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.
For all the latest news and announcements throughout August, check out Rask Media’s reporting season page and ASX reporting season calendar.
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.
