22 August 2018
Lendlease Group 2018 Annual Report
Lendlease Group today announced its results for the year ended 30 June 2018. Attached is the 2018 Annual Report, including:
§ Directors’ Report § Remuneration Report § FY18 Financial Statements
ENDS
FOR FURTHER INFORMATION, PLEASE CONTACT:
Investors: Media: Justin McCarthy Stephen Ellaway Mob: 0422 800 321 Mob: 0417 851 287
Lendlease Corporation Limited ABN 32 000 226 228 and 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
Level 14, Tower Three, International Towers Sydney Telephone +61 2 9236 6111 Exchange Place, 300 Barangaroo Avenue Facsimile +61 2 9252 2192 Barangaroo NSW 2000 Australia lendlease.com Annual60 Report 2018 years of creating the best places 2 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 3 Contents DIRECTORS’ REPORT RISK OUR BUSINESS Risk Governance and Management 64 Key Risks and Mitigation 68 Who We Are 08 Our Values 10 Lendlease Timeline 12 PERFORMANCE AND OUTLOOK Operational Highlights 14 Group Highlights 72 Performance Highlights 16 Development Performance 74 Chairman’s Report 18 Development Outlook 75 Group Chief Executive Officer and Development Pipeline 76 Managing Director’s Report 20 Apartments Completion Profile 77 Construction Performance 78 OUR STRATEGY AND CAPABILITIES Construction Outlook 79 Investments Performance 80 Our Approach 24 Investments Outlook 81 Global Trends Influencing Our Strategy 26 Financial Position and Cash Flow Movements 82 Global Presence, Gateway Cities 28 Group Funding and Debt Facilities 83 Development 30 Construction 32 Investments 34 GOVERNANCE Case Study – Paya Lebar Quarter 36 Board of Directors’ Information 86 Remuneration Report 102 PILLARS OF VALUE Directors’ Report 134 Lead Auditor’s Independence Declaration 136 Pillars of Value 40 Health and Safety 42 Financial 44 FINANCIAL STATEMENTS 138 Our Customers 46 Our People 48 OTHER INFORMATION Sustainability 50 Securityholder Information 206 Innovation 60 Climate Change Resilience 210 Glossary 21 1 Corporate Directory 21 2
All financial amounts within 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 Victoria Harbour, Melbourne 4 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 5 Annual Report
About this Report 4. Risk Directors’ Report and OFR DIRECTORS’ REPORT Lendlease presents its third integrated annual report (Annual Report) which will continue to evolve over time. Through this Annual An explanation of Lendlease’s approach to risk governance The required elements of the Directors’ Report, including the Report we aim to communicate how we create long term value for our securityholders through five pillars of value. The Annual and management including an assessment of key risks OFR, which is part of the Directors’ Report, are included on Report is divided into several sections with all required elements of the Directors’ Report, including the Operating and Financial and mitigation. pages 6 to 137 of this Annual Report and include the sections: Review (OFR), being covered on pages 6 to 137. Our Business; Our Strategy and Capabilities; Pillars 5. Performance and Outlook of Value; Risk; Performance and Outlook; and Governance. The OFR is contained specifically on pages 6 to 83. Lendlease 60th Anniversary Commentary on Lendlease’s financial pillar and Portfolio In FY18 Lendlease is celebrating its 60th anniversary. To mark this milestone and demonstrate the value Lendlease has been creating Management Framework, including a performance overview All non financial metrics included in the Directors’ Report
DIRECTORS’ REPORT DIRECTORS’ for key stakeholders during its history, the FY18 Annual Report contains a selection of achievements from the past 60 years. While for our three operating segments: Development, Construction on pages 6 to 69 have been verified through our internal the concept of integrated reporting may be relatively new, these activities demonstrate that Lendlease has strived to generate value and Investments, as well as a summary of our financial position, verification process. The Remuneration Report on pages 102 to throughout its history across the five pillars of value. funding and cash flow information. 133 and the Financial Statements on pages 138 to 196 have been audited by KPMG. 1. Our Business 2. Our Strategy 6. Governance Reporting Suite The Annual Report begins with an overview of who we are An outline of our strategy and how we differentiate ourselves. An overview of Lendlease’s governance and decision making and our values. In celebration of our 60th anniversary, a This is followed by a description of the global trends that will structures and remuneration information. Further information Lendlease’s Reporting Suite provides information about the timeline follows to showcase a selection of major milestones influence our business and how we will leverage gateway cities on governance can be found in the Corporate Governance Company and its key financial and operational achievements. and achievements. This is followed by a summary of our key to deliver our strategy. We explain our operating segments and Statement on the Lendlease website. The Reporting Suite includes the following: operating and financial performance for the current reporting capabilities and conclude with a specific focus on our integrated • The Annual Report: Includes information on the Company, its period, including performance highlights throughout the 2018 model, featuring a case study on Paya Lebar Quarter, Singapore. Integrated Reporting strategy, integrated financial and operational performance, financial year. This Annual Report has been prepared with reference to corporate governance, Directors’ Report, Remuneration Lendlease’s Chairman and Group Chief Executive Officer and the International Integrated Reporting (IR) Framework. This Report and Financial Statements. Managing Director concludes this section with their reviews of framework encourages businesses to consider what creates • Bi-annual Results Presentation: Includes the current performance for the year. value for them and how this value contributes to long term reporting period’s financial results, and detailed segment sustainable returns for securityholders. information for projects, investments, and pipeline.
3. Pillars of Value FINANCIAL STATEMENTS Materiality • Website – www.lendlease.com: Includes additional A description of Lendlease’s five pillars of value that drive the long term value of our business. Icons are used throughout the Annual information on sustainability reporting, corporate governance, Report to link our business activities to these pillars. An update of the performance in line with identified measures is provided on A matter is considered material if Lendlease’s senior tax compliance and historical financial information. pages 38 to 61, with further information on financial performance included in the Performance & Outlook section on pages 70 to 83. management and those charged with governance believe it A description of each pillar is provided below: could significantly impact the value created and delivered by the relevant pillar in the short, medium and long term. Future of Reporting Lendlease identifies and captures material matters through the This Annual Report sets out our competitive advantage and our following processes: Health and Safety commitment to creating long term value for our stakeholders, • Project Control Group (PCG) sessions, which include key realised through our pillars of value. In future reports we will Everyone has the right to go home safely to their families, friends and loved ones, every day. internal stakeholders and represent the governance structure continue to enhance our measurement of Key Performance
FINANCIAL STATEMENTS FINANCIAL We remain committed to the health and safety of our people, our subcontractors, and all of for overseeing the completion of the Annual Report; Indicators (KPIs) for each pillar. those who interact with a Lendlease place. • Capturing feedback through engagement and research during the financial year from key external stakeholders including investors, analysts, and other relevant groups; Financial • Engagement with the Board; and A strong balance sheet and access to third party capital enables Lendlease to fund the • Confirming that the strategy and the global trends execution of its pipeline and deliver quality earnings for our securityholders. influencing our strategy are consistent and relevant with the information collected above. The outcome of the above processes are the material issues noted on page 40 and the strategy and global trends Our Customers influencing our strategy presented on pages 22 to 37. We adopt a collaborative approach to our relationships, delivering high quality products and services that respond to our customers’ needs. Satisfied customers drive long term value. OTHER INFORMATION
Our People Lendlease’s people are the greatest contributors to our success and underpin our ability to deliver our vision to create the best places.
OTHER INFORMATION OTHER Sustainability Lendlease has a proud history of giving emphasis to environmental, social and economic outcomes. It is essential we continue to evolve our approach, to keep pace with global trends and integrate this thinking into our business strategy. 01 OUR BUSINESS
International Quarter London, Stratford 8 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 9
Who We Are DIRECTORS’ REPORT On 12 March 1958 Lendlease Corporation was formed, so 2018 marks our 60th anniversary.
DIRECTORS’ REPORT DIRECTORS’ It’s well documented that Lendlease founder Lendlease and our legacy businesses have been Dick Dusseldorp (“Duss”) was a leader ahead of entrusted with many projects that have become his time. He created Lendlease with the intent the cornerstone of cities and communities of successfully combining the disciplines of – projects like the September 11 Memorial & construction, development and investment. Museum in New York, the Athletes’ Village in Duss was equally focused on ‘how’ Lendlease London, Sydney Opera House, Petronas Towers delivered; in Kuala Lumpur, critical infrastructure, stadiums • He always looked for the common interest and entertainment facilities around the world, hospitals, schools, shopping centres, residential • He created with purpose communities and high rise apartment buildings – • He was bold in his thinking the list goes on. • And he made sure what we did mattered The relevance of our business today is testament These drivers make up our DNA and continue to to our founder’s foresight. Duss made sure we had underpin our brand and culture. all the ingredients we needed to grow Lendlease While our achievements over the past 60 years are well into the future. grounded in Duss’s ambitions, so too is our future, We are bold and innovative, we value knowledge, FINANCIAL STATEMENTS with one very important distinction – we are now we do what matters and we look for common making our mark on a global stage. interests and purposeful outcomes. Lendlease is a leading international property and This is how we deliver on our vision. infrastructure group, with approximately 13,000 employees across operations in Australia, Asia, Europe and the Americas. Headquartered in Sydney, Australia, our employees help to create places that leave a positive legacy with a focus on
FINANCIAL STATEMENTS FINANCIAL health and safety, our customers, innovation and sustainability.
Our Vision:
TO CREATE OTHER INFORMATION THE BEST PLACES OTHER INFORMATION OTHER
National September 11 Memorial & Museum, New York 10 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 11
Our Values DIRECTORS’ REPORT Our core values guide our behaviours and underpin our Code of Conduct. These are the values we live by every day. DIRECTORS’ REPORT DIRECTORS’
RESPECT Be dedicated to relationships
INTEGRITY Be true to our word FINANCIAL STATEMENTS
INNOVATION Be challenging in our approach FINANCIAL STATEMENTS FINANCIAL COLLABORATION Be one team
EXCELLENCE Be exceptional in everything we do OTHER INFORMATION
TRUST Be open and transparent OTHER INFORMATION OTHER 12 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 13 Lendlease Timeline
A selection of key highlights and milestones demonstrating the evolution and endurance of Lendlease. 1967 DIRECTORS’ REPORT • Australia 1951 1957 Square in • Dick Dusseldorp visits • Builds 1958 1959 Sydney 1972 • Wins Australia, reporting Australia’s first • Lend Lease opens 1971 • Signs ACTU contract 1961 1963 on opportunities for all concrete Corporation Limited • Establishes Memorandum of for Sydney • Conveyancing • Introduces 1966 Brederos skyscraper, is formed Australia’s Understanding Opera (Strata Titles) 1962 superannuation • Bankstown Caltex House, first listed • Civil & Civic wins • Australia’s first House Act, 1961 • Lend Lease scheme for Square in Sydney property
DIRECTORS’ REPORT DIRECTORS’ contract to supply and productivity becomes Corporation employees, opens, erect 200 prefabricated agreement was legislation listed on 20 years before Australia’s trust, GPT 1973 houses for the Snowy signed by Civil & following the Sydney becoming largest • Begins • Operations Mountains Hydro Civic and the Building Dusseldorp’s Stock industry shopping operating in expand to Electric Authority Trades Union initiative Exchange practice centre the US Singapore 1951 1960s> 1970s> 1984 1999 • Lend Lease • Joint venture with Actus, US 1988 Apprentice Military Housing business • Sydney Football Council • Bluewater Shopping Centre, Stadium opens forms UK opens, one of Europe's 1996 1989 • Lend Lease • APPF • National Tennis largest shopping centres 1991 1986 Foundation • Begins investment Centre, Melbourne • Acquires MLC, 1983 1978 FINANCIAL STATEMENTS • Sydney Athletes' Village opens launches 1993 operating fund opens Australian • Lend Lease • MLC Centre • Acquires Bovis, UK Community • Sunshine Plaza, QLD opens in United launches in • Commences financial services Foundation in Sydney construction company Day • Commences operations in China Kingdom Australia operations in Japan company forms opens <1990s <1980s FINANCIAL STATEMENTS FINANCIAL 2000 2009 2010 • Dick Dusseldorp dies 2006 • Secures International 2001 • Establishes • Secures Quarter project, London • MLC sold to National • Secures Victoria Harbour, Lend Lease Barangaroo South Australia Bank Melbourne, first major Asian project, Sydney • Acquires Retirement 2011 • Secures first Military urbanisation project 2005 Retail • Secures Brisbane Living portfolio • September 11 Memorial, NYC opens Housing contract • Acquires Delfin, Australian • Lend Lease and Investment Showgrounds • Secures Elephant Park • Acquires AbiGroup, Baulderstone in the US communities business GPT part ways Fund project project, London and Conneq 2000s> 2010s> 2018 • Announces 10 year 2015 OTHER INFORMATION partnership with Great Barrier • Lendlease brand unveiled 2013 • Secures Darling Reef Foundation 2017 • Secures Southbank project, 2014 • Wins contract Square project, • Secures London Euston Chicago • Divests Bluewater, UK to develop Sydney development agreement • One of the first international • September 11 Melbourne Memorial and • Secures • Secures Milano Santa Giulia Metro 2016 organisations to introduce Melbourne 2012 project, Milan wellbeing leave for our people Museum, NYC opens • Secures • Lendlease international (museum) Quarter project • Setia City Mall, • Secures senior living project headquarters move into • Secures Paya Lebar Quarter Malaysia opens Circular Quay • Secures The Lifestyle • Launches OTHER INFORMATION OTHER in Shanghai Tower project, Barangaroo, Sydney project, Singapore Quarter project, Lend Lease Jem • London Athletes' • Secures High Road West, UK Sydney • ICC Sydney opens • Barangaroo Reserve opens Kuala Lumpur Partners Fund Village opens TODAY 14 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 15 Operational Highlights DIRECTORS’ REPORT HEALTH AND SAFETY FINANCIAL PERFORMANCE
Critical Incident Frequency Rate1
FY17 1.1 Earnings before interest, tax, Profit after tax FY17 FY18 depreciation and amortisation DIRECTORS’ REPORT DIRECTORS’ FY18 0.8 1.7 90% 92% Group Lost Time Injury Frequency Rate2 FY17 1.6 1.8
Percentage of operations without a Critical Incident $1,244.8 MILLION $792.8 MILLION FY18 1.7
FY17 1,201.8 FY17 758.6 OUR PEOPLE FY18 1,244.8 FY18 792.8
3
Succession strength FINANCIAL STATEMENTS Earnings per security Distribution per security FY17 2.5 Retaining key talent is critical FY18 3.5 to our long term success. Our target retention rate is >90% across all talent programs, which we exceeded in FY18.
Senior Executive4 positions held by women Our pipeline of successors for 136.1 CENTS 69.0 CENTS key roles, along with females FINANCIAL STATEMENTS FINANCIAL in our succession pool, has FY17 20.6% increased in FY18. FY17 130.1 FY17 66.0
FY18 22.1% FY18 136.1 FY18 69.0
SUSTAINABILITY Return on equity Market capitalisation1
20% reduction by 2020 (against FY14 baseline) FY18 FY18 FY18 FY17 98% OTHER INFORMATION
12.7% $11.4 BILLION FY18 99% 16% 9% 28% Total development pipeline achieved FY17 12.9 FY17 9.7 or targeting green certification. FY18 12.7 FY18 11.4 ENERGY REDUCTION5 WATER REDUCTION5 WASTE REDUCTION5,6
OTHER INFORMATION OTHER 1. A Critical Incident is an event that caused, or had the potential to cause death or permanent disability. This is an indicator unique to Lendlease. 2. The Lost Time Injury Frequency Rate (LTIFR) is calculated to provide a rate of instances per 1,000,000 hours worked. 3. For all Senior Executive positions, we have a target of three unique successors. In our FY18 talent and succession review, we exceeded this target with an average of 3.5 unique successors per role identified. 4. 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. 5. The above performance is as at March 2018 and is a cumulative measure. Full FY18 performance is subject to Limited Assurance by KPMG and will be 1. As at market close on 30 June 2017 and 2018. available on www.lendlease.com in October 2018. 6. In FY18, we have updated our FY14 waste baseline due to additional project information becoming available. This has resulted in an increased performance for waste in FY18 relative to the previous baseline utilised. 16 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 17 Performance Highlights DIRECTORS’ REPORT PLACES WE CREATED PLACES WE WILL CREATE1
Lendlease creates places that leave a positive legacy with a focus on safety, innovation and sustainability. By their nature, the projects we deliver can take years, if not decades to complete. Maintaining an ongoing Our achievements are supported by pillars of value that enable us to apply a balanced approach to driving pipeline of work, supported by pillars of value is critical to maintaining the sustainability of our earnings and
DIRECTORS’ REPORT DIRECTORS’ successful outcomes. the ultimate success of our business.
Health and Safety Financial Our Customers Our People Sustainability Health and Safety Financial Our Customers Our People Sustainability
A selection of recent highlights is included below. A selection of key opportunities expected to contribute to future earnings is included below.
DELIVERED TO BE DELIVERED
residential apartment community Development completions, across land lots pipeline, including Construction Sydney, Melbourne, across 16 four new major backlog
1,314 Brisbane and London 3,912 projects BILLION revenue
BILLION $21.1 European projects: $71.1 FINANCIAL STATEMENTS • Melbourne Metro Tunnel, Melbourne • Milano Santa Giulia, Milan • The Lifestyle Quarter, Kuala Lumpur • High Road West, London of commercial • Crown Sydney Hotel Resort, Sydney • Euston Station, London space completed • Jacob K. Javits Convention Center, New York • Silvertown Quays, East London 136,000 sqm
FINANCIAL STATEMENTS FINANCIAL of construction work1 including: • Darling Square – ICC Hotel, Sydney in secured funds under management from • Office building, International Quarter London development projects currently in delivery BILLION $12.9 BILLION • New Bendigo Hospital, Victoria C.$4
INCREASED LAUNCHED
Our presence across our gateway cities – • Residential for rent partnership with CPPIB2 to deliver an initial 663 apartments at Elephant Park, London Funds under management by securing four new urbanisation projects, • Joint venture with the SoftBank Group to develop and own telecommunications towers in the US 15 per cent to $30.1 billion one in Milan and three in London • Our first senior living project in the Qingpu district of Shanghai OTHER INFORMATION AWARDED LEGACIES FOR FUTURE GENERATIONS
• Integrated Reporting Award (FY17 Integrated Report), 2018 Australasian Reporting Awards • 99 per cent of development pipeline targeting green certification • Australian Prime Property Fund Commercial ranked first out of 850 respondents in the 2017 Global Real • 20 per cent reduction targets for energy, water and waste by 2020 Estate Sustainability Benchmark (GRESB) • Commitment to Indigenous engagement in Australia via our Elevate Reconciliation Action Plan • Barangaroo South awarded 2017 Development of the Year by the Property Council of Australia ‘Building Respect; Past, Present, Future 2016 – 2018' 2
OTHER INFORMATION OTHER • Top multi-unit residential contractor in the United States for 18 consecutive years • Supporting communities towards sustained prosperity and growth via job creation, affordable housing and • Sustainable Project of the Year – South Gardens, Elephant Park, London3 skills creation • 313@somerset, Jem and Parkway Parade, Asia – repeat recipients of bizSAFE partner award for retail safety
1. Based on Construction segment revenue. 1. Subject to relevant project planning and approvals. 2. As ranked by ENR Sourcebook for Top 25 Multi-Unit Residential. 2. Canada Pension Plan Investment Board. 3. Construction News Awards (July 2018). 18 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 19
Health and Safety Financial Strength I am very saddened to report two fatal incidents on Lendlease The Group delivered a resilient result for the financial year ended projects in the 2018 financial year. These incidents continue 30 June 2018, with Profit after Tax of $792.8 million, up from to remind us of the importance of safety vigilance, and serve $758.6 million in the previous financial year. Chairman’s Report to focus every Lendlease employee and subcontractor on the Securityholders will receive a final distribution of 35.0 cents per continuous improvement of safety practices and outcomes. security, taking full year distributions to 69.0 cents per security. The payout ratio for the year was 50 per cent, which is within the Lendlease is undertaking a review of how we approach and DIRECTORS’ REPORT In Lendlease's 60th year in operation the Group delivered a resilient result for the 2018 financial year with manage safety, and the Board has oversight of this review. Board’s stated target range of 40 to 60 per cent of earnings. The Board is strongly committed to proactive and As part of a disciplined approach to managing capital, the $792.8 million in Profit after Tax and Distributions per Security of 69.0 cents. Our vision and strategy is uncompromising safety leadership throughout the organisation Board approved an on market buyback of up to $500 million. centred around innovative property and infrastructure solutions. Successful execution of this strategy, so that the right safety practices, behaviours, policies and The buyback commenced following the half year results, and culture are in place. approximately 10 million securities have been purchased on combined with a strong financial position and robust risk management and governance frameworks, set the market as at 30 June 2018. Group up to deliver attractive securityholder returns. Annual Report The Group began FY19 in a strong financial position with cash and cash equivalents of $1.2 billion and gearing of eight per Lendlease’s 2017 integrated Annual Report was the winner cent. The resilience of the balance sheet, along with ongoing of the 2018 Australasian Reporting Award for Integrated capital partnering, continues to provide the financial flexibility to DIRECTORS’ REPORT DIRECTORS’ Reporting. This is a well deserved recognition of the work capitalise on growth opportunities. undertaken to articulate the value proposition of Lendlease. This year’s Report is once again structured to demonstrate the long term value created by Lendlease through its five Sustainability pillars of value: Health and Safety; Financial; Our Customers; Lendlease has a rich pedigree in sustainability. It is well Our People; and Sustainability. We have also made additional documented that Dick Dusseldorp was a leader ahead of his time, initiating a range of industry firsts, including the refinements to this Report to further demonstrate value. negotiation of productivity agreements with unions and the This integrated Annual Report includes a timeline featuring a introduction of superannuation, 20 years before it became selection of major milestones for Lendlease. Lendlease was industry practice. born out of a vision to create a company that successfully combines the disciplines of development, construction and Sustainability continues to underpin the Lendlease strategy. investment. The Company continues in the spirit in which it This year the Board endorsed the recommendations for the Task Force on Climate-related Financial Disclosure (TCFD). TCFD was created, with one important distinction; Lendlease is now is an independent industry led framework enabling companies making its mark on a global stage. Today, more than 50 per cent to disclose climate change risk and opportunities in a format of Lendlease’s global development pipeline is in international that investors are increasingly seeking. To see how Lendlease is gateway cities. tracking against the key recommendations please refer to page 210. This year we again secured many prestigious awards in FINANCIAL STATEMENTS Governance and the Board recognition of major sustainability achievements. I am I will retire as Chairman of the Board following the 2018 Annual particularly proud of the recognition Barangaroo South is General Meeting. It has been a privilege to serve as Chairman now receiving. Since 2014, this precinct has won 52 awards, since 2003. I am delighted the Board has selected current including the Property Council of Australia's 2018 Development Non Executive Director and Chairman of the Sustainability of the Year. Barangaroo South is Lendlease’s most awarded Committee, Michael Ullmer, as my successor. urban regeneration project. In my opinion, Lendlease is an Australian corporate success story. The resilience and endurance of this organisation is Looking Back, Looking Forward testimony to the values and talents of its employees, and I In my final report to securityholders, I am reminded of the am confident the Company will continue to prosper under importance of legacy. The legacy of Lendlease founder, FINANCIAL STATEMENTS FINANCIAL Michael's and Group CEO Steve McCann’s leadership. Dick Dusseldorp, is immense and continues to serve the strength of the Lendlease brand. In my 17 year association After almost 13 years of service, Phillip Colebatch will also with this great organisation, I have seen the Group strengthen retire following the 2018 Annual General Meeting. Phillip has its governance, significantly improve safety practices, build made an outstanding contribution to the Board, notably execution capability, grow internationally and deliver many city through his roles on the Risk Management and Audit and defining projects. People and Culture Committees. During Phillip's tenure, his I am extremely pleased with Lendlease’s progress and deep commercial insight and experience, and judgement in performance over recent years. Since 2011, the Group’s risk management issues, strategy and finance, were deeply urbanisation pipeline has grown from an end development value respected and have been invaluable to his fellow Directors and of $16 billion to $56 billion. This has been achieved in a highly Lendlease senior management. I wish Phillip the very best in his disciplined and strategic manner and we are well on our way future endeavours. to replicating the Australian success of Lendlease’s integrated Elizabeth Proust was appointed to the Board as an independent model internationally. Non Executive Director, in February 2018. Elizabeth is one of I acknowledge the tireless contributions of my fellow Board Australia’s foremost business figures, holding leadership roles members. It has been a pleasure working with the Board during in the public and private sectors for more than 30 years. She my tenure and I have no doubt their passion for Lendlease, has extensive experience on listed and private companies, belief in what the Group stands for, and drive for performance
government and not for profit boards. Her appointment success will continue to prevail. OTHER INFORMATION enhances the mix of skills, diversity and experience on our Board. In particular, I would like to acknowledge the support and Corporate governance has been under the spotlight this year, contributions of the Group CEO Steve McCann, Lendlease's most notably in light of the Banking Royal Commission. The leadership team and all employees, whose commitment and Board has never been more mindful of its responsibilities dedication have helped to create the best places, now and well and continually monitors and reviews its composition and into the future. capabilities, in the context of external global trends and Finally, to you, our valued securityholders, thank you for your Lendlease’s growth strategy. The Nomination Committee support, through both challenging and prosperous times. You are regularly reviews the mix of skills, industry experience and a part of an organisation that is leaving an indelible mark on major
OTHER INFORMATION OTHER diversity on the Board, and the Nomination Committee cities around the world. Chair oversaw an external review of Board performance and effectiveness during the reporting period.
David Crawford AO Chairman 20 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 21
Health and Safety We achieved considerable success with our capital partnering strategy this year, including the sale of 25 per cent of our There is nothing more important than the health, safety and Retirement Living business in Australia to a capital partner. wellbeing of our people and those who work with us. We also raised $2.5 billion in third party equity to fund several Group Chief Executive Officer I am deeply saddened to report two corporate reportable office developments in our urbanisation pipeline. We have also fatalities during FY18. On behalf of Lendlease, I express my established two new asset classes for our investments platform, sincere condolences to the families and friends that have been residential to rent and telecommunications infrastructure.
impacted by these tragic incidents. DIRECTORS’ REPORT and Managing Director’s Report We owe it to everyone who works on, or interacts with, our Celebrating 60 Years sites to learn from these tragedies so we can prevent death or This year, Lendlease celebrates 60 years of shaping city injury on our operations. skylines and creating great places. When I visit cities around We are reviewing a number of aspects associated with the world, I see Lendlease’s history and future. Our projects Lendlease delivered a solid financial performance for the year, demonstrating the resilience of our Health and Safety to drive continuous improvement. This are the ultimate testament to our values – they represent diversified business model, with strong returns from Development and Investments outweighing review focuses on the application of our Global Minimum innovation, collaboration and excellence. They are also a tribute Requirements and the impact of our operating methodologies to the man who created this great Company, Dick Dusseldorp – underperformance in the Australian Engineering business within our Construction segment. on safety performance. We will also review the way we identify, a man determined to leave a positive legacy. report and manage risk as it relates to safety in both the
DIRECTORS’ REPORT DIRECTORS’ In 1978 Duss said, “we feel we have built solid foundations We have made significant progress on our international gateway cities strategy, securing an additional planning and delivery of activities across our business. for future growth…. an adventurous road lies ahead for both In addition to reviewing these operating frameworks, we need Australia and Lendlease.” This quote is just as relevant today, four major urbanisation projects. Our focus remains on creating quality outcomes for our customers, to advance our collective mindset of being unrelenting in with many great projects secured which will create legacies at delivering strong performance for securityholders, and operational excellence, leading with our unwavering pursuing the safest outcomes, because everyone has the right home as well as in Asia, the US and Europe. commitment to health and safety. to return to their families, friends and loved ones, every day. I acknowledge our vast alumni of Lendlease employees around the world, including those who may have worked with our Performance founder in the early days, and thank them for their efforts Lendlease delivered solid financial returns for securityholders through the decades to create a company that today allows us during FY18. Earnings per security grew by five per cent and all to contribute to and celebrate great places. return on equity was 12.7 per cent, within our target range of 10 to 14 per cent. Strong performances across our Development Outlook and Investments segments offset underperformance in our We are focused on delivering quality outcomes for our many Construction segment. and varied customers, and this will underpin the strength of our Our strong Development performance across Australia and financial performance in the years ahead. All three operating Europe was, in the most part, due to solid contributions segments are well placed. Our development pipeline stands at from our residential and commercial development activities. a record $71.1 billion, our construction backlog revenue is $21.1 Apartment buildings were completed across urbanisation billion, our funds under management stand at $30.1 billion and FINANCIAL STATEMENTS projects in four cities: Sydney, Melbourne, Brisbane and we have $3.4 billion of investments. London, and a new investment partnership was formed in As always, we remain focused on operational excellence, leading the residential for rent sector in London. Our Australian with our unwavering commitment to health and safety and communities portfolio performed well. rigorous approach to risk management. An additional four major office buildings transitioned into delivery in Sydney, Melbourne and London, comprising more Chairman Retirement than 100,000 squares metres of space. Our capability to deliver The strength of our performance is underpinned by the quality collaborative, healthy and productive working environments of our leadership. This year, our Chairman David Crawford will continues to generate strong tenant and capital partner interest. retire following our AGM in November. David has dedicated 17 FINANCIAL STATEMENTS FINANCIAL The strength of our Investments segment was underpinned years to Lendlease, 15 of these as our Chairman. I would like to by an increase in recurring earnings and gains in investment acknowledge his tremendous contributions, and sincerely thank asset values. Our investments in Barangaroo South and our US him for his unwavering support and guidance over the years. I Military Housing portfolio performed well. have no doubt David Crawford’s legacy will continue to underpin The poor performance of a small number of Engineering the future success of this great organisation. projects in Australia had a material impact on our I have worked with our incoming Chairman, Michael Ullmer, Construction segment. since 2011 and look forward to continuing to work with Building activities within our Construction segment across all Michael and the Board to grow our business towards our four regions were solid this year, including contributions to our aspiration of becoming the leading international property and earnings and growth in construction backlog. infrastructure group. I acknowledge every Lendlease employee for your many and Our Strategy varied contributions. You are the reason for Lendlease’s success. Our integrated business model provides us with a sustainable Thank you also to our securityholders for your ongoing support. competitive advantage, and is critical to delivering long term securityholder value. We can originate, fund, deliver and manage major urbanisation projects. OTHER INFORMATION This year, we expanded our globally recognised portfolio of urbanisation projects, securing four major urbanisation projects in Europe; in London – Euston Station, High Road West and Steve McCann Silvertown Quays; and in Milan - Milano Santa Giulia. We now Group Chief Executive Officer have 18 major urbanisation projects across 10 gateway cities. and Managing Director Infrastructure is a key trend that drives our strategy and is being pursued through transport infrastructure in Australia and telecommunications infrastructure in the US. Significant
OTHER INFORMATION OTHER progress has been made, with our Engineering business in Australia securing $3.5 billion of work. Our pipeline of telecommunications infrastructure development in the US is also growing, following the establishment of a joint venture with SoftBank. 02 OUR STRATEGY AND CAPABILITIES
The Lifestyle Quarter, Kuala Lumpur Artist impression as at 2018 (image subject to change and further design development and planning approval) 24 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 25
Our Approach DIRECTORS’ REPORT The Lendlease strategy delivers on our vision to create the best places by leveraging our integrated business model in key gateway cities. DIRECTORS’ REPORT DIRECTORS’
With a continued rise in urbanisation and the We are continuing to drive forward, constantly growing demand for future proof public increasing productivity, and utilising technology infrastructure, our strategy enables us to enrich advancements and sustainable practices to communities and maximise sustainable outcomes. maintain our competitive advantage. We continue to deepen our expertise across Our pillars of value enhance our ability to originate, multiple sectors to adjust and respond to fund, build, deliver and manage major urbanisation changing customer demand. and critical infrastructure projects. When these It’s a strategic approach driven by understanding pillars work together we create safe, healthy and our customers, and underpinned by our financial sustainable places for our customers and the strength and ability to work alongside our communities we serve. This helps to enhance and investment partners. Applying this approach in a strengthen the key cities we work in and builds disciplined manner has enabled us to become a trust and reputation with our partners. leading international property and infrastructure We strive to deliver long term sustainable value group known, respected and trusted in the for our investors and create an organisation of FINANCIAL STATEMENTS markets in which we operate. choice for our people.
RECOGNISED AS A LEADING INTERNATIONAL PROPERTY AND INFRASTRUCTURE GROUP FINANCIAL STATEMENTS FINANCIAL EGRATED INT MO R DE OUR APPROACH: OU L OUR PILLARS OF VALUE: ELOPMEN FOCUS & GROW EV T D HEALTH & SAFETY
GATEWAY CITIES TO CREATE FINANCIAL
S
C
T THE BEST O
KEY N
N
E OUR CUSTOMERS
TRENDS PLACES S M
T
T
R
S U
E
C
V
T OUR PEOPLE
N I I
DISCIPLINED O N
PORTFOLIO OTHER INFORMATION MANAGEMENT SUSTAINABILITY T RACK RECORD
MAXIMISING LONG TERM SECURITYHOLDER VALUE TARGET 1014% RETURN ON EQUITY OTHER INFORMATION OTHER
New York skyline 26 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 27 Global Trends Influencing Our Strategy DIRECTORS’ REPORT URBANISATION FUNDS GROWTH Urbanisation creates increasing pressure to plan for, and Global assets under management are forecast to grow over the next accommodate, growing populations. By 2030, over 60 per cent of the decade from US$85 trillion in 2016 to US$145 trillion by 2025.4 world’s population is expected to live in urban areas.1 Where We Are Today Where We Are Today Our investment management platform is well established in Australia Our urbanisation pipeline has an estimated end value of $55.9 billion and Asia with growth potential in the US and Europe. The $30.1 billion in and includes: funds under management (FUM) is managed on behalf of approximately DIRECTORS’ REPORT DIRECTORS’ 150 institutional investors globally. In FY18, we added two asset classes • US Clippership Wharf, Boston; Southbank, Chicago to our investment platform, establishing a telecommunications joint • EUROPE Elephant & Castle, London; Milano Santa Giulia, Milan venture with SoftBank Group in the US, and the £1.5 billion residential • ASIA The Lifestyle Quarter, Kuala Lumpur; for rent partnership with a capital partner in London. Paya Lebar Quarter, Singapore • AUSTRALIA Melbourne Quarter, Melbourne; Darling Square, Sydney The Opportunity Continue to provide institutional investors with real estate and The Opportunity infrastructure solutions, via our product creation capability. Grow our Expand our globally recognised portfolio of urbanisation projects to residential for rent and telecommunications infrastructure platforms satisfy an increasing demand for urban living. and leverage our strong institutional investor relationships.
INFRASTRUCTURE SUSTAINABILITY Urbanisation and population growth are creating strong demand for With two thirds of the world’s population living in urban areas by infrastructure. Global social and economic infrastructure spending 2050,1 the built environment faces increasing challenges, including FINANCIAL STATEMENTS was US$3.8 trillion in 2015 and is estimated to rise to an average of climate change and social pressures such as inclusion, population US$5.1 trillion per year between now and 2035.2 growth and housing affordability. Where We Are Today Where We Are Today Our Engineering business in Australia secured $3.5 billion of transport We are recognised by GRESB5 as an international leader, with the infrastructure in FY18. In FY18, a consortium including Lendlease Lendlease managed Australian Prime Property Fund (Commercial) was awarded the $5.2 billion Melbourne Metro Tunnel Project, to be ranked first. In FY18, Lendlease achieved 99% green certification of delivered via a public private partnership. Recent social infrastructure our development pipeline. We remain focused on a 20% reduction6 in projects include hospitals in Bendigo and on the Sunshine Coast. We the consumption of energy, emissions, water and waste by 2020. We
FINANCIAL STATEMENTS FINANCIAL have project managed the deployment of over 75,000 communications are implementing the recommendations of the Taskforce for Climate towers and rooftop antenna sites in Japan since 2001. related Financial Disclosure (TCFD) and are a signatory to the UN Principles of Responsible Investment (UNPRI). The Opportunity Partner with governments and other institutions to meet the growing The Opportunity infrastructure needs of cities. Continue to grow our engineering pipeline and Partner with government, investors, the private sector and community broaden our telecommunications infrastructure business in key markets. stakeholders to deliver inclusive, healthy and adaptable places.
AGEING POPULATION The ageing population requires different housing solutions and TECHNOLOGY greater healthcare services in all major markets. The proportion of Global investment in real estate technology start ups has grown from the global population aged 60+ is projected to increase three times US$1.8 billion in 2015 to US$12.6 billion in 2017.7 as fast as overall population (2.4% vs 0.8%pa) in average annual terms between 2015 and 2050.3 Where We Are Today OTHER INFORMATION Where We Are Today We are introducing delivery technology to support productivity gains including digital design, prefabrication, online sales channels and Lendlease operates one of the largest Retirement Living businesses in drone and facial recognition applications. We have also delivered Australia, with 71 villages. In FY18, we welcomed a capital partner to several cross laminated timber buildings with 25 King, Brisbane to continue to grow this business. Drawing upon our sector experience, be Australia’s tallest timber commercial building on completion later we secured a project with the Qingpu district of Shanghai to develop in 2018. and operate approximately 900 senior living units. The Opportunity OTHER INFORMATION OTHER The Opportunity To drive value by leading in the deployment of these technology Consolidate our leading position in the Australian retirement living enabled tools and techniques in our projects. sector. Successfully deliver our first senior living project in Shanghai and establish a scale platform in China.
1. World Urbanization Prospects: The 2018 Revision, United Nations. 4. Asset & Wealth Management Revolution: Embracing Exponential Change, PwC 2017. 2. McKinsey Global Institute: Bridging Infrastructure Gaps – Has the World Made Progress? October 2017. Includes some Group Research calculations. 5. Global Real Estate Sustainability Benchmark. 3. World Population Prospects: The 2017 Revision, United Nations. 6. Compared to FY14 consumption. 7. RE: Tech: Real Estate Tech Annual Report 2017. 28 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 29 Global Presence, Gateway Cities
Shaping cities is what we do, and our DIRECTORS’ REPORT urbanisation led strategy primarily focuses on major ‘gateway cities’ around the world. Relative to their national average, gateway cities typically experience higher population growth; have the most appealing employment prospects; are more resilient through property
DIRECTORS’ REPORT DIRECTORS’ and economic cycles; and attract more global investment capital. Playing to the breadth of our skills, these cities often contain sites well suited to regeneration and infrastructure upgrades. Chicago London To identify the cities most relevant Milan to our strategy and capabilities, we periodically undertake an extensive Boston Rome global study, evaluating key metrics San Francisco Beijing including economic, business climate, New York Tokyo geopolitical risks, urbanisation Los Angeles potential and capital market indicators. Shanghai We also evaluate global cities on additional metrics such as demographics, demand drivers, property fundamentals, unique FINANCIAL STATEMENTS attributes, policy and planning frameworks and Lendlease’s presence in a market. Kuala Lumpur Wherever we operate, our business Singapore operations must comply with our robust safety and sustainability standards. Attracting the right teams with the appropriate capabilities to deliver on our pipeline is also a key consideration FINANCIAL STATEMENTS FINANCIAL of the cities we choose to target. This process identified an initial Brisbane 17 gateway cities for our urbanisation Perth platform to target. Today, we operate Sydney in 15 of these 17 gateway cities. Melbourne Major urbanisation projects have been secured in ten of these cities, including:
AMERICAS EUROPE ASIA AUSTRALIA OTHER INFORMATION OTHER INFORMATION OTHER
• Southbank, Chicago • 30 Van Ness, • Elephant & Castle, London • Milano Santa Giulia, Milan • The Lifestyle Quarter, • Paya Lebar Quarter, • Melbourne Quarter, • Darling Square, Sydney (pictured) San Francisco (pictured) Kuala Lumpur (pictured) Singapore Melbourne (pictured)
All images - Artist impression as at 2018 (image subject to change and further design development and planning approval). 30 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 31 Development DIRECTORS’ REPORT evelopm D en t Financial returns for the segment are generated via Disciplined s portfolio development margins, development management fees t
management C n o
e to maximise received from external co-investors and origination
n
m securityholder s
t
t fees for the facilitation of infrastructure public
s value r
u e
v c
n t I
i private partnership transactions. o n DIRECTORS’ REPORT DIRECTORS’
Our Capability Americas Our Development segment comprises activities across urbanisation, Our urbanisation strategy was extended to the Americas in 2014. communities, retirement living and infrastructure development. Urbanisation projects have been secured in four gateway cities. Our first phase of apartments will be delivered in FY19, at We manage the entire development process from securing land, residential projects in Chicago, Boston and New York. creating masterplans, consulting with stakeholders including authorities and local communities through to project management, While the initial development phase is complete across our sales and leasing. We also establish investment partnerships. Military Housing portfolio, there will be periodic redevelopment opportunities over the remaining 38 year average project life. Our urbanisation strategy is focused on urban renewal in targeted gateway cities, creating and shaping city skylines. Our presence in the telecommunications infrastructure sector was extended in FY18 through a joint venture with the SoftBank Group Our Communities business has a strong presence throughout to develop and own telecommunications towers. Australia. We design the masterplan and deliver a range of amenities to the precinct. We also develop retirement FINANCIAL STATEMENTS communities within our Retirement Living portfolio. Asia Our Development business in Asia works with our capital Infrastructure Development is focused on transport and social partners and governments to create retail, commercial, infrastructure in Australia and telecommunications towers in the residential and senior living precincts. We are delivering two US and Asia. Over the years, we have delivered a range of public large mixed use projects, Paya Lebar Quarter in Singapore and facilities including sporting and entertainment venues, hospitals, The Lifestyle Quarter in Kuala Lumpur, Malaysia. school and university buildings, major road and rail projects. We secured our first senior living project in Shanghai in FY18 as Australia we leverage our expertise from Australia into the China market. We have urbanisation projects in Sydney, Melbourne, Brisbane FINANCIAL STATEMENTS FINANCIAL and Perth. Europe Our Development business in Europe is partnering with Darling Square in Sydney achieved an important milestone governments and local communities to create sustainable in FY18 with the completion of all the large commercial residential, commercial and retail precincts. Today these projects components. Since 2013, we have delivered an office building represent a total estimated end value in excess of $20 billion. of approximately 26,000 square metres, approximately 2,700 square metres of retail space, more than 500 residential We secured four major urbanisation projects in FY18; in London apartment units and a 590 room luxury hotel. The International at Euston Station, High Road West in Tottenham and Silvertown Convention and Exhibition Centre and associated public Quays in East London; and in Milan, Milano Santa Giulia. amenity was delivered via a public private partnership. We entered the residential for rent sector with the This precinct is expected to be fully complete by the end establishment of an investment partnership with Canada of FY19, following the delivery of almost 1,000 residential Pension Plan Investment Board (CPPIB). Two apartment apartments, along with a community building centred on a buildings at our Elephant Park project are under construction – public library. our first residential for rent products in the region. Our Communities business masterplans and delivers the streetscape, open spaces, town centres and blocks of land
for homes to create an inclusive living environment. Many OTHER INFORMATION Australians live in a Lendlease community. Over the last 50 years, we have delivered more than 50 residential communities around Australia. Today, we have 15 active projects. The Lendlease Retirement Living business has an extensive development pipeline, and we expect to create and upgrade thousands of units over the coming decade. OTHER INFORMATION OTHER
Steam Mill Lane, Darling Square, Sydney 32 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 33 Construction DIRECTORS’ REPORT evelopm D en t Disciplined s portfolio Financial returns for the segment are generated via t
management C n o
e to maximise project management and construction management
n
m securityholder s
t
t fees, in addition to construction margin.
s value r
u e
v c
n t I
i o n DIRECTORS’ REPORT DIRECTORS’
Our Capability Americas We have delivered construction projects around the world In the Americas, we have delivered construction projects over for 60 years. We provide project management, design and the past 20 years. Our strong client relationships and execution construction services for both internal and external clients capabilities are evidenced by approximately across a range of sectors including residential, office, retail, 80 per cent of our Construction business being generated by health and defence. In Australia, we also have extensive repeat customers. engineering capabilities with a focus on the transport sector. This business is focused on six key markets, namely New York, Our Construction and Development segments partner to Boston, Chicago, Washington DC, Los Angeles and San Francisco. deliver mixed use urbanisation projects. Our Investments We are looking to add more diversification by sector, given segment usually participates, and this is where our integrated the significant existing weighting to high rise residential model brings our capabilities together to work in unison to construction. Sectors we are targeting include office,
deliver on a shared vision for a project. education, healthcare and public facilities, such as courts and FINANCIAL STATEMENTS convention centres. Our growing internal development pipeline Barangaroo South in Sydney is an excellent example of what in the region is expected to make a larger contribution to the Lendlease’s integrated approach can achieve. This vibrant Construction segment over the coming years. waterfront financial district features a mix of sustainable office space, premium residential buildings, shopping, dining and leisure experiences. This year, Property Council of Australia Asia named Barangaroo South 2018 Development of the Year, Our construction capability in Asia is well established, dating with awards in design, economic performance, environmental back to the 1970s. In Singapore, we have delivered more than commitment and innovation. Our construction capability was 400 projects across various sectors. critical in achieving this recognition and continues to play a key While our focus for construction in Asia is on our internal
FINANCIAL STATEMENTS FINANCIAL role in delivering our internal urbanisation pipeline. urbanisation pipeline, we maintain specialist capabilities to deliver pharmaceutical and telecommunications projects for Australia external clients. More than 75,000 telecommunications towers Our construction capability is brought to life in the places and have been delivered over the last 17 years. structures we create such as offices, retail centres, residential apartments, hospitals, roads, tunnels and railways. Our Building Europe business is renowned for creating innovative places and in FY18 Our ongoing pipeline of development work continues to completed projects including Adelaide Convention Centre and underpin our construction backlog in the region with the Sofitel Sydney Darling Harbour. addition of several major urbanisation projects including We are a specialist in the construction of civil infrastructure Milano Santa Giulia in Milan and High Road West and and asset maintenance in Australia through our engineering and Euston Station in London. services capabilities. We are also well placed to secure third party work with Our Engineering business delivers transport infrastructure our selective bidding approach, with recent external client across road, rail and civil work including bridges and tunnels. wins including One Triton Square in central London for For example, projects in delivery include Melbourne Metro longstanding client, British Land, and Manchester New Square Rail Tunnel, the Caulfield to Dandenong Level Crossing residential towers. Removal Project, early earthworks for Western Sydney Airport, OTHER INFORMATION key sections of the Northern Road Upgrade in Western Sydney, and the upgrade of Kingsford Smith Drive, a new gateway to Brisbane. Our Services business supports and maintains the infrastructure and places we and others create, extending across transport, communities infrastructure, telecommunications, utilities, industrial and resources, and
OTHER INFORMATION OTHER renewable energy.
International Quarter London, Stratford 34 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 35 Investments DIRECTORS’ REPORT evelopm D en t Financial returns for the segment are generated via Disciplined s portfolio fund and property management fees, income and t
management C n o
e to maximise capital growth on investment positions, and returns
n
m securityholder s
t
t from the Group’s retirement living portfolio and US
s value r
u e
v c
n t I
i military housing operations. o n DIRECTORS’ REPORT DIRECTORS’
Our Capability Americas Our Investments segment owns and manages investments, We manage a US Military Housing portfolio and have an often created by other parts of our business. associated equity investment. We have worked extensively with the US Department of Defense through the Our investment management platform provides capital partners Military Housing Privatisation Initiative and have long term with access to quality property and infrastructure assets. agreements to manage the housing on selected military bases. We invest on behalf of pension and sovereign wealth funds, Our portfolio has grown to over 40,000 residential units and investment managers and insurance companies. apartments and more than 12,000 hotel rooms. Co-investments in our property and infrastructure funds provide alignment with our capital partners, and a quality Our presence in the US telecommunications infrastructure source of income for Lendlease. sector was extended in FY18 through a joint venture with the SoftBank Group to develop and own telecommunications The product we create through our development pipeline
towers. Lendlease is asset and fund manager of this vehicle, FINANCIAL STATEMENTS is a differentiator for our Investments segment. Two new which is targeting US$5 billion in assets over the medium term. asset classes for the segment, residential for rent and The strength of our relationship with SoftBank in Japan led to telecommunications infrastructure, are expected to this opportunity in the US. support future growth in investment income and funds under management. Asia Australia We manage both wholesale funds and mandates. These assets are retail malls and commercial assets, which include 313@somerset, We are one of the largest owners, operators and developers Parkway Parade and Jem in Singapore and Setia City Mall in Malaysia. of senior living communities across 71 retirement villages. This portfolio consists of more than 12,700 units across Australia. In Singapore, the office and retail led mixed use scheme at
FINANCIAL STATEMENTS FINANCIAL The retirement living development pipeline will add to this over our Paya Lebar Quarter project will add to our funds under time. Lendlease owns 75 per cent of this portfolio, with the management when complete, as this will be managed ongoing remaining 25 per cent owned by one of our capital partners. for our mandate client. The retail mall at The Lifestyle Quarter in Kuala Lumpur is also expected to grow our funds under We manage a suite of wholesale funds and mandates. Most of management in future years. the funds are managed across the retail and office sectors with capabilities also in industrial property and social infrastructure. Europe Our business model is centred on managing assets for our In Europe, we are rebuilding our fund and asset management capital partners and co-investing in these assets. Investment platform following a number of divestments over the past opportunities will emerge as our development pipeline five years. The £1.5 billion residential for rent investment is delivered. partnership with CPPIB that was established in FY18 is the first step in this rebuilding process. We expect our extensive urbanisation pipeline in Europe will provide additional investment opportunities as we progress these projects. OTHER INFORMATION OTHER INFORMATION OTHER
Setia City Mall, Kuala Lumpur 36 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 37
Case Study – Paya Lebar Quarter Awards
We breathe new life into forgotten precincts, Outcomes to date BCA Green Mark for Non Residential Buildings NRB: 2015 (GM NRB: 2015) DIRECTORS’ REPORT creating spaces and places for generations to enjoy. Achieved the highest rating for the Singapore BCA Green Mark Platinum for Residential Buildings Today, Lendlease has 18 major urbanisation projects Building and Construction Authority’s (BCA) PUB Active, Beautiful, Clean (ABC) Waters Certified project underway in gateway cities around the world. latest version of the Green Mark scheme for retail and office components 2017 PropertyGuru Asia Property Awards, Singapore’s Best Commercial Landscape Architectural Design We drive long term securityholder value 2017 PropertyGuru Asia Property Awards, Singapore’s Best Universal Design Development
DIRECTORS’ REPORT DIRECTORS’ and sustain our competitive advantage by
combining our three capabilities of development, 300 per cent more trees planted 2017 BCI Asia Awards, Top 10 Developers in Singapore construction and investment to originate, fund than previously on this site and deliver major urbanisation projects. PLQ’s office space, which is due for Paya Lebar Quarter completion by September 2018, achieved The Singapore Government identified Paya Lebar Central as a new commercial hub for Singapore, which will include an close to 60 per cent precommitment integrated commercial node with offices, retail and attractive public spaces flowing with activity. (leases signed, under final offer or in Lendlease is developing Paya Lebar Quarter (PLQ). This is a key advanced negotiations), as at June 2018 cornerstone development within this new district, which will be one of Singapore’s most progressive and sustainable new city precincts. PLQ will be a complete ecosystem. As one of the largest PLQ mall, due for completion in early 2019, achieved FINANCIAL STATEMENTS business and lifestyle precincts in Singapore, PLQ integrates over 60 per cent precommitment dynamic workplaces with a diverse range of retail, entertainment and recreational activities, alongside premier (leases signed, under final offer or in residential apartments – all within an active, green and engaging environment. advanced negotiations), as at June 2018 Sustainability is at the heart of our approach with notable firsts for Singapore including registration for WELL1 Core and Shell certification – the world’s first building standard focused exclusively on increasing the wellbeing and productivity of Over 90 per cent occupants, using a performance and evidence based system. of Park Place Residences at PLQ sold, more than a FINANCIAL STATEMENTS FINANCIAL The Opportunity year prior to target completion of mid 2019 • The 3.9 hectare site was originally a vacant plot, well served by transport infrastructure and surrounded by historical cultural districts Use of highly innovative technology in construction, • The precinct’s strategic location and connectivity to the dual including drones to monitor construction progress line MRT rail interchange allows convenient travel to the city centre and airport and enhance logistics planning • As development manager and investment manager, Lendlease is working alongside our joint venture partner Abu Dhabi Investment Authority (ADIA), also a key investor PLQ has been recognised for achieving high across our Asian investment platform standards of safety, showcasing safety The Project innovation through initiatives including • S$3.325 billion (approximate value as at Dec 2017) project biometric facial recognition software for site secured in April 2015 access control, virtual reality type learning, OTHER INFORMATION • More than 80,000 square metres of grade A prime office space for more than 10,000 workers in three modern towers, and the application of 3D plant and person designed to optimise the health and wellbeing of occupants, proximity detection software to ensure with a range of initiatives including superior air filtration, biophilic design, cycling paths and end of trip facilities people and plant separation • More than 30,000 square metres of retail space featuring more than 200 stores including lifestyle, boutique, dining and entertainment options Singapore’s Prime Minister
OTHER INFORMATION OTHER • A range of community spaces including a public plaza, rain gardens, kids’ playground and roof gardens Lee Hsien Loong • 429 residential apartments across three towers Paya Lebar Quarter, Singapore • The precinct will be completed in phases between mid 2018 commended Lendlease’s safety approach on PLQ at Artist impression as at 2018 (image subject to change and further design development and planning approval) and mid 2019 the World Congress On Safety & Health at Work 2017
1. Launched in October 2014 after six years of research and development, the WELL Building Standard is the premier standard for buildings, interior spaces and communities seeking to implement, validate and measure features that support and advance human health and wellness. 03 PILLARS OF VALUE
Southbank, Chicago Artist impression as at 2018 (image subject to change and further design development and planning approval) 40 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 41 Pillars of Value
The long term value of our business is driven by five distinct pillars. DIRECTORS’ REPORT Innovation Our Group strategy is underpinned by these pillars, and supported by disciplined governance and risk Innovation is part of our heritage and embedded in our approach management. These value pillars drive our approach to create economic, safe and sustainable outcomes for to business. our customers, partners, securityholders and people. Innovation is part of our heritage and is embedded in Throughout this Report this icon our approach to business, and in the delivery of each value pillar. highlights key innovations.
DIRECTORS’ REPORT DIRECTORS’ Icons are featured throughout this Report linking business activities to respective value pillars.
Pillar Material Issue How the Pillar is Delivered Value Created by the Pillar How We Measure Value
Operating safely across our We are committed to the safety of our people Operating safely helps people feel valued and cared Percentage of projects with no Critical Incidents: operations and projects. and those who engage with our assets and sites. for, and fundamentally makes us more consistent, A Critical Incident is an event that had the potential to cause death Maintaining the health and wellbeing Through our Global Minimum Requirements reliable and efficient in everything we do. or permanent disability. This is an indicator unique to Lendlease. of our employees and those who (GMRs), we operate to a consistent standard across Critical Incident Frequency Rate: engage with our assets and sites. all operations. These GMRs extend to physical A Lendlease indicator measuring the rate of Critical Incidents. safety and people’s health and wellbeing. Lost Time Injury Frequency Rate: An indicator and industry standard measuring a workplace injury Health and Safety which prevents a worker from returning to duties the next day. FINANCIAL STATEMENTS Delivering securityholder returns. We deliver returns to our securityholders and Margins, fees and ownership returns across Return on Equity: Maintaining strong capital adopt a prudent approach to capital management Development, Construction and Investments. The annual Profit after Tax attributable to average securityholders’ management to support ongoing with a view to maintaining a strong balance sheet Our Portfolio Management Framework sets target equity throughout the year. investment in our future pipeline. throughout market cycles. guidelines for how we manage our portfolio. Earnings per Security: Profit after Tax attributable to securityholders divided by the weighted average number of securities on issue during the year. Financial
FINANCIAL STATEMENTS FINANCIAL Understanding our customers and Embedding a process of continuous improvement Evolves our ability to improve the customer experience, Customer satisfaction and advocacy tracked: responding to changes in the market. based on customer insights and actions identified building our brand and reputation, enabling us to Measured at the regional and business unit level and reported Designing and delivering innovative, through market research. This research approach win more work. Customer feedback also provides annually to our global leadership team. Action plans are developed customer driven solutions. also consistently measures customer satisfaction greater insight into product development and at the business unit level to drive continuous improvement in the and advocacy. innovation opportunities. customer experience, supporting the delivery and growth of our development pipeline, construction backlog and funds Our Customers under management.
Attracting, developing and retaining We attract, develop and retain diverse talent by Capable and motivated people committed to the Retention of key talent: diverse talent. building a culture of collaboration and continuous long term success of our business. The organisation benefits from its investment in leaders and key Ensuring we have the right capability learning, where successes are recognised and Effective succession planning and leadership workforce capabilities. across the organisation to deliver people are rewarded. We invest in developing transitions support business continuity and can reduce Succession strength: results for all stakeholders. leaders, and capabilities critical to our success. risks and costs associated with external recruitment. Demonstrates depth of capable talent ready to progress into Diversity of thought and experience can support leadership roles. innovation, knowledge sharing and better Percentage of women in senior executive positions: decision making. Demonstrates our broader commitment to diversity and inclusion, OTHER INFORMATION Our People and our objective of increasing female representation across our business.
Managing and optimising our As a signatory to the United Nations Global Recognised leadership in sustainability enhances 2020 targets: performance in the context Compact, we are committed to the continuous our brand and is a competitive differentiator. Meaningful progress against our 20 per cent reduction targets by of challenges facing the built improvement of our operations. We are integrating It also provides more opportunities to partner with 2020 across water, waste and energy, compared to FY14 environment, including climate strategies to mitigate the impact of climate change governments, investors and the private sector who are consumption levels. OTHER INFORMATION OTHER change and social pressures and deliver inclusive, healthy and adaptable places. placing increasing importance around Environmental Total development pipeline targeting green certification: such as population growth and We are focused on governance matters including Social Governance (ESG) matters. Demonstrates our commitment to green buildings across our Sustainability housing affordability. anti corruption and responsible labour practices. development pipeline. 42 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 43 Health and Safety
Everyone has the right to go home safely to their DIRECTORS’ REPORT families, friends and loved ones, every day. We remain committed to the health and safety of our people, our subcontractors, and all of those who interact with a Lendlease place. The second area we are examining relates to culture and Safety Performance and Incidents climate. We appreciate that organisational culture, and climatic DIRECTORS’ REPORT DIRECTORS’ It is with profound sadness that we report two corporate factors can impact the way people approach safety. reportable fatalities during FY18. We offer our sincere With the help of an independent expert, we are examining condolences to the families and friends that have been cultural inhibitors and enablers, in the context of driving further impacted by these tragic incidents. safety improvements. The first event occurred in August 2017 and claimed the life The third area being examined is risk perception and risk of a 22 year old subcontractor labourer on Lendlease’s tolerance, particularly as they relate to field based decisions. 277 Fifth Avenue project in New York City. The second event Our GMRs encourage a hierarchy of risk control in how safety claimed the life of a 67 year old security guard, subcontracted is managed. That is, we apply a control commensurate with the on the 217 West 57th Street project in New York in May. These level of risk. However perceptions and tolerances can vary, and tragedies remind us of why we must continue to pursue our we need to strive to meet a consistently high standard in how uncompromising approach to safety, and do whatever we are risk controls are deployed. able to do to prevent this from happening again. We will also review the way we identify, report and manage During FY18, our frequency rate across the Group for risk as it relates to safety in both the planning and delivery of Critical (high potential) Incidents decreased by 27 per cent. activities across our business. The frequency rate for Lost Time Injuries increased marginally We commenced a Group wide education effort with our across the Group by 6 per cent. supervisor cohort titled: “Engage and Influence”. More broadly,
we are encouraging a greater enquiry based approach to risk, FINANCIAL STATEMENTS through continually probing situations by asking the question; Our Approach to Health and Safety “What’s the worst that could happen?” We are undertaking a review of how we approach and manage This approach requires a commitment by our people and our safety. This will involve examining three key areas. supply chain teams to embrace this way of thinking, not just in Our first area of focus is our Global Minimum Requirements the field, but across the full lifecycle of what we do. We need a (GMRs). While we believe our GMRs provide an appropriate risk mindset that is unrelenting in pursuing the safest outcomes foundation to manage critical risk events, we will undertake in how we design, procure, plan, deliver and operate across our a review of the means and methods we use across our various entire business. jurisdictions and how their application can impact safety It has been a difficult time for our business, and for those FINANCIAL STATEMENTS FINANCIAL performance. directly and indirectly impacted by these tragic events. Our commitment to safety has never been more resolute.
Key Performance Highlights Critical Incident Frequency Rate1
90% 92% FY17 1.1 FY17 FY18 FY18 0.8 1.7
Operations without a Critical Incident Group Lost Time Injury Frequency Rate2 OTHER INFORMATION
FY17 1.6 1.8
FY18 1.7 OTHER INFORMATION OTHER
NorthConnex, West Pennant Hills 1. A Critical Incident is an event that caused, or had the potential to cause death or permanent disability. This is an indicator unique to Lendlease. 2. The Lost Time Injury Frequency Rates (LTIFR) are calculated to provide a rate of instances per 1,000,000 hours worked. 44 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 45 Financial
A strong balance sheet and access to third party DIRECTORS’ REPORT capital enables Lendlease to fund the execution of its pipeline and deliver quality earnings for our securityholders. Our Approach to Financial Performance How We Measure Financial Performance The Portfolio Management Framework, updated FY17, When measuring financial performance, we focus on Return on Equity and Earnings per Security to measure the DIRECTORS’ REPORT DIRECTORS’ underpins our approach to how we govern our operations across the Development, Construction and Investments returns we achieve for our securityholders. businesses globally. The Portfolio Management Framework outlines target returns We generate earnings for our securityholders and deliver value at a segment level. These returns are used to derive a Return on for our customers through these businesses in their own right. Equity target within the 10 to 14 per cent range, and Earnings per Security used to make distributions within the 40 to 60 per cent When these businesses combine and leverage the competitive payout ratio target. advantage of our integrated model, value can be enhanced for our securityholders, partners and the community. This can include award winning and innovative design excellence, creation of better public places, integrated transport outcomes Detailed Financial Performance and Outlook and superior sustainable solutions. For detailed information on our financial performance as measured under the Portfolio Management Framework for FY18, refer to the Performance and Outlook section on pages Financial Strategy 70 to 83 and the financial statements on pages 138 to 196. The Portfolio Management Framework is the core of our financial strategy. This framework sets target
guidelines and is designed to: FINANCIAL STATEMENTS • Maximise long term securityholder value through a diversified, risk adjusted portfolio; 1. Capital allocation • Focused on gateway cities • Leverage the competitive advantage of our • 50-70 per cent capital integrated model; in Australia • Optimise our business performance relative to the • 20 per cent maximum per international region outlook for our markets on a long term basis; and 2. Business model • Provide financial strength to execute our strategy, • Integrated model maintain an investment grade credit rating, 5. Distribution policy synergies
FINANCIAL STATEMENTS FINANCIAL and capacity to both absorb and respond to • Target EBITDA mix: • Payout 40-60 per market volatility. 35-45 per cent cent of earnings Maximising Development • Capital 30-40 per cent As an example of executing on our Portfolio management long term Investments Management Framework, the Group undertook the discipline 20-30 per cent securityholder Construction following two significant activities this year: value • The introduction of a capital partner to our Retirement Living business, providing diversification opportunities through the reallocation of capital to 4. Capital structure 3. Target returns growth areas across our business, with a focus on • Investment grade • Group ROE 10-14 per cent the Investments segment. credit rating • Development ROIC 9-12 • Optimised Weighted per cent1 • During FY18, as part of a disciplined approach Average Cost of Capital 2 • Investments ROIC 8-11 to managing capital, the Board approved an on • Gearing 10-20 per cent per cent 1 market buyback of up to $500 million, subject to • Construction the Group’s ongoing assessment of the surplus EBITDA margin capital position, market conditions and growth 3-4 per cent opportunities. OTHER INFORMATION OTHER INFORMATION OTHER
Barangaroo South, Sydney 1. Through-cycle target based on rolling three to five year timeline. 2. Gearing definition: Net debt to total tangible assets less cash. 46 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 47 Our Customers
We adopt a collaborative approach to our DIRECTORS’ REPORT relationships, delivering high quality products and services that respond to our customers’ needs. Satisfied customers drive long term value. Customer Snapshot1
APPROXIMATELY MILITARY HOUSING FOR APPROXIMATELY APPROXIMATELY APPROXIMATELY APPROXIMATELY DIRECTORS’ REPORT DIRECTORS’
238.3 MILLION 125,000 444,400 150 17,000 RETAIL VISITORS ANNUALLY RESIDENTS IN THE UNITED STATES RESIDENTS ACROSS GLOBAL INSTITUTIONAL RETIREMENT LIVING APARTMENTS AND COMMUNITIES2 CAPITAL PARTNERS RESIDENTS
Our Approach to Customers Customer Service Touchpoints We are committed to better understanding customers’ needs Customers deeply value the way in which service is delivered. and improving their experience with Lendlease. They emphasised the importance of getting things right ‘the first time’ to avoid systemic issues. Where this is not To support this goal, in FY18 we started measuring achieved, and issues must be resolved, ‘moments of truth’ are customer satisfaction (CSAT) and advocacy (NPS) across defined by the way issues are handled. Speed and politeness Lendlease globally. of response, along with positive outcomes, are deeply valued. This involved each region incorporating standardised CSAT How these customer outcomes are delivered is critical to and NPS questions in all local customer experience research gaining good NPS and CSAT results. conducted throughout the year. FINANCIAL STATEMENTS Regional leaders are accountable for conducting annual More than 21,000 government, business and consumer customer experience research and implementing customer customers were surveyed throughout the year. There were insight driven action plans to address research findings. some consistent themes, with the main drivers of satisfaction This year’s research provides key learnings and insights strongly dependent on the quality of key relationships and the that will help to further embed a customer centric culture. customer service touchpoint experience. Over time research results will show a trend, allowing us to track performance and identify key improvement opportunities. Quality of Key Relationships Customers highlighted the importance of regular contact FINANCIAL STATEMENTS FINANCIAL with Lendlease as critical to better understanding customer sentiment, needs and issues. This included providing advanced warning of issues and general responsiveness. The quality of relationships was also underpinned by the degree to which Lendlease understood each customer’s business, industry and internal environments.
Giving Our Residents Choice Leaving the family home and moving to a retirement These included: village can be a stressful experience. Removing some • Payment of management fees at exit, freeing up cash stress can be an empowering experience for customers. to enjoy retirement; Customer research gave us deeper insight into the • Upfront payment of management fees to retain concerns of retirees. Lack of flexible payment options capital gain on exit; was a major source of this stress. For some, capital gain
was important, others wanted certainty they would get • Refundable contribution where the entry amount, OTHER INFORMATION back what they paid and many didn’t want a surprise excluding establishment fee, is refunded within 60 exit fee. days of exit; and Based on the results of this research and experimentation • Pay as you go as a monthly instalment. through our innovation pathway, our Retirement Living In February 2018, we piloted this approach in three business introduced options, giving our customers the villages: Coastal Waters in NSW, and in Victoria, power to choose the approach that worked best for them. Classic Residences Brighton and Lexington Gardens. Customers immediately took advantage of these options. Today, 54 of our 71 villages across Australia have OTHER INFORMATION OTHER introduced these payment options. Lendlease is one of the only operators with a suite of retirement living payment options offered nationally.
1. As at 30 June 2018. Internal data capture, not audited. 2. An estimate of current and future residents based on our projects to date and existing pipeline. 48 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 49 Our People
Lendlease’s people are the greatest contributors to Employee Wellbeing DIRECTORS’ REPORT our success and underpin our ability to deliver our We believe in taking care of our employees, supporting their physical and mental wellbeing through our focus on healthier vision to create the best places. minds, bodies, places and cultures. We offer eligible employees industry leading wellbeing leave, encouraging them to take a Our Approach to People and Culture proactive and preventative approach to their health. In FY18, 68.4% of employees took wellbeing leave. An inclusive work environment inspires employees and drives Mental health continues to be a growing focus. Our programs innovation and business growth. We support our people by offer preventative support to employees experiencing a mental
DIRECTORS’ REPORT DIRECTORS’ fostering a culture of collaboration, knowledge sharing and health condition, and guide our managers in supporting team continuous learning, which contributes to higher performance members who may be experiencing mental health challenges. and career progression. We recognise and reward individual and More than 1,150 employees globally have trained in mental team achievements including outstanding safety performance, health first aid since 2015. project excellence and exceptional customer outcomes. For the year ended June 2018: • Attendance in other mental health programs reached Understanding Our Workforce 3,709,2 among Lendlease employees. Programs included Mental Health Awareness, Mates in Construction and We review our workforce as part of the strategic business mindfulness courses. planning and review process. This year, we made a significant investment in Workday, a global HR information system, enhancing workforce planning and analytics capabilities. Diversity and Inclusion We are progressing our Diversity and Inclusion strategy, Developing and Retaining Key Talent which continues to focus on gender equity, flexible work and inclusive leadership. We provide targeted development to high potential employees Many of our gender equity initiatives have transitioned into at key points in their careers to ensure we have a strong pool FINANCIAL STATEMENTS of talent for senior roles. We also continue to invest in growing business as usual activities, such as gender pay analysis within our core capabilities of project management and property our annual compensation review. development to ensure Lendlease has the critical skills required Flexible working is essential in supporting a diverse workforce to deliver our pipeline. and attracting and retaining talent. We have a variety of Retaining key talent is critical to our long term success. initiatives to support flexible work and continue to focus on Our target retention rate is >90% across all talent programs, providing flexibility on construction projects where possible. which we have exceeded in FY18. Our pipeline of successors For the year ended 30 June 2018: for key roles along with females in our succession pool has • Three out of our 11 Board members are female; increased in FY18. • Three members of our global leadership team are female; Lesbian Gay Bisexual
FINANCIAL STATEMENTS FINANCIAL Our global graduate program is in its second year. We have 508 graduates across our four regions. 53% per cent of our and Transgender Intersex graduates are female, helping to address gender representation. • 31 per cent of our employees are female; (LGBTI) Inclusion • Lendlease has again been recognised as an Employer of We respect diversity and encourage inclusion. Choice for Gender Equality by the Australian Workplace In May 2018, Lendlease was named a Platinum Level Succession Strength Gender Equality Agency. Employer in the Australian Workplace Equality Index For all senior executive positions, we have a target of three This year we were awarded Platinum status, as a top employer (AWEI) awards. The AWEI is Australia’s national unique successors. In our FY18 talent and succession review, in the Australian Workplace Equality Index for Lesbian, Gay, benchmark on LGBTI workplace inclusion. We are one we exceeded this target with an average of 3.5 unique Bisexual, Transgender and Intersex (LGBTI) inclusion. Platinum of only seven organisations to achieve Platinum status successors per role identified. status recognises organisations that have demonstrated a long in Australia. term commitment to LGBTI inclusion. This award recognises the longevity and value of the FY17 2.5 work we do to promote LGBTI inclusion. In August 2017, over 160 Lendlease sites across Australia FY18 3.5 Our People Survey participated in an engagement campaign which We are committed to giving our people a voice and ensuring our included leader stories, manager toolkits and rainbow leaders and managers are best equipped to respond to issues boot laces to inspire conversations.
1 and opportunities, to improve the overall employee experience. OTHER INFORMATION Senior Executive Positions Held by Women In the US, our Americas business achieved a score This year, we adopted a new approach to measure the of 100 on the Human Rights Campaign Foundation’s FY17 20.6% employee experience at Lendlease. Employee surveys will be Corporate Equality Index (CEI). The CEI is the conducted every six months, at the team and business unit national benchmarking tool on corporate policies and level. This provides managers with a better understanding of practices pertinent to LGBTQ employees. With a top FY18 22.1% what is working and any areas of concern. In future surveys, score of 100 per cent1, Lendlease earned distinction on we intend to introduce a measure of organisational culture. the list of “Best Places to Work for LGBTQ Equality”. A number of initiatives including transgender inclusive health care coverage are in place to support our OTHER INFORMATION OTHER LGBTQ community.
1. 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 Global Function Heads. 1. Lendlease was one of 609 (of 947 participating) organisations to get a perfect score https://www.hrc.org/campaigns/corporate-equality-index. Lendlease also scored 100 in the prior year. 2. Attendance is equivalent to course participation, not discreet participants, therefore individual employees may have participated in more than one program. 50 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 51
Sustainability In 1973 our founder, Dick Dusseldorp said
Lendlease has a proud history of giving emphasis Community DIRECTORS’ REPORT to environmental, social and economic outcomes. Our goal is to address resilience by promoting social and “Companies must start justifying their worth to society, economic wellbeing in the communities in which we operate. It is essential we continue to evolve our approach, We are passionate about understanding and working inclusively with local people and communities to create places that are with greater emphasis placed on environmental and to keep pace with global trends and integrate this respectful of their needs. We strive to provide opportunities for thinking into our business strategy. people to thrive both in social and economic terms. As a signatory to the United Nations Global Compact, we are social impact rather than straight economics.” Our Approach to Sustainability committed to the continuous improvement of our operations.
DIRECTORS’ REPORT DIRECTORS’ We are also focusing on our value chain in the areas of Lendlease is focused on delivering long term value as procurement, human rights, the environment, anticorruption governments, investors and the private sector seek trusted and responsible labour practices. Lendlease has valued sustainability partners who can deliver efficient, healthy and resilient We are also investing in skilling and training programs for our for more than 60 years outcomes that are financially, environmentally, culturally and people, subcontracted workforce, and the communities we work in. socially inclusive. Our founder Dick Dusseldorp (pictured right) led the way in many reforms, from safety initiatives, to employee profit We are building on our extensive sustainability expertise, sharing, to establishing apprentice training programs. consolidating our focus around two principal areas, namely environment and community, with continuous strong 20% reduction by 2020 (against FY14 baseline) Here’s a sample of some of our leading sustainability governance and oversight from the Lendlease Board initiatives, from over the years. Sustainability Committee. FY18 FY18 In our formative years Dusseldorp introduced several initiatives to support employees, including employee profit sharing, 16% 28% superannuation and designated site safety committees. Environment During the 1980s he turned his focus to employee and Our goal is to mitigate the impacts of climate change and build ENERGY REDUCTION WASTE REDUCTION industry skilling initiatives, establishing the ACTU Lend Lease resilience into the places we create. This includes minimising, Foundation to support skill building in young people and and where possible, preventing pollution associated with our creating the Dusseldorp Skills Forum to skill the
FY18 FINANCIAL STATEMENTS operations, and protecting biodiversity and ecosystems across FY17 98% next generation. the environments we work in. We are also rethinking our natural 99% In the 1990s Lendlease delivered the world’s largest solar and manufactured resource use and reuse. Since FY14, we 9% FY18 powered suburb, Newington, in Sydney. This site initially have continued to improve the energy and water efficiency of served as a part of the athletes’ village for the Sydney 2000 Total development pipeline achieved our operations. We are also reducing emissions intensity and WATER REDUCTION Olympic Games. We also partnered with the UK Government to or targeting green certification improving waste reuse, recycling and reducing rates of establish ‘Job Centre Plus’ to match job seekers with site roles landfill disposal. during this decade. The above performance is at March 2018 and is a cumulative Across our Development, Construction and Investments measure. Full FY18 performance is subject to Limited Assurance segments we are committed to reducing environmental impacts by KPMG and will be available on www.lendlease.com in October by integrating environmental management into our planning, 2018. In FY18, we have updated our FY14 waste baseline due to
FINANCIAL STATEMENTS FINANCIAL design, procurement, delivery and operations. additional project information becoming available. This has resulted Between 2000 – 2010 We ensure appropriate actions are taken to report, investigate in an increased performance for waste in FY18 relative to the previous baseline utilised. and remedy any environmental incidents or observations. Participates in the Creates the world’s Listed by Corporate As a developer, Lendlease is committed to the creation of Dow Jones Sustainability largest solar powered Knights as Global 100 independently rated green certified buildings and precincts and World Index in 2001-2004 community in Hawaii “Most Sustainable Corporations” climate resilient communities. and 2006-2010 A Selection of FY18 Awards 2000 2010 Australia Lendlease managed fund ranked 1st out of 850 respondents in 2017 under GRESB Establishes The Hornery Lendlease investment Projects included in APPF Commercial Becomes Australia’s first 6 Star Green Star rated portfolio Institute to drive management becomes President William the development of a signatory to the United J. Clinton’s Climate Property Council of Australia – Development of the Year in Australia sustainable communities Nations Principles of Positive Development Barangaroo South World First Core & Shell Platinum certification for International Towers Sydney – Towers 1, 2 and 3 Responsible Investment Announcement World’s largest WELL Interior Platinum certification for Lendlease’s global headquarters (UN PRI) OTHER INFORMATION Property Council of Australia – Best Public Building ICC Sydney Convention Centre Property Council of Australia – Best Tourism & Leisure Development 2011 – Present Day The largest healthcare building in Australia to achieve a 6 Star Green Star rating, signifying Sunshine Coast University Hospital ‘World Leadership’ in environmentally sustainable building practices Joins President Obama’s Becomes UN Global Introduces wellbeing Better Building Challenge Compact signatory leave for employees Asia Investment Management GRESB Number One Retail Non Listed Fund in Asia PRESENT Americas OTHER INFORMATION OTHER 2011 DAY Lendlease Nashville Office WELL Interior Silver Certification Europe Participates in the Dow Partners with International Achieves ‘elevate’ status Jones Sustainability World WELL Building Institute® from Reconciliation Residential Gold Award Winner (1st) – Next Generation Residential Sustainability Benchmark 2017 Index, 2011-2017 Action Australia 52 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 53
Cross Laminated Timber (CLT) Sustainability – Environment Lendlease began using engineered timber (CLT) Our projects include: in 2012. Timber naturally stores carbon, and the • International House, Barangaroo – Australia’s first timber Lendlease uses comes from responsibly
engineered timber commercial office building. DIRECTORS’ REPORT We care about the environment and the importance Resources and Our Supply Chain sourced certified plantations and uses less water • 25 King – The world’s largest engineered timber office We continue to drive efficiency in our operations, and value the during manufacture and installation than traditional of positive legacies for future generations. building and a first for Brisbane’s commercial market. importance of natural resources. We aim to reduce our overall construction. Timber buildings are 30 to 50 per cent We are continually measuring and setting new consumption through smarter design, responsible sourcing and lighter and 30 per cent quicker to construct, compared • ANU Union Court – 450 bed student accommodation working with our valued supply chain partners. This year we to concrete buildings. Research also indicates health and teaching building, and a first for Canberra. targets with the aim to improve the environmental benefits for those working in timber buildings, including report meaningful progress against our 20 per cent by 2020 • The Candlewood Suites – Lendlease has delivered decreased blood pressure and general improvements performance of our projects and operations. From reduction targets for energy, water and waste. two hotels for the US Department of Defense’s in wellbeing. Today, we are responsible for the Privatized Army Lodging portfolio, on Fort Drum in the resources required to develop and construct, In FY18, we continued to implement energy and water development, design and construction of the largest Watertown, New York, and on Redstone Arsenal in efficiency measures across projects, operations and assets number of buildings constructed from CLT and Glue DIRECTORS’ REPORT DIRECTORS’ Huntsville, Alabama. to the operational efficiency of the buildings and under management, working towards our 2020 targets. Laminated Timber (Glulam) in Australia. Business initiatives to increase live metering and monitoring infrastructure we deliver, we take active steps to across our Investments segment is driving transparency of mitigate the impacts of climate change. asset performance. We also improved diversion of waste from landfill. We remain focused on designing out waste in our Construction and Climate Change and Resilience Engineering businesses, and working with our supply chain partners to identify materials with more recycled content and Building resilience in the places we create and investments less waste. we make is an integral part of Lendlease’s strategy. We are committed to emissions reduction targets. We continue to assess and mitigate the impact of climate change in our design and construction processes, our investment decision making and management of our operations. Lendlease is committed to an analysis of its climate change risks and opportunities, in accordance with the recommendations of the Taskforce for Climate Related
Financial Disclosure, on which we will report progress in FINANCIAL STATEMENTS FY19. We continue to seek opportunities with our investors to align climate action with sustainable investment and achieved this with Clean Energy Finance Corporation’s investment in Melbourne Quarter.
FINANCIAL STATEMENTS FINANCIAL Lendlease and Clean Energy Finance Corporation The Lendlease managed Australian Prime Property Fund Commercial (APPF Commercial) has assets worth an estimated $4.5 billion. It is also the first Australian fund to be awarded a 6 Star Green Star Performance portfolio rating, and is the number one fund globally on the 2017 Global Real Estate Sustainability Benchmark (GRESB) Real Estate Assessment across all sectors and geographies. Lendlease’s Investment Management business is targeting a 5.5 star National Australian Built Environment Rating System (NABERS) Energy average across the APPF Commercial portfolio by 2021, and net zero carbon emissions by 2025. These industry leading commitments, together with APPF Commercial’s investment into Melbourne OTHER INFORMATION Quarter’s highly sustainable commercial office precinct, led to the Clean Energy Finance Corporation’s (CEFC) $100 million investment into the Fund. Melbourne Quarter is one of the largest mixed use urban regeneration developments in Melbourne and will include Melbourne’s first Sky Park. The first commercial stage of the precinct, One Melbourne Quarter, will be completed in September 2018.
OTHER INFORMATION OTHER Melbourne Quarter will feature one of the largest solar installations in Melbourne’s CBD. Melbourne Quarter, Melbourne Artist impression as at 2018 (image subject to change and further design development and planning approval) 25 King, Brisbane 54 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 55 Sustainability – Community Reconciliation Action Plan BUILDING RESPECT: PAST, PRESENT, FUTURE Our work in the built environment aims to leave a While we will continue our RAP initiatives beyond 2018, in 2019 2016 – 2018 DIRECTORS’ REPORT we will work with Reconciliation Australia to extensively review social legacy in creating jobs, building skills and and measure our RAP progress before developing the next supporting local and marginalised communities, iteration of our RAP commitments. Our RAP continues to recognise the importance of engaging while achieving positive environmental outcomes. with the traditional owners and custodians of the land to incorporate Indigenous culture, heritage and values at the How we are taking action heart of our projects and assets. Our Gosford Hospital There are numerous programs and initiatives Redevelopment team developed a partnership with the underway across Lendlease focused on supporting Darkinjung Local Aboriginal Land Council and the Aboriginal DIRECTORS’ REPORT DIRECTORS’ Employment Strategy to support local job creation through communities towards sustained prosperity and growth. Lendlease and our subcontractors. Through relationships Providing built on mutual respect and trust, we exceeded contractual Indigenous participation requirements on the project. cultural 1 Reconciliation Action Plan Our approach provides us with an opportunity to meet awareness and Australian Federal and State Governments’ mandatory Our vision for reconciliation remains one that drives all 5,400+ 100+ FIRST Indigenous employment, training and economic participation employees to acknowledge and celebrate the proud heritage engagement targets as part of their Indigenous Participation Policies, while client of Arrilla Digital, of Australia’s First Peoples. It also promotes opportunities Lendlease employees in Lendlease employees in also building capacity in the industry. learning an Indigenous cultural for career development, sustainable business growth and Australia have Australia have engaged competency online economic participation of Aboriginal and Torres Strait Our Elevate RAP status demonstrates our commitment to opportunities completed face to face in cultural immersion learning program Islander Australians. Indigenous cultural awareness, employment and or online cultural opportunities procurement nationally. for Lendlease available to all In 2016, our Reconciliation Action Plan (RAP) achieved ‘Elevate’ awareness learning on Country status, the highest level to be awarded by Reconciliation employees Lendlease employees Australia. Lendlease first introduced a RAP in 2011. We are into the final year of our Elevate RAP, ‘Building Respect: Past, Present, Future 2016 – 2018’. FINANCIAL STATEMENTS
Increasing the Approximately The Gymea Program Brings RAP to Life number of Increasing procurement activity through Aboriginal • Our spend with Supply Nation certified and registered 90+ 5 and Torres Strait Islander owned businesses is one of Indigenous businesses has more than doubled in FY18 Aboriginal and our Elevate RAP goals. In 2017, we launched the Gymea to $68.3 million. Torres Strait 2% Indigenous university formal partnerships with program, our Indigenous procurement program focused • An independently verified Social Return on Investment interns have been organisations that work to on developing partnerships with Indigenous owned of Lendlease forecast1 estimated that for every $1 invested in the Islander people hosted by Lendlease improve academic and
FINANCIAL STATEMENTS FINANCIAL businesses to drive economic and social outcomes. Gymea program, we will create $2.90 in societal employees self identify In our first year: directly employed through our partnership employment outcomes for value. Much of the value generated will be through as Indigenous with CareerTrackers Indigenous students • Eleven Indigenous businesses signed strategic additional employment opportunities for Indigenous by Lendlease Australians partnership agreements with Lendlease. This first people in our supply chain. since 2011 group of suppliers reflects a diverse industry and • For the second consecutive year, Lendlease was geographical spread. By partnering with the selected announced as a finalist in Supply Nation's Supplier suppliers, we are testing a new way of working, while Diversity Awards for Corporate Member of the Year. supporting their growth. • Over 50 Supply Nation certified and registered Indigenous businesses are engaged across our Australian businesses. Increasing procurement 11
activity with $68.3 MILLION Indigenous businesses Aboriginal and The Gymea program is our spent in FY18 have signed strategic
Torres Strait national procurement with registered and partnership OTHER INFORMATION strategy targeted certified Indigenous agreements with Islander at increasing businesses Lendlease to create businesses procurement activity with (compared to FY17 opportunities that Indigenous businesses spend of $26 million) enable them to grow
Our RAP has achieved ‘Elevate’ status, the highest level to be awarded by Reconciliation Australia, demonstrating our
OTHER INFORMATION OTHER commitment to the participation of Aboriginal and Torres Strait Islander people and communities around Australia.
Northern Connector, Adelaide
1. The Report has been independently verified, having received a Statement of Report Assurance from Social Value International in September 2017. 1. Since 2012. 56 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 57
Paving the Way for Flexible Working Sustainability – Community In 2016, parts of our construction operations in Australia Initially, we set limits on total hours of work and weekend commenced a cultural change journey to ensure our work. In July 2017, we began to bid all jobs on the basis sites are an enjoyable and healthy place to work for all. of a ‘5 in 7’ program (where all employees have two days DIRECTORS’ REPORT Improving the resilience of cities where we have a presence and empowering communities through skilling Restricted flexibility of work hours and practices and rest in every seven). and training are key to our community focus. excessive hours were identified as key causes for More than half the business has adopted the 5 in 7 industry wide issues including skills shortages and a lack approach, and already observing positive changes in of diversity. attraction, retention, performance and morale of site Employee workshops across Australia identified three based employees. key steps towards achieving greater flexibility: ensuring Lendlease is leading an industry collaboration through healthy hours of work; pioneering the ‘5 in 7’ work week; the Australian Constructors Association to drive similar Barangaroo is One of and promoting flexible work practices. commitment to cultural change across all stakeholders in the World’s Healthiest the industry. DIRECTORS’ REPORT DIRECTORS’ Workplaces International Towers Sydney is the first commercial precinct in the world to be awarded WELL Certification for Core & Shell at the Platinum level. This is the highest certification available from the International WELL Building Institute under its WELL Building Standard. This standard is a performance based system for measuring, certifying and monitoring features of buildings that impact the health of people who interact with these structures. Lendlease’s global headquarters, Tower Three International Towers, has also achieved a Platinum rating for our office fit out. Ours is the first workplace to be awarded WELL Certification at the Platinum level in Australia, and the largest globally. This rating cements Barangaroo’s status FINANCIAL STATEMENTS as one of the most sustainable precincts in the world.
Barangaroo South, Sydney
FINANCIAL STATEMENTS FINANCIAL NorthHub Launches Be Onsite New Careers Lendlease supports employment initiatives in the In 2008, Lendlease evolved this partnership into an When our Engineering business was tendering for communities we work in. Be Onsite traces back to the independent not for profit. Over the last 10 years, the Northern Connector road project in Adelaide, Bluewater project in the late 1990s, when Lendlease Be Onsite has employed 616 people on Lendlease the South Australian Government stipulated this partnered with the UK Government’s ‘Job Centre Plus’ to projects throughout the UK, with 238 of these roles major project needed to create jobs for locals. match local disadvantaged job seekers with employment on our Elephant Park project. High unemployment rates in the northern Adelaide opportunities on this project. region was further impacted by the closure of the Holden automotive plant in 2017. Upon winning this new 15.5 kilometre, six lane road project, Lendlease, in partnership with the Department of Planning, Transport & Infrastructure, launched NorthHub, an employment and training centre to connect jobseekers to employment opportunities. Former Holden employees are now employed on this project, including an office manager, an environmental officer and several OTHER INFORMATION construction workers. Through NorthHub, we have provided employment and training opportunities to a range of target groups including displaced automotive workers, long term unemployed, women, Indigenous Australians, trainees and apprentices. Our goal was for 20 per cent of onsite hours to be delivered by these target groups, and we have OTHER INFORMATION OTHER already exceeded 35 per cent. We are proud to be helping locals establish sustainable careers in the construction industry. Northern Connector, Adelaide 58 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 59 Sustainability – Community
Lendlease Foundation Springboard DIRECTORS’ REPORT For more than 30 years, Lendlease Foundation has been a Springboard is Lendlease Foundation’s flagship global program. major vehicle for creating shared value by driving community Each year, approximately 250 employees participate in this five engagement, employee wellbeing and development programs day personal development experience. This program develops for Lendlease people, their families and the communities we skills and resilience in dealing with change, developing interact with. Two of Lendlease Foundation’s global programs, confidence and growing self awareness. The interactive Community Day and Springboard, are helping to shape and component of Springboard brings together members of the steer our community agenda. local community and employees to work on projects designed to leave a positive social legacy. Since FY15 we have partnered
DIRECTORS’ REPORT DIRECTORS’ with the Tasman Peninsula community of Tasmania. Community Day From FY19, the Lendlease Foundation will partner with This year, over 4,000 Lendlease employees around the world the Great Barrier Reef Foundation to deliver on a range of joined community volunteers supporting over 400 Community community and environment focused sustainability outcomes, Day projects. This annual event, now in its 22nd year, allows the cornerstone of which will be a new Springboard program. employees to work alongside colleagues, community partners, families and suppliers. Our projects ranged from renovating buildings for the homeless, to restoring green spaces and assisting children with special needs.
Great Barrier Reef Foundation Partnership In April, our Group Chief Executive Officer and This partnership will support a range of programs to Managing Director, Steve McCann joined protect and build resilience in the Great Barrier Reef, His Royal Highness, The Prince of Wales, on one of the seven wonders of the natural world. Where FINANCIAL STATEMENTS Queensland’s Lady Elliot Island, to announce a possible, the work we undertake with GBRF will further $5 million, 10 year partnership between Lendlease and support our RAP goals. Among the existing partners the Great Barrier Reef Foundation (GBRF). and supporters of the GBRF, Lendlease is unique in its commitment to contribute employee skills and Community Day 2017 resources, in addition to financial contributions. FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER INFORMATION OTHER
Lady Elliot Island, Great Barrier Reef Springboard 2018 60 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 61 Innovation
Innovation is simply change that adds value DIRECTORS’ REPORT
60 Years of Bold Thinking Our founder Dick Dusseldorp was a bold thinker who constantly innovated to create value for our customers. Over the past 60 years, we’ve embraced innovation to stay ahead of evolving markets. Today innovation underpins our global strategy and is integral to our culture. We encourage diversity of thought, collaborate with external partners including universities and start ups to accelerate progress, and challenge industry norms to deliver
DIRECTORS’ REPORT DIRECTORS’ purposeful innovation. We recognise that our customers’ success and our success are inherently connected and we always place our customers at the heart of our innovations.
Supporting Innovation Across Our Business All employees have access to training, tools and resources to help bring their ideas to life. Innovators are supported through our ‘innovation pathway’ steered by our trained innovation guides. Our innovators also have access to advisory forums, made up of internal and external entrepreneurs. Along with advice, these forums can also allocate seed funding to support experiments in our innovation labs. Critical to our innovation approach is the equal focus we place on defining the need, conceiving and testing our ideas. Through frequent ‘hackathon’ events we generate ideas around our strategic priorities including safety, health and wellbeing, sustainability, the future of retail and housing affordability. ‘Incubator’ and ‘accelerator’ programs provide opportunities for our innovators to navigate ambiguity and grow their ideas into scalable and impactful innovations. FINANCIAL STATEMENTS FINANCIAL STATEMENTS FINANCIAL
883 Collins Street, Victoria Harbour
Island Palm Communites, Hawaii
Online Sales Platform In a world where people are increasingly conditioned Online Sales allows our customers to easily access Innovating to Create Safer Window Solutions to online transactions, we are starting to offer our property and pricing information, and pro forma customers greater choice around how they buy land and contracts. Holding deposits can be paid online using a Every year, around 3,300 children sustain injuries as a Approximately 190 screens have been installed across apartments from Lendlease. This is thanks to our new credit card, and in the rare occurrence of the customer result of falls from windows in the US. 55 homes at Island Palm Communities (IPC) in Hawaii. ‘Online Sales’ digital platform. changing their mind during the cooling off period, OTHER INFORMATION We have tried several window limiting devices, but most At the successful completion of this pilot, IPC plans In Australia, Online Sales provides flexibility to customers our Online Sales platform can refund deposits. failed because when access to a window is limited, to install the screens across its portfolio over the next who cannot attend a sales suite easily, or who prefer This platform was recently used to support sales of land emergency egress is compromised. few years. Other military housing projects within to shop online at a time that suits them. Our customers lots at the Atherstone community, and will soon be rolled the Lendlease portfolio are looking at ways to adopt Using our innovation pathway, employees from our value the simplicity and speed of this tool, which is out across our Communities and Apartments businesses this initiative. There are plans to install screens at all Nashville office and Fort Campbell Project Company supported by our sales teams. in Australia. Lendlease military housing sites within the next five years. collaborated with the local fire and police departments The creation of Online Sales was supported by our and window manufacturers. A screen allowing full What’s most exciting is the potential for this innovation to innovation pathway, developed in response to customer make its mark beyond Lendlease.
OTHER INFORMATION OTHER window functionality and safe emergency access, insights, and refined following user experience testing while preventing falls, was designed. and experimentation. 04 RISK
150 Bishopsgate, London 64 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 65
Risk Governance and Management Three Lines of Defence
Lendlease has a multi layered approach to identifying, managing and mitigating external, corporate and DIRECTORS’ REPORT operational risk to support our five pillars of value. Board and Committees
The Lendlease risk management approach recognises the • Providing an understanding of risk limits; nature and level of risk we are willing to accept to achieve our • Providing context for identifying, reporting and strategic goals and key performance targets to create managing risks; and securityholder value. Global Leadership Team • Creating a culture of risk awareness and accountability. Our approach to risk management is focused on: DIRECTORS’ REPORT DIRECTORS’ Risk awareness, governance and improvement underpin our • Aligning Board and management to drive informed and approach, which has evolved with the business and consistent decision making; external market. • Achieving effective and efficient allocation of capital and resources; Risk Based Business Regional Leadership Internal External Governance Integrity Teams Audit Audit Functions Group
First Line of Defence Second Line of Defence Third Line of Defence
Business Operations FINANCIAL STATEMENTS
First Line of Defence – Responsibilities
Identify Assess Control and Manage Monitor Report
FINANCIAL STATEMENTS FINANCIAL Underlying business units are the first line of defence responsible for identifying, managing, and owning their risks. These business units have the appropriate tools and interaction with the various Group functions to execute business responsibilities effectively.
Second Line of Defence – Assurance Measures
Inform Plan Oversee Guide Report
Group functions involved in the second line of defence include corporate risk and insurance, operational assurance and performance, safety, legal, information technology, sustainability, people and culture and finance. Function specific policies outline the assurance measures to enable each business to identify and manage risks appropriately. OTHER INFORMATION
Third Line of Defence – Independent Processes
Assess Plan Execute Report Follow Up
Internal and external audit make up the third line of defence, acting independently from the first and second lines of defence and reporting directly to the Board and Risk Management and Audit Committee. OTHER INFORMATION OTHER 66 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 67
Accountability and responsibility for risk governance and management is held at various levels across the business including the Board and Board Committees, Group leadership, regional leadership, business operations and specialist functions such as
corporate risk and insurance, operational assurance and performance, and internal audit. DIRECTORS’ REPORT
Risk Management Approach
Structure
Board Risk Management Reviews the effectiveness of the Group’s enterprise risk management system and seeks assurances and Audit Committee that material risks are identified and appropriate risk management processes are in place. DIRECTORS’ REPORT DIRECTORS’ Liaises with regional chief executive officers and risk specialists on both business specific and Group Risk Function enterprise wide risks in order to assist the Group’s businesses to further develop their risk management processes.
Internal Audit Formal processes provide supplementary assurance to operational businesses.
External Audit Formal independent regular reviews.
Policy and Procedure
The Board has matters that are reserved for its determination under the risk appetite of Lendlease, and further, under the Limits of Authority. The Board approval process is set up so decisions and Board Approval Process commitments of a predetermined magnitude require express Board approval, thereby supporting sound governance and continued alignment with strategy.
Investment committees are in place at regional and Group levels in order to assess and approve FINANCIAL STATEMENTS Investment Committees potential projects/commitments.
Limits of Authority are in place to outline matters that are specifically reserved for determination Limits of Authority by the Board and those matters that are delegated to management.
Risk Tools
Lendlease uses a risk management platform throughout all our regions to allow consistent risk
FINANCIAL STATEMENTS FINANCIAL Risk Management Platform identification and assessment.
Stage Gates Across our property and construction operations, the conversion and delivery of projects is governed by a number of gates utilising proprietary and in house developed systems.
Business Protect Review Submit Execute development conversion Delivery lessons proposal contract pipeline process learnt OTHER INFORMATION 01 02 03 04 05 06 07
Project Authority to submit go/no go to customers Commit to Changes to Authorisation Regular Implement pursuit costs initial proposal to proceed project for new OTHER INFORMATION OTHER reviews projects
Business unit milestone reviews/health checks and portfolio reviews during delivery 68 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 69 Key Risks and Mitigation DIRECTORS’ REPORT Description Mitigation Pillars of Value
Health, Safety and Wellbeing Failure to provide an environment which promotes health, safety and wellbeing impacting our We are committed to the health, safety and wellbeing of our people. Through our Global ability to achieve our corporate and social responsibilities Minimum Requirements (GMRs), which include both physical safety and health and wellbeing, we empower our people to operate in a consistent standard across all our operations.
Disruption Responsiveness to disruption, including digital disruption as well as other new methods and With the increasing dependence on technology, our strategic intent aims to turn disruption into materials emerging in the investment, development and construction sectors an opportunity by creating a culture that fosters innovation and focuses on adopting leading edge
DIRECTORS’ REPORT DIRECTORS’ technologies, to deliver innovative solutions, and generate a competitive point of difference.
Commercial Commercial performance fails to meet our corporate objectives Our capital deployment guidelines mitigate risk and improve performance. Quarterly business reviews assess business operations against approved strategy to drive consistent, focused and risk assessed investment decisions.
Execution Failure to execute strategy or projects affect our ability to meet our corporate objectives Our risk management approach and use of stage gates across our property and construction operations, which is articulated earlier in this section, contributes to the mitigation of execution risk. To inform our investment decisions, we use internal research to develop a house view of property cycles in every region and the strength of our gateway cities.
Geopolitical Global and local events or shifts in government policy occurs in the regions in which we We are committed to growing our business in sectors that are supported by positive global operate, adversely impacting our ability to achieve strategic objectives. Failure to adequately trends. We are sensitive to geopolitical shifts and concentration risk and coordinate our approach understand government’s mandate, expectations and performance standards to government in all regions to mitigate against sovereign risk.
Regulatory and Counterparty • Non compliance with regulatory and policy requirements by Lendlease, or our To further improve our culture of compliance, we focus on aligning business priorities with
clients/suppliers the necessary compliance and assurance measures. We are focused on maintaining an ethical FINANCIAL STATEMENTS • Client, investor, or supply chain ethics fail to meet Lendlease standards supply chain to ameliorate the risk of material substitution and modern slavery. We have an appetite for relationships with parties who are aligned with our values. • Failure to adequately select, govern, and drive value from counterparties • Failure to comply with government regulations impacts our ability to access government opportunities
Corporate Culture Failure to create and maintain culture which supports Lendlease’s core behaviours, principles Our values drive our approach to business and delivery of long term value. We empower our and values to drive disciplined strategy execution people to make business decisions that are aligned to our core values and behaviours, principles, and pillars of value. To provide a ‘voice of risk’, we have separate reporting routes outside those who can influence risk issues through optimism bias. FINANCIAL STATEMENTS FINANCIAL
Cyber/Data Governance/ Failure of cyber resilience and defence systems. Leakage, misappropriation or unauthorised Physical and data security continue to be key focus areas globally. We invest in preventative Asset Protection storage of data. Unauthorised control of systems and physical asset infrastructure technology and education of employees to achieve a sustainable security culture. (i.e. lifts, security, air conditioning)
Customer Loss of existing client (including government) relationships, or inability to tailor services to Bid leadership training of key employees reinforces understanding of customers’ requirements. future clients’ needs, impacting Lendlease’s financial objectives Recurrent client survey feedback informs our business strategy. A single platform assists in customer data security and aligns customer service across all regions.
Non Scalable Growth • People: Inability to attract, retain, and upskill key talent necessary to deliver To deliver the desired level of performance, we continue to invest in growing our core strategic objectives capabilities through active talent management and targeted professional employee • Process: Lack of scalable processes to support predictable growth development to attract, retain and grow the best people. Our processes are designed to be consistent, scalable and effective. OTHER INFORMATION Corporate and Failure to comply with regulatory, societal and investor expectations of corporate and We are committed to creating the best places and optimising our corporate and environmental Environmental Sustainability environmental sustainability such as climate change and social responsibility sustainability performance (including climate change and social responsibility) through our Sustainability Framework and integrating sustainability considerations into our business strategies. We continually increase engagement through training programs to promote sustainable behaviours in the organisation globally. We have endorsed the TCFD recommendations on climate change and have begun reporting Lendlease's resilience to the changes in both policies and the physical environment.
Business Continuity Failure to properly plan for and/or appropriately respond to events which may disrupt To achieve organisational resilience, we are committed to operating in a way that supports our OTHER INFORMATION OTHER Lendlease’s business business being able to respond to threats and disasters without affecting our core business operations. We continue to invest in learning and development of our people to better prepare them in the event of disruption through training programs and various threat scenario simulations to stress test the plan. 05 PERFORMANCE AND OUTLOOK
432 Park Avenue, New York 72 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 73 Group Highlights PORTFOLIO MANAGEMENT FRAMEWORK GROUP OUTLOOK The Group delivered a solid result for securityholders for the year investment in technology and systems across the platform in The Portfolio Management Framework is designed to: Earnings visibility remains high with a growing pipeline across all DIRECTORS’ REPORT ended 30 June 2018 with Profit after Tax of $792.8 million, up five recent years, and additional equipment related to increased • Maximise long term securityholder value through a well three operating segments. per cent on the prior year. engineering activity. diversified, risk adjusted portfolio; The development pipeline grew by 44 per cent on the prior Earnings per Security was 136.1 cents, up five per cent on the prior Net finance costs of $72.0 million were down 25 per cent on the • Leverage the competitive advantage of our integrated model; year to $71.1 billion. This includes $55.9 billion of urbanisation year with a Return on Equity of 12.7 per cent. The distribution per prior year primarily due to lower average net debt and non interest • Optimise our business relative to the outlook for our markets on a projects following the addition of four major European projects security of 69.0 cents was up five per cent on the prior year. finance costs. Net debt ended the year at $1.2 billion, with the long term basis; and in the year. We expect the urbanisation projects in our targeted Group EBITDA of $1,244.8 million was up four per cent. average cost of debt broadly flat on the prior year at 4.8 per cent. international gateway cities to account for a larger proportion of • Provide financial strength to execute our strategy, maintain an Outperformance in the Development and Investments segments The effective tax rate of 25.6 per cent was up 90 basis points earnings over coming years. investment grade credit rating and the capacity to both absorb offset underperformance in the Construction segment. on the prior year, reflecting the changing earnings mix by both and respond to market volatility. Construction backlog revenue rose by two per cent on the geography and segment. DIRECTORS’ REPORT DIRECTORS’ Strong residential and commercial development contributions As a part of this framework, the Group has set target ranges on a prior year to $21.1 billion, with approximately $12 billion of in Australia and Europe underpinned the Development segment Net operating and investing cash flows were $294.6 million for the number of key metrics, which are set out below. preferred work at balance date. The immediate focus will remain result. Apartment for sale buildings were completed across year. Cash inflows included the proceeds from the part sale of the on improving the performance of the Australian Engineering Return on Equity was towards the upper end of the target range and urbanisation projects in four cities and a new investment Retirement Living business in Australia, apartment settlements business, which secured a number of projects over the year. partnership was formed in the residential for rent sector in London. and commercial development receipts. The Group continued to the dividend payout ratio was at the mid-point of the target range. Four major office building developments commenced delivery in invest in the development pipeline during the year, most notably The upper end of the target gearing range was raised to realign Funds under management rose by 15 per cent on the prior the year and the Australian master planned communities portfolio across international urbanisation projects. gearing with leverage metrics following the change in accounting year to $30.1 billion. The development pipeline, including new treatment of the Retirement Living business in Australia. sectors across the residential for rent and telecommunications performed well. Maintaining an optimal capital structure, a core element of the infrastructure markets, supports future growth potential. An increase in recurring earnings and strong gains in underlying Portfolio Management Framework, is critical in maximising The Development and Investments segments delivered returns Together with investment positions of $3.4 billion, the investment asset values underpinned the outperformance in the securityholder value. As part of a disciplined approach to above their respective target ranges, while the Construction Investments segment. Key highlights included the performance managing capital, the Board approved an on market buyback of segment generated an EBITDA margin below its target range. Investments segment is well placed to continue to deliver a solid base of recurring earnings. of our investments in Barangaroo South and the US Military up to $500.0 million. The segment invested capital mix is weighted towards the Housing portfolio. The buyback commenced on 13 March 2018, with 9.7 million Development segment, reflecting the significant amount of Operational excellence across our platform remains a priority. The underperformance in the Construction segment related to securities representing $178.0 million acquired on market by development activity that has been undertaken. This will be pursued through a rigorous approach to risk a small number of Engineering projects in Australia. Operations 30 June 2018. In line with strategy, the capital weighting to Australia declined by management, an unwavering commitment to health, safety and across the Building businesses in each of the regions remained 11 percentage points. This reflects the investment that has been sustainability, and a disciplined approach to origination. solid in the year. made in the international development pipeline. The Group is well placed for future success with integrated Group Services costs at the EBITDA level of $140.1 million were The balance sheet remains resilient. Gearing of 8.2 per cent, cash capabilities across property and infrastructure providing a FINANCIAL STATEMENTS down nine per cent on the prior year as we continued to focus on and cash equivalents, of $1.2 billion and total liquidity of $3.0 sustainable competitive advantage. Diversification by geography prudent expense management. Depreciation and amortisation of billion provides capacity to complete the on market buyback and sector is designed to provide resilience to the business $106.6 million was up nine per cent on the prior year, reflecting while continuing to fund the pipeline and pursue new growth model and optimise risk adjusted returns. opportunities. Key Financials Profit after Tax Development Pipeline3 Percentage 800 700 FINANCIAL FY17 FY18 Movement 600 500 CAPITAL FRAMEWORK Target FY17 FY18 Key Metrics 400 FINANCIAL STATEMENTS FINANCIAL $ 300 Revenue1 $m 16,671.0 16,572.1 (1%) 759 793 200 Group Metrics EBITDA $m 1,201.8 1,244.8 4% 100 $ Return on Equity 10-14% 12.9% 12.7% 0
792.8 BILLION Profit after Tax $m 758.6 792.8 5% FY17 FY18 Dividend payout ratio 40-60% 51% 50% 71.1 Operating and Investing $m 216.1 294.6 36% MILLION Cash Flow Gearing 10-20% 5.0% 8.2% Net Assets $m 6,166.5 6,414.2 4% Return on Equity EBITDA Mix Construction Backlog 15 Net Debt $m 912.8 1,181.8 29% Development 35-45% 40% 47% 12 Effective Tax Rate2 % 24.7 25.6 4% Construction 20-30% 24% 6% 9 Key Returns Investments 30-40% 36% 47% % 6 12.9% 12.7% Earnings per Security cents 130.1 136.1 5% 3 Segment Returns 1,2 $ Distribution per Security cents 66.0 69.0 5% Development 9-12% ROIC 13.7% 13.4% 0
12.7 BILLION Weighted avg Securities no.(m) 583.0 582.5 - FY17 FY18 Construction 3-4% EBITDA 2.7% 0.6% 21.1 OTHER INFORMATION 1,2 EBITDA Mix Investments 8-11% ROIC 11.7% 15.5% Earnings per Security Segment Invested Capital Mix Funds Under Management 150 Development 40-60% 48% 57%
120 $1,420 Investments 40-60% 52% 43% 47% 47% 90 O Regional Invested Capital Mix E TDA 60 130.1 136.1 Australia 50-70% 70% 59% 30 OTHER INFORMATION OTHER Asia 5-20% 10% 12% $ 6% 136.1 0 FY17 FY18 Europe 5-20% 12% 16% 30.1 BILLION Development Construction Investments CENTS Americas 5-20% 8% 13%
1. Includes finance revenue. 1. Through-cycle target based on rolling three to five year timeline. 2. Lendlease’s approach to tax and primary drivers of the effective tax rate are outlined in the 2018 Tax Report 2. Return on Invested Capital (ROIC) is calculated using the annual operating Profit after Tax divided by the arithmetic average of beginning, half and year end invested capital. (http://www.lendlease.com/investor-centre/taxation). Details on tax balances are included within the Consolidated Financial Statements. 3. Remaining estimated development end value. 3. Excludes Corporate. 74 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 75 Development Performance Development Outlook
The Development segment delivered EBITDA of $673.2 million, up partners and are expected to add over $1.0 billion to funds under The development pipeline which grew to $71.1 billion, a rise of providing the Group with flexibility around delivery and timing, in DIRECTORS’ REPORT 22 per cent. The segment accounted for 47 per cent of Group operating management upon completion. The 26,000 sqm office building at 44 per cent on the prior year, continues to provide significant line with market cycles. EBITDA. Invested capital rose by $1.3 billion to $4.3 billion and International Quarter London was also forward sold during the year. earnings visibility. The pipeline comprises $55.9 billion of The pipeline supports our target of delivering 1,000 to 2,000 Return on Invested Capital was 13.4 per cent, above the target range. The European region made significant progress in origination, urbanisation projects, $15.1 billion of communities projects and apartment units per annum and commencing two to three The result was driven by strong performance in Australia with 11 per securing four major urbanisation projects. In London, High Road telecommunications infrastructure. commercial buildings per annum. cent growth in EBITDA to $551.3 million. Europe also delivered a West, Euston Station and Silvertown Quays were secured. We also The strong growth in the pipeline was driven by the four newly The origination focus in recent years has centred on our strong contribution with EBITDA of $110.4 million, up substantially secured the Milano Santa Giulia project in Milan. These projects secured European projects that added a combined $21.9 billion international operations with the year dominated by new projects from $68.3 million. have added a combined $21.9 billion to the development pipeline. to the pipeline. Together with progress made on upscaling the secured in Europe. The majority of the urbanisation pipeline is There were 1,314 apartment for sale completions in the year. Asia and the Americas were focused on the delivery of their respective 30 Van Ness project in San Francisco, we now have 18 major now exposed to international gateway cities. We expect this to Apartment units completed at projects in Sydney, Melbourne, pipelines, with major development completions in both regions urbanisation projects across 10 gateway cities. result in a greater contribution from these international cities DIRECTORS’ REPORT DIRECTORS’ Brisbane and London. expected in FY19. Development management fees across our two The Group has 13 major commercial buildings in delivery across over coming years. A new investment partnership focusing on the residential for major urbanisation projects in Asia were the key contributor in the 486,000 sqm with a total estimated end value of $8.3 billion. The Communities pipeline consists of an estimated 52,333 lots. region. In the Americas, progress was made on upscaling the 30 rent sector in London was formed with the Canada Pension Plan We have 3,070 presold apartments for sale in delivery and 1,513 With an annual target of 3,000 to 4,000 completions, more than Van Ness project in San Francisco. We also continued to deliver on Investment Board (CPPIB). The first project will deliver 663 units apartments for rent in delivery with a combined total estimated a decade of supply has already been secured. across two buildings at Elephant Park in London. our telecommunications tower pipeline in the region, which was further end value of $4.5 billion. enhanced through the formation of a joint venture with SoftBank. The development pipeline provides long term earnings visibility Commercial development was a key contributor to the result, with In addition, the Group has a further estimated $44.4 billion and the flexibility to be both disciplined and patient with the profit recognised on four office developments following tenant and Land lot completions across the Australian master planned of secured urbanisation pipeline representing an estimated communities portfolio rose by 28 per cent on the prior year to pursuit of future opportunities. Diversification by geography and capital support. In Australia approximately 90,000 sqm of space 25,917 apartment units and 1,516,000 sqm of commercial space. 3,912 lots at the upper end of the 3,000 to 4,000 target range. Key sector is expected to provide resilience through market cycles. was commenced across Two Melbourne Quarter, the University of These projects are typically held in capital efficient structures, Melbourne Innovation Precinct and Daramu House at Barangaroo projects that contributed to the strong result included Springfield South. These buildings have been forward sold to capital Lakes in Queensland and Jordan Springs in New South Wales.
Segment Snapshot EBITDA by Region ($m) Pipeline1 by Product Pipeline1 by Region 673 7% 498 551 552 21% 42% 47% $71.1 $71.1 FINANCIAL STATEMENTS 1 68 110 41% of EBITDA (14) 27 - (15) P P % 5 3 T Australia Asia Europe Americas Total 79% E 10% RG 45% TA FY17 FY18 Communities2 Urbanisation Australia Asia Europe Americas
Invested Capital2 ($b) Return on Invested Capital Movement in Presales – Residential for Sale ($b) Residential for Rent in Delivery3 ($b)
FINANCIAL STATEMENTS FINANCIAL 4.3 13.7% 1.5 (2.2) 13.4% - 0.1 1.3 4.8 4.2 0.7 3.0 12% 0.1 TAR ET 9% 3.9 3.4 0.5 0.9 0.8
FY17 Sales Completions FX and FY18 FY17 Commencements Completions FX and Other FY18 FY17 FY18 FY17 FY18 Other Communities Apartments for Sale Apartments for Rent
Commercial Commencements ($b) Residential Completions (Units) Commercial Buildings Completion Profile Expected Building Completion Project Capital Model sqm ’0004 Building FY19 FY20 FY21 FY22 Victoria Harbour, Melbourne Fund through⁵ 39 839 Collins Street 5 BUILDINGS 5,769
Fund through⁵ 26 One Melbourne Quarter OTHER INFORMATION 176 5,226 Melbourne Quarter 3.8 Fund through⁵ 50 Two Melbourne Quarter 2,533 1,314 Brisbane Showgrounds Fund through⁵ 15 25 King 4 BUILDINGS Barangaroo South, Sydney Fund through⁵ 11 Daramu House 1.5 3,912 University of Melbourne Innovation Precinct BOOT⁶ 27 Innovation Precinct 3,060 Circular Quay Tower, Sydney Joint venture 55 Commercial Joint venture 84 Commercial (3 buildings) Paya Lebar Quarter, Singapore OTHER INFORMATION OTHER FY17 FY18 FY17 FY18 Joint venture 29 Retail The Lifestyle Quarter, Kuala Lumpur Joint venture 124 Retail Development End Value3 Communities Apartments Retirement4 International Quarter London Fund through⁵ 26 Commercial building
1. The proportion of EBITDA from Operating Businesses. 4. Retirement completions exclude resales, Development activity only. 1. Remaining estimated development end value. 4. Floor space measured as Net Lettable Area. 2. Securityholder equity plus net debt. Operational and financial metrics for the Australian Retirement Living 2. Excludes Australian Retirement pipeline which is now included in the 5. A funding model structured through a forward sale to a capital partner 3. Total estimated development end value. business have been included in the Investments segment following the Investments segment following the Retirement Living transaction. resulting in staged payments prior to building completion. Retirement Living transaction. 3. Total estimated development end value. 6. Build, Own, Operate, Transfer. 76 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 77 Development Pipeline Apartments Completion Profile DIRECTORS’ REPORT
Urbanisation Pipeline1 Profile Apartments for Sale
Apartments Delivery2 Ownership Presold Presales1 23 major apartment buildings² in delivery across 3,070 presold units and 1,513 units for rent, expected completion FY19 to FY21 Project Building Total Units (%) (%) ($b) FY19 FY20 FY21 Darling Square, Sydney Darling North, Harbour 577 100% 100% 0.8 30,500Units Place and Trinity House
DIRECTORS’ REPORT DIRECTORS’ Units 3 Units Units Darling Rise, Barker House 3,070 presold 1,513 for rent 25,917 remaining 390 100% 100% 0.5 and Arena
$31.4 Victoria Harbour, b Collins Wharf 1 321 100% 89% 0.3 Melbourne 3 4 $3.2b presold $1.1b for rent $27.1b remaining Melbourne Quarter, East Tower 719 50% 76% 0.4 Melbourne Commercial Paya Lebar Quarter, 13 major buildings⁵ in delivery, with expected completion FY19 to FY22 Residential (3 Buildings) 429 30% 90% 0.5 Singapore
Victoria Drive sqm in sqm Wandsworth, London 68 50% 10% - 486,000 delivery 1,516,000 remaining 2,002,000 sqm (remaining sections)
Elephant Park, London West Grove (Buildings 1 534 100% 82% 0.4 and 2) (remaining sections) 6
$7.2b in delivery $17.3b remaining $24.5b FINANCIAL STATEMENTS East Grove and Park 166 100% 100% 0.1 Central North³
Deptford, London Cedarwood Square 203 100% 85% 0.1
Urbanisation Pipeline1 by Product Urbanisation Pipeline1 by Region Fifth Avenue, New York 277 Fifth Avenue 130 40% -⁴ -⁴
Clippership Wharf, Building 3 80 100% 100% 0.1 9% Boston
FINANCIAL STATEMENTS FINANCIAL 27% Indicates expected building completion date during the year 44% $55.9b $55.9b Urbanisation 56% Urbanisation Apartments for Rent Pipeline 52% Pipeline 12% Delivery2 Ownership Project Building Total Units (%) FY19 FY20 FY21 Apartments Commercial Australia Asia Europe Americas East Grove and Park Elephant Park, London 663 20%5 Central North 1,7 Southbank (formerly Cooper at Southbank Communities Pipeline Profile 452 100%6 Riverline), Chicago (formerly Riverline D) Clippership Wharf, Buildings 1, 2 and 4 398 100% 52,333 Lots Boston Lots Lots 3,231 presold 49,102 remaining Indicates expected building completion date during the year OTHER INFORMATION
$15.1b
$0.8b presold $14.3b remaining
OTHER INFORMATION OTHER 1. Remaining estimated development end value. 2. Refer to Apartments Completion Profile on page 77 for a breakdown of the major buildings. 3. Presales balance on major buildings in delivery only. 1. Closing presales balance as at 30 June 2018. 4. Total estimated development end value of c.$1.3 billion, with c.$0.2 billion realised to date. 2. Based on expected completion date of underlying buildings, subject to change in delivery program. Not indicative of profit recognition. 5. Refer to Commercial Buildings Completion Profile on page 75 for a breakdown of the major buildings. 3. Affordable housing units presold within apartment for rent buildings. 6. Total estimated development end value of c.$8.3 billion, with c.$1.1 billion realised to date. 4. Project information subject to joint venture confidentiality. 7. Excludes Australian retirement development units. Includes built form units to be sold with land lots and Asian retirement development units. 5. 20% stake in Lendlease Residential Investment Partnership which will own the completed residential for rent product. 6. Following dissolution of the Riverline joint venture, ownership has increased to 100%. 78 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 79 Construction Performance Construction Outlook
The Construction segment delivered an EBITDA of $78.2 million, The Australian region enjoyed strong pipeline success in the year. The outlook for the Construction segment is solid with backlog Hotel Resort, 130 Lonsdale Street in Melbourne, DIRECTORS’ REPORT compared to $338.3 million in the prior year. The segment New work secured in Engineering reached $3.5 billion compared revenue of $21.1 billion, up two per cent on the prior year. New 60 Martin Place in Sydney, Western Sydney Stadium and the accounted for six per cent of Group operating EBITDA. The with $1.0 billion in the prior year with several large transport work secured of $14.3 billion was up eight per cent on the prior Joan Kirner Women’s and Children’s Hospital in Melbourne. performance of the Building businesses in each region was solid, year and above revenue realised of $12.9 billion. projects secured, including the Melbourne Metro Tunnel and In the Americas, the established Construction business has with the result impacted by the underperformance of the Australian the Ballarat Line Upgrade. In Building, there was further success The backlog position is well diversified across multiple a strong market share in its target cities and sectors. The Engineering business. As a result, the global EBITDA margin of 0.6 in securing projects in the Defence sector and a number of geographies, sectors and clients. The workbook is spread across now extensive development pipeline in Europe will provide a per cent was well below the target range of three to four per cent. commercial projects including 130 Lonsdale Street, Melbourne. six major sectors, with the largest exposure to transport and significant amount of future construction backlog, while the Australian Construction delivered an EBITDA loss of $23.1 million, The EBITDA margin from the Americas normalised in the year, residential. The global business has significant diversification by Asian business will continue to focus predominantly on the impacted by weak performance in the Engineering business. compared with performance upside on several projects that client, with government work accounting for approximately half of internal development pipeline. Revenue of $7.0 billion was up nine per cent on the prior year as completed in the prior year. While it was a slower year for the major project1 backlog. DIRECTORS’ REPORT DIRECTORS’ activity levels remained resilient. The Building portfolio performed converting new projects, there was $3.6 billion of new Beyond the current backlog position, there is approximately strongly with more than $3.7 billion of work delivered. work secured. The Engineering business in Australia remains a key element in $12 billion of additional work in preferred bidder status. The the Group’s strategy. The anticipated higher level of activity in the business is well placed to convert a significant proportion of this There were performance issues across a small number of Europe delivered a solid outcome against the backdrop of a transport sector is materialising in key project wins. Significant preferred work into backlog revenue over coming periods. Engineering projects. The result recognised the impact of softer operating environment reflective of challenging market investment has been made in the business, including origination expected losses on these projects, including the reversal of conditions. EBITDA was supported by some high margin projects investment to grow the business to scale and additional resources previously booked profit. These projects are not expected to during the year. The internal pipeline was the largest source of to deliver the greater volume of work. Near term profitability contribute to margin for their remaining life and will therefore new work secured. will be impacted by this investment and the completion of impact the overall construction margin until they complete. Asia continues to focus on the delivery of the internal underperforming projects. The Services business in Australia had a solid year, underpinned development pipeline. The improved margin outcome was The Building businesses across each region have a combined by the telecommunications and transport sectors. However, an supported by ongoing construction on The Lifestyle Quarter backlog of $15.2 billion. Australia has a significant pipeline of work adverse settlement outcome relating to a dispute on a legacy project in Kuala Lumpur. with $6.5 billion in backlog. Key projects include a number of project that was completed in 2014 had a negative impact on Defence contracts and major projects including the Crown Sydney EBITDA.
Segment Snapshot EBITDA by Region ($m) Backlog by Product Backlog by Region
338 8% FINANCIAL STATEMENTS
% 30% 0
2 20%
201
T
E 105 $21.1 $21.1 6% G 78 R 63 59% 1 A (23) 15 32 23 R R of EBITDA T 7% - 72% % 0 3 Australia Asia Europe Americas Total 4%
FY17 FY18 Building Engineering Services Australia Asia Europe Americas FINANCIAL STATEMENTS FINANCIAL
Revenue by Product EBITDA Margin Backlog by Sector Backlog by Client 7% 4% 7% 14% TAR ET 8% 25% 19% 3% 2.7% 14% 1 1 $12.9 Major Project Major Project Backlog Revenue 51% Backlog Revenue R 35% 0.6% 12% 24% 74% 10% Transport FY17 FY18 Residential Hotel/Entertainment Defence Building Engineering Services Commercial Social Infrastructure Other Lendlease Corporate Government
New Work Secured by Product New Work Secured by Region Backlog Revenue Movement by Product ($b) Backlog Realisation OTHER INFORMATION 6% 16% 25% 1.1 (0.1) 21.1 24% 20.6 (0.5) $14.3b $14.3b $21.1 New Work Secured 9% New Work Secured 54% Revenue Revenue 61% 30% R OTHER INFORMATION OTHER 70% 5%
FY17 Building Engineering Services FY18 Building Engineering Services Australia Asia Europe Americas FY19 FY20 Post FY20
1. The proportion of EBITDA from Operating Businesses. 1. Includes all Construction projects greater than $100 million, which represents 80 per cent ($16.8 billion) of secured backlog. 2. Includes the impact of movement in foreign exchange rates, where applicable. 80 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 81 Investments Performance Investments Outlook
The Investments segment delivered EBITDA of $668.9 million, up 35 year. The Retirement Living business delivered a solid contribution. The Investments segment is well placed to continue to provide Investments managed on behalf of the Group closed the year DIRECTORS’ REPORT per cent. The segment accounted for 47 per cent of Group operating While the underlying business performance was impacted by soft a solid base of recurring earnings to the Group. The integrated at $3.4 billion. This includes $1.7 billion of co-investments in our EBITDA. The result was supported by an increase in recurring trading conditions across the sector, there was an uplift in the value business model, with the development pipeline providing product funds under management platform that provides strong alignment earnings and strong gains in underlying investment asset values. This of the retained 75 per cent of the business post the introduction of a and the Construction segment providing delivery capability, is likely with investors along with a high quality income stream. Following boosted the Return on Invested Capital to 15.5 per cent, well above capital partner. to remain the main source of growth for the Investments segment. the introduction of a capital partner into the Retirement Living the target range. Higher investment income was derived from co-investment The investments platform ended the year with funds under business in Australia, the Group’s remaining 75 per cent interest The Group made significant progress on its capital partner strategy positions, in particular the inclusion of all three towers at Barangaroo management of $30.1 billion, up 15 per cent. In addition, there accounts for $1.3 billion of investments. The remaining capital is with three new office developments in Australia receiving support South for the full year. Strong leasing and asset markets generated is approximately $4 billion of additional secured funds under primarily allocated to the equity in the US Military Housing and US from capital partners. These buildings will add to the growth of the co-investment revaluations in both Australia and Asia. There was management based on development projects currently in delivery. telecommunications infrastructure portfolios. investments platform in future periods. also a substantial uplift in the value of the equity investment in the Through the investments platform, Lendlease has established Continued focus on diversification of the investments across the DIRECTORS’ REPORT DIRECTORS’ APG Asset Management N.V. acquired 25 per cent of the Retirement US Military Housing operations which was revalued during the year. relationships with approximately 150 institutional investors and a Group is designed to provide improved risk adjusted returns. Living business in Australia. This highlights the quality of the Operating EBITDA was $133.2 million, up 15 per cent on the prior strong track record of performance. The further conversion of the Future co-investment income is expected to be derived from portfolio and will assist our future development and growth plans year. Higher fund management fees were generated from the 15 development pipeline with our capital partners will provide future telecommunications infrastructure and residential for rent assets in the sector. per cent growth in funds under management. Asset and property opportunities to continue to grow funds under management. The in addition to the current commercial property asset classes. management fees from our US Military Housing operations and the remaining secured urbanisation pipeline totals $44.4 billion. Continuing to foster capital partner relationships will be critical for Two new asset classes for Lendlease will add to the investment the ongoing success of the Investments segment. platform in future periods. A joint venture with SoftBank will develop Australian and Asian investment management businesses continue The outlook for our new asset classes is strong, with the and own telecommunications infrastructure assets in the United to support recurring earnings. telecommunications infrastructure joint venture in the United States States, and our investment partnership with CPPIB will develop and New equity of $3.0 billion was raised across the investment targeting US$5 billion of assets over the medium term, and the own residential for rent assets in London. management platform, including the residential for rent partnership, residential for rent partnership in London targeting an initial £1.5 billion in assets. Ownership EBITDA was $535.7 million, up 41 per cent on the prior telecommunications joint venture and capital partner participation across new office developments. Segment Snapshot EBITDA by Region ($m) Funds Under Management1 by Asset Class Funds Under Management1 by Region 3% 3% 669 5% 483 495 393 21% FINANCIAL STATEMENTS 47% 46% 124 $30.1b $30.1b 1 % 35 55 57 Funds Under Funds Under of EBITDA 0 10 7 3 48% Management Management
T E 74% G Australia Asia Europe Americas Total R TA 40% FY17 FY18 Retail Office Industrial Other Australia Asia Europe
FINANCIAL STATEMENTS FINANCIAL Invested Capital2 ($b) Return on Invested Capital Investments1,2 by Product Investments1,2 by Region 4% 3.3 3.3 15.5% 6% 9% 11% 11.7% 11% $3.4 51% $3.4 TAR ET 39% 8% 80% Co-investments FY17 FY18 FY17 FY18 Retirement ownership US Military Housing Infrastructure Australia Asia Americas
Investments EBITDA by Activity ($m) Investments5 ($b) Funds Under Management1 ($b) Funds Under Management1 roll forward ($b) 536 3.0 3.0 3.3 3.4 30.1 0.5 30.1 OTHER INFORMATION 2.6 23.6 26.1 1.9 379 21.3 2.0 (0.4) 16.3 26.1 116 133
FY14 FY15 FY16 FY17 FY18 FY14 FY15 FY16 FY17 FY18 FY17 Additions Divestments Revaluations FX and FY18 Ownership Operating Other OTHER INFORMATION OTHER interests earnings FY17 FY18
1. The proportion of EBITDA from Operating Businesses. 1. The Group’s assessment of market value. 2. Securityholder equity plus net debt. 2. The Group’s ownership interest. Total invested capital in the segment of $3.3 billion in FY18. 3. Returns derived from investments, the Group’s Retirement investment, US Military Housing and infrastructure investment. 4. Earnings primarily derived from the investment management platform and the management of US Military Housing operations. 5. The Group’s assessment of market value of ownership interests. 82 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 83 Financial Position and Group Funding and Cash Flow Movements Debt Facilities DIRECTORS’ REPORT
FY17 FY18 Percentage Percentage Financial Position $m $m Movement FY17 FY18 Movement
Cash and cash equivalents 1,249.2 1,177.1 (6%) Net debt $m 912.8 1,181.8 29%
DIRECTORS’ REPORT DIRECTORS’ Inventories 5,127.4 5,546.3 8% Borrowings to total equity plus borrowings % 25.9 26.9 4%
Equity accounted investments 834.6 2,626.6 215% Net debt to total tangible assets, less cash % 5.0 8.2 64%
Investment properties 6,967.4 278.2 (96%) Interest cover times 10.3 10.7 4%
Other assets (including financial) 6,675.6 7,335.4 10% Average cost of debt % 4.9 4.8 (2%)
Total assets 20,854.2 16,963.6 (19%) Average debt maturity years 5.1 4.6 (10%)
Borrowings and financing arrangements 2,152.4 2,358.5 10% Average debt mix fixed: floating1 ratio 86:14 86:14
Other liabilities (including financial) 12,535.3 8,190.9 (35%) Undrawn facilities $m 2,225.2 1,827.1 (18%)
Total liabilities 14,687.7 10,549.4 (28%) Net debt and gearing increased in the year as the Group continued to invest in the development pipeline. An additional $1.3 Net assets 6,166.5 6,414.2 4% billion of capital was deployed into the Development segment. Despite this, interest cover improved from the prior year on both higher earnings and lower average net debt.
Inventories Investment Properties and Other Liabilities Debt Facilities2 ($m) FINANCIAL STATEMENTS Inventories increased by eight per cent on the prior year. Key (including financial) projects in development that contributed to the increase included The sale of the 25 per cent interest in the Retirement Living 1,500 Clippership Wharf in Boston and Southbank in Chicago. business in Australia resulted in the retained share of the investment properties, and corresponding resident liabilities, being recorded on a net basis at the Group’s 75 per cent share as an Equity Accounted Investments equity accounted investment. 714 Equity accounted investments increased by $1.8 billion. This now 533 533 536 536 476 476 286 296 296 includes the Group’s 75 per cent interest in the Retirement Living Total Assets, Total Liabilities and Net Assets 225 business in Australia following a part sale of the business during 33 FINANCIAL STATEMENTS FINANCIAL the year. Also included is the Group’s investment in The Lifestyle The 19 per cent decline in total assets and the 28 per cent decline Quarter project in Kuala Lumpur following the execution of a in total liabilities were primarily driven by the Retirement Living revised joint ownership agreement and deconsolidation of the and The Lifestyle Quarter investments shifting to equity accounted Syndicated Multi UK Bond Issue Club Revolving US$ Reg. S Notes Singapore Bond Australian Medium investment. The Group continues to retain a 60 per cent interest in investments. Net assets rose by four per cent. Option Facility Credit Facility S$300m Term Notes the project.
Drawn Facility
Cash Movements ($m) Operating and Investing Debt Maturity Profile3 ($m) Net operating and investing cash inflows were $294.6 million. Positive operating cash flow of $72.8 million was primarily due to the cash proceeds received on apartment settlements in Australia and Europe, and the settlement of the Darling Square commercial 225 222 (398) building and hotel. This more than offset outflows on major development projects. 1,249 73
31 1,177 Net cash inflow from investing activities of $221.8 million was 250 OTHER INFORMATION primarily due to the proceeds received on sell down of a 25 per cent interest in the Retirement Living business in Australia. Expenditure 900 714 on major international development projects, notably The Lifestyle 600 Quarter in Kuala Lumpur and Southbank in Chicago, were the main 536 541 source of investing cash outflows. 297 Financing FY17 Operating Investing Financing Foreign FY18 FY19 FY20 FY21 FY22 FY23 FY26 FY27 exchange Net cash outflow from financing activities was $397.8 million. impact Dividend payments and the maturity of the S$275 million Singapore OTHER INFORMATION OTHER Bond during the year were the largest source of outflow. The commencement of the on market buyback was also a source of cash outflow. The Club Revolving Credit and Syndicated Syndicated Multi Option Facility Australian Medium Term Notes Multi Option facilities were the main source of inflows. UK Bond Issue Club Revolving Credit Facility US$ Reg. S notes Singapore Bond S$300m Undrawn
1. Methodology for ratio has been updated to represent a daily average calculation (Jun-17 comparative has been updated to reflect this change in methodology). 2. Values are shown at amortised cost. 3. Values are shown at gross facility value. 06 GOVERNANCE
313@somerset, Singapore 86 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 87 Board of Directors’ Information Board Skills and Experience Matrix
The Lendlease Board is committed to exceptional corporate The Corporate Governance Framework is regularly assessed The Directors have a mix of local and international experience and expertise, as well as specialised skills to assist with decision DIRECTORS’ REPORT governance policies and practices which we see as and amended as required to remain current. The Board’s four making and to effectively govern and direct the organisation, for the benefit of securityholders. The table below sets out the skills fundamental to the long term success and prosperity of the permanent Committees continue to assist, advise and make and experience considered by the Board to be important for its Directors to have collectively. Group. In FY18, the Board continued its longstanding practice recommendations to the Board on matters falling within their These skill areas are reviewed at least annually to assess their alignment and support the Group’s strategic direction. The skills of reviewing its corporate governance and reporting practices. areas of responsibility, as set out in the Committee charters. matrix assists the Board with succession planning and professional development initiatives for Directors. In determining this skills The Corporate Governance Statement is available on the Lendlease The Board delegates authority for all other functions and matrix, each Director undertook a skills and experience self assessment. website at: www.lendlease.com/au/company/governance. matters necessary for the day to day management of the Group Membership of the Board as at 22 August 2018 is set out to the Group Chief Executive Officer, who delegates to senior below. For detailed information on the skills, experience and management as required. Limits of Authority are in place which Skills/ 1 DIRECTORS’ REPORT DIRECTORS’ qualifications of each of the Directors, refer to pages 94 to 99 outline the matters specifically reserved for determination by Experience Comments Total of the Annual Report. the Board and those matters delegated to Board Committees or Group Executive Management. The Limits of Authority are A commitment to and experience in setting exceptional corporate governance policies, reviewed at least annually, and changes were made during FY18. Governance practices and standards. 11
Industry Possesses industry knowledge, exposure and experience gained in the core Lendlease operating segments of Experience Development, Construction and Investments. This includes advisory roles for these industries. 7
International Exposure to international regions either through experience gained directly in the region or through Operations management of regional client and other stakeholder relationships. 10
Health & Experience in programs implementing safety, mental health and physical wellbeing, on site and within Safety business. Monitoring the proactive management of workplace health and safety practices. 9 FINANCIAL STATEMENTS Ability to identify economically, socially and environmentally sustainable developments. Ability to set Sustainability and monitor sustainability aspirations. 8 6 4 Developing, setting and executing strategic direction. Experience in driving growth and executing 3 Strategy 7 against a clear strategy. 11 5
11 9 Risk Experience in anticipating and evaluating risks that could impact business. Recognising and managing Management these risks by developing sound risk governance policies and frameworks. 11 FINANCIAL STATEMENTS FINANCIAL 10 8 Experience in identifying and resolving of legal and regulatory issues and having the ability to assist Legal 1 2 the Board on these matters. 5
Human Experience in building workforce capability, setting a remuneration framework which attracts and Resources retains a high calibre of executives, promoting diversity and inclusion. 11
Skills gained whilst performing at a senior executive level for a considerable length of time including Executive delivering superior results, dealing with complex business models, projects, and issues and change Leadership management. 11
Financial Understands the financial drivers of a business. Experience in financial reporting and corporate Acumen financial management. 11 OTHER INFORMATION Strong technology background including online communications, IT workplace knowledge, security Technology and data analysis skills. 6
1. D A Crawford AO 4. P M Coffey 8. J S Hemstritch 1. In facilitating the skills matrix, each Director undertook a self assessment of their skills and experience. Chairman (Independent Non Executive Director) (Independent Non Executive Director) (Independent Non Executive Director) 5. P M Colebatch 9. E M Proust AO Engagement by the Board 2. S B McCann (Independent Non Executive Director) (Independent Non Executive Director) The Board members, led by the Chairman, maintain an active and extensive engagement program to represent the interests of Lendlease at Group Chief Executive Officer OTHER INFORMATION OTHER various industry functions and bodies. The Chairman acts as a spokesperson for Lendlease and regularly meets with customers, investors, 6. D P Craig and Managing Director 10. M J Ullmer governments and media. (Executive Director) (Independent Non Executive Director) (Independent Non Executive Director) In addition to these industry events, the Chairman and Board members also meet regularly with local Lendlease management and 3. C B Carter AM 7. S B Dobbs 11. N M Wakefield Evans employees. These events typically take the form of employee ‘meet and greet’ sessions or smaller networking sessions targeting high (Independent Non Executive Director) (Independent Non Executive Director) (Independent Non Executive Director) potential or diverse employees. The Board members encourage employees to ask questions at these sessions and they provide the opportunity for open and honest debate on organisational culture. 88 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 89 Board Skills and Experience Matrix DIRECTORS’ REPORT
The Board views ‘industry experience’ as skills or experience GENDER DIVERSITY gained in the core Lendlease operating segments of Female Directors Target of Development, Construction and/or Investments.
HAVE EXPERIENCE % % IN ONE OR MORE OF
DIRECTORS’ REPORT DIRECTORS’ 27 30 OUT OF THE CORE SEGMENTS OF DEVELOPMENT, at August 2018 by end 2018 7 11 The Lendlease Board adopted a target of 30 per cent female INVESTMENTS, AND Board members OR CONSTRUCTION Board members by the end of 2018 to improve gender diversity and to focus its attention on achieving this objective. FINANCIAL STATEMENTS FINANCIAL STATEMENTS FINANCIAL
DIRECTORS’ DIRECTORS’ AVERAGE TENURE EXPERIENCE IN 1–3 3–6 6–9 9+ OTHER INFORMATION GOVERNANCE AND YEARS YEARS YEARS YEARS FINANCIAL ACUMEN % OTHER INFORMATION OTHER 100 3 2 3 3 The Board considers it has an appropriate mix of new, mid and longer tenured Directors. experience The average term of the Board is six years. 90 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 91 Board Regional Program 2017 – 2018 PROJECT ASSESSMENT – PAYA LEBAR QUARTER (PLQ) Board Case Study As an international Company and having regard to the scale of individual projects, the Board program One of the key responsibilities of the Lendlease Board is In visiting the site, and gaining an appreciation for its location DIRECTORS’ REPORT to oversee the strategy, allowing the Group to pursue its and proximity to road and rail infrastructure, the Board further reflects the geographic spread of Lendlease businesses. Board meetings are scheduled in Australia and integrated business model in targeted gateway cities around understood the operational complexity of this project. each of the regions where Lendlease operates. the world. The PLQ project assessment is an example of how Site visits allowed the Board to see and experience firsthand the Board reviews and evaluates strategic opportunities, over the challenges associated with this project’s delivery, and Board members attend program activities in addition to formal Where deeper project reviews are required, the program may a longer term period. ensured Board conversations around project challenges and meetings. Generally, the program runs over two or three days take up to five days. Directors are also encouraged to visit This project was first presented to the Board in 2014. Due to opportunities were appreciated in a fuller geographic context. and comprises formal meetings, business briefings, Lendlease project sites outside of a scheduled Board program. the project’s size and significance, the Board initially received presentations from external sources, project site visits, The program is an important element of the Board’s activities and The Board visited this project again in September 2017, progress updates on the PLQ opportunity ahead of a formal receiving a detailed commercial update, a tour of the DIRECTORS’ REPORT DIRECTORS’ client meetings and networking events with employees and enables Directors to obtain the required deep understanding of request for approval. In arriving at the decision to approve key stakeholders. the activities and operations within each region. marketing suite, project offices, worker areas and the PLQ the bid tender, the Board considered numerous factors residential display suite. The management team also updated including the rationale for the investment, macro economic the Board on a range of PLQ innovations. Some of the sites and regional Lendlease offices visited by Board members during the period indicators, financial and commercial assessment, funding and development strategy, safety and sustainability issues, and The Board’s interactions with PLQ, both before and 1 January 2017 to 30 June 2018 included: key risks. during delivery, including visits, tours, presentations and project team interactions are indicative of the scrutiny and While not exhaustive, these factors are indicative of the issues governance undertaken by the Board to oversee the delivery AUSTRALIA considered by the Board during Boardroom discussions. After of projects in accordance with the Group’s strategy. careful consideration, the Board approved an equity commitment • Presentation by and networking session with CareerTrackers interns (January 2017) for Lendlease’s interest in PLQ in April 2015. More information on the PLQ development is shared on page 36. • Site walk of Victoria Harbour Sales Centre and precinct (May 2017) The Board has continued to receive updates on PLQ both • Tour of 889 Collins Street apartment (May 2017) as a standalone project and as part of the Asia regional • Caulfield to Dandenong Rail project review and site visit (June 2017) strategy. In 2015, the Board visited the PLQ site prior to the • Site walk of NorthConnex project (August 2017) commencement of construction, as part of its program of • Overview and site walk of Melbourne Quarter project (February 2018) regional site visits.
• Attended forum and networking session with Young Indigenous Pathways Program participants, FINANCIAL STATEMENTS Lendlease RAP initiative (May 2018) • Board networking forum supporting employee diversity and regional top talent (May 2018)
EUROPE • Received a detailed presentation on the Milano Santa Giulia project (April 2017) • Networking session with CEO and Chair of Risanamento, JV partner for Milano Santa Giulia FINANCIAL STATEMENTS FINANCIAL project (April 2017) • Toured a mixed use urban regeneration project in Milan (April 2017)
AMERICAS • Tour of 277 Fifth Avenue sales centre and residential apartment (July 2017) • Overview of the 217 West 57th Street and 220 Central Park South projects; site walk of 220 Central Park South projects (July 2017) • Guided walk through completed Columbia Mind & Brain Institute, New York (July 2017) • Board networking forum supporting employee diversity and regional top talent (July 2017 and January 2018)
• Overview and site walk of 30 Van Ness, San Francisco (January 2018) OTHER INFORMATION
ASIA • Overview and site walk of Paya Lebar Quarter, Singapore (PLQ) project and guided walk through integrated project office and worker areas (September 2017) • Tour of PLQ marketing suite and residential display suite (September 2017) • Overview of innovation partnership pathways with Starhub (September 2017)
OTHER INFORMATION OTHER • Stakeholder meeting with Chairman of Singapore Economic Development Board • Board coffee chat and panel sessions with local employees (September 2017 in Singapore and April 2018 in Malaysia) • Board networking forum supporting employee diversity and regional top talent (September 2017) • Overview and site walk of The Lifestyle Quarter, Kuala Lumpur (April 2018) 92 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 93 Focus Areas for The Board Supporting The Delivery of The Group’s Strategic Priorities
The Board recognises that the pillars of value, 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 DIRECTORS’ REPORT 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 in support of the value pillars. This does not represent the full scope of Board activities, but provides an example of some activities. DIRECTORS’ REPORT DIRECTORS’ Health & Safety Financial Our Customers Our People Sustainability
Material Issue: Material Issues: Material Issues: Material Issues: Material Issue: • Ability to operate safely across our • Delivering securityholder returns. • Understanding our customers and • Ability to attract and retain the • Ability to manage and optimise operations and projects. responding to changes in the market. best people. our sustainability performance • Maintaining strong capital by delivering economic, social The Board and Sustainability Committee management to enable investment in • Ability to deliver customer • Ensuring we have the right capability and environmentally sustainable undertook a range of activities as our future pipeline. driven solutions. across the organisation. outcomes. part of its continued review of the The Board and Risk Management and The Board and its Committees The Board, People and Culture Lendlease Health and Safety Framework The Board and Sustainability Committee Audit Committee undertook a range undertook a range of activities as part Committee and Nomination Committee and its unwavering commitment to undertook a range of activities to of activities to help fulfil the Board’s of its support of the Group’s customer undertook a range of activities to health and safety, in conjunction with help deliver environmental, social and oversight responsibilities in relation focused approach, in conjunction with help create an engaged, diverse and responsibilities set out in the charter. economic value, in conjunction with to the Group’s risk management responsibilities set out in the charter. capable workforce, in conjunction with responsibilities set out in the charter. Examples of some of the Board and internal control systems, and to responsibilities set out in the charter. Examples of some of the Board activities and actions undertaken to help create sustainable returns for Examples of some of the Board activities and actions undertaken to Examples of some of the Board
support the value pillars included: securityholders, in conjunction with activities and actions undertaken to FINANCIAL STATEMENTS support the value pillars included: activities and actions undertaken to responsibilities set out in the charter. support the value pillars included: Continued • Board members had conversations support the value pillars included: • Received presentations from with frontline leaders and employees Examples of some of the Board • Approved sustainability strategy, • Endorsed management to undertake economic research on target markets • Approved a revised Executive Reward on Lendlease’s Global Minimum activities and actions undertaken to including targets for energy, water preparatory analysis of its climate and gateway cities. strategy, establishing a clearer link Requirements and uncompromising support the value pillars included: and waste. change risks and opportunities, in line between strategy and reward and with recommendations of the approach to safety during site visits. • Received an update on the Retirement • Received presentations from business • Reviewed the Group’s capital position providing longer dated rewards better Task Force on Climate-related Living business in Australia regarding unit leaders on initiatives to deliver • Endorsed and discussed the continuing and approach to capital management. aligned to the Group’s earnings profile. Financial Disclosure (TCFD). offering alternative forms of contracts. against environmental targets. implementation of the Lendlease See Remuneration Report for details. Progress will be reported in FY19. • Reviewed Group financial scenarios Global Minimum Requirements across • Met with the Trustees of the as part of the annual financial • Discussed the outcomes of the • Approved community engagement FINANCIAL STATEMENTS FINANCIAL Lendlease and our supply chains. Responsible Entities for the Group’s strategy, and received reports on planning process. gender pay review to further embed investment funds. Lendlease Foundation programs • Received and discussed Critical the Group’s standard compensation • Continued to work with management for employee development, health Incident reports and health and safety • Received presentations on customer approach. on examining the Group’s top risks and wellbeing. trends with the global leadership team. engagement strategies and results of and mitigating activities. • Received a presentation from the feedback surveys. • Monitored progress on • Approved the adoption of additional Australia Building business on a range • Approved the sale of 25% of the Reconciliation Action Plan, including health and safety key performance • Received a presentation from the of flexible working initiatives. Retirement Living business to APG initiatives to employ Indigenous indicators for the global leadership chief executive officer of The Hornery Asset Management N.V. • Received updates on specialised trainees on major projects. team for FY18. Institute on its partnership with leadership programs across the Group. • Approved the commencement of an Lendlease in driving the development • Received reports from regional • Received presentations and held regular on market buyback of up to $500 of sustainable urban communities. • Attended Board networking events in business leaders on community discussions with the global leadership engagement programs related to million after consideration of relevant Asia, Australia and the Americas team, project and business leaders • Engaged with clients, investors and urban regeneration projects and commercial factors. to engage in discussions with on safety performance, innovations other stakeholders at various industry skilling opportunities in areas of employees around culture and and initiatives. • Received a presentation on the functions, bodies and events. disadvantage. development opportunities. ‘residential for rent’ and multifamily • Assessed the health and safety • Endorsed initiatives to address sectors in the Americas, Australia • Received a presentation from emerging culture through regular visits of housing affordability in Australia. OTHER INFORMATION and Europe. young leaders in the Asia business Lendlease projects as detailed in on career development opportunities • Supported management in the Board regional program. Visits • Received presentations from the within Lendlease. participating in industry roundtables were conducted as part of the respective regional chief executive on modern slavery and supply chain. scheduled calendar of events and by officers on risk issues. Presentations • Conducted an external Board review individual Directors outside of the are cycled quarterly across all regions. covering Board culture, effectiveness • Requested a report on the transition formal program. and performance. plan for the Springboard program in the Tasman Peninsula which • Reviewed skills of the Board and concluded in June 2018.
OTHER INFORMATION OTHER identified gaps in Board composition. • Endorsed a 10 year partnership between Lendlease and the Great Barrier Reef Foundation. 94 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 95 Board of Directors’ Profiles
The names, skills, experience and qualifications of each person holding the position of Director of DIRECTORS’ REPORT the Company at the date of this Report are outlined below: DIRECTORS’ REPORT DIRECTORS’
1. D A Crawford AO 2. S B McCann 3. C B Carter AM 4. P M Coffey Chairman Group Chief Executive Officer and Managing Director (Independent Non Executive Director) (Independent Non Executive Director) (Independent Non Executive Director) (Executive Director)
Term of Office Term of Office Term of Office Term of Office Mr Crawford joined the Board in July 2001 and was appointed Mr McCann was appointed Group Chief Executive Officer in Mr Carter joined the Board in April 2012. Mr Coffey joined the Board in January 2017. Chairman in May 2003. December 2008 and joined the Board as Managing Director in March 2009. FINANCIAL STATEMENTS
Skills, Experience and Qualifications Skills, Experience and Qualifications Skills, Experience and Qualifications Skills, Experience and Qualifications Mr Crawford has extensive experience in risk management Mr McCann joined Lendlease in 2005. Prior to his appointment Mr Carter is one of the founding partners of The Boston Mr Coffey served as the Deputy Chief Executive Officer and business reorganisation. He has acted as a consultant, as Group Chief Executive Officer, Mr McCann was Group Consulting Group in Australia, retiring as a Senior Partner in of Westpac Banking Corporation, from April 2014 until his scheme receiver and manager, and liquidator to many large and Finance Director, appointed in March 2007 and Chief Executive 2001, and continues as an advisor with that company. He has retirement in May 2017. As the Deputy Chief Executive Officer, complex corporations. Mr Crawford was previously Australian Officer for Lendlease’s Investment Management business from over 30 years’ experience in management consulting advising Mr Coffey had the responsibility of overseeing and supporting National Chairman of KPMG and a former Non Executive September 2005 to December 2007. on organisational, strategy and governance issues. His career relationships with key stakeholders of Westpac including Director of BHP Billiton Corporation Limited. He was appointed Mr McCann is a highly regarded and experienced business has included major projects in Australia and overseas. industry groups, regulators, customers and government. an Officer of the Order of Australia (AO) in June 2009 in leader with over 25 years’ of executive experience. Prior to Mr Carter has wide industry knowledge on corporate He was also responsible for Westpac’s Mergers &
FINANCIAL STATEMENTS FINANCIAL recognition for service in various fields including to business as joining Lendlease, Mr McCann had 15 years’ experience in governance issues and has carried out Board performance Acquisitions function. a Director of public companies, to sport particularly through property, funds management, investment banking and capital reviews for a number of companies. He has co authored a Prior to this role, Mr Coffey held a number of executive the review and restructure of national sporting bodies, and to markets transactions gained through senior leadership roles at book on Boards, ‘Back to the Drawing Board’, published by positions at Westpac including Chief Financial Officer the community through contributions to arts and educational ABN AMRO and as Head of Property at Bankers Trust. Previous Harvard Business School Press. Mr Carter was also a former and Group Executive, Westpac Institutional Bank. He has organisations. roles included four years as a mergers and acquisitions lawyer Non Executive Director of Wesfarmers Limited, serving on that successfully led operations based in Australia, New Zealand, Mr Crawford holds a Bachelor of Commerce and Bachelor of at Freehills and four years in taxation accounting. board for 12 years. the United States and the United Kingdom and Asia and has extensive experience in financial markets, funds management, Laws from the University of Melbourne and is a Fellow of the Mr McCann is a member of the Business Council of Australia and Mr Carter holds a Bachelor of Commerce from Melbourne balance sheet management and risk management. He began Institute of Chartered Accountants. the Property Council of Australia’s Property Male Champions University and a Master of Business Administration from his career at the Reserve Bank of Australia and has also held of Change. In 2013 Mr McCann was announced as the Property Harvard Business School, where he graduated with Distinction executive positions at Citibank. Person of the Year by the Urban Taskforce Australia. and as a Baker Scholar. He is a Fellow of the Australian Institute of Company Directors. Mr Coffey holds a Bachelor of Economics (Hons) from the Mr McCann holds a Bachelor of Economics (Finance major) and a University of Adelaide and has completed the Executive Listed Company Directorships Bachelor of Laws from Monash University in Melbourne, Australia. (held within the last three years) Listed Company Directorships Program at Stanford University Business School. He is a graduate member of the Australian Institute of Company Inaugural Chairman and Non Executive Director of (held within the last three years) Directors and a Senior Fellow of the Financial Services Institute South32 Limited (appointed May 2015) Non Executive Director of SEEK Limited (appointed March of Australasia.
Non Executive Director of Evans Dixon Limited 2005, retired March 2018) OTHER INFORMATION (appointed May 2018)
Other Current Appointments Other Directorships and Positions Other Current Appointments Other Current Appointments Chairman of Australia Pacific Airports Corporation Limited • Nil President of Geelong Football Club Chairman of the Westpac Bicentennial Foundation Director of The National Golf Club Director of Clean Energy Finance Corporation Board OTHER INFORMATION OTHER
Board Committee Memberships Board Committee Memberships Board Committee Memberships Member of the Nomination Committee Chairman of the Nomination Committee Member of the Nomination Committee Member of the People and Culture Committee Member of the People and Culture Committee Member of the Sustainability Committee Member of the Risk Management and Audit Committee 96 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 97 Board of Directors’ Profiles DIRECTORS’ REPORT DIRECTORS’ REPORT DIRECTORS’
5. P M Colebatch 6. D P Craig 7. S B Dobbs 8. J S Hemstritch (Independent Non Executive Director) (Independent Non Executive Director) (Independent Non Executive Director) (Independent Non Executive Director)
Term of Office Term of Office Term of Office Term of Office Mr Colebatch joined the Board in December 2005. Mr Craig joined the Board in March 2016. Mr Dobbs joined the Board in January 2015. Ms Hemstritch joined the Board in September 2011.
Skills, Experience and Qualifications Skills, Experience and Qualifications Skills, Experience and Qualifications Skills, Experience and Qualifications Mr Colebatch has extensive experience in insurance, strategy, Mr Craig is a business leader with a successful international Mr Dobbs was Senior Group President, Industrial and Ms Hemstritch has extensive senior executive experience in risk management and investment banking, gained over an career spanning over 37 years in finance, accounting, audit, Infrastructure at Fluor Corporation until his retirement in June information technology, communications, change management
international career spanning 35 years. He held a number risk management, strategy and mergers and acquisitions, in the 2014. After joining Fluor in 1980, Mr Dobbs was responsible for and accounting. She also has broad experience across the FINANCIAL STATEMENTS of senior roles at large international corporations including banking, property and professional services industries. He was a wide diversity of markets including infrastructure, mining, financial services, telecommunications, government, energy Swiss Reinsurance Company, Zurich, where he served on the the Chief Financial Officer of Commonwealth Bank of Australia telecommunications, transportation, heavy manufacturing, and manufacturing sectors and in business expansion in Asia. Executive Board, and at Credit Suisse Group, where he was he from 2006, through the global financial crisis, until he retired healthcare, water and alternative power. He served the During a 25 year career with Accenture and Andersen Consulting, was Chief Financial Officer and subsequently Chief Executive in June 2017. At Commonwealth Bank, he was responsible for company in numerous locations including the US, China, Ms Hemstritch held a number of leadership positions and worked Officer of Credit Suisse Asset Management and also served on leading the finance, treasury, property, security, audit and Europe and Southern Africa. with clients across Australia, Asia and the US. the Executive Board. investor relations teams. Mr Dobbs is an industry expert in public private partnerships She was Managing Director Asia Pacific for Accenture from 2004 Mr Colebatch has extensive experience as a company Mr Craig’s previous leadership roles have included Chief Financial and private finance initiatives and has served as an advisor until her retirement in 2007. Ms Hemstritch was a member of director, including 10 years on the Man Group Board, a FTSE Officer for Australand Property Group, Global Chief Financial on these issues to a number of government ministries. He Accenture’s global Executive Leadership Team and oversaw the 250 company, and six years as a Non Executive Director of Officer for PwC Consulting and a Partner at PwC (17 years). was a governor of industry forums related to engineering and management of Accenture’s business in the Asia Pacific region FINANCIAL STATEMENTS FINANCIAL international general insurance group IAG Limited. construction at the World Economic Forum from 2008 to 2014 which spanned 12 countries and included 30,000 personnel. Mr Craig holds a Bachelor of Economics degree from the Mr Colebatch has a Bachelor of Science and Bachelor of and served as Vice Chair of the Forum’s Global Agenda Council Ms Hemstritch has a Bachelor of Science in Biochemistry and University of Sydney, is a Fellow of the Institute of Chartered on Infrastructure in 2013 and 2014. Engineering from the University of Adelaide, a Master of Accountants, ANZ and a Fellow of the Australian Institute of Physiology from the University of London and is a Fellow of the Mr Dobbs holds a Doctorate in Engineering from Texas A&M Science from Massachusetts Institute of Technology and a Company Directors. Institutes of Chartered Accountants in Australia and in England Doctorate in Business Administration from Harvard University. University and is a registered professional engineer (retired). and Wales. She is a Member of the Council of the National Library of Australia and Chief Executive Women Inc. Listed Company Directorships Listed Company Directorships (held within the last three years) (held within the last three years) Listed Company Directorships Non Executive Director of Man Group plc Non Executive Director of Cummins Inc (held within the last three years) (appointed September 2007, retired September 2017) (appointed October 2010) Non Executive Director of Telstra Corporation Limited (appointed August 2016) Non Executive Director of Tabcorp Holdings Ltd (appointed November 2008, retired October 2017) Non Executive Director of the Commonwealth Bank of Australia (appointed October 2006, retired March 2016) OTHER INFORMATION Non Executive Director of Santos Limited (appointed February 2010, retired May 2016) Other Current Appointments Other Current Appointments Board Committee Memberships Board of Trustees for the Prince of Liechtenstein Foundation President of the Financial Executives Institute of Australia Member of the Nomination Committee Other Current Appointments and the LGT Group Foundation Deputy Chairman of the Victor Chang Cardiac Research Institute Member of the Risk Management and Audit Committee Member of the Advisory Board of Herbert Smith Freehills Global LLP Member of the Sustainability Committee Council of the National Library of Australia Vice President of the Board of The Walter and Eliza Hall Institute OTHER INFORMATION OTHER
Board Committee Memberships Board Committee Memberships Board Committee Memberships Member of the Nomination Committee Chairman of the Risk Management and Audit Committee Chairman of the People and Culture Committee Member of the People and Culture Committee Member of the Nomination Committee Member of the Nomination Committee Member of the Risk Management and Audit Committee Member of the People and Culture Committee Member of the Risk Management and Audit Committee 98 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 99 Board of Directors’ Profiles DIRECTORS’ REPORT DIRECTORS’ REPORT DIRECTORS’
9. E M Proust AO 10. M J Ullmer 11. N M Wakefield Evans General Counsel and Company Secretary (Independent Non Executive Director) (Independent Non Executive Director) (Independent Non Executive Director) Qualifications and Experience
Term of Office Term of Office Term of Office Ms Proust joined the Board in February 2018. Mr Ullmer joined the Board in December 2011. Ms Wakefield Evans joined the Board in September 2013.
Skills, Experience and Qualifications Skills, Experience and Qualifications Skills, Experience and Qualifications Ms Proust is one of Australia’s leading business figures and has Mr Ullmer brings to the Board extensive strategic, financial Ms Wakefield Evans is an experienced Non Executive Director and had a diverse career holding leadership roles in the public and and management experience accumulated over his career in has considerable management and legal experience having spent K Pedersen
private sectors for over 30 years. Ms Proust spent eight years at international banking, finance and professional services. He was 29 years at King & Wood Mallesons (20 years as a partner). Nicola Ms Pedersen was appointed Group General Counsel in January FINANCIAL STATEMENTS ANZ Group including four years as Managing Director of Esanda, the Deputy Group Chief Executive Officer of National Australia was a mergers & acquisitions and capital markets lawyer and held 2013. Prior to this she was General Counsel and Company Managing Director of Metrobanking and Group General Manager, Bank (NAB) from 2007 until he retired in August 2011. He joined a number of senior management roles. She has been involved in Secretary for other large property and construction companies. Human Resources, Corporate Affairs and Management Services. NAB in 2004 as Finance Director and held a number of key a number of significant and groundbreaking M&A transactions Ms Pedersen has a Masters of Law from the University of Before joining ANZ, Ms Proust was Secretary (CEO) of the positions including Chairman of the subsidiaries Great Western and has advised some of the largest companies in Australia, Asia Technology, Sydney and a Bachelor of Commerce/Bachelor of Department of Premier and Cabinet (Victoria) and Chief Executive and globally. She has extensive international experience, having of the City of Melbourne. Bank (US) and JB Were. Laws from the University of New South Wales. Prior to NAB, Mr Ullmer was at Commonwealth Bank of Australia, worked in New York and Hong Kong, and is well known in Asia Ms Proust has extensive board experience on listed and private where she was the Managing Partner, International at initially as Group Chief Financial Officer and then Group Executive companies, subsidiaries and joint ventures, as well as government King & Wood Mallesons, Hong Kong. Ms Wakefield Evans was with responsibility for Institutional and Business Banking. Before and not for profit boards. She was made an Officer of the Order of included in the Australian Financial Review and Westpac Group’s that he was a Partner at accounting firms KPMG (1982 to 1992) and Australia in 2010 for distinguished service to public administration inaugural list of ‘Australia’s 100 Women of Influence’. She is a FINANCIAL STATEMENTS FINANCIAL Coopers & Lybrand (1992 to 1997). and to business, through leadership roles in government and member of Chief Executive Women Limited. private enterprise, as a mentor to women, and to the community Mr Ullmer has a Bachelor of Mathematics from the University of Ms Wakefield Evans holds a Bachelor of Jurisprudence and Bachelor through contributions to arts, charitable and educational bodies. Sussex. He is a Fellow of the Institute of Chartered Accountants of Laws degree from the University of New South Wales and is a Ms Proust holds a Bachelor of Arts (Hons) from La Trobe University and a Senior Fellow of the Financial Services Institute of Australia. qualified lawyer in Australia, Hong Kong and the United Kingdom. and a Bachelor of Laws from the University of Melbourne.
Listed Company Directorships Listed Company Directorships Listed Company Directorships W Lee (held within the last three years) (held within the last three years) (held within the last three years) Ms Lee joined Lendlease in September 2009 and was appointed Non Executive Director of Perpetual Limited Non Executive Director of Woolworths Limited Non Executive Director of Macquarie Group Limited Company Secretary in January 2010. Prior to her appointment, (appointed January 2006, retired November 2015) (appointed January 2012) (appointed February 2014) Ms Lee was a Company Secretary for several subsidiaries of Non Executive Director of Toll Holdings Limited a large financial institution listed on the Australian Securities (appointed May 2011, retired June 2017) Exchange. She has over 10 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 Other Current Appointments in Applied Corporate Governance and is a Fellow of the
Chair of 30% Club, Australia Governance Institute Australia. OTHER INFORMATION Director of Bupa Australia & New Zealand Director of the Clean Energy Finance Corporation Other Current Appointments Other Current Appointments Director of O’Connell St & Associates Chairman of the Australian Institute of Company Directors Chairman of the Melbourne Symphony Orchestra Director of UNSW Foundation Limited Officers Who Were Previously Partners of the Chairman of Nestle (Australia) Trustee of the National Gallery of Victoria Director of Australian Institute of Company Directors Audit Firm Chairman of the Advisory Board of the Bank of Melbourne Director of Chief Executive Women Limited KPMG or its predecessors was appointed as Lendlease’s auditor at its first Annual General Meeting in 1958. OTHER INFORMATION OTHER Mr Crawford was a Partner and Australian National Chair of Board Committee Memberships Board Committee Memberships Board Committee Memberships KPMG. He resigned from this position on 28 June 2001 prior to his appointment as a Director of Lendlease on 19 July 2001. Member of the Nomination Committee Chairman of the Sustainability Committee Member of the Nomination Committee Member of the Sustainability Committee Member of the Nomination Committee Member of the Risk Management and Audit Committee Mr Ullmer was also a Partner at KPMG from 1982 until October 1992. Member of the Risk Management and Audit Committee Member of the Sustainability Committee 100 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 101
Attendance at Meetings of Directors 1 July 2017 to 30 June 2018 The number of Board and Board Committee meetings held, and the number of meetings attended by each Director during the 2018 financial year, are set out in the tables below. Number of Number of Board of Directors’ Information 1 Membership Meetings Held Meetings Attended Board D A Crawford (Chairman) 14 14 Interests in Capital S B McCann (Group CEO) 14 14 DIRECTORS’ REPORT C B Carter4 14 13 The interests of each of the Directors in the Stapled Securities of the Group at 22 August 2018 is set out below. P M Coffey 14 14 Securities Held Securities Held P M Colebatch 14 14 Securities Held Beneficially/ Total Securities Held Beneficially/ Total D P Craig 14 14 Current Directors Directly 2018 Indirectly 20181 2018 Directly 2017 Indirectly 20171 2017 S B Dobbs 14 14 D A Crawford 962 82,353 83,315 926 80,437 81,363 J S Hemstritch4 14 13 E M Proust2 5 5 S B McCann 495,492 270,644 766,136 380,243 364,754 744,997 D J Ryan3 7 7 C B Carter 15,000 15,000 15,000 15,000 M J Ullmer 14 14 DIRECTORS’ REPORT DIRECTORS’ P M Coffey 9,810 9,810 4,810 4,810 N M Wakefield Evans4 14 13
5 P M Colebatch 8,790 9,533 18,323 6,712 11,611 18,323 Board Subcommittee Meetings D A Crawford (Chairman) 2 2 S B McCann (Group CEO) 3 3 D P Craig 24,870 24,870 14,870 14,870 C B Carter 1 1 S B Dobbs 12,000 12,000 8,000 8,000 P M Coffey 2 2 P M Colebatch 1 1 J S Hemstritch 20,000 20,000 20,000 20,000 D P Craig 2 2 E M Proust2 10,000 10,000 - - - S B Dobbs 1 1 M J Ullmer 50,000 50,000 50,000 50,000 J S Hemstritch 1 1 M J Ullmer 3 3 N M Wakefield Evans 16,766 16,766 16,131 16,131 N M Wakefield Evans 2 2 Former Director Nomination Committee D A Crawford (Chairman) 8 8 D J Ryan3 37,703 37,703 37,200 37,200 S B McCann (Group CEO) 8 8 C B Carter4 8 8 1. Includes securities in the Retirement Plan beneficially held by D A Crawford, P M Colebatch and D J Ryan. P M Coffey 8 8 2. E M Proust joined the Board in February 2018. P M Colebatch 8 8 FINANCIAL STATEMENTS 3. D J Ryan ceased to be a Non Executive Director on 17 November 2017. The balance of securities held at the end of the financial year shown here represents D P Craig 8 8 the balance held at that date. S B Dobbs 8 8 J S Hemstritch4 8 8 E M Proust2 3 3 Directors’ Meetings D J Ryan3 4 4 M J Ullmer 8 8 Board Meetings People and Culture Committee N M Wakefield Evans4 8 8 The Board meets as often as necessary to fulfil its role. Directors The People and Culture Committee’s agenda reflects the People and Culture Committee J S Hemstritch (Chairman) 5 5 are required to allocate sufficient time to the Group to perform importance of human capital to the Group’s strategic and C B Carter 5 5 their responsibilities effectively, including adequate time to business planning and it assists the Board in establishing P M Coffey 2 2 FINANCIAL STATEMENTS FINANCIAL prepare for Board meetings. During the financial year ended 30 appropriate policies for people management and remuneration P M Colebatch 2 2 June 2018, 14 Board meetings were held. Four of these meetings across the Group. During the financial year ended 30 June 2018, D P Craig 2 2 were held in Australia, two in the US and two in Asia. In addition, five meetings of the People and Culture Committee were held. D J Ryan3 3 3 Standing Invitees: six meetings were held via teleconference to discuss specific Sustainability Committee matters, and matters were dealt with as required by circular D A Crawford 5 5 resolution. Three Board subcommittee meetings were also The Sustainability Committee consists entirely of Non Executive S B McCann (Group CEO) 5 5 constituted to deal with specific matters. Directors. The Committee assists the Board in monitoring the Risk Management and Audit Committee D P Craig (Chairman) 4 4 decisions and actions of management in achieving Lendlease’s The Board recognises the essential role of Committees in P M Coffey 2 2 aspiration to be a sustainable organisation. During the financial guiding the Company on specific issues. Committees address P M Colebatch 4 4 year ended 30 June 2018, four meetings of the Sustainability important corporate issues, calling on senior management and S B Dobbs 4 4 Committee were held. external advisors prior to making a final decision or making a J S Hemstritch 2 2 recommendation to the full Board. Nomination Committee M J Ullmer 4 4 N M Wakefield Evans 4 4 There are four permanent Committees of the Board. The Nomination Committee consists entirely of Non Executive Standing Invitees: Directors. The Committee assists the Board by considering D A Crawford 4 4 Risk Management and Audit Committee nominations to the Board which provide for an appropriate mix of
S B McCann (Group CEO) 4 4 OTHER INFORMATION The Risk Management and Audit Committee consists entirely expertise, skills and experience on the Board. During the financial Sustainability Committee M J Ulmer (Chairman) 4 4 of Non Executive Directors. The principal purpose of the year ended 30 June 2018, all eight meetings of the Nomination C B Carter 4 4 Committee is to assist the Board in fulfilling its corporate Committee were held in conjunction with scheduled Board S B Dobbs 4 4 governance and oversight responsibilities in relation to the meetings and all Non Executive Directors routinely attended. E M Proust2 1 1 Group’s risk management and internal control systems, D J Ryan3 2 2 accounting policies and practices, internal and external audit N M Wakefield Evans 4 4 functions and corporate reporting. During the financial year Standing Invitees: ended 30 June 2018, four meetings of the Risk Management and D A Crawford 4 3 Audit Committee were held. OTHER INFORMATION OTHER S B McCann (Group CEO) 4 4
1. Reflects the number of meetings held during the time the Director held office during the year. 6 out of the 14 meetings were out of schedule Board teleconference constituted to address specific issues. 2. E M Proust was appointed to the Board on 1 February 2018. The number of meetings attended reflects the number of meetings since E M Proust’s appointment. 3. D J Ryan retired from the Board on 17 November 2017. The number of meetings attended reflects the number of meetings since D J Ryan’s retirement. 4. C B Carter, J S Hemstritch and N M Wakefield Evans were unable to attend the out of schedule Board teleconference as this was called at short notice to addess a specific issue. 5. Three subcommittes of the Board were convened during the reporting period to address specific issues. Only the subcommittee members attended the relevant meeting. 102 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 103 Remuneration Report
Message from the Board Contents DIRECTORS’ REPORT We are pleased to present the 2018 Remuneration Report where we explain how performance has been linked to reward outcomes Executives and Non Executive Directors Covered by this Report 104 for Key Management Personnel (KMP) during this year. Lendlease has developed and embedded a competitive Executive Reward Strategy (ERS) to deliver long term outperformance and to secure the right people to lead the Group. Our approach to executive reward has been a factor in driving our success. a. Executive Remuneration at Lendlease and 2018 Performance 105 For securityholders, this performance has been illustrated in Lendlease’s Total Securityholder Return (TSR) of 193.8 per cent over the past five years, compared to 72.2 per cent for the ASX 100 accumulation index over the same period (see graph below). Short Term Incentive (STI) outcomes are strongly linked to business performance. During the year, the Group delivered financial and b. Executive Remuneration Outcomes and Disclosures 110 DIRECTORS’ REPORT DIRECTORS’ operational outcomes slightly ahead of the challenging targets set by the Board. Stretch goals to continue to improve safety performance were set in 2018. There have been improvements in these broader measures, however tragically two fatalities were reported during 2018. c. Remuneration Governance 114 These incidents have been accounted for in the Board’s determination of the overall incentive pool, the Board’s assessment of the STI payable to the Group CEO, and in STIs paid to other executives based on either accountability or having responsibility for safety outcomes. d. How Executive Rewards are Linked to Performance 118 Changes Considered During 2018 As indicated in last year’s Remuneration Report, the Board has been actively reviewing the Executive Reward Strategy (ERS) this year e. Executive Contracts 123 to assess opportunities to better align senior executives’ pay to Lendlease’s strategy and to drive continued success. Following a thorough review process and consultation with internal and external stakeholders, the Board has made the decision to make substantial changes to the ERS for 2019. f. Equity Based Remuneration 124 A summary of the changes is included in the final section of the Remuneration Report. The most common questions raised during the consultation period have been included – along with the answers. We look forward to your comments on both our remuneration arrangements and the Remuneration Report. g. Non Executive Directors’ Fees 129 FINANCIAL STATEMENTS
h. Executive Reward Changes for 2019 130
This report forms part of the Directors’ Report and has been audited in accordance with the Corporations Act 2001.
David Crawford, AO Jane Hemstritch Chairman Chairman, People and Culture Committee FINANCIAL STATEMENTS FINANCIAL
Comparative Total Securityholder Return Performance LLC vs ASX 100
200%
150%
100%
50% OTHER INFORMATION
0% Total Securityholder (TSR) Return Total Jul 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Source: Bloomberg OTHER INFORMATION OTHER 104 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 105
Remuneration Report continued
Executives and Non Executive Directors Covered by this Report a. Executive Remuneration at Lendlease and 2018 Performance DIRECTORS’ REPORT The following Executives and Non Executive Directors were considered Key Management Personnel (KMP) for the year ended Lendlease’s Executive Reward Strategy on a Page 30 June 2018. Former Executives and Non Executive Directors who were KMP for the year ended 30 June 2017 are also covered by this report. The following provides a high level overview of the key aspects of Lendlease’s Executive Reward Strategy, guiding principles and remuneration components.
Group CEO and Senior Executives Vision To create the best places. Current Executives Strategic To be the leading international property and infrastructure Group. DIRECTORS’ REPORT DIRECTORS’ Stephen McCann Group Chief Executive Officer and Managing Director (Group CEO) Direction Johannes Dekker Group Head of Engineering and Building since 1 May 2018 Underpinned by Tarun Gupta Group Chief Financial Officer Our Executive A remuneration framework which attracts and retains high calibre executives needed to Denis Hickey Chief Executive Officer, Americas Reward deliver on the strategy and aligns rewards with sustainable performance. Daniel Labbad Chief Executive Officer, International Operations and Chief Executive Officer, Europe Strategy
Anthony Lombardo Chief Executive Officer, Asia Applying principles of Kylie Rampa Chief Executive Officer, Property Australia Executive Simplicity Responsiveness Balance Governance and Risk Simple, transparent and Considers the interests A significant portion of Management David Andrew Wilson Group Chief Commercial and Risk Officer since 15 January 2018 Reward Strategy easy to communicate. of internal and external remuneration is at risk, but can Clear practices that minimise Principles stakeholders. be earned by achieving potential conflicts of interest and Former Executive outstanding performance. enable effective decision making by the Board and management. Robert McNamara Group Chief Risk Officer until 31 March 2017 and ceased employment with the Group on 31 March 2017 Delivered through remuneration components of Note: the term senior executives used throughout this Remuneration Report refers to all the executives listed above, unless stated otherwise.
Key Fixed remuneration. Short Term Incentives STI delivered as deferred Long Term Incentives (LTI). FINANCIAL STATEMENTS Remuneration (STI) delivered as cash. securities. Non Executive Directors Components Current Non Executive Directors With business and operational risks managed by David Crawford Independent Chairman Business and Performance Robust forfeiture Substantial Key Performance Qualitative Board discretion hurdles that and malus Mandatory Indicators that overlay built into to reward good Colin Carter Independent Non Executive Director Operational Risk appropriately provisions and Securityholding for focus on key performance decisions, Philip Coffey Independent Non Executive Director reflect the ‘long deferral of the Group CEO and operational risks assessment to account for tail’ of risk and incentives for up senior executives. including safety. provide a unforeseen Phillip Colebatch Independent Non Executive Director profitability in to four years. balanced and circumstances our business. holistic and FINANCIAL STATEMENTS FINANCIAL David Craig Independent Non Executive Director assessment. appropriately manage windfall Steve Dobbs Independent Non Executive Director gains. Jane Hemstritch Independent Non Executive Director While aligning management and securityholders through Elizabeth Proust Independent Non Executive Director (appointed 1 February 2018) Alignment with Mandatory securityholding for the Use of Total Securityholder Return and Significant deferral of incentives into Michael Ullmer Independent Non Executive Director Securityholders Group CEO and senior executives. Return on Equity as LTI performance Lendlease securities. hurdles. Nicola Wakefield Evans Independent Non Executive Director Driving performance through Short Term Incentives Former Non Executive Director Short Term Industry specific measures Financial measures Strategic, operational David Ryan Independent Non Executive Director (ceased this role 17 November 2017) Incentives To focus management on That measure both the quality and people measures building a healthy development and growth in earnings and To focus management on a pipeline and backlog (which are have a qualitative overlay that balance of measures that key to long term sustainable reviews the overall financial health underpin the growth and value creation). of the business. sustainability of the Group including operational
efficiency, safety and OTHER INFORMATION leadership.
And long term securityholder value creation through Long Term Incentives Long Term Performance period of three Relative Total Securityholder Return Average Return on Equity Incentives to four years Only rewards the Group CEO and senior An important long term measure of Reflects an appropriate balance executives for delivering returns that are how well the management team between reward that motivates greater than a securityholder could achieve generates earnings from capital executives while reflecting the long in the market and encourages management invested and rewards decisions in term ‘tail’ of profitability and risk to maintain a strong focus on respect of developing, managing,
OTHER INFORMATION OTHER associated with ‘today’s decisions’. securityholder outcomes. acquiring and disposing of assets.
While maintaining the highest standards of governance Governance The Board holds ultimate discretion. Strict protocols in place for interactions with the Board’s remuneration advisor. 106 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 107
Remuneration Report continued
a. Executive Remuneration at Lendlease and 2018 Performance continued Five Year Performance Summary Performance and Funding for Short Term Incentives DIRECTORS’ REPORT 2018 Performance & Outlook The graphs below outline some key indicators of Group Incentives are funded by an incentive pool which represents a performance over the past five years. maximum that can be spent on incentives. Using an incentive pool For a detailed analysis of our Group and segment Performance and Outlook, please refer to pages 70 to 83. A summary is included below. provides for a fair sharing of profits between securityholders and Statutory Profit after Tax (PAT) Attributable employees by capping the amount of profits that can be paid to to Securityholders ($m) employees. It also forges a strong link between Group performance and Short Term Incentive (STI) outcomes because STI outcomes are 822.9 influenced (up or down) by the available pool. 698.2 758.6 792.8
DIRECTORS’ REPORT DIRECTORS’ Key Financials Profit after Tax 618.6 Group Profit after Tax (PAT) is one factor that determines the overall Percentage 800 size of the STI pool. An assessment of overall profit make up, the 700
FINANCIAL FY17 FY18 Movement 600 quality and sustainability of earnings and other financial and non
500 financial factors are also considered. Key Metrics 400 Group PAT was above target for 2018. Following an overall $ 300 759 793 Revenue1 $m 16,671.0 16,572.1 (1%) FY14 FY15 FY16 FY17 FY18 200 assessment of performance and in particular acknowledging the EBITDA $m 1,201.8 1,244.8 4% 100 two fatal incidents which occurred, the Board approved an overall 792.8 0 1 incentive pool that will deliver lower average STI awards compared Profit after Tax (PAT) $m 758.6 792.8 5% FY17 FY18 Total Dividends/Distributions ($m) to 2017, whilst PAT increased by 5 per cent. Operating and Investing MILLION 409.8 384.9 399.6 Cash Flow $m 216.1 294.6 36% 313.2 349.1 Group CEO Scorecard and Performance in 2018 Net Assets $m 6,166.5 6,414.2 4% Return on Equity STI outcomes are based on both individual performance against 15 Net Debt $m 912.8 1,181.8 29% personal Key Performance Indicators (KPIs) and on the performance 12 of the Group (and the respective region for executives with regional Effective Tax Rate2 % 24.7 25.6 4% 9 responsibility). Personal KPIs for the Group CEO and senior Key Returns executives are contained in a scorecard. The Board has a rigorous % 6 FY14 FY15 FY16 FY17 FY18 12.9% 12.7% process for the setting of scorecards at the beginning of the year Earnings per Security cents 130.1 136.1 5% FINANCIAL STATEMENTS 3 and for the evaluation of scorecards at the end of the year. Since Distribution per Security cents 66.0 69.0 5% 2 12.7 0 Earnings per Stapled Security (EPSS) (cents) 2017 a simpler approach to goal setting has been used for senior Weighted avg Securities no.(m) 583.0 582.5 - FY17 FY18 executives, which focuses efforts on fewer, more critical financial, (Excluding Treasury Securities) people and strategic objectives. 150.8 135.2 137.0 EBITDA Mix Earnings per Security 112.4 126.3 They include items such as: 150 • Financial performance;
120 • Health and safety; • Delivery of key projects; 90 $1,420 • Sale of key assets; 47% 47% 60 FINANCIAL STATEMENTS FINANCIAL O 130.1 136.1 • Embedding operational excellence; and E TDA 30 • Investing in people. FY14 FY15 FY16 FY17 FY18 0 The Board also assesses the Group CEO and senior executives 136.1 FY17 FY18 6% against Lendlease’s defined: CENTS Annual Total Securityholder Return (%)3 • Leadership capabilities (including health and safety, sustainability Development Construction Investments and diversity and inclusion); 62 • Values; and 1. Includes finance revenue. • Leadership behaviours. 2. Lendlease’s approach to tax and primary drivers of the effective tax rate are outlined in the 2018 Tax Report 38 (http://www.lendlease.com/investor-centre/taxation). Details on tax balances are included within the Consolidated Financial Statements. 20 24 In this way, the STI outcome rewards ‘what’ is achieved as well as 3. Excludes Corporate. (13) ‘how’ it is achieved. Lendlease is committed to the safety and wellbeing of all of its employees. The Board considers safety leadership behaviours and FY14 FY15 FY16 FY17 FY18 outcomes in assessing the overall performance of the Group CEO and each senior executive. While the assessment is not structured formulaically or as a ‘gateway’ measure, expectations are clearly 4 Return on Equity (ROE) (%) communicated to the Group CEO and senior executives that poor OTHER INFORMATION health and safety outcomes may lead to reduction in STI outcomes for 18.2 the year. The two fatal incidents in 2018 have been considered in assessing 12.4 13.0 12.9 12.7 the Group CEO’s STI award. Notwithstanding the increase to PAT and continuing strong scorecard results, the Group CEO’s STI award has been assessed at target, rather than at a level that would have been substantially above target. The Board’s assessment of the Group CEO’s scorecard is included OTHER INFORMATION OTHER FY14 FY15 FY16 FY17 FY18 over the page.
1. $174.2 million company unfranked dividend was declared subsequent to the reporting date for June 2018. 2. EPSS (Earnings per Stapled Security) is calculated using the weighted average number of securities on issue excluding treasury securities. EPSS, including treasury securities, is reported in the Performance and Outlook section of this report. 3. Represents the movement in the Group’s security price, distribution yield and any return on capital during the financial year. 4. ROE is calculated as the annual Statutory Profit after Tax attributable to securityholders divided by the arithmetic average of beginning, half year and year end securityholders’ equity. 108 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 109
Remuneration Report continued
a. Executive Remuneration at Lendlease and 2018 Performance continued DIRECTORS’ REPORT Group CEO Scorecard and Performance in 2018 continued 30 June 2018 was $1,750,000 (being the combined cash and deferred components of his STI), which equated to 100 per cent of the Group The Board has assessed the Group CEO’s 2018 scorecard and made an overall judgement as to whether the scorecard results fully reflect CEO’s target STI award. Refer to the table Remuneration Awarded by the Board on page 111 to see the total remuneration awarded to the performance and appropriate management of risk. Following the Board’s assessment, the Group CEO’s STI awarded for the year ended Group CEO for 2018.
PERFORMANCE MEASURES PILLARS for year ended 30 June 2018 OF VALUE REASON CHOSEN RESULT PERFORMANCE ASSESSMENT PER CENT
DIRECTORS’ REPORT DIRECTORS’ Financial performance
A range of financial measures that include A breadth of financial measures, in A summary of the result against each financial measure is below: specific targets for: combination with the forward-looking assessment of the financial health of the Profit after Tax Ahead of Target Target increased by 6 per cent from $735m in FY17 to $780m in FY18. Actual Profit after Tax is business, focuses the Group CEO on the 2 per cent ahead of target for FY18 and 5 per cent ahead of FY17. - Profit after Tax delivery of financial results in the short - EBITDA term whilst taking decisions with an EBITDA $ Behind Target Target increased by 12 per cent from $1,144m in FY17 to $1,277m in FY18. Actual EBITDA was $1,245m, behind target and up 4 per cent on FY17. - Return on Equity emphasis on the long term interests of securityholders. - Operating and Investing Cash Flow Return on Equity On Target At 12.7 per cent the result was in the upper half of the stated target range of 10 per cent - 14 per cent. - Overheads Operating and Ahead of Target Actual cash flow was $294.6m, up 36 per cent from FY17. BELOW ABOVE An assessment of the overall financial health of Investing Cash Flow the business: Overheads Ahead of Target Actual overheads were 6 per cent better than target. - Comparing the quality of the result relative to the targets set. The Group continues to deliver results in line with its Portfolio Management Framework, with strong Return On Investment Capital (ROIC) performance in the Development and Investments segments. The balance sheet remains strong with gearing at 8 per cent and total liquidity at $3.0 billion.
Non financial performance FINANCIAL STATEMENTS Health and Safety We are committed to the health and The frequency rate of critical incidents fell by 27 per cent during the year and the Level 3 CIFR decreased by 63 per cent compared to FY17 safety of our people. The Critical Incident – ahead of the challenging 50 per cent reduction target that was set. Level 3 incidents are the most serious incidents that have the potential Frequency Rate (CIFR) helps us assess to cause fatalities to multiple workers or member of the public. how effective we are at eliminating life Notwithstanding the progress made during FY18 there were two fatal incidents recorded. These incidents in FY18 have been considered in threatening incidents. BELOW ABOVE assessing the Group CEO’s overall performance and STI outcome. The Group CEO provided visible health and safety leadership throughout the year. A deeper review of our safety culture and approach to implementing our GMRs is underway to drive continuous improvement in safety.
Strategic initiatives focused on capital Effective capital management drives Capital allocation targets are embedded by segment and region; and are aligned to the Portfolio Management Framework. Lendlease is ranked allocation and alternative sources of capital longer term securityholder returns. 3rd out of 50 peers in terms of capital management and financial discipline (Corporate Confidence Index).
FINANCIAL STATEMENTS FINANCIAL Surplus capital has been utilised through an on market buyback. Offshore invested capital is forecast to grow in line with our Portfolio BELOW ABOVE Management Framework.
Customers and Innovation Satisfied customers drive long term There has been continued focus on innovation, knowledge management and digital opportunities throughout the year. In FY18 we started value.Innovation contributes to better measuring customer satisfaction (CSAT) and advocacy (NPS) globally. More than 21,000 government, business and consumer customers were performance – capturing and surveyed across our Development, Construction and Investment businesses. There were some consistent themes across results, with the main responding to disruption creates drivers of satisfaction strongly dependent on the quality of key relationships and the customer service touchpoint experience. This research will opportunity. be regularly repeated in the future and we will be able to track performance against this value pillar, to further identify improvement BELOW ABOVE opportunities.
People Having the right people in leadership The average number of unique successors for regional leadership roles has increased by 23 per cent across the Group. roles is critical to long term success. The Group continues to invest in tailored talent development programs for project directors and other targeted groups. Retention of critical talent The Group CEO sponsors key people (those individuals identified in targeted groups) is 94 per cent, which is significantly in excess of the target retention rate of >90 per cent. initiatives and supports the internal The proportion of women in leadership roles1 has increased from 24.0 per cent to 24.3 per cent compared to our target of 24.5 per cent. movement of resources. Substantial progress across the Group was impacted by a 25 per cent headcount increase in the Engineering business where female The Group CEO actively promotes BELOW ABOVE representation in leadership roles improved from 11.5 per cent to 13.4 per cent, but is well below our Group target. diversity and inclusion to grow capability. The Group continues to address the issue of gender pay equity and the Group CEO is a member of the Property Male Champions of Change group.
Sustainability Capital investors, policy makers, This year, we report meaningful progress against our 20 per cent by 2020 reduction targets for energy, water and waste. OTHER INFORMATION customers and communities are seeking Cumulative results for Q3 FY18 are as follows:2 partners who can deliver efficient, - Energy (16 per cent reduction) healthy, resilient, culturally and socially - Water (9 per cent reduction) inclusive outcomes which deliver long - Waste (28 per cent reduction) (subject to audit confirmation). terms value Lendlease achieved recognition at the 90th percentile on the Dow Jones Sustainability Index. Lendlease maintained a leadership position against the Global Real Estate Sustainability Benchmarks (GRESB), where the following funds/ trusts achieved global number one rankings: - APPF Commercial, BELOW ABOVE - Lendlease International Towers Sydney Trust - Lendlease One International Towers Sydney Trust. The Group continues to demonstrate strong market leadership in indigenous engagement, including the following highlights: OTHER INFORMATION OTHER - Indigenous employment at 2 per cent of the total workforce (based on employees who identify as being Aboriginal or Torres Strait Islander) - 19 interns from the CareerTracker program are employed as permanent employees, as at June 2018. More than 90 indigenous university interns have been hosted by Lendlease through our partnership with CareerTrackers since 2011. - $68.3 million was spent in FY18 with registered and certified Indigenous businesses (compared to FY17 spend of $26m).
1. Leadership roles include a number of levels in the Lendlease Career Job Framework, including executive level roles. 2. The above performance is at March 2018 and is a cumulative measure. Full FY18 performance is subject to Limited Assurance by KPMG and will be available on www.lendlease.com in October 2018. In FY18, we have updated our FY14 waste baseline due to additional project information becoming available. This has resulted in an increased performance for waste in FY18 relative to the previous baseline utilised. 110 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 111
Remuneration Report continued
b. Executive Remuneration Outcomes and Disclosures Remuneration Awarded by the Board for the Year Ended 30 June 2018 DIRECTORS’ REPORT Comparison of Remuneration Tables The remuneration awarded by the Board to the Group CEO and senior executives during this year is set out in the table below. No fixed remuneration increases were awarded to senior executives in 2018, with the exception of an increase for Kylie Rampa. Any other In this section, the value of remuneration for the Group CEO and each senior executive is included. In addition to the required statutory increases to total remuneration for senior executives were made in the form of LTI awards. table (based on the accounting disclosures), we have included a further table setting out the remuneration awarded and a graph showing the remuneration received to provide a more complete illustration of our approach to executive remuneration. An explanation ‘AT RISK’ – DEFERRED TO of the differences between the tables is set out below. $000s1 SHORT TERM FUTURE PERIODS STI OPPORTUNITY % of % of STI STI LTI Face Total Target Maximum
DIRECTORS’ REPORT DIRECTORS’ 4 Disclosure Awarded Table and Remuneration Received Graph Statutory Table Name Fixed2 Cash3 Deferred Value Potential STI Paid STI Paid Stephen McCann 2,034 875 875 3,300 7,084 100% 67% Remuneration disclosed will relate to both the time in their Only shows remuneration for the time the Period Covered 5 current role (as KMP) and any other role they have held at executive was KMP. Johannes Dekker 198 50 50 - 298 78% 52% Lendlease during the financial year. Tarun Gupta 1,100 561 627 1,040 3,328 120% 80% Denis Hickey 1,429 390 390 720 2,929 65% 43% Fixed Includes the contractually awarded amount of Total The statutory disclosures include a value for Remuneration Package Value/Base Salary from 1 September 2017 or later. cash salary, non monetary benefits, Daniel Labbad 1,123 472 472 890 2,957 100% 67% It excludes annual leave and long service leave accruals. For superannuation and other long term benefits in Anthony Lombardo 1,010 433 433 790 2,666 100% 67% individuals employed for part of the year, only remuneration line with statutory remuneration disclosure paid during the employment period is included. requirements. Non monetary benefits also Kylie Rampa 1,000 524 635 720 2,879 140% 93% includes the movement in annual leave accruals. David Andrew Wilson6 1,247 262 306 - 1,815 130% 87%
Short Term The cash portion of the 2018 STI award that will be paid in The cash portion of the 2018 STI award that will Incentive September 2018 in respect of the 2018 financial year. be paid in September 2018 in respect of the Remuneration Received 2018 (STI) Cash 2018 financial year. The graph below outlines the remuneration received by the Group CEO and by senior executives during the year. Remuneration received is different from: FINANCIAL STATEMENTS STI Deferred In the Remuneration Awarded table, the deferred securities The accounting expense attributed to this • The remuneration awarded by the Board in 2018 which is wholly in respect of the current year; whilst remuneration received includes portion of the STI earned in respect of the year ended 30 financial year for Deferred STI granted in June 2018 but deferred until September 2019 and September 2016 and September 2017. remuneration for this and previous years; and September 2020. • The Statutory Remuneration disclosures (on page 112), which are prepared in accordance with the relevant accounting standards.
Long Term In the Remuneration Awarded table, the face value of 2018 The accounting expense attributed to this Incentive LTI grants made in September 2017. financial year for LTI awards made in the 2014, (LTI) These vest in September 2020 and September 2021 and are 2015, 2016, 2017 and 2018 financial years. 2,527 subject to relative Total Securityholder Return (TSR) and 1 FINANCIAL STATEMENTS FINANCIAL average Return on Equity (ROE) hurdles (explained in detail on page 120).
$000s 2,541 Prior STI and LTI In the Remuneration Received graph, the value of any 875 607 525 575 561 337 192 Awards Deferred STI awards and LTI awards which vested during 986 934 886 811 676 651 this financial year. The value shown represents the value of 50 the awards at the grant date. 561 390 472 433 524 262 The Deferred STI awards which vested in September 2017 2,034 198 1,100 1,429 1,123 1,010 1,000 520 were granted in September 2015 and September 2016. Stephen Johannes Tarun Denis Daniel Anthony Kylie David Andrew The LTIs which vested in September 2017 were granted in McCann Dekker5 Gupta Hickey Labbad Lombardo Rampa Wilson6 September 2013 and September 2014. Fixed Remuneration2 STI Cash3 Prior STI and LTI Awards Security Price Growth and Distributions Security Price In the Remuneration Received graph, the value of security Growth and price growth on vested awards between the grant date and 1. All executives are paid in local currency but reported in the above table and graph in AUD based on the following 12 month average Distributions the vesting date and the value of distributions for the same historic foreign exchange rates: GBP 0.57 (applied to Daniel Labbad), SGD 1.04 (applied to Anthony Lombardo), USD 0.77 (applied to period for prior STI and LTI awards. Denis Hickey).
2. Fixed remuneration includes the contractually awarded amount of Total Package Value (including the value of any benefits salary OTHER INFORMATION sacrificed) but excludes any allowances or non monetary benefits. 3. STI cash refers to the portion of the STI award for the year ended 30 June 2018 that will be paid in cash in September 2018. As outlined on page 118, the STI cash portion reflects half of the STI awarded up to a senior executive’s target STI and one third of the STI awarded above their target. 4. LTI awards were granted on 1 September 2017 on a face value basis. Refer to page 120 for a detailed explanation of LTI awards. 5. Johannes Dekker became KMP from 1 May 2018 when he commenced employment with Lendlease as Group Head of Engineering and Building. The amounts in the table and graph represent the total remuneration awarded or received. OTHER INFORMATION OTHER 6. David Andrew Wilson became KMP from 15 January 2018 when he returned from a period of unpaid leave and was appointed Group Chief Commercial and Risk Officer. The amounts in the table and graph are not pro rated for his time as KMP. Fixed remuneration in the awarded table represents his full year contractually awarded amount. 112 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 113
Remuneration Report continued
b. Executive Remuneration Outcomes and Disclosures continued Reconciliation of 2018 Statutory Remuneration with Actual Remuneration Received for the Group CEO DIRECTORS’ REPORT The following table shows the difference between the Group CEO’s remuneration received (page 111) and the statutory remuneration Statutory Disclosures – Remuneration of the Group CEO and Senior Executives for the Years Ended 30 June 2018 disclosure (page 112). and 2017
POST EMPLOYMENT SECURITY $000s1 SHORT TERM BENEFITS BENEFITS BASED PAYMENTS6 7,977 (3,573) Non Other 2,483 6,370 Cash Monetary STI Long Term Name Year Salary2 STI Cash3 Benefits4 Superannuation5 LTI Deferred Benefits7 Total DIRECTORS’ REPORT DIRECTORS’ (1,495) 948 Group CEO 30 Stephen McCann 2018 2,014 875 - 20 2,483 948 30 6,370 $000s 2017 2,014 875 - 20 2,342 1,190 30 6,471
Senior Executives Johannes Dekker8 2018 195 50 198 3 - 151 122 719 Total Remuneration LTI Deferred Leave Deferred LTI Total Received Vesting STI Vesting Expense STI Expense Expense Statutory Tarun Gupta 2018 1,080 561 - 20 648 677 1 2,987 2017 1,080 578 - 20 533 725 16 2,952 Less Add Denis Hickey 2018 1,429 390 50 11 461 624 - 2,965 2017 1,503 628 98 11 395 686 - 3,321 Long Term Incentive Performance Daniel Labbad9 2018 1,145 472 75 99 544 601 - 2,936 During 2018, two LTI awards were subject to performance testing. The performance hurdles were Relative TSR and average Return on Equity (ROE). Each hurdle is tested over a three and four year performance period. The outcomes are shown below. 2017 1,088 538 47 117 456 585 - 2,831 2014 Award FINANCIAL STATEMENTS Anthony Lombardo 2018 1,010 433 226 - 555 389 - 2,613 The four year Relative TSR test was conducted in July 2017. Lendlease’s relative TSR performance achieved the 85th percentile when 2017 1,000 343 246 - 496 551 - 2,636 compared to the comparator group. As a result, 100 per cent of the tested award vested. Kylie Rampa 2018 967 524 11 20 362 504 15 2,403 The four year average ROE test was also conducted in July 2017. Lendlease’s four year average ROE performance was 14.1 per cent. 2017 900 442 3 20 264 575 13 2,217 As a result, 83.1 per cent of the tested award vested. David Andrew Wilson10 2018 511 262 43 9 282 139 8 1,254 2015 Award The three year Relative TSR test was conducted in July 2017. Lendlease’s relative TSR performance achieved the 53rd percentile when Former Executives compared to the comparator group. As a result, 56 per cent of the tested award vested. 11 FINANCIAL STATEMENTS FINANCIAL Robert McNamara 2017 1,099 - 211 7 1,198 906 - 3,421 The three year average ROE test was also conducted in July 2017. Lendlease’s three year average ROE performance was 12.8 per cent. As a result, 58.8 per cent of the tested award vested. 1. All executives are paid in local currency but reported in the above table in AUD for 2018 based on the following 12 month average historic The four year Relative TSR and four year ROE tests are scheduled for July 2018 and the results will be shown in the 2019 Remuneration foreign exchange rates: GBP 0.57 (applied to Daniel Labbad), SGD 1.04 (applied to Anthony Lombardo), USD 0.77 (applied to Denis Report. Hickey). 2. Cash salary includes the payment of cash allowances such as motor vehicle allowance and holiday pay on termination. Average ROE % 3. Short Term Incentive (STI) Cash refers to the portion of the STI award for the year ended 30 June 2018 that will be paid in cash in 100 September 2018. As outlined on page 118, the STI cash portion reflects half of the STI awarded up to a Seniors Executive’s target STI and 83.1% of for 2014 LTI plan awards (Sept 2013 grant) one third of the STI awarded above their target. 90 4. Non monetary benefits may include items such as car parking, relocation and expatriate benefits (such as house rental, health insurance, vested = 14.1% shipping of goods and tax return preparation), motor vehicle costs, travel benefits and annual leave. 80 Average ROE % 5. Superannuation includes the value of pension contributions for non Australian based executives. 58.8% of for 2015 LTI plan 70 6. The amounts for security based payments reflect the accounting expense on a fair value basis. awards (Sept 2014 grant) vested = 12.8% 7. Other long term benefits represent the accrual of long term leave entitlements (e.g. long service leave). For Johannes Dekker, the value 60 includes an amount representing the pro rated accounting expense of future payments relating to remuneration foregone on resignation from his previous employer. 50 OTHER INFORMATION 8. Johannes Dekker became KMP from 1 May 2018 when he was appointed to the role of Group Head of Engineering and Building. The 2014 LTI 2015 information for the current year reflects his remuneration for the time he was KMP being the period 1 May 2018 to 30 June 2018. 40 Amounts under STI Deferred include the pro rated accounting expense of future payments relating to remuneration foregone on Plan – Plan – resignation from his previous employer. 4 year 3 year 30 9. Superannuation benefit includes an allowance paid in lieu of pension contributions. TSR TSR % of tested awards vesting Test Test 10. David Andrew Wilson became KMP from 15 January 2018 when he was appointed Group Chief Commercial and Risk Officer. The 20 information reflects his remuneration for the time he was KMP being the period 15 January 2018 to 30 June 2018. 100% 56% 11. Robert McNamara was KMP until 31 March 2017 when he retired. The security based payment expense for 2017 reflects the full vested vested 10
OTHER INFORMATION OTHER entitlement to the unvested LTI securities and Deferred STI (but which are still subject to the original vesting conditions). 0 10% 11% 12% 13% 14% 15% 16% Average ROE achieved over performance period 114 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 115
Remuneration Report continued
c. Remuneration Governance Setting Remuneration Levels DIRECTORS’ REPORT Robust governance is a critical part of Lendlease’s approach to executive remuneration. Board Lendlease benchmarks remuneration mix and levels to confirm market competitive total rewards for on target performance, and total rewards above the market median if outstanding performance is achieved The Board has overall responsibility for executive remuneration at Lendlease. The Board assesses the performance of, and determines the remuneration outcome for, the Group CEO. Remuneration is reviewed annually by the P&C Committee for the Group CEO and senior executives (or during the year if there are any People and Culture (P&C) Committee role changes or new executive appointments). The Committee’s agenda reflects the importance of human capital to the Group’s strategic and business planning and it assists the
DIRECTORS’ REPORT DIRECTORS’ Board in establishing appropriate policies for people management and remuneration across the Group. A description of the P&C Primary Sources The P&C Committee typically uses a number of sources for benchmarking Group CEO and senior executive Committee’s scope can be found on page 100. of Data remuneration including: Management • Data provided by the Board’s remuneration advisor, PwC, about remuneration for similar roles in companies of Management makes recommendations to the P&C Committee in relation to developing and implementing the Executive Reward a similar size: Strategy and structure. The Group CEO also provides his recommendations on fixed pay and Short Term Incentive (STI) outcomes for – for Australian based executives, we refer to companies listed on the ASX that are ranked between 26 and 75 his direct reports for approval by the P&C Committee. by market capitalisation (excluding companies domiciled overseas and property trusts where management Independent Remuneration Advisor (PwC) is not typically employed by the trust); The Board has appointed PwC as its independent remuneration advisor. Strict governance protocols were observed to ensure PwC’s – comparable roles in ASX listed companies with revenue of between 50 and 200 per cent of Lendlease’s advice to the P&C Committee was made free from undue influence by Key Management Personnel (KMP). During the year, PwC did revenue; and not provide a remuneration recommendation as defined in Section 9B of theCorporations Act 2001. – relevant local comparator groups for executives based in other countries. PwC provided advice on aspects of the remuneration of the KMP including commentary on positioning of the Group CEO's, senior executives’ and Non Executive Directors’ remuneration for FY18 against the market. • Publicly available data for comparable roles at organisations in Australia such as CIMIC (formerly Leighton), Mirvac and Stockland; and The following arrangements were made to ensure that PwC’s advice was free of undue influence: • Published remuneration surveys, remuneration trends and other data sourced from Mercer, Aon Hewitt, FIRG, • PwC was engaged by, and reported directly to, the Chair of the P&C Committee; Hay Group, Avdiev and others. • The agreement for the provision of remuneration consulting services was executed by the Chair of the P&C Committee on behalf FINANCIAL STATEMENTS of the Board; Market Positioning Fixed remuneration is set with reference to the market median and 75th percentile. The positioning will depend • Reports delivered by PwC were provided by PwC directly to the Chair of the P&C Committee; and upon the specific nature of the role, the individual’s performance and the overall remuneration mix. • PwC was permitted, where approved by the P&C Committee Chair, to speak to management to understand company processes, practices and other business issues and obtain management’s perspectives. The remuneration outcomes for each senior executive will also take into consideration the target remuneration mix in the Executive Reward Strategy. As a consequence, the Board is satisfied that advice and market data provided by PwC was made free from undue influence from any of the KMP. Application of Data The P&C Committee has applied a number of principles when applying remuneration benchmarks to Lendlease to Lendlease Group roles. These principles include: CEO and Senior FINANCIAL STATEMENTS FINANCIAL Executives • Understanding the relative size, scale and complexity of the organisations in the data set (so that a fair comparison can be made to organisations with similar global breadth and operational complexities as Lendlease); • Understanding the relative size, scale and complexity of the roles in the data set; • Recognising an individual’s tenure, position, experience and performance; • Differentiating risk profiles between roles when reviewing pay mix; • Considering key talent, including an emphasis on where we source talent from and where we lose talent to; and • Considering internal relativities, role and/or person criticality and key talent and succession risk. In addition to the above, when setting remuneration levels, the P&C Committee takes into account Group and regional performance and the positioning of the senior executive relative to the market. OTHER INFORMATION OTHER INFORMATION OTHER 116 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 117
Remuneration Report continued
c. Remuneration Governance continued Mandatory Securityholding DIRECTORS’ REPORT Remuneration Mix The Mandatory Securityholding requires the Group CEO and senior executives to hold a minimum amount of Lendlease securities so that they have a significant personal investment in Lendlease. Along with the Deferred STI and LTI, the Mandatory Securityholding Securityholder alignment and longer term focus through significant incentive deferral provides additional alignment with securityholders and encourages the Group CEO and senior executives to consider long term securityholder value when making decisions. The remuneration mix is structured so that a substantial portion of remuneration is delivered as Lendlease securities through either The Group CEO and other senior executives are required to accumulate and maintain a holding of Lendlease securities calculated with Deferred Short Term Incentives (STI) or Long Term Incentives (LTI). This, along with the Mandatory Securityholding requirement reference to their fixed remuneration (divided by the security price to determine a number of securities that must be held). In the case (set out on page 117), aligns the interests of senior executives with securityholders. Remuneration awarded (refer to page 111) is of:
DIRECTORS’ REPORT DIRECTORS’ delivered over a period of up to four years, over which time senior executives are exposed to movements in the security price on any • The Group CEO – the requirement is 150 per cent of Total Package Value (TPV); and deferred amounts. • Senior executives – the requirement is 100 per cent of TPV or 100 per cent of base salary for senior executives outside of Australia. The mandatory holding for each senior executive is outlined in the Equity Based Remuneration tables on page 128. Year 1 Year 2 Year 3 Year 4 Year 5 and beyond Personally held securities may be counted towards the requirement. Unvested deferred securities and unvested LTI awards do not count toward this mandatory holding. Fixed remuneration Until such time as the senior executive meets the Mandatory Securityholding requirements, Lendlease imposes a disposal restriction Cash STI on 50 per cent of any senior executives’ Deferred STI or LTI that vest (for senior executives based in Australia). This disposal restriction means that the senior executive will not be able to sell these securities until such time as Lendlease agrees to lift the disposal Deferred STI for 1 year The Group CEO and senior executives restriction. must maintain a holding of Lendlease Deferred STI for 2 years Senior executives based outside of Australia are required to achieve the mandatory holding requirement within six years of their securities until the Mandatory appointment as Key Management Personnel (KMP). LTI 3 year performance period Securityholding requirement is achieved
LTI 4 year performance period Securities Trading Policy The Lendlease Securities Trading Policy applies to all employees of the Lendlease Group. In accordance with the policy, Directors and
senior executives may only deal in Lendlease securities during designated periods. Directors and senior executives must not enter into FINANCIAL STATEMENTS The remuneration mix has been specifically designed to align to the execution of Lendlease’s business strategy transactions or arrangements that operate to limit the economic risk of unvested entitlements to Lendlease securities. No Director or senior executive may enter into a margin loan arrangement in respect of Lendlease securities. The Executive Reward Strategy provides for a target remuneration mix that links remuneration outcomes to the execution of business strategy over the short (one year), medium (two to three years) and long (three to four years) term. The target remuneration mix for FY18 for the Group CEO is shown below. Hedging Deferred STI and LTI awards are subject to the Securities Trading Policy which prohibits executives from entering into any type of Percentage of Total Target Remuneration ‘protection arrangements’ (including hedging, derivatives and warrants) in respect of those awards before vesting. The FY18 Actual remuneration mix for the Group CEO is compared to the target remuneration mix for the same period. FINANCIAL STATEMENTS FINANCIAL Group CEO FY18 Actual
29% 12% 12% 47%
Group CEO FY18 Target
29% 12% 12% 47%
Fixed Remuneration STI Cash STI Deferred LTI (face value) OTHER INFORMATION The target remuneration mix for FY18 for senior executives is shown below.
Fixed Remuneration STI cash Deferred STI LTI Senior Executives 40% – 55% 20% – 25% 20% – 25% 20%
The remuneration mix reflects the desired remuneration mix for the Group CEO and senior executives. During the year, changes to remuneration were made to LTI with the exception of a fixed remuneration increase for Kylie Rampa. OTHER INFORMATION OTHER During 2018, the Board has reviewed the Executive Reward Strategy (ERS) and is making changes to the remuneration mix for senior executives for 2019. Refer to the Executive Reward Changes for 2019 section on page 130. 118 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 119
Remuneration Report continued
d. How Executive Rewards are Linked to Performance DIRECTORS’ REPORT Short Term Incentives (STI)
STIs are based on performance against a scorecard of financial, strategic and non financial Key Performance Indicators (KPIs) and Group and regional performance
STI Design How the STI Works DIRECTORS’ REPORT DIRECTORS’ STI Funding • The pool of funds available to reward executives under the STI plan is determined by direct reference to Group financial performance and, where relevant, regional financial performance. • In determining the pool of funds available, the Board also considers the safety performance, overall profit make up, the quality and sustainability of earnings and other financial and non financial factors. STI Targets • STIs are based on ‘target opportunities’ which are set using the remuneration mix outlined on page 116. and • The minimum possible STI outcome is zero and the maximum STI outcome is generally limited to 150 per cent of Opportunity the senior executive’s target STI opportunity. A payment above 150 per cent of target may be made if the Group has performed at a level considerably in excess of target and the senior executive has made a significant contribution to the result. STI Key • STI outcomes are based on performance during the financial year, primarily measured through the use of Performance the Group CEO and senior executive scorecards. Indicators • The Group CEO 2018 scorecard (approved by the Board) and performance against the scorecard is set out in summary on pages 108 and 109. • Lendlease is committed to the safety and wellbeing of all of its employees. The Board considers safety leadership behaviours and outcomes in assessing the overall performance of the Group CEO and each
senior executive. While the assessment is not structured formulaically or as a ‘gateway’ measure, FINANCIAL STATEMENTS expectations are clearly communicated to the Group CEO and senior executives that poor health and safety outcomes may lead to reduction in STI outcomes for the year. The two fatal incidents in 2018 have been considered in assessing the Group CEO’s STI for FY18. Notwithstanding the increase to Profit after Tax (PAT) and continuing strong scorecard results, the Group CEO’s STI award has been assessed at target, rather than at a level that would have been substantially above target. • The P&C Committee also assesses each senior executive against Lendlease’s defined leadership capabilities (including safety, sustainability and diversity), values and behaviours. In this way, the STI rewards ‘what’ is achieved as well as ‘how’ it is achieved.
FINANCIAL STATEMENTS FINANCIAL How The STI is • The STI award is delivered as a mix of cash and Deferred STI. The Deferred STI may be settled in Lendlease Delivered securities or in cash as determined by the Board. The significant portion (at least 50 per cent) delivered as Deferred STI encourages executives to deliver sustainable performance. • For STI awards up to ‘target’, 50 per cent of the STI awarded is paid in cash in September following the end of the performance year. The remaining 50 per cent is deferred. Half of the deferred portion vests one year after the grant and the other half of the deferred portion vests after two years. Deferred STI awards are held in an employee share plan trust until vesting. • For ‘above target’ STI awards, the above target portion is delivered one third as cash and two thirds deferred on the same basis as set out above. • Distributions are not paid on any unvested Deferred STI for the Group CEO and senior executives, however in calculating the amount of Lendlease securities or cash provided on vesting of any Deferred STI, the value of any distributions made during the vesting period is taken into consideration. • The Board's current intention is to deliver Deferred STI as Lendlease securities and Lendlease intends to purchase securities on market around September each year to satisfy these awards. Malus • The Board has the discretion to forfeit part or all of any unvested Deferred STI awards prior to their vesting where it transpires that the award(s) would provide a participant with a benefit that was unwarranted or inappropriate.1 The Board may delay vesting of any unvested Deferred STI in the event it is reviewing OTHER INFORMATION whether to exercise discretion to reduce or forfeit unvested awards. Termination • Malus provisions work alongside the Deferred STI terms to provide discretion for the Board to adjust unvested awards on termination of employment. In particular: − If an employee is terminated for fraud or other serious misconduct, unvested Deferred STI awards will lapse; − Where an employee is terminated for poor performance, the number of unvested Deferred STI awards can be adjusted downwards; and − Deferred STI awards are forfeited by the individual if they resign during the vesting period. OTHER INFORMATION OTHER • For ‘good leavers’, the Deferred STI awards may remain on foot until the original vesting date, subject to the original terms. • In exceptional circumstances (such as death or total and permanent disability), the Board may exercise its discretion and pay the award at the time of termination of employment. 252 East 27th Street, New York 1. In particular, in circumstances where there has been a material misstatement in the Group’s Consolidated Financial Statements or the participant has engaged in misconduct or dereliction of duty. 120 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 121
Remuneration Report continued
d. How Executive Rewards are Linked to Performance continued LTI Design How the LTI Works DIRECTORS’ REPORT
Long Term Incentives (LTI) Performance This is an absolute measure. The vesting schedule is shown below: Hurdle – Average ROE LTI is designed to reward our senior executives for achievement of long term value creation for securityholders 100
This section presents a summary of the key features of the 2018 LTI plan (granted September 2017). Page 122 demonstrates the key differences between this award and other awards that remain on foot. 75
DIRECTORS’ REPORT DIRECTORS’ The key features of the 2018 LTI plan (granted September 2017) are:
LTI Design How the LTI Works 50
Overview • LTI awards are designed to reward executives for delivering on Lendlease’s long term strategy and for delivering sustained long term securityholder value. 25
• LTI awards align the interests of senior executives and securityholders because of the senior executives’ exposure % of tested awards vesting to the Lendlease security price and through performance measures strongly tied to securityholder value. 0 • Half of the LTI will be tested against a relative Total Securityholder Return (TSR) hurdle and half against an 9% 10% 11% 12% 13% 14% 15% average Return on Equity (ROE) hurdle. • Half of the LTI for each performance hurdle is tested after three years and half after four. Average ROE achieved over performance period • Relative TSR is measured against companies that comprise the Standards & Poor’s (S&P)/Australian Securities Exchange (ASX) 100 index. • Average ROE is measured against an absolute measure with progressive vesting when average ROE over Performance • The Board believes that these measures, combined with other features of ‘at risk’ remuneration at the performance period is between 10 and 14 per cent. Hurdle Lendlease, provide a suitable link to long term securityholder value creation because: Selection
- The use of relative Total Securityholder Return incentivises senior executives to deliver returns that FINANCIAL STATEMENTS Performance • An annual grant of ‘performance securities’ is made to a limited number of executives. outperform what a securityholder could achieve in the market and promotes management to maintain a Securities • The allocation for FY18 is made on a face value basis. strong focus on securityholder outcomes; and • The Board intends that the awards be settled in Lendlease securities, although the award may be settled in - Return on Equity (ROE) reflects the capital intensive nature of Lendlease’s activities and is an important cash or other means at the Board’s discretion. 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. Performance • 50 per cent of the performance securities are assessed over a three year period. • The Group’s currently stated ROE target range is 10 to 14 per cent, which was amended from 11 to 15 per Period cent when the Group’s Portfolio Management Framework was refreshed in October 2016. For the LTI grant • The remaining 50 per cent of the performance securities are assessed after four years. made in 2018, the Board revised the vesting range to align with the Group’s stated target range above. • There is no retesting on any portion of the LTI award. If the performance hurdle is not met at the time of The Board believes that the updated vesting range provides a realistic goal at the lower end (in the context testing, the awards are forfeited. of lower risk free rates of return, cost of capital and market consensus) and a realistic stretch at the upper FINANCIAL STATEMENTS FINANCIAL • The performance period was chosen as the Board believes that the timeframe appropriately reflects a end. balance between reward that motivates executives while reflecting the long term ‘tail’ of profitability and • The hurdles are reviewed annually by the Board with the aim of setting an average ROE hurdle range that will risk associated with ‘today’s decisions’. drive outperformance without incentivising excessive risk taking. The Board also has governance protocols in place to monitor levels of net debt and is conscious of the impact that debt can have on the ROE result. Performance The vesting schedule is shown below: • While the Board appreciates that there are at times different views held by different stakeholders, we Hurdle – believe that these measures provide the appropriate balance between market and non market measures. Relative TSR 100 Distributions • Distributions are not paid on unvested performance securities. • In calculating the value of the awards which vest, the value of any distributions declared during the performance period is taken into consideration.
• The Board may adjust the number of performance securities downwards prior to the date of vesting in the 50 Malus case of a material misstatement of the Group’s financial accounts. • The Board may adjust the number of LTI awards downwards where the Board reasonably determines that delivery of part, or all of, an LTI award would result in the senior executive receiving an inappropriate or unwarranted benefit (having regard to their personal performance, the performance of the Group and all OTHER INFORMATION
% of tested awards vesting other benefits they have received). 0 • If the executive is terminated for cause, the unvested LTI is forfeited. 25 50 75 100 Termination of Employment • If the executive is terminated for poor performance, the Board can adjust unvested LTI prior to the Percentile achieved – relative TSR vs ASX 100 Companies vesting date. • For ‘good leavers’, including executives who resign but do not engage in activities that are competitive with the Group, the LTI grant may remain on foot subject to the original performance hurdle. • In exceptional circumstances (such as death or total and permanent disability), the Board may exercise its
OTHER INFORMATION OTHER discretion and pay the award at the time of termination of employment. 122 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 123
Remuneration Report continued
d. How Executive Rewards are Linked to Performance continued e. Executive Contracts DIRECTORS’ REPORT Prior Year Long Term Incentive Awards Group CEO Contract Key features of the 2014, 2015, 2016 and 2017 plans are the same as the 2018 LTI plan except for: The Board and the Group CEO entered into a new employment contract effective 1 September 2013. The key terms are summarised • The ROE performance hurdle; and below: • Awards were allocated on a fair value basis. A comparison between the ROE vesting schedules for 2014-2017 (inclusive) and the 2018 plan is set out below. Fixed The contract provides for fixed remuneration of $2,034,000, including superannuation. Remuneration DIRECTORS’ REPORT DIRECTORS’ LTI Design – How the LTI Works 2014-2017 Incentives STI and LTI plan participation is at the Board’s discretion. The Group CEO’s target Short Term Incentive (STI) for Performance hurdle 2018 2018 was $1,750,000 and target Long Term Incentive (LTI) for 2018 was $3,300,000 (with the number of awards determined on a face value basis). This results in a target remuneration package of $7,084,000 for 2018. 100 Notice The contract has no fixed term. The notice periods under the contract are as follows: Periods 75 Notice by Group CEO 6 months Notice by Lendlease 12 months 50 Payment in lieu of notice Where the Group CEO is not employed for the full period of notice, a payment in lieu of notice may be made. The payment in lieu of notice includes pro rata 25 fixed remuneration and the cash value of statutory entitlements and benefits. Non compete period 12 months % of tested awards vesting
0 Non solicitation period 12 months 9% 10% 11% 12% 13% 14% 15% 16% Treatment of incentives The Group CEO may continue to receive an STI award for the latest financial FINANCIAL STATEMENTS year based on an assessment of his performance by the Board. LTI awards will Average ROE achieved over performance period be treated in accordance with the plan rules at that time. Deferred STI awards will remain on foot in certain mutually agreed termination circumstances. How Risk Management is Incorporated into Executive Reward The Board has placed a significant focus on incorporating risk management into the reward framework. Senior Executives’ Contracts Senior executives are typically employed on contracts that have no fixed term. Benefits may include health/life insurance, car allowances, Remuneration How risk management is incorporated into the remuneration component motor vehicle leases and salary. All senior executives have termination benefits that are within the limit allowed by theCorporations Act 2001 without securityholder Short Term • The total value of STI awards is strongly linked to Profit after Tax (PAT) and there are limits on the total FINANCIAL STATEMENTS FINANCIAL approval. Incentive incentive pool and individual STI payments. (STI) • In determining the pool of funds available, the Board also considers the safety performance, overall profit Termination clauses in each contract describe treatment on termination based on the reason for termination (e.g. resignation, with notice, make up, the quality and sustainability of earnings and other financial and non financial factors. due to illness, or immediate termination for cause). • STI outcomes are based on performance and are determined based on a scorecard of financial and non The Group may make a payment in lieu of notice. financial Key Performance Indicators (KPIs). The notice period for each senior executive is shown below: • STI outcomes are modified based upon an assessment of the senior executive against Lendlease’s defined leadership capabilities (including safety, sustainability and diversity), values and behaviours. In this way, Notice by Notice by Senior the STI rewards ‘what’ is achieved as well as ‘how’ it is achieved. Senior Executives Lendlease Executive Treatment on Termination with Notice by Lendlease • A significant portion (at least 50 per cent) of the actual STI award is retained and deferred into securities. In this Johannes Dekker1 12 months 6 months Notice payment is based on Total Package Value. Payment for accrued way, senior executives continue to be incentivised to drive performance and are exposed to movements in the leave is based on Total Package Value less superannuation. Lendlease security price. Tarun Gupta 6 months 6 months Notice payment is based on Total Package Value. Payment for accrued • STI awards are subject to a malus clause which enables the Board to adjust downwards the Deferred STI leave is based on Total Package Value less superannuation. that vests to an individual in certain circumstances. This provision operates alongside provisions in the Denis Hickey 6 months 6 months Notice payment is based on base salary and other minimum benefits as Deferred STI terms that allow the Board to adjust unvested awards on termination of employment. In required by applicable United States legislation. particular: Daniel Labbad 9 months 6 months Notice payment and accrued leave is based on base salary. – If an employee is terminated for fraud or other serious misconduct, unvested Deferred STI will be OTHER INFORMATION forfeited; and Anthony Lombardo 12 months 6 months Notice payment and accrued leave is based on base salary. – Where an employee is terminated for poor performance, the Board can adjust the Deferred STI at the Kylie Rampa 6 months 6 months Notice payment is based on Total Package Value. Payment for accrued time of termination. leave is based on Total Package Value less superannuation. David Andrew 6 months 6 months Notice payment is based on Total Package Value. Payment for accrued Long Term • 50 per cent of the LTI is assessed over a three year period and 50 per cent is assessed over a four year Wilson leave is based on Total Package Value less superannuation. Incentive (LTI) period. There is no retesting. 1. Notice by Lendlease for the first three years of employment is 12 months and reverts to 6 months notice by Lendlease thereafter. • As performance is assessed based on a combination of relative TSR and average ROE, any adverse financial, reputational or other events that could occur over the vesting period should be reflected in the
OTHER INFORMATION OTHER number and value of LTI performance securities that ultimately vest. • Malus provisions apply to unvested LTI awards (see page 121).
Mandatory • Senior executives are subject to a Mandatory Securityholding Policy that requires them to accumulate and Securityholding maintain a holding of Lendlease securities. This encourages them to take a long term perspective when making decisions and strengthens alignment with securityholders. 124 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 125
Remuneration Report continued
f. Equity Based Remuneration Deferred Securities continued DIRECTORS’ REPORT Expense Deferred Securities Fair Total Fair For The In 2018, Deferred Short Term Incentive (STI) awards were granted to the Group CEO and senior executives based on the value of the Value Per Value At Year Ended 2017 STI award that was deferred. STI Award Deferred Grant 30 June Performance Grant Vesting Number Security1 Date1,2 2018 % % Details of Deferred STI awards are set out in the following table: Name Plan Year Date Date Granted $ $ $ Vested Forfeited Fair Value Total Fair Expense For Per Value At The Year Kylie Rampa Deferred STI 2015 Sept 2015 Sept 2017 17,636 13.47 237,502 - 100% -
DIRECTORS’ REPORT DIRECTORS’ STI Award Deferred Grant Ended 30 Deferred STI 2016 Sept 2016 Sept 2017 22,062 13.79 304,239 - 100% - Performance Grant Vesting Number Security1 Date1,2 June 2018 % % Name Plan Year Date Date Granted $ $ $ Vested Forfeited Deferred STI 2016 Sept 2016 Sept 2018 22,062 13.79 304,239 152,119 - - Deferred STI 2017 Sept 2017 Sept 2018 13,710 17.11 234,605 234,605 - - Group CEO Deferred STI 2017 Sept 2017 Sept 2019 13,710 17.11 234,605 117,303 - - Stephen McCann Deferred STI 2015 Sept 2015 Sept 2017 43,304 13.47 583,171 - 100% - Total 89,180 1,315,190 504,027 Deferred STI3 2016 Sept 2016 Sept 2017 43,434 13.43 583,336 - 100% - David Andrew Deferred STI 2016 Sept 2016 Sept 2018 22,843 13.79 315,010 72,064 - - Deferred STI3 2016 Sept 2016 Sept 2018 43,434 13.43 583,336 291,668 - - Wilson Deferred STI 2017 Sept 2017 Sept 2018 5,698 17.11 97,504 44,611 - - Deferred STI 2017 Sept 2017 Sept 2018 26,725 16.37 437,512 437,512 - - Deferred STI 2017 Sept 2017 Sept 2019 5,698 17.11 97,504 22,306 - - Deferred STI 2017 Sept 2017 Sept 2019 26,725 16.37 437,512 218,756 - - Total 34,239 510,018 138,981 Total 183,622 2,624,867 947,936 1. The fair value at grant date is the value of the Deferred STI award (as advised to the senior executive). Current Senior Executives 2. At vesting, the minimum value is nil and the estimate of the maximum value is the fair value multiplied by the number of securities granted. Johannes Dekker4 Sign-On Award - May 2018 Sept 2018 14,225 17.57 250,000 125,000 - - 3. Fair Value per Deferred Security and Total Fair Value at Grant Date have been revised downward to reflect updated management information. This does not impact the expense for the year ended 30 June 2018 shown in the table above.
Sign-On Award - May 2018 Sept 2019 8,535 17.57 150,000 18,750 - - 4. Johannes Dekker received a ‘sign on’ award in lieu of forfeited awards from his previous employer. The award is split into three tranches, and will vest FINANCIAL STATEMENTS during the first, second and third years of his employment. Sign-On Award - May 2018 Sept 2020 5,690 17.57 100,000 7,143 - - Total 28,450 500,000 150,893 Tarun Gupta Deferred STI 2015 Sept 2015 Sept 2017 26,733 13.47 360,011 - 100% - Deferred STI 2016 Sept 2016 Sept 2017 26,324 13.79 363,013 - 100% - Deferred STI 2016 Sept 2016 Sept 2018 26,324 13.79 363,013 181,506 - - Deferred STI 2017 Sept 2017 Sept 2018 19,285 17.11 330,004 330,004 - -
FINANCIAL STATEMENTS FINANCIAL Deferred STI 2017 Sept 2017 Sept 2019 19,285 17.11 330,004 165,002 - - Total 117,951 1,746,045 676,512 Denis Hickey Deferred STI 2015 Sept 2015 Sept 2017 29,193 13.47 393,139 - 100% - Deferred STI 2016 Sept 2016 Sept 2017 23,642 13.79 326,028 - 100% - Deferred STI 2016 Sept 2016 Sept 2018 23,642 13.79 326,028 163,014 - - Deferred STI 2017 Sept 2017 Sept 2018 17,966 17.11 307,434 307,434 - - Deferred STI 2017 Sept 2017 Sept 2019 17,966 17.11 307,434 153,717 - - Total 112,409 1,660,063 624,165 Daniel Labbad Deferred STI 2015 Sept 2015 Sept 2017 27,521 13.47 370,623 - 100% - Deferred STI 2016 Sept 2016 Sept 2017 19,302 13.79 266,178 - 100% - Deferred STI 2016 Sept 2016 Sept 2018 19,302 13.79 266,178 133,089 - -
Deferred STI 2017 Sept 2017 Sept 2018 18,234 17.11 312,020 312,020 - - OTHER INFORMATION Deferred STI 2017 Sept 2017 Sept 2019 18,234 17.11 312,020 156,010 - - Total 102,593 1,527,019 601,119 Anthony Lombardo Deferred STI 2015 Sept 2015 Sept 2017 20,050 13.47 270,011 - 100% - Deferred STI 2016 Sept 2016 Sept 2017 20,121 13.79 277,473 - 100% - Deferred STI 2016 Sept 2016 Sept 2018 20,121 13.79 277,473 138,737 - - Deferred STI 2017 Sept 2017 Sept 2018 9,753 17.11 166,893 166,893 - - OTHER INFORMATION OTHER Deferred STI 2017 Sept 2017 Sept 2019 9,753 17.11 166,893 83,447 - - Total 79,798 1,158,743 389,077
126 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 127
Remuneration Report continued
f. Equity Based Remuneration continued LTI Awards continued DIRECTORS’ REPORT Fair Value Expense For Long Term Incentive Awards Per Total Fair The Year Fair Value Expense For Performance Value At Ended 30 Per Total Fair The Year Plan Grant Vesting Number Security1 Grant Date1,2 June 2018 % % Performance Value At Ended 30 Name (For The Year Ended) Date Date Granted $ $ $ Vested Forfeited Plan Grant Vesting Number Security1 Grant Date1,2 June 2018 % % Name (For The Year Ended) Date Date Granted $ $ $ Vested Forfeited Anthony Lombardo June 2014 LTI (50%) Sept 2013 Sept 2017 25,990 7.80 202,714 8,446 92% 8% June 2015 LTI (50%) Sept 2014 Sept 2017 21,226 11.14 236,458 13,137 57% 43% Group CEO
DIRECTORS’ REPORT DIRECTORS’ June 2015 LTI (50%) Sept 2014 Sept 2018 21,226 11.27 239,111 59,778 - - Stephen McCann June 2014 LTI (50%) Sept 2013 Sept 2017 140,069 7.80 1,092,530 45,522 92% 8% June 2016 LTI (50%) Sept 2015 Sept 2018 23,679 10.34 244,722 81,574 - - June 2015 LTI (50%) Sept 2014 Sept 2017 106,128 11.14 1,182,266 65,681 57% 43% June 2016 LTI (50%) Sept 2015 Sept 2019 23,679 10.56 249,932 62,483 - - June 2015 LTI (50%) Sept 2014 Sept 2018 106,128 11.27 1,195,532 298,883 - - June 2017 LTI (50%) Sept 2016 Sept 2019 26,618 11.33 301,449 100,483 - - June 2016 LTI (50%) Sept 2015 Sept 2018 101,818 10.34 1,052,289 350,763 - - June 2017 LTI (50%) Sept 2016 Sept 2020 26,618 11.44 304,510 76,127 - - June 2016 LTI (50%) Sept 2015 Sept 2019 101,818 10.56 1,074,689 268,672 - - June 2018 LTI (50%) Sept 2017 Sept 2020 24,034 13.07 314,004 87,223 - - June 2017 LTI (50%) Sept 2016 Sept 2019 122,440 11.33 1,386,633 462,211 - - June 2018 LTI (50%) Sept 2017 Sept 2021 24,034 13.23 317,850 66,219 - - June 2017 LTI (50%) Sept 2016 Sept 2020 122,440 11.44 1,400,714 350,178 - - Total 217,104 2,410,750 555,470
June 2018 LTI (50%) Sept 2017 Sept 2020 100,388 13.07 1,311,569 364,325 - - Kylie Rampa June 2014 LTI (50%) Sept 2013 Sept 2017 14,326 7.80 111,739 4,656 92% 8% June 2018 LTI (50%) Sept 2017 Sept 2021 100,388 13.23 1,327,631 276,590 - - June 2015 LTI (50%) Sept 2014 Sept 2017 9,552 11.14 106,409 5,912 57% 43% Total 1,001,617 11,023,853 2,482,825 June 2015 LTI (50%) Sept 2014 Sept 2018 9,552 11.27 107,603 26,901 - - Current Senior Executives June 2016 LTI (50%) Sept 2015 Sept 2018 9,472 10.34 97,893 32,631 - - Tarun Gupta June 2014 LTI (50%) Sept 2013 Sept 2017 25,990 7.80 202,714 8,446 92% 8% June 2016 LTI (50%) Sept 2015 Sept 2019 9,472 10.56 99,977 24,994 - - FINANCIAL STATEMENTS June 2015 LTI (50%) Sept 2014 Sept 2017 21,226 11.14 236,458 13,137 57% 43% June 2017 LTI (50%) Sept 2016 Sept 2019 19,165 11.33 217,044 72,348 - - June 2015 LTI (50%) Sept 2014 Sept 2018 21,226 11.27 239,111 59,778 - - June 2017 LTI (50%) Sept 2016 Sept 2020 19,165 11.44 219,248 54,812 - - June 2016 LTI (50%) Sept 2015 Sept 2018 23,679 10.34 244,722 81,574 - - June 2018 LTI (50%) Sept 2017 Sept 2020 21,904 13.07 286,176 79,493 - - June 2016 LTI (50%) Sept 2015 Sept 2019 23,679 10.56 249,932 62,483 - - June 2018 LTI (50%) Sept 2017 Sept 2021 21,904 13.23 289,680 60,350 - - June 2017 LTI (50%) Sept 2016 Sept 2019 33,272 11.33 376,805 125,602 - - Total 134,512 1,535,769 362,097 June 2017 LTI (50%) Sept 2016 Sept 2020 33,272 11.44 380,632 95,158 - - David Andrew June 2015 LTI (50%) Sept 2014 Sept 2017 15,920 11.14 177,349 4,508 57% 43% Wilson3 June 2018 LTI (50%) Sept 2017 Sept 2020 31,638 13.07 413,350 114,820 - - June 2015 LTI (50%) Sept 2014 Sept 2018 15,920 11.27 179,339 20,514 - -
FINANCIAL STATEMENTS FINANCIAL 3 June 2018 LTI (50%) Sept 2017 Sept 2021 31,638 13.23 418,413 87,169 - - DE Award (50%) May 2016 May 2021 80,000 13.42 1,073,904 98,270 - - DE Award (50%)3 May 2016 May 2023 80,000 13.42 1,073,904 70,193 - - Total 245,620 2,762,137 648,167 June 2016 LTI (50%) Sept 2015 Sept 2018 14,208 10.34 146,840 22,395 - - Denis Hickey June 2014 LTI (50%) Sept 2013 Sept 2017 20,010 7.80 156,074 6,503 92% 8% June 2016 LTI (50%) Sept 2015 Sept 2019 14,208 10.56 149,965 17,153 - - June 2015 LTI (50%) Sept 2014 Sept 2017 18,573 11.14 206,903 11,495 57% 43% June 2017 LTI (50%) Sept 2016 Sept 2019 15,971 11.33 180,872 27,585 - - June 2015 LTI (50%) Sept 2014 Sept 2018 18,573 11.27 209,225 52,306 - - June 2017 LTI (50%) Sept 2016 Sept 2020 15,971 11.44 182,708 20,899 - - June 2016 LTI (50%) Sept 2015 Sept 2018 16,576 10.34 171,313 57,104 - - Total 252,198 3,164,881 281,517 June 2016 LTI (50%) Sept 2015 Sept 2019 16,576 10.56 174,960 43,740 - - 1. The fair value at grant date represents an actuarial valuation of the award using assumptions underlying the Black-Scholes methodology to produce a June 2017 LTI (50%) Sept 2016 Sept 2019 22,626 11.33 256,239 85,413 - - Monte-Carlo simulation model in accordance with Australian Accounting Standards rounded to two decimal places. June 2017 LTI (50%) Sept 2016 Sept 2020 22,626 11.44 258,841 64,710 - - 2. At vesting, the minimum value is nil and the estimate of the maximum value is the fair value multiplied by the number of securities granted. 3. David Andrew Wilson was granted a Distinguished Executive (DE) Award in May 2016 that vests in two equal tranches over five and seven years. Refer to June 2018 LTI (50%) Sept 2017 Sept 2020 21,904 13.07 286,176 79,493 - - Note 34(c) of the Notes to Consolidated Financial Statements. The amount included here represents the expense for the time David Andrew Wilson has been a KMP. June 2018 LTI (50%) Sept 2017 Sept 2021 21,904 13.23 289,680 60,350 - - Total 179,368 2,009,411 461,114 OTHER INFORMATION Daniel Labbad June 2014 LTI (50%) Sept 2013 Sept 2017 25,990 7.80 202,714 8,446 92% 8% June 2015 LTI (50%) Sept 2014 Sept 2017 18,573 11.14 206,903 11,495 57% 43% June 2015 LTI (50%) Sept 2014 Sept 2018 18,573 11.27 209,225 52,306 - - June 2016 LTI (50%) Sept 2015 Sept 2018 18,943 10.34 195,776 65,259 - - June 2016 LTI (50%) Sept 2015 Sept 2019 18,943 10.56 199,943 49,986 - - June 2017 LTI (50%) Sept 2016 Sept 2019 27,683 11.33 313,510 104,503 - -
OTHER INFORMATION OTHER June 2017 LTI (50%) Sept 2016 Sept 2020 27,683 11.44 316,694 79,173 - - June 2018 LTI (50%) Sept 2017 Sept 2020 27,076 13.07 353,748 98,263 - - June 2018 LTI (50%) Sept 2017 Sept 2021 27,076 13.23 358,080 74,600 - - Total 210,540 2,356,593 544,031 128 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 129
g. Non Executive Directors’ Fees Non Executive Directors receive a Board fee and fees for chairing or participating on Board Committees. The Chairman does not receive extra fees for participating on Committees. Remuneration Report continued The maximum aggregate remuneration payable to Non Executive Directors is $3.5 million per year, as approved at the 2015 Annual General Meeting. continued f. Equity Based Remuneration Board and Committee Fees DIRECTORS’ REPORT Equity Holdings and Transactions for the Year Ended 30 June 2018 Nomination People and Culture Risk Management and Sustainability Board Committee Committee Audit Committee Committee Number Of Securities Chair fee $ 640,000 36,000 48,000 48,000 48,000 Required Under The Securities Held Securities Other Net Securities Held Mandatory Securityholding At Beginning Of Received During Change To At End Of Member fee $ 160,000 Nil 36,000 36,000 36,000 Year as at Period End1 Financial Year The Year 2 Securities Financial Year Non Executive Directors No changes were made to fees payable to Non Executive Directors during the year. David Crawford 2018 - 81,363 - 1,952 83,315 As an international company and having regard to the material scale of individual projects, the Board program is formulated to reflect the geographic spread of the Lendlease businesses. Board meetings are scheduled in Australia and in each of the regions where Lendlease
DIRECTORS’ REPORT DIRECTORS’ 2017 - 79,388 - 1,975 81,363 operates. Generally, the program runs over two or three days and includes a number of activities outside of the formal meeting. These include Colin Carter 2018 - 15,000 - - 15,000 business briefings, presentations from external sources, project site visits, client meetings and networking events with employees and key 2017 - 15,000 - - 15,000 stakeholders. Where deeper project reviews are required, the program may take up to five days. Philip Coffey 2018 - 4,810 - 5,000 9,810 All Directors may be required to travel to attend Board meetings. This can involve significant additional time, particularly when visiting project 2017 - - - 4,810 4,810 sites in the regions where Lendlease operates. Where significant additional time has been spent travelling to fulfil the requirements of the Phillip Colebatch 2018 - 18,323 - - 18,323 program, fees are paid to compensate Directors for the extra time commitment. 2017 - 18,323 - - 18,323 The program is an important element of the Board’s activities to enable the Directors to obtain the required deep understanding of the David Craig 2018 - 14,870 - 10,000 24,870 operations within the regions. 2017 - 14,870 - - 14,870 Fee (each way) $ Steve Dobbs 2018 - 8,000 - 4,000 12,000 Travel less than 4 hours Nil 2017 - 2,000 - 6,000 8,000 Travel between 4 and 10 hours 2,800 Jane Hemstritch 2018 - 20,000 - - 20,000 Travel over 10 hours 6,000 2017 - 20,000 - - 20,000 David Ryan3 2018 - 37,200 - 503 37,703 Board and Committee fees are paid as cash. Non Executive Directors are no longer entitled to retirement benefits other than FINANCIAL STATEMENTS 2017 - 36,172 - 1,028 37,200 superannuation. However, some Directors have retirement benefits or securities accrued previously. Michael Ullmer 2018 - 50,000 - - 50,000 Remuneration of Non Executive Directors for the Years Ended 30 June 2018 and 2017 2017 - 50,000 - - 50,000 SHORT TERM BENEFITS POST EMPLOYMENT BENEFITS Nicola Wakefield Evans 2018 - 16,131 - 635 16,766 Committee 2017 - 12,517 - 3,614 16,131 Committee Membership Elizabeth Proust4 2018 - - - 10,000 10,000 $000s Year Base Fees Chair Fees Fees Travel Fees Superannuation1 Total Executive Director David Crawford 2018 640 - - 35 20 695 Stephen McCann 2018 186,000 744,997 405,249 (384,110) 766,136 2017 640 - - 36 20 696 FINANCIAL STATEMENTS FINANCIAL 2017 234,000 827,194 417,803 (500,000) 744,997 Colin Carter 2018 160 36 72 35 20 323 Senior Executives 2017 160 36 72 24 20 312 Johannes Dekker5 2018 - - - - - Philip Coffey2 2018 160 - 36 35 20 251 Tarun Gupta 2018 67,000 110,487 98,670 (50,825) 158,332 2017 80 - - - 10 90 2017 84,000 116,850 104,467 (110,830) 110,487 Phillip Colebatch 2018 160 - 54 38 20 272 Denis Hickey6 2018 88,000 38,202 40,522 (29,661) 49,063 2017 160 - 36 72 20 288 2017 112,000 26,271 33,931 (22,000) 38,202 David Craig 2018 160 48 18 35 20 281 Daniel Labbad6 2018 67,000 100,227 48,565 (81,791) 67,001 2017 160 40 6 30 20 256 2017 100,000 161,139 59,870 (120,782) 100,227 Steve Dobbs 2018 160 - 72 75 20 327 Anthony Lombardo 2018 58,000 174,680 84,204 (122,176) 136,708 2017 160 - 72 90 20 342 2017 80,000 247,308 61,030 (133,658) 174,680 Jane Hemstritch 2018 160 48 18 35 20 281 Kylie Rampa 2018 61,000 34,081 62,168 (84,771) 11,478 2017 160 48 - 36 20 264 2017 70,000 - 34,081 - 34,081 Elizabeth Proust3 2018 67 - 6 6 7 86
David Andrew Wilson7 2018 - - 51,788 (28,791) 22,997 David Ryan4 2018 67 - 30 12 12 121 OTHER INFORMATION Total 2018 1,468,371 791,166 (750,035) 1,509,502 2017 160 8 66 30 20 284 Total 2017 1,627,032 711,182 (869,843) 1,468,371 Michael Ullmer 2018 160 48 36 35 20 299 2017 160 48 36 36 20 300 1. Mandatory Securityholding requirements are reviewed in August each year. Mandatory Securityholding requirements for Johannes Dekker and David Andrew Wilson will be set for the first time in August 2018. Nicola Wakefield Evans 2018 160 - 72 35 20 287 2. For the Executive Director and senior executives, securities received relate to security entitlements under employee benefits vehicles. 3. David Ryan ceased to be a Non Executive Director on 17 November 2017. The balance of securities held at the end of the financial year shown here 2017 160 - 72 30 20 282 represents the balance held at that date. 4. Elizabeth Proust joined the Board on 1 February 2018. 1. Directors have superannuation contributions paid on their behalf in accordance with superannuation legislation.
OTHER INFORMATION OTHER 5. Johannes Dekker became a Key Management Personnel (KMP) from 1 May 2018. 2. Philip Coffey was appointed to the Board in January 2017. 6. Securities received during the period were after withholding tax obligations. 3. Elizabeth Proust was appointed to the Board on 1 February 2018. 7. David Andrew Wilson became a KMP from 15 January 2018. 4. David Ryan ceased to be a Non Executive Director on 17 November 2017. Loans to Key Management Personnel No loans were made to Key Management Personnel or their related parties during the current year or prior year. Other Transactions with Key Management Personnel From time to time, Directors and executives of Lendlease or its consolidated entities, or parties related to them, may purchase goods from the Consolidated Entity. These purchases are on terms and conditions no more favourable than those entered into by unrelated customers. 130 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 131
Remuneration Report continued
h. Executive Reward Changes for 2019 Impact of Changes on Pay for Senior Executives DIRECTORS’ REPORT As indicated in last year’s Remuneration Report, the Board has been actively reviewing the Executive Reward Strategy (ERS) to assess The table below shows the key changes to pay for the Group CEO and provides an illustrative example for a senior executive. opportunities to better align senior executives’ pay to Lendlease’s Group Strategy and to drive continued success. The changes are proposed to take effect during 2019. Following a thorough review process and consultation with internal and external stakeholders, the Board has made the decision to GROUP CEO SENIOR EXECUTIVE proceed with enhancements to the ERS for the year ending 30 June 2019. Proposed Proposed Board Objectives and Alignment to Strategy Current FY19 Current FY19 Notes The Board’s key objectives in making changes to the remuneration structure are: Fixed 2,034 2,200↑ 1,100 1,200 ↑ Some senior executives will receive a fixed pay
DIRECTORS’ REPORT DIRECTORS’ • To create longer dated rewards that align to earnings; increase to align fixed pay levels for similar sized roles. • To further align with securityholder interests; This simplifies pay setting and supports mobility. • To promote team behaviours and an enterprise leadership mindset; 1,750 1,200↓ 1,000 500↓ STI reduced and delivered as cash (currently cash • To retain the senior executive team; and Short Term Award Target and Deferred STI). • To better align reward and strategy. Performance will be assessed using Group pillars of A summary of how the proposed approach aligns to these objectives is set out below. value (health and safety, our people, our customers, sustainability, financial) to drive collaboration and operational excellence. Longer Dated • Reduce short term pay. Short Term 2,625 1,800↓ 1,500 750↓ As above. Rewards, Aligned to • Increase the time horizon of long term awards to six years, to align with Lendlease’s earnings profile (a Award Maximum Earnings significant portion of the expected profit from business activity taking place in the current period will be recognised over a five+ years’ timeframe). Long Term 3,300 3,700 900 1,600 Increased weighting to focus senior executives on • Retain long term awards post employment, which aligns senior executives’ interests to creating long Award Target1 creating long term value. term value and effective succession. Awards delivered over a six year time period, with performance assessed over a three year period (currently awards are measured and released over FINANCIAL STATEMENTS three years (50 per cent) and four years (50 per cent)). + ROE and Relative TSR hurdles will continue to be used to assess performance. Alignment to • Majority of variable reward is directly linked to securityholder outcomes and delivered in securities. Long Term Award is reported as face value. Securityholders Long Term 3,300 5,550↑ 900 3,200↑ Opportunity for a higher long term award for Award Maximum outstanding performance creates a compelling wealth opportunity. + Long Term Award is reported as face value. FINANCIAL STATEMENTS FINANCIAL Team Behaviours • Shift the weighting of team based reward in both long term and short term pay, with more than 85% of Long Term 0 500↑ 0 500↑ Introduce a minimum award to align senior and Enterprise target variable pay based on Group outcomes, in order to promote an enterprise leadership mindset Award Minimum executives and securityholders at all times and align Leadership and collaborative approach. senior executives’ interests with effective risk • Align reward opportunity across similarly sized roles, supporting a team approach and senior management. executive mobility. Total Target 7,084 7,100↑ 3,000 3,300↑ Higher total target reward offsets impact of longer Reward2 dated reward for senior executives.
1. Under the current LTI plan the target and maximum values both represent the maximum award that can be received. Under the proposed Long Term Award plan a distinction is drawn between target and maximum awards with the latter paid for delivering exceptional performance. + 2. Total Target Reward comprises Fixed, Short Term Award Target and Long Term Award Target above. Retention of Senior • Increase the maximum long term award, to create a compelling reward opportunity if securityholder Short Term Award (Focus) Executive Team outcomes are achieved. Objective: The short term award is designed to focus senior executives on priority areas for delivery in the current financial year, including • Forfeiture of deferred rewards to disincentivise working for a competitor. key Group financial targets, safety and other non financial targets aligned to the Group’s pillars of value. Assessment period: One year.
Delivery: It is intended the award is delivered as cash in September after the end of the financial year. OTHER INFORMATION = Maximum opportunity: Group CEO and senior executives will have the opportunity to earn up to 150 per cent of the target short term award for outperformance. Whilst performance is assessed against a set of group metrics when determining awards, the Board will An Executive Reward Strategy that better aligns strategy and reward by: assess overall performance and contribution of individual senior executives, particularly around safety performance. • Recognising the importance of the integrated model to deliver growth from long dated urbanisation projects; Performance hurdles: See below for the weighting and some illustrative examples of targets for the short term award. • Recognising the importance of securityholders, our customers, employees and communities with direct links to the pillars of value; 50 per cent of award assessed against a set of team targets 50 per cent of award assessed against non financial performance. • Shifting the pay mix towards long term awards that are strongly aligned to shareholder returns; and for Group financial performance. Example targets may Example targets may include:
OTHER INFORMATION OTHER • Adapting short term pay to reward senior executives for maintaining focus on disciplined execution and growth within a target include: • Health and Safety – Critical Incidents and Lost Time Injury portfolio mix. • Target PAT Frequency Rate (LTIFR) targets • EBITDA segment mix • Our People – Succession and retention of critical talent • ROIC for Development and Investments • Sustainability – Progress towards 2020 sustainability targets • Cash (operating and investing) • Our Customers – NPS or similar, in line with customer framework 132 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 133
Remuneration Report continued h. Executive Reward Changes for 2019 continued Questions and Answers Concerning the Enhancements to the ERS.
Long Term Award (Grow) The following questions were raised in the consultation period by internal and external stakeholders. Our answers are included below. DIRECTORS’ REPORT Objective: The long term award supports behaviours that drive long term securityholder value. 1. Can senior executives earn more under the new ERS? Assessment period: Three years Yes. There is the potential for executives to earn more under the new ERS in circumstances where long term performance substantially exceeds expectations. In these circumstances, we expect there will be superior returns for securityholders. Reward will be delivered over Delivery: The award is delivered as a target number of ‘rights’ to acquire securities. The number of rights is adjusted up or down at vesting a longer period (for a comparison with current remuneration see page 132) and a higher proportion of pay is directly aligned to based on performance over the assessment period. securityholder outcomes. Deferral period: Once the award has been determined, awards are retained and released in four equal tranches over a three year period. The value of retained awards can be reduced in circumstances where the Board considers that delivery of all or part of the award would 2. Some companies are combining short and long term incentive plans – why have you decided to keep them separate? result in a benefit that is unwarranted or inappropriate. The short term award is designed to focus senior executives on priority areas for delivery in the current financial year, including key DIRECTORS’ REPORT DIRECTORS’ group financial targets, safety and other non financial targets linked to our pillars of value. The long term award rewards senior 3 YEAR PERFORMANCE PERIOD 3 YEAR RELEASE PERIOD executives when they deliver long term value for securityholders. 3. Why will some senior executives receive a fixed pay increase? Grant Performance Test Year 3 Year 4 Year 5 Year 6 The Board has chosen to use a tiered approach to set pay levels, and senior executives will be moved towards the target fixed pay for their tier over time. This approach supports mobility and simplifies pay setting. The Board will still externally benchmark pay against a 25% 25% 25% 25% number of ‘anchor roles’. Executives based outside Australia will receive similar pay, adjusted to account for cost of living, housing and currency differences. Maximum opportunity: Executives will have the opportunity to earn an award above target for outperformance across both performance hurdles. Some senior executives have had no adjustment to their fixed pay for several years, and in the case of the Group CEO there has been no increase to fixed pay since September 2011. Minimum award: This promotes alignment with securityholders as a minimum of 15 per cent of target compensation is delivered in Lendlease securities. This gives the long term award a retention value across the cycle, balances the dominant weighting of long term 4. Why is there a minimum long term award? awards in the pay mix and better aligns reward to risk management. The minimum long term award delivers a component of senior executives’ remuneration in Lendlease securities and assists senior Distributions: Distributions are paid on the minimum and as an adjustment of additional securities to any awards that vest. executives build towards their Mandatory Securityholding requirements (for more information please refer to page 117). The minimum Performance hurdles: promotes alignment between securityholders and senior executives, increases the value of the long term award to senior executives and aligns reward to effective risk management. Performance hurdles are all based on Group outcomes. FINANCIAL STATEMENTS Relative TSR: Vesting (above the minimum) is achieved if Lendlease TSR over the three year performance period is ≥ 50th percentile of 5. Do senior executives earn distributions on their long term awards? TSR performance among a comparator group that comprises companies in the S&P/ASX index 100 at the grant date. Maximum vesting Yes, initially only on the minimum component of the long term award, during the performance period. Otherwise distributions are not is achieved if TSR performance is at or above the 75th percentile. paid on long term awards until performance conditions are met and awards vest. When awards do vest, a ‘true up’ will be performed Average ROE: Average ROE over three years. Target and maximum ROE are set by the Board for each three year period, with reference and any distributions that would have been paid on vested awards during the performance period (greater than the minimum) will be to the Group’s Portfolio Management Framework. paid at the time of vesting as additional securities. Time Horizon of Reward – Illustrated for the Group CEO 6. Are there any provisions for awards to be reduced and under what circumstances would these provisions be used? Yes. The Board may adjust long term awards downwards where the Board reasonably determines that delivery of part, or all, of an The graph below illustrates the current and proposed time horizon of target reward for the Group CEO. Short term and long term award would result in the senior executive receiving an inappropriate or unwarranted benefit.1 remuneration would be paid at the end of each year shown here. The Board has discretion to forfeit the awards of any senior executive in circumstances where they join (or subsequently join) a FINANCIAL STATEMENTS FINANCIAL CURRENT competitor. 8,000 6,000 4,000 2,000 0 Total Rem Year 01 Year 02 Year 03 Year 04
Fixed STI Cash STI Deferred LTI
PROPOSED OTHER INFORMATION 8,000 6,000 4,000
OTHER INFORMATION OTHER 2,000 0 Total Rem Year 01 Year 02 Year 03 Year 04 Year 05 Year 06 1. In particular, in circumstances where there has been a material misstatement in the Group’s Consolidated Financial Statements or the participant has Fixed Short Term Award Long Term Award Min Long Term Award engaged in misconduct or dereliction of duty. 134 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 135
Directors’ Report Directors’ Report continued
The Directors’ Report for the financial year ended 30 June 2018 has been prepared in accordance with the requirements of the Corporations Act 2001. The information below forms part of this Directors’ Report: g. Non Audit Services DIRECTORS’ REPORT • Principal activities on page 8; During the year, KPMG, the Company’s auditor, performed certain other services in addition to its statutory duties. • Operating and Financial Review on pages 6 to 83 incorporating the Performance & Outlook on pages 70 to 83; The Board has considered the other services provided during the year by the auditor and, in accordance with written advice provided • Biographical information for the Directors and Company Secretary on pages 94 to 99; by resolution of the Risk Management and Audit Committee, is satisfied that the provision of those services during the year by the • Officers who were previously partners of the audit firm on page 99; auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the • Directors’ interests in capital on page 100; following reasons: • Board and Committee meetings and attendance on page 101; • All other services were subject to the corporate governance procedures adopted by the Group and the Risk Management and Audit • Remuneration Report on pages 102 to 133; and Committee is satisfied that those services do not impact the integrity and objectivity of the auditor; and DIRECTORS’ REPORT DIRECTORS’ • Auditor’s Independence Declaration on page 136. • 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 a. Dividends/Distributions decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards. The 2017 final dividend/distribution of $192.5 million (33.0 cents per security, unfranked) referred to in the Directors’ Report dated A copy of the Lead Auditor's Independence Declaration, as required under Section 307C of the Corporations Act 2001, is included at 28 August 2017, was paid on 20 September 2017. Details of dividends/distributions in respect of the current year are as follows: the end of the Directors’ Report. $m 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. 1 Interim dividends/distributions of 34.0 cents per security (unfranked) paid on 22 March 2018 198.6 CONSOLIDATED Final dividends/distributions of 35.0 cents per security (unfranked) declared by Directors to be payable on 21 September 20182 201.0 June 2018 June 2017 Total dividends/distributions 399.6 $000s $000s
1. Comprised of an unfranked dividend of 29.43223 cents per share paid by the Company and a trust distribution of 4.56777 cents per unit paid by Lendlease Trust. Audit and Other Assurance Services 2. Comprised of an unfranked dividend of 30.3271 cents per share payable by the Company and a trust distribution of 4.6729 cents per unit payable by Lendlease Trust. Audit services 6,338 5,922 b. Significant Changes in State of Affairs Other assurance services 399 485 There have been no significant changes in the Group’s state of affairs.
Total audit and other assurance services 6,737 6,407 FINANCIAL STATEMENTS c. Events Subsequent to Balance Date Non audit services 447 280 There were no material events subsequent to the end of the financial year. Total audit, non audit and other assurance services 7,184 6,687 d. Security Options h. Rounding Off 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. Lendlease Corporation Limited is a company of the kind referred to in the ASIC Corporations (Rounding in Financial/Directors' Reports) e. Indemnification and Insurance of Directors and Officers Instrument 2016/191 dated 24 March 2016 and, in accordance with that Instrument, amounts in the Consolidated Financial Statements Rule 12 of the Company’s Constitution provides for indemnification in favour of each of the Directors named on pages 94 to 99 of this and this report have been rounded off to the nearest tenth of a million dollars or, where the amount is $50,000 or less, to zero, unless report, the officers of the Company or of wholly owned subsidiaries or related entities of the Company (Officers) to the extent specifically stated to be otherwise. FINANCIAL STATEMENTS FINANCIAL permitted by the Corporations Act 2001. Rule 12 does not indemnify a Director, Company Secretary or Officer for any liability involving This report is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Directors. 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 94 to 99 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 D A Crawford, AO Indemnity with a Director or Officer of an unrelated entity. Chairman No indemnity has been granted to an auditor of the Company in their capacity as auditor of the Company. In accordance with the Corporations Act 2001, Rule 12 of the Constitution also permits the Company to purchase and maintain insurance or pay or agree to pay a premium for insurance for Officers against any liability incurred as an Officer of the Company or of a related body corporate. This may include a liability for reasonable costs and expenses incurred in defending proceedings, whether civil or criminal, and whatever their outcome. Due to confidentiality obligations and undertakings of the policy, no further details in respect of the premium or policy can be disclosed. OTHER INFORMATION S B McCann f. Environmental Regulation Group Chief Executive Officer and Managing Director The Group is subject to various state and federal environmental regulations in Australia. The Directors are not aware of any material non compliance with environmental regulations pertaining to the operations or activities Sydney, 22 August 2018 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.
OTHER INFORMATION OTHER 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. 136 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 137
DIRECTORS’ REPORT Lead Auditor’s Independence Declaration under
DIRECTORS’ REPORT DIRECTORS’ 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 2018 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.
FINANCIAL STATEMENTS
This page is intentionally left blank.
KPMG DM McLennan Partner
FINANCIAL STATEMENTS FINANCIAL Sydney 22 August 2018
OTHER INFORMATION OTHER INFORMATION OTHER
KPMG, an Australian partnership and a member firm of the KPMG Liability limited by a scheme approved under network of independent member firms affiliated with KPMG Professional Standards Legislation. International Cooperative (“KPMG International”), a Swiss entity. 07 FINANCIAL STATEMENTS
Potato Wharf, Manchester Artist impression as at 2018 (image subject to change and further design development and planning approval) OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 140 Financial Statements 36. Directors’ Declaration 35. 34. 33. 19. 18. 32. Notes F: Other Section 31. 30. 29. 28. Consolidation of Basis E: Section 27. 26. Hedging 25. 24. Management Risk D: Section 23. 22. 21. 20. 17. 16. 15. Capital Working and Liquidity C: Section 14. 13. 12. Inventories 11. Investment B: Section 10. 9. Taxation 8. 7. 6. 5. Revenue 4. 3. 2. 1. Performance A: Section Index Notes Notes to the Consolidated Financial Statements Flows Cash of Statement Equity in Changes of Statement Position Financial of Statement Statement of Comprehensive Income Statement Income Consolidated Financial Statements Table Contents of
Dividends/Distributions
Commitments
Other SignificantAccounting Other Policies Standards Accounting Revised and New of Impact Benefits Employee Plans Benefit Defined Information Party Related Disclosures Entity Parent Vehicles Benefit Employee Entities Consolidated Contingent Liabilities ValueFair Measurement Payables Trade Other and Receivables and Loans Exposure Risk Liquidity Capital Management Intangible Assets Issued Capital Issued and FinancingBorrowings Arrangements Financial Risk Management Flows Cash of to Statement Notes Equivalents Cash and Cash Assets Financial Other Properties Investment Investments Accounted Equity Date to Balance Subsequent Events Costs Finance and Revenue Finance Other Expenses Income Other Investments Accounted of Equity Profit of Share Security Share/Stapled Per Earnings Reporting Segment
143
LENDLEASE ANNUAL REPORT 2018
190 180 150 194 150 164 168 186 184 163 195 188 148 156 159 183 185 192 158 162 155 182 196 170 152 178 173 176 172 144 146 175 177 174 174 147 142 181 151 171 171 141 August 2018. equity, notwithstanding that the unitholders of LLT of also are unitholders the that notwithstanding equity, its and Company the comprises 2018 June 30 ended consolidated entity Statement of Financial Position within within Position Financial of Statement entity consolidated Company The (ASX). Exchange Securities Australian the on controlled entities including Lendlease Trust (LLT) (together and infrastructure group. Further information about the the about information Further group. infrastructure and Group’s primary activities is included in Note 1 ‘Segment 1‘Segment Note in included is activities primary Group’s property international an is and entity profit afor is Group financial report of the Company for the financial year year financial the for Company the of report financial report was authorised for issue by the Directors on 22 22 on Directors by the issue for authorised was report LLT, of units by issued owned The however, not are report. The Group). the or entity consolidated the to as referred Reporting’. Shares in the Company and units in LLT in units and are Company the in Shares Reporting’. Lendlease Corporation Limited (the Company) is is (the Company) Limited Corporation Lendlease the shareholders of the Company. The consolidated financial the Company and are therefore presented separately in the financial Group’s the into LLT consolidated is therefore Group Lendlease of name the under security one as traded is deemed to control LLT for accounting purposes and and purposes LLT accounting to control for deemed is andincorporated domiciled in Australia. The consolidated The accompanying notes form part of these consolidated financial statements. financial consolidated these of part form notes accompanying The Year June 2018 30 Ended Statement Income Revenue Other income investments accounted equity of profit of Share Gross profit sales of Cost Other expenses Finance costs Finance revenue Results from operating activities Profit after Tax attributable to securityholders to: attributable after Tax Profit after Tax Profit expense tax Income before Tax Profit Net finance costs Securities on issue Securities excluding securities Securities treasury (EPSS) Security Stapled Group Lendlease per Earnings Basic/Diluted on issue Shares excludingShares shares treasury (EPS) Share Limited Corporation Lendlease per Earnings Basic/Diluted after Tax Profit External non controlling interests Consolidated FinancialStatements Unitholders of Lendlease Trust Limited Corporation Lendlease of Members (cents) (cents) (cents) (cents) LENDLEASE ANNUAL REPORT 2018 Note 6 9 4 8 8 3 3 3 3 5 June 2018 June (15,038.1) (1,007.2) 16,556.1 1,066.2 1,518.0 1,138.2 (272.6) (72.0) 580.0 (88.0) 496.2 792.8 793.6 793.6 100.2 212.8 137.0 131.2 136.1 99.6 16.0 $m 0.8
(14,841.0) June 2017 June 16,659.0 (1,039.5) 1,007.0 1,818.0 1,103.6 (248.3) (108.6) (96.6) 758.6 645.7 758.7 758.7 247.2 135.2 110.8 112.9 130.1 115.1 12.0 77.9 0.1 $m
141
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 142 The accompanying notes form part of these consolidated financial statements. financial consolidated these of part form notes accompanying The Total comprehensive income after tax External non controlling interests Total comprehensive income after tax attributable to securityholders Total items that may be reclassified subsequently to profit or loss or profit to subsequently reclassified be may that Total items Total comprehensive income after tax attributable to: attributable tax after income Total comprehensive Total comprehensive income after tax loss or profit to reclassified be not will that Total items loss: or profit to reclassified be not will that Items Year June 2018 30 Ended Statement of Comprehensive Income Consolidated FinancialStatements 3. 2. 1. Items that may be reclassified subsequently to profit or loss: or profit to subsequently reclassified be may that Items Other Comprehensive Income/(Expense) After Tax after Tax Profit Movements in foreign currency translation reserve translation currency foreign in Movements Unitholders of Lendlease Trust Limited Corporation Lendlease of Members Movements in hedging reserve hedging in Movements Movements in fair value revaluation reserve revaluation value fair in Movements Defined benefitDefined plan remeasurements reserve acquisition interest controlling non in Movements Includes $28.1 million (June 2017: ($8.6) million) relating to share of other comprehensive income of equity accounted investments. accounted equity of income comprehensive other of share to relating million) ($8.6) 2017: (June million $28.1 Includes ($0.1) million). 2017: (June interests controlling non external to relating million $0.2 Includes retained earnings. opening to reserve revaluation value fair in Movements from million $1.1 transferring by Standards) Accounting Revised and New of Instruments 9Financial AASB Impact of adoption time first the of impact the reflect to adjusted been has Income Comprehensive of Statement 2017 June 1 LENDLEASE ANNUAL REPORT 2018 2 3 continued Note 9b 9b 9b 9b June 2018 June 793.6 918.5 918.5 704.7 212.8 917.5 80.4 (6.9) (3.8) 73.5 55.2 51.4 $m 1.0
June 2017 June (refer to to (refer (22.0) 758.7 727.9 727.9 727.9 615.0 (41.0) (11.6) 112.9 (8.8) 19.0 2.8 $m
Inventories Loans and receivables Assets Current Non assets Total current Other assets Other financialassets Inventories Loans and receivables 1. Retained earnings Retained The accompanying notes form part of these consolidated financial statements. financial consolidated these of part form notes accompanying The June 2018 30 at As Position Financial of Statement Equity accounted investments accounted Equity equivalents Cash and cash Current Assets Total equity External non controlling interests Total equity attributable to securityholders Trust Lendlease of to unitholders attributable Total equity Total equity attributable to members of Lendlease Corporation Limited Deferred tax assets tax Deferred Other financialassets Investment properties Other financial liabilities financial Other and financingBorrowings arrangements Issued capital Issued Equity liabilities financial Other Current liabilities tax and financingBorrowings arrangements Provisions Total assets assets Total current non Intangible assets Property, plant and equipment Net assets Total liabilities liabilities Total current non liabilities tax Deferred Provisions payables Trade other and Non Current Liabilities Total liabilities current Reserves Treasury securities liabilities Resident payables Trade other and Current Liabilities Other assets asset plan benefit Defined of New and Revised Accounting Standards) by transferring $10.2 million from Reserves to opening Retained earnings. Retained opening to Reserves from million $10.2 transferring by Standards) Accounting Revised and New of Instruments 9 Financial AASB of adoption time first the of impact the reflect to adjusted been has Position Financial of Statement 2017 June 1 1 LENDLEASE ANNUAL REPORT 2018 Note 13b 13a 17a 17a 9c 9c 33 32 23 23 22 22 14 14 18 15 12 11 11 June 2018 June 2018 10,649.4 10,549.4 16,963.6 6,588.0 2,626.6 2,369.2 6,414.2 6,414.2 3,961.4 6,314.2 2,670.2 6,413.3 5,168.8 5,769.5 1,296.8 1,244.5 1,530.7 3,855.1 1,883.7 1,547.8 1,421.4 3,177.1 329.9 464.7 1,177.1 478.5 278.2 474.8 120.0 (44.1) 787.8 154.7 67.8 91.0 10.4 61.0 71.1 0.9 $m 3.4 0.7 6.7
(refer to Impact Impact to (refer 20,854.2 14,592.9 June 2017 June 14,687.7 4,946.4 10,757.7 6,063.4 3,930.0 3,696.8 4,573.0 6,261.3 5,578.8 6,166.5 6,967.4 6,166.5 2,975.4 1,860.5 1,203.3 2,749.2 1,289.8 1,249.2 2,152.0 1,772.1 1,415.1 1,117.0 834.6 425.8 285.6 238.2 (24.7) 291.9 (15.5) 507.7 129.4 103.1 64.3 33.0 69.9 58.4 22.0 77.9 0.8 6.4 $m
143
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 144 Year June 2018 30 Ended Total Comprehensive Income Total Comprehensive Income Transactions with owners of the Company the of owners with Transactions Transactions with Owners of the Company the of Owners with Transactions On market buyback of securities marketOn buyback Consolidated FinancialStatements 4. 3. 2. 1. Net investment hedging investment Net gains value Fair Total Comprehensive Income Balance as at 1 July 2016 1July at as Balance Other movements Other movements Dividends and distributionsDividends Effect of foreign exchange movements exchange foreign of Effect Other Comprehensive Income (Net of tax) Profit for theperiod Balance as at 30 June 2018 June 30 at as Balance Total other movements through reserves Asset disposal and disposal transfers Asset Treasury acquired securities Effective cash flow hedges flow cash Effective Total other movements through reserves Fair value movement on allocation and vesting of securities of vesting and allocation on movement value Fair Treasury vested securities Dividends and distributionsDividends benefitDefined plans remeasurements Total Comprehensive Income Other Comprehensive Income (Net of tax) Profit for theperiod 2017 June 30 at as Balance Treasury acquired securities (DRP) Plan Reinvestment Distribution Capital contributed by non controlling interests ComprehensiveOther Income (Net of Tax) Balance as at 1 July 2017 1July at as Balance Asset disposal and disposal transfers Asset Treasury vested securities Effect of foreign exchange movements exchange foreign of Effect Effective cash flow hedges flow cash Effective hedging investment Net Fair value movement on allocation and vesting of securities of vesting and allocation on movement value Fair Defined benefitDefined plans remeasurements Other ComprehensiveOther Income (Net of Tax) Distribution Reinvestment Plan (DRP) Plan Reinvestment Distribution Capital contributed by non controlling interests Other Comprehensive Income (Net of tax) Other Comprehensive Income (Net of tax) Statement of Changes in Equity in Equity Changes of Statement of number equivalent an securities on acquiring by market. stapled Plan Reinvestment Distribution Interim 2018 the under issued securities stapled neutralised Group the year the During earnings. retained opening been year has prior to million $1.1 of tax) of transferred (Net Income Comprehensive Other earnings. retained to transferred been have respectively, million $10.2 and $9.1 million 9Financial AASB of Instruments adoption time first the of impact the reflect to adjusted been has Equity in Changes of Statement 2017 June and 2018 June The year. the in loss and profit to transferred were reserves in million. 3.7 movements was These 2018 June 30 at balance closing and million) 29.2 2016: (1 July million 4.3 was 2017 1July securities treasury of number for balance Opening of balances Reserve Revaluation Value Fair opening year current and year Prior Standards). Accounting Revised and New of Impact to (refer 4 LENDLEASE ANNUAL REPORT 2018 1,296.8 1,289.8 Capital 1,289.8 1,276.3 Issued Issued 13.5 13.5 $m 7.0 7.0 - - - -
Securities Treasury Treasury (24.7) (99.5) (44.1) (19.4) (24.7) (46.1) 40.8 (4.6) 38.6 74.8 26.7 $m - - - 1
continued Revaluation Revaluation Fair Value Fair Reserve (19.6) (19.6) 20.7 (1.5) (1.1) (1.1) (1.1) $m 0.4 - - - - - 3 - 2
Hedging Hedging Reserve (23.0) (35.6) (16.5) (16.5) (6.9) (6.9) (0.3) (6.9) 19.0 19.0 (7.4) 19.0 0.4 19.3 0.1 0.4 $m 0.5 0.1 2 2
RESERVES Translation Currency Reserve Foreign
(40.9) (40.9) (25.0) (95.3) (40.9) (54.4) (63.5) (95.3) (9.9) (9.9) 80.2 80.2 80.2 22.6 (7.9) 88.1 $m - 2
Non Controlling Controlling Non Acquisition Acquisition Reserve Interest (92.2) (86.3) (88.9) (86.3) (0.2) (3.8) (3.8) (0.2) (3.8) (3.8) (2.1) (2.1) $m 2.8 2.8 2.8 2.8
Reserve Other Other 106.0 106.1 106.1 (5.6) (5.6) (0.1) 111.7 (0.1) $m - - - -
Compensation Compensation Reserve Equity Equity (11.4) 95.2 76.5 76.5 (5.1) 18.7 81.6 18.7 $m 6.3 LENDLEASE ANNUAL REPORT 2018 - - - -
Compensation Compensation Reserve (53.8) Other Other (53.8) 53.8 $m The accompanying notes form part of these consolidated financial statements. financial consolidated these of part form notes accompanying The ------
Retained Retained Earnings 3,696.8 3,696.8 3,299.8 3,855.1 (476.9) (320.9) (337.2) (144.7) (237.1) 580.0 635.2 645.7 634.1 (11.6) (11.6) (11.6) 55.2 83.8 55.2 55.2 $m 5.0
Corporation Corporation Members of Members Lendlease Lendlease 4,946.4 4,946.4 4,565.5 Limited 5,168.8 (482.3) (233.0) (320.9) (337.2) (144.7) 580.0 704.7 (62.5) 645.7 (31.8) 613.9 124.7 (31.8) (19.5) (46.1) 124.7 (11.6) 40.8 84.8 (4.6) (9.5) 55.2 22.6 26.7 (7.9) (7.4) 19.3 51.4 13.5 18.7 $m 0.4 6.3 2.8 7.0 -
of Lendlease Unitholders 1,244.5 1,048.6 1,117.0 (44.5) (85.3) 1,117.0 (33.3) (53.5) 212.8 (47.6) 212.8 112.9 Trust 112.9 $m 1.5 3.1 - -
Controlling Controlling Interests External External (103.2) (124.8) 101.4 103.1 101.3 103.1 Non Non (0.1) (0.1) (0.1) 21.6 0.9 $m 0.2 0.8 0.2 0.2 1.0 0.1 0.1 1.7 -
6,414.2 6,166.5 (670.8) 6,166.5 5,615.8 (368.5) (390.7) (134.3) (178.0) Equity (176.1) (62.6) 726.8 793.6 (31.9) 124.9 918.5 (31.9) 758.7 (19.5) 124.9 (46.1) Total 101.3 (11.6) 40.8 85.0 (4.6) 55.2 22.6 26.7 (7.9) (7.4) 16.6 19.3 21.6 51.5 18.7 $m 0.4 6.3 8.5 2.8
145
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 146 The accompanying notes form part of these consolidated financial statements. financial consolidated these of part form notes accompanying The Year June 2018 30 Ended Flows Cash of Statement Consolidated FinancialStatements Dividends/distributions received paid Interest operations of course the in payments Cash operations of course the in receipts Cash Activities Operating from Flows Cash Cash and cash equivalents at beginning of financial year financial of beginning at equivalents cash and Cash Other financingactivities Increase in capital of non controlling interest controlling non of capital in Increase Plan Reinvestment –Distribution securities stapled of buyback market on for Payments securities stapled of buyback market on for Payments securities sale from of treasury Proceeds ventures joint and associates from repayments loan Net properties investment on expenditure of/capital Acquisition investments of Acquisition activities by operating provided cash Net operations of respect in paid tax Income Interest received Cash and cash equivalents at end of financial year financial of end at equivalents cash and Cash Net (decrease)/increase in cash and cash equivalents equivalents cash and cash on movements rate exchange foreign of Effect Other Cash Flow Items activities by financing in)/provided (used cash Net Dividends/distributions paid of plant property, andDisposal equipment costs) transaction and disposed cash of (net entities consolidated of Disposal investments of Sale/redemption Activities Investing from Flows Cash Repayment of borrowings from borrowings Proceeds Cash Flows from Financing Activities activities by investing provided cash Net Acquisition of intangible assets Acquisition of plant property, and equipment LENDLEASE ANNUAL REPORT 2018 Note continued 16 15 June 2018 June (16,216.4) 16,354.3 (1,870.7) 1,249.2 2,021.0 (448.9) (397.8) (372.0) (178.0) (110.3) 1,177.1 (112.4) (122.1) 433.6 (32.6) (32.2) 409.7 221.8 (72.1) (10.1) (9.6) 72.8 76.5 74.4 21.6 31.1 13.1 $m 7.9
(15,928.7) (2,576.8) June 2017 June 16,254.6 2,800.6 1,008.4 1,249.2 (244.4) (337.9) (144.8) (257.3) (120.4) (136.4) 240.8 (20.9) 548.4 (23.9) 146.0 106.5 164.9 75.4 16.2 37.0 70.1 13.1 8.5 9.9 5.7 $m
• • current. non or current as Position Financial of Statement the in liabilities and assets presents Group The • • • assumptions. and estimates judgements, make to management requires AASBs with complies that report afinancial of preparation The • • been: have policies accounting Significant • • • • which: report financial purpose general is a report financial consolidated The Preparation of Basis Notes toConsolidatedFinancialStatements operating cycle and those liabilities due within one year from the reporting date. All other liabilities are classified as non current. current. non as classified are liabilities other All date. reporting the from year one within due liabilities those and cycle operating Group’s the of course the in settled to be expected liabilities purposes, trading for primarily held liabilities include liabilities Current current. non as classified are assets other All cycle. operating Group’s the of course the in, use or sale for intended or in, realised to be expected assets and equivalents, cash and cash purposes, trading for primarily held assets include assets Current year. financial next the within adjustments material in resulting of risk significant havea that uncertainties estimated about information further and amounts reported on effects significant most the have that policies accounting applying in judgements accounting about information highlight policies accounting significant The prospectively. recognised are to estimates Revisions basis. ongoing an on reviewed are assumptions underlying and Estimates may differ from estimates.these results Actual expenses. and income liabilities, assets, of amounts reported the and policies accounting of application the affect can This Standards’. Accounting Revised and New of ‘Impact 35 Note in explained as except Group, the in entities all and by statements financial consolidated the in presented years financial to all applied Consistently SignificantAccounting Policies’; and ‘Other 36 Note in discussed are policies accounting significant other while relate, policies the to which notes relevant the in Included value. fair at measured liabilities and assets of valuation of basis the for statements financial the to notes the within policies accounting specific to the Refer hedged. is that risk the of respect in value fair at stated are hedged are that liabilities and assets Recognised plans. compensation based share settled cash for liabilities and liabilities resident properties, investment investments, loss or profit through value fair instruments, financial derivative value: fair their at stated are which liabilities, and assets following the for except basis cost historical the under prepared Is and 2016/191; Instrument Reports) Financial/Directors’ in (Rounding Corporations ASIC with accordance in indicated, otherwise unless dollars million of a tenth nearest the to off rounded ($), values all with dollars Australian in presented Is Board; Standards Accounting International by the adopted (IFRSs) Standards Reporting Financial International with Complies Corporations 2001 Act the and Board, Standards Accounting Australian by the adopted (AASBs) Standards Accounting Australian with accordance in prepared been Has ; LENDLEASE ANNUAL REPORT 2018
147
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 148 Total segment Statutory result attributable to securityholders activities Corporate items Reconciling Statutory result Statutory External non controlling interests Construction Investments Financial Disclosure isbelow.statements financial included to the segments reportable these of areconciliation and segment reportable each of performance the regarding information Financial RetirementInvestments, Living Housing. and US Military wholesale investment management platform and also includes the Group’s ownership interests and in infrastructure property Co- aleading includes segment investments The regions. geographic four all across investments managing and/or owning include Services Investments predominantlyservices, in the infrastructure, defence, mixed use, commercial and residential construction sectors. and design management, project of provision the include services and products Its regions. geographic four all across Operates Construction and infrastructure. social and retirement, economic retail, assets commercial apartments, developments, use mixed city inner communities, of development the include services and products Its regions. geographic four all in Operates Development follows: as are segments operating The 1. A:Performance Section Notes toConsolidatedFinancialStatements Development does not consider corporate activities to be an operating segment. operating an to be activities corporate consider not does Group The industries. these within operate that entities to other relative segments reportable certain of results the evaluating in relevant most the is information such that believes PAT. on management as based is PAT performance performance to measure used is Segment regions. all in consistent broadly being model business Group’s to the due geography than rather activity business around segments the arranged has Group The Group. the managing and targets, operational setting resources, of allocation the determining performance, assessing in maker) decision operating chief (the Director Managing and Officer Executive Chief Group by the used and reviewed are that reports internal and segment, each for resources of allocation and profile returns target distinct the segment, by each provided services and products distinct the on based segments operating these identified has Group The Investments. and Construction Development, are segments Group’s The Accounting Policies Report. Directors’ the of section Outlook & Performance the in found be can resources of allocation and performance on analysis and information Further section. this in included been has items these on disclosure therefore payout, dividend and security stapled per earnings the impact also will performance Group balances. reported the behind detail provide components their with along Statement Income the of items key line The activity. operational the by revenue and profit of abreakdown provides PAT. of below Reporting understanding auser’s Segment enhances that disclosure on focuses Report Financial the of section This performance. Group’s the assess to used (PAT)after Tax measure key the is Profit Segment Reporting Segment LENDLEASE ANNUAL REPORT 2018 June 2018 June 2018 1,066.2 1,066.2 (306.5) 1,372.7 668.8 BEFORE TAX BEFORE 661.6 42.3 $m PROFIT PROFIT June 2017 June
1,006.9 1,007.0 1,341.2 (334.3) 549.4 488.7 303.1 $m 0.1
June 2018 June 2018 BENEFIT/(EXPENSE) (364.9) (273.4) (272.6) (168.2) (176.9) INCOME TAX (19.8) 91.5 0.8 $m June 2017 June (350.3) (248.3) (248.3) (107.3) (151.6) 102.0 (91.4)
$m
June 2018 June 2018 1,007.8 (215.0) 493.4 792.8 793.6 491.9 AFTER TAX AFTER 22.5 continued 0.8 $m PROFIT PROFIT June 2017 June
(232.3) 990.9 758.6 758.7 397.8 381.4 211.7 $m 0.1
3. 2. 1. 4. 3. 2. 1. The following tables set out other financial information by reportable segment. reportable by information financial other out set tables following The Americas Europe Asia Australia Investments Construction Corporate activities Corporate Total segment Investments Construction Development 2017 Year June Ended result Statutory activities Corporate Total segment Development 2018 Year June Ended No revenue from transactions with a single external customer amounts to 10 per cent or more of the Group’s revenue. Group’s the of more or cent per to 10 amounts customer external asingle with transactions from revenue No Statutory result Statutory activities Corporate Total segment The operating segments generate earnings in the following regions. following the in earnings generate segments operating The Statutory result Statutory a result of this transaction, the Non Current Assets related to Retirement Living have been derecognised. derecognised. been have Living Retirement to related Assets Current As Non the period. the during transaction, this of investment a result Living Retirement Group’s the in interest cent per 25 of a sale the reflects Australia for Assets Current assets. Non in of location reduction The geographical the on based is and assets plan benefit defined and instruments financial assets, tax deferred Excludes Revenue. Finance and Revenue of comprised is Outlook, and Performance the in disclosed as Revenue, Segment financialassets. benefit plan assets, tax Excludes and deferred instruments defined or gains value fair and losses. movements exchange foreign unrealised back, written or raised provisions and impairments to relate Items Cash Non Material The Equity Accounted Investments. Revenue. Finance and Revenue of comprised is Outlook and Performance the in disclosed as Revenue, Segment 16,644.2 Segment Segment Revenue 16,538.2 12,940.4 12,644.5 16,671.0 16,572.1 3,433.0 3,204.2 393.6 566.7 33.9 26.8 $M 1
Revenue Revenue Finance LENDLEASE ANNUAL REPORT 2018 16.0 12.0 11.3 $M 0.4 0.5 3.2 8.8 4.7 1.6 1.2 3.1 1.1
June 2018 June 16,538.2 16,572.1 10,156.0 4,830.0 Expense Expense Finance (108.6) 900.2 652.0 (107.7) (88.0) 33.9 (84.1) REVENUE (0.9) (3.9) (0.9) (0.7) (1.9) $m (1.3) $M
Results EAI Results 1 Share of 131.2 131.2 40.5 86.5 39.4 76.6 32.5 77.9 $M 4.2 4.7 1.3 2
June 2017 June 16,644.2 16,671.0 10,029.7 Amortisation Amortisation Depreciation Depreciation 1,328.8 4,711.5 574.2 26.8 $m (106.6) (48.4) (98.2) (47.0) (58.2) (34.7) (51.2) (35.1)
(4.0) (8.3) (5.6) (7.7) and and $M
Material Non Material Non Cash Items NON CURRENT ASSETS 205.8 (45.0) 223.6 (16.3) (65.1) 256.1 (8.0) (9.7) 36.7 June 2018 June 14.8 17.8 $M 6.6 4,931.5 8,570.8 8,826.7 1,602.0 1,180.9 3 856.4
255.9 Non Current $m 3
Segment Segment 12,927.5 13,195.9 8,570.8 4,649.3 8,826.7 7,044.8 Assets 1,969.2 4,164.5 1,952.3 1,718.2 268.4 255.9 $M 4
2 20,854.2 16,963.6 20,146.4 16,538.2 June 2017 June 12,927.4 13,195.9 4,988.2 8,520.3 5,549.5 9,936.5 3,762.0 6,637.9 7,226.7 Assets Assets Group Group 1,135.7 860.6 994.6 425.4 268.5 707.8 Total $M $m
149
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 150 Basic/Diluted EPSS June 2017 – paid 20 September 2017 September 20 –paid 2017 June 2018) September 21 (payable for –provided 2018 June TrustLendlease Final Distribution 2. continued A:Performance Section Notes toConsolidatedFinancialStatements 3. year. financial current the in utilised losses tax and statements financial the in provided tax income of payment the from arise will which credits franking for adjusting after calculated is million). This $13.0 2017: June (30 rate tax cent per a30 on based million, $14.3 is 2018 June 30 at as periods reporting subsequent in use for available credits franking of amount The Franking Dividend 2. 1. June 2017 – paid 20 September 2017 September 20 – paid 2017 June Weighted average number of stapled securities stapled of number average Weighted Profit attributable to securityholders of LendleaseGroup (EPSS) Security Stapled Per Earnings Basic/Diluted Financial Disclosure December 2017 – paid 22 March 2018 March 22 –paid 2017 December Distribution Trust Interim Lendlease 2017 March 24 –paid 2016 December 2018 March 22 –paid 2017 December Parent Company Interim Dividend Basic/Diluted EPS June 2018 – declared subsequent to reporting date to reporting subsequent –declared 2018 June Parent Company Final Dividend 2017 March 24 –paid 2016 December Weighted average number of ordinary shares ordinary of number average Weighted (Company) Limited Corporation Lendlease of members to attributable Profit (EPS) Per Share Earnings Basic/Diluted Dividends/Distributions from the calculation of basic and diluted earnings per Company share presented in the Income Statement. Income the in presented share Company per earnings diluted and basic of calculation the from LLT to is excluded attributable profit the therefore and equity, within separately Trust presented (LLT) are Lendlease of units issued The options are included in shares. outstanding share employee and shares treasury when occurs Dilution shares/securities. ordinary potential dilutive any have not does currently Group The shares/securities. ordinary potential dilutive all of effects the for outstanding shares/securities ordinary of number average weighted the and Group, and Company the of members to attributable after Tax Profit/(loss) the by adjusting determined is EPS/EPSS Diluted year. financial the during issued shares/securities ordinary in elements bonus for year,adjusted financial the during outstanding shares/securities ordinary of number average weighted by the shares/securities, ordinary than other equity servicing of costs any excluding Group, and Company the of members to attributable after Tax Profit/(loss) by dividing determined is EPS/EPSS Basic Report. Annual the of section Pillar Finance the in details further to Refer Group. the for measure akey is performance This Statement. Income the in EPS/EPSS diluted and basic presents Group The Accounting Policies No provision for this dividend has been recognised in the Statement of Financial Position at 30 June 2018, as it was declared after the end of the financial financial the of end the after year. declared was it as 2018, June 30 at Position Financial of Statement the in recognised been has dividend this for provision No year. prior and current the in franked not were dividends/distributions interim and Final Earnings (EPS/EPSS) Per Share/Stapled Security 1 LENDLEASE ANNUAL REPORT 2018 2 cents cents $m $m Per Share/Unit m m Securities Securities Excluding Treasury Treasury Cents Cents Shares/ 30.3 28.4 29.4 29.8 580.0 4.6 4.6 3.2 100.2 4.7 792.8 JUNE 2018 578.7 578.7 137.0
Securities Securities on Issue on Shares/ 580.0 582.5 582.5 792.8 136.1 99.6 COMPANY/TRUST June 2018 June
399.6 174.2 171.9 26.8 26.7 $m Securities Securities Excluding Treasury Treasury Shares/
JUNE 2017 645.7 758.6 135.2 561.0 561.0 continued 115.1
Securities Securities June 2017 June 2017 on Issue on Shares/ Shares/ 583.0 384.9 583.0 645.7 758.6 110.8 165.8 130.1 173.5 26.7 18.9 $m
Total revenue Total Other revenue Rental revenue Revenue from the sale of development properties development of sale the from Revenue services of provision the from Total revenue 4. Financial Disclosure Investments Development Construction services of provision the from Revenue right usually to payment is on receive established, declaration of the dividend/distribution. revenueOther lease. Rental revenue market conditions and commercial factors. inputs, to cost consideration due the given sale, property adevelopment of components individual the valuing in judgement exercise The measurement of revenue from the sale of development properties is another accounting judgement as it requires management to • • • • Revenue from the sale of development properties • • date. sheet balance the at transactions Revenue from the provision of services Accounting Policies Revenue The Group can reliably measure the costs incurred or to be incurred in respect of the transaction. the of respect in incurred to be or incurred costs the measure reliably can Group The and due; consideration the receive will Group the that probable is it and reliably measured be can revenue The sold; properties development the over control effective nor ownership, with associated usually degree to the involvement managerial continuing neither retains Group The buyer; the to transferred been have ownership of rewards and risks significant The unit. the occupied first resident the since growth capital of estimates and licence resident’s the of term expected the upon based basis accrual annual an on recognised is income DMF property) (investment villages retirement turnover. owned on For realised gain capital the of ashare plus total) in cent per –36 cent per 30 or years, –12 to 10 up aperiod for price resale or purchase of annum per cent per (e.g. three by aresident occupied property the on period afixed for fee annual an for provides contract DMF Atypical (DMF). Fees Management Deferred Living Retirement includes also Investments rendered. services for recognised are entitlements fee management asset and origination funds, Investments: For includes origination fees for infrastructure rendered. services Also costs. estimated total of apercentage as to date incurred expenses to estimate judgement uses management as judgement accounting an is measurement This contract. each for costs forecast total of apercentage as to date incurred to costs by reference measured is which method, complete percentage the using performed work of value the Development: and Construction For primarily includes dividends/distributions and miscellaneous items. Dividend/distribution revenue is recognised when the , including lease incentives granted, is recognised in the Income Statement on a straight line basis over the term of the the of term the over basis line astraight on Statement Income the in recognised is granted, incentives lease , including is recognised in the Income Statement in proportion to the stage of completion of the the of completion of stage to the proportion in Statement Income the in recognised is LENDLEASE ANNUAL REPORT 2018 is recognised in the Income Statement when: Statement Income the in recognised is June 2018 June 12,922.4 13,819.3 16,556.1 2,602.9 605.0 291.9 96.0 37.9 $m
16,659.0 June 2017 June 12,646.5 13,735.1 2,829.3 507.0 581.6 23.3 71.3 $m
151
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 152 Total share of profit from associates from profit of Total share Total Americas 1. Financial Disclosure 5. continued A:Performance Section Notes toConsolidatedFinancialStatements Other Investments Americas Asia Total a. investments accounted equity of profit of Total share Share of profit Joint Ventures Share of profit Associates Lendlease Asian Retail Investment Fund 3 Fund Investment Retail Asian Lendlease 2 Fund Investment Retail Asian Lendlease Investments Asia Total Australia Fund Retail Regional Sub Lendlease Investments 1 Fund Communities Lendlease Development Australia Associates ventures, this is from the date joint control commences until the date joint control ceases. ceases. control joint date the until commences control joint date the from is this ventures, joint for and ceases, influence significant that date the until commences influence significant that date the from is this associates, For of the arrangement. assets net to the rights have arrangement the of control joint have that parties the whereby arrangement ajoint is venture Ajoint policies. operating and financial the over control, joint or control not but influence, significant has rights, voting its of aresult as Group, the which in entities are partnerships) (including Associates held. interest ownership on based loss or profit investment’s the of share Group’s the is method equity the under recognised profit of share The method. equity the using for accounted are ventures joint and associates in Investments Accounting Policies for various Equity Accounted Investments, the share of tax is paid by the Group and is included in the Group’s current tax expense. tax current Group’s the in included is and Group the by paid is tax of share the Investments, However, Accounted relevant. Equity where various for themselves, vehicles Investment Accounted Equity the by paid tax after is and profit, Group’s the to contribution the Reflects Share of Profit of Equity Accounted of Investments Accounted Profit of Share Equity 1 LENDLEASE ANNUAL REPORT 2018 June 2018 June 2018 June 2018 June 2018 131.2 20.0 107.1 24.1 19.5 24.1 2.3 0.5 $m $m 2.3 1.8 1.8
continued June 2017 June June 2017 June 20.7 (0.2) 20.7 15.4 77.9 57.2 14.9 2.3 3.0 0.5 3.2 2.3 $m $m
4. 3. 2. 1. Total Americas Other Construction Other Development Americas Total share of profit from equity accounted investments accounted equity from profit of Total share ventures joint from profit of Total share Total Europe Other Investments Other Lendlease Retirement Living Trust Joint Ventures b. Joint Stratford City Business District Limited (International Quarter London) Quarter (International Limited District Business City Stratford Development Europe Asia Total Ltd (313@somerset) JV CDR Investments Lendlease One International Towers Sydney Trust The Quarter Lifestyle Quarter Paya Lebar Development Asia Total Australia Lendlease InternationalLendlease Towers Sydney Trust Investments Other Metro Melbourne Tower Quay Circular Development Australia Accounted Investment. The Group has consolidated the results of this investment for the period control was maintained. was control period the for investment this of results the consolidated has Equity an to Group The Interest Investment. Controlling Non a with Accounted entity consolidated controlled a from reclassified been has investment this aresult, As Quarter. Lifestyle The control to ability its the reassessed has Group the period, the during Quarter Lifestyle The in investment the on rights voting Group’s the to achange Following partner. accounts equity residual Group its the transaction, this of aresult As Trust. Living Retirement Lendlease the in interest cent per a25 sold Group the period, the During maintained. was control joint period the for investments these through value fair at measured Assets Financial control joint that determined and conclusions, control joint its reassessed has Group The Trust changed. Towers Sydney International One Lendlease Trust and Towers Sydney International Lendlease of structures governance Towers Sydney, the International at towers three the for FY2017 in phase operational the reaching of aresult As expense. tax current Group’s the in included is and Group the by paid is tax of share the Investments, However, Accounted relevant. Equity where various for themselves, vehicles Investment Accounted Equity the by paid tax after is and profit, Group’s the to contribution the Reflects major decisions governing this investment. The Group can no longer exercise control over major decisions of the entities comprising the investment in in investment the comprising entities the of decisions major over control exercise longer no can Group The investment. this governing decisions major interest in the Lendlease Retirement Living Trust as the Group has joint control over the major decisions over the entity with its joint venture venture joint its with entity the over decisions major the over control joint has Group the Trust as Living Retirement Lendlease the in interest 1 4 3 no longer exists. As a result, these investments have been reclassified from Equity Accounted Investments to Other Other to Investments Accounted Equity from reclassified been have investments these aresult, As exists. longer no 2 profit and loss in the prior period. The Group recorded its share of comprehensive income in relation to relation in income comprehensive of share its recorded Group The period. prior the in loss and profit LENDLEASE ANNUAL REPORT 2018 2 June 2018 June 131.2 107.1 (4.7) (3.3) (0.7) 23.4 22.7 57.2 31.9 (1.4) 18.6 (0.1) 51.8 8.0 0.5 0.2 $m 5.9 4.2
June 2017 June (8.3) (0.3) (3.5) 23.9 39.6 (4.8) 77.9 57.2 17.6 37.1 2.0 0.5 6.6 2.0 2.0 $m
153
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 154 1. Income Statement Group. the to immaterial individually are that ventures joint and associates those for information financial summarised provides below table The 2. 1. Total comprehensive income Other comprehensive income period the for Profit of: share total Group’s Group’s ownership interest Total comprehensive income Other comprehensive income period the for Profit expense tax Income Income Statement assets. property of development and in investment is ventures joint material the of activities principal and nature The policies. accounting in differences and adjustments value fair including method, equity the using when Group the by made adjustments to reflect amended been have They amounts. those of share Group’s the indicated, where and, associates and ventures joint relevant the of statements financial the in presented amounts the reflects disclosed information The ventures. joint and associates material of determination for Investments’ Accounted ‘Equity 12c Note to Refer Group. the to material are that ventures joint and associates those for information financial summarised provides below table The c. 5. continued A:Performance Section Notes toConsolidatedFinancialStatements individually investments accounted immaterial equity of income comprehensive total of share Group’s of amounts Aggregate Other comprehensive income/(expense) Profit continuingfrom operations of: share Group’s the of amounts Aggregate Other expenses Depreciation and amortisation services of provision from Revenue Material Associates and Joint Ventures Summarised Financial Information Financial Summarised Ventures Joint and Associates Material figures in the above table have been restated. been have table above the in figures this to relating total of income share Group’s The 2017. June comprehensive for venture joint amaterial as disclosed was London) Quarter (International Limited District Business City Stratford deconsolidation. following incurred million $16.6 of costs transaction of share Group’s the include expenses Other period. month asix approximately Lendlease Retirement Living Trust Income Statement has been presented from when this investment was deconsolidated, representing Share of Profit of Equity Accounted Investments continued of Investments Accounted Profit of Share Equity investment was $35.3 million in the prior year. This investment is no longer considered a material joint venture. No No venture. joint amaterial considered longer no is investment year. This prior the in million $35.3 was investment LENDLEASE ANNUAL REPORT 2018 June 2018 June 34.2 ASSOCIATES 24.1 10.1 $m
June 2017 (11.1) 20.7 9.6 $m
LENDLEASE RETIREMENT June 2018 June JOINT VENTURES JOINT LIVING TRUST LIVING 73.0 55.3 17.7 $m continued
June 2017 June June 2018 June (75.9) 75.0% 145.3 1 24.4 (0.8) 68.7 68.7 51.8 51.5 20.1 4.3 $m 0.3 $m 0.1 2 1
Fair value through profit or loss assets loss or profit through value Fair Investment properties measurement value fair on gain Net Total net gain on sale/transfer of investments liabilities and assets Other Financial assets Financial Disclosure 6. Consolidated entities Consolidated Net gain on sale/transfer of investments Other measurement value fair on gain Total net 3. 2. 1. Total other income Properties’ and Note 14 ‘Other Financial Assets’. Financial ‘Other 14 Note and Properties’ ‘Investment 13 Note in stated policies the with accordance in recognised are remeasurements value fair on losses or gains Net place. in is contract unconditional an when Net gains or losses on sale/transfer of investments IncomeOther Accounting Policies the revaluation gain of $101.8 million, loss on disposal of $20.9 million noted in footnote 1, $16.6 million for the Group’s share of transaction costs recorded within within recorded costs Share total transaction of share Group’s the for million $16.6 1, of footnote in comprised is noted which million million, $20.9 of $15.5 Trust was disposal on Living loss million, Retirement $101.8 of Lendlease gain the in revaluation interest the cent per 25 the of sale on loss net overall The price. based was which transaction the investment, on accounted equity Trust retained Living Retirement Lendlease the on gain revaluation million $101.8 the includes income Other Assets’. Financial ‘Other 14 Note in disclosed are uplift value fair the comprising assets The Lendlease the of disposal on LP. LRIP loss the in The interest cent per 80 an Trust and Living Retirement Lendlease the in interest cent per a25 sold Group year, the current the During Other Income Income Other 3 of Profit from Equity Accounted Investments in Note 5c, and tax expense of $79.8 million reflected in total income tax expense. tax income total in reflected million $79.8 of expense tax and 5c, Note in Investments Accounted Equity from Profit of 1 Retirement Living Trust was $20.9 million offset by the profit on disposal of the LRIP LP of $90.3 million. $90.3 of LP LRIP the of disposal on profit the by offset million $20.9 Trust was Living Retirement 2 LENDLEASE ANNUAL REPORT 2018 , including consolidated entities and Equity Accounted Investments are recognised recognised are Investments Accounted Equity and entities consolidated , including June 2018 June 496.2 305.2 275.5 119.3 69.4 29.7 71.7 $m 2.2 0.1
June 2017 June 247.2 119.7 49.9 94.5 22.5 23.2 77.6 55.1 2.0 $m
155
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 156 7. continued A:Performance Section Notes toConsolidatedFinancialStatements motor vehicles over four to eight years and computer equipment over three years. three over equipment computer and years to eight four over vehicles motor 15 years, to three over fittings and furniture years, 20 exceeding not aperiod over depreciated is plant Most lease. the of term remaining the over improvements leasehold on provided is Amortisation separately. for accounted are that components major and equipment, and plant property, of items of lives useful estimated the over basis line astraight on Statement Income to the charged is Depreciation and Amortisation Depreciation lease. the of term the over basis line astraight on Statement Income the in recognised are incentives, lease including leases, operating under made Payments Operating Lease Expense recognised. been had loss impairment no if amortisation, or depreciation of net determined, been have would that amount carrying the exceed not does amount carrying asset’s the that extent to the only reversed is loss impairment An amount. recoverable the determine to used estimates in change is a there or exist longer no may impairment that indication the event, to aspecific due be could increase The amount. recoverable the in increase asubsequent is there when goodwill) than (other reversed be can assets on losses Impairment ofImpairment Reversals Statement. Income the in recognised are losses Impairment amount. recoverable its exceeds asset an of amount carrying the whenever recognised is loss impairment An calculations. these on information further contain will policies accounting assets’ material The asset. of type the on dependent is amount recoverable this of calculation The estimated. is amount recoverable asset’s the exists, indication such any If impairment. of indication any is there whether to determine date sheet balance each at reviewed are tests, to impairment subject assets, Group’s the of amounts carrying The Impairment detail. further for Plans’ Benefit ‘Defined 33 to Note Refer closed. now is which of membership plan, superannuation benefit defined a operates also Group The due. are they when expense benefit employee an as recognised are contributions The paid. been have contributions the once obligations payment further no has Group The Group. the from contributions fixed receive and plan contribution to adefined party are employees these of majority The plan. accumulation superannuation Group’s the from death or disability retirement, on to benefits entitled are region Australia the in employees All Accumulation PlanSuperannuation Expense met. being not conditions to market due to vest fail they if recognised not are plans compensation based share settled equity for entitlement in Changes period. vesting remaining the over to equity adjustment acorresponding and Statement, any, if Income the in estimates, original of revision of impact the recognises It due. entitlement the of estimates its revises Group the date, sheet balance At each satisfied. be will conditions vesting whether and price security Lendlease’s on judgements requires it as uncertainty estimation of area an to be assigned value fair the considers Management detail. further for Statements’ Financial the in Recognised ‘Amounts 34d to Note Refer model. simulation aMonte-Carlo using determined primarily is value fair The granted. securities the of value fair to the by reference determined is period vesting the over expensed to be amount total The Reserve. Compensation Equity the in equity, in increase acorresponding and expense an as recognised is grant the for exchange in received equity the of value fair The price. security to Lendlease’s linked are that plans compensation based share settled equity operates Group The Share Compensation Based detail. further for Incentives’ Term ‘Short 34a Note to Refer adjustments. certain after securityholders Group’s the to attributable profit the consideration into takes that aformula on based is This paid. to be expected amount the for liability accrued an recognises Group the bonuses, cash For recoveries. of net are Statement Income the in recognised benefits Employee transactions. payment based cash and equity both includes and provided is employee the by service related the as expensed are benefits Employee Employ Other Expenses Expenses Other LENDLEASE ANNUAL REPORT 2018 continued
Expenses includeExpenses impairments raised/(reversals) relating to: expense plans benefit defined Net expense plan accumulation Superannuation Auditors’ Remuneration 1. Employee benefit expenses benefit Employee items: expense other following the includes tax income before Profit Financial Disclosure Other assurance services services Audit Audit and Assurance Other Services for: Group Lendlease of auditors by the receivable and due or received Amounts Depreciation and amortisation expense lease Operating Total audit, other assurance and non audit services services audit Non Total audit and other assurance services Net foreignNet exchange loss Loans and receivables Equity accounted investments accounted Equity Property, plant and equipment inventoriesProperty Total expense before recoveries through projects. 1 LENDLEASE ANNUAL REPORT 2018 June 2018 June June 2018 June 2,627.3 $000s 6,338 6,737 7,184 106.6 65.9 399 447 92.7 (1.6) $m 4.2 0.7 1.8
June 2017 June June 2017 June 2,330.4 6,407 6,687 5,922 $000s (31.6) (4.0) 98.2 99.3 56.2 280 485 11.4 $m 5.4 0.7 1.5
157
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 158 Net finance costs Total finance costs Initial discounting of receivables costs finance interest Non Total interest finance costs 1. Less corporations Other Finance Costs Totalrevenue finance discountingInterest Financial Disclosure 8. continued A:Performance Section Notes toConsolidatedFinancialStatements Total interest finance revenue finance Total interest Other finance revenue corporations Other Revenue Finance use or sale. Finance costs related to qualifying assets are capitalised. are assets to qualifying related costs Finance sale. or use intended their for to prepare months six than more take that assets are assets Qualifying assets. qualifying of development and acquisition to relate they unless incurred as immediately expensed are costs Finance borrowings. the of life the over amortised and capitalised are borrowings of arrangement the with connection in incurred Costs facilities. borrowings new of arrangement the with connection Finance costs instrument. financial the of life remaining the over revenue finance as recognised then is discount The instrument. financial the of life expected the over receipts cash future revenue Finance Accounting Policies cent), which is the effective interest rate. per 4.9 interest 2017: June (30 effective the is cent per which cent), 4.8 was capitalisation for eligible costs finance interest of amount the determine to used rate interest average weighted The : Capitalised interest finance costs : finance Capitalised interest Finance Revenue and Finance Costs RevenueFinance Costs Finance and include interest, amortisation of discounts or premiums relating to borrowings and amortisation of costs incurred in in incurred costs of amortisation and to borrowings relating premiums or discounts of amortisation interest, include is recognised as it is earned using the effective interest method, which applies the interest rate that discounts estimated estimated discounts that rate interest the applies which method, interest effective the using earned is it as recognised is 1 LENDLEASE ANNUAL REPORT 2018 June 2018 June (72.0) (36.2) 118.0 88.0 16.0 81.8 12.4 13.1 0.9 $m 2.9 5.3 0.7
continued June 2017 June (96.6) (25.3) 108.6 92.6 117.9 12.0 16.0 9.2 2.8 9.2 $m
9. Taxation excluding LLT. As a consequence, all members of the Australian Tax Consolidation Group are taxed as a single entity. asingle as taxed are Group Tax Consolidation Australian the of members all LLT.excluding aconsequence, As subsidiaries, owned wholly Australian the all comprising Group Tax Consolidated Australian the of entity head the is Company The Tax Consolidation simultaneously. realised to be or basis anet on settled to be intended are but entities, tax different on or entity taxable same the on authority tax same by the levied taxes to income relate they and assets, Presentation policies. regulatory and monetary fiscal, government and conditions demand and oversupply funding, to access ability prices, commodity rates, exchange rates, interest inflation, of level the including Group, the of control the outside are which conditions, business and economic general of variety a by influenced is Group the of performance The assets. tax deferred the of value carrying the support to profitability future of basis the form budgets and forecasts These basis. regular ona reviewed are which period, year five a covering forecasts, and budgets financial prepares Group The Group. the of profitability future the on impact an have would forecasting and budgeting in used assumptions the of any in change as a uncertainty estimation of area an be to profits taxable future of estimation the considers Management • • • following: the include may assets tax Deferred realised. be will Recognition date. sheet balance the laws) at (and tax rates tax applicable using Measurement • • • for: provided not are differences temporary following The sheets. balance tax and accounting the between liabilities and assets accounting balance sheet to the tax balance sheet. Temporary differences are provided for any differences in the carryingamounts of Deferred tax years. financial previous of respect in payable to tax adjustment any and jurisdiction, each in date sheet balance the at laws) tax (and rates tax year,applicable using financial the for income taxable the on payable tax expected the is tax Current LLT. of income taxable the attributed are unitholders that extent to the tax, gains capital including tax, law, income LLT for tax liable not income is Australian current Under equity. in recognised is it case which in equity, in directly recognised to items relates it that extent to the except Statement Income the in recognised is tax Income tax. deferred and current comprises year financial the for loss or profit the on tax Income Income Taxes Accounting Policies
Unused tax credits. credits. tax Unused and losses; tax Unused Deductible temporary differences; future. foreseeable the in reverse to likely not are they that extent the to subsidiaries in investments to relating Differences and profit; taxable nor accounting neither affect that liabilities or assets of recognition initial The goodwill; of recognition initial The 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 asset tax related the as so be available will profits taxable future that probable is it extent to the only is assets tax deferred of is the expected tax payable in future periods as a result of past transactions or events and is calculated by comparing the the by comparing calculated is and events or transactions past of aresult as periods future in payable tax expected the is of deferred tax assets and liabilities can be offset if there is a legally enforceable right to offset current tax liabilities and and liabilities tax current offset to right enforceable legally is a there if offset be can liabilities and assets tax deferred of of deferred tax is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, liabilities, and assets of amount carrying the of settlement or realisation of manner expected the on based is tax deferred of LENDLEASE ANNUAL REPORT 2018
159
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 160 Non allowable expenses allowable Non Temporary differences recognised through income tax expense expense tax income through losses tax of (recognition)/writeoff Net Effect of tax rates in foreign jurisdictions foreign in rates tax of Effect assets of disposal on losses capital of Utilisation Change in tax rate tax in Change off (recognised)/written losses tax Net 9. continued A:Performance Section Notes toConsolidatedFinancialStatements 6. 5. 4. 3. 2. 1. Total other comprehensive income net of tax reserve acquisition interest controlling non in Movements b. Relating to: Relating Equity in Directly Tax Recognised Deferred expense tax Income Other Income tax using the domestic corporation tax rate 30% rate tax corporation domestic the using tax Income Profitbefore Tax Rate Effective Tax of Reconciliation expense tax Total income Adjustments for prior years Temporary differences recovered/recognised Origination and reversal of temporary differences Deferred Tax Expense recognised losses tax of Benefit Adjustments for prior years Current year Current Tax Expense Recognised in the Income Statement a. Movements in definedbenefit plan remeasurements Movements in hedging reserve hedging in Movements Non assessable and exempt income exempt and assessable Non Adjustments for prior year Movements in foreign currency translation reserve translation currency foreign in Movements Total deferred tax expense/(benefit) recognised directly in equity in directly recognised expense/(benefit) tax Total deferred Defined benefitDefined plan remeasurements Foreign currency translation reserve Non controlling interest acquisition reserve acquisition interest controlling Non reserve Hedging Tax Effect Relating to Other Comprehensive Income Comprehensive Other to Relating Tax Effect Income Tax Expense Income Includes $0.2 million relating to external non controlling interests (June 2017: $(0.1) million). $(0.1) 2017: (June interests controlling non external to relating million $0.2 Includes earnings. retained opening to $7.3 million transferring by Standards) Accounting Revised and New of Instruments 9Financial AASB Impact to of (refer adoption time first the of impact the reflect to adjusted been has tax of net income comprehensive Other rates. 2017 tax June in The change of effect the includes Also Japan. and America of States United the as such rates tax higher and United the as Singapore and such Kingdom Australia than rates tax lower significantly have which purposes trading for jurisdictions foreign of anumber in operates Group The year. current the until recognised not were but year previous in a temporary and arose year that current the in differences expense tax income to off written subsequently are but year previous in a recognised differences temporary Includes permanently. allowed not is deduction atax which for expenses accounting Includes Includes Trust Lendlease profit. Taxation continued 2 1 4 LENDLEASE ANNUAL REPORT 2018 3 Before Before 145.3 (6.9) (3.8) 84.5 71.5 Tax Tax $m
JUNE 2018 (Expense)/ Benefit Benefit (20.4) (16.3) (4.1) Tax Tax $m
of Tax 124.9 80.4 (6.9) (3.8) 55.2 Net Net $m 6
June 2018 June (52.5) Before Before (58.6) (14.4) 1,066.2 17.7 Tax Tax $m 2.8 242.3 272.6 272.6 238.3 (82.6) (14.0) (19.6) (14.5) 319.9 (71.8) 153.2 (11.8) (17.7) 30.3 23.4 (1.6) 16.3 5 47.1 4.0 3.0 $m 4.0 2.6
9.7 4.1 JUNE 2017
(Expense)/ Benefit Benefit continued 21.7 17.6 Tax Tax $m 2.8 1.3 5
June 2017 June 1,007.0 (17.5) 248.3 248.3 (56.0) (32.2) 302.1 (17.6) (41.0) (11.4) 174.1 181.3 (30.8) of Tax (4.0) 99.9 (4.8) (2.8) (2.1) 24.8 74.2 (4.8) (1.3) (2.1) (5.1) (5.1) (11.6) 4.8 8.9 4.2 2.4 19.0 Net Net $m $m 2.8 5 6
Other assets Net defined benefit plan plan benefit defined Net Intangible assets Property, plant and equipment Investment properties investments accounted Equity Other financialassets Inventories Loans and receivables following: to the attributable are liabilities and assets tax Deferred Recognised Deferred Tax Assets and Liabilities Trade and other payables Trade other and
June 2018 June Items with a tax base but no carrying value carrying no but base atax with Items recognised losses tax revenue Unused Other financial and non financial liabilities and financingBorrowings arrangements Provisions liabilities Resident Other assets Other financialassets Inventories Net deferred tax assets/(liabilities) Total tax assets/(liabilities) deferred Unused revenue tax losses recognised losses tax revenue Unused Other financial and non financial liabilities and financingBorrowings arrangements Property, plant and equipment Investment properties investments accounted Equity Loans and receivables Movement in temporary differences during the financial year: Deferred tax set off set tax Deferred Total tax assets/(liabilities) deferred value carrying no but base atax with Items Provisions liabilities Resident payables Trade other and plan benefit defined Net Intangible assets c. Deferred Tax Assets and Liabilities and Tax Assets Deferred LENDLEASE ANNUAL REPORT 2018 (284.5) (108.8) (273.2) (48.6) (28.0) (49.4) 1 July 160.9 (10.8) 109.5 (13.6) 231.3 2017 (2.9) (2.6) 81.5 14.7 $m 5.0 Assets Assets (510.9) 1.9 630.9 120.0 JUNE 2018 124.6 133.3 99.0 32.4 76.8 111.7 10.3 13.0
13.7 $m 0.8 2.0 7.2 6.1 Recognised Recognised
in Income in (256.5) (212.3) (30.3) (30.2) (30.2) 273.2 (81.5) 156.3 (0.2) (3.4) (4.3) 50.7 12.9 74.7 13.7 0.4 Liabilities 6.4 $m (989.4) (478.5) (299.2) (375.4) (130.4)
(28.9) (24.2) (55.2) 510.9 (19.2) (41.5) (15.1) (0.2) (0.1) Recognised $m in Equity
(23.4) (16.3) (3.0) (7.3) $m 3.2
JUNE 2017 Assets Assets (719.3) Exchange 848.7 129.4 109.5 163.8 231.3 137.8 30.2 26.3 20.7 81.5 Foreign 14.7 15.1 (196.0) $m 2.0 8.5 5.5 Other/ (183.0) 1.8 (12.3) (0.5) (0.2) (0.2) (4.5) (2.8) (1.6)
$m 4.3 2.4 1.0 1.4
Liabilities 30 June30 (238.2) (286.3) (358.5) (957.5) (273.2) (292.0) (186.4) (263.7) (128.4) (34.3) (28.9) (33.5) (25.2) (54.4) (28.5) (57.9) (10.8) (18.0) 719.3 (10.5) 124.6 (2.9) (15.1) 133.1 2018 99.0 (0.1) 57.6 10.3 $m 6.0 $m 3.5
161
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 162 assets have no expiry date. expiry no have assets tax deferred unrecognised the of remainder The by 2038. expires million $13.8 only million, $112.1 of assets tax deferred unrecognised the Of Total unrecognised deferred tax assets Net deductible temporary differences There were no material events subsequent to the end of the financial year. 10. 2017 June 9. continued A:Performance Section Notes toConsolidatedFinancialStatements Unused capital tax losses capital tax Unused losses tax revenue Unused items: following the of respect in recognised been not have assets tax Deferred Tax Assets Deferred Unrecognised Total tax assets/(liabilities) deferred value carrying no but base atax with Items recognised losses capital tax Unused liabilities financial Other and financingBorrowings arrangements liabilities Resident Unused revenue tax losses recognised losses tax revenue Unused Provisions payables Trade other and plans benefit defined Net Intangible assets Property, plant and equipment Investment properties investments accounted Equity Other assets Other financialassets Inventories Loans and receivables
Events Subsequent to Balance Date to Balance Events Subsequent Taxation continued LENDLEASE ANNUAL REPORT 2018 (244.8) (189.2) (20.0) (141.0) (34.7) 1 July (14.0) 188.9 237.9 (48.1) 107.4 2016 (3.9) 97.8 (1.2) 12.6 $m 0.6 4.2 5.3 2.2
Recognised Recognised in Income in (143.9) (84.0) (74.2) (30.4) (27.6) 192.8 (10.1) (0.9) (0.6) (2.0) (4.4) (2.9) (5.6) 27.4 (1.2) (1.7) 17.7 $m 3.2
Recognised in Equity 29.6 (4.2) 14.7 $m 2.8 7.6 7.6 1.1
Other/Foreign June 2018 June Exchange (44.2) (34.0) 112.1 63.5 32.4 16.2 (6.0) (3.6) (9.7) $m (0.1) 0.4 $m 3.4 2.4 continued 0.1 1.2 1.7
June 2017 June 30 June30 (108.8) (284.5) (273.2) 125.7 (48.6) (28.0) (49.4) 42.2 55.2 28.3 160.9 (10.8) 109.5 (13.6) 231.3 (2.9) (2.6) 2017 81.5 14.7 5.0 $m $m 1.9
11. Construction work in progress in work Construction Development properties Other Development properties Total current Total current non Total inventories Current Section B: Investment B: Section Non Current Financial Disclosure • • • The NRV is the estimated selling price, less the estimated costs of completion and selling expenses. Management considers the estimation estimation the considers Management expenses. selling and completion of costs estimated the less price, selling estimated the is NRV The The gross amount of Construction and Development work in progress consists of costs attributable to work performed, including including performed, to work attributable costs of consists progress in work Development and Construction of amount gross The a whether to assess required is judgement accounting and date balance each at assessed is property each of amount recoverable The The cost of development properties includes expenditure incurred in acquiring the property, preparing it for sale and borrowing borrowing and sale for it preparing property, the acquiring in incurred expenditure includes properties development of cost The Accounting Policies costs incurred. incurred. costs conditions affecting and each the property underlyingstrategy for selling the property. market consideration into take estimations these as uncertainty, estimation of area an to be completion of costs and prices selling both of and other payables. other and required. is judgement accounting losses, these for providing on policies accounting and Investment Properties and indirect property assets such as Equity Accounted Investments and Other Financial Assets contained contained Assets Financial Other and Investments Accounted Equity as such assets property indirect and Properties Investment and Construction Work in Progress in Work Construction Work in progress is presented as part of inventories for all contracts in which costs incurred plus recognised profits exceed progress progress exceed profits recognised plus incurred costs which in contracts all for inventories of part as presented is progress Work in within the Statement of Financial Position. Financial of Statement the within recoverable pre contract and project bidding costs and emerging profit after providing for any foreseeable losses. In applying the the applying In losses. foreseeable any for providing after profit emerging and costs bidding project and contract pre recoverable NRV. exceeds to complete) costs (including cost where raised is provision property funds, drives the current and future performance of the Group. This section includes disclosures for property such as Inventories Inventories as such property for disclosures includes section This Group. the of performance future and current the drives funds, property Inventories are expensed as cost of sales in the Income Statement. Management uses accounting judgement in determining determining in judgement accounting uses Management Statement. Income the in sales of cost as expensed are Inventories Investment in the Development pipeline, joint ventures in property projects, the retirement sector, and more passive assets, such as as such assets, passive more and sector, retirement the projects, property in ventures joint pipeline, Development the in Investment Property acquired for development and sale in the ordinary course of business is carried at the lower of cost and Net Realisable Value (NRV). Value (NRV). Realisable Net and cost of lower the at carried is business of course ordinary the in sale and development for acquired Property the following: the Development Properties billings. If progress billings and recognised losses exceed costs incurred plus recognised profits, then the difference is presented in trade trade in presented is difference the then profits, recognised plus incurred costs exceed losses recognised and billings progress If billings. Inventories The nature of the expenditure, which may include acquisition costs, development costs, borrowing costs and those costs incurred in in incurred costs those and costs borrowing costs, development costs, acquisition include may which expenditure, the of nature The and costs; forecast final and to date incurred costs includes which sales, of cost of amount The revenue; sales through sales of cost of apportionment The preparing for the sale. property LENDLEASE ANNUAL REPORT 2018 June 2018 June 5,546.3 2,369.2 1,475.8 3,177.1 3,177.1 882.7 10.7 $m
June 2017 June 2,975.4 2,975.4 2,152.0 5,127.4 1,163.0 975.7 13.3 $m
163
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 164 Les ventures joint in Investment Joint Ventures Total associates Less associates in Investment Associates Financial Disclosure 12. continued Investment B: Section Notes toConsolidatedFinancialStatements Total investments accounted equity Total joint ventures standards applicable to the particular assets, liabilities, revenues and expenses in relation to the Group’s interest in the joint operation. joint the in interest Group’s to the relation in expenses and revenues liabilities, assets, particular to the applicable standards accounting the with accordance in basis by line aline on amounts by recognising for accounted are operations joint in Investments obligations for the liabilities relating to the arrangement. and assets to the rights have arrangement the of control joint have that parties the whereby arrangement ajoint is operation A joint Joint Operations authorities. government relevant the from downs draw periodic through obtained payment with assets to the related equipment and plant of items major replace or overhaul necessary, where and, use prescribed their for assets individual the available to make obligations contractual arrangements provide facilities management and maintenance with services terms generally of 25 to 30 years. They also incorporate (PPPs). These partnerships private public through SCAs with companies project in investment its accounts equity Group The Arrangements Concession (SCAs)Service reserves. consolidated Group’s the in directly recognised are reserves ventures’ joint and associates’ in movements Other impairment. of evidence no is there that extent to the only but gains, unrealised as way same the in eliminated are losses Unrealised venture. joint or associate the in interest Group’s the of extent to the venture joint or associate the in investment the against eliminated are investments accounted equity with transactions from arising gains Unrealised investment. the of value carrying to the areduction as applied are such, as and, investment Group’s the on areturn represent ventures joint and associates from Dividends venture. joint or associate the of respect in obligations has Group the that extent to the except discontinued is losses further of recognition and to nil reduced is amount carrying the entity), venture joint or associate the in investment net the of part form that assets (including investment accounted equity the of amount carrying the exceeds losses of share Group’s the When amount. recoverable the and amount carrying accounted equity the of lower the at carried are ventures joint and associates in Investments held. interest ownership on based assets net investment’s the of share Group’s the is method equity the under recognised investment of share The accounted. equity are Joint Ventures and Associates in investments Investments’, Accounted of Equity Profit of 5‘Share Note in outlined As Ventures) Joint and (Associates Investments Accounted Equity Accounting Policies s: Impairment : Impairment Equity Accounted Investments Equity Accounted LENDLEASE ANNUAL REPORT 2018 Note 12b 12a June 2018 June 2,386.3 2,626.6 2,393.1 240.3 247.7 (6.8) (7.4) $m
continued June 2017 June 834.6 223.5 617.4 629.1 217.2 (11.7) (6.3) $m
Total associates Less Total Total Americas Other Investments Americas Total Europe Other Development Europe Asia Total 3 Fund Investment Retail Asian Lendlease 2 Fund Investment Retail Asian Lendlease Investments Asia Lendlease Sub Regional Retail Fund Retail Regional Sub Lendlease Investments 1 Fund Communities Lendlease Development Australia a. 1. Total Australia Associates has significant influence over the investment. As a result, the Group applies equity accounting for its ownership interest. ownership its for accounting equity applies Group the result, Asa investment. the over influence and fund the over significant has rights voting the of cent per 20 holds it Fund, Retail Regional Sub Lendlease in interest ownership cent per a10 has Group the Although : Impairment 1 LENDLEASE ANNUAL REPORT 2018 June 2018 June 36.8 20.8 INTEREST 10.0 20.1 %
June 2017 June 36.4 20.8 10.0 20.1 %
June 2018 June 2018 NET BOOK VALUE 240.3 199.4 247.7 172.7 38.6 42.7 26.7 (7.4) 4.5 $m 4.5 4.1 1.1 1.1
June 2017 June 223.5 175.0 217.2 151.8 43.4 (6.3) 39.3 23.2 3.8 3.8 1.3 1.3 4.1 $m
165
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 166 The Quarter Lifestyle Quarter Paya Lebar Development Asia Lendlease Towers LLCLendlease 12. continued Investment B: Section Notes toConsolidatedFinancialStatements Total Australia 3. The Riverline Joint Venture was dissolved in the current period. The Group acquired its share of net assets as part of the dissolution, which are recorded as as recorded are which dissolution, the of part as assets net of share its acquired Group The period. current the in dissolved was Venture Joint Riverline The 3. 2. 1. Hungate (York) Regeneration Limited Regeneration (York) Hungate Development Europe Asia Total Ltd (313@somerset) JV CDR Investments Other Madison 845 Lendlease Retirement Living Trust Investments Other Metro Melbourne R1 Quarter Melbourne Tower Quay Circular Development Australia Ventures b. Joint Intown SRL Joint Venture Joint SRL Intown Total joint ventures ventures Total joint Total Total Americas Other Construction Stratford City Business District Limited (International Quarter London) Quarter (International Limited District Business City Stratford LP LRIP Total investments accounted equity Less Treviso Investments Wandsworth Drive Victoria Riverline Avenue Fifth 277 Development Americas Total Europe Other inventory. maintained. was control period the for investment this of results the consolidated has Equity an to Group The Interest Investment. Controlling Non a with Accounted entity consolidated controlled a from reclassified been has investment this aresult, As in Quarter. investment the Lifestyle The comprising entities the of decisions major over control exercise longer no can Group The investment. this control to governing ability its decisions major the reassessed has Group the period, the during Quarter Lifestyle The in investment the on rights voting Group’s the to achange Following investment. accounted equity an of partner, classification to venture leads joint which its with entity the of decisions major the over control joint has Group the Trust as Living Retirement its Lendlease the in accounts interest equity Group the residual transaction, this of aresult As investment. Living Retirement its in interest cent per a25 sold Group the period, the During : Impairment Equity Accounted Investments continuedEquity Accounted 3 2 1 LENDLEASE ANNUAL REPORT 2018 June 2018 June 60.0 40.0 30.0 30.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 20.0 20.0 25.0 70.0 75.0 INTEREST %
June 2017 June 60.0 40.0 30.0 50.0 50.0 50.0 50.0 20.0 25.0 70.0 %
June 2018 June 2,386.3 2,626.6 1,433.0 1,303.0 2,393.1 NET BOOK VALUE 125.4 215.6 316.3 218.3 619.1 118.7 (6.8) 43.5 84.5 54.5 58.2 37.9 14.4 12.0 21.6 31.5 31.2 16.7 11.6 6.6 $m 3.6 7.4 1.6 continued
June 2017 June 834.6 145.2 629.1 255.1 617.4 179.6 175.7 (11.7) 34.9 34.6 52.0 89.8 26.6 75.5 53.1 18.2 93.1 0.9 6.9 5.0 8.9 3.1 $m
Statement of Financial Position 1. accounted investments value carrying ofAggregate individually immaterial equity Group. the to immaterial individually are that ventures joint and associates those for information financial summarised provides below table The 2018. June 30 at as commitments lease operating in million $2.1 and commitments expenditure capital in million $41.8 had ventures joint Material year of end at amount Carrying adjustments Other assets net of share Group’s % Ownership Closing net assets Acquisition/contributions year the for income Total comprehensive 1July assets net Opening Amounts to Carrying Reconciliation Net assets liabilities Total current non Financial liabilities (excluding trade payables) Non Current Liabilities Total liabilities current current liabilitiesOther liabilities Resident Current Liabilities assets Total current non Other non current assets Investment properties Assets Current Non assets Total current Other current assets equivalents Cash and cash Current Assets property assets. property of development is ventures joint and associates material the of activities principal and nature The policies. accounting in differences and adjustments value fair including method, equity the using when Group the by made adjustments to reflect amended been have They amounts. those of share Group’s the indicated, where and, associates and ventures joint relevant the of statements financial the in presented amounts the reflects disclosed information The factors. qualitative relevant of consideration with along profit, of share and value carrying investment accounted equity total the with value book net investment individual by comparing determined been have ventures joint and associates Material Group. the to material are that ventures joint and associates those for information financial summarised provides below table The c. Material Associates and Joint Ventures Summarised Financial Information Financial Summarised Ventures Joint and Associates Material material to the overall equity accounted investment balance, and has been disclosed as an immaterial joint venture for June 2018. No figures in the above above the in figures No table have 2018. restated. been June for venture joint immaterial an as disclosed been has and balance, investment accounted equity longer no is overall the to material investment the of value book net the as Group the for investment equity amaterial be to considered longer no is It million. $89.8 was assets Stratford City Business District Limited (International Quarter London) was disclosed as a material joint venture for June 2017 and the Group’s share of net net of share Group’s the and 2017 June for venture joint amaterial as disclosed was London) Quarter (International Limited District Business City Stratford 1 LENDLEASE ANNUAL REPORT 2018
June 2018 June 240.3 ASSOCIATES $m
June 2017 June 217.2 $m
LENDLEASE RETIREMENT June 2018 June 1,083.3 JOINT VENTURES JOINT LIVING TRUST LIVING $m
June 2018 June June 2017 June 6,969.4 4,685.9 1,303.0 1,289.6 6,971.3 4,733.1 1,719.5 1,719.5 1,667.7 75.0% 584.7 584.7 527.6 66.0 40.8 25.2 47.2 13.4 51.8 $m 1.9 $m
-
167
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 168 Total investment properties Other investment properties Assets under construction under Assets towers Telecommunication properties Retail 2. 1. Retirement Living properties a. Financial Disclosure 13. continued Investment B: Section Notes toConsolidatedFinancialStatements contracts. Refer to Note 4 ‘Revenue’ for further detail. further for 4‘Revenue’ to Note Refer contracts. resident with accordance in calculated is DMF The agreements. management term to long subject villages, retirement at occupancy Deferred management fees receivable on owned sites months. 12 within depart to choose may resident any because liabilities current as classified are and bearing interest non are liabilities Resident to date. earned fees management deferred less date, balance at property underlying the of values market on based gains capital of share resident’s the plus paid, principal the being value, face at measured are they Subsequently units. and apartments the to occupy properties investment Living Retirement of by residents paid amount the as recognised initially are liabilities Resident Group. by the occupied not are which yields income term long for held development) Retirement Living investment properties incurred. may fees include tocapitalised of and the acquisition, certain properties cost borrowing costs additions, redevelopments, refurbishments, Expenses 4‘Revenue’. Note in described as for accounted are properties investment from fees management deferred and revenue Rental uncertainty. or illiquidity market of periods in relevant particularly is This valuation. recent most the than lower or higher be may sold) be properties investment the (should achieved prices sale actual date, reporting the at value fair of estimation best the represents this While uncertainty. estimation of area an to be value fair the of calculation the considers Management Statement. Income the in recognised is value fair in achange from arising loss or gain Any evidence. market from derived rate acapitalisation using fees management deferred and income operating net of perpetuity on based are projections income Capitalised projections. income capitalised or markets active less on prices recent projections, flow cash discounted as such methods calculation alternative uses Group the available, not is information this If condition. and location same the in properties similar for market active an in prices current on based is value Fair six months. every property each of value fair the review to Group the of policy the is It valuers. independent external by qualified valuations triennial, least at but periodic, on based is million, $10.0 than less at valued those and construction under those except properties, all for value fair The Investment properties Accounting Policies Investment Properties – Non Current –Non Properties Investment Quarter. As a result, this investment has been reclassified from a controlled consolidated entity with a Non Controlling Interest to an Equity Accounted Accounted Equity an to Interest Investment. Controlling Non a with entity consolidated controlled a from reclassified been has investment this Lifestyle aresult, As The in Quarter. investment the comprising entities the of decisions major over control exercise longer no can Group The investment. this decisions governing major the control to ability its reassessed Group the period, the during investment the on Quarter. rights voting Group’s the to Lifestyle The in achange Following investment Group’s the to relating construction under properties investment include 2017 June at construction under Assets 12 Note and Income’, ‘Equity Accounted‘Other Investments’ 6 forNote more information. Investments’, Accounted Equity of Profit of 5‘Share Note to Refer derecognised. been have Living properties Retirement to investment the related transaction, this of aresult As investment. Living Retirement its in interest cent per a25 sold Group the period, the During Investment Properties on initial recognition are measured at cost, including transaction costs and subsequently stated at fair value. value. fair at stated subsequently and costs transaction including cost, at measured are recognition initial on 2 1 principally comprises retirement villages (both operating villages and villages under LENDLEASE ANNUAL REPORT 2018 (DMF) represent amounts owed to the Group in connection with resident resident with connection in Group to the owed amounts represent (DMF) June 2018 June 278.2 141.3 39.4 23.2 74.3 $m
continued June 2017 June 6,443.4 6,967.4 368.1 83.3 72.6 $m
1. Foreign exchange rate/other movements rate/other exchange Foreign to attributable Increase capital gain Statement Income the through recognised gain value Fair Capital expenditure (Disposal)/acquisition of investment properties and transfers amount at beginning ofCarrying financial year follows: as are properties investment for amount carrying the of Reconciliations Reconciliations Financial Disclosure Reconciliation of carrying value for Level 3 net investment properties: investment 3net Level for value carrying of Reconciliation d. material. considered longer no is 2018 June 30 at balance the as material, not are 2018 June 30 at held properties investment for adopted techniques valuation the on Disclosures c. million). $368.1 2017: (June million $23.2 construction under assets and million) $155.9 2017: (June million $255.0 properties other and telecommunication and million), retail $1,738.7 2017: (June million Net investment properties include net Retirement Living properties after deducting resident liabilities and related deferred revenue, $nil hierarchy. value fair the in 3 Level as classified are properties investment Net Total liabilities resident sites owned on receivable fees management Deferred liabilities resident Gross Additions/(disposals) and capital expenditure amount at beginning ofCarrying financial year Resident Liabilities b. Resident year financial of end at amount Carrying The potential effect of using reasonably possible alternative assumptions for valuation inputs would not have a material impact on the Group. the on impact material have a not would inputs valuation for assumptions alternative possible reasonably using of effect potential The year financial of end at amount Carrying Other movements Statement Income in recognised Gains/(losses) ValuationTechnique Fair Value Reconciliation Fair Living Trust. Refer to Note 5 ‘Share of Profit of Equity Accounted Investments’, Note 6 ‘Other Income’, and Note 12 ‘Equity Accounted Investments’ for more more for information. Investments’ Accounted ‘Equity 12 Note and Income’, ‘Other 6 Note Investments’, Accounted Equity of Profit of 5‘Share Note to Refer Trust. Living liabilities, and deferred revenue related to Retirement Living have been derecognised. The Group equity accounts its residual interest in the Lendlease Retirement During the period, the Group sold a 25 per cent interest in its Retirement Living investment. As a result of this transaction, the investment properties, resident resident properties, investment the transaction, this of aresult As investment. Living Retirement its in interest cent per a25 sold Group the period, the During 1 LENDLEASE ANNUAL REPORT 2018 June 2018 June June 2018 June (2,041.7) (6,889.0) 2,262.7 6,967.4 278.2 278.2 29.7 27.5 101.7 49.0 29.7 $m 19.4 $m
-
June 2017 June June 2017 June 4,573.0 6,967.4 2,262.7 5,940.7 5,295.7 1,705.7 (722.7) 300.2 468.8 429.5 105.0 218.1 22.5 22.5 $m $m 17.1
169
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 170 The potential effect of using reasonably possible alternative assumptions for valuation inputs would not have a material impact on the Group. the on impact material have a not would inputs valuation for assumptions alternative possible reasonably using of effect potential The year financial of end at amount Carrying Transfers Other movements Australian Prime Property Fund –Commercial Fund Property Prime Australian Parkway Parade Partnership Limited Partnership Parade Parkway Other investments –Retail Fund Property Prime Australian The reconciliation of the carrying amount for Level 3 financial assets is set out as follows. as out set is assets 3financial Level for amount carrying the of reconciliation The 1. InternationalLendlease Towers Sydney Trust Recognition Initial at Designated – Loss or Profit Value Through Fair Value Fair at Measured Current Non Total current Derivatives Negotiable instruments Recognition Initial at Designated – Loss or Profit Value Through Fair Value Fair at Measured Current 14. continued Investment B: Section Notes toConsolidatedFinancialStatements Gains recognised in Income Statement Income in recognised Gains Additions amount at beginning ofCarrying financial year Other a. Fair Value Reconciliation Fair a. Total other financialassets Total current non Lendlease Asian Retail Investment Fund Investment Retail Asian Lendlease Initiative Projects Housing Military Company Investment Infrastructure Public Lendlease Australian Prime Property Fund –Industrial Fund Property Prime Australian Lendlease One International Towers Sydney Trust 2. 1. Financial Assets at amortised cost are presented within loans and receivables in Note 22. Note in receivables and loans within presented are cost amortised at Assets Financial Statement. Income the in recognised is value fair in change a from arising loss or gain Any incurred. are they when expenses as recorded are costs Transaction value. fair at stated subsequently F Accounting Policies inancial Assets at fair value through profit or loss on initialloss recognition or profit through value fair at Assets inancial Initiative of $102.8 million and Other Investments of $9.5 million. These investments were previously classified as Available for Sale Investments. Sale for as Available classified previously were investments These million. $9.5 of Investments Other and million Projects Housing $102.8 of Military Initiative million, $37.2 of Limited Partnership Parade Parkway million, $24.9 of Fund Investment of Retail -Retail Asian Fund Lendlease Property million, Prime $45.9 Australian million, $6.3 of -Commercial Fund Property Prime Australian million, $4.2 of -Industrial Fund Australian in units Property include Prime to restated been have comparatives 2017 June Loss. or Profit Through Fair to Value Sale for Available from reclassified been Instruments 9Financial AASB of adoption time first the of aresult As technique. valuation and value fair determining of basis on details for Measurement’ Value ‘Fair 26 Note to Refer Comparative balances have also been reclassified. been also have balances Comparative Instruments 9Financial AASB of adoption the Following Other Financial Assets Other 2 1 2 2 2 2 2 2 LENDLEASE ANNUAL REPORT 2018 , the assets previously classified as Available for Sale have been reclassified to unlisted investments. investments. unlisted to reclassified been have Sale for as Available classified previously assets , the (refer to Impact of New and Revised Accounting Standards), these investments have have investments these Standards), Accounting Revised and New of Impact to (refer
are measured at fair value (generally transaction price) and Fair Value Value Fair Level 3 Level 3 Level Level 3 Level 3 Level 3 Level 3 Level 3 Level Level 3 Level Level 3 Level Level 3 Level Level 2 Level Level 1 Level Level 1 Level Level N/A 1
June 2018 June June 2018 2018 June 1,554.5 1,529.3 1,547.8 1,547.8 1,195.3 246.0 292.0 258.4 195.4 515.2 (10.1) 39.8 40.7 76.4 73.4 38.7 74.5 10.6 18.5 12.3 $m $m 6.7 6.7
continued June 2017 June 2017 June 1,203.3 1,236.3 1,195.3 1,195.3 490.5 202.7 102.8 619.4 211.6 411.5 33.0 24.9 70.9 40.7 73.4 37.3 37.2 19.6 31.4 48.1 8.0 $m $m 1.6
16. 15. Increase in receivables (Decrease)/increase in payables in (Decrease)/increase Increase in other assets inventories in Increase liabilities and assets in changes before activities by operating provided cash Net Other properties investment on gain value Fair Dividends/distributions investments accounted from equity investments accounted equity of profit of Share investments on gain value fair Net Increase/(decrease) in other provisions tax current in Decrease Decrease in deferred tax items assets/liabilities derivatives in operating Increase plans benefit defined net in Increase costs hedging currency and gain exchange foreign unrealised Net Impairment of plant property, and equipment investments accounted equity of back) Impairment/(write Net cash provided by operating activities by operating provided cash Net equipment and plant investments, of sale on gain Net Amortisation and depreciation Profit after tax(including external noncontrolling interests) Short term investments term Short Cash Total cash and cash equivalents cash and Total cash 1. Changes in Assets and Liabilities Adjusted for Effects of Purchase and and Purchase of Effects for Adjusted Liabilities and Assets in Changes Section C: Liquidity and Working and C: Liquidity Capital Section Disposal of Consolidated Entities and Operations During the Financial Year Financial the During Operations and Entities Consolidated of Disposal Reconciliation of Profit after Tax to Net Cash Provided by Operating Activities Operating by Provided Cash Net after to Tax Profit of Reconciliation Financial Disclosure The ability of the Group to fund the continued investment in the property and infrastructure pipeline, invest in new opportunities and and opportunities new in invest pipeline, infrastructure and property the in investment continued the to fund Group the of ability The Accounting Policies excluding inventories, and the trading liabilities incurred as a result of trading activities used to generate the Group’s performance. performance. Group’s the to generate used activities trading of aresult as incurred liabilities trading the and inventories, excluding cash balance in the Statement of Cash Flows. Cash of Statement the in balance cash inchanges value. and the liquidity risk exposure associated with financial liabilities. The section also contains disclosures for the Group’s trading assets, assets, Group’strading the for disclosures contains also section The liabilities. financial with associated exposure risk liquidity the and Cash and cash equivalents include cash on hand, deposits held at call with banks, bank overdrafts and other short term highly liquid liquid highly term short other and overdrafts bank banks, with call at held deposits hand, on cash include equivalents cash and Cash financial assets, financial liabilities, cash flows and equity that are required to finance the Group’s activities, including existing commitments commitments existing including activities, Group’s the finance to required are that equity and flows cash liabilities, financial assets, financial meet current commitments is dependent on available cash and access to third party capital. This section contains disclosure on the the on disclosure contains section This capital. party to third access and cash available on dependent is commitments current meet Bank overdrafts (if applicable) are shown as a current liability on the Statement of Financial Position and are shown as a reduction to the to the areduction as shown are and Position Financial of Statement the on liability acurrent as shown are applicable) (if overdrafts Bank investments that are readily convertible to known amounts of cash within three months and which are subject to an insignificant risk of of risk insignificant to an subject are which and months three within cash of amounts to known convertible readily are that investments Short term investments earned variable rates of interest which averaged 1.7 per cent per annum during the year (30 June 2017: 2.0 per cent). per 2.0 2017: June (30 year the during annum per cent per 1.7 averaged which interest of rates variable earned investments term Short Notes toNotes Statement Flows Cash of Cash and Cash Equivalents Cash and Cash 1 LENDLEASE ANNUAL REPORT 2018
June 2018 June June 2018 June (275.5) (318.6) (172.5) 1,177.1 (131.2) 234.5 233.4 793.6 (29.7) 106.6 647.4 529.7 (10.4) (16.3) (18.3) (14.7) (79.1) (71.7) (2.5) 72.8 58.3 15.6 $m $m 4.0 1.8
June 2017 June June 2017 June
1,249.2 1,096.7 (454.0) (802.4) (252.5)
(119.7) (36.2) 889.6 (29.4) 359.6 146.0 (22.5) (73.3) 341.8 (77.9) (18.8) 758.7 (55.1) (4.0) 33.9 98.2 (0.7) 74.8 28.7 $m $m 1.5
171
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 172 17. Facility available and unused amount Amount of facility unused Amount of facility used facility of Amount available Facility Amount of facility unused used facility of Amount available Facility credit: of lines following to the access has Group The Total borrowings Total current non facilities credit Bank Commercial notes Total current facilities credit Bank Commercial notes Notes toConsolidatedFinancialStatements Commercial Notes Commercial Current a. Section C: Liquidity and Working and C: Liquidity continued Capital Section Bank Overdrafts Bank Bank Credit Facilities Credit Bank Non Current Financial Disclosure Finance Facilities Facilities b. Finance financial liabilities. financial other and arrangements finance and borrowings to its relation in obligations any on defaulted not has Group the periods, prior with Consistent demand. on repayable are and time any at drawn be may facilities overdraft bank The • • include: facilities credit Bank • • • • Commercial notes include: Accounting Policies Borrowings – Measured at Amortised Cost Amortised at –Measured Borrowings cost using the effective interest rate method. Under the amortised cost method the difference between the amount initially recognised recognised initially amount the between difference the method cost amortised the Under method. rate interest effective the using cost are referred to in this section using their redemption value when describing the terms and conditions. and terms the describing when value redemption their using section to this in referred are Borrowings basis. interest effective an on borrowing the of period the over Statement Income the in recorded is value redemption the and Borrowings Borrowings
tranche B remains undrawn as at 30 June 2018. June 30 at as undrawn Bremains tranche and 2018 June for current as classified been has facility option multi syndicated Tranche the Aof 2018. June 30 at as million to $225.0 drawn million) $900.0 B: (tranche 2020 June and million) $600.0 A: (tranche 2019 June in maturing facility option multi syndicated million $1,500.0 and 2018; June 30 at as million to $285.7 drawn 2023 March in maturing facility bank club million £400.0 2018. June for current as classified been has 2018 November in maturing note term medium unsecured million $250.0 The 2020. May in maturing coupon annum per cent per a6.0 with million $225.0 and 2018 November in maturing coupon annum per cent per a5.5 with million $250.0 comprising market bond Australian the in million) ($100.0 2014 June and million) ($375.0 2013 May in issued notes term medium unsecured of million $475.0 and 2027; April in maturing coupon cent per a3.9 with Term Programme Medium Note Euro Lendlease’s under market bond Singapore the in 2017 April in issued notes senior unsecured guaranteed of million S$300.0 2017; July in repaid was and matured that coupon annum per cent per a4.625 with market bond Singapore the in 2012 July in issued notes unsecured senior guaranteed of million S$275.0 2026; May in maturing coupon annum per cent per a4.5 with Term programme Medium Note Euro Lendlease’s under Smarket Reg. US the in 2016 May in issued notes senior unsecured guaranteed of million US$400.0 2017; October in repaid was and matured that coupon annum per cent per a5.8 with market placement private US the in 2005 October in issued notes senior unsecured guaranteed of million US$25.0 2021; October in maturing coupon annum per cent per a6.125 with market bond UK the in 2006 October in issued notes unsecured guaranteed of million £300.0 Borrowings and Financing Arrangements Financing and Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised amortised at measured subsequently are Borrowings incurred. costs transaction of net value, fair at initially recognised are LENDLEASE ANNUAL REPORT 2018 June 2018 June (1,839.7) 2,358.5 2,222.4 1,703.6 1,883.7 1,589.9 1,839.7 (518.8) 474.8 293.8 225.0 249.8 123.5 $m -
continued June 2017 June (2,068.1)
1,860.5 2,152.4 2,068.1 2,186.0 2,101.7 1,776.2 (84.3) 291.9 123.5 291.9
84.3 $m -
The Group’s Distribution Reinvestment Plan (DRP) was reactivated in February 2011. The last date for receipt of an election notice for for notice election an of receipt for date last The 2011. February in reactivated was (DRP) Plan Reinvestment Distribution Group’s The 18. June 2017 June June 2018 June Between one and five years five and one Between Total Total years five than More years five than More years five and one Between As at 30 June 2018, the Group had 574.3 million stapled securities on issue, equivalent to the number of Lendlease Corporation shares and and shares Corporation Lendlease of number to the equivalent issue, on securities stapled million 574.3 had Group the 2018, June 30 at As On market buyback of stapled securities stapled of buyback market On end of financial year at buyback market on of net capital Issued Issued capital at end of financial year financial of end at capital Issued 2. 1. Balance at beginning of financial year financial of beginning at Balance Issued capital at beginningIssued of financial year Balance at end of financial year Other movements movements rate exchange foreign of Effect borrowings from proceeds Net Distribution Reinvestment Plan cents. Stapled securities issued under the DRP rank equally with all other stapled securities on issue. on securities stapled other all with equally rank DRP the under issued securities Stapled cents. c. Movement in Borrowings and Financing Arrangements Financing and Borrowings in Movement c. average price of Lendlease stapled securities traded (on the Australian Securities Exchange) for the period of five consecutive business days days business consecutive five of period the for Exchange) Securities (on Australian the traded securities stapled Lendlease of price average a. separately in the Consolidated Statement of Financial Position within equity. within Position Financial of Statement Consolidated the in separately participation in the DRP is 30 August 2018. The Group intends to neutralise stapled securities issued under the DRP for the upcoming dividend dividend upcoming the for DRP the under issued securities stapled to neutralise intends Group The 2018. August 30 is DRP the in participation 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 presented therefore are and Company by the LLT of owned units not are issued The date. that at as Trust issue on (LLT) units Lendlease Financial Disclosure by acquiring an equivalent number of stapled securities on market. The issue price is the arithmetic average of the daily volume weighted weighted volume daily the of average arithmetic the is price issue The market. on securities stapled of number equivalent an by acquiring immediately following the record date for determining entitlements to distribution. If that price is less than 50 cents, the issue price will be 50 50 be will price issue the cents, 50 than less is price that If to distribution. entitlements determining for date record the following immediately b. Accounting Policies Security Accumulation Plans Accumulation Security Issuance of Securities of Issuance deduction from equity. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a as recognised are shares ordinary of issue the to attributable directly costs Incremental equity. as classified are shares Ordinary When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is is costs, attributable directly including paid, consideration the of amount the repurchased, is equity as recognised capital share When recognised as a change in equity. Repurchased shares are classified as treasury shares and are recognised as a deduction from equity from deduction as a recognised are and shares treasury as classified are shares Repurchased equity. in achange as recognised Issued Capital Issued Stapled securities acquired as part of the Group’s on market stapled security buyback have been recorded in retained earnings for the Company and in in and Company the for earnings for Lendlease Reserves Trust.Buyback retained in recorded been have buyback security stapled market on Group’s the of part as acquired securities Stapled securities. stapled of Trust number million 0.6 Lendlease for million representing $1.9 and company, the for million $8.2 is 2018 June 30 at securities stapled neutralised of value stapled of total The number market. on equivalent an securities acquiring by (DRP) Plan Reinvestment Distribution Interim 2018 the under issued securities stapled neutralised Group The
Issued Capital Capital Issued 1 2 2,068.1 1,008.3 1,839.7 1,272.5 795.6 LENDLEASE ANNUAL REPORT 2018 Fixed Fixed 831.4 INTEREST EXPOSURE INTEREST $m Shares Shares LENDLEASE CORPORATION LIMITED No. of 584.0 583.5 574.3
(9.7) June 2018 June 0.5 (m)
Floating 518.8 510.7 1,296.8 84.3 1,289.8 76.3 (144.7) 1,152.1 $m 8.0 8.1 $m 7.0
2,358.5 2,152.4 1,348.8 1,519.0 Shares Shares 803.6 839.5 No. of Total 583.5 583.5 582.3 $m June 2017 June (m) 1.2
1,289.8 1,289.8 1,276.3 700.5 700.5 13.5 475.6 475.6 $m $m A$ A$
No. of 584.0 583.5 574.3 Units Units 546.8 (9.7) 535.8 535.8 June 2018 June 514.3 0.5 (m) 32.5 US$ US$ $m
CURRENCY
LENDLEASE TRUST LENDLEASE Note 17a 920.4 17a (33.3) 918.9 887.1 826.6 589.3 818.5 581.3 $m 1.5 $m 8.0 8.1 £ No. of 295.6 540.7 583.5 583.5 295.6 259.4 582.3 281.3 Units Units June 2017 June $m (m) S$ 1.2 June 2018 June
. 2,358.5 2,358.5 2,152.4 1,348.8 2,152.4 1,519.0 803.6 918.9 918.9 839.5 915.8 150.3 Total 54.0 $m $m $m
3.1 1.8
173
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 174 Total Derivative Liabilities Financial Total liabilities financial Other Resident liabilities Resident 1. payments. interest estimated including liabilities financial of maturities flow cash contractual the are following The facilities. credit of letter against $nil) 2017: (June $nil of collateral provided has Group The ratio. gearing low and a facilities undrawn committed significant includes which profile, financial Group’s the and securities, stapled of number of million 9.7 buyback market on the by supported as flows, cash strong continued its to due is This months. 12 next the in facilities these to relation in risk liquidity asignificant anticipate not does Group the 2018, June At 30 the provider. bank havebonding guarantees and bank Issued guarantees. collateralisation if cash the requirements bank is guarantee by facility not renewed of of entities particular their Group obligations the in Company the guarantees respect including circumstances, performance certain in Liabilities’, ‘Contingent 27 Note in disclosed As Management’. Risk ‘Financial 24 Note in disclosed is risk liquidity on information Further 20. Report. Annual this of sections &Outlook Performance and Pillar Financial the in Framework Management Portfolio the of to details refer capital, manages and allocates Group the how on information further For debt. of level the changing and Plan Reinvestment Distribution the to securityholders, distributions paying issuance, by equity changed be can Group the of structure capital The Baa3/BBB-). 2017: (June respectively Baa3/BBB- are 2018 June 30 at ratings credit term long Moody’s/Fitch profile. The financial appropriate an by maintaining rating credit grade investment an to maintain and returns securityholder total strong deliver to is objective Group’s the capital, investing When liabilities. bearing interest other and borrowings equity, total includes capital Group’s The investments. existing its evaluate and capital its invest to how on decisions makes Group the when account into taken all are These profile. maturity and debt of cost average weighted and ratio coverage interest ratio, leverage ratio, gearing its monitors also Group The capacity. borrowing and growth earnings equity, on return including parameters, financial interrelated on focuses Group The plan. strategic broader its of part as management capital assesses Group The 19. securities. stapled issued its of respect in value par or capital authorised have not does Group The ofrepayment capital. in creditors all after rank securityholders stapled Ordinary meetings. securityholders’ at security stapled per vote to one LLT entitled are and from distributions and Company the from dividends declared to receive right the have LLT. in unit to one securityholders stapled Stapled Company the in share one represents security Astapled paid. fully shares ordinary comprises Limited Corporation Lendlease for capital Issued c. 18. Working and C: Liquidity continued Capital Section Notes toConsolidatedFinancialStatements Borrowings and financing arrangements and financingBorrowings arrangements Trade and other payables Trade other and DerivativeNon Liabilities Financial 2017 June Total Total Borrowings and financing arrangements and financingBorrowings arrangements Trade and other payables Trade other and DerivativeNon Liabilities Financial 2018 June Derivative Liabilities Financial liabilities financial Other Other contractually committed cash flows the Group is exposed to are detailed in Note 21 ‘Commitments’. 21 Note in detailed are to is exposed Group the flows cash committed contractually Other Inflow (Outflow) Inflow (Outflow) Terms Conditions and current and $533.7 million of non current amounts) as they do not meet the definition of a financial liability under Australian Accounting Standards. Standards. Accounting Australian under liability financial of a definition the meet not do they as amounts) of current million non of million $822.4 2017: $533.7 (June and amounts current current non of million $359.8 and current of million $1,532.7 excludes payables other and trade of amount carrying The
Capital Management Capital Liquidity Risk Exposure Liquidity continued Capital Issued 1 1 LENDLEASE ANNUAL REPORT 2018 Note 13b 17a 17a 23 23 Carrying Carrying 12,729.8 Amount 5,994.8 4,573.0 2,358.5 7,766.6 5,407.7 2,152.4 13.2 13.2 $M 0.4 9.6 3.7 3.7
Contractual Contractual Cash Flows 13,367.4 8,526.8 4,573.0 5,425.5 3,100.8 6,065.1 2,719.5 (649.1) (147.9) 635.9 (13.2) 147.5 (0.4) $M 0.5 9.8
Less Than Than Less One Year Year One 4,858.7 4,836.5 4,573.0 9,814.3 4,237.0 (639.7) (139.7) 395.4 629.6 140.5 621.5 (10.1) $M 0.8 0.2 9.4
One to TwoOne 1,035.7 685.4 914.6 Years Years 547.3 350.1 367.1 (0.4) (5.8) (6.7) $M 0.2 6.0 0.2 0.2 6.3
Two to Five 1,742.4 1,414.3 1,016.6 1,149.5 592.8 Years Years 397.5 (0.7) continued (1.4) $M 0.2 0.7 0.1 -
More Than More Than Five Years Five
1,103.1 1,011.1 962.7 957.4 145.7 (0.7) (2.7) 48.4 (2.7) (1.0) $M 0.3
Total years five than later Due Total years five than later Due years five and one between Due Plant and equipment Due between one and five years five and one between Due year one within Due follows: as are statements financial the in for provided not but contracted investments other and investments accounted equity in interests of respect in existing commitments capital date, At balance c. Recognised in other financial liabilities financial in other Recognised years five and one between Due year one within Due follows: as payable are leases to finance relation in commitments date, At balance b. year one within Due follows: as payable are leases operating cancellable to non relation in commitments date, At balance escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. terms, varying have leases The leases. operating cancellable non under equipment and plant and buildings, and land leases Group The 21. Total occupied –self buildings and Land follows: as is statements financial the in for provided not but contracted or agreed expenditure lease operating cancellable non of amount aggregate estimated The a.
Investments
Finance Lease Commitments Operating Lease Commitments Commitments LENDLEASE ANNUAL REPORT 2018 June 2018 June June 2018 June June 2018 June June 2018 June 596.4 229.2 621.6 621.6 301.0 181.4 127.2 26.4 25.2 91.4 27.8 0.4 0.2 0.2 $m $m $m $m
June 2017 June June 2017 June June 2017 June June 2017 June 493.9 493.9 488.3 238.9 186.9 98.6 60.3 38.3 68.1 0.4 9.6 $m 5.6 9.2 $m $m $m
175
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 176 Other receivables Retentions Less Related parties Non Current Total current Less Other receivables considered past due at 30 June 2018 (30 June 2017: $nil). 2017: June (30 2018 June 30 at due past considered are receivables and loans other no debtors, trade than Other days. 90 than greater aged are cent) per 5.0 2017: June (30 7.5 cent per debtors, trade total the Of date. due contractual the after days more or one for outstanding amount any mean to standards accounting under defined is due’ million). ‘Past $232.5 2017: June (30 impaired not was million $285.8 amount, due past the million). Of $242.4 2017: June (30 due past were million $298.0 and million) $1,008.3 2017: June (30 current were debtors trade the of million $1,318.7 date, reporting the at As receivables and Total loans Total current non Retentions Related parties Less Trade receivables Current Financial Disclosure 22. Working and C: Liquidity continued Capital Section Notes toConsolidatedFinancialStatements Carrying amount at beginning ofCarrying financial year Impairment impaired, including related party loans where the Group’s interest in a development was via an equity accounted investment. accounted equity an via was adevelopment in interest Group’s the where loans party related including impaired, being as identified been have that receivables and loans to specific relates provision impairment The entities. certain of creditworthiness the affect will conditions market and economic how considers year,Group the financial the for provision impairment To the basis. determine ongoing an on monitored and assessed is impaired, nor due past neither those including receivables, and loans all of quality credit The receivables and loans total of apercentage as Total impairment year financial of end at amount Carrying movements) rate exchange foreign (including movements Other provision impairment debts doubtful and bad Utilised back written provisions of net loss impairment debts doubtful and Bad contract are rectified. are contract Retentions Statement. Income the in recognised is provision the of amount The information. looking forward relevant any and customers of assessment credit experience, impairment historical Group’s the on based analysis, information that and supportable isreasonable relevant and available. This includes both quantitative and qualitative information and considers Group The material. if loss, expected on based receivables and loans of impairment for provision assesses Group The term. remaining the over revenue as recognised then is material, if discount, The immaterial. is discounting of effect the if discounted not are receivables other and trade term short to relating flows Cash receivables. and loans the of term the over receipts cash future estimated discounts that rate interest the applies which method, interest effective the using cost amortised at carried are receivables and Loans miscellaneous items. and development, property management, to investment related receivables include receivables Other receivable. the trading of intention no with to adebtor directly services or money, goods provides Group the when arise They securities. equity not are that payments L Accounting Policies oans and receivables, which includeoans and trade receivables, and other receivables,
: Impairment : Impairment : Impairment Loans and Receivables and Loans receivable on construction contracts represent deposits held by the Group until the satisfaction of conditions specified in the the in specified conditions of satisfaction the until Group by the held deposits represent contracts construction on receivable LENDLEASE ANNUAL REPORT 2018 are non derivative financial assets with fixed or determinable determinable or fixed with assets financial derivative non are June 2018 June June 2018 June 3,458.0 2,670.2 1,604.5 (100.0) 1,616.7 364.0 346.8 638.7 787.8 120.2 307.7 (12.2) 108.5 0.4% (0.9) 78.2 14.3 (1.2) $m $m 4.1 1.7
continued June 2017 June June 2017 June 3,256.9 1,240.8 2,749.2 1,250.7 1,180.0 269.8 (93.7) 325.8 108.5 507.7 216.4 120.3 3.3% 115.2 (2.0) (4.9) (9.9) (9.8) $m $m 7.5
Total current Total trade and other payables Total current non Other Retentions and deferred payments Related parties to customers due –amounts revenue Construction 2. 1. creditors Trade accrued and Current Financial Disclosure 23. Retentions and deferred payments creditors Trade accrued and Non Current Other income in line with the ‘Revenue from the sale of development properties’ accounting policy in Note 4‘Revenue’. Note in policy accounting properties’ development of sale the from ‘Revenue the with line in income as recognised be will amounts These apartments. presold on advance in received deposits and income to unearned relates primarily Other Other terms. contractual with accordance in are amounts retention of Release terms. contract with accordance in defects of provision the for and security of purpose the for payable amounts are Retentions Retentions liability. as a recognised are contract the on profit recognised plus to date incurred costs the exceed aproject on applicable) if losses foreseeable with (together to clients issued billings progress total the where contracts Construction Customers to Due –Amounts Revenue Construction term. remaining the over expense an as recognised then is material, if discount, The immaterial. is discounting of effect the if discounted not are payables other and trade term short to relating flows Cash payables. other and trade the of term the over outflows cash future estimated discounts that rate interest the applies which method, interest effective the using cost amortised at carried are payables Trade other and business. of course normal the in settled are payables Trade other and Group. to the billed not or whether received, services or goods for future the in paid to be amounts for recognised are Liabilities Trade Creditors Accounting Policies development project to a third party for cash consideration. cash for specific a for party athird to flows cash project apartment development presold the selling involve transactions PLLACes transactions. PLLACes from liabilities income unearned reserves. claim Includes insurance to relating million $21.3 of period prior from areclassification includes creditors accrued and trade 2017 June Trade Payables Other and 2 2 1 LENDLEASE ANNUAL REPORT 2018 June 2018 June 7,300.2 5,769.5 1,530.7 3,407.2 1,014.4 480.8 880.2 637.9 856.1 12.6 11.0 $m
June 2017 June 5,578.8 7,350.9 3,435.2 1,772.1 870.3 783.4 978.7 571.2 702.1 10.0 $m
177
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 178 Equity Price Equity Rate Interest Liquidity Currency Foreign Credit Credit Risks Identified below. table the in detailed is exposures of management and exposures identified, key risks of Policy. Treasury Asummary the of scope the within exposure risk material of issues reviews and management risk financial for framework wide aGroup Policy, maintains Treasury and approved aBoard of parameters the within risks, treasury Group’s the of management the oversees Committee Liability and Asset Lendlease The markets. and jurisdictions numerous across operates Group The 24. Management Risk D: Section Notes toConsolidatedFinancialStatements Group manage these risks. The impact of contingent liabilities is also considered in this section. this in considered also is liabilities contingent of impact The risks. these manage Group the how and to is exposed Group the risks financial of disclosures contains section This risk. this managing for Board by the approved been have policies Treasury performance. Group’s the on effects adverse minimise to seeks and markets financial of unpredictability the on focuses strategy management risk financial Group’s overall The risks. financial of to avariety it expose activities Group’s The Financial Risk Management decreases in the future the in decreases financial or instruments, increases such of aportfolio or instrument, equity derivative investment, equity traded non or a traded either of value fair the that risk The rates interest market in changes to due fluctuate will instrument the with associated flow cash or instrument financial a of value the that risk The due fall they when and as liabilities financial to settle funds insufficient having of risk The rates exchange currency foreign in to changes due fluctuate will liability, or asset arecognised or commitment afinancial of value the that terms currency local in risk The Group the to loss afinancial in resulting instrument, afinancial of respect in obligations its to meet able be not will acounterparty that risk The Definition LENDLEASE ANNUAL REPORT 2018
• • • • • of levels Insufficient • • • • • • • • • Exposures
measured at fair value fair at measured instruments financial traded non and/or traded All bank at cash mainly assets, Financial Risk Exposure’ ‘Liquidity 20 Note in detailed is exposures on information Further liabilities financial of Settlement facilities credit committed Risk Exposure’ Rate ‘Interest 24c Note in detailed is exposures on information Further arrangements and financingborrowings mainly liabilities, Financial Risk Exposure’ 24a ‘Foreign Currency Note in detailed is exposures on information Further foreign currency in settled Transactions foreign operations in investments Net earnings Foreign currency 24b ‘Credit Risk Exposure’ Risk ‘Credit 24b Note in detailed is exposures on information Further deposits cash and assets financial other of Recoverability receivables and loans of Recoverability • • • • • • • • • • • • • Management of Exposures •
part of capital recyclingpart initiatives as closely monitored is portfolio Group’s The basis. individual an on managed are portfolio the within investments Material Policy Treasury the in outlined as benchmarks portfolio to funding Managing capital requirements working and commitments financial to meet facilities credit committed and cash of levels sufficient Maintaining Speculative trading is not permitted not is trading Speculative Treasury Policy the in outlined as funding recourse of respect in limits to hedging Managing swaps rate interest mainly instruments, financial Derivative instruments financial Physical facilities Timely review and renewal of credit investment grade ratings grade investment minimum on based counterparty each for limits credit out sets Policy Treasury suppliers are appropriately credit assessed and customers that so place in Policies foreign exchange contracts mainly instruments, financial Derivative liabilities and assets foreign matching from hedges natural Physical financial including instruments, Speculative trading is not permitted not is trading Speculative out Contracting continued
1. June 2017 has been adjusted to separate the comparative for ‘Other’ to disclose the Group’s exposure to CNY. to exposure Group’s the disclose to ‘Other’ for comparative the separate to adjusted been has 2017 June 1. A 10 per cent movement in the average foreign exchange rates would have impacted the Group’s Profit after follows. as after Tax Profit Group’s the impacted have would rates exchange foreign average the in movement cent per A 10 contracts. exchange foreign the of effects the excludes and constant, remain rates, interest particular in variables, other all that assumes analysis This respectively. date balance at rate spot the and year financial the during rates the average on fluctuation) cent per 10 2017: (June fluctuation cent per a10 on based is movements currency to foreign Position Financial of Statement and Statement Income denominated dollar Australian Group’s the of analysis sensitivity The Analysis Sensitivity 2. 1. currency) (local exposure asset/(liability) Net 2017 June currency) (local exposure asset/(liability) Net 2018 June The USD USD MYR a. EUR EUR SGD GBP USD SGD SGD GBP CNY EUR EUR A 10 per cent movement in the foreign exchange spot rates at balance date would have impacted the Group’s net assets as follows. as assets net Group’s the impacted have would date balance at rates spot exchange foreign the in movement cent per A 10 MYR
Foreign Currency Risk Exposure June 2017 has been adjusted to aggregate the Group’s exposure to NZD to ‘Other’. to NZD to exposure Group’s the aggregate to adjusted been has 2017 June CNY. to exposure Group’s the disclose to ‘Other’ for comparative the separate to adjusted been has 2017 June net asset exposure 1 by currency is detailed below. detailed is by currency INCREASE/(DECREASE) IN PROFIT AFTER TAX AFTER PROFIT IN INCREASE/(DECREASE) INCREASE/(DECREASE) IN NET ASSETS LENDLEASE ANNUAL REPORT 2018 10% LEADS WEAKENING TO 10% LEADS WEAKENING TO 5,285.0 4,903.7 June 2018 June A$m June 2018 June 160.2 38.2 28.7 37.2 14.9 22.7 (1.0) 71.6 12.9 6.6 $m 0.3 $m 3.3 1.2
US$m 506.5 257.4 105.0 173.2 £m June 2017 June June 2017 June
20.0 96.2 (3.2) 28.6 38.7 10.2 20.1 (1.7) 11.6 0.4 $m 3.0 $m 8.4 0.1 (29.3) 264.2
S$m INCREASE/(DECREASE) IN PROFIT AFTER TAX AFTER PROFIT IN INCREASE/(DECREASE) INCREASE/(DECREASE) IN NET ASSETS 10% STRENGTHENING LEADS TO LEADS 10% STRENGTHENING 10% STRENGTHENING LEADS TO LEADS 10% STRENGTHENING 66.4 89.8 €m June 2018 June June 2018 June CNY m CNY (131.4) (31.0) (29.8) (23.6) (10.5) (18.3) (12.5) (59.1) 289.6 (0.2) (2.8) (5.4) (1.0) 0.8 $m $m 19.9
1 MYR m MYR 849.1 31.7 June 2017 June June 2017 June Other m
(78.5) (23.4) (16.8) (16.5) (31.5) (0.3) (9.4) (8.2) (2.8) 43.0 (7.0) (0.1) 21.2 $m $m 2.6 1.3 2
179
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 180 Financial liabilities Financial Financial assets Variable Rate There are 47 foreign currency contracts that will mature in more than one year (June 2017: 23 foreign currency contracts). currency foreign 23 2017: (June year one than more in mature will that contracts currency foreign 47 are There million). $465.2 payable 2017: (June million $168.2 is exposure payable gross total The exposures. currency foreign specific to hedge date reporting at MYR and JPY SGD, EUR, USD, in held primarily contracts derivative exchange foreign has Group The accounted investments. equity within borrowings on mainly are and hedges flow cash as treated are These borrowings. from arising rates to interest exposure Group’s the manage to used are swaps rate Interest Statement. Income the in off net mainly which transactions and loans intercompany border cross to hedge contracts exchange foreign forward uses also Group The transactions. dividend and purchase sale, probable highly for hedges flow cash as contracts exchange foreign forward uses primarily Group The value. fair at designated hedges minimal has Group The follows. as out set is liabilities and assets financial its on risk rate to interest exposure Group’s The c. • • • • • 25. • b. continued Management Risk D: Section Notes toConsolidatedFinancialStatements Interest rate derivatives have been included in this calculation. this in included been have derivatives rate Interest rates. interest in decrease or increase the to proportional is income/(expense) interest in decrease or increase The after Tax). Profit and equity Group’s the in increase $5.1million 2017: million (June $9.5 after by Tax Profit and equity Group’s the increased have would rates interest in decrease point percentage one after A Tax). Profit and equity Group’s the in decrease million $5.1 2017: Tax(June million by $9.5 after Profit and equity Group’s the decreased have would rates interest in point percentage one of increase an that estimated is it 2018 June At 30 Analysis Sensitivity liabilities Financial Financial assets Rate Fixed meet the criteria for hedge accounting are classified as either fair value hedges, cash flow hedges or investment hedges. or investment hedges flow cash hedges, value fair either as classified are accounting hedge for criteria the meet that hedges for accounting The item. hedged the and instruments financial derivative the of value fair the in changes of loss or profit on effects offsetting the recognises accounting Hedge value. fair at remeasured subsequently and into entered is contract derivative date a the on value fair at initially recognised are instruments financial Derivative activities. investing and financing operating, from arising risks rate interest and exchange foreign to exposure its hedge to instruments financial derivative uses Group The Accounting Policies Exposure Risk Rate Interest otherwise. or by acounterparty default of aresult as risk credit potential to mitigate bonds performance and guarantees bank as such collateral other hold will Group the time, in point any At collateral. as assets financial non or financial hold not did year, Group prior the and current the During transactions. selected on risk credit potential the mitigate further to collateral as assets financial non or financial either hold will Group the circumstances, certain In receivables. and loans on to impairment relating information for Receivables’ and ‘Loans 22 to Note Refer million). $nil 2017: (June assets financial other against year the during recorded impairment million $nil was There agency. rating by arecognised determined as rating credit grade investment minimum a with intermediaries financial to recognised limited are deposits cash and counterparties Derivative counterparties. acceptable determines that policy credit approved Board a under managed is instruments financial on risk Credit basis. specific industry or geographic a either on risk credit of concentrations significant to any exposed not is Group The impairment. any of net amount, carrying the equals Group) the of investments T Credit Risk Exposure Risk Credit he maximum exposure to credit risk at balance date on financial instruments recognised in the Statement of Financial Position (excluding (excluding Position Financial of Statement the in recognised instruments financial on date balance at risk to credit exposure maximum he Hedging LENDLEASE ANNUAL REPORT 2018 CARRYING AMOUNT June 2018 June (1,463.4) (1,899.9) (521.2) 654.3 436.5 133.1 $m
continued June 2017 June (2,372.8) (2,740.2) (87.0) 367.4 673.1 760.1 $m
recognised at amounts that represent a reasonable approximation of fair value, with the exception of the following borrowings. following the of exception the with value, fair of approximation areasonable represent that amounts at recognised are cost, amortised at carried instruments those including Position, Financial of Statement the in recognised instruments financial All 26. Commercial notes Non Current Commercial notes Current Liabilities During the period, there were no material transfers between Level 1, Level 2 and Level 3 fair value hierarchies. value 3fair Level 2and Level 1, Level between transfers material no were there period, the During • • • follows: as defined been have method valuation for levels different The b. • • • follows: as summarised are value fair at measured are that liabilities and assets financial of values fair of determination The a. note. commercial the of term relevant to the applicable margin credit and rates bond government appropriate the by flows cash future expected the by discounting calculated been has notes commercial of value fair The future periods. in rates exchange foreign or prices market in is volatility there if differ may values fair the date, reporting the at value fair of estimation best the represents this While uncertainty. estimation of area an be to instruments financial the of valuation the considers Management ‘Hedging’. 25 Note and Assets’ Financial ‘Other 14 Note in included are value fair at held instruments financial for policies accounting The Accounting Policies Fair Value Measurements Fair Value Fair Determining of Basis Level 3: The fair value is calculated using inputs that are not based on observable market data. market observable on based not are that inputs using calculated is value fair The 3: Level and liability; or asset identical an for prices quoted unadjusted than other data market observable predominantly using calculated is value fair The 2: Level liabilities; or assets identical for market active an in liability or asset identical an for price quoted unadjusted the using determined is value fair The 1: Level adjustments. risk counterparty of consideration includes and rates interest quoted from derived curves yield applicable on based discounted and estimated flows cash future of value present the at measured are which contracts, swap rate interest and date, balance at rates forward using valued are which contracts, exchange foreign forward comprises instruments derivative of value fair The substantially the same, and discounted flow cash analysis; and generally accepted valuation techniques; these include the use of recent arm’s length transactions, reference to other assets that with are accordance in determined are instruments) derivative (excluding liabilities financial and assets financial other of values fair The investment; particular to the pertaining circumstances which valuations, mayunderlying assets, net and Directors’ include future independent periodic maintainable earnings and any special the of assessment an on based determined is funds, property in investments including investments, equity unlisted of value fair The Fair Value Measurement LENDLEASE ANNUAL REPORT 2018 Note 17a 17a Carrying Carrying Amount 1,589.9 249.8 JUNE 2018 $m
Fair ValueFair 1,803.1 252.9 $m
Carrying Carrying Amount 1,776.2 JUNE 2017 291.9 $m
Fair ValueFair 2,088.4 293.3 $m
181
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 182 • • liabilities: contingent following the has Group The 27. continued Management Risk D: Section Notes toConsolidatedFinancialStatements
Contingent LiabilitiesContingent certain of the Company’s subsidiaries. Company’s the of certain for guarantees performance as well as business Construction by the primarily used facilities guarantee bank and bonding includes This obligations. their of respect in entities Group particular of performance the guarantees Company the circumstances, certain In losses. anticipated any for made been has provision adequate that and to account brought been have liabilities known all that opinion the of are Directors The time. this at reliably measured be cannot any, if liability, of arise, may that amount The items. to these respect in arise will liability afuture whether as to uncertainty significant is There business. of course normal the from arise that exposures and claims legal of anumber are There LENDLEASE ANNUAL REPORT 2018 continued Lendlease Development Pty Limited Pty Development Lendlease (Australia) Communities Limited Lendlease Limited Pty Contractors Building Lendlease Limited Pty Building Lendlease Capella Capital Partnership Limited Pty Lendlease Capital Capella • • • During the current and prior year, there were no acquisitions 1. TrustLendlease LimitedLendlease Pty Services Limited Entity Responsible Lendlease Limited Investments Estate Real Lendlease Limited Primelife Lendlease InternationalLendlease Limited Pty Limited Pty Investments Infrastructure Lendlease Lendlease Finance Limited Limited Pty Engineering Lendlease AUSTRALIA CorporationLendlease Limited PARENT ENTITY 28. E: of Consolidation Basis Section section for details on the disposal of entities. of disposal the on details for section following year. to the prior Refer and current the during owned wholly were below listed Group the of entities consolidated material The securityholders. of equity the from separately Position, Financial of Statement consolidated the in equity within presented are and income comprehensive total of share their allocated are interests controlling non External exist. may that policies accounting dissimilar any line into to bring made adjustments with policies accounting consistent company, using parent the as period reporting same the for prepared are subsidiaries of statements financial The ceases. control that date the until commences control that date the from statements financial consolidated the in included are subsidiaries of statements financial The entity. the with relationship its of substance the reviewing and criteria control above the by applying entity an controls Group the whether determining in judgement accounting uses Management account. into taken are convertible or exercisable presently are that rights voting potential control, assessing In • • • Company: the when exists Control Company. by the controlled subsidiaries all comprises consolidation Group The Accounting Policies excluded. those and consolidation the in included transactions and entities of types the detail disclosures The whole. asa Group the of performance and position financial the affects structure Group the how on information provides section This Lendlease Trust is a consolidated entity of the Group as the parent entity is deemed to control it. Lendlease Trust is not wholly owned. wholly not Trust is Lendlease it. control to deemed is entity parent the as Group the of entity aconsolidated Trust is Lendlease
Has the ability to use its power over the investee to affect the amount of returns. returns. of amount the to affect investee the over power its to use ability the Has and fees; and loans dividends, as such investee the with involvement its from returns to variable rights or exposure Has decisions; investing and financial key operating, as such activities relevant the to direct power the Has Consolidated Entities Consolidated 1 LENDLEASE ANNUAL REPORT 2018 of entities. material consolidated Lendlease Development, Inc. AMERICAS ASIA (Europe) Construction Lendlease Limited EUROPE Lendlease (ElephantLendlease & Castle) Limited Lendlease Residential (CG) Limited Lendlease Europe Limited EuropeLendlease Finance plc Limited (Europe) Holdings Construction Lendlease Lendlease (US) Public Partnerships Holdings LLC Holdings Partnerships Public (US) Lendlease LLC Partnerships, Public (US) Lendlease Inc. LMB, Construction (US) Lendlease (US)Lendlease Inc. Construction, Inc. Capital, (US) Lendlease Limited Pte. Singapore Lendlease Lendlease Japan Inc.
183
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 184 2. 1. disposals material following The 28. continued Consolidation of E: Basis Section Notes toConsolidatedFinancialStatements governance rules pertaining to the deed or trust laws in the legal and tax jurisdiction within which the trust operates. trust the which within jurisdiction tax and legal the in laws trust or deed to the pertaining rules governance or fiduciary any with accordance in rights these may exercise trustee The constraints. tax and legal regulatory, to subject intention this reflect plans The securities. allocated for rights voting and to distributions entitled are plans security operating various the in employees Generally, Distributions and/or Voting Rights Group operates. the which in country each of rules tax and legal regulatory, to the by reference determined are plans particular for eligibility for rules The Eligibility • Ltd Pty (EGRP) Lendlease • • below. outlined are which of details vehicles ownership and plans security employee Lendlease active various through Group the of capital issued the of cent) per 1.24 2017: (June cent per 1.04 approximately own employees 2018, June 30 at As a. purposes. accounting for consolidated to be required currently are controlled, legally not while vehicles These vehicles. ownership security employee and plans security employee including vehicles, benefit employee of anumber sponsors Company The 29. Employee Benefit Vehicles LRIP LP LRIP Lendlease Retirement Living Trust Australia 2018 June Victoria Drive Wandsworth LLP Wandsworth Drive Victoria Europe Circular Quay Tower Quay Circular Australia 2017 June Securities are currently allocated to employees across Australia, Singapore, Malaysia, the United Kingdom and the United States. United the and Kingdom United the Malaysia, Singapore, Australia, across to employees allocated currently are Securities subscriptions. by Lendlease funded are which awards (STI) Term Incentive Short Executive of component deferred the as granted securities allocating and acquiring of purpose the for 2014 July in established was STI ESAP STI): (ESAP (STI) Plan Acquisition Share Employee contributions. new accepting currently not is plan the of part This employees. based US for securities Group to acquire used contributions share profit employee of acceptance the for 2005 in updated and 2004 in Trust) Trust established was (Rabbi Rabbi US Americas: contributions. sacrifice salary employee and subscriptions by Lendlease funded is and Group the in securities acquiring employees of purpose the for 1988 December in established was ESAP (ESAP): Plan Acquisition Share Employee Australia: Employee Security Plans Security Employee Refer to Note 6 ‘Other Income’ for further detail. further for Income’ details. 6‘Other Note to further Refer for Investments’ Accounted ‘Equity 12 Note and Investments’ Accounted Equity of Profit of 5‘Share Note Income’, 6‘Other Note to Refer Consolidated EntitiesConsolidated continued 2 of consolidated entities occurred during the current and prior year. prior and current the during occurred entities consolidated of 1 LENDLEASE ANNUAL REPORT 2018 Interest Disposed Disposed Interest Ownership 100.0 80.0 80.0 50.0 25.0 %
20 December 2016 18 December 2017 21 December 2017 6 October 2016 6 October 27 June 2017 June 27 Disposed Date Date
Received/Receivable Gross Consideration Consideration Gross continued 240.0
196.8 510.4 40.0 64.9 $m
Reserves capital Issued Net assets Total liabilities current liabilitiesNon liabilities Current Total assets Non current assets Current assets Position Financial Total comprehensive income after tax Other comprehensive (loss)/income after tax Profit after Tax Results Total equity • • (RBF). Fund Benefit Retirement Lendlease vehicle, ownership security employee an has Lendlease above, discussed plans to the addition In b. Treasury securities guarantees toguarantees entities. Group of provision the in participates Company the Liabilities’, ‘Contingent 27 Note in disclosed Group the of liabilities contingent the of respect In 1. for the year ended 30 June 2018. June 30 ended year the for and at as Company), (the Limited Corporation entity,Lendlease parent Group’s the of information financial the summarises following The 30. Retained earnings Retained Employee Security Ownership Vehicles Ownership Security Employee transferring $3.5 million from Reserves to opening retained earnings. retained opening to Reserves from million $3.5 transferring Instruments 9Financial AASB of adoption time first the of impact the reflect to adjusted been has Position Financial of Statement 2017 June
Parent Entity Disclosures Parent The RBF arrangement is subject to periodic review to assess its ongoing role and operation. operation. and role ongoing its to assess review to periodic subject is arrangement RBF The consolidated for accounting purposes. to be required not currently is RBF therefore and RBF of control have not does currently 2017, Lendlease June 22 on trustee RBF the of structure governance and constitution the to changes of result As a Foundation. Lendlease the through activities benefit employee to fund Company to the RBF of income the of distribution the for allows which executed was poll adeed 1992, In funds. RBF the of distribution to the as discretion has trustee RBF The Group. to the available not is trust the of capital the deed, trust RBF’s with accordance in and, Group the of control of achange of event the in than other to employees allocation for available not are RBF in securities Lendlease The securities. Lendlease holds RBF employees. of benefit the for approval shareholder with 1984 in established was RBF 1 1 LENDLEASE ANNUAL REPORT 2018 June 2018 June 3,048.0 3,048.0 4,539.9 3,482.5 3,506.1 6,554.1 1,296.8 2,014.2 1,632.8 COMPANY (56.8) 751.5 751.6 175.2 23.6 (0.1) $m
by by June 2017 June 2,545.2 3,246.6 2,494.7 2,772.7 2,772.7 1,289.8 5,317.9 2,071.3 1,363.7 351.4 (57.8) 351.0 177.0 50.5 0.4 $m
185
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 186 Corporation Limited and its consolidated entities. Limited and its consolidated Corporation Lendlease between end at year outstanding balances the and year financial the during occurred that transactions the represents following The conditions. and terms normal under charged are fees Guarantee developments. form built commercial business Development certain for guarantees performance as well as business Construction by the primarily used facilities In addition, to are guarantees provided of entities particular their Group obligations. include in These bonding respect and bank guarantee arising balances from workingOutstanding capital facilities and long term andrepayable typically financingon unsecured demand. are returns. and risks specific project on based subsidiaries with drawn to or provided loans term long on only incurred or earned is Interest Lendlease Corporation Limited statements. financial Company’s the in impairments less acquisition of cost their at carried are subsidiaries in Investments statements. financial consolidated the preparing in eliminated are transactions, intragroup from arising losses or gains unrealised any and transactions, and balances Intragroup a. 31. continued Consolidation of E: Basis Section Notes toConsolidatedFinancialStatements Payables Receivables of (Net Provisions Balances Raised) Outstanding Interest expense Interest income Dividend income fees Guarantee Transactions • • • • included: Group Lendlease the in entities between year financial the during occurred that Transactions • • • • •
Consolidated Entities Consolidated Provision of investment management services; management investment of Provision services; management development of Provision Provision of project management, design construction services, management and engineering to services development projects; Reimbursement of expenses made on behalf of subsidiaries; of behalf on made expenses of Reimbursement contributions; superannuation of payment and Receipt Provision of payroll, transaction and management services; Dividends received or due and receivable from subsidiaries. from receivable and due or received Dividends and policies; insurance Group’s the for receipts and payments Premium Loan advances and repayments subsidiaries; between Related Party Information Related Party provides financing and treasury services, which includes workingcapitalfacilities services, and long financing provides andterm financing. treasury LENDLEASE ANNUAL REPORT 2018 3,409,408 3,435,339 June 2018 June 795,156 36,481 $000s 61,027 10,212 COMPANY
continued June 2017 June 2,459,831 3,198,184 442,987 74,478 $000s 13,501 14,149
c. Position. Financial of Statement and Statement Income consolidated the in included are operations joint with Payables’. Transactions Other ‘Trade and 23 Note and Receivables’ and ‘Loans 22 Note Assets’, Financial ‘Other 14 Note Costs’, Finance and Revenue 8‘Finance Note Expenses’, 7‘Other Income’, Note 6‘Other Note 4‘Revenue’, Note in disclosed been have parties related other and ventures joint associates, with balances outstanding and transactions Other ventures Joint The key management personnel compensation is as follows: follows: as is compensation personnel key management The Directors’ Report. Directors’ Information regarding individual Directors’ and senior executives’ remuneration is provided in the Remuneration within Report the Total Other long term benefits payments based Security Post employment benefits termShort employee benefits Associates Revenue Revenue earned by Lendlease during the year as a result of transactions with its associates and joint ventures is as follows: as is ventures joint and associates its with transactions of aresult as year the during by Lendlease earned Revenue conditions. and terms normal on typically are balances outstanding and transactions above, noted as Except (June 2018 June 30 2017: at ventures to joint $nil). provided loans bearing interest non no were There • • • to: relate principally ventures joint and associates its and Group Lendlease the between Transactions Investments’. Accounted ‘Equity 12 Note in out set are by Lendlease ventures joint and associates in held Interests b.
Key Management Personnel Investments: provision and of infrastructure property investment management, management and property asset management services. and services; construction and engineering building, management, project of provision Construction: with funds; managed Lendlease properties development of purchase and sale the and services advisory and bid infrastructure services, management development Development: Ventures Joint and Associates LENDLEASE ANNUAL REPORT 2018 June 2018 June June 2018 June 25,470 15,545 1,195.8 $000s 9,368 381 176 $m 5.9
June 2017 June June 2017 June 26,963 10,902 $000s 15,617 641.5 385 6.0 $m 59
187
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 188 Carrying amount at end of financial year financial of end at amount Carrying Effect of foreign exchange rate movements rate exchange foreign of Effect amount at beginning ofCarrying financial year Development year financial of end at amount Carrying Effect of foreign exchange rate/other movements rate/other exchange foreign of Effect amount at beginning ofCarrying financial year Construction follows: as are goodwill of category each for amounts carrying the of Reconciliations Reconciliations Total goodwill Development Construction a. Total intangible assets intangibles Other Management agreements Goodwill Financial Disclosure 32. Notes F: Other Section Notes toConsolidatedFinancialStatements Goodwill estimated useful lives of the intangible assets, ranging from three to 20 years. to 20 three from ranging assets, intangible the of lives useful estimated the over basis line astraight on Statement Income to the charged is Amortisation Expenses’). 7‘Other Note (see losses impairment Management agreements and other intangible assets amount. recoverable the calculate to order in rate discount suitable a and CGU the from arise to expected flows cash future the to estimate Group the requires which basis, use in value the uses CGU Construction The allocated. is goodwill the to which CGU the of amount recoverable the of estimation an involve calculations these as uncertainty estimation of area an is this considers Management goodwill. the with associated cash generate that assets of group identifiable an are CGUs arose. goodwill the which in combination business the from benefit to expected are that CGUs), of (or (CGUs) groups units generating to cash allocated is goodwill testing, impairment of purposes the For sold. entity to the relating goodwill of amount carrying the include entity an of disposal the on losses and Gains amortised. not is Goodwill losses. impairment accumulated less cost at carried and impairment for annually tested is Goodwill associates. in investments of value carrying the in included is associates of acquisition on Goodwill goodwill. as assets intangible in included is subsidiaries of acquisition on Goodwill acquisition. of date the at business acquired the of liabilities Goodwill Accounting Policies
Intangible Assets represents the excess of the purchase price over the fair value of the Group’s share of the net identifiable assets and contingent contingent and assets identifiable net the of share Group’s the of value fair the over price purchase the of excess the represents LENDLEASE ANNUAL REPORT 2018 acquired by the Group are stated at cost less accumulated amortisation and and amortisation accumulated less cost at stated are Group by the acquired Note 32b 32a June 2018 June 1,421.4 1,185.3 1,215.7 1,165.0 1,185.3 1,215.7 164.0 30.4 30.4 20.3 29.2 41.7 $m 1.2
continued June 2017 June 1,165.0 1,194.2 1,165.0 1,194.2 1,415.1 1,179.2 168.4 (14.2) 30.0 (0.8) 29.2 52.5 29.2 $m
Goodwill relating to the Construction business is allocated to CGUs identified according to regions as set out below. out set as regions to according identified to CGUs allocated is business Construction to the relating Goodwill b. adjustments for the risk profile relating to the relevant CGUs and the countries in which they operate. The discount rates used are pre tax. pre are used rates discount The operate. they which in countries the and CGUs relevant the to relating profile risk the for adjustments appropriate with rate, discount the determining for point astarting as used is capital of cost average weighted Group’s The cent). per 22.0 and cent per 13.0 between 2017: (June cent per 21.4 and cent per 13.7 between vary projections flow cash to the applied rates discount The Rate Discount operate. they which in countries the and CGU each for rate growth average term long forecast the reflects rate growth The cent). per 3.0 2017: cent(June per 3.0 is period year five the beyond flows cash the to extrapolate used rate growth value terminal The Rate Growth CGU. each for flows cash and expenditure capital expenses, income, to determine estimates management on based are forecasts These by management. approved been have which period year five a covering forecasts financial and results, operating actual on based projections flow cash tax pre use calculations VIU The Cash Flows Construction CGUs. the to relating VIU determining when projections flow cash its based has management which on key assumptions the describes following The goodwill. Construction of in impairment result not would assessment this in made assumptions the in change foreseeable areasonably 2018, June 30 at conditions market and available information on Based 2018. June 30 ended year the for CGUs Construction the for goodwill of review the of aresult as arose impairment No trends. industry relevant and data of sources external and internal both utilising future, the for expectations and experience past on based are CGU each of amount recoverable the determining for used assumptions the CGUs, Construction the For calculations. (VIU) use in value on based determined is CGUs Construction the of amount recoverable The c. Total construction goodwill Asia Americas Europe Australia Construction Goodwill Allocation Goodwill Impairment Tests and Key Assumptions Used –Construction Used Key Tests Assumptions and Impairment LENDLEASE ANNUAL REPORT 2018 June 2018 June 1,185.3 244.4 743.4 189.9 $m 7.6
June 2017 June 1,165.0 743.4 182.6 231.4 $m 7.6
189
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 190 The amounts recognised in the Statement of Financial Position are determined as follows: as determined are Position Financial of Statement the in recognised amounts The i. Financial Disclosure Lend Lease Superannuation Plan Financial Disclosure 33. continued Notes F: Other Section Notes toConsolidatedFinancialStatements Net definedbenefit asset/(liability) Lend Lease UK Pension Scheme The defined benefit plan is exposed to actuarial risk and market (investment) risk. Information which follows provides additional detail on risk. on detail additional provides follows which Information risk. (investment) market and risk actuarial to exposed is plan benefit defined The deficit. actuarial the reduce contributions These 2024. March to period the for agreed been have contributions repair deficit where 2017 March 31 for valuation triennial the following million, $10.7 of contribution off one as a well as payment recovery deficit annual the includes 2019. This in plan benefit defined its to contributions in million $30.0 pay to expects Scheme service. The in death on payable benefits of costs and costs administration expected Scheme’s the cover to salaries basic members’ of cent per four plus contributions funding deficit pays Construction year. UK the during settlements or curtailments payable, benefits defined affecting amendments Scheme no were There 2012. January 31 on accruals future to closed section linked index the and 2008 August 31 on accruals future to closed section salary final The not included in disclosures. these are accounts Fund Investment Personal members’ to contributions Construction’s UK The basis. contribution defined on a benefits retirement provides Section, Investment Personal the section, separate A salary. average career on based benefits retirement providing section linked index the and salary final on based benefits retirement providing section salary final with scheme, benefit defined afunded is Scheme The the benefits. of administration dayday to the plus assets the to regard with policy investment the for responsible are and beneficiaries relevant all of interest the in to act by law required are Trustees The employees. and employer the both of representatives of composed are Trustees Scheme’s The Construction. UK from separate legally is which Trustees of board by aseparate administered is Scheme The employees. UK qualifying for Scheme) (the scheme pension benefit defined afunded sponsors Construction) (UK Limited (Europe) Holdings Construction Lendlease a. Lend Lease UK Pension Scheme Total definedbenefit planasset Defined benefitobligations Defined Fair value of plan assets plan of value Fair Past service costs are recognised immediately in the Income Statement. Income the in immediately recognised are costs service Past Position. Financial of Statement the in and directly in other comprehensive income as remeasurements. They are included in retained earnings in the Statement of Changesoccur, in they Equity period the in recognised are losses/(gains) actuarial These trends. financial and to demographic relation in assumptions to change or a experience, actual and estimates previous between adifference is there where arise will losses/(gains) Actuarial of area an to be actuaries simplistic terms proportions the benefit based on Management service. considers the valuation of defined benefit plans undertakenin which by the method, credit unit projected the using actuaries independent by annually least at calculated is obligation benefit defined The • • that: bonds, government or corporate quality high of rates interest using outflows cash future estimated the by discounting determined is liability pension the of value present The assets. plan of value fair the less date sheet balance the at liability’ pension ‘the i.e. obligation benefit defined the of value present the is plans benefit defined of respect in Position Financial of Statement the in recognised liability or asset The compensation. and service of years age, as such factors more or one on dependent usually retirement, on receive will employee an benefit pension of amount the defines that plan pension isa plan benefit A defined calculations. actuarial by periodic determined as funds administered trustee or companies to insurance payments through funded generally are plans The plans. pension operate companies Group Accounting Policies Statement of Financial Position Amounts Position Financial of Statement Have terms to maturity approximating the terms of the related pension liability. pension related the of terms the approximating to maturity terms Have and paid; be will benefits the which in currency the in denominated Are Defined Benefit Plans Benefit Defined estimation uncertainty as a number of key assumptions must be adopted to determine the valuation. the to determine adopted be must key assumptions of anumber as uncertainty estimation LENDLEASE ANNUAL REPORT 2018 Note 33a June 2018 June June 2018 June (1,077.1) 1,228.4 151.3 154.7 151.3 $m $m 3.4
continued June 2017 June June 2017 June (1,139.7) 1,198.5 64.3 58.8 58.8 $m $m 5.5
Financial Disclosure Interest cost cost Interest Included in Income Statement year financial of beginning at obligations benefit Defined ii. Net definedbenefit plan expense costs Administration cost interest Net Statement Income the in Recognised iv. Expense year financial of end at assets plan of value Fair costs Administration Interest income Included in Income Statement year financial of beginning at assets plan of value Fair Assets Value Plan Fair of the of Reconciliation iii. benefitDefined obligations at end of financial year movements rate exchange foreign of Effect paid Benefits Other arisingActuarial from: (gain)/loss Remeasurements Included in Comprehensive Other Income matching assets (June 2017: 75.0 per cent growth assets and 25.0 per cent matching assets). matching cent per 25.0 and assets growth cent per 75.0 2017: (June assets matching cent per 25.0 and assets growth cent per 75.0 is allocation benchmark current The expected. than higher being inflation against to protect as so plan the of liabilities the with line in perform that assets in by investing plan pension the of level funding the of volatility the to reduce aims which policy matching asset–liability an includes This appropriate. when and as risk investment reducing for strategy term along agreed have Trustees and $1,137.1 2017: Construction 2(June million). UK Level as categorised were assets plan total of million $1,214.1 approximately end, At year inputs. observable from indirectly or directly either derived is value fair the where 2, Level or asset, identical an for price quoted unadjusted an using determined is value fair the where 1, Level as categorised be can assets plan The return. of level absolute an target funds investment The Fair value of plan assets at the end of the financial year Other assets Government index linked bonds linked index Government Infrastructure funds Investment Equities of: comprise assets Plan v. Assets Value Plan Fair of movements rate exchange foreign of Effect paid Benefits companies by Group Contributions Other income interest excluding assets plan on return Actual Remeasurements Included in Comprehensive Other Income Demographic assumptions Demographic Experience adjustments Financial assumptions Global UK Reconciliation of Defined Benefit Obligations Benefit Defined of Reconciliation LENDLEASE ANNUAL REPORT 2018 June 2018 June 1,228.4 1,228.4 1,198.5 1,077.1 1,139.7 304.6 (86.8) 382.0 (22.8) 359.3 (31.8) 120.2 (56.1) (56.1) (4.0) 63.5 58.6 62.3 24.2 29.3 (1.8) 18.2 31.1 4.0 2.2 $m
June 2017 June 1,056.2 1,059.6 1,198.5 1,198.5 1,139.7 (50.3) (42.0) (42.0) 335.9 274.6 310.2 132.0 (51.5) 153.5 95.6 (3.5) 78.8 113.1 (7.2) 27.3 27.3 69.1 3.5 $m 3.5
191
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 192 • • • follows: as are plans key incentive The Report. Directors’ the within Report Remuneration the in provided is strategy Reward Executive Group’s the regarding information Detailed 34. • • role. each for levels market relevant against tested is and individual by varies benefit potential the of value total The goals. individual and targets financial non and financial Lendlease both of achievement the upon dependent are which benefits receive employees of anumber whereby plan incentive annual an is plan STI The a. Future mortality (years):Future mortality (%) payments in increase pension Average (%) inflation RPI (%) rate Discount vi. 33. continued Notes F: Other Section Notes toConsolidatedFinancialStatements have affected the defined benefit obligations by the amounts shown below. shown amounts the by obligations benefit defined the affected have would constant, assumptions other holding assumptions, actuarial relevant the of to one date reporting the at changes possible Reasonably vii. years). 19 2017: (June years 19 was obligation benefit defined the of duration average weighted the 2018, June At 30 27.2 years). 2017: (June female are they if years 26.3 and male are they if years) 25.4 2017: (June years 24.8 afurther for live will 63 aged amember that is assumption The improvements. mortality future expected for allow which tables mortality standard on based are assumptions mortality The liabilities. the in increase an in result will expectancy life in increases so member, the of life the for benefits to provide are obligations Scheme’s the of majority The deficit. the increase also will inflation in increase an that meaning inflation, with correlated loosely or by unaffected either are assets the of majority The inflation. extreme against protect to capped be will this cases most in although liabilities, higher to lead will inflation higher and inflation to linked are obligations benefit Scheme’s the of majority The holdings. bond corporate Scheme’s the of value the in increase an by offset partially be will this although liabilities, Scheme’s the on placed value the increase will yield bond corporate in A decrease deficit. a create will yield this underperform assets If yield. bond to corporate reference with set rate adiscount using calculated are liabilities The and the associated increases in payment. per cent floor and different caps applying to different periods pensionable of service. The inflation sensitivityreflects achange in RPI inflation azero with but RPI to linked are increases pension payment, in Once retirement. up to period the in RPI to linked are benefits pensioner Non correlated. be may assumptions the of some as another one of isolation in occur would assumptions in change the that unlikely is it as obligation benefit defined the in change actual the of representative be not may above presented analysis sensitivity The asset/(obligations)benefit Defined 2017 June Defined benefit asset/(obligations)benefit Defined 2018 June
Long Term Incentives (LTI); Term and Long Incentives (STI); Term Incentives Short at the time of vesting. of time the at Group by the employed be generally must they component, deferred full the to receive employees For Plans’). Security ‘Employee 29a Note to (refer period deferral the for employees of behalf on trusts plan security employee Lendlease in held are Securities cash. as instances some in and securities Lendlease as awarded normally is component deferred The years. two or one for generally are periods Deferral benefit typicallyis higher, the plan also includes a deferredcomponent. potential the where employees, senior more For end. year following September in paid is which component, acash comprises plan STI The (STI) Term Incentives Short ExecutiveDistinguished Awards (DE Awards). Principal Actuarial Assumptions
Male Female Employee Benefits Defined Benefit Plans continued Plans Benefit Defined Sensitivity Analysis
Discount Rate Discount Increase in LENDLEASE ANNUAL REPORT 2018 0.1% 0.1% 22.4 19.5 $m
Discount Rate Discount Decrease in Decrease (22.9) (19.8) 0.1% 0.1% $m
Pension Payment Inflation and Increase RPI (18.3) (16.1) 0.1% 0.1% $m
Pension Payment Decrease RPI Decrease Inflation and 0.1% 0.1% 14.1 12.1 $m June 2018 June
Increase in 24.8 26.3 Mortality Mortality 3.3 2.8 2.7 Future Future 1 Year Year 1 (39.5) (35.1) $m
continued Decrease in Decrease June 2017 June Mortality Future Future 1 Year Year 1 25.4 39.3 27.2 35.1 3.3 2.4 2.6 $m
Arrangements for LTIArrangements awards • • to: LTI designed The is plan b. year) financial 2018 June to (applicable – ROE Schedule Vesting financial financial years) 2017 to 2014 June to (applicable – ROE Schedule Vesting financial financial years) 2018 to 2013 June to (applicable – TSR Schedule Vesting Hurdles Performance Employment of Termination Period Performance Securities Performance LTI design LTI on Equity performance. Return average and price security Group’s to the linked is received value the that given securityholders, and executives of interests the Align and peers; its than value securityholder better delivers Group the where reward provide and goals strategic term long Group’s the to achieve executives Motivate (LTI) TermLong Incentives 14 per cent or greater or cent per 14 cent per 14 below but cent per 10 Above less or cent per 10 performance period the over ROE Average 15 per cent or greater or cent per 15 cent per 15 below but cent per 11 above At or cent per 11 than Less performance period the over ROE Average At the 75th percentile or greater percentile 75th the below but percentile 51st the above At or At the percentile 50th Below the percentile 50th Relative TSR percentile ranking • • Years Financial 2018 to 2014 June • • • • • • • • • • • • How the LTI the How works inappropriate, the Board can adjust unvested LTI prior to the vesting date. date. LTI vesting to the unvested prior adjust can Board the inappropriate, or unwarranted was that abenefit provide would vesting considers Board the if and terminated is executive the If 50 per cent subject to Return on Equity (ROE) hurdle. (ROE) Equity on to Return subject cent per 50 period. performance the of start the at determined are S&P/ASX companies The Index. 100 100 S&P/ASX the in companies to the compared (TSR) Return Total Securityholder to Lendlease’s subject cent per 50 LTI forfeited. unvested is the cause, for terminated is or resigns executive the If There is no retesting on any portion of the LTI the of grant. portion any on retesting no is There forfeited. are awards the met, not is hurdle performance the If years. four after assessed are securities performance the of cent per 50 remaining The lapse. will vested not have that securities performance those time, this at achieved fully not is hurdle performance the If period. year athree over assessed are securities performance the of cent per 50 some or all performance securities should be accelerated. be should securities performance all or some of vesting the whether to determine discretion the has Board the Group, the of control in achange of event the In value. equivalent of instruments other or cash discretion, Board’s the at or security, stapled Lendlease to one executives entitles security performance each vesting, On discretion. Board’s the at means other or cash in settled be may award the although securities, Lendlease in settled be awards the that intends Board The executives. of number to alimited made is securities’ ‘performance of grant annual An settle the award at the time of termination of employment. of termination of time the at award the settle and discretion exercise may Board the disability), permanent total or death as (such circumstances exceptional In hurdles. performance original to the subject foot, on LTI leavers’, remain the may ‘good grant For LENDLEASE ANNUAL REPORT 2018 100 per cent vesting cent per 100 cent per 100 and cent 0per between basis line astraight on vesting rata Pro vesting No met is hurdle ROE Percentage of performance securities that vest if the 100 per cent vesting cent per 100 cent per 100 and cent per 25 between basis line astraight on vesting rata Pro vesting No met is hurdle ROE Percentage of performance securities that vest if the 100 per cent vesting cent per 100 cent per 98 and cent per 52 between basis line astraight on vesting rata Pro vesting cent per 50 vesting No relative TSR hurdle is met Percentage of performance securities that vest if the
193
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 194 New Accounting Standards and Interpretations Not Yet Not Adopted Interpretations and Standards Accounting New There were no material financial impacts on theGroup followingadoption of these amendments. Leases 16 AASB amendments consequential Venture Joint and or Associate its and anInvestor between ofAssets Contribution or – Sale Standards Accounting Amendments to Australian 2014-10AASB amendments consequential and with Customers Revenue from Contracts 15 AASB Accounting Standard Unrealised Losses Tax for Assets ofDeferred –Recognition Standards Accounting Australian to Amendments 2016-1 AASB adopted Group the 2017 1July From liabilitiesassets, and hedging. financial for policies accounting Group’s the on effect amaterial had not have and immaterial deemed been have implementation the from changes the as disclosed been not has sheet balance Athird Flows. Cash of Statement and Statement Income to the impacts no were There earnings. to retained transferred was million $10.2 of reserve revaluation value fair corresponding the and Income Comprehensive Other through recorded was that million $1.1 of reserve revaluation value fair in movement the and basis, value afair on monitored and managed are assets these because loss and profit through value fair to reclassified been have million $230.8 of investments sale for available retrospectively, adopted be must standard new the As hedging. and liabilities financial assets, financial of derecognition and measurement the classification, 9 addresses AASB and amendments. consequential Instruments 9Financial AASB adopted Group the 2017 1July From 2017 1July Adopted Standards Accounting Revised and New 35. $47.1 2017: (June awards million). payment based security settled to equity relation in Statement Income the in recognised was expense million $45.3 a 2018, June 30 ended year financial the During yield. dividend and volatility expected rate, interest free arisk price, security Group Lendlease the include inputs model The applicable). (if date vesting the until date valuation the from paid be to assumed dividends expected by the price security the by discounting valued are awards Retention formula. Black-Scholes the underlying assumptions the on based projected be can price security the where methodology simulation Monte-Carlo using LTI valued are awards d. grant. of time the at awards these of respect in made purchases market on of price average the on based valued are Awards DE vesting. of time the at Group by the employed be generally must they component, deferred the to receive employees For employees. the of behalf on trusts plan security employee Lendlease in held and securities Lendlease as awarded is component deferred The years. seven and five over deferred generally are Awards) (DE Awards Executive Distinguished c. 34. continued Notes F: Other Section Notes toConsolidatedFinancialStatements
Amounts Recognised in the Financial Statements Executive Awards Distinguished Impact of New and Revised Accounting and New of StandardsImpact continued Employee Benefits
Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107 AASB to Initiative: Amendments –Disclosure Standards Accounting Australian to Amendments 2016-2 AASB and retrospectively. applied be will and year financial 2020 June the for mandatory becomes standard The accounting for leases. for model anew provides 16 AASB prospectively. applied be will and year financial 2023 June the for mandatory becomes amendment The venture. joint or associate its and investor an between assets of contribution or sale the recording for requirements the to clarify 128 AASB and 10 AASB amends 2014-10 AASB retrospectively. applied be will and year financial 2019 June the for mandatory becomes standard The Contracts Revenue 118 AASB existing the replace will and acustomer with acontract from earned revenue recognising for model step five anew provides 15 AASB Requirement . LENDLEASE ANNUAL REPORT 2018 Construction Construction 111 AASB and no material impact on the Group. As a lessee, the Group will: Group the alessee, As Group. the on impact material no is there alessor, as performed, analysis preliminary on Based Group. the on impact amaterial to have expected not are amendments the performed, analysis preliminary on Based generated. to be expected revenue future and key judgements contracts, from derived to revenue relation in disclosure the in increase an require will standard new The • • • • follows: as are impacts the 15, AASB of adoption On Statements Financial on Impact • • obligation liabilities, respectively. liabilities, obligation lease the and assets lease to use’ ‘right the for expense finance and amortisation an to record expense lease operating of presentation Statement Income the Revise and commitments; lease operating material its for Position Financial of Statement the in liabilities obligation lease and assets lease to use’ ‘right Record onwards. from FY19 recognition of timing the impact will This to settlement. completion practical of practice current the from change will properties development of point recognition The rendered; and are services when recognised to be continue will fees origination and management investment of Recognition time; over to be continue will services development and construction of Recognition change; not will transactions revenue of components individual to consideration allocate and to value process The
continued
. or payable to, the ATO are classified as operating cash flows. flows. cash operating as ATO to, the payable or classified are from, recoverable are which activities financing and investing from arising flows cash of components GST The basis. agross on Flows Cash of Statement the in included are flows Cash Position. Financial of Statement the in liability or asset current asa Taxationincluded (ATO) Office is Australian to, the payable or from, recoverable GST of amount net The included. GST of amount the with stated are payables and Receivables expense. the of part as or asset the of acquisition of cost the of part as recognised is GST the circumstances, these In authority. taxation the from recoverable not is incurred GST of amount the where except (GST), tax services and goods of amount the of net recognised are assets and expenses Revenue, b. rate. closing the at translated and entity foreign the of liabilities and assets as treated are entity aforeign of acquisition the on arising adjustments value fair and Goodwill • • • follows: as translated are economy) ahyperinflationary of currency the has which of (none dollars Australian in presented not are that entities Group all of Position Financial of Statement and results The Entities Group loss. or gain value fair the of part as reported are loss, or profit through value fair at held equities as such items, monetary non on Translation differences detail. further for ‘Hedging’ 25 to Note Refer income. comprehensive other in recognised are that operations foreign in hedges investment net qualifying and hedges flow cash qualifying for except payables, and receivables as such liabilities and assets monetary for Statement Income the in recognised are losses or gains exchange Foreign date. balance at dollars to Australian translated are currencies foreign in denominated liabilities and Assets transactions. the of date the on rate exchange the using dollars Australian into translated are transactions currency Foreign Transactions and Balances the Company’s functional and presentation currency. is which dollars, Australian in presented is report financial consolidated The currency). (the functional operates entity the which in environment economic primary the of currency the using measured are entities Group’s the of each of statements financial the in included Items Functional and Presentation Currency a. 36.
Goods and Services Tax Services and Goods All resulting exchange differences are recognised in othercomprehensive income, in the foreign currency translation reserve. and date; balance at rate closing the at translated are presented Position Financial of Statement each for liabilities and Assets transactions); the of date the at translated are expenses and revenue case which in rate, transaction of approximation areasonable not is average this (unless rates exchange average at translated are expenses and Revenue Foreign Currency Translation Other Significant AccountingOther Policies LENDLEASE ANNUAL REPORT 2018
195
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 196
Sydney, 22 August 2018 Sydney, August 22 Managingand Director ChiefGroup Executive Officer S BMcCann Chairman AO D ACrawford, 1. (the Company): Limited Corporation Lendlease of Directors the of opinion the In Directors’ Declaration Directors: the of aresolution with accordance in Signed 4. 3. 2.
a. including: 2001, Act Corporations the with accordance in are The financialstatements and notes and the remuneration disclosurescontained in the Remuneration inReport theDirectors’ Report b. Officer and Group Chief Financial Officer for the financial year ended 30 June 2018. June 30 ended year financial the for Officer Financial Chief Group and Officer Executive Chief Group the from 2001 Act Corporations the of 295A by Section required declarations the given been have Directors The payable. and due become they when and as debts its to pay able be will Company the that to believe grounds reasonable are There Preparation. of Basis the in disclosed as Standards Reporting Financial International with comply also notes and statements financial The performance for the financial year ended on that date; and date; that on ended year financial the for performance their of and 2018 June 30 at as Entity Consolidated and Company the of position financial the of view fair and atrue Giving Regulations 2001. withComplying Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
LENDLEASE ANNUAL REPORT 2018 Code. the accordancewith fulfilledourotherethicalresponsibilities in Wehave Report inAustralia. the Financial 110 CodeofEthicsforProfessionalBoard’s APES Accountants Corporations Act2001 with CorporationLimited in accordance and Lendlease ofLendlease Group We areindependent sectionofour report.audit of the Financial Report Our responsibilities under those standards are further described in the issufficientand appropriate toprovideabasisforouropinion. have obtained evidence we
We conducted our audit in accordance with ourauditinaccordance with We conducted To themembersofLendleaseCorporationLimited Basis for opinion Corporations Act2001 is in accordancewith the Report Financial In ouropinion,theaccompanying Group security arrangementof presenting thestapled deemed parent asthe Limited Lendlease Corporation theFinancial ReportWe haveaudited Opinion Report onthe auditofthe FinancialReport Independent Auditor’sReport • • . Corporations Regulations2001 Accounting Standards with complying year endedonthatdate;and its financialperformance forthe 30 June2018andof position asat financial Lendlease Group’s giving atrueandfairview of the (the Financial Report). (the FinancialReport).
and the ethicalrequirements of the and Australian , including: Lendlease International Cooperative (“KPMG International”), aSwiss entit with KPMG affiliated firms member independent of network KPMG, an Australian partnership and a member firm theof KPMG andthe LENDLEASE ANNUAL REPORT 2018 of Australian Auditing Standards Australian The FinancialReport Lendlease Group. Lendlease Group. Securities Exchangeunderthenameof the Australian Lendlease TrustarejointlytradedasaStapledSecurityon and units in Limited Shares inLendleaseCorporation Lendlease Trust. thefinancialyearand end orfromtimetoduring entities itcontrolledattheyear Corporation Limitedandthe The Lendlease Group • • • •
Directors' Declaration. Directors' Declaration. policies; and of significantaccounting asummary Notes including statement ofcash flows fortheyearthenended; and Consolidated statement ofchangesinequity, Consolidated income, statement ofcomprehensive Consolidated Consolidated incomestatement, June 2018; statement offinancialposition as at30 Consolidated
Accounting Professional and Ethical Standards Accounting (theCode)thatarerelevanttoourauditof y. y. of the Lendlease Group comprises: comprises: Lendlease Group ofthe (the Group) consists of Lendlease ofLendlease (theGroup)consists Auditor’s responsibilitiesforthe . Webelievethattheaudit Professional Standards Legislation. Liability limited by a scheme approved under the
197
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 198
customer atthereportingdate. not beenformallyagreedwith the whichhas claims revenue, variations and relation tocontractual specifically in amount of revenue to berecognised required inassessingthe Judgement is recognised. the amountofrevenueandprofit/loss giverisetovariancesin estimates could tothesecost overheads. Changes materials, andproject equipment, subcontractors, include labour, cost estimates judgement. Typical project lifeiscomplexandrequires Estimating totalcoststocomplete during impact on profit. costs andrevenue,thepotential that impacttheGroup’sestimateof required inassessingtherangeoffactors profit recognition duetothejudgement constructionrevenueand We focusedon characteristics. anddelivery individual contractual different riskprofile basedonits in avarietyofways.Eachprojecthas contracts range ofcustomers.TheGroup contract works(projects)forawide engineering andservicesconstruction building, The Groupperformsvarious The keyauditmatter report thefinancial Refer toNote4‘Revenue’ Construction Revenue(A$12,922.4m) for LendleaseGroupare: Matters The KeyAudit Matters Key Audit • • • • Asset Valuation Asset Valuation Profit/Loss Recognition Development Revenueand Property Inventory ofDevelopment Recoverability Profit/Loss Recognition Construction Revenue and
we identified we LENDLEASE ANNUAL REPORT 2018 and Profit/Loss Recognition and Profit/LossRecognition matters. opinion onthese thereon, andwedonotprovideaseparate andinformingouropinion Report asawhole, the Financial wereaddressedinthecontextofouraudit These matters ofthecurrentperiod. audit oftheFinancialReport inour wereofmostsignificance professional judgement, Matters Key Audit Our procedures included: Our proceduresincluded: Howmatter thewas addressedinour audit • • •
For thesampleselected,we: for testingSelection ofasamplecontracts using: forecasting; approval ofconstructionrevenueandcost and review testingofmanagement’s Evaluation and ------
accounting standards via assessment of: via assessment accounting standards the criteria for recognition in the revenue against within tested thevariationsandclaimsincluded future contracts; and actual incurredspend andcommitted comparing to overheads by materials, andproject equipment, tested forecastcostsforlabour,subcontractors, and projectrisksintheGroup’sestimates; characteristics evaluate theinclusionofindividual to read relevantcontracttermsandconditions required; engineering specialistswhere opportunities andworkedwithKPMG and risks forecastrevenue/cost understand projectschedule, conducted visitstoaselectionofprojectsites and riskofprojects; factors, relatedtosize quantitative andqualitative of on a number Data Analyticroutinesbased o o the Group’sprojectreportingtool.
received on contentious matters. received oncontentious The Group’slegalandexternal experts’reports customer; and correspondence betweentheGroupand
are those mattersthat,inour are those
area estimation. area estimation. project profit based oneitherrevenueor oftotalforecast typically afunction allocation is requires judgementascost ofprofitrecognition The assessment sales. residential apartment retailbuildingand commercial and profit recognition, for inparticular and revenue assessing development required by us in number of judgements auditmatterduetothe This wasakey settlement riskisrequired. of contractual termsofsaleand ofthe to thepurchaser an assessment risks and rewards of ownershiptransfer when the of based onanassessment revenue is recognised As development communities. residential land buildings) and retail and apartments, commercial form product(forexampleresidential bothbuilt The Groupdevelopsforsale The keyauditmatter report thefinancial Refer toNote4‘Revenue’ Development Revenue(A$2,602.9m)
LENDLEASE ANNUAL REPORT 2018 and Profit/Loss recognition and Profit/Loss Our procedures included: Our proceduresincluded: Howmatter thewas addressedinour audit • • •
For thesampleselectedwe: and the contractualtermsofsale; complexity of the potentialsettlementriskand transaction size, as quantitative andqualitativeinformationsuch on based Selection ofasampledevelopments forecasting; andcost approval ofdevelopmentrevenue and review testingofmanagement’s Evaluation and - - - - -
the accountingstandards. the requirements of policyand Group’s accounting the yearrelative to thetotalproject,against to sales recognisedin costs allocated by comparing methodology Group’s cost allocation assessed the and post yearendcashproceeds; debtors to communities of residentialland sampling tested settlement risk byperforming statistical bytheGroup; of deposits/instalmentsreceived position ofthepurchaserincontext of thelevel astothefinancial information evaluating public riskincluding customers’ credit assessed the criteria intheaccountingstandards; the contractual terms of sale against analysis of the and rewardsofownershiptransferbyadetailed risks Group’s determination ofthe assessed the settlements; of sale and cash recognisedtocontractualterms compared revenue
199
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 200
complete the development. future coststo estimating salespricesand audit complexity in judgement and offorecasting increases thelevel beinglongterm,which developments audit matter due to many This wasakey is recognised. an expense considered to be impaired and considered toberecoverable,itis theinventoryis no longer and loss making is forecast to be Where adevelopment forecasts of: isbasedon the assessment judgement as recoverability of these costsisasignificant valueandthe and netrealisable atthe lower ofcost Inventory iscarried and borrowingcosts. construction costsforbuiltformproduct of land,siteinfrastructurecosts, purchase Development costsincludethe into inventory overthelifeofitsprojects. developmentcosts The Groupcapitalises The keyauditmatter Refer toNote11‘Inventories’ to thefinancialreport ofDevelopment Recoverability • • development development infrastructure the costs tocomplete forecast constructionand sales prices
LENDLEASE ANNUAL REPORT 2018 Property Inventory (A$4,652.9m) Property Inventory(A$4,652.9m) Our procedures included: Our proceduresincluded: Howmatter thewas addressedinour audit
• •
Selection ofasampleprojectsfortesting using: For thesampleselected,we: - - - -
duration andriskofprojects; factors, relatedtosize, quantitative andqualitative of on a number Data Analyticroutinesbased achieved in the year; and achieved in the prices industry forecastsandcomparablesales salespricesto published compared expected escalation assumptions. escalation assumptions. cost expectation ofcostcontingency levels and our industry experience of similar costs and contracts, historical costs tounderlying supplier tested forecast constructionandinfrastructure the Group’sprojectreportingtool.
matter asthey: of these assets is a key audit The valuations interests intheseassets. directlyimpactstheGroup’s investment entities The fairvalueoftheproperties heldby various and growthrates. market prices units/homes current rates, changesinvillageresidents, arediscount the valueofretirementvillages usedindetermining down). Thekeyassumptions priortothepartialsell and Residentliabilities (previously reflectedwithinInvestmentproperties Group’s interestintheretirement living business includethe Equity accountedinvestments projections andleasingincentives. future rentalincome, expenditure capital of earningsrates,discount capitalisation the arepredominantly valuation assumptions retailproperty.Accordingly,the commercial and investments inentitieswhichturnown Other financialassetsarepredominantly valued internally. being investments each year,withtheremaining are obtainedonaroutinebasisbymanagement of externalvaluationexperts.Externalvaluations or through the approach) use capitalised income flowor cash (discounted valuation methodologies assets are generallyperformed using internal reportingdate. Valuations of assets at each and other financial investments equity accounted of The Groupisrequiredtoassess the value The keyauditmatter tothefinancialreport and Note 26 ‘FairValueMeasurement’ (A$1,554.5m) 14‘OtherFinancialAssets’ Note (A$2,626.6m), Refer toNote12‘Equityaccountedinvestments’ Valuation Asset • • • and models, across varying asset classes. asset classes. varying across and models, ofdiffering the highnumber assumptions lead toadditionalauditeffortoftendue audit; and challenging to whichareinherently estimation uncertainty, with contain certainassumptions are judgemental;
LENDLEASE ANNUAL REPORT 2018 Howmatter thewas addressedinour audit Our procedures included: Our proceduresincluded: • • • • as: such assumptions historical performance,key knowledge of the nature of the asset and its estateagentsand/orour commercial real withmarketdatapublishedby Comparing, industry practicefortheasset’sclass;and accounting standardsand consistency with for thevaluationmethodology of Assessment assets; the Group’spoliciesforinternallyvalued internalvaluationsbased on and approvalof review testingmanagement’s Evaluating and by external valuation experts; assetsvalued engaged by management for objectivity ofexternalvaluationexperts thescope,competenceand of Assessment ------
leasing incentives projections capital expenditure future rentalincome of earningsrates capitalisation market prices units/home current changes invillageresidents discount rates
201
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ OTHER INFORMATION FINANCIAL STATEMENTS DIRECTORS’ REPORT 202 date ofthisAuditor’sReportwehavenothingtoreport. the workwehaveperformedonOther Information that wehaveobtainedpriortothe and basedon We arerequiredtoreportif we conclude that there is misstated. our knowledgeobtainedintheaudit,orotherwiseappearstobematerially doing so, we consider whether the Other Information is In connectionwithourauditoftheFinancialReport, Report and ourrelatedassurance opinions. Remuneration conclusionthereon,withthe exception ofthe opinionorany form ofassurance express anaudit Reportdoesnot cover t Our opinionontheFinancial fortheOtherInformation. Corporation Limitedareresponsible Report. The Directors of Lendlease and the Auditor’s to the Financial Report provided in addition info and non-financial Other Informationisfinancial website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. StandardsBoardwebsiteat:http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. and Assurance forthe A furtherdescriptionofour responsibilities basis of theFinancial Report. users taken on the to influence the economic decisions of beexpected aggregate, theycouldreasonably orinthe if,individually canarisefromfraud orerror.Theyareconsideredmaterial Misstatements accordance with butisnotaguaranteethatanauditconductedin isahighlevel of assurance, assurance Reasonable Our objectiveis: The Directorsareresponsiblefor:
formspartofourAuditor’sReport. This description Other Information Auditor’s responsibilities for the audit of theFinancialReport Auditor’s responsibilitiesfortheauditof Financial Report the for Responsibilities oftheDirectors • • • • • to issue an Auditor’s Reportthatincludes ouropinion. to issueanAuditor’s whether due to fraud or misstatement, error; and awhole is freefrommaterial aboutwhethertheFinancialReport as to obtainreasonableassurance the LendleaseGrouportocease operations, orhaveno realistic alternativebuttodo so. unlesstheyeither intendtoliquidate going concernandusingthebasisofaccounting relatedto matters applicable, disclosing, as of accountingisappropriate.Thisincludes concern basis concernandwhetherthe asagoing use ofthe going abilitytocontinue Group’s assessing Lendlease true andfairviewisfreefrommaterial Report thatgivesa controltoenablethepreparationofaFinancial necessary internal implementing Accounting Standards with Australian that gives atrueand fair viewinaccordance Report preparing theFinancial
Australian Auditing Standards Australian andtheCorporationsAct2001; LENDLEASE ANNUAL REPORT 2018 will always detect a material misstatement whenitexists. misstatement detectamaterial willalways misstatement, whether due to fraud or misstatement, error; and audit at the of theFinancialReportislocated rmation in Lendlease Group’s annual reportingwhichis Group’sannual rmation inLendlease he Other Information and, accordingly, wedonot he OtherInformationand,accordingly, a material misstatement ofthis OtherInformation, misstatement amaterial
responsibility is toreadtheOtherInformation.In responsibilityis materially inconsistent with the Financial Report or with the Financial materially inconsistent
Auditing
Sydney KPMG the with 2018, complies Limited for the year ended 30 June Report of Lendlease Corporation In ouropinion,theRemuneration Opinion Report Remuneration onthe Report CorporationsAct2001
Section 300A . LENDLEASE ANNUAL REPORT 2018 of Remuneration Report in accordance with Report in accordance Remuneration responsible forthepreparation andpresentationof the The DirectorsofLendleaseCorporationLimitedare Directors’ responsibilities accordance with accordance with on our audit conducted in Report, based Remuneration on the Our responsibility is to express an opinion 2018. 102 to 133 oftheDirectors’reportfor the yearended30June Reportincludedinpages theRemuneration We haveaudited Our responsibilities Corporations Act2001 DM McLennan DM McLennan Partner 22 August 2018 22 August2018
Australian Auditing Standards Australian .
Section 300A .
of the
203
FINANCIAL STATEMENTS FINANCIAL OTHER INFORMATION OTHER REPORT DIRECTORS’ 08 OTHER INFORMATION
Harpley, Werribee 206 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 207
Securityholder Information
Securities Exchange Listing and Code Privacy Legislation Security Information at a Glance at 1 August 2018 DIRECTORS’ REPORT Lendlease Group is listed on the Australian Securities Exchange Under Chapter 2C of the Corporations Act 2001, a (comparative 1 August 2017) and trades under the code LLC. securityholder’s information (including their name, address and 2018 2017 In the United States, Lendlease securities are traded on the details of securities held) is required to be included in Lendlease’s ‘over the counter’ market in the form of sponsored American public register. This information must continue to be included in Number of securityholders 56,118 58,350 Lendlease’s public register for seven years after a person ceases Depositary Receipts (ADRs) under the symbol LLESY. Each ADR Units issued 574,260,939 583,469,558 represents one ordinary security. Information about ADRs is to be a securityholder. These statutory obligations are not altered available from the depositary, The Bank of New York Mellon by the Privacy Amendment (Private Sector) Act 2000. Information Percentage owned by 20 largest securityholders 76.29% 73.94%
DIRECTORS’ REPORT DIRECTORS’ is collected to administer the securityholder’s holding and if (www.adrbny.com). Interim dividend/distribution 34.0 cents per security 33.0 cents per security some or all of the information is not collected, then it may not be Voting Rights possible to administer the holding. Lendlease’s privacy policy is Total dividend/distribution 69.0 cents per security 66.0 cents per security Each stapled security in Lendlease Group and each ADR entitles available on its website. Dividend payout ratio 50% 51% the holder to one vote. Rights to Lendlease Group securities Dispute Resolution granted under Lendlease Group’s employee equity incentive Spread of Securityholdings as at 1 August 2018 plans do not carry voting rights. There is a dispute resolution mechanism that covers complaints by securityholders. For more information, please contact (comparative 1 August 2017) Share Accumulation Plan Lendlease Investor Relations at +61 2 9236 6111 or email us at 2018 2017 The Share Accumulation Plan is designed to be a convenient [email protected] 1 to 1,000 securities 29,486 30,087 way for securityholders with a registered address in Australia or Distribution and Share Accumulation Plan New Zealand to build their securityholdings without incurring Issue Price History 1,001 to 5,000 21,939 23,299 transaction costs. The laws of other countries make it difficult 5,001 to 10,000 3,008 3,171 for us to offer securities in this way. Lendlease securityholders For historical distribution and Share Accumulation Plan Issue are able to reinvest their distributions to acquire more Lendlease Price information, please see the below link to our website 10,001 to 100,000 1,602 1,698 www.lendlease.com/au/investor-centre/distribution-history securities through the Distribution Reinvestment Plan (DRP) 100,001 securities and over 83 95 or the Share Election Plan (SEP). Securityholders may also
make contributions of between $500 and $2,500 to acquire Total number of securityholders 56,118 58,350 FINANCIAL STATEMENTS new Lendlease securities under the Share Purchase Plan Securityholders with less than a marketable parcel 2,100 2,165 (SPP). Together the DRP, SEP and SPP constitute the Share (representing 15,548 securities) (representing 19,613 securities) Accumulation Plan. The rules of each of these plans are set out in the Share Securities Purchased on Market Accumulation Plan Information Sheet. Copies are available on the Lendlease website. Please note that the Share Election Plan and The following securities were purchased on market during the financial year for the purpose of funding employee incentive awards the Share Purchase Plan are currently suspended. through Lendlease securities. Number of Securities Purchased Average Price Paid Per Security Key Sources of Information for Securityholders
FINANCIAL STATEMENTS FINANCIAL We report the following to securityholders each year: Stapled Securities 2,782,717 $17.29 • Annual Report; and • March and September distribution statements. Buyback Electronic Communications On 21 February 2018, Lendlease Group announced an on market buyback of up to $500 million. Purchasing commenced on 13 March 2018 and the program is expected to be completed over a 12 month period until 12 March 2019, or earlier if completed by that date. Securityholders have the option of receiving the following As at 30 June 2018, Lendlease Group had purchased 9,722,400 securities under the on market buyback. The total consideration paid communications and all other Company related information for the securities bought back up to 30 June 2018 and as at 22 August 2018 is $178.0 million. The on market buyback is subject to the electronically: ongoing assessment of the Group’s surplus capital position, market conditions and growth opportunities. • Annual Report; • Distribution statements; and • 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, OTHER INFORMATION you 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 212. OTHER INFORMATION OTHER
1. Amount restated to disclose the whole units issued. 208 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 209
Securityholder Information continued
Name No. of Units % of Issued Capital DIRECTORS’ REPORT
HSBC Custody Nominees (Australia) Limited 175,981,925 30.64 J P Morgan Nominees Australia Limited 111,484,574 19.41 Citicorp Nominees Pty Limited 44,435,487 7.74 National Nominees Limited 35,473,908 6.18 BNP Paribas Nominees Pty Ltd
Substantial Securityholders as Shown in the Company’s Register at 1 August 2018
Name Date of Last Notice Received No. of Units % of Issued Capital FINANCIAL STATEMENTS FINANCIAL BlackRock Group 20/4/2017 29,288,950 5.01
The Vanguard Group 6/9/2017 29,216,612 5.0074 OTHER INFORMATION OTHER INFORMATION OTHER
Clippership Wharf, Boston Artist impression as at 2018 (image subject to change and further design development and planning approval) 210 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 211 Climate Change Resilience Glossary Co-investment: The total market value of Lendlease equity Long Term Incentive (LTI): An incentive scheme which provides invested across Lendlease managed funds as at period end. Lendlease equity (or cash, in some circumstances) to participating DIRECTORS’ REPORT For several years Lendlease has identified climate change as a material risk to creating the best places. Represents the Group’s assessment of the market value. executives that may vest, in whole or part, if specified performance measures are met over a three or four year period. The Group continues to work with wider industry partners to develop plans to respond to the physical Completions: Apartments – pre sold units on buildings completed during the period and units sold in the period Lost Time Injury Frequency Rate (LTIFR): An indicator and risks of climate change on our business. on completed buildings; Communities and Retirement – industry standard measuring a workplace injury which prevents units settled in the period on completed land lots or units; a worker from returning to duties the next day. LTIFR refers to We also acknowledge the dynamic and transitional risks and opportunities of climate change on our business segments, including – buildings that have achieved practical completion the number of lost time injuries within a year, relative to the total policy fluctuations, market movements, technology evolution and reputational impacts. We recognise these risks and opportunities Commercial during the period. number of hours worked in the financial year. may differ by region. This year the Lendlease Board endorsed the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD). Construction backlog realisation: The proportion of LTI (face value): Refers to the number of LTI performance DIRECTORS’ REPORT DIRECTORS’ Construction backlog revenue which is expected to be earned securities granted multiplied by the Lendlease security price at Key TCFD recommendations and Lendlease’s implementation approach are included in the table below. across future years. the applicable time. Construction backlog revenue: Current year Construction Market capitalisation: The number of securities on issue TCFD Element TCFD Recommended Disclosure Index backlog revenue is the total revenue to be earned across multiplied by the security price at year end. future periods. Borrowings, including certain other financial liabilities, Governance Board’s oversight of climate related risks and opportunities Page 93 Net debt: Critical incident: An event that had the potential to have caused less cash. Disclosure of the Company’s • In FY18, the Board endorsed the recommendations of the TCFD and tasked Lendlease with death or permanent disability. governance around climate assessing and reporting against climate related risk for the organisation. New work secured revenue: Estimated revenue to be earned related risks and Development pipeline: Estimated remaining end value of all of the from construction contracts secured during the period. New opportunities Group’s secured development projects based on values as at period work is secured and forms part of Construction backlog revenue Management role in assessing and managing climate related risks and opportunities Page 50 end; includes 100 per cent of joint venture projects and therefore when formal contracts are signed. will not necessarily correlate with the Group’s Profit after Tax. • Climate related risks and opportunities are governed by the Board with support from the People and Culture (P&C) Committee: The Board subcommittee Board Sustainability Committee. Distribution payout ratio: Distribution divided by Profit after Tax. that helps the Board fulfil its responsibilities in people management and reward policies. It is made up entirely of Distribution per security: Amount of interim and final independent Non Executive Directors. Strategy Climate related risks and opportunities Lendlease has identified over the short, medium Page 50 distribution per stapled security from the company/Trust. What are the impacts of and long term. Profit after Tax (PAT): Profit after Tax attributable to Earnings per security: Profit after Tax divided by the weighted climate change on the
securityholders, determined in accordance with Australian FINANCIAL STATEMENTS • Responses to climate change impacts have been identified as an area for long term value average number of securities on issue during the year (including company’s strategy Accounting Standards. creation and a key driver in long term strategic business decisions. treasury securities) unless otherwise stated. Public Private Partnerships (PPP): A joint procurement EBITDA: Earnings before interest, tax, depreciation and arrangement for infrastructure development contracts between Risk Management Organisational processes for identifying and assessing climate related risks. Page 68 amortisation. How are climate related risks the public and private sectors. • Processes for identifying and assessing climate related risks are integrated into the Effective tax rate: Income tax expense as a percentage of profit identified and managed Residential apartments, typically in the Lendlease Risk Governance and Management approach. Again for the third year, climate before tax. Residential for Rent: related risks are identified as a key business risk. Key risks are a focus area of Board and form of an entire building, that are made available for rent as Lendlease management. Face value of a security: The value of a Lendlease security at the separate dwellings. Lendlease and its capital partners maintain applicable time. ownership of these apartments. Metrics and Targets Metrics and targets used to manage climate related risk and opportunities Page 50 Fair value of a security: The value of a Lendlease security, Return on Equity (ROE): ROE is calculated using annual FINANCIAL STATEMENTS FINANCIAL derived by applying a discount rate determined by the Board, statutory Profit after Tax attributable to securityholders divided What does the Company • Lendlease recognises the importance of reducing its greenhouse gas impact on the designed to reflect the likelihood of vesting (in cases where there by the arithmetic average of beginning, half year and year end assess to measure the impact environment. We report progress against this commitment annually through a reduction in are performance hurdles to be met before vesting can occur). securityholders’ equity. of climate related risk and weighted intensity. Our progress for FY18 will be published in October 2018. mitigation efforts Funds under management (FUM): The total market value of Securityholders: An individual or entity that owns Lendlease investments across Lendlease managed funds. securities. • Lendlease reports full financial year Scope 1 and 2 greenhouse gas emissions on its Page 134 website (Lendlease.com) each year in October. Previous year disclosures may be found on Gearing: Net debt to total tangible assets less cash. Senior executive: Employees who hold a position at Executive this website. Global Minimum Requirements (GMRs): GMRs are Lendlease’s level according to the Lendlease Career Job Framework. This minimum environment, health and safety standards designed to generally includes Regional Business Unit Heads, Regional control the risks across our operations. Function Heads and in some cases, direct reports to Group Function Heads. Good leaver: A senior executive who is leaving Lendlease for a reason such as retirement, redundancy, or resignation where the Short Term Incentive (STI): Incentives awarded with direct senior executive is not joining a competitor, and who may remain reference to the achievement of Group, regional and individual eligible for part or all of an incentive opportunity. performance. The measures are selected annually and align to our long term strategic priorities.
Green Star rating: Green Star is a national voluntary OTHER INFORMATION environmental rating system used by the Green Building Total Package Value (TPV): Salary plus the value of salary Council of Australia to evaluate the environmental design and package items such as motor vehicles and parking and achievements of buildings. compulsory superannuation contributions paid on behalf of an employee. Investments: Includes equity invested in Lendlease managed funds and direct investment in property and property related Total Shareholder Return/Total Securityholder Return (TSR): assets. Represents the Group’s assessment of market value. The movement in a company’s share/security price, dividend yield and any return of capital over a specific period. It is often Investments performance: The performance of our Investments expressed as a percentage. business which includes our funds under management, assets under management, co-invested equity in Lendlease managed funds and Urbanisation pipeline: Estimated remaining end value of all of the Group’s secured development projects (excluding OTHER INFORMATION OTHER direct investment in property and property related assets. Communities projects and Retirement projects) based on values Key Management Personnel (KMP): Those executives who as at period end; includes 100 per cent of joint venture projects have the authority and responsibility for planning, directing and and therefore will not necessarily correlate with the Group’s controlling the activities of the Group directly or indirectly (as Profit after Tax. per Accounting Standard AASB 124 Related Party Disclosures). Weighted average number of securities: The time weighted KPIs: Key Performance Indicators. number of securities outstanding during the period. 212 LENDLEASE ANNUAL REPORT 2018 LENDLEASE ANNUAL REPORT 2018 213
Corporate Directory DIRECTORS’ REPORT
ANNUAL GENERAL MEETING 2018 The Annual General Meeting 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 16 November 2018, Four Seasons Hotel, 199 George Street Sydney. DIRECTORS’ REPORT DIRECTORS’ Full details will be provided in the Notice of Meetings. 2018 FINANCIAL CALENDAR 22 August Full Year Results Announced 28 August Security Price Ex Distribution 21 September Final Distribution Payable 16 November Annual General Meeting 2019 FINANCIAL CALENDAR 22 February Half Year Results Announced 28 February Security Price Ex Distribution 1 March Interim Distribution Record Date 20 March 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. FINANCIAL STATEMENTS 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 FINANCIAL STATEMENTS FINANCIAL 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 W: www.lendlease.com SHARE REGISTRY INFORMATION OTHER 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) W: www.computershare.com.au OTHER INFORMATION OTHER
Euston Station, London Level 14, Tower Three, International Towers Sydney, Exchange Place, 300 Barangaroo Avenue, Barangaroo NSW 2000 www.lendlease.com