Lendlease profit hit by Leeds hospital dispute

Lendlease’s profit fell by more than a third after it failed to recoup millions of pounds on a Leeds hospital construction project, according to its annual results published today (8 April).

The contractor said it had been “virtually certain of success” when it tried to claim around £3m from a subcontractor working on the same project last year, but a High Court judge threw out the case in November.

Lendlease’s pre-tax profit fell by more than a third to £11.9m in the year to June 2023, in comparison with £18.9m the year before. Revenue was also down, coming in at £509.0m, compared with £553.5m the previous year.

Lendlease tried to sue Aecom for £3m over fire-safety defects at the oncology wing for St James’s University Hospital in Leeds, after the contractor was forced to pay nearly £8m to the hospital when 25 defects were found on the site.

Lendlease claimed Aecom was responsible for 18 of those 25 defects, including fire safety issues in one of the plant rooms. The judge found Aecom would have been liable for a number of deficiencies at the site, but that Lendlease brought the claim after a 12-year limitation period came to an end – meaning it was too late for it to claim anything from Aecom.

“Based on external advice received, management had previously considered this recovery [from Aecom] virtually certain of success,” Lendlease said in its accounts.

It also said “depressed bidding activity” during the Covid pandemic contributed to its drop in revenue, and that it faced a “complex market landscape” last year, characterised by market uncertainty and inflation.

“[But] we managed these challenges through a risk-focused approach to procurement as well as high-quality relationships in the industry with both key suppliers and clients,” it added.

Lendlease’s cash position was up, though, coming in at £94.1m compared with £72.1m last year.

The results come weeks after the contractor put aside an additional £11.4m to deal with historical liabilities related to fire safety. In total, it has tabled provisions of £173.1m to deal with defective cladding and other fire-safety issues.

It previously highlighted the impact of the UK government’s decision to increase the defect liability to 30 years.