Lendlease Group shares jumped sharply yesterday on the news that the company is in the process of getting rid of its troubled engineering and services business.
The shares were up 10.8% to $15.01 on the news of the looming sale (the company says it is currently looking at offers).
The sharp rise in shares was despite a cut to the final dividend and a 40% plus slump in full-year profit for the 2018-19 financial year.
Revenue for the 12 months to June 30 edged down 0.1% to $16.54 billion, while net full-year profit sank 41.1% to $467 million (from $793 million in 2017-18).
Lendlease cut its final unfranked distribution by 5.0 cents to 30 cents a share. Total distribution for the year is 42 cents per security, down from 69 cents in 2017-18.
“The past year has been a difficult one for the group, which has impacted our security holders, customers and employees,” Lendlease chairman Michael Ullmer said in yesterday’s release, adding that the company’s “board is currently overseeing a sale process for the non core (engineering and services) business” following a strategic review.
Lendlease Group took a $500 million hit related to three disappointing roadworks projects that drove that sharp slide drop in profit.
CEO Steve McCann called it a challenging year for the company and later told analysts “Our pipeline looks fantastic and I think our outlook looks very strong, in terms of delivering longer-term earnings”.
Lendlease said it had several interested parties undertaking due diligence for its engineering and services units, which lost $461 million in 2018-19 (and were the subject of a surprise write down revealed late in 2018).
The company said it would take a $500 million hit on the Gateway Upgrade North and Kingsford Smith Drive highway widening projects in Brisbane, as well as the NorthConnex M1/M2 9km tunnel project in Sydney.
Gateway Upgrade North was finished in March and the other two projects are due to be finished in 2020
Once the now “non-core” engineering and services units are sold, Lendlease will be left with its construction, development and investment divisions, which it said had a profit after tax of $804 million, down 16% from last year.
Lendlease said in yesterday’s announcement that it now had $100 billion in projects in the pipeline, including $27 billion in urbanisation work in four cities.
The company said these new deals included “three major urbanisation projects in Milan, Chicago, and Sydney, an around $US20 billion project in the San Francisco Bay Area secured post balance date, Preferred on two projects in London and Birmingham valued at around $US17 billion
