Lendlease share price falls as earnings and dividends suffer in FY22

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The Lend-Lease Group (ASX: LLC) the stock price is in the red in morning trading.

Lendlease shares plunged 4.5% on the open to hit a low of $10.06 before recovering to their current level of $10.34, down 0.58%.

This follows the release of S&P/ASX 200 Index (ASX:XJO) real estate and infrastructure group’s annual results for the 12 months ending June 30 (FY22).

Profits turn into losses

Key takeaways from the report include:

  • Statutory after-tax loss of $99 million, down from a profit of $222 in FY21
  • After-tax operating profit of $276 million, down 27% year-over-year
  • $18.4 billion record work in progress
  • Final dividend of 11 cents per share, partially franked, compared to 12 cents per share in FY21

What else happened in fiscal year 2022?

Lendlease said the continued impacts of COVID hampered its performance in FY22. Despite these headwinds, the company reported progress in its organizational reset.

Changes included simplifying its operating model and refreshing its leadership and overall organizational structure.

Costs were significantly reduced, exceeding the company’s savings goal of $160 million per year. Lendlease also formed some $11 billion in investment partnerships during the year to grow its platform.

Other key financial data included earnings per share (EPS) of 40.1 cents, compared to 54.8 cents per share a year earlier.

Dividends for the full year were 16 cents per share, compared to 27 cents in FY21.

The company noted a strong performance boost in the second half of the year, saying it had “solid momentum” heading into FY23. at $248 million, versus $28 million in H1.

Leverage of 7.3% is below the company’s target range of 10% to 20%, with total available liquidity of $3.9 billion.

What did management say?

Commenting on the results, Lendlease CEO Tony Lombardo said:

We have made significant progress in resetting our business for future growth. We are now a leaner and more agile organization to respond to our customers. This year, we have formed approximately $11 billion in investment partnerships that will support strong growth in funds under management as work in progress reaches a record $18.4 billion.

Lendlease CFO Simon Dixon added:

Maintaining financial strength, reflected in a single digit leverage ratio, was a priority for the group as we navigated a reset year. This was achieved while deploying an additional $1 billion of development capital during the year.

And after?

Going forward, Lendlease stock price may experience continued headwinds in FY23 due to rising inflation and rising interest rates.

The company expects its return on investment for the investment segment to be between 6% and 7.5% for FY23, while expecting a return on investment for the development segment between 4% and 6%.

Lendlease expects earnings before interest, taxes, depreciation and amortization (EBITDA) margin for its construction segment in the range of 1.5% to 2.5% for FY23. This figure is below its target range of 2% to 3% due to continued risks from COVID-19 related disruptions, supply chain constraints and cost pressures.

Lendlease expects a significantly improved outlook for FY24, with a return on investment target for its development segment of 10% to 13% and a return on equity target of 8% to 11%.

Lendlease Stock Price Overview

Lendlease’s share price is around 5% in 2022, down just below the 7% year-to-date loss recorded by the ASX 200.

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