$3.8b Metro Tunnel, WestConnex backlog hit Lendlease profits
A $3.8 billion backlog on two key Lendlease projects, Melbourne Metro Tunnel and Sydney’s WestConnex, is weighing down the group’s troubled engineering division and hitting profits.
Lendlease, whose development activity spans Australia, Europe and North America, has revealed its after tax profit fell 41 per cent to $467 million for the year to June 30.
A year earlier, Lendlease reported profit of $793 million.
The group’s earnings were hit by a first-half $500 million pre tax provision in its engineering business to cover cost overruns on the Gateway Upgrade North in Queensland, and Kingsford Smith Drive and NorthConnex M1/M2 Tunnel in Sydney.
The Metro Tunnel and WestConnex, its two largest projects, account for the majority of the $3.8 billion backlog, Lendlease said.
The company’s share price blew up in August last year after investors marked down the stock on the back of the engineering division’s difficulties.
The stock crashed from a high of $21.60 to a low of $11.11 less than five months later.
The news for Lendlease got worse in June this year when Victoria’s Auditor-General revealed cost overruns and time delays on the $11 billion Metro Tunnel, labelling them an "early warning flag".
The engineering division had a $461 million EBITDA loss for the year here more than double the previous year's $218 million.
Lendlease is currently trying to sell the engineering division. On the upside, several interested buyers were in due diligence, it said.
Lendlease said it would pay security holders full year distribution of 42 cents per stapled security, a payout ratio of 50.7 of its profit.
The group reported 17 per cent growth in funds under management to $35.2 billion.
Chief executive Steve McCann said Lendlease was disappointed with the performance of its non core operations but emphasised the strong position of its core business.
“It was a difficult year for the group with the provision taken in the first half for underperforming engineering projects impacting the overall result.”