Dive Brief:
- Australian-based contractor and developer Lendlease is continuing its hard pivot, pulling out of international construction markets to change its business model. The impact of that change was clear in its full-year earnings call Monday, where Lendlease reported a statutory loss of $1.5 billion Australian dollars ($1 billion USD), wider than its AU$232 million statutory loss at the end of fiscal year 2023.
- In May, Lendlease announced the strategy shift, saying it would divest, sell off parts of its business and reduce employment numbers overseas in order to focus funds on areas where it has been more successful, such as development in its home country.
- “Our results for FY24 reflected challenging business conditions and the early actions from our refreshed strategy,” said CEO Tony Lombardo on the call with investment analysts. “We have made significant progress toward our target of recycling AU$2.8 billion of capital in FY25, with further cost savings realized as a result of our simplified management structure.”
Dive Insight:
A significant portion of Lendlease’s statutory loss came from AU$1.4 billion in impairments and charges from the revised strategy, including AU$513 million of goodwill charges from the company’s 1999 acquisition of U.K.-based Bovis Construction.
“Operational changes were made during the year as we seek to improve the risk-return profile of the business and divest the international construction operation,” Lombardo said, claiming the company had made “great strides” in doing so.
In late May, Lendlease reached a non-binding agreement with Consigli Construction Co. for the sale of Lendlease’s U.S. operations on the East Coast. The deal has not yet been finalized, and the transaction is currently going through due diligence and negotiations, per the company’s earnings report.
At the same time, the firm is planning to divest its U.K. construction operations within the next 18 months, and has begun to “wind down” West Coast and central operations in the U.S., Lombardo said.
In July, Lendlease completed the sale of its life sciences interests in Asia to a 50/50 joint venture with Warburg Pincus, which will contribute approximately AU$80 million to Lendlease’s operating profit after tax in fiscal year 2025.
At home, Lendlease reported a backlog of AU$3.9 billion, as it looks to build on capabilities in defense, social infrastructure and life science sectors.
“In summary, we’re taking significant strategic action at an accelerated pace to leverage our key competitive strengths and simplify our business,” Lombardo said on the call. “I’m excited by the progress we’ve made since May and we’ll continue to work hard to achieve our goals for FY25 in the interest of all of our stakeholders, our security holders, our customers and our people.”
