Construction firm LendLease Group says it is now looking to rid itself of its loss-making engineering and services business after reporting a 96.3% drop in first-half profit.
Net profit after tax for the six months ended December 31 was a miserable $15.7 million, down from $425.6 million in the previous year, the company said in its first-half report.
Shareholders will be hit – the interim dividend has been slashed to 12 cents a share from 34 cents in the first half of 2017.18.
LendLease warned of the problems in its engineering and services business in a profit downgrade late in 2018 and said it was no looking to quit the business.
LendLease took a $350 million write-down of the troubled unit in the half is now considering alternatives after a review deemed it a non-core part of its business.
“We’re considering a range of options to provide clarity for our people while seeking to optimise security holder value,” chief executive and managing director Steve McCann said.
Restructuring the overall business could cost between $450 million and $550 million before tax, Lendlease warned yesterday.
LendLease revealed the hefty provision and review of engineering and services in November, citing issues with Sydney’s NorthConnex tunnel, excessive wet weather and remedial work due to defective design on some projects.
“The review concluded that it is in the best interests of clients, employees and security holders to consider alternatives that will allow both the engineering and services business and Lendlease Group to focus on their core competitive advantages,” Lendlease said yesterday.
LendLease claims the unit could be attractive to buyers due to a pipeline of Federal and State government work forecast to drive transport engineering growth of about 5% a year for the next five years. But Lendlease will be a forced seller, so it can’t expect to get a big price for the troubled business.
Revenue for the six months to December 31 dipped 11% to $7.68 billion.
LendLease securities fell 6.3% to $13.30. The securities had been trading around $17.40 before the warning was issued last November, along with the impairment.
