Lendlease Annual Report 2022

8 Lendlease Annual Report 2022 Global Chief Executive Officer’s Report My thanks to our securityholders, customers, partners, people and the community for your continued support. During the past year our operating environment remained challenging. COVID continued to impact our regions and geopolitical uncertainty generated widespread volatility in global markets. Despite these headwinds, we made significant progress in resetting our company for future growth. We entered the new financial year with a renewed sense of optimism, reflected in solid operating momentum across the Group. Business renewal Delivering the very best real estate products and services drives our purpose. Just as the cities in which we operate undergo constant renewal, so must Lendlease. In 2021, I announced our five-year roadmap: Reset; Create; Thrive to enhance the way we operate to deliver sustained performance. This year, we implemented the first phase, Reset . A new streamlined company structure generated more than $160m in ongoing cost savings and the refreshed management team and simplified operating model has enabled more nimble decision making and increased accountability. Several portfolio divestments supported the focus on our core business and strengthened the Group’s balance sheet. More than $1b of capital was recycled including the exit of the Services business, the reduction of our investment in Retirement Living and the introduction of a partner into our Military Housing portfolio. We also committed to enhancing our financial and non financial disclosure, and providing greater visibility on our contribution to economic, environmental, and social value creation. All three are critical to restoring securityholder confidence and value. Responding to real estate trends with a focused business model The COVID pandemic has had a profound impact on all facets of life. Following its onset, we remained steadfast in our conviction that cities would endure and continue to be the centrepiece of modern society for generations to come. The past couple of years have taught us that the value of human connection, and a sense of belonging, is immeasurable. We move to the Create phase of our roadmap in better shape to deliver places and precincts that draw people in while also addressing urban challenges. We aim to be an investment led company that responds to continued strong institutional investor demand for real estate. We are scaling up our investment and asset management teams to further grow our product offering, enhance the value of the assets we manage and provide investors with recurring income streams. Our teams will pursue resilient and sustainable development schemes that leverage our capabilities in placemaking and enhance urban connectivity. The workplace of the future needs to adapt to both changing employee expectations and employers needs for talent retention, collaboration and fostering corporate culture. Central city residential markets have begun to recover strongly with residents looking for improved amenity and additional spaces to connect. In the construction sector, our goal remains to be a market leader, maintaining the right capability to support operational excellence. We will be more selective by targeting customers whose values align to ours. Financial and operating performance As foreshadowed at the beginning of this financial year, addressing legacy issues, and combating the ongoing impacts of a global pandemic suppressed our financial performance. This was reflected in a substantial statutory loss and a modest core profit. However, financial performance rebounded in the second half, providing momentum into FY23. The Investments segment performed above target, underpinned by capital recycling. Funds under management grew to $44b and $11b of investment partnerships were established during the year. This includes our pivot to acquiring existing secondary assets on market that utilise our asset management capabilities. Development segment returns were below target due to ongoing COVID challenges, severe weather impacts on Communities settlements and our revised joint venture structuring approach which means profit recognition should more closely align earnings with development milestones and cash going forward. Projects available to start total $42b following planning progress. Commencements exceeded completions, taking Work in Progress to a record $18.4b. Construction segment profit was at the lower end of the target range. Ongoing COVID and global supply chain disruptions, along with challenging weather events all impacted our productivity during the year. The construction workbook remains healthy at $10.5b. Refer to the Performance and Outlook on page 56 for a detailed analysis of our financial and operating performance. Our principles drive an ambition to make a difference A culture of care Making sure people arrive home safely each day continues to be our highest priority. Tragically, a sub contractor on one of our projects in New York lost his life in September 2021. We once again extend our deepest condolences to the man’s family, friends and colleagues and everyone impacted by this event. We continue to strive to eliminate incident and injury wherever we operate using our refreshed Global Minimum Requirements, or GMRs, as the cornerstone of our global approach to health and safety. We are extending our culture of care to encompass psychological safety to further support employees.