Investors have punished Lend Lease after the company revealed it will undergo a major restructure and slash jobs as the construction sector softens.
Shares in the development and construction giant slumped more than eight per cent in early trade, and closed 70 cents lower, down 7.5 per cent, at $8.65.
Analysts say the global slowdown in construction is now beginning to bite in Australia as resources projects come off the boil and competition heats up for work in major cities.
Lend Lease on Monday said the profit composition mix for the company had changed during the 2013 full year.
“Underlying construction markets in Australia and Europe, the Middle East and Africa have softened in the second half of fiscal 2013, contributing to reduced earnings from the construction businesses in those regions,” Lend Lease said in a market update.
Lend Lease Group chief executive Steve McCann later told an analyst briefing that back office positions would be cut as the company booked a $20 million restructure charge in the current half, with more costs to come in the next financial year.
Under the company-wide revamp of its construction and infrastructure business, Lend Lease will merge its four domestic divisions: Abigroup, Baulderstone, Project Management & Construction and Infrastructure Services businesses.
The new structure will create more effective and competitive operating businesses, with improved operational systems and efficiencies, the company says.
Mr McCann says the move also will increase the company’s capacity for growth.
“We will have businesses that compete for the leading market position against our external competitors in each of the engineering, building and infrastructure services sectors,” Mr McCann said.
The changes take effect from August 1.
Lend Lease also will sell a $A189 million, or 25 per cent, interest in its Jem retail and office asset in Singapore to the newly-created Lend Lease Jem Partners Fund.
Morningstar analyst Tony Sherlock predicts more than 100 jobs will be lost as part of the restructure.
He said the share price fall came as investors realised the underlying business was deteriorating faster than expected, particularly as competitors moved out of the cooling resources sector.
“Lend Lease is not as immune as others from the slowdown,” Mr Sherlock said.
He said rationalisation would not help the company win more work.
“They’re in an ultra-competitive sector and the sector’s margins are going to get hit and their margins are going to get hit.”
