LENDLEASE 2018 Full Year Results. 22 August 2018 P R E S E N T A T I O N. Steve McCann, Group Chief Executive Officer & Managing Director, Lendlease

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1 P R E S E N T A T I O N, Group Chief Executive Officer & Managing Director, Lendlease Good morning everyone and welcome to the Lendlease presentation. My name is, Group Chief Executive Officer and Managing Director of Lendlease. Sitting here at Barangaroo in Sydney, I'd like to acknowledge that we're on the land of the Gadigal people and extend my respects to their elders past, present and future. The Gadigal people are the traditional custodians of this land and form part of the wider Aboriginal nation known as the Eora. Joining me in the room is, Group Chief Financial Officer. Today I will provide an overview of Lendlease s results for the year ended 30 June I ll then hand over to Tarun who will talk through the financial results before I provide an update on our operations and outlook. We ll then both be available to take questions. I will begin with the most important subject, safety. There is nothing more important than the health, safety and wellbeing of our people and those who work with us. I am therefore deeply saddened to report two fatalities occurred on our operations during FY18. On behalf of Lendlease, I express my sincere condolences to the families and friends that have been impacted by these tragic incidents. We are reviewing a number of aspects associated with Health and Safety to drive continuous improvement. This review focuses on the application of our Global Minimum Requirements and the impact of our different operating methodologies on safety performance. We will also review the way we identify, report and manage risk as it relates to safety in both the planning and delivery of activities across our business. In addition to reviewing these operating frameworks, we need to advance our collective mindset of being unrelenting in pursuing the safest outcomes, because everyone has the right to return to their families, friends and loved ones every day. Moving to slide 5. We have a clear strategy to pursue our integrated model which involves leveraging more than one of our operating segments of Development, Construction and Investments across our diversified portfolio. This is a resilient model designed to withstand market cycles and challenges. In combination, our business model, financial strength and strong track record provide a point of difference that we believe very few can match. We take a disciplined approach in implementing our strategy with a focus on opportunities in targeted gateway cities that are underpinned by the six identified trends of urbanisation, infrastructure, funds growth, the aging demographic, sustainability and technology. Our five pillars of value, in conjunction with a strong risk management and governance framework, drive our approach to business. Turning now to slide 6 and the performance drivers for the period. The business generated profit after tax of $792.8 million, up five per cent on the prior year. Earnings per stapled security were cents, also up five per cent. 1

2 Distributions of 69 cents per stapled security represents a payout ratio of 50 per cent of profit after tax. Return on Equity for the period was 12.7 per cent, towards the upper end of our per cent target range. We commenced a $500 million on-market buyback that was announced as part of our Half Year results and have acquired $178 million of securities to date. The FY18 result highlighted the strength of our business model and the diversity of earnings drivers by both segment and geography. Development activity across our urbanisation projects was strong. We secured capital solutions across four office developments, supporting commencements in the period above our annual target of two to three buildings. Residential apartment completions of 1,314 units was within our target range. In addition, we formed a new residential for rent investment partnership in the UK and commenced the first phase of developments. It was a good year for our Australian Communities business with 3,912 land lot completions, at the upper end of our target range. The result from the Construction segment was unsatisfactory, with our Engineering and Services business impacted by underperformance in a small number of projects. On a more positive note, our Building businesses globally delivered solid performance and new work secured in both Engineering and Building was strong. The Investments segment performed well with growth in recurring earnings and strong gains in underlying asset values. Funds Under Management grew 15 per cent. We were pleased with the cash outcome, with Net Operating and Investing cash flow of $294.6 million. The Group begins FY19 in a strong financial position with gearing below our target range and liquidity of $3 billion. Turning to slide 7. Our key achievement in FY18 was the significant progress made on a number of key strategic initiatives that provide substantial earnings visibility. Several years ago we outlined our intention to shift our origination focus towards targeted international gateway cities. We emphasised this would be done organically, in a disciplined way by leveraging our existing capabilities. This year we continued to make progress through strengthening and broadening our capital partner relationships, predominantly in our international regions. We made strong inroads into our residential for rent strategy and I m delighted to announce today another very significant milestone. We have teamed up with one of our key longstanding investors, First State Super, to launch an investment partnership in the US with an equity commitment of $US1 billion. The 50:50 partnership will acquire three buildings for approximately $US400 million comprising 736 apartments for rent that are currently in delivery, with the balance of US$600 million available for future investment opportunities. 2

3 This follows our investment partnership in the UK which was formed in December. We are excited about our progress, along with the significant growth opportunities this new asset class brings to our platform. We also established a Joint Venture in the US to develop and own telecommunications infrastructure, targeting $US5 billion of assets over the medium term. A capital partner was introduced to our Retirement Living business, endorsing our strategy to focus on the aging demographic, and providing further growth capital for this business. Three office developments secured capital partners via forward sale agreements that are expected to add $1 billion to future Funds Under Management upon their completion. These various partnerships are a strong endorsement of our integrated model, which enables us to source, deliver and manage a broad range of opportunities. Our development pipeline closed the year at $71.1 billion in development end value and now includes 18 major projects, spread across 10 gateway cities. During the year we secured four new major urbanisation projects in Europe with a combined end development value of $21.9 billion. We consolidated our strong position in London with Euston Station, Silvertown Quays and High Road West. And our first major urbanisation project in Milan, Milano Santa Giulia, has an estimated development value of $3.6 billion. Operational excellence will be vital to deliver these projects successfully. To drive this execution and further growth in Europe, Dan Labbad will now focus exclusively on the European business. Denis Hickey, CEO Americas and Tony Lombardo, CEO Asia will report directly to me. Focusing now on our non financial pillars on slide 8. During FY18, our frequency rate for Critical Incidents continued to decline, although the frequency rate for Lost Time Injuries increased marginally. I ve already mentioned the review of aspects associated with health and safety underway across the business. In FY18 we introduced a global approach to measuring customer satisfaction and advocacy. Quality of key relationships and customer service touchpoints emerged as the two main drivers of customer satisfaction. In our Retirement Living business, customer research and feedback led to the introduction of three additional contract types, giving our customers the ability to choose the option that works best for them. 54 of our 71 villages across Australia now offer a suite of four contract options. We are one of the only operators in Australia offering this choice. Our people drive our success. We support them by fostering a culture of collaboration, knowledge sharing, innovation and continuous learning. We invest in growing our core capabilities of project management and property development to ensure we have the critical skills to deliver our pipeline. This year we were again recognised as an employer of choice for Gender Equality and awarded Platinum status as a top employer in the Australian Workplace Equality Index for LGBTI inclusion. Sustainability continues to underpin our strategy. This year, we committed to quantifying the impacts of climate change on our business in accordance with the recommendations of the Task Force on Climaterelated Financial Disclosure. 3

4 APPF Commercial was again ranked first globally in the Global Real Estate Sustainability Benchmark survey. We progressed initiatives that underpin our Elevate Reconciliation Action Plan. Most notably, during the year we spent approximately $68 million with certified indigenous businesses compared with $26 million in FY17. I ll now hand over to Tarun who will talk to our financial performance., Group Chief Financial Officer, Lendlease Thanks Steve and good morning everyone. In the next few slides I will provide more detail on our financial results. Turning first to our Financial Performance for FY18 on slide 10. Group EBITDA was up 4 per cent. Strong results for both Development and Investments outweighed the underperformance in Construction. Development EBITDA rose by 22 per cent driven by a strong performance across our urbanisation projects and the Australian Communities business. Profit was generated on the forward sale of four office developments with a combined end value of $1.5 billion. We generated $1.2 billion of revenue from the 1,314 apartment completions. Since the ramp up of our apartment completions three years ago, we have been very pleased with how our pre-sales book has converted. More than 5,000 units totaling over $4 billion in revenue have completed at a default rate of 1.5 per cent to date, well below our long-term average of less than 3 per cent. In FY18 we saw a modest increase in rescissions, predominantly at our Yards project, due to a weak Brisbane market. The default rate for the period was approximately 3 per cent. We currently have 112 units with settlement outstanding. 63 of these are in London and relate to product that completed towards the back end of FY18. These are anticipated to settle shortly. The remaining 49 units are in Brisbane and Melbourne and are provided for to cover any potential further defaults. FY19 remains on track to be a significant year for apartments for sale with completions expected at Darling Square, Victoria Harbour and Elephant Park. From FY19, revenue recognition on residential development properties will shift from practical completion to settlement. The change follows the adoption of the new accounting standard under AASB15. The first phase of the residential for rent partnership in the UK completed in the first half generating a strong profit contribution. Our Communities business had a strong year with volumes at the upper end of our target range and solid margin performance. The Construction segment delivered EBITDA of $78.2 million, returning to profitability in the second half after a loss in the first half. 4

5 The EBITDA loss from our Engineering and Services operations was $218 million. This result includes the financial impact of the underperformance from a small number of Engineering projects. It also includes the second half impact of a negative outcome from a claim in the Services business that relates to a project completed in The FY19 margin will be suppressed by the underperforming projects not contributing margin, recently secured projects not reaching 20 per cent complete, which is when we book margin, and elevated bid and overhead costs as we prepare for greater activity in the Engineering business. Investments EBITDA rose by 35 per cent, driven by an uplift in recurring earnings and gains in underlying asset values. At the EBITDA level the total impact of the Retirement Living transaction was a gain of $64 million, including the premium to book value, transaction costs and the uplift of the retained 75 per cent investment. Co-investment revaluations were 12.8 per cent of Group operating EBITDA. Approximately half of the asset value appreciation was derived from income growth driven by leasing success. There was also an uplift in the value of the equity investment in the US Military Housing operations which was booked in the first half, with the initial development period across each of the projects completing during the period. Group Services costs were down 9 per cent as we continue to prudently manage our cost base. Depreciation and amortisation was up 9 per cent, reflecting the investment we have made in technology and systems in recent years, and equipment depreciation. Net finance costs were down 25 per cent predominantly due to lower average net debt and non interest finance costs. The effective tax rate of 25.6 per cent was up by 0.9 of a percentage point. The higher tax impact from the part sale of the Retirement Living business was largely offset by a reduction in the US corporate tax rate. We expect the tax rate for FY19 to be in the range of per cent on a business as usual basis. Finally, foreign exchange rate movements had a slightly positive impact of 0.6 per cent or $4.5m on after tax profit. Moving on to cash flow on slide 11. Combined operating and investing cash flow was $294.6 million representing 37 per cent of profit after tax. We believe this is a solid outcome given we have continued to invest, with development capital up by $1.3 billion over the year. Given that we retain approximately 50 per cent of our earnings, combined operating and investing cash flows will typically be less than 50 per cent of profit. The chart provides an overview of the major movements in our cash flows over the year, with Construction included on a net basis. We commenced the year with $1.2 billion in cash. The major contributors to operating cash inflows were apartment settlements across our urbanisation projects. 5

6 The main driver of operating cash outflows was the build out of our urbanisation pipeline, in particular the large number of apartments we have completing at Darling Harbour in FY19. The Retirement Living transaction was the major contributor to investing cash flow, generating approximately $800 million of cash for the Group. This was almost matched by investing cash outflows, with the largest item being the expenditure on the international development projects that are equity accounted. Net financing outflows of $400 million reflect the payments of dividends, the commencement of the onmarket buyback and debt draw downs in the period. We closed the period with a cash balance of $1.2 billion. Looking now at the Group s Financial Position on slide 12. In addition to the cash reserves just noted, we have $1.8 billion of undrawn facilities, taking total liquidity to $3 billion. Gearing was up marginally to 8.2 per cent, and we continue to deploy capital into the development pipeline as reflected in development inventories climbing from $4.1 billion to $4.7 billion. The interest coverage ratio has risen to 10.7 times. We have $3.4 billion in Investments across co-investments, Retirement Living and infrastructure assets. We remain in a very strong financial position with a resilient balance sheet. Importantly, we continue to maintain flexibility to pursue growth opportunities. Turning now to our Portfolio Management Framework on slide 13. The objective is to maximise sustainable securityholder value by optimising risk adjusted returns. Capital deployment is driven by fundamental research and our current geographic presence and capability. And as we ve illustrated today, that origination capability has continued to broaden across our targeted gateway cities. In terms of EBITDA mix, underperformance in the Construction segment has pushed each of the segments outside of their respective target ranges. Our Operating EBITDA composition was 47 per cent for both Development and Investments with 6 per cent from Construction. In line with our stated strategy, our capital weighting to Australia has pulled back by 11 percentage points over the last year. All regions are now close to the mid-point of their target ranges with the Americas receiving the most incremental capital over the period. The regional shifts in capital are in line with our expectations, highlighting our origination focus in recent years on international gateway cities. Capital is being increasingly deployed in our international projects where we believe there is strong embedded margin. In terms of returns, Development generated a Return on Invested Capital of 13.4 per cent, while Investments delivered a Return on Invested Capital of 15.5 per cent. Both these segments delivered returns well above their respective target ranges. The Construction EBITDA margin is well below the target range of 3-4 per cent. 6

7 Turning to the other components of the Portfolio Management Framework on slide 14. As Steve noted earlier, our Return on Equity was 12.7 per cent, towards the upper end of our per cent target range. We have delivered a solid historic return profile using modest financial leverage. Distributions of 69 cents represents a payout ratio of 50 per cent for the full year, the mid-point of our per cent range. While gearing edged up, it remains below our target range of per cent. Finally, an update on capital management. Maintaining an optimal capital structure, which is a core element of our Portfolio Management Framework, is critical in maximising securityholder value. For us, three key considerations drive our optimal capital structure: maintaining an investment grade credit rating; optimising our weighted average cost of capital; and having sufficient liquidity buffers to manage operational and cyclical risks. Given these considerations, and as part of a disciplined approach to managing capital, the Board approved an on-market buyback of up to $500 million earlier in the year. Since commencing the buyback in March, we ve acquired 9.7 million securities for a consideration of $178 million. We have the financial capacity to complete the buyback, subject to market conditions, while continuing to fund our share of the development and investment pipelines as well as pursuing potential growth opportunities. Prudent capital management will remain an ongoing focus for our Management team and Board. I will now hand back to Steve for an operational update., Group Chief Executive Officer & Managing Director, Lendlease Thanks Tarun. Turning to Development on slide 16 and starting with apartments. FY18 completions were at the lower end of our target range with buildings completing on the Eastern seaboard of Australia and in London. Our Darling Square project in Sydney was the largest contributor from both a revenue and margin perspective. The final stage of Darling Square is expected to make a larger contribution in FY19. We are well placed heading into FY19 and beyond with significant progress made on our pivot towards international urbanisation projects. Up until FY18 we had apartment product completing in four cities being Sydney, Melbourne, Brisbane and London. From FY19 we ll add the three cities of Boston, New York and Singapore. And in the coming years we anticipate we will launch product in Kuala Lumpur, Milan, San Francisco and Perth. In the space of a few years we ve gone from a residential portfolio focused on four cities to potentially 11 cities. We have been anticipating a slowdown in the Australian apartment market for some time. Most key cities in Australia are now past their cyclical peak as they absorb supply. We are preparing our portfolio for the next cycle with our backlog of more than 9,000 apartments in Australia. We have a number of projects ready for launch at the appropriate time. A key element of our diversification strategy has been our entry into the residential for rent sector. 7

8 Progress has been ahead of our expectations, with the partnership in the UK contributing to the FY18 result, and the US partnership to contribute to earnings from FY19. The apartment pipeline is extensive with more than 30,000 units, almost 26,000 of which are yet to be put into delivery. That s 15 years of supply at the top end of our annual target. It was a particularly strong year for our Communities business with completions at the top end of our target range. We secured two new large Community sites during the year, one in Brisbane and one in Sydney. The land sub division market is starting to moderate although we have approximately 3,200 presold lots going into FY19. Turning to commercial development on slide 17. It was a solid year for commercial development. Strong office markets in Australia underpinned the forward sale of three office developments across approximately 90,000 square metres of space. Two Melbourne Quarter is a 50,000 square metre office tower that will be anchored by Energy Australia. 27,000 square metres of office space at the University of Melbourne Innovation Precinct was put into delivery, and Daramu House, the next cross-laminated timber building at Barangaroo South, has been fully pre-let to WeWork. We also forward sold an office building at International Quarter London which will become the headquarters for Cancer Research UK and the British Council. We realised profits on the commercial and hotel completions at Darling Square and origination fees on Melbourne Metro Tunnel. Our two major urbanisation projects in Asia, Paya Lebar Quarter in Singapore and the Lifestyle Quarter in Kuala Lumpur are both progressing well, generating development management fees. The office and retail components at Paya Lebar Quarter have continued to see a pick-up in leasing enquiries while the new Malaysian Government reiterated their support for the broader Tun Razak Exchange development in Kuala Lumpur. We entered the Senior Living sector in Shanghai with a project in Qingpu where we will develop approximately 900 units. In the US, our telco infrastructure strategy continues to progress with 86 towers completed in the period, a further 138 currently under development and the signing of master lease agreements with a number of major carriers. Looking further out, we have good line of sight on another 16 commercial buildings or 516,000 square metres that are in various stages of planning to meet our target of converting two to three building commencements each year. They form part of more than 1.5 million square metres of space with an estimated development value of $17.3 billion that is yet to be put into delivery. Moving on to our Construction segment on slide 18. The Construction segment returned to profitability in the second half of the year with EBITDA of $104.3 million. As I noted earlier, the financial performance of our Engineering and Services business was not where it needs to be. We are working hard to drive improvement. While it is our policy not to comment on individual projects, our client Transurban noted at their results that the timeframe of NorthConnex is under review. I confirm that NorthConnex was one of the Engineering projects that we identified as underperforming and subsequently informed the market about 8

9 in October last year. The issues noted last year included logistical and geotechnical challenges, both of which have been experienced on NorthConnex. The financial result of the Engineering & Services business that Tarun addressed, incorporates the anticipated cost for completing NorthConnex, with the overall position broadly in line with our assessment at the half year. On the Engineering business more generally, the market opportunity remains compelling. The anticipated higher level of activity in the transport sector is starting to materialise as reflected in the $3.5 billion of new work secured in Engineering. We are deploying more resources into the business ahead of the acceleration in activity, resulting in elevated overheads. We have also bolstered our senior executive ranks with the appointment of Hans Dekker as Group Head of Engineering & Building. Hans joins us from Fluor Corporation, where he was most recently the Global Head of Infrastructure. Based in Sydney, Hans will play a key role in driving our strategic growth in this area and working with the CEOs of Engineering & Services and Building to enable their businesses to reach their full potential. The Building businesses in each of the regions performed well in FY18, most notably in Australia with new work secured of $4.4 billion in the period, including a number of new Defence contracts and commercial building wins. In the Americas, we have an established business with strong market share in target cities. In Europe, the team is focused on delivering the growing internal pipeline and winning selected external work. The team in Asia remains focused on delivering the backlog of internal construction work in Singapore and Kuala Lumpur. In addition to our strong backlog revenue of $21.1 billion, there is approximately $12 billion of work for which we are preferred across the diverse geographies and sectors where we operate. It has been another year of strong growth for the Investments segment. The product we create at our urbanisation projects is the key differentiator for our investment management platform and provides access to quality investment product for both ourselves and our capital partners. The conversion of strategic opportunities across residential for rent, office, retirement and telecommunications infrastructure has strengthened and broadened our capital partner relationships. These significant achievements have been made organically with a focus on the key trends that guide our Group strategy, namely: urbanisation; infrastructure; aging demographic; funds growth; sustainability; and technology. The residential for rent partnerships and telecommunications Joint Venture will add two new asset classes to our investment platform in future periods as the assets shift from Development into Investments. At the half year results, I noted a clear trajectory towards $40 billion of Funds Under Management. The strategic initiatives in the second half, combined with an additional $4.0 billion of secured future Funds Under Management from development projects currently in delivery within existing funds or mandates, provide greater visibility on that trajectory. Ownership earnings are derived from our $3.4 billion of investments. All components of our ownership earnings were strong in the period, resulting in growth of 41 per cent. 9

10 The investment in the office precinct at Barangaroo South was a standout. Additional leasing and rental growth drove strong investment income. Tower One is almost fully occupied with no remaining contiguous space available, Towers Two & Three are close to 90 per cent let, and both CLT buildings will be fully let on completion. With the best part of 300,000 square metres of office space in the precinct, that s a great outcome since the first tenants moved in in FY16. We implemented a new business structure for our Retirement Living business in the first half. The unitised structure facilitates the introduction of capital partners with a governance regime modelled on that of our leading funds across the Investment Management platform. The business has funding certainty to accelerate development activity towards our medium term target of delivering units per annum. It was a softer year for trading conditions in the retirement sector following negative press relating to one of the industry players. More recently we have experienced an improvement in sales rates back towards pre-industry disruption levels and the early feedback on our new contract choice has been promising. Operating earnings are derived from our funds and asset management platforms with earnings up by 15 per cent. While we allocated more resources to grow the platform in both Europe and the Americas, higher performance fees in the second half in one of our funds saw earnings keep pace with growth in funds under management. The asset management businesses continue to provide a steady base of earnings. We manage retail assets of $12.7 billion and over 50,000 US military housing units. Moving to the outlook on slide 21. This year Lendlease celebrates 60 years of shaping city skylines and creating great places. In celebrating our history, we also acknowledge the importance of creating a strong future. We continue to lay solid foundations for future growth. Our achievements in FY18 demonstrate a disciplined approach to implementing our strategy. We have a diversified business model and a proven track record of executing our integrated capabilities with the support of our capital partners. Our development pipeline, at $71.1 billion, has never been stronger. We ve continued to make significant progress in diversifying to targeted international markets with a global portfolio of 18 major urbanisation projects across 10 gateway cities. The Construction segment has backlog revenue of $21.1 billion and approximately $12 billion of work in preferred bidder status globally which is well diversified by client, sector and geography. Our ability to partner with third party capital, as demonstrated by the progress made on strategic opportunities across several asset classes, is a key feature of our business model. The funds management platform is well placed to grow from the current $30.1 billion. Our integrated capabilities across property and infrastructure provide a sustainable competitive advantage, while diversity by business and geography ensures our business model, as we have demonstrated this year, is resilient. Maintaining Financial strength and capital discipline remains a priority. With that, I ll open it up for questions. The webcast is not two-way so we will only be able to take questions over the phone. 10

11 Q U E S T I O N A N D A N S W E R Operator Ladies and gentlemen if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Our first question comes from Rob Freeman from Macquarie. Rob Freeman, Macquarie G day guys. Could you please just talk about this claim in Construction in the second half I think from a 2014 project? A claim Rob that related back to There was a reliance in our numbers back then which then went through a litigation process and the outcome was negative and it was in the second half. It took us a bit by surprise, but that's impacted the performance in the second half of the year. Rob Freeman I think the Construction business last year did $201.4 million. You've got a $23.1 million loss. So $224 million swing and you called out a provision I think in the first half at the upper end of $190 million. Is that $35 million odd swing the quantum of this claim? Just on those numbers. I don't think we did call out a provision in the first half. But, what we've come out with in this announcement is to clarify the full EBITDA result for the year so that there's certainty around what that number is. The vast majority of the loss was in the first half with the second half impacted by a combination of that outcome in the Services business plus bid costs and increased overheads as we flagged. There's also a number of projects that haven't reached 20 per cent completion yet. That contributed to a slightly negative second half. Rob Freeman When you say the bulk of that provision in the first half, what is the split between the two halves? We haven't outlined that provision. We ve just provided full disclosure on the EBITDA contribution for Engineering and Services over the full year and that's the $218 million negative we ve come out with. Rob Freeman These projects are obviously not completed yet. They'll continue to be assessed on a daily, weekly basis. How confident are you now that you've caught it and given NorthConnex is a project we're now talking about, is that sufficiently de-risked with the tunnel complete? Yes Rob I think we've stated that it's more than 60 per cent complete across the projects that we're talking about. We do continue, as you've rightly said, to assess these on an ongoing basis. What we've tried to capture is our expectation of both program and cost outcomes over the life of those projects. NorthConnex has gotten to the end of the tunnelling process. But then there's a significant amount of paving and then mechanical and electrical to go - there's still two years to go on that project. We're making these estimates to the best of our ability. Scott Charlton came out and said that the programs under review, which is why we've named NorthConnex - we don't typically talk about individual projects. 11

12 But we've confirmed that that it is under review. But our expectation of where it will land in terms of both cost and program is in those numbers. Rob Freeman That provision obviously wrote back prior profit and also took a view on what will happen. Is it fair to say that there's losses assumed all the way to completion for the next two years there? Yes so the projects that we've written down won't contribute to margin going forward, which is why we've also said you ve got to factor in a drag in FY19 because of that impact. We've made our own assessment. I think I said before there's still two years to go. Don t read anything into that timeframe. What I mean is we've got two more financial years of those projects to run through. Rob Freeman Then just more broadly you ve put in your ROIC hurdles and targets, and obviously in Development and Investments you're miles ahead next year. Tarun pointed out Darling Harbour, so FY19 is kind of done. As we look into FY20/FY21 do you think Construction will start to take a bit of a load there? Or should we be looking to developments in Europe? Hi Rob, it's Tarun here. Yes, I think FY19 we've flagged a number of apartment completions. We still have other apartments that we put into production completing in FY20. As Steve pointed out, the projects we've highlighted do run into FY20 so that backlog revenue will continue to drag on margins over that time. But other than that, our expectation is for the rest of our businesses to be performing in line with what we target. There's been quite a bit of growth in backlog so that starts to come through across our Construction business in later years as well. If we maintain that run rate then there is upside purely from that business. Rob Freeman Just finally at the current share price is the buyback still a compelling use of capital? Yes, we've come out and reiterated that we certainly have the capacity to complete that buyback. It comes down to an ongoing assessment of the uses of capital. But we're still in a pretty conservative position from a balance sheet perspective. The rate of buyback will come down to an ongoing assessment of that. Rob Freeman Thanks. Operator Our next question comes from Ben Brayshaw from JP Morgan. Ben Brayshaw, JP Morgan Good morning Steve. Just in the accounts and perhaps this is a question for Tarun. I'd be interested to know if Lendlease debtors past due being $298 million in FY18, up in the order of $50 million on FY17 levels, is that related to apartments? Or is that somehow connected to Engineering? 12

13 No Ben, it's neither of those. This is just business as usual in our businesses. There was a couple of claims that hadn't been paid at 30 June. In fact we've seen some of those come through in post-year end, in July and August. So it's fairly business as usual activity. Ben Brayshaw Great, thank you. Just on presales, would you be able to talk a bit more about the presales environment? Specifically, whether Lendlease will look to launch new presales campaign in the next 12 months for projects in either Australia or in the UK? Yes Ben, Steve noted in our market call currently that the main cities, and this includes London as well, are going through their cyclical peak. Demand has moderated. Our focus has been on delivering on our presales and production, which are doing pretty well. In terms of new launches we would say for the next 12 months our view is the market still has to absorb the supply. But suffice to say we've got a number of buildings that are shovel ready, and ready to go as we see demand start to return. In our other markets - in Asia, in Kuala Lumpur, in TRX - that project is preparing to launch its residential. There are further launches in the Americas portfolio as well. The initial comments I made were apartments for sale. Apartments for rent are through now our two JVs in the UK and America which offer us opportunities to launch new product as well. Ben Brayshaw Okay thanks, that's helpful. You touched on progress at PLQ and TRX on the leasing front. Would you be able to give some feedback on the percentage committed at both the retail and office at PLQ, and obviously the retail at TRX? Yes, on PLQ we are about two-thirds committed on both retail and office. In fact the first office building is undergoing practical completion as we speak in the coming days. In TRX retail we've already committed the major tenants and the mini-major tenants, around a third of the income. We still have a number of years to go there. The specialty leasing has just kicked in, and that will start to come through in future periods. Ben Brayshaw In terms of realising potential margin at PLQ, do you see opportunity in FY19 in either the retail or office components? Or does it really depend on how you go on stabilising the occupancy? No, we do expect earnings contributions from PLQ on practical completion, which is when we do an oncompletion valuation under our joint venture. Given the progress we have been making we do anticipate a solid contribution from PLQ in FY19. Ben Brayshaw Okay, thanks Tarun. Operator Our next question comes from Sameer Chopra from Merrill Lynch. 13

14 Sameer Chopra, Merrill Lynch Good morning. Good result, I had just two questions. One is, Tarun, you mentioned the move in going from practical completion to settlement in terms of recognising earnings. Could you give us a sense around what impact it would have had on 2018 numbers just so we get a like-for-like as we think about 2019? My second question was about ownership earnings. They were up very strongly over the course of the year. I just wanted to get a sense around how much of this can we bank on as being recurring, and how much of this is revaluation related, thanks? Yes, so the first question in terms of FY18 Sameer, we'll come back to you on that question. But looking forward in terms of the change in AASB and what impact it would have had, more importantly really we're focused on FY19. As highlighted we'll be recognising earnings on settlement not on practical completion. But across our portfolio we don t see a material impact in terms of our profit recognition for FY19. Sameer Chopra Thanks. Just on ownership earnings? Yes, so ownership earnings - in FY18 we have had strong contribution at the EBITDA level from our Retirement Living business as we did the transaction; our Military Housing portfolio; and very strong leasing that we have done particularly here at Barangaroo where the towers have let up and also the income has been very strong. Going forward into FY19 our anticipation is that cap rates are stable now in terms of there's not much of a firming bias, they're stable. But we'll be really looking towards income growth embedded within our portfolio to drive investment earnings. Our operating earnings, our fees, broadly grow in line with Funds Under Management. Last year we grew by 15 per cent. Sameer Chopra Thank you. Operator Our next question comes from Grant McCasker from UBS. Grant McCasker, UBS Good morning, just one more question on the Construction business. Outside of the troublesome projects that you ve called out can you make a comment on how you re seeing the project margins today versus your initial feasibility? It's a hard one to just give one answer to. I think the right answer is to talk about the broader direction of the sector. Generally speaking in Engineering when we target these projects we're looking to achieve double-digit margins at the headline (GPM) level. Then it translates into an EBITDA margin which we target to be above 5 per cent overall on the engineering sector. 14

15 But there's a mix of projects. In recent times we've formed alliance projects which are lower risk, and therefore lower margin. At the larger scale projects certainly everyone in the industry targets delivering headline margins of double-digit and tries to build in contingency and risk elements to provide for some of the risk in lump sum projects. I think the important thing is to get a mix of those projects across our business going forward, and a better mix than what we've had historically, which is part of our strategy. On the building side, the commercial Building business has actually outperformed against its strike margin this year, which is a very good result. There are no problem projects in that business, which is a first for us really in 10 years. I think that's a great achievement. Grant McCasker Okay, thank you. Just moving onto the Development business. We've seen a step-change in the development inventory this period. Should we expect it to drop down materially in FY19 post-darling Square and the Asia developments? Or is more going back into production capital throughout 2019? Yes, Grant, that will depend based on what new projects we put into production in FY19. But we are anticipating a lot of capital coming back, particularly from our presales that settle. There's a large revenue number there that we anticipate coming back. That will be the positive cash coming back. But then it will depend on what new launches we do, some of which I touched on in my answer to Ben. Grant McCasker Then just one last one around the Australian Communities business. You called out slowing sales rates. Are you able to make some comments and say how the sales rates are tracking relative to 12 months ago over the last couple of months? Yes, Grant, we've had a very good year in FY18 and we're carrying quite good presales into FY19. We have seen in recent periods a moderation in enquiry levels. Usually if you look forward that starts to translate to moderation in volumes. Predominantly the feedback we're getting is due to further tightening in credit conditions that's having an impact. But we continue to expect to be within the target range for our Communities business of 3,000 to 4,000 lots. Grant McCasker Okay, excellent, thank you. Operator Our next question comes from Sholto Maconochie from CLSA. Sholto Maconochie, CLSA Just a couple, a lot of them have been answered. Just following from Rob's question on the $218 million reversal, could you provide a split of what was first and second half on that at all in terms of total? Yes, Sholto, as Steve has said, we provided the full year impact and that's $218 million. But as Steve said, there are a number of factors that came into the second half which we've been through. 15

16 Sholto Maconochie Alright, and just on your problem projects that are finished in Do you see yourselves hitting that 3-4 per cent construction margin in 2021? Or where do you see reaching that target? Yes, that's certainly our target. It's been disappointing that we're not at that level yet, but that's certainly our target. I just wanted to reiterate too that you used the word reversal. Just to be clear that 2018 is the full EBITDA loss for the Engineering and Services business for the full year, as opposed to reversal, that's the actual EBITDA loss. Sholto Maconochie Okay. Then just in the beginning you were saying, it's related to one of the questions on the residential, there were 112 remaining units. What was the percentage of cash collected versus completions on the dollar value? What's remaining to be collected in post balance date? Yes, this is for FY18 settlements? Sholto Maconochie Yes. In terms of dollar value, it's circa $80 million. But as I said in my opening, most of that is in our London portfolio and that's just timing. We finished that project in June. A lot of that cash is already starting to come in. Sholto Maconochie Then just on the operating cashflow, it was obviously a lot weaker, so $80 million would have helped it there, but what were the other drivers? Was it just the timing issue because the payments look like they're up? I'm just trying to get a handle on that. Yes Sholto. Actually we think the cashflow performance was very good at 37 per cent of profit which is what you'd anticipate and expect, given our business model and that we retain half our cash for future growth. As we said, a lot of the capital did go back into production - circa $1.2 circa billion increase in the development capital so we have invested back in the business, particularly in our offshore markets. Sholto Maconochie Then on the new residential for rent, Tarun in the US, do you expect to book some profits on that in 2019 and any guidance on materiality there on dollar value? That transaction will go through in the first half. We'll come back to you at the Half Year Result and talk to it. Suffice to say there will be profits because there are three buildings that were well advanced in terms of their production and FSS has come into the joint venture at this stage where they were well advanced, and we have embedded profit there. But we'll articulate that at the Half Year Result. Sholto Maconochie Then on the revaluations, obviously there's about 12.8 per cent of operating EBITDA well up on last year. That seems to come from retirement and US military, and Barangaroo. Can you give a split on percentage - was it a third, a third, a third? What was the driver of that on a percentage basis? 16

17 Yes, that s on our co-investments so it excludes the Military Housing and retirement revaluation. This is on all our co-investment positions. I'll need to come back to you on the split, but in terms of our contribution, about half came from income growth. A lot of the income growth was coming through the Barangaroo projects. The other half was non-income related, cap rate tightening as the market tightened. Sholto Maconochie Then just finally for me, just on the update on retirement. Are you still progressing another future partner given that things sound like they're improving there? Any update on bringing another partner in to get you down to that 50 per cent? Yes, it is now in a structure which is unitised so that makes it pretty flexible in terms of bringing in additional investors. We have got some pretty strong capital relationships. We're not in a hurry to bring in somebody in the short term, but we've certainly got appetite out there. Ultimately we expect to reduce down to 50 per cent based on getting the right deal. Sholto Maconochie Great, thanks very much. Operator Once again to ask a question please press star one on your telephone. Our next question comes from David Lloyd from Citi. David Lloyd, Citi Good morning guys. Sorry to harp on about it. Engineering. There are a couple of projects that entered the backlog. In particular I suppose WestConnex M4-M5, also Melbourne Metro - two tunnelling projects. What's been done differently this time around on the geotech versus NorthConnex that might give investors comfort that this may not be repeated? That's a good question. They are scale projects, and yes they do involve a significant tunnelling component. On Melbourne Metro Tunnel, there's more to it than that, there's also above ground development, and there's also subsequent master planning and development opportunities in the related areas which we think appeals as an integrated opportunity for us. We do have joint ventures in each of those projects, and we've worked with our joint venture partners to try and analyse the risk to the best of our ability and price that risk and program accordingly, but they're very early. We're in the early ramp up phase on both of those projects. We have done detailed geotech analysis and we're using tunnel boring machines which do also help in terms of working through different soil conditions. The other point I'd make on WestConnex is a couple of phases of WestConnex have already been completed. That helps in understanding the conditions that we're operating in. But it's early days as I've said. We've added a lot to the team. We've employed over 600 new people over the last 12 months in the Engineering business. As I said earlier, we've also added significant capability at the senior management levels as well, including Hans Dekker who has come in as a Group Head of Engineering and Building. So, there's a lot we've done. We're very conscious that the market wants to see improvement in that business, and clearly so do we. 17

18 David Lloyd Naturally. So, any changes to those targets around $4 billion in revenue and 5 per cent margins? How should we be thinking about the timeline on those? No changes to the targets. I think when you look at the backlog secured of $3.5 billion clearly the scale of opportunity is out there, and we don't think that we need to chase particularly hard to hit our revenue targets. We are becoming more selective on the type of risk profile we'll adopt. Interestingly too, and positively, the New South Wales government has come out with their 10-point plan adopting a different approach to procurement and trying to make sure there's a better mix of risk in these projects, which we think is a very positive thing. Our target EBITDA margin over time remains at that 5 per cent level for the Engineering business. So, we'll certainly be eyeing our business on those sorts of targets. David Lloyd Okay, just a couple more if I can. At what point, another months down the track, at what point if this business doesn't hit its mark do you start considering strategic alternatives for this Engineering business within Lendlease? Look I mean we don't get into conversations around our strategic framework or anything like that. I'm not going to go there. The reality is, it is part of our business and it's an important part of our business. It does give rise to integrated opportunities as well. We're working on projects now that offer those opportunities and we're bidding on a couple of projects where the opportunities across all of our businesses are very significant. The strategic reasons for getting into the sector remain what they were, and the scale of opportunities, if anything, are probably stronger than what we initially anticipated. We've got to get it right, that's the reality. David Lloyd Just one last one from me. Just wondering are there any new fund initiatives planned within the region? In particular potentially the opportunity to list a retail fund within Asia. With a view being that could create a takeout vehicle for your upcoming retail development through Asia? Interesting concept. We're always looking at new sectors and opportunities. The telco tower fund that we've discussed and the two build to rent partnerships in the UK and the US are good examples of that. In terms of specific opportunities, we prefer to talk about achievements when we achieve things rather than have a guess at what we might do going forward. David Lloyd Alright, I'll leave it there. Thanks very much guys. Operator Thank you. We have no further questions thank you, so I'll hand back to your speakers for closing. 18