Lendlease strategy hits ACCC hurdle

Lendlease has hit a snag as it looks to cut down its sprawling empire

Lendlease - led by Tony Lombardo - said that on the basis that completion of the deal did not occur in this financial year, its guidance for return on equity is anticipated to be impacted by approximately 2 per cent. Picture: Jane Dempster/The Australian.

Embattled developer Lendlease’s attempts to slim down its sprawling empire have hit a roadblock with the competition watchdog pushing its decision on the sale of a $1.3bn housing unit to a Stockland venture back past the end of this financial year.

Lendlease had struck a deal to sell the housing business to Stockland and its Thai-backed capital partner Supalai Australia Holding last December but in April the ACCC suspended the timeline pending receipt of information from the parties.

After getting more information it has set the provisional date for announcement of ACCC’s findings - which may be either a final decision or release of a statement of issues - as July 4.

Lendlease - led by Tony Lombardo - said that on the basis that completion of the deal did not occur in this financial year, its guidance for return on equity is anticipated to be impacted by approximately 2 per cent.

This was calculated on the same basis as the 7 per cent guidance that was previously provided and equates to approximately $450m of core operating profit after tax reducing to approximately $305m.

The downward impact reflects the delay to anticipated sale profits of $130m to $160m, now anticipated in the first half of fiscal 2025, subject to satisfaction of conditions precedent.

The revised earnings guidance is subject to the completion of a number of transactions, including the sale of Lendlease’ Asia life sciences interests into a new joint venture with investment bank Warburg Pincus, which remains subject to conditions precedent.

The company said that on the basis that completion does not occur this financial year, its gearing was expected to be at or around the upper end of the 10-20 per cent target range before the anticipated provision for impairments and charges.

This compares to prior gearing guidance of modestly above the mid-point of the 10-20 per cent target range.

On Wednesday, Lendlease said it had struck a deal to offload its US east coast construction operations to US builder Consigli Construction as it consolidates its operations back to Australia.

The company’s international construction business has been a millstone on returns, and it said the overall business, which includes operations in Britain that are also on the block, had generated a low earnings margin of about 0.6 per cent in financial years 2019 to 2023.

Lendlease said at its strategy update on Monday that it was targeting trade sales of the units as going concerns, so its construction operations would shrink back to focus solely on Australia. The sale of the entire international building business will see about 1,400 jobs trimmed when it is completed.

The US sale, for an undisclosed sum, was one of its first steps back towards focusing on Australia as part of the dramatic reversal that will see Lendlease pull out of most international markets.

The overall shift will see Lendlease look to return up to $4.5bn worth of capital back into its local operations, and it will next look to exit its costly British building arm.