- Australia-based contractor Lendlease said on Thursday that it anticipates a core profit for fiscal year 2021 of between $375 million and $410 million in Australian dollars ($281 million and $307 million USD) after taxes, which is down from an earlier market consensus of between AU$469 million and AU$525 million.
- CEO Tony Lombardo spoke about the projection on a call with investors, blaming most of the decrease on the coronavirus. "COVID-19 continues to impact the business negatively," he said.
- Nevertheless, Lendlease's balance sheet and liquidity position remain strong, the company said in a press release. Thursday's announcement marked the second time that the company has downgraded its profit guidance in the past two years.
Lombardo said on the call that the pandemic greatly affected the company's profitability, particularly on projects in London. He took over as CEO on June 1 when Steve McCann retired and assumed the role of CEO at Australian casino and entertainment company Crown Resorts.
Although Lendlease said it has taken "mitigating actions" to help navigate the pandemic, continued and new shutdowns in the areas where it works have impacted its business this year. London, for example, has locked down several times since last spring. The U.K.'s current lockdown, recently extended by two weeks, is slated to end July 19, but Prime Minister Boris Johnson has said extra precautions could still be required after that date, Bloomberg reported.
The company said that impacts of the pandemic on its business include:
- A delay in the expected timing of securing an investment partner for International Quarter London, a business development in the city's Stratford neighborhood.
- Weaker rental demand on recently completed residential buildings at Elephant Park in London.
Additionally, Lombardo said the contractor is facing legal claims on projects completed before it sold its engineering business in September. That forced Lendlease to take an additional provision between $90 million and $175 million, on top of the $500 million provision already taken against the engineering business.
Lendlease and Lombardo will provide an update on the outcomes of a financial review in mid-August. The review will cover:
- A restructure to support efficient resource allocation and simplification, and execute the strategy after recent divestments.
- Core business operations to ensure projects and operating units are set up to achieve the appropriate returns.
- The impact of market uncertainties given the duration of the pandemic on the company's operations over the short to medium term.
Despite the impacts of COVID-19 on business, the company completed key initiatives, it said, including:
- Introducing a second investment partner for the second residential tower at One Sydney Harbour.
- Securing an anchor tenant for the largest office tower at Melbourne Quarter.
- Securing an investor for the Milan Innovation District.