Lendlease (LLC), the multinational construction and asset management company, reported their full year results for 2024. There were few surprises with the result pre-announced, along with their exit from international construction. The HNW Growth Portfolio holds a 2% weight to LLC

  • Profits Up: Profits were up +2% to $26 million. Developments was the highlight cash being received for the Barangaroo apartments and completions of projects in San Francisco and Malaysia. Funds Management is unchanged at $47 billion, a good outcome with $3.4 billion fund inflows offsetting $3.5 billion of downward asset revaluations.  We were pleased to see costs reduce by 14% reflecting an 11% fall in headcount.
  • Prioritising Balance Sheet Strength: Lendlease currently has a gearing ratio of 21%, but Lendlease expects to receive $2.4 billion from the sale of 12 of their communities and the settlement of One Sydney Harbour in the next six months, which will see gearing around 15%.
  • Dividend: flat at 16 cents
  • Outlook: Lendlease expects a 50% increase in profits in 2025, with $2.8B in capital being released from the international business that will be used to pay down debt and return capital to shareholders. Based

Portfolio Strategy: LLC gives the portfolio exposure to a globally diverse pipeline of developments and gives good long-term earnings visibility. The volatility of company profits will decrease now the engineering business is off the books. The company’s business model is 1) to reduce risk by bringing in a financial partner at the development stage, 2) generate development profits as the projects such as office towers in Barangaroo are developed, then 3) vend the completed assets into an unlisted fund that they manage thus delivering ongoing annual funds management revenue.   We applaud management’s decision to shed the glamourous loss making international business, but this is a decision that should have been made several years ago. Streaming some of the trapped capital out to shareholders (current $3.19 per share) will improve sentiment towards the company

Lendlease finished down -0.7% to $6.30.