You’d be forgiven for thinking Lendlease Group [ASX:LLC] has made a deal with the market devil. Despite posting a 40% slide in profits, the share price is up more than 10% this morning.
So, what gives?
Well, it’s a case of good and bad news for the property developer. And right now, traders are banking on the good outweighing the bad.
A forgettable year
CEO Steve McCann was candid in his comments about his company’s troubles. An issue that isn’t group-wide, but isolated. As McCann remarks:
‘It was a difficult year for the Group with the provision taken in the first half for underperforming Engineering projects impacting the overall result.’
This engineering and services business is the thorn in McCann’s side. For the year it has amounted to a $337 million net loss. A burden that Lendlease is now hoping to quickly rid itself of. As McCann continues:
‘As the separation process progresses, we remain committed to delivering the best possible outcome for our clients, employees and securityholders,’
Whatever that outcome will be, Lendlease needs to make it happen soon.
Bright spots and clear views
Lendlease was quick to point out that bar this one blemish, the core of the business is still strong. Excluding the engineering business, the company delivered an $804 million profit. A record for the developer.
That will no doubt please long-term investors who are willing wait out the separation process. Especially given the recent climate around the property market.
What has and will please the market though, is their court win.
The NSW Supreme Court has delivered Lendlease (and Crown) the news they’ve been waiting for. Their three apartment towers at Barangaroo Sydney will retain their prized Sydney harbour views.
Up until this decision, the NSW state government was considering other development bids near the site. Proposals that may have blocked the scenery from Lendlease’s apartments.
Fortunately for the developer, following this decision the government has dropped its case. Meaning the view should be all but secured. A relief for the company, investors and potential property buyers.
Not out of the woods yet
While the market is rewarding a good result today, whether Lendlease has long-term potential is still unclear.
Until the engineering arm is finally sold off, the pain will continue. Whatever value it still has left is seemingly shrinking by the day. That is a fact that should give investors pause for concern.
With a final dividend of 30 cents per share — down from 35 cents last year — shareholders will need to consider whether it’s worth sticking around. After all, there are plenty of alternative income plays for yield hungry investors.
If that’s you, we have critical information you need. You can find our report on the top 5 dividend stocks on the ASX, for free, right here.
As for Lendlease, we’ll be keeping an eye out for further developments. In both the stock and property markets.
For Money Morning
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