Lendlease Group (ASX: LLC) delivered its full-year FY20 result this morning, with shares edging lower in late morning trade.
What did Lendlease report?
There was little doubt that Lendlease had a difficult financial year – a combination of funding issues, the costly exit from its Engineering division and a slowdown in residential property sales was well flagged during the year.
The company looks to have missed expectations, reporting an 88% fall in net profit to $96 million, and a statutory loss of $310 million once the $368 million in exit costs are included. Yes, management has paid to sell the underperforming division.
On the positive side, the development pipeline has increased by 48% to $113 billion, but it remains to be seen whether this can be delivered on time and on budget.
On closer inspection, the divisional figures were incredibly weak, Development falling 59% to $322 million in earnings, Construction decreasing 52% to $101 million and the Investments group down 71% to $140 million even whilst increasing assets under management.
The company may have learned a difficult lesson in why unlisted property is more popular than listed after its Lendlease Global Commercial REIT (SGX:JYEU) commenced trading in Singapore only to fall 30% in just a few months.
Lendlease’s FY20 distribution
Lendlease declared a final distribution of 3.3 cents per share from its trust earnings. Seeing as though the company delivered a second-half loss, no distribution was paid from the core business.
The final distribution was down 89% on FY19, while the total FY20 distribution of 33.3 cents per share was down 21% compared to last year.
What happens next?
It’s looking like a difficult year for the business, but it is well capitalised and should be able to navigate through, with a $1.2 billion raising and some $580 million in pre-sales on-sold to investors.
The biggest risk remains falling capitalisation rates of valuations in the company’s $14.2 billion of residential assets, a lot of which are in Australia, and shrinking margins in most projects.
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This article was written by Drew Meredith, Financial Adviser and Director of Wattle Partners. To get in contact with Drew, click here to visit the Wattle Partners website.