Now might not be the best time for Lendlease to double down on Australia

Investors like the plan – so far – but is Lendlease’s strategy to shrink back to Australia really that great?

Lendlease CEO Tony Lombardo announced a major restructuring of its operations offshore back to Australia after its shares plummeted. Jane Dempster/The Australian.

Investors loved Lendlease’s bold plan to shrink – heck, slash and burn – to a “Little Australia” future. The share price leapt 8 per cent Monday.

But one has to ask: will it prove a case of out of the global frying pan and into a parochial – and, I have to add, all-round mindless – homegrown fire?

In short and in sum, construction and property development giant (no longer so) Lendlease is going to abandon any international pretensions and embrace an Australia-only future.

Yes, it will retain an international investment management capability.

But, good luck with that long-term, when it’s to be divorced from any development capacity, expertise and operations.

Lendlease International becomes just another one of hundreds of names jostling in that space behind the mega US and European players that have the real financial and asset-management muscle.

But the core Lendlease development and construction operations will become, as the slide in the Lendlease presentation puts it, “Australia Only”.

Now this does have the virtue of sticking to one’s knitting. For much of its life Lendlease was among the premier construction and development groups in the land. If not absolutely the No. 1. And you might reasonably think this is exactly where a company like Lendlease should focus in this space: with immigration-driven population growth forcing us to pour a lot, and I mean a lot, of concrete. We, and Lendlease in particular, are building a lot of buildings; we’ve just had a collection of state budgets – and the federal one as well – commit tens of billions of dollars to yet more infrastructure.

Two big and broad things, though, niggle at my mind.

Are the “good” – heck, money for old rope, almost literally – times coming to an end?

Does anyone seriously believe we can just keep careering down the road we are on? Again, bluntly, broadly, pouring ever-more concrete?

Are we going to tumble over into a China future of massive over-building and widespread (major) developer crashes?

Or will it just be more-of-the-same massive cost overruns and material shortages? Is this really the optimum time to go totally long on Australian construction and development?

To say nothing of the actual execution mess involved in what is a very major corporate restructure and huge and extended executive and management disruption?

Of course, it has to be noted that Lendlease clearly could not keep blundering on as a minnow in the global construction and development space.

Let’s also put that share price surge in context.

Yes, the share price was up 8 per cent, but at $6.36 it was barely one-third of the price in 2019, just before Covid.

That’s to say, on Friday the share price had been 30 per cent of its immediately pre-Covid peak. After Monday’s “good news” it soared to be 32 per cent of that pre-Covid level.

As the vexed Star Casino group has shown, you can get huge upward surges if you drive the share price down low enough. On another front, we await the final terms of the BHP-Anglo marriage.

Originally published as Now might not be the best time for Lendlease to double down on Australia