Lendlease Annual Report 2024

150 Lendlease Annual Report 2024 Notes to Consolidated Financial Statements continued 32.b. Goodwill Allocation Goodwill relating to the Construction business is allocated to CGUs identified as set out below. June 2024 June 2023 $m $m Construction Australia 573 573 Europe - 260 Americas - 210 Asia - 8 Total construction goodwill 573 1,051 32.c. Impairment Tests and Key Assumptions Used – Construction The recoverable amount of the Construction CGUs is determined based on value in use (VIU) calculations for Australia CGU, and fair value less costs of disposal (FVLCD) for the Americas, Asia and Europe CGUs. For all the Construction CGUs, the assumptions used for determining the recoverable amount of each CGU are based on past experience and expectations for the future, utilising both internal and external sources of data and relevant industry trends. Australia Construction - VIU No impairment arose as a result of the review of goodwill for the Australia Construction CGU for the financial year ended 30 June 2024. Based on information available and market conditions at 30 June 2024, a reasonably foreseeable change in the assumptions made in this assessment would not result in impairment of the Australia Construction goodwill. The foreseeable change in the assumptions took the economic conditions into consideration. The following describes the key assumptions on which management has based its cash flow projections when determining VIU relating to the Australia Construction CGU: • Cash Flows The VIU calculations use pre tax cash flow projections based on actual operating results, and financial forecasts covering a five year period which have been approved by management. These forecasts are based on management estimates to determine income, expenses, capital expenditure and cash flows for the CGU. • Growth Rate The terminal value growth rate used in the VIU calculations to extrapolate the cash flows beyond the five year period is 3.0 per cent (June 2023: 3.0 per cent). The growth rate reflects the forecast long term average growth rate for the Australia Construction CGU. • Discount Rate The discount rate applied to the cash flow projections was 13.8 per cent (June 2023: 11.8 per cent). The Group’s weighted average cost of capital is used as a starting point for determining the discount rate, with appropriate adjustments for the risk profile relating to Australia Construction CGU. The discount rates used are pre tax. Americas, Asia and Europe Construction - FVLCD On 27 May 2024 the Group announced a strategy update with key actions to simplify the organisational structure, exit international construction and accelerate the release of capital from its offshore development project and assets. As a result of this strategy update, the recoverable amount of the Americas, Asia and Europe Construction CGUs was reassessed to their FVLCD and an impairment charge was recognised against the goodwill balances attributable to those regions, writing the balances off in full for the financial year ended 30 June 2024. No other assets within these CGUs were impaired as part of this assessment given the nature of the underlying operations. The following describes the key assumptions on which management has based its cash flow projections when determining FVLCD relating to the Americas, Asia and Europe Construction CGUs: • Cash Flows The FVLCD calculations use pre tax cash flow projections based on estimated actual operating results, and financial forecasts covering the period up to expected business divestments, which have been approved by management. The cashflow projections also include estimated selling price of each business based on current negotiated transactions or appropriate EBITDA multiples, and expected working capital adjustments on sale. Cashflow projections included expected transaction costs. • Discount Rate The discount rates applied to the cash flow projections vary between 10.8 per cent and 14.1 per cent (June 2023 VIU model discount rates: between 10.3 per cent and 12.0 per cent). The Group’s weighted average cost of capital is used as a starting point for determining the discount rate, with appropriate adjustments for the risk profile relating to the relevant CGUs and the countries in which they operate. The discount rates used are pre tax. In May 2024 the Group announced it had agreed non-binding heads of terms with leading US construction firm, Consigli Construction Co, for the sale of the Group’s US East Coast construction operations. The transaction is currently progressing through due diligence and negotiations to finalise detailed terms and conditions. The Group is progressing with the planned divestment of UK construction operations, targeting completion within 18 months. Section F. Other Notes continued 32. Intangible Assets continued