Lendlease posts $264m loss as pandemic bites development, cuts dividend

World News

Global property giant Lendlease has reported a loss for the first half of $264 million as it moves to simplify the business and focus on its core operations of development, construction and funds management.

The loss compared to a statutory profit of $196 million in the prior year. The loss was due to one-off restructuring costs from staff cut backs, development costs and impairments and asset sales.

Chief executive Tony Lombardo, who replaced Steve McCann in June last year, said the first half of the year will mark “the trough in activity and profitability”.

“We’ve made significant progress in reducing the cost base of the organisation as well as improving operational execution and capital allocation decisions.“: Lendlease chief Tony Lombardo,

When he took over the reins he kicked off a review of the business which has seen a shake-up in the business model as it worked through the impacts of the global pandemic.

“Despite the ongoing impacts of COVID-19, we’ve made significant progress in reducing the cost base of the organisation as well as improving operational execution and capital allocation decisions,” he said.

“We also made significant headway progressing projects and initiatives we expect will drive future profits. This includes introducing major new investors to our platform, growing our funds under management, and achieving important planning milestones across projects in San Francisco, London and Sydney.”

Lendlease has an ASX market value of $7.1 billion and invests, constructs and develop mixed use residential, office and industrial sites in what it calls gateway cities.

The company cut its interim dividend to 5¢ from 15¢ a year ago. It is payable on February 25.

Mr Lombardo said the investments segment continues to recover from the worst of the COVID-19 impacts.

“Investment income was higher, driven by an improved contribution from the retirement business and distributions on investments,” he said.

The $6 billion of investment partnerships includes the launch of a value add diversified fund; a joint venture to develop the remaining office precinct at International Quarter London; the acquisition of an industrial portfolio; and the launch of a US Life Sciences partnership.

Also due to the pandemic, there was a subdued contribution from the development segment was the result of fewer completions. While the returns from the segment were well below target, progress continues to be made towards converting the development pipeline into work in progress, which rose $1.6 billion in the first half to $16.1 billion.

“We’re confident Lendlease has passed the low in profitability. While COVID-19 risks remain, improved visibility of factors within our control provides more certainty on the outlook for the group,” he said.

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