COVID-19 has had a material effect Lend Lease causing them to cancel their final distribution and book a further loss in excess of $240m in FY20.
The Groups' development business has experienced delays in the conversion of a number of opportunities across urbanisation projects due to the impact of COVID-19, including at Melbourne Quarter, Barangaroo and International Quarter London. This segment has also been impacted by delays in apartment settlements along with elevated cancellations across the Communities business.
Performance of the construction segment was impacted by COVID-19 across all regions, particularly in cities where mandated shutdowns were implemented. This has included lower productivity, projects being put on hold and delays in the commencement or securing of new projects.
The Group's investments have also been impacted by reductions in valuations across in the c.$4 billion Investment portfolio, including the Group’s co-investments within the funds platform, Retirement Living business and other asset positions. The reduction in valuations in H2 FY20 is expected to have an impact on FY20 Core profit after tax in the range of $130 – $160 million.
The retail asset management business within Investments has been working with retail partners as they navigate through a difficult period. This will have a negative impact on the operating earnings of the Investments segment in both FY20 and FY21. Following an assessment of these and other impacts, the Group expects FY20 profit after tax for the Core business to be in the range of $50 to $150 million.
Lend Lease confirmed that their partnership with PSP Investments, one of Canada’s largest Pension funds, formed to develop the c.$4 billion Milano Santa Giulia project has achieved satisfaction of their conditions precedent and that the pre-sale of the first two buildings have contributed to the results for FY20.
The Group also noted that they had progressed planning consents for projects in the urbanisation pipeline, including approval being obtained for Milan Innovation District and 30 Van Ness, San Francisco which supports the conversion of these projects to delivery.
With respect to the exit of the Engineering business, the sale to Acciona is expected to complete in early FY21, subject to outstanding conditions, including third party consents, being satisfied. The Melbourne Metro Tunnel Project, NorthConnex and Kingsford Smith Drive projects are being retained by Lendlease and will the subject of imminent completions or further discussions.
Lendlease has previously disclosed a restructuring cost estimate to exit the Engineering and Services businesses of $450 – $550 million on a pre-tax basis. This cost estimate included implementation and selling costs, indemnities included in any sale agreements and potential costs to cover concluding projects retained by the Group. Lendlease now expects these costs to be approximately $550 million pre tax, with approximately $525 million pre tax ($370 million after tax) anticipated to be accounted for in FY203.
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