The divestment of its underperforming engineering business and the impact of COVID-19 resulted in property developer Lendlease (ASX: LLC) recording a $310 million loss in FY20.
This marks two years in a row of "disappointing" results from Lendlease, with the major loss representing a 166.4 per cent dive year-on-year following a $467 million profit in FY19.
The majority of the group's woes were experienced in the second half, with COVID-19 impacts contributing to $212 million in losses during the period.
Despite the result Lendlease is still distributing a dividend, with shareholders to secure 33.3 cents per stapled security.
During the financial year Lendlease was supported by $9.7 million in JobKeeper wage subsidies. Globally, the company received $15 million in government support in markets where it was offered.
Lendlease CEO and managing director Steve McCann (pictured) says a number of mitigating actions were implemented to stem the company's losses, including cost reductions, but COVID-19 market conditions ultimately took a heavy toll.
"The group responded swiftly to the onset of COVID-19 with the health and safety of our people and customers paramount, along with measures to strengthen our financial position," says McCann.
"Notwithstanding the challenging environment, the group advanced its strategic agenda in FY20.
"Significant progress was made on growing and converting the development pipeline, including securing additional major urbanisation projects, achieving important planning milestones and creating new investment partnerships to support projects moving into delivery."
The impacts of the COVID-19 pandemic were felt by Lendlease during the second half leading to delays in converting development opportunities and weak trading conditions in its home building segment.
Lendlease says its construction business was most hit in cities where mandated shutdowns were implemented, with effects including lower productivity, projects being put on ice, and delays in the commencement or securing of new projects.
Further, deteriorating market conditions and declining real estate values saw the company's investment portfolio take a hit.
McCann says he has optimism for the company's post-COVID future.
"Our ability to developer urban precincts with a focus on financial, environmental and social outcomes is being recognised globally," says McCann.
"Continued organisation success during the year resulted in the development pipeline more than doubling over the last five years to above $100 billion."
Since June 30 the company has already added a major investment partnership with Mitsubishi Estate to deliver the first residential tower at One Sydney Harbour, Barangaroo South. This project is expected to contribute approximately $100 million to after tax profit in FY21.
"The ongoing conversion of our pipeline provides access to development opportunities and high quality assets for our investment partners," says McCann.
"This integrated approach, along with our placemaking skills, provides a point of difference we believe few can match."
The previously announced $160 million sale of Lendlease's engineering business is expected to complete soon.
Lendlease says it expects the costs associated with the sale of its engineering business will now be $550 million pre-tax, with $525 million accounted for in FY20.
Post-sale Lendlease will retain some major projects including the NorthConnex project in Sydney and the Melbourne Metro Tunnel Project.
Updated at 9:56am AEST on 17 August 2020.
Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support