Lendlease draws a protest after ‘disappointing’ year

The company has been hit by global economic weakness and warned of more uncertainties to come.

20/11/2019. Lendlease AGM held at The Four Seasons hotel in Sydney. Chairman Michael Ullmer during the opening of meeting. Britta Campion / The Australian

Property major Lendlease admitted at its annual meeting on Friday that it had gone through a disappointing period and warned that it still faced global uncertainties including the war in Ukraine.

The company has been sold down after downgrading return expectations for its key units but insisted it was on track to turn its operations around by the 2024 financial year.

Lendlease shares closed down 1.6 per cent $7.80 after chairman Michael Ullmer reiterated its tough outlook, but set a “first step” fiscal 2024 target on return on equity.

Mr Ullmer told shareholders that returns for each of its operating segments are likely to be “at the lower end of the ranges”. With the distribution payout ratio cut to 30-50 per cent of core operating profit, from 40-60 per cent, Mr Ullmer expected nearer term distributions to be at the lower end of the range.

“We acknowledge it has been a difficult period for our securityholders, and our financial performance has not met your expectations,” he told investors.

Lendlease said Ukraine, Ukrainian conflict had prompted some capital partners to take a more cautious approach, with one of its transactions in Europe delayed before an investor returned to the table to complete a deal.

Lendlease is also facing questions about its ability to fund and complete its large long-term urban regeneration projects as global economies, including Britain where it has a large exposure, head into recession.

At the same time, the company is looking to shift its earnings mix away from traditional building into becoming more of an investment and funds house. It has launched a series of new products but these may take time to work.

Mr Ullmer said it well positioned after buying into projects like the One Circular Quay in Sydney, where it has a $3bn luxury hotel and apartment scheme.

But investors marked the company down and even though it had the support of all proxy houses on its remuneration report it drew an 11 per cent protest vote.

Mr Ullmer said some investors may have been disappointed with the company‘s recent performance, including share price weakness, but insisted it was on the right path.

He said that when a loss was recorded, some investors took an attitude that executives did not deserve payment, regardless of what they had achieved.

He noted that all real estate stocks had come off but Lendlease had come off further than some others, as it had an exposure to places like Britain which was “clearly going through some political turmoil”.

Lendlease chief executive Tony Lombardo said the company would complete about $4.5bn of work and was on track to deliver more than $8b of projects in 2024.

Mr Ullmer said that as it increased the weighting towards investments in its portfolio, it would also look for new opportunities, particularly assets which are depressed in value “because of the current environment”.