Lendlease in embarrassing global retreat to home base

Lendlease is pulling the plug on a disastrous foray into the US, UK and European construction markets with a retreat from its sprawling international portfolio that promises to unlock $4.5 billion in capital.

The company and its under-fire chair Michael Ullmer have faced a backlash from investors who have been pressing the board and senior executives to focus on Australian operations as it struggles to rekindle a stock price that has plunge almost two-thirds since 2019.

Lendlease revealed in a strategy update on Monday that it would simplify the business to enhance its integrated real estate business in Australia with international investment management capabilities. It expects “significant progress” towards the goal within the next 12 to 18 months.

“We recognise that our security price performance and securityholder 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 securityholders, capital partners and customers.

“Today we have announced the blueprint to position Lendlease for success – focussing on our core strengths and competitive advantages.

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

Shares rocketed 9 per cent on the news in early trade to $6.41.

Mr Ullmer has faced a barrage of criticism as he fighting an investor revolt and exit the property and construction conglomerate on his own terms.

Investor worries about Lendlease’s direction became public last week when major backer Aware Super, which holds 8.5 per cent of the company’s shares, called for a shake-up at the very top.

Other big Lendlease investors including Tanarra Capital, Allan Gray and 5 per cent shareholder HMC Capital had already lost patience with a company.

Lendlease said its turnaround strategy to “right size its cost base” and “simplify” the business would recycle $4.5b of capital by exiting international construction and accelerating capital release from its offshore development projects and assets. It also includes a phased return of capital to investors through a $500 million share buyback program.

Group chief executive Tony Lombardo said ”a new Lendlease is emerging”. The new structure would be less complex, “more focused and fit for purpose ... and more easily understood by our people and customers, and 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,“ Mr Lombardo said.

“Importantly, we do not launch this strategy from a standing start. Significant work has already been undertaken and we anticipate making further positive announcements in the near-term on our progress.”

Through a new Capital Release Unit, Lendlease said it would recycle $4.5b, with $2.8b expected by the end of the next financial year.