Lendlease has terminated an AUD 90 million asset sale after the agreement's conditions were not met. It involved the sale of development rights to a mixed-use project in Milan, Italy, to a local developer.
Lendlease is set to be leaner in the future. The shift to focus more on the capital-light, higher-margin investment management business should improve the company’s return on invested capital.
Bears
Lendlease’s construction division generates huge revenue but wafer-thin margins. Unexpected cost blowouts can destroy returns.
Lendlease has three segments: investments, development, and construction. Lendlease in the past operated locally and overseas across all three segments. But the group opted to retreat from international development and construction, focusing on Australia. The investment management platform, however, will still retain international exposure. Historically, the investments segment contributed about one-third of group EBITDA, development around half, and construction the remainder. The group is targeting an earnings mix between investments/development/construction of 50%/35%/15% after the current restructure, shifting more weight to the defensive and higher-margin investments segment. Sales proceeds from asset divestments will primarily be used to repay debt.