If your business relies on building and engineering contracts and they look few and far between at the moment, what do you do? Announce a restructuring plan.
That’s what Lend Lease has done today. Its Australian construction and infrastructure business that includes the brands Abigroup and Baulderstone, acquired in 2010, as well as a project management, construction and infrastructure services business, will be submerged into one brand whose name will likely be unveiled on August 1 when the changes come into effect.
Lend Lease says by merging disparate elements that sometimes competed for contracts it will lead to a more efficient business as duplicate roles may be cut while skills can be leveraged. The company cannot give a figure on cost savings. But it says its announcement today will improve its ability to win contracts and build market share.
Time will tell. It is likely some Lend Lease employees, as in the case of almost all restructurings, may lose their jobs. Lend Lease’s announcement comes at a time when many other companies, especially those exposed to the mining sector, have announced restructurings and related costs cuts as the world’s largest mining companies slash capital spending. The economies where Lend Lease operates – Australia, the US and Europe – are hardly beacons of red hot activity. Europe’s property market, unsurprisingly, may remain depressed for a considerable time as austerity on both sides of the Atlantic crimp building and engineering activity.
Asia is a bright spot for companies such as Lend Lease. But it is hardly the only company of its type and the region’s biggest building firms from China, Japan, Korea and southeast Asia are hardly wallflowers when it comes to bidding for contracts in the world’s most dynamic economic region.
As yet Lend Lease shares have yet to be punished despite the gloomy prospects of many of its markets. The company’s stock is up 0.8 per cent so far this year compared with the S&P/ASX200 Index’s 3.1 per cent rise during the same period. If Lend Lease chief executive Steve McCann can spot other efficiencies he may be wise to announce them soon.