Lendlease avoids ‘second strike’ in crucial AGM showdown
Lendlease has avoided a second strike against its remuneration report at its annual general meeting on Friday, convincing shareholders that it has found a path forward from poor financial results by focusing on its Australian business.
A second strike – or two consecutive annual protest votes of 25 per cent or more against its remuneration report – would have led to a spill motion over whether to dissolve the board.
More than 91 per cent of shareholders voted in favour of the remuneration report, a sharp turnaround from last year when 39.8 per cent of shareholders protested its executive pay scheme.
“As can be seen from this vote, we have clearly responded to concerns given that we received such a high level of support for our remuneration report,” outgoing chairman Michael Ullmer said.
“I see this more generally as a strong endorsement from our security holders for Lendlease.”
As The Australian Financial Review’s Street Talk column reported on Friday, newly appointed chairman John Gillam held meetings with some of the company’s largest – and most critical – shareholders, including John Wylie’s Tanarra Capital and David Di Pilla’s HMC Capital in the four weeks since his nomination to the board.
But those meetings with Mr Gillam, best known for turning Bunnings into an Aussie retail icon, did not win over Tanarra, which on Friday said it voted against the remuneration report.
“We have been encouraged by our early engagement with, and the responsiveness of, John Gillam as incoming chair,” a Tanarra spokesperson said.
“We believe he fully accepts the need for focused change. Given that change is however yet to happen, we are maintaining our stance on voting on the 2024 remuneration report. We support the election of Mr Gillam as chair and the re-election of Nick Collishaw as a non-executive director.”
The Australian Shareholders Association also said it voted against the remuneration report due to the majority of executive pay incentives being based on Lendlease reaching a targeted share price.
“We believe that there’s a degree of lost opportunity to focus on what’s happening right now,” an association spokesman said.
“[It’s] a lost opportunity to focus on the milestones that will get us to that, a lost opportunity to have some reward based on achievement of some key metrics in this particular financial year.”
Sean Wareing, a former Lendlease finance executive and shareholder of the company, slammed the listed developer for cutting off its international business which has led to about 7500 job losses, a strategy driven by pressure from larger shareholders such as Tanarra and HMC.
“To witness what has happened to Lendlease in the last few years, to say that it’s appalling is an absolute understatement. We’ve seen a complete collapse of capability on the [international] part of the organisation,” he said.
Earlier, Lendlease chief executive Tony Lombardo appealed to shareholders to look past this financial year to better times ahead. He vowed to follow through on a promised $500 million share buyback to restore confidence in the developer’s ability to tame its debt burden.
The troubled company would only get its gearing back within its targeted 5 per cent to 15 per cent range by the end of 2025-26, investors were told ahead of Friday’s annual general meeting in Sydney. It reported gearing of 21 per cent in August.
“We as the management team have not been happy with the performance that we’ve had recently. The team and I are very focused on restoring this company and fixing this company, ensuring we get back to the growth that we need,” Mr Lombardo told shareholders.
A revamp strategy
While keeping earnings guidance for the current year unchanged, with a range of 54¢ to 62¢ per security, the company would “in the near term” launch a share buyback worth up to $500 million to return capital – provided it could sell certain assets – and this would give investors confidence it could get gearing levels back down, Mr Lombardo said.
The company first announced the buyback in May.
Lendlease’s construction arm was still battling with loss-making projects during the pandemic and would only return to “more normal” operating conditions with better earnings margins and revenue next year, the CEO said.
Lendlease shares closed up 18¢, or 2.7 per cent, at $6.82 on Friday, reflecting the improving attitude of investors towards the company.
The shares have gained just 4.8 per cent over the past 12 months, lagging much larger gains in the S&P/ASX 200 and real estate indices.
