One of the world’s largest construction contractors is selling out of its US and UK businesses – and is hoping that the deals will free up AU $4.5 billion to pay down debts and reinvest back into its Australian operations.
Announced overnight, Lendlease—which in late 2021 signed off on a Global Agreement with Stora Enso to establish a dedicated mass timber research and development studio—described the assets as a “drag” on shareholder returns. “Australia’s first global builder” is now in the early stages of bringing the businesses to market, which, instead, amounts to a major u-turn from its global expansion over the past decade.
According to Lendlease Chair Michael Ullmer, the “strategic refocus” is part of a new “blueprint to position Lendlease for success – focusing on our core strengths and competitive advantages.”
In a conference call with institutional investors, Tony Lombardo, Lendlease CEO and Managing Director mapped out the new direction:
“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.”
Tony Lombardo, Lendlease CEO and Managing Director
Mr Lombardo added that two-thirds of the company’s assets are now deployed in projects and assets outside Australia, with 80% expected to reach practical completion after 2030.
“These projects have excellent fundamentals, but they are long-dated, and their expected returns are too far into the future,” he said, citing that the projects had a 0.6% EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation).
According to Mr Ullmer, the executive team has “thought very carefully about the necessary strategic refocus and made some tough decisions,” adding that the “bold strategy” addresses a drop in financial performance:
“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,” Mr Ullmer said. “We need to take significant action at an accelerated pace to deliver value for our security holders, capital partners and customers.”
Capital Release Unit will sell $2.8 billion over the next year.
Wood Central understands that the new strategy is centred around simplification. It will see a new Capital Release Unit established to raise AU $2.8 billion over the next 12 months. The strategy will involve exiting international construction and accelerating capital release from offshore development projects and assets.
“Through the decisive actions announced now, a new Lendlease is emerging,” Mr Lombardo said, “One that is anchored in the very best of our proud legacy, but less complex, more focused, and fit for purpose.” Before adding that, “our people and customers will more easily understand this new Lendlease and will be transparent and predictable for security holders.”
Key measures include reducing the company’s annual cost base by $125m within 12 months, strengthening the balance sheet by lowering gearing to between 5% and 15% by the end of the financial year 2026 and initiating a $500m on-market buyback.
Some of Lendlease’s international projects.
Last year, Wood Central revealed that the Australian construction giant was working with the US Department of Defence on the US Army’s Privatised Army Lodging (PAL) program. This program will see Lendlease develop four hotel developments for the US Army out of cross-laminated timber.
The latest of these projects, Candlewood Suites – set to open in 2026, is located at Fort Liberty in North Carolina, one of the world’s largest military bases. “For more than a decade, Lendlease and IHG – one of the world’s largest hotel chains – have had a long and successful relationship with the Fort Liberty leadership team through the Privatised Army Lodging (PAL) program,” Matt Garrett, from Lendlease Communities said last year.
Lendlease, through its Milan-based Podium MX studio, has been driving the uptake in cross-laminated timber projects worldwide, including International Quarter London’s ‘lego-like’ ‘Timber Pavilion’ in the heart of the Olympic precinct.
- To learn more about Lendlease’s timber-led strategy, visit Wood Central’s special feature.
