From Bunnings with love: New Lendlease boss wants reset, then growth
New Lendlease chairman John Gillam has emphatically backed the embattled property giant’s chief executive Tony Lombardo to lead the group’s strategy reset, declaring it will create the opportunity for “fresh growth” in 18 to 24 months.
Gillam, who helped turn Bunnings into an Australian retail powerhouse and more recently oversaw the turnaround and eventual sale of CSR as chairman of the building products group, says Lombardo has moved quickly since Lendlease announced a radical turnaround plan in May, under which it will sell $4.5 billion worth of assets and abandon many of its international operations.
Any changes to Lendlease’s senior leadership would disrupt that progress, Gillam says. “He is absolutely the right person to keep driving the reset and then open the door for new growth on the other side of completing the reset agenda,” he says of Lombardo.
Gillam was announced after a process that began when Michael Ullmer announced his plan to retire at the annual general meeting in November. Ullmer says the focus was on finding an Australian-based chairman who could hold management to account and lift financial returns for long-suffering shareholders.
Lendlease’s share registry includes two heavyweight investors in John Wylie’s Tanarra Capital and David di Pilla’s HMC Capital, who have offered no shortage of advice to the board and management, urging the company to focus on its profitable Australian property development business.
Ullmer says investors were consulted as part of the chairman succession process. Sources said early candidates, including former Suncorp boss and Lendlease alumni John Mulcahy and Dexus CEO Darren Steinberg, were effectively ruled out after investor feedback.
The market has been pleased with the progress on the turnaround plan, Ullmer says, which has included the sale of its master-planned communities business to Stockland, the sale of its US construction arm, and the sale of its US military housing division. Several other asset sales, including offloading its British construction business and the sale of its remaining interests in its Australian retirement arm, are in train.
Lendlease shares have jumped almost 30 per cent since mid-July, which reflects both falling bond yields and progress on the asset sales. Gillam says the momentum is solid, but execution remains key. “What needs to occur … is to bring a much stronger performance discipline that builds on our foundation, so that all of that good work at the frontline turns into the right outcomes for security holders and customers and team.”
That’s exactly what Lendlease’s investors want to hear. But while shareholders weren’t commenting publicly on Monday following the announcement of Gillam’s appointment, it’s fair to say the early reviews were somewhat mixed.
On one view, Gillam is seen as an experienced, relatively young and energetic leader who can help Lombardo execute on the reset. His success at CSR, and its sale for a fat premium, is a real advantage.
But the enthusiasm with which Gillam’s candidacy has been endorsed by Lendlease’s board and management has some investors wondering if Gillam can really deliver the sort of cultural change the company needs, or whether some inside the business remain resistant.
Gillam knows the investor feedback will keep coming, and says he’d “much rather be dealing with people that care than people who don’t”.
But having backed Lombardo so strongly, investors will want Gillam to ride his CEO hard. Execution remains this company’s Achilles’ heel.
