LLC
Lendlease managing to get out an operating result inline with street estimates. The UK provisioning story is just very on brand for LLC. As always, they manage to give you glimpses of what is possible if the company can execute.
You can see the $105m actual UNPAT number (above, called Operating Profit After Tax) matching the forecast $102m below (Net Income Adj+); same with EPS adjusted at 15c street, and 15.2 actual.
Note also the massive escalation in forecast earnings over the forward horizon (the blue bars, above, under the earnings trends). That’s why/what anyone who owns LLC shares is there for.
Funds under management, and investment management assets (on which they charge a fee) continue to grow, and those are high quality earnings on which you can put a decent multiple.
Just as important are the development earnings. COVID, the pandemic, supply chain issues, project delays, you name it, have resulted in a very low level of completions over the past few years (see graph below).
LLC think (and anyone who owns the shares hopes) they can double the work in progress completions.
Putting the two together and you get that very attractive looking blue bar earnings profile in the graph above, referenced earlier.
The share price is near multi-decade lows, and as such we’d suggest the expectations for LLC are pretty modest. The share price is saying they can’t achieve those earnings estimates.
Given that the pandemic impacts fade, supply chains normalise, and LLC is a builder with a good track record of building, we think those are good odds.
NB – the UK provisioning issue arose on the 30th Jan, requiring builders to extend the warranty for defects from 6yrs to 30yrs, which means some of LLC’s exposures going all the way back to 2005 impact the P&L in terms of likely/expected future expenses, hence the provisioning chart.
This is something of a “from deep left field”, impact, and although the total cost is not enormous, it is nonetheless frustrating to the thesis.
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