Lendlease restructures with divestment of international construction businesses

Lendlease has this morning announced a restructuring of its business that will see it sell off its international construction business and refocus its European division on partnerships. The changes are part of a strategy that will “simplify its organisational structure and right-size its cost base” and follow tough trading figures. Its most recent interim results saw the business post a A$136m (£70m) loss. Lendlease chairman Michael Ullmer (pictured above, left) said: “We recognise that our security price performance and security-holder 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 security-holders, capital partners and customers.  “Today we have announced the blueprint to position Lendlease for success – focusing on our core strengths and competitive advantages. We have thought very carefully about the necessary strategic refocus and made some tough decisions.” The “blueprint” includes a focus on its Australian business and international investments platform, the recycling of A$4.5bn of capital by completing transactions announced and underway, exiting international construction and accelerating capital release from its offshore development projects and assets. For the European business, including the UK, this means that development projects traditionally funded from Lendlease’s balance sheet will now be brought forward though partnerships. The group said the complexity and timescales involved with large urban regeneration meant that the balance sheet-funded model was “not sustainable” at the scale at which it operates. The new third-party partnership plan will enable the group to reduce its reliance on its balance sheet and accelerate delivery of its pipeline. Lendlease said it would work out ways “to best maximise” projects on which it was master developer, which could include land sales to bring in other developers to help build plots out. Lendlease group chief executive and managing director Tony Lombardo (pictured above, right) said: “By reshaping the portfolio, concentrating on our core competencies in markets where we have proven we have the right to play, and the competitive advantage to win, the financial and operational risk profile will be lower, and we believe the quality of our earnings will ultimately be higher and more sustainable.”  He added: “The optimum path we have chosen is built upon the creation of lasting economic value. We will not walk away from commitments to our valued customers, and we will treat our people around the world with the care and respect they deserve as our business changes.” Lombardo said the firm had retained its international investments platform for “several compelling reasons”, including its strong relationships with major capital partners and because it saw “appealing long-term growth” in building its funds under management. He added: “We will leverage our scale and improve performance through active portfolio management, reducing our co-ownership interests over time, and right-sizing our cost base through the removal of regional cost structures that have weighed on performance.” Photos © Lendlease