Lendlease bows to pressure and quits overseas misadventure

Lumbering property giant Lendlease has bowed to investor pressure and will try to offload its offshore construction operations as part of a $4.5 billion-plus asset shift.

The Sydney-based group has also flagged moves to reduce its stakes in offshore building, development and property investment ventures in a long-awaited bid to focus on its profitable Australian operations.

But it plans to hang onto its $48b international funds management activities to build on what chief executive Mark Lombardo claims is “a deep relationship with capital partners”.

The changes come after weeks of influential investors pushing the company to give up on its failed ambition to become a major global construction player with operations in the UK, US, Italy, China, Singapore and Malaysia.

Despite the Monday morning announcement being light on detail, shares in the battler rose from their record low close of $5.89 on Friday to trade above $6.40 for most of the day.

The shares have lost two-thirds of their value since the start of the decade amid doubts about its overseas construction push and an Australian Taxation Office probe into the sale proceeds from three-quarters of its Australian retirement villages trust.

In preparation for trying to offload its UK and US construction business and battling assets, Lendlease warned it would record $1.14b to $1.48b of abnormal hits in its 2023-24 full year result.

This could drive Lendlease’s bottom line towards $1b into the red given it has conditionally flagged a $450 million operating profit after tax.

That flagged operating profit assumes Lendlease can complete the sale of 12 communities projects to Stockland and Supalai, as well as finishing offloading half its stake in an Asian laboratory venture.

Besieged chair Michael Ullmer on Monday continued to deflect blame for Lendlease’s problems, claiming “structural challenges and a prolonged market downturn” were to blame for the company’s poor investor returns.

“We need to take significant action at an accelerated pace to deliver value for our security holders, capital partners and customers,” he said.

“We thought very carefully about the necessary strategic refocus and made some tough decisions.”

Lendlease will retain its $48b funds management operation with investments in Australia, Asia, Europe, North America and South America.

Mr Lombardo said it would reduce its co-ownership of investments “over time” and remove regional cost structures that have hampered performance.

Management plans to move around $2.8b of investments by June 30 next year as part of what Mr Lombardo described as a “recycling” of $4.5b in capital.

“This is a profound change and is based upon making some very tough but necessary decisions,” he said.