Lendlease (LLC), the formerly multinational construction and asset management company, reported its full-year results for 2025, which showed progress on the turnaround and a successful exit from problematic international construction. The HNW Core Portfolio holds a 2% weight to LLC.

Key Points:

  • Profits Up: Lendlease’s profits were 37% up to $386 million. Development profits were solid, driven by the settlement of luxury apartments in Barangaroo, Sydney. Funds management earnings were steady, with FUM increasing by 3% to $48.9 billion. Corporate cost management was a highlight, decreasing by 67% thanks to a reduction in headcount of 1,000.
  • Shrinking to Improve: Over the year, LLC has announced $2.5 billion of capital recycling initiatives, exiting international construction, US military housing, and Australian project housing. We have been pleasantly surprised at the prices management has received in slimming down the organisation (see table below).
  • Dividends Up: The LLC’s dividend of $0.23 per share was up 44% from last year, with a payout ratio of 41% being low. The payout ratio for dividends is expected to increase once the cash proceeds from sales come through in the second half of 2025.
  • Buy-back:  Excess capital is going to be returned to shareholders via an on-market share buy-back, roughly totalling $500 million or 10% of the outstanding capital. This will put upward pressure on LLC’s share price.
  • Outlook: Management is targeting another $2 billion of asset sales for FY26, with $1 billion at an advanced stage. For the base Australian business,  profits in the coming year will be supported by $1.5B in new investment mandate wins and $5 billion in new construction work. What the market wants to see is LLC returning capital to shareholders.

Portfolio Strategy: The market remains sceptical towards LLC after it revealed in May 2024 that its sprawling, glamorous developments in the USA and Europe had been consistently unprofitable and propped up by the company’s operations in Australia and Asia. This infuriated shareholders. Streaming some of the trapped capital out to shareholders (current $3.19 per share) will improve sentiment towards the company. While we can see the moves and asset sales made by management over the past year, scepticism will remain until investors see the colour of LLC’s money. Post these capital returns,  Atlas will reassess our investment case.

Lendlease finished +6.7% to $5.92