Lendlease still in the ‘early stages’ of selling UK construction arm

Lendlease has said it is still in the “early stages” of selling its UK construction arm nearly three months after putting the business up for sale.

In its full-year results published this morning, the New South Wales-based multinational provided an update on its surprise decision announced in May to offload all of its overseas construction businesses.

The group said it was “progressing” with the divestment of its UK construction business and was targeting completion of a sale within 18 months.

It comes three months after the division’s former boss Simon Gorski said Lendlease needed to “move quickly” in selling its UK construction arm.

The group said it had agreed terms in principle for the sale of its US East Coast construction operations with US firm Consigli Construction Co with the transaction currently progressing through “due diligence and negotiations to finalise detailed terms and conditions”.

It said it had already shelled out £714m (AD $1,384m) on the May restructure and £49m (AD $95m) on other restructuring costs.

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It also admitted the sum set aside by the group for building remediation costs in the UK had risen in the year by £23m, from £165m (AD $319m) in 2023 to £188m (AD $365m) in 2024.

The accounts also reveal a bill of £8.8m (AD $17m) in the year for building remediation costs in the UK following a series of new building safety regulations for residential buildings above 11m in height.

The group said it believes its currently liability to cover 60 buildings, one more than in 2023, most of which were developed by Crosby, a company which Lendlease acquired in 2005 in order to enter the UK residential development market.

The cash expenditure is expected to be spread over a period of at least six and a half years from the end of June 2024 with these ongoing expenses being excluded from the group’s core operating profit.

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Operating profit before tax for the group in 2024 was £160m (AD $311), down from £163m (AD $316) in 2023, while turnover from construction across all regions increased by some 40% to £65m (AD $126m) over the year.

It said this gain was partially due to a remeasurement of UK pension scheme liabilities which bought in nearly £22m (AD $42m).

The group’s results come a month after the departure of Gorski, who has led the UK construction business since 2019.

Gorski told Building following the restructure announcement in May that Lendlease needed to “move quickly and diligently” in selling its UK construction arm, adding: “We don’t want an extended period of uncertainty. It won’t drag on.”

Lendlease’s decision to sell the UK construction arm brings to an end a 25-year ownership which began in 1999 when the firm paid £285m for the business, then called Bovis, which had been owned for a quarter of a century by shipping firm P&O.