Lendlease Group is confident of selling its UK operation by the end of next year, it said today after announcing it was withdrawing from construction markets outside of Australia.

In explaining why it was pulling out of its overseas markets, the firm described them as a “drag” on shareholder returns.

In a conference call today, Lendlease group chief executive and managing director Tony Lombardo said his company was in the early stages of getting the UK business ready to bring to market.

He said: “We think the UK and US are very good ongoing businesses and we feel we will be able to find the buyers for both – we are assuming over that next 18-month period [that we will] have executed transactions.”

Lombardo told analysts that more than two-thirds of the company’s assets are deployed in projects and assets outside of Australia, with 80 per cent of these expected to complete after 2030.

Citing a 0.6 per cent EBITDA on these overseas projects, he said: “These projects have excellent fundamentals but they are long-dated and their expected returns are too far into the future.”

The news that Lendlease will focus on Australia comes less than two months after the UK arm announced a drop in profit for the year to June 2023 compared with the previous year.

Lendlease group chairman Michael Ullmer cited the need for bold actions to address the company’s recent performance challenges.

“We recognise that our security price performance and securityholder returns have been poor as we have faced structural challenges and a prolonged market downturn,” he said.

“We need to take significant action at an accelerated pace to deliver value for our securityholders, capital partners and customers.”

The firm was 34th in the 2023 CN100 ranking of the UK’s biggest contractors, having posted a turnover of £553m for the year to June 2022.

Lendlease’s new strategy focuses on simplifying the firm’s organisational structure, reducing costs and leveraging its competitive strengths.

A newly established Capital Release Unit will play a central role in this strategy, targeting AUS$4.5bn (£2.35bn) in capital release, with $2.8bn expected by the end of financial year 2025.

This will involve exiting international construction, and accelerating the release of capital from offshore development projects and assets.

Lombardo said: “Through the decisive actions announced today, a new Lendlease is emerging. One that is firmly anchored in the very best of our proud legacy, but less complex, more focused, and fit for purpose.

“This new Lendlease will be more easily understood by our people and customers, and transparent and predictable for securityholders.”

Key measures include reducing the company’s annual cost base by $125m within 12 months, strengthening the balance sheet by reducing gearing to between 5 per cent and 15 per cent by the end of financial year 2026, and initiating a $500m on-market buyback.

Ullmer said: “Today we have announced the blueprint to position Lendlease for success – focusing on our core strengths and competitive advantages.

“We have thought very carefully about the necessary strategic refocus and made some tough decisions.”