Lendlease share price tumbles 5% on $141 million loss

The group realised a $200 million provision on the back of UK government action.

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Key points

  • The Lendlease share price is falling more than 5% to trade at $7.85 at the time of writing
  • Its fall comes despite news the company's statutory loss narrowed year-on-year to come in at $141 million in the first half 
  • That included a $200 million provision due to changes enacted by the United Kingdom government

The Lendlease Group (ASX: LLC) share price is plunging on the back of the property and infrastructure group's first-half earnings.

The stock has dropped 5.42% at the time of writing to trade at $7.85.

Here are the highlights of the group's report:

Lendlease share price slumps amid $200m UK provision

  • Core operating profit came in at $105 million – compared to $28 million in the prior comparable period
  • Statutory loss after tax of $141 million – the pcp saw a $264 million statutory loss
  • Operating earnings per share (EPS) of 15.2 cents – a 271% improvement
  • 4.9 cents per share interim dividend declared – down from 5 cents per share in the pcp
  • Funds under management lifted 8% to $48 billion
  • Development pipeline grew to $121 billion

The group's $141 million statutory loss for the period included a $200 million provision due to action by the United Kingdom government, the company said.

Industry-wide government action saw the period for defects liability extended from six years to 30 years, along with changes to building safety regulations for completed residential buildings.

The liability mainly relates to buildings Lendlease holds as a result of its 2005 Crosby acquisition.

What else happened last half?

The company's bottom line was also dinted by a $39 million impact of property revaluations.

Meanwhile, Lendlease acquired Sydney's One Circular Quay for $3.1 billion and its completions, including Sydney Place, came to $2.8 billion.

What did management say?

Global CEO and managing director Tony Lombardo commented on the news weighing on the Lendlease share price today, saying:

Notwithstanding the impact of the UK Government's retrospective industry wide action on our statutory result, we achieved solid progress against our key operating metrics after successfully resetting the business.

Our global workplace assets comprise more than $25 billion in [funds under management] and are currently 95% occupied – reflecting our leadership in delivering and managing sustainable places and precincts where people want to be.

Going forward, our development work in progress of $18 billion puts Lendlease on track to achieve its target of $8 billion completions by financial year 2024.

What's next?

The group expects to kick off $6 billion of work in the second half. That's expected to include Sydney's One Circular Quay and Los Angeles' La Cienega.

It also tips its core operating earnings to improve in the second half but notes current market risks, including inflation and interest rates, are tempering the pace of recovery.

Outcomes for its three operating segments are likely to be towards the lower end of financial year 2023 guidance.

Its investments segment is expected to post a return on invested capital of 6% to 7.5% while that of its development segment is tipped to come in between 4% and 6%. Its construction segment is forecast to have an earnings before interest, tax, depreciation, and amortisation (EBITDA) margin range of 1.5% to 2.5%.

Lendlease share price snapshot

The last 12 months have been rough on the Lendlease share price.

It's tumbled 21% during that time. For comparison, the S&P/ASX 200 Index (ASX XJO) has lifted 2% since this time last year.

However, this year has been stable for the stock so far. It's currently 0.4% higher than it was at the start of 2023. Meanwhile, the ASX 200 has gained around 7% year to date.

Motley Fool contributor Brooke Cooper 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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