Lendlease Annual Report 2022

Performance and Outlook 63 Financial position and cash flow movements Financial position ($m) FY21 FY22 Var. Investment assets Other financial assets 1,070 1,149 7% Equity accounted investments 2,162 2,128 (2%) Investment properties 278 216 (22%) Development assets Inventories 3,298 3,110 (6%) Equity accounted investments 1,595 2,246 41% Investment properties 189 266 41% Other assets and liabilities (including financial) Cash and cash equivalents 1,662 1,297 (22%) Borrowing and financing arrangements (2,357) (2,357) - Other net assets and liabilities (946) (1,085) 15% Net assets 6,951 6,970 - Investment Assets The investment portfolio was steady with the equity contributions to the new Industrial Fund and Lendlease Global Commercial REIT broadly offsetting the Retirement Living divestment in Australia. Investment properties directly held fell due to the disposal of retail assets at Barangaroo. Development Assets Total development assets rose 10 per cent as Work in Progress accelerates ahead of higher completions. Inventory decreased by 6 per cent with lower carrying values on underperforming projects following their impairment and the reclassification of International Quarter London to Equity Accounted Investments following the formation of the new investment partnership. Equity contributions to development projects in delivery, including One Sydney Harbour, The Exchange TRX, and Milan Innovation District also contributed to the 40 per cent increase in Equity Accounted Investment assets. The increase in Investment Properties includes capital expenditure on our Retirement Living asset in Asia. Other assets and liabilities The movement in other assets and liabilities predominantly relates to the disposal of the Services business. Cash and cash equivalents of $1.3b are moderately below the prior year levels. Cash flow and treasury management The Group commenced the year with cash and cash equivalents of $1.7b. Movements during the year comprised Operating cash outflow of $835m, Investing cash inflow of $552m and Financing cash outflow of $106m. The Group closed the year with cash and cash equivalents of $1.3b. The Group measures underlying cash flow to enable an assessment of cash conversion. The measures are derived by adjusting statutory cash flows, with the largest adjustment relating to the impact on cash flows from investments in development. Underlying core operating cash inflow was $514m, representing a cash conversion ratio of 82 per cent. Investment segment cash flows were the primary driver with softer Construction cash flows, a result of subdued activity in international regions, impacting cash conversion. The change in approach to profit recognition has improved the cash conversion ratio. Underlying investing cash outflow was $482m. The major contributors included proceeds from the 24.9 per cent divestment of Retirement Living and the remaining 20 per cent interest in our Sydney Place development, offset by equity contributions to the new Industrial Fund and Lendlease Global Commercial REIT, as well as continued investment across key development projects in delivery. Proceeds received from the sale of the Services business partially offset production spend in the year. Group facilities reduced from $5.6b to $5.0b 1 following the decision to reduce the quantum of available committed facilities. The Group remains in a strong financial position with $3.9b of liquidity comprised of $1.3b of cash and cash equivalents and $2.6b in available undrawn debt. Average debt maturity increased to 6.6 years providing greater flexibility and access to longer term capital. Gearing of 7.3 per cent is below the target range of 10-20 per cent, reflecting several divestments in the second half of FY22. This is expected to rise to the middle of the target range during FY23. Treasury management FY21 FY22 Var. Net debt $m 695 1,060 53% Gearing 1 % 5.0 7.3 46% Interest cover 2 times 6.4 5.6 (13%) Average cost of debt % 3.6 3.6 - Average drawn debt maturity years 4.9 6.6 35% Available liquidity $m 4,930 3,944 (20%) Average debt mix fixed:floating $m 87:13 88:12 1. Net debt to total tangible assets, less cash. 2. FY22 EBITDA has been adjusted to exclude the Restructure costs incurred. FY21 EBITDA has been adjusted to exclude one off items related to the Engineering business. Credit ratings 1 Moody's Baa3 stable outlook Fitch BBB- stable outlook 1. Credit ratings have been issued by a credit rating agency which holds an Australian Financial Services Licence with an authorisation to issue credit ratings to wholesale clients only and are for the benefit of the Group’s debt providers. 1. Comparative period the year ended 30 June 2021.