Lendlease Annual Report 2021

The Group completed the sale of the Engineering business to Acciona Infrastructure Asia Pacific in September 2020. The Group has received $150 million of the agreed purchase price of $197 million. The final deferred payment, which was due on 30 June 2021, has not been received. The Group has commenced legal proceedings against Acciona in relation to remaining amounts owing. There was no impact on the Income Statement from the sale, that is, there was no gain or loss on sale. A working capital cash balance of $411 million transferred to the buyer upon settlement. Under the terms of the sale agreement, the Group retained three projects and exposure to other historical projects. The Group recorded $168 million after tax in additional provisioning relating to claims on historical projects completed prior to the sale of the Engineering business. These claims are subject to dispute proceedings and are expected to take time to resolve. The Melbourne Metro Project, the remaining project in delivery, is scheduled to complete in 2025. During the year, the Cross Yarra Partnership and the D&C Subcontractor joint venture between Lendlease, John Holland and Bouygues Construction resolved identified issues with the Victorian Government in relation to the scope and costs on the project. The project progressed well during the year and did not require any additional provision. Post balance date, an agreement was entered into with Service Stream for the sale of the Services business for a purchase price of $310 million. The transaction is expected to complete prior to the end of calendar year 2021. The loss of $181 million after tax for the Non core segment includes the additional provision to cover claims on historical projects, the performance of the Engineering business prior to sale completion, the retained Melbourne Metro project and the Services business. Non core segment 1. Only the next five years of revenue secured on new contracts has been included. FY20 FY21 Var. Revenue ($b) 2,884 1,444 (50%) Operating EBITDA ($m) (495) (139) n/a Operating Loss after Tax ($m) (406) (181) n/a Services New Work Secured1 ($b) 1.4 1.5 7% Backlog ($b) 2.0 2.7 35% Key Financials and Operational metrics Inventories Inventories decreased by 28 per cent following several development initiatives with investment partners, the settlement of residential apartments and declining construction inventories. The formation of new investment partnerships and subsequent reclassification of both Residences One and Two at One Sydney Harbour to Equity Accounted Investments were the largest contributors to the decline. Equity accounted investments Equity accounted investments increased by two per cent. The residential towers at Barangaroo, together with equity contributions for the newly secured urbanisation projects in New York and Los Angeles, were the main sources of growth. These were almost offset by a reduction in investments relating to the divestment of a 25 per cent interest in the Retirement Living business. Other asset movements The 29 per cent decline in Investment properties reflects the sale of the US Telecommunications business, more than offsetting growth in other investments. The sale of the Engineering business resulted in Disposal Group assets held for sale declining to zero. Total assets, total liabilities and net assets Total assets decreased four per cent and total liabilities declined by seven per cent, with the sale of the Engineering business being a key contributor in each case. FY20 $m FY21 $m Var. Cash and cash equivalents 1,111 1,662 50% Inventories 5,369 3,873 (28%) Equity accounted investments 3,671 3,758 2% Investment properties 658 467 (29%) Disposal Group assets held for sale1 841 - (100%) Other assets (including financial) 6,098 7,240 19% Total assets 17,748 17,000 (4%) Borrowing and financing arrangements 2,395 2,357 (2%) Disposal Group liabilities held for sale1 670 - (100%) Other liabilities (including financial) 7,751 7,692 (1%) Total liabilities 10,816 10,049 (7%) Net assets 6,932 6,951 - Financial Position Financial position and cash flowmovements 1. Net assets of $171 million have been disposed of upon completion of the sale of the Engineering business. 67 A sense of place 66 Lendlease Annual Report 2021 Performance and Outlook