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Lendlease (ASX:LLC) - Global CEO, Tony Lombardo
Global CEO, Tony Lombardo
Source: Lendlease
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  • Global property giant Lendlease (LLC) has made a $222 million profit for the year, reversing a $310 million deficit the previous year
  • Production delays plagued the development segment of the company, wreaking havoc on leasing and sales across current projects
  • Lendkease recorded a non-core loss after tax of $181 million, including an additional provision of $168 million
  • Although preliminary findings have been reached, the CEO’s wide-ranging business assessment has yet to be completed
  • Shares in Lendlease are down 6.27 per cent to trade at $11.80 at 12:27 pm AEST

Lendlease (LLC), the global property powerhouse, has turned a profit of $222 million for the full year, reversing a $310 million loss from a year ago.

Property investment valuations drove the company’s core operating profit to $377 million, up 83 per cent.

Production delays plagued the development segment of the company, wreaking havoc on leasing and sales across current projects.

Following weaker rental demand and lower rents for the recently constructed apartments for rent towers at Elephant Park in London, a $60 million pre-tax contingency was taken.

Lendlease recorded a non-core loss after tax of $181 million, including an additional provision of $168 million.

Despite COVID’s effects many significant efforts had been advanced, the company said, including securing an investment partner for One Sydney Harbour’s first two residential buildings.

These measures contributed to a 7.2 per cent increase in development return on invested capital (ROIC), which is still below target.

Delays in the start of new projects, site closures and decreased productivity all slowed construction activity for the firm.

The impact of social distancing policies was reflected in a 16 per cent drop in income compared to a nine per cent drop in hours spent across Lendlease’s sites.

With the help of cost control, the earnings before interest, taxes, depreciation and amortization margin increased to 2.7 per cent, nearing the higher end of the goal range of 2-3 per cent.

The ROIC for the investments arm was 5.9 per cent, which was just below the desired range of 6-9 per cent. Investment management earnings remained stable, but lower than the previous year due to a large performance fee.

Co-investment yields were reduced by roughly $40 million in rental assistance offered to tenants across the platform. Returns on the group’s investment portfolio were also hurt by interruption across underlying assets.

Acting group chief financial officer Frank Krile said the group entered FY22 with gearing below its 10-20 per cent target range, providing it with significant funding capacity.

“The strategic divestments executed throughout the year, together with our balance sheet strength, puts the group in a solid position to navigate through further COVID uncertainty,” he said.

A total of $8.4 billion was added to the development pipeline, comprising six urbanisation projects totalling $7.4 billion and five investment partnerships totalling $5.1 billion.

Although preliminary findings have been reached, the CEO’s wide-ranging business assessment, which he began upon his hiring, has yet to be completed.

The plan has been reaffirmed, as have the strategic priorities. By FY24, the group core operating return on equity goal range of 8-11 per cent should be met.

The new organisational structure aims to provide a more consistent operating model across all areas, integrate an enterprise-wide strategy and simplify group operations.

The new structure is projected to save more than $160 million per year on average, with benefits beginning in H2 FY22.

The COVID pandemic’s imposed lockdowns continue to have a major impact on real estate markets in the group’s global market. While Lendlease is optimistic that these cities will recover quickly in the short term, FY22 is anticipated to be a difficult year.

Lendlease Global CEO Tony Lombardo said: “As an international real estate group, we expect FY22 to be the cyclical low point for both development production and profitability.”

“We are targeting to deliver solid returns across the construction and investments segments, although activity levels are likely to continue to be affected by the pandemic.”

Shares in Lendlease fell 6.27 per cent to trade at $11.80 at 12:27 pm AEST.

LLC by the numbers
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