Dive Brief:
- Australian builder and developer Lendlease announced Monday a AU$232 million statutory loss ($150 million) for its fiscal year 2023, a widening from its AU$99 million loss a year earlier.
- The contractor reported AU$22.9 billion in work in progress, up 24% compared to fiscal year 2022, and AU$8.7 billion in external construction backlog, down 17% from last year.
- The company is two years into a five-year pivot toward an investment-led strategy due to lingering financial impacts from the COVID-19 pandemic, and CEO Tony Lombardo further detailed those risk-dodging changes, saying Lendlease will no longer build external projects below AU$150 million, nor build apartments for sale for third parties.
Dive Insight:
For years, Lendlease has said COVID struck its business hard. The impacts still linger.
“In construction, our business performance was subdued in the face of supply chain difficulties, high inflation and subcontractor collapse,” Lombardo said during the most recent earnings call.
That’s been a driver for the company to pivot to an investment-led strategy. Lombardo said the company has “achieved more than AU$170 million in cost savings from the reset phase of our strategy.”
As CEO, Lombardo seeks to transform Lendlease to a slimmer, investment-oriented business with $70 billion of funds under management by fiscal year 2026. Nonetheless, financial experts indicate the company needs to quicken the turnaround, the Australian Financial Review reported.
That reset included trimming 10% of the company’s global workforce in July, which Lombardo described as “difficult but necessary” and designed to aid with pre-tax savings in the years to come.
As with the half-year results, Lombardo also blamed poor performance on the U.K.’s Defective Premises Act, wherein the British government extended the period of defect claims for residential buildings from six to 30 years. As a result, Lendlease took an AU$200 million provision for the first half of its fiscal year, and an additional AU$95 million in the second half of its fiscal year due to “additional information,” Lombardo said.
During the earnings call, Lombardo also confirmed Lendlease has hit pause on Hayes Point, the $1.2 billion mixed-use tower in San Francisco. Originally set for completion in 2026, Lombardo said the project will remain on hold until it secures more renters or capital backing.
Lombardo said Hayes Point was unique in its funding situation, and the San Francisco property market has been hit particularly hard, due to remote work reducing office demand.