Lendlease back in black but warns of construction hiccups

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Lendlease back in ****** but warns of construction hiccups

Property giant Lendlease has limped back to the ****** as it tries to focus on its *********** development and investment operations after a series of costly foreign forays.

Posting a $48 million profit for the December half, the Sydney-based group claimed to have made “strong progress” on its focus on higher-performing businesses unveiled in May last year.

The modest profit compares with a loss of $136m for the December half of 2023 and a massive improvement on the $1.5 billion bottom line losses after Lendlease acted on an investor revolt over failed ***, US and European forays.

And Lendlease is preparing to take on the *********** Tax Office over $120m of assessments for allegedly unpaid capital gains tax on the partial sales of its retirement living operation.

In notes to the profit result, Lendlease said it had received “independent legal advice” on its position and it believed its tax treatment on its retirement village dealing was in line with the law and a ruling by the tax office in 2022.

Lendlease would “contest the matter through litigation” if its objections to the tax office were unsuccessful.

“The group intends to vigorously defend its position,” it told the stock exchange.

Former Bunnings boss John Gillam took over from Michael Ullmer as Lendlease chair in November last year as investors forced action over plunging profits and the share price falling by two-thirds this decade.

The latest result shows the construction division is still battling, suffering a a $26m loss as revenue slipped by $331m to $1.55b.

Chief executive Tony Lombardo said material costs inflation and subcontractor issues hit profits, pointing to two projects having “negatively impacted financial performance”.

While not identifying those two projects, Mr Lombardo said his team was in the “process of recovering some of those losses” related to fixed price *********** contracts secured in 2020/21. “Some of those discussions are commercially in confidence,” he said.

“There’s been supply chain, insolvencies and productivity issues. They’ve been impacted by hyper inflation in construction.”

Mr Gillam said the problems with the projects were identified “well after” Lendlease released its full -year results in August and he expected the *********** construction division to be profitable in the second half.

“We believe that, based on the thorough review of all projects, that the problems isolated these two projects,” he said.

The Lendlease bosses said in the results announcement to the stock exchange that known loss-making projects would completed in the June half and project losses had been fully recognised in the December half result.

The Lendlease development segment enjoyed a $95m half-year net profit, up from a $29m loss, thanks in large part of settlements on two big apartment projects beside Sydney Harbour.

Mr Gillam and Mr Lombardo painted an optimistic picture for the developments division, saying it was well-placed for new mixed-use and residential projects.

Lendlease shares were trading about 1.2 per cent down on Monday morning.

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