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Lendlease to sell off engineering division

Derek Rose
Property developer Lendlease says it plans to sell off its engineering and services unit

Lendlease Group says it will sell its engineering and services units after taking a $500 million hit related to three disappointing roadworks projects that contributed to a 41.1 per cent drop in profit.

The company said it would cut its final dividend by five cents a share after making just $467 million in profit after tax in the 12 months to June 30, down from $793 million the year before.

Chief executive Steve McCann called it a challenging year for the company but told analysts "our pipeline looks fantastic and I think our outlook looks very strong, in terms of delivering longer-term earnings".

Investors seemed to agree on Monday, with Lendlease stock up 8.8 per cent to a two-week high of $14.73 at 1124 AEST.

Lendlease said it had several interested parties undertaking due diligence for its engineering and services units, which lost $461 million in fiscal 2019.

The company said it would take a $500 million hit on the Gateway Upgrade North and Kingsford Smith Drive highway widening projects in Brisbane, as well as the NorthConnex M1/M2 9km tunnel project in Sydney.

Gateway Upgrade North was finished in March and the other two projects are scheduled to complete next year.

Once its "non-core" engineering and services units are sold, Lendlease will be left with its construction, development and investment divisions, which it said had a profit after tax of $804 million, down 16 per cent from last year.

Lendlease said it had $16.54 billion in revenue, down 0.1 per cent from FY18, and had $100 billion in projects in the pipeline, including $27 billion in urbanisation work in four cities.

Those are Lendlease's San Francisco Bay Area development with Google, an innovation district in Milan, luxury apartment apartments in Chicago, and the Victoria Cross project in North Sydney, with a 40-storey commercial building above the new metro stop.

Mr McCann said the company believed the Australian property market had reached a bottom.

Lendlease is building a foundation for its planned 72-storey luxury apartment tower in Barangaroo, which will be Sydney's tallest residential building and likely its priciest, with the six-bedroom penthouse expected to sell for about $118 million.

The company wants to have pre-sold at least half of the 370 units in the tower before beginning construction.

"We do expect to launch that very shortly," Mr McCann said.

"We're pretty confident the demand is there."

Two smaller towers are also planned for the project, dubbed One Sydney Harbour.

LENDLEASE

* Full-year profit after tax down 41.1pct to $467 million

* Revenue down 0.1pct to $16.54 billion

* Dividend down five cents to 30 cents, unfranked.