Lendlease Group (LLC) Earnings Call Transcript & Summary

Good morning, and welcome to the 2024 Lendlease Annual General Meeting, and it's great to see all of you here and also to see some of the great places that Lendlease has created around the world. My name is Michael Ullmer, and I am Chairman of the Lendlease Group. So thank you for joining us today at the Wesley Convention Center in Sydney and online. The meeting is being held on the land of the Gadigal people. They are the traditional custodians of this land. And on behalf of the Board, we extend our respects to their elders past and present, and extend that respect to all Aboriginal and Torres Strait Islander peoples joining today's meeting. Securityholders attending virtually may be joining us from other ancestral lands, and we pay our respects to the traditional custodians of those lands and their elders past and present. For those who have joined online, our team has worked hard to ensure you have a smooth experience; however, should you have any technical difficulties, please contact Computershare on the details on the meeting platform. A recording of the meeting would also be available on our website following the meeting. For the people in the room, in the event of a fire or other safety incident, should the alarm sound, please follow the instructions of the safety wardens. If there is a need to adjourn the meeting, we will provide updates via the ASX platform and on our website. It is now my pleasure to introduce your Board of Directors and Company Secretary. So starting from my far right, Margaret Lui; then Philip Coffey; Elizabeth Proust, Chair of the People and Culture Committee; Nicholas Collishaw, Chair of our Risk Committee and standing for reelection today; Karen Pedersen, Chief Legal Officer, and Company Secretary; and then on my left here, Tony Lombardo, Group Chief Executive Officer and Managing Director; Chair-elect, John Gillam, appointed to the Board in October 2024 and standing for election today; Nicola Wakefield Evans, Chair of our Sustainability Committee, who will be retiring after today's meeting; David Craig, Chair of our Audit Committee; Barbara Knoflach; and Bob Welanetz, Chair of our Nominations Committee. Members of Lendlease's corporate leadership team are either here in person or joining the meeting virtually. And Eileen Hoggett and Paul Rogers from KPMG, the group's auditor, are also here and available to answer any questions relating to the audit of the group's financial statements. Barry Azzopardi from our share registry, Computershare, is in attendance and will act as Returning Officer. I now confirm that a quorum is present and formally declare the meeting open. Before we begin, our Chief Legal Officer, Karen, will outline the procedure for asking questions and for voting. Karen?

Thank you, Chairman. First, I will outline the procedures for those attending virtually and then the procedures for those attending in person. As this is a meeting of securityholders, only Lendlease securityholders and proxyholders are entitled to speak and vote at this meeting. For those attending the meeting virtually, today's meeting is being held via the Computershare meeting platform. Attendees can watch a live webcast of the meeting and securityholders and proxies also have the ability to ask questions and submit votes online. Securityholders and proxies can submit questions online by selecting the Q&A icon on your screen, typing your question into the chatbox, selecting the relevant topic for your question, and pressing Send. As Q&A has been enabled, securityholders are encouraged to begin submitting their questions now. You do not need to wait until we get to the relevant item of business to ask a question; however, your question won't be addressed until the appropriate time in the meeting.

Okay. I now declare voting open on all items of business, so please submit your votes at any time. Before commencing the formal business of the meeting, our Group CEO, Tony Lombardo, and I will briefly address the challenges of the past year, how we have responded, our business achievements as well as the outlook ahead. So let me turn first to the strategic review announced in May of this year. The past year was another period of significant change for Lendlease with our operating environment continuing to be impacted by pressure on global property markets due to uncertainty about economic growth, inflation, and monetary policy. As a developer of large urban projects, our operations and financial performance were materially impacted as was the performance of Lendlease's security price, resulting in disappointing returns for securityholders, for which I, as Chairman of the Board, I'm ultimately accountable. Despite proactively responding to these challenging market conditions by simplifying our business, reducing costs, and reducing headcount, the impact of the prolonged property downturn on Lendlease's operating earnings and security price necessitated a fundamental review of our 5-year strategy. Accordingly, Tony and our leadership team worked with the Board on a comprehensive update of the group's strategy with the decisions taken reflecting the need for significant and rapid action to restore value for securityholders. The strategy refresh is grounded in leveraging Lendlease's competitive strengths and simplifying the company to become a leading integrated real estate business in Australia, with an international investment management capability. Throughout this period, we engaged extensively with our securityholders who provided valuable input into the strategic review. I am pleased with the widespread endorsement of the decisive plan of action that we have committed to delivering. Tony and the management team have wasted no time implementing the strategy. This includes making strong progress already towards our FY '25 divestment target of $2.8 billion, with a further $1.7 billion of net capital targeted for release. We are confident we have the right strategy in place, which prioritizes deliberation and return of capital to securityholders, investing in our high-performing Australian business, simplification of our operations through the exit of international construction, accelerated release of capital from long-dated international development projects and further streamlining of our overhead structures. Now turning to our core operations. Despite the headwinds experienced, I'm pleased with Lendlease's operational performance in FY '24. In our Investments business, funds under management ended the year at $47.3 billion, together with $3.4 billion of new asset creation, including completion of the exchange TRX in Kuala Lumpur and you saw some screenshots of that earlier; Melbourne Quarter Tower; a build-to-rent asset in Chicago; and our first 70-megawatt data center in Tokyo. In development, activity increased during the year with $8.2 billion of completions across Sydney, New York, and Kuala Lumpur and $1.9 billion of commencements. Supporting the replenishment of our Australian development pipeline, we secured the $1.3 billion Gurrowa Place project at the Queen Victoria market site in Melbourne. And we have continued this momentum into FY '25, securing the $500 million luxury development at 1 Darling Point in Sydney and are actively pursuing other value-accretive development opportunities. In our Construction segment, we wound down our U.S. West Coast and Central operations and recently completed the sale of our U.S. East Coast operations, and are now preparing our U.K. operations for sale. The group's FY '24 operating earnings improved 23% on the prior year due to a higher contribution from our business segments and lower corporate costs. Core operating profit after tax was modestly higher year-on-year at $263 million, impacted by higher funding costs that reflected peak development capital expenditure and higher interest rates. Our strong operational performance also extended to our safety outcomes and focus on our people, which remain high priorities. Across more than 400 operations, encompassing more than 80 million hours worked, this year, there were no fatalities recorded, and I thank all our people and our supply chain partners for their continuing focus on safety. As we undergo significant organizational change, our focus has been to strengthen our performance culture, retain key talent, and support our people. Our recent global engagement survey had an 85% participation rate and resulted in a modest 1 point decrease, which is a creditable result, given the extent of the transformation underway across all of our businesses, but we need to improve on this. I think all of our teams around the world for their resilience and ongoing commitment to delivering exceptional outcomes for our customers. In terms of our statutory result, as a result of the costs associated with implementing the strategy, largely relating to historic goodwill and asset impairments, the group recorded a statutory loss after tax of $1.5 billion for the year. I recognize this is a disappointing outcome for securityholders. However, it is imperative we make these changes to set Lendlease up for long-term sustainable success. The full year distribution and dividend payment of $0.16 per security was maintained and reflect a payout ratio of 42% of core operating earnings. On our reward structure in response to the first strike received on the 2023 remuneration report, Elizabeth Proust, our People and Culture Committee Chair, and I met with many of Lendlease's key stakeholders to listen and understand the reasons for the strike. This reinforces our view of the need to demonstrate a strong alignment between remuneration outcomes for executive management and the experience of our securityholders. Accordingly, given the poor financial outcomes for securityholders, the Board, with the support of our CEO, exercised a downward discretion in assessing the FY '24 performance with the CEO and leadership team not receiving a short-term award for FY '24. The FY '25 remuneration outcomes for the CEO and leadership team will be further aligned with the securityholder experience. The short-term award for FY '25 will be replaced with the transformation award involving the issue of options with vesting linked to security price performance. We will discuss this further later in the meeting. The FY '25 long-term award has also been modified to place greater weighting on securityholder returns. I note that our CEO has met his mandatory security holding requirement ahead of the 5-year accumulation period, including buying securities on market, thereby demonstrating his commitment to our refreshed strategy. Turning to the transition to a new Chair. As I announced in May, I will retire as Chairman as planned at the conclusion of this meeting. To be succeeded by John Gillam, who joined the Lendlease Board as a Director on the 14th of October 2024. John received the Board's unanimous support as a Chair-elect. He is both an accomplished Executive and Non-Executive Director with extensive commercial and leadership experience and a strong track record of operational delivery and execution working for some of Australia's largest companies. John has more than 6 years of listed Chair experience, including as former Chair of CSR Limited and current Chair of Nufarm Limited. And this follows a successful 20-year executive career with Wesfarmers, where he led the Bunnings Group through its formative expansion. Throughout his career, John has demonstrated a strong focus on instilling the right culture to deliver bottom-line outcomes and drive securityholder returns. And these attributes give the Board great confidence that John is the right person to support Tony and the leadership team to continue executing the company's refreshed strategy, further simplifying Lendlease and supporting the future growth of the business. And John's appointment follows a comprehensive and disciplined succession process that commenced in March of this year. Conducted with the support of a leading Board advisory firm, the process included extensive engagement with securityholders to assist in the identification of potential candidates. Following a rigorous preliminary assessment process, a shortlist of candidates was interviewed by the Board using a strict set of criteria before a final decision was made. I was delighted that John was able to join Elizabeth Proust and me in our meetings with key investors and stakeholders in the lead-up to this AGM, and I'm pleased to report that all securityholders that we engage with during the selection process have advised that John has their full support. So on behalf of my fellow directors, I welcome John to the Board and congratulate him on his appointment as upcoming appointment as Chairman. Nicola Wakefield Evans will join me in retiring from the Board at the conclusion of today's meeting. And on behalf of the Board, I also thank Nicola for her contribution to Lendlease since her appointment in September 2013. Nicola has been Chair of the Sustainability Committee since 2019 and a member of the Audit Committee and the Risk Committee. And the Board has appreciated her counsel and insights and wishes Nicola the best for her future endeavors. In September last year, we welcomed Barbara Knoflach as a Non-Executive Director. Barbara has been an outstanding addition to the Board, bringing a strong background in real estate, asset management, and investment management. Her appointment, together with the appointments of Bob Welanetz, Nick Collishaw, and Margaret Lui in recent years, reflects the Board's commitment to building significant depth of director talent drawn from Lendlease's core sectors of real estate and investment management. As to the future, looking ahead, under John's leadership, I am confident the Board is well positioned to hold management to account for the execution of the company's refreshed strategy and support them in developing the growth agenda that will unlock value for securityholders. Reflecting on my 6 years as Chairman of Lendlease, it has been a period of significant challenge for the company, both strategically and in the operating environment we have faced. There is no doubt that Lendlease is at a critical juncture in its history. The Board and management have thought very carefully about the necessary strategic actions and taken the tough decisions to set the company up for long-term success. I am confident in our team and their ability to realize the value inherent in our business on behalf of you, our securityholders. The culture of Lendlease is a special and resilient one. The diligence and commitment of our people across the business has been truly remarkable, and the achievements and outcomes for our clients around the world during this time deserve to be recognized and commended. I would like to thank my fellow directors and the entire Lendlease team for their ongoing dedication to repositioning the organization for sustainable future growth. It's been a great privilege to serve you, our securityholders, on the Lendlease Board since 2011, and I thank you for your support over that time. I will now hand over to Tony.

Thanks, Michael, and good morning, everyone. I also acknowledge the Gadigal people and pay my respects to their elders, past and present. As the Chairman said earlier, FY '24 was a year of significant change for Lendlease. Since becoming the CEO 3 years ago, my priority has been to transform our company into one that delivers more sustainable returns to securityholders. In simple times, our financial performance in recent years hasn't met our securityholders' expectations nor has it met our own. The turnaround plan we launched in early 2022 was an important first step; however, with the global property market downturn running into a third year, it became clear that we needed to make more fundamental changes. A high proportion of capital was allocated to offshore development projects that, in some cases, wouldn't deliver profits for many years. In May 2024, we announced our Refresh strategy. Each objective is simple: focus our time, expertise, capital on Lendlease's market-leading Australian business and grow our international investment platform. To achieve this fundamental shift in how and where Lendlease does business, we have identified 3 key actions: simplify our organizational structure to further reduce our cost of doing business; divest our offshore construction businesses; recycle $4.5 billion of securityholder money through the divestment of businesses and assets while releasing capital from offshore development projects. In the 6 months since we launched, we have moved with considerable pace to make changes necessary to set Lendlease up for future success. This includes announcing the sale of our U.S. Military Housing business in July, the sale of our integrated life sciences interest in Asia into a new joint venture in August and the sale of our U.S. East Coast construction business in September. Combined with the sale of 12 master-planned community projects, which we expect to complete by the end of 2024, these 4 transactions represent more than half of the $2.8 billion of capital recycling target we set ourselves in FY '25. And we have initiated plans to liberate an additional $1.7 billion of capital through new assets and project sales. In parallel, we've announced an action more than $125 million of pretax cost savings across Lendlease as we simplify our management structure and create a much leaner and more focused organization. From a capital allocation perspective, we continue to focus on 3 key priorities: strengthening our balance sheet and achieving our FY '26 gearing targets; returning up to $500 million of capital to securityholders once our stated objectives are satisfied; and investing in our high-return Australian operations, including further building our local development pipeline while also achieving profitable growth within our investments platform. Across our Australian business, we've made a strong start in FY '25 including. The establishment of a new joint venture with Mitsubishi Estate Asia in securing the 1 Darling Point in Sydney project, a $500 million luxury residential-led project, a first-ever partnership with Nippon Steel Kowa Real Estate to deliver $500 million build-to-rent apartment development in Melbourne and the Exemplar Health Consortium securing the new Melton Hospital project in Victoria valued at $900 million. In addition, the Vita Life Sciences platform recently announced the acquisition of a portfolio of $1.8 billion to Singapore real estate assets. This will deliver profitable FUM growth and returns comfortably above Lendlease's cost of equity and will contribute to the increased scale of our international investment platform. Now to our outlook for the balance of FY '25 and beyond. In Australia, the breadth and depth of our service offering and our capabilities of our people are at the core strength of our competitive advantage. As I outlined earlier, the opportunities for us to grow Lendlease in our home market is significant. With the project pipeline that plays to our core competitive strength, especially in urban regeneration. And our valued relationships with major global capital partners providing a long-term growth pathway to extend our international funds platform. Our earnings guidance for FY '25 remains unchanged, with group earnings per security of $0.54 to $0.62 with a number of transactions targeted for completion. Gearing is anticipated to remain elevated at the first half of '25 due to the timing of key capital recycling transactions and planned capital expenditure across major development projects. However, gearing is expected to trend down significantly in the second half of 2025 towards the top end of our target 5% to 15% gearing range. A launch of a security buyback of up to $500 million in the near term is subject to completing certain key capital recycling transactions to provide confidence that we will be within our target gearing range by the end of FY '26. Looking beyond FY '25 to FY '26, we anticipate that the improvement in market conditions and operating conditions for the Investment segment will support profitable FUM growth and improvement in co-investment yields and higher transaction volumes. In the Development segment, the focus remains on origination of new opportunities, noting that development earnings in FY '27 are supported by the targeted completion of the One Circular Quay development, which is already 76% presold by value. In construction, projects won during COVID continued to impact margins in FY '25. A return to more normal operating conditions in FY '26 is expected, which will support improved EBITDA margins while higher revenues are forecast. In the Capital Release Unit, FY '26 is expected to see a number of international joint venture projects complete, while an improvement in market conditions will support further capital recycling of land and inventory. Continued progress in our capital recycling program should see debt and associated interest costs materially reduce in FY '26. Our cost-out program remains on track, with half of the announced $125 million of annual savings to be realized in FY '25 and the full run-rate benefit expected to be realized in FY '26, noting we are working to exceed this target. I firmly believe that the decisive actions announced in May provide a clear pathway to performance for our people, our customers, our securityholders. While I'm pleased with the progress we've achieved so far, I also acknowledge there is more we need to do for Lendlease to deliver the sustainable returns that securityholders should expect. In closing, I'd like to expect my thanks to the Board, particularly our Chairman, who retires today. Having worked very closely with Michael for more than a decade, I've greatly appreciated his counsel and support over those years. I look forward to working closely with our new Chairman-elect, John Gillam, to expedite the delivery of our Refresh strategy and develop meaningful growth options for us to pursue. I'd also like to thank my management team and the people of Lendlease for their unwavering dedication and resilience through a time of significant change. Finally, the U.S. securityholders, I'd like to restate our commitment to restore securityholder returns and extend my thanks for your ongoing support. We, as a management team, have not been happy with the performance that we've had recently. The team and I are very focused on restoring this company and fixing this company, ensuring we get back to the growth that we need to. I now would like to hand back to the Chairman.

Thank you, Tony. I will now turn to the formal business of the meeting. Each resolution and supporting information is outlined in the Notice of Meeting as well as consideration of the financial statements, the business before us today includes 6 resolutions. If the resolution in agenda item 3 is not passed and additional agenda item 7 will be put to the meeting. The Board recommends that securityholders vote in favor of all resolutions other than agenda item 7, and I intend to vote all undirected proxies that I hold as Chairman in favor of each resolution other than agenda item 7. As stated in the Notice of Meeting, a poll has been called on all resolutions. We will work through each resolution in order, and I will provide you with a summary of proxies received for each resolution as we progress. Now as this is a hybrid meeting, I'll invite questions on each item first from the room, then through the Computershare meeting platform, and finally, the telephone before moving to the next item. General questions relating to the management of the company may be asked during the first item, which is the consideration of financial statements. So the first item of business is to receive the financial statements and the directors' and auditor's reports for FY '24. If you have any questions about the reports or on the management of Lendlease, please submit your questions now. For those securityholders attending the meeting in person here in the room, please make your way to a fixed microphone point and make yourself known to the attendant by showing your blue or yellow attendance card.

Good morning, Chairman. I'd like to introduce Peter Gregory representing the Australian Shareholders' Association.

Michael, I'm here representing the Australian Shareholders Association. I have proxies from 124 securityholders, totaling 480,000 shares. I'd note also that 60% of Lendlease's securityholders have less than 1,000 shares. So I think the questions I'm putting to you really represent that large body of people who are invested in Lendlease. Firstly, Michael, thank you for your engagement with ASA recently and also over the years. It's been very productive working with you, and we thank you for that.

Thank you.

I'd like to ask some questions about the security strategy update. Tony has just given us an update on the recycling process that's in place and the rightsizing of the organization. But I'd like to ask is there any likelihood of any further impairment as a result of the update? Or is there a possibility that the impairment in place is overcooked?

So the -- good questions, Peter. And again, from my perspective, also I've really very much enjoyed the engagement with the Australian Shareholders' Association. I think you do a very important role in representing the broad body of securityholders and investors generally throughout Australia. So thank you. With respect to the capital recycling, it's progressing well, as Tony mentioned. And the majority of our $2.8 billion recycling target for this current year has been announced in terms of the transactions that we're working on, which includes the completed life sciences joint venture with Warburg Pincus and the announced sales of Military Housing as well as the 12 community projects that we're selling to Stockland, and they were touched on by Tony. We've also completed the sale of our U.S. East Coast operations. So that's progressing well. As Tony mentioned, the work on reducing our overhead with a target of $125 million run rate by the end of this year is well advanced and the team are targeting to increase on that. With respect to your question around the write-downs, the management are confident that the amount of impairment announced was adequate. Of course, that is all subject to where property markets and interest rates move over the coming time. And these are long term, as we mentioned, some of the realization of those assets could take up to 2 to 4 years. So at this stage, everything they're seeing is that the divestments are progressing well on track. The impairments are adequate. It's always nice to think, Peter, as to whether there's some excess in there, but we think it's appropriate to be prudent and conservative and to make sure that we're adequately provisioned. And as I say, at the moment, it looks as though that is adequate and good progress is being made.

Okay. No, thanks for that. Michael, most of the change in strategy that's happening is affecting international marketplaces. And there will be a number of activities that are already in process. How firm is the line being drawn on -- in terms of stopping what was happening before? And is there processes in place, I guess, to stop the temptation of PAP diverting resources to being continuing with some things that are already underway? So will it be a firm cutoff? Or will there be some challenges in terms of exiting some projects?

You're worried about people drifting off the reservation.

Yes, absolutely.

So we -- the strategy that we announced in May was very much about focusing on our core strengths. And a core part of that, as you've alluded to, Peter, was around Australia, where we clearly have very strong competitive advantage across all of investments development and construction. And that's one of the key focuses that we have with bringing back the capital from some of our international developments in order to drive the growth in our Australian business. With respect to offshore, we are committed to our international investments platform, again, where we have core competitive advantages in the real estate and property investment. But with respect to our development activities offshore as pure developments, what we are doing there is completing those where we have joint venture arrangements with major capital partners, major superannuation funds from around the globe, we are committed to delivering on those, and we will. And with respect to those, which were just pure on balance sheet developments of ours, we are working as we speak with various parties to see how to best realize those and bring the capital back. So the extent of new activity offshore is very much going to be focused around that investment management platform. And we have very strong controls around the management structures that have been put in place in order to keep people focused on delivering against that. And I'm absolutely confident that Tony, together with John and the rest of the Board, will make sure everyone remains focused on delivering what we said we would do in that strategy.

Okay. Can I perhaps use the Asian joint venture, just as an example, to test a little further? Can you describe how the activity going forward with that project will be? Will it be purely as an investment manager? Or will there be some development involvement too?

So it's purely -- that's a joint venture now that we are [indiscernible] with Warburg Pincus, and we also have external capital partners that are part of that joint venture. That joint venture is all about the booming life sciences sector in Asia. And the activity there is very much within our investment management world. So that reports up to Justin Gabbani, who is Head of Investment Management globally. And it is anything we do within that will have to be part of an investment management mandate of that joint venture with us as one of the joint venture parties. We will not be going out in those Asian region, for example, doing property development of our own back. Anything we do will be part of mandates within investment management and within that joint venture.

Okay. I'd now like to ask a question about the people of Lendlease. This is a fairly large, and I expect traumatic change for many people and also has the potential to impact the culture of the organization going forward. Can you describe how Lendlease is supporting its people, protecting its culture and the people who remain in this right-sized organization, how your engendering their belief and confidence in the company going forward?

Thanks, Peter, and that's a very thoughtful and perceptive question. As you say, it's been a very deep change, and we should notice, well, there's been a lot of change over the last 3 years under Tony's leadership. But as you say, this is taking that to the next level. And it's one of the reasons that so much thought went into how we were going to manage those change programs before we made the announcement in May of this year for that very reason. And so very detailed and targeted change management programs were developed ahead of that announcement. And that's involved very detailed communication plans, engagement with senior leaders across the organization and continual regular updates, keeping people posted as to developments and with respect to impacted individuals outplacement support and the like. I think what has been really important is to provide clarity on the strategy. It is why changing -- wide ranging, that change in strategy. So it will need to be continually reinforced because what we're finding is what our people are looking for is just continual reinforcement of what the strategy is to be very clear around that and to understand what it means for them and what is their role in that and for us to be very -- and management to be very clear and transparent in letting people know where they stand. We also have a global mental fitness program in place, which provides coaching to our employees to help them address any issues together with any family members. And so we have over 2,000 active users of that platform. And we've also made a very strong push into psychological safety in the organization, training up individuals to be effectively mental first-aid partners. And all of this is very much driven around making sure we look after our people who are staying with us and that they feel committed and continue to do the great work that Lendlease does, and also that we look after the people who are leaving and make sure that they leave with memories of Lendlease of being a very professional and supportive organization.

Okay. That's good to hear. Just a final question from me for now to do with emissions. Lendlease has very proudly been a strong player in terms of reducing emissions from its activities. But I'd suggest that your current measure of absolute emissions reduction is not going to be relevant in the future as the organization is going to be somewhat different. And can you please assure shareholders that Lendlease will move to an intensity measure as soon as is practical so that we have a better understanding of what's happening with emissions going forward?

Yes, that is, again, a very good question, Peter, because when we started out on this journey in terms of our public commitment, so Lendlease has for decades been very focused on environmental issues. But in 2020, we made our commitment to net-zero Scope 1 and 2 by 2025 and to absolute Zero Scopes 1, 2 and 3, subject to the developments in technology that will be required by then by 2040. And at that time, it was very much around gross emissions. And what impressed me with the way management brought that to the Board was the detailed thought that had gone into what was the existing footprint of emissions, what could be the trajectory of bringing that down through to 2025, specific -- in what specific areas, what would we need to do, what would be the cost of doing that, what would be the offsets we needed, what would be the cost of those offsets? But as you're pointing out, in a sense, the way people analyze this has evolved. And so looking at intensity is now important because for us, if we have a large construction project underway, then there's a certain level of emissions that will come from that, as that construction project moves into the next phase, of course, it completely changes. So looking at an intensity side of things is very important. You can actually calculate the intensity figures on our detailed ESG data book that we issue. And our next issue of the data book will be coming out on the 25th of November this month, but it is something that we will continue to look at because, as you say, as our business is reshaping the way we look at this needs to be reshaped as well. So thank you for that question. Any other questions? We have another one here.

Good morning, Chairman. I would like to introduce securityholder, Sean Wearing.

You and I are known to each other and have been over some years. And it's, therefore, with some regret that I find myself standing here today as a former Finance Director of Lendlease in the Dick Dusseldorp's period. I have watched with some interest what's been happening to Lendlease now over practically all of my adult life. And I go back to the period when we were involved in internationally developing the activities of Lendlease, which were quite embryonic in those days became much larger since. But to witness what has happened to Lendlease in the last few years, it's -- to say that it's a calling is an absolute understatement. We've seen a complete collapse of capability on the part of the organization in terms of being able to handle its business. And I regret saying that with enormous deepness. It's a company that I know and love, and I hate to see what's happened to it. The current position of Lendlease as exemplified by its current share price, which is equally appalling, it leaves me completely confused. I mean, as I understand what you're about, having developed extensive overseas operations, particularly those that were bought after we sold MLC, which I had a large role in acquiring, we seem to be retreating from all of that internationally, at least in terms of development and construction. That was, and I hope still is the major strength of Lendlease is development and construction, yet we're retreating a rather untidy retreat at that back to Australia. And do I, therefore, understand that we're going to continue as a major development and construction organization here. And I know that our credentials to do that are just fine. But that in terms of overseas, we are literally going to adopt a purely investment role. And I think you answered that question for the Australian shareholder, but I just want to confirm that, that is correct. Can you tell me what proportion of our workforce will no longer be with us as a result of this transformation? I'm interested to know the total employee numbers approximately and what number approximately won't be with us in the continuation. And I also want to say that I congratulate you on your time with the company. I think your replacement, although a person seemingly not of our industry, but certainly with a very great track record, I welcome him, and I wish him great success. I do think you should look across your Board, though, to ensure that those that are there actually do have the requisite skills for the business that we're in. Can you answer some of that?

Absolutely, Sean. And very good questions. And like you and as Tony has expressed as well, none of the Board are happy with the way the stock has performed. I think we need to reflect on a number of things around circumstances. Firstly, going back to that time when you mentioned around MLC. Interestingly, Bob Welanetz, one of our directors here back in the '90s was with one of the companies that -- in the U.S., the real estate companies that was acquired at that time. But the majority of those investments that are acquired at that time of MLC were actually sold from the group through the 2000s. The only thing that -- of substance, which is, I believe, pre-MLC sale would be the Bovis Construction Group, which had the big presence in the U.K. and the U.S. and has been core to our construction business over there.

Bovis was post-MLC.

Now what's happened in that construction world is the margins in those offshore markets have come down considerably because the barriers to entry, particularly in the U.S., are very, very low. And so in terms of the use of our security holders' money, in terms of the risks you take in construction, both financially but also with people, the returns are just far too low in those offshore markets. And that's the reason for that element of the strategy. Margins typically of 1% or below, which will be quite different to the time when you were a Finance Director. With respect to then -- so what has happened post then, it's worth thinking back to pre-COVID and just prior to the announcement of the global pandemic, which was in February 2020, our stock was trading well. I think it was over $18. It had been as high as $19 in December. And with the announcement in February of 2020 of the global pandemic, all property stocks globally had a significant drop. And Lendlease, in particular, in the Australian market was hit particularly hard because of our international exposures, and that's the way the market reacted. So there was a deep setoff in the markets. What then has followed is one expected through COVID that the property cycle would be depressed. I think what has surprised a lot of people is that 3 years post-COVID, the property cycle globally is still depressed. What that identified was that as part of our growth offshore in the development business, which really took off in 2015 and had been very well received by the market up until COVID. What it exposed was the extent to which that growth quite naturally because it was new business was long dated. And then due to COVID, everything got delayed, and then due to the downturn in the property cycle got delayed further. And I'm sure, as you would appreciate, delays in property development are tragic for returns. And so we had this fabulous pipeline that we've built up offshore. But what has become clear to us is that has really exposed our balance sheet in a way that we need to now pull that capital back. And that's what we've announced in May that we will be doing that. And that, by the way, has been really well received by the market, as you would have seen in our stock price since then. So we have strong support for that strategy. And in the round of investor meetings that I did together with Elizabeth and also John joined us over the last month, everyone has said that, that's exactly the strategy they think we should be pursuing. And you're quite correct. What it means for our offshore businesses is that we will be focusing on our investment management platforms where we do believe we have a competitive strength.

Employee numbers?

Employee numbers. So if I go back to the beginning of the piece, when we had our full Construction operations, we were, I think, Tony, about 3 years ago, around 13,000 people?

Yes, we were over, Michael, 11,000 people. Today -- at the 30th of June last year, the financial year, we're 6,500 people. As of today, we're 5,500. Post all the actions we're taking, we will be under 4,000 with the majority of that workforce that will be here in Australia.

Chairman, I would like to introduce securityholder, William Prentis.

Just a couple of questions. In your address, you said that you're accountable. So can you expand on that further? And why I'm asking that is that as a security holder, we're accountable in the sense that our securities haven't done very well. In most cases, people in this room have lost money. And how have you been accountable for the results that have happened here other than saying that you are accountable? I noticed that you're still being paid quite well, I should imagine, 700,000 or something like that. But in what other ways have you been held accountable?

So I own 200,000 securities that I purchased with my own money. And so I feel very much the same outcomes that you would have suffered. So that's how I feel accountable very much through that. And also in terms of making sure that we work really hard as a team in order to find the right strategy to move forward to unlock the value that's clearly inherent in our business.

Okay. The next thing is on -- I think you call it project Refresh.

Yes, the Strategic Refresh, yes.

Strategic Refresh. And that sometime in the future, the shareholders are going to get around about $500 million return to them. Is that -- and I'm just wondering in what form is that going to be? Is it going to be a special dividend, share buyback?

So Sean, what we announced in May as part of that strategic refresh that was a range of actions, which were designed to restore balance sheet strength to bring our gearing levels down to provide the capacity for the further growth in our development business, particularly in our investment business. And also that we said we would be considering a buyback of up to $500 million, dependent on market conditions and the progress of that capital recycling. That is not something where the Board has formalized a view of what form it would take, what the timing would take. And so that will be subject to further discussion down the track.

In relation to a buyback, I think the last time that I remember when Lendlease did a buyback was when the proceeds from MLC came through and they did a buyback and may have been at $20 a share or something like that. So that was sort of a fairly disastrous buyback for continuing shareholders at that stage.

Yes. I think that would have been 20 years ago. We have done buybacks, I think, Tony, more recently.

It was in '17, '18.

Yes. So that was probably the last buyback would have been then, which is 7 years ago.

Yes, 7 years ago, the -- to do the buyback, you felt that the balance sheet was sufficiently strong to be able to do the buyback at that stage I'm assuming.

Yes, that was before COVID and before the 3-year downturn in the property cycle that we've currently enduring. With respect to a buyback, if I can understand where you're heading, obviously, one of the things the Board will need to consider is what do they think is an appropriate valuation on the company? What do they think about where the stock is currently trading? What do they think about the financial capacity and the balance sheet, et cetera? So there are a whole range of factors that will need to be taken into account.

So you mentioned there a valuation of the company. Do you people have a view of what the valuation of this company should be now? I'm not asking you for a specific answer, but just in general, is that something that comes up at Board meetings?

Yes, that -- it's good because we wouldn't give you a specific answer on that, but it absolutely does. So it's one something that I think all responsible Boards should have a view of what they think the value of the strategic plan is, and I can assure you we do.

Yes. Unfortunately, not all Boards are responsible.

Thank you.

And with the project refresh, to me, it seems like or strategic, whatever it is, you call it, it seems to me more like a liquidation, a company liquidation. We'll get rid of stuff that we don't want. And I noticed with Mr. Lombardo, I think he's a chartered accountant, and I'm not sure whether he worked in the liquidations area or whatever, but -- in the past, when we had people like Dick Dusseldorp or Stuart Hornery, who I remember just like the gentleman there, I did never work for Lendlease, but I remember them. They were basically engineers, I would say, people that really knew the business inside out. And no disrespect to Mr. Lombardo, it looks like he's come in to say, well, we've got to cut costs here. We've got to do this. And so it's been -- it's more sort of like a liquidator coming in and saying, let's get rid of this, let's get rid of that and let's make it more efficient, if you might say, other than at the opportunities that can be out there, which I think people like Dusseldorp and Stuart Hornery did.

Well, Sean, I can assure you that the Board is very focused on 2 things. One is delivering on the strategic reset in terms of the capital recycling. The reason that capital recycling is important is in order to put us in the position to fund the growth opportunities. So there is just as much conversation around the Board table and work with management on looking at what the growth opportunities are, but we've got to make sure that part of that is really delivering on the capital recycling in order to put our balance sheet in the position where we can take advantage of those growth opportunities.

I suppose my question was more directed at -- I think that at the top, and it hasn't been there for a while at Lendlease, people of construction experience are right at the top. I don't know, maybe there are people there that are, but certainly, Lendlease used to be very innovative, very forward thinking. They did a lot of -- I think the other gentleman there said they did a lot of firsts not only in Australia, but around the world. And I think they basically introduced REITs to America, those sorts of things. And that was sort of very lateral thinking and very creative. That's just an observation, if you might say.

And I think, Sean, that it's a good observation, and that is -- William, sorry. My son is William, so I should remember that. The -- I think that innovation is still the hallmark of what we do. And I would make a number of observations. You look at the extent of phenomenal work that we continue to win. Tony has already touched on in this last 4 months of this FY '25 financial year, the wins we've had in Darling Point here, the build-to-rent in Melbourne, Melton Hospital, Queen Victoria market earlier on in the financial year. So there continue to be significant wins, significant innovations. So -- and if you look around the Board table, the last 4 Board appointments we've made are all of people with deep experience in real estate, whether that's in development or in investment management. So there's a huge amount of talent throughout the organization, a huge amount of wins and innovation, but we do have to deal with the structural change and the cyclical change that has been forced upon us to realize that we need to get that balance sheet back in order in order to deliver on the things you're talking about.

Just a general observation here today. And when I sort of looked around the room, and I suppose this might surprise you sort of reminding me of being on a luxury cruise, where you have a big ratio of passengers to people serving you and things like that. There seems to be -- I know that -- I think they're all Lendlease employees here, and there must be sort of a high proportion of Lendlease employees here. I know that they deserve time off every now and then. But it just seems very, very inordinate. I don't think I've been to a meeting where it's probably the Lendlease employees are close to outnumbering the shareholders.

Well, I think there are a couple of things happening there, William. One is online. So nowadays, with the hybrid meeting, so many people will be watching this from online. We, as an organization, believe out of respect and more of a democratic process, we should hold -- continue to hold the physical meeting, the online meeting and also invite people on the telephone. And that's the sort of difference in weighting you're going to get. And I would have thought it was a sign of respect for our executive management to take the time to come along and meet with security holders. And I can assure you they are working very, very hard. And whatever they're not doing now because they're here with you as a security holder, they will be doing over the weekend, late in the evening or early in the morning.

And that goes for the Board as well, sir?

Yes, it does. This is a very, very hard-working Board.

Just on that point, does the Board keep time sheets?

We have a Company secretary who keeps detailed meetings of all our meetings. So I'll give you WordCamp, if you like. We have another question.

Good morning, Chairman, introducing securityholder, Aaron Speiser.

My question is actually for John. Given whenever a new CEO comes in or a new Chair, often, there's a bit of a [indiscernible] and all of those sort of things. And given you haven't been on the Board for very long, just curious as to what level of due diligence you did in coming into the role. And are you in agreement with Michael and Tony that the future is bright, the provisions are more than sufficient and that it's happy days are here again?

I'm not sure I made it quite as lighthearted as Aaron. But John will be speaking later when the resolution comes up for his election. But I'm very happy, John, for you to give a response to that question.

Answer Aaron's question.

Happy to answer Aaron's question. Thank you, Michael. I was contacted in late June, and I started my due diligence then, and I'm not sitting here having not done extensive due diligence, firstly. Your main thrust of your question is about whether there will be a rebasing or however people talk about that my track record at Nufarm and at CSR, I'd point you to that. I think what was -- what occurred in May was a significant restatement of positions across all assets. And as I sit here now, having attended 1 full Board meeting, I'm very comfortable with the position that's been taken.

Thank you, Aaron. Any more questions? We have another one here.

Introducing securityholder, Diana Pride.

And before I forget, I wish you all the best in your retirement, Mr. Ullmer.

Thank you.

So my questions are around Lendlease's reputation in koala conservation and sustainability. So the first is quite detailed. Are you aware that Lendlease gave false information to a Member of Parliament, that is Greg Warren, the Member for Campbelltown, in a letter to him from -- which was signed by Brendan O'Brien claiming that there was 0 koala vehicle strikes on the 3-kilometer stretch of Appin Road between Noorumba Reserve and Beulah since the work started on that stretch of road in March. However, publicly available records on BioNet, a government database, revealed that there have been 4 koalas hit on that stretch of road, 2 were killed, 1 was actually a Joey near Noorumba and 2 were severely injured and another koala was trapped behind the fence. I'm happy to provide you with a copy of the letter and the evidence that I have provided to dispute that. So that's my first point. So maybe my next one...

Diana, would you like me to take them one at a time, that be easy, and give you a bit of a break?

Yes.

So we will absolutely follow that up. So I'll have one that the teams speak with you after the meeting and take those details and ensure that we look into that because that is not what Lendlease does, and let's make sure that we're talking about the same thing. With respect to the works that you're referring to on Appin Road, I'm sure as you're aware that Appin Road for decades has been the cause of significant koala deaths and injuries. And I believe, in fact, that is the greatest threat to the koala habitat in that area. And that Lendlease has for ever since we've been involved in this project has been working with the appropriate authorities to build the underpasses underneath Appin Road in order to allow koala traffic to safely traverse as they move from one river system to the other river system in that area.

My next question is on that.

Okay. Well, if I just finish off that. And as you then be aware that, that work has started recently. The reason it hadn't started earlier was the need to get the various approvals in order to do that. And it was not because of any delay on our part. It's also included the fencing along there and replacing that fencing. And so that's another key part of keeping the koalas away from that dangerous stretch of road. So off to your second question, but we will follow up what you said immediately after this meeting.

Yes. So in regards to the underpasses, in 2022, I asked you a question about the planned underpass on Appin Road and the design of the underpass. And it turned out that the design originally was only 2.4-meter round pipe, which was we felt -- and I felt and others felt was suboptimal. And as it turned out, after the submission process, the design was improved to a box cover, which is obviously much better and is more proven to work, and that was largely due to the advice of Dr. Steve Phillips. So we -- I have a concern that Lendlease uses Ecological for their biodiversity reports. And the biological report -- the report for the road works on Appin Road and the underpass was signed off by Ecological, but even the Environment and Heritage Group from the Department of Planning questioned the adequacy of the biodiversity assessment to support land proposed use on Stage 2. So we have -- I have concerns of the use of Ecological and in hindsight, should Lendlease have followed the advice of Dr. Steve Phillips who's a recognized koala expert and the author of the Campbelltown Koala Plan of Management. He's written 4 letters -- 4 pieces of advice, the last 2 to the government about the design of the underpasses. And I know Lendlease has changed the design, which is far superior. But also, there's a problem with the timing because koalas have been killed on that road now because of the fencing. Normally, the koalas would move from the East with the Georges River across their corridors through to the Nepean River. And before when it was just farmland, they would walk through paddocks. But now they face a fence, and it's actually breeding season, so they're trying to get across the road. That's the way the young koalas move towards the Nepean river, and they're being trapped on the road because the fencing has already up, Noorumba's blocked off and the koalas is getting stuck on the road and getting hit by cars. So really, the underpass should have been built first, which is what saves koalas, has always advocated for. So I guess there's two questions there. One in hindsight, should Lendlease have actually engaged a koala expert? And in the second place, the timing of the underpass.

Well, as I'm sure you're aware, there's been very expensive engagement with all manner of impacted parties and experts over the period of this development. I think it's around about 9 years that this development has been underway. And clearly, going forward, that development now is part of one that Stockland will be taking on from us. And I'm sure they will continue to engage extensively and do the right thing. We've always complied with and engaged with all the regulatory requirements, the Chief Scientist report, et cetera. The company has engaged koala experts. And indeed, I can recall, Tony, I think it may be 4 years back, there was a presentation to the Board by the Koala expert that had been engaged, talking on a whole range of issues. And in respect to the underpasses, I'm trying to remember the time frame, but certainly, the Board has seen the renders on those wide underpasses that are being put in place sometime ago. So it's one of these things where we're engaging very extensively. We are responding where appropriate and taking the right advice, but there are clearly going to be differences of views. I can recall one of the complaints being made was the area wasn't fenced, and there's something like 20 kilometers of fencing I think, that's required along that area. But if you stand back and look at it from a big picture, Lendlease has committed to spending $35 million on koala measures there to encourage and protect the koala habitat, including significantly increasing what is the current koala habitat as opposed to the farmland that is currently there. So I will get one of our team to speak with you directly afterwards on the points you've raised, and I do appreciate you raising them. And hopefully, those questions are -- have been -- well, you won't think they have been adequate. You don't think they're adequately answered and you may have another one. So let's see if you got another question.

Another question was about -- around reputational damage too. I know you've always said that you comply with the advice of the Chief Scientist. But on many occasions, I've pointed out that you haven't. It's better now and closer to his advice, but Woodhouse Creek Corridor is still not wide enough. So yes, I appreciate it if you could follow up.

Yes. Let's be clear, we have got all the environmental and other approvals required at this stage for the work that's being done.

Yes, that's on Stage 1, yes.

Yes, yes. So let's not get into a suggestion that in a sense we're doing something that is not allowed.

No. But the underpass should have been your first and then the koalas wouldn't be getting killed.

But I think you should take that up with the road authorities rather than Lendlease because we've been trying to do that for some considerable time. And we are the ones that get in the face of it because it's not happening, but it's been constant discussions at the Board level as to why is this not happening? And the reason it's not happening is the time it's been taking to get the regulatory approval.

Right. So the reputational damage side is backed up by the fact that Australian Ethical divested its shares from Lendlease and their grounds was lack of transparency about how you were working out for koala corridor widths.

Yes. And we're engaged with Australian Ethical very extensively over a long period of time. And in the final letter that they wrote to us setting out their reasons, I recall that one of the final things they said is that ideally, they would like the whole land returned to pre-farmland as a koala habitat. And this is one of the things where you get into this challenge between the whole issue of affordable housing, the appropriate and important protection of biodiversity, dealing with issues such as climate change, et cetera. So how are those things come together in the growing cities that we have around the world is a challenge that needs to be phased into and it's something where I think we've all got to have an open and transparent discussion with people such as yourself, developers such as Lendlease, politicians, the community.

On that we agree.

Thank you. If there are no more questions in the room, are there any questions online?

Chairman, the following question has been received from Stephen Maine. As one of the biggest construction companies in Australia over many decades, you obviously have a long history of dealing with the CFMEU. Some of the ousted officials of the Victorian CFMEU have described engagement with our company over many years as their toughest and longest battle. Could CEO, Tony Lombardo, please provide some broad comments on how we managed the difficult process of dealing with the CFMEU during his time with the company and whether there has been any noticeable change since administrators were appointed.

So I'll certainly throw that one to Tony, but I will point out that in Australia and around the world, we endeavor to have very positive relationships with all of our employee groups and those that represent them. And I think, Tony, it will be fair to say that we've had productive relationships, and we've had good progress always on our construction projects.

Yes, I'd say the CFMEU like a number of our key stakeholders is one of our stakeholders we deal with all the time. Lendlease has about 300 people who are actually part of the union and are on ABA. So from a Lendlease standpoint, we have relationships with those unions. Our supply chain also has a significant amount of workforce that are part of the CFMEU. So as a business, we continue to engage, we continue to work with them. But we do have ABAs in place that last for a 3- or 4-year period. So there the regulations that are in place as a company, we follow those regulations and we work productively with all of our stakeholders.

Thank you, Tony. Karen, are there any more questions online?

Chairman, the following question has been received from Stephen Maine. Thank you to Michael Ullmer for his 13 years of service on the Board, the last 6 years as Chairs. It is always helpful for investors to have access to some exit perspectives from retiring directors. Could Michael please comment on what he regards as the best 2 decisions made during his time on the Board and what are his 2 biggest regrets? Also, could he please clarify the history with his predecessor, David Crawford, given that both of you worked together for many years at KPMG, our long-term auditor. Does Michael agree with the optics were not great of having successive long-term Chairs who hailed from our long-term audit firm, particularly given the shareholder experience and the earlier comments from shareholders about the lack of engineering and construction experience at the top of our company?

Okay. So I'll take the last question first because I think it's easiest. And with respect to my association, yes, in the early part of my career, I did work with KPMG. Then I worked with one of their competitors, then I worked with 2 major banks. So I don't think in any way that I have a particular association of that nature with KPMG. We have run in the last -- the time since I've been on the Board 2 tender processes, 4 audit appointments. The first -- the second one, the most recent one we paused given all of the uncertainty that was happening in the audit market at that time for -- with respect to other firms, not with respect to KPMG. And so that is something that I'm very comfortable. I'm not quite sure about the relationship with engineering. What I can tell you with respect to the KPMG audit approach, they do have a very significant capability of specialist engineers who they bring to bear at all of our construction sites around the world when they are doing our audit. So from a Board perspective, we are very comfortable that they have, as do other firms, a very strong capability in order to properly audit our company. And I would also add there's no sort of evidence of any concerns from that quality of that audit quite reverse. With respect to the 2 best decisions and the 2 that I regret, I think it's -- in some cases, they're one and the same and in responding to Sean's question earlier. When you go back to 2015 and look at our strategy to then significantly expand our development capability in offshore markets, that was incredibly well received by the market. It was very well executed by the team. And we built up a pipeline over the ensuing 5 years of around about $130 billion of developments around the world. And through that time, it became clear certainly to me, just those depth and strength of our capability and how highly we regard it in a global context, around the world and to be able to showcase incredible developments like Barangaroo, to people based in London or based in Kuala Lumpur or based in Singapore, it really demonstrated what this great Australian company could do. And so that, to me, was a very strong strategic move. And as I said earlier, the issue is that, that building up that pipeline and then the combined impacts of COVID and the continuing downturn in the property cycle has then exposed the problems that, that has created in having such a long-dated pipeline, which gets deferred because of those externalities and the need to then just revisit that and take the hard decisions we have. So I think that is certainly sort of in the sense the ying and the yang of key decisions like that. And as part of being life as a Non-Executive Director that you have to, with the team, take the decisions that are bought out, appear to be the best decisions based on the circumstances at the time and the information you have. And if those circumstances change, you've got to have the courage to face into it and revisit those decisions and take the necessary actions. So I think I'll leave it there. I didn't get to your 2 plus 2, Stephen, but I gave you 1 plus 1. Are there any other questions?

Chairman, there are no further online questions for this item.

Thank you, Karen. So let's move to questions from the telephone. Are there any questions from securityholders who have telephoned into the meeting?

Thank you, Chairman. There are no questions on the phone line.

Okay. So we've had a good range of discussion on issues which are really important, and I thank everybody here for those questions. So I will now bring Item 1 which, as I mentioned at the beginning, is a nonvoting item to a close. We will now continue with the formal business of the meeting. The first 2 resolutions in agenda item 2 relate to the election and the reelection of directors. That's the election of John because it's the first time that he's come to this forum and then the reelection of Nick. The experience and profiles for the directors standing for election and reelection were included in the Notice of Meeting. Prior to seeking election or reelection, all directors confirmed that they will continue to have sufficient time to properly fulfill their director duties of Lendlease Group. So first, turning to agenda item 2A relating to the election of Chairman-elect John Gillam as a Director. John's experience and skills are outlined in the Notice of Meeting, and I will ask John to say a few words to the forum.

Thank you, Michael. It's a great privilege to have been appointed to the Lendlease Board last month and to stand today for election in front of you all, our securityholders. I'm excited to join the Board at this very important time in the company's history. As you can see from the details in the Notice of Meeting, my career to date has been diverse and spans almost 4 decades working at the executive and non-executive level for some of Australia's largest and most well-known companies. Across all different roles, I've prided myself on strategic and operational execution that achieves positive business outcomes. My executive career included 2 decades working within the Wesfarmers Group, where I was the CEO of Bunnings for a dozen years and also Chairman of Officeworks for 9 years. Since 2017, I've enjoyed a number of Non-executive Board roles, including 6 years as a listed company Chair. I'm the current Chair of Nufarm and was likewise the Chair of CSR until its recent acquisition. My ongoing membership of other Boards provides me with additional perspectives that will assist with my insights needed at Lendlease. Looking to the future, there is much to do to ensure Lendlease restores its financial performance. My immediate priority is to work with the Board and with our management team to identify opportunities that can accelerate delivery of our Refresh strategy, intensify the quality of its execution and improve efficiency. Thank you for your support.

Thank you, John. We will now take questions relating to the election of John as a Director. Are there any questions from securityholders here in the room? We have one here.

Chairman, introducing Peter Gregory, representing the Australian Shareholders' Association.

John, thank you for that brief synopsis of your background and what you can contribute to Lendlease. I'd like to ask you about your style of going about things in terms of implementing change as is certainly going to be the charter going forward. Can you talk about in terms of your personal way of going about things, how you'll approach it?

It's an interesting question. Thanks, Peter. Look, I care about what I'm involved in. I care about the assets that we're responsible for. I care deeply about the outcomes that we can achieve with those, and I care about the people that I'm working with. And I focus very much on playing my role in a team to bring about the best that we can.

Thanks, Peter. Are there any other questions in the room? Okay. If there are no questions -- further questions in the room, Karen, are there any questions online?

Chairman, the following question has been received from Stephen Maine. Could new Director and Chair-elect John Gillam and the Chair comment on the recruitment process that led to John's selection as the next Chair, which headhunting firm was involved, which major shareholders or proxy advisers influenced the process and did the full Board interview John as a group? And did they interview any other candidates? Did John know any of our directors before engaging with the recruitment process?

It's pretty comprehensive there, Stephen. So I'll try and address all of those, and John can add at the end. So in terms of the process, we started out this process in March of this year firstly looking around the Board table to identify were there any of the existing directors who both had the inclination and the support from colleagues around the table to be considered as candidates, and we identified through that process, which was a process where Elizabeth and I sat down one-on-one with each of our Board colleagues that there were at least 2 well credential candidates who had the time availability to take on this role. During that time, there was -- our first half results had been released. So as part of my normal practice, I was out there meeting with investors and getting their feedback. That came through a very strong preference from the external market. And when I say the external market, I'm talking around meetings with 15 to 20 of our larger -- largest securityholders that we should be making an external appointment. I made my announcement in May that I will be retiring at this AGM. That is something that has been long in the planning between me and my darling wife, Jenny, that I would be stepping down then. And so we made that announcement and immediately appointed one of the top Board advisory firms. I don't think it's necessary to go into who that firm was, but it was a very highly credentialed, very well-regarded firm. The market feedback we were also getting at that time was that given the depth of talent in real estate development and investment management that we have built up around the Board table that there was not a requirement for the next Chair to have a real estate background, not that they shouldn't have, but it wasn't a necessary requirement. And as part of the process, we had developed around the Board table a strict list of criteria as to who we were looking for in terms of their skill sets. When I was going around meeting the investors after that May announcement because I then did another round with key investors and the like, they -- I said to them that if they had any names that they would like to throw into the mix, I would ensure that they would be given serious consideration. And the interesting thing was at the same time as the Board advisory firm was drawing up for the Board's consideration, they had long list of potential names, all of the names that came through from a market sounding point of view at that time were on that long list. So there was a good sort of coalescing of names. From that point, the Board met and brought down that long list to what I would call a medium list. And as is normal, the advisory firm, the search firm reached out to the people on that medium list to see on a no-names basis to see if they had interest in the -- being considered for the appointment. The result of that was that we got down to a shorter list of 4 or 5 candidates who then the Board decided that we would meet one on -- I was going to say one on one, meet with those candidates. And the way we did that was 3 non-executive directors at a time. So there are effectively sort of 3 meetings, all done by video because we do have overseas directors with all of the people on that shorter list. The outworking of that was that we then came down to a short list of more than 1. And there was also, at that stage, another name suggested, which we also threw into the mix and went through exactly the same process. The final stage that we came to was -- given the significance of this decision was to then meet in person with each of the final shortlist candidates, as I say, there was more than 1. And they had a 90-minute session with the Board face to face. And I had shared with each of those candidates beforehand a list of the topics that my fellow directors would be asking questions on and that was around strategy, it was around execution, it was around culture, and it was around any views they had on Board and management. And so we had those final 90-minute sessions, assessed the individuals against our strict list of criteria and made the decision following that where it was a unanimous decision of all people around the Board table to select John. In terms of any prior context, John, the first time I met you was when we had the interview. So I hadn't met John before. And I don't think there was any sort of close associations with anyone around the Board table indeed with any of the candidates. So I don't think that was a factor. So I think, hopefully, I've covered off on everything, a very comprehensive process. John was clearly a standout candidate as you have seen. And one of the things, as I mentioned earlier, that's been really good is John cleared his diary to be able to come around and meet with all of the stakeholders that Elizabeth and I had already scheduled to meet with in the lead up to the AGM, which, again, is a very normal practice, but it gave John the opportunity to see and the discussions that we were having with our investors and the proxies and also sort of see get it really actually a very good induction in addition to the normal induction around current issues in the company. So that was very positive. And then the final comment I'll make is that on the day of the announcement, I spoke with all of the key stakeholders who had put forward names. And more recently, as I say, we have done the rounds with the investors, and all of those investors in those recent rounds have said that they have -- John has their full support. So thank you for that question, Stephen. Karen, are there any more questions online?

Chairman, the following question has been received from Stephen Maine. The AFR Street Talk column yesterday reported the following: Street Talk understands Gillam has powered through a 1-man roadshow of Lendlease's largest shareholders, giving John Wylie's Tanarra Capital and David DePillo's HMC Capital, the opportunity to air their gripes in private for a change. Could our Chair-elect, please detail which major shareholders he selectively briefed, whether it was one, whether it was indeed a solo road show with no other Lendlease personnel present and what he both learned from these exchanges and promised our most public critics?

So before I ask John to respond on that, I'm sure Stephen didn't mean to use the term selective briefing. And -- but as I've already mentioned, there was a comprehensive road going around seeing our stakeholders as we do every year ahead of the AGM with Elizabeth and myself. And as I say, it was great that John was able to clear his diary in order to join and be part of that. So that was around 20 meetings that we would have, including with the Australian Shareholders' Association as part of that. And I know, John, that the various stakeholders have reached out to you separately and you may well have had conversations with them. Do you want to make a comment on that?

Yes. Thank you, Michael. Firstly, I'm acutely aware of my obligations as a director and my ASX listing rules and in no way, shape or form, was there any selective briefing. Let me just state that very, very clearly. There was a comprehensive briefing pack that the company released on the 16th of October that outlined all of the matters that are quite normal for a company to be dealing with before its AGM. And Stephen, if you haven't read that, I point you to that. That was the basis for all conversations that I attended with Michael and Elizabeth. I'm not sure how someone thought I was solo when I was with 2 other people, but that's the media. I did meet with other major shareholders to give them a chance for them to explain their concerns. I listened, as you would expect me to. I also met with major customers and other stakeholders. And as a matter of good corporate governance, the discussions I were having were released for the benefit of all securityholders in a letter that I sent on the 28th of October.

Thank you, John, and thank you, Stephen. Karen, any other questions?

Chairman, there are no further online questions on this item. Thank you, Karen. So let's move to questions from the telephone. Are there any questions from securityholders who have telephoned into the meeting?

Thank you, Chairman. There are no questions on the phone line.

Thank you. Well, if there are no more questions, I will show you the proxy position. So these are the votes that we've had ahead of the meeting. If you have not already voted, please select one of the voting options for this resolution. Given voting on all items will not close until the end of the last item, the final results of all resolutions will be lodged on the ASX following the conclusion of the meeting. Now you'll see on the screen there that John has received support so far from 99.48%. John, that's kind of set some sort of record, I think, for colleagues on this table to and others to receive. So congratulations. And on a serious note, that is an extraordinary level of support. And I think applauses will justify. And I think it bodes very well for the future. Turning now to agenda item 2B relating to the reelection of Nick Collishaw as a Director. Nick's experience and skills are also outlined in the Notice of the Meeting. I will ask Nick to say a few words.

Thank you, Michael. Good morning, everyone. I've had the pleasure of representing you, our shareholders, on the Lendlease Board for the past 3 years. Lendlease is a highly regarded Australian company with a proud history, yet like many companies, faces the challenges presented by recent global events. I've been working in the real estate industry for more than 40 years, and I've seen many of these events before. I've been in construction, but my welding skills are probably not up to speed right now. I can refresh on that. I've been in development, investment management and funds management. During my time, I've witnessed interest rates of 18%, inflation of over 10% and unemployment over 11%. I say this because times have been tougher in the past, yet we still face challenges today. I've led businesses and management teams through share market crash of '87, the recession that we had to have in the '90s, the global financial crisis in 2008, and most recently, I've established and driven a real estate start-up company to success through the world shutdown, which was COVID-19. All lived experiences, all situations that have required a deep understanding of general business principles as well as real estate specific knowledge and the ability to assess risk and chart a path for business survival and importantly, business growth. As recently elected Chair of the Board's Risk Committee, I work closely with the management team in identifying both existing business and project risks as well as setting strategies to identify and mitigate future risks for the group. I have a deep experience in the property industry, and I have an entrepreneurial spirit and a drive to continue to positively continue with the operation of the Board and of the Lendlease management team. I have a desire to assist John and my fellow directors in steering the future of Lendlease's Group and to deliver on Lendlease Refresh and growth strategy in the years ahead. Again, I thank you for your trust that you've placed in me for my initial election to this Board. And with your continued support, I do look forward to continuing to be a constructive part and a participant in Lendlease's future. Thank you.

Thank you, Nick. We will now take questions relating to the election of Nick as a director. Are there any questions from securityholders here in the room? Hi, Peter, you need no introduction.

Nick, the kind of process and the change that's happening within Lendlease right now is really hard. And you've described some of the tough experiences that you've been through in your career. Could you just share with us the particular contributions that you've made to the Board in the contemplations and work that's gone through this process?

Sure. I participated as a team member with the -- my other directors and with management sharing experiences of the past, looking at our business model, and how we can shape our business model taking the experience of Tony and much wider business heads so that we could formulate as a team, which Tony and Michael presented, which was the May strategy Refresh, a strategy which is right for the times. It is great to look back on our very, very great and proud history at Lendlease times which have -- strategies that were great for times now have changed. And I hope that my fellow directors would -- and management would say that I've participated constructively in voicing a view which has been encapsulated in the new strategy or the Refresh, I should say, that we've got.

Thanks, Peter. Thanks, Nick. Any other questions in the room? No. If there are no more questions in the room, let's turn to questions received from the Computershare meeting platform online. Karen?

Chairman, there are no questions online on this item.

Okay. Well, let's move to the telephone. Are there any questions from securityholders who have telephoned into the meeting?

Thank you, Chairman. There are no questions on the telephone line.

Thank you. Well, as there are no more questions, I will show you the proxy position. Again, if you've not already voted, please select one of the voting options for this resolution. As I mentioned earlier, given voting on all items will not close until the end of the last item, the final results of all resolutions will be lodged on the ASX following the conclusion of the meeting. So we have there the current state of the votes. You'll see that with respect to Nick, he has 98.4%, so in favor. So not quite the stellar heights of our new Chairman to come, but very, very good. So well done, Nick.

Thank you.

We will now turn to agenda item 3, which relates to consideration of the 2024 remuneration report, which can be found in the annual report and on the company's website. The remuneration report explains how performance has been linked to reward outcomes for our key management personnel at Lendlease this year. The Board has carefully considered the feedback received from securityholders in relation to key management personnel remuneration outcomes last year in 2023 at that Annual General Meeting where we received a first strike against the FY '23 remuneration report. In determining the way forward, the Board has also taken into account Lendlease's current operating environment, including the poor security price performance and securityholder returns as a result of the structural challenges and prolonged market downturn. In the light of those considerations and in order to align the company's key management personnel reward to securityholder outcomes, the Board exercised the following discretions to the executive remuneration framework. For FY '24, the short-term award payments for the Managing Director and Group CEO, Tony Lombardo, and the corporate leadership team were reduced to 0. For FY '25, the short-term award payments for that team have been suspended and replaced by a transformation award focused on security price recovery. This transformation award will be delivered as market price security options with vesting contingent on achieving significant security price growth over a 2-year period. And I should add that there is one very important gateway in the way that is assessed, which is safety. So to the extent there are any adverse safety outcomes during FY '25, they will be assessed in exactly the same way as we do in for the rest of the executive team. In FY '25, the long-term award will be simplified to allocate greater weighting on just the two measures of relative total security return and statutory return on equity with both having an equal weighting. So that means we've dropped out the third measure we had there around investment management ROIC. The Board believes that the revised FY '25 framework has a clear linkage to security price recovery and the delivery of the Refresh strategy because we see those two as intertwined. We note that while the vote on this item is advisory only, if more than 25% of the votes cast on this item are cast against adopting the company's remuneration report, then agenda item 7, being the conditional Board spill meeting resolution, will be put to the meeting today. So I'll now turn to questions on this item. Are there any questions from securityholders in the room today? Peter?

Michael, more a statement than a question. There is no question that we share with you the goal of the remuneration plan for the future in place of achieving an improved return for -- on our investment for shareholders. And we also absolutely want the management team to be accountable for delivering that in the longer term and to be focused on the strategy of reverting to the strengths that Lendlease really has and having more productive and disciplined use of capital. And they are the kind of things that ultimately will drive share price appreciation. But we're looking at a situation now where 3/4 of the variable incentives that management are receiving is based on one thing, on the security price. And while as I said this is critically important and needs to be part of the -- I hate that word.

I struggle with that as well.

Part of the remuneration plan that's in place, we believe that there's a degree of lost opportunity to focus on what's happening right now. Lost opportunity to focus on the milestones that will get us to that. Lost opportunity to have some reward based on achievement of some key metrics in this particular financial year. Those actions that the strategy demands, we think, are important and will provide more immediate accountability and more immediate measurement for management. And so our position is that we would prefer to have a degree of those immediate measurements in the remuneration structure now so that management are not only measured for what's happening but also rewarded for the results they're achieving that might -- that we hope would precede a significant increase in security prices. On that basis, Michael, I'm sorry, but we will be voting undirected proxies against this resolution, not because we don't think the intention is right, but because we believe there's a better approach to take.

And that's a very thoughtful position, Peter. And I respect the decision that you've taken and advice your members. And we thought a lot about this around the Board table as non-executive directors. And what we didn't want to be was in a position where we have a range of what I would call more traditional KPIs, key performance indicators, that are tied to various milestones, management deliver against all of those and yet we find ourselves in the same position as we did in '23 and again in '24 where at the end of the day, we haven't seen that stock price response and the market say to us that their expectation is, why should management get any reward notwithstanding all the huge effort they've put in, et cetera. So we tried to develop an alternative, and I note that it's measured over 2 years, although it only relates to 1 year. So it's getting that sustained performance. So your point about things happening before you see a response in the stock price, well, hopefully, one will see that response in the stock price through FY '26 before the measurement is taken at the end of FY '26. And the other really important thing to be aware of, as I'm sure you are, this applies to Tony and his direct reports, so we're talking around about a dozen people. The next 200 to 300 people in the organization and the executives are on the sort of scheme that you are describing, and so there still will be those drivers within the organization at very senior levels to achieve those milestones that you're talking about, but I accept your position, we've had the discussion before and thank you for the thoughtful way that you've put it.

I also respect your consideration on that point of view. Thank you, Michael.

Thank you. Thanks, Peter. Any more questions in the room? If not, Karen, online?

Chairman, the following question has been received from Stephen Maine. Did any of the 5 main proxy advisers, AXI, Ownership Matters, Glass Lewis, ISS and ASA recommend a vote against any of today's resolutions, including this remuneration report item? If so, what reasons did they give? And did this translate into any material protest vote? Please don't say proxy adviser for and against recommendations are confidential. It is standard for companies to be across this detail and inform shareholders where relevant without publishing the full proxy advisor reports, of course.

Okay. So I won't say that proxy advisor reports are confidential. But I will say that we've just heard that the Australian Shareholders' Association recommended to their members voting against on this item. I think in terms of whether it's created any material process vote, we will see shortly when I put up the proxies that we've received to date. Any more questions online?

Chairman, there are no more questions online on this item.

Let's move to questions from the telephone. Are there any questions from securityholders who have telephoned into the meeting?

Thank you, Chairman, there are no questions on the telephone line.

Thank you. As there are no more questions, I will show you the proxy position, and this answers for one question from Stephen. So the proxy position is set out on the screen. If you have not already voted, please select one of the voting options for this resolution. And based on the proxy and direct votes received ahead of the meeting and the number of votes that I have been informed are represented at the meeting today, I am pleased that our remuneration report has received a vote of over -- as you can see on the screen, over 91% of votes in favor. Accordingly, we have not received a second strike, I thank particularly Elizabeth for the work she did together with our team in remuneration in the company, the enormous work that went in to hearing the concerns of our securityholders, and as can be seen from this vote, we have clearly responded to those concerns. Given that we've received such a high level of support for our remuneration report, the -- as set out in the Notice of Meeting, the contingent spill resolution, there is no requirement now for that to be put to the meeting today. And I see this more generally as a strong endorsement from our securityholders for Lendlease because as has been indicated by Stephen, the remuneration report is a vehicle by which securityholders express their protest vote, which has not happened here. So if we now turn to agenda item 4, which relates to the approval of the allocation of market priced options to our CEO and Managing Director, Tony Lombardo, so that's the transformation award that we've just been discussing. These options will be issued to Tony under a plan, which is designed to incentivize performance through the period of this strategic Refresh. Options create a close alignment between Tony and securityholders and provide Tony with the full benefits of ownership of securities, such as distribution and voting rights only when the options vest and are exercised. The full details are set out in the Notice of Meeting. I'll now turn to questions on this item. Are there any questions from securityholders in the room?

Chairman, there are no online questions on this item.

You jumped ahead of the people in the room, but I don't think there are any in the room. I think Karen is trying to hurry, the pies may be getting overcooked or something. So if there are no questions online, can we please go to questions from the telephone? Are there any questions there, please?

Thank you, Chairman. There are no questions on the telephone.

As there are no questions, I will now show the proxy position, which is set out on the screen. Again, if you have not already voted, please select one of the voting options for this resolution. As you will see, I will note the support for Tony that has been advised to date at 97% of votes in favor of this resolution, is, again, a great endorsement of the work, Tony, that you are doing with the team. So thank you for that. We will now turn to agenda Item 5, which relates to the approval of the allocation of Performance Rights to the CEO and Managing Director, Tony Lombardo. Securityholder approval is being sought to allocate Performance Rights as a long-term award to Tony. So what we've just done was a short-term award. This is a long-term award. Lendlease uses Performance Rights to create, again, alignment between Tony and securityholders over the long term and to provide Tony with the full benefit of ownership of securities such as distributions and voting rights, again, only when those performance rights vest. The full details are set out in the Notice of Meeting. I will now turn to questions on this item. It appears that there are no questions in the room. So Karen, are there any questions online?

Chairman, the following question has been received from Stephen Maine. Lendlease has 56,633 shareholders, but less than 2% of them will have voted today on this latest LTI grant to the CEO. I'm curious to know what retail shareholders thought about this resolution rather than just the big end of town investors who dominate corporate voting? Therefore, when disclosing the outcome of voting today, please advise the ASX how many shareholders voted for and against each item similar to what happens with the scheme of arrangement. This will provide a better gauge of retail shareholder sentiment on all resolutions and insight into Australia's chronically low retail shareholder participation rate. Our own share registry provider, Computershare did this for the first time after its AGM yesterday, so market practice is moving. It would also be better to disclose the proxies early with the formal addresses ahead of next year's AGM to allow for a more fully informed debate. Will John Gillam commit to doing this next year? I know he did neither of these disclosure initiatives at Nufarm and CSR and encourage him to move with the times as our new Chair.

So thank you, Stephen, again some very thoughtful observations there. I think a number of things I would mention. The Australian Shareholders' Association does a great job, in my view, in representing the interests and views of the broad church of retail shareholders, and that's why Lendlease and I have always engaged very seriously with them because I respect that role they have. And you can also see that the Australian Shareholders' Association is prepared to take different views when they feel that way. So they are clearly a meaningful voice in this. Secondly, I think you can gauge by the level of support that we received on the previous motion with respect to Tony that there is a strong widespread support for that particular motion, and you've raised it again in a similar way here. As you correctly point out, it hasn't been our practice to put out the individual voting or the numbers by sort of size of shareholding, et cetera. It's something that I'm not going to take a decision on the fly given I have about 10 minutes left as Chair. But I certainly would refer that through to John to consider. Clearly, John, you've had a conversation with Nick previously. And so we will certainly -- I imagine the Board will certainly look at that and give it due consideration, Stephen. So thank you. Any other questions online?

Chairman, there are no further online questions on this item.

So if we move to the telephone, are there any questions on the telephone, please?

Thank you, Chairman. There are no questions on the telephone.

Okay. As there are no more questions, I will show the proxy position and I should note on that back to Stephen, we are now showing the proxies, and we did -- I recall last year, ahead of the voting in the room. So that is, I think, again, giving people the opportunity when they're casting their votes if they hadn't already in advance to know where the votes are going to land in terms of advanced voting. Again, if you have not voted yet, please select one of the voting options for this resolution. And again, as you can see on the screen, over 97% of the votes have been cast in favor of this resolution. So it's great to see that strong support for Tony's long-term award. So vote on Tony. Okay. Before we turn to the last item of business, I remind securityholders that voting will close on all items following the conclusion of the next item. So please take this chance to vote on any items now if you haven't already done so. The final agenda item #6 relates to the renewal of the proportional takeover provisions in Rule 15 of the Lendlease constitution. This is a fairly technical matter that has to be periodically done. But the last time we approved this by -- or put it to securityholders was at the 2021 AGM when it was approved. The full details are set out in the Notice of Meeting. I'll now turn to questions on this item. Are there any questions? If there are no questions in the room, are there any online?

There are no questions online on this item.

Are there any questions on the telephone?

Thank you, Chairman. There are no questions on the telephone.

This confirms, so it's a pretty technical item. So as there are no more questions -- in fact, there are no questions, we put the proxy position up on the screen. 99.61%, so even better than John Gillam. If you have not already voted on any of the items, again, please do that. If you are in the room and not voting online via the QR code and instead completing the blue card, these will now be collected by Computershare staff in the room. They are now coming around to collect those. So thank you for doing that. Okay. So I think I'll declare just as those last ones are being collected, all voting closed. And that concludes today's formal business. As I've mentioned, the results of the poll will be announced to the ASX later today. But before I close, I'll now pass over to the real Chairman, John Gillam, who wants to say a few words. John?

Well, thank you, Michael, and thank you all for your support. Firstly, on behalf of the Board and our securityholders, I'd like to acknowledge your dedication, Michael, and commitment to Lendlease over the past 13 years of service and particularly the past 6 years as Chairman of the Board. As Chairman, you have presided over some difficult and unprecedented times, including overseeing a material restructure of the group, guiding the company through a global pandemic, which materially impacted the real estate sector and Lendlease's operations and most recently, leading the company's Refresh strategy in response to these prolonged market impacts. You have left the company on firm footing and provided a platform from which to further build upon. It is an honor to take over as Chairman of Lendlease to represent our securityholders as we seek to restore the company's financial performance and operational strengths. I am committed to bringing a renewed focus to overseas delivery of Lendlease's Refresh strategy, and I'm confident that we can bolster efforts to unlock value for securityholders while continuing to deliver strong outcomes for our customers, investors and partners. As you heard earlier in the meeting, since the May announcement, there has been good progress implementing actions to improve performance. While Lendlease is building momentum, there is clearly a lot more to do. As your next Chairman, my immediate priority is to work with the Board and management to identify opportunities that can accelerate delivery of our Refresh strategy, intensify its execution and improve efficiency. I look forward to meeting with securityholders who are here today and commit to maintaining an active dialogue with all stakeholders, our securityholders, our partners and customers and our people. Michael, on behalf of the Board, we thank you and wish you all the very best for your future endeavors. And likewise, Nicola, on behalf of the Board, we thank you also for your wonderful service and wish you all the very best. Please join me in thanking them both.

Thank you, John. I really appreciate the kind words and the sentiment expressed on behalf of the Board. I wish you all the very best as Lendlease's next Chairman and are confident that the Board and securityholders have made the right decision. I look forward to following Lendlease's continued progress, particularly as I've still got 200,000 securities. And in closing the meeting, let me thank all of you, our securityholders for your support and invite you now to join the Board and the company's executives for refreshments outside the room. Thank you.