A new CEO usually means a new broom and ideas and a bit of a clean out after a company’s long time chief moves elsewhere, and so it was for Lendlease in the six months to December.
CEO Tony Lombardo replaced Steve McCann in June last year (he is now running Crown Resorts, which could turn out to be a short-term gig given the Blackstone bid), and immediately started a review of the global company.
Yesterday we saw the first major sign of that review with a first half loss of $264 million as it moves to simplify the business and focus on its core operations of development, construction and funds management.
The loss compared to a statutory profit of $196 million in the prior year. The loss was due to one-off restructuring costs from staff cut backs, development costs and impairments and asset sales.
Lendlease said its core operating profit was down to $28 million from $205 million for the final six months of 2020.
Shareholders suffered as a result – the interim dividend of 5 cents per share was a third of the 15 cents paid a year earlier. The company paid an interim of 20 cents a share for the December 2019 half, which was pre-pandemic.
The new CEO’s review of the company has already seen a shake-up in the business model as it worked through the impacts of the global pandemic.
“Despite the ongoing impacts of COVID-19, we’ve made significant progress in reducing the cost base of the organisation as well as improving operational execution and capital allocation decisions,” he said in Monday’s statement.
“We also made significant headway progressing projects and initiatives we expect will drive future profits. This includes introducing major new investors to our platform, growing our funds under management, and achieving important planning milestones across projects in San Francisco, London and Sydney.”
Mr Lombardo said the investments segment continues to recover from the worst of the COVID-19 impacts.
“Investment income was higher, driven by an improved contribution from the retirement business and distributions on investments,” he said.
“Also due to the pandemic, there was a subdued contribution from the development segment was the result of fewer completions. While the returns from the segment were well below target, progress continues to be made towards converting the development pipeline into work in progress, which rose $1.6 billion in the first half to $16.1 billion.
“The first half of FY22 is expected to mark the trough in both activity and profitability for the Core business with a significant improvement anticipated from the second half of FY22.
“We’re confident Lendlease has passed the low in profitability. While COVID-19 risks remain, improved visibility of factors within our control provides more certainty on the outlook for the group,” Mr Lombado said in the statement.
Lendlease shares ended the day steady at $10.31
