Lendlease Annual Report 2021

Chicago: The Cooper, Southbank Performance and Outlook As an international real estate group with a presence in targeted gateway cities, the pandemic had a pervasive impact on operations in FY21. Statutory Profit after Tax for the year ending 30 June 2021 was $222 million. This included a loss of $181 million for the Non core segment, driven by additional provisioning relating to claims on historical engineering projects. The Performance and Outlook discloses profit after tax on both a statutory and operating basis. The Core Operating profit metrics1 provide a clear view of the Group’s underlying operating result, excluding the impacts of the Non core segment and property revaluations in the Investments segment. The Group recorded Core Operating Profit after Tax of $377 million for the year ended 30 June 2021. Core Operating Earnings per Security was 54.8 cents with a Return on Equity of 5.4 per cent, below the target range. Distributions per Security totalled 27 cents, representing a payout ratio of 49 per cent of Core Operating profit. The Group made significant progress on its strategic priorities. Investment partner initiatives worth $5.1 billion that will drive future funds under management were progressed. Six new urbanisation projects were secured with a total end value of $7.4 billion. The sale of the Engineering business was completed and the US Telecommunications and Energy businesses were divested. Post balance date the sale of the Services business was announced with completion expected prior to the end of the calendar year. Core segment EBITDA of $918 million increased 27 per cent on the prior year as performance recovered from the worst of the COVID impacts. However, the pandemic continues to impact the business with ongoing challenging operating conditions affecting each of the segments. Development was adversely impacted by London lockdowns, investment income was suppressed and construction revenue was lower. The largest contributor to the Development segment was the creation of separate investment partnerships to deliver the first two residential towers at Barangaroo. While the return outcome for the segment was below target, progress continues to be made towards converting the development pipeline, as well as securing additional urbanisation projects. In the Construction segment, despite revenue being down and a weak second half in the UK, performance across the portfolio was solid, with overall returns at the upper end of the target range. Activity continued to be impacted by delays in the commencement of new projects and ongoing productivity impacts across sites. The Investments segment recovered from the worst of the COVID impacts, although returns remained below the target range. Ownership returns across retirement were higher, while asset management fees were impacted by lower activity across the retail sector. Earnings in the prior year were boosted by a substantial performance fee. Corporate costs of $161 million comprised Group Services costs of $128 million, which were stable, and treasury costs of $33 million. Net finance costs of $137million were down 10 per cent2 due to lower average net debt. 1. Excludes property valuations movements in the Investments segment, impairment losses relating to intangibles and Non core items. 2. Comparative period the year ended 30 June 2020. 3. Operating earnings presented reflects statutory earnings adjusted for non operating items. 4. Excludes Corporate. 5. Final dividend component zero franking. Interim dividend component of 11.2 cents per share 50 per cent franked. $m FY20 FY21 Var. Core Business Development 322 469 46% Construction 101 173 71% Investments 300 276 (8%) Segment EBITDA 723 918 27% Corporate Costs (158) (161) (2%) Operating EBITDA 565 757 34% Depreciation and Amortisation (160) (148) 8% Net Finance Costs (153) (137) 10% Operating Profit before Tax 252 472 87% Income tax expense (46) (95) (107%) Operating Profit after Tax 206 377 83% Non Core Operating EBITDA (495) (139) 72% Operating Profit/(Loss) after Tax (406) (181) 55% Total Group Operating EBITDA 70 618 >100% Operating Profit /(Loss) after Tax (200) 196 >100% Non Operating Items (110) 26 >100% Statutory Profit /(Loss) after Tax (310) 222 >100% Total Group Core Operating EPS cents 34.2 54.8 60% Distribution per Security cents 33.3 27.0 (19%) Total Group Statutory EPS cents (51.4) 32.3 >100% Total Group Statutory ROE % (4.7) 3.2 n/a Core Segment EBITDA Mix Key Financials 3  Development   Construction   Investments $918m Core Segment EBITDA 4 30% 51% 19% Group performance $377m Core Operating Profit after Tax $206m FY20 FY21 5.4% Core Operating Return on Equity 3.1% FY20 FY21 54.8c Core Operating Earnings per Security 34.2c FY20 FY21 27.0c5 Distribution Per Security 33.3c FY20 FY21 57 A sense of place 56 Lendlease Annual Report 2021 Performance and Outlook