Lendlease warns of more financial pain in 2023-24 as its claims win with US military housing sale

Lendlease has claimed a victory with a $480 million sale deal for its US military housing business as it reveals its battles to return to profits.

While flagging a $105m-plus profit boost in the new financial year from the US sale, Lendlease has slashed up to $190 million off its likely 2023-24 earnings because of delays in a deal to offload part of its Asian life sciences property venture.

Lendlease told the stock exchange it had slashed its self-styled underlying earnings measure, called operating profit after tax, to somewhere between $260m and $275m for 2023-24. This is down from the $450m figure for 2023-24 confirmed just five weeks ago.

Management had just embarked on a $4.5 billion “capital recycling” plan in the wake of the company losing more than two-thirds of its share market value in six years.

Lendlease management warned on May 27 they would also make up to $1.15b to $1.48b of impairment charges related to the group’s battling US and UK construction businesses, poorly performing overseas assets and a variety of looming restructuring costs.

Their biggest potential achievement so far remains the $1.3 billion sale of 12 residential land development projects to rival Stockland, unveiled in February.

That deal remains subject to approval by Australian Competition and Consumer Commission, hopefully as early as this week.

Lendlease management now hopes to offload the remaining 25.1 per cent in its former flagship retirement village chain. The chain is now known as Keyton and is 49.9 per cent owned by Aware Super and 25 per cent owned by Dutch pension group APG.

Lendlease chief executive Tony Lombardo said on Monday it anticipated selling the rest of the Australian retirement village stake in 2024-25, along with a retirement village project in outer Shanghai and its stake in the TRX development in Kuala Lumpar.

Mr Lombard said that with the $1.9b of sales already unveiled, Lendlease had “made significant progress towards our target of recycling $2.8 billion of capital in the next 12 months”.

He said the profit on the US military housing sale indicated his team was taking a disciplined approach to capital recycling and achieving premiums to book value.

“We balance speed of execution with achieving value for our security holders,” he said.

“Implementation of our strategy is progressing well, with cost savings being realised across the regions as we today move to a simplified management structure.”

Lendlease management is fighting a backlash from peeved big-ticket investors with a plan to focus on its Australian assets and international investment platforms.

It reported a $232m net loss in 2022-23 after claiming a $257m core operating profit after tax.

It posted a $136m net loss for first six months of 2023-24 on the back of what management claimed was a $61m core operating profit after tax.