Lendlease to exit offshore construction ops to focus on Australian business

Significant developments are expected within 12-18 months.

Australia’s Lendlease Group announced its focused strategy for the coming months which includes exiting its overseas construction business and accelerating payments from its offshore development projects and assets to recycle $4.04b (A$4.5b) of capital.

In a statement, the company said the recycling of the said capital will be facilitated by a new Capital Release Unit.

Also part of Lendlease’s new strategy are focusing on its Australia business and international investment platform, and simplifying its organisational structure and right size its cost base.

Lendlease said these leverage the company’s competitive strengths and simplify the business to enhance its integrated real estate business in Australia with international investment management capabilities. 

The company expects significant progress within the next 12 to 18 months, with a range of important initiatives already well progressed.

These strategies will be supported by other measures to be implemented, which include a phased return of capital to shareholders with an intention to undertake an initial $449.37m (A$500m) on-market buy-back, Lendlease said.

The company will also work on lowering cost base, with an annual target of $112.34m (A$125m) pre-tax savings, to be achieved within 12 months and additional opportunities to follow 

Lendlease said it will prioritise debt reduction and capital returns for shareholders through a Capital Allocation Framework that reflects the changed business priorities and provides a transparent hierarchy for capital deployment.

“We recognise that our security price performance and securityholder returns have been poor as we have faced structural challenges and a prolonged market downturn. We need to take significant action at an accelerated pace to deliver value for our securityholders, capital partners and customers,” Lendlease Chairman Michael Ullmer said.

Lendlease Group CEO and Managing Director Tony Lombardo said by concentrating on the company’s core competencies, financial and operational risk profile will be lower, which is expected to improve earnings. 

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The company expects impairments and charges of up to $1.32b (A$1.475b) pre-tax in fiscal year 2024. This will include write down of goodwill attached to the US and UK construction businesses, Lendlease noted. 

A$1=S$0.89