The Lendlease Group (ASX: LLC) share price is charging higher today.
Shares in the S&P/ASX 200 Index (ASX: XJO) property and infrastructure group closed on Friday trading for $5.89. In morning trade on Monday, shares are swapping hands for $6.41 apiece, up 8.8%.
For some context, the ASX 200 is up 0.6% at this same time.
Here's what investors are considering today.
Lendlease share price surges amid focus on shareholder returns
The Lendlease share price is leaping higher after the company released a major strategy update.
The property developer is moving to simplify its global business and bring costs under control.
As part of the new strategy, Lendlease will exit its struggling international construction projects and focus on its integrated Australian real estate business with international investment management capabilities.
Lendlease said it intended to complete the transactions already announced and underway and accelerate the capital release from its offshore development projects and assets to recycle $4.5 billion of capital.
Management expects to achieve "significant progress" within the next 12 to 18 months.
The company will prioritise debt reduction and shareholder capital returns.
In line with that, the Lendlease share price is likely catching some tailwinds after management flagged "a phased return" of capital to shareholders with a planned initial $500 million on-market buy-back.
As for debt reduction, Lendlease aims to significantly reduce gearing to within a lowered target range of 5% to 15% by the end of FY 2026, down from the current range of 10% to 20%.
Additionally, the property developer said it would release around $3.42 per share of net tangible assets from a newly established Capital Release Unit (CRU). Most of that is expected by the end of FY 2025.
What did management say?
Commenting on the strategy changes lifting the Lendlease share price today, chairman Michael Ullmer said, "We recognise that our security price performance and securityholder returns have been poor as we have faced structural challenges and a prolonged market downturn."
Ulmer added, "We have thought very carefully about the necessary strategic refocus and made some tough decisions."
Lendlease CEO Tony Lombardo said, "Through the decisive actions announced today, a new Lendlease is emerging."
Lombardo continued:
By reshaping the portfolio, concentrating on our core competencies in markets where we have proven we have the right to play, and the competitive advantage to win, the financial and operational risk profile will be lower, and we believe the quality of our earnings ultimately higher and more sustainable.
Importantly, we do not launch this strategy from a standing start. Significant work has already been undertaken… There is no question that the Australian business of Lendlease is market leading and unique in the breadth and strength of its integrated capability and services…
The establishment of the Capital Release Unit (CRU) is central to our new strategy. The CRU will facilitate the recycling of $4.5 billion in capital of which $2.8 billion is anticipated by the end of FY25. Our priority will be to pay down debt and efficiently return capital to securityholders.
The company maintained its previously announced full-year guidance of a 7% return on equity.
Lendlease share price snapshot
With today's intraday gains factored in, the Lendlease share price remains down 18% over 12 months.
