Lendlease Group (ASX: LLC) shares are starting the year in the red despite an announcement.
At the time of writing, the international property and infrastructure company's shares are down approximately 1% to $6.17.
This compares unfavourably to a 0.4% gain by the benchmark S&P/ASX 200 Index (ASX: XJO).
What's going on with Lendlease shares?
Investors have been selling down the company's shares today despite it announcing another divestment.
According to the release, Lendlease has entered into a binding agreement with Atlas Holdings for the sale of its UK Construction business.
Atlas Holdings is an industrial holding company with construction sector experience.
Management notes that upon completion, this will finalise Lendlease's exit of its international construction operations. This is well ahead of the targeted 18-month timeline that was announced in May 2024 at its strategy update.
It also highlights that the sale of its UK Construction business accelerates its progress to further simplify the group and focus on the growth of its Australian operations and international Investments platform. It closely follows the sale of its US East Coast construction operations in September to Consigli Building Group.
What are the terms?
The release reveals that Lendlease expects to receive a GBP35 million ($70 million) cash consideration for the business. This includes GBP10 million ($20 million) that will be deferred until June 2026, subject to completion adjustments.
However, the profit outcome is expected to be broadly neutral after providing for retained risks in relation to projects that have completed or substantially completed prior to exchange of the sale agreement.
Furthermore, the net cash outflow as a result of the transaction is anticipated to be approximately $100 million. This is due to the unwind of negative working capital in the business prior to and at transaction close and including the offset from receipt of initial sale proceeds.
Commenting on the deal, Lendlease Group CEO, Tony Lombardo, said:
This transaction builds on our progress to simplify Lendlease as we look to lower our risk profile and increase securityholder returns. It also represents a positive outcome for both our people and our valued customers.
Guidance update
Lendlease advised that its earnings guidance for FY 2025 remains unchanged.
It continues to expect group earnings per share of 54 to 62 cents, but with a heavy skew to the second half of FY 2025. This skew is being driven by the delay in the completion of the Military Housing sale, which is now expected to contribute $145 million to $160 million of operating profit after tax.
Management also notes that gearing during the first half is anticipated to be in the range of 26% to 28%. However, it is expected to trend down significantly in the second half towards the top end of its target range of 5% to 15%.
