Lendlease Annual Report 2023Create Front cover: Sydney BarangarooThis page: London 21 MoorfieldsArtist’s impression Contents
Year in Review
Chairman’s Report
Global Chief Executive Officer’s Report
FY23 snapshot
Our Business
Operating segments
Create
Transition to an Investments-led business
Accelerating development
Disciplined construction capability
One Circular Quay, Sydney
Our Focus Areas
Managing and measuring value
Health and Safety
Financial
Our customers
Our people
Sustainability
Risk and Climate- Related Resilience
Risk governance and management
Climate-related strategic resilience
Performance and Outlook
Group performance
Investments segment
Development segment
Construction segment
Financial position and cash flow movements
Governance
Board of Directors’ information and profiles
Engagement
Remuneration Report
Directors’ Report
Lead Auditor’s Independence Declaration
Financial Statements
Other Information
Corporate directory
Securityholder information
Glossary
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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 2
Lendlease Annual Report 2023
About this report
The 2023 Lendlease Annual Report has been prepared with reference
to the International Integrated Reporting 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 in
the following ways:
• Project Control Groups (PCGs), which
include key internal stakeholders and
represent the governance structure
for overseeing the completion of the
Annual Report
• Capturing feedback from key
external stakeholders including
securityholders, analysts and other
relevant groups
• Engagement with the Board
• Confirming the strategy is consistent
and relevant
The outcome of these processes are the
material issues noted on pages 28 and 29
in Managing and Measuring Value and in
Our Business on pages 12 to 15.
Directors’ Report and Operating
and Financial Review (OFR)
The required elements of the Directors’
Report, including the OFR, are featured
on pages 4 to 98 of this Report
and include the sections: Year in
Review; Our Business; Create; Our
Focus Areas; Risk and Climate-related
resilience; Performance and Outlook;
and Governance.
The OFR is covered specifically on pages
4 to 57. All non-financial metrics
included in the Directors’ Report on pages
4 to 49 have been verified through
Lendlease's internal verification process.
The Remuneration Report on pages 72
to 94 and the Financial Statements on
pages 99 to 167 have been audited
by KPMG.
Reporting suite
Our reporting suite provides information
about the organisation and its key
financial and operational achievements
and includes:
• The Annual Report
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, detailed segment
information, investment portfolio,
major urban projects and pipeline.
• www.lendlease.com
Additional information on
sustainability reporting, corporate
governance, tax compliance and
historical financial information.
Our focus areas
Five focus areas underpin our ability to create safe, resilient, economic
and sustainable outcomes. Our success is measured by the value we create
in these areas. Icons linking our activities to this value creation are used
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 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
Understanding our
customers and their
evolving needs is
critical as we
partner, collaborate
and innovate to create
places people love.
Our
People
Our people bring
Lendlease, our purpose
and our culture to life.
Creating places where
communities thrive.
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 this Report
3
Kerkar Kus Dance Team of Erub Island perform under Mermer Waiskeder: Stories of the Moving Tide in Barangaroo.Acknowledgement of CountryWe acknowledge the Traditional Custodians of the land and pay our respect to them and their Elders past and present.As a business that works across many locations, we have a responsibility to listen, learn and walk alongside First Nations peoples so that our activities support their ongoing connection to their lands, waters, cultures, languages and traditions.We value their custodianship of 65,000 years.Lendlease’s global headquarters are in Australia where our Reconciliation Action Plan (RAP) commits us to Acknowledging Country. The RAP is one way we demonstrate our operational performance on human rights, and specifically the rights of First Nations peoples. 4
Lendlease Annual Report 2023
Year in
Review
Sydney One Circular QuayArtist’s impression Year in Review
5
6
Lendlease Annual Report 2023
Chairman’s
Report
This year we moved into the Create
phase of the Group’s five-year Reset,
Create, Thrive strategic roadmap,
and I am pleased to report strong
progress in our turnaround, which saw
Lendlease continue its transition from
a Development-led to an Investments-
led organisation.
However, a combination of the difficult
market environment, provisions relating
to activities from prior periods, and the
industry-wide retrospective action taken
by the UK Government to extend the
warranty period for completed residential
buildings to 30 years, resulted in a
substantial Statutory loss and a modest
core operating profit.
A stable full year distribution and dividend
payment of 16 cents per security reflects
a payout ratio of 43 per cent on core
operating earnings.
Strategic direction
The Board is confident Lendlease now has
the right strategy in place to drive future
value for our securityholders, via the
delivery of sustainable, recurring earnings.
This will be achieved through growth in
funds management income, leveraging
both our development pipeline and our
capital transaction capabilities to grow
funds under management.
Growing the Investments platform;
accelerating the realisation of our
development pipeline in a profitable,
more capital-efficient manner; and a
continued focus on operational efficiency,
are key elements of the strategic
road map.
Though markets remain challenging
given geopolitical events and changed
monetary policy settings, much has been
achieved, including deployment of funds
into new products, continuing to scale
our development pipeline with our capital
partners through project acquisition,
maintaining discipline and execution
excellence in our Construction business in
the face of inflationary and global supply
chain pressures, and continued progress
across important sustainability targets.
Under Tony’s leadership, the senior
executive team has been renewed, and
the organisation focused on executing
our strategy and business simplification.
This includes continuing to pursue capital
recycling initiatives to support business
growth and maintain prudent gearing.
While market conditions continue to
provide headwinds, the Board remains
focused on positioning the business to
take advantage of opportunities as market
conditions improve.
This includes investing in the right
capability to drive outcomes in
the Investments business; investigating
pathways to accelerate the realisation of
value and capital in the Development
business; and improving risk reward
outcomes in the Construction business.
Following material cost reductions
delivered in FY22, additional cost
initiatives were announced post balance
date to further improve efficiency and
securityholder returns. The full benefit
of these cost savings is expected to be
realised in future years and importantly,
these cost savings do not impact our
ability to deliver the FY26 roadmap,
including execution of the development
pipeline and growth in Investments.
Health and Safety
The health and safety of our people, our
subcontractors and those who interact
with the places we create and manage
is our highest priority, with the welfare
of our people being one of the founding
principles of Lendlease.
Across all our operations where
Lendlease was responsible for the
operational control of health and safety
outcomes, there were no fatalities
recorded in FY23. For projects where
work was not under our operational
control, there was a fatality of a
subcontract worker on the 1 Java Street
project in New York. We extend our
sincerest condolences to the family and
colleagues of the man who lost his life.
Incidents such as this are a sombre
reminder of the emphasis we must place
on safety, as well as the ongoing support
we must offer to our supply chain
partners to improve safety performance.
Our overall safety performance
demonstrated continued improvement
across a number of key safety metrics.
Our health and safety focus has also
been expanded to incorporate Physical,
Product, and Psychological safety at
all stages of the property lifecycle,
from investment decisions to operations
and maintenance.
Board renewal
We continued to renew the Board with
the appointment of Margaret Lui as a Non
Executive Director in 2022. Margaret is
based in Singapore and brings extensive
international investment management
experience to the Board, which
aligns with the Group’s Investments-
led strategy.
Margaret will stand for election at the
2023 Annual General Meeting, along with
Phil Coffey, Elizabeth Proust and Robert
Welanetz, who will each be standing
for re-election.
>10%
Compound annual FUM
growth since FY21
~$23b
Work in Progress,
accelerating delivery
Year in Review
7
The Board continues to be actively
engaged with each of the business
segments and regions, and has met
regularly throughout FY23 to refine the
Group’s strategic direction in light of
market developments and to oversee
its execution.
The Board remains committed to
appointing directors with deep industry
experience in our core segments
of Investments, Development and
Construction and expects to appoint an
additional Non Executive Director based
in Europe in FY24.
Sustainability
Our purpose statement, creating places
where communities thrive, is core to
each business segment and our long-term
strategy for shared value creation and
sustainable performance.
Living our purpose means we help
to create the best places for our
customers and the communities we
serve, inspire our people, preserve our
culture, and deliver sustainable growth for
our securityholders.
Our leadership position on environmental
sustainability is something we are
extremely proud of.
We are striving to eliminate the use of
fossil fuels across our business while also
playing a leadership role in transforming
the real estate sector.
approach to placemaking and is integral
to our purpose.
To that end, we were pleased to receive
validation from the Science Based Targets
initiative that our carbon reduction targets
are aligned with a 1.5 degree trajectory.
As we work towards fossil fuel-free
construction, we are increasing our use
of electric construction equipment and
using renewable diesel as a transition
fuel where available. Funding support was
secured from the New York State Energy
Research and Development Authority for
the geothermal heat exchange system at
1 Java Street, an all-electric building and
the largest geothermal residential system
in New York State.
Since launching our $250m social value
target in 2020, we have created more
than $180m of social value through the
work of our shared value partnerships.
These partnerships focus on creating
measurable social value by addressing the
needs of communities.
We continued to action commitments
to First Nations peoples detailed in
our Elevate Reconciliation Action Plan.
The prioritisation of First Nations voices,
language and culture is redefining our
We support a constitutionally enshrined
Voice as we believe this is essential to
facilitate genuine reconciliation.
Looking to the future
While the external market challenges
of the past year have tempered
performance, the business has continued
to execute the elements of the strategy
over which it has control and has a clear
pathway to achieve its FY26 goals.
The Board will continue to closely monitor
external risks, while maintaining focus
on further simplification, rebalancing
the portfolio toward higher returning
investments and generating sustainable
earnings for securityholders.
I would like to thank my Board
colleagues and the entire Lendlease
team for their ongoing dedication to
reposition the organisation for sustainable
future growth.
M J Ullmer, AO
Chairman
Though global markets remain challenging, the Board is focused on positioning the business to take advantage of opportunities as market conditions improve. 8
Lendlease Annual Report 2023
Global Chief Executive
Officer’s Report
When I took the role as Lendlease CEO
two years ago, I accepted the challenge
of transforming our company into one
that not only delivered outstanding
environmental and social outcomes, but
sustainable financial returns as well.
Despite a cascade of market challenges,
including the recent instability from
inflationary and interest rate pressures
and the residual impacts of the pandemic
on our industry, we have taken steps in
the past 12 months to set the company
up to deliver more sustainable returns
to securityholders.
We made significant strides in delivering
against our five-year turnaround plan
Reset, Create, Thrive. We continued
to grow our funds under management
(FUM) to generate more reliable
and recurring income. We sharpened
our focus on development projects
in our pipeline that support our
FUM growth. And we rightsized our
construction workbook around projects
that carry less risk and generate more
predictable returns.
In parallel, we continued to refine the way
we work in order to be more productive
as a business and efficient in the way
we operate. This ‘always on’ program
is helping us progressively lower our
cost base while redirecting our global
workforce to those activities that deliver
the highest value for securityholders.
However, our financial results for the year
were negatively impacted by provisions
against prior projects and receivables
primarily in our international operations,
and this is extremely disappointing. The
actions we are taking to transform
Lendlease aim to reduce these impacts
and instead create earnings certainty for
our securityholders.
Accelerating funds growth
We successfully grew FUM by nine
per cent during the period to
$48.3b despite challenging market
conditions. Our investment partners
remained engaged across our portfolio
of opportunities including build-to-rent
(BTR) and sustainable office. In addition,
we made good progress in building our
Investments platform through new hires.
We began to acquire new opportunities in
the marketplace including 21 Moorfields
in London, and acquired assets for our
recently created value-add Real Estate
Partners 4 fund.
than $150m per annum, with c.$60m
expected to be realised in FY24.
Our global BTR funds under management
grew to more than $3b. We also launched
our first BTR projects in Australia. Given
our strong international capability in this
asset class, which is set to experience
sustained growth given housing shortages
in many of the cities in which we operate,
we’re ideally positioned to maximise the
value of the $28b of BTR product in our
global development pipeline.
Scaling development
Our development pipeline is $124b.
Translating this pipeline into active
projects provides earnings visibility into
future years. This drives our strategic
focus to only commence projects with an
appropriate risk profile.
We commenced $7.7b of projects
alongside our investment partners,
including large superannuation funds.
These commencements take our work
in progress to $22.9b at year end
and provide the ideal platform as
markets recover.
During the year we completed $3.6b of
projects, including Salesforce Tower at
Circular Quay, and Blue and William at
North Sydney, to meet continued demand
for well appointed, sustainable offices – a
key asset class where customers demand
best in class.
Significant work was done to replenish
our development pipeline in Australia
where we won the privilege to create
the iconic $3.1b Sydney Harbour project,
One Circular Quay. We were also
announced as preferred developer for the
historic and much-loved Queen Victoria
Market precinct on behalf of the City
of Melbourne.
Executing with excellence
In FY22 we simplified our operating
model and management structure,
removing more than $170m in operating
expense in the Reset phase of our
turnaround plan. This disciplined cost
reduction approach was sustained
through FY23. We are undertaking
additional operational changes to further
focus resources behind activities which
generate the highest sustainable returns.
We expect our current actions will
generate cost savings pre tax of more
A disciplined approach to cost
management is especially important in
the Construction segment where a recent
spate of insolvencies demonstrates the
risk inherent in this traditionally low
margin segment. To improve profitability
and reduce future risk, we’ve made the
decision to no longer undertake certain
types of work, for example residential
build to sell, and remain selective in our
customer portfolio.
Our Construction business has a product-
focused backlog of c.$8.7b and is well
positioned for FY24 with a renewed
focus on risk adjusted returns. The
business remains a key component and
differentiator of our integrated model,
contributing to the origination and
delivery of our urban projects.
Investing in our people
We commenced a reduction of our global
workforce to better reflect the resources
required for the work we do. But we
haven't reduced our focus on developing
our people, significantly investing in
their career development and learning,
and backing our leaders to be more
impactful and inclusive. Pleasingly, our
employee engagement increased versus
a declining global average. In more
than half of our operating locations, our
teams recorded engagement levels above
external country benchmarks.
Driving further engagement is a key
operating principle across my leadership
team. While we still have more to do, I’m
confident the engagement of our people
will continue to build during the Create
phase of our turnaround and as we move
towards Thrive.
Progressing our
Sustainability targets
Operating sustainably forms a core
part of our DNA. It’s also fundamental
to how we do business – whether
investing, developing or building. Further,
our global sustainability leadership helps
us attract investment partners and
tenants, contributes to our investment
performance, provides a competitive
advantage, and helps us attract and
retain talent.
Year in Review
9
Our industry-leading Mission Zero targets
aim to lead the transformation of the
sectors in which we operate. To that end,
we are firmly on track to achieve our Net
Zero carbon by 2025 target for Scope 1
and 2 emissions.
And we have increased our engagement
with industry associations and our
supply chain, advocating for rapid
decarbonisation, as we know industry
collaboration will be crucial if we’re to
achieve our absolute zero carbon by 2040
target for Scope 1, 2 and 3 emissions.
Financial and
operating performance
Disappointingly, Lendlease reported a
Statutory Loss after Tax of $232m, driven
by non-cash losses in relation to industry-
wide retrospective UK Government
action on UK residential buildings
and lower property valuations in the
Investments segment.
Core operating profit of $257m was
down from $276m in the prior year with
improved Development earnings more
than offset by lower contributions from
Investments and Construction.
Consistent with our ongoing focus to
maintain balance sheet flexibility, we
completed several transactions including
further monetising our US Military
Housing Asset Management income
stream, completing $0.6b in PLLACes
transactions on residential towers at
Barangaroo, conducting a partial bond
buyback and introducing a majority
capital partner for the One Circular
Quay development.
In addition, a number of capital recycling
initiatives are currently being explored,
including the potential introduction of
a capital partner for our Australian
Communities and China senior living
businesses, as well as the divestment of
our remaining 25.1 per cent interest in the
Australian retirement living business.
Outlook
I firmly believe we have the right strategy
in place to deliver on our purpose and
provide a sustainable improvement in
returns to securityholders.
I’m confident we are on track to achieve
our core FY24 target of an 8–10 per cent
Return on Equity, albeit at the low end
of the range. We’re also committed to
targeting annual completions of $8b and
growing FUM to $70b by FY26, providing
it remains prudent to do so.
In closing, I’d like to thank our
securityholders for their insight, feedback
and understanding throughout the year
as we executed our plan to transform
Lendlease. I extend my sincere thanks to
our investment and project partners for
choosing to invest and work alongside
Lendlease. I also recognise the critical
role our supply chain partners have
played, and continue to play, in the cost
efficient delivery of our projects.
We are a business that is absolutely
responding; in our transformation to
be a sustainable and high-performing
company for our securityholders, to the
opportunities presented in the real estate
sector for our partners and customers,
and to the state of our planet and
climate change.
This is only possible because we have an
enthusiastic global team of people who
are highly knowledgeable and rising to
the challenges we are facing, and have
consistently strived during the past 12
months to create an improved Lendlease.
Tony Lombardo
Global Chief Executive Officer
I firmly believe we have the right strategy in place to deliver on our purpose and provide a sustainable improvement in returns to securityholders. 10
Lendlease Annual Report 2023
FY23 SnapshotSydney Salesforce Tower, Sydney Place Year in Review
11
($232m)
Statutory
loss after tax
$257m
Core operating profit
after tax
Stable
financial position,
gearing 14.8%
$48.3b
Funds
under management
(up 9%)1
$22.9b
Development Work
in Progress
(up 24%)1
$8.7b
External construction
backlog revenue
(down 17%)1
Three funds
ranked in the GRESB2
Global Top 10
>190m
customer
interactions
Continued focus
on key safety metrics
$1.3b
Portfolio divestments
since FY22
>$60b
Investment grade pipeline
Increase
in global
people engagement
1. Comparative period the year ended 30 June 2022.
2. Global Real Estate Sustainability Benchmark 2022.
12
Lendlease Annual Report 2023
Our Business
Lendlease is transitioning to be an
Investments-led real estate group,
leveraging market-leading investment
management and asset creation skills
with proven expertise in shaping
cities and creating strong and
connected communities.
We manage funds and assets for some of the world’s largest real
estate investors, and for more than 60 years, we have created
thriving places. We work with purpose to design, build and
curate places that people care about and want to be in.
Our vision for the future of the urban landscape is tied
to our purpose as an organisation: We create places where
communities thrive.
In partnership with stakeholders, we aim to create social,
environmental, and economic value for cities and their
communities. We have a proud legacy of creating award-winning
urban precincts as well as being entrusted with delivering
essential civic and social infrastructure.
Guiding our behaviours and underpinning our Code of Conduct are
our core values.
Respect
Innovation
Excellence
Integrity
Collaboration
Trust
Los Angeles La CienegaArtist’s impression Our Business
13
14
Lendlease Annual Report 2023
Operating
segments
We leverage our integrated business model
of Investments, Development and Construction,
to manage and create mixed-use precincts,
communities, civic and social infrastructure.
Investments
The segment comprises investment and
asset management platforms and the
Group’s real estate investment portfolio.
Capability
For decades we have managed funds and
assets for some of the world’s largest real
estate investors.
Our expertise spans unlisted and listed
property funds and mandates. We offer
investment capability supported by active
asset management and leadership in
sustainability. Our competitive edge lies
in the opportunities we provide to
investment partners in accessing the
diverse, high-quality product created
through our integrated model and
our capacity to assess on-market
opportunities at any stage of a
project lifecycle.
Our development pipeline will provide a
key source of growth for the Investments
segment. This will be supplemented by
pursuing other market opportunities with
our investment partners.
Platform
• $48.3b funds under management
• $32.8b assets under management
• $3.9b investment portfolio
Development
The segment is predominantly focused
on the creation of mixed-use precincts
comprising build-to-rent and for-sale
apartments and sustainable workplaces.
The Group also develops outer suburban
masterplanned communities.
Capability
We manage the entire development
process – from securing land
or management rights, achieving
entitlements through planning approvals,
creating masterplans and consulting with
communities and authorities, through to
project management, sales and leasing.
Placemaking is core to our strategy and
competitive position. We create places
that resonate with people and contribute
to the quality and liveability of our
cities by working in partnership with
governments, institutions, landowners,
investors and the community.
Platform
• $124.3b development pipeline
• 21 major urban projects in nine global
gateway cities
• 16 Communities projects in Australia
Construction
The segment provides project
management, design and construction
services, predominantly in the
commercial, defence and social
infrastructure sectors.
Capability
Our capability is showcased in the
places and structures we create, including
workplaces for some of the world’s
largest organisations, hospitals and other
buildings of civic and social importance.
Ongoing investment in innovation and
technology aims to improve our safety,
sustainability and efficiency.
Our Construction business also typically
designs and delivers the built form for our
urban projects which is captured within
our Development segment earnings.
Platform
• $8.7b external backlog revenue
• Key sectors: defence; commercial;
social infrastructure
• 62 per cent of backlog revenue for
government clients
• $4.3b internal backlog revenue
supporting Development
Our Business
15
$48b
Funds
under management
(up 9%)
$23b
Work in progress
(up 24%)
$7.2b
Revenue
(up 9%)
$33b
Assets
under management
(up 9%)
$3.6b
Completions
(up 44%)
$4.7b
New work secured
(down 11%)
$3.9b
Investment portfolio
(up 13%)
$124b
Development pipeline
(up 6%)
$8.7b
Backlog revenue
(down 17%)
InvestmentsDevelopmentConstruction 16
Lendlease Annual Report 2023
Create
Sydney Powerhouse ParramattaArtist’s impression Create
17
18
Lendlease Annual Report 2023
Transition to an
Investments-led business
Our strategy is to become an Investments-led business, leveraging a
deep development pipeline and exploring new investment products that
meet our customers' investment needs.
Building scale in funds under
management (FUM)
Our Investments platform, which
currently sits at $48.3b of FUM, provides
a strong foundation to build global
scale. We have decades of experience
managing real estate assets, with our
expertise spanning multiple asset classes
and geographies.
We have a target of growing FUM to
more than $70b by FY26, and in doing
so, moving towards a higher proportion of
recurring and annuity earnings.
Our $124b development pipeline will
continue to deliver seed assets to grow
the Investments business, supplemented
by expansion into new products, such as
value-add strategies.
Our direct Investments portfolio is
currently valued at $3.9b and includes
co-investment positions in our managed
funds and equity interests in our
Retirement Living and Military Housing
businesses. The portfolio is diversified
across the workplace, residential, retail,
retirement and industrial sectors.
We have invested meaningfully in our
Investments team and platform and are
in the process of scaling up the business
in offshore jurisdictions, particularly in the
UK and the Americas.
We remain focused on driving best-in-
class performance for our investment
partners globally. This includes accessing
compelling investment opportunities,
producing leading ESG performance and
optimising investment returns.
Top: London: 21 Moorfields
London: 21 Moorfields
Our $124b development pipeline includes
approximately $28b in workplace assets,
with more than $4b of future secured
workplace FUM currently in delivery.
This includes:
• Melbourne Quarter Tower
• Victoria Cross Over Station
development, North Sydney
• 60 Guest Street, Boston
During the year, two workplace
developments were completed and are
now contributing to FUM, and will
continue to mature as they become
established assets.
• Salesforce Tower, Sydney Place
• Blue and William, North Sydney
Asset creation opportunities
Our develop to core products, derived
from our development pipeline, are
expected to be a key source of FUM
growth. More than 50 per cent of
the development pipeline comprises
investment yielding assets, including
build-to-rent (residential) and A-grade
workplaces, which we anticipate will be
key future growth sectors.
Workplace (including Life Sciences and
Innovation Districts)
Our global workplace portfolio is our
largest contributor to FUM, comprising
approximately $27b in largely established
assets that are 94 per cent leased.
We believe there is opportunity for
FUM growth in this sector across our
target gateway cities. The workplace is
essential for businesses to continue to
build and create culture and identity and
remains fundamental to collaboration and
business success. The past year has seen
an increase in employees returning to
workplaces and we expect this trend to
continue given the benefits of working
in amenity rich environments which drive
productivity, collaboration and innovation.
Create
19
Lendlease’s integrated capability, track
record and extensive development
pipeline in these areas should support
growth in capital partnering.
Our focus on safety and creating
innovative and sustainable product, whilst
driving investment returns, is also a
key differentiator.
Assets under management
Our asset management business has
more than $32b under management
across the key asset classes of retail
($11.7b), residential ($15.9b) and workplace
($5.2b). This business is complementary
to FUM earnings, also deriving an
annuity-style income stream from the
management of real assets for our
capital partners.
During FY23, we took steps to rebalance
the residential portfolio, with further
sales of 34 per cent of the Military
Housing asset management income
stream to an existing financial partner.
The sales realised proceeds of $0.2b
and allow for the redeployment of
capital into higher growth opportunities,
with Lendlease retaining 38 per cent
ownership of the income stream and 100
per cent ownership of development and
construction management rights.
Leading sustainability targets
and credentials
Sustainable real estate attracts capital
partners and quality tenants, as well as
contributing to investment performance
and our competitive edge.
Our industry-leading Mission Zero targets
aim to lead the transformation of the
real estate industry, focusing on the
elimination of carbon emissions, not just
reduction or offsetting.
We maintain a leading position across
ESG assessments and benchmarks,
including GRESB2 and WELL3
certifications. Our recent achievements
are highlighted on page 39 of this Report.
Build-to-rent (residential)
The build-to-rent residential asset class
has strong growth potential. Institutional
capital has significant interest in this
product, driven by housing affordability
constraints, an undersupply of affordable
housing, strong migration tailwinds and
supportive government initiatives.
We completed our first build-to-rent
development in 2019 and now have
more than $3b in FUM across the
Americas and the UK. Our development
pipeline includes a further c.23,000
apartments for rent, from $28b of
potential institutional product.
We are now applying our strong
integrated offshore capabilities to
Australia, this year launching two projects
in Brisbane and Melbourne.
In Brisbane we partnered with QuadReal
to deliver 443 apartments at the
Brisbane Showgrounds precinct, while
in Melbourne we partnered with Daiwa
House to develop 797 apartments at
our Melbourne Quarter precinct. Both
projects are set to provide residents with
a high-quality, long-term alternative to
the traditional apartment rental market
and will include premium amenities and
communal spaces.
Retail
Retail is presently our second largest
asset class representing approximately 25
per cent of FUM, with an established
capability of developing and managing
retail assets. Our current portfolio is
geographically skewed to the Asia Pacific
region, with growth in recent years across
Singapore and Malaysia.
Going forward, retail is expected to
represent a smaller proportion of our
portfolio given the growth we are
targeting in other asset classes.
Data Centres and Industrial
We see data centres as a key growth area,
particularly across Asia, which is well
supported by institutional capital partners.
Phase One of our data centre in Tokyo,
which is 100 per cent pre-leased, with an
end value of $0.4b, is due to complete
in FY24.
Social Infrastructure and Other
We have a strong track record in Social
Infrastructure development through our
integrated business model and strong
financing capability, leveraged through
our established public private partnership
(PPP) business, Capella. Through this and
other channels, we expect to source
further opportunities in this sector.
$48.3b
Funds
under management
up 9%
On-market opportunities
Against a challenging market and macro
environment, progress was made in
growing FUM via external opportunities
through the launch of new partnerships
and the acquisition of new products.
21 Moorfields
With the support of two investment
partners, including NSW TCorp and a key
Asian institutional investor, we acquired
21 Moorfields in London. The A-grade
workplace development, located above
Moorgate Station, is 100 per cent leased
on a 25-year term to Deutsche Bank. It
is now contributing $1.4b in FUM and
assets under management (AUM), which
will become fully established and yielding
in FY24.
Real Estate Partners 4
Our value-add Real Estate Partners 4
fund, which was launched in FY22,
acquired four commercial assets in
Melbourne, Brisbane and Perth, with
Lendlease co-investing. Utilising our deep
office sector expertise, this fund aims to
reposition older assets for future tenant
demand. This includes refurbishment to
increase sustainability performance and
rating and improving the tenant mix.
Appetite for global real estate
The top 100 global real estate investors
control approximately $1.7t in real estate
assets.1 We have relationships with a large
number of them and continue to build
out access to European, North American
and Asian capital pools which have
historically been underrepresented on
our Investments platform. While capital
partners remain cautious with respect to
new investments and markets, given the
uncertain market backdrop for rates and
global growth, capital remains active in
certain sectors, such as build-to-rent and
life sciences, where global appetite is
driven by strong underlying fundamentals.
1. PERE: Global Investor 100, 2022: The full ranking.
2. Global Real Estate Sustainability Benchmark.
3. Third-party, performance-based rating system that measures the impact of the built environment on human health and wellbeing.
20
Lendlease Annual Report 2023
Accelerating development
Accelerating our global development pipeline in a profitable and more
capital efficient manner.
A compelling product offering
Lendlease is a globally significant
developer, with a pipeline of $124b
end value across selected international
gateway cities. Our development
capability is world-leading and enables
us to realise our vision to create places
where communities thrive.
Through the developments we design,
build and manage, we create quality
assets for our investors – delivering
improved liveability and amenity,
environmental sustainability, inclusion,
affordability, connectedness, wellbeing
and a sense of community.
Our development pipeline includes:
• Build-to-rent (residential) $28b:
helping to address housing
affordability and supply constraints in
key cities.
• Build-to-sell (residential apartments)
$46b: providing housing supply,
including luxury waterfront.
• Sustainable workplace and
mixed use $34b: including
innovation districts, life science,
and select industrial and data
centre developments.
• Communities $16b: residential
land development, supporting
key population growth corridors
in Australia.
Delivering the pipeline
Our strategy includes the accelerated
delivery of our large development
pipeline, alongside our investment
partners. The pipeline is categorised into
three phases:
• In Conversion: earliest stage of
development; initial planning phase
(predominantly undertaken prior to
land acquisition; capital light)
• Master planned: security of overall
entitlements, development approvals
obtained. This phase includes
preparing individual construction
approvals, and focuses on introducing
capital partners, pre-leasing or pre-
sales, design and procurement,
as applicable
• Work in Progress: building
and execution phase; undertaken
alongside capital partners/investors.
The ability to control the development
pipeline and recycle capital provides
balance sheet flexibility and optionality.
Excluding the Australian Communities
business, the focus for this phase is on
obtaining individual building consents,
launching products to market via pre-
sales or pre-leasing to de-risk execution,
and working with our partners/investors
to secure capital on specific projects
or stages.
Work in Progress (WIP)
Once a project begins construction,
known as Commencement, it moves into
active delivery, progressing to the WIP
phase and through to completion. There
is currently $23b of WIP with $3.5b of
capital employed.
The Group is targeting through-the-
cycle completions of $8b annually and
maintaining WIP at c.$20b.
In FY23, 75 per cent of completions
represented investment yielding assets.
Our development pipeline will continue to
focus on delivery of investment yielding
assets, supporting our FUM target of
$70b by FY26.
Our focus on execution will see an
acceleration of completed product, from
$3.6b in FY23 up to a target of
more than $8b per annum by FY24,
subject to market conditions. This
is expected to contribute to more
consistent development fee earnings,
improved return on invested capital
(ROIC) and accelerated FUM growth for
our Investments business.
In Conversion
Close to half of the urban development
pipeline, or $50b, is In Conversion, with
limited capital investment of $0.3b.
Once master planning approval is
received for a development, it progresses
to the Master planned phase where final
building approvals and co-investment are
sought before progressing to WIP.
The timeframe to achieve master planning
is typically up to three years from the date
a project is secured. On smaller projects,
the conversion period may be shorter.
Master planned
Approximately $51b of the pipeline has
master plan approval, supported by total
invested capital of $2.3b1.
Achieving master planning provides
Lendlease with an entitlement to
develop, invest, sell down or proceed
in phases, accelerate or pause
development, or introduce co-investors/
partners depending on prevailing market
conditions and commercial priorities.
1.
Includes c.$0.9b of Lendlease capital to support the Communities business in Australia.
Create
21
Commencements
$7.7b of product
commenced, including:
• One Circular Quay, Sydney
• Habitat, Los Angeles (formerly
La Cienega)
• Hayes Point, San Francisco
Completions
$3.6b of workplace and residential
product was completed, including:
• Salesforce Tower, Sydney
• Blue and William, North Sydney
• City Lights Point, London
• Communities settlements
Replenishing the pipeline
More than $85b, or two-thirds of our
pipeline is comprised of projects in
Europe and the Americas.
Given the current weighting offshore,
Lendlease is focused on execution of
these projects, with origination focused
on Australia and select Asian markets.
New origination will also seek to
supplement the existing pipeline, through
shorter-dated projects that complement
the completions profile of the business.
One Circular Quay
During the year, we added One Circular
Quay to our pipeline in Australia, a
landmark, luxury development at the
heart of Sydney’s Circular Quay. The
project comprises two towers including
luxury residential apartments and a luxury
hotel, expected to complete in FY27. For
more information on One Circular Quay,
please refer to page 24 of this Report.
Queen Victoria Market
We were announced as preferred
developer for the Queen Victoria Market
in Melbourne. The project has an
estimated end development value of
$1.7b and, subject to approvals, will
comprise a new landmark development
of a sustainable workplace; build-to-
rent apartments; student accommodation
(alongside student accommodation
partner Scape); and a large public park.
Capital efficient,
partnership approach
Our strategy to develop at scale
will be facilitated by a more capital
efficient development model. Invested
capital of $6.1b is targeted to reduce
by FY26 through capital recycling
initiatives, however, Lendlease’s capital
will work harder, across more projects, by
introducing early-stage capital partners
to share equity and debt commitments.
Over time, this is expected to smooth
development fee earnings and ROIC, by
increasing the number and frequency
of project completions, with a greater
proportion of our development capital
in production.
This will include a greater emphasis on
joint venture partnerships and the early
introduction of co investors, targeting
a Lendlease economic interest of less
than 50 per cent per project and
providing opportunities for origination,
development, performance and long-term
funds management fees.
Commencements in FY23 alongside joint
venture capital partners were:
• One Circular Quay, Sydney:
33% Lendlease
• Habitat, Los Angeles: 50% Lendlease
Build-to-rent (BTR)
BTR assets are a highly sought
after, investment-grade, asset
class, supported by industry
fundamentals of housing shortages,
government policy, demographic
change, city migration trends and
investor appetite.
We have a long history of
constructing these assets for clients
in the Americas and completed our
first BTR development in 2019. We
now have more than $3b in FUM
across the UK and the Americas
in BTR. Our development pipeline
includes c.23,000 apartments,
representing c.$28b of potential
product for our funds and asset
management businesses.
We are now applying our strong
offshore experience and capabilities
to Australia, this year launching two
projects in Brisbane and Melbourne.
In Brisbane we are partnering
with QuadReal to deliver 443
apartments, while in Melbourne we
are partnering with Daiwa House
to develop 797 apartments at our
Melbourne Quarter precinct.
Opposite: Los Angeles: Habitat.
Artist's impression.
Above: Sydney: One Sydney Harbour
22
Lendlease Annual Report 2023
Disciplined construction
capability
Our construction capability plays an important role in our integrated
model and in the delivery of superior outcomes for our customers.
Strategically significant
Our Construction capability remains a
key component and differentiator of our
integrated model and the delivery of
major urban projects. Our experience
in delivering large integrated global
precincts such as Barangaroo South,
Sydney, Elephant Park, London and Paya
Lebar Quarter, Singapore, establishes
Lendlease as a partner of choice.
This capability is also a key strategic
advantage that is leveraged in origination,
demonstrated by the Comcentre project
win in Singapore, which was secured in
FY22, and more recently the acquisition
of 21 Moorfields in London and One
Circular Quay in Sydney.
Comcentre, Singapore
Responding to a highly competitive
tender process from Singtel to transform
its Comcentre headquarters into a $3.3b
sustainable workplace, Lendlease was the
only non-Singaporean company in the
process with four other parties.
Drawing on our integrated construction
capabilities, including expertise in digital
and ESG, we put forward a compelling
proposal which incorporated a ‘faster and
smarter’ buildable scheme. Consequently,
we were awarded the project which, on
completion in FY28, is anticipated to be a
world-class sustainable workplace.
21 Moorfields, London
Our construction team was invaluable in
supporting the recent acquisition of 21
Moorfields, a c.52,000sqm commercial
office building in London. The asset,
which was only part built by a third-party,
was acquired by our Investments team, in
conjunction with two capital partners.
The Construction business provided its
expert opinion and risk assessment on the
quality of the build, the general contractor
and the subcontractors, as well as its view
on the potential of the asset performance
when completed. Our ability to draw
on this expertise was critical in helping
us execute this significant transaction
alongside our capital partners.
We have a rich heritage of project
management, design and construction
excellence with leading risk, safety and
sustainability credentials.
Our Construction strategy is to provide
delivery excellence in support of our
integrated development model and for
our external government and corporate
clients across target sectors.
A significant proportion of our customer
base is repeat business which is a
testament to being a trusted and
strategic partner.
More focused
Our strategy to become an Investments-
led business, does not diminish the
importance of Construction within our
integrated model, although the growth
of the Investments and Development
segments is expected to see the target
earnings contribution for Construction
being reduced to approximately 10 per
cent over time.
Our objective is to focus on risk-
adjusted returns, maintain strong market
knowledge and capability, and to
maintain a steady external construction
backlog of approximately $10b. We
will also continue to provide execution
excellence and support through internal
construction work and services of
c.$4b, contributing to both Development
earnings and execution.
We are targeting a more focused external
portfolio which comprises:
• Government: with strong capability
and track record in the defence sector
• Social infrastructure: including
hospitals and key public assets
• Corporate: select projects such as
workplace and life science
We are no longer originating residential
work for external parties, as we pursue
better risk adjusted opportunities in our
external book. Also, only projects above
$150m in value will be originated, with
limited exceptions.
Continuing our longstanding relationship
with the Australian Government, we
were chosen to build Canberra’s National
Security Office Precinct.1 The precinct will
provide permanent accommodation for
up to 5,000 workers in national security
and other Commonwealth agencies.
In Europe, we were awarded a place
on the Ministry of Defence’s Strategic
Alliance Contract which will carry out
improvements to the Defence Estate. Our
first major project will be the construction
of living and training facilities at the Imjin
Barracks near Gloucester.
1. The Lendlease 2023 Annual Report lodged with the Australian Securities Exchange incorrectly stated the Group had been selected by the Department of Defence to build
Canberra’s National Security Office precinct. Lendlease was selected by the Department of Finance.
Create
23
One Circular Quay
For information about our One Circular
Quay project, please refer to page 24 of
this Report.
Risk management
Our risk management starts with
disciplined origination that incorporates
thorough market assessments. Leveraging
our market knowledge acquired through
customer, contract and sector diversity,
forms part of this origination strategy.
Prior to the commencement
of construction, detailed project
management plans are formed and a team
with the optimal skill set for the project
is chosen. Depending on the contract
type, we then go into product design and
cost planning.
The delivery phase comprises
construction management, production
and program controls, functional reviews
and reporting. Post construction, a
rigorous commissioning process is
undertaken ahead of transitioning to
the customer.
The approach for pricing and managing
contract risk varies by jurisdiction. At
face value, contracts are largely fixed
price with the risk profile dependant on
the quality of design resolution and the
level of market coverage on the cost. In
Australia, our high design management
capability, and deep supplier relationships
and buying power across the supply
chain, provide high confidence in the
price-setting process. In the UK and the
Americas, contracts are typically more
than 80 per cent procured before pricing
contracts, providing high visibility on
costs, while in Asia, projects are generally
set on a cost-plus basis, with negligible
pricing risk.
Our construction
capability plays a critical
role in the delivery of our
urban projects.
Partnership approach
Working collaboratively with our partners
has been essential in mitigating
supply chain risk and achieving our
sustainability targets.
Supply chain
The continued disruption caused by
geopolitical uncertainty highlights the
importance of the supply chain in the
successful delivery of our projects.
Counteracting disruption by working
directly with manufacturers and
implementing agreements with strategic
partners remains a key focus for
the business.
Key areas include:
• Maintaining deep relationships
with our suppliers to proactively
manage risk
• Establishing the right trading
partnerships to introduce low
embodied carbon materials
• Building a more connected
supply chain via the use of
digital technologies
Fossil fuel-free construction
In 2022, in collaboration with
the University of Queensland,
we published research into how
to decarbonise the construction
industry. The industry accounts for
23 per cent of global greenhouse
gas emissions, with approximately
5.5 per cent directly caused by
powering construction machinery,
primarily through fossil fuels such
as mineral diesel.
The research found that Australia
must accelerate the electrification
of construction machinery, as well
as support the creation of a
local renewable diesel market.
Renewable diesel offers a transition
fuel to the industry while it works
on converting to electrification of
construction equipment.
In collaboration with our partners,
we’ve introduced the first
renewable diesel to Australia and
onto our project sites, which
includes the NSW Government’s
Powerhouse Parramatta project.
All three cranes at the site
are among the first in Australia
to be powered by 100 per
cent renewable diesel, reducing
greenhouse gas emissions from
the crane operations by up to 90
per cent, when compared with
mineral diesel.
Opposite: Kuala Lumpur: TRX
Above: Renewable diesel cranes,
Powerhouse Parramatta
24
Lendlease Annual Report 2023
One Circular Quay, Sydney
Harnessing the power of our integrated business model.
In combination, our
three operating segments
become powerful
and, in our view,
provide a sustainable
competitive advantage
With excellent market knowledge,
construction expertise and long-term
supply chain relationships, our
Construction business was capable of
providing a detailed assessment of cost,
within the desired design parameters,
that gave confidence to the business to
execute the transaction. The experience
of the Construction team also allowed for
risks to be properly assessed, including
evaluating the quality of the commenced
basement works.
Partnership funding
In line with our capital-efficient
development strategy and acknowledging
more than $800m of capital was needed
to acquire the land for the $3.1b1
project, we introduced one of our trusted
partners, Mitsubishi Estate Asia (MEA), to
the project.
With an already deep relationship
stretching across several projects,
including Salesforce Tower and One
Sydney Harbour, MEA recognised One
Circular Quay’s unique potential and
ultimately acquired a 67 per cent interest
in the project, with Lendlease retaining 33
per cent.
The hotel component of the project
was forward sold in early 2023 with
the majority of the cash consideration
paid upfront, de-risking the project. This
provided further pricing certainty, as
well as locking in development and
construction management fees over the
life of the development.
Top and opposite: Sydney: Artist's
impression of One Circular Quay.
The competitive edge generated by our
integrated business model of Investments,
Development and Construction is realised
in many ways, including:
• Deep expertise across every
component of the real estate
value chain
• Strong origination
capability, leveraging urban
regeneration credentials
• Access to third-party capital to fund
development and improve returns
• Execution excellence through project
management and delivery
During the first half of the financial
year, an opportunity arose to acquire
a development project at one of the
world’s most iconic locations, Sydney’s
Circular Quay.
With initial planning approval issued and
basement construction already underway
for the project’s two towers – the first
comprising luxury residential apartments
and the second a luxury hotel – the
original developer elected to exit the
project via an accelerated six-week
competitive sale process.
Three disciplines, one team
Drawing on Lendlease’s integrated
capability, a project team was quickly
mobilised to review, assess and ultimately
convert the opportunity.
Performance at pace
Key to the success of this fast-tracked
process was the team’s collective
experience and ability to work within
the constraints of an already approved
planning application, ensuring One
Circular Quay would be economically
attractive, the apartments saleable and
the development of the highest quality. A
premium offering in a premium location.
Working to minimise the impacts on the
already approved planning application,
our development and construction teams
refined the project design to ensure the
viability of the commerce. This included
carrying out all necessary due diligence,
refining the apartment layouts, revising
the building engineering solutions and
developing a new construction plan and
schedule all within a six-week period of
becoming exclusive with the vendor.
Critical to securing the transaction was
the ability to offer a firm price in a highly
accelerated process.
1. Estimated development end value for the residential tower and hotel.
Create
25
Guests will have access to an array of
amenities including restaurants, spa and
wellness facilities, and an indoor pool.
Once realised, the project will
complement Lendlease’s Sydney Place
precinct and build on the diverse
range of retail and commercial tenants
we have attracted to the adjacent
Salesforce Tower.
Construction of the development is
anticipated to complete in FY27.
The power of brand
Our strong track record of delivering
quality residential apartments for our
customers around the world means
the Lendlease brand is synonymous
with excellence.
This strong brand allows us to
significantly de-risk our residential
projects via the achievement of pre-sales
targets prior to vertical delivery.
At One Circular Quay, the project was
first offered to an exclusive database of
potential customers in November 2022,
leveraging the success of our luxury
One Sydney Harbour development. Just
a month later the project was 30 per
cent pre-sold, despite no significant sales
collateral or display gallery.
This is a testament to the quality of our
product and the trust placed in our brand.
The project has now reached almost
$1.3b in pre-sales which represents
approximately 50 per cent of the building
by value.
One Circular Quay is
set to become one of
the world's most desired
places to live and stay.
Located between the Sydney Harbour
Bridge and the Opera House, One
Circular Quay comprises a freehold,
luxury residential tower and luxury hotel.
The 58-storey residential tower includes a
collection of two, three and four-bedroom
residences, six sub-penthouses and a
three-level penthouse with panoramic
views of Sydney Harbour.
The 20-storey hotel will be managed by
Hilton Hotels under the Waldorf Astoria
brand, the first for the brand in Australia.
The Project
Details
• Mixed-use urban regeneration scheme comprising two luxury towers:
– 158 freehold residential apartments
– 220-room hotel and associated retail
• Targeting 5 Star Green Star Design & As Built ratings for both towers
• Development Joint Venture with Mitsubishi Estate Asia
•
•
$3.1b total estimated development end value
Project secured and commenced in FY2023; expected completion FY2027
26
Lendlease Annual Report 2023
Our Focus
Areas
We measure our success by the positive
outcomes we generate over the long-
term through five focus areas.
They underpin our ability to create safe, sustainable and
economic outcomes for our customers, partners, securityholders
and the community.
While we approach these focus areas with an innovative mindset,
our decisions are supported by disciplined governance and
risk management.
Our five focus areas are:
Health and Safety
Financial
Our Customers
Our People
Sustainability
Melbourne Town Hall PlaceArtist’s impression Our Focus Areas
27
28
Lendlease Annual Report 2023
Managing and
measuring value
Area of focus
Material issues
How we deliver value
Value created
How we measure value
Health and Safety
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 apply 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
Percentage of projects with no critical incidents: a critical incident is an event
and fundamentally makes us more consistent, reliable and
that has the potential to cause death or permanent disability. This is an indicator
efficient in everything we do.
unique to Lendlease.
Critical Incident Frequency Rate: a Lendlease indicator measuring the rate of
critical incidents.
next day.
Lost Time Injury Frequency Rate: an indicator and industry standard measuring
a workplace injury which prevents a worker from returning to duties the
Financial
Delivering securityholder returns. Maintaining a strong
financial position 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 equity returns across Investments,
Core Operating Return on Equity: the annual Core Operating Profit after Tax
Development and Construction. Our Portfolio
attributable to average securityholders’ equity throughout the year.
Management Framework sets target guidelines for how
we manage our portfolio.
Core Operating Earnings per Security: Core Operating Profit after Tax
attributable to securityholders divided by the average number of securities on
issue during the year.
Our Customers
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.
Evolves our ability to improve the customer experience,
Customer satisfaction and advocacy tracked: measured at the regional and
building our brand and reputation, enabling us to win
business unit level and reported regularly to our Global Leadership Team and
more work and grow our business. Customer feedback
the Board. Action plans are developed to drive continuous improvement in
also provides greater insight into product development
the customer experience, supporting the delivery and growth of FUM, our
and innovation opportunities.
development pipeline and construction backlog.
Our People
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 an inclusive culture and enabling continuous
learning, where successes are recognised and people
are rewarded. We invest in developing inclusive
leaders and capabilities to drive our success.
Sustainability
Designing, delivering and operating buildings and
precincts that respond to the immediate challenge
of reducing carbon emissions while creating social
value. Meeting the increasing expectations of key
stakeholders for climate resilient assets that support
human health and value natural capital.
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.
Capable and motivated people committed to
Retention of key talent: the organisation benefits from its investment in leaders
the long-term success of our business. Effective
and key workforce capabilities.
succession planning and leadership transitions support
business continuity and can reduce risks. Diversity
supports innovation, knowledge sharing and better
decision making.
Succession strength: demonstrates the depth of capable talent ready to
progress into leadership roles.
Leadership positions held by diverse talent: demonstrates our broader
commitment to diversity and inclusion and our objective of increasing diverse
representation across our business.
Employee engagement: provides the organisation with insights to help provide
the right environment for our employees to perform at their best.
Recognised leadership in sustainability enhances our
Measurement of, and reporting on our progress towards our sustainability
brand and is a competitive differentiator. It also
targets and tangible examples of the way we are addressing our
provides more opportunities to partner with governments,
sustainability imperatives.
investors and the private sector who are placing
increasing importance around ESG matters.
Carbon Target: we are a 1.5ºC aligned company:
• Net Zero Carbon by 2025 (Scope 1 and 2)
• Absolute Zero Carbon by 2040 (Scopes 1, 2 and 3, no offsets)
Social Target: create $250m of social value by 2025
Our Focus Areas
29
Area of focus
Material issues
How we deliver value
Value created
How we measure value
Health and Safety
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 apply 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.
Financial
future pipeline.
Delivering securityholder returns. Maintaining a strong
financial position to support ongoing investment in our
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 equity returns across Investments,
Development and Construction. Our Portfolio
Management Framework sets target guidelines for how
we manage our portfolio.
Core Operating Return on Equity: the annual Core Operating Profit after Tax
attributable to average securityholders’ equity throughout the year.
Core Operating Earnings per Security: Core Operating Profit after Tax
attributable to securityholders divided by the average number of securities on
issue during the year.
Our Customers
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.
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 and
the Board. Action plans are developed to drive continuous improvement in
the customer experience, supporting the delivery and growth of FUM, our
development pipeline and construction backlog.
Our People
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 an inclusive culture and enabling continuous
learning, where successes are recognised and people
are rewarded. We invest in developing inclusive
leaders and capabilities to drive our success.
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
supports innovation, knowledge sharing and better
decision making.
Sustainability
Designing, delivering and operating buildings and
precincts that respond to the immediate challenge
of reducing carbon emissions while creating social
value. Meeting the increasing expectations of key
stakeholders for climate resilient assets that support
human health and value natural capital.
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.
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 ESG matters.
Retention of key talent: the organisation benefits from its investment in leaders
and key workforce capabilities.
Succession strength: demonstrates the depth of capable talent ready to
progress into leadership roles.
Leadership positions held by diverse talent: demonstrates our broader
commitment to diversity and inclusion and our objective of increasing diverse
representation across our business.
Employee engagement: provides the organisation with insights to help provide
the right environment for our employees to perform at their best.
Measurement of, and reporting on our progress towards our sustainability
targets and tangible examples of the way we are addressing our
sustainability imperatives.
Carbon Target: we are a 1.5ºC aligned company:
• Net Zero Carbon by 2025 (Scope 1 and 2)
• Absolute Zero Carbon by 2040 (Scopes 1, 2 and 3, no offsets)
Social Target: create $250m of social value by 2025
30
Lendlease Annual Report 2023
Health and Safety
The health, safety and wellbeing of our people is our highest priority.
Safety strategy
As our health and safety focus has
historically been on the prevention of
incidents that can cause injury and harm
to people, property and the environment,
we have further investigated the risks to
our people, the supply chain, and the
community, and have expanded the focus
of Health and Safety.
Our revised Health and Safety strategy
covers what we have summarised as
the '3Ps':
• Physical Safety: Risk of incidents from
the work activities we oversee
• Product Safety: Risk of failure from
the products we provide
• Psychological Safety: Risk of a culture
that inhibits respect for all.
This expanded remit continues the focus
on preventing physical injuries, while
also acknowledging the risks of product
failures in the built environment, and
looks to better understand the risk of
psychological impacts from the potential
stress of the workplace.
Our expanded approach seeks to
address these risks at all stages of
the property lifecycle, from investment
decisions through to the operations and
maintenance of the places we create.
To deliver on our Safety strategy, we will
continue to explore technology solutions
to mitigate risk wherever possible. For
example, on some projects we have
begun trialling the use of technology
applications such as CCTV with an
overlay of AI or daily reviews to identify
or alert teams to at-risk situations.
Safety performance
Our approach to health and safety
reporting is inclusive of our people, our
subcontractors and those who interact
with the places we create and manage.
During the 93.1 million hours worked
across our operations in FY23, we
continued to improve our performance
against a number of key safety metrics.
Our Critical Incident Frequency Rate
(CIFR) and Lost Time Injury Frequency
Rate (LTIFR) further improved on the high
benchmark set in FY22.
In instances of a fatal incident being
reported, we defer to the findings of an
independent investigation to determine
Lendlease’s degree of operational control.
Opposite: New York: Central Park Tower 1
Across all our operations in FY23,
for locations where Lendlease was
responsible for the operational control of
health and safety outcomes, there are no
fatalities to report for FY23. For projects
outside our operational control, we report
the fatality of a subcontract worker on the
1 Java Street project in New York. Our
thoughts continue to be with the family
and colleagues of this worker and those
impacted by this event.
For future periods, we are undertaking
a review of our approach to safety
reporting to ensure alignment with our
Investments-led strategy.
• Installation of the façade behind
perimeter screens (eliminating
300,000 hours of work at height)
• Utilising stair form for the fire stairs
(allowing for in situ access to the
floors under construction).
This is the first time these initiatives
have been used in Malaysia, with
the TRX Residences team receiving
the Gold Award from the Malaysian
Occupational Safety and Health
Professional Association (MOSHPA) at
the National Excellence Awards in 2022.
Percentage of operations without
a critical incident1
Continued
focus
Strong performance
against key safety metrics
1. An event that caused or had the potential to cause
death or permanent disability. This is an indicator
unique to Lendlease.
Critical Incident Frequency Rate1
Excellence in innovation
Within the 17-acre Tun Razak Exchange
(TRX) integrated development in
Malaysia, the TRX Residences offer
premier urban homes in an experience-
led lifestyle precinct.
Two towers, each more than fifty storeys
in height, are being built with 896
apartments, cantilevered sky decks, and
an interconnecting bridge.
These impressive buildings require
highly complex and challenging safety
considerations that have required bold
thinking, highly committed planning, and
an exceptional commitment to execution.
To overcome the risks associated with
the close proximity to other structures,
the overall height of the buildings, and
the duration of construction with a
transient migrant workforce, the team has
implemented several safety initiatives.
These include:
• An innovative jump form system
(eliminating 300,000 hours of work
at height)
1. Calculated to provide a rate of instances per
1,000,000 hours worked.
Lost Time Injury Frequency Rate1
1. Calculated to provide a rate of instances per
1,000,000 hours worked.
94%94%94%94%FY23FY220.460.460.570.57FY23FY221.361.361.371.37FY23FY22
Our Focus Areas
31
32
Lendlease Annual Report 2023
Financial
Refining our Portfolio Management Framework to provide improved risk
adjusted returns.
Detailed financial performance
For detailed information on our
FY23 financial performance, as
measured under the Portfolio
Management Framework, refer
to the Performance and
Outlook section and the
Financial Statements.
We have a Group Core Operating
Return on Equity target within the
8-10 per cent range. Core Operating
Earnings per Security forms the basis
for securityholder distributions within the
payout ratio of 30-50 per cent.
See Note 1 ‘Segment Reporting’ in the
Financial Statements for more details on
Operating profit.
Sustainable financing
Lendlease is one of the leaders in
sustainable financing in Australia. Of the
Group’s total financing facilities, 73 per
cent, or $3.7b are green or sustainability-
linked.
73%
of the Group's total
financing facilities are
green or sustainability-
linked
Accessing green and sustainability-linked
borrowings has allowed us to facilitate the
following outcomes:
• Lengthen the maturity profile
• Diversify funding
• Support the execution of the Group’s
sustainability strategy
• Improve lender engagement
• Provide good access to markets whilst
achieving competitive funding costs.
Portfolio Management Framework
1. Invested capital mix
Investments
Development
Australia
International
regions1
50-70%
30-50%
40-60%
10-25%
2. Core business EBITDA mix2
Investments
Development
Construction
3. Target returns
Core Operating ROE
Investments ROIC3
Development
ROIC3
Construction
EBITDA margin
4. Capital structure
Gearing4
Investment grade
credit rating
5. Distribution policy2
Distribution
payout ratio
40-50%
40-50%
10%
8-10%
6-9%
10-13%
2-3%
10-20%
30-50%
1. Per region.
2. Core operating profit based measure.
3. Through-cycle target based on rolling three
to five-year timelines.
4. Net debt to total tangible assets, less cash.
Financial strategy
The Portfolio Management Framework
(the Framework) sets out various financial
targets for our business and provides a
framework to guide the decisions we
make. It 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 sustain
capacity to both absorb and respond
to market volatility.
This year, the Group completed the
second year of a five-year plan to deliver
long-term sustainable performance.
Progress against the five-year plan is
outlined in the Performance and Outlook
on page 50.
Measuring financial performance
Reflecting the evolution of the Group’s
strategy, evolving market conditions and
a continued focus on securityholder
returns, external market guidance will
solely focus on Group Return on
Equity from FY24, which continues
to be the Group’s measure of return
for securityholders.
The structure of the Framework, and its
through-the-cycle targets (not guidance),
will continue to support internal capital,
investment, and portfolio decisions.
Opposite: London: City Lights Point
Elephant Park
Our Focus Areas
33
34
Lendlease Annual Report 2023
Our customers
From visiting our Singapore shopping malls, working from a sustainable
office building in Melbourne, seeking a more affordable home in London,
or looking to invest in a life sciences precinct in Boston, we strive to
deliver outstanding customer experiences in every place we operate.
This leasing success is the result of
putting customers at the centre of all
operations. In addition to a best-in-class
product, new initiatives include a unique
virtual tour booking function as well
as the ability to complete the entire
leasing process online. The initiatives have
ultimately delivered favourable returns to
our investment partners.
Business
We partner with business customers
around the world to deliver to them,
and their stakeholders, outstanding real
estate outcomes.
From commercial office tenants, some
12,350 suppliers, to global and local
investment partners. And the best place
to start? Truly understanding what makes
our customers tick.
In Australia, we conducted extensive
research to better understand the nation’s
commercial office market. The local office
market continues to evolve as companies,
and the talent that makes them a success,
continue to demand more from the
spaces in which they work.
In response, our teams conducted
extensive deep dive interviews with
current and prospective tenants as well as
a range of academics and HR experts.
Key takeouts from this research are
helping inform our office product as
we deliver premium-grade workplaces
that prioritise sustainability, flexibility and
amenity which are critically important
in the race to attract and retain the
best talent.
In the past 12 months, we had more than
190,794,000 opportunities to meet and
exceed our customers’ expectations.
That’s the total number of customer
interactions recorded across our urban
development projects, office and retail
assets, master planned, military and
senior living communities, and real estate
investments in Australia, China, Japan,
Italy, Malaysia, Singapore, the United
Kingdom and the United States.
We track customer satisfaction via
two globally recognised metrics, CSAT
(customer satisfaction) and NPS (net
promoter score).
In FY23 we achieved an uplift in NPS
while our CSAT score held steady,
reflecting the value we continue to deliver
for our customers across our Investments,
Development and Construction segments.
Consumer
We’re continuing to embrace innovation,
guided by quality research, to enhance
the experience of our largest customer
groups – visitors to our retail centres and
residents who call our places home.
In Singapore, Lendlease and Accenture
delivered an innovative experience across
four Lendlease shopping malls throughout
the Lion City in celebration of Chinese
New Year.
Using artificial intelligence, augmented
reality and virtual reality, customers
accessed in-store offers, digital tokens
and NFTs, allowing our retailers to blur
the line between online and in-store
experiences. Over the four-week trial,
10,000 wallets were created via a mobile
app and 29,000 offers were collected
and viewed across 50 participating
tenant stores.
In London, our build-to-rent product
at Elephant Park continues to gain
momentum, with a stable average 97 per
cent lease up of our first two buildings,
Park Central East and Park Central West.
Our third building, City Lights Point, was
launched in January 2023 and is already
71 per cent leased.
24,702
Customers surveyed
in FY23
62%
of major construction
backlog in public
sector projects
41
Funds and Mandates
Opposite: Singapore: Parkway Parade.
Our Focus Areas
35
Government
Trust. It’s what our long-standing and
deep relationships with local, state and
national governments are built on.
We’re a partner of choice for critical
health and defence infrastructure, as well
as hubs for sporting and cultural pursuits.
In the US, our Military Housing
portfolio continues to garner
accolades for customer service,
with our property management
partner, WinnResidential Military Housing
Services, being recognised as a National
SatisFacts Resident Satisfaction Company
Award winner for 2022. Ninety-six
neighbourhoods, more than 92 per cent
of the portfolio, attracted high resident
satisfaction scores.
In Australia, Canberra’s National Security
Office Precinct will be built by Lendlease,
continuing our longstanding relationship
with the Australian Government.1
The Precinct will provide permanent
accommodation for up to 5,000
workers in national security and other
Commonwealth agencies. Construction is
proposed to commence in early 2025.
In Europe we were awarded a place
on the Ministry of Defence’s Strategic
Alliance Contract which will carry out
improvements to the Defence Estate. Our
work will include the construction of
live, work and train facilities at the Imjin
Barracks near Gloucester.
>190 million
Interactions with
customers across
Australia, Asia, Europe
and the Americas
1. The Lendlease 2023 Annual Report lodged with the Australian Securities Exchange incorrectly stated the Group had been selected by the Department of Defence to build
Canberra’s National Security Office precinct. Lendlease was selected by the Department of Finance.
36
Lendlease Annual Report 2023
Our people
Elevating the capabilities of our people and the impact of our leaders to
enable our strategy.
We remain committed to enhancing
gender diversity within our leadership
cohort, with women currently occupying
27 per cent of leadership positions.
We have also been investing in our
Investment Management business to
execute on our global Investments-led
strategy, including the appointment of
a new Managing Director of Investment
Management in Australia.
Careers
We have had a strong focus on
modernising how we manage talent
at Lendlease, with a focus on
attraction and retention. We have
increased the transparency of internal
career opportunities, utilising modern
technology to go beyond advertising roles
internally to proactively alerting our talent
at junior levels of career opportunities
that are available. We are showcasing
roles that match our employees’ skills via
Opportunity Emails and making it easier
for them to apply through a streamlined
application process.
Retention of key talent remains
challenging in the current operating
environment. While we achieved a
retention rate of 88 per cent, this was
below our target of 90 per cent.
Our talent pipeline greatly depends on
the acquisition of early career talent.
We have hired more than 300 current
graduates globally and following a
key focus on their engagement and
experience we have seen the engagement
scores increase to 76 per cent in FY23, up
from 71 per cent in FY22.
Learning
We remain committed to investing in
learning and development opportunities
for our people. Our global leadership
programs, in collaboration with INSEAD,
have been successfully implemented
across all regions, with 342 participants
globally. These programs aim to develop
leaders who are contemporary and
inclusive, at every level and region.
Furthermore, our Ignite and Mosaic
programs, which foster sponsorship of
diverse talent by senior leaders to
mitigate obstacles that impede the
progress of underrepresented talent,
have been launched globally, with 126
participants to date.
These programs are aligned with regional
initiatives to enhance representation
and foster inclusion throughout
our organisation.
Culture
We continue to be proud of our culture
and our values. They drive the way
we interact, which creates a sense of
belonging and an environment for our
people to thrive as part of a team, grow
with the organisation, and to deliver for
our customers and communities.
We have focused on continuing to
build a performance culture where our
people understand our three pillars of
performance, which are financial, social
and environmental. Through our key
senior leaders across the globe, we have
focused on the transparency of current
performance against all three pillars and
clarity of the work to be done to deliver to
all stakeholders. People want to work on
our projects because of their impact on
communities and our culture of care.
Following a focus on
engagement, five of
our office locations
are at or above
country benchmark.
Our people strategy continues to bring
our purpose-led business strategy and
culture to life. We continue to invest in
learning and careers, especially for key
talent in the Investments, Development,
and Construction segments, as well as
our leaders.
We remain committed to growing
and retaining our diverse talent, and
developing inclusive leaders, while
creating a performance culture that is
caring and trusting, where people feel
valued, belong, and have an opportunity
to thrive.
Our focus areas continue to be:
• Learning
• Careers
• Leadership
• Culture
The principles we will never compromise
on are:
• A physically safe workplace
• A psychologically safe workplace
• Prioritising the wellbeing of our
people and their families.
Leadership
Our strategy is focused on attracting,
developing, retaining, and investing in
our people. Succession planning is a
continuous focus and all key leadership
roles have one or more identified
successors. Sixty-seven per cent of those
identified successors are ready to move
into the leadership roles in the near term.
Key to this is prioritising the development
of our top talent through the delivery of
flagship leadership programs.
Our Focus Areas
37
Initiatives that support Mental Health and Wellbeing
Mental Health First Aid
•
890 employees became Mental Health First Aiders.
•
Provides mental health awareness skills and knowledge and assists in a mental
health crisis.
Introduction to Mental Health
•
Provides an understanding of what mental health is, why it’s important and how to
support yourself or someone else who may be struggling.
•
503 employees from Lendlease and our supply chain have completed the
Introduction to Mental Health Learning.
Frankie Health
•
Frankie Health is a holistic mental fitness platform and counselling service; our
new mental fitness platform helps develop resilience using preventative exercises
that provide the tools to handle difficult situations when they arise, and therapy
is recommended when times are challenging. Frankie Health is available to
Lendlease employees and family members.
•
In six months, there have been 1,562 practitioner sessions and 2,617 mental health
clinical assessments completed.
Headspace
•
1,289 employees have accessed Headspace.
• A meditation app that has shown to help people stress less, have better focus and
improved sleep.
•
112 Lendlease family members have accessed Headspace.
Heart on My Sleeve - Real Conversations
• A leadership program that helps create a positive mental health culture and
improves psychological safety.
•
102 Leaders have completed the Real Conversations Training.
We continue to invest in listening to
our employees, formally through our
employee engagement survey as well
as informally.
Our Global Engagement Score increased
four points to 62 per cent over the
last 12 months. Over the same time
period, global benchmarks declined. Our
most noticeable returns are in the
areas we have had increased focus,
including career development, learning,
and manager effectiveness.
Our guiding principles of Safety and
Sustainability continue to resonate with
our people and remain among our top
performing areas. Our senior leaders
continue to have high engagement
collectively and we have seen notable
year on year increases in the engagement
of our people managers.
While we have seen meaningful positive
increases in Engagement taking us to
industry average in most of our cities,
this is still below our expectation of
upper quartile engagement. Our focus in
FY24 will be to implement actions that
will continue to improve the employee
experience for all Lendlease employees.
Wellbeing
Prioritising our people’s health and
wellbeing is fundamental to Lendlease’s
culture and purpose. We are committed
to promoting and supporting the health,
wellbeing and psychological safety of
our people.
Our Health and Wellbeing Framework
promotes healthier minds, bodies, places
and cultures through a variety of
programs and initiatives to support our
people. Our commitment to this has
extended our certification of a Global
Healthy Workplace until 2024.
Engagement scores compared with benchmarksAustraliaLendlease GroupUnitedStatesUKChinaJapanMalaysiaItalySingapore0102030405060708090100 Lendlease 2023 Country external benchmark score Global external benchmark score 38
Lendlease Annual Report 2023
Sustainability
Our sustainability targets and aspirations provide a leadership platform
for our core business segments, as we continue to decarbonise our
operations and create measurable social value.
1.5 degree aligned
Our progress
Scope 1 and 2 gross emissions continue
to track well below our 1.5 degree
aligned target, resulting in an 18 per cent
reduction against FY22. These emission
reductions are underpinned by our global
decarbonisation mandates, the delivery
of Mission Zero Regional Roadmaps,
and increasing renewable electricity and
renewable diesel purchase. Globally,
63 per cent of our electricity use is
from renewable sources, and we are
well positioned to achieve our target of
100 per cent renewable electricity by
2030. We continued our purchase of
carbon offsets for unavoidable emissions.
In FY23, we offset 28 per cent of our
remaining Scope 1 and 2 emissions of
81 ktCO2-eq, taking our net position to
58 ktCO2-eq.
Building momentum
We received validation from the Science
Based Targets initiative that our carbon
reduction targets are 1.5 degree aligned.
We have progressed our global Carbon
Offset Procurement Strategy and are
engaging with potential partners to
support our ability to access high quality
carbon offsets to meet our Net Zero by
2025 target. We are now developing our
global Renewable Energy Procurement
Guidance and Criteria to outline how
we intend to source alternative fuels,
including renewable diesel, hydrogen
and biogas.
To position our business to achieve
our Absolute Zero by 2040 target,
we have developed the Lendlease
Scope 3 Emissions Protocol V.1, which
outlines our current view on our Scope
3 emissions reporting boundary. The
Protocol is available on our website
and is intended to contribute to
a broader global conversation on a
consistent and comparable approach
to the measurement and reporting
of Scope 3 emissions across real
estate investments, development and
construction business activities.
18%
Reduction in gross Scope
1 and 2 emissions1
against FY22
63%
Global electricity use
from renewable2 sources,
up from 42% in FY22
and targeting 100%
renewables by 2030
We continue to build momentum for
the decarbonisation of the real estate
sector, including working with Concrete
Zero in Europe to advocate for lower
carbon concrete and contributing to the
Green Building Council of Australia’s Low
Carbon Design Guide.
We joined the Global Cooksafe Coalition,
committing to phase out gas from
kitchens in our new developments by
2030 and delivering all-electric retrofits
of existing properties by 2040, helping
our residents and tenants transition to
fossil fuel-free cooking powered by
renewable electricity.
We expanded our ESG Databook to
provide a more complete view of
how we manage our environmental,
social and governance topics. The ESG
Databook includes links to policies,
governing committees, and other related
information such as our new Human
Rights Position Statement.
1. Scope 2 emissions calculated using the market-based method, which includes the use of renewable energy certificates, power purchase agreements, and renewable tariffs.
2. Includes renewable energy certificates, power purchase agreements, renewable tariffs and the benefit of inherent grid renewable electricity where we have evidence that
there is no claim by another entity.
Our Focus Areas
39
Sustainability leadership across real estate
Investments
"We are providing
our partners with high-
performing, sustainable
real estate investment
opportunities and healthy
buildings for residents
and tenants."
Development
"We are creating world-
leading, climate-resilient,
precincts and buildings
across our gateway
cities, designed and
managed to sustain
thriving communities."
Construction
"We are challenging
onsite traditions, from the
types of products and
machinery we use to the
methods of construction,
solving challenges for the
industry and the planet."
Penny Ransom, Group Head
of Investments
David Hutton, Group Head
of Development
Toby Matthews, Group Head
of Construction
49%
of electricity used
by Investments is
renewably sourced.
46%
of our $21.9b urban
development work
in progress are all-
electric buildings.1
9%
of fuel used
by Construction is
renewably sourced.
We continue to focus on improving
operational energy efficiency while
increasing the generation and purchase of
renewable electricity and trialling battery
storage. We continue to maintain leading
positions across ESG benchmarks.
Regional examples
In the 2022 GRESB Assessment,
three Lendlease funds ranked in
the global top 10. Lendlease One
International Towers Sydney Trust was
named #1 Office globally, and we
achieved five #1 ranked regional funds.
The Australian Investment Management
business received five International WELL
Building Institute 2022 Awards and all
three commercial office towers at Paya
Lebar Quarter achieved WELL Core
& Shell Gold, the first commercial
property in Singapore to achieve a
WELL certification.
For the second year running,
Barangaroo International Towers was
named Australia’s most sustainable
commercial property collection,
according to NABERS’s 2023 Sustainable
Portfolios Index.
Opposite: Sydney: Electric concrete
pump, One Sydney Harbour
1. All-electric refers to base building only.
We are increasing the number of new
all-electric developments, an important
decarbonisation strategy to maintain our
1.5 degree aligned trajectory. We are
creating inclusive and climate-resilient
buildings and precincts, targeting top tier
sustainability ratings.
We are looking to use alternative fuels,
increasing the use of electric construction
equipment, and trialling battery storage
and charging infrastructure. We are
collaborating with our suppliers to
progressively source and procure low
embodied carbon materials.
Regional examples
We secured US$4m in funding support
from the New York State Energy Research
and Development Authority for the
geothermal heat exchange system at 1
Java Street, an all-electric building and
the largest geothermal residential system
in New York State. The geothermal
system will reduce annual carbon
emissions from heating and cooling by
53 per cent compared with typical
residential systems.
At MIND in Milan, we completed a six-
month collaborative research project to
identify pathways to adopt mass timber
construction in Italy which included
creating a physical and digital prototype
timber building.
At our Habitat project in Culver City
in Los Angeles, we are installing a
distributed 100kW rooftop solar system.
Regional examples
In Australia, we are trialling renewable
diesel in cranes at Powerhouse
Parramatta and the Queensland
Performing Arts Venue.
At One Sydney Harbour, we are using
an electric concrete pump powered by
renewable electricity.
On 555 Collins Street in Melbourne,
we collaborated with project partners to
reduce the concrete structure’s overall
embodied carbon by approximately
30 per cent, at no cost to the client.
At 2 Aldermanbury Square in London,
we are supporting our client GPE in
implementing opportunities to reduce the
project’s embodied carbon by 36 per cent
from the initial design.
On the Shaw Tower and Paya Lebar
Green redevelopments in Singapore, we
are trialling biodiesel to power onsite
plant and equipment, and battery storage
to replace diesel generators.
40
Lendlease Annual Report 2023
Decarbonisation challenges
and insights
To achieve Absolute Zero Carbon by
2040 we will be reliant on sector
transformation at scale and pace.
However, we recognise there are
challenges ahead and that key to
finding solutions is sharing insights we
have gained.
Limited availability of renewable diesel
As we work towards fossil fuel-free
construction, renewable diesel is an
important transition fuel for our sector,
but its availability varies across our
regions of operation. In Europe, where
renewable fuels are more readily
accessible, renewable fuels represent
96 per cent of fuel purchased.
In Australia, we have procured and
imported renewable diesel as part
of a cross-industry collaboration to
demonstrate its viability as a low carbon
solution for the construction industry.
Trials have been successful however
implementation at scale is challenging
given limited existing supply.
We continue to advocate for the local
manufacture of renewable diesel in
Australia and we are exploring options to
increase the supply of renewable diesel in
all regions where we operate.
Eliminating Scope 3 emissions
Our Absolute Zero by 2040 target
includes eliminating Scope 3 emissions
within the boundaries we have defined
as being relevant to our value chain. As
Scope 3 emissions are the Scope 1 and
2 emissions of third parties, they present
a unique challenge because they are not
within our direct control.
Eliminating Scope 3 emissions in the real
estate sector will require collaboration
along the building value chain to
accelerate the decarbonisation of carbon
intensive materials such as steel, cement,
aluminium and glass. Detailed tracking of
Scope 3 emissions via the digitisation,
collection and reporting of Scope 3
emission data across our vast supply
chains will also be required.
Despite these challenges, we see
opportunities for partnerships between
like-minded organisations to spark the
investment and innovation needed for
industry transformation. We will also
continue to advocate for a data-sharing
ecosystem to facilitate the secure
exchange of product-level emissions
performance data.
Increasing biodiversity
The Waterman's Cove Living
Seawall at Barangaroo is nearly 2.5
years old.
Designed by the Living Seawalls
team to create 96sqm of habitat
for marine organisms, the panels
are now home to hundreds
of fish, native oysters, seaweed
and invertebrates.
Bespoke for Barangaroo, the panels
add intertidal complexity and aim
to enhance native species over non-
indigenous species.
Above: Living Seawall panels at
Barangaroo, Sydney, before and
after installation.
Photo credit: Sian Liddy.
Environmental performance
Our environmental performance data1 disclosure is in line with
our financial reporting program and provides 12 months of data to
30 June 2023, which includes actual data for Q1–Q3 and partially
estimated Q4 data.
Our full year environmental performance data will be available
on the Lendlease website in the ESG Databook once
Q4 data has been gathered and the limited assurance
engagement completed.
Scope 1 and 2 carbon target performance ktCO2-eq
FY23 energy use by segment (GWh)
Investments
Development
Construction
Non-Core
Lendlease tenancies
Total
% of electricity use from
renewable sources
Our Focus Areas
41
FY22
174
7
98
19
6
304
FY23
180
3
140
-
5
328
42%
63%
Total energy consumption in FY23 increased by 8 per cent
compared with FY22. The overall increase in energy use was
primarily due to an increase in construction activity in Australia.
Globally, 63 per cent of our electricity use is from renewable
sources, up from 42 per cent in FY22. This includes renewable
energy certificates, power purchase agreements, renewable
tariffs and the benefit of inherent grid renewable electricity
where we have evidence that there is no claim by another entity.
FY23 waste diverted and disposed (kTonnes)
Waste disposed
Waste diverted
% waste diverted from landfill
FY22
30
196
87%
FY23
31
204
87%
Waste rates remained relatively stable in FY23 with a small
increase in waste diverted and waste disposed related to
construction work phasing and delivery.
FY23 water consumption by segment (MLitres)
Investments
Development
Construction
Engineering and Services
Lendlease tenancies
Total
FY22
4,143
115
377
6
30
FY23
4,465
45
394
-
38
4,671
4,942
FY23 saw an increase of water use across our operations. There
was some reduction due to the sell down of the Australian
Retirement Living business, but this was offset by an increase
of water use in the Investments business in the Americas.
In FY23, we offset 28 per cent of our remaining Scope 1 and 2
emissions, taking our net position to 58 ktCO2-eq.
Scope 2 emissions have been calculated using the market-based
method, which includes the use of renewable energy certificates,
power purchase agreements, renewable tariffs and the benefit of
inherent grid renewable electricity where we have evidence that
there is no claim by another entity.
FY23 Scope 1 and 2 emissions by segment
Electricity used by the Investments business is the largest
contributor to our combined Scope 1 and 2 emissions. Our plans
to increase the purchase of renewable electricity to achieve our
target of 100 per cent renewable electricity by 2030 should
significantly reduce the Scope 2 carbon emissions associated
with this line of business.
1. Some charts and tables may not sum due to rounding.
FY22FY23 Scope 1 Scope 2 Net emissions after offsets 1.5° aligned trajectory998221018977238154275881 ktCO2-eq75% Investments0.5% Development24% Construction0.5% Lendlease tenancies
42
Lendlease Annual Report 2023
Creating social value
On track to reach our target
Since launching our social value target
in 2020, we have created $186m of
social value through the work of our
shared value partnerships, supported by
Lendlease Foundation.
We are well on track to achieve our target
of $250m by 2025, with 74.4 per cent
achieved at the end of year three in a five-
year journey.
$186m
of social value created,
which equates to 74.4%
of our $250m by
2025 target
Shared value partnerships
Our shared value partnerships are assessed using a methodology guided by the principles of Social Return on Investment (SROI). Social
value is accounted for through a calculation placing a financial value on the quantified change people experience across a series of
social outcomes.
For every dollar invested we aim for an average return on social value of five dollars. Each year we use third-party social impact
measurement consultants to assess the social value created through our shared value partnerships and verify progress towards our
social value target.
More than 40 partnerships have now been assessed. A sample of assessment outcomes of our regional partnerships is shown below.
Chicago Women in Trades, US
Hide Out Youth Zone, Manchester, UK
Landcare Australia
•
•
Supporting women in construction by
providing work readiness, training and
job placement opportunities
$1.6 million social value created from
FY21–23
•
•
Providing young people with
something to do, somewhere to go,
and someone to talk to
$932,000 of social value created from
FY22–23
•
•
Providing grants to schools to support
environmental education activities and
resources for students
$1.5 million of social value created from
FY21–23
Social impact on projects and assets
Our social value target and reporting does not capture social impact activities across our projects and assets. We have developed a
tool to help us track our social impact efforts on projects and assets across three social metrics: skilling and training; employment,
and volunteering.
Skilling and Training
Employment
Volunteering
• Manchester Town Hall Restoration, UK
• As at end FY23, we've created more than
100 apprenticeships, helping local people
to access careers focused on heritage and
conservation in the built environment.
•
•
Jordan Springs and Ropes Crossing,
Western Sydney
•
Since 2005, the St Mary's Skilling &
Employment Hub has placed more
than 4,500 people in jobs.
From FY21–23 our annual, global
Lendlease Community Day, together
with our Community Grants program
in Australia and Asia has created
$5.7m of social value.
Above: Community Day in Singapore
Our Focus Areas
43
Elevate Reconciliation
Action Plan (RAP)
This year we have continued to build upon the strategy and targets
outlined in our Elevate RAP: Country, Truth and our Shared Story.
Lendlease is one of only 18 organisations
with an Elevate RAP1 which includes
accountabilities to advance the national
reconciliation conversation, advocate for
systemic and structural reform within our
institutions, drive equity and equality and
support self-determination principles for
First Nations people.
To this end, our purpose remains to create
places where communities thrive and to
lift the industry standard in placemaking
led by the voices of First Nations people.
Our FY23 focus has been to:
Drive a consistent approach to delivering
Country Centred Design and First
Nations city-shaping by the
incorporation of First Nations thinking and
design concepts into the built form,
showcasing storytelling, cultural
connections and caring for Country. This
year we created two new senior First
Nations identified positions to provide
increased strategic input and governance
oversight into internal project origination
and operations forums and business
processes.
Increase shared value by using our
capacity and reach to influence investor,
tenant and customer audiences to
contribute to the national reconciliation
conversation and enhance the tangible
social impact and value to communities.
We have achieved this through support
Above: Lendlease Mob, gathering on
Gadigal Country
for the Uluru Statement from the Heart
across our assets and projects; and
through collaborations with investors,
businesses and First Nations communities
such as the Dhawura Ngilan Business and
Investor Initiative2 which aims to provide
best practice standards and practical
guidance to improve the protection of
First Nations’ cultural heritage.
Ensure shared prosperity with
First Nations communities, First
Nations businesses and Lendlease’s
businesses by supporting self-
determination through employment and
procurement opportunities.
This year, we acknowledged the
proposed Constitutional Recognition and
Voice to Parliament referendum as an
important step towards advancing the
Voice, Treaty, Truth objectives of the
Uluru Statement from the Heart. We
will continue to work within our sphere
of influence to educate, engage and
encourage eligible Australian people to
enrol and exercise their democratic vote.
We have made a public statement of our
support of the Yes campaign.3
FY23 RAP Goals
Actions
Outcome
Providing cultural
engagement
and learning
for all employees
Embedding First
Nations businesses
in our supply chain
86% of Lendlease's Australian
workforce have completed
at least one cultural learning
activity. (Data since FY2012
for salaried employees.)
120 Supply Nation businesses
engaged (registered and
certified First Nations
businesses). $136.6m spent
in FY23 with registered
and certified First
Nations businesses.
Understanding that recognition of
Country and the story of place is core
to our placemaking activity.
Our procurement goal aligns with
the national Raising the Bar initiative,
which sets annual targets to embed
First Nations owned businesses in our
supply chain. We have exceeded our
year four Raising the Bar target.
Supporting First
Nations voices
within Lendlease
1.4% per cent of
Lendlease employees in
Australia identify as First
Nations Australians.
We have increased support for First
Nations employees through monthly
Mob meetings, and an annual multi-
day in-person gathering.
1. Who has a RAP: Reconciliation Australia (30 June 2023), out of a total of 2,450 Reconciliation Australia endorsed RAPs.
2. https://culturalheritage.org.au/dhawura-ngilan-business-investor-initiative-2023/
3. Lendlease joins more than 70 organisations in the Reconciliation Australia network in support of a "yes" vote in the Voice Referendum. https://
www.reconciliation.org.au/large-diverse-support-for-the-voice-to-parliament/
44
Lendlease Annual Report 2023
Risk and
Climate-
Related
Resilience
Our approach recognises the nature and
level of risk we are willing to accept to
achieve our strategic goals and targets
in order to create securityholder value.
London Elephant Park Risk and Climate- Related Resilience
45
46
Lendlease Annual Report 2023
Risk governance
and management
A strong governance framework that embeds a risk-focused culture,
aligns to strategy and creates value through risk-based decision making.
The Risk Management Framework
outlines the governance, risk appetite and
accountability for our risk management
and operational resilience program.
The framework embeds risk management
into day-to-day operations and helps
to drive a consistent risk management
culture across our operating platform.
This enables the risk function to be
proactive and forward-looking to inform
and support strategy across the business.
Risk framework
Our risk framework, underpinned by
a ‘Three Lines of Defence’ model,
remains unchanged from a governance
perspective. The model continues to
provide a structured approach to risk
management by defining clear roles and
responsibilities across the organisation.
Three Lines of Defence Risk EcosystemRisk Management Framework1Business OperationsIdentify, manage and own risks relevant to the project / investmentRegional Leadership TeamAccountable for achieving regional objectives2Group FunctionsOutline assurance measures to enable appropriate identification and management of risks3Internal and External AuditProvide assurance independently from the first and second lines of defenceBoard and CommitteesGlobal Leadership TeamRisk EcosystemRisk Based Internal Audit Plan Root CausesControl MatrixRisk Appetite FrameworkEnterprise RisksSystems | Insurance | Resilience | Governance & Culture Risk Appetite Framework
The Risk Appetite Framework sets the risk
management guardrails for the business
as well as the extent and nature of risks
that the Board is willing to accept in
pursuit of its strategic objectives.
The Framework works in harmony with
the Limits of Authority and the Operating
Rhythm of the business.
The Risk Appetite Framework and Limits
of Authority were both updated in
the period.
The underpinning enterprise risks in the
Risk Appetite Framework have been
consolidated into the six categories
shown in the diagram.
Risk and Climate- Related Resilience
47
Global market risks across
the business
Geopolitical
The geopolitical risk landscape continues
to evolve at a rapid pace, weighing on
economies and financial markets.
We continue to navigate the landscape
at a time of heightened tensions,
ensuring our risk appetite and resilience
framework remain agile and fit for
purpose to support the business as well
as understand our potential exposures
and mitigation strategies.
Supply chain
Global supply chain disruption linked
to the pandemic and, more recently,
geopolitical conflict is closely managed
across our business, with mitigation
strategies in place to manage risk
across our procurement activities. We are
also progressing our efforts to mitigate
modern slavery risk.
Globally we continue to harness and
grow our global and regional supply
partnerships, supporting the delivery of
our strategy to create and thrive.
Inflation
Inflation and rising interest rates continue
to create a challenging environment
across our business.
Our business actively manages this
exposure by working closely with our
supply chain to lock in trades and pricing
during the early stages of a project.
We also undertake regular scenario
planning which helps understand
the potential impacts and mitigation
strategies across a range of
potential scenarios.
Risk framework hierarchyEnterprise risksPerformance and CapitalPeople, CorporateCulture and CustomerBusiness StrategySustainabilityEHS and AssuranceRAFPurposeValuesPolicies and ProceduresCodeLOAThese setour vision andaspirationsOur Purpose:Our collective visionfor LendleaseOur Values:How we work togetherto achieve our purposeRisk Appetite Framework:What we will and willnot do as an organisationEmployee Code of Conduct:What we will and willnot do as individualsLimits of Authority:Framework for the typesof decisions that can be madeand who can make themPolicies and Procedures:The standards designed to setthe operating parametres and risk tolerance associated withour operationsThese provideclear instructionsand directionsTechnology and data security 48
Lendlease Annual Report 2023
Climate-related
strategic resilience
Lendlease supports the recommendations of the Task Force on Climate-
Related Financial Disclosure (TCFD) and in 2018 committed to producing
annual disclosures that consider these recommendations.
We have a phased approach to
integrating the recommendations of
TCFD over time, and this is our
fifth annual TCFD disclosure. Our
disclosure continues to evolve as we
enhance our management of climate-
related risks and as advancements are
made in the maturity of climate-related
financial disclosures.
Building strategic resilience
Lendlease has previously identified
10 Climate-Related Impacts (CRIs)
associated with our three potential
climate scenarios: Polarisation (a 3 degree
scenario), Paris Alignment (a 2–3 degree
scenario) and Transformation (a well
below 2 degree scenario). In FY23,
Lendlease senior leaders met to review
the CRIs for continued relevance. The
CRIs were assessed for their ongoing
likelihood over the next 10 years and
updated accordingly – focusing on
five key CRIs under each scenario.
The residual sensitivity under each
CRI, by reference to potential impact
to revenue, remains unchanged from
prior periods including the assessed
level of action required to achieve the
residual sensitivity.
Initial work was also undertaken on
the identification of financial and non-
financial metrics to measure and/or
monitor the emergence of the updated
CRIs. These metrics span both physical
and transition risks and opportunities
across all three scenarios.
With the refresh of the identified CRIs
now complete across the three scenarios,
Lendlease will continue to monitor
the identified climate-related risks and
opportunities for signs of the CRIs
emerging. This includes expanding the
scope of our data capture and analysis
to assess the materiality of any potential
future impacts to the business.
While every effort has been taken to
engage in a robust scenario analysis
process with input from experienced
senior leaders in each business around
the globe, scenario planning is, by its
nature, subjective and may be subject
to change as key considerations evolve.
When reviewing the disclosures below,
please consider the above factors.
Emerging Climate-Related
Reporting Requirements
In June 2023, the International
Sustainability Standards Board (ISSB)
released its global sustainability
disclosure standards, IFRS S1 and
IFRS S2. IFRS S1 provides a set
of disclosure requirements designed
to enable companies to communicate
to investors about the sustainability-
related risks and opportunities they
face over the short, medium and long-
term. IFRS S2 sets out specific climate-
related disclosures.
The Australian government has
also confirmed they intend to
introduce standardised, climate-related
reporting requirements for businesses,
through proposed amendments to the
Corporations Act 2001, aligned to the
ISSB standards.
The new reporting requirements are
expected to be aligned to the
recommendations of the Task Force
on Climate-related Financial Disclosures
(TCFD), which Lendlease has been
following. As a result, it is anticipated that
Lendlease will be able to meet the new
Australian standard requirements when
they are introduced.
Top Left: Manchester: Potato Wharf.
Top Right: London: Elephant Park.
Scenario
Polarisation Scenario (>3oC)
Our Polarisation Scenario sees a world where climate action is
delayed by the polarisation of climate action. This delay results in a
world where physical climate changes are the greatest across our
three scenarios, resulting in significant disruption.
• Under the higher physical impacts of this scenario, Lendlease
recognises a transformation of our strategy is needed in
all businesses to manage global supply chains and labour
sourcing risks. Even so this would still incur moderate
negative sensitivities.
• The integration of ‘Leadership in Sustainability’ as a strategic
priority and our Net and Absolute Zero Carbon targets sees
higher residual positive sensitivities without any further action
taken beyond our current strategy.
Paris Alignment Scenario (2-3oC)
Our Paris Alignment Scenario sees a market led transition to a
lower carbon future through global government commitments to
the Paris Agreement, resulting in higher regulation to climate action
and with lower physical impacts of climate change compared to
our Polarisation scenario.
• Our leadership in sustainability and Mission Zero targets
creates positive sensitivities to an increased cost of both
carbon and the cost to comply with sustainability / climate
legislation and regulation.
• While there are many ‘difficult to decarbonise’ products and
materials in our supply chain, including cement, steel, and
aluminium, achieving this goal would result in significant
positive sensitivity to Lendlease.
Transformation Scenario (<2oC)
Our Transformation Scenario sees a rapid decarbonisation pathway,
where global emissions are close to zero in 2040, driven by society.
• The speed of change that is needed to limit global warming
to 1.5 degrees is likely to create some negative sensitivities
in our supply chain as preferences shift towards localisation
and would require transformational and adaptive practices to
mitigate the impact.
• Our leadership in sustainability and Mission Zero targets create
positive sensitivities to shifting “social license to operate”
expectations and would result in positive sensitivities to
Lendlease if we adapt our strategy by accelerating our
decarbonisation pathway.
Risk and Climate- Related Resilience
49
Climate-Related Impact
Investments Development Construction
Residual Sensitivity & Action to Achieve
Impact of climate change
on assets, communities,
and cities
Access and cost
of capital
Availability of
international products,
materials, and resources
Availability and cost
of labour
Industry leadership in
decarbonisation valued
Cost to comply with
sustainability/ climate
legislation and regulation
Increased cost of carbon
Changing preferences
away from new
build development
Demand for
decarbonisation of
supply chain
Increased scrutiny
of actions vs
branding resulting in
industry leadership in
decarbonisation valued
Increase speed of change
in climate related impacts
Local companies and
products preferred over
global ones
Shifting social
license to operate
expectations resulting in
industry leadership in
decarbonisation valued
Expectation of
R&D investment
for decarbonisation
Shifting consumer
preferences towards
lower impact living
More information
For more information about our TCFD disclosures, please refer to our ESG Databook.
For further information about our decarbonisation strategy, please visit Mission Zero.
TransformAdaptAdaptTransformAdaptAdaptTransformTransformTransformAdaptAdaptAdaptAdaptAbsorbAbsorbAbsorbAbsorbAbsorbAdaptTransformTransformTransformTransformTransformAdaptTransformTransformTransformAdaptAdaptTransformAdaptAdaptTransformAdaptAdaptTransformAdaptAdaptTransformAdaptAdaptTransformTransformAdaptHigher positive sensitivityHigher negative sensitivityLevel of Action Required to Achieve Residual SensitivityAbsorb: Current strategy absorbs the impact of the CRI Adapt: Changes required to current strategy to respond to the CRI Transform: New strategy or significantly altered strategy required to respond to the CRIResidual Sensitivity 50
Lendlease Annual Report 2023
Performance
and Outlook
Milan Milano Santa Giulia Performance and Outlook
51
52
Lendlease Annual Report 2023
Group performance
Key Financials1
Core Business
Investments
Development
Construction
Segment EBITDA
Corporate Costs
Operating EBITDA
Depreciation & Amortisation
Net Finance Costs
Operating Profit before Tax
Income tax expense
Core Operating Profit after Tax
$m FY22 FY23
Var.
497
332 (33%)
181
131
809
(180)
629
(146)
(116)
367
(91)
276
283
56%
90
(31%)
705
(161)
(13%)
11%
544 (14%)
4%
(140)
(88) 24%
316 (14%)
(59) 35%
257
(7%)
Reconciliation to Statutory Profit/(Loss)
after Tax
Non Core
Non Operating Items2
Statutory Loss after Tax
Group
Core Operating EPS
Distribution per Security
Total Group Statutory EPS
Total Group Statutory ROE3
(42)
(19) 55%
(333)
(470)
(41%)
(99)
(232) NA
cents 40.1
cents
16.0
37.3
16.0
(7%)
-
cents (14.4)
(33.7) NA
% (1.4%) (3.4%) NA
1. Operating earnings presented reflects Statutory profit adjusted for Investment
property revaluations (including in Other financial assets and Equity accounted
investments) that are classified in the Investment segment, and material
one-off items that could not reasonably have been expected to arise from
normal operations.
2. Non operating items after tax for the period ending 30 June 2023 includes
a provision in relation to UK building remediation of $295m and Investment
segment valuation decreases of $175m. Prior period includes Investment segment
revaluation increases of $70m, offset by impairment relating to intangibles $61m,
restructuring costs $119m, development impairment costs $223m.
3. Return on Equity is calculated using annualised Profit after Tax divided by the
arithmetic average of beginning, half and year end securityholders’ equity.
Performance1
The Group’s Statutory Loss after Tax for the year was $232m,
after recording a provision of $295m due to retrospective UK
Government action, a revaluation loss of $175m relating to
property revaluations in the Investments segment, and a Non
core segment loss of $19m.
The provision is a consequence of industry-wide action by
the UK Government. This action has retrospective effect by
extending the period for defects liability from six years to 30
years and updating building safety regulations for completed UK
residential buildings. The liability primarily relates to buildings
developed by Crosby entities, acquired by Lendlease in 2005.
This estimate does not include anticipated recoveries from third
parties, including insurances and supply chain. For further details
refer to Note 23 in the financial statements.
The Group’s core Operating Profit after Tax (OPAT) fell by 7 per
cent to $257m. Core Operating Earnings per Security of 37.3
cents represents a Return on Equity of 3.8 per cent. Distributions
per Security totalled 16.0 cents, unchanged from FY22. This
represents a payout ratio of 43 per cent of OPAT.
Core Segment EBITDA fell by 13 per cent to $705m. Improved
Development earnings from Communities and increased
completions were offset by lower contributions from Investments
and Construction. Lower earnings from the Investments segment
were due to loss of earnings from current and prior year asset
1. Comparative period the year ended 30 June 2022.
sales and higher platform costs, as the business continues the
pivot to be Investments-led. Construction earnings were lower,
with margin pressure amidst difficult industry conditions despite
a robust performance in Australia.
The Group’s performance was also impacted by provisioning
in relation to a divestment and prior projects in the offshore
businesses. An additional $110m of post-tax provisions has been
booked in relation to claim settlements, remediation obligations
and impairment of receivables. This was partially offset by a
$50m post-tax gain on the partial repurchase of the Group’s
Sterling bonds which were trading at a discount to book value.
Corporate costs decreased by 11 per cent to $161m, reflective
of the recent focus on a leaner head office function and
lower bonuses.
Adjusted for the gain on repurchase of the Sterling bonds, net
finance costs were 30 per cent higher, with higher average net
debt during the year and an increase in the average cost of debt
to 4.3 per cent, reflecting base rate increases mitigated by a
well-positioned hedging strategy.
A Non core loss of $19m primarily reflects overhead costs
associated with the retained elements of the Engineering and
Services businesses. We continue to maintain provisions we
consider to be appropriate to complete our share of the retained
Melbourne Metro project, and for potential warranties associated
with the exited Engineering and Services businesses.
The Group has reached the mid-point of the two-year Create
phase of the five-year Reset, Create, Thrive strategic roadmap
to deliver sustained, improved performance. The key elements
of the Create phase involve continued growth in funds under
management (FUM); achieving scale in development; and
maintaining execution excellence in construction.
Progress was made during the year to grow FUM by nine per
cent to $48.3b. This included $5.3b of new additions, partially
offset by divestments and negative valuation movements. Key
activities contributing to growth include the 21 Moorfields
acquisition in London, deployment of investment mandate
capital, and investment into new products across build to rent,
sustainable office, value add and life sciences assets.
Development progress was also evident with the acceleration
of Work in Progress. There were $7.7b of commencements
in the year, including One Circular Quay in Sydney, a $3.1b
residential-led project in joint venture with Mitsubishi Estate
(67 per cent), as well as Habitat (formerly La Cienega), a $1.1b
mixed-use, build to rent/office project in Los Angeles, with joint
venture partner Aware Super (50 per cent). Progress was made
with the launch of build to rent projects in Australia, including
Melbourne Quarter West and Brisbane Showgrounds, introducing
the Group’s international capabilities to the Australian market.
Build to rent is a key growth product for both the Development
and Investments segments.
The Construction segment continued to pursue execution
excellence during the year, with an improved focus on
transitioning its portfolio to better risk reward outcomes. The
business will no longer bid for third-party residential build to sell
projects and, separately, will only bid on external construction
projects with a value of more than $150m. These changes
should deliver an improved earnings profile for securityholders
over time given increasing long tail risks across the residential
building sector.
Group performance continued
Performance and Outlook
53
Outlook
The Group remains focused on further executing its Investments-
led strategy, with the aim of delivering a higher proportion
of stable and recurring earnings to the Group and its
securityholders. Since FY21, more than 10 per cent compound
growth per annum in FUM has been achieved, with further
double-digit growth required to meet our goal.
Investments is targeting an increase in FUM growth from $48b
in FY23 to $70b by FY26. In part, this will be achieved through
the growth of our co-investments portfolio, alongside investment
partners. This should see capital in Investments increase towards
60 per cent of total Investment and Development capital from
40 per cent today. To help fund this growth and re-weight
our Development portfolio, Development capital is planned to
be recycled from offshore over time and redeployed into the
Investments business, as well as replenishing the Australian
Development pipeline.
The Development pipeline is pivotal to achieving our overall
strategy, with currently more than $60b of investment
yielding assets to be delivered across attractive asset classes,
including build to rent and sustainable office. The Group’s
objective is to accelerate delivery of the pipeline in a capital-
efficient manner alongside investment partners, prioritising
completion and delivery of investment products to the funds
management platform.
The journey to become an Investments-led business has begun,
with solid progress made against a challenging backdrop. The
Group is confident it has the right strategy, capital resources and
teams in place to deliver for securityholders.
The Group’s balance sheet remains strong with gearing at 14.8
per cent, at the mid-point of the target range. The business
continues to actively manage its capital and liquidity position,
while funding growth opportunities. There is $2.6b of liquidity
at year end. With a strong FY24 completions profile, and
operational and strategic levers to access additional capital
pools, the Group remains confident it has the financial flexibility
to execute its strategy while remaining within the target gearing
range of 10–20 per cent.
Portfolio Management Framework
Target
FY22
FY23
Total Group Metrics
Core Operating ROE
Distribution payout ratio1
Gearing
Core Business
EBITDA Mix
Investments
Development
Construction
Core Business
Segment Returns
Investments ROIC2
Development ROIC2
Construction
EBITDA margin
Segment Invested
Capital Mix
Investments
Development
Regional Invested
Capital Mix
Australia
Asia
Europe
Americas
8-10%
30-50%
10-20%
40-50%
40-50%
10%
6-9%3
10-13%3
2-3%
50-70%
30-50%
40-60%
10-25%
10-25%
10-25%
4.0%
40%
7.3%
61%
23%
16%
9.7%
2.2%
2.0%
40%
60%
33%
22%
25%
20%
3.8%
43%
14.8%
47%
40%
13%
6.1%
3.3%
1.2%
40%
60%
31%
23%
24%
22%
1. Distribution payout ratio has been calculated on Core Operating Earnings.
2. Return on Invested Capital (ROIC) is calculated using the annualised Operating
Profit after Tax divided by the arithmetic average of beginning, half and year end
invested capital.
3. Through-cycle target based on rolling three to five year timeline.
Portfolio Management Framework
The Portfolio Management Framework (PMF) sets out various
financial targets for our business and provides a framework
to guide the decisions we make. It is designed to maximise
long-term securityholder value via a diversified risk adjusted
portfolio, leveraging the integrated model and the Group’s
financial strength. This includes maintaining an investment grade
credit rating.
It provides the structure for both capital allocation and
generating through-the-cycle returns across the three operating
segments of Investments, Development and Construction.
Reflecting the evolution of the Group’s strategy, evolving market
conditions and a continued focus on securityholder returns,
external market guidance will focus on Group Return on Equity
from FY24, which continues to be the Group’s key measure
of return for securityholders. The structure of the PMF, and its
through-the-cycle targets (not guidance), will continue to support
internal capital, investment, and portfolio decisions.
54
Lendlease Annual Report 2023
Investments segment
completion). Rising interest rates also impacted investment
distributions and returns for the year.
The Group’s investment portfolio is valued at $3.9b at FY23, up
from $3.5b, an increase of 12.9 per cent. The increase was due to
the co-investment in 21 Moorfields, assets acquired through REP
4 and the transfer of assets from Development including build to
rent products, Cascade and City Lights Point.
Operations
FUM increased nine per cent to $48.3b. The movement was
comprised of $5.3b of new FUM, offset by $1.0b of divestments,
valuation, and market-related impacts. New FUM contributions
were from 21 Moorfields, MSG North, REP 4 and deployment of
investment mandates. In addition to current FUM, there is more
than $6b of future secured FUM in delivery from development
projects that is planned to move into funds or mandates.
The Group’s develop to core products, derived from its urban
development pipeline, are expected to be the primary source
of growth for the Investments platform. More than 50 per
cent of the urban development pipeline comprises investment
yielding assets, derived mostly from build to rent and sustainable
office assets.
Assets under management increased nine per cent to $32.8b.
The increase was driven by new AUM of $1.9b, from 21
Moorfields and Cascade, as well as market-related gains,
partially offset by $0.8b of retail asset sales.
The Group’s investment portfolio of $3.9b is well diversified with
$1.4b in residential, $1.2b in workplace; $0.9b in retail and the
balance in data centres, industrial and other assets.
Key financial and operational metrics
FY22
FY23
Management EBITDA ($m)1
Ownership EBITDA ($m)2
Operating EBITDA ($m)2
Operating Profit after Tax ($m)
Invested Capital ($b)3
Funds Under Management ($b)4
Assets Under Management ($b)4
Investment Portfolio ($b)5
141
356
497
361
3.7
44.4
30.0
3.5
104
228
332
245
4.0
48.3
32.8
3.9
1. Earnings primarily derived from the investment management platform and the
management of US residential housing operations.
2. Returns excluding non-cash backed property related revaluation movements of
Investment Property, Other Financial Assets, and Equity Accounted Investments in
the Investments segment.
3. Securityholder equity plus gross debt less cash on balance sheet.
4. The Group's assessment of market value.
5. The Group’s assessment of market value of ownership interests.
Performance1
The Investments segment delivered EBITDA of $332m, down
33 per cent from $497m. The decline in earnings reflects
the reduction in investment portfolio earnings from last year’s
sale of 24.9 per cent of Keyton (formerly Retirement Living),
reduced contributions from funds and asset management, and
provisioning against a receivable from the disposal of the
Americas Telecommunications business, partially offset by a
further 34 per cent selldown of the Military Housing Asset
Management income stream.
OPAT for Investments of $245m was down 32 per cent from
$361m, representing a Return on Invested Capital (ROIC) of
6.1 per cent. The impact to ROIC of the provision was 1.2
percentage points.
Management EBITDA, derived from funds management and
asset management activities across the Group’s Investments
platform, was down 27 per cent to $104m.
Funds management EBITDA was $82m, down from $94m,
primarily due to higher costs from building out the offshore
investment management platforms. Revenue increased to $177m
from $172m, supported by growth in funds under management,
although the full year impact of FUM earnings growth has not
been fully reflected due to the timing of asset completions and
FUM addition.
Asset management EBITDA reduced to $22m, down from $47m.
The change reflects the loss of income from the partial sale of
Military Housing Asset Management income streams.
Investment portfolio EBITDA was $228m, down from
$356m. Portfolio earnings were impacted by the Americas
Telecommunications receivable provision and a reduction of
portfolio assets from the 24.9 per cent disposal of Keyton in
FY22, partially offset by a gain on sale of Parkway Parade to
Lendlease Global Commercial REIT (LREIT).
Investment distribution yield was lower against the prior year
at 3.0 per cent, down from 4.7 per cent. FY23 yields were
impacted by deployment of capital into new products that are
yet to stabilise (e.g., Real Estate Partners (REP) 4, which targets
capital gains in addition to income, and 21 Moorfields, which is
expected to begin generating a yield in 1Q24 following practical
1. Comparative period the year ended 30 June 2022.
Performance and Outlook
55
Development segment
Hayes Point, a $1.9b mixed-use project comprising apartments
for sale, as well as boutique office space, commenced in
San Francisco during 1H23. Following completion of key sub-
structure works, the project was recently paused pending
further de-risking through either tenancy pre-commitments or
the introduction of a capital partner.
Operations
The Development pipeline rose from $117b to $124b, underpinned
by the addition of One Circular Quay, Sydney. Excluding
Communities, the urban development pipeline was $108b. The
Group was announced as preferred developer of the Queen
Victoria Market in Melbourne. The project has an estimated
end development value of $1.7b and, subject to approvals,
will comprise a new landmark of sustainable workplace; build
to rent apartments; student accommodation alongside student
accommodation partner Scape; and a large public park.
Invested capital rose from $5.4b to $6.1b during the year, which
includes $1.0b of Australian Communities developments. Key
urban projects utilising capital include: One Sydney Harbour;
One Circular Quay; The Exchange TRX; Victoria Cross Over
Station development; 60 Guest Street; Habitat and Hayes Point.
Over time, invested capital in Development is expected to trend
down towards 40 per cent of capital invested across Investments
and Development.
As part of the Group’s capital management approach, $0.6b was
raised from the forward sale of apartment pre-sale contracts
(PLLACes) on Residences Two (R2) and Waterman’s Residence
(R3) at One Sydney Harbour.
The pipeline in Conversion of $50b is controlled by $0.3b of
invested capital with the more capital intense Master planned
phase holding $1.4b of capital (ex Communities), with a $51b
development pipeline. The Work in Progress (WIP) phase, with
projects moving from commencement through to completion,
employs $3.5b of capital.
Development WIP, the lead indicator for future completions,
was $22.9b, up from $18.4b in the prior year. The business
is seeking to maintain WIP above $20b with a focus on
accelerating execution.
Key financial and operational metrics
Operating EBITDA ($m)
Operating Profit after Tax ($m)
Invested Capital ($b)1
Work in Progress ($b)
Commencements ($b)2
Completions($b)3
Pipeline ($b)4
FY22
FY23
181
111
5.4
18.4
5.9
2.5
117.0
283
192
6.1
22.9
7.7
3.6
124.3
1. Securityholder equity plus gross debt less cash on balance sheet.
2. Project end value on product commenced during a financial period (representing
100% of project value). Subject to changes in delivery program.
3. Project end value on product completed during a financial period (representing
100% of project value).
4. Total estimated end value (representing 100% of project value).
Performance1
The Development segment delivered EBITDA of $283m, up 56
per cent from $181m. The result was driven by the Australian
region, with Asia also contributing an improved result. Europe’s
performance was negatively impacted by weak economic
conditions and a prior project provision, while the Americas also
remains challenged due to market conditions. OPAT of $192m
was up from $111m, or 73 per cent. The FY23 ROIC of 3.3 per
cent was higher than the 2.2 per cent on the prior year.
The Australian Communities business underpinned the result,
generating $142m of EBITDA, up from $16m, with FY22
impacted by planning and weather delays. There were 2,253
lot settlements, up from 1,478, and 1,765 lot sales, down from
3,114. Settlements were lower than anticipated due to delays
in obtaining authority approvals for lot registrations, whilst the
impact of continued upward pressure on interest rates tempered
sales volumes, albeit with sentiment improving in the last few
months of the year.
The Exchange TRX (Retail) in Kuala Lumpur, which is now 87 per
cent leased, recorded a gain as it nears completion this year. A
joint venture partnership with Daiwa House to develop build to
rent apartments at Melbourne Quarter also contributed.
There were $3.6b of completions for the year, comprised of
$2.8b urban projects and $0.8b of Communities development,
noting the urban delivery pipeline is still working through
pandemic-related delays to completions. Sydney Place, which
was divested in FY22, was the key contributor to urban
completions, followed by Blue & William, a 14,000sqm workplace
project in North Sydney. City Lights Point, London, also delivered
118 build to rent units and 104 apartments for sale.
There were $7.7b of commencements during the year. One
Circular Quay, a $3.1b project in joint venture with Mitsubishi
Estate, commenced in Sydney. The project comprises 158 luxury
apartments and a luxury hotel that was forward sold, de-risking
the project at inception.
In Los Angeles, a $1.1b mixed-use, build to rent/office project,
Habitat, commenced. The project is in partnership with Aware
Super and will provide investment grade product to the funds
management platform.
In Melbourne, a $0.6b build to rent joint venture project
commenced alongside Daiwa House, leveraging the Group’s
existing offshore build to rent capabilities.
1. Comparative period the year ended 30 June 2022.
56
Lendlease Annual Report 2023
Construction segment
Operations
Backlog revenue remains solid at $8.7b, declining compared to
last year due to the fall in new work secured relative to revenue.
The workbook is diversified by client and sector, although is
concentrated within Australia and the Americas.
The Australian region has the largest backlog revenue, at $5.7b,
with key projects including RAAF Tindal Stage 6 and USFPI
Airfield Works, Frankston Hospital Redevelopment, Powerhouse
Parramatta and Liverpool Health and Academic Precinct.
The Americas has backlog revenue of $2.5b across the key
sectors of defence and sustainable office. Backlog revenue
remains below historical levels, due to lower project activity
post-pandemic and a more selective approach to origination of
new work.
The Construction business is preferred for $9.9b in new projects,
including $4.3b of social infrastructure and $3.7b of office,
providing confidence that the backlog revenue can be increased
to the target ~$10b.
Key financial and operational metrics
Revenue ($m)1
Operating EBITDA ($m)
Operating Profit after Tax ($m)
New Work Secured ($b)2
Backlog ($b)2
FY22
6,579
131
68
5.3
10.5
FY23
7,203
90
32
4.7
8.7
1. Construction revenue earned in period (excludes internal projects).
2. Construction revenue to be earned in future periods (excludes internal projects).
Performance1
The Construction segment booked revenue of $7.2b for the year,
up nine per cent, despite a decline in European activity.
EBITDA of $90m was down 31 per cent, while OPAT of $32m
was down 53 per cent, delivering a subdued outcome in
the context of industry challenges, including high inflationary
pressures, ongoing supply chain challenges and sub-contractor
collapses. EBITDA was also impacted by $53m from provisions
relating to prior projects in the Americas and Europe.
While inflationary headwinds remain, they have shown signs
of moderating.
EBITDA margin for the segment was 1.2 per cent for the year,
down from 2.0 per cent, impacted by provisions which reduced
the EBITDA margin by 0.8 percentage points.
The Australian business remained the largest contributor to
earnings, delivering $3.7b of revenue, $105m of EBITDA and
$58m of OPAT. Margins at 2.8 per cent were down from 3.8
per cent in FY22 due to industry headwinds. A continued focus
on defence and social infrastructure projects supported external
revenues for the year.
The Americas business remains a large revenue contributor,
delivering $2.5b, an increase of 10 per cent. However, earnings
were negatively impacted by low margins and provisions, leading
to a loss after tax of $25m.
Across other offshore markets, activity slowed in Europe to
deliver revenue of $0.7b, down 17 per cent, while Asian activity
increased 13 per cent with a revenue contribution of $0.3b.
Europe contributed modestly to EBITDA and core OPAT for
the year.
Construction contributed 13 per cent to Group EBITDA, down
from 16 per cent in FY22. The contribution to Group EBITDA
will trend towards a target of 10 per cent as Investments
and Development are expected to increase their proportionate
contributions over time.
New work secured for the segment was $4.7b, down from $5.3b.
Australia remained the largest contributor with $2.4b, while the
Americas business saw the largest growth in new work to $2.1b.
Social infrastructure projects remain the key sector for new work
secured, with office and life science projects also contributing
to growth.
1. Comparative period the year ended 30 June 2022.
Performance and Outlook
57
Financial position and cash
flow movements
Financial position ($m)
Investment assets
Other financial assets
Equity accounted investments
Investment properties
Development assets
Inventories
Equity accounted investments
Investment properties
Other assets and liabilities
(including financial)
Cash and cash equivalents
FY22
FY23
Var.
1,149
2,128
216
1,124
2,611
223
3,110
3,649
2,246
3,031
266
316
(2%)
23%
3%
17%
35%
19%
1,297
900
(31%)
Borrowing and financing arrangements
(2,357)
(3,281)
(39%)
Other net assets and liabilities
(1,085)
(1,929)
(78%)
Net assets
6,970
6,644
(5%)
Investment Assets
Other financial assets were lower due to revaluation movements
and the sale of Parkway Parade to LREIT, partially offset by the
acquisition of industrial assets.
Growth in Equity accounted investments resulted from co-
investments in 21 Moorfields, REP 4 and Lendlease Datacentre
Partners, as well as capital transferred to Investments on
completed trading assets, MSG South and Cascade, partially
offset by the divestment of industrial assets.
Investment properties increased with the transfer of the Darling
Square retail asset, partially offset by the sale of Craigieburn.
Development Assets
Development assets increased in line with delivery of key
projects. Inventory increased by 17 per cent with key
contributors including production expenditure on Australian
Communities, Hayes Point and the third residential tower at One
Sydney Harbour.
Equity accounted investments assets increased by 35 per cent
with material contributions to development projects in delivery
including One Sydney Harbour, The Exchange TRX and One
Circular Quay.
The increase in Investment properties under Development
includes build to rent apartments at Melbourne Quarter alongside
partner Daiwa House.
Other assets and liabilities
The increase in Other net assets and liabilities predominantly
reflects PLLACes liabilities within Trade and Other Payables,
along with the impact of the provision in relation to UK
building remediation.
Cash flow and treasury management
The Group commenced the year with cash and cash equivalents
of $1.3b. Movements during the year comprised Operating cash
outflows of $486m, Investing cash outflows of $758m and
Financing cash inflows of $723m. The Group closed the year with
cash and cash equivalents of $900m.
Core operating cash outflows include production spend on
majority controlled development projects including Waterman’s
Residence, being the third residential tower at One Sydney
Harbour; Australian Communities; Hayes Point; and Lakeshore
East. This was offset by PLLACes proceeds on the second and
third residential towers at One Sydney Harbour.
Investing cash outflows during the year included the acquisition
of 21 Moorfields, asset acquisitions in REP 4 and APPF Industrial
and production spend on jointly controlled development projects
including the first and second residential towers on One
Sydney Harbour, The Exchange TRX, Victoria Cross Over Station
Development, and the acquisition of One Circular Quay.
The PLLACes transactions were part of the Group’s capital
management program, bringing forward cash proceeds
from future apartment settlements to fund ongoing project
development. The PLLACes product is an established capital
management tool that has been deployed across the Group’s
residential build to sell developments since 2014. There are
now four outstanding instruments with a face value of
approximately $1.7b, secured against One Sydney Harbour
apartment settlements.
The Group remains in a strong financial position with $2.6b
of liquidity comprised of $0.9b of cash and cash equivalents
and $1.7b in available undrawn debt. The debt hedging strategy
remains well-positioned, with fixed debt of 64 per cent and an
average drawn debt maturity of 4.4 years, decreasing due to the
further utilisation of floating rate facilities in the year and the
partial buy back of long-dated Sterling bonds.
Gearing of 14.8 per cent at year end is within the
target range of 10-20 per cent. The Group employs capital
management initiatives to support growth and expenditure on
key Development projects while prioritising maintaining gearing
within target levels.
Treasury management
Net debt
Gearing1
Interest cover2
Average cost of debt
Average drawn debt maturity
Available liquidity
Average debt mix fixed:floating
FY22
1,060
7.3
5.6
3.6
6.6
FY23
2,381
14.8
3.0
4.3
4.4
Var.
NA
NA
(46%)
19%
(33%)
3,944
2,581
(35%)
88:12
64:36
$m
%
times
%
years
$m
$m
1. Net debt to total tangible assets, less cash.
2. EBITDA has been adjusted to exclude Non Operating Items.
Credit ratings1
Moody's
Fitch
Baa3 stable outlook
BBB- stable outlook
1. Credit ratings have been issued by a credit rating agency which holds an Australian
Financial Services Licence with an authorisation to issue credit ratings to wholesale
clients only and are for the benefit of the Group’s debt providers.
58
Lendlease Annual Report 2023
Governance
Kuala Lumpur The Exchange TRX Governance
59
60
Lendlease Annual Report 2023
Board of Directors’
information and profiles
Michael J Ullmer, AO
Chairman
(Independent Non 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 Westpac (appointed April 2023)
Non Executive Director of Woolworths Limited (appointed January
2012) (retired November 2021)
Other Current Appointments
Nil
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
Anthony P Lombardo
Global Chief Executive Officer of the Group
(Executive Director)
Term of Office
Anthony (Tony) was appointed Managing Director on 3 September
2021 and also appointed Global Chief Executive Officer in
June 2021.
Skills, Experience and Qualifications
Tony Lombardo has more than 25 years’ experience working across
real estate development, investment management, finance, mergers
and acquisitions (M&A) and strategy in Australia and internationally.
Tony joined Lendlease in 2007 as Group Head of Strategy and
M&A where he led a number of initiatives including refocusing
the Group's overall business strategy. In 2011, he was appointed
Group Chief Financial Officer and played a key role in enhancing
the flexibility of the Group’s capital structure via a stapled
structure as well as significantly broadening its funding and
banking relationships. He also implemented a range of people
focused initiatives including creation of the Young Indigenous
Pathways program, which provides mentoring opportunities for
young Indigenous students.
In 2016, Tony was appointed Chief Executive Officer Asia based
in Singapore. As part of resetting Lendlease Asia’s growth
strategy, Tony spearheaded a number of major initiatives to
drive future growth. Recent successes include the completion
of Singapore’s S$3.7 billion Paya Lebar Quarter mixed use
development, establishment of a US$1 billion data centres joint
venture with a large institutional investor and the successful listing
of S$1 billion global LREIT on the Singapore Exchange.
Prior to joining Lendlease, Tony spent almost 10 years at GE with
responsibilities across a number of functional disciplines including
strategy, M&A and finance for both GE Capital and GE Corporate.
Tony commenced his career at KPMG where he worked for more
than four years.
Tony holds a degree in Accounting and Finance from RMIT
University and is a member of the Institute of Chartered
Accountants in Australia.
Governance
61
Nicola M Wakefield Evans, AM
(Independent Non Executive Director)
Term of Office
Ms Wakefield Evans joined the Board in September 2013.
Skills, Experience and Qualifications
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 has had a diverse career as one of Australasia’s
leading corporate finance lawyers and held several senior key
management and leadership 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. She has
extensive experience in the financial services, resources and energy
and infrastructure sectors. She also has extensive international
experience working in Australia, New York and Hong Kong.
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.
She is a member of Chief Executive Women.
Listed Company Directorships (held within the last
three years)
Non Executive Director of Macquarie Group Limited (appointed
February 2014)
Non Executive Director of Viva Energy Group Limited
(appointed August 2021)
Other Current Appointments
Chair of 30% Club, Australia
Director of the Clean Energy Finance Corporation
Director of Metlife Insurance Limited
Director of UNSW Foundation Limited
Director of the Goodes O'Loughlin (GO) Foundation Limited
Member of the Takeovers Panel
Board Committee Memberships
Chair of the Sustainability Committee
Member of the Nomination Committee
Member of the Audit Committee
Member of the Risk Committee
David P Craig
(Independent Non Executive Director)
Term of Office
Mr Craig joined the Board in March 2016
Skills, Experience and Qualifications
Mr Craig is a business leader with a successful international
career spanning over 40 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.
Listed Company Directorships (held within the last
three years)
Nil
Other Current Appointments
President of the Financial Executives Institute of Australia
Deputy Chairman of the Victor Chang Cardiac Research Institute
Director of Sydney Theatre Company
Board Committee Memberships
Chair of the Audit Committee
Member of the Nomination Committee
Member of the People and Culture Committee
Member of the Risk Committee
62
Lendlease Annual Report 2023
Philip M Coffey
(Independent Non Executive Director)
Term of Office
Mr Coffey joined the Board in January 2017
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 Goodstart Early Learning
Board Committee Memberships
Chair of the Risk Committee
Member of the Sustainability Committee
Member of the Nomination Committee
Elizabeth M Proust, AO
(Independent Non Executive Director)
Term of Office
Ms Proust joined the Board in February 2018.
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. She is a
Life Fellow of the Australian Institute of Company Directors.
Ms Proust holds a Bachelor of Arts (Hons) from La Trobe University
and a Bachelor of Laws from the University of Melbourne.
Listed Company Directorships (held within the last
three years)
Lead Independent Director GQG Partners (appointed October 2021)
Other Current Appointments
Chair of Cuscal Limited
Member of the Fujitsu Advisory Board
Board Committee Memberships
Chair of the People and Culture Committee
Member of the Nomination Committee
Member of the Risk Committee
Member of the Sustainability Committee
Governance
63
Robert F Welanetz
(Independent Non Executive Director)
Term of Office
Mr Welanetz joined the Board in March 2020.
Skills, Experience and Qualifications
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
Other Current Appointments
Non Executive Director of Qiddiya Coast Saudi Arabia
Non Executive Director of Stone Mountain Industrial Property
Company, USA
Board Committee Memberships
Chair of the Nomination Committee
Member of the Risk Committee
Member of the People & Culture Committee
Member of the Sustainability Committee
Nicholas R Collishaw
(Independent Non Executive Director)
Term of Office
Nicholas Collishaw was appointed to the Board as an independent
Non Executive Director, effective 1 December 2021.
Skills, Experience and Qualifications
Based in Sydney, Mr Collishaw is an experienced property
executive and non executive director with more than 40
years’ expertise gained across Lendlease’s core segments of
Development, Construction and Investments. During his career
he has overseen the development and delivery of a number of
significant and ground-breaking projects across the commercial,
industrial and retail sectors. Mr Collishaw currently serves as
the joint Chief Executive Officer of Lincoln Place Pty Ltd,
a boutique funds management entity focused on affordable
retirement accommodation, and is Chairman of hospitality group,
Redcape Hotel Group. Until his recent retirement, he was a non-
executive director of ASX-listed investment manager, Centuria
Capital. Mr Collishaw’s executive career comprised a number
of high-profile roles including Centuria Capital’s Chief Executive
Officer of Listed Property. Prior to this role, Mr Collishaw spent
eight years at Mirvac Group serving as the Chief Executive Officer
and Managing Director between 2008 and 2012. He also held
senior leadership positions at James Fielding Group where he was
Executive Director and Head of Property, Deutsche Industrial Trust
and Paladin Commercial Trust.
Listed Company Directorships (held within the last
three years)
Non Executive Director of Centuria Capital Group (appointed May
2013, retired August 2021)
Other Current Appointments
Chair of Redcape Hotel Group (delisted 2021)
Board Committee Memberships
Member of the Audit Committee
Member of the People and Culture Committee
Member of the Risk Committee
Member of the Nomination Committee
64
Lendlease Annual Report 2023
Ann Soo Chan ("Margaret Lui")
(Independent Non Executive Director)
Term of Office
Ms Lui joined the Board in December 2022.
Skills, Experience and Qualifications
Based in Singapore, Ms Lui is currently the Chief Executive Officer
and Executive Director of Azalea Asset Management, which she
helped to found in 2015. At Azalea, Ms Lui leads an experienced
team of investment managers, overseeing a portfolio valued at
US$10 billion.
Ms Lui was previously a member of the investment team at
Temasek Holdings and involved in direct investments across a
variety of sectors including transportation, industrial, real estate
investments, and major redevelopment projects in Asia. She has
a track record in restructuring, transforming and creating new
Temasek businesses and led the startup of several business joint
ventures including Tiger Airways and Jetstar Asia, and the creation
of Cityspring Infrastructure, the first infrastructure business trust
listed on the Singapore Exchange. As a senior executive at Temasek,
she was a director of numerous subsidiaries and JV entities and
listed companies including Sembcorp Industries, a leading energy
and urban development company.
Ms Lui holds a Bachelor of Accountancy from The National
University of Singapore and has attended the Advanced
Management Development Program at the Wharton School,
University of Pennsylvania.
Listed Company Directorships (held within the last
three years)
None
Other Current Appointments
Chair of the Marine Services Supervisory Committee of PSA
International (Singapore)
Director of the Board of Trustees and Member of the Investment
and Finance Committees of the Singapore Institute of Technology
Member of the Singapore Exchange's Listing Advisory Committee
Board Committee Memberships
Member of the Nomination Committee
Member of the People & Culture Committee
Member of the Risk Committee
Member of the Sustainability Committee
Previous Board Members During Period
Jane S Hemstritch
(Retired 18 November 2022)
Ms Hemstritch joined the Board in September 2011 and retired in
November 2022.
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.
Governance
65
Board skills and experience
The Directors have a mix of Australian and international experience and expertise, as well as specialised skills to assist with decision
making to effectively govern and direct the organisation for the benefit of securityholders. The skills matrix assists the Board with
succession planning and professional development initiatives for Directors.
The target of 40 per cent female Board members aims to improve gender diversity and focus the Board's attention on achieving this
objective. Current female Directors represent 33 per cent of the Board.
The table below sets out the skills and experience considered by the Board to be important for its Directors to have collectively. The
Board considers that Governance, Strategy, People & Culture, Financial Acumen, Risk Management are core skills which all Directors
have self-assessed as being within their core competencies.
Skills/
Experience
Governance
Michael
Ullmer
Nicola
Wakefield
Evans
David
Craig
Phil Coffey
Elizabeth
Proust
Robert
Welanetz
Anthony
Lombardo
Nicholas
Collishaw
Margaret
Lui
Total
Commitment to and experience in setting exceptional corporate governance policies, practices and standards.
Industry
experience
Possessing industry knowledge, exposure and experience gained in one or more of the core Lendlease
operating segments of Investments, Development and/or Construction. This includes acting in advisory roles for
these industries.
International
Operations
Exposure to international regions either through experience gained directly in the region or through the
management of regional clients and other stakeholder relationships.
Health and
Safety
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.
ESG
Experience in assessment strategy and performance against environmental, social and governance criteria.
Strategy
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
Identifying and resolving legal and regulatory issues, and advising 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
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.
Financial
Acumen
Understanding of the financial drivers of a business. Experience in financial reporting and corporate
financial management.
Technology
Experience via direct line accountability for managing significant technology functions or major
project implementations.
-
-
-
-
9
9
9
8
7
9
9
3
9
9
9
5
66
Lendlease Annual Report 2023
Engagement
As an international company and having regard to the material scale
of projects, the Board program is formulated to reflect the geographic
spread of Lendlease businesses.
• Engagement with Australia Regional
Leadership Team. (June 2023)
• Town Hall with Australia regional staff.
(August 2022)
Americas
• Review and site visit of the 1
Java, Claremont Hall and 4 Hudson
Square projects. Interaction with
senior project leaders and area site
viewings. (October 2022)
• Review and site visit of Southbank
(The Reed) and Lakeshore East (Porte)
Chicago Projects. (October 2022)
• Engagement with Americas Regional
Leadership team in New York and
Chicago offices. (October 2022)
• Town Hall with Americas regional
staff. (October 2022)
Europe
• Review and site visit of The Elephant,
International Quarter London and
KGX projects. (July 2022)
• Review and site visit of MIND and
Milano Santa Giulia North projects.
Client meetings held during site visits.
(July 2022)
• Presentation from local expert on
Europe, and Italy, and insights into
the local market and political agenda.
(July 2022)
• Engagement with Europe Regional
Leadership Team. (July 2022)
• Town Hall with Europe regional staff.
(July 2022)
Stakeholder engagement
The Board members, led by the Chairman,
maintain an active and extensive
engagement program to represent the
interests of the Group. The Chairman acts
as a spokesperson and regularly meets
with customers, investors, governments
and media. In February 2022, the
Board endorsed a refreshed investor
engagement program to encourage two
way communications with the investment
community. As part of this, a presentation
detailing the scope of the Board
activities and focus areas for the Board
Committees was made available on the
ASX announcements platform and on the
Lendlease website in June 2023.
The Annual General Meeting (AGM) has
always been an important date in our
calendar and provides our securityholders
with a valuable opportunity to
communicate with the Board. In 2023,
Lendlease will continue to hold the AGM
in a hybrid format. This will provide
both an ‘in-person’ and virtual component
which will allows greater access to
our securityholders to participate, ask
questions and vote on all resolutions.
Board engagement with our people
The Board members have approved
a code of conduct which articulates
the standards of behaviour expected
of all our people. The tone is ‘set at
the top’ and Board members believe
that meeting with our people, in
addition to information received in
formal meetings on the organisation’s
culture, is an important element of
reinforcing the Lendlease values. The
Board members meet regularly with local
Lendlease management and employees.
These events typically take 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.
In FY23, these events occurred in all
Lendlease regions.
Board regional program FY23
The Board program typically comprises
formal meetings and additional business
briefings, presentations from internal
and external sources, project site visits,
employee events and meetings with key
stakeholders. These are scheduled in each
of the regions where Lendlease operates
on a rotational basis.
The Board views that these program
activities – in addition to the
formal, scheduled Board and Committee
meetings – are important for Board
members to receive a greater
understanding of our people and our
business and a deep understanding of the
activities and operations. The Chair works
with the Company Secretary to plan the
yearly program. Depending on the time of
year, the program runs for a minimum of
two days and up to five days where more
detailed project reviews are required.
Program for the
reporting period
between 1 July 2022
and 30 June 2023.
Board program activities
undertaken during the reporting
period are listed below.
Asia
• Site visit of Tun Razak Exchange (TRX)
Malaysia (Retail and Residences).
(March 2023)
• Received a briefing from an external
speaker on the economic landscape in
Asia including sovereign risk and trade
issues. (March 2023)
• Engagement with Asia Regional
Leadership Team. (March 2023)
• Town Hall with Asia regional staff.
(March 2023)
Australia
• Engagement with regional business
leaders to provide updates
and overview of key regional
business issues.
• Review of the Victoria Cross Project
followed by a site visit. (May 2023)
Governance
67
Board Project Assessments
A key responsibility of the Board is to approve and oversee the
implementation of the strategy so that the Group can pursue its
integrated business model in targeted global gateway cities around
the world
Site visits allow the Board to speak to
project teams about the challenges and
opportunities in the delivery of a project,
enabling these to be appreciated in a
fuller geographic and strategic context.
These activities undertaken by the Board
are examples of how the Board oversees
management and delivering projects in
accordance with the Group’s strategy.
Tun Razak Exchange, Malaysia (The
Exchange, TRX)
The Exchange TRX project in Malaysia is
presented as a case study of the activities
that the Board undertakes in reviewing
and assessing strategic opportunities and
sustains competitive advantage of the
integrated model to originate, fund and
deliver major urban projects.
The Exchange TRX is Lendlease's largest
integrated development in Asia. It is
located in the heart of Kuala Lumpur,
Malaysia and was identified by the
Malaysian Government to transform the
broader TRX precinct into a world-class
business and financial hub. The project
will encompass a new international
financial district underpinned by a
world-class residential, retail, leisure and
cultural offering.
Commencing in 2015, the Board was
introduced to the opportunity to deliver
a landmark, mixed-use development at
The Exchange, Malaysia. The project is
delivered through Lendlease's integrated
business model, allowing the project
team to respond to the needs of all
stakeholders throughout entire property
value chain. After careful consideration,
approval was provided to bid for the
project. Due to the project’s size and
significance, the Board has continued
to receive updates on the progress of
The Exchange and initially visited the
project in 2018, prior to commencement
of construction. Throughout 2020 and
2021 when travel restrictions were
in place, the Board visited the site
virtually, where an aerial flythrough
of the project was provided to show
the pace of construction since the
Board's last in-person visit. Updates
on the project were also provided
at regular intervals throughout this
period. These updates have centred on
financial and commercial assessments,
key risks, safety and sustainability issues
and macro economic indicators. Whilst
not exhaustive, these factors were
indicative of the issues considered during
Boardroom discussions. In March 2023,
the Board returned in person to see
the progress of the retail centre and
the residences. In visiting the site
over a longer time frame, the Board’s
discussions on the project’s risks and
opportunities were appreciated in a fuller
geographic context.
The Board’s interactions with The
Exchange team, before, during and after
completion of delivery, including visits,
tours, presentations and project team
interactions are indicative of the scrutiny
and governance undertaken by the Board
to oversee the delivery of projects in
accordance with the Group’s strategy.
Top: Kuala Lumpur, Board Visit to
TRX Exchange
68
Lendlease Annual Report 2023
Supporting
value creation
The Board recognises 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.
Health and Safety
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.
The Board, Risk and Sustainability
Committees 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.
Activities and actions:
• Received an independent report on and
discussed the measures and actions
taken in response to the supply chain
fatality that occurred on our operations
in FY23. No employee fatalities were
reported in FY23.
• Assessed the remuneration adjustments
to be made following the supply chain
fatality, using a safety decision tree.
• Continued to receive reports from
management on the steps taken to
reduce incidents through continuous
improvement measures, and by
advocating for industry change.
• Oversighted the development of a
revised health and safety strategy
which addresses the '3Ps', being
Physical Safety, Product Safety and
Psychological Safety.
• Received reports on the significant
EH&S focus given during the investment,
design and procurement phase of
a project.
• Continued to oversight improvements
to reporting noting a shift from
compliance checks to forward focused
risk management.
• Continued to receive quarterly updates
on project metrics which are treated as a
leading indicator of safety risk.
• Received deep dive presentations from
the CEOs and Safety leads in each
region showing the progress of the '3Ps'
strategy and EH&S innovation.
Material Issue:
Delivering securityholder returns.
Maintaining strong capital management to
enable investment in our future pipeline.
The Board, 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.
Activities and actions:
• Ongoing monitoring and review of
Treasury management was a key
focus area to ensure that Lendlease
remains within the target gearing
ranges and maintains investment grade
credit ratings.
• Continued to consider project approvals
in the context of the Portfolio
Management Framework, with the
object to maximising long-term
securityholder value.
• Reviewed and approved the revised
Limits of Authority for the Group
in conjunction with the revised
Risk Appetite Framework to further
enhance risk maturity and ensure that
they remained fit-for-purpose within
the organisation.
• Commenced an audit tender
process during FY23, which remains
under consideration.
• Reviewed and approved the
implementation of a simplified Operating
Profit metric in order to provide a
more transparent assessment of financial
performance, with only material one-off
items taken below the line outside of
Core Operating Profit.
• Received a report following completion
of an external assurance review of the
Internal Audit function, which concluded
that the function was operating to the
highest rating available in relation to
Standard compliance.
Governance
69
Our Customers
Our People
Sustainability
Material Issue:
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.
Activities and actions:
• Continued to engage with clients,
investors and other stakeholders
at various industry functions, site
visits, events and meetings.
• Continued to receive reports
on customer engagement, types
of complaints and resolution
timeframes for every region, under
the Group Customer Complaint
Handling & Feedback Policy.
• Continued to receive reports on the
progress against prescribed metrics
for the Australian Government
Payment Times Reporting Scheme
for small business suppliers.
•
•
Engaged with securityholders
through meetings and events
including the Annual General
Meeting (AGM) and webcasts.
Provided access to a greater
number of securityholders at the
AGM, by facilitating attendance via
a hybrid meeting.
• Released on the ASX a presentation
of the Board Committee areas of
focus for FY23 to engage with a
wide audience on matters discussed
during Chair-led investor meetings.
Material Issue:
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.
Activities and actions:
• Continued to refine remuneration
policies to align with market practice,
for example, revising the Executive
MSH policy to include all equity
awards subject to a time-based hurdle.
• Continued the program of Board
refreshment by actively reviewing
Board composition against the skills
matrix. Appointed Margaret Lui to the
Board effective December 2022.
• Continued to oversee the
implementation of the human capital
strategy, review mission critical
capabilities and endorsed refreshed
global leadership programs.
• Continued to receive reports on
building a more inclusive culture
and supported the introduction of
a flagship program focused on
acceleration of under-represented
female and racial minority talent.
• Received a report on the
global roadmap to Wellbeing
program, supported the “You
Can’t Ask That” series promoting
employee engagement.
• Received reports on the recalibration
of globally consistent gender
pay reporting.
•
Supported the introduction of an
enhanced and market-leading parental
leave benefit in Australia.
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 the Sustainability Committee
engaged in the following activities to help
deliver inclusive, healthy and adaptable places
that can thrive through change.
Activities and actions:
• Received quarterly reports tracking progress
against the Group’s two sustainability targets
to reflect the Group’s commitment to:
– A ‘Net Zero Carbon’ for Scope 1 and 2
emissions by 2025, and ‘Absolute Zero
Carbon’ by 2040
– Delivering $250m of measured social value
by 2025.
• Received regular reports on ethical supply
chain within the Group to ameliorate the risk
of material substitution and modern slavery.
• Continued to receive reports at every meeting
on the progress against the Task Force
on Climate-Related Financial Disclosures risk
assessment and reporting framework.
• Received reports on the progress of the
initiatives outlined in the Group’s second
Elevate RAP.
•
In tandem with the Audit Committee,
received a report on Lendlease's readiness
for adoption of enhanced climate and
sustainability reporting under the proposed
International Sustainability Standards Board
exposure drafts. The report concluded that
Lendlease is well placed given it has already
adopted Task Force on Climate-Related
Financial Disclosures (“TCFD”) reporting
since FY19.
•
Launched the #MissionZero and
#ALittleHelpToThrive campaigns to support
our the 2025 Carbon and Social Value targets.
• Received validation from the Science Based
Target initiatives ("SBTi") on our Mission
Zero targets.
70
Lendlease Annual Report 2023
Board of Directors’ information
Interests in Capital
The interests of each of the Directors in the stapled securities of the Group at 14 August 2023 set out below. The current Non Executive
Directors acquired Lendlease securities using their own funds.
Directors
M J Ullmer
A P Lombardo
P M Coffey
N R Collishaw
D P Craig
E M Proust1
N M Wakefield Evans
R F Welanetz
A S Chan ("Margaret Lui")2
Former Directors
J S Hemstritch
Securities
held directly
2023
Securities
held
beneficially/
indirectly
2023
Total 2023
Securities
held directly
2022
Securities
held
beneficially/
indirectly
2022
Total 2022
-
-
-
-
-
-
20,000
175,000
175,000
-
125,000
125,000
51,216
25,000
106,000
83,061
38,000
-
3,000
9,764
51,216
25,000
106,000
83,061
38,000
20,000
3,000
9,764-
-
-
-
-
-
7,000
-
21,216
14,500
73,061
68,061
34,379
-
-
9,764
21,216
14,500
73,061
68,061
34,379
7,000
-
33,061
33,061
1. As at 30 June 2023 E M Proust holds through her super fund, $500,000 face value of Lendlease Green Bonds.
2. As A S Chan was appointed to the Board on 1 December 2022, a nil balance is shown at the beginning of the financial year.
Sustainability Committee
The Sustainability Committee assists the
Board in monitoring the decisions and
actions of management in achieving
Lendlease’s aspiration to be a sustainable
organisation. The Committee has
oversight of health and safety, ESG
matters, the Lendlease Foundation,
modern slavery and the Group’s
Elevate RAP.
Nomination Committee
The Nomination Committee has
responsibility for Board renewal,
composition and Director development
and oversees the reviews of Board,
Committee and Director performance.
Workplans for each of the Committees
was undertaken.
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 and
inclusion, 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 the role
of considering, and if approved,
recommending to the Board for
approval major transactions as referred
to the Committee by the Global
Investment Committee.
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 2023, 11 Board
meetings were held. Five face to face
meetings were held in Australia and one
each in the UK, Asia and the Americas.
Three meetings were held virtually. From
time to time, special subcommittees are
also constituted to deal with specific
matters. During the reporting period, two
such subcommittee meetings were held.
Matters were also dealt with as required
by circular resolution.
Overview of Board Committees
The Board recognises the essential role
of Committees in guiding the Company
on specific issues. There are five
standing Board Committees to assist,
advise and make recommendations to
the Board on matters falling within their
areas of responsibility. Each Committee
consists of independent, Non Executive
Directors. The Chair of each Committee
is not a Chair of other Committees, or
Chair of the Board. Each Committee
is governed by a formal Charter
setting out its objectives, roles and
responsibilities, composition, structure,
membership requirements and operation.
During the reporting period a review
of the accompanying Charters and
Governance
71
Attendance at Meetings of Directors 1 July 2022 to 30 June 2023
The number of Board and Board Committee meetings held, and the number of meetings attended by each Director during the 20223
financial year, are set out in the tables below.
(MH) Number of meetings held. (MA) Number of meetings attended.
Membership
Board
(Chair M J Ullmer)
Board Subcommittee1
Nomination
Committee2(Chair R
F Welanetz)
Audit Committee
(Chair D P Craig)
MH3
MA
MH
MA
MH
MA
MH
MA
M J Ullmer
A P Lombardo4
N M Wakefield Evans
D P Craig
P M Coffey
E M Proust
R F Welanetz
N R Collishaw
A S Chan ("Margaret Lui")6
Former Member
J S Hemstritch7
11
11
11
11
11
11
11
11
6
5
11
11
11
11
11
11
11
11
6
5
1
1
2
1
2
-
-
2
-
-
1
1
2
1
2
-
-
2
-
-
8
8
8
8
8
8
8
8
4
4
8
8
8
8
8
8
8
8
4
4
4
4
4
4
25
25
25
4
1
1
4
4
4
4
2
2
2
4
1
1
1. These subcommittee meetings of the Board or its Committees were convened during the reporting period to address specific issues. Only the subcommittee members
attended the relevant meeting.
2. Meetings are held in conjunction with a Board meeting.
3. Reflects the number of meetings held during the time the Director held office during the year. 1 out of 11 meetings were out of schedule Board teleconferences constituted to
address specific issues.
4. A P Lombardo is not a member of the Board Subcommittee or any of the five standing Board Committees, but as the Global CEO and Managing Director, has a standing
invitation to all these meetings, where deemed appropriate.
5. P M Coffey, E M Proust and R F Welanetz are not members of the Audit Committee but attend the meeting at the half and full year financial statements review.
6. A S Chan was appointed to the Board on 1 December 2022. The number of meetings attended reflects the number of meetings since Ms Chan's appointment.
7. J S Hemstritch retired from the Board on 18 November 2022.
Membership
Risk Committee
(Chair P M Coffey)
Sustainability
Committee(Chair N M
Wakefield Evans)
People and Culture
(Chair E M Proust)
MH
MA
MH
MA
MH
MA
M J Ullmer
A P Lombardo1
N M Wakefield Evans
D P Craig
P M Coffey
E M Proust
R F Welanetz
N R Collishaw
3A S Chan ("Margaret Lui")
Former Member
J S Hemstritch4
7
7
7
7
7
7
7
7
3
4
7
7
7
7
7
7
7
7
3
4
4
4
4
-
4
4
4
-
1
-
4
4
4
-
4
4
4
-
1
-
6
6
32
6
42
6
6
6
2
2
6
6
3
6
4
6
6
6
2
2
1. A P Lombardo is not a member of any of the five standing Board Committees, but as the Global CEO and Managing Director, has a standing invitation to all of these meetings,
where deemed appropriate.
2. P M Coffey and N M Wakefield Evans are not members of the People & Culture Committee but attended to consider matters relevant to annual executive performance, talent
management and remuneration.
3. A S Chan was appointed to the Board on 1 December 2022. The number of meetings attended reflects the number of meetings since Ms Chan's appointment.
4. J S Hemstritch retired from the Board on 18 November 2022.
We invite you to read the remuneration
report outlining the outcomes for key
management personnel during the year.
M J Ullmer, AO
Chairman
Elizabeth Proust, AO
Chairman, People & Culture Committee
72
Lendlease Annual Report 2023
Remuneration Report
Message from the Board
During FY23 the Group faced challenging
external market conditions, fuelled
by significant inflationary pressures,
aggressive increases in official interest
rates, supply chain disruption and
geopolitical uncertainty. The Group’s
Statutory Loss after Tax for the year
was $232m, after recording a provision
of $295m due to retrospective UK
Government action, a revaluation loss of
$175m relating to property revaluations in
the Investments segment, and a Non core
segment loss of $19m.
Notwithstanding these external
challenges, the Group made significant
progress on our strategic objectives
as part of the ‘Create’ phase of our
five-year Reset, Create, Thrive business
strategy. This includes progress towards
our Investments led business model,
leveraging our development pipeline and
our construction capability, as well as
continued progress in achieving our ESG
targets. The Group’s core Operating Profit
after Tax fell by 7 per cent to $257m.
Core Operating Earnings per Security of
37.3 cents represents a Return on Equity
of 3.8 per cent. Distributions per Security
totalled 16.0 cents, unchanged from FY22.
This represents a payout ratio of 43 per
cent of OPAT.
The safety of our people and those
working with us is our highest priority
and a core focus for the Committee
during the year. Whilst recognising the
Group’s success in achieving a record
low Critical Injury Frequency Rate, we
were saddened during the year with
the loss of one of our sub-contractor’s
worker. While the work was not under
the operational control of Lendlease, we
nevertheless paused site operations and
undertook a global safety review. The
safety review enabled us time to reflect
on the learnings from this incident and
reinforced our commitment to advocacy
for industry change to meet the safety
standards expected by Lendlease.
FY23 Executive Reward Strategy
and outcomes
Significant changes to the Executive
Reward Strategy were made in FY22
following securityholder engagement
to enhance the structure of our
remuneration framework. As a result,
minimal changes were required to the
Executive Reward Strategy during FY23.
The Group did not meet our performance
targets for Operating Profit, Completions
and Construction EBITDA margin.
However, there was on or above target
performance across Investments EBITDA,
Safety, Sustainability, Customer and
People KPIs.
Given the Group’s financial performance
and a fatality of a sub-contractor, the
Board exercised downward discretion to
STA scorecard outcomes, resulting in
reduced bonus awards to the Global
Leadership Team. The STA payment for
the CEO reflects 32% of maximum, and
for the other KMP ranged between 25%
and 46% of maximum.
There was no vesting of the 2021 LTA
given the performance hurdles were
not met.
We believe that the remuneration
outcomes for executives appropriately
reflect the performance of the Group
and are aligned to the experience of
our securityholders.
Non-Executive Director fees
The fees for the Chairman and
Non-Executive Directors are reviewed
and benchmarked annually against
relevant comparators.
No increases to Non-Executive Directors
fees were made in FY23.
Looking ahead
The Group enters FY24 having made
significant progress against our strategic
objectives. We are excited with the
opportunities presented by our record
development pipeline, which supports the
delivery of our Portfolio Management
Framework return targets.
At the same time, we acknowledge
the impact the challenging market
environment has had on our financial
performance, and hence on returns to
securityholders. Accordingly, in FY24 the
Group will continue to focus on improving
our financial performance. As part of
this we continue to seek opportunities to
improve the efficiency of our operations,
and recently announced the difficult
decision to reduce our workforce by a
further 10%.
The STA scorecard has been refined to
provide greater emphasis on financial
return and to focus on fewer measures.
In addition, the LTA framework has
been amended to replace the FUM
growth measure with Investments
ROIC, providing closer alignment to
securityholder outcomes.
The Group will build on the significant
improvement in employee engagement
achieved in FY23. The Committee will
introduce an all-employee equity plan to
further align the interests of all employees
across the globe with the performance of
the Group and our securityholders.
Governance
73
FY23 Remuneration Report Snapshot32%of Maximum STA awarded to Global CEO(KMP STA outcomes range from 25% to 46% of Maximum STA opportunity)76%of Global CEO Total Maximum Remuneration is performance basedNil LTA awards vestedLong Term Performance targets (relative TSR, ROE and FUM) failed to meet challenging thresholdsFY24 ChangesLTA changeReplace CAGR % in FUM performance hurdle with an Investments Return on Invested Capital (IM ROIC) measureSTA changeIncrease Financial KPI weighting to 70% and reduce Non-Financial KPI weighting to 30%New global employee equity plan Plan to be introduced in FY24 75
76
77
78
78
79
81
81
82
82
83
84
85
85
86
87
90
90
91
91
92
93
94
74
Lendlease Annual Report 2023
Contents
KMPs covered by this report
Executive Reward Strategy
Our Remuneration Framework
Fixed Remuneration
Short Term Award (STA)
Long Term Award (LTA)
FY23 Global CEO STA Scorecard
Impact of Safety Incidents on FY23 STA Outcomes
FY23 Short Term Performance Outcomes
FY23 Long Term Performance Outcomes
Alignment Between Remuneration Outcomes and
Securityholder Experience
Adjustments to Denis Hickey's Incentive Awards
Total Remuneration Realised
Executive Service Agreements
Non Executive Director Fee Policy
Remuneration Governance and Risk Management
Other Statutory Disclosures
FY23 Executive Statutory Remuneration
FY23 Non Executive Director Statutory Remuneration
FY23 Executive Equity Holdings
Executive Equity Based Remuneration - Deferred Securities
Executive Equity Based Remuneration - Long Term Awards
FY23 Non Executive Director Equity Holdings
Abbreviations
AGM
CAGR
CIFR
CSAT
FUM
FY22
FY23
GDV
GLT
GMR
KMP
KPI
Annual General Meeting
Compound Annual Growth Rate
Critical Incident Frequency Rate
Customer Satisfaction
Funds Under Management
Financial year ending 30 June 2022
Financial year ending 30 June 2023
Google Development Ventures
Global Leadership Team
Global Minimum Requirements
Key Management Personnel
Key Performance Indicator
LTA
LTI
PMF
ROE
ROIC
RSA
RTSR
SBP
STA
STI
TPV
Long Term Award
Long Term Incentive
Portfolio Management Framework
Return on Equity
Return on Invested Capital
Restricted Securities Award
Relative Total Shareholder Return
Security Based Payment
Short Term Award
Short Term Incentive
Total Package Value
VWAP
Volume Weighted Average Price
Governance
75
KMPs covered by this report
Name
Position
Term as KMP
People &
Culture Committee
Non Executive KMP
Michael Ullmer
Philip Coffey
Independent Non Executive Chairman
Independent Non Executive Director
Nicholas Collishaw
Independent Non Executive Director
David Craig
Jane Hemstritch1
Elizabeth Proust
Independent Non Executive Director
Independent Non Executive Director
Independent Non Executive Director
Nicola Wakefield Evans
Independent Non Executive Director
Robert Welanetz
Margaret Lui2
Executive KMP3
Anthony Lombardo
Dale Connor
Simon Dixon
Justin Gabbani
Claire Johnston4
Frank Krile
Neil Martin5
Former Executive KMP
Independent Non Executive Director
Independent Non Executive Director
Global CEO
CEO, Australia
Group Chief Financial Officer
CEO, Asia
CEO, Americas
Group Chief Risk Officer
CEO, Europe
X
X
X
Chair
X
X
Full Year
Full Year
Full Year
Full Year
Part Year
Full Year
Full Year
Full Year
Part Year
Full Year
Full Year
Full Year
Full Year
Part Year
Full Year
Full Year
Denis Hickey6
CEO, Americas and Global Chief Operating Officer
Part Year
1. Ceased as NED on 18 November 2022.
2. Appointed 1 December 2022.
3. Whilst the majority of Executive KMP are male, 36% of the Lendlease Global Leadership Team are female.
4. Appointed 1 November 2022.
5. Neil ceased as KMP on 30 June 2023, and was replaced by Andrea Ruckstuhl in the role of CEO, Europe commencing 3 July 2023.
6. Ceased as KMP on 31 October 2022.
Note: The term 'Executives' used throughout this Remuneration Report refers to the Executive KMP listed above, unless
stated otherwise.
76
Lendlease Annual Report 2023
Executive Reward Strategy
Our remuneration framework is designed to support our strategy and
reinforce our culture and values.
Our Purpose
We create places where communities thrive.
Our Strategy
Employ our placemaking expertise and integrated business model in global gateway cities
to deliver urban projects and investments that generate social, environmental and economic value.
Remuneration Principles
Remuneration at Lendlease should be:
Aligned with securityholder interestsTransparent and easy to communicateAligned with team behaviours and enterprise leadershipMarket competitive to retain highly capable executivesBalanced with a significant portion of remuneration at risk, which is only earned for outstanding performanceLonger dated and aligned to our earnings profile, reflecting the importance of urbanisation projectsRisk management focused with clear practices that minimise potential conflicts of interest and enable effective and aligned decision making Governance
77
Our Remuneration Framework
Fixed Remuneration
Short Term Award (STA)
Long Term Award (LTA)
Purpose
To attract and retain highly capable
executive talent.
Fixed remuneration is
benchmarked against relevant
comparator companies to assess
market competitiveness.
Considers the relative size, scale
and complexity of roles to enable a
fair comparison.
Sustained performance and
leadership as an Executive.
Approach
Link to Performance
To provide focus on key
strategic priorities in the relevant
financial year.
STA is linked to a balanced
scorecard representing key
strategic priorities aligned to
delivering the Group Strategy and
securityholder returns.
Delivered as 50% cash and 50%
deferred as Lendlease securities
released in two equal tranches after
one and two years.
STA scorecards are designed to
include a mix of financial and non-
financial performance targets for the
relevant financial year:
• Financial (65%)
• Non-Financial (35%).
To reward for delivering sustained long
term securityholder value.
LTA provides an annual grant of ‘at-
risk’ equity to reward for delivering the
Group Strategy, aligned with long term
securityholder returns.
Delivered as rights to Lendlease
securities which are released in four
equal tranches at the end of Y3, Y4, Y5
and Y6.
LTA is linked to forward-looking, three-
year performance under:
• Relative TSR (1/3)
• Return on Equity (1/3)
• Growth in Funds Under Management1
(FUM) (1/3).
Award value is linked to security price
movements over three to six years.
Governance
The People & Culture Committee and the Board review our remuneration principles and remuneration framework as
well as determine the STA and LTA outcomes for Executive KMP, which remain subject to the Board's discretion to
reduce or forfiet any unvested awards. The Board retains the 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 would be unwarranted or
inappropriate. Additionally, the Global CEO LTA is submitted for securityholder approval at the AGM.
For more information, refer to the 'Remuneration Governance and Risk Management' section.
1. Growth in FUM will be replaced with an Investments Return on Invested Capital (IM ROIC) measure from FY24 onwards.
Executive Reward Strategy Structure
The following diagram illustrates the structure of the Executive Reward Strategy:
Remuneration Mix
Maximum remuneration mix for the Global CEO and Executives (excluding the Group Chief Risk Officer1) is as follows:
1The remuneration mix for the Group Chief Risk Officer is: 28% Fixed Remuneration, 31% Maximum STA and 41% Maximum LTA.
Fixed RemunerationYear 1Year 2Year 3Year 4Year 5Year 6STAEnd of deferral / performance periodLTAPerformance Based33%33%Cash 16.5%Deferred 16.5%Fixed RemunerationTarget STATarget LTAROE 11%FUM 11%Relative TSR 11%33% 78
Lendlease Annual Report 2023
Fixed Remuneration
This section presents our approach to setting Fixed Remuneration.
Design
How Fixed Remuneration Works
Benchmarking Approach
• Quantum and remuneration mix are benchmarked to test that total remuneration remains
market competitive.
• Reviewed periodically as part of the Group's Annual Compensation Review process.
• Considers the relative size, scale and complexity of roles to enable a fair comparison.
• Benchmarking considers fixed and total remuneration with reference to the market median and
75th percentile.
•
Primary market benchmarking compares companies with relative revenue and market capitalisation.
• To supplement the above, companies operating in similar industries and those that Lendlease compete
for talent are also considered, such as Charter Hall Group, Dexus, Goodman Group, GPT Group,
Mirvac Group, Scentre Group, Stockland and Vicinity Centres.
Short Term Award (STA)
This section presents the key features of the STA plan.
STA Design
Eligibility
Quantum
Funding
Key Performance Indicators
Delivery
FY24 STA Changes
How the STA Works
• Global CEO and Executives.
•
For FY23, target STA opportunity was as follows:
– Global CEO: 100% of Fixed Remuneration
– Executives (excluding Group Chief Risk Officer): 100% of Fixed Remuneration
– Group Chief Risk Officer: 80% of Fixed Remuneration.
• The minimum possible STA outcome is zero.
• The maximum STA outcome is limited to 139% of target STA opportunity for the Global CEO and
140% of target STA opportunity for other Executives.
• The Board determines the pool of funds to be made available to reward Executives, with reference to
Group financial and non financial performance.
• The Board examines safety performance and the overall health of the business (including a broader
set of metrics around origination, sustainability and how we have managed risk).
• Global CEO and Executive scorecards, including:
– 65% Financial Performance (Group Operating Profit After Tax, Development - Completions,
Construction - EBITDA margin, Investment Management - EBITDA margin)
– 35% Non Financial Performance (safety, sustainability, customer and people).
• Refer to page 81 for a summary of the FY23 Global CEO scorecard.
•
Lendlease is committed to the safety and wellbeing of all of its employees. Whilst the assessment
is not structured formulaically or as a ‘gateway’ measure, health and safety outcomes are taken into
consideration by the Board in assessing the appropriateness of STA outcomes.
• The People & Culture Committee considers feedback from multiple sources to consider ‘how’
performance outcomes are achieved:
– Executive input: Group Chief Financial Officer and Group Chief Risk Officer
– Board committees: the Audit Committee, Risk Committee, and Sustainability Committee.
50% paid as cash in September following the assessment of performance.
50% deferred as Lendlease securities released in two equal tranches after one and two years.
•
•
The STA scorecards provide a metricated approach to determining the annual incentive outcomes based on key financial and
non-financial measures. Since the introduction in FY22, the scorecard design has undergone an annual review to ensure it
continues to drive organisational performance and deliver the Group Strategy.
In FY24, the STA Scorecard will increase the Financial KPI wieghting from 65% to 70%, and reduce the Non-Financial KPI
weighting from 35% to 30%. This change reflects the importance of improving the financial performance of the business in FY24.
Governance
79
Long Term Award (LTA)
This section presents the key features of the 2023 LTA (granted in September 2022).
LTA Design
Eligibility
Quantum
Delivery
Determining the
Number of
Performance Rights
Performance Period
Deferral
How the LTA Works
• Global CEO and Executives.
•
The maximum face value of the 2023 LTA award granted in September 2022 is as follows:
– Global CEO: 178% of Fixed Remuneration
– Executives (excluding Group Chief Risk Officer): 180% of Fixed Remuneration
– Group Chief Risk Officer: 144% of Fixed Remuneration.
•
•
•
•
•
•
•
•
Rights to acquire securities, subject to specific performance conditions and continued tenure.
The number of performance rights is adjusted up or down at vesting based on performance over the
assessment period.
The award may be settled in cash or other means at the Board’s discretion.
Face value - VWAP of stapled securities traded on the ASX over the 20 trading days prior to the release of the full year
results preceding the grant date.
Three years.
Released in four equal tranches at the end of Y3, Y4, Y5 and Y6.
The timeframe reflects a balance between reward that motivates Executives while reflecting the ‘long tail’ of
profitability and risk associated with ‘today’s decisions’.
The Board believes that these measures provide a suitable link to long term securityholder value creation.
• 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.
Market Measure
Non Market Measures
Relative Total
Securityholder (RTSR)
– 1/3
•
TSR incentivises
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.
Rationale
Average Operating Return on Equity (ROE)
– 1/3
CAGR % in FUM – 1/3
• Operating ROE reflects the capital
• CAGR % in FUM
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.
reflects our key strategic
objective of increasing
our Investments platform
globally, achieved through
our internal development
pipeline, creating new
products, using value-add
strategies and through
external market acquisitions.
Performance Hurdles
Definition
•
•
Target
Setting
TSR is measured
by the growth in
security price and any
dividends/distributions
paid during the
performance period.
• Operating ROE is calculated as the
Group’s Operating Profit After Tax
divided by the arithmetic average
of beginning, half and year end
securityholders’ equity.
•
Performance is based on the average
Operating ROE results over the three
year performance period.
• CAGR % in FUM
is calculated as the
compounded annual growth
rate of Lendlease’s
funds under management
over the three year
performance period.
TSR is measured
against companies that
comprise the Standard
& Poor’s (S&P)/
Australian Securities
Exchange (ASX)
100 index.
• Operating ROE target is reviewed
annually and is set within the
published range of the Group’s Portfolio
Management Framework which is
currently between 8% and 10%.
•
FUM hurdles are reviewed
annually and are set with
reference to the Group’s
operating plan.
• Operating ROE target aims to drive
outperformance without incentivising
excessive risk taking.
•
•
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 Board is conscious of the impact
that debt can have on the Operating
ROE result and has governance
protocols in place to monitor this.
80
Lendlease Annual Report 2023
LTA Design
How the LTA Works
Vesting Schedule (as
% of Maximum LTA)
RTSR
Percentile
Ranking
Below 50th
At the 50th
At or above
the 50th and
below the
75th
75th or
greater
% of Maximum LTA
Nil
40%
Average
Operating ROE
Below threshold
At threshold
Straight line vesting
between 40% and 100%
Between threshold
and maximum
% of Maximum LTA
CAGR % in
FUM
% of
Maximum LTA
Nil
0%
Straight line vesting
between 0%
and 100%
Below threshold
At threshold
Between
threshold and
maximum
Nil
0%
Straight line
vesting
between 0%
and 100%
100%
100%
At or
above maximum
100%
At or above
maximum
Retesting
Distribution
• No retesting.
•
If the performance hurdle is not met at the time of testing, the awards are forfeited.
• Distributions are not paid, unless and until vesting conditions are met.
FY24 LTA Changes
Replacing CAGR % in FUM with Investments Return on Invested Capital (IM ROIC)
In 2020, growth in FUM was added to the LTA as a third measure to support the key strategic objective of increasing Lendlease’s
Investments platform globally.
Given the Group’s strategic focus to become Investments led, retention of an Investments performance metric is an important
component of our reward framework. To encourage a disciplined growth profile, and reinforce alignment to the Group’s stated
Portfolio Management Framework (PMF), IM ROIC will be introduced into the LTA metric assessment from FY24, replacing the
FUM growth element as an equally weighted measure. This long term measure reflects the segment’s capital intensive nature and
will assess the ability to generate acceptable earnings, which further aligns with the securityholder experience and a greater mix
of stable recurring earnings.
The FY24 IM ROIC target will be set within the range provided under the Group's Portfolio Management Framework which is
currently between 6% and 9%. The performance measurement will be based on the average IM ROIC results over the relevant
performance period.
Governance
81
FY23 Global CEO STA Scorecard
The Board in assessing STA outcomes for the CEO and the executive team have given consideration to both financial outcomes and
strategic progress.
KPI
Weighting
FY23 Result
Operating Profit After
Tax ($m)
35%
Financials
65%
Development –
Completions ($b)
Construction –
EBITDA margin (%)
Investments –
Management EBITDA
margin (%)
Safety – Critical
Incident Frequency
Rate (CIFR) (%)
Non
Financials
35%
Sustainability -
carbon emission
(000's tonnes)
Customer Satisfaction
(CSAT score)
People - Employee
Engagement (%)
10%
10%
10%
10%
7.5%
7.5%
10%
OPAT of $257m fell from FY22. This reflects
sustained challenging economic conditions and
investment for future growth together with the
impact of prior projects.
There were $3.6b of completions for the
year, comprised of $2.8b urban projects and
$0.8b of Communities development, noting the
delivery pipeline is still digesting pandemic
related delays, reflected by lower volumes.
Construction EBITDA margin was 1.2% for the
period, impacted by provisions which lowered
the segment margin by 0.8 percentage points.
37.5% result is above target and has
been delivered during a period of upfront
investment to build out the international funds
management platform. Board discretion to cap
outcome at target as detailed below.
FY23 CIFR result achieved above maximum
(represented by grey dot). Despite CIFR
achieving above maximum, the Board has
reduced the outcome under the safety
metric to target (represented by black dot)
after considering the subcontractor employee
fatality which occurred during the year as
discussed in the following section.
Continued significant progress made on
delivering long term goals, achieving carbon
emissions of 109k tonnes beating the target of
<135k tonnes.
Customer satisfaction of 7.9 is in line with FY22
results and has achieved target outcome.
Employee engagement of 62% has achieved
target outcome and an increase of 4
percentage points from FY22.
Adjusted Global CEO STA outcome
In reviewing the performance of the Global CEO against his STA scorecard, in addition to outcomes against the specific KPIs, the
Board also took into account a range of factors such as progress on the strategic agenda, the overall financial result, and safety.
The organisation has continued to make significant progress on its strategic agenda, which will support delivery of financial
returns within the PMF in future years.
Clearly the operating environment has had a significant negative effect on the return to securityholders in the current year, and it
is important to align STA outcomes to this – to a degree the scorecard mechanism delivers this. However, the Board exercised its
discretion to make a further downward adjustment in respect of the overall financial result.
The Board also took into account the impact of safety incidents – refer further to discussion in the section following.
Accordingly, the Board have exercised discretion to reduce the outcome on both the financial and non-financial KPIs.
• A total downwards adjustment of 15% has been applied to the metricated scorecard outcome for the Global CEO.
• The final adjusted Global CEO STA outcome is 32% of maximum opportunity.
Impact of Safety Incidents on FY23 STA Outcomes
Although no fatalities occurred on works under Lendlease operational control in FY23, we are deeply saddened by a fatal incident
involving a subcontractor worker that occurred on one of our project sites under the operational control of a supply chain partner.
We go beyond regulatory reporting requirements and report all incidents, working hours and fatalities on our sites as we do not
consider the lives of contractors, subcontractors, consultants and community members are any different to our employees. In assessing
potential remuneration adjustments in response to a fatality, we review the findings of an independent incident investigation. The
THRESHOLDMAXIMUMTHRESHOLDMAXIMUMTHRESHOLDMAXIMUMTHRESHOLDMAXIMUMTHRESHOLDMAXIMUMTHRESHOLDMAXIMUMTHRESHOLDMAXIMUMTHRESHOLDMAXIMUM
82
Lendlease Annual Report 2023
investigation includes an assessment of the degree of operational control for any associated work activities or hazards attributable
to Lendlease.
In line with the guiding principles for determining remuneration adjustments arising from safety incidents set out on page 81, the Board
considered the following key factors in assessing adjustments for FY23 along with CIFR performance globally:
• The Board is satisfied, based on material from internal and independent external sources currently available,
1 Java Street, New
York, USA
•
that this incident is not a result of a failure of Lendlease supervision as the relevant area was under
subcontractor management.
Lendlease is not subject to any prosecution from regulatory authorities, and it was confirmed the work site
was under the operational control of a supply chain partner.
• The region met its other EHS metrics targets for FY23.
Notwithstanding the above, the board recognises that there is an opportunity for management to continue to proactively manage
inconsistencies between local market custom, practices and application of our GMRs. Accordingly, the board has determined
to exercise discretion to adjust the former CEO, Americas and Global Chief Operating Officer's deferred STA on foot by 5%.
Similarly, FY23 bonus outcomes for other associated management roles have been reduced in accordance with the Board approved
adjustment range.
There are no material updates in relation to any ongoing investigations into past fatalities.
FY23 Short Term Performance Outcomes
The following table outlines the FY23 STA opportunity and outcomes for each Executive.
A$’0001
Anthony Lombardo
Dale Connor
Simon Dixon
Justin Gabbani
Claire Johnston5
Frank Krile
Neil Martin
Target STA
opportunity
Maximum STA
opportunity
Total STA
awarded
STA awarded -
cash2
STA awarded -
deferred3
1,800
1,200
1,000
919
824
800
1,263
2,500
1,680
1,400
1,286
1,154
1,120
1,768
810
658
500
597
330
400
442
405
329
250
299
165
200
221
405
329
250
299
165
200
221
Total STA
awarded as %
of Maximum
STA4
Total STA
forfeited as %
of Maximum
STA4
32%
39%
36%
46%
29%
36%
25%
68%
61%
64%
54%
71%
64%
75%
1. Remuneration is reported in AUD based on the 12 month average historic foreign exchange rates for FY23 (rounded to two decimal places): SGD 0.91 (applied to Justin
Gabbani), USD 0.67 (applied to Claire Johnston) and GBP 0.55 (applied to Neil Martin).
2. 50% of the FY23 STA is paid as cash in September 2023.
3. 50% of the FY23 STA is granted as Deferred Securities that will be released in two equal tranches after one and two years.
4. Rounded to the nearest decimal place
5. The FY23 STA for Claire Johnston reflects time as KMP (1 November 2022 to 30 June 2023).
FY23 Long Term Performance Outcomes
The table below presents the performance and vesting outcomes for awards that were tested in FY23. The Board sets challenging LTA
targets. The 2021 LTA was tested following the end of the financial year, resulting in nil vesting for FY23.
LTA1
Performance Period
1 July 2020 to 30 June 2023
2021 LTA
(3 years)
1 July 2021 to 30 June 2024
2022 LTA
(3 years)
1 July 2022 to 30 June 2025
2023 LTA
(3 years)
Performance
Hurdle2
Performance
Outcome
Vesting Outcome
Overall Vesting
Outcome (%
Maximum LTA)
% Maximum
LTA forfeited
Below Threshold
Below Threshold
Below Threshold
0%
0%
0%
0%
0%
Peformance period on going
RTSR
ROE
FUM
RTSR
ROE
FUM
RTSR
ROE
FUM
1. Refer Note 35 of the Notes to Consolidated Financial Statements for details of LTI / LTA Awards granted in prior financial years.
2. As noted in the FY24 LTA Changes section, Growth in FUM will be replaced with an Investments Return on Invested Capital (IM ROIC) measure from FY24 onwards.
ROE and FUM targets are set within the Group's Portfolio Management Framework. As these targets are considered commercially
sensitive, they are published following the end of the performance period. The ROE target for the 2021 LTA was 8.4%. The FUM target
for the 2021 LTA was 16% CAGR.
Governance
83
Alignment Between Remuneration Outcomes and Securityholder Experience
STA outcomes and securityholder experience
In the August 2021 Strategy Briefing1, the Global CEO set out the five year roadmap for delivering sustainable performance. At the
end of FY23, the Group reached the mid-point of the two-year Create phase of the five-year Reset; Create; Thrive roadmap to deliver
sustained, improved performance. The key elements of the Create phase involve continued growth in funds under management (FUM);
achieving scale in development; and maintaining execution excellence in construction.
Key outcomes delivered in FY23 against the strategic roadmap are:
• Growth in funds under management of 9% to $48.3bn.
• Development Work in Progress of $22.9bn providing continuing strong momentum as we enter FY24, on the pathway to delivering
annual completions in excess of $8bn by FY24.
• Secured One Circular Quay with an estimated end value of $3.1bn to support replenishing the Australian Development pipeline,
along with being announced as preferred developer for the Queen Victoria Market, with an estimated end value of $1.7bn.
• Delivering a resilient Construction result in the context of industry challenges.
• Refining the Construction platform's target portfolio to reflect a lower risk book going forward.
In applying the discretion embedded in the Executive Reward Strategy, the Board had regard to these and other factors when assessing
the appropriate balance between pay for performance in the form of STA and securityholder outcomes for FY23. Refer also to the
assessment of performance against the Global CEO STA scorecard set out on page 81.
1Refer to the ASX Announcement "Lendlease Strategy briefing" released on 30 August 2021.
Statutory Profit after Tax (PAT) Attributable to
Securityholders ($m)
Core Operating Profit After Tax (PAT)
Attributable to Securityholders ($m)
Total Dividends / Distributions ($m)
Statutory Earnings per Stapled Security (EPS)
(cents) excluding treasury securities
Core Operating Earnings per Stapled Security
(EPS) (cents)
Annual Total Securityholder Return (%)
Statutory Return on Equity (ROE) (%)1
Core Operating Return on Equity (ROE) (%)2
Closing Security Price as at 30 June ($)3
CEO STA outcome (% maximum opportunity)
Executive STA outcomes (%
maximum opportunity)
LTI / LTA vesting outcome5
FY19
467
632
237
80
111.5
(33)
7.4
10.1
13.00
0%
FY20
(310)
206
191
(51.8)
34.2
(2)
(4.7)
3.1
12.37
23%
FY21
222
377
186
32.5
54.8
(6)
3.2
5.4
11.50
30%4
FY22
(99)
276
110
(14.5)
40.1
(19)
(1.4)
4.0
9.11
48%
FY23
(232)
257
110
(34.0)
37.3
(13)
(3.4)
3.8
7.75
32%
17% - 33%
17% - 27%
17% - 40%
55% - 61%
25% - 46%
5.80%
0%
0%
0%
0%
1. Statutory 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.
2. Core Operating ROE is calculated as annual Core Operating Profit after Tax attributable to securityholders divided by the arithmetic average of beginning half year and year
end securityholders' equity. Core Operating ROE replaces Statutory ROE as an LTA hurdle from FY21 onwards as it better reflects the impact management have in creating
value for securityholders.
3. FY19 reflects 28 June 2019 closing security price.
4. Reflects STA outcome for the current Global CEO for the period 1 June 2021 to 30 June 2021. The STA outcome for the Former Group CEO was 0% for the period from 1 July
2020 to 31 May 2021.
5. Relating to the LTA grant where the performance period ends in the relevant financial year. The FY19 result relates to the 2017 LTI award.
84
Lendlease Annual Report 2023
Adjustments to Denis Hickey's incentive awards
GDV performance adjustment
In FY22, Denis Hickey was issued a one–off incentive aligned to key delivery milestones under the Google Development Ventures
(GDV) project over a 3 year performance period from 1 July 2021 to 30 June 2024. At the time of grant, this incentive reflected the
criticality and scope of the GDV project. The award is structured as follows:
• 70% of Performance Rights is subject to the achievement of the key milestones for GDV during the performance period, including
the securing of entitlements and capital plans and the commencement of construction for each project.
• 30% of Performance Rights is subject to customer satisfaction feedback from the client and internal stakeholders at key
touchpoints in the project life cycle, so that GDV milestones are not only delivered within the required timeframes but also to
an exceptional standard.
• There is no retesting on any portion of the GDV award that does not vest.
The Board retains an overarching discretion to reduce or forfeit any unvested awards if it considers that the vesting of the awards would
result in receipt of a benefit that was unwarranted or inappropriate.
For full details of the key terms of the incentive, refer to the Appendix 3G lodged with the ASX on 1 April 2022.
As Denis Hickey’s role was made redundant, under the terms of the award any unvested portion remains on foot.
In FY23, the Board exercised discretion to carry out an interim assessment on the 70% performance milestones component of the GDV.
As a result, it was determined that 51% of the total award will lapse based on past milestone outcomes during FY22 and FY23. The
balance of the grant remains subject to testing against key milestones and performance goals.
STA adjustment
In addition to the partial lapsing of the GDV award, the Board exercised further discretion to adjust down Denis Hickey’s deferred
STA on foot by 5%. This adjustment relates directly to the FY23 fatality. Refer to the section 'Impact of Safety Incidents on FY23 STA
Outcomes' for more information.
Governance
85
Total Remuneration Realised
The table below presents the remuneration paid to, or vested for, Executives in respect of FY23.
Fixed
Remuneration2
Previous
years' RSA
Previous
years'
deferred
securities
vested
FY23 STA
awarded
(cash
component)
Previous
years' LTA
awards
FY23 Total
Remuneration
Realised
Awards
forfeited or
lapsed
1,800
1,200
1,000
912
1,000
1,254
805
569
353
352
-
-
-
349
-
349
67
71
171
284
298
197
360
110
405
329
250
299
200
221
165
-
-
-
-
-
-
-
-
-
2,625
1,952
1,421
1,495
1,498
2,021
1,330
(2,790)
(2,122)
(900)
(689)
(720)
(2,426)
(824)
1,028
(1,100)
A$’0001
Current Executives
Anthony Lombardo
Dale Connor
Simon Dixon
Justin Gabbani
Frank Krile
Neil Martin
Claire Johnston3
Former Executives
Denis Hickey4
1. Remuneration is reported in AUD based on the 12 month average historic foreign exchange rates for FY23 (rounded to two decimal places): SGD 0.91 (applied to Justin
Gabbani), USD 0.67 (applied to Claire Johnston) and GBP 0.55 (applied to Neil Martin).
2. Fixed remuneration increases in FY23 applied to Justin Gabbani and Neil Martin.
3. Claire Johnston was appointed to the CEO, Americas role on 1 November 2022 and remuneration reflects time as KMP.
4. Denis Hickey ceased as KMP on 31 October 2022 and remuneration reflects time as KMP.
Definitions
Fixed Remuneration
Previous years' RSA and
security price growth / decline
Previous years' deferred
securities vested
Includes the TPV / Base Salary plus superannuation (where applicable) received during FY23.
Includes the RSA that was granted in September 2020 and reached the end of the deferral period on
30 June 2023. The value reflects the number of securities multiplied by the security price at the end
of the deferral period. 25 per cent of this award value will be released in September 2023 and the
remaining 75 per cent will be released in three equal tranches in September 2024, 2025 and 2026,
subject to malus provisions.
Also includes the value of the distribution equivalent amounts paid as cash on the RSA.
Includes previously granted deferred securities that are not subject to hurdles such as Deferred STA,
Deferred Equity Awards, and sign-on awards. The value reflects the number of securities that vested in
FY23 multiplied by the security price at vesting, and includes the value of any distribution equivalent
amounts received at vesting.
FY23 STA awarded
(cash component)
Reflects the 50% cash portion of the STA awarded in relation to FY23 performance to be paid in
September 2023.
Previous years' LTA awards
Includes the 2021 LTA that reached the end of the performance period on 30 June 2023, vesting
in September 2023. The value reflects the number of securities scheduled to vest multiplied by the
grant price.
Awards forfeited or lapsed
The value reflects the maximum number of securities that were forfeited / lapsed in respect of FY23
multiplied by the grant price plus the value of the forfeited portion of the maximum FY23 STA.
Executive Service Agreements
An overview of key terms of employment for current Executives is provided below:
Contract Term
Contract type
Notice period
by Lendlease
Notice period by executive
Global CEO
Permanent
12 months
12 months
Other Executives
Permanent
6 months
6 months
All Executives have termination benefits that are within the limit allowed by the Corporations Act 2001 without
securityholder approval. Specifically, in the case where the Executive is not employed for the full period of
notice, a payment in lieu of notice may be made.
Treatment of unvested awards depends on the reason for termination:
Termination Payment
• Terminated for cause: Awards lapse.
• Terminated for poor performance: Board discretion.
• Resignation (engaged in activities that are competitive with the Group): Awards lapse.
•
‘Good leavers’: Awards remain on foot subject to the original vesting conditions. LTA granted from FY23
onwards are prorated for good leavers based on time served.
86
Lendlease Annual Report 2023
Non Executive Director Fee Policy
Non Executive Directors’ fees
The maximum aggregate remuneration payable to Non Executive Directors is $3.5 million per year, as approved at the 2015 Annual
General Meeting.
Board and Committee Fees
Non Executive Directors receive a Board fee and fees for chairing or participating on Board committees:
A$’000
Chair Fee
Member Fee
Board
6401
160
Nominations
Committee
People & Culture
Committee
Risk Committee Audit Committee
36
Nil
48
36
48
Nil
48
36
Sustainability
Committee
48
36
1. The Chairman does not receive extra fees for participating on committees
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.
Non Executive Directors are not entitled to retirement benefits other than superannuation.
There were no increases to Non Executive Director fees during FY23.
Travel Fees
Board meetings are scheduled in Australia and in each of the regions where Lendlease operates. As an international company, the Board
program is formulated to reflect the geographic spread of the Lendlease businesses. Generally, the program runs over three to five days
and includes a number of activities outside 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 across the Group.
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:
A$
Travel less than 4 hours
Travel between 4 and 10 hours
Travel over 10 hours
Fee (each way)
Nil
2,800
6,000
Governance
87
Remuneration Governance and Risk Management
Robust governance is a critical part of Lendlease’s approach to executive remuneration. The diagram below illustrates the roles various
stakeholders play in making remuneration decisions at Lendlease:
Independent Remuneration AdvisorThe Board and People & Culture Committee engage advisors (EY) to provide advice or information. Their input is used to guide Board and Committee decisionsDuring the year, advisors did not provide a remuneration recommendation as defined in Section 9B of the Corporations Act 2001The Board is satisfied that any advice provided by advisors was made free from undue influence from any of the KMP given the structure of the engagementManagementThe Global CEO recommends Fixed Remuneration and STA outcomes for his direct reports (for approval by the People & Culture Committee)The Group Chief Financial Officer and Group Chief Risk Officer present on the ‘Health of the Business’ when the Committee is considering STA outcomesRecommends potential approaches for developing and implementing the Executive Reward Strategy and structureProvides information relevant to remuneration decisions and, if appropriate liaises with advisors to provide factual information relating to company processes, practices and other business issues; and provide management’s perspectivesAudit CommitteeAssists in setting and assessing financial targets for remuneration purposesAssesses and advises of any audit matters which may impact remuneration outcomesThe Chair of the Audit Committee is a member of the People & Culture Committee Risk CommitteeAdvises of risk issues and/or conduct matters to assist in determining an appropriate Risk adjustment for STA outcomes Sustainability CommitteeAssists in setting and assessing Safety/Sustainability related Key Performance Indicators People & Culture Committee Assists in establishing appropriate policies for people management and remuneration across the GroupReviews and recommends the goals, performance and remuneration of other ExecutivesUndertakes a holistic assessment of annual performance when determining STA outcomes, including input from other Committees and ManagementRegularly considers matters outside of remuneration – including organisational culture, talent development and succession, and feedback from employees through Our People SurveyBoardThe Board has overall responsibility for Executive and Non Executive Director remuneration at LendleaseThe Board assesses the performance of and determines the remuneration outcomes for the Global CEO 88
Lendlease Annual Report 2023
Risk management and governance processes apply across remuneration timelines, aligned with our business cycle. We have short term,
long term and ongoing mechanisms:
Overall 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.
Malus
• The Board retains an overarching discretion to reduce or forfeit any unvested awards (during the deferral
Guiding principles
for determining
remuneration
adjustments arising
from safety incidents
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.
• To inform robust decision making in relation to remuneration adjustments arising from safety incidents, the
Board formalised a set of guiding principles and relevant factors in FY22. The key guiding principles are
as follows:
– Our objective is to learn from incidents and to reinforce an open dialogue and safety culture. Our people
must have confidence that sharing safety related information supports this objective and helps to identify
how we will adapt in the future.
– As the facts and circumstances surrounding each incident are unique, decision making is not prescriptive or
formulaic and requires the application of judgement.
– To facilitate a consistent approach to decision making, rather than the application of a consistent outcome,
the following set of relevant factors are used by the Board to evaluate the application of any remuneration
adjustments to be made arising from safety incidents:
Safety Leadership
Safety Performance
Findings
Availability of new information
How is safety leadership demonstrated in the relevant
business / project?
How has the relevant business / project performed against safety
performance indicators?
In the event of a fatality, what was Lendlease's role based on
internal investigations?
As events unfold over time, has new and pertinent information
emerged from external investigations?
Change of Control
• The early vesting of any unvested awards may be permitted by the Board in other limited circumstances
such as a change in control of Lendlease. In these circumstances the Board will determine the timing and
proportion of any unvested awards that vest.
Year 1Year 2Year 3Year 4Year 5Year 6Long term• Long dated performance periods (up to 3 years)• Significant portion of remuneration delivered in equity• Remuneration deferral (up to 6 years)Short term• Significant portion of annual opportunity at risk and subject to performance• Holistic assessment of annual performance• Input from Risk committeeOngoing• Board discretion• Malus• Guiding principles (remuneration adjustments arising from safety incidents)See below for details of ongoing Risk Management and Governance Mechanisms• Change of control• Mandatory securityholding• Securities trading policy• Hedging• Independent advisor governance protocols Governance
89
Mandatory
Securityholding
•
Following investor feedback relating to current KMP securityholding levels, the Mandatory Securityholding
Policy has been reviewed and updated in February 2023 to standardise one globally consistent approach.
• The Global CEO and Executives are required to accumulate and maintain a significant personal investment
in Lendlease securities. This policy encourages Executives to consider long term securityholder value when
making decisions.
What is the Mandatory Securityholding requirement?
Mandatory Securityholding Requirement
Global CEO
Executives (Australia)
150% of TPV
100% of TPV
Executives (International)
100% of Base Salary
What is counted towards the Mandatory Securityholding requirement?
Included
Personally held securities
Vested or unvested securities subject to a time-based hurdle only (i.e., RSA, LTA Minimum and Deferred STI/STA)
• The Mandatory Securityholding requirement is a set number of securities based on the 20-day VWAP on the
date of appointment to the Global Leadership Team.
Until the Mandatory Securityholding requirement is reached, 50 per cent of any vested equity awards (e.g.
Deferred STI, Deferred STA, RSA, LTI or LTA) will be subject to a disposal restriction.
•
Executives are required to achieve the Mandatory Securityholding requirement within five years of their
appointment to a KMP role.
• The Board may review the number of mandatory securities to be held to account for movements in security
price using 20-day VWAP leading up to 30 June financial year end and movements in salary. As a general
rule, if the change is less than 15% from when the requirement was last set, no adjustment will be made to the
number of securities required.
•
Progress toward the minimum requirement is outlined in the Executive Equity Holdings table on page 91.
Securities Trading Policy • The Lendlease Securities Trading Policy applies to all employees of the Lendlease Group. In accordance with
the policy, Directors and Executives may only deal in Lendlease securities during designated periods.
Hedging
• Directors and Executives must not enter into transactions or arrangements that operate to limit the economic
risk of unvested entitlements to Lendlease securities. No Director or Executive may enter into a margin loan
arrangement in respect of unvested Lendlease securities.
• Deferred STI, Deferred STA, 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.
Independent Advisor
Governance Protocols
•
Strict governance protocols are observed to so that advisors’ advice to the Committee is made free from
undue influence by Executive KMP:
– 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; and
– 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.
90
Lendlease Annual Report 2023
Other Statutory Disclosures
FY23 Executive Statutory Remuneration
A$’0001
Short term benefits
Post-
employment
benefits
Security Based
Payments2
Cash
salary3
STA
cash4
Non
monetary
benefits5
Super-
annuation6
Other
long
term
benefits7
Sub-
Total LTI/LTA
Deferred
STI
Termi-
nation
benefits
Name
Current Executives
Anthony Lombardo
Dale Connor
Simon Dixon
Justin Gabbani
Claire Johnston10
Frank Krile
Neil Martin
Former Executives
Denis Hickey12,13
Total
Year
2023
2022
2023
2022
2023
2022
2023
2022
2023
2023
2022
2023
2022
2023
2022
2023
2022
1,788
1,867
1,187
1,181
975
732
912
814
805
975
976
1,374
1,334
578
1,533
405
600
329
507
250
319
299
346
165
200
340
221
500
0
588
8,594
1,869
8,438
3,200
1118
156
259
5
22
26
23
74
173
-3611
-
35
38
69
247
422
546
33
29
31
29
25
18
-
-
-
28
26
-
-
-
-
29
29
19
19
16
12
-
-
-
16
16
-
-
2,366
2,681
1,591
1,740
1,288
1,109
1,234
1,234
1,143
1,183
1,358
1,630
1,872
952
1,109
918
986
422
307
361
282
378
294
271
774
822
27114
918
-
2,368
4,265
2,058
450
39
380
43
279
160
306
188
271
305
253
360
111
594
63
Total
3,768
3,829
2,889
2,769
1,989
1,576
1,901
1,704
1,792
1,782
1,882
2,764
2,805
-
-
-
-
-
-
-
-
-
-
-
-
-
27715
-
6,054
4,489
117
102
351
77
11,353
8,364
2,944
277
22,939
12,363
5,835
856
-
19,055
1. 2023 remuneration is reported in AUD based on the 12 month average historic foreign exchange rates for FY23 (rounded to two decimal places): SGD 0.91 (applied to Justin
Gabbani), USD 0.67 (applied to Claire Johnston) and GBP 0.55 (applied to Neil Martin). 2022 remuneration is reported in AUD based on the 12 month average historic foreign
exchange rates for FY22 (rounded to two decimal places): SGD 0.98 (applied to Justin Gabbani), USD 0.72 (applied to Denis Hickey) and GBP 0.55 (applied to Neil Martin).
2. Security based payments reflect the accounting expense on a fair value basis. Security based payments are issued either as indeterminate rights and performance rights or as
deferred securities. LTI/LTA includes the accounting expense for the RSA. For Denis Hickey, this also includes the accounting expense for his GDV award.
3. Includes the payment of cash allowances such as motor vehicle allowance and the value of the distriibution amounts paid as cash on the RSA. For Neil Martin this also includes
cash allowances paid in lieu of pension contributions.
4. Reflects 50 per cent of the FY23 STA that is paid as cash in September 2023.
5. 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.
6. Superannuation includes the value of insurance premiums funded by Lendlease for Australian Executives who are members of the Lendlease default superannuation fund.
7. Other Long Term Benefits represents the accrual of long term leave entitlements (e.g. long service leave).
8. Includes a grossed-up reportable fringe benefit amount of $18,160 for the year ended 31 March 2023 which primarily relates to the ongoing storage of goods following
Anthony Lombardo's relocation to Australia in 2021.
9. Includes a grossed-up reportable fringe benefit amount of $33,877 for the year ended 31 March 2023 which primarily relates to professional services rendered for assistance
with Dale Connor's US tax affairs.
10.Claire Johnston was appointed to the CEO, Americas role on 1 November 2022 and remuneration reflects time as KMP.
11. Frank Krile's annual leave taken exceeded his accrued leave for the year.
12.Denis Hickey ceased as KMP on 31 October 2022 and remuneration reflects time as KMP.
13.As Denis Hickey's role was made redundant and considered a ‘Good Leaver’, unvested equity awards remain on foot and subject to the original vesting conditions. The security
based payment accounting expense for FY23 therefore includes unvested award expenses that have been accelerated and disclosed in total for FY23, including those amounts
which would otherwise have been included in future year disclosures. All unvested equity awards that remain on foot following departure are still subject to the original
performance conditions and will be tested at the relevant testing date. Depending on performance, these awards may have nil value. To the extent these awards do not vest
when tested, the accounting expense that has been previously booked will be reversed. Please also refer to the section "Adjustments to Denis Hickey's Incentive Awards" for
more detail.
14.Denis Hickey's long term benefits comprises of a contractually agreed long service leave payment.
15.Denis Hickey's termination benefits relate to the settling of a contractual obligation.
Governance
91
FY23 Non Executive Director Statutory Remuneration
A$’000
Name
Current Non Executive Directors
Michael Ullmer2
Philip Coffey
Nicholas Collishaw
David Craig
Margaret Lui3
Elizabeth Proust
Nicola Wakefield Evans
Robert Welanetz
Former Non Executive Directors
Jane Hemstritch4
Total
Short term benefits
Committee
chair fees
Committee
membership
fees
Year
Base fees
Post-employment
benefits
Travel fees
Superannuation1
Total
2023
2022
2023
2022
2023
2022
2023
2022
2023
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
640
512
160
160
160
93
160
160
93
160
160
160
160
160
160
67
160
1,760
1,565
-
-
48
48
-
-
48
48
-
48
48
48
48
24
-
15
36
231
228
-
-
36
60
72
24
36
36
18
36
36
36
36
72
72
15
60
321
324
30
6
30
-
30
6
30
6
11
30
6
30
6
81
36
24
6
296
72
25
24
25
24
25
12
25
24
9
25
24
25
24
25
24
11
24
195
180
695
542
299
292
287
135
299
274
131
299
274
299
274
362
292
132
286
2,803
2,369
1. Directors have superannuation contributions paid on their behalf in accordance with superannuation legislation.
2. To reflect accountability in the 2021 financial year for further provisions relating to the legacy Engineering business and the business review preliminary findings that were
announced in relation to the Development portfolio, on behalf of the Board, the Chairman took a 20 per cent reduction in base fees for the 2022 financial year. This reverted to
the standard base fee in FY23.
3. Margaret Lui was appointed as a Non Executive Director on 1 December 2022.
4. Jane Hemstritch ceased to be a Non Executive Director on 18 November 2022.
FY23 Executive Equity Holdings
Number of
securities
required
under the
mandatory
securityholding
at period end1
Securities
held at
beginning of
financial year
Securities
received
during the
financial year2
Other net
changes to
securities
Securities
held at end of
financial year
Total
securities /
performance
rights that
count
towards the
mandatory
securityholding
requirement
Unvested
unhurdled
deferred
securities /
rights3
280,000
124,000
104,000
82,000
98,000
127,000
125,000
n/a
9,764
34,344
-
14,010
433,389
4,211
46,599
25,989
568,306
16,631
19,428
16,889
27,947
29,333
12,857
23,459
15,232
161,776
60,500
-
50,000
-
-
-
-
86,895
53,772
66,889
41,957
462,722
17,068
70,058
141,144
127,394
31,472
40,263
40,373
106,086
44,573
228,039
181,166
98,361
82,220
503,095
123,154
114,631
(15,232)
95,268
25,989
825,350
143,682
674,987
169,671
1,500,337
Name
Current Executives
Anthony Lombardo
Dale Connor
Simon Dixon4
Justin Gabbani
Frank Krile
Neil Martin
Claire Johnston5
Former Executives
Denis Hickey6
Total
1. Mandatory securityholding requirements are reviewed in August each year.
2. For Executives, securities received relate to security entitlements under employee benefit vehicles.
3. Under the updated policy, unvested deferred securities and performance rights which are only subject to a time-based vesting hurdle count towards mandatory
securityholding requirements.
4. Simon joined Lendlease and was appointed Group Chief Financial Officer as of October 2021.
5. Claire Johnston was appointed to the CEO, Americas role on 1 November 2022.
6. Denis Hickey ceased as KMP on 31 October 2022.
92
Lendlease Annual Report 2023
Executive Equity Based Remuneration – Deferred Securities
Name
Plan
Current Executives
Performance
Year Grant date
Vesting
date
Number
granted
Fair value
per
security $1
Total fair
value at
grant date
$1
Expense for
the year
ended
30 June
2023 $
Anthony Lombardo Deferred STA
2022
Sept 2022
Total
Dale Connor
Deferred STA
2022
Sept 2022
Sept
2023-2024
Sept
2023-2024
Total
Simon Dixon
Sign-On Award
n/a
Nov 2021
Sept 2022
Deferred STA
2022
Sept 2022
Sept
2023-2024
59,242
10.13
600,008
450,006
59,242
600,008
450,006
50,000
10.13
506,406
379,804
50,000
16,889
506,406
11.84
199,966
379,804
39,993
31,472
10.13
318,752
239,064
48,361
518,718
279,057
Justin Gabbani
Total
Executive
Deferred Award
Deferred STI
Frank Krile
Total
Executive
Deferred Award
Deferred STI
Neil Martin
Total
Executive
Deferred Award
Deferred STA
2022
Sept 2022
Deferred STA
2022
Sept 2022
2019
Sept 2019
Sept 2022
8,807
16.86
148,486
8,249
2021
Sept 2021
Sept 2023
5,051
11.84
59,804
29,902
Sept
2023-2024
35,212
10.13
356,630
267,473
49,070
564,920
305,624
2019
Sept 2019
Sept 2022
9,887
16.86
166,695
9,261
2021
Sept 2021
Sept 2023
6,803
11.84
80,548
40,274
Sept
2023-2024
33,570
10.13
340,000
255,000
50,260
587,243
304,535
2019
Sept 2019
Sept 2022
11,329
16.86
191,007
10,611
Deferred STA
2022
Sept 2022
Sept
2023-2024
Total
Claire Johnston
Deferred STI
2021
Sept 2021
Sept 2023
Deferred STI
2022
Sept 2022
Operational
Leaders Incentive
Total
2022
Sept 2022
Former Executives
Denis Hickey2
Deferred STA
2022
Sept 2022
Total
Sept
2023-2024
Sept
2024-2025
Sept
2023-2024
45,976
10.13
465,650
349,237
57,305
6,143
656,657
72,733
359,848
36,367
11.84
24,270
10.13
245,808
184,356
14,160
10.13
143,440
49,796
44,573
461,981
270,519
61,780
10.13
625,714
594,428
61,780
625,714
594,428
1. The fair value at grant date is the value of the deferred short term award (as advised to the executive).
2. A 10% reduction has been applied by the Board to the first tranche of Denis Hickey's September 2022 STA grant (i.e. 5% of the overall grant) in relation to the fatality that
occurred in FY23.
Governance
93
Executive Equity Based Remuneration – Long Term Awards
Name
Current Executives
Plan (for the
year ended)
Grant Date
Vesting date
Number
granted1
Fair value per
security $2
Total fair
value at
grant date $2
Expense for
the year
ended
30 June 2023
$
Anthony Lombardo
June 2019 LTA
Sept 2018
Sept 2022-2024
June 2020 LTA
June 2021 LTA
June 2021 LTA
Prorata CEO
June 2021 RSA
June 2022 LTA
June 2023 LTA
Total
June 2019 LTA
June 2020 LTA
June 2021 LTA
June 2021 RSA
June 2022 LTA
June 2023 LTA
Total
June 2022 LTA
June 2023 LTA
Total
Dale Connor
Simon Dixon
Sept 2019
Sept 2022-2025
Sept 2020
Sept 2023-2026
Sept 2020
Sept 2023-2026
5,124
Sept 2020
Sept 2023-2026
Sept 2021
Sept 2024-2027
Sept 2022
Sept 2025-2028
Sept 2018
Sept 2022-2024
Sept 2019
Sept 2022-2025
Sept 2020
Sept 2023-2026
Sept 2020
Sept 2023-2026
Sept 2021
Sept 2024-2027
Sept 2022
Sept 2025-2028
Sept 2021
Sept 2024-2027
Sept 2022
Sept 2025-2028
Justin Gabbani
June 2022 LTA
Sept 2021
Sept 2024-2027
June 2023 LTA
Sept 2022
Sept 2025-2028
Frank Krile
Neil Martin
Total
June 2021 LTI
June 2022 LTA
June 2023 LTA
Total
June 2020 LTA
June 2021 LTA
June 2021 RSA
June 2022 LTA
June 2023 LTA
Total
Sept 2020
Sept 2023
Sept 2021
Sept 2024-2027
Sept 2022
Sept 2025-2028
Sept 2019
Sept 2022-2025
Sept 2020
Sept 2023-2026
Sept 2020
Sept 2023-2026
Sept 2021
Sept 2024-2027
Sept 2022
Sept 2025-2028
Claire Johnston
June 2023 LTA
Sept 2022
Sept 2025-2028
Former Executives
Denis Hickey3
Total
June 2019 LTA
June 2020 LTA
June 2021 LTA
June 2021 RSA
GDV Incentive
June 2022 LTA
June 2023 LTA
Total
Sept 2018
Sept 2022-2024
Sept 2019
Sept 2022-2025
Sept 2020
Sept 2023-2026
Sept 2020
Sept 2023-2026
Jan 2022
Sept 2024
Sept 2021
Sept 2024-2027
Sept 2022
Sept 2025-2028
57,702
111,120
96,432
43,832
265,416
314,928
894,554
36,066
111,120
96,432
43,832
179,160
212,580
679,190
149,304
177,144
326,448
119,532
154,440
273,972
26,301
119,436
141,720
287,457
69,448
96,432
43,832
187,980
214,944
612,636
211,944
211,944
57,702
111,120
96,432
43,832
469,572
224,076
77,916
11.49
22.08
12.92
12.92
11.41
8.42
6.25
11.49
22.08
12.92
11.41
10.40
9.01
10.40
9.01
10.40
9.01
10.15
10.40
9.01
22.08
12.92
11.41
10.40
9.01
9.01
11.49
22.08
12.92
11.41
10.65
10.40
9.01
662,997
2,453,528
1,245,900
65,268
302,819
-51,672
66,204
-2,746
500,124
2,234,804
1,968,300
9,131,857
414,399
2,453,528
1,245,900
500,124
1,863,264
1,915,344
8,392,559
1,552,760
1,596,068
3,148,828
1,243,132
1,391,504
2,634,636
266,955
1,242,136
1,276,896
2,785,987
1,533,412
1,245,900
500,124
1,954,992
1,936,644
7,171,072
1,909,616
1,909,616
662,997
2,453,528
1,245,900
500,124
5,000,942
2,330,392
702,024
118,752
129,908
389,560
951,889
40,795
302,819
-51,672
118,752
127,788
379,080
917,562
106,492
315,888
422,380
85,256
275,400
360,656
-44,098
85,188
252,720
293,810
189,257
-51,672
118,752
134,076
383,296
773,709
377,944
377,944
107,167
589,373
106,100
282,300
1,512,500
965,104
702,024
1. For LTA awards granted from September 2021 and for LTI and other long term awards, the number granted reflects maximum opportunity. For all prior awards, the number
granted reflects target opportunity.
2. The fair value at grant date represents an actuarial valuation of the award, including the RSA (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.
3. As a ‘Good Leaver’, unvested equity awards remain on foot and subject to the original vesting conditions. The security based payment accounting expense for FY23 therefore
includes all remaining unvested award expense that has been accelerated and disclosed in total for FY23, including those amounts which would otherwise have been included
in future year disclosures. All unvested equity awards that remain on foot following departure are still subject to the original performance conditions and will be tested at the
relevant testing date. Depending on performance, these awards may have nil value. To the extent these awards do not vest when tested, the accounting expense that has been
previously booked will be reversed. Please also refer to the section "Adjustments to Denis Hickey's Incentive Awards" for more detail on the forfeiture of a portion of the GDV
award that has not met relevant performance conditions to date.
1,080,650
12,895,907
4,264,568
94
Lendlease Annual Report 2023
FY23 Non Executive Director Equity Holdings
Name
Non Executive Directors
Michael Ullmer
Philip Coffey
Nicholas Collishaw
David Craig
Elizabeth Proust1
Nicola Wakefield Evans
Margaret Lui2
Robert Welanetz
Former Non Executive Directors
Jane Hemstritch3
Total
Securities held
at beginning of
financial year
Other net changes
to securities
Securities held at end of
financial year
125,000
21,216
14,500
73,061
68,061
34,379
-
7,000
33,061
376,278
50,000
30,000
10,500
32,939
15,000
3,621
3,000
20,000
-
165,060
175,000
51,216
25,000
106,000
83,061
38,000
3,000
27,000
33,061
541,338
1. As at 30 June 2023 Elizabeth Proust also holds $500,000 of green bonds.
2. As Margaret Lui was appointed as a Non Executive Director on 1 December 2022 a nil balance is shown at the beginning of the financial year.
3. Jane Hemstritch ceased as Non Executive Director on 18 November 2022.
Purchase of Lendlease securities by Non Executive Directors
The current Non Executive Directors acquired Lendlease securities using their own funds.
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 that those entered into by
unrelated customers.
Governance
95
This page has been left blank intentionally.
96
Lendlease Annual Report 2023
Directors’ Report
The Directors’ Report for the financial year ended 30 June 2023 has been prepared in accordance with the requirements of the
Corporations Act 2001.
The information below forms part of the Directors’ Report:
• Principal activities on page 12
• Operating and Financial Review on pages 4 to 57 incorporating the Performance and Outlook on pages 50 to 57
• Biographical information for the Directors and Company Secretary on pages 60 to 64
• Officers who were previously partners of the audit firm on page 60
• Directors’ interests in capital on page 70
• Board and committee meetings and attendance on pages 70 and 71
• Remuneration Report on pages 72 to 94
• Lead Auditor’s Independence Declaration on page 98
a. Dividends/Distributions
The 2022 final dividend/distribution of $75 million (comprised of a dividend component franked to 75 per cent of 5.7 cents per share
to be paid by the Company and an unfranked trust distribution of 5.3 cents per unit to be paid by Lendlease Trust) referred to in
the Directors’ Report dated 22 August 2022 was paid on 15 September 2022 and 22 September 2022 respectively. Details of dividends/
distributions in respect of the current year are as follows:
Interim distribution of 4.9 cents per security (unfranked) paid on 8 March 20231
Final dividends/distributions of 11.1 cents per security declared by Directors to be payable on 13 September 20232
Total dividends/distributions
1. Comprised of an unfranked trust distribution of 4.9 cents per unit paid by Lendlease Trust.
2. Comprised of a dividend component fully franked of 4.7 cents per share to be paid by the Company and an unfranked trust distribution of 6.4 cents per unit to be paid by
Lendlease Trust.
$m
34
76
110
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
There were no material events subsequent to the end of financial reporting period.
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 60 to 64 of
this report and 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 60 to 64 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, regardless of 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.
Governance
97
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 reason:
• 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 2023
$000s
June 2022
$000s
7,887
985
8,872
159
9,031
7,004
822
7,886
70
7,956
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
Sydney, 14 August 2023
A P Lombardo
Global Chief Executive Officer
Sydney, 14 August 2023
98
Lendlease Annual Report 2023
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 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 2023 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. KPM_INI_01 PAR_SIG_01 PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 KPMG Eileen Hoggett Partner Sydney 14 August 2023 Financial Statements
99
Financial
Statements
Sydney Victoria Cross over station development 100
Lendlease Annual Report 2023
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 Consolidated Financial Statements
Section A. Performance
1.
2.
3.
4.
5.
6.
7.
8.
9.
Segment Reporting
Dividends/Distributions
Earnings Per Share/Stapled Security (EPS/EPSS)
Revenue from Contracts with Customers
Share of Profit of Equity Accounted Investments
Other Income
Other Expenses
Finance Revenue and Finance Costs
Taxation
10.
Events Subsequent to Balance Date
Section B. Investment
11.
12.
Inventories
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.
17.
Borrowings and Financing Arrangements
Issued Capital
18. Capital Management
19.
Liquidity Risk Exposure
20. Commitments
21.
Loans and Receivables
22. Trade and Other Payables
23. Provisions
101
102
103
104
105
107
114
115
116
118
118
119
121
122
125
126
127
132
133
134
134
136
137
137
138
139
140
142
Section D. Risk Management
24. Financial Risk Management
25. Hedging
26. Fair Value Measurement
27. Contingent Liabilities
Section E. Basis of Consolidation
28. Consolidated Entities
29. Employee Benefit Vehicles
30. Parent Entity Disclosures
31.
Related Party Information
Section F. Other Notes
32.
Intangible Assets
33. Discontinued Operations
34. Defined Benefit Plans
35. Employee Benefits
36. Reserves
37.
Impact of New and Revised Accounting Standards
38. Other Significant Accounting Policies
Directors’ Declaration
Directors' Declaration
Independent Auditor’s Report
144
146
147
148
149
150
151
151
153
154
157
159
165
165
165
167
168
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 2023 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 14 August 2023.
Consolidated Financial Statements
Income Statement
Year Ended 30 June 2023
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) before tax from continuing operations
Income tax benefit from continuing operations
(Loss) after tax from continuing operations
Profit after tax from discontinued operations
(Loss) after tax
Profit/(Loss) after tax attributable to:
Members of Lendlease Corporation Limited
Unitholders of Lendlease Trust
(Loss) after tax attributable to securityholders
External non controlling interests
(Loss) 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 shares
Securities on issue
(cents)
(cents)
(cents)
(cents)
Financial Statements
101
June 2023
June 2022
$m
10,229
144
(9,642)
731
28
299
$m
8,822
142
(8,135)
829
181
358
(1,208)
(1,429)
(150)
85
(173)
(88)
(238)
6
(232)
-
(232)
(278)
46
(232)
-
(232)
(34.0)
(33.7)
(34.0)
(33.7)
(61)
9
(125)
(116)
(177)
51
(126)
27
(99)
(239)
140
(99)
-
(99)
(18.4)
(18.3)
(14.5)
(14.4)
Note
4
5
6
7
8
8
9.a
33
3, 33
3, 33
3
3
The accompanying notes form part of these consolidated financial statements.
102
Lendlease Annual Report 2023
Consolidated Financial Statements continued
Statement of Comprehensive Income
Year Ended 30 June 2023
(Loss) after Tax
Other Comprehensive Income/(Loss) 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
Movements in defined benefit plans remeasurements
Total items that will not be reclassified to profit or loss
Total comprehensive (loss)/income after tax
Total comprehensive (loss)/income after tax from continuing operations
attributable to:
Members of Lendlease Corporation Limited
Unitholders of Lendlease Trust
Total comprehensive income after tax from discontinued operations attributable to:
Members of Lendlease Corporation Limited
Total comprehensive (loss)/income after tax attributable to securityholders
External non controlling interests
Total comprehensive (loss)/income after tax
Note
9.b
9.b
9.b
9.b
June 2023
June 2022
$m
(232)
1
120
121
(4)
(108)
(112)
(223)
(297)
73
-
(224)
1
(223)
$m
(99)
136
63
199
(5)
44
39
139
(40)
150
27
137
2
139
1. Includes Other comprehensive income of $166 million (June 2022: Other comprehensive income of $214 million) relating to share of other comprehensive income of equity
accounted investments.
The accompanying notes form part of these consolidated financial statements.
Financial Statements
103
June 2023
June 2022
Note
$m
14
21
11
13
21
11
12
13
9.c
32
34
22
23
16.a
22
23
16.a
9.c
17
36
900
2,299
1,562
32
57
4,850
1,439
2,681
5,647
539
1,140
219
247
1,236
171
45
13,364
18,214
4,646
708
19
53
3
5,429
2,333
326
3,262
87
133
6,141
11,570
6,644
1,894
(67)
273
2,653
4,753
1,863
6,616
28
6,644
$m
1,297
2,033
1,459
24
51
4,864
1,896
2,320
4,379
482
1,181
144
272
1,225
282
56
12,237
17,101
4,557
720
-
28
49
5,354
1,988
68
2,357
102
262
4,777
10,131
6,970
1,891
(77)
184
3,078
5,076
1,867
6,943
27
6,970
Statement of Financial Position
As at 30 June 2023
Current Assets
Cash and cash equivalents
Loans and receivables
Inventories
Other financial assets
Other assets
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
Income tax payable
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
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
The accompanying notes form part of these consolidated financial statements.
104
Lendlease Annual Report 2023
Consolidated Financial Statements continued
Statement of Changes in Equity
Year Ended 30 June 2023
Balance as at 1 July 2021
Total Comprehensive Income
Loss for the financial year
Other comprehensive income (net of tax)
Total comprehensive income
Other Comprehensive Income (Net of tax)
Net investment hedge
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)
Dividends and distributions
Treasury securities acquired
Treasury securities vested
Fair value movement on allocation and vesting
of securities
Transfer as a result of asset disposal2
Other movements
Total other movements through reserves
Balance as at 30 June 2022
Balance as at 1 July 2022
Total Comprehensive Income
Loss for the financial year
Other comprehensive income (net of tax)
Total comprehensive income
Other Comprehensive Income (Net of tax)
Net investment hedge
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)
Dividends and distributions
Treasury securities acquired
Treasury securities vested
Total other movements through reserves
Issued
Capital
$m
1,888
-
-
-
-
-
-
-
-
-
3
-
-
-
-
-
-
3
1,891
1,891
-
-
-
-
-
-
-
-
-
3
-
-
-
3
Balance as at 30 June 2023
1,894
Treasury
Securities1 Reserves
Retained
Earnings
Members of
Lendlease
Corporation
Limited
Unitholders
of
Lendlease
Trust
External
Non
Controlling
Interests
$m
(79)
-
-
-
-
-
-
-
-
-
-
-
(25)
27
-
-
-
2
(77)
(77)
-
-
-
-
-
-
-
-
-
-
-
(39)
49
10
(67)
$m
3
-
182
182
(16)
62
136
-
182
-
-
-
-
-
23
(24)
-
(1)
184
184
-
89
89
(20)
108
1
-
89
-
-
-
-
-
-
273
$m
3,327
(239)
44
(195)
-
-
-
44
44
-
-
(55)
-
-
-
-
1
(54)
3,078
3,078
(278)
(108)
(386)
-
-
-
(108)
(108)
-
-
(39)
-
-
(39)
2,653
$m
5,139
(239)
226
(13)
-
(16)
62
136
44
226
-
3
(55)
(25)
27
23
(24)
1
(50)
5,076
5,076
(278)
(19)
(297)
(20)
108
1
(108)
(19)
-
3
(39)
(39)
49
(26)
4,753
$m
1,788
140
10
150
-
10
-
-
10
-
1
(71)
-
-
-
-
(1)
(71)
1,867
1,867
46
27
73
-
27
-
-
27
-
1
(78)
-
-
(77)
1,863
$m
24
-
2
2
-
2
-
-
2
1
-
-
-
-
-
-
-
1
27
27
-
1
1
-
1
-
-
1
-
-
-
-
-
-
28
1. Opening balance for number of treasury securities 1 July 2022 was 6 million (1 July 2021: 6 million) and closing balance at 30 June 2023 was 6 million.
2. These movements in reserves were transferred to profit and loss in the financial year.
The accompanying notes form part of these consolidated financial statements.
Total
Equity
$m
6,951
(99)
238
139
(16)
74
136
44
238
1
4
(126)
(25)
27
23
(24)
-
(120)
6,970
6,970
(232)
9
(223)
(20)
136
1
(108)
9
-
4
(117)
(39)
49
(103)
6,644
Statement of Cash Flows
Year Ended 30 June 2023
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 paid in relation to lease liabilities
Dividends/distributions received
Income tax paid in respect of operations
Net cash (used in) operating activities
Cash Flows from Investing Activities
Sale/redemption of investments
Acquisition of investments
Sale of investment properties
Acquisition of/capital expenditure on investment properties
Net loan drawdowns from /(repayment to) associates and joint ventures
Disposal of consolidated entities (net of cash disposed and transaction costs)
Disposal of property, plant and equipment
Disposal of other financial assets
Acquisition of property, plant and equipment
Acquisition of intangible assets
Net cash (used in)/provided by investing activities
Cash Flows from Financing Activities
Proceeds from borrowings
Repayment of borrowings
Dividends/distributions paid
Increase in capital of non controlling interests
Repayment of lease liabilities
Net cash provided by/(used in) financing activities
Other Cash Flow Items
Effect of foreign exchange rate movements on cash and cash equivalents
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at end of financial year
Financial Statements
105
June 2023
June 20221
Note
$m
$m
10,801
(11,104)
27
(192)
(15)
113
(116)
(486)
622
(1,632)
84
(6)
6
247
-
3
(28)
(54)
(758)
5,235
(4,333)
(105)
-
(74)
723
124
(397)
1,297
900
8,893
(9,606)
3
(129)
(17)
109
(88)
(835)
846
(985)
82
(71)
(13)
709
69
-
(10)
(75)
552
2,457
(2,387)
(114)
2
(64)
(106)
24
(365)
1,662
1,297
15
14
1. Balances include cash flows relating to both continuing and discontinued operations. Net cash flows relating to discontinued operations have been disclosed in Note 33
‘Discontinued Operations’.
The accompanying notes form part of these consolidated financial statements.
106
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements
Basis of Preparation
The consolidated financial report is a general purpose financial report which:
• Has been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards
Board, and the Corporations Act 2001
• Complies with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board
• Is presented in Australian dollars ($). At June 2023, 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
• 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 38
‘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 37 ‘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 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.
At 30 June 2023, the Group is in a net current deficit (current liabilities exceeds current assets) but does not anticipate a significant
liquidity risk in the next 12 months. This is due to the Group’s strong financial profile, which includes significant committed undrawn
facilities and low gearing ratios.
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 general market conditions.
The Group has:
• $1,681 million in undrawn facilities. See Note 16 ‘Borrowings and Financing Arrangements’
• $900 million in cash and cash equivalents. See Note 14 ‘Cash and Cash Equivalents’.
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.
Financial Statements
107
Section A. Performance
In addition to the statutory result, Operating Earnings before Interest, Tax, Depreciation and Amortisation (Operating EBITDA)
and Operating Profit after Tax (Operating PAT) are the key measures used to assess the Group’s performance. This section
of the Financial Report focuses on disclosure that enhances a user’s understanding of Operating EBITDA and Operating PAT.
Segment Reporting below provides a breakdown of profit and revenue by the operational activity and region. 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 Investments, Development, Construction and Non core. The Group has identified these operating
segments based on the distinct products and services provided by each segment, the distinct target return profile and allocation
of resources for each segment, and internal reports that are reviewed and used by the Global 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 presented the segments around business activity due to the Group's business model being broadly consistent in all
regions. Additional disclosure has also been included for Operating EBITDA, Operating PAT and Statutory Profit by region.
The Group reports Operating EBITDA and Operating PAT as its primary earnings metrics, in addition to the statutory result.
Operating PAT is defined as Statutory profit adjusted for Investment property revaluations (including in Other financial assets and
Equity accounted investments) that are classified in the Investment segment, and material one-off items that could not reasonably
have been expected to arise from normal operations. Operating EBITDA is before Interest, Tax, Depreciation and Amortisation.
Operating EBITDA and Operating PAT includes revaluation increases or decreases of Investment properties under construction
that are classified in the Development segment.
The Chief Operating Decision Maker receives information and assesses segment performance under these metrics. Operating
EBITDA and Operating 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:
Investments
Operates across all four geographic regions. Services include owning and/or managing investments. The segment includes an
investment management platform and the Group’s ownership interests in residential, office, retail, industrial, retirement and
infrastructure investment assets.
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
development 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 commercial, residential, mixed use, defence and social infrastructure sectors.
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 retained Engineering and retained Services projects. The discontinued operations referenced
throughout the financial statements are included in this segment. Discontinued operations represent the Engineering and Services
businesses sold in previous periods, excluding the projects retained by the Group.
108
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Section A. Performance continued
1. Segment Reporting continued
1.a. Business Segment Information
Financial information regarding the performance of each reportable segment and a reconciliation of these reportable segments to the
financial statements are included below:
Investments
Development1
Construction
Total Core Segments
Non Core
Total Segments
Total Core Segments
Corporate Activities
Total Core
Non Core2 Total Group
TOTAL SEGMENT RESULTS
RECONCILIATION OF CORE AND NON CORE SEGMENTS TO STATUTORY PROFIT
30 June 2023
Revenue
Construction services
Investment services
Development services
Sale of development properties
Total revenue from contracts with customers -
continuing operations
Other revenue
Total revenue from external customers -
continuing operations
Construction services – discontinued operations
Total revenue from external customers
Cost of sales – continuing operations
Cost of sales – discontinued operations
Gross profit
Share of profit of Equity accounted investments3
Other income3
Other expenses4,3
Operating EBITDA
Reconciling items
Finance revenue
Finance expenses
Depreciation and amortisation
Operating profit before tax5
Operating income tax (expenses)/benefit
Operating profit after tax
Investments segment revaluations (pre-tax):
Investment properties
Financial assets
Equity accounted investments
Provision in relation to UK building remediation
Total adjustments5
Income tax benefit on adjustments
Statutory profit/(loss) after tax
$m
-
261
-
-
261
68
329
-
329
(110)
-
219
77
204
(168)
332
1
(1)
(15)
317
(72)
245
(20)
(76)
(134)
-
(230)
55
70
$m
-
-
1,483
795
2,278
47
2,325
-
2,325
(2,036)
-
289
78
84
(168)
283
8
(2)
(19)
270
(78)
192
-
-
-
(295)
(295)
-
(103)
$m
7,191
-
-
-
7,191
12
7,203
-
7,203
(6,963)
-
240
7
34
(191)
90
-
(3)
(39)
48
(16)
32
-
-
-
-
-
-
32
$m
7,191
261
1,483
795
9,730
127
9,857
-
9,857
(9,109)
-
748
162
322
(527)
705
9
(6)
(73)
635
(166)
469
(20)
(76)
(134)
(295)
(525)
55
(1)
1. The Development segment includes $87 million (June 2022: $73 million) of revaluation gains from Equity accounted investments.
2. Includes impact of provisions previously recognised in relation to the sold Engineering business being revised in the current year to include the associated tax benefit, with no
impact to total profit after tax. Refer to Note 33 'Discontinued Operations' for more details.
3. Excludes Investments segment revaluations.
4. Excludes depreciation and amortisation.
5. Operating profit before tax of $211 million (June 2022: profit of $344 million) plus Investment segment revaluations (pre-tax) of $(230) million (June 2022: $74 million), Provision in
relation to UK building safety risks legislation of $(295) million (June 2022: $nil million) and Restructuring costs (pre tax) of $nil million (June 2022: $(484) million) reconciles to Loss
before tax from continuing operations of $(238) million (June 2022: loss of $(177) million) as disclosed in the Income Statement and Loss before tax for discontinued operations of
$(76) million (June 2022: Profit of $28 million) as disclosed in Note 33 ‘Discontinued Operations’.
The Non core segment operating profit after tax includes overhead costs associated with managing the completion of the remaining retained projects
from the sale of the Engineering and Services businesses and other residual exit related matters. Corporate Activity costs are not allocated to the Non
core segment given these costs relate to supporting the growth and operations of the Core segments.
$m
499
499
499
499
(517)
(18)
(5)
(80)
(102)
(3)
(105)
86
(19)
-
-
-
-
-
-
1
-
-
-
-
-
-
-
-
(19)
$m
7,690
261
1,483
795
10,229
127
10,356
10,356
(9,626)
-
-
730
163
317
(607)
603
9
(6)
(76)
530
(80)
450
(20)
(76)
(134)
(295)
(525)
55
(20)
$m
7,191
261
1,483
795
9,730
127
9,857
9,857
(9,109)
-
-
748
162
322
(527)
705
9
(6)
(73)
635
(166)
469
(20)
(76)
(134)
(295)
(525)
55
(1)
$m
$m
-
-
-
-
-
17
17
-
17
(16)
-
1
(1)
2
(163)
(161)
76
(167)
(67)
(319)
107
(212)
-
-
-
-
-
-
7,191
261
1,483
795
9,730
144
9,874
9,874
(9,125)
-
-
749
161
324
(690)
544
85
(173)
(140)
316
(59)
257
(20)
(76)
(134)
(295)
(525)
55
(213)
499
10,229
$m
499
499
499
(517)
(18)
(5)
(80)
(102)
(3)
(105)
86
(19)
-
-
-
-
-
-
1
-
-
-
-
-
-
-
-
$m
7,690
261
1,483
795
144
10,373
10,373
(9,642)
-
-
731
162
319
(770)
442
85
(173)
(143)
211
27
238
(20)
(76)
(134)
(295)
(525)
55
(232)
(212)
(19)
Financial Statements
109
Investments
Development1
Construction
Total Core Segments
Non Core
Total Segments
Total Core Segments
Corporate Activities
Total Core
Non Core2 Total Group
TOTAL SEGMENT RESULTS
RECONCILIATION OF CORE AND NON CORE SEGMENTS TO STATUTORY PROFIT
30 June 2023
Revenue
Construction services
Investment services
Development services
Sale of development properties
Total revenue from contracts with customers -
continuing operations
Other revenue
Total revenue from external customers -
continuing operations
Construction services – discontinued operations
Total revenue from external customers
Cost of sales – continuing operations
Cost of sales – discontinued operations
Share of profit of Equity accounted investments3
Gross profit
Other income3
Other expenses4,3
Operating EBITDA
Reconciling items
Finance revenue
Finance expenses
Depreciation and amortisation
Operating profit before tax5
Operating income tax (expenses)/benefit
Operating profit after tax
Investments segment revaluations (pre-tax):
Investment properties
Financial assets
Equity accounted investments
Provision in relation to UK building remediation
Total adjustments5
Income tax benefit on adjustments
Statutory profit/(loss) after tax
$m
261
261
68
329
-
-
-
-
-
329
(110)
219
77
204
(168)
332
1
(1)
(15)
317
(72)
245
(20)
(76)
(134)
-
(230)
55
70
2,325
(2,036)
7,203
(6,963)
$m
1,483
795
2,278
47
2,325
-
-
-
-
289
78
84
(168)
283
8
(2)
(19)
270
(78)
192
-
-
-
-
(295)
(295)
(103)
$m
7,191
7,191
12
7,203
-
-
-
-
-
7
240
34
(191)
90
-
(3)
(39)
48
(16)
32
-
-
-
-
-
-
32
$m
7,191
261
1,483
795
9,730
127
9,857
9,857
(9,109)
-
-
748
162
322
(527)
705
9
(6)
(73)
635
(166)
469
(20)
(76)
(134)
(295)
(525)
55
(1)
1. The Development segment includes $87 million (June 2022: $73 million) of revaluation gains from Equity accounted investments.
2. Includes impact of provisions previously recognised in relation to the sold Engineering business being revised in the current year to include the associated tax benefit, with no
impact to total profit after tax. Refer to Note 33 'Discontinued Operations' for more details.
3. Excludes Investments segment revaluations.
4. Excludes depreciation and amortisation.
5. Operating profit before tax of $211 million (June 2022: profit of $344 million) plus Investment segment revaluations (pre-tax) of $(230) million (June 2022: $74 million), Provision in
relation to UK building safety risks legislation of $(295) million (June 2022: $nil million) and Restructuring costs (pre tax) of $nil million (June 2022: $(484) million) reconciles to Loss
before tax from continuing operations of $(238) million (June 2022: loss of $(177) million) as disclosed in the Income Statement and Loss before tax for discontinued operations of
$(76) million (June 2022: Profit of $28 million) as disclosed in Note 33 ‘Discontinued Operations’.
$m
499
-
-
-
499
-
499
-
499
(517)
-
(18)
1
(5)
(80)
(102)
-
-
(3)
(105)
86
(19)
-
-
-
-
-
-
(19)
$m
7,690
261
1,483
795
10,229
127
10,356
-
10,356
(9,626)
-
730
163
317
(607)
603
9
(6)
(76)
530
(80)
450
(20)
(76)
(134)
(295)
(525)
55
(20)
$m
7,191
261
1,483
795
9,730
127
9,857
-
9,857
(9,109)
-
748
162
322
(527)
705
9
(6)
(73)
635
(166)
469
(20)
(76)
(134)
(295)
(525)
55
(1)
$m
$m
-
-
-
-
-
17
17
-
17
(16)
-
1
(1)
2
(163)
(161)
76
(167)
(67)
(319)
107
(212)
-
-
-
-
-
-
(212)
7,191
261
1,483
795
9,730
144
9,874
-
9,874
(9,125)
-
749
161
324
(690)
544
85
(173)
(140)
316
(59)
257
(20)
(76)
(134)
(295)
(525)
55
(213)
$m
499
-
-
-
499
-
499
-
499
(517)
-
(18)
1
(5)
(80)
(102)
-
-
(3)
(105)
86
(19)
-
-
-
-
-
-
(19)
$m
7,690
261
1,483
795
10,229
144
10,373
-
10,373
(9,642)
-
731
162
319
(770)
442
85
(173)
(143)
211
27
238
(20)
(76)
(134)
(295)
(525)
55
(232)
110
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Section A. Performance continued
1. Segment Reporting continued
1.a. Business Segment Information continued
Investments
Development1
Construction
Total Core Segments
Non Core
Total Segments
Total Core Segments
Corporate Activities
Total Core
Non Core
Total Group
TOTAL SEGMENT RESULTS
RECONCILIATION OF CORE AND NON CORE SEGMENTS TO STATUTORY PROFIT
30 June 2022
Revenue
Construction services
Investment services
Development services
Sale of development properties
Total revenue from contracts with customers -
continuing operations
Other revenue
Total revenue from external customers -
continuing operations
Construction services – discontinued operations
Total revenue from external customers
Cost of sales – continuing operations
Cost of sales – discontinued operations
Gross profit
Share of profit of Equity accounted investments2
Other income2
Other expenses3
Operating EBITDA
Finance revenue
Finance expenses
Depreciation and amortisation
Operating profit before tax4
Operating income tax (expenses)/benefit
Operating profit after tax
Investments segment revaluations (pre-tax):
Investment properties
Financial assets
Equity accounted investments
Impairment losses relating to intangibles (pre-tax)
Restructuring costs (pre-tax):
Development impairments
Tenancy impairments
Redundancy costs
Other restructuring costs
Total adjustments4
Income tax (expense)/benefit on adjustments
Statutory profit/(loss) after tax
$m
-
279
-
-
279
67
346
-
346
(46)
-
300
120
188
(111)
497
1
(1)
(9)
488
(127)
361
4
59
11
(6)
-
-
-
-
68
(4)
425
$m
-
-
928
610
1,538
35
1,573
-
1,573
(1,328)
-
245
42
85
(191)
181
6
(5)
(11)
171
(60)
111
-
-
-
-
(289)
-
-
-
(289)
66
(112)
$m
6,572
-
-
-
6,572
7
6,579
-
6,579
(6,266)
-
313
6
22
(210)
131
-
(4)
(36)
91
(23)
68
-
-
-
-
-
-
-
-
-
-
68
$m
6,572
279
928
610
8,389
109
8,498
-
8,498
(7,640)
-
858
168
295
(512)
809
7
(10)
(56)
750
(210)
540
4
59
11
(6)
(289)
-
-
-
(221)
62
381
1. The Development segment includes $73 million of revaluation gains from Equity accounted investments.
2. Excludes Investments segment revaluations.
3. Excludes depreciation and amortisation, Impairment losses relating to intangibles and Restructuring costs.
4. Operating profit before tax of $344 million plus Investment segment revaluations (pre-tax) of $74 million, less impairment losses relating to intangibles (pre tax) of $83 million and
restructuring costs (pre tax) of $484 million, reconciles to loss before tax from continuing operations of $177 million as disclosed in the Income Statement and Profit before tax for
discontinued operations of $28 million as disclosed in Note 33 ‘Discontinued Operations’.
$m
433
433
433
351
784
(467)
(320)
(3)
2
16
(21)
(6)
(17)
(23)
(1)
(24)
-
-
-
-
-
-
-
-
-
-
-
-
-
(25)
(25)
7
(42)
$m
7,005
279
928
610
8,822
109
8,931
351
9,282
(8,107)
(320)
855
170
311
(533)
803
7
(10)
(73)
727
(211)
516
4
59
11
(6)
(289)
(25)
-
-
(246)
69
339
$m
6,572
279
928
610
8,389
109
8,498
8,498
(7,640)
-
-
858
168
295
(512)
809
7
(10)
(56)
750
(210)
540
4
59
11
(6)
(289)
-
-
-
(221)
62
381
$m
$m
433
8,822
-
-
-
-
-
-
5
-
-
2
-
-
-
-
33
33
-
33
(28)
(185)
(180)
(115)
(90)
(383)
119
(264)
(77)
(104)
(56)
(10)
(247)
73
(438)
6,572
279
928
610
8,389
142
8,531
8,531
(7,668)
-
-
863
168
295
(697)
629
9
(125)
(146)
367
(91)
276
4
59
11
(83)
(289)
(104)
(56)
(10)
(468)
135
(57)
$m
433
433
351
784
(467)
(320)
(3)
2
16
(21)
(6)
(17)
(23)
(1)
(24)
-
-
-
-
-
-
-
-
-
-
-
-
-
(25)
(25)
7
(42)
$m
7,005
279
928
610
142
8,964
351
9,315
(8,135)
(320)
860
170
311
(718)
623
9
(125)
(163)
344
(92)
252
4
59
11
(83)
(289)
(129)
(56)
(10)
(493)
142
(99)
Financial Statements
111
Investments
Development1
Construction
Total Core Segments
Non Core
Total Segments
Total Core Segments
Corporate Activities
Total Core
Non Core
Total Group
TOTAL SEGMENT RESULTS
RECONCILIATION OF CORE AND NON CORE SEGMENTS TO STATUTORY PROFIT
30 June 2022
Revenue
Construction services
Investment services
Development services
Sale of development properties
Total revenue from contracts with customers -
continuing operations
Other revenue
Total revenue from external customers -
continuing operations
Construction services – discontinued operations
Total revenue from external customers
Cost of sales – continuing operations
Cost of sales – discontinued operations
Share of profit of Equity accounted investments2
Gross profit
Other income2
Other expenses3
Operating EBITDA
Finance revenue
Finance expenses
Depreciation and amortisation
Operating profit before tax4
Operating income tax (expenses)/benefit
Operating profit after tax
Investments segment revaluations (pre-tax):
Investment properties
Financial assets
Equity accounted investments
Impairment losses relating to intangibles (pre-tax)
Restructuring costs (pre-tax):
Development impairments
Tenancy impairments
Redundancy costs
Other restructuring costs
Total adjustments4
Income tax (expense)/benefit on adjustments
Statutory profit/(loss) after tax
$m
279
279
67
346
-
-
-
-
-
346
(46)
300
120
188
(111)
497
1
(1)
(9)
488
(127)
361
4
59
11
(6)
-
-
-
-
68
(4)
425
1,573
(1,328)
6,579
(6,266)
$m
928
610
1,538
35
1,573
-
-
-
-
-
-
-
-
-
-
-
245
42
85
(191)
181
6
(5)
(11)
171
(60)
111
(289)
(289)
66
(112)
$m
6,572
6,572
6,579
313
6
22
(210)
131
-
(4)
(36)
91
(23)
68
-
-
-
7
-
-
-
-
-
-
-
-
-
-
-
-
68
$m
6,572
279
928
610
8,389
109
8,498
8,498
(7,640)
-
-
858
168
295
(512)
809
7
(10)
(56)
750
(210)
540
4
59
11
(6)
(289)
-
-
-
(221)
62
381
1. The Development segment includes $73 million of revaluation gains from Equity accounted investments.
2. Excludes Investments segment revaluations.
3. Excludes depreciation and amortisation, Impairment losses relating to intangibles and Restructuring costs.
4. Operating profit before tax of $344 million plus Investment segment revaluations (pre-tax) of $74 million, less impairment losses relating to intangibles (pre tax) of $83 million and
restructuring costs (pre tax) of $484 million, reconciles to loss before tax from continuing operations of $177 million as disclosed in the Income Statement and Profit before tax for
discontinued operations of $28 million as disclosed in Note 33 ‘Discontinued Operations’.
$m
433
-
-
-
433
-
433
351
784
(467)
(320)
(3)
2
16
(21)
(6)
-
-
(17)
(23)
(1)
(24)
-
-
-
-
-
(25)
-
-
(25)
7
(42)
$m
7,005
279
928
610
8,822
109
8,931
351
9,282
(8,107)
(320)
855
170
311
(533)
803
7
(10)
(73)
727
(211)
516
4
59
11
(6)
(289)
(25)
-
-
(246)
69
339
$m
6,572
279
928
610
8,389
109
8,498
-
8,498
(7,640)
-
858
168
295
(512)
809
7
(10)
(56)
750
(210)
540
4
59
11
(6)
(289)
-
-
-
(221)
62
381
$m
$m
-
-
-
-
-
33
33
-
33
(28)
-
5
-
-
(185)
(180)
2
(115)
(90)
(383)
119
(264)
-
-
-
(77)
-
(104)
(56)
(10)
(247)
73
(438)
6,572
279
928
610
8,389
142
8,531
-
8,531
(7,668)
-
863
168
295
(697)
629
9
(125)
(146)
367
(91)
276
4
59
11
(83)
(289)
(104)
(56)
(10)
(468)
135
(57)
$m
433
-
-
-
433
-
433
351
784
(467)
(320)
(3)
2
16
(21)
(6)
-
-
(17)
(23)
(1)
(24)
-
-
-
-
-
(25)
-
-
(25)
7
(42)
$m
7,005
279
928
610
8,822
142
8,964
351
9,315
(8,135)
(320)
860
170
311
(718)
623
9
(125)
(163)
344
(92)
252
4
59
11
(83)
(289)
(129)
(56)
(10)
(493)
142
(99)
112
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Section A. Performance continued
1. Segment Reporting continued
1.a. Business Segment Information continued
The following table provides information on the Return on invested capital for the Investments and Development segment. Construction
is excluded from the table below on the basis that its main operational metric is EBITDA margin.
JUNE 2023
JUNE 2022
Net assets
Less: Cash and cash equivalents
Less: Other financial liabilities
Less: Borrowings and
financing arrangements
Invested capital at end of year
Invested capital at half year
Invested capital at beginning of year
Average invested capital
Operating profit after tax
Return on invested capital1
4,065
(33)
-
-
4,032
4,365
3,657
4,018
245
6.1%
Investments
$m
Development
$m
Remaining
Group
$m
Total
Group
$m
6,644
(900)
140
5,949
(3,370)
(68)
-
(799)
140
3,073
3,281
208
6,089
5,947
5,377
5,804
192
3.3%
Remaining
Group
$m
(2,081)
(1,066)
129
Total
Group
$m
6,970
(1,297)
130
2,144
2,357
Investments
$m
Development
$m
3,789
(140)
1
7
3,657
3,931
3,633
3,740
361
9.7%
5,262
(91)
-
206
5,377
5,018
4,416
4,937
111
2.2%
1. Return on Invested Capital is calculated using the Operating Profit after Tax divided by the arithmetic average of beginning, half year and year end invested capital.
The following table provides information on the Group's Return on equity:
Equity attributable to securityholders at end of year
Equity attributable to securityholders at half year
Equity attributable to securityholders at beginning of year
Average equity attributable to securityholders
Core operating profit after tax
Operating return on equity1
Statutory loss after tax
Statutory return on equity
June 2023
June 2022
$m
6,616
6,766
6,943
6,775
257
3.8%
(232)
(3.4)%
$m
6,943
6,654
6,927
6,841
276
4.0%
(99)
(1.4)%
1. Return on Equity is calculated using the Core operating Profit after Tax divided by the arithmetic average of beginning, half year and year end securityholders’ equity.
The following table provides a reconciliation of Core operating earnings per stapled security to the Total Group statutory earnings per
stapled security:
Core operating earnings per stapled security
Non core operating earnings per stapled security
Total Segment operating earnings per stapled security
Total adjustments (after tax) to reconcile to statutory profit1
Total Group statutory earnings per stapled security
CENTS PER STAPLED SECURITY
Note
June 2023
June 2022
37.3
(2.8)
34.5
(68.2)
(33.7)
40.1
(3.5)
36.6
(51.0)
(14.4)
3
1. The total adjustments (after tax) is calculated using the Total adjustments of $(525) million (June 2022: $(493) million) and Income tax benefit/(expense) on adjustments of
$55 million (June 2022: $142 million) divided by weighted average number of stapled securities of issue.
Financial Statements
113
The following tables set out other financial information by reportable segment:
JUNE 2023
JUNE 2022
Material Non
Cash Items1
Non Current
Segment Assets2
Group Total
Assets
Material Non
Cash Items1
Non Current
Segment Assets2
Group Total
Assets
$m
(109)
(271)
(1)
(381)
(1)
(382)
19
(363)
$m
$m
2,989
7,170
1,375
11,534
4
11,538
296
11,834
4,355
9,495
3,769
17,619
256
17,875
339
18,214
$m
57
(294)
(1)
(238)
(26)
(264)
(278)
(542)
$m
$m
2,638
6,201
1,494
10,333
7
10,340
290
10,630
4,093
7,940
3,847
15,880
304
16,184
917
17,101
Core
Investments
Development
Construction
Total core segments
Non core
Total segments
Corporate activities
Total
1. Material Non Cash Items relates to impairments and provisions raised or written back, unrealised foreign exchange movements and fair value gains or losses.
2. Excludes deferred tax assets, financial instruments and defined benefit plan assets.
1.b. Geography Segment Information
The following table sets out further information on Operating EBITDA, Operating PAT and Statutory Profit by region:
OPERATING
EBITDA
June
2023
June
2022
$m
499
100
18
88
705
(161)
544
(102)
442
$m
496
115
26
172
809
(180)
629
(6)
623
OPERATING
PAT
TOTAL
ADJUSTMENTS
TAX ON
ADJUSTMENTS
STATUTORY
PROFIT
June
2023
$m
348
78
(1)
44
469
(212)
257
(19)
238
June
2022
June
2023
$m
344
80
13
103
540
(264)
276
(24)
252
$m
(76)
(1)
(347)
(101)
(525)
-
(525)
-
(525)
June
2022
$m
(139)
(1)
(78)
(3)
(221)
(247)
(468)
(25)
(493)
June
2023
$m
8
6
9
32
55
-
55
-
55
June
2022
$m
58
-
3
1
62
73
135
7
142
June
2023
$m
280
83
(339)
(25)
(1)
(212)
(213)
(19)
(232)
June
2022
$m
263
79
(62)
101
381
(438)
(57)
(42)
(99)
Australia
Asia
Europe
Americas
Total region
Corporate activities
Total core
Non core1
Total Group
1. Includes impact of provisions previously recognised in relation to the sold Engineering business being revised in the current year to include the associated tax benefit, with no
impact to total profit after tax. Refer to Note 33 'Discontinued Operations' for more details.
The following table sets out Non current assets by region:
Australia
Asia
Europe
Americas
Total segment
Corporate activities
Total
1. Excludes deferred tax assets, financial instruments and defined benefit plan assets and is based on the geographical location of assets.
NON CURRENT ASSETS1
June 2023
June 2022
$m
4,915
2,108
1,996
2,519
11,538
296
11,834
$m
4,577
1,794
1,629
2,340
10,340
290
10,630
114
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Section A. Performance continued
1. Segment Reporting continued
1.b. Geography Segment Information continued
The operating segments generate revenue in the following regions:
REVENUE1
Total
Segments
$m
Corporate
Activities
$m
Statutory
Result
$m
June 2023
Australia
Asia
Europe
Americas
Total
June 2022
Australia
Asia
Europe
Americas
Total
Investments
$m
Development
$m
Construction
$m
Total Core
Segments
$m
189
86
23
32
330
193
82
18
54
347
1,615
50
394
274
2,333
962
31
523
63
1,579
3,707
295
742
2,459
7,203
3,186
261
899
2,233
6,579
5,511
431
1,159
2,765
9,866
4,341
374
1,440
2,350
8,505
Non Core
$m
499
-
-
-
6,010
431
1,159
2,765
499
10,365
784
-
-
-
784
5,125
374
1,440
2,350
9,289
93
-
-
-
93
35
-
-
-
35
6,103
431
1,159
2,765
10,458
5,160
374
1,440
2,350
9,324
1. Comprised of Revenue from contracts with customers from continuing operations of $10,229 million (June 2022: $8,822 million), Other revenue from continuing operations
of $144 million (June 2022: $142 million), Finance revenue from continuing operations of $85 million (June 2022: $9 million) and Revenue from contracts with customers from
discontinued operations of $nil million (June 2022: $351 million).
No revenue from transactions with a single external customer amounts to 10 per cent or more of the Group’s revenue.
2. Dividends/Distributions
Parent Company Interim Dividend
December 20222
December 20212
Lendlease Trust Interim Distribution
December 2022 – paid 8 March 2023
December 2021 – paid 16 March 2022
Parent Company Final Dividend
June 2023 – declared subsequent to reporting date3
June 2022 – paid 15 September 2022
Lendlease Trust Final Distribution
June 2023 – provided for and payable 13 September 2023
June 2022 – paid 21 September 2022
Total
COMPANY/TRUST1
Cents
June 2023
June 2022
Per Share/Unit
-
-
4.9
5.0
4.7
5.7
6.4
5.3
$m
-
-
34
-
32
-
44
-
110
$m
-
-
-
35
-
39
-
36
110
1. The current year final dividend is fully franked. The prior year final dividend was 75 per cent franked, with the balance sourced from the conduit foreign income account.
2. No interim dividend was declared by the Company for 31 December 2021 and 31 December 2022.
3. No provision for this dividend has been recognised in the Statement of Financial Position at 30 June 2023, as it was declared after the end of the reporting period.
Dividend Franking
The amount of franking credits available for use as at 30 June 2023 in subsequent reporting periods is $99 million (30 June 2022:
$41 million), based on a 30 per cent tax rate.
Financial Statements
115
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 Managing and Measuring Value - Financial section of this 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.
Basic/Diluted Earnings Per Share (EPS)1
(Loss) 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) attributable to securityholders of Lendlease Group
Weighted average number of stapled securities
Basic/Diluted EPSS2
$m
m
cents
$m
m
cents
JUNE 2023
JUNE 2022
Shares/
Securities
Excluding
Treasury
Securities
Shares/
Securities on
Issue
Shares/
Securities
Excluding
Treasury
Securities
Shares/
Securities on
Issue
(278)
683
(40.7)
(232)
683
(34.0)
(278)
689
(40.3)
(232)
689
(33.7)
(239)
683
(35.0)
(99)
683
(14.5)
(239)
689
(34.7)
(99)
689
(14.4)
1. Balances include both continuing and discontinued operations. Earnings per share/stapled security for continuing and discontinued operations have been separately disclosed
in Note 33 ‘Discontinued Operations’.
2. Details of the Group's Core operating earnings per stapled security is disclosed in Note 1a 'Segment Reporting'.
116
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Section A. Performance continued
4. Revenue from Contracts with Customers
Accounting Policies
Construction and Development services
Construction services include project management, design and construction services predominantly in the commercial,
residential, mixed use, defence and social infrastructure 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 and 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:
i.
Status of negotiations with customers
ii. 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
v. 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 they are
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:
i.
Progress in satisfying the performance obligations within the contract, which includes estimating contract costs expected to
be incurred to satisfy performance obligations
ii. 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.
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.
Financial Statements
117
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
standalone 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 typically occurs 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 derecognised as revenue once settlement of the apartments occurs.
Revenue from the provision of services
Core Construction services
Non core Construction services
Construction services
Investment services
Development services
Total revenue from the provision of services
Revenue from the sale of development properties
Total revenue from contracts with customers1
1. Further information on revenue by geography and by segments is included in Note 1b ‘Segment Reporting’.
June 2023
June 2022
$m
7,191
499
7,690
261
1,483
9,434
795
10,229
$m
6,572
433
7,005
279
928
8,212
610
8,822
118
Lendlease Annual Report 2023
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.
Associates1,2
Share of profit
Joint Ventures1,2
Share of profit
Total share of profit of equity accounted investments
Note
12.a
12.b
June 2023
June 2022
$m
11
17
28
$m
54
127
181
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.
2. Share of profit from Associates and Joint Ventures includes $(10) million loss (June 2022: $7 million gain) and $(124) million loss (June 2022: $4 million gain), respectively,
in revaluation gains and losses recognised in the Investments segment adjustment in Note 1 ‘Segment Reporting’. Share of profit from Associates and Joint Ventures include
$nil million (June 2022: $7 million) and $87 million (June 2022: $66 million), respectively, in revaluation gains in the Development segment.
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 entities
Asset management contract sale1
Equity accounted investments
Investment properties
Other assets and liabilities
Total net gain on sale/transfer of investments
Net gain on fair value measurement
Investment properties2
Fair value through profit or loss assets
Total net gain on fair value measurement
Other
Total other income
June 2023
June 2022
$m
30
192
13
1
26
262
13
-
13
24
299
$m
2
167
86
12
13
280
4
65
69
9
358
1. 1. In August 2022, the Group disposed of a 13 per cent interest in the asset management income stream of the Group's Military Housing portfolio, recording a net gain on sale
pre-tax of $78 million. In May 2023, the Group disposed of a further 21 per cent interest, through a sale of a 25% interest in the DoD Asset Management Holdings joint venture
to the existing partner, recording a net gain on sale pre-tax of $114 million. Refer to Note 12 ‘Equity Accounted Investments’ for further details.
2. Net gain on fair value measurements for Investment properties includes $20 million loss (June 2022: $4 million gain) recognised in the Investments segment adjustments in
Note 1 ‘Segment Reporting’.
Financial Statements
119
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 35a ‘Short
Term Incentive (STI)’ 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 35h ‘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 34 ‘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.
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.
120
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Section A. Performance continued
7. Other Expenses continued
June 2023
June 2022
$m
$m
Profit before income tax includes the following expense items:
Total Employee Benefit Expense
Less: Recoveries through projects1
Net employee benefit expense1
Superannuation accumulation plan expense
Net defined benefit plans expense
Restructuring expenses:
Development impairments
Tenancy impairments - Core
Tenancy impairments - Non core
Redundancy costs
Other restructuring costs
Provision in relation to UK building remediation2
Provision in relation to Americas Telecommunications receivable3
Expenses include other impairments raised/(reversals) relating to:
Loans and receivables
Property inventories
Equity accounted investments
Intangible assets
Net loss on fair value measurement of fair value through profit or loss assets4
Lease expense (including outgoings)
Depreciation on right-of-use assets
Depreciation on owned assets
Amortisation
Net foreign exchange loss
Other1
Total Other Expenses
1,878
(1,570)
308
85
(9)
-
-
-
-
-
295
74
20
-
2
-
76
27
51
26
66
6
181
1,208
1,927
(1,495)
432
77
(1)
289
104
25
56
10
-
-
2
12
(15)
83
-
30
54
35
67
2
167
1,429
1. This note has been amended in the current year to reconcile to the income statement, with minor presentation adjustments to facilitate this reconciliation. Comparative
information has been updated to align to the current year presentation.
2. Expense recorded on recognition of provision in relation to UK building remediation. Refer to Note 23 ‘Provisions’ for further detail.
3. Represents provision raised on future consideration receivable in relation to the sale of the Americas Telecommunication business.
4. Net loss on fair value measurements for Fair value through profit or loss assets reflects $76 million loss (June 2022: $59 million gain, included in Other income) recognised in
the Investments segment adjustments in Note 1 ‘Segment Reporting’.
Auditors’ Remuneration
Amounts received or due and receivable by the auditors of Lendlease Group and its consolidated
entities for:
Audit services
Other assurance services
Total audit and other assurance services
Non audit services1
Total audit, other assurance and non audit services
June 2023
June 2022
$000s
$000s
7,887
985
8,872
159
9,031
7,004
882
7,886
70
7,956
1. Non audit services include amounts charged for work relating to financial, regulatory and asset due diligence of the Group and its consolidated entities.
Financial Statements
121
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
Gain on repurchase of commercial notes1
Total finance revenue
Finance Costs
Interest expense in relation to other corporations
Interest expense in relation to lease liabilities
Less: Capitalised interest finance costs2
Total interest finance costs
Non interest finance costs
Total finance costs
Net finance costs
June 2023
June 2022
$m
13
8
21
1
63
85
174
15
(30)
159
14
173
(88)
$m
3
3
6
3
-
9
113
17
(25)
105
20
125
(116)
1. Reflects $63 million in relation to the repurchase of £125 million of Green senior notes in the Sterling bond market.
2. The weighted average interest rate used to determine the amount of interest finance costs eligible for capitalisation was 4.3 per cent (30 June 2022: 3.6 per cent), which is the
effective interest rate.
122
Lendlease Annual Report 2023
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. The Company is monitoring the global progress
toward the enactment of proposed new Organization of Economic Cooperation and Development (OECD) rules under Pillar 2 on
the introduction of a global minimum tax, which the Company will be subject to upon implementation. The Company has applied
the exceptions to recognising and disclosing information about deferred tax assets and liabilities related to Pillar 2 income taxes
as prescribed in AASB 112 Income Taxes.
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.
Section A. Performance continued
9. Taxation continued
9.a. Income Tax Expense
Recognised in the Income Statement
Current Tax Expense
Current year
Adjustments for prior years
Current year tax losses not recognised/(recognised)
Total current tax expense
Deferred Tax Expense
Origination and reversal of temporary differences
Temporary differences recovered/recognised
Recognition of prior year net tax losses
Change in tax rate
Total deferred tax benefit
Income Tax Expense
Total income tax benefit from continuing operations
Total income tax (benefit)/expense from discontinued operations
Total income tax benefit
Reconciliation of Effective Tax Rate
Loss before tax
Income tax using domestic corporate tax rate 30%
Adjustments for prior year
Non assessable and exempt income1
Non allowable expenses2
Net write off of tax losses through income tax expense
Temporary differences recognised through income tax expense3
Utilisation of capital losses on disposal of assets
Effect of tax rates in foreign jurisdictions4
Other
Income tax benefit5
Deferred Tax Recognised Directly in Equity
Relating to:
Hedging reserve
Defined benefit plans remeasurements
Foreign currency translation reserve
Total deferred tax recognised directly in equity
Financial Statements
123
June 2023
June 2022
$m
$m
62
(13)
27
76
(192)
30
11
(7)
(158)
(6)
(76)
(82)
(314)
(94)
(13)
(29)
16
-
30
(14)
29
(7)
(82)
11
(36)
(7)
(32)
200
3
(51)
152
(222)
17
19
(16)
(202)
(51)
1
(50)
(149)
(45)
3
(45)
5
34
17
(56)
(9)
46
(50)
39
6
11
56
1. Includes Lendlease Trust Group profit.
2. Includes accounting expenses for which a tax deduction is not allowed permanently.
3. Includes temporary differences not recognised in the current year that are 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.
4. 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.
5. Represents income tax benefit from continuing operations of $6 million and income tax benefit from discontinued operations of $76 million.
JUNE 2023
Tax
(Expense)/
JUNE 2022
Tax
(Expense)/
Before Tax
Benefit Net of Tax
Before Tax
Benefit Net of Tax
9.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
$m
12
113
(4)
(144)
(23)
$m
(11)
7
-
36
32
$m
1
120
(4)
(108)
9
$m
175
74
(5)
50
294
$m
(39)
(11)
-
(6)
(56)
$m
136
63
(5)
44
238
124
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
9.c. Deferred Tax Assets and Liabilities
Recognised Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities are attributable to the following:
JUNE 2023
JUNE 2022
Assets
$m
Liabilities
$m
Assets
$m
Liabilities
$m
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
Unused capital 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)
37
74
46
3
49
3
60
7
15
152
135
77
37
204
57
41
997
(778)
219
(32)
(296)
(87)
(4)
(375)
(10)
(7)
(11)
(43)
(14)
-
(18)
-
-
-
(14)
(911)
778
(133)
June 2023
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
Unused capital tax losses recognised
Items with a tax base but no carrying value
Total deferred tax (liabilities)/assets
1 July
2022
$m
(68)
(249)
(54)
55
(340)
(9)
43
(7)
(57)
146
151
81
41
134
-
15
(118)
Recognised
in Income
Recognised
in Equity
$m
$m
$m
73
37
(27)
(12)
36
2
2
3
(3)
(3)
(4)
(34)
(4)
56
57
(21)
158
-
-
-
-
(11)
-
-
-
36
-
-
7
-
-
-
-
32
-
(10)
40
(44)
(11)
-
8
-
(4)
(5)
(12)
5
-
14
-
33
14
6
66
-
68
23
-
54
4
11
159
151
94
41
134
-
41
852
(708)
144
Other/
Foreign
Exchange
(74)
(315)
(54)
(13)
(363)
(9)
(11)
(11)
(68)
(13)
-
(13)
-
-
-
(26)
(970)
708
(262)
30 June
2023
$m
5
(222)
(41)
(1)
(326)
(7)
53
(4)
(28)
138
135
59
37
204
57
27
86
Financial Statements
125
1 July
2021
$m
Recognised
in Income
Recognised
in Equity
Other/
Foreign
Exchange
$m
$m
$m
30 June
2022
$m
(90)
(282)
(40)
108
(405)
(17)
28
(18)
(51)
170
117
54
20
99
9
12
(286)
22
9
(11)
(53)
103
(1)
15
11
-
(26)
42
31
21
36
(9)
12
202
-
-
-
-
(39)
-
-
-
(9)
-
-
(11)
-
3
-
-
(56)
-
24
(3)
-
1
9
-
-
3
2
(8)
7
-
(4)
-
(9)
22
(68)
(249)
(54)
55
(340)
(9)
43
(7)
(57)
146
151
81
41
134
-
15
(118)
9.c. Deferred Tax Assets and Liabilities continued
June 2022
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
Unused capital tax losses recognised
Items with a tax base but no carrying value
Total net deferred tax (liabilities)/assets
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
June 2023
June 2022
$m
86
33
66
185
$m
74
102
69
245
Of the unrecognised deferred tax assets of $185 million, only $29 million expires between 2025 to 2037. The remainder of the
unrecognised deferred tax assets have no expiry date.
10. Events Subsequent to Balance Date
There were no material events subsequent to the end of the financial reporting period.
126
Lendlease Annual Report 2023
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, drive 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 revenue recognised (costs incurred
plus recognised profits) exceed progress billings. If progress billings and/or recognised contract losses exceed revenue
recognised, 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
Note
21.a
June 2023
June 2022
$m
968
594
-
1,562
2,681
2,681
4,243
$m
792
664
3
1,459
2,320
2,320
3,779
1. The Group has considered the impacts of economic conditions on its recoverability assessment of inventories at 30 June 2023. As part of its semi annual review of
development property projects, the Group has considered sales volumes in the short term, production timeframes, and potential increased costs for its projects. The carrying
value of the Group’s projects has not been materially impacted during the period due to their long dated nature.
Financial Statements
127
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.
Development - Investment Property
Investments in this category hold investment property that is under construction and is subject to periodic revaluations. These
revaluations represent development profit earned and are recognised in the Development segment.
Development - Inventory
Investments in this category contain inventory under development and are held at cost. Revenue is recognised once the inventory
settles with the customer and is recognised in the Development segment.
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
12.a
12.a
12.b
12.b
June 2023
June 2022
$m
713
-
713
4,961
(27)
4,934
5,647
$m
598
-
598
3,806
(25)
3,781
4,379
128
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Section B. Investment continued
12. Equity Accounted Investments continued
12.a. Associates
Australia
Investments
INTEREST
SHARE OF PROFIT
NET BOOK VALUE
June 2023
June 2022
June 2023
June 2022
June 2023
June 2022
%
%
$m
$m
$m
$m
Lendlease Sub Regional Retail Fund1
Lendlease Real Estate Partners 4
10.0
33.3
10.0
33.3
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
26.9
48.7
39.8
-
26.2
48.7
39.8
-
Total Asia
United States
Investments
Other
Total United States
Total Group
Less: Impairment
Total associates
(1)
(24)
(1)
(26)
39
-
(4)
-
35
2
2
11
-
11
6
1
-
7
30
-
6
8
44
3
3
54
-
54
8
103
4
115
552
4
38
-
594
4
4
713
-
713
25
34
5
64
485
4
41
-
530
4
4
598
-
598
1. Although the Group has a 10 per cent ownership interest in Lendlease Sub Regional Retail Fund, it holds at least 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.
12.b. Joint Ventures
Australia
Investments
Lendlease Retirement Living Trust
Lendlease DTC Industrial Trust
Other
Development
Development - Investment Property
Circular Quay Tower
Victoria Cross
Development - Inventory
Melbourne Quarter R1
North East Link
Frankston Hospital
One Sydney Harbour R1 Trust
One Sydney Harbour R2 Trust
One Circular Quay1
Other Development
Total Australia
INTEREST
SHARE OF PROFIT
NET BOOK VALUE
June 2023
June 2022
June 2023
June 2022
June 2023
June 2022
%
%
$m
$m
$m
$m
25.1
-
-
75.0
50.0
20.0
50.0
75.0
75.0
33.3
25.1
50.0
-
75.0
50.0
20.0
50.0
75.0
75.0
-
26
3
(1)
-
(5)
2
2
-
-
-
12
1
40
63
(6)
-
31
-
1
(1)
-
1
-
-
2
91
544
-
2
-
187
2
155
90
396
413
166
21
526
161
-
-
153
35
153
88
240
205
-
15
1,976
1,576
Financial Statements
129
INTEREST
SHARE OF PROFIT
NET BOOK VALUE
June 2023
June 2022
June 2023
June 2022
June 2023
June 2022
%
%
$m
$m
25.0
30.0
49.0
60.0
20.0
15.0
20.0
50.0
25.0
50.0
50.0
50.0
50.0
8.9
50.0
37.5
50.1
50.1
42.5
25.0
25.0
42.5
50.1
25.0
50.0
40.0
25.0
30.0
49.0
60.0
20.0
15.0
20.0
50.0
-
50.0
50.0
50.0
50.0
-
50.0
37.5
50.1
50.1
42.5
50.0
25.0
42.5
50.1
25.0
50.0
40.0
50.0
50.0
-
(9)
-
40
(1)
2
32
1
(7)
(12)
2
-
-
(1)
(2)
-
(3)
-
(22)
(14)
(16)
(22)
(5)
10
-
-
-
8
-
(1)
-
-
7
(33)
17
-
17
11
28
-
9
-
-
-
-
9
9
15
-
4
-
-
(1)
(4)
-
(3)
(1)
19
7
4
-
7
2
-
-
5
-
-
2
(25)
-
6
8
127
-
127
54
181
$m
3
391
54
685
22
23
1,178
185
139
170
138
15
142
112
10
92
19
8
1,030
80
75
67
89
8
7
63
117
81
58
72
17
38
$m
3
392
49
501
-
18
963
173
103
-
78
14
106
72
14
-
25
8
593
91
89
88
93
4
4
27
107
39
40
35
14
38
5
777
4,961
(27)
4,934
713
5,647
5
674
3,806
(25)
3,781
598
4,379
12.b. Joint Ventures
Asia
Investments
CDR JV Limited
Paya Lebar Quarter
Development
Development - Investment Property
Certis and Lendlease Property Trust
The Exchange TRX1
Lendlease Data Centre Partners
Lendlease Life Science and Innovation Partners
Total Asia
Europe
Investments
LRIP LP
MSG South2
21 Moorfields
LRIP 2 LP3
Other
Development
Development - Investment Property
IQL Office LP
Milano Innovation District
Stratford City Business District Limited (International
Quarter London)
MSG North
Development - Inventory
Victoria Drive Wandsworth
Other Development
Total Europe
United States
Investments
845 Madison
Americas Residential Partnership
Clippership Wharf Multifamily Holdings
720 S Wells Holdings
445 East Waterside4
DoD Asset Management Holdings
Other
Development
Development - Investment Property
60 Guest Street
Americas Residential Partnership
211 North Harbor Drive Venture
SB Polk Street
1 Java Holdings
La Cienega
Development - Inventory
277 Fifth Avenue
Other Development
Construction
Lendlease Turner Joint Venture
Total United States
Total Group
Less: Impairment
Total joint ventures
Total associates
Total equity accounted investments
1. Investment includes both investment property and residential inventory.
2. During the period, MSG South was transferred from Development segment to the Investments segment subsequent to project completion.
3. During the period, LRIP 2 LP was transferred from Development segment to the Investments segment subsequent to project completion.
4. During the period, 445 East Waterside was transferred from Development segment to the Investments segment subsequent to project completion.
130
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Section B. Investment continued
12. Equity Accounted Investments continued
12.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 investment in property assets.
Income Statement1
Revenue and other income
Cost of sales
Other expenses
Unrealised fair value gains/(losses)
Finance costs
Income tax (benefit)/expense
Other
Profit/(loss) for the financial year
Other comprehensive
(expense)/income
Total comprehensive income
LENDLEASE GLOBAL
COMMERCIAL REIT
LENDLEASE
RETIREMENT
LIVING TRUST
PAYA
LEBAR QUARTER
THE EXCHANGE
TRX
June 2023 June 2022 June 2023 June 2022 June 2023 June 2022 June 2023 June 2022
$m
233
(56)
(26)
45
(56)
-
(12)
128
(4)
124
$m
173
(27)
(15)
52
(16)
-
-
167
(41)
126
$m
301
(53)
(86)
(29)
(30)
(1)
-
102
(3)
99
$m
240
(45)
(68)
54
(21)
(1)
-
159
34
193
$m
154
(33)
(23)
4
(64)
(2)
-
36
-
36
$m
193
(41)
(18)
11
(55)
(1)
-
89
-
89
$m
147
(150)
(4)
18
-
3
-
14
(3)
11
$m
56
(45)
(4)
45
(3)
9
-
58
10
68
Group's ownership interest
26.9%
26.2%
25.1%
25.1%
30.0%
30.0%
60.0%
60.0%
Group's total share of:
Profit/(loss) for the financial year
Other adjustments
Total profit/(loss) for the
financial year
Other comprehensive
income/(expenses)
Total comprehensive
income/(expenses)
34
5
39
29
68
44
(14)
30
11
41
26
-
26
(1)
25
63
-
63
11
74
11
(20)
(9)
40
31
27
(18)
9
23
32
8
32
40
(3)
37
35
(35)
-
18
18
1. The underlying investments in the material associate and joint ventures are office, retail and retirement living investment properties measured at fair value. At 30 June 2023,
valuations were undertaken on the underlying assets. The carrying value of the investments are considered recoverable as it correlates with the net assets of the associate and
joint ventures, which have been valued at 30 June 2023.
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:
(Loss)/profit 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 2023
June 2022
June 2023
June 2022
$m
(28)
1
(27)
$m
24
6
30
$m
(40)
100
60
$m
55
145
200
Financial Statements
131
LENDLEASE GLOBAL
COMMERCIAL REIT
LENDLEASE
RETIREMENT
LIVING TRUST1
PAYA
LEBAR QUARTER
THE EXCHANGE
TRX
June 2023 June 2022 June 2023 June 2022 June 2023 June 2022 June 2023 June 2022
$m
24
86
110
$m
41
59
100
$m
158
8
166
$m
122
93
215
$m
87
19
106
$m
63
45
108
48
23
71
3,754
8,310
7,826
3,338
3,129
1,840
1,522
16
19
-
51
-
38
-
23
-
3
-
27
-
20
3,789
8,361
7,864
3,361
3,132
1,867
1,542
Statement of Financial Position
$m
$m
Current assets
Cash and cash equivalents
Other current assets
Total current assets
Non current assets
Investment properties
Equity accounted investments
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
57
18
75
4,047
9
105
4,161
-
472
60
532
1,200
29
1,229
2,475
-
5,349
5,054
312
44
356
1,200
19
1,219
2,285
2
105
-
78
5,456
5,132
888
-
888
2,127
777
-
777
2,055
-
-
77
77
1,938
27
1,965
1,485
-
-
43
43
1,813
33
1,846
1,458
Reconciliation to Carrying Amounts
Opening net assets 1 July
2,285
1,144
2,055
1,882
1,458
1,292
Total comprehensive income/(loss) for
the financial year
Acquisition/(capital reduction)
Distributions
Foreign currency translation for the
financial year
Closing net assets
% ownership
Group's share of net assets
Other adjustments
Carrying amount at end of the
financial year
124
40
(91)
117
2,475
26.9%
665
(113)
126
1,003
(74)
86
2,285
26.2%
599
(114)
99
-
(27)
-
2,127
25.1%
534
(3)
552
485
531
193
-
(20)
-
2,055
25.1%
516
(3)
513
36
(105)
-
96
1,485
30.0%
446
(55)
89
6
-
71
1,458
30.0%
437
(45)
1. The carrying amount at the end of the financial year differs to Note 12b ‘Joint Ventures’ due to an impairment of $13 million.
Material joint ventures had $135 million (June 2022: $154 million) in capital expenditure commitments.
391
392
685
-
28
94
122
654
-
654
1,197
956
11
263
-
(33)
1,197
60.0%
718
(33)
-
113
49
162
532
-
532
956
658
68
172
-
58
956
60.0%
574
(73)
501
132
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Section B. Investment continued
12. Equity Accounted Investments continued
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
13. Other Financial Assets
ASSOCIATES
JOINT VENTURES
June 2023
June 2022
June 2023
June 2022
$m
161
$m
113
$m
3,341
$m
2,387
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 Note 21 ‘Loans and Receivables’.
Current Measured at Fair Value
Fair Value Through Profit or Loss - Designated at Initial Recognition
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
Military Housing Projects Initiative
Parkway Parade Partnership Limited
Other investments
Derivatives
Total non current
Total other financial assets
1. Refer to Note 26 ‘Fair Value Measurement’ for details on basis of determining fair value and valuation technique.
13.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
Acquisition/(Disposals)
Net gains/(losses) recognised in Income Statement
Other movements
Carrying amount at end of financial year
Fair Value
June 2023
June 2022
Level1
Level 2
Level 3
Level 3
Level 3
Level 3
Level 3
Level 3
Level 3
Level 3
Level 2
$m
32
32
155
56
276
380
57
167
2
31
16
1,140
1,172
$m
24
24
174
62
136
412
59
216
68
22
32
1,181
1,205
June 2023
June 2022
$m
1,149
17
(76)
34
1,124
$m
1,070
(7)
65
21
1,149
The potential effect of using reasonably possible alternative assumptions for valuation inputs would not have a material impact on
the Group.
Financial Statements
133
Section C. Liquidity and Working Capital
The ability of the Group to fund the continued investment in the development 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.
Cash
Short term investments1
Total cash and cash equivalents
June 2023
June 2022
$m
856
44
900
$m
1,128
169
1,297
1. Short term investments earned variable rates of interest which averaged 2.9 per cent per annum during the financial year (30 June 2022: 0.5 per cent).
134
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Section C. Liquidity and Working Capital continued
15. Notes to Statement of Cash Flows
June 2023
June 2022
Reconciliation of (Loss) after Tax to Net Cash Used in Operating Activities
Loss after tax (including external non controlling interests)
Amortisation and depreciation
Net gain on sale of investments, plant and equipment
Impairment/(reversal) of equity accounted investments
Impairment of inventories
Impairment of loan and receivables
Impairment of intangible assets
Tenancy impairments
Net unrealised foreign exchange loss and currency hedging costs
Net fair value loss/(gain) on investments
Share of profit of equity accounted investments
Dividends/distributions from equity accounted investments
Fair value gain on investment properties
Gain on repurchase of commercial notes
Other
Net cash (used in)/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
Increase in inventories
Decrease in other assets
Decrease/(increase) in net defined benefit plans/assets
Increase/(decrease) in payables
Decrease in operating derivatives assets/liabilities
Increase in deferred tax items
(Increase)/decrease in current tax
Increase in other provisions
Net cash (used in) operating activities1
1. Prior year balances include cash flows relating to both continuing and discontinued operations.
16. Borrowings and Financing Arrangements
$m
(232)
143
(232)
2
-
20
-
-
4
76
(28)
126
(13)
(63)
(24)
(221)
199
(342)
7
12
118
18
(343)
(42)
108
(486)
$m
(99)
163
(280)
(15)
294
2
83
129
31
(65)
(181)
68
(4)
-
(58)
68
11
(426)
17
(54)
(514)
53
(203)
58
155
(835)
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.
16.a. Borrowings – Measured at Amortised Cost
Current
Bank credit facilities
Total current
Non Current
Commercial notes
Bank credit facilities
Total non current
Total borrowings
Financial Statements
135
June 2023
June 2022
$m
19
19
1,928
1,334
3,262
3,281
$m
-
-
2,082
275
2,357
2,357
The Group has net debt of $2,381 million (30 June 2022: $1,060 million) and is 14.8 per cent (30 June 2022: 7.3 per cent) geared at the
balance sheet date. The Group's gearing is calculated as net debt to total tangible assets, less cash.
16.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:
June 2023
June 2022
$m
$m
1,928
(1,928)
-
2,910
(1,353)
1,557
2,082
(2,082)
-
2,798
(275)
2,523
124
124
• US$400 million of guaranteed unsecured senior notes issued in May 2016 in the US Reg. S market 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 with a 3.9 per cent coupon
maturing in April 2027
• $500 million of guaranteed unsecured Green senior notes issued in October 2020 in the Australian bond market with a 3.4 per cent
coupon maturing in October 2027
• $80 million of guaranteed unsecured senior medium term notes issued as an A$ private placement in December 2018 with a 5.4 per
cent per annum coupon maturing in December 2028
• $300 million of guaranteed unsecured Green senior notes issued in March 2021 in the Australian bond market with a 3.7 per cent
coupon maturing in March 2031
• £125 million of guaranteed unsecured Green senior notes issued in December 2021 in the Sterling bond market with a 3.5 per cent
coupon maturing in December 2033.
Bank credit facilities include:
• £400 million sustainability linked loan, maturing in October 2027 was drawn to $192 million as at 30 June 2023
• US$300 million sustainability linked loan, maturing in July 2025 was drawn to $172 million as at 30 June 2023
• CNY928 million bank facility, maturing in January 2025 was drawn to $189 million as at 30 June 2023
• S$300 million sustainability linked loan, maturing in February 2025 was drawn to $133 million as at 30 June 2023
• $800 million sustainability linked loan, with Tranche A $400 million maturing in November 2025, was drawn to $300 million as at
30 June 2023 and Tranche B $400 million maturing in November 2026 was drawn to $20 million as at 30 June 2023
• €200 million sustainability linked loan, maturing in July 2027 was drawn to $328 million as at 30 June 2023.
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.
136
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Section C. Liquidity and Working Capital continued
16. Borrowings and Financing Arrangements continued
June 2023
Within one year
Between one and five years
More than five years
Total
June 2022
Within one year
Between one and five years
More than five years
Total
INTEREST EXPOSURE
Fixed
$m
Floating
$m
Total
$m
19
1,542
575
2,136
-
1,097
1,190
2,287
-
1,145
-
1,145
-
63
7
70
19
2,687
575
3,281
-
1,160
1,197
2,357
CURRENCY
A$
$m
-
745
337
1,082
-
-
756
756
US$
$m
-
767
-
767
-
580
-
580
£
$m
19
192
238
449
-
17
441
458
€
$m
-
328
-
328
-
-
-
-
CNY
$m
-
189
-
189
-
188
-
188
S$
$m
-
466
-
466
-
375
-
375
Total
$m
19
2,687
575
3,281
-
1,160
1,197
2,357
16.c. Movement in Borrowings and Financing Arrangements
Balance at beginning of financial year
Net proceeds from borrowings
Effect of foreign exchange rate movements
Other movements
Balance at end of financial year
17. Issued Capital
Accounting Policies
Note
16.a
16.a
June 2023
June 2022
$m
2,357
902
80
(58)
3,281
$m
2,357
70
24
(94)
2,357
Issued Capital
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 typically classified as treasury shares and are recognised as a
deduction from equity.
LENDLEASE CORPORATION LIMITED
LENDLEASE TRUST
June 2023
June 2022
June 2023
June 2022
No. of
Shares
(m)
No. of
Shares
(m)
$m
No. of Units
No. of Units
$m
(m)
$m
(m)
$m
689
1,891
689
1,888
689
1,538
689
1,537
-
3
-
3
-
1
-
1
689
1,894
689
1,891
689
1,539
689
1,538
Issued capital at beginning
of financial year, net of
prior period share buyback
Distribution Reinvestment
Plan (DRP)
Issued capital at end of
financial period
17.a. Issuance of Securities
As at 30 June 2023, the Group had 689 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.
Financial Statements
137
17.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 22 August 2023. 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, commencing on 22 August 2023, 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.
17.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 2023 are Baa3/BBB- respectively (June 2022: 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 Managing and Measuring Value - Financial section and Performance and Outlook
section of this Annual Report.
19. Liquidity Risk Exposure
Further information on liquidity risk is disclosed in Note 24 ‘Financial Risk Management’. As disclosed in Note 27 ‘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 2023, the Group does not anticipate a significant liquidity risk in relation to the following financial liabilities. This is due to
the Group’s strong financial profile, as supported by the significant committed undrawn facilities and low gearing ratio. Refer to Note 14
‘Cash and Cash Equivalents’ and Note 16 ‘Borrowings and Financing Arrangements’.
The Group has provided collateral of $nil (June 2022: $nil) against letter of credit facilities.
138
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Section C. Liquidity and Working Capital continued
19. Liquidity Risk Exposure continued
The following are the contractual cash flow maturities of financial liabilities including estimated interest payments:
June 2023
Non Derivative Financial Liabilities
Trade and other payables1
Lease liabilities
Borrowings and financing arrangements
Total
Derivative Financial Liabilities
(Outflow)
Inflow
Total
June 2022
Non Derivative Financial Liabilities
Trade and other payables1
Lease liabilities
Borrowings and financing arrangements
Total
Derivative Financial Liabilities
(Outflow)
Inflow
Total
Carrying
Amount
Contractual
Cash Flows
Less Than
One Year
One to Two
Years
Two to Five
Years
More Than
Five Years
Note
$m
$m
$m
$m
$m
$m
22
22
16.a
22
22
16.a
4,996
384
3,281
8,661
-
140
140
5,101
408
2,357
7,866
-
130
130
5,502
425
3,746
9,673
(2,041)
2,181
140
5,117
450
2,878
8,445
(1,286)
1,415
129
3,572
89
135
801
93
314
3,796
1,208
(1,940)
1,993
53
3,549
86
140
3,775
(1,163)
1,190
27
(24)
48
24
914
92
197
1,203
(24)
45
21
1,103
220
2,174
3,497
(58)
109
51
637
204
913
1,754
(67)
124
57
26
23
1,123
1,172
(19)
31
12
17
68
1,628
1,713
(32)
56
24
1. Trade and other payables are presented excluding lease liabilities. The carrying amount of trade and other payables excludes $971 million of current and $628 million of non
current amounts (June 2022: $958 million of current and $78 million of non current) in relation to items where there is no future cash outflow or liquidity risk.
Other contractually committed cash flows the Group is exposed to are detailed in Note 20 ‘Commitments’.
20. Commitments
20.a. Capital Expenditure
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
20.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
June 2023
June 2022
$m
$m
-
-
-
-
-
-
-
-
June 2023
June 2022
$m
$m
1,853
1,381
16
3,250
1,131
1,222
8
2,361
Financial Statements
139
June 2023
June 2022
$m
108
108
-
216
$m
76
162
-
238
20.c. Investment Properties
At balance date, capital commitments existing in respect of the purchase, construction or development
of investment properties, 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
21. Loans and Receivables
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 a 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 met.
Current
Trade receivables
Less: Impairment
Related parties
Retentions
Contract debtors
Accrued income
Other receivables
Total Current
Non Current
Trade receivables
Related parties
Less: Impairment
Retentions
Other receivables
Total non current
Total loans and receivables
Note
21.a
21.a
June 2023
June 2022
$m
651
(29)
622
339
282
250
114
692
$m
726
(13)
713
208
259
291
82
480
2,299
2,033
2
485
(10)
477
70
892
1,439
3,738
2
589
(5)
586
71
1,239
1,896
3,929
As at the reporting date, $514 million of the trade receivables were current (30 June 2022: $603 million) and $137 million were past
due (30 June 2022: $123 million). Of the past due amount, $108 million was not impaired (30 June 2022: $110 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, 7.7 per cent (30 June 2022: 7.7 per cent) are aged greater than 90 days. Other than trade debtors, no other loans and
receivables are considered past due at 30 June 2023 (30 June 2022: $nil).
140
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Section C. Liquidity and Working Capital continued
21. Loans and Receivables continued
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
Total impairment as a percentage of total loans and receivables
June 2023
June 2022
$m
18
20
-
1
39
1.0%
$m
16
3
-
(1)
18
0.5%
The credit quality of all loans and receivables, including those neither past due nor impaired, is assessed and monitored on an ongoing
basis. Impairment as noted above was immaterial at 30 June 2023, though in view of prevailing market conditions there exists a
heighted level of credit risk associated with counterparties. 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 substantial portion of the Group’s loans and receivables balances are unsecured.
21.a. Contract Assets
Current
Contract debtors1
Construction contract assets2
Accrued income
Total contract assets
Note
11
June 2023
June 2022
$m
250
594
114
958
$m
291
664
82
1,037
1. Movements in contract debtors during the financial year relate primarily to amounts transferred into Trade receivables as the right to receive payment from the customer has
become unconditional.
2. Movements in construction contract assets during the financial year related primarily to billings raised on construction contracts with customers in excess of revenue
recognised during the financial year.
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 revenue recognised (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 income
Lease liabilities
Other
Total current
Non Current
Trade and accrued creditors
Retentions
Deferred land payments
Unearned income
Lease liabilities
Other payables - PLLACes1
Other
Total non current
Total trade and other payables
Financial Statements
141
June 2023
June 2022
$m
2,616
1,148
145
379
16
85
79
178
$m
2,316
1,327
197
344
126
38
77
132
4,646
4,557
June 2023
June 2022
$m
306
74
337
66
305
562
683
2,333
6,979
$m
366
51
330
77
331
-
833
1,988
6,545
Note
22.a
22.a
Note
22.a
1. PLLACes transactions involve selling the presold apartment cash flows for a specific development project to a third party for cash consideration. This amount relates to
$457 million of proceeds received from PLLACes transactions for One Sydney Harbour R2 Trust and $105 million in relation to PLLACes transactions for the One Sydney
Harbour R3 project. Refer to Note 4 ‘Revenue from Contracts with Customers’ for further details.
As at 30 June 2023, the Group recognised right-of-use assets of $161 million (30 June 2022: $188 million) within Property, Plant
and Equipment.
22.a. Contract Liabilities
Current
Unearned income1
Construction contract liabilities2
Total current
Non Current
Unearned income1
Total non current
Total contract liabilities
June 2023
June 2022
$m
85
1,148
1,233
66
66
1,299
$m
38
1,327
1,365
77
77
1,442
1. Movements in Unearned income relates primarily to residential presales settled during the financial year and deposits received for development properties.
2. Movements in Construction contract liabilities relate primarily to revenue recognised during the period in excess of billings raised on construction contracts with customers.
This balance also contains provisions previously incurred on retained Engineering projects that are in progress.
During the year, the Group recognised $616 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
2023 is $509 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 2023 is
$13.5 billion. This includes new work secured during the financial year. Of the total construction backlog, 55 per cent is expected to be
realised within the next 12 months to June 2024 (June 2022: 54 per cent to June 2023), 30 per cent to June 2025 (June 2022: 30 per
cent to June 2024) and the remaining 15 per cent realised post June 2025 (June 2022: 16 per cent post June 2024).
142
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Section C. Liquidity and Working Capital continued
23. Provisions
Accounting Policies
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable
that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the
reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using
the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the
effect of the time value of money is material).
Management considers this is an area of estimation uncertainty as these calculations involve a number of key assumptions
including the expected future cash outflow and the timing of the outflow to determine the provision.
Employee Benefits
Includes amounts for employee annual leave and long service leave entitlements.
Development Projects
Includes amounts for costs to close out development projects, including defects and residual guarantees. The timing of any
expected outflows of economic benefits is dependent on market factors, such as lease up rates in specific markets, and
negotiations with customers.
Construction Projects
Includes amounts for claims and litigation related to legacy construction projects. The timing of any expected outflows of
economic benefits is dependent on the progression of negotiations and litigation with claimants, which are ongoing at period end.
Other
Includes amounts related to various litigation and commercial matters, and the provision in relation to UK building remediation.
Balance as at 1 July 2022
Provisions made during the year
Provisions used during the year
Provisions reversed during the year
Balance as at 30 June 2023
Current provisions
Non current provisions
Total provisions
Employee
Benefits
Development
Projects
Construction
Projects
Other
$m
164
61
(66)
7
166
144
22
166
$m
130
20
(9)
(26)
115
79
36
115
$m
384
131
(126)
(19)
370
364
6
370
$m
110
323
(15)
(35)
383
121
262
383
Total
$m
788
535
(216)
(73)
1,034
708
326
1,034
Provision in relation to UK building remediation
The UK Government has enacted a number of retrospective legislative changes and additional measures to address building safety
risks concerning residential buildings with a height of 11 metres and above. As part of this action, the defect liabilities period has been
extended from 6 to 30 years, and there have been updates to building safety regulations for completed residential buildings.
So as not to be subject to significant trade restrictions, consistent with other listed UK developers, Lendlease entered into a contract
with the UK Government on 22 March 2023, committing to remediate building safety risks consistent with these legislative changes.
Lendlease has established a dedicated team undertaking a detailed review into this matter, however timing and access to information
is limited. Lendlease believes that the liability currently relates to 59 buildings, of which 58 were developed by Crosby, a company that
Lendlease acquired in 2005 to enter the residential development market in the UK. Notably, many of these buildings were completed or
had commenced construction prior to Lendlease’s acquisition. Lendlease no longer owns any of these buildings.
It is noted that each building completed by a Lendlease entity was certified as complying with applicable building regulations at the
time of its completion.
The government department responsible for this legislation has provided a schedule listing buildings in the portfolio and, in some cases,
their assessment or estimate of the cost to remediate. Furthermore, Lendlease has now been in initial contact with some of the building
owners to gather more information on the cost of remediation. This information is currently under evaluation and has been used to
extrapolate across the rest of the portfolio to estimate the required provision.
At 31 December 2022, Lendlease recognised a provision in respect of this matter of $200 million (pre-tax), as a gross amount. At
30 June 2023 an additional provision of $95 million (pre-tax) has been recognised to account for market cost increases and updated
information received in respect of the portfolio. The cash expenditure by Lendlease is expected to be spread over a period of at least
Financial Statements
143
seven years. This expense has been excluded from Core Operating Profit given it is a consequence of retrospective government action,
which could not reasonably have been expected from normal operations.
We have included in the provision amounts for buildings where we have cost estimates provided by third parties or building owners.
There are a number of buildings for which we do not have documentation and are not able to establish whether remediation work
is required. Given we are at the early stages of this process, there are both risks and opportunities to the provision that has been
estimated. Key risks include the addition of new buildings or new information in relation to already identified buildings, as well as the
rising costs in the local market. Key opportunities include the potential for bulk procurement, re-interrogating scope on tender pricing,
and assessing various options in the delivery model. Further, this provision does not include anticipated recoveries from third parties,
including insurances and supply chain. Lendlease is actively working to maximise third party recoveries however expects this process
will be over an extended period of time.
Determining the liability position for this matter and any estimate is a complex process requiring significant judgement with respect
to whether there is an obligating event and the quantum of any liability. The estimate of any potential liability is based on incomplete
information and will be updated as work and time progresses. Lendlease will continue to engage with building owners and the UK
Government on these industry wide actions and assess additional relevant information on an ongoing basis.
144
Lendlease Annual Report 2023
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.
24. 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
Foreign Currency
Definition
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
Exposures
•
Foreign currency earnings
• Net investments in
foreign operations
• Transactions settled in
foreign currency
Management of Exposures
•
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
Policies in place so that customers
and suppliers are appropriately
credit assessed
•
Further information on exposures
is detailed in Note 24a ‘Foreign
Currency Risk Exposure’
• Recoverability of loans
and receivables
• Recoverability of other financial
assets and cash deposits
• Treasury Policy sets out credit limits for
•
•
•
•
•
•
•
Further information on exposures
is detailed in Note 24b ‘Credit
Risk Exposure’
Insufficient levels of committed
credit facilities
Settlement of financial liabilities
Further information on exposures
is detailed in Note 19 ‘Liquidity
Risk Exposure’
Financial assets, mainly cash
at bank
Financial liabilities,
mainly borrowings and
financing arrangements
Further information on exposures
is detailed in Note 24c ‘Interest
Rate Risk Exposure’
each counterparty based on minimum
investment grade ratings
• Maintaining sufficient levels of cash
and committed credit facilities to meet
financial commitments and working
capital requirements
• Managing to funding portfolio
benchmarks as outlined in the
Treasury Policy
• Timely review and renewal of
credit facilities
•
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
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
Financial Statements
145
Section D. Risk Management continued
24. Financial Risk Management continued
24.a. Foreign Currency Risk Exposure
The net asset exposure by currency is detailed below.
June 2023
Net asset exposure (local currency)
1,842
1,008
803
662
115
638
2,096
June 2022
Net asset exposure (local currency)
2,456
876
699
740
378
628
1,499
23
45
A$m
US$m
£m
S$m
€m
CNYm
MYRm
Other m1
1. 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 2022: 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 2023
$m
(4)
(32)
7
1
(2)
5
(25)
June 2022
$m
9
(7)
4
(1)
(1)
-
4
June 2023
$m
4
32
(6)
(2)
2
(4)
26
June 2022
$m
(8)
8
(4)
-
1
1
(2)
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 2023
June 2022
June 2023
June 2022
$m
175
164
81
21
15
75
531
$m
143
145
89
68
15
54
514
$m
(143)
(136)
(67)
(16)
(12)
(61)
(435)
$m
(117)
(116)
(73)
(55)
(12)
(44)
(417)
146
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
24.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.
24.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 2023
June 2022
$m
201
(2,375)
(2,174)
783
(2,544)
(1,761)
$m
172
(2,547)
(2,375)
1,266
(1,352)
(86)
Sensitivity Analysis
At 30 June 2023, 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 $2 million (June 2022: $6 million increase 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 $2 million (June 2022: $6 million decrease
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.
25. 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 primarily treated as cash flow
hedges and are mainly on borrowings within equity accounted investments.
The Group has foreign exchange derivative contracts primarily held in GBP, USD, EUR, SGD and CNY at reporting date to hedge
specific foreign currency exposures. The total gross payable exposure is $1,595 million (June 2022: payable $1,663 million).
There are 12 foreign currency contracts that will mature in more than one year (June 2022: 31 foreign currency contracts).
Financial Statements
147
Section D. Risk Management continued
26. 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
25 ‘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 2023
JUNE 2022
Carrying Amount
Fair Value
Carrying Amount
Fair Value
$m
-
$m
-
$m
-
$m
-
1,928
1,780
2,082
1,996
Note
16.a
16.a
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.
26.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 economic
conditions into consideration to determine fair value at 30 June 2023. This included valuations of underlying investment properties
at balance date
• 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.
26.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 financial year, there were no material transfers between Level 1, Level 2 and Level 3 fair value hierarchies.
148
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
27. 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. Such claims and
exposures largely arise in respect of claims for defects (including under both contract and legislation), claims for breach of
performance obligations or breach of warranty or claims under indemnities. In some claims:
– There is uncertainty as to whether a legal obligation exists;
– There is uncertainty as to whether a future cash outflow will arise in respect to these items; and/or
– It is not possible to quantify the potential exposure with sufficient reliability.
This particularly applies in larger more complex projects, in claims involving a number of parties or in claims made a number of years
after completion of a project.
Where it is probable there will be liabilities from such claims and the potential exposure can be quantified with sufficient reliability, 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
Lendlease Corporation Limited and Lendlease Responsible Entity Limited (together the 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
Group was 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.
Financial Statements
149
Section E. Basis of Consolidation
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.
28. 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
Lendlease Corporation Limited
Australia
Capella Capital Lendlease Pty Limited
Capella Capital Partnership
Lendlease Construction Pty Limited1
Europe
Lendlease Construction (Europe) Limited
Lendlease Construction Holdings (Europe) Limited
Lendlease Europe Finance plc
Asia
Lendlease Japan Inc.
Lendlease Construction (Southern) Pty Limited2
Lendlease Singapore Pte. Limited
Lendlease Communities (Australia) Limited
Americas
Lendlease Development Pty Limited
Lendlease Finance Limited
Lendlease (US) Capital, Inc.
Lendlease (US) Construction, Inc.
Lendlease Infrastructure Investments Pty Limited
Lendlease (US) Construction LMB, Inc.
Lendlease International Pty Limited
Lendlease (US) Public Partnerships, LLC
Lendlease Real Estate Investments Limited
Lendlease (US) Public Partnerships Holdings LLC
Lendlease Responsible Entity Limited
Lendlease Development, Inc.
Lendlease Trust3
1. Formerly Lendlease Building Pty Limited.
2. Formerly Lendlease Building Contractors Pty Limited.
3. Lendlease Trust is a consolidated entity of the Group as the parent entity is deemed to control it. The parent entity has no ownership interest in Lendlease Trust.
During the current and prior year, there were no acquisitions of material consolidated entities.
150
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
During the current and prior year, the following material consolidated entities were disposed:
June 2023
AHFH Managing Member LLC
June 2022
Lendlease (US) Asset Management LLC
Lendlease Services Pty Limited
29. Employee Benefit Vehicles
Ownership
Interest Disposed
%
100.0
100.0
100.0
Date Disposed
9 August 2022
20 April 2022
1 November 2021
Consideration
Received/Receivable
$m
93
173
331
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.
29.a. Employee Security Plans
As at 30 June 2023, employees own approximately 0.9 per cent (June 2022: 0.9 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.
29.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.
Financial Statements
151
Section E. Basis of Consolidation continued
30. 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 financial year ended 30 June 2023.
Results
Profit after tax
Other comprehensive income after tax
Total comprehensive income/(loss) 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 2023
June 2022
$m
192
-
192
2,150
2,904
5,054
1,256
-
1,256
3,798
1,894
(67)
222
1,749
3,798
$m
111
-
111
1,790
2,934
4,724
1,092
-
1,092
3,632
1,891
(77)
222
1,596
3,632
In respect of the contingent liabilities of the Group disclosed in Note 27 ‘Contingent Liabilities’, the Company participates in the
provision of guarantees to Group entities.
31. Related Party Information
31.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
COMPANY
June 2023
June 2022
$000s
$000s
28,130
158,740
9,889
45,434
1,925,210
1,172,590
29,240
209,601
7,938
42,969
664,196
905,198
152
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Transactions that occurred during the financial year between entities in the Lendlease Group included:
• Provision of project management, design services, construction management 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.
31.b. Associates and Joint Ventures
Interests held in associates and joint ventures by the Group are set out in Note 12 ‘Equity Accounted Investments’.
Transactions between the Group and its associates and joint ventures principally relate to:
• Investments: provision of property and infrastructure investment management, property management and asset
management services
• 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 and construction services.
There were $nil non interest bearing loans provided to joint ventures at 30 June 2023 (June 2022: $nil).
Except as noted above, transactions and outstanding balances are typically on normal terms and conditions.
Revenue earned by the Group during the financial year as a result of transactions with its associates and joint ventures is as follows:
Revenue
Associates
Joint ventures
Total
June 2023
June 2022
$000s
$000s
42,783
1,237,258
1,280,041
55,635
1,333,517
1,389,152
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 12 ‘Equity Accounted Investments’, 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.
31.c. Key Management Personnel
The key management personnel compensation is as follows:
Short term employee benefits
Post employment benefits
Security based payments
Other long term benefits
Total
June 2023
June 2022
$000s
13,493
312
11,308
628
25,741
$000s
14,376
282
6,691
77
21,426
Information regarding Directors’ and senior executives’ remuneration is provided in the Remuneration Report within the
Directors’ Report.
Financial Statements
153
Section F. Other Notes
32. 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.
Goodwill
Management agreements
Other intangibles
Total intangible assets
32.a. Goodwill
Development
Construction
Total goodwill
Reconciliations of the carrying amounts for each category of goodwill are as follows:
Development
Carrying amount at beginning of financial year
Effect of foreign exchange rate movements
Carrying amount at end of financial year
Construction
Carrying amount at beginning of financial year
Disposals
Effect of foreign exchange rate/other movements
Carrying amount at end of financial year
Note
32.a
Note
32.b
June 2023
June 2022
$m
1,085
16
135
1,236
$m
1,056
24
145
1,225
June 2023
June 2022
$m
34
1,051
1,085
33
1
34
1,023
-
28
1,051
$m
33
1,023
1,056
30
3
33
1,170
(151)
4
1,023
154
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
32.b. Goodwill Allocation
Goodwill relating to the Construction business is allocated to CGUs identified as set out below.
Construction
Australia Core
Europe
Americas
Asia
Total construction goodwill
June 2023
June 2022
$m
573
260
210
8
1,051
$m
573
238
204
8
1,023
32.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 for the financial year ended 30 June 2023. Based
on information available and market conditions at 30 June 2023, a reasonably foreseeable change in the assumptions made in this
assessment would not result in impairment of Construction goodwill. The foreseeable change in the assumptions took the economic
conditions 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 2022: 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 10.3 per cent and 12.0 per cent (June 2022: between 9.2 per
cent and 11.0 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.
33. Discontinued Operations
Accounting Policies
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.
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.
Financial Statements
155
Section F. Other Notes continued
33. Discontinued Operations continued
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 and on 9 September 2020
the Group completed the sale.
On 21 July 2021, the Group entered into an agreement with Service Stream to sell the Services business and on 1 November 2021 the
Group completed the sale. The agreed purchase price for the sale of the Services business was $310 million which was adjusted by
$19 million at completion, resulting in total estimated proceeds of $329 million. $317 million has been received by 31 December 2022,
and the remaining balance was received in January 2023.
Provisions previously recognised in relation to the sold Engineering business have been revised in the current year to include the
associated tax benefit. There is no impact to total profit after tax.
The major classes of assets and liabilities sold are as follows:
Assets and Liabilities Sold
Cash and cash equivalents
Loans and receivables
Inventories
Other assets
Total assets sold
Trade and other payables
Other liabilities
Total liabilities sold
Net assets and liabilities sold
Net proceeds from sale
Transaction and separation costs
Gain on sale
SERVICES
1 November
2021
$m
3
84
145
276
508
121
97
218
290
331
(25)
16
The results of the discontinued operations representing the Engineering business during the current year and the Services business for
the prior period are as follows:
Results from Discontinued Operations
Revenue from contracts with customers
Cost of sales
Gross profit
Other income
Gain on sale
Other expenses
(Loss)/Profit before tax for discontinued operations
Income tax benefit/(expense)
Total profit after tax for discontinued operations as presented in the Income Statement
ENGINEERING
SERVICES
June 2023
$m
-
-
-
-
-
(76)
(76)
76
-
1 July to
1 November
2021
$m
351
(320)
31
-
16
(19)
28
(1)
27
156
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Basic/Diluted Earnings Per Share (EPS) from Continuing Operations
(Loss) from continuing operations attributable to members of Lendlease Corporation
Limited (Company)
Weighted average number of ordinary shares
Basic/Diluted EPS from continuing operations
Basic/Diluted Earnings Per Share (EPS) from Discontinued Operations
Profit 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 Security (EPSS) from Continuing Operations
(Loss) 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 Security (EPSS) from Discontinued Operations
Profit from discontinued operations attributable to securityholders of
Lendlease Group
Weighted average number of stapled securities
Basic/Diluted EPSS from discontinued operations
Shares/
Securities
Excluding
Treasury
Securities
Shares/
Securities on
Issue
June 2022
June 2022
(266)
683
(38.9)
27
683
3.9
(126)
683
(18.4)
27
683
3.9
(266)
689
(38.6)
27
689
3.9
(126)
689
(18.3)
27
689
3.9
$m
m
cents
$m
m
cents
$m
m
cents
$m
m
cents
The net cash flows for discontinued operations, representing the Engineering and Services business for the current year and the
Services business for the prior period are as follows:
Cash Flows from Discontinued Operations
Net cash inflow from operating activities
Net cash inflow from investing activities
Net cash outflow from financing activities
Net increase in cash and cash equivalents
1. Balance represents $11 million and $13 million, attributtable to the Engineering and Services businesses respectivley.
2. Balance represents the Services business, from 1 July 2022 to 1 November 2022, being the period that the Group controlled the business.
June 20231
June 20222
$m
-
24
-
24
$m
16
4
(2)
18
Financial Statements
157
Section F. Other Notes continued
34. 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
34.a. Lendlease UK Pension Scheme
Note
34.a
June 2023
June 2022
$m
-
171
171
$m
-
282
282
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 four per cent of members’ basic salaries to cover the Scheme’s expected administration costs and costs of
benefits payable on death in service. Following the triennial valuation for 31 March 2020, deficit repair contributions are not required to
be paid as the scheme is in an actuarial surplus.
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 2023
June 2022
$m
$m
(795)
966
171
(902)
1,184
282
158
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
June 2023
June 2022
ii. Reconciliation of Defined Benefit Obligations
Defined benefit obligations at beginning of financial year
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
Actuarial 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
v. Fair Value of Plan Assets
Plan assets comprise:
Investment funds
Infrastructure
Government index linked bonds
Other assets
Fair value of plan assets at end of financial year
$m
902
35
(172)
68
(22)
(39)
23
795
1,184
46
(3)
(270)
5
(39)
43
966
(11)
3
(8)
10
-
918
38
966
$m
1,272
24
(332)
15
14
(34)
(57)
902
1,515
28
(3)
(254)
5
(36)
(71)
1,184
(4)
3
(1)
430
107
608
39
1,184
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, $966 million
(June 2022: $1,077 million) and $nil (June 2022: $107 million) of total plan assets were categorised as Level 2 and Level 3, respectively.
UK Construction and Trustees have agreed to 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 targeted
benchmark allocation is 22.5 per cent growth assets and 77.5 per cent matching assets (June 2022: 22.5 per cent growth assets and
77.5 per cent matching assets).
vi. Principal Actuarial Assumptions
Discount rate (%)
RPI inflation (%)
Average pension increase in payments (%)
Future mortality (years):
Male
Female
June 2023
June 2022
5.2
3.6
3.1
25.5
26.8
3.8
3.5
2.7
25.3
26.8
Financial Statements
159
Section F. Other Notes continued
34. Defined Benefit Plans continued
The liabilities are calculated using a discount rate set with reference to corporate bond yield. If assets underperform this yield, this 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 25.5 years (June 2022: 25.3 years) if they
are male and 26.8 years if they are female (June 2022: 26.8 years).
At 30 June 2023, the weighted average duration of the defined benefit obligation was 14 years (June 2022: 16 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 2023
Defined benefit obligations
June 2022
Defined benefit obligations
(11)
(14)
12
14
7
11
(7)
(11)
27
22
(22)
(21)
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.
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.
35. 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)
• Restricted Securities Award (RSA)
• Pro Rata CEO Grant
• Google Development Ventures (GDV) Incentive.
35.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 29a ‘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.
160
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
35.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 and regional 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.
For FY20 and FY21, the STA plan has been awarded as cash in September following year end. From FY22 onwards, 50 per cent of
awarded STA will be a deferred grant of Lendlease securities. The deferred portion will be released in two equal tranches after one and
two years.
35.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.
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
Performance Period
(applicable to FY21,
FY22 and FY23 Grants)
Termination
of Employment
• 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.
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.
•
•
•
•
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 terms
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
• One third 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
• One third subject to Average Operating Return on Equity (Operating ROE) hurdle
• One third subject to compound annual growth rate (CAGR) % in funds under management.
Vesting Schedule –
Relative TSR
(FY21)
Measure
Below the 50th percentile
At the 50th percentile
Percentage of performance securities that vest as a
proportion of maximum opportunity
No vesting
50 per cent vesting
Between the 50th percentile and 75th percentile
Pro rata vesting on a straight line basis between 52 per
cent and 98 per cent
Vesting Schedule –
Relative TSR
(FY22 and FY23)
At or above the 75th percentile
Below the 50th percentile
At the 50th percentile
100 per cent vesting
No vesting
40 per cent vesting
Between the 50th percentile and 75th percentile
Pro rata vesting on a straight line basis between 40 per
cent and 100 per cent
At or above the 75th percentile
100 per cent vesting
Financial Statements
161
Section F. Other Notes continued
35. Employee Benefits continued
LTI Design
How the LTI Works
Vesting Schedule
- Average
Operating ROE
(FY21)
Vesting Schedule
- Average Core
Operating ROE
(FY22 and FY23)
Vesting Schedule -
CAGR % FUM
(FY21)
Vesting Schedule -
CAGR % FUM
(FY22 and FY23)
Measure
Percentage of performance securities that vest as a
proportion of maximum opportunity
Less than 8 per cent
No vesting
Between 8 per cent and target Operating ROE set by
the Board
Pro rata vesting on a straight line basis between 20 per
cent and 50 per cent vesting
At target Operating ROE set by the Board
50 per cent vesting
Between target Operating ROE set by the Board and 11
per cent
Pro rata vesting on a straight line basis between 50 per
cent and 100 per cent vesting
At or above 11 per cent
Below threshold
100 per cent vesting
No vesting
At Core Operating ROE for threshold vesting
0 per cent vesting
Between Core Operating ROE for threshold vesting and
Core Operating ROE for maximum vesting
Pro rata vesting on a straight line basis between 0 per
cent and 100 per cent vesting1
At or above Core Operating ROE for maximum vesting
100 per cent vesting
Below CAGR for threshold vesting
No vesting
Between CAGR for threshold vesting and CAGR for
target vesting
Pro rata vesting on a straight line basis between 20 per
cent and 50 per cent vesting
At CAGR for target vesting
50 per cent vesting
Between CAGR for target vesting and CAGR for
maximum vesting
Pro rata vesting on a straight line basis between 50 per
cent and 100 per cent vesting
At CAGR for maximum vesting
Below threshold
At CAGR % for threshold vesting
100 per cent vesting
No vesting
0 per cent vesting
Between CAGR % for threshold vesting and CAGR %
for maximum vesting
Pro rata vesting on a straight line basis between 0 per
cent and 100 per cent vesting
At or above CAGR % for maximum vesting
100 per cent vesting
1. Subject to the 3 year Average Annual Core Operating ROE being above a vesting floor based on the cost of equity and the Portfolio Management Framework as determined
by the Board.
35.d. Long Term Award (LTA)
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.
162
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
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 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 nil and a 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.
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 are forfeited
• There is no retesting of the LTA grant.
•
•
•
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 terms.
Performance
Period
(applicable to
FY21, FY21 and
FY23 Grants)
Termination of
Employment
Performance
Hurdles
• One third 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
• One third subject to Average Operating Return on Equity (Operating ROE) hurdle
• One third subject to compound annual growth rate (CAGR) % in funds under management.
Vesting Schedule -
Relative TSR
(FY21)
Measure
Below the 50th percentile
At the 50th percentile
Between the 50th percentile and
75th percentile
Percentage of performance securities that vest as a proportion of
maximum opportunity
Senior Executive
No Vesting
11 per cent vesting
Pro rata vesting on a straight line basis between 11 per cent and 100 per cent
At or above the 75th percentile
100 per cent vesting
Vesting Schedule -
Relative TSR
(FY22 and FY23)
Below the 50th percentile
At the 50th percentile
Between the 50th percentile and
75th percentile
No Vesting
40 per cent vesting
Pro rata vesting on a straight line basis between 40 per cent and 100 per cent
Vesting Schedule
- Average
Operating
ROE (FY21)
At or above the 75th percentile
100 per cent vesting
Less than 8 per cent
No Vesting
Between 8 per cent and target Operating ROE
set by the Board
Pro rata vesting on a straight line basis between 8 per cent and 41 per cent
At target Operating ROE set by the Board
41 per cent vesting
Between target set by the Board and 11
per cent
Pro rata vesting on a straight line basis between 41 per cent and 100 per cent
At or above 11 per cent
100 per cent vesting
Financial Statements
163
Section F. Other Notes continued
35. Employee Benefits continued
Percentage of performance securities that vest as a proportion of
maximum opportunity
Vesting Schedule
- Average Core
Operating ROE
(FY22 and FY23)
Vesting Schedule
- CAGR % FUM
(FY21)
Vesting Schedule
- CAGR % in FUM
(FY22 and FY23)
Measure
Below threshold
At Core Operating ROE for
threshold vesting
Senior Executive
No vesting
0 per cent vesting
Between Core Operating ROE for threshold
vesting and Core Operating ROE for
maximum vesting
At or above Core Operating ROE for
maximum vesting
Pro rata vesting on a straight line basis between 0 per cent and 100
per cent1
100 per cent vesting
Below CAGR for threshold vesting
No Vesting
Between CAGR for threshold vesting and
CAGR for target vesting
Pro rata vesting on a straight line basis between 8 per cent and 41
per cent
At CAGR for target vesting
41 per cent vesting
Between CAGR for target vesting and
CAGR for maximum vesting
Pro rata vesting on a straight line basis between 41 per cent and 100
per cent
At CAGR for maximum vesting
100 per cent vesting
Below threshold
No Vesting
At CAGR % for threshold vesting
0 per cent vesting
Between CAGR % for threshold vesting and
CAGR % for maximum vesting
Pro rata vesting on a straight line basis between 0 per cent and 100
per cent
At or above CAGR % for maximum vesting
100 per cent vesting
1. Subject to 3 Year Average Annual Core Operating ROE being above the cost of equity determined by the Board.
35.e. Restricted Securities Award (RSA)
The Restricted Securities Award (RSA), previously referred to as the LTA Minimum, is similar to fixed remuneration as it is not subject to
performance conditions. It is designed to motivate and reward a limited number of key executives to deliver on the Group’s long term
strategy and to allow them to have a sense of ownership and share in the value created for securityholders. The RSA (and previously
referred to LTA Minimum) was discontinued from FY22 under the revised Executive Reward Strategy.
Arrangements for RSA Awards
RSA Design
How the RSA Works
Performance Rights
• An annual grant of ‘performance rights’ is made to a limited number of executives on the Global
Leadership Team
• However, following feedback from proxy-holders and other stakeholders, the RSA has no longer been offered
from FY22
• 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 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 rights should be accelerated.
Vesting Period
• The first tranche (i.e. 25%) will vest after three years and the second, third and fourth tranches will vest
progressively four, five and six years after the grant date.
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 RSA 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 RSA grant may remain on foot, subject to the original terms.
35.f. Pro Rata CEO Grant
The pro rata CEO Grant is designed to recognise the period served as Global CEO (one month) in FY21 for Anthony Lombardo.
164
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
Arrangements for the Pro Rata CEO Grant
Pro Rata CEO Grant
How the Pro Rata CEO Grant Works
Performance Rights
A one-off grant of ‘performance rights’ to reflect time served as Global CEO in FY21 reduced to reflect the length
of the period and value already granted for FY21
All other terms, including the performance period, performance hurdles, termination rules remain as per the FY21
LTA Grant referred to above.
35.g. Google Development Ventures (GDV) Incentive
Incentive Design
How the Incentive Works
Performance Rights
Performance Period
Performance Hurdles
Termination
of Employment
• A one-off grant of ‘performance rights’ to Denis Hickey to reward the successful delivery of GDV
•
•
•
•
•
3 years from 1 July 2021 to 30 June 2024
70% of Performance Rights will vest based on the achievement of the key milestones for GDV during the
performance period, including the securing of entitlements and capital plans and the commencement of
construction for each project
30% of Performance Rights will vest based on customer satisfaction feedback from the client and internal
stakeholders at key touchpoints in the project life cycle, so that GDV milestones are not only delivered within
the required timeframes but also to an exceptional standard
In the event of resignation or termination for cause, unvested rights are forfeited
In all other circumstances, the portion of the award that reflects milestones that are already tested and
achieved during the performance period will remain on foot. The untested portion is forfeited (except in the
case of redundancy, whereby the untested portion will be continue to be tested against plan milestones and
vest if applicable following the end of the performance period)
35.h. 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 2023, a
$49 million expense was recognised in the Income Statement in relation to equity settled security based payment awards (June 2022:
$51 million).
Financial Statements
165
Other
Reserve
$m
106
-
-
-
-
-
-
-
106
106
-
-
-
-
-
-
-
-
Equity
Compensation
Reserve
$m
Total
Reserve
$m
131
-
-
-
-
23
-
23
154
154
-
-
-
-
-
-
-
-
3
(16)
62
136
182
23
(24)
(1)
184
184
(20)
108
1
89
-
-
-
-
(101)
106
154
273
Section F. Other Notes continued
36. Reserves
Foreign
Currency
Translation
Reserve
$m
Hedging
Reserve
$m
Non
Controlling
Interest
Acquisition
Reserve
$m
Balance as at 1 July 2021
Net investment hedge
Effect of foreign exchange movements
Effective cash flow hedges
Total comprehensive income
Fair value movement on allocation and
vesting of securities
Transfer as a result of asset disposal1
Total other movements through reserves
Balance at 30 June 2022
Balance at 1 July 2022
Net investment hedge
Effect of foreign exchange movements
Effective cash flow hedges
Total comprehensive income
Fair value movement on allocation and
vesting of securities
Transfer as a result of asset disposal1
Other movements
Total other movements through reserves
Balance at 30 June 2023
(79)
-
-
136
136
-
(9)
(9)
48
48
-
-
1
1
-
-
-
-
49
(63)
(16)
67
-
51
-
(15)
(15)
(27)
(27)
(20)
112
-
92
-
-
-
-
65
1. These movements in reserves were transferred to profit and loss in the year.
37. Impact of New and Revised Accounting Standards
New Accounting Standards and Interpretations Not Yet Adopted
(92)
-
(5)
-
(5)
-
-
-
(97)
(97)
-
(4)
-
(4)
-
-
-
-
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 17 Insurance Contracts
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 2026 financial year and will be
applied prospectively.
AASB 17 establishes the principles for the
recognition, measurement, presentation and
disclosure of insurance contracts and supersedes
AASB 4 Insurance Contracts. The standard
becomes mandatory for the June 2024 financial
year and will be applied retrospectively.
Based on preliminary analysis performed, the
amendments are not expected to have a material
impact on the Group.
Based on the preliminary analysis performed,
the standard is not expected to have a material
impact on the Group.
38. Other Significant Accounting Policies
38.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.
166
Lendlease Annual Report 2023
Notes to Consolidated Financial Statements continued
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 25 ‘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.
Group Entities
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.
38.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.
Financial Statements
167
Directors’ Declaration
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 2023 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 Global Chief
Executive Officer and Group Chief Financial Officer for the financial year ended 30 June 2023.
Signed in accordance with a resolution of the Directors:
M J Ullmer, AO
Chairman
A P Lombardo
Global Chief Executive Officer and Managing Director
Sydney, 14 August 2023
168
Lendlease Annual Report 2023
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 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 Lendlease Group’s financial position as at 30 June 2023 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 2023; • 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 the 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 (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with these requirements. Financial Statements
169
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; and • UK Building Safety Provision 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$7,690m) 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. Currently, global market conditions are uncertain with disruption to supply chains and inflationary pressures. These conditions continue to create a challenging operating environment impacting 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 recognized. 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 Our procedures included: • Evaluating and testing the Group’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 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, committed future contracts and current market quotes, with specific consideration of inflation in our assessment of contingency; − tested the variations and claims recognised within revenue against the criteria for 170
Lendlease Annual Report 2023
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. recognition in the 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; and 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$795m) 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 mixed-use buildings which incorporate commercial and retail) and residential land lots. 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. The assessment of profit recognition requires judgment as cost allocation is typically a function of total forecast project profit based on either revenue or area estimation. Our procedures included: • Evaluating and testing the Group’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; and − 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. Financial Statements
171
Recoverability of Development Property Inventory (A$3,649m) Refer to Note 11 ‘Inventories’ to the Financial Report The key audit matter How the matter was addressed in our audit 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; and • 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 current economic conditions. 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; and − 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. 172
Lendlease Annual Report 2023
Asset Valuation Refer to Note 12 ‘Equity Accounted Investments’ (A$5,647m), Note 13 ‘Other Financial Assets’ (A$1,172m) and Note 26 ‘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. Within these investments are a significant number of investment properties measured at fair value. These properties include commercial, retail, industrial, life sciences and residential (build to rent) assets. The fair value of these properties directly impacts the Group’s interests in its equity accounted investments and other financial 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. The Group’s key valuation assumptions are predominantly: • capitalisation of earnings rates • market rent • leasing incentives • discount rates • rental growth rates Given the current market conditions real estate valuations have been subject to fluctuation. The assessment of the valuations of these assets is a key audit matter as they: • contain certain forward-looking assumptions, with higher estimation uncertainty given current economic conditions, 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. 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; • For the sample selected: − Worked with our real estate valuation specialists, we compare key assumptions 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 include: o capitalisation of earnings rates o market rent o leasing incentives o discount rates o rental growth rates − Assessed the scope, competence and objectivity of external valuation experts engaged by the Group for assets valued by external valuation experts; − Assessed the valuation methodology for consistency with accounting standards and industry practice for the asset’s class; and − Evaluated and tested the Group’s review and approval of internal valuations based on the Group’s policies for internally valued assets; • 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 against the requirements of the accounting standards. Financial Statements
173
UK Building Safety Expense (A$295m) Refer to Note 22 ‘Provisions’. The key audit matter How the matter was addressed in our audit In January 2022 the UK Government set out its roadmap to resetting building safety in the UK. Since then, the UK Government has introduced the Building Safety Act which requires developers to remediate fire-safety issues on all buildings of 11 metres and above. In March 2023, the Group signed the UK Government’s Developer Remediation Contract, requiring the Group to remediate buildings which they developed within the last 30 years where there are life critical fire-safety issues identified. Estimation of the provision requires identification of which buildings will, more likely than not, require remediation based on information currently available. The Group’s assessment process is ongoing as information continues to be obtained from a range of parties in respect of each building. A full intrusive building inspection against the required safety standards will determine whether remediation is required or not. However, these assessments take time to complete resulting in the Group using judgement to determine whether a provision is required for each building before the formal inspection process is complete. The estimate also requires an assessment of the likely cost and timing of these future works. This was a key audit matter for us due to the high degree of estimation uncertainty and subjectivity in determining the likely cost of future works. The key assumptions giving rise to this estimation uncertainty are: •the number of buildings requiringremediation;•remediation cost per building;•expected period over which the portfolio ofbuildings will be remediated; and•the appropriateness of the discount rateapplied to the estimate.Our procedures included: •Performing a walkthrough to understand theGroup’s process for identifying which buildings,will more likely than not, require remediationbased on the information available.•Assessing the completeness of buildingsincluded in the Group’s assessment withreference to publicly available information onbuildings developed by the Group.•For each building identified by the Group,assessing the recognition of a provision withreference to information provided by the UKGovernment (Building Safety Fund), buildingowners and the Group’s internal investigations.•Working with our major projects advisoryspecialists, we compared the methodologyapplied and key assumptions selected by theGroup in developing the estimate with ourknowledge of the industry. We challenged keyassumptions by:−Inspecting individual building informationfrom the UK Government (Building SafetyFund) and building owners compared to theprovision recognised along with obtainingevidence for any adjustments;−Benchmarking the cost of remediation of theGroup’s portfolio of buildings based on sizeand number of apartments, as well ascomparing individual building costs wherethere are multiple buildings in the samedevelopment; and−Benchmarking the discount rate and periodof remediation adopted by the Group to otherdevelopers within the industry.•Assessing disclosures included in the financialreport highlighting the estimates andjudgements in determining the provision. Weused our understanding obtained from ourtesting against the requirements of theaccounting standards. 174
Lendlease Annual Report 2023
The Group’s estimated provision may be subject to further refinement as detailed building inspections are completed and the extent of building remediation, and the cost of that remediation work becomes clearer. 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 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 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 the 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 Lendlease Group or to cease operations, or have no realistic alternative but to do so. 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. Financial Statements
175
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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf This description forms part of our Auditor’s Report. Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of Lendlease Corporation Limited for the year ended 30 June 2023, complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities 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 72 to 94 of the Directors’ report for the year ended 30 June 2023. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Eileen Hoggett Paul Rogers Partner Partner Sydney Sydney 14 August 2023 14 August 2023 176
Lendlease Annual Report 2023
Other
Information
New York 1 Java StreetArtist’s impression Other Information
177
178
Lendlease Annual Report 2023
Corporate directory
Annual General Meeting 2023 (AGM)
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 17 November 2023 in the Fitzroy Ballroom at the Sofitel
Hotel, 25 Collins Street, Melbourne, NSW. As the meeting will be
a hybrid AGM, securityholders who are not able to physically
attend the AGM will be able to participate and vote at the
meeting using technology. 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 29 September 2023.
Important dates
14 August 2023
18 August 2023
21 August 2023
Full Year results announced
Security price ex distribution
Final distribution record date
13 September 2023
Final distribution payable
17 November 2023
Annual General Meeting
19 February 2024
Half Year results announced
23 February 2024
Security price ex distribution
26 February 2024
Interim distribution record date
13 March 2024
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
Other Information
179
Securityholder information
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 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
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 178.
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.
180
Lendlease Annual Report 2023
Security information at a glance at 1 August 2023 (comparative 1 August 2022)
Number of securityholders
Units issued
Percentage owned by 20 largest securityholders
Interim dividend/distribution
Total dividend/distribution
Dividend payout ratio
2023
61,036
688,322,065
77.28%
2022
65,909
688,906,938
77.03%
4.9 cents per security
5.0 cents per security
16.0 cents per security
16.0 cents per security
43%
40%
Spread of securityholdings as at 1 August 2023 (comparative 1 August 2022)
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
2023
32,110
22,743
3,991
2,109
83
61,036
2022
37,814
25,683
4,318
2,235
98
70,148
Securityholders with less than a marketable parcel
4,496 (representing
112,604 securities)
3,158 (representing
50,236 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
3,006,856
$9.98
Number of Securities Purchased Average Price Paid Per Security
Top 20 securityholders as at 1 August 2023
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
BNP PARIBAS NOMS PTY LTD
NATIONAL NOMINEES LIMITED
LL EMPLOYEE HOLDINGS CUSTODIAN PTY LIMITED
ARGO INVESTMENTS LIMITED
LL EMPLOYEE HOLDINGS CUSTODIAN PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
HMC CAPITAL PARTNERS HOLDINGS PTY LTD
NETWEALTH INVESTMENTS LIMITED
BNP PARIBAS NOMINEES PTY LTD
HOME CONSORTIUM LIMITED
BUTTONWOOD NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
CUSTODIAL SERVICES LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS (NZ) LTD
20
SOLIUM NOMINEES (AUSTRALIA) PTY LTD
Total Top 20 holders of fully paid ordinary shares
Total Remaining Holders Balance
Other Information
181
Units % of Units
36.58
252,158,265
86,987,290
80,892,032
30,937,471
26,810,628
14,075,522
6,980,092
5,854,261
3,733,977
3,500,000
3,494,129
2,333,705
2,306,237
2,160,983
2,042,426
2,033,154
1,838,191
1,779,902
1,429,578
1,374,982
532,722,825
156,599,240
12.62
11.74
4.49
3.89
2.04
1.01
0.85
0.54
0.51
0.51
0.34
0.33
0.31
0.30
0.29
0.27
0.26
0.21
0.20
77.28
22.72
Substantial securityholders as shown in the Company’s Register at 1 August 2023
Name
Aware Super Pty Limited
State Street Corporation
BlackRock Group
The Vanguard Group
Allan Gray Australia Pty Ltd
Date of Last Notice Received
6/5/2022
15/12/2022
13/1/2020
3/5/2019
21/12/2022
No of Units
58,980,938
49,248,365
34,049,935
33,903,122
35,779,122
% of Issued Capital
8.56
7.15
6.03
6.01
5.19
182
Lendlease Annual Report 2023
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 revenue: Current
year Construction backlog revenue is
the total revenue to be earned across
future periods.
Core Operating Return on Equity
(ROE): ROE is calculated using annual
operating Profit after Tax attributable to
securityholders divided by the arithmetic
average of beginning, half year and year
end securityholders’ equity.
Development pipeline: Estimated 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.
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: An employee who is
leaving Lendlease for a reason such as
retirement or redundancy, 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.
Public Private Partnerships (PPP): A
joint procurement arrangement for
infrastructure development contracts
between the public and private sectors.
Residential build to 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.
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: Cash settled in the period
on completed units/lots in Australia,
Europe and Americas, and units which
have reached practical completion
in Asia.
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.
Urban development pipeline: Estimated
end value of all of the Group’s
secured development projects (excluding
Communities 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.
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 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
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.
PLLACes: Pre-sold Lendlease
Apartment Cashflows.
Profit after Tax (PAT): Profit after
Tax attributable to securityholders,
determined in accordance with Australian
Accounting Standards.
London Elephant Park Level 14, Tower Three International Towers Sydney Exchange Place 300 Barangaroo Avenue Barangaroo NSW 2000www.lendlease.com @lendlease @lendleasegroup @lendlease