Highlights

  • FY26 statutory loss after tax was A$749 million, largely reflecting impairments and provisions in the Capital Release Unit.
  • IDC Earnings reached 33.7 cents per security, at the top of guidance, while IDC operating profit after tax was A$233 million.
  • Construction Revenue rose 29% to A$3.9 billion and Backlog increased 42% to A$8.4 billion.
  • Net Debt ended FY26 at A$3.7 billion and gearing was 30.3%, compared with the group's 15% long-term target.
  • FY27 IDC earnings guidance is 37 to 41 cents per security, while Capital Release Unit outcomes remain outside guidance.

Lendlease Group (ASX:LLC) is a property and infrastructure group spanning investments, development and construction. Its FY26 result showed a clear divide between ongoing operations and the Capital Release Unit, where impairments and provisions drove a large statutory loss. Core IDC earnings reached the top of guidance, leaving the balance sheet, construction backlog and capital recycling as central FY27 focus areas.

Core Earnings Contrast With Statutory Loss

Lendlease reported a statutory loss after tax of A$749 million for FY26. The Capital Release Unit recorded an EBITDA loss of A$500 million, including A$340 million of non-cash impairments, A$42 million of negative asset revaluations and A$92 million of provisions for retained construction risks. Transaction profits of A$63 million partly offset those charges. The ongoing IDC Business produced earnings of 33.7 cents per security and operating profit after tax of A$233 million, while the group declared a 15.7-cent distribution per stapled security.

Construction Backlog Expands

Construction revenue increased 29% to A$3.9 billion and the EBITDA Margin reached 4.3%, above the group's 3.0% to 4.0% target range. New work secured rose 28% to A$6.4 billion, while backlog increased 42% to A$8.4 billion. Government clients represented 74% of backlog and defence work 32%. The mix provides work visibility, although construction remains exposed to cost overruns and contract execution risk.

Development and Investment Earnings Ease

Development EBITDA fell to A$78 million from A$316 million, reflecting project-completion timing. Lendlease secured A$4.7 billion of new projects and expanded its Australian development pipeline to A$13.2 billion from A$9.8 billion. Management expects about A$8.6 billion of completions across FY27 to FY29. Investments EBITDA was A$297 million, funds under management fell by A$5 billion to A$43.9 billion, and the management margin narrowed to 35.9%.

Balance Sheet and Capital Release Remain Central

Statutory net debt was A$3.7 billion and gearing reached 30.3%, around twice the group's 15% long-term target. Available Liquidity was A$4.0 billion. Lendlease contracted A$1.2 billion of Capital Release Unit transactions during FY26, taking the total contracted or completed to about A$3.4 billion, with roughly A$2.5 billion still to recycle on a pro forma basis. A further A$500 million was received after balance date, while overheads were reduced by 22% to a run rate of about A$350 million.

FY27 Guidance and Key Risks

For FY27, Lendlease expects IDC earnings of 37 to 41 cents per security, compared with 33.7 cents in FY26. Investment earnings are expected to ease as portfolio recycling continues. Key risks include further impairments during asset sales, disposal prices below book values, construction cost overruns, slower property markets and refinancing pressure if gearing remains elevated.

Key Insights

The FY26 result reflects a business in transition. Construction and the broader IDC operations generated positive operating earnings, while the Capital Release Unit drove the statutory loss and kept balance-sheet pressure elevated. FY27 guidance points to higher IDC earnings, but the pace and value of asset recycling remain important for gearing and liquidity.