Lendlease Group (ASX: LLC)
Lendlease Group (ASX: LLC) faced a challenging year in FY24, impacted by global property market pressures, economic uncertainty, inflation, and fluctuating monetary policies. These external factors significantly affected the company’s financial performance, including its security price, leading to disappointing returns for securityholders. Lendlease is actively pursuing capital releases and strategic divestments to create value for securityholders, with a target of $2.8 billion in divestments by FY25.
Despite the market headwinds, Lendlease saw positive operational performance across several segments in FY24. In the Investments business, funds under management (FUM) reached $47.3 billion, along with $3.4 billion in new asset creation, including key projects like The Exchange TRX in Kuala Lumpur and Melbourne Quarter Tower. In Development, Lendlease completed $8.2 billion worth of projects and secured new opportunities, including the $1.3 billion Gurrowa Place project in Melbourne. In Construction, the company wound down operations on the US West Coast and Central regions and began preparing its UK operations for sale. Overall, the Group saw a 23% improvement in operating earnings, which reflected the strength of the business segments and cost reductions. However, higher interest rates and peak capital expenditure still impacted Lendlease's Core Operating Profit after Tax, which modestly increased to $263 million.
Lendlease has also focused on maintaining a strong safety culture, with no fatalities across more than 80 million hours worked. Employee engagement remains a priority, and despite the challenges, Lendlease maintained an 85% participation rate in its global engagement survey, with a minor decrease in results—something the company aims to improve as it continues transforming the business. The year’s statutory loss of $1.5 billion was primarily due to costs from restructuring efforts, including goodwill and asset impairments, which, while disappointing, are necessary for positioning Lendlease for long-term success. This restructuring will streamline operations, reduce costs, and help unlock capital for securityholders. Lendlease has committed to a full-year dividend of 16 cents per security, maintaining a payout ratio of 42% of Core Operating Earnings.
The company is focusing on the Australian market, where its competitive advantages in urban regeneration and strong relationships with global capital partners create significant growth opportunities. For FY25, Lendlease has maintained its earnings guidance, expecting Group Earnings per Security of 54 to 62 cents, with a number of key transactions expected to complete. Gearing will remain elevated in the first half of FY25 but is expected to decrease in the second half as capital recycling progresses. In FY26, Lendlease anticipates improved market conditions, with profitable growth in the Investments segment, higher FUM, and increased transaction volumes. Additionally, Lendlease's capital recycling program is on track to reduce debt and interest costs, while its cost-out program is expected to deliver savings of $125 million annually, with half of these savings realized by FY25 and the full benefit by FY26.
Source: Company’s Report
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