UPDATE 2-Lendlease Reports $1 bln Loss Amid Strategy Shift
Australia’s Lendlease reported a wider annual loss on Monday, as the real estate developer faced challenges from an operational strategy shift and delays in the review of the sale of community projects.
The Sydney-based company, which stands as the largest property developer, builder, and real estate investor in the country, has announced plans to retreat from its overseas construction business. This strategic pivot aims to free up to A$4.5 billion ($3.01 billion) in capital.
Earlier in May, Lendlease had warned investors that its annual core earnings would take a substantial hit. This warning came following the Australian competition regulator’s decision to delay its review of a sale of community projects to Stockland Corp by more than two months, in a deal valued at A$1.3 billion.
For the fiscal year, the developer reported a loss after tax of A$1.50 billion ($1.00 billion), a significant decline compared to a loss of A$232 million in the previous year. “Our results for FY24 reflected challenging business conditions and the early actions from our refreshed strategy,” commented Tony Lombardo, chief executive of Lendlease. He also noted that the company has achieved further cost savings thanks to a simplified management structure.
Lendlease has made headway in its restructuring efforts, having sold A$1.9 billion in assets as a part of its targeted A$2.8 billion by June 2025. The overhaul efforts have seen the divestiture of its U.S. construction business, including the wind-down of operations on the West Coast and Central regions, along with an agreement over the sale of its East Coast operations.
The move to revamp its operations has come under the intense scrutiny of shareholders, with major investors like businessman and Australian Sports Commission chair John Wylie’s Tanarra Capital, along with David Di Pilla’s HMC Capital, pushing for operational overhauls.
Analysts, including those from UBS, have pointed out the underlying operational challenges within the company, while brokerage Citi has raised concerns regarding Lendlease’s development pipeline, strategy, and cost measures.
In the midst of these strategic shifts and operational challenges, Lendlease has declared a final dividend of 9.5 Australian cents per share. However, the announcement did little to buoy investor confidence, with shares dropping as much as 2.7% during the trading day.
($1 = 1.4948 Australian dollars)
