This article is from the Australian Property Journal archive
LEND Lease shares dived yesterday following its announcement of a major restructuring of its Australian construction and infrastructure business and the group talking down its construction earnings for the year.
The development giant will consolidate its Abigroup, Baulderstone, project management & construction and infrastructure Services businesses into sector-based businesses, with one for each of the building, engineering and infrastructure services sectors.
The announcement sparked fears of job cuts, with Morningstar analyst Tony Sherlock predicting more than 100 jobs could be lost.
Lend Lease also revealed that earnings from its construction business had been reduced by softening conditions in Australia and EMEA, raising further concerns that saw shares plunge by more than 8 per cent during trading to $8.57, after opening at $9.35.
It closed the day at $8.65, down 70 cents, or 7.49%.
Group managing director Steve McCann said the group was “on track to deliver a solid result in line with market expectations in a tough market environment”.
The restructuring will take effect from the start of August, and the group said it would create more effective and competitive operating businesses.
“It will enable greater leverage of skills and expertise, improved operational systems and efficiencies,” it said.
McCann said Lend Lease would now have businesses that compete for the leading market position against its external competitors in each of the engineering, building and infrastructure services sectors.
The restructuring will be overseen by Lend Lease’s CEO David Saxelby; COO Dale Conner and CFO Andrew Muller. The branding of the businesses will be announced through June and July, following stakeholder consultation.
Lend Lease said its FY13 profit composition mix had changed, with its Asian development, Australian infrastructure and Australian property businesses improving on the previous year, offsetting to an extent construction earnings reductions.
Meanwhile, it has also launched the Lend Lease Jem Partners Fund, established to acquire its $US227 million ($A189 million), 25% equity interest in the suburban retail and office asset Jem in Singapore, resulting in a profit on the sale slightly ahead of plan.
McCann said the sale of its direct stake in Jem to the new fund would lead to another strong result for its Asian operations in FY13.
The Jem site was acquired in June 2010 by a joint venture between Lend Lease, with 25% ownership, and Lend Lease Asian Retail Investment Fund, with the remaining 75%. The retail component of Jem opened 100% leased on Saturday.
It was the first mixed-use development in Singapore to be awarded Green Mark Platinum version 4 and was one of the recipients of the Building and Construction Authority’s first Universal Design Mark Award.
McCann said “solid progress” had been made in the group’s key projects over the past six months, including at Barangaroo in Sydney, Jem in Singapore and “healthy” pre-sale in Elephant and Castle in London.
Lend Lease has announced several large-scale projects in the past 12 months, including the $1 billion Waterbank redevelopment project in Perth, $2 billion Sunshine Coast University Hospital in Queensland, $2.5 billion Sydney International Convention, Exhibition and Entertainment Precinct and the $630 million Bendigo Hospital in Victoria.
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