Lendlease reports fresh loss as cladding costs bite again

Lendlease has reported an A$173m (£89.7m) pre-tax loss in interim results after making further provisions to deal with dangerous cladding in the UK.

The publicly listed Australian contractor and developer has put aside a further A$22m (£11.4m) to tackle its historic building-safety liabilities in the UK, it revealed in interim results for the six months to 31 December 2023.

Lendlease has now put aside a total of A$334m (£173.1m) to deal with the problem since it started tackling cladding issues across its portfolio. It previously highlighted the impact of the UK government’s decision to increase the defect liability to 30 years.

Lendlease said most of the 58 affected buildings were developed by Crosby, which Lendlease acquired in 2005 as its route into the UK housing market.

“Notably, many of these buildings were completed or had commenced construction prior to Lendlease’s acquisition,” it added.

Inflation costs were also partly blamed for Lendlease’s latest loss, which was larger than the A$122m (£63.2m) lost by the company in the same period last year. Lendlease’s global revenue also fell, from A$5.1bn (£2.6bn) to A$4.8bn (£2.5bn) during the period.

The contractor also pointed to large redundancy costs and investment-property troubles for its difficulties.

In July the company announced it was cutting 760 jobs, or 10 per cent of its global workforce, with the majority of the cuts expected to be made outside of its Australian business.

“Statutory earnings were affected by a reduction in investment-property valuations in the investments segment of A$125m, redundancy costs of A$56m, an additional A$22m provision in relation to UK building-remediation regulations, and A$6m in profit from the non-core segment,” Lendlease said in a statement.

Lendlease is one of a number of large contractors seeking to recover losses from other companies that it blames for fire-defective work. In its statement, it said “anticipated recoveries” from subcontractors and other businesses were not included in the provision.

“Lendlease is actively working to maximise third-party recoveries, however [it] expects this process will be over an extended period of time,” it added.

In November, a judge threw out its attempt to sue Aecom for £3m over defects at a cancer centre it worked on in Yorkshire, on the basis that it had brought the action after the liability period had elapsed. It was earlier forced to pay almost £8m to the client on the job following another court battle.

Lendlease reported an A$238m (£122m) pre-tax loss for the year ending 30 June 2023 and a A$177m (£90.5m) pre-tax loss for the year to 30 June 2022. Lendlease’s Europe arm reported a £230m loss for the financial year to 30 June 2022, its last reported financial period.

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