Lendlease share price dips as profits and dividends take a hit in FY22

Ongoing impacts of COVID, supply chain disruptions, and rising inflation and interest rates threw up some headwinds in FY22.

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Key points

  • Lendlease share price has fallen today after the company released its earnings results
  • The company reported a statutory loss after tax of $99 million for FY22
  • Lendlease has record work in progress of $18.4 billion

The Lendlease Group (ASX: LLC) share price is in the red in morning trade.

Lendlease shares plunged 4.5% at the open to a low of $10.06 before retracing to their current at $10.34, down 0.58%.

This follows the release of the S&P/ASX 200 Index (ASX: XJO) property and infrastructure group's full-year results for the 12 months ending 30 June (FY22).

Profits turn to losses

Key takeaways from the report include:

  • Statutory loss after tax of $99 million, down from a profit of $222 million in FY21
  • Core operating profit after tax of $276 million, a decrease of 27% year on year
  • Record work in progress of $18.4 billion
  • Final dividend of 11 cents per share, partly franked, down from 12 cents per share in FY21

What else happened during the 2022 financial year?

Lendlease said the ongoing impacts of COVID hindered its performance over FY22. Despite those headwinds, the company reported progress in its organisational reset.

The changes included simplifying its operating model and refreshing its leadership and the overall structure of the organisation.

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

Other key financials included earnings per share (EPS) of 40.1 cents, down from 54.8 cents per share the prior year.

Full-year dividends came in at 16 cents per share, down from 27 cents in FY21.

The company noted a big uptick in its performance in the second half of the year, saying it had "solid momentum" heading into FY23. Core profit in H2 came in at $248 million, up from $28 million in H1.

Gearing 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 made significant progress in resetting our company for future growth. We are now a leaner organisation and more agile in responding to our customers. This year, we formed approximately $11 billion of investment partnerships that will underpin strong growth in funds under management while work in progress is at a record $18.4 billion.

Lendlease CFO Simon Dixon added:

Maintaining financial strength, reflected in gearing of less than 10%, was a priority for the group as we transitioned through a reset year. This was achieved while deploying an additional $1 billion of development capital during the year.

What's next?

Looking ahead, the Lendlease share price could be in for some continuing headwinds in FY23 from higher inflation and interest rates.

The company forecasts its return on invested capital for the investments segment to be in the range of 6% to 7.5% for FY23 while forecasting a return on invested capital for the development segment in the range of 4% to 6%.

Lendlease forecast earnings before interest, taxes and depreciation (EBITDA) margin for its construction segment in the range of 1.5% to 2.5% for FY23. That's below its target range of 2% to 3% due to ongoing risks from COVID-19 disruptions, supply chain constraints and costs pressures.

Lendlease expects a material improvement in the outlook for FY24, with a return on invested capital target for its development segment of 10% to 13% and a return on equity target of 8% to 11%.

Lendlease share price snapshot

The Lendlease share price is around 5% in 2022, a drop just under the 7% year-to-date loss posted by the ASX 200.

Motley Fool contributor Bernd Struben 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 Scott Phillips.

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