Lendlease Annual Report 2024

138 Lendlease Annual Report 2024 Notes to Consolidated Financial Statements continued 23. Provisions Accounting Policies Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). Management considers this is an area of estimation uncertainty as these calculations involve a number of key assumptions including the expected future cash outflow and the timing of the outflow to determine the provision. Employee Benefits Includes amounts for employee annual leave and long service leave entitlements. Development Projects Includes amounts for costs to close out development projects, including defects and residual guarantees. The timing of any expected outflows of economic benefits is dependent on market factors, such as lease up rates in specific markets, and negotiations with customers. Construction Projects Includes amounts for claims and litigation related to legacy construction projects. The timing of any expected outflows of economic benefits is dependent on the progression of negotiations and litigation with claimants, which are ongoing at period end. UK Building Remediation Includes the provision in relation to UK building remediation. Refer to below for further detail. Other Includes amounts related to various litigation and commercial matters and amounts recognised in relation to the strategy update announced in May 2024. Employee Benefits Development Projects Construction Projects UK Building Remediation Other 1 Total $m $m $m $m $m $m Balance as at 1 July 2023 166 115 370 319 64 1,034 Provisions made during the year 42 12 195 54 141 444 Provisions used during the year (59) (43) (86) (8) (21) (217) Provisions reversed during the year (2) (5) (59) - (4) (70) Balance as at 30 June 2024 147 79 420 365 180 1,191 Current provisions 129 46 398 138 180 891 Non current provisions 18 33 22 227 - 300 Total provisions 147 79 420 365 180 1,191 1. Provisions made during the year include impacts of the strategy update announced on 27 May 2024. Provision in relation to UK building remediation The UK Government has enacted a number of retrospective legislative changes and additional measures to address building safety risks concerning residential buildings with a height of 11 metres and above. As part of this action, the defect liabilities period has been extended from 6 to 30 years, and there have been updates to building safety regulations for completed residential buildings. So as not to be subject to significant trade restrictions, consistent with other UK developers, Lendlease entered into a contract with the UK Government on 22 March 2023, committing to remediate building safety risks consistent with these legislative changes. Lendlease has established a dedicated team undertaking the work to address the issues raised on various buildings. Lendlease believes that the liability currently relates to 60 buildings (June 2023: 59 buildings), most of which were developed by Crosby, a company that Lendlease acquired in 2005 to enter the residential development market in the UK. Notably, many of these buildings were completed or had commenced construction prior to Lendlease’s acquisition. Lendlease no longer owns any of these buildings. It is noted that each building completed by a Lendlease entity was certified as complying with applicable building regulations at the time of its completion. At 30 June 2024, Lendlease holds a provision of $365 million (June 2023: $319 million) in respect of this matter. Movements in the provision during the year relate to changes in cost estimates, changes in discount rate, the unwinding of discount due to the passage of Section C. Liquidity and Working Capital continued