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Lendlease has made a AUS$200m provision to cover the cost of cladding repair work as ordered by the government on residential schemes 11m and above.

The figure, which at today鈥檚 exchange rate is the equivalent of 拢115m, was revealed in its latest interim accounts which the Australian firm published overnight. It is the first time the firm has put a number on what it expects to have to pay to carry out remediation work.

It said most of the figure related to its former Crosby Homes business which it bought from Berkeley Group in summer 2005 for 拢261m and which Lendlease says it now no longer owns.

Lendlease said the amount 鈥減rimarily relates to approximately 56 buildings developed by Crosby, no longer owned by Lendlease. The Crosby entities were acquired by Lendlease in 2005 to enter the residential development market in the UK. Many of these buildings were completed or construction commenced prior to Lendlease鈥檚 acquisition.鈥�

It added: 鈥淟endlease has not received any specific claims to date, and only has limited information relating to the buildings in the Crosby portfolio. However, the government department responsible for this legislation has provided a schedule of claims that it has received to date in respect of some of the buildings in the Crosby portfolio and, in some cases, their assessment or estimate of the cost to remediate.

鈥淎t 31 December 2022 Lendlease has recognised a provision in respect of this matter of $200 million (pre-tax), as a gross amount. It is expected that any cash expenditure by Lendlease will be paid over a period of at least five years.鈥�

Lendlease said it would 鈥渃ontinue to engage with the UK Government on these industry wide actions and assess additional relevant information on an ongoing basis鈥�.

Lendlease said it, along with several other developers, was sent a letter at the end of last month by the housing and communities department telling it sign up to its proposals 鈥� or face a series of trade restrictions. 鈥淕iven the letter received from the UK Government, Lendlease has recognised a provision in its financial statements as it has limited options to avoid incurring a liability,鈥� the company added.

Lendlease said the 拢115m figure 鈥渄oes not include anticipated recoveries from third parties, including insurances and supply chain. We will be working to maximise third party recoveries.鈥�

The firm also revealed that profit at its construction business had been hit by a claim on a 鈥減ast non-residential project in the UK dating back to 2015鈥�. The scheme is not identified but is thought to be a specialist emergency care hospital in Cramlington, just north of Newcastle.

The job is at the centre of a 拢140m dispute between Northumbria Healthcare NHS Trust and Lendlease over allegations that the complex requires so much repair work that a temporary replacement needs to be built while this is carried out.

Other firms that have been dragged into the row include M&E giant Balfour Beatty Kilpatrick, architect Keppie Design and roofing company Briggs Amasco.

Revenue from Lendlease鈥檚 construction business in the six months to December 2022 was up 16% to AUS$3.7bn (拢2.1bn) although pre-tax operating profit was down 19% to AUS$64m (拢37m).

Last September, Lendlease bought 21 Moorfields, the late-running office scheme being built by Sir Robert McAlpine in the City of London, from Landsec for 拢809m and in its results the firm said the scheme was 鈥渘ot expected to contribute to income until the second half of FY23鈥�. Practical completion for the Wilkinson Eyre-designed block is due next month.

Half-year income across Lendlease was up 23% to AUS$5.1bn (拢2.9bn) with the firm narrowing pre-tax losses at its continuing operations from AUS$390m (拢224m) to AUS$122m (拢70m). The firm said its statutory loss after tax was AUS$141m (拢81m), from AUS$264m (拢152m).