Lendlease Annual Report 2024

50 Lendlease Annual Report 2024 Group performance Key Financials 1 $m FY23 FY24 Var. Core Business Investments 332 174 (48%) Development 283 509 80% Construction 90 126 40% Segment EBITDA 705 809 15% Corporate Costs (161) (140) 13% Operating EBITDA 544 669 23% Depreciation & Amortisation (140) (120) 14% Net Finance Costs (88) (238) NM Operating Profit before Tax 316 311 (2%) Income tax expense (59) (48) 19% Core Operating Profit after Tax 257 263 2% Reconciliation to Statutory Loss after Tax Non Core (19) (9) 53% Investments segment revaluations (175) (260) (49%) Non Operating Items (excluding revaluations) 2 (295) (1,496) NM Statutory Loss after Tax (232) (1,502) NM Group Core Operating EPS cents 37.3 38.1 2% Distribution per Security cents 16.0 16.0 - Total Group Statutory EPS cents (33.7) (217.7) NM Total Group Statutory ROE 3 % (3.4%) (25.4%) NM 1. Operating earnings presented reflects Statutory profit adjusted for Investment property revaluations (including in Other financial assets and Equity accounted investments) that are classified in the Investments segment, and material one-off items that could not reasonably have been expected to arise from normal operations. 2. Non operating items after tax for the year ending 30 June 2024 includes costs relating to the 27 May 2024 strategy update $1,384m, other restructuring costs of $95m and UK building remediation of $17m. Prior period includes a provision in relation to UK building remediation of $295m. 3. Return on Equity is calculated using Profit after Tax divided by the arithmetic average of beginning, half and year end securityholders’ equity. Performance 1 The Group recorded a Statutory Loss after Tax for the year ending 30 June 2024 of $1,502m, compared with a Statutory Loss after Tax of $232m for the prior year. This includes $1,384m of impairments and charges required to implement the revised strategy announced in May 2024, comprising $805m relating to goodwill, deferred tax assets and other costs, $506m from development asset impairments and $73m of provisions relating to redundancy, tenancy and other break costs. Property revaluation losses in the Investments segment of $260m and other restructuring charges of $95m, which largely relate to redundancies announced in July 2023, also contributed. The Group’s Core Operating Profit after Tax (OPAT) for the year was $263m, up 2 per cent on the prior year. Core Operating Earnings per Security was 38.1 cents, equating to a Return on Equity of 4.4 per cent. Distributions per Security totalled 16.0 cents, unchanged from the prior year, representing a payout ratio of 42 per cent of OPAT. Core segment EBITDA increased by 15 per cent to $809m. Improved Development and Construction earnings were partially offset by lower contributions from Investments. Development earnings were higher following the completion of key projects in Australia and Malaysia, and a payment received in relation to the San Francisco Bay project in the US. Construction earnings were higher, including a gain from the remeasurement of UK pension scheme liabilities. Investments earnings were lower primarily due to performance in the US, noting an absence of earnings from prior year asset sales, and a final provision taken against a receivable from the disposal of the US Telecommunications business. Corporate costs decreased 13 per cent to $140m, predominantly due to people related cost savings. Net finance costs of $238m increased due to higher average net debt for the year and higher base rates impacting the average cost of debt. This increase was partially offset by a $39m pre-tax gain from a further buy-back of the Group’s Sterling bonds in the first half of FY24. Excluding the impact of the Sterling bond buy-backs, net finance costs were 83 per cent higher on the prior year. Gearing of 21 per cent includes the impact of impairments and charges relating to the revised strategy. There is a clear pathway to de-leverage the balance sheet with net cash proceeds of ~$2.4b anticipated in FY25. This includes settlements at One Sydney Harbour, first receipts from the sale of 12 Communities projects, completion of the sale of the US Military Housing business and the sale of the Group’s Asian life sciences interests into a new joint venture. The increase in net debt from $2.4b at FY23 to $3.2b at FY24, follows peak production capex being reached at HY24, and includes production spend on key development projects including One Sydney Harbour, One Circular Quay, Victoria Cross over station development (all in Sydney), MIND, MSG (both in Milan) and Habitat (Los Angeles) as well as Communities production in Australia. The Group maintains strong liquidity, with total available committed facilities and cash of $2.2b. This liquidity, together with expected cash inflows from transactions, provides the Group with flexibility to manage its balance sheet. The Group recorded a Non core loss of $9m which primarily reflects overhead costs associated with the retained elements of the Engineering and Services businesses. The Group continues to maintain provisions it considers appropriate to complete its share of the retained Melbourne Metro project, which is more than 85 per cent complete, and for potential warranties associated with the exited Engineering and Services businesses. 1. Comparative period the year ended 30 June 2023.