that up with the announcement that it had struck a deal to sell its United States construction business, and then announced it was selling its US Military Housing business for $480 million.
Despite the result, Lendlease shares only slipped by 5c in yesterday’s trading, to $6.30.
Core operating EBITDA for FY24 showed a 23% uplift, to $669 million, while core operating profit after tax lifted 2% to $263 million. It had slashed its core operation profit projections by nearly a third after hitting a $1.3 billion roadblock to its business overhaul plans, with Australia’s consumer watchdog raising concerns over its sale of master-planned communities across the country to Stockland and Thai group Supalai.
The parties have been given until 12th September by the Australian Competition and Consumer Commission to take out communities located in four regions of concern from the proposed transaction, representing five of the 12 assets, or to convince the ACCC otherwise.
Core operating earnings per security was 38.1c, with a return on equity of 4.4%
A full-year distribution of 16.0c per security was maintained.
Gearing was 21% with available liquidity of $2.2 billion. Contracted and anticipated cash inflows of $2.4 billion in FY25 are expected.
“We are focussed on growing and improving the performance of the investments, development and construction (IDC) segments. The primary focus of the capital release unit (CRU) is to accelerate the release of capital (NTA of CRU currently $3.19 per security).”
Group earnings per security of 54c to 62c is forecast in FY25.
Its investment segment EBITDA was down 48% after the previous year saw the divestment of just over a third of the US Military Housing Asset Management income stream. Funds under management decreased 2% to $47.3 billion, with $3.4 billion of new additions that were more than offset by negative revaluations.
EBITDA in the development segment was up 80% to $509 million, with key contributions from Residences One at One Sydney Harbour of $183 million, a payment received relating to the San Francisco Bay Area project and $73 million from the completion of retail and residential components at TRX in Kuala Lumpur.
The revaluation of the Victoria Cross over-station development negatively impacted earnings by $57 million.
Development work in progress (WIP) was $14.5 billion, including $8.3 billion of projects in Australia. There were $8.2 billion of development completions and $1.9 billion of development commencements
Communities generated EBITDA of $48 million, down from $142 million in FY23 which benefitted from higher margin settlements and the sale of industrial land parcels. EBITDA of $40 million, equating to $28 million of operating profit after tax, was booked from lots settled in FY24 which would otherwise have been part of the delayed sale of 12 communities projects to Stockland.
In construction, EBITDA of $126 million was up 40%, with a margin of 2.1%. Construction new work secured of $4.8 billion was up 2%, including $1.7 billion in Australia which also has a preferred work book of $10.6 billion.
Lendlease said supplier insolvencies were experienced on a number of Australian projects, requiring re-tendering for various goods and services. The impact of those insolvencies in FY24 was in the order of $50 million.
