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Dive brief:
- Australian based contractor and developer Lendlease continues its hard pivotwithdrawing from international construction markets to change its business model. The impact of that change was clear on its full-year earnings call on Monday, where Lendlease reported a statutory loss of A$1.5 billion ($1 billion), up from its A$232 million losses at the end of the 2023 financial year.
- In May, Lendlease announced the change in strategy, saying it would divest, sell parts of its business and cut overseas employment to focus funds on areas where it has been most successful, such as development at its country of origin
- “Our results for fiscal year 24 reflected challenging business conditions and the first actions of our renewed strategy,” CEO Tony Lombardo said on the call with investment analysts. “We have made significant progress towards our target of recycling A$2.8 billion of capital in FY25, with further cost savings achieved as a result of our simplified management structure.”
Diving knowledge:
A significant portion of Lendlease’s statutory loss came from A$1.4 billion in impairments and charges from the revised strategy, including A$513 million of goodwill charges from the company’s 1999 acquisition of Bovis Construction, based in the United Kingdom.
“Operational changes were made during the year as we look to improve the profitability profile of the business and divest the international construction operation,” said Lombardo, who said the company had made “great strides” in making- it
At the end of May, Lendlease reached a non-binding agreement with Consigli Construction Co. for the sale of Lendlease’s North American operations on the East Coast. The deal has not yet been finalized, and the transaction is currently undergoing due diligence and negotiations, according to the company’s earnings report.
At the same time, the company plans to divest its U.K. construction operations over the next 18 months and has begun “winding down” its U.S. central and West Coast operations, Lombardo said.
In July, Lendlease completed the sale of its life sciences business interests in Asia to a 50/50 joint venture with Warburg Pincus, which will contribute approximately A$80 million to Lendlease’s operating profit after tax in fiscal 2025.
At home, Lendlease reported a backlog of A$3.9 billion as it seeks to tap capabilities in the defence, social infrastructure and life sciences sectors.
“In short, we are taking important strategic actions at an accelerated pace to leverage our key competitive strengths and simplify our business,” Lombardo said on the call. “I am excited about the progress we have made since May and will continue to work hard to achieve our goals for FY25 in the interests of all our stakeholders, our security holders, our customers and our people”.
