Lendlease’s Revenue Drops 37% as Capital Recycling Targets $3 Billion

Overview of Financial Results

Lendlease Group has reported a statutory loss after tax of $318 million for the half year ended 31 December 2025, a sharp reversal from the $48 million profit recorded in the prior corresponding period. This downturn was largely influenced by non-cash investment property revaluations and impairments totalling $118 million, primarily across the US, UK, and Singapore markets. Revenue fell 37% to $2.839 billion, reflecting reduced transaction earnings and limited completions in key segments.

Segment Performance Highlights

The Investments segment maintained a stable underlying operating performance with Operating EBITDA of $101 million, though transaction earnings were lower compared to the prior period. The Development segment saw a significant drop in earnings to $34 million, impacted by fewer project completions and increased invested capital. Conversely, the Construction segment showed improvement, with revenue rising 22% to $1.9 billion and Operating EBITDA turning positive at $69 million, driven by new project commencements and better project execution.

The Capital Release Unit (CRU) segment was the most challenged, posting an Operating EBITDA loss of $284 million. This included a $95 million write down on Communities land parcels and $44 million in provisions related to exited international construction businesses. The CRU’s primary focus remains on accelerating capital recycling, balancing value realisation with execution speed.

Balance Sheet and Capital Management

Lendlease’s reported gearing stood at 25.8%, with an underlying gearing of 32.9% after excluding the benefit of recently issued hybrid securities. The Group is targeting a reduction in underlying gearing to 15% by the end of FY26, contingent on the successful completion of capital recycling initiatives. These initiatives, amounting to approximately $3 billion, include the joint venture with The Crown Estate, sale of TRX retail and office investments, and transactions under exclusivity such as the sale of Keyton Retirement Living and UK build-to-rent assets.

Liquidity remains robust at $3.3 billion, supported by $0.65 billion in cash and $2.6 billion in undrawn debt facilities. The weighted average debt tenor has shortened to 2.5 years, reflecting a proactive approach to managing debt maturity profiles.

Distribution and Shareholder Returns

The Group declared an interim distribution of 6.2 cents per security from the Trust, payable on 18 March 2026, with no interim dividend declared by the Company. The Distribution Reinvestment Plan (DRP) remains active, offering securityholders the option to reinvest distributions at a price based on the average market price following the record date.

Outlook and Strategic Focus

Lendlease describes FY26 as a transitional year, maintaining IDC earnings guidance of 28–34 cents per security. The second half is expected to deliver improved earnings, supported by project completions such as One Circular Quay and Victoria Harbour, and growth in the Construction pipeline. The Group remains committed to disciplined delivery, performance improvement, and long-term value creation.

Meanwhile, the CRU segment will continue to focus on capital recycling, with costs expected to remain elevated in the second half but reduce as transactions complete. The Board has reiterated its commitment to returning surplus capital to securityholders, including through an on-market buyback once gearing targets and pre-conditions are met.

Risks and Legal Matters

The Group faces ongoing challenges including a shareholder class action alleging breaches of continuous disclosure obligations and a tax dispute with the Australian Tax Office related to the partial sale of its Retirement Living business. Additionally, Lendlease holds a $280 million provision for UK building remediation liabilities, reflecting legislative changes and remediation commitments on buildings developed prior to Lendlease’s acquisition of Crosby.

Despite these headwinds, Lendlease maintains a strong financial position and balance sheet flexibility, positioning it to navigate the current environment while pursuing growth opportunities.