Key Highlights

  • The statutory loss after tax was $749 million, driven largely by the Capital Recycling Unit.
  • The core IDC Business earned $233 million of operating profit after tax, with segment EBITDA of $542 million.
  • Net Debt was $3.7 billion and statutory gearing was 30.3%, against a 15% target.
  • FY27 guidance is IDC Earnings Per Share of 37 to 41 cents, compared with 33.7 cents in FY26.

Why is Lendlease Group (ASX:LLC) putting Balance Sheet repair ahead of growth? Its FY26 results, released on 17 August 2026 for the year ended 30 June 2026, showed a statutory loss after tax of $749 million, driven largely by the group's Capital Recycling Unit (CRU), even as the core Investments, Development and Construction (IDC) business earned $233 million of operating profit after tax.

The result matters because it frames a new chief executive's agenda: lower gearing, lower overheads and a narrower earnings base. All figures are in Australian dollars and from the company's FY26 results announcement unless stated.

A business in two parts

Lendlease now reports two groupings. IDC covers the businesses the company intends to keep: investments and funds management, property development, and construction. CRU is the unit through which the company recycles capital out of Assets and projects it does not regard as core.

The split explains the headline. Group operating profit after tax was a loss of $567 million, made up of $233 million from IDC and a loss of $800 million from CRU. Statutory earnings per share were a loss of 108.4 cents.

How IDC performed

IDC segment EBITDA was $542 million. Investments contributed $297 million, Development $78 million and Construction $167 million, the latter at an EBITDA Margin of 4.3 per cent. IDC operating earnings per share were 33.7 cents.

Lendlease declared a distribution of 15.7 cents per stapled security, which comes entirely from the trust with no company dividend.

The cost of the clean-up

CRU segment EBITDA was a loss of $500 million, including $304 million of non-recurring items. Non-cash CRU impairments were $340 million before tax, and provisions were $92 million. Separately, non-cash Investment property revaluations and impairments were $182 million after tax, of which $138 million related to CRU and $44 million to Investments.

Net overheads were cut 22 per cent, from $466 million to $363 million, with an exit run rate of about $350 million. Management's targets include a construction EBITDA margin of 3.0 to 4.0 per cent and co-investment capital of 5 to 10 per cent of its portfolio.

Balance sheet and gearing

Net debt was $3.7 billion, up $0.4 billion on the half-year position. Statutory gearing was 30.3 per cent, including a hybrid benefit of about 7.4 per cent. Underlying gearing was 37.7 per cent, and pro forma underlying gearing was 30.2 per cent after $1.3 billion of contracted transactions. Available Liquidity was $4.0 billion.

The company's target underlying gearing is 15 per cent. By our arithmetic, even the pro forma figure is about double that target, which explains the emphasis on capital recycling. The filing did not set a timetable for reaching the target.

The Investments result shows the trade-off in the strategy. Selling assets reduces debt, but it also reduces the base on which management fees and co-investment income are earned. The company itself says investment earnings are expected to fall in FY27 for that reason.

Pipeline, funds and the new chief executive

The Australian development pipeline rose to $13.2 billion from $9.8 billion at FY25, and the total development pipeline, including the UK and Singapore, was $64.2 billion. Construction Backlog Revenue was $8.4 billion, up 42 per cent, with a further $5.2 billion preferred, and new work secured was $6.4 billion.

Funds under management fell to $43.9 billion from $48.9 billion, reflecting $7.2 billion of divestments against $2.0 billion of additions. The management EBITDA margin was 35.9 per cent, down from 40.6 per cent.

A larger pipeline and backlog are not earnings in themselves. Development profit is recognised as projects progress or settle, and construction margins are thin, at 4.3 per cent of EBITDA in FY26. The figures therefore indicate future activity, but conversion into profit depends on execution, costs and market conditions over several years.

Nick O'Neil took over as group chief executive on 24 August 2026, a week after the results. The announcement did not set out how his priorities might differ from the stated plan, so we draw no conclusions on that point.

FY27 guidance

Lendlease guided to IDC earnings per share of 37 to 41 cents, compared with 33.7 cents in FY26. It expects development earnings to be supported by pre-sold apartment revenue, construction revenue to grow, and investments earnings to fall owing to lower co-investment and funds management income. No specific CRU earnings guidance was given, though further cost savings are targeted.

On our arithmetic, the guided range is roughly 10 to 22 per cent above the FY26 IDC figure of 33.7 cents. That is a comparison of two numbers rather than a forecast, and the announcement indicated that investments earnings are expected to move in the opposite direction to development and construction.

These are management expectations, not results. They depend on settlements, construction execution and asset sale outcomes.

What to monitor

Investors may watch the pace and pricing of asset sales, whether gearing moves toward the 15 per cent target, and the cash costs of running down CRU. Construction margins relative to the 3 to 4 per cent range and the conversion of pre-sold apartments into earnings also matter.

Finally, further funds under management reductions would lower management fee income, so the balance between divestments and new capital raising will be a recurring theme in future updates.