Lendlease Group announces its strategic plan to sell its UK operations by 2025, aiming to restore shareholder returns and focus on core strengths.
- The decision follows a significant drop in profits of the UK arm for the year ending June 2023, compared to the previous year.
- CEO Tony Lombardo cites low EBITDA returns from international projects as a primary reason for exiting overseas markets.
- The restructuring involves establishing a Capital Release Unit targeting £2.35bn in capital release by the end of financial year 2025.
- Lendlease aims to strengthen its financial position by reducing annual costs and gearing, alongside a £500m share buyback.
Lendlease Group has unveiled a confident strategy to sell its UK operations by the end of 2025. This move is part of a broader plan to withdraw from construction markets outside Australia, which have been described as a “drag” on shareholder returns. The decision follows a noticeable drop in profits for the UK arm, recorded for the year ending June 2023 compared to the previous year.
Tony Lombardo, Lendlease’s Chief Executive, highlighted in a conference call that while the UK and US markets are deemed solid, they are currently preparing the UK business for sale. Lombardo said, “We think the UK and US are very good ongoing businesses and we feel we will be able to find the buyers for both – we are assuming over that next 18-month period [that we will] have executed transactions.” This strategy underscores Lendlease’s intent to streamline its focus on regions that promise higher immediate returns.
The company’s strategic realignment is driven by a modest 0.6 per cent EBITDA obtained from its overseas projects. Lombardo emphasised that although these projects possess excellent fundamentals, the forecasted returns are too far into the future. More than two-thirds of Lendlease’s assets are currently involved in projects outside Australia, with a significant portion completing post-2030.
Michael Ullmer, the group chairman, notes the necessity of bold actions to address performance challenges. Recent years have seen poor securityholder returns and a market downturn. Ullmer stated, “We need to take significant action at an accelerated pace to deliver value for our securityholders, capital partners and customers.” This remark highlights the urgent need to reposition the company to ensure financial stability and competitive advantage.
Central to Lendlease’s new strategy is a Capital Release Unit, targeting an AUS$4.5bn capital release, with £2.35bn expected by the end of the financial year 2025. Exiting international construction, the firm is accelerating capital release from offshore development projects. Lombardo communicated a new vision for Lendlease as a “less complex, more focused” entity.
The restructuring aims to reduce the annual cost base by $125m within a year, enhance the balance sheet by lowering gearing to between 5 and 15 per cent by the end of financial year 2026, and initiate a £500m on-market share buyback. Ullmer described these measures as a “blueprint to position Lendlease for success” and focused on core strengths.
Lendlease’s strategic overhaul is a decisive step towards improving shareholder value by focusing on high-return regions and simplifying its business model.
