Lendlease Group has announced a comprehensive “refocused strategy” update aimed at simplifying its organisational structure and enhancing its focus on its core Australian business and international investments platform.
The company plans to streamline operations and achieve $125 million in annualised pre-tax savings within 12 months, as part of its effort to reduce complexity and lower costs.
In an ASX announcement on Monday, Lendlease said it will recycle $4.5 billion in capital by exiting international construction and accelerating the release of capital from offshore development projects and assets, of which $2.8 billion is anticipated by the end of FY2025.
This capital recycling effort is expected to be facilitated by a newly established Capital Release Unit (CRU), which will help release approximately $3.42 per security of net tangible assets, with a significant portion anticipated by the end of FY25.
Lendlease said the strategy aims to enhance shareholder value by strengthening the company’s financial position. Lendlease plans to reduce its gearing to a revised target range of 5–15 per cent by the end of FY26 and will undertake an initial $500 million on-market buyback as part of a phased return of capital to securityholders.
It elaborated that debt reduction and capital returns for securityholders will be prioritised through the implementation of a “disciplined” capital allocation framework that reflects the changed business priorities and providers a transparent hierarchy for capital deployment.
Ultimately, by focusing on its core competencies and reducing operational complexity, the company expects to deliver higher and more sustainable earnings.
Chairman Michael Ullmer emphasised the need for decisive action to address past performance issues and capitalise on the company’s competitive strengths.
“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,” Ullmer said.
“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. I am confident that we have the right team and commitment to realise the value for our securityholders that is inherent in our business. And I am determined to dedicate my final months with this great company to ensure momentum builds toward the exciting future that lies ahead.”
CEO Tony Lombardo highlighted the progress already made and the company’s commitment to reshaping its portfolio for lasting economic value. Lombardo stressed that the new strategy will make Lendlease more easily understood by its people and customers, and more transparent and predictable for securityholders.
“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 ultimately higher and more sustainable,” said Lombardo.
“There is no question that the Australian business of Lendlease is market leading and unique in the breadth and strength of its integrated capability and services. Moreover, the opportunities to grow remain significant with a robust project pipeline that plays to our core competitive strengths, especially in urban regeneration. We are exceptionally well placed to benefit from the key structural shifts underway in the economy,” he continued.
Lombardo explained that Lendlease has retained its investments platform in international markets for “several compelling reasons”.
“Lendlease has deep relationships with major capital partners, and this presents an appealing long-term growth vector through continuing to build our funds under management. We will leverage our scale and improve performance through active portfolio management, reducing our co-ownership interests over time, and rightsizing our cost base through removal of regional cost structures that have weighed on performance.”
Despite anticipated impairments and charges of up to $1.475 billion in FY24, Lendlease maintains its FY24 guidance of a 7 per cent return on group equity, equating to approximately $450 million in operating profit after tax.
The strategy is designed to create a more focused, transparent, and predictable Lendlease, better positioned for profitable future growth. This comprehensive approach underscores Lendlease’s determination to build momentum towards a stronger and more resilient business model.
