Lendlease cuts staff as it launches roadmap to future
Global property giant Lendlease has launched its road map to the future that will see up to 400 jobs cut, a consolidation of the Australian operations to simplify the business and a focus on its planned $8 billion development pipeline.
The job cuts are in addition to the 4000 that will go following the sale of the engineering and services business. Under the scheme, Lendlease will merge the Australian property and construction business units which have previously operated as standalone centres.
Newly minted chief executive Tony Lombardo announced the new business model at the group’s strategy day. He took over the reins on June 1, replacing former CEO Steve McCann who was at the helm for 12 years.
In what is one of the biggest shake-ups of the business in the past decade, Lendlease will focus on selling out of what it sees as non-core developments and bring in new sectors such as build-to-rent, data centres, and reposition its older office assets into more flexible spaces.
In his address on Monday Mr Lombardo said there will be a hit of $230 million to $290 million in restructure charges to the pre-tax first half profit for this current year, with cost savings to benefit the earnings in the 2023 year.
“We will continue to invest in our people, but cities of the future need organisations that can adapt to changes,” Mr Lombardo said.
Morgan Stanley analyst Simon Chan said Lendlease’s strategy briefing was bullish, in that its 2024 targets for completions and returns have now been confirmed.
“However, the less bullish points include the uncertainty around the progress of the pipeline, and the potential for 2022/2023 to be unexciting years for earnings,” Mr Chan said.
As part of Mr Lombardo’s plan to simplify the company, Lendlease will create a separate Australian business unit, which will operate in the same way as the other three regions – Europe, Americas and Asia. This will also result in cost savings.
Mr Lombardo on Monday reaffirmed the group’s commitment to hitting $8 billion in production projects by the 2024 year. These projects will include the two Barangaroo South residential towers in Sydney, the Melbourne Quarter in Southbank, the Elephant Park development in London and the large towers at Chicago, in the US.
Lendlease will also pursue the sale of interests in some developments as they near completion, including the divestment of a 25 per cent stake in the Victoria Cross metro station site in North Sydney.
Phil Montgomerie, the director, real estate and income stocks at BTIG said Lendlease’s management is focusing on expanding the margins at its residential communities and construction businesses and has a target for funds under management growth of up to 12 per cent by 2026.
“Essentially, it’s a further evolution of the existing strategy, however it is being enhanced by focusing on costs,“Mr Montgomerie said.
“Lendlease has identified about $160 million in cost reductions where 70 per cent will come from staff reductions and the secondary costs they bring such as property rental space requirements.”
Lendlease shares closed 1.2 per cent weaker at $12.02.
