Lendlease will target more contracts outside London in the coming year as the regional market comes back into play, according to its construction MD Neil Martin.
Mr Martin said the group’s full-year results released this week showed its strategy over the past couple of years had been the correct one, despite the contractor having “taken a bit of external stick”.
Lendlease scaled back its regional work and shied away from tendering for smaller, riskier projects as it concentrated on complex development schemes such as its work at Elephant & Castle.
However, Mr Martin said he expected work outside of London to be a major growth area for the business after it posted a 10 per cent rise in revenue to £667m in the year to 30 June 2015.
It also boosted EBITDA by around £25m from around a £13m loss to a £12m profit.
“No matter how many times I say it I can’t seem to scotch this rumour. We look for a balanced portfolio of work. The lion’s share of our revenue comes from external work”
Neil Martin, Lendlease
“Those decisions we took two years ago, what we’re seeing now is the outcome of those results,” Mr Martin said.
“Hindsight is a wonderful thing, but the decisions we took about who we work for, disciplined bidding and how we structure the business has played out in these results, so I’m immensely proud.”
He pointed in particular to opportunities in Scotland and Manchester in the coming years, but said he also expected the European construction business to see growth in other parts of the UK such as Staffordshire, Liverpool and Wrexham, as well as growth in Italy.
“Where do I see growth coming from? Quite simply, the regional business.
“There is a lot of residential, where we need a disciplined approach to winning work and also government work.
“I am hopeful we will see more public sector work coming through to the regional business, like a nuclear framework or some more [Defence Infrastructure Organisation] work.”
Asked about the group’s appetite for working in joint ventures, Mr Martin said he would enter JVs based on the company fit, rather than on sector or a partner’s geographical location.
He said Chinese firms would be of interest, and said a Japanese client had recently asked Lendlease to look at a job having worked with the business in Australia several times.
“If it was a Chinese contractor with the right opportunity, then yes, but it’s more about the opportunity”
Neil Martin, Lendlease
“We are interested in JVs. We JV with Bouygues in Australia. It’s more about who your partner is rather than the country and the opportunity.
“If it was a Chinese contractor with the right opportunity, then yes, but it’s more about the opportunity.
“We have put a lot of work into making sure we have the right connections, so has [CEO for international operations] Dan Labbad. I’m often in contact with global colleagues talking about [potential] clients as well.”
The construction MD expressed frustration with “rumours” in the market that Lendlease was less interested in contracting for external clients, than on its own development pipeline.
“I’d love to scotch this rumour and no matter how many times I say it I can’t seem to scotch it.
“We look for a balanced portfolio and that’s somewhere between 30 and 40 per cent internal work of our revenue, which means that the lion’s share of our revenue comes from external work.
“I am immensely proud we have such a successful development business because it provides us opportunities to secure revenue and have the right skillsets across the business.”
Neil Martin on diversity
Construction News this week published the results of an LGB survey which provided a damning indictment of the attitudes towards sexuality among the employees of contractors.
We asked Neil Martin for his view on diversity:
“It’s important we have diversity of age, gender and sexuality. If you go to our construction sites you will see management teams wearing rainbow coloured laces, we have had Stonewall in to present to the construction business about what [diversity] means.
“We’re on the Stonewall index, so we are doing a lot in that space.
“It’s difficult for industry to adapt. We have historically been male-dominated, but I’m proud that I can say I have a female project director and a team that is 60 per cent female delivering a job for a major client.
“We have a female commercial director who we’ve just promoted. We’re doing a lot in that space but there’s a lot more we can do, I’d like to answer that question in 12 months’ time.
“We need to create an environment that allows women to step forward more and succeed.”
He said there was no upper limit to the projects it will bid for as a contractor, with a £15m lower value aspiration.
“One of the difficulties industry faces is resourcing. One of the elements you have in order to attract and retain talent is not only a culture as a company and financial sustainability, but also opportunities.
“When I was a young engineer in the early 90s, it was great that I could work on a small project and see a career path to being a kingpin on a small project, but basically cutting my teeth.
“It’s important that we have a wide variety of projects to match the talents and skills within the business.
“We have jobs from £15m upwards, being able to match peoples’ career paths to those opportunities is even more important now than it was in my day.”
Lendlease results presentation
In an analysts’ presentation, CEO for international operations Dan Labbad said European EBITDA was down 78 per cent overall due primarily to the sale of Bluewater but hailed the improvement in construction.
He said the construction business had backlog revenue of A$1.5bn, up 36 per cent year on year.
Mr Labbad said production capital was being deployed into its existing European pipeline to enable better earnings over the medium term, with an ability to invest in growth opportunities.
He highlighted London as a targeted gateway city for Lendlease in line with its investment criteria.
Other gateway cities included Boston, Chicago, Kuala Lumpur, New York and Singapore. He said the business would be measured and targeted in terms of its capital deployment.
Group chief financial officer Tony Lombardo said Lendlease recorded overall EBITDA profit margins of 2.6 per cent in construction, with a A$17.3bn backlog of revenue and A$11.8bn in new secured work.