Lendlease Posts $89M Six-Month Loss as Comeback Stalls Amid Valuation Slide

Lendlease posted a fiscal first-half loss after tax of A$136 million ($89.2 million), narrowing from a year-earlier loss of A$141 million but casting doubt on the trajectory of the troubled Australian builder’s comeback.

Stung by a A$125 million drop in property valuations during the six-month period, Sydney-based Lendlease is under pressure to stanch the bleeding after recording full-year losses of A$99 million in fiscal 2022 and an even-wider A$232 million in fiscal 2023.

Revenue from contracts with clients during the six months fell 5 percent year-on-year to A$4.84 billion, as Lendlease struggles to execute a strategy of leveraging its competitive edge in large-scale urban development while expanding the investment platform, but CEO Tony Lombardo accentuated the positive.

“Despite challenging capital markets, we’ve continued to execute on our stated strategic initiatives, simplifying the business and further streamlining our operations,” Lombardo said Monday in a release. “We reached a major development milestone with completion of the A$1.5 billion retail development, The Exchange TRX, and are nearing completion on A$2 billion of luxury apartments at One Sydney Harbour, Barangaroo.”

Share Value Wipeout

Lendlease’s ASX-listed shares tumbled nearly 14 percent Monday upon release of the results and fell a further 4 percent in Tuesday trading.

A host of activist investors have grown impatient with the stalled progress of Lendlease’s turnaround, The Australian reported Monday, with some calling for more board accountability after a series of downgrades and earnings misses.

“Lendlease has a broken business model set in a different era of cheap money, which allowed poor capital allocation, big overheads and undisciplined global expansion,” Tanarra Capital’s John Wylie told the newspaper. “Incredibly; the shares of this once iconic company are less than what they were 30 years ago. It needs restructuring and change.”

The development segment’s earnings before interest, tax, depreciation and amortisation rose 26 percent year-on-year to A$112 million in the fiscal half. A payment was received in relation to the cancelled San Francisco Bay Area project with Google, and a gain of A$37m was recorded after completion of The Exchange TRX in Kuala Lumpur, with the mall now open and 96 percent leased, the company said.

Rosy Scenario

In the second half, Lendlease expects a consistent performance from investments, a much improved showing from development and a higher contribution from construction.

By region, another strong full-year contribution is anticipated from Australia and a consistent performance in Asia, while Europe and the Americas continue to be hit by capital market woes.

“The group will continue to prioritise securityholder value ahead of transaction timing,” Lendlease said. “While there is potential earnings upside from certain planned transactions if they complete prior to year end, challenging markets and operational risks remain.”

The company said it will provide a strategy update in late May.