Lendlease (ASX:LLC) share price sinks 5% on FY21 earnings

The company’s shares are slumping following a 16% reduction in revenue. Here’s the nitty gritty of its FY21 result…

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The Lendlease Group (ASX: LLC) share price is suffering a selloff on Monday after the company reported its full-year results.

At the time of writing, shares in the property and infrastructure group are down 5.48% to $11.90.

Lendlease share price slumps despite return to profit

Investors are driving down the Lendlease share price today after the company released its results for the 2021 financial year. Key results included:

  • Statutory profit after tax of $222 million, up from $310 million loss in FY20.
  • Core operating profit after tax of $377 million, up 83% on the prior year.
  • Full year dividend distribution of 27 cents per share, including a 12 cent per share final distribution.
  • Funds under management increased by 10% to $39,600 million.
  • $14,500 million work in progress compared to $12,300 million in FY20.
  • Revenue down 16.4% to $9,892 million compared to the prior full year.
  • Operating earnings before interest, tax, depreciation, and amortisation (EBITDA) increased 34% to $757 million.

What happened in FY21 for Lendlease?

The Lendlease share price is having a disappointing start to the week after the $8.67 billion company released its latest results.

On the top line, the company generated $9,892 million in revenue during the 12-month period. This was 16.4% lower year on year, impacted by social distancing protocols across Lendlease’s sites. For instance, the company’s total work hours declined 9%, resulting in constrained construction activity.

On the other hand, EBITDA picked up compared to the previous year due to disciplined cost measures. Lendlease reduced its costs across overheads, employee expenses, and project expenditure.

Meanwhile, the company experienced a boost in its development division from the strong housing market. This manifested in strong demand for luxury apartments and detached dwellings. Unfortunately for Lendlease shareholders, this doesn’t seem to be enough to push the Lendlease share price into the positive.

Furthermore, Lendlease continued to strategically divest during FY21. The company became more focused on its core businesses following the divestment of its services, engineering, retirement living, and US energy businesses.

Regarding the development pipeline, Lendlease added $8.4 billion worth of projects including six urbanisation projects.

What did management say?

Commenting on the result, Lendlease global chief executive officer Tom Lombardo said:

As an international real estate group with a presence in targeted global gateway cities, the pandemic has had a significant impact across each of our markets and operating segments. Despite COVID impacts, profit recovered, and the Group made significant strategic progress.

Additionally, regarding the company’s development portfolio, Lombardo said:

The review of the development portfolio reaffirmed the underlying strength of the $114b development pipeline across targeted gateway cities. We are confident that production will accelerate to more than $8b per annum by FY24.

What’s next for Lendlease?

Looking ahead, Lendlease shared that the ongoing pandemic-induced lockdowns will continue to have significant ramifications for its real estate markets. The company remains confident that such impacts will eventually pass, however, FY22 is anticipated to be a “challenging year”.

Management noted it expects FY22 to include a restructuring charge and impairment expense.

Lendlease share price snapshot

The Lendlease share price has climbed by around 2% in the past 12 months. For comparison, the S&P/ASX 200 Index (ASX: XJO) has delivered a 24% return during the same period. Year to date, Lendlease shares have fallen by almost 11%.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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