How Did Lendlease Achieve a 44% Distribution Boost Amid Turnaround?

A Return to Profitability

Lendlease Group has marked a significant milestone in its turnaround strategy with a return to profitability for the full year ended 30 June 2025. The company reported a statutory profit after tax of $225 million, a stark reversal from the $1.5 billion loss recorded in FY24, which was impacted by impairments and restructuring charges. Operating profit after tax (OPAT) rose to $386 million, reflecting improved performance across its core segments.

This financial rebound was supported by a 44% increase in distributions to securityholders, with a fully franked dividend component, signaling confidence in the group’s cash flow and earnings sustainability.

Capital Recycling and Cost Efficiency Drive Progress

Central to Lendlease’s recovery has been its aggressive capital recycling program, with $2.5 billion of initiatives completed or announced in FY25, and a further $2 billion targeted for FY26. These efforts have helped streamline the group’s portfolio, particularly through the exit of international construction operations, which has improved the overall risk and return profile.

Cost management has also been a key focus, with $141 million in pre-tax annualised overhead savings achieved, exceeding the initial target of $125 million. The group aims to realise an additional $50 million in run-rate savings in FY26, further enhancing operational efficiency.

Segment Performance Highlights

The Investments, Development, and Construction (IDC) segments collectively delivered a 49% increase in Operating EBITDA to $662 million. The Investments segment benefited from the establishment of the Vita Partners life sciences joint venture and maintained strong fund performance with a 40.6% EBITDA margin. Development saw robust apartment settlements and the sale of Capella Capital, achieving a 17% return on invested capital.

Construction revenues declined slightly to $3 billion due to project completions and delayed commencements, but new work secured surged to $5 billion, with a backlog revenue increase of 51% to $5.9 billion. The second half of FY25 showed margin improvement to 4%, reflecting better project execution and risk management.

Balance Sheet and Outlook

Lendlease’s net debt decreased by $400 million to $3.4 billion, with gearing at 26.6%. The group targets reducing gearing to at or below 15% by the end of FY26, supported by ongoing capital recycling and improved working capital management. The board has endorsed an on-market securities buyback of up to $500 million, contingent on further capital recycling progress.

Looking ahead, FY26 is expected to be a transition year with EPS from IDC segments forecast between 28 and 34 cents, reflecting fewer scheduled development completions. However, strong earnings visibility from project completions in FY27 and beyond, including One Circular Quay and Victoria Harbour, underpins a positive medium-term growth outlook.

Strategic Positioning for Sustainable Growth

Lendlease is focusing on disciplined capital management, cost efficiency, and growth in core capabilities across Investments, Development, and Construction. The group’s strategy emphasizes sustainable returns above the cost of equity, supported by a $9.8 billion Australian development pipeline, $1.5 billion in new investment mandates, and a robust construction pipeline targeting sectors such as defence, social infrastructure, and data centres.

With a simplified portfolio and strengthened balance sheet, Lendlease is well positioned to deliver long-term value for securityholders while navigating market uncertainties.