Lendlease to cut up to 400 jobs as restructure bites

The developer will make big cuts to its Australian operations as its new chief executive looks to get it back on track.

Lendlease is cutting head office staff. Picture: AAP Image/Jeremy Piper

Global building and development giant Lendlease has opened the corporate restructuring season by culling between 300 to 400 staff as it looks to reshape its business.

The cuts will fall around the world but the bulk are expected at the company’s local headquarters as it targets about $160m worth of annualised cost savings.

The move reflects a drive by new chief executive Tony Lombardo to make the famed company more efficient and better integrate its regional operations.

The company is making the move partly as many of its largest projects are in Europe and the United States where it is undertaking a $21bn precinct for Google in San Francisco Bay Area.

While Lendlease declined to comment ahead of a strategy briefing on Monday, the move had been expected as the new chief puts his stamp on the company and looks to step up development in the wake of the coronavirus crisis.

The company said earlier this month that it would take a restructuring charge of $130m-$170m and another of $230m-$290m as it simplified its development business.

The new chief executive is putting a broom through management in the wake of both the pandemic and after the long reign of previous chief Steve McCann, who now heads Crown Resorts.

Chief executive Tony Lombardo. Picture: Rendy Ryanto

Lendlease has been under pressure from investors to simplify its business and to produce more steady returns after heavy losses on its exit from engineering.

The company raised about $1.15bn when the pandemic struck last year and has taken write downs on build to rent projects in London hit by slow markets.

Lendlease has almost exited from its costly engineering operations and sold off unwanted businesses including its services unit, a renewable energy business and a US telco business.

But it is sticking to its plans to roll out its $114bn-plus pipeline and wants to step up the production in coming years to $8bn per annum.

The company has made big strides in Australia with projects including the new Medibank headquarters in Melbourne and two towers of luxury apartments being developed at Sydney’s harbourside Barangaroo.

But the company has warned that its development unit is not yet trading up to expectations and it is hoping to turn this around over the next two years.

Mr Lombardo was met with a share price plunged when he delivered the company‘s first annual results at the helm earlier this month.

Lendlease shares fell by 7 per cent and although they have since recovered they were trading at about $12 on Thursday afternoon.

The company warned about the tough outlook for the development division and the disruptions caused by the pandemic.

Lendlease also gave a downbeat assessment about the short-term prospects of its development unit but said returns should be back on track as it rolls out its huge pipeline.

Lendlease this month reported net profit of $377m, at the lower end of its flagged range of $375m-$410m. Investors marked the company down as it said it would not meet a targeted return on equity of 8-11 per cent until fiscal 2024, and would take the restructure and development-related charges.