Lendlease Group Annual Report 2020

FY2020 Annual Report · Lendlease Group

Loading PDF…

Creating
together

Lendlease
Annual Report
2020

Lendlease Annual Report 2020 Managing and Measuring Value2

All financial amounts in this report are in
Australian dollars unless otherwise specified.

Lendlease Corporation Limited
ABN 32 000 226 228
Incorporated in NSW Australia

Lendlease Responsible Entity Limited
ABN 72 122 883 185 | AFS Licence 308983
as responsible entity for Lendlease Trust
ABN 39 944 184 773 | ARSN 128 052 595

Lendlease Annual Report 2020

Contents

Directors’ Report

1. Overview

Chairman’s Report
Group CEO and Managing Director’s Report

FY20 snapshot

2. Our Business

Our vision: To create the best places
Our strategy
Global presence, local knowledge
Development
Construction
Investments

3. Creating Together

By shaping cities
Through creating the best places
Through partnering
By engaging with the community
By looking into the future

4. Managing and Measuring Value

Our five focus areas of value creation
Health and Safety

Financial

Our Customers
Our People

Sustainability

5. Risk

Risk governance and management
Key risks and mitigation

6. Climate Related Risks and Opportunities 68

7. Performance and Outlook

8. Governance

Board of Directors’ information and profiles
Remuneration Report

Directors’ Report

Lead Auditor’s Independence Declaration

9. Financial Statements

10. Other Information

Securityholder information

Glossary
Corporate directory

142

214

Front cover:
Singapore: Paya Lebar
Quarter

c.$4 billion lifestyle
precinct.

This page:
Sydney: Daramu House,
Barangaroo South

Lendlease Annual Report 2020

About this
report

The Lendlease Annual Report 2020 has been prepared
with reference to the International Integrated Reporting (IR)
Framework that encourages businesses to consider what
creates value for them and how this value contributes to long
term sustainable returns for securityholders.

Materiality
A matter is considered material if senior
management and those charged with
governance believe it could significantly
impact the value created and delivered
in the short, medium and long term.
We identify and capture material matters
through the following processes:

• Project Control Group (PCG) sessions,
which include key internal stakeholders
and represent the governance structure
for overseeing the completion of the
Annual Report

• Capturing feedback through

engagement and research during
the financial year from key external
stakeholders including investors,
analysts, and other relevant groups

• Engagement with the Board

• Confirming that the strategy is

consistent and relevant with the
information collected above.

The outcomes of these processes are the
material issues noted on page 44 and 45,
and in the section Our Business on pages
14 to 27.

Reporting suite
Our reporting suite provides information
about the organisation and its key financial
and operational achievements including:

Directors’ Report and Operating and
Financial Review (OFR)
The required elements of the Directors’
Report, including the OFR, are featured
on pages 4 to 141 of this report and include
the sections: Our Business, Creating
Together, Managing and Measuring
Value, Risk, Climate Related Risks and
Opportunities, Performance and Outlook,
and Governance.

The OFR is covered specifically on pages
4 to 89. All non financial metrics included
in the Directors’ Report on pages 4 to 75
have been verified through our internal
verification process. The Remuneration
Report on pages 106 to 137 and the
Financial Statements on pages 142 to 205
have been audited by KPMG.

• The Annual Report

Features information about Lendlease,
our strategy, integrated financial and
operational performance, corporate
governance, Directors’ Report,
Remuneration Report and Financial
Statements

• Biannual Results Presentation

The current reporting period’s financial
results and detailed segment information
for projects including major urbanisation
projects, investments and pipeline

• www.lendlease.com

Includes additional information on
sustainability reporting, corporate
governance, tax compliance and
historical financial information.

Our focus areas
We have five focus areas that create
long term value. They underpin our
ability to create safe, economic and
sustainable outcomes. Our success
is measured by the value we create
in these five focus areas and can be
found throughout this report.

Health and Safety
Everyone has the right to go home safely. We remain committed to the
health and safety of our people, and all of those who interact with a
Lendlease place.

Financial
A strong balance sheet and access to third party capital enables us to
fund the execution of our pipeline and deliver quality earnings for our
securityholders.

Our Customers
Our customers love the places we create when we partner effectively,
collaborate and innovate. Only through these actions can we respond to a
changing world.

Our People
Our people are the greatest contributors to our success and enable us to
fulfil our vision to create the best places.

Sustainability
Sustainability is core to our planning and clear in our outcomes. We have
a proud history of giving emphasis to environmental, social and economic
impacts.

About us

Lendlease is an international
property and investments
group with core expertise in
shaping cities and creating
strong and connected
communities.

Founded in Sydney in 1958, Lendlease was
born out of a vision to create a company
that could successfully combine the
disciplines of Development, Construction
and Investments.

Headquartered in Sydney, our people
are located in four operating regions:
Australia, Asia, Europe and the Americas.

We create award winning urban precincts,
living options for any stage of life, retail
precincts and workplaces to the highest
sustainability standards.

Our people and our partners are the
greatest contributors to our success and
underpin our ability to deliver our vision:
To create the best places
Places that we have created together with
our customers, partners, securityholders,
the community and our people.

Sydney: One
Sydney Harbour,
Barangaroo South

Artist’s impression

Lendlease Annual Report 2020 Overview

Overview

Chicago: The Cooper,
Southbank

Lendlease is
undertaking a major
revitalisation on the
banks of the Chicago
River, on a site that has
been mostly dormant
for half a century.

Lendlease Annual Report 2020 Overview

Chairman’s
Report

It is impossible to present our year in
review to securityholders without first
acknowledging COVID-19 and its impacts
on the regions in which we operate and
our stakeholders including our people,
securityholders and customers.

The pandemic has reshaped most aspects
of society. Governments around the world
quickly responded to help shield their
citizens and economies from the worst of
the virus’s effects. This was, and continues
to be, an entirely appropriate course of
action. In a similar vein, the Board moved
decisively to tackle COVID-19 related
risks – including the health and safety
of our people, our customers and the
communities in which we operate, as well
as our operations and our balance sheet.

A Board subcommittee, which was formed
in March 2020, had primary oversight of
the Group’s response to COVID-19.

Health and Safety
This past year has reinforced that the
health and safety of our people, and
those who interact with our operations,
is Lendlease’s number one priority. This
year the Group recorded our lowest
incident frequency rates for both Critical
Incidents and Lost Time Injuries since we
began reporting these metrics.

Notwithstanding this strong performance, a
construction worker tragically passed away
in hospital from an infection contracted
following surgery after a critical incident
on one of our sites in Kuala Lumpur. This
provides a strong reminder of why we
have such an unrelenting focus on health
and safety. Our sincerest condolences are
extended to the deceased worker’s family
and colleagues.

Financial Result
Lendlease reported a Statutory Loss after
Tax of $310 million, as $368 million of costs
previously flagged in February 2019 relating
to the exit of Engineering were brought to
account. While disappointing, the Board
remain confident that exiting Engineering
and focusing on our Core business is in the
best interests of securityholders.

Our first half Core profit of $308 million
was followed by a $212 million loss in the
second half of the year. Distributions to
securityholders reflect the distribution of
54 per cent of first half earnings, 30 cents
per security, and the distribution of Trust
earnings in the second half of 3.3 cents
per security.

The Board moved decisively to tackle COVID-19
related risks – including the health and safety of
our people, our customers and the communities
in which we operate.

A range of measures were implemented in
the second half of the year to strengthen
our financial position. This included raising
$1.2 billion of new equity, arranging
additional debt facilities, reducing
operating costs and reviewing project
expenditure. The equity raising provides
additional flexibility and capacity to
continue the delivery of our development
pipeline while pursuing further investment
opportunities. The equity was allocated
48.4 per cent to Lendlease Corporation
and 51.6 per cent to Lendlease Trust.
This allocation will enable the Group to
continue to implement its strategy of
conducting its active business in Lendlease
Corporation, while holding its passive
assets in Lendlease in an efficient manner,
and will provide the Trust with additional
capacity for investments to grow recurring
earnings within the Group’s overall
portfolio management framework.

The Group entered FY21 in a strong
financial position with cash and cash
equivalents of $1.6 billion, undrawn
debt facilities of $4.2 billion and gearing
of 5.7 per cent.

Board Renewal
During the year, we continued to focus
on our program of Board renewal and
appointed two new Non Executive
Directors, Margaret Ford OBE and
Robert Welanetz.

However, given the disruption caused by
COVID-19, including continuing global
travel bans and ongoing time zone
challenges, Margaret has elected to
step down from the Board. Margaret will
continue to assist the Lendlease Board in
respect of the Group’s Europe operations
in an advisory capacity. Margaret has
expressed a willingness to re-join the
Board once the COVID-19 restrictions
have significantly subsided.

Robert, who brings significant
international experience in our core
sectors of Development and Investments,
continues to serve as a Non Executive
Director and will be standing for election
at the Annual General Meeting.

After more than eight years of service,
Colin Carter will retire at the conclusion of
our 2020 Annual General Meeting. During

his tenure, Colin made an outstanding
contribution, including oversight of the
Board’s long term renewal and succession
strategy and Board performance
assessment. His depth of experience in
strategy, sustainability and governance
has helped shape Lendlease’s position on
these critical issues. On behalf of the Board,
I thank Colin for his unwavering support.

More broadly, I am confident the Board
has the right mix of skills, experience and
diversity to govern Lendlease in the best
interests of all our stakeholders.

Executive Reward Strategy
In this challenging year, the Board has
considered a number of factors when
determining remuneration outcomes
for our CEO and senior executives.

While the business performed well during
the first nine months of the year, the dual
impacts of COVID-19 and accounting
for the costs associated with exiting
Engineering, resulted in a statutory loss.
On this basis, no short term award in
relation to financial performance was made
to the Group CEO or senior executives.

Based on the achievement of non financial
metrics that support long term value
creation, the Board recognised the efforts
of the CEO and senior executives via a
Deferred Equity Award vesting over two
tranches in FY21 and FY22. The Board
considered that the recognition of the
performance in this area, albeit at a
reduced quantum from prior years, to be
fair and appropriate as these contributions
position the Group for success in FY21
and beyond. Further detail on the Board’s
deliberations in this regard is provided in
the Remuneration Report.

Risk Culture
After extensive internal consultation
and testing, Lendlease’s Risk Appetite
Tolerances were approved by the Board
Risk Committee. These provide guardrails
to assist management in aligning
Lendlease’s appetite for risk with our
decision making and review processes.
They also provide a mechanism to identify,
manage and report on risks through the
lifecycle of projects and investments.
The strength and maturity of our risk
framework was evident in recent months
as we navigated through the initial phases
of COVID-19.

Sustainability
At Lendlease, we have a long and proud
history of achieving numerous sustainability
firsts. This continues to be the case.

Following deep engagement across our
entire business, including with the Board
and Global Leadership Team, Lendlease
has committed to two bold new
sustainability targets. First, market leading
carbon targets to meet our vision to
live in a world warmed by no more than
1.5ºC. Second, we are aiming to create
$250 million of social value by 2025.

While recognising these new targets will
be difficult to achieve, we believe they are
worthwhile striving for, as our leadership
position on sustainability continues to be
a key competitive advantage.

Commitment to First Nations Peoples
The Board is also proud of the way we
support and implement the principles
of the UN Global Compact. Our Elevate
Reconciliation Action Plan (RAP) is one
way we demonstrate our operational
performance on human rights, and
specifically Indigenous peoples’ rights.
It outlines our commitment to First
Nations Peoples, acknowledging their
unbroken connection to country and
creating respectful relationships that
provide opportunities for equal social
and economic outcomes – this aligns to
our purpose, and is vital to meeting the
expectations of our people and those of
key relationship customers.

Looking to the Future
Finally, I would like to thank my Board
colleagues and the entire Lendlease team
for the extraordinary effort they have
made in steering Lendlease through one of
the most turbulent times in living memory.
Importantly, while we have responded
comprehensively to the challenges that
COVID-19 has thrown at us, the team
have continued to lay down the strategic
foundations that position us to create long
term value for securityholders.

M J Ullmer, AO

Chairman

Lendlease Annual Report 2020 Overview

Group CEO and
Managing Director’s
Report

2020 will be a watershed year in history
with the impacts of COVID-19 likely to
reshape society for years to come. I start
this report by recognising the unwavering
support and commitment of the people of
Lendlease; to each other, our customers
and to the strength of our organisation.
Our people have drawn on the resilience,
adaptability, focus and care that have long
been hallmarks of our business to steer
us through an extraordinary operating
environment.

While Lendlease delivered a disappointing
financial result for the year, we made
substantial progress on our strategic
agenda including growing and converting
the development pipeline, achieving
important planning milestones and
creating new investment partnerships to
support projects moving into delivery.

We made significant inroads into
positioning the organisation at the
forefront of sustainable development.
This included investment in people,
process and technology which has laid
the foundation to better enable and fast
track the delivery of our pipeline to meet
the needs of changing urban landscapes.

Health and Safety
Tragically, a construction worker was
seriously injured in a critical incident
on a project in Kuala Lumpur where
Lendlease is the construction manager.
He subsequently passed away from
complications following surgery.
On behalf of Lendlease, I extend my
heartfelt condolences to his family,
friends and colleagues.

It is difficult to call out positive
achievements given this tragedy, but I
do want to thank the commitment of our
teams which has enabled us to reduce
critical incident and lost time injury
frequency rates to their lowest levels
since we began reporting these metrics.

As COVID-19 set in, an extraordinary
effort was made by our teams to keep our
people, and those who interact with us,
safe and to support the continuance of
operations. This level of focus was applied
across all businesses and locations,
through adjusting office and site-based
working arrangements and quickly
introducing new policies, education and
support for employees and customers
as restrictions and social distancing
protocols became first lines of defence
against the virus.

Lendlease’s ability to deliver transformational urban
precincts with a focus on financial, environmental
and social outcomes is being recognised globally.
This has resulted in significant growth in the
development pipeline to more than $100 billion.

To support our people, Lendlease
launched a Hardship and Wellbeing Fund
with grants to help cover expenses for
employees experiencing hardship during
the pandemic.

Financial performance
The Group’s Core business generated
Profit after Tax of $96 million, Earnings
per Security of 15.9 cents and a Return on
Equity of 1.5 per cent. The Core business
was adversely impacted by COVID-19.

Our performance in the second half of the
year was down significantly across the
Core operations. A solid Core operating
EBITDA in the first half of $628 million
was followed by a $65 million loss in the
second half as the Group experienced
a substantial deterioration in operating
conditions.

The Group reported a Statutory Loss after
Tax of $310 million for the year ended
30 June 2020. Engineering exit costs of
$368 million after tax, along with
$19 million of goodwill impairment
relating to the anticipated completion of
the sale of Engineering, were expensed.

Progress on converting opportunities
across our urbanisation pipeline was
hindered. The impact across our
construction projects was greater in
our international regions, particularly in
cities where mandated shutdowns were
implemented. The Group’s investments
portfolio was impacted by declining
real estate values.

We implemented a range of measures
to strengthen the financial position
of the Group. Costs were reduced along
with the reassessment of capital and
project expenditure. The issuance of new
equity and the arranging of additional
debt provides the Group with the capacity
to manage through a potential sustained
downturn and positions the Group for a
market recovery.

While our financial performance was
curtailed, we achieved substantial growth
in our development pipeline, established
new investment partnerships and
extended existing partnerships.

Wherever we operate, Lendlease has
continued its partnership approach with
governments by responding to the public
health and economic crisis presented
by COVID-19. We provided practical
support, including surge capacity plans
to extend hospital infrastructure as well
as accommodation to frontline workers
and food and other supplies to the most
vulnerable members of our community.

We also shared our safety standards
to help make construction sites across
our operations globally, COVID-safe.
We acknowledge that our government
partners have adopted the same approach
and recognised the crucial role of the
property and infrastructure sectors in
the economy. The Group accessed wage
subsidy support in markets where it was
offered. Further details are set out on
page 160 of the Financial Statements.

Strategy
The cornerstone of the Group’s strategy
is to create value through the best urban
precincts in key global gateway cities.
We have demonstrated over more than
two decades our ability to deliver major
urbanisation projects, and together
with our integrated business model and
placemaking skills, have created a point
of difference few can match.

A demonstrated track record of superior
outcomes for placemaking, sustainability
and connectivity has helped us in our aim
to be the global urbanisation partner of
choice and has underpinned the strong
growth of our Investments platform.

Two new major urbanisation projects
with a combined estimated end value of
$37 billion were added to the pipeline
during the year. The unlocking of these
and other opportunities across our
targeted gateway cities has resulted in
the development pipeline more than
doubling over the last five years to above
$100 billion. This includes a portfolio of 21
major projects across nine gateway cities.

Creating value for future generations
We aim to tackle the climate crisis head on.

We launched two new ambitious targets:
to be a 1.5ºC aligned company and
to create $250 million of social value
by 2025. These were developed after
extensive analysis and consultation with
clients, partners and employees. They are
our call to action and will be a measure
of our success.

We have set market leading carbon
targets to meet our 1.5ºC aligned
commitment. Net zero carbon scope 1
and 2 by 2025 and absolute zero carbon
by 2040 will be challenging but will
inspire our next generation of leaders
and we believe can be achieved while
delivering client and shareholder value.

Outlook
While the duration of the impacts of
the pandemic is uncertain, the Group
entered FY21 in a strong financial position.
Business resilience and adaptability are
critical to navigate the uncertainty the
world still faces. We have a tremendous
team and an outstanding pipeline of
projects and are well placed to drive high
quality earnings growth and pursue new
opportunities as we emerge from the
current economic challenges.

On behalf of the Group I again thank our
employees, along with our investment
partners, securityholders and financiers for
supporting Lendlease throughout the year.

Stephen McCann

Group Chief Executive Officer
and Managing Director

Lendlease Annual Report 2020 Overview

FY20
snapshot

$37 billion
Two major urbanisation
projects secured
in London and
San Francisco Bay Area

Safety
Record low Critical and
Lost Time injury rates,
sadly one fatality

48%1

Increase in
development pipeline
to $113b

Listed
Lendlease Global
Commercial REIT in
Singapore

Two
Investment partnerships
established to deliver
One Sydney Harbour2
and the Victoria Cross
over station development

#1
Ranked fund in GRESB3,
with four funds ranked in
the global top 10

Milano
Santa Giulia
New investment
partner to deliver the
$4 billion4 project

c.$4 billion
Paya Lebar Quarter
completed

Australian
first
Barangaroo South named
Australia’s first carbon
neutral precinct

($310 million)

$96 million

Group Statutory
Loss after Tax

Core Profit
after Tax

33.3 cents
Distributions per
stapled security

1.5%

Core Return
on Equity

#1
Ranked infrastructure
contractor for Australian
Department of Defence

TCFD5

Four climate scenarios
developed and published
in line with TCFD
recommendations

70%6

Increase in
residential funds under
management

Milan:
Milano Santa Giulia

Artist’s impression

1. Comparative period 30 June 2019. 2. Formed post balance date. 3. Global Real Estate Sustainability Benchmark. 4. Total estimated development end value. 5. Task Force on
Climate Related Financial Disclosures. 6. Comparative period 30 June 2019.

Lendlease Annual Report 2020 Our Business

Our
Business

Artist’s impression

Kuala Lumpur:
The Exchange, TRX

Lendlease’s
largest integrated
development in Asia.
It will comprise six
residential towers, a
large scale retail mall
and a luxury hotel.

Lendlease Annual Report 2020 Our Business

Our vision:
To create the
best places

Our values

Respect
Be dedicated to
relationships.

Integrity
Be true to our word.

Innovation
Be challenging in our
approach.

Collaboration
Be one team.

Excellence
Be exceptional
in everything we do.

Trust
Be open and transparent.

Guiding what we do
Our vision and values guide everything
we do. We strive to create some of the
world’s best places, places that people
love and want to experience.

Our integrated business model,
encompassing Development,
Construction and Investments, enables our
vision. We develop inner city mixed use
developments, apartments, communities,
retirement, retail, commercial assets
and social and economic infrastructure.
Our Construction segment delivers
project management, design and
construction services for the Group’s
pipeline and for external clients across
a range of sectors. With our investment
management platform and co-investment
strategies, we can orchestrate the funding
to make the vision a reality.

This powerful combination of capability,
tightly aligned to our vision and values,
allows us to shape cities and connect
communities. We believe it delivers
great outcomes for our customers and
the communities we serve, inspires our
people and provides sustainable growth
for our securityholders.

Sydney:
Barangaroo South

Lendlease Annual Report 2020 Our Business

Our
strategy

Int e

t e d Business M

D e v e lopment

To Create the
Best Places

C
o
n

struction

Artist’s impression

Opportunities have been unlocked
across our targeted gateway cities, with
the urbanisation platform comprising a
portfolio of 21 major projects across nine
gateway cities.

An important component of the strategy
is the capital efficient land management
model where land is typically drawn
down in phases and payments linked to
development activity. It is designed to
withstand market cycles.

The outcome is an urbanisation led
strategy focused on global gateway
cities. These cities have attributes that
are typically more resilient through
property cycles and attract more global
investment capital. They often contain
sites well suited to regeneration and
infrastructure upgrades and play to
our strengths.

End to end capabilities across all aspects of real estate –
from concept and planning, to design and delivery through
to funding and investment management – generate
superior economic, social and environmental outcomes.

The cornerstone of the Group’s strategy
is to create the best urban precincts in
key global gateway cities.

The ability to deliver major urbanisation
projects through our integrated business
model, together with our financial strength
and strong track record, provides a point
of difference we believe few can match.

More than two decades of experience
creating large scale mixed use urban
precincts has enabled the Group to
deepen its expertise and sophistication
to become, in our view, the preeminent
urbanisation specialist. It has also
underpinned the strong growth of our
Investments platform.

The success and vibrancy of our
completed precincts is testament to our
capability. This demonstrated track record
of superior outcomes for placemaking,
sustainability and connectivity has helped
us achieve our aim to be the global
urbanisation partner of choice.

London: International
Quarter London

A global platform combined
with local expertise across
targeted gateway cities
enables us to deliver the
most value and create the
best places.

Our strategy is supported by a strong risk
management and governance framework
which requires robust safety and
sustainability standards and a structured
approach to capital allocation.

While the development pipeline is
expected to be the main source of growth
for the Investments platform, we will
look for other growth opportunities that
leverage our ability to add value.

Our strategy must evolve to remain
successful.

The foundations of a global platform for
growth are being assembled to accelerate
the delivery of our development pipeline.
This involves enhancing our operating
structure by employing an enterprise wide
approach to facilitate production at a
greater scale.

A key component of the pipeline
acceleration is our aim to lead digital
disruption in the construction industry.

A once in a century pandemic is having
a profound impact globally and it is
too early to gauge its lasting effects.
It may result in the acceleration of
existing trends such as online retail and
a deterioration of housing affordability,
but potentially a reversal in some others
such as densification in the workplace
and demand for inner city living.

Business resilience will be critical to
navigate the uncertainty that may persist
for some time. Our urbanisation led
strategy with its mixed use capabilities
is uniquely placed to adapt to prevailing
market conditions as opportunities arise
across a range of property sectors.

Lendlease Annual Report 2020 Our Business

21
21

Global presence,
local knowledge

Development
pipeline
$113 billion1

Construction
backlog revenue
$14 billion

Funds under
management
$36 billion

Assets under
management
$29 billion

Chicago

• Southbank

• Lakeshore East

London

• Thamesmead Waterfront

• Euston Station

• Silvertown Quays

• International Quarter London

• Elephant Park

• High Road West
• Deptford Landings1

Milan

Our urbanisation led strategy focuses on
gateway cities around the world.

These cities often contain sites well suited to regeneration,
playing to the breadth of our skills.

Broadening the platform has driven rapid growth in our pipeline
with 21 major2 urbanisation projects across nine gateway cities.

Our teams of locally based professionals combine their property
expertise and capability with the scale of our global platform.

San Francisco

• San Francisco Bay Area Project

Los Angeles

• 30 Van Ness

Boston

New York

• Milano Santa Giulia

• Milan Innovation District

Rome

Beijing

Shanghai

Tokyo

Lakeshore East,
Chicago

Milano Santa Giulia,
Milan

The Exchange TRX,
Kuala Lumpur

Victoria Cross
over station development,
Sydney

Kuala Lumpur

• The Exchange TRX

Singapore

Brisbane

• Brisbane Showgrounds

Sydney

• Barangaroo South

• Sydney Place

• Victoria Cross over station development

Perth

• Waterbank

Melbourne

• Melbourne Quarter

• Victoria Harbour

1. Formerly The Timberyard.

1. Remaining estimated development end value. 2. Projects with an estimated development end value greater than $1 billion.

Lendlease Annual Report 2020 Our Business

Development

Int e

t e d Business M

D e v e lopment

Disciplined
Portfolio
Management to
Maximise
Securityholder
Value

C
o
n

struction

The Development segment
comprises activities across
urbanisation, residential and
retirement communities, and
infrastructure development.

Financial returns for the segment
are generated via:
• Development margins

• Development management fees

• Origination fees

Our capability
Placemaking is the capability that sets
us apart to realise our vision to create
the best places. We create environments
where people consciously choose to
dwell by being sensitive to a community’s
needs and the elements that attract its
members to an urban location.

Effective place design requires active
engagement with partners who provide
input as co-creators and is informed
by an understanding of their vision and
aspirations for the urban space they
will inhabit.

Managing the entire development process
is essential for success; from securing
land, creating masterplans, consulting
with authorities and communities, through
to project management, sales and leasing.

A willingness to undertake ambitious
projects, to challenge the status quo,
and collaborate with a range of partners
to generate the right solutions are key
elements in our approach.

Development opportunities across our
Australian retirement portfolio have
been boosted with approvals for unique
developments at three villages, including
a new concept, multi generational village
adjacent to the University of Wollongong.
Our development expertise in retirement
was recently extended to Shanghai where
we are delivering an initial c.850 senior
living homes.

In the US, our Military Housing portfolio is
expected to offer periodic redevelopment
opportunities.

Infrastructure development
We provide infrastructure development
services for Public Private Partnership
projects in Australia. Financial
arrangements, and transactional and
other advisory services, are delivered in
the capacity of sponsor for projects in a
range of sectors, predominantly in social
infrastructure. The Sydney International
Convention, Exhibition and Entertainment
Precinct was one such project.

FY20 Development segment
highlights

Development pipeline of $113 billion:2

$99 billion urbanisation

$14 billion communities

Secured two major
urbanisation projects:

Thamesmead Waterfront, London:
c.11,500 homes

San Francisco Bay Area project: c.15,000
homes

Completed Paya Lebar Quarter –
Singapore’s newest lifestyle precinct:

Retail mall

Three Grade A office towers

429 residential apartments

These, combined with patience,
thoughtfulness, experience and humility,
lead to achieving great outcomes.

Urbanisation
Lendlease’s core strategy is focused on
urbanisation in targeted gateway cities
and we aim to be the urbanisation partner
of choice. Securing major urbanisation
projects where the breadth of our skills
can be applied is where our competitive
advantage excels.

Our integrated model is fundamental in
delivering these projects. Working with
Development, our Construction segment
provides design and delivery excellence,
while Investments attracts investment
partners for financing.
Our first major1 urbanisation project
was secured in Melbourne almost two
decades ago and still offers a substantial
residential pipeline. This is typical of the
type of project we look to secure: long
dated; capital efficient; whole of precinct;
and spanning multiple property cycles.

In recent years we have broadened
our urbanisation platform via targeted
international gateway cities. They include
projects in London, Milan, Chicago
and the San Francisco Bay Area. These
projects form part of a portfolio that
comprises 21 major projects across nine
gateway cities.

Being awarded these projects from both
public and private sector clients is a
strong endorsement of our expertise. Our
sustainability credentials have been critical
in the selection process, with consistent
feedback that the integration of all aspects
of sustainability within our placemaking
capabilities resonates strongly.

Our urbanisation pipeline is set to
produce more than 56,000 residential
units and more than 50 commercial
buildings over a c.25 year horizon.
We expect our development activity to
accelerate over the medium term as our
secured pipeline progresses through
planning and into delivery.

Residential and retirement communities
For more than 50 years we have created
and delivered new suburban communities.
They range from inner urban villages to
large scale, masterplanned communities
with integrated town centres. We have
17 active projects in key population
growth corridors that are anticipated to
deliver approximately 47,000 individual
land parcels.

Shanghai:
Ardor Gardens,
Qingpu District

Artist’s impression

1. Projects with an estimated development end value greater than $1 billion. 2. Remaining estimated development end value.

Lendlease Annual Report 2020 Our Business

Construction

Int e

t e d Business M

D e v e lopment

Disciplined
Portfolio
Management to
Maximise
Securityholder
Value

C
o
n

struction

The Construction segment
provides project management,
design and construction
services across a wide range
of sectors.

Financial returns for the segment
are generated via:
• Project management and

construction management fees

• Construction margins1

Our capability
Our construction capability is showcased
in the places and structures we create –
workplaces for some of the world’s
largest organisations, vibrant retail
centres, residential apartments, including
affordable housing options, state of the
art hospitals, and other buildings of civic
and social importance.

We have delivered construction projects
around the world for more than six decades,
creating thousands of buildings. And
projects delivered by businesses acquired
by Lendlease span more than a century.

We are recognised for creating innovative
places that stand the test of time and we
have been entrusted to create and restore
iconic buildings that shape city skylines.

It’s a legacy of which we are proud.

The Lendlease approach
The Construction segment combines
the benefits of global scale and the rich
heritage of corporate knowledge with a
localised capability, capacity and network
to deliver high quality projects.

Specialist design and project
management teams combine deep sector

We expect future built form environments
to be increasingly tied to precincts and
hubs. The experience and knowledge
gained from the delivery of the extensive
urbanisation pipeline strengthens our
ability to be a partner of choice.

Innovation
We use our scale and capacity to
innovate and lead disruption in the
construction sector.

Our investment in smart design and
advanced manufacturing has improved
safety, sustainability and efficiency, and
has created exciting architectural and
sustainable solutions.

We have innovated in the manufacture
and use of engineered timber in Australia,
and now use the product across our
global business. We have also developed
other product solutions across supply
chain, prefabrication and modularisation.

We are developing stronger digital
capability to enhance our construction
business. This is enabling us to simulate
all aspects of construction from design to
structural integrity to system performance
and user preferences. We expect this to
lead to a faster pace of innovation and
productivity across the business.

FY20 Construction segment
highlights

Construction backlog
revenue of $14 billion

Well diversified by sector and client

$7.5 billion of new work
secured including:

Curtin University School of Design and
Built Environment, Perth

HMAS Watson Redevelopment Delivery
Phase, Sydney

4 Hudson Square, New York

Completed projects

Wesley Place, Melbourne4

60 Martin Place, Sydney

Paya Lebar Quarter, Singapore

and product knowledge with strong
customer relationships to create places
that are innovative, sustainable and
commercially viable.

A successful project is more than just the
delivery of buildings. An integral element
is our flexible approach where our team
of industry experts work collaboratively
with the client to identify, plan and deliver
what is important for them.

A significant proportion of repeat business
is a testament to being a trusted and
strategic partner.

Our risk management processes have
evolved from decades of experience.
Disciplined origination and diversity
by client, contract type and sector are
hallmarks of our approach.

Substantial derisking takes place prior
to commencement of construction.
Production and programming controls
monitor and manage delivery, while a
rigorous commissioning process is applied
for a smooth transition to the client.

Areas of expertise
We are one of Australia’s largest
construction companies and in 2020
we were named the top infrastructure
contractor for the Australian Department
of Defence.

In the US, we have been ranked the
top multi-family residential contractor2
for 20 consecutive years.

Across Europe, we are exceptionally
well placed to participate in the integrated
delivery of the region’s c.$50 billion3
urbanisation pipeline.

Our Asian business has specialist
expertise in the life sciences, education
and telecommunications sectors. In Japan,
we have delivered more than 75,000
telecommunications towers and rooftop
antenna sites.

Construction’s role in Lendlease’s
integrated model
Our Construction segment typically
designs and delivers the built form for
our urbanisation pipeline.

A shared vision generates superior
outcomes for all stakeholders. For
example, design iterations running
in parallel with planning lead to more
creative, cost effective and timely
solutions to meet occupier and
investment partner demand.

Paya Lebar Quarter is an example of
where our delivery expertise and the
certainty we provide to partners
on long dated projects is an important
component of our offer.

Perth: Curtin
University School
of Design and Built
Environment

1. From external clients only. 2. As ranked by ENR Sourcebook for Top 25 Multi‑Unit Residential. 3. Remaining estimated development end value. 4. Formerly 130 Lonsdale Street.

Lendlease Annual Report 2020 Our Business

Investments

Int e

t e d Business M

D e v e lopment

Disciplined
Portfolio
Management to
Maximise
Securityholder
Value

C
o
n

struction

The Investments segment
owns and manages property
and infrastructure assets.

Financial returns for the segment
are generated via:
• Fund and asset management fees

• Income and capital growth from

ownership interests

Our capability
For decades we have been managing
funds and assets for some of the world’s
largest money managers including
sovereign wealth funds and large public
and private pension funds.

Our expertise spans many property
sectors across both unlisted and listed
property trusts and mandates. We have
deep relationships with c.150 institutional
investment partners.

We offer a research led investment
capability supported by active asset
management with leadership in
sustainability a critical element to
our approach.

The key point of difference for our
Investments segment is the high quality
and sustainable product we create
through our integrated model, which
offers investment partners diverse, long
term investment choices on a global scale.

Funds management
Our global funds management platform
manages $36 billion of investments,
predominantly across the office and
retail sectors. We also have a burgeoning
residential platform.

The portfolio comprises c.40,000
residential and more than 12,000
lodging units across 50 Military Housing
communities.

We have long term agreements with the
US Department of Defense to manage
these estates for military personnel and
their families. The Group added residential
for rent to the asset management platform
for the first time.

Retirement Living
One of the global trends that drives our
strategy is the ageing population.

We are one of the largest owners,
operators and developers of retirement
living communities in Australia. Our
footprint extends nationally across
72 villages and offers a range of
accommodation options including
premium resort style living and a variety
of standalone units and apartments.

We draw on our significant placemaking
and asset management skills to provide
a strong sense of community for our
c.17,000 residents.

Other investments
Lendlease’s other investments include
telecommunications assets and an
equity interest in the US Military
Housing portfolio.

FY20 Investment
segment highlights

Funds under management
of $36 billion – 2% growth

Launched Lendlease Global
Commercial REIT, Singapore

Completed Paya Lebar Quarter,
Singapore – $3.3 billion funds
under management

Introduced a new investment partner
to the platform – investment in
Milano Santa Giulia

Awarded c.$2 billion multi sector
mandate in Australia2

Our world class asset creation capabilities
focus on placemaking to create vibrant
and diverse precincts. Buildings that
respond to the needs of occupants
typically outperform over the long term.

Since FY14, our funds under management
has more than doubled. The majority
of that growth has been generated
from the completion of assets across
our urbanisation projects. The recently
completed Paya Lebar Quarter in
Singapore has contributed $3.3 billion
of funds under management.

Further growth is expected to continue
over the medium term as the urbanisation
pipeline converts into investment grade
product. We expect our residential for
rent product to be a strong contributor to
this growth.

Demonstrating our highly regarded funds
and asset management capability, we
launched the $1.5 billion Lendlease Global
Commercial REIT in Singapore. The REIT
was seeded with the Lendlease developed
313@somerset retail centre and three
office properties adjacent to our Milano
Santa Giulia project.

Maintaining strong alignment with our
investment partners, we have $2 billion
of co-investments in our funds platform.
This also provides a steady source of
income for Lendlease.

Asset management
We have been managing retail centres
across the world for more than 50 years
and currently manage retail and office
assets valued at more than $15 billion.

Our asset management capability
enables us to create places that thrive
for the long term.

We continually revitalise our assets to
stay ahead of industry trends and deliver
optimal customer experiences. The
introduction of digital tools throughout
our global retail portfolio, such as the
Lendlease Plus App in Singapore, has
provided our malls’ customers with
the latest access to many benefits and
provided new opportunities for our
members during COVID-19. Digital
technology has also been key in
communicating with more than 3,1001
retailers within our Australian retail
portfolio, providing a seamless customer
experience.

Residential
In the US, we manage a $13.6 billion
Military Housing portfolio, which
provides a steady and high quality
source of earnings.

Singapore:
313@somerset

1. Figure as at 31 December 2019. 2. Secured post balance date.

Lendlease Annual Report 2020 Creating Together

Creating
Together

Creating the best places is
not something we do alone;
it comes from the creativity
and commitment of our
customers, our investment
partners, governments,
landowners, suppliers and
the community.

Creating Together –
powerful partnerships to
deliver the best places,
now and into the future.

Sydney:
The Exchange,
Darling Square

The centrepiece of the
new Darling Square
community.

Lendlease Annual Report 2020 Creating Together

By shaping
cities

For more than six decades
we have been at the
forefront of projects
that have become the
cornerstones of cities and
communities.

Our objective is to leave a positive legacy
for future generations and build a respected
brand. Our ethos demands continual
re-evaluation of past achievements to
find innovative solutions that redefine the
benchmark of best practice.

Our integrated business model has
evolved to focus on urbanisation in key
gateway cities. The first long dated
and large scale mixed use project we
secured was Victoria Harbour in 2001.
The 30 hectare precinct, bounded by
the Yarra River and Victoria Harbour,
includes kilometres of public waterfront
promenade incorporating retail,
commercial, residential, leisure and
community facilities that cater for
thousands of people.

The ongoing management of precincts
and assets is just as critical as their
delivery. Our ability to positively impact
all parts of the property and construction
lifecycle creates health and safety benefits
for all those who construct, maintain,
and interact with our precincts. Through
our Investments platform, we value our
fiduciary role for institutional investors and
investment partners, and our experience
is deep. We launched Australia’s first
real estate investment trust in 1971 and
since that time we have fostered trusted
relationships with key global investment
partners – offering them tailored real
estate investment solutions.

For more than two decades we have been
refining and developing our placemaking
expertise. Our credentials are highlighted
by the numerous development and
sustainability awards attained and the
overwhelmingly positive feedback we
receive from those who live, work or visit
our precincts.

Strong
track record

Singapore:
Paya Lebar Quarter

Singapore:
Paya Lebar Quarter Tower 2

Singapore:
Paya Lebar Quarter Mall

Singapore:
Park Place Residences

Being chosen as the development partner for
transformational projects by both public and
private sector clients is a strong endorsement
of our urbanisation capabilities.

Singapore’s newest lifestyle precinct
The completion of Paya Lebar Quarter
(PLQ) this year marks the culmination of
a four year journey which has delivered a
c.$4 billion business and lifestyle precinct
for Singapore.

Bid in joint venture with the Abu Dhabi
Investment Authority (ADIA) in 2015, the
four hectare site was originally a vacant plot,
earmarked by the Singapore Government as
a new commercial hub.

Delivered through the integrated business
model, Paya Lebar Quarter showcases
our ability to create a progressive,
safe and sustainable mixed use city
precinct. It features some of the highest
sustainability ratings achievable and
has been recognised for showcasing
exemplary safety standards and innovation.

Going forward, we have a critical
role to play in the ongoing success
of the precinct, providing extensive
asset management services. We have
attracted a number of Singaporean
and multi national corporations to the
precinct, as well as more than 200
leading retailers.

We are the fund manager for the
commercial component which is valued
at $3.3 billion and have a 30 per cent
interest.

Paya Lebar Quarter showcases our
international experience in large scale
urban regeneration projects, while
tapping into our local expertise of
operating in Singapore for more than
45 years.

The PLQ precinct

A bustling pedestrian friendly
precinct with a rich cultural heritage:

83,000 sqm of Grade A office space
across three towers

– Home to key Singaporean

and multi national corporations
including Lendlease’s Asian
headquarters

Retail mall featuring more than
200 stores

– Leading retailers and alfresco dining

429 residential apartments
across three towers

– Direct access to shopping and
lifestyle amenities and transport

Community spaces including
public plaza, playgrounds and
roof gardens

Melbourne:
Victoria Harbour

Lendlease Annual Report 2020 Creating Together

We create place by responding to the
common interests of all stakeholders,
enlisting bold thinking and applying a
visionary approach.

We create places
that meet the needs
of people today and
well into the future.

London:
Elephant Park

Through creating
the best places

Our core capability is placemaking.

We aim to design places that are vibrant
and authentic. They are crafted and
thoughtfully curated to help people feel
safe, belong and thrive.

We view placemaking as a collaborative
process that enables physical spaces
to meet people’s needs and resonate with
their aspirations. The places we create are
meaningful, appealing and enduring.

By doing this, we create value for all
stakeholders.

Placemaking is our competitive advantage
and a commercial imperative for us to
remain the partner of choice. Not only is
it key to securing projects and attracting
capital, we see it as our responsibility
and the legacy we will leave for future
generations.

Great places are accessible and
convenient; activated and sociable;
responsible; and genuine and memorable.

Bringing together design and living
metrics provides a framework to assess
placemaking. This also provides a method
to identify priorities and inform investment
decisions.

Understanding the history of the land and
precincts we reinvigorate is fundamental
to curation of place. Acknowledgement
and genuine respect for heritage provides
context and enhances place creation.

London: International Quarter London

The Wellbeing Capital –
International Quarter London
Adjacent to the 2012 London Olympic
site, International Quarter London (IQL)
anchors the transformation of the district
into London’s newest cultural quarter and
a desirable place to live and work.

Inspired by Stratford’s rich cultural
heritage and nurtured by its Olympic
legacy, IQL has been designed to
encourage movement, interaction,
engagement and creativity. It features
state of the art workspaces that promote
wellbeing and encourage interaction,
as well as a variety of outdoor meeting
spaces in the precinct’s three acres
of parklands.

In the public realm, plant life and foliage
are being chosen to eliminate the need
for chemical pesticides, and pollination
by insects is being encouraged to reduce
airborne allergens. A variety of bird
species are being targeted for inclusion in
a biodiversity strategy that recognises the
psychological benefits of birdsong.

IQL’s lasting contribution will be the
richness of the social, economic and
individual wellbeing it helps create
amongst all who visit.

Brisbane: Yarrabilba

Sydney: Barangaroo South

Connected Community –
Yarrabilba
In Queensland’s South East, we are
building a complete community from
the ground up. Drawing on a rich and
diverse heritage, Yarrabilba, or ‘place
of song’ in Wangerriburra/Bundjalung
language, is set to become home to
more than 45,000 residents.

More than a quarter of the 647 hectares
will become parkland, sporting fields
and nature sanctuaries, all linking to the
surrounding bushland rich in history.
Residents will benefit from a lively, healthy
lifestyle provided by easy access to
green open spaces and innovative leisure
facilities that offer a balance of community
and nature.

Yarrabilba offers an inspiring new address,
where people are given the opportunity to
grow and prosper. It is a fresh new place
that residents feel proud to call home.

The Streets of Barangaroo –
Barangaroo South, Sydney
Barangaroo South introduced six new
streets, lanes and walkways to the city,
each taking its name from an historical
aspect of the site and showcasing a very
distinct purpose and personality.

These streets became the heart of
placemaking for the precinct. Home to a
highly curated mix of cafés, restaurants,
bars and retail stores, they also act as
public thoroughfares, places to eat and
meet, and a civic canvas for a diverse
program of events and activations.

Innovative collaborations with the City of
Sydney, local community groups, artists
and commercial partners enhance the
place by continually introducing diverse
and inspiring experiences within the
precinct that are accessible to all.

Lendlease Annual Report 2020 Creating Together

Sunnyvale

• Moffett Park

Mountain
View

• North Bayshore

• East Whisman

San Jose

• Diridon Station Area

Artist’s impression

Through
partnering

Whether it’s urban redevelopment
projects, nation building
infrastructure such as hospitals
and universities, or fostering long
term investment relationships, we
create lasting legacies through
collaborative partnering.

Artist’s impression

From client to partner
Lendlease prides itself on building long
term partnerships with institutions,
landowners and investors across the globe.
This has been no different with Google.

What began as a traditional client service
relationship to help build Google’s London
HQ has evolved and, in 2017, we expanded
our relationship to work with Google on
c.15 acres within their property holdings
in the San Francisco Bay Area. A resulting
two year consultancy helped us in being
selected as the preferred development
partner for up to 15 million square feet
of residential, retail, hospitality, and
associated community uses across three
major cities in the Bay Area.

To successfully deliver a project of
this scale, we have assembled a cross
functional team of experts to explore
solutions to some of the industry’s most
pressing matters, such as lack of affordable
housing, issues with transportation, and
creating opportunity pathways.

Understanding before the shovel hits the
ground how a project will look, feel, work
and impact the environment will simplify
interdependencies in the decision making
process and allow us to achieve a more
productive, safer and efficient approach
to the life of the projects.

Development grounded
in digitisation
While the projects may be grounded in
the physical world, it is undeniable that
digitisation will power a transformation of
the built environment. As part of our work
across all our projects we will harness
this potential and seek to recognise
the significant advantages it may offer
in building more livable, efficient and
sustainable communities.

Moreover, the built environment we create
as a result of these insights will create
solutions more tailored and adaptable to its
users. In exploring these new approaches
we succeed in our mission to improve the
human experience with a more affordable,
inclusive and resilient future.

This is an extraordinary opportunity for
Lendlease, and just the beginning of
this important partnership as we help
Google realise their vision for mixed use
communities.

Lendlease Annual Report 2020 Creating Together

Unlocking an
underutilised
riverside location
in London
Leading UK housing
association, Peabody,
selected us to jointly
deliver 11,500 homes
at Thamesmead
Waterfront in London.
The 250 acre site is
currently undeveloped
and benefits from
2.5km of river frontage.
The project will
rejuvenate the existing
town centre and create
new cultural, community
and commercial spaces.

Artist’s
impression

Through
partnering

London: Thamesmead Waterfront

Sydney: HMAS Watson
Image courtesy of Department of Defence

Trusted partner for the
Australian Department
of Defence
We were named the top infrastructure
contractor for the Australian Department
of Defence in FY20.

During the year we were selected to
complete several large new contracts
including the delivery of training facilities
at HMAS Watson, the Navy’s principal
navigation training facility in Sydney
Harbour; and new facilities to support
the operation and maintenance of
offshore patrol vessels at HMAS Stirling
in Western Australia.

Queensland: Sunshine Coast University Hospital

Birmingham: Birmingham Smithfield

Chicago: Lakeshore East

Artist’s impression

Providing critical health
infrastructure
In the past decade, we have proudly
delivered more than 50 public and private
hospitals and health related projects
across Australia.

Our expertise was recognised by the
Queensland and NSW Governments with
the awarding of two significant projects:
the Caboolture Hospital redevelopment,
which includes design and construction
of a five storey clinical services building to
increase hospital capacity; and the main
works contract to build the Prince of Wales
Hospital’s new Acute Services Building,
part of the NSW Government’s $720
million Randwick Campus Redevelopment.

Transport enabled
development opportunities
in London
We have been selected as the preferred
development partner by Birmingham City
Council to deliver a $2.8 billion urban
quarter incorporating more than 2,000
homes and a new site for the city’s historic
Bullring retail markets.

Birmingham Smithfield will be a short
walk from the new High Speed 2 (HS2)
terminus station. Phase One of HS2 will link
Birmingham to London, and the line will
terminate at Euston Station, adjacent to the
site of our $10.9 billion urbanisation project.

A step closer to Milan’s
new innovation ecosystem
Working collaboratively with the Arexpo
SpA Group, planning consent was
received for Phase One of the Milan
Innovation District, a 100 hectare mixed
use redevelopment set to regenerate
the site of the 2015 World Expo. Dubbed
a ‘real city in the city’, the precinct is
set to become a world leading science,
knowledge and technology hub.

Separately, transformation of the broader
precinct has begun with work underway
on the Galeazzi Hospital. Following an
international competition, a design has
been chosen for the Human Technopole
– a new building for scientific research.

Investment partner
relationships
Our investment partners have unique
access to Lendlease’s leading development
capability and pipeline, with investments
focused on generating sustainable, long
term returns.

Throughout the year we progressed several
initiatives with investment partners.

In Milan, we introduced PSP Investments
to the platform through a 50/50
partnership to develop Milano Santa Giulia.
The $4 billion urban regeneration project
is expected to deliver more than 2,500
residential units, 124,000 sqm of office
space and 108,000 sqm of retail, leisure
and entertainment areas. The first phase of
the partnership will develop c.50,000 sqm
of office space across two buildings, which
are already c.85% pre leased.

In the residential for rent sector, a further
two buildings at Elephant Park were
put into delivery under our existing
UK Residential Investment Partnership
with CPP Investments. In the US, our
partnership with First State Super
committed to developing a further
residential building at our Southbank
urban regeneration project in Chicago.

We launched the Lendlease Global
Commercial REIT in Singapore and listed
on the Singapore Exchange. The REIT was
seeded with the Lendlease developed
313@somerset retail centre and three
office properties adjacent to our Milano
Santa Giulia project.

We were selected by TCorp, the
investment and financial management
partner of the New South Wales public
sector, to manage a c.$1.5 billion
diversified property portfolio. The
mandate has subsequently grown to
include an additional asset and is now
valued at c.$2.1 billion.

Artist’s impression

Milan: Milan Innovation District

Lendlease Annual Report 2020 Creating Together

By engaging
with the
community

Promoting diversity in construction industry employment
Increasing participation of under represented communities in construction is a Lendlease
social sustainability focus area. This year, the Lendlease Foundation expanded its
construction industry employment barrier reduction program in Chicago with the launch
of a new funding partnership with HIRE360, a workforce development organisation made
up of construction industry wide partners.

HIRE360 acts as a hub for job candidates seeking to start careers through apprenticeship
training programs in the building trades, offering a one stop shop for job seekers to receive
mentoring, enrol in training, connect with trades employers and other support services.

As of April 2020, the funding has benefited 54 job seekers including high numbers of
women, minorities and veterans. All 54 were either accepted into or in the process of
applying to and pursuing an apprenticeship program at the time of service provision.

Lendlease support for
Australian bushfire recovery
In response to the devastating bushfires
in Australia, the Lendlease Foundation
worked with partners to directly support
communities in need immediately and for
the long term.

Lendlease and our employees from
around the world helped raise more than
$1 million to assist the Australian Red
Cross in supporting communities most
affected by bushfires. Working with our
partner, Landcare, plans are underway to
identify appropriate employee volunteering
projects tied to the support and recovery of
communities affected by bushfires as part
of the Lendlease 2020 Community Day
later this year. In addition, ten Lendlease
Community Grants have been allocated
to help bushfire affected community/non
profit organisations.

Two For Tea And A Chat
COVID-19 has had significant impact
on our Retirement Living residents’
opportunities for social interaction and
connection. In response, we developed
a national program designed to better
connect residents isolated by social
distancing requirements. The program
included ‘Two For Tea And A Chat’ weekly
calls to participating residents from
Lendlease employees and volunteers.
Our employees’ children have also been
encouraged to send letters or drawings to
residents as a thoughtful surprise.

London: Silvertown Quays

Artist’s impression

Community consultation –
Silvertown Quays
and Elephant Park
Engaging with the community is an
important part of Lendlease’s approach
to urban regeneration and the creation
of thriving, sustainable communities that
are rich in culture and context. London’s
Silvertown Quays and Elephant Park
exemplify this approach.

Silvertown Quays will provide thousands
of new homes and non residential
spaces for commercial, retail, hotel
and community use. The Silvertown
Partnership, a joint venture between
Lendlease and Starwood Capital, aims
to create a place that is innovative
and environmentally sustainable and
will provide tangible benefits for the
local community for the long term.

The partnership is committed to
engaging residents, the community and
other key stakeholders throughout the
development process.

As well as providing high quality homes,
jobs and business opportunities, Elephant
Park is centred around a park, providing a
new green public space for the Elephant
and Castle community. To ensure the park
reflected local aspirations, we provided
the opportunity for those who live in, work
in or visit Elephant Park to input to the
park’s design.

Both projects have initiated a range of
activities to ensure consultation and
engagement including workshops, public
exhibitions and site tours, open days,
walking tours and digital communications.

London: Elephant Park

A place to call home –
FutureSteps
FutureSteps is a Lendlease shared value
initiative grounded in the belief that
everyone needs a place to call home.
The aim of FutureSteps is to empower
vulnerable people by partnering with
established not for profit organisations
to boost the availability of quality
accommodation and support services,
and by investing in targeted skilling,
training and jobs programs.

FutureSteps has awarded close to
$200,000 in grants and provided more
than $170,000 in kind to program partners
via skilled volunteering and procurement
savings. We will continue to expand
FutureSteps with revenue from our
Australian residential business.

Lendlease Annual Report 2020 Creating Together

By looking
into the future

New digital mentor
technology supports
project management
excellence globally

Key to thriving in our
industry is the ability
to anticipate and even
initiate technological
disruption.

An important digital technology initiative
that has begun roll out at Lendlease is
the One Lendlease Interactive digital
mentor platform, or ‘OLi’ as it is more
commonly known. Its purpose is to help
us more consistently deliver projects
via an endorsed Lendlease Way so that
customers experience the same high
quality products and services delivered at
scale anywhere in the world.

OLi integrates all traditional project
management steps into the process and
digitises the full project lifecycle, from
business development and origination
to delivery, asset management and
potentially divestment. Once fully
rolled out, this global tool will connect
our people with our best practice
Knowledge Gateway, pre populate digital
templates, systematise the investment
committee process, and automate team
task management. Additional future
capabilities will include project team
collaboration space, project mobilisation
and resourcing tools and a dynamic
approval system that adjusts to changing
project characteristics.

Sydney: Digital Twin,
60 Martin Place
Image courtesy of
Willow Inc.

Accelerating
digital twin adoption
in the property
and construction
industry

Digital twin technology combines
geometry, physics and process to create
a digital rehearsal of the built world.
While this technology has been around
since the early 2000s, its application in
the construction and property industry is
relatively new and facilitated by advances
in the Internet of Things and increased
cost effectiveness.

In the past year, we have accelerated the
development of our digital twin capability
and expertise. Our goal is to drive disruption
in the property and construction industry
to deliver better outcomes in safety, cost

and time savings, risk management and
sustainability. We have taken a leading
role in championing this technology
through partnering with government,
industry and academia. This has included
becoming a founding member of the
Digital Twin Consortium, a global group of
users working together to accelerate the
digital twin market and demonstrate the
value of technology. Chaired by Bill Ruh,
CEO Digital, Lendlease, the consortium
includes companies such as Ansys, Dell
Technologies and Microsoft.

We have also partnered with the NSW
Department of Customer Service
to establish the NSW branch of the
Digital Twin Consortium. Through the
NSW Government spatial twin, we are
collaborating to share anonymised data
across public and privately owned spaces
and building assets.

This will provide NSW with insights that
help improve planning and decision
making in the development of new places
within the state. It will also enable access
to critical data for our first responders in
the event of an emergency.

Carbon neutral –
building a better world

We are committed to creating
strategic resilience across our business
and addressing the climate impacts of
our business with greater focus and
direct action.

In line with our Carbon Target and
building on our Australian construction
business’ achievement of net zero carbon
in FY19, we have commitments in place
for assets representing more than $12
billion in Gross Asset Value to operate
at a net zero carbon basis by 2025.
In December 2019, our business signed
up as the first property and infrastructure
company to become a member of the
ResponsibleSteel initiative, which aims to
drive low to zero carbon steel solutions
for our supply chain. Also at the end of
last year, Barangaroo South was certified
by the Commonwealth Government as
Australia’s first carbon neutral precinct.

Our carbon neutral innovation
achievements were also recognised this
year with selection as a finalist in Fast
Company’s Best World Changing Ideas
APAC category for our holistic efforts
to change what we create and how we
create it to be carbon neutral.

Townsville: The Science Place, James Cook University

Lendlease Annual Report 2020 Managing and Measuring Value

Managing
and
Measuring
Value

London:
Euston Station

One of London’s
largest urban
renewal projects.

Lendlease Annual Report 2020 Managing and Measuring Value

Our five focus
areas of value
creation

We measure our
success by the
positive outcomes
we generate through
five focus areas.

They underpin our ability to create
economic, safe and sustainable
outcomes for our customers, partners,
securityholders and the community.

While we approach our focus areas with
an innovative mindset, our decisions are
supported by disciplined governance and
risk management.

Area of focus

Material issue

How we deliver value

Value created

How we measure value

Operating safely across our
operations and projects.
Maintaining the health and
wellbeing of our employees
and those who engage with
our assets and sites.

We are committed to the safety of our people and those who
interact with our assets and sites. Through our Global Minimum
Requirements (GMRs) we operate to a consistent standard across
all operations. These GMRs extend to physical safety and people’s
mental health and wellbeing.

Operating safely helps people feel valued
and cared for, and fundamentally makes
us more consistent, reliable and efficient
in everything we do.

Percentage of projects with no critical incidents: A critical incident is an
event that has the potential to cause death or permanent disability. This is an
indicator unique to Lendlease.

Critical Incident Frequency Rate: A Lendlease indicator measuring the rate
of critical incidents.

Lost Time Injury Frequency Rate: An indicator and industry standard
measuring a workplace injury which prevents a worker from returning to
duties the next day.

Delivering securityholder returns.
Maintaining strong capital
management to support ongoing
investment in our future pipeline.

We deliver returns to our securityholders and adopt a prudent
approach to capital management with a view to maintaining a
strong balance sheet throughout market cycles.

Margins, fees and ownership returns across
Development, Construction and Investments.
Our Portfolio Management Framework sets target
guidelines for how we manage our portfolio.

Return on Equity: The annual Profit after Tax attributable to average
securityholders’ equity throughout the year.

Earnings per Security: Profit after Tax attributable to securityholders divided
by the average number of securities on issue during the year.

Understanding our customers
and responding to changes in the
market. Designing and delivering
innovative, customer driven
solutions to win the projects we
want to win and ultimately deliver
the best places.

Embedding a process of continuous improvement based on
customer insights and actions identified through market research.
This approach also consistently measures customer satisfaction
and advocacy.

Attracting, developing and
retaining diverse talent. Ensuring
we have the right capability
across the organisation to deliver
results for all stakeholders.

We attract, develop and retain diverse talent by building a culture
of collaboration and continuous learning, where successes are
recognised and people are rewarded. We invest in developing
leaders and capabilities to drive our success.

Managing and optimising our
performance in the context
of challenges facing the built
environment, including climate
change and social pressures
such as population growth and
housing affordability.

As a signatory to the United Nations Global Compact, we are
committed to the continuous improvement of our operations.
We integrate strategies to mitigate the impact of climate
change. For example, as a developer Lendlease is committed
to the creation of independently rated green certified buildings
and precincts and climate resilient communities. We aim to
deliver inclusive, healthy and adaptable places that can thrive
through change.

Sustainability

Evolves our ability to improve the customer
experience, building our brand and reputation,
enabling us to win more work and grow our
business. Customer feedback also provides greater
insight into product development and innovation
opportunities.

Customer satisfaction and advocacy tracked: Measured at the regional and
business unit level and reported regularly to our Global Leadership Team.
Action plans are developed to drive continuous improvement in the customer
experience, supporting the delivery and growth of our development pipeline,
construction backlog and funds under management.

Capable and motivated people committed to
the long term success of our business. Effective
succession planning and leadership transitions
support business continuity and can reduce risks.
Diversity of thought and experience can support
innovation, knowledge sharing and better decision
making.

Retention of key talent: The organisation benefits from its investment in
leaders and key workforce capabilities.

Succession strength: Demonstrates depth of capable talent ready to
progress into leadership roles.

Leadership positions held by women: Demonstrates our broader
commitment to diversity and inclusion, and our objective of increasing
female representation across our business.

Recognised leadership in sustainability enhances
our brand and is a competitive differentiator. It
also provides more opportunities to partner with
governments, investors and the private sector
who are placing increasing importance around
Environmental Social Governance (ESG) matters.

Measurement of, and reporting on our progress towards our sustainability
targets and the tangible examples of the ways in which we are addressing
our sustainability imperatives:

Carbon Target: We are a 1.5ºC aligned company:

– Net zero carbon scope 1 and 2 by 2025

– Absolute zero carbon by 2040

Social Target: Create $250m of social value by 2025.

Health
and Safety

Financial

Our
Customers

Our People

Lendlease Annual Report 2020 Managing and Measuring Value

Health
and Safety

FY20 has reinforced that the
health and safety of our people,
and those who interact with
our operations, is Lendlease’s
number one priority.

In a year of unprecedented events, we
recorded improvements across a number
of key indicators.

Performance metrics
Across our organisation we have seen
critical incident and lost time injury
frequency rates at the lowest rates
recorded since we commenced reporting
on these metrics, with the percentage
of operations without a critical incident
at 90 per cent or above for the fourth
consecutive year. These results are
testament to the dedicated focus of
our teams.

Operations without
a Critical Incident1

FY19

FY20

Critical Incident
Frequency Rate2

FY19

FY20

0.8

0.7

Lost Time Injury
Frequency Rate3

FY19

FY20

1.8

1.5

1. A Critical Incident is an event that caused, or had
the potential to cause death or permanent disability.
This is an indicator unique to Lendlease. 2. The
Critical Incident Frequency Rate (CIFR) is calculated
to provide a rate of instances per 1,000,000 hours
worked. 3. The Lost Time Injury Frequency Rate
(LTIFR) is calculated to provide a rate of instances per
1,000,000 hours worked.

These key metrics were trending towards
new record low levels prior to COVID-19,
which impacted the end of the financial
year. Maintaining these low frequency rates
during the COVID-19 period demonstrates
the diligence of our operational teams
in retaining a focus on workplace safety
in the midst of applying a range of new
workplace practices and protocols.

Fatality
Despite a significant improvement in
performance across a wide range of
safety metrics, it is with much sadness
that we report a fatality on one of our
operations during FY20.

Tragically, in September 2019, a
construction worker was seriously
injured in a critical incident on a project
in Kuala Lumpur where Lendlease is the
construction manager. While recovering
from surgery in hospital, the man
contracted an infection and subsequently
passed away.

We extend our deepest sympathies to
the family, friends and colleagues of the
deceased worker.

COVID-19
The onset of COVID-19 resulted in
significant disruptions across Lendlease’s
operations and a significant broadening
in the scope of our health and safety
objectives. In response to the pandemic,
we developed a range of global standards
addressing project shutdown protocols,
personal screening for people entering our
operations, social distancing applications,
COVID-19 specific personal protective
equipment requirements, and protocols in
the event of confirmed cases.

In addition, an online learning module
was developed as part of our mandatory
learning requirements. This module
addressed the revised ways of working
and directed our people to support
services available to those whose mental
health has been affected.

Objectives and targets
In support of Lendlease’s ongoing
commitment to health and safety, we
developed a range of objectives and
targets to be applied from FY21 to help
re-affirm our purpose when it comes to
health and safety, as well as establishing
a broader range of key performance
indicators.

To coincide with this revised approach,
updated Global Minimum Requirements
(GMRs) will be released in FY21. The
GMRs are the global standards we apply
to environment, health and safety across
all our operations and the updated
standards will be the fourth edition of the
GMRs since first released in 2008.

The Lendlease view is that a place
that cares is a safe place to work.
To demonstrate how this approach is
applied through the lens of our operations,
we have developed a set of objectives in
line with our core values.

In future reports we will supplement the
incident frequency rate metrics already
provided in this report with a wider range
of health and safety metrics that have a
greater focus on leading indicators.

The broader range of leading and lagging
indicators will provide a more rounded
approach to health and safety as well as
the resulting performance.

South Australia: Osborne South Development Project

Eliminating work at height
The Osborne South Development Project (OSDP) in South Australia involved the
assembly of a collection of large scale industrial facilities – the largest of which spans
187m long, 87.4m wide and standing 50m high.

In bringing together innovation and safety, the project team was able to develop
techniques to assemble the walls and roofing structures at ground level – with the
vertical elements then raised into position mechanically, and the roof structure then
undergoing strand jacking to be lifted into position.

Meticulous planning resulted in thousands of hours of work at height being eliminated
and the results were widely acknowledged by the client, the Australian Department
of Defence.

“I have not felt safer
on a job than I have on
this one. If all jobs took
into account what has
been done here, I’d be
fine with that.”
20 Year Concrete Foreman

Revised construction methods
The 17 storey towers and town homes that
comprise 845 West Madison in Chicago
includes 586 residences.

During the planning and construction
phases of the project, a number of
substantial changes to locally accepted
construction methodologies were applied
that provided significant benefits to the
project and the workers involved.

The project has adopted revised methods
for erecting interior core platforms and
elevator shafts, revised structural formwork
systems, and altered the approach to the
façade of the building – all with the intent
of delivering safe yet productive outcomes.

Traditionally high rise projects have their
amenities on the ground floor. We have
designed an innovative solution to
provide fully functioning facilities that are
transferred floor to floor as the structure
takes shape to support our workers.

The workers on the project have provided
the ultimate compliments:

Chicago: 845 West Madison

“Never thought there would be
a full restroom totally plumbed,
heated, and with proper
sanitation on a working deck.”
Tradesmen

“If I could work on a project
like this throughout the rest of
my career, I would take it in a
heartbeat.”
15 Year Pipefitter

Lendlease Annual Report 2020 Managing and Measuring Value

Financial

How we measure financial performance
When measuring financial performance,
we focus on Return on Equity and
Earnings per Security to measure the
returns we achieve for our securityholders.
The Portfolio Management Framework
outlines target returns at a segment level.
These returns are used to derive a Return
on Equity target within the 10 to 14 per
cent range, and Earnings per Security
used to make distributions within the
40 to 60 per cent payout ratio target.

FY20 – equity raising
On 28 April 2020, the Group
announced the launch of an equity
raising via an institutional placement
and Security Purchase Plan (SPP) to
eligible securityholders. The Group
raised $950 million via the institutional
placement and $260 million via the
SPP at the offer price of $9.80 per new
security, resulting in the issue of a total
of 123.4 million new fully paid ordinary
stapled securities.

Detailed financial performance
and outlook
For detailed information on our FY20
financial performance as measured under
the Portfolio Management Framework,
refer to the Performance and Outlook
section on pages 76 to 89 and the
Financial Statements on pages 142 to 205.

Our approach to financial performance
The Portfolio Management Framework
provides structure and financial
discipline across the operating segments
of Development, Construction and
Investments. It is designed to maximise
risk adjusted returns for securityholders
and deliver value for our customers.

Combining the three operating segments
leverages the competitive advantage of
our integrated model, enhancing value
for our securityholders, partners and
the community. This has included award
winning and innovative design excellence,
the creation of better public places and
superior sustainability solutions.

Financial strategy
The Portfolio Management Framework is
the core of our financial strategy.

This framework sets target guidelines and
is designed to:

• Maximise long term securityholder

value through a diversified, risk adjusted
portfolio

• Leverage the competitive advantage of

our integrated model

• Optimise our business performance

relative to the outlook for our markets
on a long term basis

• Provide financial strength to execute
our strategy, maintain an investment
grade credit rating, and capacity to both
absorb and respond to market volatility.

The Group is currently reviewing the
framework in conjunction with the
strategy review. The revised framework
will be provided in FY21.

Portfolio Management
Framework

Maximising long term
securityholder value

1. Capital allocation

Focused on gateway cities

Australia

International regions

50-70%

5-20%1

2. Business model

Integrated model synergies
Target EBITDA mix:

Development

Construction

Investments

3. Target returns

Group ROE

Development ROIC

40-50%

10-20%

35-45%

10-14%

10-13%2

Construction EBITDA margin

2-3%

Investments ROIC

8-11%2

4. Capital structure

Investment grade credit rating

Optimised Weighted
Average Cost of Capital

Target gearing3

10-20%

5. Distribution policy

Payout of earnings

40-60%

Capital management discipline

New York:
National September 11
Memorial

1. Per region. 2. Through cycle target based on
rolling three to five year timeline. 3. Gearing
definition: Net debt to total tangible assets less cash.

Artist’s impression

San Francisco:
30 Van Ness

Lendlease Annual Report 2020 Managing and Measuring Value

Our
Customers

Our customers range from
individuals to the largest
government, investment and
corporate organisations.

Successful customer relationships depend
on our ability to understand what is
truly important to customers and then
delivering what they want.

Customer experience research
Over the past three years, our global
customer experience research program
has been embedded across all regions.
The program helps us understand how
customers perceive their experiences
with us and identify where we can
improve. It also guides decision making
on customer experience improvement
planning and new product and service
development.

In FY20, approximately 25,000 customers
participated in our customer satisfaction
(C-SAT rating) and loyalty (NPS rating)
research, an increase of approximately
ten percent on FY19. Notwithstanding
the impact of events such as the
COVID-19 pandemic, Brexit and the
Australian bushfires, our performance
this year remained steady and positive.
The Development portfolio results saw a

small upward NPS result for B2C and small
downward movement for B2B, with C-SAT
remaining steady. Overall Construction
results saw a small downward movement
in NPS. Investment Management had a
solid increase in NPS and small positive
increase in C-SAT.

Customer experience feedback clustered
around relationship performance, service
delivery and product quality. Strength of
relationships drives trust and provides
a buffer in difficult times. Highly skilled
employees embed confidence in the
relationship, whilst having a compatible
cultural fit can provide a strong input into
driving elements of trust, a key driver
of customer experience (particularly for
B2B customers).

Customers also highlighted the
importance of having customer centric
service delivery and communication
processes to keep them informed, resolve
problems and respond effectively in
a timely manner. Product quality, and
a positive experience with Lendlease
products, gives customers confidence
and is a key factor in future engagement
and advocacy. The ability to “go the extra
mile” and add value (beyond price) results
in customers justifying their purchase/
investment decision.

Customer snapshot1

200 million

Retail visitors annually2
(approximate)

110,000

Residents in US Military Housing
(approximate)

471,000

Residents across apartments
and communities3 (approximate)
17,000

Retirement living residents
(approximate)

1. As at 30 June 2020. Internal data capture,
not audited. 2. Number excludes urban
regeneration retail. 3. An estimate of current
and future residents based on our projects to
date and existing pipeline.

Customer experience
improvement initiatives

Each year across Lendlease a range
of customer experience improvement
initiatives are implemented to improve
customers’ and residents’ experiences.

Customer facing digital portal
In the UK, in collaboration with the Global
Residential Practice, a customer facing
digital portal is being developed and
progressively implemented to improve the
customer experience by enabling tailored
communication with the customer. This
will empower customers to do what they
want, when they want and interact more
easily with Lendlease all the way through
their journey.

Military Housing Privatisation
Initiative (MHPI) Customer
Care Program
Our US Communities business launched
a customer care program with the vision
to provide outstanding customer service
to communities where military families
live, work and thrive. The program is
based on a commitment to six pillars: to
provide Safe and Healthy Homes, Quality
and Consistent Service Experience,
Communication and Education,
Organisational Culture of Caring, Sense
of Community, and Sense of Value. As a
result, we have successfully identified and
are implementing new ways of listening
to and engaging with more than 110,000
residents in over 40,000 homes.

At the centre of our resident engagement
strategy is our intent to establish a
Resident Advisory Board (RAB) in each
of our Army and Marine Corps/Navy
communities. These RABs are designed
to give residents the opportunity
to directly work with local property
management teams to help shape their
community, express their concerns,
share their ideas and suggestions, and to
work directly with them to develop and
implement effective solutions.

Retirement Living
connecting residents
The Australian Retirement Living business
launched a new free app called Lendlease
Together, designed to help residents feel
more connected to their community, keep
informed and easily access their friends,
family and the village management team.
Using the app, residents and their family
and friends can access the latest village
news, wellbeing ideas and resident stories
as well as video chat with loved ones.

COVID-19 drives customer
rewards program innovation
Our Singapore shoppers’ rewards program
and app, Lendlease Plus, launched several
new COVID-19 stimulated offers in FY20
to the program’s approximately 128,000
members. This included new food delivery
special offers with partners GrabFood,
foodpanda and deliveroo, designed to
support customers who did not want to
leave home and provide indirect support
to participating food and beverage
retailers. Members could also donate
reward dollars to Willing Hearts, a local
meal delivery charity supporting people in
need during the COVID-19 period.

Lendlease Annual Report 2020 Managing and Measuring Value

Our People

Wellbeing

In our most recent People Survey, we
achieved a significant increase in the
effectiveness of leaders as measured
by their direct employees. Improving
the effectiveness of our leaders remains
a key focus for us as we deliver our
global pipeline.

Workforce management
With a focus on preserving jobs and
reducing costs, a number of workforce
management actions were implemented
in response to COVID-19.

Working with a set of globally consistent
principles, leaders tailored their plans and
actions based on the situation in each
location – in some cases accommodating
site specific requirements and accessing
government support where it was
available. This enabled us to implement
workforce management actions that our
people understood and were relevant to
their local experience.

The range of actions include reduced
pay for a temporary period without
a corresponding reduction in hours,
reduced hours of work, furloughs and
stand downs and, in a limited number of
cases, redundancies.

Our people are the greatest
contributors to our success
and enable us to fulfil our vision
to create the best places.

As we continue to grow our influence
internationally, the way we work is
evolving. Together with our partners,
we aim to deliver large scale projects
faster by drawing on innovation,
knowledge sharing, leadership excellence
and our diverse and capable workforce.
Our ambition is to create a work
environment that:

• Values and cares for its people, with
safety and wellbeing our priority

• Has inspirational leaders who others

aspire to emulate

• Is team oriented, inclusive and diverse

• Fosters a unique culture that balances
innovation, knowledge sharing and risk
management.

To support these ambitions, our people
strategy has focused on developing
leadership excellence, codifying and
sharing knowledge globally, creating
a consistently positive employee
experience, and developing and deploying
our talent globally.

Developing and deploying key talent
As the scale of placemaking increases,
we continue to invest in developing
the capability of our people to deliver.
This investment is across all career stages,
from our global graduate program to
our Construction Director Program and
Urbanisation Project Director Program.

We currently have 404 of the brightest
new graduates across our four operating
regions in our Global Graduate Program.
Now in its fourth year, this program
immerses the graduates in Lendlease
practices to accelerate their careers and
build lasting knowledge and relationships.

To deliver the best places we need
the best leaders on our projects. We
continue to grow our expertise in project
and construction delivery. In FY20, we
had 39 senior leaders participate in our
Construction Director Program and
Urbanisation Project Director Program.

Our target retention rate for key talent
is 90 per cent or higher across all talent
programs. This year we achieved a
retention rate of 91 per cent.

In FY20, our pipeline of successors for key
leadership roles, along with the number of
females in our succession pool, increased.
For senior executive positions, we have a
target of three unique successors and in
our FY20 talent and succession review,
75 per cent of senior executive positions
met this target. While the number of unique
successors has decreased, the readiness of
those successors has improved.

Succession strength1

FY19

FY20

Leadership positions
held by women2

FY19

FY20

78%

75%

26.1%

26.9%

The employee experience
Listening to our people helps us to
create an environment and experiences
that support our employees. It provides
an environment where our people are
recognised and rewarded for living our
values and building the culture we need
to create the best places.

We continuously communicate and
engage with our people in designing and
evolving the way we work to foster greater
enterprise wide collaboration, continuous
learning and open and transparent
dialogue.

As part of this open dialogue, we measure
the effectiveness of our leaders through
Our People Survey, conducted every six
months. During the year, we embarked
on a targeted Leadership Excellence
Program to build leadership capability.
This focused on direction setting, leading
effective teams and regular and open
communication.

1. For all senior executive positions, we have a target of three unique successors. We define this as succession strength. This year we have moved from an average measure
across the cohort to a percentage of positions that met the three or more target. 2. Leadership roles include a number of levels in the Lendlease Career Job Framework,
including executive level roles.

Health and wellbeing response
to COVID-19
In response to COVID-19, Lendlease
put in place a range of measures across
our global operations to support our
people’s health and wellbeing.

Hardship and Wellbeing Fund
The Lendlease Hardship and Wellbeing
Fund was established to support team
members impacted by COVID-19 who
need short term help to cover the essentials
and expenses of everyday life. This includes
things like a mortgage or rental payment,
groceries, utilities and medical expenses.

Online programs
With most of our office based employees
working remotely due to COVID-19, we
were able to adapt our suite of health and
wellbeing programs to be delivered online.
The Roadmap to Wellbeing Program covers
nine topics themed around Productive
People, Performance Stamina and Positive
Connections. They are offered as one hour
bite sized workshops, short toolbox talks and
ten minute digital learning modules that can
be accessed at any time from any device.

Leader webinars focused on equipping
our leaders to support their teams as well
as a range of additional services such as
an online doctor service, meditation and
movement programs.

Mental Health First Aid
Lendlease has long had a focus on the health and wellbeing of its people and developed
a holistic framework and initiatives to promote and support this focus. Since 2014,
Lendlease has partnered with Mental Health First Aid (MHFA) to help our people identify
and support mental health in the workplace. In FY20, we trained 186 employees and now
have more than 1,850 trained MHFA Officers globally.

To expand our support of mental health in the workplace, we launched the MHFA
Leaders Program with more than 400 leaders completing the training. The program aims
to provide our people leaders with the tools and skills to support employees with mental
health issues.

Mental health support is part of the wider Lendlease health and wellbeing framework and
for the second year we have been certified as a ‘Healthy Workplace’ by the Global Centre
for Healthy Workplaces.

Knowledge
sharing

To better codify and share our global
intellectual property (IP), in 2019 we
launched two ‘Practices’; Urbanisation and
Residential Development.

These practices bring together a
community of senior sector leaders
and subject matter experts to develop
specialist sector IP that is available to
anyone in Lendlease.

Direct guidance from practice affiliate
members, as well as access to expert
validated knowledge, boosts our peoples’
professional development. It also protects
our IP if an individual leaves the business.

Joining a practice as an affiliate member
is an aspiration of our most accomplished
subject matter experts. It is recognition
of a person’s abilities, commitment to
continuous improvement and contribution
to our knowledge sharing culture.

Our practices clearly articulate the
expectations of our affiliate members
and foster the behaviours that are key to
Lendlease maintaining our position as an
industry leader.

Attracting future talent
Since the launch of our Global Graduate Program four years ago, we have welcomed
924 of the best and brightest students to our organisation. Our two year program offers
a breadth of experiences designed to accelerate learning and readiness of graduates.
It is an opportunity not only for the graduates to learn but also for the organisation to
learn. Along with their formal learning pathway, we engage them in projects to create
innovative solutions and enhance operations across the organisation.

Our entry level talent program is also an opportunity for us to focus on bringing a
diverse range of candidates into the organisation. In the past three years, we have
achieved a 50/50 gender balance globally, which builds a pipeline of talented women
for future leadership roles. We will continue to focus on providing opportunities to under
represented groups in our industry.

Lendlease Annual Report 2020 Managing and Measuring Value

Sustainability

We are a
1.5ºC aligned
company

Net zero carbon scope 1 and 2 by 2025

Absolute zero carbon by 2040

Introducing our new
sustainability targets
Our vision is to live in a world warmed by no more
than 1.5ºC and to be responsible for creating
measured social value on the journey.

We are a
1.5ºC aligned
company

We are excited to launch these targets. They are our call to action and will be our measure
of success as we begin the next chapter of our sustainability story. We are acutely aware
that these targets will be difficult to achieve – and believe it is this challenge that makes
them worthwhile striving for. We look forward to working with and learning from our
clients, partners, tenants and supply chain as we create the pathways towards achieving
these targets and supporting industry transformation.

Create $250m
of social value
by 2025

Committing to transformation

Sustainability has always been a priority
for Lendlease. We have a long and proud
history of leading the evolution of the
built form to be more sustainable, with
numerous sustainability firsts achieved.

In June 2019, we announced our new
Sustainability Framework, focusing our
efforts on three global imperatives to
deliver on our sustainability objectives and
help in achieving our vision to create the
best places.

As the business has implemented this new
strategy, we realised we need to act faster
as an industry to transform how we design,
construct and manage the built form.
Industry collaboration is key to achieving
the type of radical change needed in our
sector. This includes changes such as
electrification of buildings and equipment,
decarbonisation of materials manufacture
and the eradication of waste to landfill –
all while maintaining our commitment to
using our work as a platform for creating
social value for those who live, work or
visit the places we create.

We have committed to two new
sustainability targets, aligned to our
framework and sustainability imperatives.
The targets have been set after
consultation and deliberation with clients,
partners and our employees.

Imperatives

Focus Area:
Environmental

Focus Area:
Social

To Create the Best Places

Sydney: Barangaroo South

As a 1.5ºC aligned company, we aim
to tackle the climate crisis head on
while delivering client and shareholder
value, maintaining our employee
value proposition and honouring
our sustainability legacy. Achieving
zero emissions will be approached
by setting short, medium and long
term goals, addressing our immediate
emissions activity, and fostering industry
participation and partnerships to help
respond to wider, indirect emissions.

The following five steps are required to
achieve our target:
1. Create a decarbonisation investment

strategy in 2021

2. Phase out diesel and gas in our

operations

3. Use 100% renewable electricity

before 2030

4. Collaborate with supply chain partners

to set pathways to zero carbon by 2040

5. Collaborate with our tenants and

residents to transition to renewable
electricity by 2040

Taking action together
With a target as ambitious as ours, we
need to collaborate with others. We are
already working with our suppliers and
advocacy groups to develop multilateral
responses to emissions in the built
environment.

This year we announced our partnership
with ResponsibleSteel, becoming the
first property and investment company
to join the initiative. ResponsibleSteel
brings together many innovative steel
suppliers and manufacturers, partnering
to reduce emissions across the supply
chain. We also intend to play a similar role
in advocating for low carbon cement.

We are also working in our gateway cities
to respond to the evolving demands of
a zero carbon economy. After almost
a decade of work in partnership with
the NSW Government, Barangaroo
South became Australia’s first carbon
neutral precinct.

What 1.5ºC aligned means
To combat climate change we need
to minimise global warming. 1.5ºC
is a reference to the level of global
warming we hope to help limit the
world to, based on pre industrial levels.

Due to the amount of greenhouse
gases (such as carbon) already in
the system, even with our best
efforts, the planet is set to warm
by 1.5ºC (it has already warmed to
1ºC). With no change to current
practices, the planet will warm by
over 3ºC, which will catastrophically
impact the ecosystem and lives.

The Paris Agreement is striving for
less than 2ºC warming. The term
‘1.5ºC aligned’ is a commitment to
take actions to reduce our emissions
to the levels required to limit global
warming to 1.5ºC.

Governance

Lendlease Annual Report 2020 Managing and Measuring Value

Create $250m
of social value
by 2025

Assessing shared value partnerships beyond
project and asset obligations

Using industry accepted methodology

Hindsight
2020

Global Real Estate
Sustainability
Benchmark (GRESB)
leadership

FY20 was the fifth year in the past six
years that APPF Commercial has attained
the prestigious number one global GRESB
ranking. Remarkably, the Fund has grown
its net lettable area by 23 per cent over
the past six years, while simultaneously
reducing its carbon footprint by
39 per cent.

Three other Lendlease funds achieved top
10 global rankings in the 2019 GRESB:

• Lendlease International Towers

Sydney Trust (Towers Two and Three
and International House at Barangaroo)
– third globally overall and third in
the office sector (across listed and
unlisted funds)

• APPF Retail – global first in the retail

sector (across listed and unlisted funds)
and fifth overall

• Lendlease Sub Regional Retail Fund

– global third in the retail sector
(across listed and unlisted funds) and
tenth overall.

Locally across Australia and New Zealand,
APPF Industrial was ranked first in
industrial (unlisted) and Lendlease’s Asian
retail funds came first, second and third
place for unlisted Asia retail funds.

Lendlease Community Day volunteering

Our Corporate Social Value Target is
intended to demonstrate our corporate
commitment to creating social value in the
communities in which we operate, above
and beyond what we are required to do at
the project or asset level.

This target will account for our investment
in our corporate led, shared value
partnerships. It is based on achieving
an average 1:5 social value return on
investment, primarily via our Lendlease
Foundation, but also through other key
business initiatives such as FutureSteps.

Work is underway to deploy new metrics
and data collection at the asset and
project level to allow us to expand this
target to include the social value we
create at that level.

We have also commenced work with a
number of social value evaluation experts
to help develop industry accepted,
simplified, yet robust, social value
assessment methodologies to evolve
the social sustainability narrative beyond
philanthropic spend, to one of social value
created and the multiplier of shared value
partnerships.

Partnering to increase the value
Key to the success of our new social value
target is the shared value partnerships,
we will continue to establish and foster
via investment from our Lendlease
Foundation. Through our partnerships
we have been able to both deliver
and receive social value outcomes for
our communities, as well as our own
employees, who get to interact with
our partners in various ways, including
through volunteering.

It is incredibly rewarding to work with
partners on important social agendas
aligned to our Sustainability Framework
and even more exciting when we can
bring partners together to amplify
impacts. An example of this approach was
the use of Lendlease Foundation funding
at the start of the COVID-19 lockdown
to support The Pure Group, a social
enterprise that runs our Barangaroo café.
They were able to stay operational for a
period, employing staff to use our facilities
to prepare 4,000 meals that were then
shared with another partner, OzHarvest,

who delivered the meals to charities in
need. We have also been able to offer
employees the opportunity to help pack
OzHarvest hampers for deployment to
charities around Australia.

What is ‘social value
measurement’
While there is no universally
accepted definition of ‘social value
measurement,’ it is essentially
a process to understand how
much positive social change has
occurred and can be attributed
to the activities undertaken by an
organisation. An assessment of
‘social value’ should account for the
many facets of life that may affect
an individual’s wellbeing, including
but not limited to: economic
circumstances, environmental
issues, education, physical and
mental health, and employment.

Sydney: Barangaroo

A look back at the
20% by 2020 targets
(FY14 to FY20)

The Group’s performance against the
2020 targets has fluctuated over the
past five years. Endorsed in July 2014,
our flagship 20 by 20 sustainability goals
included a 20 per cent reduction in
energy, water and waste sent to landfill for
our operations1 by the end of FY20.

The targets were ambitious for the time
and aimed at driving meaningful change
across the organisation, as evidenced by
numerous initiatives that have made a big
impact to our energy, water and waste
performance over the years. There have
been a number of key lessons learned,
which we have applied to the drafting of
our new targets and metrics.

In July we retired our 2020 energy, water
and waste targets.

FY20 Performance (as at Q3)

Energy2 – 20% reduction

Investment in new, more efficient assets, retrofitting of older assets and the development
of faster construction methods over the past five years has helped the business achieve
its 20% energy (intensity) reduction.

Water2 – 5% reduction

Investment in efficient water fixtures and use of non potable water for construction
purposes has helped the business reduce its water (intensity) use. Water intensive
tunnelling projects and challenges retrofitting older assets limited our ability to reach our
20% goal.

Waste2 – 22% reduction

With most waste generated from our construction activities, innovative reuse pathways
(e.g.: recycled glass for road base) and partnerships with our suppliers to reduce
packaging, has helped the business reach its 20% reduction (waste to landfill) goal.

1. Energy and water are measured as reductions in intensity. Waste is measured as a reduction in the rate of waste
sent to landfill. 2. The above performance is at March 2020 and is a cumulative measure. Full FY20 performance is
subject to Limited Assurance by KPMG and will be available on www.lendlease.com in October 2020.

Lendlease Annual Report 2020 Managing and Measuring Value

Elevate Reconciliation
Action Plan (RAP)

Reconciliation Australia has extended our current
Elevate Reconciliation Action Plan to September 2020
and we have again been invited to submit an ‘Elevate’
level RAP in recognition of our continued leadership
and proactivity in delivery in this area.

We will release the new Lendlease Reconciliation
Action Plan 2020–2023, titled ‘Country, Truth and our
Shared Story’, in late 2020.

Providing cultural engagement and
learning opportunities for Lendlease
employees

6,030

Lendlease employees in Australia have
completed face to face or online cultural
awareness learning since FY12.

Promoted reconciliation through our
sphere of influence by activating our
projects, offices and assets in celebration
of National Reconciliation Week 2020 and
NAIDOC Week 2019.

Increasing the number of Aboriginal and
Torres Strait Islander people directly
employed at Lendlease

Of Lendlease Australian employees
identify as Indigenous Australians.

Pivoted RAP actions in FY20 due to
COVID-19 by developing a COVID-19
RAP Response Plan including a greater
focus on support and retention of existing
Lendlease Indigenous employees.

Updated our Indigenous Talent Strategy
and Resourcing Strategy under the
leadership of newly appointed identified
Indigenous managers.

Increasing procurement activity with
Aboriginal and Torres Strait Islander
businesses

128

$55.3m

Supply Nation businesses engaged
(registered and certified Indigenous
businesses).

Spent in FY20 with registered and
certified Indigenous businesses.

Lendlease Building – local and indigenous engagement
In February 2020, our team commenced the staged hand over of the $495 million
New Air Combat Capability facility at RAAF Base Tindal in the Northern Territory. The
completion of this facility will support the arrival of Australia’s cutting edge F-35A Joint
Strike Fighter aircraft. Through this project, Lendlease awarded 64 per cent of the total
work packages to Northern Territory businesses, representing some $242 million injected
into the Territory’s economy.

Through a bespoke Indigenous work training program developed by Lendlease, the
project also contributed to local Indigenous employment, with an eight per cent
Indigenous workforce participation rate and three subcontracts, valued at $27 million,
awarded to Indigenous companies.

First Nations design in
placemaking – Darling Square
Commissioned by the landowner, Place
Management NSW (State Government),
and Lendlease, ‘The Canopy’, by
Aboriginal artist and Head of Design for
Bangarra Dance Theatre Jacob Nash,
arose from a vision to reinvigorate a piece
of urban infrastructure and share stories
of Aboriginal culture with the public.
The installation has beautified the area
and attracts people to gather and use the
previously dark Pier St Underpass that
divided sections of Darling Harbour.

The Pier St underpass art installation
represents the three constants that have
always been here: the land the artwork is
on, the Wangal and Gadigal clans of the
Eora Nation in Sydney that care for this
country, and the night sky above us.

The night sky depicted evokes
primal ideas of creation, dreaming,
wonder and home, and it holds stories
about our place in the universe.
It showcases how First Nations’ culture
and design knowledge can unite us and
connect people and place.

Modern
slavery

We acknowledge the increasing
expectations on businesses to address
modern slavery risks in global supply chains.
Eliminating modern slavery from our supply
chains is a goal we take very seriously.

We intend to submit a Modern Slavery
Statement in 2020, covering our global
operations.

Our supply chain risk initiatives have
taken a risk based approach, promoting
consistency and standardisation across
our business, and have included:

• Implementing a new global Supplier

Code of Conduct (available on
Lendlease.com) setting out our
expectations of suppliers, contractors
and their supply chains across a range
of areas including health and safety,
sustainability, human rights and modern
slavery. Embedment into business
processes, including within major
standard contracts globally, is underway

• Adoption of Ethics Point, a global

platform for employees and suppliers
to raise concerns around improper
conduct. This platform is accessible in
local languages

• Developing a modern slavery risk heat
mapping tool to identify global supplier
categories and associated products
against countries with elevated risks of
modern slavery

• Convening regional Modern Slavery

Communities of Practice, focusing on
implementation of modern slavery risk
mitigation initiatives and capacity building

• Conducting modern slavery

awareness training sessions and
developing a Modern Slavery Guide
for our employees, providing practical
guidance for mitigating modern
slavery risks

• Active engagement in business forums
on industry level responses to modern
slavery risks, including UN Global
Compact Network Australia’s Modern
Slavery Community of Practice, Achilles
Building Confidence Community of
Practice in the UK, and Sustainability
Supply Chain Schools (UK and Australia)

• Working with key Global Supply

Chain partners and critical equipment
manufacturers to understand their
supply chains and their suppliers in
more detail.

We acknowledge the economic impact
of COVID-19 will have a disproportionately
adverse impact on vulnerable worker
populations. Awareness of this risk
and internal knowledge sharing on risk
mitigation measures e.g. for migrant
workers and responsible disengagement
principles (where we needed to pause)
has been a specific focus for our regional
Modern Slavery Communities of Practice
during this period.

Respect for human
rights is consistent
with our values,
our commitment to
safety and sustainability,
and drives the way
we work.

Lendlease recognises tackling modern
slavery successfully relies on strong,
open collaboration with our suppliers,
our people, and other key stakeholders.
Given the breadth and complexity of
our global supply chains, our efforts will
require a phased, multi year approach.

Lendlease Annual Report 2020 Risk

Risk

Honolulu:
Hickam Communities

A vibrant
masterplanned
community providing
homes and amenities
for the US Airforce.

Lendlease Annual Report 2020 Risk

Risk

Our approach recognises the
nature and level of risk we are
willing to accept to achieve
our strategic goals and key
performance targets to create
securityholder value.

Internal audit
Formal processes provide supplementary
assurance to operational businesses.

External audit
Formal, independent regular reviews.

Policy and procedure
Board approval process
The Board has matters that are reserved
for its determination under the risk
appetite of Lendlease, and further,
under the Limits of Authority. The Board
approval process is set up so decisions
and commitments of a predetermined
magnitude require Board approval,
thereby supporting sound governance
and continued alignment with strategy.

Investment committees
Investment committees are in place at
regional and Group levels in order to
assess and approve potential projects/
commitments.

Limits of Authority
Limits of Authority are in place to outline
matters that are specifically reserved
for determination by the Board and
those matters that are delegated to
management.

Risk tools
Risk management platform
Lendlease uses a risk management
platform throughout all regions
to allow consistent risk identification
and assessment.

We continue to focus on aligning Board
and management to drive informed and
consistent decisions, achieving effective
and efficient allocation of capital and
resources, providing an understanding of
risk limits, context to identify, report and
manage risks, and creating a culture of
risk awareness and accountability.

Our risk framework remains unchanged
from a governance perspective, and
continues to mature, underpinned by
a robust three lines of defence model.
The ‘Voice of Risk’ roles we added in FY19
continue to mature, providing further
independent assurance within each
region with alignment as a group being
coordinated through the Group Chief
Commercial and Risk Officer and Group
Head of Risk and Insurance.

The strength and maturity in the structure
has been well evidenced in recent months
as we navigate through COVID-19.
A mature crisis management framework
and appropriate business continuity
plans are in place through all regions and
functions, providing a stable platform on
which we can continue to operate safely
and plan strategically.

Structure
Board Risk and Audit Committees
Review the effectiveness of the Group’s
enterprise risk management system
and seek assurances that material risks
are identified and appropriate risk
management processes in place.

Group risk function
Liaises with regional CEOs and risk
specialists on business specific and
enterprise wide risks in order to assist the
Group’s businesses to further develop their
risk management processes are in place.

Sydney: Victoria
Cross over station
development

Artist’s impression

Lendlease Annual Report 2020 Risk

Risk governance
and management

Specific examples of how risk
governance and management have
evolved in the reporting period
include the implementation of some
granular risk appetite principles
and tolerances in key areas of risk.
These focus on areas such as latent
conditions, contamination and existing
structural risk. Further development
of risk appetite will continue to
evolve in other granular areas of our
enterprise risks.

Each region continues to have a
directly appointed ‘Voice of Risk’
executive who is part of each Regional
Leadership Team.

Importantly, these individuals do not
have P&L accountability, nor are they
part of the risk function. They are
independent and are mandated to
challenge both the business and the
risk function on genuine matters of
strategic, tactical and operational risk.

Three lines of defence

Board and Committees

Global Leadership Team

Regional
Leadership
Teams

Risk Based
Governance
Functions

Business
Integrity
Group

Internal
Audit

External
Audit

First line of defence

Second line of defence

Third line of defence

Business Operations

First line of defence –
responsibilities

Identify

Assess

Control
and Manage

Monitor

Report

Individual business units are the first line of defence responsible for identifying, managing
and owning their risks. These business units have the appropriate tools and interaction
with the various Group functions to execute business responsibilities effectively.

Stage gates
Across our property and construction operations, the conversion and delivery of projects
is governed by a number of ‘gates’ utilising proprietary and in house developed systems,
as follows: Business development pipeline. 1. Project go/no go. Protect conversion
process. 2. Commit to pursuit costs. 3. Authority to submit to customers. Submit
proposal. 4. Changes to initial proposal. Execute contract. 5. Authorisation to proceed.
Delivery. 6. Regular project reviews. Review lessons learnt. 7. Implement for new projects.
Stage gates are underpinned by business unit milestone views/health checks and
portfolio reviews during delivery.

Inform

Plan

Oversee

Guide

Report

Group functions involved in the second line of defence include corporate risk and
insurance, operational assurance and performance, safety, legal, information technology,
sustainability, people and culture, and finance. Function specific policies outline the
assurance measures to enable each business to identify and manage risks appropriately

Assess

Plan

Execute

Report

Follow up

Internal and external audit make up the third line of defence, acting independently from
the first and second lines of defence and reporting directly to the Board and Risk and
Audit Committees.

Second line of defence –
assurance measures

Third line of defence –
independent processes

In November 2019,
the Board Risk
Committee
approved the Risk
Appetite Statements
against each of the
12 Enterprise Risks.

These Risk Appetite Statements define
at a high level, the expectations of
management and the Board regarding
the nature and extent of risks the Group
is willing to take in pursuit of its strategy.
They assist in:

• Maintaining alignment amongst the
Board and management about the
Board’s appetite for risk in order to drive
more informed and consistent decision
making

• Effectively allocating capital and

resources to projects that are more
likely to be approved by management
and the Board.

Risk Appetite
Framework

In May 2020, after extensive internal
consultation and testing, the Board Risk
Committee approved the Risk Appetite
Tolerances. These provide guardrails that
will assist in aligning Lendlease’s appetite
for risk with our decision making and
review processes, namely:

• Providing a clear understanding of

Board approved risk limits, where there
is zero tolerance and where specialist
approvals and endorsements are
required to mitigate risks

• Providing a mechanism for identifying,

managing, and reporting on risks
through the lifecycle of projects and
investments

• Providing an appropriate avenue for
the ‘Voice of Risk’ to be heard, and a
culture of proactive risk management
to be embedded within all levels of the
organisation.

Implementation
The Risk Appetite Framework is
being integrated into the existing risk
management and corporate governance
processes within Lendlease, as shown
in Diagram 1. This ensures a seamless
deployment of the Framework and an
improvement in the management of risk
within the organisation.

Continuous improvement
In the first 12 months of implementation,
the framework will be reviewed on a
quarterly basis. After this period, it will
be reviewed annually by the Group
Chief Commercial and Risk Officer and
approved by the Board Risk Committee.
Any changes outside of the annual review
cycle that encompass the addition of
new statements and tolerances will be
reviewed and approved by the Board
Risk Committee.

Risk Appetite Framework deployment

Board defines its
appetite and applies
governance

Board

Defines its appetite for the 12 Enterprise Risks through the Risk Appetite Framework

Corporate
risks managed
by Group

Group

Disruption . Cyber / Data . Regulatory . Culture . Business Continuity

Appetite deployment mechanisms
Group Strategy; Investment in Digital; IT Policies; Management of Compliance
Obligations; Business Continuity Policy; Limits Of Authority (LOAs); Code of Conduct;
Formalised Investment Approval Processes

Business risks
managed at
regional level

Regions /
Businesses

Customer . Geopolitical . Environmental . Commercial Performance
Scalable Growth . Health, Safety and Wellbeing . Project Execution

Appetite deployment mechanisms
Strategy Approval; Policies; Regional Investment Committees; LOAs;
Formalised Investment Approval Processes

Operational issues
/ risks managed
at project /
investment level

Projects /
Investments

Appetite deployment mechanisms
Project Reviews; LOAs; Localised Policies; Project Approval Gates

Health, Safety
and Wellbeing

Disruption

Commercial

Execution

Geopolitical

Regulatory and
Counterparty

Corporate
Culture

Lendlease Annual Report 2020 Risk

Key risks and mitigation

Description

Mitigation

The value we create

Failure to provide an environment that promotes health, safety and wellbeing impacts our
ability to achieve our corporate and social responsibilities

Responsiveness to disruption, including digital disruption as well as other new methods
and materials emerging in the Development, Construction and Investments sectors

Commercial performance fails to meet our corporate objectives

Failure to execute strategy or projects affects our ability to meet our corporate objectives

We are committed to the health, safety and wellbeing of our people. Through our Global Minimum
Requirements (GMRs), which include both physical safety and health and wellbeing, we empower
our people to operate in a consistent standard across all our operations.

With the increasing dependence on technology, our strategic intent aims to turn disruption into
an opportunity by creating a culture that fosters innovation and focuses on adopting leading edge
technologies to deliver innovative solutions and generate a competitive point of difference.

Our capital deployment guidelines mitigate risk and improve performance. Quarterly business
reviews assess business operations against approved strategy to drive consistent, focused and risk
assessed investment decisions.

Our risk management approach, including the use of stage gates across our property and
construction operations, which is articulated earlier in this section, contributes to the mitigation of
execution risk. To inform our investment decisions, we use internal research to develop a ‘house
view’ of property cycles in every region and the strength of our gateway cities.

Global and local events or shifts in government policy occur in the regions in which
we operate, adversely impacting our ability to achieve strategic objectives. Failure to
adequately understand governments’ mandates, expectations and performance standards

We are committed to growing our business in sectors that are supported by positive global trends.
We are sensitive to geopolitical shifts and concentration risk and coordinate our approach to
government in all regions to mitigate against sovereign risk.

• Non compliance with regulatory and policy requirements by Lendlease or our

clients/suppliers

• Client, investor or supply chain ethics fail to meet Lendlease standards

• Failure to adequately select, govern and drive value from counterparties

• Failure to comply with government regulations impacts our ability to access

government opportunities

Failure to create and maintain culture which supports Lendlease’s core behaviours,
principles and values to drive disciplined strategy execution

Cyber/Data Governance/
Asset Protection

Failure of cyber resilience and defence systems. Leakage, misappropriation or
unauthorised storage of data. Unauthorised control of systems and physical asset
infrastructure (i.e. lifts, security, air conditioning)

Customer

Loss of existing customer (including government) relationships, or inability to tailor
services to future customers’ needs, impacting Lendlease’s financial objectives

Non scalable
Growth

Corporate and
Environmental
Sustainability

Business
Continuity

People: inability to attract, retain and upskill key talent necessary to deliver strategic objectives

Process: lack of scalable processes to support predictable growth

Failure to comply with regulatory, societal and investor expectations of corporate and
environmental sustainability such as climate change and social responsibility

Failure to properly plan for and/or appropriately respond to events which may disrupt
Lendlease’s business

To further improve our culture of compliance, we focus on aligning business priorities with the
necessary compliance and assurance measures. We are focused on maintaining an ethical supply
chain to ameliorate the risk of material substitution and modern slavery. We have an appetite for
relationships with parties who are aligned with our values.

Our values drive our approach to business and delivery of long term value. We empower our people
to make business decisions that are aligned to our core values and behaviours, principles, and five
areas of value creation. To provide a ‘Voice of Risk’, we have separate reporting routes outside of
those who can influence risk issues through optimism bias.

Physical and data security continue to be key focus areas globally. We invest in preventative
technology and education of employees to achieve a sustainable security culture.

Bid leadership training of key employees reinforces understanding of customers’ requirements.
Recurrent customer survey feedback informs our business strategy. A single platform assists in
customer data security and aligns customer service across all regions.

To deliver the desired level of performance, we continue to invest in growing our core capabilities
through active talent management and targeted professional employee development to attract, retain
and grow the best people. Our processes are designed to be consistent, scalable and effective.

We are committed to creating the best places and optimising our corporate and environmental
sustainability performance (including climate change and social responsibility) through our
Sustainability Framework and integrating sustainability considerations into our business strategies.
We continually increase engagement through training programs to promote sustainable behaviours
in the organisation globally. We have endorsed the TCFD recommendations on climate change
and have begun reporting Lendlease’s resilience to the changes in both policies and the physical
environment (as noted in the sustainability section).

To achieve organisational resilience, we are committed to operating in a way that supports our ability
to respond to threats and disasters without affecting our core business operations. We continue to
invest in our peoples’ learning and development to better prepare them in the event of disruption
through training programs and various threat scenario simulations to stress test the plan.

68
68

Lendlease Annual Report 2020 Climate Related Risks and Opportunities

69
69

Climate
Related
Risks and
Opportunities

London:
Google UK HQ

Dubbed a ‘landscraper’
for being as long as a
skyscraper is tall.

Lendlease Annual Report 2020 Climate Related Risks and Opportunities

Our Climate Related
Risks and Opportunities

Our Climate
Related Impacts

The business leaders identified
and ranked climate related risks
and opportunities, which have
been grouped into ten climate
related impacts for our strategic
2050 Future Climate Scenarios.

The TCFD framework could be seen as just
another layer of disclosure. However, for us,
it has helped transform the way Lendlease
is positioning itself to respond to the
climate crisis and the way in which we will
be communicating and executing on our
ambition to be a 1.5ºC aligned company.

In sharing our experiences and
outcomes from scenario planning for
climate impacts, we hope others will be
encouraged to commit to this important
evaluation and disclosure.

Our process for identifying climate
related impacts
When we committed to TCFD we
wanted to make climate change easier
to understand and actionable by senior
leaders. Most business leaders are not
climate scientists; they are generally time
poor, with their own day to day priorities.
Getting them to focus on and understand
climate related impacts is probably the
biggest challenge to any organisation on
this journey. To address this challenge, we
created climate scenarios and a scenario
planning process tailored to our business.

Our tailored approach has generated a
high level of senior leader engagement,
with the outputs integrated into short
term business planning and long term
strategic thinking. This has helped us
set up new and ambitious sustainability
targets, aligned with our TCFD work.

Our Board engaged with management
and attended a number of workshops
on the four climate scenarios to test
business strategy and how best to
respond to key trends in line with TCFD
recommendations.

Engagement commenced with the
Global Leadership Team (GLT). The GLT
was instrumental in deciding that our
Resignation scenario (RCP8.5) should only
be used to assess the inherent climate
change physical risks and not for strategic
business resilience.

The top 200 senior leaders from across
our business were engaged in risk
and opportunity workshops. In these
workshops, participants identified risks
and opportunities that might arise, ranking
them in line with the Lendlease risk matrix.
Participants also identified actions their
business unit should take within the next
3–5 years to prepare for climate related
impacts. These actions will be integrated
into the FY21 business planning process.

The risks and opportunities identified have
been consolidated into 10 climate related
impacts per strategic scenario. This
output will continue to play an important
role in our response to the TCFD
recommendations, first in our qualitative
analysis this financial year and informing
our financial disclosure in FY21.

Risks and opportunities
workshops

Our
industry
in 2050

What are
the risks and
opportunities
in the next
20-30 years?

Which of
the high
likelihood and
high impact
risks and
opportunities
could arise
in the next 10
years?

10
Climate
related
impacts
per
scenario

What are the
material financial
impacts of the risks
and opportunities?

What risk
management
processes are
needed for the risks
and opportunities?

FY21

FY20

What metrics and
targets are needed
to manage risks
and opportunities?

What actions
do we take now
(2-3 years)?

What strategic
imperatives should
we embed in the
Lendlease 10 Year
Strategy?

Task Force on Climate Related
Financial Disclosure (TCFD)
Climate change and society’s response
to it are now recognised as foundational
drivers of risk and opportunity within
the global economy. In 2018, Lendlease
committed to incorporating the TCFD
framework into our disclosure regime.
As a result, we are much better equipped
to provide our investors and stakeholders
with insights into how we are building
resilience to climate related risks and
opportunities.

Process and
timeline for
implementing
TCFD into
the business

Envision the
world in 2050

Polarisation
Scenario

Paris
Alignment
Scenario

Transformation
Scenario

Polarisation

A world warmed
by 3ºC

Our Polarisation Scenario imagines the world falters on serious
climate action, with a resultant national self interest taking
precedence over multilateral cooperation. This scenario sees
higher levels of economic protectionism with significant impacts
on global supply chains.

Risk

Opportunity

Development Construction Investment Development Construction Investment

Climate Related Impacts

Impact of climate change on assets and communities

Increase market share from public sector

Access and cost of capital

Availability of international products

Availability and cost of labour

Reduced availability of materials and resources

Impact of climate change on the way we work

Shift in consumer preference toward secure and resilient communities

Industry leadership in decarbonisation valued

Impact of climate change on cities

Not often
identified as
an impact

Lower
frequency of
identified impact

Higher
frequency of
identified impact

Strategic resilience

Our business has many attributes for
strategic resilience in a Polarisation
Scenario. Existing public sector
partnerships position us well for likely
increased climate adaptation work for the
public sector. Our sustainability leadership
positions us well, where decarbonisation
and climate resilience and adaptation are
valued, such as at Barangaroo.

Climate related impacts
The most frequently identified risks across
the business, for this scenario, came from
the impact of climate change on the way
we work and on our assets, particularly for
our Investments business. Conversely, the
impact of climate change on cities has a
high frequency of opportunities related to
adaptation.

The risk of nationalism on global supply
chains was identified as a key impact, with
most risks identified for our Construction
business. Conversely, the impact on global
supply chains was seen as an opportunity
for the Construction business due to
disaggregation of supply chains.

Although this scenario sees a more
severely impacted climate and less
global cooperation, the business
leaders recognised an inherent need for
decarbonisation, seeing continued value
in our leadership in sustainability.

Artist’s impression

Lendlease Annual Report 2020 Climate Related Risks and Opportunities

Paris Alignment

A world warmed
by 2ºC

Our Paris Alignment Scenario sees a market led transition to a
lower carbon future through global government commitment
to the Paris Agreement. This scenario differs from our
Transformation Scenario in that it relies heavily on negative
emissions technologies, such as carbon capture and storage, as
a stress test of a situation in which the economy is decarbonised
without any significant structural change occurring.

Climate Related Impacts

Risk

Opportunity

Development Construction Investment Development Construction Investment

Increase speed of change in climate related impacts

Misalignment between legislation/regulation and Lendlease strategy

Increase cost of carbon

Demand for decarbonisation of supply chain

Increased scrutiny over actions versus branding

Demand for negative emissions and geoengineering solutions

Changing preferences away from new build development

Demand for zero carbon infrastructure

Increase market share from public sector

Industry leadership in decarbonisation valued

Not often
identified as
an impact

Lower
frequency of
identified impact

“ideal image would be a solar panels on top of a lendlease
building - barangaroo resi is the best one”

Higher
frequency of
identified impact

Climate related impacts
The most frequently identified risks came
from the increased demand and need for
decarbonisation of construction supply
chains, creating a potential increase in the
cost of materials, as well as likely scarcity
of products and materials.

Risks were also identified if we did not
align our leadership in sustainability with
the legislative direction of a government
led decarbonised world. Conversely,
opportunities were identified if we aligned
early or even exceeded regulation.

An increase in carbon cost was identified
as both a risk and opportunity, particularly
for Development. Opportunities were also
identified related to new build no longer
being as valued and zero carbon solutions
attracting greater value.

Strategic resilience
Our sustainability leadership creates
strategic resilience in a Paris Aligned
Scenario. We are well positioned to build
on our global track record of delivering
commercially successful green and
carbon neutral solutions needed for a
decarbonised world.

Transformation

A world warmed
by 1.5ºC

Our Transformation Scenario sees a societally driven, controlled
and rapid decarbonisation pathway, where global emissions
peak in 2020 and are close to zero in 2040. Instead of relying
on technological fixes, the Transformation Scenario sees a
substantial reduction in emissions through lifestyle changes and
a reprioritisation of capital to community level investment.

Climate Related Impacts

Impact of climate change on assets and communities

Increase market share from public sector

Access & cost of capital

Availability of international products

Availability & cost of labour

Reduced availability of materials and resources

Impact of climate change on the way we work

Shift in consumer preference toward secure and resilient communities

Industry leadership in decarbonisation valued

Impact of climate change on cities

Not often
identified as
an impact

Lower
frequency of
identified impact

Risk

Opportunity

Development Construction Investment Development Construction Investment

Higher
frequency of
identified impact

Climate related impacts
It was anticipated that a shift in social
licence to operate would occur in a
societally driven decarbonisation scenario
and that this shift would present risks
across all aspects of business.

A rapid decarbonisation would likely
see a preference away from new build
developments, due to the emissions from
building products and materials (embodied
emissions). This shift in preference
would likely generate both risks and
opportunities across our business.

The speed of decarbonisation in our
Transformation Scenarios was highlighted
as presenting both transitional opportunities
and risks. The expectation for private
sector investment in decarbonisation was
highlighted as an opportunity.

Strategic resilience
Our track record in social sustainability
leadership, combined with our leadership
in green real estate, would help position us
well for societally driven decarbonisation.
Our integrated business model, with a
focus on digital, will allow us to respond
quickly to the speed of change in this
future scenario.

Sydney: Barangaroo

London: Elephant Park

Artist’s impression

Lendlease Annual Report 2020 Climate Related Risks and Opportunities

Integration into
risk management
processes

In addition to further
integrating climate related
risks and opportunities into the
Risk Appetite Framework, we
have also further developed
physical and transitional risk
assessments.

We have refined and piloted our physical
risk impact assessment process on
several assets and development projects
across the world. Using Representative
Concentration Pathway RCP8.5, our
greater than 4ºC Resignation Scenario,
we have focused on eight key physical
impact areas. This process will continue
to be refined in FY21 and will form the
starting point for physical risk assessment
for financial disclosure.

In FY20, we introduced a transitional
risk assessment for a regulatory price
on carbon, using a shadow carbon price
within investment assessments.

Our leadership in TCFD
Our place based approach to scenario
planning and integration of the TCFD
recommendations into our business
processes has led to invitations to take
part in key TCFD forums and advisory
groups. This year we have been proud to
be members of, and active contributors, to:

• The TCFD Construction Preparers

Forum, which seeks to provide guidance
to construction industry companies
undertaking TCFD disclosure

• The TCFD Secretariat Scenario

Advisory Group, which seeks to provide
practical guidance for climate related
scenario analysis.

Our
disclosure
progress and
next steps

In FY18, we made the commitment to disclosing
under the TCFD recommendations and in FY19,
we disclosed our 2050 Future Climate Scenarios.
This year we integrated scenario planning
into our business through risk and opportunity
workshops to identify emerging risks and
opportunities. We integrated the outcomes of
the workshops into business planning, a strategy
refresh and setting new sustainability related
metrics and targets. In FY21, we will integrate the
outcomes of the risk and opportunity workshops
into our financial disclosure.

Actions

FY19

FY20

FY21

Governance

Disclose the organisation’s
governance around
climate related risks and
opportunities

Strengthen Board and management oversight
of climate related risks through the Board
Sustainability Committee

Establish a cross functional TCFD steering
committee chaired by Chief Commercial
Risk Officer

Strategy

Disclose the actual and
potential impacts of
climate related risks and
opportunities on the
organisation’s businesses,
strategy and financial
planning where such
material is financial

Undertake risk and opportunity workshops
across the business to identify short, medium
and long term risks and opportunities for each
scenario

Assess the climate related impacts on the
business, strategy and financial planning

Physical Risk Assessment

Risk
Management

Disclose how the
organisation identifies,
assesses and manages
climate related risks

Integrate climate related impacts into strategy
refresh to build strategic resilience

Climate related risk integrated into Risk
Committee

Climate related risk assessments integrated into
investment committee decision making process

Integrate climate related risks into Risk Appetite
Framework (see page 65)

Establish global TCFD working groups to
coordinate the assessment of physical and
transitional risks and opportunities

Heatwave

Sea level rise

Wind storm

Wildfire

Increased temperatures
and heatwave

Sea level rise and storm
surge

Cyclones, tornadoes and
extreme wind events

Wildfire risk with resulting
poor air quality

Metrics
and Targets

Disclose the metrics and
targets used to assess
and manage relevant
climate related risks and
opportunities where such
information is material

Establish metrics and targets for managing
climate related risks and opportunities (see page
54 for sustainability related metrics and targets)

Continued disclosure of scope 1 and 2 emissions

Establish scope 3 emission reporting boundaries
and methodologies

Disclose scope 3 emissions

Water scarcity

Urban flooding

River flooding

Cold spell

Drought impacts and severe
water restrictions

Extreme rainfall events
leading to urban flooding

Extreme rainfall events
leading to river flooding

Increased duration cold
weather events

Completed

Commenced

Target completion year

Ongoing action

Lendlease Annual Report 2020 Performance and Outlook

Performance
and Outlook

Suzhou:
Roche Diagnostics

48,000 sqm greenfield
manufacturing facility.

Lendlease Annual Report 2020 Performance and Outlook

Group highlights

The Group experienced a challenging year with a Statutory
Loss after Tax of $310 million for the year ended 30 June 2020.
Engineering exit costs of $368 million after tax, along with
$19 million of goodwill impairment relating to the anticipated
completion of the sale of Engineering, were brought to account
and the Core business was adversely impacted by COVID-19 in
the second half. The distribution per security was 33.3 cents.
The Group’s Core business generated Earnings per Security
of 15.9 cents and a Return on Equity of 1.5 per cent.

Performance in the second half of the year was significantly
down across the Core operations with the onset of the COVID-19
pandemic impacting performance from March 2020 onwards.
A solid Core operating EBITDA in H1FY20 of $628 million was
followed by a $65 million EBITDA loss in H2FY20 with each of the
three segments impacted. In the Development segment, a number
of large transactions were deferred, mandated site shutdowns,
lower productivity and lower new work secured impacted our
Construction segment and valuation reductions impacted our
Investments segment due to deteriorating market conditions.

A range of mitigating actions were implemented in response to
the onset of the pandemic. Overhead and employee costs were
reduced, along with a review of project expenditure. In addition,
a range of measures were undertaken to strengthen the financial
position of the Group. $1.2 billion of equity was raised through an
Institutional Placement and Share Purchase Plan and additional
debt facilities of approximately $1.3 billion were arranged to
enable the Group to manage through a sustained downturn.
The strengthening of the balance sheet positions the Group to
accelerate the delivery of the development pipeline and take
advantage of new investment opportunities.

In the Development segment, despite the below target profit
outcome, significant progress was made on growing and
converting the development pipeline. This included securing
additional major urbanisation projects, achieving planning
milestones and creating new investment partnerships to support
projects moving into delivery.

In Construction, the impact of COVID-19 was greater in our
international regions, particularly in cities where mandated
shutdowns were implemented. This included lower productivity,
projects being put on hold, and delays in the commencement
or securing of new projects. This led to losses in H2FY20 for the
segment across the Americas, Europe and Asia.

In the Investments segment, COVID-19 had a significant impact on
real estate valuations across the Group’s investments. Operating
earnings within Investments was resilient, rising in the year on
higher funds management fees, including performance fees, and
a solid performance from the military housing operations.

The Non core segment recorded an EBITDA loss of $495 million,
which included accounting for $525 million pre tax in Engineering
exit costs.

Corporate costs, depreciation and amortisation and net finance
costs were all impacted in the year following the adoption of AASB
16 Leases. It resulted in the reclassification of $88 million in Core
operating lease expenses to finance costs and depreciation. The net
impact to the Income Statement on adoption of AASB 16 Leases is
an $11 million pre tax increase in expense in FY20.

Net finance costs were $153 million. Net debt ended the period at
$0.8 billion, down from $1.4 billion in the prior year. The average cost
of debt was 3.4 per cent with an average debt maturity of 4.2 years.

Group outlook
While the duration of the impacts of the pandemic is uncertain, near
term effects from COVID-19 are continuing and we expect current
conditions to suppress first half earnings. The Group entered FY21 in
a strong financial position with the capacity to execute the delivery
of the global development pipeline and take advantage of other
investment opportunities as market conditions improve.

Progress has been made on planning consents for projects across
the urbanisation pipeline, which supports the conversion of these
projects to delivery. Post year end, the Group established an
investment partnership to deliver Tower 1, One Sydney Harbour,
which is expected to make a significant contribution to profit in FY21.

The development pipeline grew significantly during the year
from $76 billion to $113 billion. We remain focused on delivering
the urbanisation portfolio safely, sustainably and profitably. The
portfolio of 21 major urbanisation projects across nine gateway
cities provides long term earnings visibility and a strong platform
to deliver enhanced risk adjusted returns to securityholders.

We expect to create more than $50 billion of institutional
investment grade product from our urbanisation pipeline. This
provides the opportunity for the Group to double current funds
under management of $36 billion as the pipeline is delivered.
Along with the $4 billion of investments and $29 billion of assets
under management, the Investments segment is expected to
provide a solid base of recurring earnings.

Portfolio Management Framework
The Portfolio Management Framework is designed to maximise long-
term securityholder value. The distributions for the year include the
54 per cent payout of first half earnings and the second half distribution
from the Trust. No dividend was declared for the Corporation in the
second half. The Group is currently reviewing the framework.

Key Financials

Core Business EBITDA Mix

Portfolio Management Framework

Core Business
Development

Construction

Investments

Operating EBITDA

Corporate Costs

Group EBITDA

Depreciation & Amortisation

Net Finance Costs

Profit before Tax

Profit after Tax

Non Core
EBITDA

Profit/(Loss) after Tax

Total Group
Revenue1
EBITDA

Profit/(Loss) after Tax

Underlying Operating Cash Flow3

Net Assets

Net Debt
Effective Tax Rate4
Earnings per Security

Distribution per Security

Weighted avg Securities

FY19

FY20

Var.

793

211

489

$m 1,493

$m (165)

$m 1,328

(94)

$m (125)

$m 1,109

804

322

101

140

563

(158)

405

(160)

(153)

(59%)

(52%)

(71%)

(62%)

(70%)

(22%)

(92%)

(88%)

$m (461)

$m (337)

(495)

(406)

(7%)

(20%)

$m 16,555

13,289

867

467

316

(90)

(310)

762

$m 6,357

6,932

$m 1,425

cents

no.(m)

24.7

79.4⁵

42.0

588⁵

833

n/a²

(51.4)

33.3

603

(20%)
n/a2
n/a2
141%

(42%)

n/a2
(21%)

Development
Construction
Investments

25%

$563m
Core Business
Operating
EBITDA6

18%

57%

Core Business Profit after Tax

FY19 $804m

FY20

$96m

Core Business Return on Equity

FY19 12.8%

FY20

1.5%

Core Business Earnings per Security

FY19 136.7¢5

FY20

15.9¢

Total Group Metrics
Return on Equity

Dividend payout ratio

Gearing

Core Business EBITDA Mix
Development

Construction

Investments

Core Business Segment Returns
Development ROIC3

Construction EBITDA margin

Investments ROIC3

Segment Invested Capital Mix
Development

Investments

Regional Invested Capital Mix
Australia

Asia

Europe

Americas

Target

FY19

FY20

10‑14%

7.4%

(4.7%)

40‑60%

10‑20%

40‑50%

10‑20%

35‑45%

10‑13%4

2‑3%

8‑11%4

40‑60%

50‑70%

5‑20%

51%

9.9%

53%

14%

33%

11.6%

2.2%

10.8%

57%

43%

45%

15%

22%

18%

n/a2

5.7%

57%

18%

25%

4.7%

1.3%

2.8%

56%

44%

42%

17%

22%

19%

COVID-19 impacts on H2FY20

H1
FY20

H2
FY20

H2 performance impacted
by COVID-19

Development

272

Construction

101

‑

Investments

255

(115)

Operating EBITDA 628

(65)

Delays in transactions across
urbanisation projects

Site shutdowns, lower
productivity, project delays

Total investment devaluations
of $211 million in H2

The H2FY20 after tax loss of $212 million recorded for the core
business reflected the significant deterioration in operating
conditions in the second half as a result of the pandemic.

We prioritised health and safety with a range of measures
implemented to protect our people, customers and the
communities in which we operate including the early introduction
of travel bans and workplace changes to prevent the spread of
the virus and initiatives across the commercial assets, retirement
villages and the residential communities we manage.

Delays were experienced in converting opportunities across our
urbanisation pipeline and the Communities business experienced
weak trading conditions, there were mandatory site shutdowns,
lower productivity and delays in new work in our Construction
segment, and H2FY20 valuation declines of $211 million in the
Group’s c.$4 billion investment portfolio.

A range of actions were implemented to mitigate the financial
impact including overhead and employee cost reductions and
a review of project expenditure. Employee cost reductions
included; temporary pay reductions for senior leaders, reduced
hours of work, furlough/stand downs and some redundancies.

We have been eligible for and accessed wage subsidy support
in markets where it was offered. Government support totalled
$15 million globally, with $9.7 million1 received under the
JobKeeper program in Australia.

The Balance sheet was strengthened by a $1.2 billion equity raising
and $1.3 billion in additional debt facilities which has positioned us
well to execute on the delivery of the global development pipeline
and take advantage of new investment opportunities.

$113b

Development
Pipeline5

$14b

Core Business
Construction
Backlog

$36b

Funds Under
Management

FY19

FY20

FY19

FY20

FY19

FY20

76.1

113.0

15.6

13.9

35.2

36.0

1. Includes finance revenue and revenue from the Non core segment. 2. Figures are nonmeaningful due to the FY20 Group statutory loss. 3. Underlying Operating Cash Flow
is derived by adjusting statutory cash flows to better reflect the operating cash generated by the Group from its operating model. 4. Lendlease’s approach to tax is outlined in
the 2020 Tax Report (https://www.lendlease.com/au/investor-centre/distribution-and-tax/). Details on tax balances are included within the Consolidated Financial Statements.
5. FY19 Total and Core Earnings per Security and Weighted avg Securities have been updated to reflect the share issue in FY20 (previously reported as 82.4 cents (total),
141.8 cents (core) and 567 #(m) respectively). 6. Excludes Corporate.

1. $6.8 million in JobKeeper subsidies were received by Lendlease companies, $2.9 million was received by our Retirement Living Joint Venture. The Group exited the program
on 22 June 2020. 2. Dividend payout ratio is nonmeaningful in FY20 due to the Group statutory loss. 3. Return on Invested Capital (ROIC) is calculated using the annual Profit after
Tax divided by the arithmetic average of beginning, half and year end invested capital. 4. Through-cycle target based on rolling three to five year timeline. 5. Remaining estimated
development end value.

Lendlease Annual Report 2020 Performance and Outlook

Development performance

Development outlook

The Development segment delivered EBITDA of $322 million, down
59 per cent on the prior year. EBITDA in H2FY20 declined to $50 million
due to the various impacts of COVID-19. Progress on converting
opportunities across our urbanisation pipeline was impacted and
the Communities business experienced weak trading conditions.

The difficult operating environment resulted in a return on invested
capital of 4.7 per cent. This was well below the bottom end of the
target range of 10 per cent.

While the profit outcome for the year was below target, significant
progress was made on growing and converting the development
pipeline. This included securing additional major urbanisation
projects, achieving planning milestones and creating new
investment partnerships to support projects moving into delivery.

Two new major urbanisation projects with a combined estimated
end value of $37 billion were added to the pipeline. In London, the
Thamesmead Waterfront development is expected to create more
than 11,500 homes. In the San Francisco Bay Area, we secured a
project that will deliver more than 15,000 new homes.

An investment partnership with the Australian Prime Property
Fund Commercial was formed to deliver the 58,000 sqm Victoria
Cross over station development in Sydney, which has an estimated
end value of $1.2 billion. A partnership was formed with PSP
Investments, one of Canada’s largest pension funds, to develop the
c.$4 billion Milano Santa Giulia project. The forward sale of the first
two buildings at the precinct contributed to the result. The retail
and residential components of Paya Lebar Quarter in Singapore
completed.

There were 2,236 apartment settlements and completions in the
period. They comprise 1,366 apartments for sale settlements mainly
from urbanisation projects in Boston, London, Melbourne and
Singapore, and 870 apartments for rent completions at projects in
Boston and Chicago.

There were 1,898 land lot settlements across the Communities
portfolio, down 25 per cent on the prior year. Performance was
significantly impacted by the onset of COVID-19 in the second
half of the year.

Key Financials ($m)

EBITDA

Australia

Asia

Europe

Americas

Total EBITDA

Total PAT

57%

of Core
Operating
EBITDA

FY19

FY20

556

121

793

554

174

116

(2)

322

233

EBITDA ($m)

500

264

236

552

292

260

673

230

443

793

532

261

322
50

272

FY16

FY17

FY18

FY19

FY20

The estimated end value of the development pipeline grew
48 per cent on the prior period to $113 billion. We have a globally
diversified portfolio of 21 major urbanisation projects across nine
gateway cities.

There are more than 1,600 apartments for rent in delivery, with
Cascade at Lakeshore East, and an additional building at Southbank,
both in Chicago, and a further two buildings at Elephant Park in
London all entering delivery during the year.

The pipeline includes an approximate $99 billion of urbanisation
projects. These projects are typically held in capital efficient
structures, providing the Group with flexibility around delivery and
timing, in line with market cycles. While there is expected to be a
substantial increase in the annual production rate over the medium
to longer term, the economic impacts of COVID-19 are likely to make
acceleration of delivery more challenging over the short term.

Post year end, the Group established an investment partnership
with Mitsubishi Estate to deliver the first residential tower at
One Sydney Harbour, Barangaroo, which will contribute to profit
in FY21. Construction on the 317 apartments has commenced,
with approximately 75 per cent in presales.

Strong presales on apartments at TRX residences in Kuala Lumpur
and One Sydney Harbour have taken presales of apartments in
delivery to $2.3 billion.

There are seven major commercial buildings in delivery across
376,000 sqm, with a total estimated end value of $5.8 billion. These
buildings are being developed in conjunction with our investment
partners. In addition, there is a further 591,000 sqm which the business
is targeting to convert and commence delivery over the next five years.

A significant number of the 21 major urbanisation projects are
recent additions to the pipeline and are therefore in early stage
planning. Good progress has been made on planning consents
for several projects, including approvals being obtained for Milan
Innovation District and 30 Van Ness in San Francisco.

The Communities pipeline consists of 47,372 lots, providing
more than a decade of supply. In our Australian Communities
business, enquiries have recently returned to pre COVID-19 levels,
with government stimulus measures boosting demand. Despite
an improvement in the near term outlook, the annual target for
settlements of 3,000 to 4,000 is unlikely to be met in FY21.

Pipeline¹ by Product

Pipeline¹ by Region

Urbanisation
Communities

12%

$113b²

88%

Australia
Asia
Europe
Americas

26%

$113b²

44%

Invested Capital¹ ($b)

Return on Invested Capital

Urbanisation – Apartments Pipeline (Units)

4.8

10.4%
5 year average

FY19

FY20

Units for rent in delivery³
Units presold in delivery³
Units for rent secured
Units for sale secured

1,624 1,418

17,335

35,848

56,225

1‑2k

Target for
settlements
per annum4

Urbanisation Completions/Settlements²

Communities Settlements (Lots)

Urbanisation – Commercial Pipeline (sqm)

FY19

FY20

6 Buildings

2,0753

2,2363

6 Buildings

2,0753

2,2363

2,523

1,898

164

3 Buildings

164

3 Buildings

Commercial (sqm ’000)

Apartments (units)

Commercial (sqm ’000)

Apartments (units)

FY19

FY20

In delivery5
Indicative launch
FY21 ‑ FY25
Remaining secured

376,000

591,000

1,448,000

2,415,000

7 Buildings

32 Buildings

2‑3

Target for building
commencements
per annum4

1. Securityholder equity plus gross debt less cash on balance sheet. 2. Commercial and apartment for rent completions are aligned with practical completion, apartment for
sale settlements are recorded on cash receipt. 3. FY19 and FY20 include 452 and 870 apartment for rent completions respectively.

1. Remaining estimated development end value. 2. Includes $0.3 billion of Infrastructure pipeline. 3. Major apartment buildings in delivery only. 4. Targets under review.
5. Major commercial buildings in delivery only.

4.7%TARGET 10-13%7.5%11.6%FY19FY2082

Lendlease Annual Report 2020 Performance and Outlook

Construction performance

Construction outlook

The Construction segment delivered EBITDA of $101 million, down
52 per cent on the prior year. The entire profit was generated in
H1FY20, with the impact of COVID-19 resulting in a break even
result in H2FY20. For the full year, revenue declined by 21 per cent
to $7.6 billion and the EBITDA margin of 1.3 per cent was below the
target range of 2-3 per cent.

The COVID-19 impact was greater in our international regions,
particularly in cities where mandated shutdowns were implemented.
This included lower productivity, projects being put on hold, and
delays in the commencement or securing of new projects. This led
to losses in H2FY20 for the Americas, Europe and Asia, offsetting a
profit in Australia which delivered a solid EBITDA margin outcome
of three per cent for the full year despite the challenging environment.

The business completed a number of significant projects during
the period. These included several Defence projects, commercial
buildings at Wesley Place1, Melbourne, and 60 Martin Place,
Sydney, redevelopments at Kambri Precinct at ANU2, Canberra
and Rod Laver Arena, Melbourne and a residential tower at
220 Central Park South, New York. Construction on a number

of integrated projects was also completed, including 845 West
Madison, Chicago, Cedarwood Square, Deptford Landings in
London and Paya Lebar Quarter in Singapore.

New work secured of $7.5 billion was down from $9.9 billion in
the prior year. Origination was impacted by lower activity in the
Americas, most notably the key New York market and some delays
in projects being brought to market, along with limited new work
in Europe. The Australian business proved resilient with new work
secured only marginally lower at $4.3 billion.

The new work secured is well diversified by sector and client, with
more than half derived from Australia during the period. Key new
projects from external clients during the year included HMAS
Watson Redevelopment, Australian Federal Police Melbourne
State Office3, the Curtin University School of Design and Built
Environment, all in Australia, and 4 Hudson Square, New York.
Integrated projects secured during the year included One Sydney
Harbour Tower 1, Victoria Cross over station development, Cirrus
at Lakeshore East and residential for rent at Elephant Park.

Key Financials ($m)

EBITDA

Australia

Asia

Europe

Americas

Total EBITDA

Total PAT

18%

of Core
Operating
EBITDA

FY19

FY20

126

(1)

211

141

(11)

(9)

101

EBITDA ($m)

288

171

117

271

144

127

296

149

147

211

100

111

101

FY164

FY17

FY18

FY19

FY20

The outlook for the Construction segment is subdued given
the current operating environment. In the absence of further
deterioration as a result of COVID-19, the operating performance
of the segment is expected to improve in FY21. The workbook
remains substantial with backlog revenue of $14 billion.
Approximately 75 per cent of major project backlog will generate
future revenue and margin for the Construction segment, with
margin on the remainder that is derived from integrated projects,
being reported through the Development segment.

Australia has a strong workbook with $7.5 billion in backlog
revenue. This accounts for more than half of the backlog for the
Construction segment and is expected to result in the region
contributing the majority of earnings in FY21. Key projects include
Sydney Place, the Crown Sydney Hotel Resort, several Defence
contracts and the Sydney Metro Martin Place and Sydney Metro
Victoria Cross Integrated Station Developments. In addition, the
business is well placed to secure government sponsored projects
as part of potential stimulus measures across a range of sectors.

The backlog revenue of $4.4 billion in the Americas is down
approximately 30 per cent as a result of the difficult operating
environment. The high rise residential construction market in the
North East of the US, a sector in which the business has historically
had a high market share, is currently subdued. Recent success
in the health care sector, including life sciences, has partly offset
weakness elsewhere. The strong growth in the urbanisation
pipeline to approximately $30 billion in the region is expected to
provide opportunities for future construction backlog.

Europe and Asia combined account for approximately 15 per cent
of backlog revenue. Europe’s $50 billion urbanisation pipeline is
expected to provide a significant amount of construction work over
the medium term. In Asia, the business is focused on the delivery
of The Exchange TRX in Kuala Lumpur and specialist sectors for
external clients.

Beyond the current backlog, there is approximately $8 billion of
work for which the Group is in a preferred position, across both
external and integrated projects. The business is well placed to
convert a significant proportion of this preferred work into backlog
revenue over coming periods.

Backlog by Region

Australia
Asia
Europe
Americas

32%

$14b

54%

Backlog Realisation

FY21
FY22
Post FY22

28%

$14b

48%

24%

Revenue by Region

EBITDA Margin

Backlog by Sector

Backlog by Client

Australia
Asia
Europe
Americas

44%

$7.6b

42%

10%

2.4%
5 year average

Commercial
Defence
Residential
Social
Infrastructure
Transport
Hotel/
Entertainment
Other

26%

11%

Major
Project¹
Backlog
Revenue

23%

25%

Lendlease
Corporate
Government

44%

Major
Project¹
Backlog
Revenue

24%

32%

New Work Secured by Region

New Work Secured by Sector

Backlog roll forward ($b)

Backlog ($b)

Australia
Asia
Europe
Americas

$7.5b

57%

32%

Residential
Commercial
Defence
Social
Infrastructure
Other
Transport
Hotel/
Entertainment

29%

$7.5b

24%

15%

23%

7.5

(7.6)

15.2

15.7

15.2

15.6

13.9

15.6

(1.6)

13.9

FY19

New work
secured

Revenue
realised

FX and
Other2

FY20

FY16

FY17

FY18

FY19

FY20

1. Formerly 130 Lonsdale Street. 2. Formerly Australian National University Union Court Redevelopment. 3. Formerly 140 Lonsdale Street. 4. Includes Engineering and
Services businesses.

1. Includes all Construction projects with backlog greater than $100 million, which represents 81 per cent ($11.2 billion) of secured backlog. 2. Includes ($0.9b) of internal revenue.

FY19FY20TARGET 2-3%2.2%1.3%84

Lendlease Annual Report 2020 Performance and Outlook

Investments performance

The Investments segment delivered EBITDA of $140 million,
down significantly on the $489 million in the prior year.
COVID-19 had a significant impact on real estate valuations
across the Group’s investments with devaluations of $211 million
in the second half, resulting in an EBITDA loss for the segment
of $115 million in H2FY20.

To further support the growing development pipeline and diversify
our capital strategy, the Group listed the Lendlease Global
Commercial REIT in Singapore. The REIT was seeded with the
Lendlease developed 313@somerset retail centre and three office
properties adjacent to the Group’s Milano Santa Giulia project. The
Group has an ownership position of 25.3 per cent in the REIT.

Ownership EBITDA was a loss of $58 million compared to a profit
of $345 million in the prior year. Performance was adversely
impacted by reductions in valuations across the Group’s c.$4 billion
investment portfolio, including co-investment positions within
the funds platform, Retirement Living business and other asset
positions. The net reduction in valuations on a pre tax basis for the
full year was $188 million compared to total revaluation gain of
$160 million in the prior year.

The trading performance of the Retirement Living business was
solid with 874 resales across the established village portfolio, up
3.8 per cent on the prior year. However, a modest decline in average
prices and delays in development activity which was affected
by COVID-19, impacted the carrying value of the entire portfolio,
offsetting the underlying trading performance.

EBITDA from Operating Earnings was $198 million, up substantially
on the $144 million in the prior year. A small increase in base
management fees was in line with higher average funds under
management. The successful completion of Paya Lebar Quarter
in Singapore, which generated a significant performance fee, was
the key driver of the strong growth in earnings.

The performance of the US Military Housing operations was solid,
with a recurring contribution of asset and property management
fees. Our retail asset management business has been working
with retail partners as they navigate through a difficult period, with
retail malls and centres experiencing restricted trading following
the onset of COVID-19. The impact on asset management fees
experienced late in the year is expected to extend into FY21.

Key Financials ($m)

EBITDA

Australia

Asia

Europe

Americas

Total EBITDA

Total PAT

25%

of Core
Operating
EBITDA

FY19

FY20

330

100

489

368

(10)

140

104

EBITDA ($m)

458

215

243

495

207

288

669

286

383

489

216

273

FY16

FY17

FY18

FY19

140

255

(115)

FY20

Investments outlook

Future investment earnings will be supported by the two per cent
growth in funds under management (FUM) to $36 billion.
Additional FUM of $4 billion was largely offset by $2 billion in
divestments, which included the partial satisfaction of redemptions
in APPF Retail and $1.4 billion of devaluations. The launch of
the Lendlease Global Commercial REIT, progress on several
commercial buildings that are currently under development, and
strong growth in residential for rent, underpinned the additional
funds under management.

Continued growth in FUM will support operating earnings in future
periods. In addition to the current funds under management, there
is approximately $3.3 billion of future secured FUM based on
development projects currently in delivery. This includes assets
being developed with investment partners including six office
buildings and approximately 1,600 residential for rent units.

A substantial uplift in the amount of institutional grade investment
product will be created for investment partners and the Group’s
Investments platform as the development pipeline is delivered
over the medium to long term. The COVID-19 related impacts

on both occupier and investment partner demand will limit the
generation of new product in the short term. However, the change
in market conditions is expected to provide opportunities for the
Group to grow the Investments platform outside of the internal
product creation capabilities. A mandate to manage a c.$2 billion
diversified property portfolio for TCorp was secured effective
from 1 July 2020.

The Group’s investments closed the period at $4 billion. This
includes $2 billion of co-investments across our funds; a $1.4 billion
ownership interest in the Retirement Living business; and $0.6 billion
in other investments including the Group’s interests in US Military
Housing, US telecommunications assets and retail at Barangaroo.

Diversification of investments across the Group supports
improved risk adjusted returns. Lendlease has relationships with
approximately 150 institutional investors and a strong track record
of performance. Continuing to deliver attractive outcomes for our
investment partners will be critical for the ongoing success of the
Investments segment.

Funds Under Management1 by Asset Class

Funds Under Management¹ by Region

Office
Retail
Residential
Industrial
Other

3% 2%

$36b

54%

36%

Australia
Asia
Europe
Americas

3%4%

24%

$36b

69%

Invested Capital¹ ($b)

Return on Invested Capital

Investments1,2 by Product

Investments1,2 by Region

3.6

3.7

FY19

FY20

10.2%
5 year average

Co‑investments
Retirement
US Military
Housing
Other

12%

$4.0b

49%

34%

Australia
Asia
Europe
Americas

17%

$4.0b

58%

23%

Investments EBITDA by Activity ($m)

Investments⁴ ($b)

Funds Under Management¹ ($b)

Funds Under Management¹ roll forward ($b)

FY19

FY20

345

144

198
120

(58)

Ownership interests²

Operating earnings³

3.0

3.3

3.4

3.7

4.0

23.6

26.1

30.1

35.2

36.0

3.9

(1.9)

35.2

(1.4)

0.2

36.0

FY16

FY17

FY18

FY19

FY20

FY16

FY17

FY18

FY19

FY20

FY19

Additions

Divest-
ments

Revalua-
tions

FX and
Other

FY20

1. Securityholder equity plus gross debt less cash on balance sheet. 2. Returns derived from co-investments, the Group’s Retirement investment, US Military Housing
equity investment and other investments. 3. Earnings primarily derived from the investment management platform and the management of US Military Housing operations.
4. The Group’s assessment of market value of ownership interests.

1. The Group’s assessment of market value. 2. The Group’s ownership interest. Total invested capital in the segment of $3.7 billion in FY20.

FY19FY2010.8%2.8%TARGET 8-11%86

Lendlease Annual Report 2020 Performance and Outlook

The Services business delivered a robust underlying operating
result. However, costs of approximately $10 million associated with
the wind up of the Energy & Technology business detracted from
the otherwise solid result. New work secured of $1.4 billion was up
on the $1.0 billion secured in the prior year. Telecommunications,
Utilities and Infrastructure and Transport, the three categories
that account for most of the $2.0 billion in backlog revenue, are
performing well and present an attractive pipeline of future
opportunities.

Non core business
performance

The Non core segment comprises the Engineering and Services
businesses in Australia.

The EBITDA loss for the year was $495 million, including
$525 million of exit related costs that are discussed in more detail
below. The prior year result was impacted by the provision taken
against three underperforming projects of $500 million pre tax.

Excluding exit related costs, the Non core segment generated
EBITDA of $30 million, including the impairment of $19 million in
goodwill relating to the Engineering business.

New work secured in Engineering of $1.0 billion was down from
$2.0 billion in the prior year, reflecting the Group’s lower risk
appetite ahead of the sale of the business. New work included
the bulk earthworks contract at Western Sydney International
Airport and additional works on the Southern Program Alliance.
The Engineering business closed the period with a backlog of
$3.1 billion.

Key Financials

EBITDA

Profit/(Loss) after Tax1

New Work Secured

Backlog

FY19

$m (461)

$m (337)

3.0

5.4

FY20

(495)

(406)

2.4

5.1

Var.

(7%)

(20%)

(6%)

Progress on separation
of non core business

Further progress has been made on the exit of Engineering.
Having announced the sale of the Engineering business to Acciona
Infrastructure Asia Pacific (Acciona) in H1 FY20, the Group
subsequently received approval from the Foreign Investment
Review Board. The sale to Acciona is anticipated to complete
shortly, subject to outstanding conditions, which include third
party consents being satisfied.

The Melbourne Metro Tunnel Project, NorthConnex and Kingsford
Smith Drive projects are being retained by Lendlease. As previously
advised, the Cross Yarra Partnership consortium for the Melbourne
Metro Tunnel Project is continuing to work with the Victorian
Government on a confidential basis to resolve issues in relation to
the scope and costs on the project. NorthConnex is expected to
be operational in the coming months and the Kingsford Smith Drive
project in Brisbane is scheduled to complete by the end of CY20.

Lendlease previously disclosed a cost estimate to exit the
Non core segment of $450-$550 million pre tax. These costs are
now estimated to be approximately $550 million pre tax, with
$525 million pre tax ($368 million after tax) accounted for in the
year ended 30 June 2020. $15 million pre tax was expensed in the
prior year. Exit related costs include: implementation and selling
costs and estimated costs to cover concluding projects retained
by the Group.

The sale process for the Services business has been paused as a
result of current market conditions. While the business has been
performing well, it is non core and is expected to be divested in
future periods.

Revenue by Product

New Work Secured by Product

Engineering
Services

Engineering
Services2

31%

$2.9b

69%

42%

$2.4b

58%

Backlog by Sector

Rail
Other Services
Transport Services
Road
Telecomm‑
unications
Other
Engineering

29%

16%

$5.1b

22%

23%

Backlog Realisation

FY21
FY22
Post FY22

28%

$5.1b

46%

26%

1. FY20 includes $32m profit from discontinued operations. 2. Only the next five years of revenue secured on new contracts has been included.

Lendlease Annual Report 2020 Performance and Outlook

Financial position
and cash flow movements

Financial Position

Cash and cash equivalents1

Inventories

Equity accounted investments

Investment properties

Disposal Group assets held for sale1

Other assets (including financial)

Total assets

Borrowing and financing arrangements

Disposal Group liabilities held for sale

Other liabilities (including financial)

Total liabilities

Net assets

FY19
$m

1,290

5,583

3,452

501

‑

6,352

17,178

2,715

‑

8,106

10,821

6,357

FY20
$m

1,111

5,369

3,671

658

841

6,098

17,748

2,395

670

7,751

10,816

6,932

Var.

(14%)

(4%)

31%

100%

(4%)

(12%)

100%

(4%)

Inventories
Inventories decreased by four per cent. A modest rise in
development inventories was more than offset by a decline in
construction inventories and the reclassification of Non core
construction inventories to assets held for sale. Capital expenditure
across a range of urbanisation projects, including Barangaroo
South and Milan Innovation District more than offset residential
apartment completions.

Equity accounted investments
Equity accounted investments increased by six per cent. The
listing of the Lendlease Global Commercial REIT was the largest
contributor to the increase. The creation of the development
joint venture for the Victoria Cross over station development and
additional capital contributions in both the UK and US residential
investment partnerships also contributed.

Cash movements ($m)

762

(184)

(810)

504

1,562

1,290

FY19
closing
cash

Underlying
operating
cash
flow

Interest
and tax
paid

Underlying
investing
cash flow

Net
financing
and other
adjustments

FY20
closing
cash¹

Financing cash flow
Net cash inflow from financing activities and other adjustments was
$504 million. The $1.2 billion of equity raised more than offset the
decline in borrowings and distributions paid in the year, representing
the final distribution for FY19 and the HY20 distribution payment.
While the Group was active in securing additional debt facilities,
more debt was repaid. The Group entered the new financial year in
a strong financial position with $5.8 billion1 of liquidity.

Other asset movements
The four per cent decline in other assets reflects the reclassification
of assets to held for sale along with the reduction in the Group’s
investment in Lendlease International Towers Sydney Trust. The
rise in Investment Properties in the year reflects ongoing capital
expenditure on telecommunications towers in the US and the
transfer of stabilised assets from development.

Total assets, total liabilities and net assets
Total assets rose by three per cent reflecting the growth in
Investment Properties and Equity Accounted Investments. The rise
in net assets reflects the modest growth in assets along with the
decline in borrowings following the equity raising.

Operating and investing cash flow
The Group measures underlying cash flows to better reflect the
cash flows generated by its business model. This approach enables
an assessment of cash conversion, measured as underlying
operating cash flow relative to EBITDA. The measures are derived
by adjusting statutory cash flows, with the largest adjustment
relating to cash flow invested in Development.

Underlying operating cash flow was $762 million. The major
operating cash inflows during the period included apartment
settlements across our development projects. There was a cash
inflow of $588 million from presold apartment revenue through
the PLLACes2 program. There was also a maturing PLLACes
transaction which would have otherwise resulted in settlement
receipts in the period. Adjusting for the $525 million of Engineering
exit costs, cash conversion in FY20 was 175 per cent.

Underlying investing cash outflow was $810 million. The
major contributors included capital invested in establishing the
new $1.5 billion Lendlease Global Commercial REIT with a
25.3 per cent interest, and additional equity commitments and
rising development inventories to convert the development
pipeline into production.

Group funding
and debt facilities

Net debt1

Borrowings to total equity plus borrowings

Net debt to total tangible assets, less cash1

Interest cover2

Average cost of debt

Average debt maturity

Average debt mix fixed: floating

Undrawn facilities

times

years

ratio

FY19

1,425

29.9

9.9

8.8

4.0

4.8

52:48

2,631

FY20

833

25.7

5.7

2.8

3.4

4.2

56:44

4,226

Var.

(42%)

(14%)

(42%)

(68%)

(15%)

(13%)

61%

Net debt and gearing declined with gearing below the bottom end of the target range. Interest cover of 2.8 times was lower due to lower
core earnings. Cash and cash equivalents of $1.1 billion excludes the c.$450 million of cash which is reported in the balance sheet as assets
held for sale. The Group’s liquidity position is $5.8 billion1.

Debt Facilities3 ($m)

Drawn

Facility

1,800

536

535

134

Euro CP
programme

UK Bond
Issue

800

714

725

960

–

Syndicated
loan facility

Syndicated
cash
advance
facility

Club
Revolving
Credit
Facility

Asia Loan
Facility

179

CNY871
million
bank
facility

575

311

US$ Reg.
S notes

S$ Reg.
S notes

A$ medium
term notes

Debt Maturity Profile4 ($m)

Euro CP programme
UK Bond Issue
Syndicated cash advance facility
Syndicated loan facility
Club Revolving Credit Facility
Asia Loan Facility
CNY871 million bank facility
US$ Reg. S notes
S$ Reg. S notes
A$ medium term notes
Undrawn

2000

1000

536

800

900

536

714

900

960

179

580

FY21

FY22

FY23

FY24

FY25

FY26

313

FY27

FY28

FY29

1. $451m million of cash and cash equivalents has been classified as Disposal Group assets held for sale at FY20. 2. Presold Lendlease Apartment Cash Flows.

1. $451m million of cash and cash equivalents has been classified as Disposal Group assets held for sale at FY20. 2. EBITDA has been adjusted to exclude one off items
related to the Engineering business (FY19: $500m; FY20: $525m). 3. Values are shown at amortised cost. 4. Values are shown at gross facility value.

Lendlease Annual Report 2020 Governance

Governance

Sydney:
Barangaroo South

Home to a mix of
cafes, restaurants,
bars and retail stores.

Lendlease Annual Report 2020 Governance

Board of Directors’
information and profiles

The Lendlease Board is
committed to exceptional
corporate governance
policies and practices which
are fundamental to the long
term success and prosperity
of the Group.

In FY20, the Board continued its
longstanding practice of reviewing its
corporate governance and reporting
practices. The Corporate Governance
Statement is available on the Lendlease
website at: www.lendlease.com/au/
company/governance. For detailed
information on the skills, experience and
qualifications of each of the Directors, refer
to pages 92 to 97 of the Annual Report.

The Corporate Governance Framework
is regularly assessed and amended
to remain current. The Board’s five
permanent committees continue to assist,
advise and make recommendations
to the Board on matters falling within
their areas of responsibility, as set out
in the committee charters. The Board
delegates authority for all other functions
and matters necessary for the day to day
management of the Group to the Group
Chief Executive Officer, who delegates
to senior management as required.
Limits of Authority which are reviewed at
least annually, are in place these outline
the matters specifically reserved for
determination by the Board and those
matters delegated to Board Committees
or Group Executive Management.

Michael J Ullmer, AO
Chairman
(Independent Non Executive Director)

Stephen B McCann
Group Chief Executive Officer and Managing Director
(Executive Director)

Term of Office

Mr Ullmer joined the Board in December 2011 and was appointed
Chairman in November 2018.

Skills, Experience and Qualifications

Mr Ullmer brings to the Board extensive strategic, financial
and management experience accumulated over his career in
international banking, finance and professional services. He
was the Deputy Group Chief Executive Officer of the National
Australia Bank (NAB) from 2007 until he retired from the Bank in
August 2011. He joined NAB in 2004 as Finance Director and held
a number of key positions including Chairman of the subsidiaries
Great Western Bank (US) and JB Were. Prior to NAB, Mr Ullmer
was at Commonwealth Bank of Australia, initially as Group Chief
Financial Officer and then Group Executive with responsibility for
Institutional and Business Banking. Before that, he was a Partner
at accounting firms KPMG (1982 to 1992) and Coopers & Lybrand
(1992 to 1997).

Mr Ullmer has a degree in mathematics from the University of
Sussex. He is a Fellow of the Institute of Chartered Accountants,
a Senior Fellow of the Financial Services Institute of Australia, and
a Fellow of the Australian Institute of Company Directors.

Listed Company Directorships
(held within the last three years)

Non Executive Director of Woolworths Limited
(appointed January 2012)

Other Current Appointments

Chairman of the Melbourne Symphony Orchestra

Board Committee Memberships

Member of the Audit Committee

Member of the Nomination Committee

Member of the People & Culture Committee

Member of the Risk Committee

Member of the Sustainability Committee

Mr McCann was appointed Group Chief Executive Officer in
December 2008 and joined the Board as Managing Director in
March 2009.

Skills, Experience and Qualifications

Mr McCann joined Lendlease in 2005. Prior to his appointment
as Group Chief Executive Officer, Mr McCann was Group
Finance Director, appointed in March 2007 and Chief Executive
Officer for Lendlease’s Investment Management business from
September 2005 to December 2007.

Mr McCann is a highly regarded and experienced business
leader with over 25 years of executive experience. Prior to joining
Lendlease, Mr McCann had 15 years’ experience in property,
funds management, investment banking and capital markets
transactions gained through senior leadership roles at ABN
AMRO and as Head of Property at Bankers Trust. Previous roles
included four years as a mergers and acquisitions lawyer at
Freehills and four years in taxation accounting.

Mr McCann is a member of the Business Council of Australia and
the Property Council of Australia’s Property Male Champions of
Change. In 2013, Mr McCann was announced as the Property
Person of the Year by the Urban Taskforce Australia.

Mr McCann holds a Bachelor of Economics (Finance major) and a
Bachelor of Laws from Monash University in Melbourne, Australia.

Other Directorships and Positions

Nil

Board Committee Memberships

Member of the Risk Committee

Colin B Carter, AM
(Independent Non Executive Director)

Term of Office

Mr Carter joined the Board in April 2012.

Skills, Experience and Qualifications

Mr Carter is one of the founding partners of The Boston
Consulting Group in Australia, retiring as a Senior Partner in
2001, and continues as an advisor with that company. He has
over 30 years of experience in management consulting advising
on organisational, strategy and governance issues. His career
has included major projects in Australia and overseas. Mr Carter
has wide industry knowledge on corporate governance issues
and has carried out Board performance reviews for a number of
companies. He has co-authored a book on Boards, ‘Back to the
Drawing Board’, published by Harvard Business School Press.

In January 2020, Westpac Group appointed Mr Carter as one
of three members to an Advisory Panel assessing Board risk
governance and accountability, and making recommendations
on how Westpac can improve its risk governance, financial crime
and anti money laundry processes.

Mr Carter was a Non Executive Director of Wesfarmers Limited,
serving on that board for 12 years. Mr Carter holds a Bachelor
of Commerce from Melbourne University and a Master of
Business Administration from Harvard Business School, where he
graduated with Distinction and as a Baker Scholar. He is a Fellow
of the Australian Institute of Company Directors.

Listed Company Directorships
(held within the last three years)

Non Executive Director of SEEK Limited
(appointed March 2005, retired March 2018)

Other Current Appointments

President of Geelong Football Club

Director of The National Golf Club

Director of the Australian Ballet Foundation

Board Committee Memberships

Chairman of the Nomination Committee

Member of the People and Culture Committee

Member of the Risk Committee

Member of the Sustainability Committee

Lendlease Annual Report 2020 Governance

Board of Directors’
profiles

Philip M Coffey
(Independent Non Executive Director)

David P Craig
(Independent Non Executive Director)

Baroness Margaret A Ford OBE
(Independent Non Executive Director)

Jane S Hemstritch
(Independent Non Executive Director)

Term of Office

Mr Coffey joined the Board in January 2017.

Mr Craig joined the Board in March 2016.

Baroness Ford joined the Board in March 2020.

Ms Hemstritch joined the Board in September 2011.

Skills, Experience and Qualifications

Mr Coffey served as the Deputy Chief Executive Officer (CEO) of
Westpac Banking Corporation from April 2014 until his retirement
in May 2017. As the Deputy CEO, Mr Coffey had the responsibility
of overseeing and supporting relationships with key stakeholders
of Westpac including industry groups, regulators, customers and
government. He was also responsible for the Group’s Mergers &
Acquisitions function. Prior to this role, Mr Coffey held a number
of executive positions at Westpac including Chief Financial
Officer and Group Executive, Westpac Institutional Bank. He has
successfully led operations based in Australia, New Zealand, the
United States, the United Kingdom and Asia and has extensive
experience in financial markets, funds management, balance
sheet management and risk management. He began his career
at the Reserve Bank of Australia and has also held executive
positions at Citibank.

Mr Coffey holds a Bachelor of Economics (Hons) from the
University of Adelaide and has completed the Executive Program
at Stanford University Business School. He is a graduate member
of the Australian Institute of Company Directors and Senior
Fellow of the Financial Services Institute of Australasia.

Listed Company Directorships
(held within the last three years)

Non Executive Director of Macquarie Group Limited
(appointed August 2018)

Other Current Appointments

Director of the Clean Energy Finance Corporation Board

Board Committee Memberships

Chairman of the Risk Committee

Member of the Audit Committee

Member of the Nomination Committee

Member of the People and Culture Committee

Mr Craig is a business leader with a successful international
career spanning over 37 years in finance, accounting, audit,
risk management, strategy and mergers and acquisitions in the
banking, property and professional services industries. He was
the Chief Financial Officer (CFO) of Commonwealth Bank of
Australia from 2006 through the GFC, until he retired in June
2017. At Commonwealth Bank, he was responsible for leading
the finance, treasury, property, security, audit and investor
relations teams.

Mr Craig’s previous leadership roles have included CFO for
Australand Property Group, Global CFO for PwC Consulting
and a Partner at PwC (17 years).

As well as his role as CFO of Australand Property Group
(now Frasers), Mr Craig was responsible for Property for the
last 22 years of his executive career, including overseeing three
significant property transformations at CBA.

Mr Craig holds a Bachelor of Economics from the University
of Sydney. He is a Fellow of the Institute of Chartered
Accountants, ANZ and a Fellow of the Australian Institute of
Company Directors.

Other Current Appointments

President of the Financial Executives Institute of Australia

Deputy Chairman of the Victor Chang Cardiac Research
Institute

Board Committee Memberships

Chairman of the Audit Committee

Member of the Nomination Committee

Member of the People and Culture Committee

Member of the Risk Committee

Based in London, Baroness Ford is a highly experienced
Non Executive Director with extensive sector experience in
development and construction, and infrastructure financing.
She has a background in urban development and has experience
in regeneration, planning and public sector reform.

She currently serves as Chairman of New River REIT Plc, a
specialist real estate investment trust focused primarily on retail
and leisure property and also as the Chairman of STV Group Plc,
a Scottish media company.

Between 2006 and 2012, Baroness Ford led the Olympic Park
Legacy Company the public sector organisation responsible for
the masterplanning, development and maintenance of the Queen
Elizabeth Olympic Park for the London 2012 Olympic Games.
Prior to this she was Managing Director of Social Infrastructure
and Development at the Royal Bank of Canada (RBC). She joined
RBC after stepping down as the Chair of English Partnerships,
where she spent six years leading a new approach to housing
and regeneration across England. Her earlier career was spent
working for various public sector organisations, including Scottish
Homes, the national housing agency in Scotland.

Baroness Ford holds a Master of Arts degree from the University
of Glasgow and a post graduate Masters degree in Applied
Economics. She was appointed to the House of Lords in 2006.

Listed Company Directorships
(held within the last three years)

Chairman of New River REIT Plc

Chairman of STV Group Plc

Other Current Appointments

Independent Member of the UK Oversight Board of Deloitte LLP

Independent Member of the Deloitte North/South Europe Board

Board Committee Memberships

Member of the Nomination Committee

Member of the Risk Committee

Member of the Audit Committee

Member of the Sustainability Committee

Ms Hemstritch has extensive senior executive experience in
information technology, communications, change management
and accounting. She also has broad experience across the
financial services, telecommunications, government, energy and
manufacturing sectors and in business expansion in Asia. During
a 25 year career with Accenture and Andersen Consulting, Ms
Hemstritch worked with clients across Australia, Asia and the US.

Ms Hemstritch was Managing Director Asia Pacific for Accenture
from 2004 until her retirement in 2007. She was a member of
Accenture’s global Executive Leadership Team and oversaw the
management of Accenture’s business in the Asia Pacific region,
which spanned 12 countries and included 30,000 personnel.

Ms Hemstritch has a Bachelor of Science in Biochemistry and
Physiology from the University of London and is a Fellow of the
Institutes of Chartered Accountants in Australia and in England
and Wales. She is a Member of Chief Executive Women.

Listed Company Directorships
(held within the last three years)

Non Executive Director of Telstra Corporation Limited
(appointed August 2016, retired January 2019)

Non Executive Director of Tabcorp Holdings Ltd
(appointed November 2008, retired October 2017)

Other Current Appointments

President of the Board of The Walter and Eliza Hall Institute
of Medical Research

Member of the Global Council of Herbert Smith Freehills
Global LLP

Board Committee Memberships

Member of the Audit Committee

Member of the Nomination Committee

Member of the People and Culture Committee

Member of the Risk Committee

Lendlease Annual Report 2020 Governance

Board of Directors’
profiles

Elizabeth M Proust, AO
(Independent Non Executive Director)

Nicola M Wakefield Evans
(Independent Non Executive Director)

Robert Welanetz
(Independent Non Executive Director)

Term of Office

Ms Proust joined the Board in February 2018.

Ms Wakefield Evans joined the Board in September 2013.

Mr Welanetz joined the Board in March 2020.

Skills, Experience and Qualifications

Ms Proust is one of Australia’s leading business figures and has
had a diverse career holding leadership roles in the public and
private sectors for over 30 years. Ms Proust spent eight years
at ANZ Group including four years as Managing Director of
Esanda, Managing Director of Metrobanking and Group General
Manager, Human Resources, Corporate Affairs and Management
Services. Before joining ANZ, Ms Proust was Secretary (CEO)
of the Department of Premier and Cabinet (Victoria) and Chief
Executive of the City of Melbourne.

Ms Proust has extensive board experience in listed and private
companies, subsidiaries and joint ventures, as well as government
and not for profits. She was made an Officer of the Order of
Australia in 2010 for distinguished service to public administration
and to business, through leadership roles in government and
private enterprise, as a mentor to women, and to the community
through contributions to arts, charitable and educational bodies.

Ms Proust holds a Bachelor of Arts (Hons) from La Trobe
University and a Bachelor of Laws from the University of
Melbourne.

Other Current Appointments

Chairman of Nestlé (Australia)

Chairman of the Westpac Victoria Advisory Board

Chairman of Cuscal Limited

Ms Wakefield Evans is an experienced business leader and non
executive director with broad ranging commercial, business
management, strategy and legal experience gained over a 30 year
international career. Ms Wakefield Evans held several key management
positions at King & Wood Mallesons (KWM), including Managing
Partner International in Hong Kong where she was responsible for the
overall governance and strategic positioning of the business in the
Asia region. In addition to holding a number of senior management
and leadership roles, Ms Wakefield Evans has had a diverse career
as one of Australasia’s leading corporate finance lawyers.

Ms Wakefield Evans has extensive experience in the financial
services, resources and energy and infrastructure sectors. She
has extensive international experience having worked in Australia,
New York and Hong Kong. Ms Wakefield Evans was included in
the Australian Financial Review and Westpac Group’s inaugural
list of ‘Australia’s 100 Women of Influence’. She is a member of
Chief Executive Women.

Ms Wakefield Evans holds a Bachelor of Jurisprudence and a
Bachelor of Laws from the University of New South Wales and is a
qualified lawyer in Australia, Hong Kong and the United Kingdom.

Listed Company Directorships
(held within the last three years)

Non Executive Director of Macquarie Group Limited
(appointed February 2014)

Board Committee Memberships

Other Current Appointments

Chairman of the People and Culture Committee

Member of the Nomination Committee

Member of the Risk Committee

Member of the Sustainability Committee

Chair of 30% Club, Australia
Director of the Clean Energy Finance Corporation
Director of UNSW Foundation Limited
Director of Australian Institute of Company Directors
Director of MetLife Australia
Director of Goodes O’Loughlin (GO) Foundation Limited
Member of the Takeovers Panel

Board Committee Memberships

Chairman of the Sustainability Committee
Member of the Nomination Committee
Member of the Audit Committee
Member of the Risk Committee

Mr Welanetz is based in the US and has significant executive,
advisory, strategic and operational experience in the property and
construction sectors, gained over an international career spanning
over 40 years.

In his most recent role, Mr Welanetz served as Chief Executive
Officer in the property division of Majid Al Futtaim (MAF), based
in Dubai, where he had overall responsibility for managing MAF’s
property portfolio and development pipeline. Mr Welanetz retired
from that position in 2018. Prior to joining MAF, Mr Welanetz
spent over seven years in a global role in Blackstone’s Real Estate
Group advising and identifying acquisition opportunities in retail
real estate and providing strategic guidance for Blackstone’s
portfolio of retail assets and retail operating companies.

Mr Welanetz also served as Chief Executive Officer of Shanghai
Kinghill Ltd, based in China, with responsibility for the operations
and delivery of retail and development projects in mainland China.
Prior to this, Mr Welanetz was President and Chief Executive
Officer, Retail at Jones Lang LaSalle Inc Americas.

Mr Welanetz holds a Bachelor of Science degree from Colorado
State University. He is a former Chairman of the International
Council of Shopping Centres and served on the board of the
Galileo Property Trust, an Australian shopping centre investor.

Listed Company Directorships
(held within the last three years)

Nil

Board Committee Memberships

Member of the Nomination Committee

Member of the Risk Committee

Member of the People & Culture Committee

Member of the Sustainability Committee

Steve B Dobbs
(Retired 20 November 2019)

Mr Dobbs joined the Board in January 2015 and retired
in November 2019.

General Counsel and
Company Secretary
qualifications and
experience

Karen Pedersen
Ms Pedersen was appointed Group
General Counsel in January 2013. Prior
to this she was General Counsel and
Company Secretary for other large
property and construction companies.
Ms Pedersen has a Masters of Law from
the University of Technology, Sydney and a
Bachelor of Commerce/Bachelor of Laws
from the University of New South Wales.

Wendy Lee
Ms Lee joined Lendlease in September
2009 and was appointed Company
Secretary in January 2010. Prior to her
appointment, Ms Lee was a Company
Secretary for several subsidiaries of a large
financial institution listed on the Australian
Securities Exchange. She has over 15
years of company secretarial experience.
Ms Lee has a Bachelor of Arts and a
Bachelor of Laws from the University of
Sydney, a Graduate Diploma in Applied
Corporate Governance, and is a Fellow of
the Governance Institute Australia.

Lendlease Annual Report 2020 Governance

Board skills
and experience

Industry experience
The Board views ‘industry experience’
as skills or experience gained in one or
more of the core Lendlease operating
segments of Development, Construction
and/or Investments.

6 of 10

100%

Board members
have experience in
one or more of the
core segments

Have Directors’
experience in
governance and
financial acumen

Directors’ average tenure
The Board considers it has an
appropriate mix of new, mid and longer
tenured Directors. At June 2020, the
average term of the Board is 5.5 years.

1-3
years

3-6
years

6-9
years

9+
years

Gender diversity
The target of 30 per cent female Board
members aims to improve gender
diversity and focus its attention on
achieving this objective. This target has
been exceeded.

33%

40%

Current female
Directors as at
June 2019

Current female
Directors as at
June 2020

The Directors have a mix of local and international experience and expertise, as
well as specialised skills to assist with decision making and to effectively govern
and direct the organisation for the benefit of securityholders.

The table below sets out the skills and experience considered by the Board to be important for its Directors to
have collectively. These skill areas are reviewed regularly to assess their alignment and support the Group’s strategic
direction. The skills matrix assists the Board with succession planning and professional development initiatives for
Directors. In determining the skills matrix, each Director undertakes a self assessment of their skills and expertise.

Skills/Experience

Comments

Total

Governance

Industry
Experience

International
Operations

Health
and Safety

Sustainability

Strategy

A commitment to and experience in setting exceptional corporate governance policies,
practices and standards.

Possessing industry knowledge, exposure and experience gained in one or more of the core
Lendlease operating segments of Development, Construction and Investments. This includes
acting in advisory roles for these industries.

Exposure to international regions either through experience gained directly in the region or through
the management of regional clients and other stakeholder relationships.

Experience in programs implementing safety, mental health and physical wellbeing, on site and
within the business. Monitoring the proactive management of workplace health and safety practices.

The ability to identify economically, socially and environmentally sustainable developments.
Ability to set and monitor sustainability aspirations.

Developing, setting and executing strategic direction. Experience in driving growth and executing
against a clear strategy.

Risk
Management

Experience in anticipating and evaluating risks that could impact business. Recognising and managing
these risks by developing sound risk governance policies and frameworks.

Legal

Experience in identifying and resolving legal and regulatory issues and having the ability to assist the
Board on these matters.

People and
Culture

Experience in building workforce capability, setting a remuneration framework which attracts and
retains a high calibre of executives, promoting workplace culture, diversity and inclusion.

Executive
Leadership

Financial
Acumen

Technology

Skills gained while performing at a senior executive level for a considerable length of time including
delivering superior results, dealing with complex business models, projects, and issues and change
management.

Understanding of the financial drivers of a business. Experience in financial reporting and corporate
financial management.

Strong technology background including online communications, IT workplace knowledge, security
and data analysis skills.

Engagement.
Board regional
program FY20

As an international company and having regard to the material scale of individual
projects, the Board program is formulated to reflect the geographic spread of
Lendlease businesses. While the Board commenced the financial year with an agreed
regional program, the onset of COVID-19 meant that some of the engagement
activities with our people and customers were temporarily placed on hold. The Board
is now looking at ways to continue this engagement through the use of technology.

Engaging with Lendlease
The Lendlease Board views that
program activities, in addition to the
formal scheduled Board and Committee
meetings, are an important element of the
Board’s activities and enables Directors to
obtain the required deep understanding
of the activities and operations within
each region. The Chair works with the
Company Secretary to forward plan the
program for the year. Depending on the
time of year and the region, the program
runs for a minimum of two days and up to
five days where deeper project reviews
are required. Each program comprises
formal meetings and additional business
briefings, presentations from internal and
external sources, project site visits, client
meetings and networking events with
employees and key stakeholders.

Directors are also encouraged to
make site visits outside of a scheduled
Board program.

During FY20, the planned Board
program of site visits, staff and customer
engagement and other activities continued
until the onset of restrictions as a result
of the COVID-19 pandemic. Board
and Committee meetings continued,
however, site visits and customer and staff
engagement with Board members was
temporarily put on hold. Induction activities
for the new Non Executive Directors
continued through the use of technology.

Stakeholder engagement
The Board members, led by the Chairman,
maintain an active and extensive
engagement program to represent the
interests of Lendlease at various industry
functions and bodies. The Chairman
as an advocate for Lendlease regularly
meets with customers, investors,
governments and media. In February
2020, the Lendlease Board endorsed a
refreshed investor engagement program
to encourage two way communications

with our investor community. As part of
this, a presentation detailing the scope of
the Board activities was made available on
the Lendlease website in June 2020.

Meeting with Lendlease people
In addition to these industry events,
the Chairman and Board members
met with local Lendlease management
and employees in the Australia, Asia
and Europe regions. These events took
the form of employee ‘town hall’ style
events. The Board members encourage
employees to ask questions at these
sessions which provide the opportunity for
open and honest debate on organisational
culture. The visit to the Americas region
was cancelled following the COVID-19
pandemic.

100

Lendlease Annual Report 2020 Governance

101

Program

Reporting period between 1 July 2019 and 30 June 2020.
Board meetings are scheduled in Australia and each of the international regions where
Lendlease operates.

Typically, a program of additional activities is programmed for the full reporting period.
Due to the travel restrictions put in place for COVID-19, the additional activities of the
Board program were temporarily suspended between 20 March 2020 to 30 June 2020.

During the period impacted by COVID-19, the Board pivoted to respond to the crisis.
Board engagement and oversight has been elevated since the onset of the pandemic
with the focus shifting towards governance oversight of the Group’s COVID-19 response
in addition to ‘business as usual’ Board and Committee meetings. This included the
formation of a Board subcommittee which met weekly across a two month period in
response to the COVID-19 pandemic.

Singapore:
Paya Lebar Quarter

Artist’s impression

London:
Elephant Park

Artist’s impression

Sydney: One
Sydney Harbour,
Barangaroo South

Artist’s impression

Asia
The Board visited Singapore and Shanghai
in July 2019.

• Board networking session for the Asia
regional senior leadership team, to
determine capability at the level below
the GLT

• Board networking session with the

China senior leadership team

• Informal mentoring of various leadership
team members to provide guidance,
motivation and support in in career
development

• Attendance at Lendlease Singapore

Region ‘town hall’ style update including
panel discussion with all Board members
followed by a broader networking
opportunity for Singapore staff

• Received briefing from external

speakers on insights into retail-led
opportunities in the Asia region

Europe
The Board visited London in October 2019.

• Board networking session for the

Europe regional senior leadership team,
to determine capability at the level
below the GLT

• Informal mentoring of various leadership
team members to provide guidance,
motivation and support in in career
development

• Attendance at Lendlease Europe

Region employee update including
Q&A with staff and broader networking
opportunity for all regional staff

• Received briefing from external speaker
on insights into infrastructure delivery
in the UK and collaboration between
public and private sectors in relation to
project delivery

• Guided walk of the Euston area for

mixed-use urban regeneration project

• Safety induction and guided site visit

of Paya Lebar Quarter mixed-use urban
regeneration project

• Received a deep dive presentation of
the Thamesmead project and viewed
the precinct

• Received a deep dive presentation of

the Ardor Gardens senior living project
in Shanghai and overall China senior
living strategy, viewed the precinct and
met with key Government officials and
customers

• In conjunction with external customers,
guided tour of The Elephant, Elephant
& Castle projects to view Lendlease
placemaking capabilities

Australia
• Quarterly engagement with regional
business leaders to provide updates
and overview of key regional business
issues. (Undertaken by individual
directors, at regular intervals throughout
the reporting period. During COVID-19,
the sessions continued via video
conference)

• Overview and site walk of Melbourne
Metro project (September 2019 by
individual directors)

• Attendance by Chairman at ‘town hall’
event and panel session in Melbourne
(September 2019)

• Viewing and site walk of One Sydney

Harbour residential precinct and
overview of project (November 2019)

• Deep-dive education session of

Lendlease Digital capability and function
(February 2020 by individual director)

Board project
assessments

One of the key responsibilities of the
Lendlease Board is to oversee the strategy
so the Group can pursue its integrated
business model in targeted gateway cities
around the world. During the first half of
the financial year, the Board continued
its longstanding tradition of extending a
Board program whilst in region to conduct
site visits and attend deep dive reviews of
various projects.

The Silvertown Quays and Ardor Gardens
development projects are presented as
case studies of the activities that the Board
undertakes in reviewing and assessing
strategic opportunities. Site visits allow
the Board to see and experience firsthand
the challenges associated with a project’s
delivery, and Board conversations around
project challenges and opportunities are
appreciated in a fuller geographic and
strategic context.

These activities undertaken by the Board
are examples of how the Board oversees
management, delivering projects in
accordance with the Group’s strategy,
through its program of activities.

Silvertown Quays, London
Commencing in early 2018, the Board
were introduced to the opportunity
to secure via a joint venture with
Starwood Capital, a long term large
scale regeneration for residential and
commercial use. Silvertown Quays
offers the regeneration of an existing
heritage asset – the Millennium Mills
– and the delivery of significant new
public realm. In making its investment
decision, the Board considered numerous
factors relevant to the development’s
viability. These included focusing on the
alignment to strategy, understanding of
risk limits, the environment, health and
sustainability profile of the project and
knowledge sharing from other London
urban regeneration projects. In October
2019, the Board received a deep dive
presentation from the Project Team
which covered several aspects of the
development including the planning
and scheme masterplan process,
community consultation program,
government relations, socioeconomic
and sustainability factors and technical
innovation. The Board visited the area
to view the site and to observe how key
stakeholder consultation process was
shaping the delivery of the project.

Shanghai:
Ardor Gardens

Artist’s impression

Ardor Gardens, Shanghai
Lendlease’s development expertise in retirement living has been extended to Shanghai
where we are delivering an initial c.850 senior living homes. The Ardor Gardens project,
in the context of the senior living strategy, is an example of how the Board reviews and
evaluates strategic opportunities over a longer term period. The China senior living
strategy was first presented to the Board more than five years ago. Due to its strategic
significance, the Board initially received progress updates ahead of a formal request for
approval to move forward in this sector in China. Numerous factors were considered prior
to the Board arriving at its decision. These included the rationale for the strategy, macro
economic indicators, financial and commercial assessment, funding and development
strategy, safety and sustainability issues, and key risks. While not exhaustive, these
factors were indicative of the issues considered during Boardroom discussions.

The Board has continued to receive updates on the senior living strategy in China and
in July 2019, a number of the Board members visited Ardor Gardens. By visiting the
site, the Board gained an appreciation for its location and proximity to infrastructure,
and in meeting with key stakeholders, the Board further understood the complexities of
this project.

London:
Silvertown Quays

Artist’s impression

102

Lendlease Annual Report 2020 Governance

103

Supporting value creation

The Board continues
to recognise that
the five focus
areas of value
creation, supported
by disciplined
governance and
risk management,
contribute to
performance and
drive the long-term
value of our business.

During the year, in addition to the
responsibilities and tasks set out in
the charter documents, the Board
and Board Committees deliberated
on the following specific matters and
undertook a number of activities to
support value creation. While these do
not represent the full scope of Board
activities, they highlight some of the
areas of focus by the Board.

This year, given the unprecedented
COVID-19 pandemic crisis, a
significant amount of Board attention
was focused on the management
response to the crisis.

Health and Safety

Material Issue:

Financial

Material Issue:

Operating safely across our operations
and projects. Maintaining the health and
wellbeing of our employees and those
who engage with our assets and sites.

Delivering securityholder returns.
Maintaining strong capital management
to enable investment in our future
pipeline.

The Board and Sustainability Committee
undertook the following activities as part
of their continued review of the Lendlease
Health and Safety Framework and the
unwavering commitment to the safety of
our people and those who interact with
Lendlease assets and sites.

Board activities and actions:
Reviewed the way health and safety issues
are reported. Supported reporting a broader
range of leading and lagging indicators to
provide a more rounded approach as well
as the resulting performance.

Discussed the measures and actions taken
at a project and regional level in response
to a fatality resulting from a critical incident
on a project in Kuala Lumpur whereby a
worker passed away from an infection
whilst recovering from surgery in hospital.

Received a cross committee referral
on the audit of safety incidents on a
Lendlease project and requested that
management investigate and report
on these incidents until the matter was
closed out to the satisfaction of both the
Sustainability and Audit committees.

Received reports on the ways that
management were responding to the onset
of COVID-19 and the significant disruptions
across Lendlease’s operations and
broadening of health and safety objectives.

Endorsed global standards in response to
COVID-19 addressing project shutdown
protocols, social distancing applications
on site and in regional offices, and the
protocols in the event of confirmed cases.

Pre COVID-19 Board members assessed
our health and safety culture and received
presentations during site visits in Asia,
Europe and Australia. Questioned frontline
leaders and employees on Lendlease’s
Global Minimum Requirements (GMRs).

Post COVID-19, Board members received
reports from management on the innovative
use of technology during safety site visits.

The Board and Audit and Risk Committees
undertook the following activities to help
fulfil the Board’s oversight responsibilities
in delivering returns to securityholders
and by adopting a prudent approach
to capital management with a view
to maintaining a strong balance sheet
throughout market cycles.

Board activities and actions:
A major focus area for the Board in
FY20 was the response to the COVID-19
pandemic. In order to keep focus on
business resilience during this time, a
Board subcommittee was formed with
the objective of oversighting cashflow,
balance sheet and liquidity scenarios,
culminating in a decision to raise capital
in April 2020.

Approved an equity raising via an
institutional placement and Security
Purchase Plan as a prudent measure to
strengthen the balance sheet and position
the Group to deliver the development
pipeline and take advantage of
opportunities as markets stabilise.

Oversight and approval of workforce
management and cost reduction initiatives
across the business to reflect the changing
environment as a result of the COVID-19
pandemic.

Oversight of an extensive review of the
Risk Appetite Statement, Risk Appetite
Framework and Risk Tolerances against
enterprise risks, to maintain alignment on
the appetite for risk in order to drive more
informed and consistent decision making.
Approved the Risk Appetite Statement,
Risk Appetite Framework and Risk
Tolerances following this review.

Endorsed the deployment of the Risk
Appetite Framework (RAF) through the
introduction of a RAF template for all
investment decisions.

Our Customers

Material Issue:

Our People

Material Issue:

Sustainability

Material Issue:

Managing and optimising our
performance in the context of challenges
facing the built environment, including
climate change and social pressures
such as population growth and housing
affordability.

The Board and Sustainability Committee
engaged in the following activities to help
deliver inclusive, healthy and adaptable
places that can thrive through change.

Board activities and actions:
Continued to support the commitment to
reconciliation in progressing the work to a
second Elevate Reconciliation Action Plan.

Engaged with management and attended
a number of workshops on the four
Lendlease Climate Scenarios created to
test business strategies and respond to
key trends in line with recommendations
of the Task Force on Climate Related
Financial Disclosures (TCFD).

Endorsed new, challenging sustainability
targets for carbon and social value to
begin the next chapter of sustainability.

Attended a ‘deep dive’ discussion on
Modern Slavery risks in our global supply
chains and oversaw the development of
timetable towards submission of the 2020
Modern Slavery Statement.

Endorsed a new global Supplier Code of
Conduct setting out the expectations of
suppliers, contractors and their supply
chains across a range of areas.

Understanding our customers and
responding to changes in the market.
Designing and delivering innovative,
customer driven solutions to win the
projects we want to win and ultimately
deliver the best places.

The Board and its committees undertook
the following activities as part of its
support of the Group’s customer focused
approach and to embed a process of
continuous improvement based on
customer insights and actions.

Board activities and actions:
Continued to engage with clients,
investors and other stakeholders at various
industry functions, site visits and events.

Continued to provide feedback on
initiatives to improve the reporting of
customer satisfaction and advocacy to
the Board and Risk Committee to drive
continuous improvement in the customer
experience. This included the reporting
of C-SAT and NPS scores for each of the
Americas, Asia, Australia Construction
& Property and Europe regions.

Received regular reports on key customer
experience initiatives underway in various
regions including ‘deep dive’ rolling
reviews across various business units.

Received various external reports on
the measuring of Board effectiveness as
viewed by external investors. Monitored
the reporting of the program of activities
to respond to the insights gained from
the report.

Received presentations from external
customers to brief the Board on key
customer relationships relevant to a
particular business.

Attracting, developing and retaining
diverse talent. Ensuring we have the
right capability across the organisation
to deliver results for all stakeholders.

The Board, People and Culture Committee
and Nomination Committee undertook
the following activities to help attract,
develop and retain diverse talent and to
monitor the investment in developing
leaders and capabilities.

Board activities and actions:
Reviewed and discussed the Group’s
talent management and strategic
resourcing strategy and endorsed actions
to provide greater transparency. Pre
COVID-19 engaged with regional senior
leaders and the Board to gain greater
visibility of the emerging pool of potential
internal successors to the GLT.

Refreshed the review of formal development
plans for the Global Leadership Team by
creating a new baseline at which to chart
progress against these plans.

Responded to COVID-19 by endorsing
various temporary workforce management
initiatives. An up to six month reduction of
20 percent in fixed remuneration for the
Global Leadership Team and a voluntary
reduction of up to 20 percent of
Non-Executive Director base fees.

Supported the establishment of a
Hardship and Wellbeing Fund in response
to COVID-19, seeded in part by the
voluntary fee reduction agreed by
Non-Executive Directors.

Continue to review the progress on the work
in evolving the Group’s purpose and values.

Endorsed the launch of two global
knowledge sharing Practices based on
Urbanisation and Residential Development.
These bring together senior sector leaders
and subject matter experts to develop
specialist IP for our people.

Endorsed a newly developed ‘Risk Index’
in the six monthly People Survey. The
‘Risk Index’ provides insight into how
our people feel about escalating issues
with their manager and with reporting
instances of unethical conduct.

104

Lendlease Annual Report 2020 Governance

105

Board of Directors’ information

Interests in Capital
The interests of each of the Directors in the Stapled Securities of the Group at 17 August 2020 is set out below.
The current Non Executive Directors acquired Lendlease securities using their own funds.

Securities Held
Beneficially/
Indirectly 20201

Total
2020

Securities Held
Directly 2019

Securities Held
Beneficially/
Indirectly 20191

Total
2019

Current Directors

M J Ullmer

S B McCann

C B Carter

P M Coffey

D P Craig

M Ford

J S Hemstritch

E M Proust

N M Wakefield Evans

R Welanetz

Former Director

S B Dobbs1

Securities Held
Directly 2020

‑

547,200

‑

7,000

110,000

291,527

18,061

21,216

63,061

4,065

23,061

53,061

34,020

‑

110,000

838,727

18,061

21,216

63,061

4,065

23,061

53,061

34,020

7,000

‑

100,000

481,478

268,540

750,018

‑

15,000

9,810

50,000

‑

20,000

25,000

30,248

‑

12,000

‑

12,000

1. S B Dobbs ceased to be a Non Executive Directors on 20 November 2019. The balance of securities held at the end of the financial year shown here represents the balance
held at that date.

Directors’ Meetings
Board meetings
The Board meets as often as necessary
to fulfil its role. Directors are required to
allocate sufficient time to the Group to
perform their responsibilities effectively,
including adequate time to prepare for
Board meetings. During the financial
year ended 30 June 2020, 16 Board
meetings were held. Five meetings were
held in person: three in Australia, one
in Asia and one in the UK. In addition,
there were three video/teleconference
meetings scheduled in the FY20 Board
calendar. From March 2020, the Board
proceeded to meet using technology
only, due to the mandatory travel and
group meeting restrictions put in place
in response to the COVID-19 pandemic.
Two of these meetings were already
scheduled in the FY20 Board calendar
as in person meetings but proceeded
using video/teleconference technology.
An additional six meeting were held via
video/teleconference to discuss specific
matters, and matters were dealt with as
required by circular resolution.

From time to time special subcommittees
are formed to give the Board better
guidance and provide oversight
concerning specific matters. During
the reporting period, eight Board
subcommittee meetings were also
constituted to deal with specific matters.

The Board recognises the essential role of
committees in guiding the organisation on
specific issues. Following the appointment
of the new Chairman in November 2018,

a comprehensive review of the Board and
its committees was undertaken. A range
of opportunities was identified to enhance
the effectiveness and efficiency of the
Board process and the responsibilities
reserved specifically for the Board and
its committees. Following this review,
there are now five standing Board
committees to assist, advise and make
recommendations to the Board on matters
falling within their areas of responsibility.

The five permanent committees of the
Board are:

Audit Committee
The Audit Committee assists the Board
with its oversight responsibilities in
relation to accounting policies and
practices, tax matters, treasury reporting,
monitoring of internal financial controls,
internal and external audit functions and
financial reporting of the Group.

People and Culture Committee
The People and Culture Committee
assists the Board with its oversight
responsibilities in relation to establishing
people management, diversity, talent and
remuneration/compensation policies for
the Group.

Risk Committee
The Risk Committee assists the Board with
its oversight responsibilities in relation
to risk management and internal control
systems, risk policies and practices, and
compliance. The Risk Committee also
has another important role – to review,
and if approved, recommend to the
Board for approval major transactions as
referred to the Committee by the Global

Investment Committee. Given the review
of major transactions moving to the Risk
Committee, all members of the Board
including the Managing Director and CEO,
are members of the Risk Committee.

Sustainability Committee
The Sustainability Committee assists
the Board to monitor the decisions and
actions of management in achieving
Lendlease’s aspiration to be a sustainable
organisation. Sustainability is viewed as
encompassing how Lendlease conducts
business through the pursuit of workplace
safety, a commitment to corporate social
responsibility, environmentally sustainable
solutions and employee diversity,
development and opportunity. Lendlease
is strategically and culturally committed
to achieving commercial success in ways
that honour ethical values and respect
people, communities and the natural
environment.

Nomination Committee
The Nomination Committee advises
and supports the Board to fulfill its
responsibilities to securityholders; to
assure that the Board is comprised of
individuals who in combination bring
a mix of expertise, skills, experience
and perspectives and contribute to
the discharge of diligent oversight and
effective corporate governance of the
Group. The Nomination Committee
also oversees activities for Director
development and oversees the reviews
of Board, Committee and Director
performance.

Attendance at Meetings of Directors 1 July 2019 to 30 June 2020
The number of Board and Board Committee meetings held, and the number of meetings attended by each
Director during the 2020 financial year, are set out in the tables below.

(MH) Number of meetings held. (MA) Number of meetings attended.

Membership

M J Ullmer

S B McCann (CEO)

C B Carter

P M Coffey

D P Craig

M A Ford2

J S Hemstritch

E M Proust

N M Wakefield Evans

R F Welanetz2

S B Dobbs3

Membership

M J Ullmer

S B McCann6 (CEO)

C B Carter

P M Coffey

D P Craig

M A Ford2

J S Hemstritch

E M Proust

N M Wakefield Evans

R F Welanetz2

S B Dobbs3

Board
(Chairman M J Ullmer)

Board Subcommittee Meetings5
(Chairman M J Ullmer)

MH1
16

MA
16

144

MH
8

MA
8

‑

Nomination
Committee
(Chairman C B Carter)

MH
7

MA
7

‑

People and
Culture Committee
(Chairman E M Proust)

Risk Committee
(Chairman P M Coffey)

Sustainability Committee
(Chairman
N M Wakefield Evans)

Audit
Committee
(Chairman D P Craig)

MH
5

MA
5

MH
7

MA
7

MH
5

MA
5

MH
5

MA
5

‑

1. Reflects the number of meetings held during the time the Director held office during the year. 6 out of the 16 meetings were out of schedule Board teleconferences
constituted to address specific issues. 2. M A Ford and R F Welanetz were appointed to the Board on 1 March 2020. The number of meetings attended reflects the number of
meetings since their appointment. M A Ford and R F Welanetz attended the February 2020 meeting held in Sydney as observers prior to their formal appointment to the
Board. This meeting has not been included in the number of meetings attended as it was prior to their formal appointments. 3. S B Dobbs retired from the Board on
20 November 2019. The number of meetings attended reflects the number of meetings until S B Dobbs’ retirement. 4. J S Hemstitch was unable to attend 2 of the 6
unscheduled Board teleconferences as they were called at short notice to address specific issues. 5. These subcommittee meetings of the Board were convened during the
reporting period to address specific issues. Only the subcommittee members attended the relevant meeting. 6. S B McCann is not a member of the Committee but as Group
CEO and Managing Director, has a standing invitation to the Sustainability and Audit Committees.

106

107

The value of the FY20 Deferred Equity Award for the Group
CEO is equivalent to 35 per cent of his STA target (23 per cent
of his STA maximum) and the value of the FY20 Deferred Equity
Awards for executives is equivalent to between 25 per cent to
40 per cent of STA targets (between 17 per cent to 27 per cent
of STA maximums).

The Board determined in August 2020 that the FY20 Deferred
Equity Award was the right approach given that it:

• Recognises the achievement of non financial performance

outcomes that support long term value creation

• Considers the balance between motivating, recognising and

rewarding executives with securityholder interests

• Considers that although a final dividend for FY20 will not be

paid from Lendlease Corporation Limited, securityholders will
receive distributions of over $191 million relating to FY20

• Provides the Board with additional review points prior

to vesting

• Provides a retention element given that executives will be
required to wait up to two years for the award to vest. The
Board is very mindful that the retention of highly capable
executives is critical to our ability to deliver the pipeline into
the future.

Looking ahead
In FY21, the Board will continue to review and assess the
effectiveness of our ERS as we contemplate what is required
to motivate and retain our senior executives to navigate
the challenges and realise the opportunities that lay ahead.
We look forward to informing you of progress.

Michael Ullmer, AO

Elizabeth Proust, AO

Chairman

Chairman,
People & Culture Committee

Remuneration Report

Message from the Board
This year has been challenging and unprecedented. It has
required the Board and management to rapidly navigate and
respond to the uncertain health, safety and financial impacts
of COVID-19.

The Board’s primary focus has been the safety of our employees,
customers, subcontractors and other stakeholders and the
strength of our balance sheet. Refer to the Board's response
to COVID-19 on page 107 for a summary of key remuneration-
related decisions made during FY20.

For the first nine months of the year, the business performed
well. As the pandemic situation has evolved and as a result of
providing for the costs of separating the Engineering business,
in line with those previously advised, a statutory loss was
recorded for FY20.

Linking remuneration decisions and performance
In applying our Executive Reward Strategy (ERS), a number
of financial and non financial factors have been considered
by the Board when determining remuneration outcomes for
Key Management Personnel (KMP) in FY20. Key points are
highlighted below:

Financial outcomes
Given the financial result for the year, no Short Term Award
(STA) has been made to the Group CEO or senior executives in
relation to financial performance. No adjustments were made
to FY20 STA scorecard targets to account for the impact of
COVID-19.

Accordingly, the receipt of a modest amount of COVID-19
related assistance from governments, had no influence on the
quantum of awards, nor did the completion of the capital raising.

Non financial outcomes
We achieved a significant improvement in performance across a
wide range of safety metrics and our Critical Incident Frequency
Rate (CIFR) is at its lowest level since records began in 2012.

However, tragically, a fatality was reported during 2020. This
incident has been accounted for in the Board's assessment of
remuneration outcomes for the Group CEO and senior executives
based on either accountability or responsibility for safety outcomes.

We achieved a significant increase in leadership effectiveness
scores as measured by their teams. This will remain a key focus for
us as we grow and deliver our global pipeline.

Our net promoter and customer satisfaction scores have improved
in an otherwise challenging environment and the development and
implementation of our digital strategy has continued to progress at
pace and a new business brand has been launched.

Our Development pipeline grew by an impressive 48 per cent over
the year.

Given the key contributions made during the year that position
the Group for success in FY21 and beyond, the Board considered
that the recognition, in part, of the achievement of non financial
performance was fair and appropriate.

FY20 remuneration outcomes
For executives, the Board determined that no cash STA would be
awarded in FY20 and it was more appropriate to issue an FY20
Deferred Equity Award albeit at a reduced quantum. Half of the
award is scheduled to vest in September 2021 and the balance in
September 2022.

Board’s response to COVID-19
The key remuneration-related decisions
that the People & Culture Committee
and Board made during FY20 in response
to COVID-19 include:

Workforce management actions

With a focus on reducing short-term costs
and preserving jobs we implemented the
following workforce management actions:

The Fixed Remuneration for the Group
CEO, Group Leadership Team (GLT) and
other senior leaders was temporarily
reduced by 20 per cent from 1 May 2020.

Non Executive Directors were able to
temporarily reduce their base fees by
20 per cent from 1 June 2020.

Other workforce management actions
across the Group included reduced hours
of work, furlough / stand downs and, in a
limited number of cases, redundancies.

Hardship & Wellbeing Fund

The impacts of COVID-19 have been
especially challenging for some of our
people. Through no fault of their own,
some have experienced hardship, even
after exploring alternative sources of
support. For this reason, we established
the Lendlease Hardship & Wellbeing
Fund which provides grants to support
our people who need short-term help to
cover essential expenses of everyday life.
A portion of the savings achieved through
the workforce management actions
outlined above have been used to seed the
Hardship & Wellbeing Fund.

In the two months since the creation of
the Hardship & Wellbeing Fund,
99 Hardship & Wellbeing Fund grants
have been approved for payment.

Temporary release from mandatory
securityholding requirement

Substantially lower FY20
Group incentive pool

The Group CEO and GLT members were
provided with the opportunity to request
a temporary release from the mandatory
securityholding requirement, such that the
required holding of Lendlease securities
is halved. The Group CEO did not request
this release.

Access to wage subsidy support

Wherever we operate, Lendlease has
continued its partnership approach to
helping governments respond to the public
health and economic crisis presented
by COVID-19. We acknowledge that our
government partners have adopted the
same approach and recognised the crucial
role of the property and infrastructure
sectors in the economy. As our company
has been negatively impacted by
COVID-19 in most markets, Lendlease has
been eligible and accessed wage subsidy
support in markets where it was offered.
Government support globally totalled
$15 million (in Australia $7 million) and
has been accounted for as a reduction in
employee expenses.

As a Board, we have considered the
amount of wage subsidy support accessed
by the Group when determining FY20
remuneration outcomes.

FY21 Fixed Remuneration to remain
unchanged from FY20 levels

There were no Fixed Remuneration
increases awarded to KMPs that remained
in the same role during FY20. For FY21, the
Board determined that Fixed Remuneration
will remain at FY20 levels for the majority
of employees across the Group.

After taking into consideration FY20
financial and non financial performance,
the Board approved a Group incentive pool
that was significantly lower compared to
prior years. The quantum of the incentive
pool recognises the statutory loss, key
contributions made in FY20 that position
the Group for success in FY21 and beyond
as well as the importance of motivating and
retaining our high performing employees
to navigate the challenges ahead. The
funding rate for the FY20 Group incentive
pool is aligned to the FY20 Deferred Equity
Award outcomes for the Group CEO and
senior executives.

Board discretion applied to executive
FY20 short term remuneration outcomes

For executives, the Board determined that
no cash STA would be awarded in FY20 and
it was more appropriate to issue an FY20
Deferred Equity Award albeit at a reduced
quantum. Half of the award is scheduled to
vest in September 2021 and the balance in
September 2022.

No adjustments to FY20
STA scorecard targets

During the year the Board made no
adjustments to FY20 STA scorecard targets
to account for the impact of COVID-19.

Target setting for 2020
Long Term Award (LTA)

In relation to the 2020 LTA, the Board
deferred its decision on setting the average
Return on Equity (ROE) target until the sale
of the Engineering business was complete.
The impact of COVID-19 will be considered
when this target is set, following the sale.

Contents

a. Questions and answers

b. Executives and Non Executive Directors covered by this report

c. Snapshot of FY20 Remuneration Outcomes

d. Executive Reward Strategy on a page

e. Executive remuneration outcomes and disclosures

f. Remuneration governance

g. How risk management is incorporated into executive reward

h. How executive rewards are linked to performance

This report forms part of the
Directors’ Report and has been
audited in accordance with the
Corporations Act 2001.

i. Executive contracts

j. Equity based remuneration

k. Non Executive Directors

108

109

110

111

112

119

121

122

128

129

134

Lendlease Annual Report 2020 Governance108

109

To support these objectives, we believe that this component of the
ERS is better described as an RSA, illustrated below.

ERS Remuneration
Elements

Fixed Remuneration

Short Term Award

Restricted Securities Award

Long Term
Award (LTA)

LTA
Minimum
LTA
Award

Short Term Award

Long Term Award

The value of the RSA is fixed at the time of grant but will vary with
the security price over the deferral period (up to six years).

The quantum of Total Target Remuneration is unchanged.

6. Is the RSA just Fixed Remuneration?
The RSA is an important component of our ERS as it aligns our
senior executives to securityholders and supports long term value
creation.

It is important to recognise that the RSA is not the same as
Fixed Remuneration given that:

• The RSA is deferred and vests between three and six years

after it is granted

• The value of the RSA is directly linked to the security

price and therefore may be lower or higher than the original
allocation value

• The Board has discretion to forfeit part or all of any unvested
RSA where it considers vesting would provide a participant
with a benefit that was unwarranted or inappropriate.

7. Does Lendlease pay distributions on the RSA?
Distribution equivalent amounts are paid as cash on the RSA.

This practice aligns senior executive reward outcomes to
securityholder interests and paying distributions on this type of
award is not uncommon.

Distributions are not paid on the LTA, unless and until vesting
conditions are met.

Remuneration Report

a. Questions and answers

We regularly receive feedback regarding our ERS from
securityholders. Below is a summary of the key questions that we
have been asked, or anticipate being asked, and our responses.

Our reward structure is unlike frameworks commonly found in
other large listed organisations as it reflects the most important
aspects of our business strategy, namely the long dated nature of
our business, where profits emerge over an extended period of
time. Accordingly, the ERS has a relatively high weighting toward
securities that have long dated vesting and deferral periods.

1. Why was a Deferred Equity Award made to KMP in
FY20 when financial goals were not achieved?
Lendlease has paid no cash STA in FY20.

Lendlease uses a balanced scorecard to assess the annual
performance of senior executives that comprises 50 per cent
financial goals and 50 per cent non financial goals.

The FY20 Deferred Equity Award recognises that although
the FY20 financial goals were not met, significant progress
was made against most of the non financial goals that support
long term value creation. The FY20 Deferred Equity Award
also acknowledges the importance of motivating, recognising,
rewarding and retaining our key executives.

The Board considered that paying a cash STA would not have been
appropriate. However, an equity award that aligns the interests
of senior executives with securityholders into the future was
considered to be fair and in the best interests of the Group.

2. Why was an equity award issued rather than a cash award?
Our current ERS is structured to pay any STA as cash.

The Board determined that an equity award would be more
appropriate, with half of the award vesting in September 2021
and the balance vesting in September 2022.

Issuing an equity award that is deferred equally over two years
provides the Board with additional review points prior to vesting
and delivers a retention element given that senior executives will
be required to wait for up to two years for the award to vest.

3. Why was an award made to KMP in FY20 when dividends
were reduced?
Notwithstanding the statutory loss for the year, securityholders
received an interim distribution, commensurate with our distribution
policy, at the half year. Whilst a final dividend has not been paid
from Lendlease Corporation Limited a small final distribution will
be paid from the Lendlease Trust. The reduced incentive pool for
the year represents a lower proportion of amounts distributed to
securityholders than in any of the past five years.

4. What impact does the capital raising have on remuneration
decisions and outcomes?
Performance securities and performance rights for existing
awards ‘on foot’ were not adjusted following the capital raising as
is the practice in many large listed organisations.

5. Why is the LTA Minimum referred to as the Restricted
Securities Award (RSA) in this report?
The RSA (LTA Minimum) was incorporated into the ERS:

• To promote alignment with securityholders as a portion of
target remuneration is delivered in Lendlease securities

• To support long term value creation

• To better align reward to risk management.

b. Executives and Non Executive Directors covered by this report
The following executives and Non Executive Directors were considered KMP for the year ended 30 June 2020.
Former executives and Non Executive Directors who were KMP during the year are also covered by this report.

Name

Group CEO
Stephen McCann

Group Chief Executive Officer and Managing Director

Current Senior Executives
Johannes Dekker

Tarun Gupta

Denis Hickey

Group Head of Engineering and Building

Group Chief Financial Officer

Chief Executive Officer, Americas

Anthony Lombardo

Chief Executive Officer, Asia

Neil Martin

Kylie Rampa

Chief Executive Officer, Europe since 10 September 2019

Chief Executive Officer, Property Australia

David Andrew Wilson

Group Chief Commercial and Risk Officer

Former Senior Executive
Daniel Labbad

Chief Executive Officer, Europe until 9 September 2019

Note: The term ‘senior executives’ used throughout this Remuneration Report refers to all the executives listed above, unless stated otherwise.

Non Executive Directors

Current Non Executive Directors
Michael Ullmer

Independent Chairman

Colin Carter

Philip Coffey

David Craig

Independent Non Executive Director

Margaret Ford

Independent Non Executive Director since 1 March 2020

Jane Hemstritch

Independent Non Executive Director

Elizabeth Proust

Independent Non Executive Director

Nicola Wakefield Evans

Independent Non Executive Director

Robert Welanetz

Independent Non Executive Director since 1 March 2020

Former Non Executive Director
Steve Dobbs

Independent Non Executive Director until 20 November 2019

Lendlease Annual Report 2020 Governance

110

111

Remuneration Report

c. Snapshot of FY20 remuneration outcomes

Target
Remuneration Mix

The FY20 target remuneration mix is:

Fixed Remuneration

RSA1

STA

LTA

31%

36%

CEO

Execs

CEO

Execs

CEO

Execs

45% CEO

Execs

34%

15%

17%

15%

A$000s

2,200

1,200

500

1,200

500

3,200

1,100

Total Target Remuneration | Group CEO ‑ 7,100 | Typical Lendlease Senior Executive ‑ 3,300

Fixed Remuneration

The Fixed Remuneration for the Group CEO and senior executives was temporarily reduced by 20 per cent from 1 May
2020 as part of the Group’s response to COVID‑19. Some of the cost savings from this action were used to seed Lendlease’s
Hardship & Wellbeing Fund.

There were no Fixed Remuneration increases awarded to KMPs that remained in the same role during FY20.

FY20 Cash STA
Outcomes

No cash STA was paid in FY20:

% of Target STA Paid

% of Maximum STA Paid

Group CEO

Senior Executives

FY20

See page 124 for more details.

FY19

25% ‑ 50%

FY20

FY19

17% ‑ 33%

d. Executive Reward Strategy on a page

Our Vision

To create the best places

Our Strategy

Sets us up for the long term so we can continue to deliver on our vision

Our strategy is urbanisation-led, leveraging our integrated model to create the best urban precincts in key gateway cities
internationally. See the ‘Our strategy’ section on page 18 for further information.

Our Remuneration Principles

Reinforce and actively support our Vision and Strategy

Executive Remuneration at Lendlease is:

Aligned with
securityholder
interests

Transparent
and easy to
communicate

Aligned with
team behaviours
and enterprise
leadership

Market
competitive
to retain
highly capable
executives

Balanced with
a significant
portion of
remuneration
at risk, which
is only earned
for outstanding
performance

Longer dated
and aligned to
our earnings
profile, reflecting
the importance
of urbanisation
projects

Risk management
focused with
clear practices
that minimise
potential conflicts
of interest and
enable effective
and aligned
decision making

FY20 Deferred
Equity Award

The Board approved in August 2020 that an FY20 Deferred Equity Award would be fair and appropriate given that it:

• Recognises the achievement of non financial performance outcomes that support long term value creation

Our Remuneration Framework

Reflects our remuneration principles and supports our Vision and Strategy

• Considers the balance between motivating, recognising and rewarding executives with securityholder interests

• Considers that although a final dividend for FY20 will not be paid from Lendlease Corporation Limited, securityholders

will receive distributions of over $191 million relating to FY20

• Provides the Board with additional review points prior to vesting

• Provides a retention element given that executives will be required to wait up to two years for the award to vest.

The FY20 Deferred Equity Award will be issued in or around September 2020 as Lendlease securities that vest over two
years, with half vesting in September 2021 and the balance in September 2022.

The value of the FY20 Deferred Equity Award for the Group CEO is equivalent to 35 per cent of his STA target (23 per cent
of his STA maximum) and the value of the FY20 Deferred Equity Awards for executives is equivalent to between 25 per cent
to 40 per cent of STA targets (between 17 per cent to 27 per cent of STA maximums).

See the Remuneration Awarded table on page 115 for more details.

LTI Outcomes

The vesting outcomes for the two LTI awards that were subject to performance testing during FY20 are set out below:

Performance
Period

Performance
Test

Performance
Hurdle

Performance
Outcome

Vesting
Outcome

Overall
Vesting
Outcome

2016
LTI
Award

2017
LTI
Award

1 July 2015 to
30 June 2019

Year 4

1 July 2016 to
30 June 2019

Year 3

See page 126 for more details.

Relative Total
Securityholder
Return (TSR)

12th percentile ranking
compared to comparator group

ROE

Relative TSR

ROE

Average 4 year ROE performance
was 11.5%

26th percentile ranking compared
to comparator group

Average 3 year ROE performance
was 11.0%

34.4%

25.0%

16.0%

11.6%

Mandatory
Securityholding
Requirement

As part of the Group’s response to support our people during COVID‑19, the Group CEO and GLT members were provided
with the opportunity to request a temporary release from the mandatory securityholding requirement, such that the
required holding of Lendlease securities is halved. The Group CEO did not request this release.

See Equity Holdings & Transactions for the year ended 30 June 2020 on page 133 for more details.

Effectiveness Review
of ERS for FY21

In FY21, the Board will continue to review and assess the effectiveness of our ERS as we contemplate what is required to
motivate and retain our senior executives to navigate the challenges and realise the opportunities that lay ahead.

NED Remuneration

Non Executive Directors were able to temporarily reduce their base fees by 20 per cent from 1 June 2020 as part of the Group’s
response to COVID‑19. Some of the cost savings from this action were used to seed Lendlease’s Hardship & Wellbeing Fund.

There were no increases to NED fees during FY20.

Aligned with
Securityholders

At Risk – Performance
Hurdles

At Risk – Performance
Hurdles & Security Price

Fixed Remuneration

Restricted Securities Award
(RSA)1

Short Term Award (STA)

Long Term Award (LTA)

Set to attract and retain
highly capable executives

Focussed on retention and long
term value creation

Focused on priority areas
in the current financial year

Focused on future years,
with a six year time horizon

Delivered as:
Base salary and superannuation
for Australian executives and
base salary for executives
outside of Australia

Consistent Fixed Remuneration
set for similarly sized roles to
simplify pay setting, support
mobility and team approach

Delivered as:
Rights

Deferral period:
Up to six years with awards
delivered in four equal tranches
over Y3, Y4, Y5 and Y6

Distributions:
Distribution equivalent amounts
are paid as cash on the RSA
during the deferral period

The value of the RSA is fixed at
the time of grant but will vary
with the security price over the
deferral period

Delivered as:
Cash

Performance period:
One year

Performance measures:
Financial (50 per cent) and Non
Financial (50 per cent) measures
aligned to Lendlease’s focus
areas of value creation

Delivered as:
Performance rights

Performance period:
Three years with vested awards
delivered in four equal tranches
over Y3, Y4, Y5 and Y6

Performance measures:
50 per cent relative TSR
and 50 per cent average ROE

Distributions:
Paid as an adjustment of
additional securities or cash
for any awards that vest

Remuneration Governance

Robust governance is critical to the integrity of our remuneration framework

The People & Culture Committee and the Board review our remuneration principles and remuneration framework as well as
determine the STA and LTA outcomes for the Group CEO and senior executives, which remain subject to malus consideration. The
Board retains an overarching discretion to reduce or forfeit any unvested awards if it considers that vesting of such awards will result
in the participant receiving a benefit that was unwarranted or inappropriate. Additionally, the Group CEO RSA and LTA is submitted
for securityholder approval at the AGM.

1. Previously LTA Minimum.

Lendlease Annual Report 2020 Governance

112

113

Remuneration Report

e. Executive remuneration outcomes and disclosures

The Board undertook an assessment of the Group CEO’s scorecard and the results are included below:

Area of Focus

Reason Chosen

Result

Performance Assessment

Performance Measures
For Year Ended 30 June 2020

Financial Performance - 50 per cent Weighting

A range of financial measures that includes
specific targets for:
‑ Profit after Tax
‑ EBITDA
‑ Cash flow from operating and investing
‑ Overheads
An assessment of the overall financial health of
the business:
‑

Comparing the quality of the result relative to
the targets set

A breadth of financial measures, in
combination with the forward‑looking
assessment of the financial health of the
business, focuses the Group CEO on the
delivery of financial results in the short term
while taking decisions with an emphasis on
the long term interests of securityholders.

BELOW

ABOVE

Non Financial Performance - 50 per cent Weighting (Aligned to our Five Focus Areas of Value Creation)

Health and Safety

We are committed to the health and safety of
our people. The Critical Incident Frequency
Rate (CIFR) helps us assess how effective we
are at eliminating life threatening incidents.

BELOW

ABOVE

Strategic Initiatives and Managing Risk

Effective capital management drives longer
term securityholder returns.

Our Customers and Innovation

Our People

Sustainability

Satisfied customers drive long term
value. Innovation contributes to better
performance – capturing and responding to
disruption creates opportunity.

Having the right people in leadership1
roles is critical to long term success.
The Group CEO sponsors key people
initiatives.
The Group CEO actively promotes diversity
and inclusion to grow capability.

Capital investors, policy‑makers, customers
and communities are seeking partners
who can deliver efficient, healthy, resilient,
culturally and socially inclusive outcomes
that deliver long term value.

BELOW

ABOVE

BELOW

ABOVE

BELOW

ABOVE

BELOW

ABOVE

A summary of the result against each financial measure is below:

Profit after Tax

Behind Target

EBITDA

Behind Target

Operating and
Investing Cash Flow
Overheads

Behind Target

The Group experienced a very challenging year with a Statutory Loss after Tax of $310 million for the
year ended 30 June 2020.
A solid Core operating EBITDA in H1FY20 of $628 million was followed by a $65 million loss in H2FY20 as
our three Core segments experienced a significant deterioration in operating conditions as a result of the
pandemic. Core operating EBITDA for the full year was $563 million. The Non core segment recorded an
EBITDA loss of $495 million which included accounting for $525 million pre tax in Engineering separation
costs. The EBITDA for the year ended 30 June 2020 was a $90 million loss.
Actual cash flow was ($232 million), which is below target primarily as a result of a delay in apartment
settlements.
Focus on business efficiencies saw overheads lower than targeted, but reduction in NPAT resulted in
Overhead / GPM ratio not being met.

Notwithstanding the progress made during the year, there was one fatal incident recorded. Tragically, Mohammed Nurul Amin passed away in hospital
while in post operative recovery following an incident on the Affin Bank Berhad project in Malaysia. This tragic incident has been considered in assessing
the Group CEO’s overall performance.

Our CIFR is at the lowest (0.7) since records began in 2012. Lost Time Injury Frequency Rate (LTIFR) for the year is 1.5, the lowest since records began in
2000. Strong focus on safety risk management remains paramount at all times and has remained our primary concern during COVID‑19. The Group CEO
continues to provide visible health and safety leadership, notwithstanding the limited number of site visits able to be arranged in the second half of the
financial year.

In response to the immediate impacts of COVID‑19, the Group enters FY21 in a strong financial position as a result of the successful completion of the
institutional placement ($950 million) and Security Purchase Plan ($260 million), with gearing below 10 per cent and total liquidity above $5 billion at
30 June 2020. In addition to these measures, significant progress has been made on our strategy, including the San Fracisco Bay Area project
(c. $22 billion end value), PSP Investments partnership in Milan (c.$4 billion end value), PLLACes on One Sydney Harbour and a new joint venture with
Mitsubishi Estate. In addition, the divestment of the Engineering business is expected to complete in early FY21.

There is continued improvement in risk management including the establishment of our first two Practices (Residential and Urban Regeneration) to drive
consistency of approach on all pipeline projects globally.

Customer centricity has been more systemically embedded within the business. Key customers have been assigned dedicated account leaders and all
activity coordinated through the account structure. Annual customer experience research is now well established across all regions and is supported by
regional CEOs.
NPS1 and C‑SAT2 global performance remains solid with small increases achieved in FY20 in a tough operating environment.
Our digital strategy, as a founding member alongside Microsoft, Dell and Anys in establishing the Global Digital Twin Consortium, has been progressed.
The launch of our property lifecycle platform, Podium, will help us continue to lead in this space.

Increasing our senior leadership effectiveness was a key focus in FY20 following the targets not being achieved in FY19. Active focus, communication
and visibility of senior leaders, supported by the Leadership Excellence Program, has driven a substantial improvement of +17 in Leadership
Effectiveness scores to 61 per cent and a 4 percentage point increase in our Change Management Index (ahead of our target).

The retention rate for talent segments was 91 per cent in FY20, ahead of our target of greater than 90 per cent. The proportion of women in leadership
roles has increased across the Group from 26.1 per cent to 26.9 per cent.

Our new Sustainability Strategic Framework has been endorsed by our GLT, including the formation of the Carbon Target Sub‑Committee to determine
appropriate targets for the coming years. Significant progress was made in the disclosure against the Taskforce for Climate‑related Financial Disclosure
(TCFD) framework as well as the publishing of our 2050 Future Climate Scenarios.

1. Leadership roles include a number of levels in the Lendlease Career Job Framework, including executive level roles.

1. NPS measures whether our customers’ experience fosters loyalty. 2. C-SAT measures whether customers are satisfied with our products and services.

Lendlease Annual Report 2020 Governance

114

115

Remuneration Report

e. Executive remuneration outcomes and disclosures continued
Comparison of remuneration tables
In this section, the value of remuneration for the Group CEO and each senior executive is reported. In addition to the required statutory
table (based on the accounting disclosures), we have included a further table setting out the remuneration awarded on page 115, and graphs
showing remuneration received on page 116, to provide a more complete illustration of our approach to executive remuneration.
An explanation of the differences is set out below.

Disclosure

Awarded Table

Remuneration Received Graphs

Statutory Table

Period Covered

Remuneration disclosed relates to both time in their current role (as KMP) and any
other role they have held at Lendlease during the financial year.

Only shows remuneration for the time
the senior executive was KMP.

Fixed
Remuneration

STA Cash

Deferred Short
Term Incentive
(STI)

This includes the contractually awarded
amount of Total Package Value (TPV)/
Base Salary from 1 September 2019 or
later and reflects the 20 per cent Fixed
Remuneration reduction that applied
from 1 May 2020 as part of the Group’s
response to COVID‑19.
It excludes annual leave and long service
leave accruals.
For individuals employed for part of the
year, only remuneration paid during the
employment period is included.

This includes the amount of TPV/Base
Salary received during the financial
year and reflects the 20 per cent Fixed
Remuneration reduction that applied
from 1 May 2020 as part of the Group’s
response to COVID‑19.
It excludes annual leave and long service
leave accruals.
For individuals whose remuneration
changed during the year, remuneration
received reflects the different amounts
of TPV/Base Salary paid.

The statutory disclosures include a
value for cash salary, non monetary
benefits, superannuation and other
long term benefits in line with statutory
remuneration disclosure requirements.
Non monetary benefits also include the
movement in annual leave accruals. Cash
salary also reflects the 20 per cent Fixed
Remuneration reduction that applied
from 1 May 2020 as part of the Group’s
response to COVID‑19 and the value of
distribution equivalent amounts paid as
cash on the RSA.

The STA that will be paid as cash in September 2020 in respect of the financial year.

N/A ‑ The STI was replaced by the
STA in FY19.

N/A ‑ The value of Deferred STI that
vested during the year is included in Prior
STI and LTI Awards.

The accounting expense attributed
to this financial year for Deferred STI
awards granted in September 2018
and the Executive Deferred Award
(EDA) granted to a limited number of
executives in September 2019.

N/A

Total Short Term
Remuneration

The sum of Fixed Remuneration and
STA Cash.

N/A

Deferred Equity
Award

RSA1

LTA

Prior STI and
LTI Awards

The value of the Deferred Equity Award
to be issued in or around September
2020 that vests over two years with
half vesting in September 2021 and the
balance in September 2022.

The value of Rights awarded at the
time of grant. The value varies with the
security price over the deferral period.
The RSA vests in September 2022,
September 2023, September 2024 and
September 2025.

The LTA replaced the LTI in FY19.
The Remuneration Awarded table shows
the target face value of the 2020 LTA
offered in September 2019.
The 2020 LTA vests in September 2022,
September 2023, September 2024 and
September 2025 and the awards are
subject to relative TSR and average ROE
performance hurdles (explained in detail
on page 126).

N/A ‑ not disclosed in this table.

Security Price
Growth and
Distributions

N/A

1. Previously LTA Minimum.

N/A ‑ value will be reflected in FY21 and FY22.

The value of Rights which vested during
the year. The value shown represents the
value of Rights at the grant date. No RSA
vested during FY20.

N/A

The RSA is reported in the Security
Based Payments section of the statutory
disclosures. This is the accounting
expense attributed to this financial year
for RSA’s granted in the 2019 and 2020
financial years.

The LTA is reported in the Security
Based Payments section of the statutory
disclosures. This is the accounting
expense attributed to this financial year
for LTA granted in the 2019 and 2020
financial years.

The value of any Deferred STI awards,
including the EDA and LTI awards which
vested during this financial year. The
value shown represents the value of the
awards at the grant date.
The Deferred STI awards which vested
in September 2019 were granted in
September 2017 and September 2018.
The LTIs which vested in September 2019
were granted in September 2015 and
September 2016.

The value of security price growth and
distributions paid between the grant date
and the vesting date for STI, RSA and LTI
awards which vested during the year.
This also includes the value of distribution
equivalent amounts paid as cash on the RSA.

Prior STI and LTI Awards are reported
as part of the Security Based Payment
section of the statutory disclosures.
This includes the accounting expense
attributed to this financial year for the
2018 Deferred STI Award and the LTI
Awards granted in the 2016, 2017 and
2018 financial years.

N/A

Remuneration awarded by the Board for the year ended 30 June 2020
The remuneration awarded is set out in the table below.
The Board has reviewed senior executive remuneration and no further increases are anticipated for FY21, with the exception of Neil Martin
who will transition to the target remuneration for the CEO, Europe role during the year.

A$000s1

Short Term

STA Opportunity

Total Short Term
Remuneration

‘At Risk’ –
Deferred to Future Periods

Name

Group CEO

Stephen McCann

Current Senior Executives

Johannes Dekker

Tarun Gupta

Denis Hickey

Anthony Lombardo

Neil Martin9

Kylie Rampa

David Andrew Wilson

Former Senior Executive
Daniel Labbad10

Fixed
Remuneration2

STA Cash3

% of
Target
STA Cash
Paid

% of
Maximum
STA Cash
Paid

2020

2019⁴

Deferred
Equity
Award⁵

LTA7
2020
Target

LTA
2020
Max7,8

RSA6

2,127

1,161

1,160

1,610

1,105

1,001

1,160

1,205

263

‑

2,127

2,200

420

500

3,200

5,550

1,161

1,160

1,610

1,105

1,001

1,325

1,880

1,320

‑

1,160

1,450

1,205

1,372

125

175

274

166

198

125

175

500

313

500

1,100

3,200

1,100

3,200

1,100

3,200

1,100

3,200

687

2,000

1,100

3,200

1,100

3,200

‑

263

1,582

‑

Remuneration received for the year ended 30 June 2020
Remuneration received during the year includes Fixed Remuneration, prior STI and LTI awards and the security price growth and
distributions on these awards which vested during the year.

The Board determined in August 2020 that a cash STA would not be awarded in FY20. Prior STI awards that vested during the year were
granted in September 2017 and 2018 and were released in September 2019. Prior LTI awards that vested during the year were tested based
on cumulative performance between the start of the year in which they were granted and the year ending 30 June 2019. These awards
were also released in September 2019.

Security price growth and distributions represent the shared ‘gain’ senior executives and securityholders have experienced over the life of
awards. The table below illustrates the change for the awards that vested during the year.

Award

2017 STI

2018 STI

2016 LTI

2017 LTI

Granted

September 2017

September 2018

September 2015

September 2016

Grant price
per security $

Vest price $
(1 Sept 2019)

Gain
per security $

Distributions
paid per security $

17.11

19.79

15.16

13.49

17.02

(0.09)

(2.77)

1.86

3.53

1.11

0.42

2.37

1.77

Total $

1.02

(2.35)

4.23

5.30

The impact of security price movements on unvested awards that are scheduled to vest in September 2020 will be included in the
FY21 Remuneration Report. This will reflect the security price decline immediately following the escalation of the COVID-19 pandemic.
For example, the security price movement on the 2018 STI was a loss of 37.5 per cent between the grant date and 30 June 2020.

1. 2020 remuneration is reported in AUD based on the 12 month average historic foreign exchange rates for FY20 (rounded to two decimal places): GBP 0.53 (applied to Daniel
Labbad and Neil Martin), SGD 0.93 (applied to Anthony Lombardo) and USD 0.67 (applied to Denis Hickey). All senior executives are paid in local currency. 2. Fixed
Remuneration includes the contractually awarded amount of Total Package Value/Base Salary (including the value of any benefits salary sacrificed) but excludes any
allowances or non monetary benefits. Also reflects the 20% Fixed Remuneration reduction that applied from 1 May 2020 as part of the Group’s response to COVID-19.
3. The STA Cash refers to the Short Term Award for the Group CEO and senior executives for the year ended 30 June 2020, which is payable in cash in September 2020. For
FY20, the Board determined that a cash STA would not be awarded. 4. 2019 remuneration is reported in AUD based on the 12 month average historic foreign exchange rates for
FY19 (rounded to two decimal places): GBP 0.55 (applied to Daniel Labbad), SGD 0.97 (applied to Anthony Lombardo) and USD 0.71 (applied to Denis Hickey). 5. The FY20
Deferred Equity Award was approved by the Board in August 2020 and is expected to be issued to executives in or around September 2020, in recognition of the non financial
goals that were achieved in FY20 that support long term value creation. The FY20 Deferred Equity Award also reflects the importance of motivating, recognising, rewarding
and retaining our key executives and will be issued as Lendlease securities that vest over two years with half vesting in September 2021 and the balance in September 2022.
6. Previously LTA Minimum. 7. The LTA refers to the Long Term Award for the Group CEO and senior executives for the year ended 30 June 2020. It is awarded on a face value
basis. Refer to page 126 for a detailed explanation of LTA awards. 8. The LTA provides for the opportunity for outperformance if hurdles are achieved above target. The
maximum opportunity is 150% of the LTA target plus the RSA for the Group CEO and 200% of LTA target plus the RSA for senior executives. 9. Neil Martin was appointed to
the Chief Executive Officer, Europe role on 10 September 2019 and remuneration reflects the remuneration awarded on appointment to this role. 10. Daniel Labbad ceased as a
KMP on 9 September 2019 and remuneration reflects his time in his KMP role.

Lendlease Annual Report 2020 Governance
116

117

Remuneration Report

e. Executive remuneration outcomes and disclosures continued
Remuneration received for the Group CEO other senior executives during 2019 and 2020

Remuneration Received for the Group CEO during 2019 and 2020

A$000s1

6,547

2,084

2,263

2,200

2019

3,609

230

1,252

2,127

2020

Stephen
McCann

Fixed Remuneration2

Prior STI & LTI Awards

Security Price Growth4

Remuneration Received for senior executives during 2019 and 2020

A$000s1

1,818
43

450

125

1,503
17

325

2,918

630

963

125

1,957
58

739

3,253

531

842

324

2,244
53

581

2,577

543

714

227

1,640
55

480

1,200

1,161

1,200

1,160

1,093

1,105

1,556

1,610

2,480

377

653

250

2,369

404

593

125

1,784
25

599

1,540
34

301

1,200

1,160

1,247

1,205

1,571

167

433

971

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

Johannes
Dekker5

Tarun
Gupta

Denis
Hickey

Anthony
Lombardo

Neil
Martin

Kylie
Rampa

David Andrew
Wilson

Fixed Remuneration2

STA Cash3

Prior STI & LTI Awards

Security Price Growth4

1. 2020 remuneration is reported in AUD based on the 12 month average historic foreign exchange rates for FY20 (rounded to two decimal places): GBP 0.53 (applied to Neil
Martin), SGD 0.93 (applied to Anthony Lombardo) and USD 0.67 (applied to Denis Hickey). 2019 remuneration is reported in AUD based on the 12 month average historic
foreign exchange rates for FY19 (rounded to two decimal places): SGD 0.97 (applied to Anthony Lombardo) and USD 0.71 (applied to Denis Hickey). All senior executives are
paid in local currency. 2. Fixed Remuneration includes the TPV/Base Salary received during the financial year and reflects the 20% Fixed Remuneration reduction that applied
from 1 May 2020 as part of the Group’s response to COVID-19. 3. STA Cash refers to the Short Term Award for the Group CEO and senior executives for the relevant financial
year, payable in cash annually in September. For FY20, the Board determined that a cash STA would not be awarded. 4. Reflects the value of security price growth and
distributions paid between the grant date and the vesting date for STI and LTI awards which vested during the year. This also includes the value of distribution equivalent
amounts paid as cash on the RSA. 5. For Johannes Dekker, his prior year awards include a sign-on award reflecting remuneration foregone on resignation from his previous
employer.

Statutory disclosures – Remuneration of the Group CEO and senior executives for the years ended 30 June 2020 and 2019
Statutory disclosures are included in the table below. Short Term Benefits, Post Employment Benefits and Other Long Term Benefits
relate to remuneration for the year. Values in the Security Based Payments columns reflect the accounting expense attributed to this
year for STI, RSA, LTI and LTA awards from prior years, and the accounting expense attributed to the RSA and LTA from this year.

A$000s¹

Short Term
Benefits

Post
Employment
Benefits

Security Based Payments7

Cash
Salary2

STA
Cash3

Non
Monetary
Benefits4

Superannu-
ation5

Other
Long Term
Benefits⁶

Sub-total

LTI / LTA

Deferred
STI

Name

Group CEO
Stephen McCann

Year

2020

2019

Current Senior Executives
Johannes Dekker8

2020

Tarun Gupta

Denis Hickey

Anthony Lombardo

Neil Martin9

Kylie Rampa

2019

2020

2019

2020

2019

2020

2019

2020

2019

David Andrew Wilson 2020

2019

Former Senior Executive

Daniel Labbad10

Total

2020

2019

2020

2019

2,130

2,155

1,180

1,191

1,164

1,166

1,634

1,558

1,129

1,094

849

1,164

1,149

1,209

1,287

454

1,424

10,913

‑

125

‑

125

‑

324

‑

227

‑

250

‑

125

‑

273

11,024

1,449

‑

260

287

‑

190

251

280

291

‑

355

284

1,165

1,116

‑

230

‑

113

299

2,192

2,213

1,488

1,844

1,203

1,312

1,824

2,133

1,409

1,612

857

1,249

1,441

1,259

1,451

809

1,981

12,290

13,987

1,815

2,375

1,700

708

735

757

715

588

692

655

303

750

538

995

735

865

669

8,570

7,025

Total

4,226

5,463

3,262

2,870

2,095

2,704

2,643

3,188

2,215

2,692

1,598

2,158

2,572

2,330

2,464

219

875

318

157

635

104

467

114

425

438

159

593

278

121

519

1,462

4,110

1,795

3,169

22,322

25,122

1. 2020 remuneration is reported in AUD based on the 12 month average historic foreign exchange rates for FY20 (rounded to two decimal places): GBP 0.53 (applied to Daniel
Labbad and Neil Martin), SGD 0.93 (applied to Anthony Lombardo) and USD 0.67 (applied to Denis Hickey). 2019 remuneration is reported in AUD based on the 12 month
average historic foreign exchange rates for FY19 (rounded to two decimal places): GBP 0.55 (applied to Daniel Labbad), SGD 0.97 (applied to Anthony Lombardo) and USD 0.71
(applied to Denis Hickey). All senior executives are paid in local currency. 2. Cash Salary includes the payment of cash allowances such as motor vehicle allowance and the
value of distribution equivalent amounts paid as cash on the RSA. For Daniel Labbad and Neil Martin, this also includes cash allowances paid in lieu of pension contributions.
Cash salary also reflects the 20% Fixed Remuneration reduction that applied from 1 May 2020 as part of the Group’s response to COVID-19. 3. STA Cash refers to the Short
Term Award for the Group CEO and senior executives for the year ended 30 June 2020, which is payable in cash in September 2020. For FY20, the Board determined that a
cash STA would not be awarded. 4. Non monetary benefits may include items such as car parking, relocation and expatriate benefits (such as house rental, health insurance,
shipping of goods and tax return preparation), motor vehicle costs, travel benefits and annual leave. 5. Superannuation includes the value of insurance premiums funded by
Lendlease for Australian executives who are members of the Lendlease default superannuation fund. For Daniel Labbad, the 2019 comparative has been restated to reflect
that cash allowances paid in lieu of pension contributions are now included in Cash Salary. 6. Other Long Term Benefits represents the accrual of long term leave entitlements
(e.g. long service leave). 7. Security based payments reflect the accounting expense on a fair value basis. For all executives other than Neil Martin, security based payments are
issued as indeterminate rights and performance rights. For Neil Martin, Deferred STI (including his Executive Deferred Award) is issued as securities. LTI/LTA includes the
accounting expense for the RSA (previously LTA Minimum). 8. For Johannes Dekker, amounts under Other Long Term Benefits, Deferred STI and LTI/LTA include the prorated
accounting expense of future payments relating to remuneration foregone on resignation from his previous employer, and a retention award relating to the strategic review of
the Engineering and Services businesses. 9. Neil Martin was appointed to the Chief Executive Officer, Europe role on 10 September 2019 and remuneration reflects time in this
KMP role. 10. Daniel Labbad ceased as a KMP on 9 September 2019 and remuneration reflects his time in his KMP role. His unvested LTI, LTA and Deferred STI awards remain
on foot and subject to the original vesting conditions. The security based payment expense for the current period therefore includes up to three years of each unvested award
expense that has been accelerated and disclosed in total for FY20, including those amounts which would otherwise have been included in future year disclosures.

Lendlease Annual Report 2020 Governance
118

119

Remuneration Report

e. Executive remuneration outcomes and disclosures continued
Reconciliation of 2020 statutory remuneration with Remuneration Received for the Group CEO
The following table shows the difference between the Group CEO’s Remuneration Received on page 116 and the Statutory Disclosure on page 117.

Remuneration
relating to Prior Years

Remuneration
relating to Current Year

Remuneration
relating to Prior Years

669

4,226

1,147

219

(25)

(2,127)

2,130

3,609

(582)

(876)

s
0
0
0
$

Total
Remuneration
Received

LTI
Vested

Deferred
STI Vested

RSA
Distributions¹

Contractual
Fixed Rem
at Sept 19

Actual
Cash
Salary
in 2020²

Superann-
uation³

Other
Long Term
Benefits⁴

LTA
Expense
(2020 grant)

STI Expense
(awards
on foot)

LTI Expense
(awards
on foot)

Total
Statutory

Less

Add

Long Term Incentive performance
During 2020, two LTI awards were subject to performance testing. The performance hurdles were relative TSR and average ROE.
Each hurdle is tested over a three and four year performance period. The outcomes are shown below.

2016 LTI Award
The four year relative TSR test was conducted in July 2019. Lendlease’s relative TSR performance achieved the 12th percentile when
compared to the comparator group over the period from 1 July 2015 to 30 June 2019. As a result, none of the tested award vested.

The four year average ROE test was also conducted in July 2019. Lendlease’s four year average ROE performance was 11.5 per cent
over the period from 1 July 2015 to 30 June 2019. As a result, 34.4 per cent of the tested award vested.

2017 LTI Award
The three year relative TSR test was conducted in July 2019. Lendlease’s relative TSR performance achieved the 26th percentile when
compared to the comparator group over the period from 1 July 2016 to 30 June 2019. As a result, none of the tested award vested.

The three year average ROE test was also conducted in July 2019. Lendlease’s three year average ROE performance was 11.0 per cent
over the period from 1 July 2016 to 30 June 2019. As a result, 25 per cent of the tested award vested.

The four year relative TSR and four year ROE tests for this award are scheduled for July 2020 and the results will be shown in the 2021
Remuneration Report.

f. Remuneration governance
Robust governance is a critical part of Lendlease’s approach to executive remuneration.

Board
The Board has overall responsibility for executive remuneration at Lendlease. The Board assesses the performance of, and determines
the remuneration outcome for the Group CEO.

People & Culture Committee
The Committee’s agenda reflects the importance of human capital to the Group’s strategy and business planning, and it assists the Board
in establishing appropriate policies for people management and remuneration across the Group. The People & Culture Committee is also
accountable for reviewing and making recommendations to the Board on the goals, performance and remuneration of members of the
GLT. A description of the People & Culture Committee’s scope can be found on page 104.

Management
Management makes recommendations to the People & Culture Committee in relation to developing and implementing the ERS and
structure. The Group CEO also provides his recommendations on Fixed Remuneration and STA outcomes for his direct reports for approval
by the People & Culture Committee.

Independent remuneration advisor
Until 30 June 2020, the Board appointed independent remuneration advisor was PwC. The Board engaged EY in July 2020. Strict
governance protocols are observed to ensure advisors' advice to the People & Culture Committee is made free from undue influence by
KMP. The following arrangements were made to ensure that advisors' advice was free of undue influence:

• Advisors are engaged by, and report directly to, the Chair of the People & Culture Committee

• The agreement for the provision of any remuneration consulting services is executed by the Chair of the People & Culture Committee

on behalf of the Board

• Any reports delivered by advisors were provided directly to the Chair of the People & Culture Committee

• Advisors are permitted, where approved by the People & Culture Committee Chair, to speak to management to understand company

processes, practices and other business issues and obtain management’s perspectives.

The Board is satisfied that any advice provided by either advisor is made free from undue influence from any of the KMP.

During the year, advisors did not provide a remuneration recommendation as defined in Section 9B of the Corporations Act 2001.

ROE Vesting

100

g
n
i
t
s
e
v
s
d
r
a
w
a
d
e
t
s
e
t

f
o
%

Average ROE % for
2017 LTI Award 11.0%
25% of awards vested

Average ROE % for
2016 LTI Award 11.5%
34.4% of awards vested

0
10%

11%

12%

13%
Average ROE achieved over performance period

14%

Relative TSR Vesting

2016 LTI Award 0% Vested

2017 LTI Award 0% Vested

Vesting schedule

15%

16%

1. Reflects the value of distribution equivalent amounts paid as cash on the RSA. 2. There is a difference between Actual Cash Salary received during 2020 and the contractually
awarded Fixed Remuneration as Actual Cash Salary includes RSA Distributions and excludes superannuation whereas contractually awarded Fixed Remuneration includes
superannuation and excludes RSA Distributions. 3. Superannuation includes the value of insurance premiums funded by Lendlease for Australian executives who are members of
the Lendlease default superannuation fund. 4. Other Long Term Benefits represents the accrual of long term leave entitlements (e.g. long service leave).

Lendlease Annual Report 2020 Governance

120

121

Remuneration Report

f. Remuneration governance continued
Setting remuneration levels

Lendlease benchmarks remuneration mix and levels to confirm market competitive total rewards for on target performance, and total rewards
above the market median if outstanding performance is achieved

Remuneration is reviewed annually by the People & Culture Committee for the Group CEO and senior executives (or during the year if
there are any role changes or new senior executive appointments).

Primary Sources
of Data

The People & Culture Committee typically uses a number of sources for benchmarking Group CEO and senior executive
remuneration including:
• Data provided by the Board’s remuneration advisor about remuneration for similar roles in companies of a similar size, such as:

‑

Comparable roles in companies listed on the ASX that are ranked between 26 and 75 by market capitalisation
(excluding companies domiciled overseas and property trusts where management is not typically employed by the trust)

‑ Comparable roles in ASX listed companies with revenue of between 50 and 200 per cent of Lendlease’s revenue
• Publicly available data for comparable roles at organisations in Australia such as CIMIC, Mirvac and Stockland
• Published remuneration surveys, remuneration trends and other data sourced from external providers.

Market Positioning

The People & Culture Committee has adopted a tiered approach to setting pay levels, with a target remuneration mix defined
for senior executives at each tier as part of changes implemented in 2019.
A target fixed and total remuneration position is set for each tier, which is established with reference to the market median and
75th percentile, benchmarked against a number of ‘anchor roles’.

Application of Data
to Lendlease Senior
Executives

The People & Culture Committee adopts the following principles when considering data and its application to setting pay:
• Understanding the relative size, scale and complexity of the organisations in the data set (so that a fair comparison can be

made to organisations with similar global breadth and operational complexities as Lendlease)

• Aligning reward opportunity across similarly sized roles, supporting a team approach and facilitating mobility among

senior executives

• For senior executives based outside Australia, target pay is adjusted to account for cost of living, housing and currency

differences, to achieve similar pay levels.

Mandatory securityholding
The mandatory securityholding requires the Group CEO and senior executives to hold a minimum number of Lendlease securities so that
they have a significant personal investment in Lendlease and they consider long term securityholder value when making decisions.

The Group CEO and other senior executives are required to accumulate and maintain a holding of Lendlease securities calculated with
reference to their Fixed Remuneration (divided by the security price to determine the number of securities that must be held). In the case of:

• The Group CEO – the requirement is 150 per cent of TPV

• Senior executives – the requirement is 100 per cent of TPV or 100 per cent of base salary for senior executives outside of Australia.

The mandatory securityholding for each senior executive is outlined in the Equity Based Remuneration tables on page 133.

Personally held securities may be counted towards the mandatory securityholding requirement as does the RSA. Unvested deferred
securities and unvested awards under the previous STI and LTI do not count towards this mandatory holding. The RSA counts towards the
mandatory securityholding.

Until such time as the senior executive meets the mandatory securityholding requirements, for senior executives based in Australia,
Lendlease imposes a disposal restriction on 50 per cent of any senior executives’ Deferred STI, RSA, LTI or LTA that vests. This
disposal restriction means that the senior executive will not be able to sell these securities until such time as Lendlease agrees to lift
the disposal restriction.

Senior executives based outside of Australia are required to achieve the mandatory holding requirement within six years of their
appointment to a KMP role.

Securities Trading Policy
The Lendlease Securities Trading Policy applies to all employees of the Lendlease Group. In accordance with the policy, Directors and
senior executives may only deal in Lendlease securities during designated periods. Directors and senior executives must not enter into
transactions or arrangements that operate to limit the economic risk of unvested entitlements to Lendlease securities. No Director or senior
executive may enter into a margin loan arrangement in respect of unvested Lendlease securities.

Hedging
Deferred STI, RSA, LTI and LTA awards are subject to the Securities Trading Policy, which prohibits executives from entering into any type
of ‘protection arrangements’ (including hedging, derivatives and warrants) in respect of those awards before vesting.

g. How risk management is incorporated into executive reward
The Board has placed a significant focus on incorporating risk management into the reward framework.

Governance

• The establishment of a separate Risk Committee, of which all Directors are a member, has allowed the Board agenda to be
restructured to focus on strategy, culture, customer outcomes, reputation, performance and succession planning. Drawing
all risk elements under a single committee allows for risk management to be considered in an integrated fashion

• The Chairs of both the Risk Committee and the Audit Committee are members of the People & Culture Committee

• The Board has overall responsibility for remuneration decisions concerning senior executives

• The People & Culture Committee regularly considers matters outside of remuneration – including organisational culture,

talent development and succession, and feedback from employees through Our People Survey.

A Holistic
Performance
Assessment to
Determine STA
Outcomes

Mandatory
Securityholding

• A risk adjustment is considered in the determination of the performance assessment of senior executives

• The Group Chief Financial Officer and the Group Chief Commercial and Risk Officer jointly present to the People & Culture

Committee on the ‘Health of the Business’ when the Committee is considering year end STA outcomes

• The Board determines the weighting of both financial and non financial performance for STA and communicates this in

executive scorecards.

• The Group CEO is expected to accumulate and maintain a securityholding of 150 per cent of his TPV

• Senior executives are expected to accumulate and maintain a securityholding of 100 per cent of their TPV or base salary for

senior executives outside of Australia

• While senior executives’ holdings are below their mandatory securityholding level, a restriction is placed on half of any

securities that vest (for senior executives in Australia).

Deferral

• The RSA has a six year time horizon, vesting progressively over Y3, Y4, Y5 and Y6

• The LTA for senior executives has a six year time horizon, tested after three years and progressively vesting over the next

three years – reflecting the long‑dated nature of our projects. The LTA represents approximately half of senior executives’
Total Target Remuneration.

Forfeiture and
Malus

• Awards lapse if senior executives resign to work for competitor organisations

• If senior executives are considered to be a ‘good leaver’, awards are retained beyond the cessation of employment.
The Board believes that this appropriately motivates executives to make decisions in the long term interests of
the Company

• The Board retains an overarching discretion to reduce or forfeit any unvested awards (during the deferral period beyond the
performance testing period) if it considers that vesting of such awards would result in the participant receiving a benefit
that was unwarranted or inappropriate.

Board Discretion

• The Board makes, reviews and approves decisions concerning executive remuneration throughout the year

• The Board uses its discretion to influence individual outcomes or to steer management towards appropriate outcomes

based on a culture of accountability. Recent examples include:

– Supporting the voluntary 20 per cent Fixed Remuneration reduction for executives in response to COVID‑19 and

matching it with a similar reduction to Non Executive Director base fees

– Looking beyond solely financial measures and recognising non financial performance that supports long term value

creation in FY20

– The announcement the Group CEO made concerning his zero STA for FY19.

Lendlease Annual Report 2020 Governance

122

123

Restricted Securities Award (RSA)1
This section presents a summary of the key features of the RSA plan.

RSA Design

How the RSA Works

Objective

• The key objectives of the RSA are:

– To promote alignment with securityholders as a portion of target remuneration is delivered in Lendlease securities

– To support long term value creation

– To better align reward to risk management.

Quantum

• The RSA is set at $500,000 for the Group CEO and for senior executives2. Refer to the target remuneration mix set out in the

Snapshot of FY20 remuneration outcomes on page 110

Instrument &
Eligibility

• The RSA is delivered to a limited number of senior executives as an annual grant of rights to acquire securities on a face

value basis

• The Board intends that the RSA be settled in Lendlease securities, although the award may be settled in cash at the Board’s

discretion

Determining the
number of Rights

• The number of rights allocated is based on the volume weighted average price (VWAP) of stapled securities traded on the
ASX over the 20 trading days prior to the release of the full year results for the financial year ending 30 June preceding the
grant date

Deferral Period

• The RSA is deferred for three years and released in four equal tranches over a further three year period, at the end of Y3, Y4,

Y5 and Y6

Distributions

• Distribution equivalent amounts are paid as cash on the RSA during the deferral period

Malus

• The Board may adjust the number of rights downwards prior to the date of vesting in the case of a material misstatement of

the Group’s financial accounts

• The number of rights can be reduced in circumstances where the Board considers that delivery of all or part of the award

would result in a benefit that is unwarranted or inappropriate

Termination of
Employment

• If the executive is terminated for cause, the unvested RSA lapses

• If the executive is terminated for poor performance, the Board can adjust unvested RSA prior to the vesting date

• For ‘good leavers’, including executives who resign but do not engage in activities that are competitive with the Group,

the RSA may remain on foot subject to the original vesting conditions.

Remuneration Report

h. How executive rewards are linked to performance

Five year performance summary
The graphs below outline some key indicators of Group
performance over the past five years.

Statutory Profit after Tax (PAT)
Attributable to Securityholders ($m)¹

698.2

758.6

792.8

467

(310)

FY16

FY17

FY18

FY19

FY20

Total Dividends/Distributions ($m)1

349.1

384.9

399.6

237

191

FY16

FY17

FY18

FY19

FY20

Earnings per Stapled Security (EPSS) (cents)2
(excluding treasury securities)

126.3

135.2

137.0

(51.8)

FY16

FY17

FY18

FY19

FY20

Annual Total Securityholder Return (%)3

(13)

(33)

(2)

FY16

FY17

FY18

FY19

FY20

Return on Equity (ROE) (%)4

13.0

12.9

12.7

7.4

(4.7)

FY16

FY17

FY18

FY19

FY20

Performance and funding for Short Term Incentives
Incentives are funded from an incentive pool which represents a
maximum that can be awarded. Using an incentive pool provides
for a fair sharing of profits between securityholders and employees
by capping the amount of profits that can be paid to employees.
It also forges a strong link between Group performance and short
term reward outcomes because they are influenced (up or down)
by the available pool.

Group PAT is one factor that determines the overall size of the
incentive pool. An assessment of overall profit make up, health of
the business and other financial and non financial factors are also
considered.

Group PAT, influenced by the costs associated with the separation
of the Engineering business, was a statutory loss for FY20.
Following an overall assessment of financial and non financial
performance and the overall health of the business before and
during the COVID-19 situation, the Board approved a small pool of
incentive awards to recognise significant contributions. The pool
was substantially lower than FY19 and an even smaller portion
compared to the five prior years. The Board acknowledges the
importance of continuing to motivate our employees through
recognising their contributions.

Group CEO scorecard and performance in 2020

STA outcomes are based on financial and non financial measures
and are designed to focus senior executives on priority areas for
delivery in the current financial year.

50 per cent of awards are assessed against a set of team targets
for Group financial performance against metrics that include:

• Profit after Tax

• EBITDA

• Overheads

• Cash flow from operating and investing.

The overall financial health of the business is also included
in the assessment.

50 per cent of awards are assessed against a range of
non financial performance measures including:

• Safety performance

• Progress against strategic initiatives

• Sustainability

• Our people – retention of critical talent and targets

for women in leadership positions

• Our customers – measures in line with our customer framework.

The Board is committed to the safety and wellbeing of employees.
The Board considers safety leadership behaviour and outcomes in
assessing the overall performance of the Group CEO and each senior
executive. While the assessment is not structured formulaically as
a ‘gateway’ measure, expectations are clearly communicated to
the Group CEO and senior executives that poor health and safety
outcomes may lead to reduction in STA outcomes for the year.

The fatal incident in FY20 has been considered in assessing the Group
CEO’s STA outcome. The Group CEO’s cash STA is 0 per cent of his
target and his FY20 Deferred Equity Award is equivalent to 35 per
cent of his STA target (23 per cent of his STA maximum). Refer to the
Group CEO’s scorecard on pages 112 and 113 for further details.

1. At 30 June 2020, all values have been rounded to the nearest million dollars unless otherwise indicated. 2. EPSS is calculated using the weighted average number of
securities on issue excluding treasury securities. As required under AASB 133 Earnings per Share, the 30 June 2019 weighted average number of ordinary shares and the
weighted average number of stapled securities have been updated to reflect the new stapled securities issued via the institutional placement and Security Purchase Plan
during the year. FY19 EPSS has been restated from 82.9 to 80.0 to reflect this change. 3. Represents the movement in the Group’s security price, distribution yield and any
return on capital during the financial year. 4. ROE is calculated as the annual Statutory Profit after Tax attributable to securityholders divided by the arithmetic average of
beginning, half year and year end securityholders’ equity.

1. Previously LTA Minimum. 2. The FY20 RSA for Neil Martin was $312,500.

Lendlease Annual Report 2020 Governance124

125

• STA outcomes are based on performance during the financial year, primarily measured through the use of the Group CEO

Deferral Period

• The FY20 Deferred Equity Award is deferred over two years, with half vesting in September 2021 and the balance in

and senior executive scorecards

September 2022

FY20 Deferred Equity Award
This section presents a summary of the key features of the FY20 Deferred Equity Award plan.

FY20 Deferred
Equity Award

How the FY20 Deferred Equity Award Works

Objective

• The key objectives of the FY20 Deferred Equity Award are to:

– Recognise the achievement of non financial performance outcomes that support long term value creation
– Consider the balance between motivating, recognising and rewarding executives with securityholder interests

– Recognise that although a final dividend for FY20 will not be paid from Lendlease Corporation Limited, securityholders

will receive distributions of over $191 million relating to FY20

– Provide the Board with additional review points prior to vesting

– Provide a retention element given that executives will be required to wait up to two years for the award to vest.

Quantum

• Refer to the Remuneration Awarded table on page 115 for more details

Instrument &
Eligibility

Determining the
number of Rights

• The FY20 Deferred Equity Award is delivered to senior executives as a grant of rights to acquire securities on a

face value basis

• The Board intends that the FY20 Deferred Equity Award be settled in Lendlease securities, although the award may

be settled in cash at the Board’s discretion

• The number of rights allocated is based on the VWAP of stapled securities acquired on or off market around September 2020

Distributions

• Distributions are not paid on any unvested FY20 Deferred Equity Award for the Group CEO and senior executives. However, in
calculating the amount of Lendlease securities or cash provided on vesting of the FY20 Deferred Equity Award, the value of any
distributions declared during the vesting period is taken into consideration

Malus

• The Board may adjust the number of rights downwards prior to the date of vesting in the case of a material misstatement of

the Group’s financial accounts

• The number of rights can be reduced in circumstances where the Board considers that delivery of all or part of the award

would result in a benefit that is unwarranted or inappropriate

Termination of
Employment

• If the executive is terminated for cause, the unvested FY20 Deferred Equity Award lapses

• If the executive is terminated for poor performance, the Board can adjust unvested FY20 Deferred Equity Award prior to the

vesting date

• For ‘good leavers’, including executives who resign but do not engage in activities that are competitive with the Group,

the FY20 Deferred Equity Award may remain on foot subject to the original vesting conditions.

Remuneration Report

h. How executive rewards are linked to performance continued
Short Term Award (STA)

STAs are based on performance against a scorecard of financial and non financial measures

This section presents a summary of the key features of the FY20 STA plan and shows the key differences between the STA and the
previous Short Term Incentive (STI), for which some awards remain on foot. The key features of the STA are outlined in the table below:

STA Design

How the STA Works

STA Quantum

• The 2020 STA has been set with reference to the Group CEO and senior executive target remuneration mix set out in the

Snapshot of FY20 remuneration outcomes on page 110.

STA Funding

• The pool of funds available to reward executives under the STA plan is determined by direct reference to Group financial and

non financial performance

• In determining the pool of funds available, the Board examines safety performance and the overall health of the business,

which considers a broader set of metrics around origination, sustainability and how we have managed risk.

• The minimum possible STA outcome is zero and the maximum STA outcome is limited to 150 per cent of the senior executive’s

target STA opportunity.

STA Targets and
Opportunity

STA Key
Performance
Indicators

• The Group CEO FY20 scorecard (approved by the Board) and performance against the scorecard is summarised on pages

112 and 113

• Lendlease is committed to the safety and wellbeing of all of its employees. The Board considers safety leadership behaviours
and outcomes in assessing the overall performance of the Group CEO and each senior executive. While the assessment is
not structured formulaically or as a ‘gateway’ measure, expectations are clearly communicated to the Group CEO and senior
executives that poor health and safety outcomes may lead to a reduction in STA outcomes for the year. The fatal incident that
occured in FY20 has been considered in assessing the Group CEO’s STA

• The People & Culture Committee considers feedback from the direct reports and teams of each senior executive. In this way,

the STA considers ‘what’ is achieved as well as ‘how’ it is achieved.

How the STA is
Delivered

• The STA is delivered as cash in September following the end of the performance year.

Prior Short Term Incentive (STI)
Key features of the 2018 STI plan are the same as the FY20 STA, except for the following which apply to the 2018 STI plan only.

STI Design

How the STI Works

How the STI is
Delivered

• The STI award is delivered as a mix of cash and Deferred STI, which is settled in Lendlease securities or cash as determined

by the Board

• For STI awards ‘up to target’, 50 per cent of the award was paid in cash in September following the end of the performance
year. The remaining 50 per cent is deferred – half of which vests one year after the grant and the other half vests after two
years. Deferred STI awards are held in an employee share plan trust until vesting

• For ‘above target’ STI awards, the above target portion was delivered one‑third as cash and two‑thirds deferred on the same

basis as set out above

• Distributions are not paid on any unvested Deferred STI for the Group CEO and senior executives; however, the value of any
distributions made during the vesting period is taken into consideration in calculating the amount of Lendlease securities or
cash provided on vesting.

Malus

• The Board has the discretion to forfeit part or all of any unvested Deferred STI awards prior to their vesting where it considers
vesting would provide a participant with a benefit that was unwarranted or inappropriate. The Board may delay vesting of any
unvested Deferred STI in the event it is reviewing whether to exercise discretion to reduce or forfeit unvested awards.

Treatment of
Deferred STI on
Termination

• Malus provisions work alongside the Deferred STI terms to provide discretion for the Board to adjust unvested awards on

termination of employment. In particular:

‑ If an employee is terminated for fraud or other serious misconduct, unvested Deferred STI awards will lapse
‑

Where an employee is terminated for poor performance, the number of unvested Deferred STI awards can be
adjusted downwards

‑ Deferred STI awards are forfeited by the individual if they resign during the vesting period

• For ‘good leavers’, the Deferred STI awards may remain on foot until the original vesting date, subject to the original terms.

In exceptional circumstances (such as death or total and permanent disability), the Board may exercise its discretion and pay
the award at the time of termination of employment.

Lendlease Annual Report 2020 Governance

126

127

Remuneration Report

h. How executive rewards are linked to performance continued
Long Term Award (LTA)
The key features of the LTA plan are set out in the table below. Page 127 shows the key differences between this award and LTI awards
from prior years, some of which remain on foot.

LTA Design

Objective

How the LTA Works

• Reward senior executives for delivering Lendlease’s strategy and for delivering sustained long term securityholder value

• Align the interests of senior executives and securityholders.

Eligibility

An annual grant of performance rights is made to a limited number of senior executives on a face value basis.

Determining
the Number of
Performance
Rights

The number of performance rights allocated is based on the VWAP of stapled securities traded on the ASX over the 20 trading
days prior to the release of the full year results for the financial year ending 30 June preceding the grant date.

LTA Design

How the LTA Works

Performance
Measure Selection

• The Board believes that these measures, combined with other features of ‘at risk’ remuneration at Lendlease, provide a

suitable link to long term securityholder value creation because:

‑

TSR incentivises senior executives to deliver returns that outperform what a securityholder could achieve in the market
and promotes management to maintain a strong focus on securityholder outcomes

ROE reflects the capital intensive nature of Lendlease’s activities and is an important long term measure of how well the
management team generates acceptable earnings from capital invested and rewards decisions in respect of developing,
managing, acquiring and disposing of assets

• The Group’s currently stated ROE target range is 10 to 14 per cent

• The Board believes that the vesting range provides a realistic goal at the lower end (in the context of risk free rates of return,

cost of capital and market consensus) and a stretch at the upper end

• The hurdles are reviewed annually by the Board with the aim of setting an average ROE hurdle range that will drive

outperformance without incentivising excessive risk taking. The Board also has governance protocols in place to monitor
levels of net debt and is conscious of the impact that debt can have on the ROE result

• While the Board appreciates that there are, at times, differing views held by stakeholders, we believe that these measures

provide the appropriate balance between market and non market measures.

Instrument

• The award is delivered as a target number of performance rights to acquire securities. The number of performance rights is

adjusted up or down at vesting based on performance over the assessment period

• The Board intends that the awards be settled in Lendlease securities, although the award may be settled in cash or other

means at the Board’s discretion.

Award Target

The amount of LTA achieved at target has been set with reference to:

• The Group CEO and senior executive target remuneration mix set out on page 110

• Having regard to the benchmark data and market positioning as described on page 120.

Performance
Period

• Three years. The performance period was chosen as the Board believes that the timeframe appropriately reflects a

balance between reward that motivates executives while reflecting the ‘long tail’ of profitability and risk associated with
‘today’s decisions’.

LTA Maximum

Opportunity to earn an award above target for outperformance across both performance hurdles.

Retesting

There is no retesting of the LTA. If the performance hurdle is not met at the time of testing, the awards are forfeited.

Deferral

• Once the award has been determined, awards are retained and released in four equal tranches over a further three

Distributions

Distributions are not paid on the LTA, unless and until vesting conditions are met.

year period.

Performance
Hurdles

Market Measure 50 per cent

Non Market Measure 50 per cent

Relative Total Securityholder Return (RTSR)

Average Return On Equity (ROE)

• TSR is measured by the growth in security price and any

dividends/distributions paid during the performance period

• ROE is calculated by dividing the annual statutory Profit
after Tax by the weighted average equity for the year

• Relative TSR is measured against companies that comprise
the Standard & Poor’s (S&P)/Australian Securities Exchange
(ASX) 100 index

• Maximum vesting is achieved if TSR performance is

at or above the 75th percentile.

• Average ROE will be based on the average of ROE results

over the three year performance period

• Target and maximum ROE are set by the Board for each

three year period and are set with reference to the Group’s
Portfolio Management Framework.

Vesting
Schedule

Relative TSR
Percentile
Ranking

Percentage of Target LTA
plus RSA Vesting1

Average ROE

Percentage of Target LTA
plus RSA Vesting1

Group CEO

Senior Executives

Group CEO

Senior Executives

At the 50th

50 per cent

At or above the
51st and below
the 75th

Pro rata straight line
vesting between
54 per cent and
146 per cent

Pro rata straight line
vesting between
56 per cent and
194 per cent

75th or greater

150 per cent

200 per cent

Between
10 per cent and
target ROE set
by the Board

Pro rata straight line
vesting between
13.5 per cent and
100 per cent

Pro rata straight line
vesting between
31.25 per cent and
100 per cent

Malus

• The Board may adjust the number of performance rights downwards prior to the date of vesting in the case of a material

misstatement of the Group’s financial accounts

• The number of performance rights can be reduced in circumstances where the Board considers that delivery of all or part of

the award would result in a benefit that is unwarranted or inappropriate.

Termination of
Employment

• If the executive is terminated for cause, the unvested LTA lapses

• If the executive is terminated for poor performance, the Board can adjust unvested LTA prior to the vesting date

• For ‘good leavers’, including executives who resign but do not engage in activities that are competitive with the Group,

the LTA grant may remain on foot subject to the original performance hurdle.

Prior LTI Awards
Key differences between the LTI plan for the years 2017-2018 and the current LTA plan are as follows:

• 2017 LTI awards were allocated on a fair value basis

• A target number of performance securities were awarded under the LTI plan. There is no opportunity to earn an award above target for

outperformance, nor is there a minimum award delivered if performance hurdles are not met

• For LTI awards, 50 per cent of the grant value is assessed over a three year period, and the remaining 50 per cent is assessed after four years

• Under the LTI plan, in exceptional circumstances (such as death or total and permanent disability), the Board may exercise its discretion

to pay the award at the time of termination of employment.

At target set
by the Board

Between target
set by the Board
and 14 per cent

At 14 per cent
or greater

100 per cent

The vesting schedules for LTI awards on foot are shown below:

Pro rata straight line
vesting between
100 per cent and
150 per cent

Pro rata straight line
vesting between
100 per cent and
200 per cent

150 per cent

200 per cent

Relative TSR
Percentile Ranking

Below the 50th
percentile

Percentage of
Relative TSR
Performance
Securities that Vest
if the Hurdle is Met

No vesting

At the 50th percentile

50 per cent vesting

At or above the 51st
percentile but below
the 75th percentile

At the 75th percentile
or greater

Pro rata vesting on
a straight line basis
between 52 per cent
and 98 per cent

100 per cent vesting

100

g
n
i
t
s
e
v
s
d
r
a
w
a
d
e
t
s
e
t

f
o
%

2017

2018

10%

11%

12%

13%

14%

15%

16%

Average ROE achieved over performance period

1. During the year the Board determined that the LTA Minimum is better described as an RSA. Given this decision was made after awards were communicated, the vesting
schedule reflects the transition and shows the proportion of the combined target LTA, and half of the RSA (previously LTA Minimum) that vests at different levels of performance.

Lendlease Annual Report 2020 Governance

128

129

Remuneration Report

i. Executive contracts
KMP employment contracts
Each KMP has an ongoing employment contract. All KMP have termination benefits that are within the limit allowed by the
Corporations Act 2001 without securityholder approval.

Contracts also set out the treatment on termination for other reasons including, but not limited to, resignation, termination with
notice and termination for cause. The Group may make a payment in lieu of notice.

Key terms for each KMP are set out below:

Name

Group CEO

Notice by
Lendlease

Notice by
Executive

Treatment on Termination with Notice by Lendlease

Stephen McCann

12 months

6 months

In the case where the Group CEO is not employed for the full period of notice, a payment in
lieu of notice may be made. The payment in lieu of notice includes pro rata Fixed Remuneration
and the cash value of statutory entitlements and benefits

Current Senior Executives

Johannes Dekker¹

12 months

6 months

Notice payment is based on TPV. Payment for accrued leave is based on TPV less
superannuation

Tarun Gupta

6 months

Notice payment is based on TPV. Payment for accrued leave is based on TPV less
superannuation

Denis Hickey

6 months

Notice payment is based on base salary and other minimum benefits as required by applicable
United States legislation

Anthony Lombardo

12 months

6 months

Notice payment and accrued leave is based on base salary

Neil Martin

6 months

Notice payment and accrued leave is based on base salary

Kylie Rampa

6 months

Notice payment is based on TPV. Payment for accrued leave is based on TPV less
superannuation

David Andrew Wilson

6 months

Notice payment is based on TPV. Payment for accrued leave is based on TPV less
superannuation

Former Executive

Daniel Labbad

9 months

6 months

Notice payment and accrued leave is based on base salary

Additional disclosure for the Group CEO contract
In addition, the Group CEO has a non compete notice period of 12 months and a non solicitation period of 12 months.

Upon termination the Group CEO:

• May continue to receive an STA award for the latest financial year based on an assessment of his performance by the Board

• LTA and LTI will be treated in accordance with the plan rules at that time

• Deferred STI awards from prior years will remain on foot in certain mutually agreed termination circumstances.

j. Equity based remuneration
Deferred securities

Name

Plan

STI Award
Performance
Year

Grant
Date

Vesting
Date

Number
Granted

Fair Value
Per
Deferred
Security1
$

Total Fair
Value At
Grant
Date1,2
$

Expense For
the Year
Ended 30
June 2020
$

%
Vested

%
Forfeited

Group CEO
Stephen McCann

Deferred STI

2017

Sept 2017

Sept 2019

2018

Sept 2018

Sept 2019

2018

Sept 2018

Sept 2020

Total

Current Senior Executives
Johannes Dekker3

Sign‑On Award

‑ May 2018

Sept 2019

Sign‑On Award

‑ May 2018

Sept 2020

Total

Tarun Gupta

Total

Denis Hickey

Deferred STI

Total

Anthony Lombardo

Deferred STI

Total

Neil Martin

Total

Kylie Rampa

Deferred STI

EDA

Deferred STI

Total

David Andrew Wilson Deferred STI

Deferred STI

Total

Former Senior Executive

Daniel Labbad

Deferred STI

Total

2018

2017

2018

2017

2018

2017

2018

2017

2018

2019

2017

2018

2017

2018

Sept 2018

Sept 2019

Sept 2018

Sept 2020

Sept 2017

Sept 2019

Sept 2018

Sept 2019

Sept 2018

Sept 2020

Sept 2017

Sept 2019

Sept 2018

Sept 2019

Sept 2018

Sept 2020

Sept 2017

Sept 2019

Sept 2018

Sept 2019

Sept 2018

Sept 2020

Sept 2017

Sept 2019

Sept 2018

Sept 2019

Sept 2018

Sept 2020

Sept 2019

Sept 2021

Sept 2019

Sept 2022

Sept 2017

Sept 2019

Sept 2018

Sept 2019

Sept 2018

Sept 2020

Sept 2017

Sept 2019

Sept 2018

Sept 2019

Sept 2018

Sept 2020

2017

2018

Sept 2017

Sept 2019

Sept 2018

Sept 2019

Sept 2018

Sept 2020

26,725

22,434

71,593

8,535

5,690

1,264

16,753

19,285

15,842

50,969

17,966

10,554

39,074

9,753

11,517

32,787

11,861

11,605

11,329

69,058

13,710

16,039

45,788

5,698

7,719

21,136

18,234

12,234

42,702

16.37

19.50

17.57

19.79

437,512

437,510

1,312,532

150,000

100,000

25,015

300,030

17.11

330,005

19.79

313,520

957,045

17.11

307,434

19.79

208,868

17.11

166,893

19.79

227,926

622,745

17.11

202,965

19.79

16.86

229,668

191,007

‑

218,755

100%

‑

18,750

100%

42,857

‑

100%

12,508

74,115

‑

156,760

‑

104,434

‑

113,963

‑

114,834

‑

100%

‑

100%

‑

100%

‑

100%

‑

190,987

100%

79,578

53,052

‑

725,170

104,434

1,235,322

438,450

17.11

234,606

19.79

17.11

19.79

317,418

869,442

97,504

152,762

403,028

17.11

312,020

19.79

242,116

796,252

‑

158,709

‑

76,381

‑

121,058

100%

‑

100%

‑

100%

‑

1. Notice by Lendlease for the first four years of employment is 12 months and reverts to 6 months notice by Lendlease thereafter.

1. The fair value at grant date is the value of the Deferred STI award (as advised to the executive). 2. At vesting, the minimum value is nil and the estimate of the maximum value
is the fair value multiplied by the number of securities granted. 3. Johannes Dekker received a sign-on award reflecting remuneration foregone on resignation from his previous
employer. The award is split into three tranches and has vested, or will vest, during the first, second and third years of his employment.

Lendlease Annual Report 2020 Governance130

131

Fair Value
Per
Performance
Security4
$

Total Fair
Value
At Grant
Date1,2,3,4
$

Expense
For the Year
Ended 30
June 20
$

%
Vested

%
Forfeited

Name

Plan
(For the Year Ended)

Grant
Date

Vesting
Date

Number
Granted

Fair Value
Per
Performance
Security4
$

Total Fair
Value
At Grant
Date1,2,3,4
$

Expense
For the Year
Ended 30
June 2020
$

%
Vested

%
Forfeited

Long Term Incentive Awards continued

Total

Current Senior Executives

982,338

14,066,173

1,815,454

Remuneration Report

j. Equity based remuneration continued
Long Term Incentive Awards

Name

Group CEO

Plan
(For the Year Ended)

Grant
Date

Vesting
Date

Number
Granted

Stephen McCann June 2016 LTI (50%)

Sept 2015

Sept 2019

101,818

June 2017 LTI (50%)

Sept 2016

Sept 2019

122,440

June 2017 LTI (50%)

Sept 2016

Sept 2020

122,440

June 2018 LTI (50%)

Sept 2017

Sept 2020

100,388

June 2018 LTI (50%)

Sept 2017

Sept 2021

100,388

June 2019 LTA (25%)

Nov 2018

Sept 2021

44,476

June 2019 LTA (25%)

Nov 2018

Sept 2022

44,476

June 2019 LTA (25%)

Nov 2018

Sept 2023

44,476

June 2019 LTA (25%)

Nov 2018

Sept 2024

44,476

June 2020 LTA (25%)

Sept 2019

Sept 2022

64,240

June 2020 LTA (25%)

Sept 2019

Sept 2023

64,240

June 2020 LTA (25%)

Sept 2019

Sept 2024

64,240

June 2020 LTA (25%)

Sept 2019

Sept 2025

64,240

Johannes Dekker⁵ June 2019 LTA (25%)

Nov 2018

Sept 2021

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2022

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2023

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2024

19,234

Retention Award

Jan 2019

Jan 2022

251,168

June 2020 LTA (25%)

Sept 2019

Sept 2022

June 2020 LTA (25%)

Sept 2019

Sept 2023

June 2020 LTA (25%)

Sept 2019

Sept 2024

June 2020 LTA (25%)

Sept 2019

Sept 2025

27,780

439,224

Total

Tarun Gupta

June 2016 LTI (50%)

Sept 2015

Sept 2019

23,679

June 2017 LTI (50%)

Sept 2016

Sept 2019

33,272

June 2017 LTI (50%)

Sept 2016

Sept 2020

33,272

June 2018 LTI (50%)

Sept 2017

Sept 2020

31,638

June 2018 LTI (50%)

Sept 2017

Sept 2021

31,638

June 2019 LTA (25%)

Nov 2018

Sept 2021

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2022

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2023

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2024

19,234

June 2020 LTA (25%)

Sept 2019

Sept 2022

June 2020 LTA (25%)

Sept 2019

Sept 2023

June 2020 LTA (25%)

Sept 2019

Sept 2024

June 2020 LTA (25%)

Sept 2019

Sept 2025

27,780

341,555

Total

11.49

11.94

22.08

10.56

11.33

11.44

13.07

13.23

11.49

22.08

1,075,198

(473,659)

1,387,245

(405,810)

16%

12%

84%

88%

10.56

11.33

11.44

13.07

13.23

9.94

22.55

1,400,714

1,312,071

1,328,133

442,091

1,448,612

350,178

382,208

386,889

107,271

286,641

220,999

53,624

3,000,000

1,000,000

613,382

121,399

6,337,524

1,700,092

‑

250,050

376,972

(110,142)

(110,278)

16%

12%

84%

88%

380,632

95,158

413,509

418,571

220,999

613,382

37,962

121,931

53,624

121,399

5,177,258

734,723

‑

1. For LTI: at vesting, the minimum value is nil and the estimate of the maximum value is the fair value multiplied by the number of securities granted. 2. For the LTA for the
Group CEO: at vesting, the estimate of the minimum value is the fair value multiplied by 13.5% of the number of performance rights granted and the estimate of the maximum
value is the fair value multiplied by 150% of the number of performance rights granted. Please refer to page 126 for more details. 3. For the LTA for other senior executives: at
vesting, the estimate of the minimum value is the fair value multiplied by 31.25% of the number of performance rights granted and the estimate of the maximum value is the fair
value multiplied by 200% of the number of performance rights granted. Please refer to page 126 for more details. 4. The fair value at grant date represents an actuarial
valuation of the award, including the RSA (previously LTA Minimum), using assumptions underlying the Black-Scholes methodology to produce a Monte-Carlo simulation
model in accordance with Australian Accounting Standards rounded to two decimal places. 5. Johannes Dekker received a retention award relating to the strategic review of
the Engineering and Services businesses.

Current Senior Executives continued

Denis Hickey

June 2016 LTI (50%)

Sept 2015

Sept 2019

16,576

June 2017 LTI (50%)

Sept 2016

Sept 2019

22,626

June 2017 LTI (50%)

Sept 2016

Sept 2020

22,626

June 2018 LTI (50%)

Sept 2017

Sept 2020

21,904

June 2018 LTI (50%)

Sept 2017

Sept 2021

21,904

June 2019 LTA (25%)

Nov 2018

Sept 2021

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2022

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2023

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2024

19,234

June 2020 LTA (25%)

Sept 2019

Sept 2022

June 2020 LTA (25%)

Sept 2019

Sept 2023

June 2020 LTA (25%)

Sept 2019

Sept 2024

June 2020 LTA (25%)

Sept 2019

Sept 2025

27,780

293,692

Total

Anthony Lombardo June 2016 LTI (50%)

Sept 2015

Sept 2019

23,679

June 2017 LTI (50%)

Sept 2016

Sept 2019

June 2017 LTI (50%)

Sept 2016

Sept 2020

26,618

June 2018 LTI (50%)

Sept 2017

Sept 2020

24,034

June 2018 LTI (50%)

Sept 2017

Sept 2021

24,034

June 2019 LTA (25%)

Nov 2018

Sept 2021

June 2019 LTA (25%)

Nov 2018

Sept 2022

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2023

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2024

19,234

June 2020 LTA (25%)

Sept 2019

Sept 2022

June 2020 LTA (25%)

Sept 2019

Sept 2023

June 2020 LTA (25%)

Sept 2019

Sept 2024

June 2020 LTA (25%)

Sept 2019

Sept 2025

Total

Neil Martin

June 2020 LTA (25%)

Sept 2019

Sept 2022

June 2020 LTA (25%)

Sept 2019

Sept 2023

June 2020 LTA (25%)

Sept 2019

Sept 2024

June 2020 LTA (25%)

Sept 2019

Sept 2025

Total

27,780

313,039

17,362

69,448

10.56

11.33

11.44

13.07

13.23

11.49

22.08

10.56

11.33

11.44

13.07

13.23

11.49

22.08

175,043

(77,106)

256,353

(74,979)

16%

12%

84%

88%

258,841

286,285

289,790

220,999

613,382

4,603,836

250,050

301,582

304,510

314,124

317,970

220,999

613,382

64,710

18,196

84,417

53,624

121,399

715,330

(110,142)

(88,219)

76,128

21,907

92,626

53,624

121,399

4,825,760

692,392

383,353

75,872

1,533,412

303,488

‑

16%

12%

84%

88%

‑

Lendlease Annual Report 2020 Governance132

133

Remuneration Report

j. Equity based remuneration continued
Long Term Incentive Awards continued

Name

Plan
(For the Year Ended)

Grant
Date

Vesting
Date

Number
Granted

Current Senior Executives continued

Kylie Rampa

June 2016 LTI (50%)

Sept 2015

Sept 2019

9,472

June 2017 LTI (50%)

Sept 2016

Sept 2019

19,165

June 2017 LTI (50%)

Sept 2016

Sept 2020

19,165

June 2018 LTI (50%)

Sept 2017

Sept 2020

21,904

June 2018 LTI (50%)

Sept 2017

Sept 2021

21,904

June 2019 LTA (25%)

Nov 2018

Sept 2021

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2022

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2023

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2024

19,234

June 2020 LTA (25%)

Sept 2019

Sept 2022

June 2020 LTA (25%)

Sept 2019

Sept 2023

June 2020 LTA (25%)

Sept 2019

Sept 2024

June 2020 LTA (25%)

Sept 2019

Sept 2025

27,780

279,666

Total

David Andrew
Wilson⁶

DE Award (50%)

May 2016 May 2021

80,000

May 2016 May 2023

80,000

June 2016 LTI (50%)

Sept 2015

Sept 2019

14,208

June 2017 LTI (50%)

Sept 2016

Sept 2019

June 2017 LTI (50%)

Sept 2016

Sept 2020

15,971

June 2019 LTA (25%)

Nov 2018

Sept 2021

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2022

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2023

19,234

June 2019 LTA (25%)

Nov 2018

Sept 2024

19,234

June 2020 LTA (25%)

Sept 2019

Sept 2022

June 2020 LTA (25%)

Sept 2019

Sept 2023

June 2020 LTA (25%)

Sept 2019

Sept 2024

June 2020 LTA (25%)

Sept 2019

Sept 2025

Total

Former Senior Executive

Daniel Labbad7

June 2016 LTI (50%)

Sept 2015

Sept 2019

June 2017 LTI (50%)

Sept 2016

Sept 2019

June 2017 LTI (50%)

Sept 2016

Sept 2020

June 2018 LTI (50%)

Sept 2017

Sept 2020

June 2018 LTI (50%)

Sept 2017

Sept 2021

June 2019 LTA (25%)

Nov 2018

Sept 2021

June 2019 LTA (25%)

Nov 2018

Sept 2022

June 2019 LTA (25%)

Nov 2018

Sept 2023

June 2019 LTA (25%)

Nov 2018

Sept 2024

27,780

394,206

18,943

27,683

27,076

19,234

Fair Value
Per
Performance
Security4
$

Total Fair
Value
At Grant
Date1,2,3,4
$

Expense
For the Year
Ended 30
June 2020
$

%
Vested

%
Forfeited

10.56

11.33

11.44

13.07

13.23

11.49

22.08

13.42

10.56

11.33

11.44

11.49

22.08

10.56

11.33

11.44

13.07

13.23

11.49

100,024

217,139

(44,059)

(63,509)

16%

12%

84%

88%

219,248

54,812

286,285

289,790

220,999

613,382

18,196

84,417

53,624

121,399

4,450,010

749,949

1,073,600

150,036

180,951

182,708

220,999

613,382

214,781

153,415

(66,094)

(52,934)

45,676

53,624

121,399

5,998,419

994,936

200,038

313,648

316,694

353,883

358,215

220,999

(88,118)

(91,743)

92,368

44,437

166,773

185,249

‑

16%

12%

84%

88%

‑

16%

12%

84%

88%

‑

Total

205,397

2,426,474

864,712

Equity holdings and transactions for the year ended 30 June 2020

Number of
Securities
Required Under
the Mandatory
Securityholding
at Period End1

Securities
Held at
Beginning of
Financial
Year

Year

Securities
Received
During
the Year²

Other Net
Change to
Securities

Securities
Held at End Of
Financial Year

Group CEO
Stephen McCann

Current Senior Executives
Johannes Dekker

Tarun Gupta

Denis Hickey4

Anthony Lombardo

Neil Martin
Kylie Rampa

David Andrew Wilson

Former Senior Executive
Daniel Labbad5

Total
Total

2020
2019

2020
2019
2020
2019
2020
2019
2020
2019
2020
2020
2019
2020
2019

2020
2019
2020
2019

248,000
169,500

90,000
62,000
90,000
62,000
60,000
76,000
84,000
54,000
75,000
90,000
62,000
94,000
64,000

66,000

750,018
766,136

14,225

116,411
158,332
61,443
49,063
110,654
136,708
‑
61,925
11,478
49,364
22,997

67,001
67,001
1,231,041
1,211,715

88,709
213,386

‑
(229,504)

12,892
14,225
73,913
78,079
24,192
37,494
29,906
61,614
18,391
35,216
50,447
23,346
49,210

20,642
33,184
327,207
537,639

‑

‑
(120,000)
(57,000)
(25,114)
(79,906)
(87,668)
(18,391)
(50,080)

‑
(22,843)

‑
(33,184)
(205,377)
(518,313)

838,727
750,018

27,117
14,225
190,324
116,411
28,635
61,443
60,654
110,654
‑
47,061
61,925
72,710
49,364

Total Securities/
Performance
Rights That May
Count Towards
the Mandatory
Securityholding
Requirement

897,447
774,042

85,893
38,273
249,100
140,459
87,411
85,491
119,430
134,702
21,704
105,837
85,973
131,486
73,412

RSA³

58,720
24,024

58,776
24,048
58,776
24,048
58,776
24,048
58,776
24,048
21,704
58,776
24,048
58,776
24,048

87,643
67,001
1,352,871
1,231,014

24,048
24,048
457,128
192,360

111,691
91,049
1,809,999
1,423,401

Loans to KMP
No loans were made to KMP or their related parties during the current year or prior year.

Other transactions with KMP
From time to time, Directors and executives of Lendlease or its consolidated entities, or parties related to them, may purchase goods from
the Consolidated Entity. These purchases are on terms and conditions no more favourable than those entered into by unrelated customers.

6. David Andrew Wilson was granted a Distinguished Executive (DE) Award in May 2016 that vests in two equal tranches over five and seven years. Refer to Note 33(e) of the
Notes to Consolidated Financial Statements. 7. Daniel Labbad ceased as a KMP on 9 September 2019. The expense for the year ended 30 June 2020 reflects the full
entitlement to unvested LTI and LTA which would otherwise have been included in future year disclosures and may not vest. These unvested awards remain on foot and subject
to the original vesting conditions.

1. Mandatory securityholding requirements are reviewed in August each year. The mandatory securityholding requirement for Neil Martin was set for the first time in
September 2019 when he was appointed to the Chief Executive Officer, Europe role. As part of the Group’s response to COVID-19, Denis Hickey requested a temporary
release from the applicable mandatory securityholding requirement and the reduced mandatory securityholding requirement (50% of the original mandatory securityholding
requirement) has been reflected for 2020. 2. For senior executives, securities received relate to security entitlements under employee benefit vehicles. 3. Under the RSA
(previously LTA Minimum), performance rights will vest over a period of up to six years. This number of performance rights counts towards mandatory securityholding
requirements. 4. The 2019 comparative for Denis Hickey has been restated from 37,494 to 61,443 to include a correction to his securityholding. 5. Daniel Labbad ceased as a
KMP on 9 September 2019. The end balance of securities for 2020 represents the balance held at that date.

Lendlease Annual Report 2020 Governance134

135

Remuneration Report

k. Non Executive Directors
Non Executive Directors’ fees
Non Executive Directors receive a Board fee and fees for chairing or participating on Board committees. The Chairman does not receive
extra fees for participating on committees.

The maximum aggregate remuneration payable to Non Executive Directors is $3.5 million per year, as approved at the 2015 Annual
General Meeting.

Board and committee fees

Chair Fee A$

Member Fee A$

Board

640,000

160,000

Nomination
Committee

People & Culture
Committee

Risk
Committee

Audit
Committee

Sustainability
Committee

36,000

Nil

48,000

36,000

48,000

Nil

48,000

36,000

48,000

36,000

Board and committee fees are paid as cash. Superannuation contributions are paid in addition to the Board and committee fees outlined
above in accordance with superannuation legislation and are capped at the Maximum Superannuation Contribution Base. The current Non
Executive Directors are not entitled to retirement benefits other than superannuation. However, some former Non Executive Directors¹
have retirement benefits or securities which were previously accrued.

There were no increases to NED fees during FY20.

As an international company and having regard to the material scale of individual projects, the Board program is formulated to reflect the
geographic spread of the Lendlease businesses. Board meetings are scheduled in Australia and in each of the regions where Lendlease
operates. Generally, the program runs over two or three days and includes a number of activities outside of the formal meeting. These
include business briefings, presentations from external sources, project site visits, client meetings and networking events with employees
and key stakeholders. Where deeper project reviews are required, the program may take up to five days.

The program is an important element of the Board’s activities to enable the Non Executive Directors to obtain the required deep
understanding of operations within the regions.

All Non Executive Directors may be required to travel to attend Board meetings. This can involve significant additional time, particularly
when visiting project sites in the regions where Lendlease operates. Where significant additional time has been spent travelling to fulfil the
requirements of the program, fees are paid to compensate Non Executive Directors for the extra time commitment.

Travel Fees

Travel less than 4 hours

Travel between 4 and 10 hours

Travel over 10 hours

Fee (Each Way) A$

Nil

2,800

6,000

The table below sets out fees paid to Non Executive Directors during 2020 and 2019.

A$000s

Year

Base Fees1

Short Term
Benefits

Committee
Chair Fees

Committee
Membership
Fees

Post Employment
Benefits

Travel
Fees

Superannuation2

Total

Non Executive Directors
Michael Ullmer

Colin Carter

Philip Coffey

David Craig

Margaret Ford3

Jane Hemstritch

Elizabeth Proust

Nicola Wakefield Evans

Robert Welanetz4

Former Non Executive Directors
Phillip Colebatch5

David Crawford6

Steve Dobbs7

Total

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

629

460

157

160

157

160

157

160

157

160

157

160

267

160

1,743

1,914

‑

228

200

396

447

178

351

170

186

668

552

292

313

316

313

280

301

273

301

275

277

283

295

130

300

146

316

2,715

3,098

1. Applies to David Crawford and Phillip Colebatch.

1. Non Executive Directors were able to temporarily reduce their base fees by 20% from 1 June 2020 as part of the Group’s response to COVID-19. 2. Directors have
superannuation contributions paid on their behalf in accordance with superannuation legislation. 3. Margaret Ford was appointed as a Non Executive Director on 1 March
2020. 4. Robert Welanetz was appointed as a Non Executive Director on 1 March 2020. 5. Phillip Colebatch ceased to be a Non Executive Director on 16 November 2018.
6. David Crawford ceased to be Chairman and Non Executive Director on 16 November 2018. 7. Steve Dobbs ceased to be a Non Executive Director on 20 November 2019.

Lendlease Annual Report 2020 Governance136

137

Remuneration Report

k. Non Executive Directors continued

Non Executive Directors’ equity holdings

Non Executive Directors

Michael Ullmer

Colin Carter

Philip Coffey

David Craig

Margaret Ford1

Jane Hemstritch

Elizabeth Proust

Year

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

Nicola Wakefield Evans

2020

Robert Welanetz²

2019

2020

Former Non Executive Directors

Phillip Colebatch³

David Crawford⁴

Steve Dobbs⁵

Total6

Total

2019

2020

2019

2020

2019

Securities Held at
Beginning of Financial Year

Other Net Change
to Securities

Securities Held at
End of Financial Year

100,000

50,000

15,000

9,810

50,000

24,870

‑

20,000

25,000

10,000

30,248

16,766

‑

18,323

81,315

12,000

262,058

260,084

10,000

50,000

3,061

‑

11,406

‑

13,061

25,130

4,065

3,061

‑

28,061

15,000

3,772

13,482

7,000

‑

1,017

‑

83,487

104,629

110,000

100,000

18,061

15,000

21,216

9,810

63,061

50,000

4,065

23,061

20,000

53,061

25,000

34,020

30,248

7,000

18,323

84,332

12,000

345,545

364,713

Purchase of Lendlease securities by Non Executive Directors
The current Non Executive Directors acquired Lendlease securities using their own funds.

1. As Margaret Ford was appointed as a Non Executive Director on 1 March 2020 a nil opening balance has been shown. 2. As Robert Welanetz was appointed as a Non
Executive Director on 1 March 2020 a nil opening balance has been shown. 3. Phillip Colebatch ceased to be a Non Executive Director on 16 November 2018. The end balance
of securities for 2019 represents the balance held at that date. 4. David Crawford ceased to be a Non Executive Director on 16 November 2018. The end balance of securities
for 2019 represents the balance held at that date. 5. Steve Dobbs ceased to be a Non Executive Director on 20 November 2019. The end balance of securities for 2020
represents the balance held at that date. 6. The 2020 opening balance excludes the securities held by Phillip Colebatch (18,323) and David Crawford (84,332) given that they
both ceased to be Non Executive Directors in the 2019 financial year.

This page is intentionally left blank.

Lendlease Annual Report 2020 Governance138

Lendlease Annual Report 2020 Governance

139

Directors’ Report

The Directors’ Report for the financial year ended 30 June 2020 has been prepared in accordance with the requirements of the
Corporations Act 2001. The information below forms part of this Directors’ Report:

• Principal activities on page 5

• Operating and Financial Review on pages 4 to 89 incorporating the Performance and Outlook on pages 76 to 89

• Biographical information for the Directors and Company Secretary on pages 92 to 97

• Officers who were previously partners of the audit firm on page 97

• Directors’ interests in capital on page 104

• Board and committee meetings and attendance on pages 104 to 105

• Remuneration Report on pages 106 to 137

• Lead Auditor’s Independence Declaration on page 140.

a. Dividends/Distributions
The 2019 final dividend/distribution of $169 million (30.0 cents per security, unfranked) referred to in the Directors’ Report dated
19 August 2019, was paid on 16 September 2019. Details of dividends/distributions in respect of the current year are as follows:

Interim dividends/distributions of 30.0 cents per security (unfranked) paid on 17 March 20201

Final dividends/distributions of 3.3 cents per security (unfranked) declared by Directors to be payable on 15 September 20202

Total dividends/distributions

1. Comprised of an unfranked dividend of 22.1 cents per share paid by the Company and an unfranked trust distribution of 7.9 cents per unit paid by Lendlease Trust.
2. Comprised of an unfranked trust distribution of 3.3 cents per unit payable by Lendlease Trust.

169

191

b. Significant Changes in State of Affairs
There have been no significant changes in the Group’s state of affairs.

c. Events Subsequent to Balance Date
On 1 July 2020, the Group disposed of a 25 per cent interest in One Sydney Harbour R1 Trust. The Group recorded a gain on sale of
$19 million (net of transaction costs). The remaining 75 per cent interest retained by the Group provided a revaluation of $128 million
based on the transaction price.

d. Security Options
No security options were issued during the year by the Company or any of its controlled entities, and there are no such options on issue.

e. Indemnification and Insurance of Directors and Officers
Rule 12 of the Company’s Constitution provides for indemnification in favour of each of the Directors named on pages 92 to 97 of this
report, the officers of the Company or of wholly owned subsidiaries or related entities of the Company (Officers) to the extent permitted
by the Corporations Act 2001. Rule 12 does not indemnify a Director, Company Secretary or Officer for any liability involving a lack of
good faith.

In conformity with Rule 12 of the Company’s Constitution, the Company has entered into Deeds of Indemnity, Insurance and Access
with each of the Directors named on pages 92 to 97 of this report and for officers of the Company and Directors of related entities of
the Company. The indemnities operate to the full extent permitted by law and are not subject to a monetary limit. The Company is not
aware of any liability having arisen, and no claims have been made during or since the financial year under the Deeds of Indemnity,
Insurance and Access.

For unrelated entities in which the Group has an interest, Deeds of Indemnity may be entered into between Lendlease Corporation
Limited and the Director or Officer. Since the date of the last report, the Company has not entered into any separate Deeds of Indemnity
with a Director or Officer of an unrelated entity.

No indemnity has been granted to an auditor of the Company in their capacity as auditor of the Company.

In accordance with the Corporations Act 2001, Rule 12 of the Constitution also permits the Company to purchase and maintain
insurance or pay or agree to pay a premium for insurance for Officers against any liability incurred as an Officer of the Company or of a
related body corporate. This may include a liability for reasonable costs and expenses incurred in defending proceedings, whether civil
or criminal, and whatever their outcome. Due to confidentiality obligations and undertakings of the policy, no further details in respect of
the premium or policy can be disclosed.

f. Environmental Regulation
The Group is subject to various state and federal environmental regulations in Australia.

The Directors are not aware of any material non compliance with environmental regulations pertaining to the operations or activities
during the period covered by this report. In addition, the Lendlease Group is registered and publicly reports the annual performance
of its Australian operations under the requirements of the National Greenhouse and Energy Reporting (NGER) Act 2007 and Energy
Efficiency Opportunities (EEO) Act 2006.

All Lendlease businesses continue to operate an integrated Environment, Health and Safety Management System, ensuring that non
compliance risks and opportunities for environmental improvements are identified, managed and reported accordingly.

g. Non Audit Services
During the year, KPMG, the Company’s auditor, performed certain other services in addition to its statutory duties.

The Board has considered the other services provided during the year by the auditor and, in accordance with written advice provided by
resolution of the Audit Committee, is satisfied that the provision of those services during the year by the auditor is compatible with, and
did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• All other services were subject to the corporate governance procedures adopted by the Group and the Audit Committee is satisfied

that those services do not impact the integrity and objectivity of the auditor

The other services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or
decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards.

A copy of the Lead Auditor's Independence Declaration, as required under Section 307C of the Corporations Act 2001, is included at
the end of the Directors’ Report.

Details of the amounts paid to the auditor of the Company, KPMG, and its related practices for audit and other services provided during
the year are set out below.

Audit and Other Assurance Services

Audit services

Other assurance services

Total audit and other assurance services

Non audit services

Total audit, non audit and other assurance services

Consolidated

June 2020
$000s

June 2019
$000s

7,233

524

7,757

557

8,314

7,141

495

7,636

714

8,350

h. Rounding Off
Lendlease Corporation Limited is a company of the kind referred to in the ASIC Corporations (Rounding in Financial/Directors' Reports)
Instrument 2016/191 dated 24 March 2016 and, in accordance with that Instrument, amounts in the Consolidated Financial Statements and this
report have been rounded off to the nearest million dollars unless specifically stated to be otherwise.

This report is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Directors.

M J Ullmer, AO

Chairman

S B McCann

Group Chief Executive Officer and Managing Director

Sydney, 17 August 2020

140

Lendlease Annual Report 2020 Governance

141

Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001

To the Directors of Lendlease Corporation Limited

I declare that, to the best of my knowledge and belief, in relation to the audit of Lendlease Corporation
Limited for the financial year ended 30 June 2020 there have been:

ii.

no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and

no contraventions of any applicable code of professional conduct in relation to the audit.

KPMG

D M McLennan
Partner

Sydney
17 August 2020

KPMG, an Australian partnership and a member firm of the
KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a
Swiss entity.

Liability limited by a scheme approved
under Professional Standards Legislation.

This page is intentionally left blank.

142

Lendlease Annual Report 2020 Financial Statements

143

Financial
Statements

Boston: Clippership
Wharf

A vibrant mixed use
community on the East
Boston waterfront.

144

145

Financial Statements

Table of Contents

Consolidated Financial Statements

Income Statement

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Consolidated Financial Statements

Notes Index
Section A: Performance

Segment Reporting

2. Dividends/Distributions

Earnings Per Share/Stapled Security

Revenue from Contracts with Customers

Share of Profit of Equity Accounted Investments

6. Other Income

7. Other Expenses

Finance Revenue and Finance Costs

Taxation

10. Events Subsequent to Balance Date

Section B: Investment

11.

Inventories

12. Equity Accounted Investments

13. Other Financial Assets

Section C: Liquidity and Working Capital

14. Cash and Cash Equivalents

15. Notes to Statement of Cash Flows

16. Borrowings and Financing Arrangements

17.

Issued Capital

18. Capital Management

19. Liquidity Risk Exposure

20. Commitments

21. Loans and Receivables

22. Trade and Other Payables

Section D: Risk Management

23. Financial Risk Management

24. Hedging

25. Fair Value Measurement

26. Contingent Liabilities

Section E: Basis of Consolidation

27. Consolidated Entities

28. Employee Benefit Vehicles

29. Parent Entity Disclosures

30. Related Party Information

Section F: Other Notes

31.

Intangible Assets

32. Discontinued Operations

33. Defined Benefit Plans

34. Employee Benefits

35.

Impact of New and Revised Accounting Standards

36. Other Significant Accounting Policies

Directors’ Declaration

145

146

147

148

150

151

152

155

156

158

159

161

162

165

166

167

172

173

174

176

177

178

179

180

182

184

185

186

187

188

189

190

192

194

196

199

202

204

205

Lendlease Corporation Limited (the Company) is incorporated
and domiciled in Australia. The consolidated financial report
of the Company for the financial year ended 30 June 2020
comprises the Company and its controlled entities including
Lendlease Trust (LLT) (together referred to as the consolidated
entity or the Group). The Group is a for profit entity and is
an international property and investments group. Further
information about the Group’s primary activities is included in
Note 1 ‘Segment Reporting’.

Shares in the Company and units in LLT are traded as one
security under the name of Lendlease Group on the Australian
Securities Exchange (ASX). The Company is deemed to control
LLT for accounting purposes and therefore LLT is consolidated
into the Group’s financial report. The issued units of LLT,
however, are not owned by the Company and are therefore
presented separately in the consolidated entity Statement
of Financial Position within equity, notwithstanding that the
unitholders of LLT are also the shareholders of the Company.

The consolidated financial report was authorised for issue by the
Directors on 17 August 2020.

Consolidated Financial Statements

Income Statement

Year Ended 30 June 2020

Revenue from contracts with customers

Other revenue

Cost of sales

Gross profit

Share of profit of equity accounted investments

Other income

Other expenses

Results from operating activities from continuing operations

Finance revenue

Finance costs

Net finance costs

(Loss)/Profit before tax from continuing operations

Income tax benefit/(expense)

(Loss)/Profit after tax from continuing operations

Profit/(loss) after tax from discontinued operations

(Loss)/Profit after tax

(Loss)/Profit after tax attributable to:

Members of Lendlease Corporation Limited

Unitholders of Lendlease Trust

(Loss)/Profit after tax attributable to securityholders

External non controlling interests

(Loss)/Profit after tax

Basic/Diluted Earnings per Lendlease Group Stapled Security (EPSS) from Continuing Operations

Shares excluding treasury shares

Shares on issue

Basic/Diluted Earnings per Lendlease Group Stapled Security (EPSS)

Securities excluding treasury securities

Securities on issue

(cents)

Note

June 2020
$m

June 20191,2
$m

11,671

163

14,889

152

(11,361)

(13,929)

473

(13)

352

(1,195)

(383)

(165)

(153)

(536)

194

(342)

(310)

(342)

(310)

(57.1)

(56.7)

(51.8)

(51.4)

1,112

338

293

(863)

880

(142)

(125)

755

(198)

557

(90)

467

313

154

467

95.4

94.7

80.0

79.4

June 2019 balances have been restated for discontinued operations during the year. Refer to Note 32 ‘Discontinued Operations’ for further detail.

2. As required under AASB 133 Earnings per Share, the 30 June 2019 weighted average number of ordinary shares and the weighted average number of stapled securities have

been updated to reflect the new stapled securities issued via the institutional placement and Security Purchase Plan during the year. The Basic/Diluted EPS and Basic/Diluted
EPSS have been restated to reflect this change.

The accompanying notes form part of these consolidated financial statements.

Lendlease Annual Report 2020 Financial Statements146

147

Note

June 2020
$m

June 20192
$m

(310)

467

Consolidated Financial Statements continued

Statement of Comprehensive Income

Year Ended 30 June 2020

(Loss)/Profit after Tax

Other Comprehensive Income/(Expense) After Tax

Items that may be reclassified subsequently to profit or loss:

Movements in hedging reserve

Movements in foreign currency translation reserve

Total items that may be reclassified subsequently to profit or loss1

Items that will not be reclassified to profit or loss:

Movements in non controlling interest acquisition reserve

Defined benefit plans remeasurements

Total items that will not be reclassified to profit or loss

Total comprehensive (expense)/income after tax

Total comprehensive (expense)/income after tax from continued operations attributable to:

Members of Lendlease Corporation Limited

Unitholders of Lendlease Trust

Total comprehensive (expense)/income after tax from discontinued operations attributable to:

Members of Lendlease Corporation Limited

Total comprehensive (expense)/income after tax attributable to securityholders

External non controlling interests

Total comprehensive (expense)/income after tax

Includes $(39) million (June 2019: $3 million) relating to share of other comprehensive income of equity accounted investments.

1.
2. June 2019 balances have been restated for discontinued operations during the year. Refer to Note 32 ‘Discontinued Operations’ for further detail.

(19)

(5)

(24)

(1)

(322)

(381)

(322)

‑

(322)

(61)

(5)

(39)

(44)

454

390

154

(90)

454

‑

454

Statement of Financial Position

As at 30 June 2020

Current Assets

Cash and cash equivalents

Loans and receivables

Inventories

Other financial assets

Current tax assets

Other assets

Disposal Group assets held for sale

Total current assets

Non Current Assets

Loans and receivables

Inventories

Equity accounted investments

Investment properties

Other financial assets

Deferred tax assets

Property, plant and equipment

Intangible assets

Defined benefit plan asset

Other assets

Total non current assets

Total assets

Current Liabilities

Trade and other payables

Provisions

Borrowings and financing arrangements

Other financial liabilities

Disposal Group liabilities held for sale

Total current liabilities

Non Current Liabilities

Trade and other payables

Provisions

Borrowings and financing arrangements

Other financial liabilities

Deferred tax liabilities

Total non current liabilities

Total liabilities

Net assets

Equity

Issued capital

Treasury securities

Reserves

Retained earnings

The accompanying notes form part of these consolidated financial statements.

Total equity attributable to members of Lendlease Corporation Limited
Total equity attributable to unitholders of Lendlease Trust

Total equity attributable to securityholders
External non controlling interests

Total equity

Note

June 2020
$m

June 2019
$m

16a

1, 1 1 1

1,667

2,256

841

1,290

2,050

2,238

‑

5,977

5,756

744

3,113

3,671

658

1,076

141

693

1,457

156

11,771

17,748

4,496

343

134

670

688

3,345

3,452

501

1,103

101

548

1,457

140

11,422

17,178

5,724

332

225

‑

5,653

6,287

2,405

2,261

434

5,163

10,816

6,932

1,889

(68)

3,265

5,151
1,756

6,907
25

6,932

1,401

2,490

597

4,534

10,821

6,357

1,300

(68)

105

3,815

5,152
1,182

6,334
23

6,357

Lendlease Annual Report 2020 Financial Statements148

Consolidated Financial Statements continued

Statement of Changes in Equity

Year Ended 30 June 2020

Balance as at 1 July 2018

Total Comprehensive Income
Profit for the period
Other comprehensive income (net of tax)

Total comprehensive income

Other Comprehensive Income (Net of Tax)
Net investment hedging
Effect of foreign exchange movements
Effective cash flow hedges
Defined benefit plans remeasurements

Other comprehensive income (net of tax)

Transactions with Owners of the Company
Capital contributed by non controlling interests
Distribution Reinvestment Plan (DRP)

On market buyback of securities
Dividends and distributions
Treasury securities acquired
Treasury securities vested
Fair value movement on allocation and vesting of securities
Asset disposal and transfers
Other movements

Total other movements through reserves

Balance as at 30 June 2019

Impact of change in accounting policy 1

Balance as at 1 July 2019

Total Comprehensive Income
Profit for the period
Other comprehensive income (net of tax)

Total comprehensive income

Other Comprehensive Income (Net of Tax)
Net investment hedging
Effect of foreign exchange movements
Effective cash flow hedges
Defined benefit plans remeasurements

Other comprehensive income (net of tax)

Transactions with Owners of the Company
Capital contributed by non controlling interests
Distribution Reinvestment Plan (DRP)
Share issue via institutional placement (net of transaction costs)2
Share issue via Security Purchase Plan (net of transaction costs)3
Dividends and distributions
Treasury securities acquired
Treasury securities vested
Fair value movement on allocation and vesting of securities

Transfer as a result of asset disposal4
Other movements

Total other movements through reserves

Balance as at 30 June 2020

Issued
Capital
$m

1,297

Treasury
Securities5
$m

(44)

Hedging
Reserve
$m

(23)

‑
‑

‑
‑
‑
‑

‑
3
‑
‑
‑
‑
‑

‑
‑

1,300

‑

1,300

‑
‑

‑
‑
‑
‑

‑
9
454
126
‑
‑
‑
‑

‑
‑

589

1,889

‑
‑

‑
‑
‑
‑

‑
‑
‑
‑
(57)
33
‑

‑
‑

(24)

(68)

‑

(68)

‑
‑

‑
‑
‑
‑

‑
‑
‑
‑
‑
(52)
52
‑

‑
‑

(68)

‑
(61)

(61)

‑
‑
(61)
‑

(61)

‑
‑
‑
‑
‑
‑
‑

‑
‑

(84)

‑

(84)

‑
(19)

(19)

‑
‑
(19)
‑

(19)

‑
‑
‑
‑
‑
‑
‑
‑

7
‑

(96)

RESERVES

Foreign
Currency Translation
Reserve
$m

(25)

‑
92

(8)
100
‑
‑

‑
‑
‑
‑
‑
‑
‑

1
‑

‑

‑
‑

‑
‑
‑
‑

‑
‑
‑
‑
‑
‑
‑
‑

(30)
‑

(30)

Non Controlling
Interest
Acquisition
Reserve
$m

(92)

Other
Reserve
$m

106

Equity
Compensation
Reserve
$m

Retained
Earnings
$m

3,855

Members of
Lendlease
Corporation
Limited
$m

Unitholders
of Lendlease
Trust
$m

5,169

1,244

‑
(5)

(5)

‑
(5)
‑
‑

(5)

‑
‑
‑
‑
‑
‑
‑

‑
‑

(97)

‑

(97)

‑
(1)

(1)

‑
(1)
‑
‑

(1)

‑
‑
‑
‑
‑
‑
‑
‑

‑
‑

‑
‑
‑
‑

‑
‑
‑
‑
‑
‑
‑

‑
‑

106

‑

106

‑
‑

‑
‑
‑
‑

‑
‑
‑
‑
‑
‑
‑
‑

‑
‑

‑
‑
‑
‑

‑
‑
‑
‑
‑
‑
17

‑
‑

112

‑

112

‑
‑

‑
‑
‑
‑

‑
‑
‑
‑
‑
‑
‑
3

‑
‑

(98)

106

115

313
(39)

274

‑
‑
‑
(39)

(39)

‑
‑
(140)
(174)
‑
‑
‑

‑
‑

(314)

3,815

(42)

3,773

(342)
13

(329)

‑
‑
‑
13

‑
‑
‑
‑
(178)
‑
‑
‑

‑
(1)

(179)

3,265

313
(13)

300

(8)
95
(61)
(39)

(13)

‑
3
(140)
(174)
(57)
33
17

1
‑

(317)

5,152

(42)

5,110

(342)
(7)

(349)

‑
(1)
(19)
13

(7)

‑
9
454
126
(178)
(52)
52
3

(23)
(1)

390

5,151

154
‑

154

‑
‑
‑
‑

‑
1
(34)
(183)
‑
‑
‑

‑
‑

(216)

1,182

‑

1,182

32
(5)

‑
(5)
‑
‑

(5)

‑
2
479
134
(67)
‑
‑
‑

‑
(1)

547

1,756

149

Total
Equity
$m

6,414

467
(13)

454

(8)
95
(61)
(39)

(13)

22
4
(174)
(357)
(57)
33
17

1
‑

(511)

6,357

(42)

6,315

(310)
(12)

(322)

‑
(6)
(19)
13

(12)

2
11
933
260
(245)
(52)
52
3

(23)
(2)

939

External
Non
Controlling
Interests
$m

‑
‑

‑
‑
‑
‑

22
‑
‑
‑
‑
‑
‑

‑
‑

‑

‑
‑

‑
‑
‑
‑

2
‑
‑
‑
‑
‑
‑
‑

‑
‑

6,932

June 2020 Statement of Changes in Equity has been adjusted to reflect the impact of the first time adoption of AASB 16 Leases (refer to Note 35 ‘Impact of New and Revised Accounting

1.
Standards’ for further detail) by recording $(42) million to opening retained earnings.
2. On 4 May 2020 the Group issued 97 million new stapled securities via an institutional placement at an issue price of $9.80.
3. On 4 June 2020 the Group issued 27 million new stapled securities via a Security Purchase Plan at an issue price of $9.80.
4. These movements in reserves were transferred to profit and loss in the year.
5. Opening balance for number of treasury securities 1 July 2019 was 4 million (1 July 2018: 4 million) and closing balance at 30 June 2020 was 4 million.

The accompanying notes form part of these consolidated financial statements.

Lendlease Annual Report 2020 Financial Statements150

151

Consolidated Financial Statements continued

Notes to Consolidated Financial Statements

Note

June 20203
$m

June 20193
$m

• Has been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board,

and the Corporations Act 2001

Basis of Preparation

The consolidated financial report is a general purpose financial report which:

Statement of Cash Flows

Year Ended 30 June 2020

Cash Flows from Operating Activities

Cash receipts in the course of operations

Cash payments in the course of operations

Interest received

Interest paid in relation to other corporations

Interest in relation to lease liabilities1

Dividends/distributions received

Income tax paid in respect of operations

Net cash provided by operating activities

Cash Flows from Investing Activities

Sale/redemption of investments

Acquisition of investments

Acquisition of/capital expenditure on investment properties

Net loan drawdowns from associates and joint ventures

Disposal of consolidated entities (net of cash disposed and transaction costs)

Disposal of property, plant and equipment

Acquisition of property, plant and equipment

Acquisition of intangible assets

Net cash (used in)/provided by investing activities

Cash Flows from Financing Activities

Net proceeds from share issue

Proceeds from borrowings

Repayment of borrowings

Dividends/distributions paid

Payments for on market buyback of stapled securities

Payments for on market buyback of stapled securities – Distribution Reinvestment Plan

Increase in capital of non controlling interests

Repayment of lease liabilities1

Net cash provided by/(used in) financing activities

Other Cash Flow Items

Effect of foreign exchange rate movements on cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of financial year

Cash and cash equivalents at end of financial year2

1. June 2019 comparatives $nil as Interest in relation to lease liabilities and Repayment of lease liabilities were not recognised under AASB 117 Leases. Operating lease expenses

were recorded as Cash payments in the course of operations. Refer to Note 35 ‘Impact of New and Revised Accounting Standards’ for further detail.

2. $451 million of Cash and cash equivalents has been classified as Disposal Group assets held for sale at 30 June 2020. Refer to Note 14 ‘Cash and Cash Equivalents’ for further

detail.

3. Balances include cash flows relating to both continuing and discontinued operations. Net cash flows relating to discontinued operations have been disclosed in Note 32

‘Discontinued Operations’.

The accompanying notes form part of these consolidated financial statements.

13,488

(13,313)

17,026

(16,902)

(164)

(25)

146

(11)

137

448

(709)

(57)

(9)

136

(112)

(77)

(369)

1,193

4,658

(4,970)

(327)

‑

(61)

495

272

1,290

1,562

(152)

‑

105

(30)

571

(378)

(53)

(22)

266

(165)

(66)

167

‑

4,640

(4,347)

(258)

(174)

(11)

‑

(128)

113

1,177

1,290

• Complies with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board

• Is presented in Australian dollars ($). At June 2020, all values have been rounded off to the nearest million dollars unless otherwise indicated,

in accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191

• Provides comparative financial information in the Income Statement, Statement of Comprehensive Income and related Notes has been
restated for discontinued operations during the year. The comparative information in the Statement of Financial Position, Statement of
Changes in Equity, Statement of Cash Flows and related Notes has not been restated. Refer to Note 32 ‘Discontinued Operations’ for
further details

• Includes certain other comparative balances that have been reclassified following the adoption of AASB 16 Leases

• Is prepared under the historical cost basis except for the following assets and liabilities, which are stated at their fair value: derivative
financial instruments, fair value through profit or loss investments, investment properties, and liabilities for cash settled share based
compensation plans. Recognised assets and liabilities that are hedged are stated at fair value in respect of the risk that is hedged. Refer to
the specific accounting policies within the Notes to the Consolidated Financial Statements for the basis of valuation of assets and liabilities
measured at fair value.

Significant accounting policies have been:

• Included in the relevant notes to which the policies relate, while other significant accounting policies are discussed in Note 36 ‘Other

Significant Accounting Policies’

• Consistently applied to all financial years presented in the consolidated financial statements and by all entities in the Group, except as

explained in Note 35 ‘Impact of New and Revised Accounting Standards’.

The preparation of a financial report that complies with AASBs requires management to make judgements, estimates and assumptions.

• This can affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results

may differ from these estimates.

• Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

• The significant accounting policies highlight information about accounting judgements in applying accounting policies that have the most
significant effects on reported amounts and further information about estimated uncertainties that have a significant risk of resulting in
material adjustments within the next financial year.

• These significant accounting estimates and judgements have been considered in the context of the COVID‑19 outbreak and the impact of

the current economic conditions.

The Group presents assets and liabilities in the Statement of Financial Position as current or non current.

• Current assets include assets held primarily for trading purposes, cash and cash equivalents, and assets expected to be realised in, or
intended for sale or use in, the course of the Group’s operating cycle or within the next 12 months. All other assets are classified as non
current.

• Current liabilities include liabilities held primarily for trading purposes, liabilities expected to be settled in the course of the Group’s
operating cycle and those liabilities due within one year from the reporting date. All other liabilities are classified as non current.

The financial statements are prepared on a going concern basis. In preparing the financial statements, including assessing the going concern
basis of accounting, the Group has considered the COVID‑19 pandemic.

The Group has:

• Raised over $1.2 billion through its recent equity raising. See Note 17 ‘Issued Capital’

• Over $4.2 billion in undrawn facilities. See Note 16 ‘Borrowings and Financing Arrangements’

• Over $1.1 billion in cash and cash equivalents. See Note 14 ‘Cash and Cash Equivalents’

• Net positive cash inflow from operating activities. See Statement of Cash Flows.

Following this assessment, the Group is well placed to manage its financing and future commitments over the next 12 months from the date of
the financial statements.

Lendlease Annual Report 2020 Financial Statements
152

153

Notes to Consolidated Financial Statements continued

Section A: Performance

The following tables set out other financial information by reportable segment.

Segment
Revenue1
$m

Finance
Revenue
$m

Finance
Expense
$m

Share of
Results EAI2
$m

Depreciation
and
Amortisation
$m

Material Non
Cash Items3
$m

Non Current
Segment
Assets4
$m

Group
Total
Assets
$m

Year Ended June 2020

Core

Development

Construction

Investments

Total core segments

Non core

Total segments

Corporate activities

Statutory result

Year Ended June 2019

Core

Development

Construction

Investments

Total core segments

Non core

Total segments

Corporate activities

Statutory result

2,344

7,627

390

10,361

2,884

13,245

13,289

3,355

9,680

348

13,383

3,141

16,524

16,555

‑

(5)

(6)

(7)

(18)

(1)

(19)

(147)

(166)

(4)

(1)

(6)

‑

(6)

(136)

(142)

(100)

(16)

(13)

‑

(13)

184

126

333

338

‑

338

(23)

(28)

(17)

(68)

(84)

(152)

(92)

(244)

(12)

(7)

(31)

(28)

(59)

(63)

(122)

(36)

(17)

(63)

(116)

(107)

(37)

(144)

(3)

138

156

159

(8)

151

5,150

1,310

7,281

3,565

3,032

4,236

9,492

15,082

279

1,828

9,771

16,910

627

838

10,398

17,748

5,275

1,440

2,597

7,101

3,710

4,028

9,312

14,839

490

2,089

9,802

16,928

276

250

10,078

17,178

1. Segment revenue as disclosed in the Performance and Outlook section of the Directors’ Report, is comprised of Revenue from contracts with customers, Other revenue and

Finance revenue.

2. Equity Accounted Investments.
3. Material Non Cash Items relates to impairments and provisions raised or written back, unrealised foreign exchange movements and fair value gains or losses.
4. Excludes deferred tax assets, financial instruments and defined benefit plan assets.

Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) and Profit after tax (PAT) are the key measures used to assess the
Group’s performance. This section of the Financial Report focuses on disclosures that enhances a user’s understanding of EBITDA and
PAT. Segment Reporting below provides a breakdown of profit and revenue by the operational activity. The key line items of the Income
Statement along with their components provide detail behind the reported balances. Group performance will also impact the earnings
per stapled security and dividend payout therefore disclosure on these items has been included in this section. Further information and
analysis on performance and allocation of resources can be found in the Performance and Outlook section of the Directors’ Report.

1. Segment Reporting

Accounting Policies
The Group’s segments are Development, Construction, Investments and Non core. The Group has identified these operating segments
based on the distinct products and services provided by each segment, the distinct target returns profile and allocation of resources for each
segment, and internal reports that are reviewed and used by the Group Chief Executive Officer and Managing Director (the Chief Operating
Decision Maker) in assessing performance, determining the allocation of resources, setting operational targets, and managing the Group.
The Group has arranged the segments around business activity rather than geography due to the Group’s business model being broadly
consistent in all regions.
Segment performance is based on EBITDA and PAT. EBITDA and PAT are used to measure performance as management believes that such
information is the most relevant in evaluating the results of certain reportable segments relative to other entities that operate within these
industries. The Group does not consider corporate activities to be an operating segment.

The operating segments are as follows:
Development
Operates in all four geographic regions. Its products and services include the development of inner city mixed use developments, apartments,
communities, retirement, retail, commercial assets and social and economic infrastructure. Construction margin earned on internal projects is
recognised in this segment.

Construction
Operates across all four geographic regions. Its products and services include the provision of project management, design and construction
services, predominantly in the defence, mixed use, commercial and residential sectors.

Investments
Services include owning and/or managing investments across all four geographic regions. The Investments segment includes a leading
investment management platform and also includes the Group’s ownership interests in property and infrastructure Co‑Investments,
Retirement Living and US Military Housing.
Non core
Non core includes the provision of project management, design and construction services in the Australian infrastructure sector. These
products and services represent the Engineering and Services businesses. The Chief Operating Decision Maker receives separate information
about these businesses, given the Group announced in February 2019 that the Engineering and Services businesses are no longer a required
part of the Group’s strategy. The results of the discontinued operations referenced throughout the financial statements is included in this
segment. Discontinued operations represents the Engineering business that the Group intends to sell, excluding the projects retained by the
Group. Refer to Note 32 ‘Discontinued Operations’ for further detail.

Financial information regarding the performance of each reportable segment and a reconciliation of these reportable segments to the financial
statements is included below.

EBITDA2

PROFIT
BEFORE TAX

INCOME TAX
(EXPENSE)/BENEFIT

PROFIT
AFTER TAX

June 2020
$m

June 2019
$m

June 2020
$m

June 2019
$m

June 2020
$m

June 2019
$m

June 2020
$m

June 2019
$m

Core

Development

Construction

Investments

Total core segments

Non core

Total segments

Reconciling items

Corporate activities

Total Group

Discontinued operations1

Results from continuing operations

Interest, tax, depreciation and amortisation2

Statutory result ((Loss)/Profit after tax)

322

101

140

563

(495)

(158)

(90)

(220)

(310)

793

211

489

1,493

(461)

1,032

(165)

867

(400)

467

300

117

484

(574)

(90)

(392)

(482)

(536)

787

198

482

1,467

(489)

978

(358)

620

(135)

755

(67)

(25)

(13)

(105)

168

109

172

(22)

194

(233)

(57)

(114)

(404)

152

(252)

(153)

(198)

233

104

379

(406)

(27)

(283)

(310)

(342)

554

141

368

1,063

(337)

726

(259)

467

(90)

557

1. Refer to Note 32 ‘Discontinued Operations’ for further detail.
2. EBITDA includes continuing and discontinued operations, and represents earnings before net finance costs of $148 million (June 2019: $125 million), tax benefit of $172 million

(June 2019: tax expense of $(153) million), depreciation and amortisation of $244 million (June 2019: $122 million).

Lendlease Annual Report 2020 Financial Statements
154

155

Notes to Consolidated Financial Statements continued

Section A: Performance continued

1. Segment Reporting continued

Australia

Asia

Europe

Americas

Total segment

Corporate activities

Statutory result

NON CURRENT ASSETS1

June 2020
$m

June 2019
$m

4,882

1,361

1,382

2,146

9,771

627

5,462

1,176

1,158

2,006

9,802

276

10,398

10,078

1. Excludes deferred tax assets, financial instruments and defined benefit plan assets and is based on the geographical location of assets.

The operating segments generate revenue in the following regions.

Development
$m

Construction
$m

Investments
$m

Total Core
Segments
$m

Non Core
$m

Total
Segments
$m

Corporate
Activities
$m

Statutory
Result
$m

REVENUE1

Year Ended June 2020

Australia

Asia

Europe

Americas

Total

Year Ended June 2019

Australia

Asia

Europe

Americas

Total

1,198

969

164

2,344

3,217

255

782

3,373

7,627

2,712

4,052

544

3,355

401

941

4,286

9,680

172

134

390

210

4,587

402

1,767

3,605

10,361

6,974

482

1,498

4,429

2,884

‑

2,884

3,141

‑

7,471

402

1,767

3,605

13,245

10,115

482

1,498

4,429

‑

7,515

402

1,767

3,605

13,289

10,146

‑

482

1,498

4,429

348

13,383

3,141

16,524

16,555

1. Segment revenue as disclosed in the Performance and Outlook section of the Directors’ Report, is comprised of Revenue from contracts with customers, Other revenue and

Finance revenue.

No revenue from transactions with a single external customer amounts to 10 per cent or more of the Group’s revenue.

2. Dividends/Distributions1

Parent Company Interim Dividend
December 2019 – paid 17 March 2020

December 20182

Lendlease Trust Interim Distribution

December 2019 – paid 17 March 2020
December 2018 – paid 20 March 2019

Parent Company Final Dividend

June 20203
June 2019 – paid 16 September 2019

Lendlease Trust Final Distribution

June 2020 – provided for (payable 15 September 2020)
June 2019 – paid 16 September 2019
Total

1. Final and interim dividends/distributions were not franked in the current and prior year.
2. No interim dividend was declared for the Company for the 31 December 2018 half year.
3. No final dividend was declared for the Company for 30 June 2020.

COMPANY/TRUST

Cents
Per Share/Unit

June 2020
$m

June 2019
$m

22.1

7.9
12.0

9.5

3.3
20.5

124

‑

45
‑

‑
‑

22
‑
191

‑

‑
68

‑
53

‑
116
237

Dividend Franking
The amount of franking credits available for use in subsequent reporting periods as at 30 June 2020 is $17 million, based on a 30 per cent tax
rate (30 June 2019: $16 million). This is calculated after adjusting for franking credits which will arise from the payment of income tax provided
in the financial statements and tax losses utilised in the current financial year.

3. Earnings Per Share/Stapled Security (EPS/EPSS)

Accounting Policies
The Group presents basic and diluted EPS/EPSS in the Income Statement. This is a key performance measure for the Group. Refer to
further details in the Finance Area of Focus section of the Annual Report.

Basic EPS/EPSS is determined by dividing Profit/(loss) after tax attributable to members of the Company and Group, excluding any costs
of servicing equity other than ordinary shares/securities, by the weighted average number of ordinary shares/securities outstanding
during the financial year, adjusted for bonus elements in ordinary shares/securities issued during the financial year.

Diluted EPS/EPSS is determined by adjusting the Profit/(loss) after tax attributable to members of the Company and Group, and the
weighted average number of ordinary shares/securities outstanding for the effects of all dilutive potential ordinary shares/securities. The
Group currently does not have any dilutive potential ordinary shares/securities. Dilution occurs when treasury shares and employee share
options are included in outstanding shares.

The issued units of Lendlease Trust (LLT) are presented separately within equity, and therefore the profit attributable to LLT is excluded
from the calculation of basic and diluted earnings per Company share presented in the Income Statement.

JUNE 2020

JUNE 20192

Shares/
Securities
Excluding
Treasury
Securities

Shares/
Securities
on Issue

Shares/
Securities
Excluding
Treasury
Securities

Shares/
Securities
on Issue

Basic/Diluted Earnings Per Share (EPS)1

(Loss)/profit attributable to members of Lendlease Corporation Limited
(Company)
Weighted average number of ordinary shares
Basic/Diluted EPS

Basic/Diluted Earnings Per Stapled Security (EPSS)1

(Loss)/profit attributable to securityholders of Lendlease Group
Weighted average number of stapled securities
Basic/Diluted EPSS

$m
m
cents

(342)
599
(57.1)

(310)
599
(51.8)

(342)
603
(56.7)

(310)
603
(51.4)

313
584
53.6

467
584
80.0

313
588
53.2

467
588
79.4

1. Balances include both continuing and discontinued operations. Earnings per share/stapled security for continuing and discontinued operations have been separately

disclosed in Note 32 ‘Discontinued Operations’.

2. As required under AASB 133 Earnings per Share, the 30 June 2019 weighted average number of ordinary shares and the weighted average number of stapled securities have

Lendlease Annual Report 2020 Financial Statements
156

157

Notes to Consolidated Financial Statements continued

Section A: Performance continued

4. Revenue from Contracts with Customers

Accounting Policies

Provision of Construction and Development services

Construction services include project management, design and construction services predominantly in the defence, mixed use,
commercial and residential sectors. Development services include development fees earned on development of inner city mixed use
developments, retirement, retail, commercial assets and social and economic infrastructure.

Contracts with customers to provide Construction or Development services can include either one performance obligation or multiple
performance obligations within each contract. The Group assesses each of its contracts individually and where there are separate
performance obligations identified, the transaction price is allocated based on the relative standalone selling prices of the services
provided. Typically, the Construction or Development services in contracts are not considered distinct as the services are highly
interrelated and an integrated bundle of services, therefore are accounted for as a single performance obligation.

The transaction price for each contract may include variable consideration in the form of contract variations or modifications, and
contract claims (collectively, ‘Modifications’). Variable consideration may also include performance or other incentive fees. The
transaction price is the amount of consideration to which the Group expects to be entitled to receive in exchange for transferring
promised goods or services to a customer per the contract.

Variable consideration is only included in the transaction price for a contract to the extent it is highly probable that a significant
reversal of that revenue will not occur, which is an area of accounting judgement. Factors considered in assessing whether the
estimated revenue associated with Modifications should be recognised include the following:

ii.

Status of negotiations with customers

The contract or other evidence provides a legal basis for the Modifications

iii. Additional costs incurred were caused by circumstances that were unforeseen at the contract date and for which entitlement

contractually exists

iv. Modification related costs are identifiable, measurable, and considered reasonable in view of the work performed

Evidence supporting the Modification is objective and verifiable, which may include independent third‑party advice

vi. Commercial and market factors specific to the Modifications

vii. Historical experience in resolving Modifications.

This assessment is reviewed each reporting period or when facts and circumstances change during the reporting period.

Revenue is recognised over time, typically based on an input method using an estimate of costs incurred to date as a percentage of
total estimated costs. These contracts are typically executed on the customer’s land so they control the assets as it is being built or the
customer benefits from the service as the work is performed. Differences between amounts recognised as revenue and amounts billed
to customers are recognised as contract assets or liabilities in the Statement of Financial Position.

The measurement of revenue is an area of accounting judgement. Management uses judgement to estimate:

ii.

Progress in satisfying the performance obligations within the contract, which includes estimating contract costs expected to be
incurred to satisfy performance obligations

The probability of the amount to be recognised as variable consideration for approved variations and claims where the final price
has not been agreed with the customer.

Revenue is invoiced based on the terms of each individual contract, which may include a periodic billing schedule or achievement of
specific milestones. Invoices are issued under commercial payment terms which are typically 30 days from when an invoice is issued.

A provision for loss making contracts is recorded for the difference between the expected costs of fulfilling a contract and the
expected remaining economic benefits to be received where the forecast remaining costs exceed the forecast remaining benefits.

Provision of Investment services

Investment services include funds management, asset management, leasing and origination services.

Each contract with a customer to provide Investment services is typically one performance obligation with revenue recognised over
time as services are rendered. Typically, our performance obligation is to manage a client’s capital and/or property for a specified
period of time and is delivered as a series of daily performance obligations over time.

The transaction price for each contract may include variable consideration in the form of performance fees. Variable consideration is
only included in the transaction price for a contract to the extent it is highly probable that a significant reversal of that revenue will not
occur. The Group assesses probability of receiving variable consideration using a combination of commercial and market factors, and
historical experience.

Revenue is invoiced either monthly or quarterly based on the terms of each individual contract. Invoices are issued under commercial
payment terms which are typically 30 days from when an invoice is issued.

Accounting Policies continued

Sale of Development Properties

The Group develops and sells residential land lots and built form products, including residential apartments, commercial and retail
buildings. Sales of residential land lots and apartments typically are recognised at a point in time, with each contract treated as a single
performance obligation to transfer control of an asset to a customer. Residential land lots and apartments are recognised on settlement
with the customer.

The sale of retail, commercial and mixed use assets may include land, construction, development management and investment service
components. Where there are multiple components within one contract, the transaction price is allocated based on the stand‑alone
selling prices of each component, typically using the residual approach, and revenue is recognised based on the policies noted above.
Sales of commercial and retail buildings are recognised when the customer obtains control of the asset based on the specific terms and
conditions of the sales contract.

The Group discounts deferred proceeds to reflect the time value of money where the period between the transfer of control of a
development property and receipt of payment from the customer exceeds one year. Deferred proceeds from customers are recognised
in trade and other receivables where the right to receive payment is unconditional. Deposits received in advance from customers are
recognised as a contract liability until the performance obligation has been met.

The measurement of revenue from the sale of development properties is an area of accounting judgement as it requires management
to exercise judgement in valuing the individual components of a development property sale, given the due consideration to cost inputs,
market conditions and commercial factors. The recognition and determination of when control passes requires management
judgement and is considered an area of accounting judgement.

Proceeds from the sale of residential land lots and apartments are received upon settlement, which will typically occur between 6‑12
weeks following practical completion on the asset. Proceeds from the sale of retail, commercial and mixed use assets are received in
accordance with the specific terms of each contract.

The Group may enter a PLLACes (Presold Lendlease Apartment Cash Flows) transaction for certain residential apartment buildings
from time to time. This involves the Group receiving an upfront cash inflow from third party investors (investors) in exchange for selling
the investors the rights to the cash proceeds that are due from customers once the apartments are completed. When customers settle
their apartments the Group does not receive any cash proceeds nor does it pay any amounts to the investors as the customers pay the
investors directly. On entry into a PLLACes transaction the cash inflow is disclosed as an operating cash inflow in the Statement of
Cash Flows which typically occurs over a year in advance of the revenue recognition from the sale of the apartments. At the same time,
an Other payables ‑ PLLACes is also recognised within Trade and Other Payables and is de‑recognised as revenue once settlement of
the apartments occurs.

Revenue from the provision of services

Core Construction services

Non core Construction services

Construction services

Development services

Investment services

Total revenue from the provision of services

Revenue from the sale of development properties

Total revenue from contracts with customers1,2

June 2020
$m

June 20193
$m

7,626

1,441

9,067

1,083

310

10,460

1,211

11,671

9,678

1,644

11,322

738

260

12,320

2,569

14,889

1. Further information on revenue by geography and by segments is included in Note 1 ‘Segment Reporting’. Segment revenue as disclosed in the Performance and Outlook

section of the Directors’ Report, is comprised of Revenue from contracts with customers, Other revenue and Finance revenue.

2. The performance of the business including the impacts of the COVID‑19 pandemic on operations has been discussed further in the Performance and Outlook section of the

Directors’ Report.

3. June 2019 balances have been restated for discontinued operations during the year. Refer to Note 32 ‘Discontinued Operations’ for further detail.

Lendlease Annual Report 2020 Financial Statements

158

159

Notes to Consolidated Financial Statements continued

Section A: Performance continued

5. Share of Profit of Equity Accounted Investments

Accounting Policies
Investments in associates and joint ventures are accounted for using the equity method. The share of profit recognised under the equity
method is the Group’s share of the investment’s profit or loss based on ownership interest held. Associates (including partnerships) are
entities in which the Group, as a result of its voting rights, has significant influence, but not control or joint control, over the financial and
operating policies. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the
net assets of the arrangement.

For associates, this is from the date that significant influence commences until the date that significant influence ceases, and for joint
ventures, this is from the date joint control commences until the date joint control ceases.

Associates1

Share of profit

Joint Ventures1

Share of profit

Total share of profit of equity accounted investments

Note

12a

12b

June 2020
$m

June 2019
$m

(14)

(13)

314

338

1. Reflects the contribution to the Group’s profit, and is after tax paid by the Equity Accounted Investment vehicles themselves, where relevant. However, for various Equity

Accounted Investments, the share of tax is paid by the Group and is included in the Group’s current tax expense.

6. Other Income

Accounting Policies
Net gains or losses on sale/transfer of investments, including consolidated entities and Equity Accounted Investments are recognised
when an unconditional contract is in place.

Net gains or losses on fair value remeasurements are recognised in accordance with the policies stated in Note 13 ‘Other Financial Assets’.

Net gain on sale/transfer of investments

Consolidated entities1

Other financial assets at fair value

Equity accounted investments

Other assets and liabilities

Total net gain on sale/transfer of investments

Net gain on fair value measurement

Investment properties

Fair value through profit or loss assets

Total net gain on fair value measurement

Other2

Total other income

June 2020
$m

June 20193
$m

183

‑

223

‑

105

352

‑

182

293

1. During the period, the Group disposed of a 25 per cent interest in Victoria Cross Commercial Head Trust. The Group recorded a gain on sale of $31 million. Refer to Note 27
‘Consolidated Entities’ for further detail. The remaining 75 per cent interest retained by the Group provided a revaluation gain of $92 million based on the transaction price.

2. The Group purchased the remaining stake in Intown SRL Joint Venture and subsequently formed a joint venture with an investment partner which resulted in a total

revaluation gain of $64 million. At 30 June 2020, the Group held a 50% interest in the joint venture, MSG South. Refer to Note 12 ‘Equity Accounted Investments’ for further
detail.

3. June 2019 balances have been restated for discontinued operations during the year. Refer to Note 32 ‘Discontinued Operations’ for further detail.

7. Other Expenses

Accounting Policies
Other expenses in general are recognised as incurred.

Employee Benefit Expenses

Employee benefits are expensed as the related service by the employee is provided and includes both equity and cash based payment
transactions. Employee benefits recognised in the Income Statement are net of recoveries.

For cash bonuses, the Group recognises an accrued liability for the amount expected to be paid. This is based on a formula that takes into
consideration the profit attributable to the Group’s securityholders after certain adjustments. Refer to Note 34a ‘Short Term Incentives’ for
further detail.

Share Based Compensation

The Group operates equity settled share based compensation plans that are linked to Lendlease’s security price. The fair value of the
equity received in exchange for the grant is recognised as an expense and a corresponding increase in equity, in the Equity Compensation
Reserve. The total amount to be expensed over the vesting period is determined by reference to the fair value of the securities granted.

The fair value is primarily determined using a Monte‑Carlo simulation model. Refer to Note 34g ‘Amounts Recognised in the Financial
Statements’ for further detail. Management considers the fair value assigned to be an area of estimation uncertainty as it requires
judgements on Lendlease’s security price and whether vesting conditions will be satisfied.

At each balance sheet date, the Group revises its estimates of the entitlement due. It recognises the impact of revision of original
estimates on non market conditions, if any, in the Income Statement, and a corresponding adjustment to equity over the remaining vesting
period. Changes in entitlement for equity settled share based compensation plans are not recognised if they fail to vest due to market
conditions not being met.

Superannuation Accumulation Plan Expense

All employees in the Australia region are entitled to benefits on retirement, disability or death from the Group’s superannuation
accumulation plan. The majority of these employees are party to a defined contribution plan and receive fixed contributions from the
Group. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as an
employee benefit expense when they are due. The Group also operates a defined benefit superannuation plan, membership of which is
now closed. Refer to Note 33 ‘Defined Benefit Plans’ for further detail.

Impairment

The carrying amounts of the Group’s assets, subject to impairment tests, are reviewed at each balance sheet date to determine whether there
is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. The calculation of this recoverable
amount is dependent on the type of asset. The material assets’ accounting policies will contain further information on these calculations.

An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are
recognised in the Income Statement.

Reversals of Impairment

Impairment losses on assets can be reversed (other than goodwill) when there is a subsequent increase in the recoverable amount.
The increase could be due to a specific event, the indication that impairment may no longer exist or there is a change in estimates used to
determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Operating Lease Expense

Short term lease and low value lease payments, including outgoings, are recognised in the Income Statement on a straight line basis over
the term of the lease.

Depreciation and Amortisation

Depreciation on owned assets is charged to the Income Statement on a straight line basis over the estimated useful lives of items of
property, plant and equipment. Amortisation is provided on leasehold improvements over the remaining term of the lease. Most plant is
depreciated over a period not exceeding 20 years, furniture and fittings over three to 15 years, motor vehicles over four to eight years and
computer equipment over three years.

Right‑of‑use assets are depreciated using the straight line method from the commencement date to the earlier of the end of the useful life
of the right‑of‑use asset or the end of the lease term.

Lendlease Annual Report 2020 Financial Statements

160

161

Notes to Consolidated Financial Statements continued

Section A: Performance continued

7. Other Expenses continued

Profit before income tax includes the following other expense items:

Employee benefit expenses1,2

Superannuation accumulation plan expense

Net defined benefit plans expense

Expenses include impairments raised/(reversals) relating to:

Loans and receivables

Property inventories

Equity accounted investments

Other assets

Net loss on fair value measurement of fair value through profit or loss assets

Lease expense (including outgoings)

Depreciation on right‑of‑use assets3

Depreciation on owned assets4

Amortisation3

Net foreign exchange loss

June 2020
$m

June 20195
$m

2,373

(2)

2,227

(1)

‑

1. Total expense before recoveries through projects.
2. Due to the COVID‑19 pandemic, the Group accessed Australian and international Government employee programs in the second half of FY20. This totalled $15 million

(Australia: $7 million) and has been accounted for as a reduction in employee expenses.

3. June 2019 comparatives are $nil as depreciation of right‑of‑use assets was not recognised under AASB 117 Leases.
4. June 2019 comparatives have been reclassified to separately present depreciation and amortisation due to the adoption of AASB 16 Leases.
5. June 2019 balances have been restated for discontinued operations during the year. Refer to Note 32 ‘Discontinued Operations’ for further detail.

Auditors’ Remuneration

Amounts received or due and receivable by the auditors of Lendlease Group for:

Audit services

Other assurance services

Total audit and other assurance services

Non audit services1

Total audit, other assurance and non audit services

1. Non audit services include amounts charged for work relating to financial, regulatory and asset due diligence of the Group.

June 2020
$000s

June 2019
$000s

7,233

524

7,757

557

8,314

7,141

495

7,636

714

8,350

8. Finance Revenue and Finance Costs

Accounting Policies
Finance revenue is recognised as it is earned using the effective interest method, which applies the interest rate that discounts estimated
future cash receipts over the expected life of the financial instrument. The discount is then recognised as finance revenue over the
remaining life of the financial instrument.

Finance costs include interest, amortisation of discounts or premiums relating to borrowings and amortisation of costs incurred in
connection with the arrangement of new borrowings facilities. Costs incurred in connection with the arrangement of borrowings are
capitalised and amortised over the life of the borrowings. Finance costs are expensed immediately as incurred unless they relate to
acquisition and development of qualifying assets. Qualifying assets are assets that take more than six months to prepare for their intended
use or sale. Finance costs related to qualifying assets are capitalised.

Finance Revenue

Other corporations

Other finance revenue

Total interest finance revenue

Interest discounting

Total finance revenue

Finance Costs

Interest expense in relation to other corporations1

Interest expense in relation to lease liabilities2

Less: Capitalised interest finance costs3

Total interest finance costs

Non interest finance costs

Total finance costs

Net finance costs

June 2020
$m

June 2019
$m

159

(33)

151

165

(153)

156

‑

(25)

131

142

(125)

As a result of the adoption of AASB 16 Leases, the description has changed from Other corporations to Interest expense in relation to other corporations.

1.
2. June 2019 comparatives are $nil as Interest expense in relation to lease liabilities was not recognised under AASB 117 Leases.
3. The weighted average interest rate used to determine the amount of interest finance costs eligible for capitalisation was 3.5 per cent (30 June 2019: 4.0 per cent), which is the

effective interest rate.

Lendlease Annual Report 2020 Financial Statements162

163

Notes to Consolidated Financial Statements continued

Section A: Performance continued

9. Taxation

Accounting Policies
Income tax on the profit or loss for the financial year comprises current and deferred tax. Income tax is recognised in the Income
Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Under current
Australian income tax law, LLT is not liable for income tax, including capital gains tax, to the extent that unitholders are attributed the
taxable income of LLT.

Current tax is the expected tax payable on the taxable income for the financial year, using applicable tax rates (and tax laws) at the
balance sheet date in each jurisdiction, and any adjustment to tax payable in respect of previous financial years.

Deferred tax is the expected tax payable in future periods as a result of past transactions or events and is calculated by comparing the
accounting balance sheet to the tax balance sheet. Temporary differences are provided for any differences in the carrying amounts of
assets and liabilities between the accounting and tax balance sheets. The following temporary differences are not provided for:

• The initial recognition of taxable goodwill
• The initial recognition of assets or liabilities that affect neither accounting nor taxable profit
• Differences relating to investments in subsidiaries to the extent that they are not likely to reverse in the foreseeable future.
Measurement of deferred tax is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities,
using applicable tax rates (and tax laws) at the balance sheet date.

Recognition of deferred tax assets is only to the extent it is probable that future taxable profits will be available so as the related tax asset
will be realised. Deferred tax assets may include the following:

• Deductible temporary differences
• Unused tax losses
• Unused tax credits.
Management considers the estimation of future taxable profits to be an area of estimation uncertainty as a change in any of the
assumptions used in budgeting and forecasting would have an impact on the future profitability of the Group. The Group prepares
financial budgets and forecasts, covering a five year period, which are reviewed on a regular basis. These forecasts and budgets form
the basis of future profitability to support the carrying value of the deferred tax assets. The performance of the Group is influenced by a
variety of general economic and business conditions, which are outside the control of the Group, including the level of inflation, interest
rates, exchange rates, commodity prices, ability to access funding, oversupply and demand conditions and government fiscal, monetary
and regulatory policies.

Presentation of deferred tax assets and liabilities can be offset if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax authority on the same taxable entity or on different tax entities, but are
intended to be settled on a net basis or to be realised simultaneously.

Tax Consolidation

The Company is the head entity of the Australian Tax Consolidated Group comprising all the Australian wholly owned subsidiaries,
excluding LLT. As a consequence, all members of the Australian Tax Consolidation Group are taxed as a single entity.

June 2020
$m

June 2019
$m

(58)

(2)

(62)

(77)

(5)

(18)

(10)

(110)
(194)

(172)

(482)

(145)
(5)

(30)

(5)

‑

(34)

(172)

(5)

(10)

(2)

(16)

(4)

(2)

77
198

(45)

153

620

186
(5)

(51)

(3)

(1)

153

‑

(8)

a. Income Tax Expense

Recognised in the Income Statement

Current Tax Expense
Current year

Adjustments for prior years

Benefit of tax losses recognised

Total current tax (benefit)/expense

Deferred Tax Expense

Origination and reversal of temporary differences

Temporary differences recovered

Net tax losses recognised

Change in tax rate

Total deferred tax (benefit)/expense
Total income tax (benefit)/expense from continuing operations
Total income tax expense/(benefit) from discontinued operations1

Total income tax (benefit)/expense2

Reconciliation of Effective Tax Rate

(Loss)/Profit before Tax

Income tax using the domestic corporation tax rate 30%
Adjustments for prior year
Non assessable and exempt income3
Non allowable expenses4

Net write off/(recognition) of tax losses through income tax expense
Temporary differences recognised through income tax expense5

Utilisation of capital losses on disposal of assets
Effect of tax rates in foreign jurisdictions6

Other

Income tax (benefit)/expense

Deferred Tax Recognised Directly in Equity
Relating to:

Impact of adoption of new accounting standard

Defined benefit plans remeasurements

Foreign currency translation reserve

Non controlling interest acquisition reserve

Total deferred tax expense recognised directly in equity

b. Tax Effect Relating to Other Comprehensive Income

Movements in hedging reserve

Movements in foreign currency translation reserve

Movements in non controlling interest acquisition reserve

Movements in defined benefit plans remeasurements

Total other comprehensive income net of tax

June 2020

Tax
(Expense)/
Benefit
$m

Net
of Tax
$m

Before
Tax
$m

June 2019

Tax
(Expense)/
Benefit
$m

‑

(1)

(19)

(5)

(1)

(12)

(61)

(5)

(47)

(14)

‑

(7)

‑

Before
Tax
$m

(19)

(15)

(1)

(21)

Net
of Tax
$m

(61)

(5)

(39)

(13)

1. Refer to Note 32 ‘Discontinued Operations’ for further detail.
2. Represents income tax benefit from continuing operations of $194 million and income tax expense from discontinued operations of $22 million.
3.
4.
5.

Includes Lendlease Trust Group profit.
Includes accounting expenses for which a tax deduction is not allowed permanently.
Includes temporary differences recognised in a previous year but are subsequently written off to income tax expense in the current year and temporary differences that arose
in a previous year but were not recognised until the current year.

6. The Group operates in a number of foreign jurisdictions for trading purposes which have significantly lower tax rates than Australia such as the United Kingdom and Singapore
and higher tax rates such as the United States of America (blended federal, state and local rate) and Japan. This also includes the effect of changes in tax rates and tax loss
carry back.

Lendlease Annual Report 2020 Financial Statements164

165

Notes to Consolidated Financial Statements continued

Section A: Performance continued

9. Taxation continued

c. Deferred Tax Assets and Liabilities

Recognised Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are attributable to the following:

Loans and receivables

Inventories

Other financial assets

Other assets

Equity accounted investments

Investment properties

Property, plant and equipment

Intangible assets

Net defined benefit plans

Trade and other payables

Provisions

Borrowings and financing arrangements

Other financial and non financial liabilities

Unused revenue tax losses recognised

Items with a tax base but no carrying value

Total deferred tax assets/(liabilities)

Deferred tax set off

Net deferred tax assets/(liabilities)

June 2020

Movement in temporary differences during the financial year:

Loans and receivables

Inventories

Other financial assets

Other assets

Equity accounted investments

Investment properties

Property, plant and equipment

Intangible assets

Net defined benefit plans

Trade and other payables

Provisions

Borrowings and financing arrangements

Other financial and non financial liabilities

Unused revenue tax losses recognised

Items with a tax base but no carrying value

Total net deferred tax assets/(liabilities)

June 2020

Assets
$m

Liabilities
$m

June 2019

Assets
$m

Liabilities
$m

104

‑

190

135

157

833

(692)

141

(53)

(451)

(54)

(13)

(403)

(57)

(18)

(21)

(34)

‑

(2)

‑

(20)

(1,126)

692

(434)

‑

192

118

‑

665

(564)

101

(64)

(424)

(61)

(96)

(398)

(8)

(37)

(23)

(29)

‑

(1)

‑

(20)

(1,161)

564

(597)

1 July
2019
$m

Recognised
in Income
$m

Recognised
in Equity
$m

Other/
Foreign
Exchange
$m

30 June
2020
$m

(64)

(357)

(59)

(3)

(391)

(8)

(34)

(23)

(6)

192

117

‑

(496)

(29)

(16)

(30)

(5)

(13)

110

‑

(1)

‑

(3)

(2)

(19)

‑

(1)

(9)

(15)

(1)

‑

(51)

(389)

(49)

(399)

(57)

(21)

(13)

190

135

157

(293)

1 July
2018
$m

Recognised
in Income
$m

Recognised
in Equity
$m

Other/Foreign
Exchange
$m

30 June
2019
$m

June 2019

Movement in temporary differences during the financial year:

Loans and receivables

Inventories

Other financial assets

Other assets

Equity accounted investments

Investment properties

Property, plant and equipment

Intangible assets

Net defined benefit plans

Trade and other payables

Provisions

Borrowings and financing arrangements

Other financial liabilities

Unused revenue tax losses recognised

Items with a tax base but no carrying value

Total net deferred tax assets/(liabilities)

(129)

(264)

(54)

(292)

‑

(29)

(15)

(10)

133

125

(359)

(88)

(2)

(4)

(90)

(8)

(4)

(8)

(4)

(11)

(10)

(77)

Unrecognised Deferred Tax Assets

Deferred tax assets have not been recognised in respect of the following items:

Unused revenue tax losses

Unused capital tax losses

Net deductible temporary differences

Total unrecognised deferred tax assets

‑

(11)

‑

(3)

(2)

(5)

(3)

(2)

‑

(1)

‑

(57)

‑

(58)

(64)

(357)

(59)

(3)

(391)

(8)

(34)

(23)

(6)

192

117

‑

(496)

June 2020
$m

June 2019
$m

153

124

Of the unrecognised deferred tax assets of $153 million, only $37 million expires by 2039. The remainder of the unrecognised deferred tax
assets have no expiry date.

10. Events Subsequent to Balance Date

On 1 July 2020, the Group disposed of a 25 per cent interest in One Sydney Harbour R1 Trust. The Group recorded a gain on sale of $19 million
(net of transaction costs). The remaining 75 per cent interest retained by the Group provided a revaluation gain of $128 million based on the
transaction price.

Lendlease Annual Report 2020 Financial Statements166

167

Notes to Consolidated Financial Statements continued

Section B: Investment

Investment in the Development pipeline, joint ventures in property projects, the retirement sector, and more passive assets, such as
property funds, drives the current and future performance of the Group. This section includes disclosures for property such as Inventories
and indirect property assets such as Equity Accounted Investments and Other Financial Assets contained within the Statement of
Financial Position.

11. Inventories

Accounting Policies
Development Properties

Property acquired for development and sale in the ordinary course of business is carried at the lower of cost and Net Realisable Value (NRV).

The cost of development properties includes expenditure incurred in acquiring the property, preparing it for sale and borrowing
costs incurred.

The NRV is the estimated selling price, less the estimated costs of completion and selling expenses. Management considers the estimation
of both selling prices and costs of completion to be an area of estimation uncertainty, as these estimations take into consideration market
conditions affecting each property and the underlying strategy for selling the property.

The recoverable amount of each property is assessed at each balance date and accounting judgement is required to assess whether a
provision is raised where cost (including costs to complete) exceeds NRV.

Inventories are expensed as cost of sales in the Income Statement. Management uses accounting judgement in determining the following:

• The apportionment of cost of sales through sales revenue
• The amount of cost of sales, which includes costs incurred to date and final forecast costs
• The nature of the expenditure, which may include acquisition costs, development costs, borrowing costs and those costs incurred in

preparing the property for sale.

Construction Contract Assets

The gross amount of Construction and Development work in progress consists of costs attributable to work performed, including
recoverable pre contract and project bidding costs and emerging profit after providing for any foreseeable losses. In applying the
accounting policies on providing for these losses, accounting judgement is required.

Construction contract assets are presented as part of inventories for all contracts in which costs incurred plus recognised profits exceed
progress billings. If progress billings and recognised losses exceed costs incurred plus recognised profits, then the difference is presented
in Trade and other payables as a Construction contract liability.

Current

Development properties1

Construction contract assets

Other

Total current

Non Current

Development properties1

Total non current

Total inventories

June 2020
$m

June 2019
$m

1,337

912

2,256

3,113

5,369

1,031

1,180

2,238

3,345

5,583

The Group has considered the impacts of COVID‑19 on its recoverability assessment of inventories at 30 June 2020. As part of its semi annual review of development
property projects, the Group has considered slow down in sales volumes in the short term, longer production timeframes, and increased costs for its projects. While the
carrying value of most projects has not been impacted due to their long dated nature, the Group has recognised a $30 million impairment (refer to Note 7 ‘Other Expenses’) to
Inventories as a result of commercial factors on certain projects.

12. Equity Accounted Investments

Accounting Policies
Equity Accounted Investments (Associates and Joint Ventures)

As outlined in Note 5 ‘Share of Profit of Equity Accounted Investments’, investments in Associates and Joint Ventures are equity accounted.
The share of investment recognised under the equity method is the Group’s share of the investment’s net assets based on ownership interest held.

Investments in associates and joint ventures are carried at the lower of the equity accounted carrying amount and the recoverable
amount. When the Group’s share of losses exceeds the carrying amount of the equity accounted investment (including assets that form
part of the net investment in the associate or joint venture entity), the carrying amount is reduced to nil and recognition of further losses is
discontinued except to the extent that the Group has obligations in respect of the associate or joint venture.

Dividends from associates and joint ventures represent a return on the Group’s investment and, as such, are applied as a reduction to the
carrying value of the investment. Unrealised gains arising from transactions with equity accounted investments are eliminated against
the investment in the associate or joint venture to the extent of the Group’s interest in the associate or joint venture. Unrealised losses
are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Other movements in
associates’ and joint ventures’ reserves are recognised directly in the Group’s consolidated reserves.

Service Concession Arrangements (SCAs)

The Group equity accounts its investment in project companies with SCAs through Public Private Partnerships (PPPs). These
arrangements provide facilities management and maintenance services with terms generally of 25 to 30 years. They also incorporate
contractual obligations to make available the individual assets for their prescribed use and, where necessary, overhaul or replace major
items of plant and equipment related to the assets with payment obtained through periodic draw downs from the relevant government
authorities.

Joint Operations

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets and
obligations for the liabilities relating to the arrangement.

Investments in joint operations are accounted for by recognising amounts on a line by line basis in accordance with the accounting
standards applicable to the particular assets, liabilities, revenues and expenses in relation to the Group’s interest in the joint operation.

Associates

Investment in associates

Less: Impairment

Total associates

Joint Ventures

Investment in joint ventures

Less: Impairment

Total joint ventures

Total equity accounted investments

Note

12a

12b

June 2020
$m

June 2019
$m

518

(5)

513

3,198

(40)

3,158

3,671

277

(7)

270

3,195

(13)

3,182

3,452

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements168

169

Notes to Consolidated Financial Statements continued

INTEREST

SHARE OF PROFIT

NET BOOK VALUE

b. Joint Ventures continued

INTEREST

SHARE OF PROFIT

NET BOOK VALUE

June 2020
%

June 2019
%

June 2020
$m

June 2019
$m

June 2020
$m

June 2019
$m

June 2020
%

June 2019
%

June 2020
$m

June 2019
$m

June 2020
$m

June 2019
$m

Section B: Investment continued

12. Equity Accounted Investments continued

a. Associates

Australia

Development

Lendlease Communities Fund 1

20.8

Investments

Lendlease Sub Regional Retail Fund1

10.0

Other

Total Australia

Asia

Investments

Lendlease Global Commercial REIT

Lendlease Asian Retail Investment Fund 1

Lendlease Asian Retail Investment Fund 2

Lendlease Asian Retail Investment Fund 3

25.3

48.7

39.4

20.1

‑

38.2

20.1

Total Asia

Europe

Development

Other

Total Europe

Americas

Investments

Other

Total Americas

Total Group

Less: Impairment

Total associates

‑

(8)

‑

(8)

(10)

‑

(14)

(9)

‑

(14)

‑

(14)

‑

(1)

‑

(1)

‑

(1)

‑

261

180

480

‑

518

(5)

513

‑

201

231

277

(7)

270

Although the Group has a 10 per cent ownership interest in Lendlease Sub Regional Retail Fund, it holds 20 per cent of the voting rights over the fund and has significant
influence over the investment. As a result, the Group applies equity accounting for its ownership interest.

INTEREST

SHARE OF PROFIT

NET BOOK VALUE

June 2020
%

June 2019
%

June 2020
$m

June 2019
$m

June 2020
$m

June 2019
$m

b. Joint Ventures

Australia

Development

Circular Quay Tower

Melbourne Quarter R1

Melbourne Metro1

Victoria Cross

Other

Investments

20.0

50.0

30.0

75.0

20.0

50.0

30.0

‑

(29)

(7)

(11)

‑

100

(1)

120

117

‑

123

1,367

‑

1,697

‑

1,397

1,584

Lendlease Retirement Living Trust

75.0

Other

Total Australia

1. Balance includes the Melbourne Metro equity accounted investment of $70 million (June 2019: $70 million), which is offset by Lendlease’s share of the hedge reserve of the

joint venture of $70 million (June 2019: $70 million). The hedge reserve represents an out of the money position of financial instruments in the joint venture.

Asia

Development

The Exchange TRX

Investments

CDR JV Ltd (313@somerset)

Paya Lebar Quarter

Total Asia

Europe

Development

Hungate (York) Regeneration Limited

Intown SRL Joint Venture

LRIP LP

LRIP 2 LP

MSG South

Silvertown

Stratford City Business District Limited (International
Quarter London)

Victoria Drive Wandsworth

Investments

Treviso

Other

Total Europe

Americas

Development

277 Fifth Avenue

845 Madison

Lendlease Towers LLC

Americas Residential Partnership

Other

Construction

60.0

25.0

30.0

25.0

30.0

50.0

‑

20.0

50.0

20.0

‑

50.0

40.0

37.5

‑

50.0

40.0

37.5

50.0

Lendlease Turner Joint Venture

50.0

Total Americas

Total Group

Less: Impairment

Total joint ventures

Total associates

Total equity accounted investments

(5)

(10)

(8)

‑

(5)

‑

(15)

(26)

‑

(14)

(13)

‑

130

135

(1)

‑

(3)

(5)

‑

(2)

‑

(3)

‑

314

‑

314

338

354

379

736

‑

125

300

‑

302

‑

465

3,198

(40)

3,158

513

3,671

364

382

842

‑

130

281

341

‑

488

3,195

(13)

3,182

270

3,452

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements170

171

Notes to Consolidated Financial Statements continued

Section B: Investment continued

12. Equity Accounted Investments continued

c. Material Associates and Joint Ventures Summarised Financial Information
The table below provides summarised financial information for those associates and joint ventures that are material to the Group. Material
associates and joint ventures have been determined by comparing individual investment net book value with the total equity accounted
investment carrying value and share of profit, along with consideration of relevant qualitative factors. The information disclosed reflects the
amounts presented in the financial statements of the relevant joint ventures and associates and, where indicated, the Group’s share of those
amounts. They have been amended to reflect adjustments made by the Group when using the equity method, including fair value adjustments
and differences in accounting policies. The nature and principal activities of the material associates and joint ventures is development and
investment of property assets.

Income Statement1

Revenue and other income

Cost of sales

Other expenses

Unrealised fair value (losses)/gains

Depreciation and amortisation

Interest expense

Income tax expense

Profit/(loss) for the period

Other comprehensive income/(expense)

Total comprehensive income/(expense)

Group’s ownership interest

Group’s total share of:

Profit/(loss) for the period

Other adjustments

Total profit/(loss) for the period

Other comprehensive income/(expense)

Total comprehensive income/(expense)

LENDLEASE GLOBAL
COMMERCIAL REIT2

PAYA LEBAR QUARTER3

LENDLEASE
RETIREMENT LIVING TRUST4

June 2020
$m

June 2019
$m

June 2020
$m

June 2019
$m

June 2020
$m

June 2019
$m

6060

(16)

(30)

(22)

‑

(1)

‑

(9)

25.3%

(2)

(8)

(10)

(5)

(15)

‑

219219

(168)

(160)

(190)

‑

(54)

(1)

(354)

‑

(354)

30.0%

(106)

(10)

(19)

(29)

361

(346)

(34)

638

‑

(36)

‑

583

‑

583

126126

(26)

(60)

(62)

‑

(18)

(39)

(1)

(40)

165

(26)

(54)

(1)

(19)

‑

133

(8)

125

30.0%

75.0%

175

(45)

130

148

(29)

‑

(29)

‑

(29)

100

‑

100

(6)

1. The presentation of the material associates and joint ventures has been reclassified to separately present Cost of sales, Unrealised fair value (losses)/gains and Interest

expense.

2. The underlying investments in this associate are office and retail investment properties measured at fair value. At 30 June 2020, valuations were undertaken that took into

account the impacts of the COVID‑19 pandemic. The downward valuation movement was driven by the retail asset due to the impact of the contraction in the local Singapore
economy. Additionally, the current market conditions relating to the carrying value of the investment were also considered. The carrying value of the investment is considered
recoverable as it correlates with the net assets of the associate, which have been valued at 30 June 2020 as noted above.

3. The underlying investments in this joint venture are office and retail investment properties measured at fair value. At 30 June 2020, valuations were undertaken that took into
account the impacts of the COVID‑19 pandemic. The downward valuation movement was driven by a decrease in assumptions on market rent by 3%, reduced growth rate of
30 basis points, an increase in assumed vacancies, and the impact of the contraction in the local Singapore economy.

4. The underlying investments in this joint venture are a portfolio of Australian retirement village investment properties measured at fair value. At 30 June 2020, valuations were
undertaken that took into account the impacts of the COVID‑19 pandemic. The downward valuation movement was driven by a reduction in average sales price of 1.9%, as
well as a marginal increase in the discount rate from 12.3% in the first half of the year to 12.4% at June, both as a result of the Australian retirement sector market pressures
including the impacts of the COVID‑19 pandemic.

The table below provides summarised financial information for those associates and joint ventures that are individually immaterial to the Group.

Income Statement

Aggregate amounts of the Group’s share of:
Profit/(loss) from continuing operations

Other comprehensive income/(expense)

Aggregate amounts of Group’s share of total comprehensive income/
(expense) of individually immaterial equity accounted investments

ASSOCIATES

JOINT VENTURES

June 2020
$m

June 2019
$m

June 2020
$m

June 2019
$m

(4)

(1)

(5)

(14)

(21)

c. Material Associates and Joint Ventures Summarised Financial Information continued

Statement of Financial Position

June 2020
$m

June 2019
$m

June 2020
$m

June 2019
$m

June 2020
$m

June 2019
$m

LENDLEASE GLOBAL
COMMERCIAL REIT

PAYA LEBAR QUARTER

LENDLEASE
RETIREMENT LIVING TRUST1

Current assets

Cash and cash equivalents

Other current assets

Total current assets

Non current assets

Investment properties

Other non current assets

Total non current assets

Current liabilities

Resident liabilities

Financial liabilities (excluding trade payables)

Other current liabilities

Total current liabilities

Non current liabilities

Financial liabilities (excluding trade payables)

Other non current liabilities

Total non current liabilities

Net assets

Reconciliation to Carrying Amounts

Opening net assets 1 July

Total comprehensive income for the period

Acquisition/contributions

Distributions

Foreign currency translation for the period

Closing net assets

% ownership

Group’s share of net assets

Other adjustments

Carrying amount at end of period

101

1,506

1,522

‑

552

565

1,037

‑

1,077

(16)

(32)

1,037

25.3%

262

(1)

261

‑

149

100

249

256

340

120

109

3,128

3,263

7,232

7,288

‑

3,128

3,263

7,233

7,290

‑

1,864

1,959

‑

121

‑

1,911

4,700

4,759

‑

1,948

4,767

4,822

‑

781

‑

781

586

146

732

1,297

1,591

1,805

1,845

1,591

(354)

‑

(9)

1,297

30.0%

389

(10)

379

875

583

‑

1,591

30.0%

477

(95)

382

1,845

(40)

‑

1,805

75.0%

1,354

‑

1,354

1,720

125

‑

1,845

75.0%

1,384

1,397

1. The carrying amount at the end of the period differs to Note 12b ‘Joint Ventures’ due to an impairment in the current period of $13 million.

Material joint ventures had $32 million (June 2019: $99 million) in capital expenditure commitments.

The table below provides summarised financial information for those associates and joint ventures that are individually immaterial to the Group.

Statement of Financial Position

Aggregate carrying value of individually immaterial equity
accounted investments

ASSOCIATES

JOINT VENTURES

June 2020
$m

June 2019
$m

June 2020
$m

June 2019
$m

257

270

1,452

1,403

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements172

173

Notes to Consolidated Financial Statements continued

Section B: Investment continued

13. Other Financial Assets

Accounting Policies

Financial Assets at fair value through profit or loss on initial recognition are measured at fair value (generally transaction price) and
subsequently stated at fair value. Transaction costs are recorded as expenses when they are incurred. Any gain or loss arising from a
change in fair value is recognised in the Income Statement.

Financial Assets at amortised cost are presented within loans and receivables in Note 21.

Fair Value
Level1

June 2020
$m

June 2019
$m

Current Measured at Fair Value

Fair Value Through Profit or Loss – Designated at Initial Recognition
Lendlease International Towers Sydney Trust
Derivatives
Total current

Non Current Measured at Fair Value

Fair Value Through Profit or Loss – Designated at Initial Recognition

Lendlease International Towers Sydney Trust

Lendlease One International Towers Sydney Trust

Australian Prime Property Fund – Industrial

Australian Prime Property Fund – Commercial

Australian Prime Property Fund – Retail

Lendlease Public Infrastructure Investment Company

Military Housing Projects Initiative

Lendlease Asian Retail Investment Fund

Parkway Parade Partnership Limited

Other investments

Derivatives

Total non current

Total other financial assets

Level 3
Level 2

Level 3

Level 2

Level 1

‑
16
16

153

101

372

211

‑

87
10
97

151

369

211

‑

1,076

1,092

1,103

1,200

1. Refer to Note 25 ‘Fair Value Measurement’ for details of the basis for determining fair value and the valuation technique.

a. Fair Value Reconciliation

The reconciliation of the carrying amount for Level 3 financial assets is set out as follows.

Carrying amount at beginning of financial year

(Disposals)

Net (losses)/gains recognised in Income Statement

Other movements

Carrying amount at end of financial year

June 2020
$m

June 2019
$m

1,180

(51)

(16)

(45)

1,068

1,529

(493)

106

1,180

The potential effect of using reasonably possible alternative assumptions for valuation inputs would not have a material impact on the Group.

Section C: Liquidity and Working Capital

The ability of the Group to fund the continued investment in the property and infrastructure pipeline, invest in new opportunities and
meet current commitments is dependent on available cash, undrawn debt facilities and access to third party capital. This section contains
disclosures on the financial assets, financial liabilities, cash flows and equity that are required to finance the Group’s activities, including existing
commitments and the liquidity risk exposure associated with financial liabilities. The section also contains disclosures for the Group’s
trading assets, excluding inventories, and the trading liabilities incurred as a result of trading activities used to generate the Group’s
performance.

14. Cash and Cash Equivalents

Accounting Policies
Cash and cash equivalents include cash on hand, deposits held at call with banks, bank overdrafts and other short term highly liquid
investments that are readily convertible to known amounts of cash within three months and which are subject to an insignificant risk of
changes in value.

Bank overdrafts (if applicable) are shown as a current liability on the Statement of Financial Position and are shown as a reduction to the
cash balance in the Statement of Cash Flows.

Notes

June 2020
$m

June 2019
$m

Continuing

Cash

Short term investments1

Total cash and cash equivalents in the Statement of Financial Position

Disposal Group Assets Held for Sale

Cash

Short term investments

Total cash and cash equivalents classified as Disposal Group assets held for sale

Total cash and cash equivalents

937

174

1,111

142

309

451

1,562

731

559

1,290

‑

1,290

1. Short term investments earned variable rates of interest which averaged 1.5 per cent per annum during the year (30 June 2019: 2.3 per cent).

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements174

175

Notes to Consolidated Financial Statements continued

June 2020
$m

June 2019
$m

2,036

(1,634)

402

4,461

(761)

3,700

124

1,727

(1,727)

3,495

(988)

2,507

124

Section C: Liquidity and Working Capital continued

15. Notes to Statement of Cash Flows

Reconciliation of Profit after Tax to Net Cash Provided by Operating Activities

(Loss)/Profit after tax (including external non controlling interests)

Amortisation and depreciation

Net gain on sale of investments, plant and equipment

Impairment of equity accounted investments

Impairment of inventories

Impairment of loans and receivables

Impairment of intangible assets

Impairment of property, plant and equipment

Net unrealised foreign exchange loss and currency hedging costs

Net fair value loss/(gain) on investments

Share of loss/(profit) of equity accounted investments

Dividends/distributions from equity accounted investments

Fair value gain on investment properties

Other

Net cash provided by operating activities before changes in assets and liabilities

Changes in Assets and Liabilities Adjusted for Effects of Purchase and
Disposal of Consolidated Entities and Operations During the Financial Year

Decrease in receivables

Decrease/(increase) in inventories

Decrease in other assets

Increase in net defined benefit plans

Increase/(decrease) in payables

Increase in operating derivatives assets/liabilities

(Increase)/decrease in deferred tax items

Increase in current tax

Increase/(decrease) in other provisions

Net cash provided by operating activities1

1. Balances include cash flows relating to both continuing and discontinued operations.

16. Borrowings and Financing Arrangements

June 2020
$m

June 2019
$m

b. Finance Facilities

The Group has access to the following lines of credit:

Commercial Notes

Facility available

Amount of facility used

Amount of facility unused

Bank Credit Facilities

Facility available

Amount of facility used

Amount of facility unused

Bank Overdrafts

Facility available and amount unused

Commercial notes include:

(310)

244

(225)

102

(24)

(83)

(166)

282

(20)

102

(9)

(176)

(13)

137

467

122

(99)

‑

(97)

(338)

(85)

(19)

644

(224)

(13)

(439)

‑

130

(23)

(32)

Accounting Policies
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised
cost using the effective interest rate method. Under the amortised cost method the difference between the amount initially recognised
and the redemption value is recorded in the Income Statement over the period of the borrowing on an effective interest basis. Borrowings
are referred to in this section using their redemption value when describing the terms and conditions.

a. Borrowings – Measured at Amortised Cost

Current

Commercial notes

Total current

Non Current

Commercial notes

Bank credit facilities

Total non current

Total borrowings

June 2020
$m

June 2019
$m

134

1,500

761

2,261

2,395

225

1,502

988

2,490

2,715

• £300 million of guaranteed unsecured notes issued in October 2006 in the UK bond market with a 6.125 per cent per annum coupon

maturing in October 2021

• US$400 million of guaranteed unsecured senior notes issued in May 2016 in the US Reg. S market under Lendlease’s Euro Medium Term

Note Programme with a 4.5 per cent per annum coupon maturing in May 2026

• S$300 million of guaranteed unsecured senior notes issued in April 2017 in the Singapore bond market under Lendlease’s Euro Medium

Term Note Programme with a 3.9 per cent coupon maturing in April 2027

• $225 million of unsecured medium term notes issued in May 2013 ($125 million) and June 2014 ($100 million) in the Australian

bond market with a 6.0 per cent per annum coupon which matured and was repaid in May 2020

• $80 million of unsecured medium term notes issued as an A$ private placement in December 2018 with a 5.4 per cent per annum coupon

maturing in December 2028

• £300 million COVID Corporate Financing Facility from the Bank of England maturing March 2021 drawn to $134 million as at 30 June 2020.
A number of bank credit facilities were entered into in the current period. These include:

• $800 million syndicated loan facility with Tranche A $400 million and Tranche B $400 million both maturing in May 2022. As at 30 June

2020, tranches A and B were undrawn

• CNY871 million bank facility maturing in January 2025 drawn to $29 million as at 30 June 2020.

Existing bank credit facilities include:

• £400 million club bank facility maturing in March 2023 undrawn as at 30 June 2020

• $1,800 million syndicated cash advance facility with Tranche A $900m maturing December 2021 and Tranche B $900 million maturing

September 2022. As at 30 June 2020, tranche A and tranche B were undrawn

• $960 million A$ syndicated loan facility, maturing in March 2024. As at 30 June 2020, the $725 million tranche A was fully drawn and the

$235 million tranche B was undrawn.

The bank overdraft facilities may be drawn at any time and are repayable on demand.

The Group has not defaulted on any obligations in relation to its borrowings and financing arrangements.

June 2020
Within one year
Between one and five years
More than five years

Total
June 2019
Within one year
Between one and five years
More than five years

Total

INTEREST EXPOSURE
Fixed
$m

Floating
$m

Total
$m

134
564
965

1,663

225
543
959

1,727

‑
725
7

732

‑
980
8

988

134
1,289
972

2,395

225
1,523
967

2,715

A$
$m

‑
725
79

804

225
835
78

1,138

US$
$m

‑
‑
575

575

‑
‑
567

567

CURRENCY
£
$m

CNY
$m

S$
$m

Total
$m

134
535
7

676

‑
688
8

696

‑
29
‑

‑
‑
‑

‑
‑
311

311

‑
‑
314

314

134
1,289
972

2,395

225
1,523
967

2,715

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements176

177

Notes to Consolidated Financial Statements continued

Section C: Liquidity and Working Capital continued

16. Borrowings and Financing Arrangements continued

c. Movement in Borrowings and Financing Arrangements
Balance at beginning of financial year
Net (repayments of)/proceeds from borrowings
Effect of foreign exchange rate movements
Other movements

Balance at end of financial year

17. Issued Capital

Accounting Policies
Issued Capital

Note

16a

June 2020

June 2019

2,715
(312)
(8)
‑

2,395

2,359
293
64
(1)

2,715

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a
deduction from equity.

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is
recognised as a change in equity. Repurchased shares are classified as treasury shares and are recognised as a deduction from equity.

Issued capital at beginning of financial year

Distribution reinvestment plan (DRP)

Share issue via institutional placement (net of
transaction costs)1,4
Share issue via Security Purchase Plan (net of
transaction costs)2,4

Issued capital at end of financial year

Buyback at beginning of financial year3

On market buyback of stapled securities3

Buyback at end of financial year3
Balance reflected in Retained Earnings/
Reserves3

LENDLEASE CORPORATION LIMITED

LENDLEASE TRUST

June 2020

June 2019

June 2020

June 2019

No. of
Shares
m

584

‑

708

(20)

‑

(20)

No. of
Shares
m

584

‑

584

(10)

(20)

1,300

454

126

1,889

(285)

‑

(285)

285

1,297

‑

1,300

(145)

(140)

(285)

285

No. of
Units
m

584

‑

708

(20)

‑

(20)

No. of
Units
m

584

‑

584

(10)

(20)

921

479

134

1,536

(67)

‑

(67)

Issued capital at end of financial year

688

1,889

564

1,300

688

1,536

564

920

‑

921

(33)

(34)

(67)

921

1. On 4 May 2020, the Group issued 97 million new stapled securities via an institutional placement at an issue price of $9.80.
2. On 4 June 2020, the Group issued 27 million new stapled securities via a Security Purchase Plan at an issue price of $9.80.
3. Stapled securities acquired as part of the Group’s on market stapled security buyback have been recorded in retained earnings for the Company and in Buyback Reserves for

Lendlease Trust.

4. During the period the Group raised $1,193 million in equity after costs which was allocated 48.4% to the Company and 51.6% to Lendlease Trust.

a. Issuance of Securities
As at 30 June 2020, the Group had 688 million stapled securities on issue, equivalent to the number of Lendlease Corporation shares and
Lendlease Trust (LLT) units on issue as at that date. The issued units of LLT are not owned by the Company and are therefore presented
separately in the Consolidated Statement of Financial Position within equity.

b. Security Accumulation Plans

The Group’s Distribution Reinvestment Plan (DRP) was reactivated in February 2011. The last date for receipt of an election notice for
participation in the DRP is 25 August 2020. The issue price is the arithmetic average of the daily volume weighted average price of
Lendlease Group stapled securities traded (on the Australian Securities Exchange) for the period of five consecutive business days
immediately following the record date for determining entitlements to distribution. If that price is less than 50 cents, the issue price will be
50 cents. Stapled securities issued under the DRP rank equally with all other stapled securities on issue.

c. Terms and Conditions
Issued capital for Lendlease Corporation Limited comprises ordinary shares fully paid. A stapled security represents one share in the Company
stapled to one unit in LLT. Stapled securityholders have the right to receive declared dividends from the Company and distributions from
LLT and are entitled to one vote per stapled security at securityholders’ meetings. Ordinary stapled securityholders rank after all creditors in
repayment of capital.

The Group does not have authorised capital or par value in respect of its issued stapled securities.

18. Capital Management
The Group assesses capital management as part of its broader strategic plan. The Group focuses on interrelated financial parameters,
including Return on Equity, earnings growth and borrowing capacity. The Group also monitors its gearing ratio, leverage ratio, interest
coverage ratio and weighted average cost of debt and maturity profile. These are all taken into account when the Group makes decisions on
how to invest its capital and evaluate its existing investments.

The Group’s capital includes total equity, borrowings and other interest bearing liabilities. When investing capital, the Group’s objective is to
deliver strong total securityholder returns and to maintain an investment grade credit rating by maintaining an appropriate financial profile. The
Moody’s/Fitch long term credit ratings at 30 June 2020 are Baa3/BBB‑ respectively (June 2019: Baa3/BBB‑).

The capital structure of the Group can be changed by equity issuance, paying distributions to securityholders, the Distribution Reinvestment
Plan and changing the level of debt. For further information on how the Group allocates and manages capital, refer to details of the Portfolio
Management Framework in the Financial Area of Focus and Performance and Outlook sections of this Annual Report.

19. Liquidity Risk Exposure
Further information on liquidity risk is disclosed in Note 23 ‘Financial Risk Management’. As disclosed in Note 26 ‘Contingent Liabilities’, in certain
circumstances, the Company guarantees the performance of particular Group entities in respect of their obligations including bonding and bank
guarantees. Issued bank guarantees have cash collateralisation requirements if the bank guarantee facility is not renewed by the provider.

At 30 June 2020, the Group does not anticipate a significant liquidity risk in relation to the following financial liabilities. This is due to its
continued strong cash flows and the Group’s financial profile, as supported by the $1.2 billion equity raising, significant committed undrawn
facilities and low gearing ratio. Refer to Note 14 ‘Cash and Cash Equivalents’, Note 16 ‘Borrowings and Financing Arrangments’ and Note 17
‘Issued Capital’ for further details.

The Group has provided collateral of $nil (June 2019: $nil) against letter of credit facilities.

The following are the contractual cash flow maturities of financial liabilities including estimated interest payments.

Carrying
Amount
$m

Contractual
Cash Flows
$m

Less Than
One Year
$m

One to Two
Years
$m

Two to Five
Years
$m

Note

More
Than Five
Years
$m

June 2020

Non Derivative Financial Liabilities

Trade and other payables1,2

Lease liabilities3

Borrowings and financing arrangements

Other financial liabilities

Total

Derivative Financial Liabilities

(Outflow)

Inflow

Total

June 2019

Non Derivative Financial Liabilities

Trade and other payables1

Borrowings and financing arrangements

Total

Derivative Financial Liabilities

(Outflow)

Inflow

Total

16a

4,688

544

2,395

‑

7,627

‑

5,566

2,715

8,281

‑

5,166

650

2,667

8,509

(399)

404

5,785

3,295

9,080

(434)

432

(2)

3,941

119

215

782

123

588

‑

234

848

‑

346

174

1,016

‑

4,301

1,493

1,179

1,536

(397)

404

4,513

354

4,867

(428)

432

‑

662

119

781

(4)

‑

(4)

(1)

‑

(1)

559

1,749

2,308

(1)

‑

(1)

‑

(1)

1,073

1,124

(1)

‑

(1)

Trade and other payables are presented excluding lease liabilities. The carrying amount of trade and other payables excludes $884 million of current and $785 million of non
current amounts (June 2019: $1,375 million of current and $184 million of non current amounts) in relation to items where there is no future cash outflow or liquidity risk.

2. Balance includes Disposal Group liabilities held for sale.
3.

Lease liabilities are presented separately from trade and other payables to disclose a maturity analysis as required under AASB 16 Leases. June 2019 comparatives are $nil
as lease liabilities were not recognised under AASB 117 Leases.

Other contractually committed cash flows the Group is exposed to are detailed in Note 20 ‘Commitments’.

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements178

179

Notes to Consolidated Financial Statements continued

Section C: Liquidity and Working Capital continued

20. Commitments

21. Loans and Receivables

a. Capital Expenditure Commitments

At balance date, capital expenditure commitments agreed or contracted but not provided for
in the financial statements are as follows:

Due within one year

Due between one and five years

Due later than five years

Total

Balance includes Disposal Group capital expenditure commitments.

b. Investments

At balance date, capital commitments existing in respect of interests in equity accounted
investments and other investments contracted but not provided for in the financial statements
are as follows:

Due within one year

Due between one and five years

Due later than five years

Total

c. Operating Lease Commitments

June 20201
$m

June 2019
$m

‑

June 2020
$m

June 2019
$m

386

1,234

1,635

292

340

‑

632

Operating lease commitments are no longer required under AASB 16 Leases as these are now recorded as Lease liabilities. The difference
between the operating lease commitment disclosed at 30 June 2019 and the Lease liabilities recorded on adoption is due to discounting of
the lease payments.

Accounting Policies
Loans and receivables, which include trade and other receivables, are non derivative financial assets with fixed or determinable
payments that are not equity securities. They arise when the Group provides money, goods or services directly to a debtor with no
intention of trading the receivable. Contract debtors represent receivables where the right to receive payment from customers remains
conditional. Other receivables include receivables related to investment management, property development and miscellaneous items.

Loans and receivables are carried at amortised cost using the effective interest method, which applies the interest rate that discounts
estimated future cash receipts over the term of the loans and receivables. Cash flows relating to short term trade and other receivables are
not discounted if the effect of discounting is immaterial. The discount, if material, is then recognised as revenue over the remaining term.

The Group assesses provision for impairment of loans and receivables based on expected loss, and books provision if material. The
Group considers reasonable and supportable information that is relevant and available. This includes both quantitative and qualitative
information and analysis, based on the Group’s historical impairment experience, credit assessment of customers and any relevant
forward looking information. The amount of the provision is recognised in the Income Statement.

Retentions receivable on construction contracts represent deposits held by the Group until the satisfaction of conditions specified in the
contract are rectified.

Note

June 2020
$m

June 2019
$m

Current

Trade receivables

Less: Impairment

Related parties

Retentions

Contract debtors

Accrued income

Other receivables

Less: Impairment

Total current

Non Current

Related parties

Less: Impairment

Retentions

Other receivables

Total non current

Total loans and receivables

21a

762

(16)

746

351

263

213

‑

1,012

(13)

999

330

349

241

(2)

1,667

2,050

176

(2)

218

352

744

2,411

(1)

351

300

688

2,738

As at the reporting date, $501 million of the trade debtors were current (30 June 2019: $640 million) and $261 million were past due (30 June
2019: $372 million). Of the past due amount, $245 million was not impaired (30 June 2019: $359 million). ‘Past due’ is defined under accounting
standards to mean any amount outstanding for one or more days after the contractual due date. Of the total trade debtors, 23.1 per cent (30
June 2019: 18.6 per cent) are aged greater than 90 days. Other than trade debtors, no other loans and receivables are considered past due at
30 June 2020 (30 June 2019: $nil).

Provision for Impairment

Carrying amount at beginning of financial year

Bad and doubtful debts impairment loss net of provisions written back

Utilised bad and doubtful debts impairment provision

Other movements (including foreign exchange rate movements)

Carrying amount at end of financial year

June 2020
$m

June 2019
$m

(2)

‑

Total impairment as a percentage of total loans and receivables

0.7%

0.6%

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements180

181

Notes to Consolidated Financial Statements continued

Section C: Liquidity and Working Capital continued

21. Loans and Receivables continued
The credit quality of all loans and receivables, including those neither past due nor impaired, is assessed and monitored on an ongoing basis.
In the current reporting period, additional reviews were undertaken to assess recoverability in light of the COVID‑19 pandemic. As the majority
of the Group’s customers are Government entities for the Construction business and are institutional investors in the Development and
Investment businesses, no additional risk has been identified. Impairment as noted above was immaterial in FY20. The impairment provision
relates to specific loans and receivables that have been identified as being impaired, including related party loans where the Group’s interest in
a development was via an equity accounted investment.

a. Contract Assets
Current

Contract debtors

Construction contract assets

Accrued income

Total contract assets1

Note

June 2020
$m

June 2019
$m

263

912

1,237

349

1,180

1,586

Movements in contract assets during the period relate primarily to the transfer of balances into Trade receivables as the right to receive payment from customers becomes
unconditional and contract assets transferred to Disposal Group assets held for sale. Refer to Note 32 ‘Discontinued Operations’ for further details.

22. Trade and Other Payables

Accounting Policies

Trade Creditors

Liabilities are recognised for amounts to be paid in the future for goods or services received, whether or not billed to the Group.
Trade and other payables are settled in the normal course of business. Trade and other payables are carried at amortised cost using the
effective interest method, which applies the interest rate that discounts estimated future cash outflows over the term of the trade and
other payables. Cash flows relating to short term trade and other payables are not discounted if the effect of discounting is immaterial.
The discount, if material, is then recognised as an expense over the remaining term.

Construction contract liabilities

Construction contracts where the total progress billings issued to clients (together with foreseeable losses, if applicable) on a project
exceed the costs incurred to date plus recognised profit on the contract are recognised as a liability.

Retentions

Retentions are amounts payable for the purpose of security and for the provision of defects in accordance with contract terms. Release of
retention amounts are in accordance with contractual terms.

Unearned Income

Primarily relates to unearned income and deposits received in advance on presold apartments. These amounts will be recognised as
income in line with the ‘Sale of development properties’ accounting policy in Note 4 ‘Revenue from Contracts with Customers’.

Lease Liabilities
Lease liabilities are measured at the present value of the lease payments discounted using the interest rate implicit in the lease. The
Group uses its incremental borrowing rate as the discount rate.

Current

Trade and accrued creditors

Construction contract liabilities

Related parties

Retentions

Deferred land payments
Unearned Income1
Lease liabilities2
Other payables ‑ PLLACes1,3

Other

Total current

Note

22a

June 2020
$m

June 2019
$m

2,281

1,460

476

‑

132

3,136

1,404

476

119

‑

164

309

4,496

5,724

1. June 2019 Unearned income balance has been reclassified to separately present PLLACes transactions. PLLACes transactions involve selling the presold apartment cash

flows for a specific development project to a third party for cash consideration.

2. As a result of the adoption of AASB 16 Leases, Lease liabilities have been presented separately. June 2019 comparatives are $nil as Lease liabilities were not recognised

under AASB 117 Leases.

3. Refer to Note 4 ‘Revenue from Contracts with Customers’ for further details.

Non current

Trade and accrued creditors

Retentions

Deferred land payments

Unearned income1

Lease liabilities2

Other payables ‑ PLLACes1,3

Other

Total non current

Total trade and other payables

Note

22a

June 2020
$m

June 2019
$m

190

614

177

473

608

339

2,405

6,901

309

635

183

‑

267

1,401

7,125

1. June 2019 Unearned income balance has been reclassified to separately present PLLACes transactions. PLLACes transactions involve selling the presold apartment cash

flows for a specific development project to a third party for cash consideration.

2. As a result of the adoption of AASB 16 Leases, Lease liabilities have been presented separately. June 2019 comparatives are $nil as Lease liabilities were not recognised

under AASB 117 Leases.

3. Refer to Note 4 ‘Revenue from Contracts with Customers’ for further details.

As a result of the adoption of AASB 16 Leases, the Group has recognised amounts for Right‑of‑use assets and Lease liabilities. As at 30 June
2020, the Group recognised right‑of‑use assets of $359 million within Property, Plant and Equipment and $50 million within Investment
Properties.

a. Contract Liabilities
Current
Unearned income1,2

Construction contract liabilities3

Total current

Non Current
Unearned income1

Total non current

Total contract liabilities

June 2020
$m

June 2019
$m

1,460

1,500

177

1,677

119

1,404

1,523

183

1,706

1. Movements in Unearned income relates primarily to residential presales settled during the period and deposits received for development properties.
2. June 2019 Unearned income balance has been reclassified to separately present PLLACes transactions.
3. Movements in Construction contract liabilities relate primarily to billings raised during the period in excess of revenue recognised on construction contracts with customers

and losses incurred on retained Engineering projects, offset by Construction contract liabilities transferred to Disposal Group liabilities held for sale. Refer to Note 32
‘Discontinued Operations’ for further details.

During the year, the Group recognised $846 million in revenue from contracts that held a contract liability balance at the beginning of the
financial year. The total transaction price relating to the Group’s Unearned income on the Group’s development contracts at June 2020 is $758
million relating primarily to various UK and Australian projects. The difference between the Unearned income amount noted in the table above
and this amount primarily relates to the remaining development value of apartments versus the deposit amount received. Revenue from these
contracts is expected to be realised as control over each asset is transferred to the customer.

The total transaction price allocated to unsatisfied performance obligations on the Group’s construction contracts as at June 2020 is
$13.9 billion for the core business (June 2019: $15.6 billion) and $5.1 billion for the Non core business (June 2019: $5.4 billion), which is the
construction backlog reported in the Performance and Outlook section of the Directors’ report. This includes new work secured during the
period. Of the total construction backlog, 47 per cent is expected to be realised within the next 12 months to June 2021 (June 2019: 53 per cent
to June 2020), 25 per cent to June 2022 (June 2019: 25 per cent to June 2021) and the remaining 28 per cent realised post June 2022 (June
2019: 22 per cent post June 2021).

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements182

183

Notes to Consolidated Financial Statements continued

Section D: Risk Management

The Group’s activities expose it to a variety of financial risks. The Group’s overall financial risk management strategy focuses on the
unpredictability of financial markets and seeks to minimise adverse effects on the Group’s performance. Treasury policies have been
approved by the Board for managing this risk. This section contains disclosures of financial risks the Group is exposed to and how the
Group manages these risks. The impact of contingent liabilities is also considered in this section.

23. Financial Risk Management

The Group operates across numerous jurisdictions and markets. The Lendlease Asset and Liability Committee oversees the management of
the Group’s treasury risks, within the parameters of a Board approved Treasury Policy, and maintains a Group wide framework for financial risk
management and reviews issues of material risk exposure within the scope of the Treasury Policy. A summary of key risks identified, exposures
and management of exposures is detailed in the table below.

Risks Identified

Definition

Exposures

Management of Exposures

Foreign Currency

The risk in local currency terms
that the value of a financial
commitment or a recognised
asset or liability, will fluctuate
due to changes in foreign
currency exchange rates

• Foreign currency earnings
• Net investments in
foreign operations

• Transactions settled in

foreign currency

• Further information on

exposures is detailed in Note
23a ‘Foreign Currency
Risk Exposure’

• Physical financial instruments, including
natural hedges from matching foreign
assets and liabilities

• Derivative financial instruments, mainly

foreign exchange contracts

• Contracting out
• Speculative trading is not permitted

Credit

The risk that a counterparty will
not be able to meet its obligations
in respect of a financial instrument,
resulting in a financial loss to the
Group

Liquidity

The risk of having insufficient
funds to settle financial liabilities
as and when they fall due

Interest Rate

The risk that the value of a
financial instrument or cash flow
associated with the instrument
will fluctuate due to changes in
market interest rates

Equity Price

The risk that the fair value of either
a traded or non traded equity
investment, derivative equity
instrument, or a portfolio of such
financial instruments, increases or
decreases in the future

• Recoverability of loans and

• Policies in place so that customers and

receivables

suppliers are appropriately credit assessed

• Recoverability of other

financial assets and cash
deposits

• Further information on

exposures is detailed in Note
23b ‘Credit Risk Exposure’

• Treasury Policy sets out credit limits for
each counterparty based on minimum
investment grade ratings

• Insufficient levels of

• Maintaining sufficient levels of cash

committed credit facilities

• Settlement of financial

liabilities

and committed credit facilities to meet
financial commitments and working
capital requirements

• Further information on

• Managing to funding portfolio benchmarks

exposures is detailed in Note
19 ‘Liquidity Risk Exposure’

as outlined in the Treasury Policy
• Timely review and renewal of credit

facilities

• Financial assets, mainly cash

at bank

• Financial liabilities, mainly
borrowings and financing
arrangements

• Further information on

exposures is detailed in
Note 23c ‘Interest Rate
Risk Exposure’

• Physical financial instruments
• Derivative financial instruments,

mainly interest rate swaps

• Managing to hedging limits in respect
of recourse funding as outlined in the
Treasury Policy

• Speculative trading is not permitted

• All traded and/or non traded

financial instruments
measured at fair value

• Material investments within the portfolio
are managed on an individual basis. The
Group’s portfolio is monitored closely as
part of capital recycling initiatives

a. Foreign Currency Risk Exposure

The net asset exposure by currency is detailed below.

A$m

US$m

£m

S$m

€m

CNY m

MYR m Other m2

June 20201
Net asset/(liability) exposure (local currency)

June 2019
Net asset/(liability) exposure (local currency)

3,390

717

596

3,380

645

476

593

462

190

118

599

1,044

569

1,047

1. Balance includes Disposal Group assets and liabilities held for sale.
2. Other currency is translated and disclosed in AUD.

Sensitivity Analysis

The sensitivity analysis of the Group’s Australian dollar denominated Income Statement and Statement of Financial Position to foreign currency
movements is based on a 10 per cent fluctuation (June 2019: 10 per cent fluctuation) on the average rates during the financial year and the spot
rate at balance date respectively. This analysis assumes that all other variables, in particular interest rates, remain constant, and excludes the
effects of the foreign exchange contracts.

A 10 per cent movement in the average foreign exchange rates would have impacted the Group’s Profit after tax as follows:

USD

GBP

SGD

EUR

CNY

MYR

10% WEAKENING LEADS TO
INCREASE/(DECREASE) IN PROFIT AFTER TAX

10% STRENGTHENING LEADS TO
INCREASE/(DECREASE) IN PROFIT AFTER TAX

June 2020
$m

June 2019
$m

June 2020
$m

June 2019
$m

‑

(2)

(5)

‑

(4)

(3)

(1)

(2)

(15)

(12)

(5)

(6)

(1)

(22)

A 10 per cent movement in the foreign exchange spot rates at balance date would have impacted the Group’s net assets as follows:

USD

GBP

SGD

EUR

CNY

MYR

10% WEAKENING LEADS TO
INCREASE/(DECREASE) IN NET ASSETS

10% STRENGTHENING LEADS TO
INCREASE/(DECREASE) IN NET ASSETS

June 2020
$m

June 2019
$m

June 2020
$m

June 2019
$m

117

127

401

103

313

(96)

(104)

(59)

(28)

(11)

(33)

(331)

(83)

(86)

(46)

(17)

(11)

(33)

(276)

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements
184

185

Notes to Consolidated Financial Statements continued

Section D: Risk Management continued

23. Financial Risk Management continued

b. Credit Risk Exposure

• The maximum exposure to credit risk at balance date on financial instruments recognised in the Statement of Financial Position (excluding

investments of the Group) equals the carrying amount, net of any impairment.

• The Group is not exposed to any significant concentrations of credit risk on either a geographic or industry specific basis.
• Credit risk on financial instruments is managed under a Board approved credit policy that determines acceptable counterparties. Derivative

counterparties and cash deposits are limited to recognised financial intermediaries with a minimum investment grade credit rating as
determined by a recognised rating agency.

• Refer to Note 21 ‘Loans and Receivables’ for information relating to impairment on loans and receivables.
• In certain circumstances, the Group will hold either financial or non financial assets as collateral to further mitigate the potential credit risk

on selected transactions. During the current and prior year, the Group did not hold financial or non financial assets as collateral. At any point
in time, the Group will hold other collateral such as bank guarantees and performance bonds to mitigate potential credit risk as a result of
default by a counterparty or otherwise.

c. Interest Rate Risk Exposure

The Group’s exposure to interest rate risk on its financial assets and liabilities is set out as follows:

Fixed Rate

Financial assets

Financial liabilities

Variable Rate

Financial assets

Financial liabilities

CARRYING AMOUNT

June 20201
$m

June 2019
$m

173

(2,103)

(1,930)

1,241

(736)

505

770

(1,806)

(1,036)

476

(990)

(514)

Balance includes Disposal Group financial assets and liabilities held for sale.

Sensitivity Analysis

At 30 June 2020, it is estimated that an increase of one percentage point in interest rates would have decreased the Group’s equity and Profit
after tax by $6 million (June 2019: $21 million decrease in the Group’s equity and Profit after tax). A one percentage point decrease in interest
rates would have increased the Group’s equity and Profit after tax by $6 million (June 2019: $21 million increase in the Group’s equity and Profit
after tax). The increase or decrease in interest income/(expense) is proportional to the increase or decrease in interest rates. Interest rate
derivatives have been included in this calculation.

24. Hedging

Accounting Policies

The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from
operating, financing and investing activities. Derivative financial instruments are recognised initially at fair value on the date a
derivative contract is entered into and subsequently remeasured at fair value. Hedge accounting recognises the offsetting effects on
profit or loss of changes in the fair value of the derivative financial instruments and the hedged item. The accounting for hedges that
meet the criteria for hedge accounting are classified as either fair value hedges, cash flow hedges or investment hedges.

The Group has minimal hedges designated at fair value. The Group primarily uses forward foreign exchange contracts as cash flow hedges
for highly probable sale, purchase and dividend transactions. The Group also uses forward foreign exchange contracts to hedge cross border
intercompany loans and transactions which mainly net off in the Income Statement. Interest rate swaps and interest rate options are used to
manage the Group’s exposure to interest rates arising from borrowings. These are treated as cash flow hedges and are mainly on borrowings
within equity accounted investments.

The Group has foreign exchange derivative contracts primarily held in USD, EUR, SGD, JPY and MYR at reporting date to hedge specific
foreign currency exposures. The total gross payable exposure, including Disposal Group, is $936 million (June 2019: $249 million).

There are 56 foreign currency contracts that will mature in more than one year (June 2019: 72 foreign currency contracts).

25. Fair Value Measurement

Accounting Policies
The accounting policies for financial instruments held at fair value are included in Note 13 ‘Other Financial Assets’ and Note 24 ‘Hedging’.

Management considers the valuation of assets at fair value including financial instruments to be an area of estimation uncertainty. While
this represents the best estimation of fair value at the reporting date, the fair values may differ if there is volatility in market prices or
foreign exchange rates in future periods.

All financial instruments recognised in the Statement of Financial Position, including those instruments carried at amortised cost, are
recognised at amounts that represent a reasonable approximation of fair value, with the exception of the following borrowings.

Liabilities

Current

Commercial notes

Non Current

Commercial notes

JUNE 2020

JUNE 2019

Carrying
Amount
$m

Fair Value
$m

Carrying
Amount
$m

Fair Value
$m

134

133

225

234

1,500

1,676

1,502

1,640

Note

16a

The fair value of commercial notes has been calculated by discounting the expected future cash flows by the appropriate government bond
rates and credit margin applicable to the relevant term of the commercial note.

a. Basis of Determining Fair Value

The determination of fair values of financial assets and liabilities that are measured at fair value are summarised as follows:

• The fair value of unlisted equity investments, including investments in property funds, is determined based on an assessment of the

underlying net assets, which may include periodic independent and Directors’ valuations, future maintainable earnings and any special
circumstances pertaining to the particular investment. Fair value of unlisted equity investments has also taken the COVID‑19 pandemic
into consideration to determine fair value at 30 June 2020. This has included more frequent independent valuations of underlying
investment properties to account for current market conditions. This has resulted in a net fair value loss in Other financial assets of $17
million. Refer to Note 7 ‘Other expenses’

• The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with

generally accepted valuation techniques; these include the use of recent arm’s length transactions, reference to other assets that are
substantially the same, and discounted cash flow analysis

• The fair value of derivative instruments comprises forward foreign exchange contracts, which are valued using forward rates at balance
date, and interest rate swap contracts, which are measured at the present value of future cash flows estimated and discounted based on
applicable yield curves derived from quoted interest rates and include consideration of counterparty risk adjustments.

b. Fair Value Measurements

The different levels for valuation method have been defined as follows:

• Level 1: The fair value is determined using the unadjusted quoted price for an identical asset or liability in an active market for identical

assets or liabilities

• Level 2: The fair value is calculated using predominantly observable market data other than unadjusted quoted prices for an identical

asset or liability

• Level 3: The fair value is calculated using inputs that are not based on observable market data.

During the period, there were no material transfers between Level 1, Level 2 and Level 3 fair value hierarchies.

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements186

187

Notes to Consolidated Financial Statements continued

Section D: Risk Management continued

Section E: Basis of Consolidation

26. Contingent Liabilities
The Group has the following contingent liabilities, being liabilities in respect of which there is the potential for a cash outflow in excess of any
provision where the likelihood of payment is not considered probable or cannot be measured reliably at this time.
• There are a number of legal claims and exposures that arise from the normal course of the Group’s business, particularly in respect of claims for
defects and under warranties and indemnities. In many cases, there is uncertainty as to whether a future liability will arise in respect to these
items. Where it is probable there will be liabilities from such claims, a provision has been made for anticipated losses arising from such claims.
• In certain circumstances, the Company guarantees the performance of particular Group entities in respect of their obligations. This includes

bonding and bank guarantee facilities used primarily by the Construction business as well as performance guarantees for certain of the
Company’s subsidiaries.
• Securities Class Action

On 18 April 2019, Lendlease Corporation and Lendlease Responsible Entity (Lendlease Group) were served with a shareholder class action
proceeding filed in the Supreme Court of New South Wales on 18 April 2019 by David William Pallas and Julie Ann Pallas as trustees for the
Pallas Family Superannuation Fund, represented by Maurice Blackburn. On 7 August 2019, Lendlease Corporation and Lendlease Responsible
Entity (Lendlease Group) were served with a shareholder class action proceeding filed in the Supreme Court of New South Wales on 6 August
2019 by Martin John Fletcher, represented by Phi Finney McDonald. On 21 November 2019, the Supreme Court ordered consolidation of the
two class actions into a single proceeding. The consolidated proceeding alleges that Lendlease was in breach of its continuous disclosure
obligations under the Corporations Act 2001 and made representations about its Engineering and Services business that were misleading or
deceptive or likely to mislead or deceive. It is currently not possible to determine the ultimate impact of these claims, if any, on Lendlease
Group. Lendlease Group denies the allegations and intends to vigorously defend this proceeding.

This section provides information on how the Group structure affects the financial position and performance of the Group as a whole. The
disclosures detail the types of entities and transactions included in the consolidation and those excluded.

27. Consolidated Entities

Accounting Policies
The Group consolidation comprises all subsidiaries controlled by the Company. Control exists when the Company:

• Has the power to direct the relevant activities such as key operating, financial and investing decisions
• Has exposure or rights to variable returns from its involvement with the investee such as dividends, loans and fees
• Has the ability to use its power over the investee to affect the amount of returns.
In assessing control, potential voting rights that are presently exercisable or convertible are taken into account. Management uses
accounting judgement in determining whether the Group controls an entity by applying the above control criteria and reviewing the
substance of its relationship with the entity.

The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date
that control ceases. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent
accounting policies with adjustments made to bring into line any dissimilar accounting policies that may exist.

External non controlling interests are allocated their share of total comprehensive income and are presented within equity in the consolidated
Statement of Financial Position, separately from the equity of securityholders.

The material consolidated entities of the Group listed below were wholly owned during the current and prior year. Refer to the following section
for details on the disposal of entities.

PARENT ENTITY

EUROPE

Lendlease Corporation Limited

Lendlease Construction (Europe) Limited

AUSTRALIA

Capella Capital Lendlease Pty Limited

Capella Capital Partnership

Lendlease Building Pty Limited

Lendlease Construction Holdings (Europe) Limited

Lendlease Europe Finance plc

Lendlease Europe Limited

Lendlease Residential (CG) Limited

Lendlease Building Contractors Pty Limited

Lendlease (Elephant & Castle) Limited

Lendlease Communities (Australia) Limited

ASIA

Lendlease Development Pty Limited

Lendlease Engineering Pty Limited

Lendlease Finance Limited

Lendlease Japan Inc.

Lendlease Singapore Pte. Limited

AMERICAS

Lendlease Infrastructure Investments Pty Limited

Lendlease (US) Capital, Inc.

Lendlease International Pty Limited

Lendlease (US) Construction, Inc.

Lendlease Real Estate Investments Limited

Lendlease (US) Construction LMB, Inc.

Lendlease Responsible Entity Limited

Lendlease (US) Public Partnerships, LLC

Lendlease Services Pty Limited

Lendlease (US) Public Partnerships Holdings LLC

Lendlease Trust1

Lendlease Development, Inc.

Lendlease Trust is a consolidated entity of the Group as the parent entity is deemed to control it. Lendlease Trust is not wholly owned.

During the current and prior year, there were no acquisitions of material consolidated entities.

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements188

189

Notes to Consolidated Financial Statements continued

Section E: Basis of Consolidation continued

27. Consolidated Entities continued

The following material disposals of consolidated entities occurred during the current and prior year.

Ownership
Interest Disposed
%

Date
Disposed

Gross Consideration
Received/Receivable
$m

June 2020

Australia

Victoria Cross Commercial Head Trust

25.0

21 December 2019

June 2019

Americas

Americas Residential Partnership

50.0

19 July 2018

172

28. Employee Benefit Vehicles

The Company sponsors a number of employee benefit vehicles, including employee security plans and employee security ownership vehicles.
These vehicles while not legally controlled, are currently required to be consolidated for accounting purposes.

a. Employee Security Plans

As at 30 June 2020, employees own approximately 1.0 per cent (June 2019: 1.0 per cent) of the issued capital of the Group through various
active Lendlease employee security plans and ownership vehicles, details of which are outlined below:

• Australia: Employee Share Acquisition Plan (ESAP): ESAP was established in December 1988 for the purpose of employees acquiring

securities in the Group and is funded by Lendlease subscriptions, and employee salary sacrifice contributions

• Americas: US Rabbi Trust (Rabbi Trust) was established in 2004 and updated in 2005 for the acceptance of employee profit share

contributions used to acquire Group securities for US based employees. This part of the plan is not currently accepting new contributions

• Employee Share Acquisition Plan (STI) (ESAP STI): ESAP STI was established in July 2014 for the purpose of acquiring and allocating

securities granted as the deferred component of Short Term Incentive (STI) awards, which are funded by Lendlease subscriptions. Securities
are currently allocated to employees across Australia, Singapore, Malaysia, the United Kingdom and the United States.

Eligibility
The eligibility rules for each plan are determined by reference to the regulatory, legal and tax rules of each country in which the Group
operates.

Distributions and/or Voting Rights

Generally, employees in the various operating security plans are entitled to distributions and voting rights for allocated securities. The plans
reflect this intention subject to regulatory, legal and tax constraints. The trustee may exercise these rights in accordance with any fiduciary or
governance rules pertaining to the deed or trust laws in the legal and tax jurisdiction within which the trust operates.

b. Employee Security Ownership Vehicles

In addition to the plans discussed above, Lendlease has an employee security ownership vehicle, Lendlease Retirement Benefit Fund (RBF).

•

RBF was established in 1984 with shareholder approval for the benefit of employees. RBF holds Lendlease securities. The Lendlease
securities in RBF are not available for allocation to employees other than in the event of a change of control of the Group and, in
accordance with RBF’s trust deed, the capital of the trust is not available to the Group. The RBF trustee has discretion as to the distribution
of the RBF funds. In 1992, a deed poll was executed which allows for the distribution of the income of RBF to the Company to fund
employee benefit activities through the Lendlease Foundation. As a result of changes to the constitution and governance structure of
the RBF trustee on 22 June 2017, Lendlease currently does not have control of RBF and therefore RBF is currently not required to be
consolidated for accounting purposes.

•

The RBF arrangement is subject to periodic review to assess its ongoing role and operation.

29. Parent Entity Disclosures

The following summarises the financial information of the Group’s parent entity, Lendlease Corporation Limited (the Company), as at and
for the year ended 30 June 2020.

Results

Profit after tax

Other comprehensive income after tax

Total comprehensive income after tax

Financial Position

Current assets

Non current assets

Total assets

Current liabilities

Non current liabilities

Total liabilities

Net assets

Issued capital

Treasury securities

Reserves

Retained earnings

Total equity

COMPANY

June 2020
$m

June 2019
$m

613

(1)

612

1,613

2,858

4,471

577

579

3,892

1,889

(68)

182

1,889

3,892

110

‑

110

5,738

1,978

7,716

4,844

4,850

2,866

1,300

(68)

179

1,455

2,866

In respect of the contingent liabilities of the Group disclosed in Note 26 ‘Contingent Liabilities’, the Company participates in the provision of
guarantees to Group entities.

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements190

191

Notes to Consolidated Financial Statements continued

Section E: Basis of Consolidation continued

30. Related Party Information

a. Consolidated Entities

Intragroup balances and transactions, and any unrealised gains or losses arising from intragroup transactions, are eliminated in preparing
the consolidated financial statements. Investments in subsidiaries are carried at their cost of acquisition less impairments in the Company’s
financial statements.

Lendlease Corporation Limited provides financing and treasury services, which includes working capital facilities and long term financing
to certain subsidiaries. Interest is earned or incurred only on long term loans provided to or drawn with subsidiaries based on project specific
risks and returns. Outstanding balances arising from working capital facilities and long term financing are typically unsecured and repayable on
demand.

In addition, guarantees are provided to particular Group entities in respect of their obligations. These include bonding and bank guarantee
facilities used primarily by the Construction business as well as performance guarantees for certain Development business commercial built
form developments. Guarantee fees are charged under normal terms and conditions.

The following represents the transactions that occurred during the financial year and the balances outstanding at year end between Lendlease
Corporation Limited and its consolidated entities.

Transactions

Guarantee fees

Dividend income

Interest income

Interest expense

Outstanding Balances (Net of Provisions Raised)

Receivables

Payables

COMPANY1

June 2020
$000s

June 2019
$000s

30,998

478,893

6,932

103,546

1,251,166

505,634

29,497

306,217

10,249

106,282

4,730,795

4,772,546

During the period the funding of the majority of Group entities was moved from the Company to Lendlease Finance Limited, a wholly owned subsidiary of the Company.

Transactions that occurred during the financial year between entities in the Lendlease Group included:
• Provision of project management, design services, construction management and engineering services to development projects
• Provision of development management services
• Provision of investment management services
• Provision of payroll, transaction and management services
• Receipt and payment of superannuation contributions
• Reimbursement of expenses made on behalf of subsidiaries
• Loan advances and repayments between subsidiaries
• Premium payments and receipts for the Group’s insurance policies
• Dividends received or due and receivable from subsidiaries.

b. Associates and Joint Ventures

Interests held in associates and joint ventures by Lendlease are set out in Note 12 ‘Equity Accounted Investments’.

Transactions between the Lendlease Group and its associates and joint ventures principally relate to:

• Development: development management services, infrastructure bid and advisory services and the sale and purchase of development

properties with Lendlease managed funds

• Construction: provision of project management, building, engineering and construction services
• Investments: provision of property and infrastructure investment management, property management and asset management services.

There were no non interest bearing loans provided to joint ventures at 30 June 2020 (June 2019: $nil).

Except as noted above, transactions and outstanding balances are typically on normal terms and conditions.

Revenue earned by Lendlease during the year as a result of transactions with its associates and joint ventures is as follows:

Revenue

Associates

Joint ventures

Total

June 2020
$000s

June 2019
$000s

42,343

1,297,079

1,339,422

5,808

1,197,961

1,203,769

Other transactions and outstanding balances with associates, joint ventures and other related parties have been disclosed in Note 4 ‘Revenue
from Contracts with Customers’, Note 6 ‘Other Income’, Note 7 ‘Other Expenses’, Note 8 ‘Finance Revenue and Finance Costs’, Note 13 ‘Other
Financial Assets’, Note 21 ‘Loans and Receivables’ and Note 22 ‘Trade and Other Payables’. Transactions with joint operations are included in the
consolidated Income Statement and Statement of Financial Position.

c. Key Management Personnel

The key management personnel compensation is as follows:

Short term employee benefits1

Post employment benefits1

Security based payments

Other long term benefits

Total

June 2020
$000s

June 2019
$000s

14,623

269

10,032

113

25,037

16,501

285

11,135

299

28,220

The 2019 comparative has been restated to reflect that cash allowances paid in lieu of pension superannuation in the UK have been reclassified from post employment

benefits to short term employee benefits.

Information regarding Directors’ and senior executives’ remuneration is provided in the Remuneration Report within the
Directors’ Report.

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements192

193

Notes to Consolidated Financial Statements continued

Section F: Other Notes

31. Intangible Assets

Accounting Policies
Goodwill represents the excess of the purchase price over the fair value of the Group’s share of the net identifiable assets and contingent
liabilities of the acquired business at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets as
goodwill. Goodwill on acquisition of associates is included in the carrying value of investments in associates.

Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Goodwill is not amortised. Gains and
losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

For the purposes of impairment testing, goodwill is allocated to cash generating units (CGUs) (or groups of CGUs), that are expected to
benefit from the business combination in which the goodwill arose. CGUs are an identifiable group of assets that generate cash associated
with the goodwill. Management considers this is an area of estimation uncertainty as these calculations involve an estimation of the
recoverable amount of the CGU to which the goodwill is allocated. The Construction CGUs use the value in use basis, which requires the
Group to estimate the future cash flows expected to arise from the CGUs and a suitable discount rate in order to calculate the recoverable
amounts.

Management agreements and other intangible assets acquired by the Group are stated at cost less accumulated amortisation and
impairment losses (see Note 7 ‘Other Expenses’). Amortisation is charged to the Income Statement on a straight line basis over the
estimated useful lives of the intangible assets, ranging from three to 20 years.

b. Goodwill Allocation

Goodwill relating to the Construction business is allocated to CGUs identified as set out below. During June 2019, the Group identified an
additional segment, Non core ‑ Engineering and Services, as noted in Note 1 ‘Segment Reporting’. As a result of this change in segments, the
Group identified a corresponding change in CGU for goodwill impairment testing. The Construction Australia CGU was split into two CGUs,
Construction Australia Core and Construction Australia Non core. Construction Australia Non core contains the Services business.
Goodwill has been re‑allocated to each CGU on a relative value basis.

The goodwill from the Engineering business, held within Construction Australia Non core CGU, was transferred to Disposal Group assets
held for sale during the year.

Construction

Australia Core

Australia Non core1

Europe

Americas

Asia

Total construction goodwill

June 2020
$m

June 2019
$m

573

151

246

203

1,181

573

170

248

201

1,200

Note

31a

Goodwill

Management agreements

Other intangibles

Total intangible assets

a. Goodwill

Construction

Development

Total goodwill

Reconciliations

Reconciliations of the carrying amounts for each category of goodwill are as follows:

Construction

Carrying amount at beginning of financial year

Transferred to Disposal Group

Effect of foreign exchange rate/other movements

Carrying amount at end of financial year

31b

Development

Carrying amount at beginning of financial year

Effect of foreign exchange rate movements

Carrying amount at end of financial year

June 2020
$m

June 2019
$m

1. Goodwill of $19 million relating to the Engineering business was transferred to Disposal Group assets held for sale during the year. This has subsequently been
impaired within the Disposal Group assets held for sale. Refer to Note 32 ‘Discontinued Operations’ for further details.

1,213

208

1,457

1,181

1,213

1,200

(19)

‑

1,181

‑

1,232

186

1,457

1,200

1,232

1,185

‑

1,200

c. Impairment Tests and Key Assumptions Used – Construction

The recoverable amount of the Construction CGUs is determined based on value in use (VIU) calculations. For the Construction CGUs, the
assumptions used for determining the recoverable amount of each CGU are based on past experience and expectations for the future, utilising
both internal and external sources of data and relevant industry trends.

No impairment arose as a result of the review of goodwill for the Construction CGUs other than in the Disposal Group for the year ended 30
June 2020. Based on information available and market conditions at 30 June 2020, a reasonably foreseeable change in the assumptions made
in this assessment would not result in impairment of Construction goodwill. The forseeable change in the assumptions took the COVID‑19
pandemic into consideration.

The following describes the key assumptions on which management has based its cash flow projections when determining VIU relating to the
Construction CGUs.

Cash Flows

The VIU calculations use pre tax cash flow projections based on actual operating results, and financial forecasts covering a five year period
which have been approved by management. These forecasts are based on management estimates to determine income, expenses, capital
expenditure and cash flows for each CGU.

Growth Rate

The terminal value growth rate used to extrapolate the cash flows beyond the five year period is 3.0 per cent (June 2019: 3.0 per cent). The
growth rate reflects the forecast long term average growth rate for each CGU and the countries in which they operate.

Discount Rate

The discount rates applied to the cash flow projections vary between 9.4 per cent and 13.1 per cent (June 2019: between 10.0 per cent and
13.2 per cent). The Group’s weighted average cost of capital is used as a starting point for determining the discount rate, with appropriate
adjustments for the risk profile relating to the relevant CGUs and the countries in which they operate. The discount rates used are pre tax.

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements194

195

Notes to Consolidated Financial Statements continued

Section F: Other Notes continued

32. Discontinued Operations

Discontinued operations relate to a component of the Group including its corresponding assets and liabilities that have been classified as held
for sale and represent a separate major line of business or geographical area of operation. The group of assets and their corresponding liabilities
(together referred to as a Disposal Group), may only be classified as held for sale once the following criteria are met:
• The carrying amount will be recovered principally through a sale transaction rather than through continuing use
• The sale must be highly probable.

A disposal group is measured at the lower of its carrying amount and fair value less costs to sell. Where fair value is lower than the carrying
amount, the difference is recognised as an impairment loss within the Income Statement.

The results of discontinued operations are presented separately in the Income Statement and Statement of Comprehensive Income.
Comparatives have also been restated for the Income Statement, Statement of Comprehensive Income and corresponding Notes to separately
disclose the results of the discontinued operations from continuing operations.

On 25 February 2019, the Group announced that its Engineering and Services businesses are no longer a required part of the Group’s strategy.
Management at that time committed to a plan to exit from Non core operations of Engineering and Services. On 19 December 2019, the Group
entered into an agreement with Acciona to sell its Engineering business for a purchase price of $180 million. In June 2020, the purchase price was
revised to $160 million. The discontinued operations represents the Engineering business to be sold, excluding the projects retained by the Group.
The transaction, which at 30 June 2020 was subject to conditions including client and third party consents, is expected to complete in the first
half of FY21. On 28 April 2020, the Group announced the sales process for the Services business has been paused given the uncertainty in market
conditions. The Services business no longer meets the accounting criteria to be held for sale, therefore it has not been included in discontinued
operations or assets and liabilities classified as held for sale at 30 June 2020.

The Group previously disclosed a cost estimate to exit the Non core segment of $450‑$550 million pre tax. These costs are now estimated to be
approximately $550 million pre tax, with $525 million pre tax ($368 million after tax) expensed in the year ended 30 June 2020. $15 million pre
tax was expensed in the prior year. Exit related costs include: implementation and selling costs and estimated costs to cover concluding projects
retained by the Group which have been recorded in Continuing Operations.

At 30 June 2020, the results of the Engineering and Services businesses have been presented separately from the Construction segment as Non
core. Refer to Note 1 ‘Segment Reporting’ for details.

The results of the discontinued operations, representing the Engineering business to be sold, are as follows:

June 2020

June 2019

Shares/
Securities
Excluding
Treasury
Securities

Shares/
Securities
on Issue

Shares/
Securities
Excluding
Treasury
Securities

Shares/
Securities
on Issue

Basic/Diluted Earnings Per Share (EPS) from Continuing Operations

(Loss)/profit from continuing operations attributable to members of Lendlease
Corporation Limited (Company)

Weighted average number of ordinary shares

(374)

599

(374)

603

Basic/Diluted EPS from continuing operations

cents

(62.4)

(62.0)

Basic/Diluted Earnings Per Share (EPS) from Discontinued Operations

Profit/(loss) from discontinued operations attributable to members of Lendlease
Corporation Limited (Company)

Weighted average number of ordinary shares

Basic/Diluted EPS from discontinued operations

Basic/Diluted Earnings Per Stapled Security (EPSS) from Continuing Operations

(Loss)/profit from continuing operations attributable to securityholders of
Lendlease Group

Weighted average number of stapled securities

Basic/Diluted EPSS from continuing operations

Basic/Diluted Earnings Per Stapled Security (EPSS) from Discontinued
Operations

Profit/(loss) from discontinued operations attributable to securityholders of
Lendlease Group

Weighted average number of stapled securities

Basic/Diluted EPSS from discontinued operations

cents

599

5.3

(342)

599

(57.1)

599

5.3

603

5.3

(342)

603

(56.7)

603

5.3

403

584

69.0

(90)

584

403

588

68.5

(90)

588

(15.4)

(15.3)

557

584

95.4

557

588

94.7

(90)

584

(90)

588

(15.4)

(15.3)

June 2020
$m

June 2019
$m

The net cash flows for discontinued operations, representing the Engineering business to be sold, are as follows:

Results from Discontinued Operations

Revenue from contracts with customers

Cost of sales

Gross profit/(loss)

Other income

Impairment on Disposal Group held for sale1

Other expenses

Profit/(loss) before tax for discontinued operations

Income tax (expense)/benefit

Total profit/(loss) after tax for discontinued operations as presented in the Income Statement

1. Relates to the impairment of goodwill as a result of the measurement of the Disposal Group at fair value less costs to sell.

1,437

(1,263)

174

(19)

(109)

(22)

1,497

(1,509)

(12)

‑

(125)

(135)

(90)

Cash Flows from Discontinued Operations

Net cash inflow from operating activities

Net cash outflow from investing activities

Net cash outflow from financing activities

Net increase in cash and cash equivalents

June 2020
$m

June 2019
$m

156

(59)

‑

263

(12)

‑

251

The major classes of assets and liabilities held for sale at 30 June 2020, representing the Engineering business to be sold, are as follows:

Disposal Group Assets/(Liabilities) Held for Sale

Cash and cash equivalents

Loans and receivables

Inventories

Other assets1

Total Disposal Group assets held for sale

Trade and other payables

Other liabilities

Total Disposal Group liabilities held for sale

Disposal Group net assets held for sale

June 2020
$m

June 20192
$m

451

135

223

841

629

670

171

‑

1.
2.

Includes $201 million of Property, plant and equipment.
The Group had no assets or liabilities recorded as held for sale at 30 June 2019. Comparative balances for the Statement of Financial Position have not been restated.

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements196

197

Notes to Consolidated Financial Statements continued

Section F: Other Notes continued

33. Defined Benefit Plans

Accounting Policies
Group companies operate pension plans. The plans are generally funded through payments to insurance companies or trustee
administered funds as determined by periodic actuarial calculations.

A defined benefit plan is a pension plan that defines the amount of pension benefit an employee will receive on retirement, usually
dependent on one or more factors such as age, years of service and compensation.

The asset or liability recognised in the Statement of Financial Position in respect of defined benefit plans is the present value of the
defined benefit obligation i.e. ‘the pension liability’ at the balance sheet date less the fair value of plan assets. The present value of
the pension liability is determined by discounting the estimated future cash outflows using interest rates of high quality corporate or
government bonds, that:

• Are denominated in the currency in which the benefits will be paid
• Have terms to maturity approximating the terms of the related pension liability.

The defined benefit obligation is calculated at least annually by independent actuaries using the projected unit credit method, which in
simplistic terms proportions the benefit based on service. Management considers the valuation of defined benefit plans undertaken by the
actuaries to be an area of estimation uncertainty as a number of key assumptions must be adopted to determine the valuation.

Actuarial losses/(gains) will arise where there is a difference between previous estimates and actual experience, or a change to
assumptions in relation to demographic and financial trends. These actuarial losses/(gains) are recognised in the period they occur,
directly in other comprehensive income as remeasurements. They are included in retained earnings in the Statement of Changes in Equity
and in the Statement of Financial Position.

Past service costs are recognised immediately in the Income Statement.

Lendlease Superannuation Plan

Lendlease UK Pension Scheme

Total net defined benefit plan asset

a. Lendlease UK Pension Scheme

Note

33a

June 2020
$m

June 2019
$m

(1)

157

156

139

140

Lendlease Construction Holdings (Europe) Limited (UK Construction) sponsors a funded defined benefit pension scheme (the Scheme) for
qualifying UK employees. The Scheme is administered by a separate board of Trustees which is legally separate from UK Construction. The
Scheme’s Trustees are composed of representatives of both the employer and employees. The Trustees are required by law to act in the
interest of all relevant beneficiaries and are responsible for the investment policy with regard to the assets plus the day to day administration of
the benefits.

The Scheme is a funded defined benefit scheme, with the final salary section providing retirement benefits based on final salary and the index
linked section providing retirement benefits based on career average salary. A separate section, the Personal Investment Section, provides
retirement benefits on a defined contribution basis. The UK Construction’s contributions to members’ Personal Investment Fund accounts are
not included in these disclosures.

The final salary section closed to future accruals on 31 August 2008 and the index linked section closed to future accruals on 31 January 2012.
There were no Scheme amendments affecting defined benefits payable, curtailments or settlements during the year. UK Construction pays
deficit funding contributions plus four per cent of members’ basic salaries to cover the Scheme’s expected administration costs and costs of
benefits payable on death in service. The Scheme expects to pay $33 million in contributions to its defined benefit plan in 2021. This includes
the annual deficit recovery payment of $28 million, following the triennial valuation for 31 March 2017 where deficit repair contributions have
been agreed for the period to March 2024. These contributions reduce the actuarial deficit.

The defined benefit plan is exposed to actuarial risk and market (investment) risk. The following information provides additional detail on risk.

i. Statement of Financial Position Amounts

The amounts recognised in the Statement of Financial Position are determined as follows:

Defined benefit obligations

Fair value of plan assets

Net defined benefit plan asset

June 2020
$m

June 2019
$m

(1,324)

1,481

157

(1,208)

1,347

139

ii. Reconciliation of Defined Benefit Obligations

Defined benefit obligations at beginning of financial year

1,208

1,077

June 2020
$m

June 2019
$m

Included in Income Statement

Interest cost

Remeasurements Included in Other Comprehensive Income

Actuarial loss/(gain) arising from:

Financial assumptions

Experience adjustments

Demographic assumptions

Other

Benefits paid

Effect of foreign exchange rate movements

Defined benefit obligations at end of financial year

iii. Reconciliation of the Fair Value of Plan Assets

Fair value of plan assets at beginning of financial year

Included in Income Statement

Interest income

Administration costs

Remeasurements Included in Other Comprehensive Income

Actual return on plan assets excluding interest income

Other

Contributions by Group companies

Benefits paid

Effect of foreign exchange rate movements

Fair value of plan assets at end of financial year

iv. Expense Recognised in the Income Statement

Net interest cost

Administration costs

Net defined benefit plan (income)/expense

v. Fair Value of Plan Assets

Plan assets comprise:

Global equities

Investment funds

Infrastructure

Government index linked bonds

Other assets

Fair value of plan assets at the end of the financial year

135

(9)

(41)

(28)

1,324

1,347

(2)

173

(41)

(33)

1,481

(3)

(1)

437

384

115

491

1,481

116

(48)

1,208

1,228

(4)

(48)

1,347

(5)

(1)

422

417

335

1,347

The investment funds target an absolute level of return. The plan assets can be categorised as Level 1, where the fair value is determined using
an unadjusted quoted price for an identical asset, or Level 2, where the fair value is derived either directly or indirectly from observable inputs,
or Level 3, where inputs are unobservable (i.e for which market data is unavailable). At year end, approximately $1,408 million (June 2019: $1,246
million) and $73 million (June 2019: $82 million) of total plan assets were categorised as Level 2 and Level 3 respectively. UK Construction and
Trustees have agreed a long term strategy for reducing investment risk as and when appropriate. This includes an asset–liability matching policy
which aims to reduce the volatility of the funding level of the pension plan by investing in assets that perform in line with the liabilities of the plan
so as to protect against inflation being higher than expected. The current benchmark allocation is 75.0 per cent growth assets and 25.0 per cent
matching assets (June 2019: 75.0 per cent growth assets and 25.0 per cent matching assets).

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements198

199

Notes to Consolidated Financial Statements continued

Section F: Other Notes continued

33. Defined Benefit Plans

vi. Principal Actuarial Assumptions

Discount rate (%)

RPI inflation (%)

Average pension increase in payments (%)

Future mortality (years):

Male

Female

June 2020

June 2019

1.5

3.0

2.5

24.9

26.4

2.3

3.4

2.7

24.9

26.4

The liabilities are calculated using a discount rate set with reference to corporate bond yield. If assets underperform this yield will create a
deficit.

A decrease in corporate bond yield will increase the value placed on the Scheme’s liabilities, although this will be partially offset by an increase
in the value of the Scheme’s corporate bond holdings. The majority of the Scheme’s benefit obligations are linked to inflation and higher
inflation will lead to higher liabilities, although in most cases this will be capped to protect against extreme inflation. The majority of the assets
are either unaffected by or loosely correlated with inflation, meaning that an increase in inflation will also increase the deficit. The majority
of the Scheme’s obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the
liabilities. The mortality assumptions are based on standard mortality tables which allow for expected future mortality improvements. The
assumption is that a member aged 63 will live for a further 24.9 years (June 2019: 24.9 years) if they are male and 26.4 years if they are female
(June 2019: 26.4 years).

At 30 June 2020, the weighted average duration of the defined benefit obligation was 19 years (June 2019: 19 years).

vii.

Sensitivity Analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would
have affected the defined benefit obligations by the amounts shown below.

0.1%
Increase in
Discount Rate
$m

0.1%
Decrease in
Discount Rate
$m

0.1%
Increase RPI
Inflation and
Pension Payment
$m

0.1%
Decrease RPI
Inflation and
Pension Payment
$m

1 Year
Increase in
Future
Mortality
$m

1 Year
Decrease in
Future
Mortality
$m

June 2020
Defined benefit asset/(obligations)

June 2019
Defined benefit asset/(obligations)

(26)

(20)

(19)

(16)

(64)

(41)

34. Employee Benefits

Detailed information regarding the Group’s Executive Reward strategy is provided in the Remuneration Report within the Directors’ Report.
The key incentive plans are as follows:

• Short Term Incentive (STI)
• Short Term Award (STA)
• Long Term Incentive (LTI)
• Long Term Award (LTA)
• Distinguished Executives Award (DE Award)
• Executive Deferred Award (ED Award).

a. Short Term Incentive (STI)

The STI plan is an annual incentive plan whereby a number of employees receive benefits which are dependent upon the achievement of both
Lendlease financial and non financial targets, and individual goals. The total value of the potential benefit varies by individual and is tested
against relevant market levels for each role.

• The STI plan typically comprises a cash component, which is paid in September following year end. For more senior employees, where

the potential benefit is typically higher, the plan also includes a deferred component.

• Deferral periods are generally for one or two years. The deferred component is normally awarded as Lendlease securities and in some

instances as cash. Securities are held in Lendlease employee security plan trusts on behalf of employees for the deferral period (refer to
Note 28a ‘Employee Security Plans’). For employees to receive the deferred component in full, they must generally be employed by the
Group at the time of vesting.

b. Short Term Award (STA)

The STA plan is an annual incentive plan which replaced the STI for a limited number of senior executives from 2019. It is designed to focus
senior executives on priority areas for delivery in the current financial year, including key Group financial targets, safety and other non financial
targets aligned to the Group’s areas of focus.

Whilst performance is assessed against a set of Group metrics when determining awards, the Board will assess the overall performance and
contribution of individual senior executives, with a particular focus on safety.

The total value of the potential benefit varies by individual and is set with reference to both internal peers and external market levels. The STA
plan is intended to be awarded as cash in September following year end.

c. Long Term Incentive (LTI)

The LTI plan is designed to:

•

Motivate executives to achieve the Group’s long term strategic goals and provide reward where the Group delivers better value to
securityholders than its peers

• Align the interests of executives and securityholders, given that the reward received is linked to the Group’s security price and average

Return on Equity performance.

A summary of arrangements for LTI awards is provided in Note 34d below.

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that
the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

d. Long Term Award (LTA)

Non pensioner benefits are linked to RPI in the period up to retirement. Once in payment, pension increases are linked to RPI but with a zero
per cent floor and different caps applying to different periods of pensionable service. The inflation sensitivity reflects a change in RPI inflation
and the associated increases in payment.

The LTA plan replaced the LTI for a limited number of executives from 2019. It was designed to motivate and reward key executives to deliver
on the Group’s long term strategy and to allow them to share in the value created for securityholders. Specifically, the objectives are to:

• Create rewards that are aligned to earnings

• Align the interests of securityholders and our most senior executives

• Promote team behaviours and an enterprise leadership mindset

• Retain the senior executive team.

The intended outcome is that reward and strategy are better aligned.

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements200

201

Notes to Consolidated Financial Statements continued

Section F: Other Notes continued

34. Employee Benefits continued

Arrangements for LTI Awards

LTI Design

How the LTI Works

Performance
Securities

• An annual grant of ‘performance securities’ is made to a limited number of executives.
• The Board intends that the awards be settled in Lendlease securities, although the award may be settled in cash or

other means at the Board’s discretion.

• On vesting, each performance security entitles executives to one Lendlease stapled security, or at the Board’s

discretion, cash or other instruments of equivalent value.

• In the event of a change in control of the Group, the Board has the discretion to determine whether the vesting of

some or all performance securities should be accelerated.

Performance
Period (applicable
to FY17 and FY18
Grants)

Performance
Period (applicable
to FY19 and FY20
Grants)

• 50 per cent of the performance securities are assessed over a three year period. If the performance hurdle is not

fully achieved at this time, those performance securities that have not vested will lapse.
• The remaining 50 per cent of the performance securities are assessed after four years.
• If the performance hurdle is not met, the awards are forfeited.
• There is no retesting on any portion of the LTI grant.

• 100 per cent of the performance securities are assessed over a three year period. If the performance hurdle is not

fully achieved at this time, those performance securities that have not vested will lapse.

• If the performance hurdle is not met, the awards are forfeited.
• There is no retesting on any portion of the LTI grant.

Termination of
Employment

• If the executive resigns or is terminated for cause, the unvested LTI is forfeited.
• If the executive is terminated and if the Board considers vesting would provide a benefit that was unwarranted or

inappropriate, the Board can adjust unvested LTI prior to the vesting date.

• For ‘good leavers’, the LTI grant may remain on foot, subject to the original performance hurdles.
• In exceptional circumstances (such as death or total and permanent disability), the Board may exercise discretion

and settle the award at the time of termination of employment.

Performance
Hurdles

Financial Years 2017 to 2020

Vesting Schedule
– TSR
(applicable to
FY17 to FY20
Grants)

Vesting Schedule
– ROE
(applicable to FY17
Grant)

Vesting Schedule
– ROE
(applicable to FY18
to FY20 Grants)

• 50 per cent subject to Lendlease’s Total Securityholder Return (TSR) compared to the companies in the S&P/ASX

100 Index. The S&P/ASX 100 companies are determined at the start of the performance period.

• 50 per cent subject to Average Return on Equity (ROE) hurdle.

Relative TSR percentile ranking

Percentage of relative TSR performance securities that
vest if the hurdle is met

Below the 50th percentile

No vesting

At the 50th percentile

50 per cent vesting

At or above the 51st percentile but below the 75th
percentile

Pro rata vesting on a straight line basis between 52 per cent
and 98 per cent

At the 75th percentile or greater

100 per cent vesting

Average ROE over the performance period

Percentage of ROE performance securities that vest if the
hurdle is met

Less than 11 per cent

No vesting

At 11 per cent

25 per cent vesting

Greater than 11 per cent but below 15 per cent

Pro rata vesting on a straight line basis between 25 per cent
and 100 per cent

15 per cent or greater

100 per cent vesting

Average ROE over the performance period

Percentage of ROE performance securities that vest if the
hurdle is met

10 per cent or less

No vesting

Above 10 per cent but below 14 per cent

Pro rata vesting on a straight line basis between 0 per cent and
100 per cent

14 per cent or greater

100 per cent vesting

Arrangements for LTA Awards

LTA Design

How the LTA Works

Performance
Rights

• An annual grant of ‘performance rights’ is made to a limited number of executives on the Global Leadership Team.
• The grant of ‘performance rights’ includes the minimum number of securities that will be received following vesting
(the LTA minimum). The value of the LTA minimum is fixed at the time of grant but will vary with the security price
over the deferral period.

• During the year the Board determined that the LTA minimum is better described as a Restricted Securities Award

(RSA).

• The Board intends that the awards be settled in Lendlease securities, although some or all of the award may be

settled in cash at the Board’s discretion.

• Performance rights are rights to receive a variable number of Lendlease securities or at the discretion of the Board,

cash with an equivalent value, upon vesting.

• Outcomes against performance hurdles will determine how many Lendlease securities will be received following

vesting between a minimum and maximum number.

• In the event of a change in control of the Group, the Board has the discretion to determine whether the vesting of

some or all performance rights should be accelerated.

Performance
Period (applicable
to FY19 and FY20
Grants)

• 100 per cent of the performance rights are assessed over a three year period and the number of Lendlease

securities that may be delivered on vesting is determined. The first tranche will vest immediately thereafter, and
the second, third and fourth tranches will be deferred and will vest progressively four, five and six years after the
grant date.

• If the performance hurdle is not met, the awards above the minimum award number are forfeited.
• There is no retesting on any portion of the LTA grant.

Termination of
Employment

• If the executive resigns and becomes engaged in activities that are competitive with the Group or is terminated for

cause, the unvested LTA is forfeited.

• If the executive is terminated and if the Board considers vesting would provide a benefit that was unwarranted or

inappropriate, the Board has the discretion to lapse some or all performance rights prior to the vesting date.

• For ‘good leavers’, the LTA grant may remain on foot, subject to the original performance hurdles.

Performance
Hurdles

Financial Years 2019 and 2020

• 50 per cent subject to Lendlease’s Total Securityholder Return (TSR) compared to the companies in the S&P/ASX

100 Index. The S&P/ASX 100 companies are determined at the start of the performance period.

• 50 per cent subject to Return on Equity (ROE) hurdle.

Vesting Schedule
– TSR (applicable
to FY19 and FY20
Grants)

Relative TSR percentile ranking

Percentage of Target LTA plus RSA Vesting

Group CEO

Senior Executives

At the 50th percentile

50 per cent vesting

Vesting Schedule
– ROE (applicable
to FY19 and FY20
Grants)

At or above the 51st percentile but
below the 75th percentile

Pro rata vesting on a straight line basis
between 54 per cent and 146 per cent

Pro rata vesting on a straight line basis
between 56 per cent and 194 per cent

At the 75th percentile or greater

150 per cent vesting

200 per cent vesting

Average ROE over the
performance period

Percentage of Target LTA plus RSA Vesting

Group CEO

Senior Executives

Between 10 per cent and the target
ROE per cent set by the Board

Pro rata on a straight line basis
between 13.5 per cent and
100 per cent

Pro rata on a straight line basis
between 31.25 per cent and
100 per cent

At the target ROE per cent set by the
Board

100 per cent vesting

Between the target ROE per cent set
by the Board and 14 per cent

Pro rata vesting on a straight line
basis between 100 per cent and
150 per cent

Pro rata vesting on a straight line
basis between 100 per cent and
200 per cent

At 14 per cent or above

150 per cent vesting

200 per cent vesting

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements202

203

Notes to Consolidated Financial Statements continued

Section F: Other Notes continued
34. Employee Benefits continued

e. Distinguished Executives Award

The Distinguished Executives Award (DE Award) is a program established to recognise and reward Lendlease technical mastery and significant
contribution to the business. DE Awards are generally deferred over five and seven years. The deferred component is awarded as Lendlease
securities and held in Lendlease employee security plan trusts on behalf of the employees. For employees to receive the deferred component,
they must generally be employed by the Group at the time of vesting. DE Awards are valued based on the average price of on market
purchases made in respect of these awards at the time of grant.

f. Executive Deferred Award

The Executive Deferred Award (ED Award) is an award that was made to a limited number of executives and senior managers in recognition of
their role in supporting the Lendlease transformation program.

The ED Award comprises a one off grant of Lendlease deferred securities which vest in three equal tranches, with the final vesting three years
after grant. Securities are held in Lendlease employee plan trusts for the deferral period. Refer to Note 28a ‘Employee Security Plans’ for
further details. For employees to receive the deferred components in full, they must generally be employed by the Group at the time of vesting.

g. Amounts Recognised in the Financial Statements

LTI and LTA awards are valued using Monte‑Carlo simulation methodology where the security price can be projected based on the
assumptions underlying the Black‑Scholes formula. Retention awards are valued by discounting the security price by the expected dividends
assumed to be paid from the valuation date until the vesting date (if applicable). The model inputs include the Lendlease Group security
price, a risk free interest rate, expected volatility and dividend yield. During the financial year ended 30 June 2020, a $55 million expense was
recognised in the Income Statement in relation to equity settled security based payment awards (June 2019: $50 million).

35. Impact of New and Revised Accounting Standards
New and Revised Accounting Standards Adopted 1 July 2019
From 1 July 2019, the Group adopted Interpretation 23 Uncertainty over Income Tax Treatments. Interpretation 23 did not have a material impact on
the Group.

From 1 July 2019, the Group adopted AASB 16 Leases and consequential amendments. AASB 16 provides a new model for accounting for leases.
AASB 16 is based on the principle that all leases the Group enters as a lessee will be recognised on balance sheet, with a right‑of‑use asset
and lease liability recognised, with depreciation recognised on the right‑of‑use asset and interest expense on the lease liability. Lease expense
(depreciation expense and interest expense) will effectively be front loaded to the start of the lease period, even when cash lease payments are
constant throughout the period of the lease.

The Group utilised the modified retrospective cumulative approach to transition to AASB 16, therefore comparatives have not been restated.
Comparatives continue to be accounted for in accordance with the Group’s previous accounting policies outlined in the 30 June 2019 annual
consolidated financial report.

Payments associated with short term leases and leases of low value assets are recognised on a straight line basis as an expense in the Income
Statement. Short term leases are leases with a lease term of 12 months or less. Low value assets comprise IT equipment and small items of office
furniture.

The Group presents right‑of‑use assets that do not meet the definition of investment property in Property, plant and equipment, the same line
item in which it presents underlying assets of the same nature that it owns. Right‑of‑use assets that meet the definition of investment property are
presented within investment property.

Based on analysis performed, as a lessor, there was no material impact to the Group on adoption. As a lessee, on adoption, the Group has:
• Recorded a right‑of‑use asset of $437 million, lease liabilities of $(514) million, derecognition of existing lease balances under AASB 117 Leases

of $18 million and a net deferred tax asset of $17 million in the Statement of Financial Position for its material operating lease commitments. The
sum of these adjustments is $(42) million

• The net difference of $(42) million was recorded as a reduction to equity to reflect the cumulative impact on initial adoption of the standard
• The net impact to the Income Statement for the year is a $11 million increase in expense.

On adoption, the Group has measured lease liabilities at the present value of the remaining lease payments, discounted using the Group’s
incremental borrowing rate as of 30 June 2019. The incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 4.8%.

In applying AASB 16 for the first time, the Group has applied the following practical expedients permitted by the standard for leases:
• The ability to not reassess whether a contract is, or contains, a lease at the date of initial application (prior to 1 July 2019)
• The application of a single discount rate to a portfolio of leases
• The use of hindsight in determining the lease term
• The decision to exclude a lease for which the lease term ends within 12 months of initial application.

New disclosures have been included where required. Changes to disclosures include reclassification of prior period balances to better align the
presentation of comparative information to the new disclosure requirements.

Changes to accounting policies from 1 July 2019
The Group’s accounting policies have been revised to reflect the guidance of the new leasing standard with effect from 1 July 2019. Refer below
for further details.

Recognition
As a lessee, the Group assesses whether a contract is or contains a lease at inception of a contract. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract
conveys the right to control the use of an identified asset for a period of time, the Group assesses whether:
• The contract involved the use of an identified asset
• The Group has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use
• The Group has the right to direct the use of the asset. The Group has this right when it has the decision‑making rights that are most relevant to

changing how and for what purpose the asset is used.

For the leases of land and buildings in which it is a lessee, the Group has elected not to separate non lease components and account for the lease
and non lease components as a single lease component.
The Group’s primary leasing activities are for office space in the regions and cities in which it operates. There are no material future cash outflows
to which the Group is potentially exposed that are not reflected in the measurement of lease liabilities, and there are no material restrictions or
covenants imposed by the Group’s leases.

Measurement
The Group recognises a right‑of‑use asset and a lease liability at the lease commencement date. The right‑of‑use asset is initially measured at
cost, which comprises:
• The initial amount of the lease liability
• Any lease payments made at or before the commencement date less any lease incentives received
• Initial direct costs
• Restoration cost.

Right-of-Use Assets
Right‑of‑use assets which meet the definition of property, plant and equipment form part of the property, plant and equipment balance and are
measured at cost less accumulated depreciation in accordance with AASB 116 Property, Plant and Equipment.
Right‑of‑use assets which meet the definition of investment property form part of the investment property balance and are measured at fair value
in accordance with AASB 140 Investment Property.

Lease Liabilities
Lease liabilities are initially measured at the present value of the lease payments discounted using the interest rate implicit in the lease. If that rate
cannot be determined, the Group’s incremental borrowing rate is used. Generally, the Group uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of lease liability comprise the following:
• Fixed payments offset by any lease incentives
• Variable lease payments, for lease liabilities which are tied to a floating index
• Amounts expected to be payable under a residual value guarantee
• The exercise price of purchase options (if it is reasonably certain that the option will be exercised)
• Payments of penalties for terminating leases, if the lease term reflects the lease terminating early.

Lease liabilities are subsequently measured by:
• Increasing the carrying amount to reflect interest on the lease liability
• Reducing the carrying amount to reflect the lease payments made
• Remeasuring the carrying amount upon the occurrence of certain events (such as a change in the lease term or lease payments).

When a lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right‑of‑use asset and is recorded in the
profit or loss if the carrying amount of the right‑of‑use asset has been reduced to zero.

Depreciation and Amortisation
Right‑of‑use assets are depreciated using the straight line method from the commencement date to the earlier of the end of the useful life of the
right‑of‑use asset or the end of the lease term.

Presentation
Items relating to leases are presented as follows:
• Right‑of‑use assets are recognised in the Statement of Financial Position within the same line item as that within which the corresponding

underlying assets would be presented if they were owned by the Group, within either Property, plant and equipment or Investment property
• Lease liabilities are recognised within Trade and other payables in the Statement of Financial Position and split between current and non current

liabilities

• Depreciation charge for right‑of‑uses assets is recognised within Other expenses
• Interest expense on lease liabilities is recognised within Finance costs.

Relevant information on the Group’s leasing has been included in the following notes: Note 7 ‘Other Expenses’, Note 8 ‘Finance Revenue and
Finance Costs’ and Note 22 ‘Trade and Other Payables’.

Notes to Consolidated Financial Statements continuedLendlease Annual Report 2020 Financial Statements204

Lendlease Annual Report 2020 Financial Statements

205

Notes to Consolidated Financial Statements continued

Directors’ Declaration

Section F: Other Notes continued

35. Impact of New and Revised Accounting Standards continued

Short term leases and leases of low value assets

The Group has elected not to recognise right‑of‑use assets and lease liabilities for short term leases that have a lease term of 12 months or less and
leases of low value assets. The Group recognises the lease payments associated with these leases as an expense on a straight line basis over the
lease term.

New Accounting Standards and Interpretations Not Yet Adopted

Accounting Standard

Requirement

Impact on Financial Statements

AASB 2014‑10
Amendments to Australian
Accounting Standards – Sale or
Contribution of Assets between
an Investor and its Associate or
Joint Venture and consequential
amendments

AASB 2014‑10 amends AASB 10 and AASB 128 to
clarify the requirements for recording the sale or
contribution of assets between an investor and its
associate or joint venture.
The amendment becomes mandatory for the
June 2023 financial year and will be applied
prospectively.

Based on preliminary analysis performed, the
amendments are not expected to have a material
impact on the Group.

36. Other Significant Accounting Policies

a. Foreign Currency Translation

Functional and Presentation Currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency). The consolidated financial report is presented in Australian dollars, which is
the Company’s functional and presentation currency.

Transactions and Balances

Foreign currency transactions are translated into Australian dollars using the exchange rate on the date of the transactions. Assets and
liabilities denominated in foreign currencies are translated to Australian dollars at balance date.

Foreign exchange gains or losses are recognised in the Income Statement for monetary assets and liabilities such as receivables and
payables, except for qualifying cash flow hedges and qualifying net investment hedges in foreign operations, which are recognised in other
comprehensive income. Refer to Note 24 ‘Hedging’ for further detail.

Translation differences on non monetary items, such as equities held at fair value through profit or loss, are reported as part of the fair value
gain or loss.

In the opinion of the Directors of Lendlease Corporation Limited (the Company):

1. The financial statements and notes and the remuneration disclosures contained in the Remuneration Report in the Directors’ Report

are in accordance with the Corporations Act 2001, including:

a. Giving a true and fair view of the financial position of the Consolidated Entity as at 30 June 2020 and of its performance for the

financial year ended on that date; and

b. Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations

Regulations 2001.

2. The financial statements and notes also comply with International Financial Reporting Standards as disclosed in the Basis of Preparation.

3. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

4. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Group Chief Executive

Officer and Group Chief Financial Officer for the financial year ended 30 June 2020.

Signed in accordance with a resolution of the Directors:

M J Ullmer, AO
Chairman

S B McCann
Group Chief Executive Officer and Managing Director

Group Entities

Sydney, 17 August 2020

The results and Statement of Financial Position of all Group entities that are not presented in Australian dollars (none of which has the currency
of a hyperinflationary economy) are translated as follows:

• Revenue and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the transaction

rate, in which case revenue and expenses are translated at the date of the transactions)

• Assets and liabilities for each Statement of Financial Position presented are translated at the closing rate at balance date

• All resulting exchange differences are recognised in other comprehensive income, in the foreign currency translation reserve.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.

b. Goods and Services Tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is
not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as
part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the Australian
Taxation Office (ATO) is included as a current asset or liability in the Statement of Financial Position. Cash flows are included in the Statement
of Cash Flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from,
or payable to, the ATO are classified as operating cash flows.

Notes to Consolidated Financial Statements continued206

Lendlease Annual Report 2020 Financial Statements

207

Independent Auditor’s Report

To the members of Lendlease Corporation Limited

Report on the audit of the Financial Report

Opinion

We have audited the Financial Report of
Lendlease Corporation Limited as the
deemed parent presenting the stapled
security arrangement of Lendlease Group
(the Financial Report).

In our opinion, the accompanying Financial
Report is in accordance with the Corporations
Act 2001, including:

• giving a true and fair view of the

Lendlease Group’s financial position as at
30 June 2020 and of its financial
performance for the year ended on that
date; and

• complying with Australian Accounting

Standards and the Corporations
Regulations 2001.

The Financial Report of Lendlease Group comprises:

• Consolidated statement of financial position as at

30 June 2020;

• Consolidated income statement, Consolidated

statement of comprehensive income, Consolidated
statement of changes in equity, and Consolidated
statement of cash flows for the year then ended;

• Notes including a summary of significant

accounting policies; and

• Directors' Declaration.

The Lendlease Group consists of Lendlease
Corporation Limited and the entities it controlled at the
year end or from time to time during the financial year
and Lendlease Trust.

Shares in Lendlease Corporation Limited and units in
Lendlease Trust are jointly traded as a Stapled Security
on the Australian Securities Exchange under the name
of Lendlease Group.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.

We are independent of Lendlease Group and Lendlease Corporation Limited in accordance with the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) (including independence
Standards) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other
ethical responsibilities in accordance with the Code.

KPMG, an Australian partnership and a member firm of the
KPMG network of independent member firms affiliated with
KPMG International Cooperative (“KPMG International”), a
Swiss entity.

Liability limited by a scheme approved
under Professional Standards Legislation.

Key Audit Matters

The Key Audit Matters we identified
for Lendlease Group are:

• Construction Revenue Recognition

• Sale of Development Properties

• Recoverability of Development

Property Inventory

• Asset Valuation

Key Audit Matters are those matters that, in our
professional judgement, were of most significance in our
audit of the Financial Report of the current period.

These matters were addressed in the context of our audit of
the Financial Report as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.

Construction Revenue Recognition (A$9,067m)

Refer to Note 4 ‘Revenue from Contracts with Customers’ to the financial report

The key audit matter

How the matter was addressed in our audit

The Group performs various building,
engineering and services construction
contract works (projects) for a wide range of
customers. The Group contracts in a variety
of ways. Each project has a different risk
profile based on its individual contractual
and delivery characteristics.

As a result of COVID-19, disruption was
experienced across certain projects,
particularly in international cities where
mandated shutdowns were implemented.
These impacted productivity, expected
timing of completion and expected costs to
complete.

Construction revenue recognition is a key
audit matter as judgement is required to
assess the timing of recognition determined
by the Group. Revenue on construction
contracts is earned over time, typically using
costs incurred as a proportion of total
forecast costs as the measure of progress.

Estimating total forecast costs to complete
during project life is complex and requires
judgement. Typical cost estimates include
labour, subcontractors, equipment,
materials, and project overheads. Changes
to these cost estimates could give rise to
variances in the amount of revenue
recognised.

Our procedures included:
• Evaluating and testing management’s review and

approval of revenue and cost forecasting;

• Selecting a sample of contracts for testing using:
- Data Analytic routines based on a number of

quantitative and qualitative factors, related to size
and risk of projects; and
the Group’s project reporting tool.

• For the sample selected, we:

- conducted visits to a selection of project sites and
used up-to-date site photographs, where site
visits were not possible, to evidence physical
progress;
inquired with key project personnel to assess the
project schedule, forecast costs, risks and
opportunities, with involvement from KPMG
engineering specialists where appropriate;
read relevant contract terms and conditions to
evaluate the inclusion of individual characteristics
and project risks in the Group’s estimates;
tested a sample of incurred costs to supplier
invoices or other underlying documentation;
tested forecast costs for labour, subcontractors,
equipment, materials, and project overheads by
comparing to actual incurred spend and
committed future contracts, with specific
consideration of the impacts of COVID-19;
tested the variations and claims (including COVID-
19 related impacts) recognised within revenue
against the criteria for recognition in the

208

Lendlease Annual Report 2020 Financial Statements

209

The revenue on construction contracts may
also include variations and claims, which fall
under either the variable consideration or
contract modification requirements of AASB
15. These are recognised on a contract-by-
contract basis when evidence supports that
it is highly probable that a significant
reversal in the amount of revenue
recognised will not occur.

The assessment of revenue on construction
contracts resulting from variations and
claims was a focus of our audit due to the
audit effort in assessing this across bespoke
projects and contracting arrangements.

accounting standards via inspection and
assessment of:
o correspondence between the Group and the

customer;

o the Group’s legal basis for the variations and
claims, including, where necessary, external
legal opinions;

o the Group’s analysis of the amounts they

consider meet the recognition requirement of
highly probable, using our knowledge of the
Group’s historical experience in resolving
variations and claims, and considering the
commercial factors specific to each variation
or claim and quality of information
underpinning the amounts recognised.

Sale of Development Properties (A$1,211m)

Refer to Note 4 ‘Revenue from Contracts with Customers’ to the financial report

The key audit matter

How the matter was addressed in our audit

The Group develops for sale both built form
products (for example residential
apartments, and commercial and retail
buildings) and residential land communities.
It is the Group’s policy for development
revenue to be recognised when control
transfers to the purchaser, based on an
assessment of the contractual terms of
sale.

This was a key audit matter due to the
volume of transactions that occur across
multiple jurisdictions. In addition, the
assessment of cost of sales includes
judgement as cost allocation for site
infrastructure costs is typically based on the
proportion of revenue for each unit, lot or
building as compared to total forecast
project revenue.

Whilst COVID-19 resulted in some delays in
residential settlements and cancellations,
these do not impact the Group’s revenue
recognition policy for residential apartments
and residential land communities as
revenue is recognised on settlement.

Our procedures included:
• Evaluating and testing management’s review and

approval of development revenue and cost
forecasting;

• Selecting a sample of settlements, across multiple
jurisdictions, during the year. For the sample
selected we:
- compared revenue recognised to contractual

terms of sale and cash settlements;

- assessed the Group’s determination of when
control transfers by a detailed analysis of the
contractual terms of sale against the criteria in the
accounting standards;

- assessed the Group’s cost allocation

methodology against the requirements of the
accounting standards;
tested the application of the cost allocation
methodology by comparing allocated costs to
revenue recognised in the year relative to the
total project revenue;

- assessed total project revenue by comparing
expected sales prices to published industry
forecasts and comparable sales prices achieved in
the year, being alert to the impacts of current
challenging market conditions.

Recoverability of Development Property Inventory (A$4,450m)

Refer to Note 11 ‘Inventories’ to the financial report

The key audit matter

How the matter was addressed in our audit

Our procedures included:

• Selecting a sample of projects for testing using:
- Data Analytic routines based on a number of

quantitative and qualitative factors, related to size,
duration and risk of projects; and
the Group’s project reporting tool.

• For the sample selected, we:

- compared expected sales prices to published

industry forecasts and comparable sales prices
achieved in the year, being alert to the impacts of
current challenging market conditions;
tested a sample of forecast construction and
infrastructure costs to underlying supplier
contracts, historical experience of similar costs,
and our industry expectation of cost contingency
levels and cost escalation assumptions;

- assessed expected sales prices, the volumes of
sales expected each period and holding costs in
light of current challenging market conditions,
using our industry knowledge.

• Assessing disclosures included in the financial report

highlighting the key factors in determining
recoverability of development property inventory,
using our understanding obtained from our testing and
against the requirements of the accounting standards.
This included considerations of the impacts of COVID-
19.

It is the Group’s policy to capitalise
development costs into inventory over the
life of its projects. Development costs
include the purchase of land, site
infrastructure costs, construction costs for
built form products and borrowing costs.

It is the Group’s policy to carry inventory at
the lower of cost and net realisable value.
The recoverability therefore of these
capitalised development costs is a
significant judgement made by the Group,
and their assessment is based on
forecasts of:

• sales prices
• construction and infrastructure costs to

complete the development.

Where a development is forecast to be
loss making and the inventory is no longer
considered to be recoverable, the Group
considers it to be impaired and it is their
policy for an expense to be recognised.

This was a key audit matter for us due to
many developments being long term
which increases the level of forecasting
judgement and audit complexity in
assessing estimated sales prices and
future costs to complete the development.
We considered the heightened risk in
estimating future sales prices, the timing
of sales, and future costs as a result of the
impact of COVID-19 to these assumptions.

210

Lendlease Annual Report 2020 Financial Statements

211

Asset Valuation

Refer to Note 12 ‘Equity accounted investments’ (A$3,671m), Note 13 ‘Other Financial Assets’
(A$1,092m) and Note 25 ‘Fair Value Measurement’ to the financial report

The key audit matter

How the matter was addressed in our audit

The Group is required to assess the value of
equity accounted investments and other financial
assets at each reporting date. The fair value of
the properties held by various investment
entities directly impacts the Group’s interests in
these assets.

Valuations of assets are generally performed by
the Group using internal valuation methodologies
(discounted cash flow or capitalised income
approach) or through the use of external
valuation experts. External valuations are
obtained on a routine basis by the Group each
year, with the remaining investments being
valued internally.

Other financial assets are predominantly
investments in entities which in turn own
commercial and retail property. Accordingly, the
Group’s valuation assumptions are predominantly
the capitalisation of earnings rates, discount
rates, future rental income, and leasing
incentives.

Equity accounted investments include the
Group’s interest in the retirement living business.
The key assumptions used by the Group in
determining the value of retirement villages are
discount rates, changes in village residents,
current units/homes market prices and pricing
growth rates.

COVID-19 has had a significant impact on real
estate valuations across the Group’s
investments.

The assessment of the valuations of these
assets is a key audit matter as they:

• are inherently judgemental, amplified by the
impact of COVID-19. There were fewer
market transactions as a result, which are
ordinarily strong sources of evidence
regarding fair value;

Our procedures included:

• Selecting a sample of valuations performed by
the Group, based on the significance of the
asset to the Group’s financial position and
performance;

• Assessing the scope, competence and

objectivity of external valuation experts engaged
by the Group for assets valued by external
valuation experts;

• Assessing the impact of market uncertainty

caveats included in valuations performed by the
Group’s external valuation experts to determine
the impact, if any, on our testing of key
assumptions;

• Evaluating and testing management’s review

and approval of internal valuations based on the
Group’s policies for internally valued assets;

• Assessing the valuation methodology for

consistency with accounting standards and
industry practice for the asset’s class;
• Comparing, with market data published by
commercial real estate agents, previous
external valuations, our knowledge of the
industry, and/or our knowledge of the asset and
its historical performance, key assumptions
such as:
- discount rates
- changes in village residents
- units/home current market prices
- pricing growth rates
- capitalisation of earnings rates
-
-

future rental income
leasing incentives

• Assessing disclosures included in the financial

report highlighting the estimates and
judgements in determining fair values of the
Group’s equity accounted investments and
other financial assets. We used our
understanding obtained from our testing,
including considerations of the impacts of

COVID-19, against the requirements of the
accounting standards.

• contain certain forward looking assumptions,
this year with higher estimation uncertainty
from the business disruption due to COVID-
19, which are inherently challenging to audit;
and
lead to additional audit effort, often due to
the high number of differing assumptions and
models, across varying asset classes.

•

Other Information

Other Information is financial and non-financial information in Lendlease Group’s annual reporting which is
provided in addition to the Financial Report and the Auditor’s Report. The Directors of Lendlease
Corporation Limited are responsible for the Other Information.

Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.

In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date of
this Auditor’s Report we have nothing to report.

Responsibilities of the Directors for the Financial Report

The Directors of Lendlease Corporation Limited are responsible for:

• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting

Standards and the Corporations Act 2001;

•

implementing necessary internal control to enable the preparation of a Financial Report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error; and

• assessing Lendlease Group’s ability to continue as a going concern and whether the use of the going
concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless they either intend to liquidate
the Lendlease Group or to cease operations, or have no realistic alternative but to do so.

212

Lendlease Annual Report 2020 Financial Statements

213

Auditor’s responsibilities for the audit of the Financial Report

• Our objective is:

•

to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and

to issue an Auditor’s Report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the Financial Report.

A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar_2020.pdf. This description forms part of our Auditor’s
Report.

Report on the Remuneration Report

Opinion

Directors’ responsibilities

In our opinion, the Remuneration
Report of Lendlease Corporation
Limited for the year ended 30 June
2020 complies with Section 300A of
the Corporations Act 2001.

The Directors of Lendlease Corporation Limited are
responsible for the preparation and presentation of the
Remuneration Report in accordance with Section 300A of the
Corporations Act 2001.

Our responsibilities

We have audited the Remuneration Report included in pages
106 to 136 of the Directors’ report for the year ended 30 June
2020.

Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.

KPMG

D M McLennan
Partner

Sydney
17 August 2020

This page is intentionally left blank.

214

Lendlease Annual Report 2020 Other Information

215

Other
Information

Artist’s impression

Milan:
Milano Santa Giulia

A mixed use
redevelopment
covering more than
110 hectares in the
south east of Milan.

216

Lendlease Annual Report 2020 Other Information

217

Securityholder
information

Securities exchange listing and code
Lendlease Group is listed on the Australian
Securities Exchange and trades under the
code LLC.

Key sources of information
for securityholders
We report the following to
securityholders each year:

In the United States, Lendlease securities
are traded on the ‘over the counter’
market in the form of sponsored American
Depositary Receipts (ADRs) under the
symbol LLESY. Each ADR represents one
ordinary security. Information about ADRs
is available from the depositary, The Bank
of New York Mellon (www.adrbny.com).

Voting rights
Each stapled security in Lendlease Group
and each ADR entitles the holder to one
vote. Rights to Lendlease Group securities
granted under Lendlease Group’s
employee equity incentive plans do not
carry voting rights.

Share Accumulation Plan
The Share Accumulation Plan is
designed to be a convenient way
for securityholders with a registered
address in Australia or New Zealand
to build their securityholdings without
incurring transaction costs. The laws of
other countries make it difficult for us
to offer securities in this way. Lendlease
securityholders are able to reinvest their
distributions to acquire more Lendlease
securities through the Distribution
Reinvestment Plan (DRP) or the Share
Election Plan (SEP). Securityholders may
also make contributions of between
$500 and $2,500 to acquire new
Lendlease securities under the Share
Purchase Plan (SPP). Together the
DRP, SEP and SPP constitute the Share
Accumulation Plan.

The rules of each of these plans are
set out in the Share Accumulation Plan
Information Sheet. Copies are available
on the Lendlease website. Please note
that the Share Election Plan and the Share
Purchase Plan are currently suspended.

• Annual Report

• Half Year Financial Report

• March and September
distribution statements.

Electronic communications
Securityholders have the option of
receiving the following communications
and all other Company related information
electronically:

• Annual Report

• Distribution statements

• Notice of Annual General Meetings.

Lendlease makes the Annual Report
available in an online version. A hard copy
of the Annual Report will only be sent to
those securityholders who elect to receive
it in that form. In addition, securityholders
may elect to receive notification when the
Annual Report is available online.

Securityholders who wish to register their
email address should go to the website of
the Lendlease share registry
www.investorcentre.com/ecomms.

For registry contact details, see page 220.

Privacy legislation
Under Chapter 2C of the Corporations
Act 2001, a securityholder’s information
(including their name, address and details
of securities held) is required to be
included in Lendlease’s public register.
This information must continue to be
included in Lendlease’s public register
for seven years after a person ceases
to be a securityholder. These statutory
obligations are not altered by the Privacy
Amendment (Private Sector) Act 2000.
Information is collected to administer
the securityholder’s holding and if some
or all of the information is not collected,
then it may not be possible to administer
the holding. Lendlease’s privacy policy is
available on its website.

Dispute resolution
There is a dispute resolution mechanism
that covers complaints by securityholders.
For more information, please contact
Lendlease Investor Relations at
+61 2 9236 6111 or email us at
investorrelations@lendlease.com.

Distribution and Share Accumulation
Plan issue price history
For historical distribution and
Share Accumulation Plan Issue Price
information, please see the below
link to our website
www.lendlease.com/au/investor-centre/
distribution-and-tax.

Security information at a glance at 1 August 2020
(comparative 1 August 2019)

Number of securityholders

Units issued

Percentage owned by 20 largest securityholders

Interim dividend/distribution

Total dividend/distribution

Dividend payout ratio

Spread of securityholdings as at 1 August 2020
(comparative 1 August 2019)

1 to 1,000 securities

1,001 to 5,000

5,001 to 10,000

10,001 to 100,000

100,001 securities and over

Total number of securityholders

2020

66,696

688,267,587

75.89%

2019

63,121

564,131,072

72.18%

30.0 cents per security

12.0 cents per security

33.3 cents per security

42.0 cents per security

NA1

51%

2020

35,448

24,515

4,414

2,231

66,696

2019

33,122

24,680

3,463

1,764

63,121

Securityholders with less than a marketable parcel

3,396
(representing 60,497 securities)

2,544
(representing 28,947 securities)

Securities purchased on market
The following securities were purchased on market during the financial year for the purpose of funding employee incentive awards
through Lendlease securities.

Stapled Securities

1,971,036

$16.85

Number of Securities Purchased

Average Price Paid Per Security

1. Dividend payout ratio is nonmeaningful in FY20 due to the Group statutory loss.

218

Lendlease Annual Report 2020 Other Information

219

Securityholder
information

Rank

Name

Units

% of Units

HSBC Custody Nominees (Australia) Limited

J P Morgan Nominees Australia Pty Limited

Citicorp Nominees Pty Limited

National Nominees Limited

BNP Paribas Nominees Pty Ltd

BNP Paribas Noms Pty Ltd

LL Employee Holdings Custodian Pty Limited

HSBC Custody Nominees (Australia) Limited

Argo Investments Limited

LL Employee Holdings Custodian Pty Limited

BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd

Custodial Services Limited

Netwealth Investments Limited

Citicorp Nominees Pty Limited

Avanteos Investments Limited

LL Employee Holdings Custodian Pty Limited

BNP Paribas Noms (NZ) Ltd

CS Fourth Nominees Pty Limited

HSBC Custody Nominees (Australia) Limited-GSCO ECA

Australian Executor Trustees Limited

Total Top 20 holders of fully paid ordinary shares

Total Remaining Holders Balance

208,004,440

131,088,694

61,379,423

42,136,610

17,790,146

15,549,473

14,075,522

5,557,573

4,480,092

4,174,080

3,003,387

2,787,498

2,165,644

2,002,395

1,738,214

1,583,948

1,468,741

1,205,107

1,086,864

1,063,881

522,341,732

165,925,855

30.22

19.05

8.92

6.12

2.58

2.26

2.05

0.81

0.65

0.61

0.44

0.41

0.31

0.29

0.25

0.23

0.21

0.18

0.16

0.15

75.89

24.11

Substantial securityholders as shown in the Company’s Register at 1 August 2020

Name

BlackRock Group

The Vanguard Group

Date of Last Notice Received

08/01/2020

29/4/2019

No. of Units

34,049,935

33,903,122

% of Issued Capital

6.03

6.01

Glossary

Co-investment: The total market value
of Lendlease equity invested across
Lendlease managed funds as at period
end. Represents the Group’s assessment
of the market value.

Construction backlog realisation: The
proportion of Construction backlog
revenue which is expected to be earned
across future years.

Construction backlog revenue: Current
year Construction backlog revenue is the
total revenue to be earned across future
periods.

Critical incident: An event that had
the potential to have caused death or
permanent disability.

Development pipeline: Estimated
remaining end value of all of the Group’s
secured development projects based
on values as at period end; includes 100
per cent of joint venture projects and
therefore will not necessarily correlate
with the Group’s Profit after Tax.

Distribution payout ratio: Distribution
divided by Profit after Tax.

Distribution per security: Amount of
interim and final distribution per stapled
security from the Company/Trust.

Earnings per security: Profit after Tax
divided by the weighted average number
of securities on issue during the year
(including treasury securities) unless
otherwise stated.

EBITDA: Earnings Before Interest, Tax,
Depreciation and Amortisation.

Effective tax rate: Income tax expense as
a percentage of Profit before Tax.

Face value of a security: The value of a
Lendlease security at the applicable time.

Funds under management (FUM): The
total market value of investments across
Lendlease managed funds.

Gearing: Net debt to total tangible assets
less cash.

Global Minimum Requirements
(GMRs): GMRs are Lendlease’s minimum
environment, health and safety standards
designed to control the risks across our
operations.

Good leaver: A senior executive who is
leaving Lendlease for a reason such as
retirement, redundancy, or resignation
where the senior executive is not joining a
competitor, and who may remain eligible
for part or all of an incentive opportunity.

Green Star rating: Green Star is a national
voluntary environmental rating system
used by the Green Building Council of
Australia to evaluate the environmental
design and achievements of buildings.

Investments: Includes equity invested
in Lendlease managed funds and direct
investment in property and property
related assets. Represents the Group’s
assessment of market value.

Investments performance: The
performance of our Investments
business which includes our funds under
management, assets under management,
co-invested equity in Lendlease managed
funds and direct investment in property
and property related assets.

Key Management Personnel (KMP):
Those executives who have the authority
and responsibility for planning, directing
and controlling the activities of the Group
directly or indirectly (as per Accounting
Standard AASB 124 Related Party
Disclosures).

KPIs: Key Performance Indicators.

Long Term Incentive (LTI)/Long Term
Award (LTA): An incentive scheme which
provides Lendlease equity (or cash, in
some circumstances) to participating
executives that may vest, in whole or part,
if specified performance measures are
met over a three or four year period.

Lost Time Injury Frequency Rate (LTIFR):
An indicator and industry standard
measuring a workplace injury which
prevents a worker from returning to duties
the next day. LTIFR refers to the number
of lost time injuries within a year, relative
to the total number of hours worked in the
financial year.

Market capitalisation: The number of
securities on issue multiplied by the
security price at year end.

Net debt: Borrowings, including certain
other financial liabilities, less cash.

New work secured revenue: Estimated
revenue to be earned from construction
contracts secured during the period.
New work is secured and forms part of
Construction backlog revenue when
formal contracts are signed.

People and Culture Committee: The
Board subcommittee that helps the
Board fulfil its responsibilities in people
management and reward policies. It is
made up entirely of independent Non
Executive Directors.

Profit after Tax (PAT): Profit after
Tax attributable to securityholders,
determined in accordance with Australian
Accounting Standards.

Public Private Partnerships (PPP):
A joint procurement arrangement for
infrastructure development contracts
between the public and private sectors.

Residential for rent: Residential
apartments, typically in the form of an
entire building, that are made available
for rent as separate dwellings. Lendlease
and its investment partners maintain
ownership of these apartments.

Return on Equity (ROE): ROE is calculated
using annual statutory Profit after Tax
attributable to securityholders divided by
the arithmetic average of beginning, half
year and year end securityholders’ equity.

Securityholders: An individual or entity
that owns Lendlease securities.

Senior executive: Employees who hold
a position at executive level according
to the Lendlease Career Job Framework.
This generally includes Regional Business
Unit Heads, Regional Function Heads and
in some cases, direct reports to Group
Function Heads.

Settlements (units): Apartments – units
cash settled in the period on completed
units in Australia, Europe and Americas,
and units which have reached practical
completion in Asia; Communities and
Retirement – units settled in the period on
completed land lots or units; Commercial
– buildings that have achieved practical
completion during the period.

Short Term Incentive (STI)/Short Term
Award (STA): Incentives awarded with
direct reference to financial and non
financial performance over a one year
period. Measures are designed to focus
individuals on priority areas for the current
financial year.

Total Package Value (TPV): Salary
plus the value of salary package items
such as motor vehicles and parking and
compulsory superannuation contributions
paid on behalf of an employee.

Total Shareholder Return/Total
Securityholder Return (TSR): The
movement in a company’s share/security
price, dividend yield and any return of
capital over a specific period. It is often
expressed as a percentage.

Urbanisation pipeline: Estimated
remaining end value of all of the Group’s
secured development projects (excluding
Communities projects and Retirement
projects) based on values as at period
end; includes 100 per cent of joint venture
projects and therefore will not necessarily
correlate with the Group’s Profit after Tax.

Weighted average number of securities:
The time weighted number of securities
outstanding during the period.

220
220

Corporate
directory

Annual General Meeting 2020
The Annual General Meeting (AGM) of shareholders of Lendlease
Corporation Limited and the general meeting of unitholders of
Lendlease Trust (together, Lendlease Group) will be held at 10am on
Friday 20 November 2020. Due to the ongoing risks of the COVID-19
pandemic, and in light of the social distancing requirements of the
Australian and State governments currently in place, the Board has
decided in the interests and health and safety of securityholders, staff
and other stakeholders, that a virtual rather than face to face meeting
will be held. Securityholders will not be able to physically attend the
AGM. We will provide securityholders with full details of participation
in the Notice of Meetings. Lendlease advises that the date of close of
director nominations for election at the AGM is Friday 2 October 2020.

2020 Financial Calendar
Mon 17 Aug
Mon 17 Aug

Full Year Results Announced
Full Year Results Announced

Fri 21 Aug
Fri 21 Aug

Security Price Ex Dividend
Security Price Ex Dividend

Mon 24 Aug
Mon 24 Aug

Final Distribution Record Date
Final Distribution Record Date

Tue 15 Sep
Tue 15 Sep

Fri 20 Nov
Fri 20 Nov

Final Distribution Payable
Final Distribution Payable

Annual General Meeting
Annual General Meeting

2021 Financial Calendar
Mon 22 Feb

Half Year Results Announced

Fri 26 Feb

Security Price Ex Dividend

Mon 1 Mar

Interim Distribution Record Date

Wed 17 Mar

Interim Distribution Payable

Please note that the timing of events can be subject to change.
A current calendar is available online at www.lendlease.com

Entity Details
Lendlease Corporation Limited
ABN 32 000 226 228
Incorporated in NSW Australia

Lendlease Responsible Entity Limited
ABN 72 122 883 185
AFS Licence 308983 as responsible
entity for Lendlease Trust
ABN 39 944 184 773
ARSN 128 052 595

Registered Office
Level 14, Tower Three
International Towers Sydney
Exchange Place
300 Barangaroo Avenue
Barangaroo NSW 2000

Contact
T: +61 2 9236 6111
F: +61 2 9252 2192
www.lendlease.com

Share Registry Information
Computershare Investor Services Pty Limited
ABN 48 078 279 277
GPO Box 242, Melbourne Victoria 3000 Australia

T: 1800 230 300 (within Australia)
T: +61 3 9946 4460 (outside Australia)

www.computershare.com.au

Artist’s impression

221

Sydney: Sydney Place

Lendlease Annual Report 2020 Managing and Measuring Value222

Our paper goes
another round
This report is printed
on locally sourced
recycled paper and
contains waste from
Lendlease assets
around Australia
including Melbourne
Quarter and
Barangaroo South,
Sydney.

Level 14, Tower Three
International Towers Sydney
Exchange Place
300 Barangaroo Avenue
Barangaroo NSW 2000

www.lendlease.com

@lendlease

@lendleasegroup

@lendlease