Lendlease Earnings Call: Deals, Debt And A Turnaround

Lendlease ((LLESY)) has held its Q2 earnings call. Read on for the main highlights of the call.

Lendlease’s latest earnings call struck a cautiously constructive tone, blending solid operational progress with stark financial setbacks. Management highlighted strong construction growth, resilient investment platforms, and ample liquidity, yet recurring losses, heavy CRU write-downs, and high gearing underscored how much now hinges on executing planned asset sales.

Capital Recycling Drive Accelerates

Lendlease detailed $2.8 billion of CRU exits and $500 million of new asset sales in the half, with a further $1.5 billion targeted in H2 FY’26. Management framed the roughly $3 billion of announced and active transactions as central to reducing leverage and potentially enabling a future buyback once balance sheet metrics improve.

Construction Surges With Backlog at Multi‑Year Highs

Construction was a clear bright spot, with revenue up 22% and EBITDA reaching $69 million, delivering a 3.7% margin. New work of $4.0 billion and an Australian backlog of $8.0 billion, 36% above FY’25, support a combined backlog and preferred work pipeline of about $15 billion.

Investment Platform Holds Scale Despite Market Noise

Funds under management remained steady at $48.7 billion, including $1.5 billion of net additions in the half, while co‑investment capital totalled $2.9 billion. The platform executed $4.4 billion of property transactions and maintained a 4.4% co‑investment yield, signalling resilient income despite valuation headwinds.

Development Pipeline Builds Toward FY’27 Upswing

Development completions reached $1.3 billion, including the Victoria Cross project, and apartment presales climbed to $3.3 billion with settlements weighted to FY’27. Lendlease secured $4.7 billion of new projects this half and is targeting more than $10 billion of development wins across FY’26 to underpin future earnings.

Liquidity Provides Breathing Room on Leverage

The group reported $3.3 billion of available liquidity, split between $2.7 billion of undrawn committed debt lines and $600 million in cash. Net debt excluding hybrids stood at $3.3 billion, and recent hybrid issuances were highlighted as providing flexibility while the company works through its recycling program.

Cost Base Under the Microscope

Net overheads were cut by $58 million to $197 million, putting the current run rate below $400 million. Management has actioned $21 million of pretax run‑rate savings and is targeting $50 million in total, aiming for an exit overhead run rate around $350 million by the end of FY’26.

IDC Guidance Intact Despite H1 Earnings Dip

Lendlease maintained IDC earnings guidance at $0.28–$0.34 per security, after delivering $0.126 in the first half. That leaves a demanding H2 requirement of $0.154–$0.214 per security, with management pointing to stronger operational delivery and key transactions as the main levers.

Finance Leadership Transition Designed for Continuity

The call confirmed a planned CFO transition, with Simon Dixon moving into an advisory role and chairing CRU. Internal executive Andrew Nieland will step into the CFO position from 1 March, a move framed as ensuring continuity while the capital recycling and cost‑reduction programs are executed.

Heavy Losses Highlight Execution Challenge

The group posted a statutory loss of $318 million and an operating loss after tax of $200 million for the half. Management linked the result to impairments, write‑downs, and minimal transactional earnings, underscoring how dependent near‑term profitability is on completing the current pipeline of disposals.

CRU Write‑Downs Drive Major Earnings Swing

CRU recorded an EBITDA loss of $284 million versus a $34 million gain a year earlier, a swing of about $318 million. This included a $136 million pretax write‑down of Communities development land and a $44 million provision for tail risks in exited international construction businesses, with noncash items totalling $180 million.

IDC Profitability Squeezed by Lower Completions

IDC segment EBITDA fell sharply from $341 million to $204 million, a decline of around 40% as development completions and transactional investment earnings both softened. The drop reinforces the importance of rebuilding the development cycle and activating the presales and pipeline booked for FY’27 and beyond.

Investment Transactions Slow, Margins Ease

Investments segment EBITDA was $101 million, down from a prior period boosted by one‑off transaction gains, including $129 million from the Vita joint venture. Management EBITDA margins slipped to 40.7%, reflecting the absence of similar large deals but still indicating a relatively profitable fee platform.

Gearing Elevated and Reliant on Deal Execution

Reported gearing was 25.8% including hybrids and 32.9% excluding them, compared with a 15% underlying target by end FY’26. Management acknowledged that hitting this goal depends heavily on timely completion of roughly $3 billion of CRU and IDC transactions, leaving the balance sheet exposed to deal and timing risk.

CRU Cost Base Still Heavy but Set to Fall

CRU’s large loss was compounded by substantial holding and operating costs, including people, IT, legal, and insurance expenses. Management conceded the cost base remains too high and indicated it will be progressively wound down as asset recycling progresses and the portfolio shrinks.

Valuation Pressures Evident in Noncash Charges

Noncash negative revaluations and impairments on investment properties totalled $118 million, mainly in the U.S., U.K., and Singapore. These marks contributed to the statutory loss and point to ongoing valuation pressure across several key markets in Lendlease’s global portfolio.

Guidance Hinges on Transactions and FY’27 Recovery

Lendlease reiterated IDC FY‑26 earnings guidance of $0.28–$0.34 per security and a 15% gearing target by year‑end, assuming about $3 billion of asset transactions settle as planned. The outlook bakes in net production spend of roughly $600 million, a $50 million cost‑saving program, and a medium‑term IDC recovery supported by development completions of about $4.5 billion in FY’27 and rising construction revenues with 3–4% margins.

Overall, Lendlease’s earnings call painted a picture of a business with strong underlying franchises but significant repair work ahead. Investors will watch closely whether management can deliver the promised asset sales, cost cuts, and development ramp‑up needed to translate operational strengths into restored profitability and a safer balance sheet.