Further cladding costs help keep Lendlease in red

Further building safety costs in the UK helped keep Lendlease in the red for the half year to December 2023, the Australian firm said in interim results published overnight UK time.

The company, which is listed on the Sydney stock exchange, had previously warned it would be forking out AUS$200m (£104m) on carrying out repairs to more than 50 buildings but said this has now gone up by an extra AUS$22m (£11.5m).

Lendlease said at the end of last year its estimated provision to comply with government requirements on carrying out repairs to buildings 11m and above was AUS$334m (£173m).

It said it had identified 58 buildings, most of which came with its deal to buy Crosby Homes nearly 20 years ago, where it had a liability.

“There continue to be both risks and opportunities to the provision that has been estimated,” Lendlease said. “Key risks include the addition of new buildings or new information in relation to already identified buildings, as well as the rising costs in the local market.

“Key opportunities include the potential for bulk procurement, re-interrogating scope on tender pricing and assessing various options in the delivery model.”

It added that it was “actively working to maximise third party recoveries however expects this process will be over an extended period of time”.

The firm also revealed that it spent AUS$17m (£8.8m) on a settlement “relating to a prior project in the UK”, thought to be a dispute on a hospital scheme in Northumberland which was settled out of court last February.

The construction arm remains the firm’s biggest but revenue at the business during the period fell 18% to AUS$3bn (£1.6bn) with earnings down 25% to AUS$51m (£26m). The firm said margins had been “impacted by a provision taken against a prior year project in the UK”.

Earlier this month, Lendlease’s UK arm received a tonic when its job to build a £400m mixed-use scheme at the site of the former ITV Studios on London’s South Bank was given the green light by communities secretary Michael Gove but in the results the firm said it expected its Australia business to be “the main contributor to earnings” in the near term.

Overall, group revenue, which also includes its investments and developments business, fell 5% to AUS$4.9bn (£2.5bn) in the six months to December 2023.

Lendlease said restructuring costs of AUS$56m (£29m) and valuation decreases of AUS$125m (£65m) at its investments business, along with the increased cost of remediation work in the UK, meant the firm’s loss after tax was AUS$136m (£70.5m), an improvement from the AUS$141m (£73m) loss it posted last time.