Lendlease (ASX: LLC) has announced the sale of its UK Construction business to Atlas Holdings, a company with experience in the construction sector. This sale is effective from 31 December 2024 and marks the completion of Lendlease’s exit from international construction operations, ahead of the 18-month timeline outlined in the May 2024 strategy update.
Sale Details:
- Buyer: Atlas Holdings, an industrial holding company with construction sector expertise.
- Transaction Terms:
- Cash Consideration: £35 million (
$70 million), with £10 million ($20 million) deferred until June 2026, subject to completion adjustments. - Profit Outcome: Expected to be broadly neutral after accounting for retained risks related to completed or substantially completed projects before the sale agreement exchange.
- Net Cash Outflow: Anticipated to be around $100 million, primarily due to the unwind of negative working capital and the offset from initial sale proceeds.
- Cash Consideration: £35 million (
- Employee Transfer:
Nearly all of Lendlease’s existing UK construction employees will be transferred as part of the sale, ensuring a smooth transition for clients, projects, and business partners. - Strategic Context:
The sale accelerates Lendlease’s ongoing efforts to simplify its operations, allowing it to focus on expanding its Australian operations and international investments platform. This follows the earlier sale of its US East Coast construction operations.
FY25 Earnings Update:
- Earnings Guidance:
Lendlease has reaffirmed its FY25 earnings guidance, expecting Group Earnings Per Security (EPS) to be in the range of 54 to 62 cents. However, there will be a heavy skew towards 2H FY25 due to delays in the completion of the Military Housing sale, which is now expected to contribute $145-160 million to Operating Profit After Tax (OPAT). - Gearing:
For 1H FY25, gearing is anticipated to be in the range of 26-28%. However, it is expected to decrease significantly in 2H FY25, moving towards the top end of the target range (5-15%). This improvement is due to approximately $1.5 billion of gross contracted cash inflows expected in 3Q FY25, which will come from:- Apartment settlements
- Final instalment of the Communities transaction
- Proceeds from the Military Housing sale
CEO Commentary:
Tony Lombardo, CEO of Lendlease, commented that this transaction is part of their strategy to simplify the business, lower risk, and increase securityholder returns. He also highlighted that the sale represents a positive outcome for Lendlease’s employees and customers.
