Lendlease Group

Good morning and thank you for joining the LendLeaf 2026 Half-Year Results presentation. I'm Tony Lombardo, Group Chief Executive Officer and Managing Director of LendLeaf. With me is Simon Dixon, Group's Chief Financial Officer. Sitting here at Barangaroo in Sydney, we're on the land of the Gadigal people and I extend my respects to their elders past and present. Today I'll provide an overview of our Half-Year 2026 results Some will talk through the financials and I will then cover the outlook and strategy. We'll then open for questions. Starting on slide four, FY26 is a transitional year for Lendlease as the strategy reset announced in May 2024 continues to be executed. There are three core components of the strategy that I want to highlight today. The group is being repositioned to focus on our market-leading Australian operations and international investments platform, reported as Investments Development and Construction or IDC. These businesses have historically delivered double-digit returns on equity through the cycle and continue to show strong operating momentum. The other core element of our strategy was the establishment of the Capital Release Unit or CRU to facilitate the recycling of capital from underperforming or non-core parts of the group. At the May 2024 strategy update, we announced that $2.8 billion of CRU assets were on the market alongside a further $1.7 billion of CRU assets identified as being available for sale. We've now announced or completed the exit of $2.8 billion of CRU assets. In addition, we've made strong progress with advancing the remaining asset pool, with a further $1.5 billion of assets targeted for the second half. In May 2024, we also announced our intent to launch a securities buyback subject to specified preconditions. The main outstanding condition is achieving a clear contractual visibility to a sustainable underlying gearing level of 15%. In the first half, we've increased that contractual visibility through the signing of the announced TRX transaction, and are progressing the satisfaction of conditions precedent for both the joint venture with the Crown Estate and the sale of our TRX interest. The divestment process for Keaton Retirement Living, the UK bill to rent assets and the recapitalisation of AWPF Retail are all now in exclusivity. Capital recycling initiatives for our Victoria Cross investment and many other assets are also underway. We are targeting the completion of $3 billion in announced and active transactions in the second half of 2026 across both IDC operations and CRU. The 15% gearing threshold is assessed on a forward-looking basis and requires a degree of contractual certainty on the receipt of sale proceeds translating into net debt reduction. As that certainty increases, we should be in a position to commence the buyback. The Group maintains a strong financial position with $3.3 billion of liquidity and flexibility provided by the recent hybrid issuances. This position enables us to take a measured approach to capital recycling. Turning now to slide five and our half-year financial performance. As anticipated, with limited completions in development and lower transaction earnings in investments, the IDC segment EBITDA of $204 million was down from $341 million, with an improved performance from the construction segment being a highlight. Moving to CRU, as we have stated, the segment's primary purpose is capital recycling with $500 million of further progress made in the period. At the group level, a statutory loss for the half of $318 million was recorded, including $118 million of non-cash negative investment property revaluation and impairment primarily in the US, UK and Singapore. A group operating loss after tax of $200 million included a positive $87 million contribution from IDC and a loss of $287 million from CRU. The CRU operating loss included a $95 million write down of community land parcels as previously flagged last calendar year. and that is after tax, $95 million, and a further $44 million provision in relation to tail risks in the exited international construction businesses. Reported statutory gearing was 25.8%, benefiting from the hybrid issuance. The group continues to target underlying gearing of 15% by the end of FY26, subject to the completion of targeted recycling initiatives across both CIU and IDC. Simon will talk to our balance sheet position and capital management later in the presentation. Our investment segment earnings highlighted on slide 7 are derived from funds under management and contributions from our directly held co-investment portfolio. Our team's focus is on performance. liquidity and growth to drive positive outcomes for our investors. Funds under management was stable at $48.7 billion and included $1.5 billion of additions. The group held $2.9 billion of co-investment capital at the half. We continue to actively manage this position to support an appropriate balance between capital alignment and our role as manager of third-party capital. Portfolio movements in the period included increasing our investment in the AWPF Industrial Fund and down-weighting ownership in the ALREIT. The co-investments portfolio remains well diversified, with a primary weighting to workplace and retail assets. The co-investment yield driven by underlying asset performance remained consistent with a gross yield of 4.4%. Our investments platform continues to grow with more than 80 investors. We have $2.8 billion of capital available to deploy across existing mandates. And we have $4.7 billion of capital being raised for a Japan value-add mandate. a new Australian private credit partnership, and existing funds and developed a core product. We remain highly active in the market, completing $4.4 billion of gross property transactions across our investment platform in the period. Turning to development on slide 8, there were $1.3 billion of development completions this half including Victoria Cross in North Sydney. Across our residential business, gross apartment pre-sales increased to $3.3 billion, with settlements weighted to FY27, expected to deliver gross cash proceeds to landlords of circa $1 billion. We've made strong progress growing the Australian development pipeline, with more than $4.7 billion of new projects secured in the half. And we remain well positioned to achieve our $10 billion target for this financial year. Sydney Metro's Hunter Street West overstation development was secured, as was the luxury residential project 175 Liverpool Street in Sydney, alongside existing partners Mitsubishi Estate Asia, and Nippon Steel Kawa Real Estate. We are focused on unlocking $12 billion of future development opportunities from balance sheet holdings at the R&A Showgrounds in Brisbane and our Roselle Bay site in Sydney. We currently have two residential opportunities that we are pursuing in Melbourne, representing a further $4 billion of project end value. In the half, We secured a role as Master Development Manager for Sea Capital for the rezoning of land in Victoria for industrial use, leveraging LendWaste's development planning capabilities. LendWaste expects a new development management fee stream with rezoning targeted by FY28. LendWaste has the option to secure all or part of the industrial land post-rezoning which is expected to have an end value of around $4.5 billion. Our origination efforts remain focused in Australia, deploying a capital-like joint venture partnering model. Together with our strong liquidity position, this enables us to remain well capitalised to pursue new development opportunities as we continue to replenish the development pipeline. Moving now to the construction segment on slide nine. Revenue graph for the half was strong, up 22%, driven by new project commencements such as the new Melton Hospital and multiple data centre projects. Discipline project execution saw an EBITDA margin of 3.7% recorded for the half. There was $4 billion of new work secured Another very strong result led by the Hunter Street West overstation development contract, following $3.8 billion secured in the prior period. New winds contributed to a strong Australian backlog revenue position of $8 billion, up 36% on F by 25 with an existing social infrastructure and defence backlog. We continue to pursue and win high quality work with an additional $9 billion of active bids underway including major transport, social infrastructure and data centre projects. This backlog revenue together with a preferred workbook of $6.9 billion places the business in a strong position to increase its future revenues and earnings with circa $15 billion of secured and preferred work. Before I hand over to Simon, I'd like to make a few remarks. Today's financial result will be Simon's last for Lendlease, with Simon finishing in his role as Group Chief Financial Officer at the end of February as he relocates to Asia. I'd like to take this opportunity to thank him for his dedication and contribution to the organisation. and wish him every success in his future endeavours. I would also like to welcome Andrew Nealon into the role from the 1st of March. I look forward to working with him in his new capacity. I'll now hand over to Simon to talk through the financials.

Thanks, Tony, for your kind words, and good morning, everyone. I'd like to acknowledge what a privilege it has been to spend the last four and a half years working at LendLease. I firmly believe the strategy that we have in place is the right strategy for the benefit of our security holders, customers and our people and I wish the team every success in continuing to execute it. Starting with the group's financial performance on slide 11. As Tony mentioned earlier, limited completions in development and lower transaction earnings in investment led to a lower IDC segment EBITDA of $204 million, down from $341 million, with an improved performance from construction. In investments, segment EBITDA of $101 million reflected a stable underlying operating performance, with the prior period including transaction earnings associated with the formation of the Vita Partners joint venture of $129 million. In development, Segment Eva Dar of $34 million reflected the timing of major completions, with the prior period including $118 million from residences 2, 1 Sydney Harbour. In construction, Segment Eva Dar of $69 million. It was driven by 22% higher revenues and improved project performance. The CRU segment reported an EBITDA loss of $284 million, down from a prior period gain of $34 million, reflecting previously mentioned non-cash write-downs and provisions. and the limited completion of capital recycling transactions. Group corporate costs decreased 4% to $55 million, reflecting cost savings from downsizing and productivity improvements, partially offset by elevated costs of finance transformation. Operating EBITDA fell to a loss of $135 million compared with a gain of $318 million in the prior period. Depreciation and amortization reduced materially as IT amortization wound down and tenancies were exited following the simplification of the group. Net finance costs decreased to $85 million, reflecting a lower average cost of debt and lower average net debt levels. The group recorded an OPAT loss of $200 million, compared to a gain of $122 million in the prior period. This includes an $87 million positive contribution from IDC operations, representing 12.6 cents per security. Moving to a summary of segment performance on slide 12, beginning with the investment segment. The segment performance was stable across key measures. Total EBITDA of $101 million reflected a stable underlying performance. Management EBITDA from funds management activities reduced modestly to $48 million, reflecting lower fees and margins in Australia, offset by a stronger performance in Asia. Management EBITDA margin of 40.7% reduced from the prior period, although was comparable to FY25's full-year margin of 40.6%. Co-investment EBITDA of $42 million was lower due to a lower level of co-investment as a result of asset divestment. and recapitalisations. In the development segment, a return on invested capital of 3.2% was achieved as there were limited completions in FY26 to date as anticipated. Capital was also transferred to the segment from CRU in the period in relation to the announced development joint venture with the Crown Estate and the Comm Centre project in Singapore. which is a joint venture with Singtel, and along with production capital spend during the period, resulted in a $1 billion increase in the development capital balance to $2.1 billion. In the construction segment, revenue increased by 22% on the prior period, reflecting a higher level of project activity, including commencement of the New Melton Hospital and a number of data centre projects. EBITDA increased to $69 million. The segment achieved an EBITDA margin of 3.7%, demonstrating continued strong performance from the second half of FY25. Turning now to slide 13. The primary role of the capital release unit is to accelerate the release of capital. To date, we've completed or announced $2.8 billion of CRU capital recycling initiatives, including $500 million of new asset sales this half. CRU recorded an EBITDA loss of $284 million, which included the write-down of communities' development land of $136 million pre-tax. Provisions taken in relation to tail risks in the exited international construction businesses of $44 million and the underlying cost base, which includes people costs, IT costs, legal costs, insurance and other overhead. The segment loss to the period compares to first half FY25 gain of $34 million that included profits on capital recycling and land sales of $160 million that were not repeated this half. The CRU cost base is expected to reduce progressively as capital recycling completes and retained risks are resolved, although it is expected to remain elevated in the second half of FY26. As we complete the remaining CIU initiatives, the release of capital will be a key enabler for our capital management priorities. This includes further reducing gearing, returning capital to security holders and creating capacity for disciplined reinvestment in accordance with our capital allocation framework. Moving now to slide 14, which highlights our cost savings achievements. Net overheads reduced $58 million to $197 million, a run rate of below $400 million. This reflects the full run rate benefit of FY25 cost savings and the early impact from further cost initiatives actions in FY26. In the half, we actioned pre-tax run rate savings of $21 million with further cost savings to be actioned by the end of FY26. The full benefit of our $50 million in savings target is expected to be realised in FY27. The targeted exit run rate for overheads of circa $350 million at the end of FY26. This will be achieved through the completion of asset divestment and productivity initiatives, including the removal of technology costs. Turning now to net debt on slide 15. We have provided a walk summarising key cash flows for the period, rounded to the nearest $100 million, and outlined the key cash inflows and outflows for each of the IDC segments and CRU segments. Report of net debt excluding capital from hybrid securities closed the period at $3.3 billion. Net debt is anticipated to reduce in FY26 due to $3 billion of CIU and IDC transactions that are announced and underway. These include the targeted completion of announced TRX and the Crown Estate transactions. Transactions under exclusivity for Keaton Retirement Living, UK build-to-rent assets and the recapitalisation of our ATPS retail fund and capital recycling on Victoria Cross Tower. Offsetting these inflows across CIU and IDC are expected net production spend, interest costs, corporate costs and other. Achievement of our group gearing target of 15%, by the end of FY26 is subject to successful completion of these outlined initiatives this year. Turning now to slide 16, covering group debt and liquidity. Half year 26 reported gearing was 25.8%, including the benefit of hybrid issuance in the half, excluding this benefit underlying gearing was 32.9%. The group maintains strong available liquidity of $3.3 billion, comprising $2.7 billion of committed available undrawn debt and $600 million of cash and cash equivalents, providing balance sheet flexibility as further capital recycling is progressed. Debt maturities are well balanced with an average maturity of 2.5 years. Maintaining our investment grade credit ratings remains a priority. I'll now hand back to Tony.

Moving now to slide 18, the FY26 financial outlook. FY26 remains a transitional year with IDC earnings guidance maintained at 28 to 34 cents per securities. The second half of earnings for IDC is expected to be stronger than the first half, supported by similar underlying performance and anticipated transactional profits. IDC earnings are expected to further recover in FY27, supported by major development completions, a strong construction pipeline and growth initiatives across investments. As transactions complete, CRU earnings volatility and associated financing costs expected to reduce progressively, supporting the strengthening of the balance sheet. As such, no guidance has been provided for CRU earnings per security in FY26 as the segment's focus remains accelerating capital recycling while balancing value realisation and speed of execution for security holders. We have well progressed on our capital recycling initiatives and are targeting a total of $2 billion of CRU capital recycling in FY26. Additionally, the group's strong liquidity position enables us to balance executing our recycling program with realising value for security holders. Underlying group gearing is targeted to reduce to 15% by the end of FY26, subject to the completion of our capital recycling initiatives. On costs, we're targeting an exit run rate of $350 million at the end of FY26, reflecting $50 million of targeted cost-saving initiatives to be actioned throughout FY26. Our current priorities remain strengthening our balance sheet, returning capital to security and importantly, redeploying capital for future growth in earnings in our IDC segments. Moving to slide 19, at our medium-term growth and earnings profile from FY27 onwards. In investments, we expect to see management EBITDA margins above 40% in FY27 and growing towards 50% by FY30. We anticipate average FUM growth of 8% to 10% annually through the cycle, delivering scale benefits across the platform. We currently have $2.8 billion of available capital to deploy in the near term. We are raising more than $4.7 billion of further capital, supporting FUM and future earnings growth. Investor demand remains strong in a number of our key markets and sectors, including our core funds and mandates. where we have demonstrated capabilities and a proven track record, allowing Lendlease to deliver differentiated investment products. In development, we're looking to secure more than $5 billion of development projects in the second half of FY26 to achieve our $10 billion plus target. We expect this momentum to continue with $4 billion of origination targeted per annum in FY27 and beyond. In FY27, we're on track for $4.5 billion of development completions, expecting to receive cash and profits from the settlement of One Circular Quay in Sydney and the Regatta in Victoria Harbour. We'll also generate new development management fee streams as a capital-wide master developer on both the joint venture with the Crown Estate and Victorian Northern Freight Project 4C Capital. In FY28, there are $3.9 billion of completions targeted, including Comm Centre in Singapore and One Darling Point. Lenley should earn ongoing development management fees from its joint venture with the Crown Estate once completed. The JV also expects to earn profits from plot sales and will unlock potential development opportunities from its $50 billion development pipeline. This includes more than $20 billion of future investment product. In construction, annual revenues are expected to reach over $4.5 billion in FY27, stepping up to over $5 billion by FY28, supported by strong backlog revenues and preferred work. We also expect to sustainably deliver EBITDA margins within the target range of 3% to 4% while pursuing both a disciplined approach to pricing and risk profile of future work. Additionally, the group will benefit from working capital inflows as the business grows. These key drivers provide confidence in the outlook for the growth. Moving to slide 20, enclosing. My management team and I remain committed to delivering on our May 2024 strategy and our stated FY26 objectives. We continue to build momentum across our investments, development and construction segments. Throughout the half, we continue to execute on strategic initiatives that we announced in May 2024. And we continue to lay the groundwork for FY27 and beyond. and have strong visibility to earnings in coming years. The group's strategic direction remains unchanged, with a continued focus on discipline execution, performance and long-term value creation for our customers, investors and security holders. Finally, I want to thank our hardworking and talented LendLace people for their ongoing commitment to turning this great company around. Their efforts in delivering on our strategic priorities are vital to the future success of the business. And I'm personally committed to doing my part to ensure we achieve our F-126 target and continue building the momentum needed for long-term success. We'll now open up for analyst questions.

Thank you. The line is now open to analysts. The first question will come from David , please go ahead.

Good morning, Tony and Simon. Thanks for your time. And best of luck to you, Simon, going forward. Just in relation to the guidance range for IDC, the 28 to 34 cents, if you could just talk to the moving parts between now and the end of the year that kind of drives the top and the bottom end of that range, please.

Perhaps I'll have a first go at that. On the first half, IDC delivered $0.126 per security. We achieved the $0.28 to $0.34 per security range for IDC. Mathematically, the second half has to deliver $0.154 to $0.214 per security. So the outcome of that range is primarily dependent on Firstly, the continued underlying operational delivery across investments, development and construction. The completion timing of TRX and the completion timing of the Crown Estate joint venture. The bottom of the range assumes more conservative settlement timing. The top of the range assumes those major completions occur in FY26.

Thank you and my second one on the provisions and the write downs announced in the period. Firstly could you just reiterate how much of that is non-cash and then secondly in terms of the community's land parcel have discussions with the land parcel owner stopped in terms of negotiating an outcome?

So the non-cash was $180, so it was $136 million for the community's parcel pre-tax and $44 in provisions on the international construction. In terms of the land parcel, we continue to have discussions with the landowner.

And I would note that the write-down of the community's parcels is absolutely non-cash, writing down an existing balance. The provisioning on the international construction provision whilst there'll be a time difference that will flow into cash outflows in the future.

Alright, thanks for your time guys.

The next question will come from Simon Chan with Morgan Stanley. Please go ahead.

Hi, good morning guys. There's a lot of detail in the presentation regarding asset sales, et cetera, and you call that a $3 billion number, right, for the second half. But if I were to get you to dumb it down for me, guys, and split the $3 billion into three simple buckets, can you give me an indication as to how much of the $3 billion is locked in and you just need to wait for the cash to come in through the door? How much of the $3 billion is in the final stages of discussions? And how much of the $3 billion is probably... closer to the start or the middle of the sale campaign?

So firstly, the joint ventures with Crown Estates and TRX are contracted and we're working through the CP, so that's some $640 million there. We've announced three exclusive transactions, so that is T10, the UK built-to-rent and the recapitalisation of AWPF, which will deliver over a billion dollars. And then we've called out Victoria Cross, which we've now completed, around looking to recycle some of our capital in that asset and a number of other investments. So that other group makes up the remainder. All those transactions are underway at the moment.

Okay, that's quite clear. Next question, just on the actual results, there are two things I was hoping to get some more details on. One, I think you called out there was an interest expense benefit as a result of the hybrids in the first half. Can I just get an indication as to the P&L impact of that benefit? And part two of my question, I saw that there was a $47 million benefit from a reversal of a prior period impairment that came through in the first half. Can you give me some colour as to what that is?

For the time, I think I'll take in the first part d um the hybrid benefit uh in the first half uh is nine million dollars right so they're kind of relatively late issuances in terms of the during the second quarter that we issued um okay okay that's fine and this is not nine million bucks just booked through uh it's a dividend rather than uh interest that's right yep just like all the other hybrids in the market yeah and nest on development as we're progressing the number of

unlocking our different development projects, there has been some provisions which have reversed through the period. And as we continue to progress those, we'll keep the market involved.

So did the $47 million increase your MPAT? I guess, sorry. So your MPAT increased by $47 million in the first half because of that reversal, that fair way of looking at it?

That's the way to look at it.

Thanks, guys. And just a final one, just to follow up on the previous guy's question, Simon, I think when you were talking about the outcome for the second half, you talked about continued underlying operational delivery across investments and completion of TRX and Crown Estate. I thought TRX was in Crown. Is it? Or am I wrong?

No, so CRU were flagged that once the TRX completes, it will then move across as a fund management product. There was negligible profits, as we call that on the asset. It was on the ASIC slide there.

That's right. And it's part of it comes down also timing around capital and the impact that has on interest expense. The Crown Estate JV is now clearly in IDC. You're right, the bulk of TRX sits within CRU, but the residual element of that will transfer into IDC. In terms of ordering... It would be, firstly, continued underlying operational delivery across IDC. Second, completion timing of the Crown Estate JV. Third, completion timing of TRX. So they're kind of the three major components.

Very clear. Thanks, Gus.

Cheers. The next question will come from Ben Brayshaw with Baron Joey. Please go ahead.

Good morning. Thanks for the presentation, Tony. I've just got a question for Simon. Could you clarify the construction provision of the $44 million post-tax? What does that relate to? And secondly, is that a net number inclusive of reversals of prior provisions? Thanks.

It's not a net number. It's a new provision. It relates to a long-standing project that previously been delivered where we had ongoing liability. We've been able to assess and quantify that liability sort of late in the period.

And secondly, on APPF Retail, there's obviously been a lot of media commentary on the current situation with respect to providing unit holders with liquidity. Could you just give an update on the situation and also comment on whether then Leeson intends to retain its $200 million stake in the fund?

Yes, and we flagged today that the team had been working through liquidity. We're pleased that we have now in exclusivity with the party to recapitalise the AWPF fund. And we intend to, as part of that, sell down our stake in that fund as part of the recapitalisation, as I noted earlier.

And could that come through, just to clarify, in the second half, or is it just two other days?

Yes, we're anticipating to complete the recapitalization in the next few months.

Great. Okay.

Thanks, guys.

The next question will come from James Drews with a CLSA. Please go ahead.

Yeah, good morning Tony and Simon and best wishes within your endeavour. I just wanted to get a sense, with CRU, what's the underlying expenses per annum if you stick that in capital profits that you just need to sort of bear? It looks like it's sort of over 100 mil for the half. How do we think about that if you're not actually... I guess literally the expense if you're not actually delivering any capital profit through the year.

You're right. That's roughly the number if you back out the provisions. About three quarters of that really is kind of direct expense which relates to employees, tenancy related overhead. There's another sort of allocation, a central allocation. Clearly there's a lot of involvement from the centre in managing our crew. Those balances are required or those costs are required to manage the capital. There's still substantial capital and very large sort of projects being delivered within CIU and risk being managed within CIU. But clearly we're watching that very closely and one would expect progressively that will be managed down as capital is recycled. Tony, I'm not sure if there's anything you want to add.

No, look, I think the key focus there is they are people, that's just what I meant, people, insurance, legal, technology costs that are making that up. As we round down and aim to complete the crew divestments over the next coming six months, we will progressively be targeting that cost base. We've already targeted, you know, costs to come down overall by another 50 and we'll continue to work through that as we progressively execute on the crew.

Yes, the provider's pretty helpful sort of medium-term thinking or 27, 28 thinking in your prepared remarks, Tony. So for CREW next year, you're talking about an aggressive cost reduction. Is that sort of what we should take away just from your comments then?

Yeah, I think CREW, the purpose of the CRU was intended for capital recycling. So that's its primary purpose. So we're very focused on completing that. We set ourselves a target this year for $2 billion. As we talked about, we've progressed 500. We've got one and a half to still complete. And so there's the focus. At the same time of completing that, we are looking at progressively taking that cost out. And so we are focused as a team to get that cost down to a more manageable base for next year going forward.

I think just, I mean, we're acutely aware, obviously, of the holding costs associated with CIU and those management costs. We're also acutely aware of our cost of capital. which is why we are looking at any way possible really to accelerate that capital recycling through CRU, through FY26 and FY27. Okay.

And my second question is around management changes at the leadership level. Obviously, it's been publicly announced, Simon and Tony, but you've also had the head of CEO of construction, move on, I believe the chief risk officer, the CEO of the development as well. Is there anyone else at that senior leadership that I'm missing there? And I'm just trying to get a sense of the confidence in the turnaround amid some of this challenging sort of turnover that you guys have had.

Look, each of the executives that we've announced, You know, there's either been retirements, personal or exploring other opportunities. So, you know, we've got a great depth of talent. I would say our new CFO, Andrew, spent over 18 years in the business. He was previously the controller and he's currently the CFO of the investment management. So he now steps up into the CFO role. Construction, Steph Graham's been in the organisation for greater than 20 years. She actually had been running the Australian construction operations for the last 18 months. Of course, as we've exited all international construction, that was the right time to now step up to the CLC in that role. Claire Johnson, who was running the CEO of the US, and as we finish up those, she was looking to relocate back to Australia, and pleasingly, Claire now steps into the role as our Head of Development for the organisation. There has been a number of moves in terms of leadership, but we've got the right leadership in place to take the business forward for many years to come. Simon will stay on in a capacity as an advisory role. He's going to help chair the CRU, as we called out, just to make sure we continue that focus on executing our capital recycling plan. Right. Thank you.

The next question will come from Richard Jones with JP Morgan. Please go ahead.

Thanks, and good morning. Earring has, I think, pretty consistently been higher than where you've guided. Can you provide some colour as to what production spend and interest and overheads you anticipate in the second half?

Sure. Thanks, Richard. I'll have a go at that. So we obviously didn't guide... so much to kind of the half year until we gave a bit of an update sort of pre-blackout. We've kind of landed pretty much where we said we would in terms of the balance sheet. Clearly, it's very linked to the timing of the capital recycling transactions, many of which will progress, as Tony has alluded to. If we kind of roll forward to... And again, this sort of is how to sort of think about the confidence levels around on a forward-looking basis of getting down to 15%. gearing, excluding the benefit of the hybrids. But clearly we have the $3 billion of CIU and IDC transactions which are announced are underway, which will benefit from when they settle. In terms of the outflows, within IDC, it's a relatively standardised sort of outflow for the second half. In terms of net production spend, it's expected to be approximately $400 million. On the cruise side, We've got net production spend of approximately $200 million going out the door. Those amounts are fully incorporated into our gearing forecast, so there's nothing particularly unusual about those. The key is, in terms of that forward-looking gearing, is really around capital recycling and making sure that we continue to progress those transactions.

The next question will come from Siraj Nobani with Citi. Please go ahead.

Hi, guys. Thanks for the opportunity. Firstly, a quick one on the... Can you just talk a bit more about that?

And I'm also... Siraj, can you please just repeat because it just broke up?

Sorry, can you hear me now?

Yes, I thought.

Yeah, perfect. Sorry about that. So just the impairments in immunities and the construction division, Simon talked about earlier, looking forward, Can you give us a bit more comfort around, you know, the non-reference of this and possibly give us a bit more detail on what role the community's impairment plays and whether, you know, you're sort of sure this is it?

So I will just repeat that question just to make sure because it's become a bit broken up. So you've talked about the provisions that we have taken, in particular the community's gross provision of 136. and the construction, international construction provision of 44. So just in relation to both of those, Suraj, so firstly communities, we did flag last year. We talked about we're in the courts on a parcel on a community's plot of land being Gilead. The courts have found adversely against that. and therefore we have flagged the risk around $136 million. So we have now taken a provision against that, which is a non-cash item. What we are doing is we're still in discussions with the landowner as we are trying to come up with a position to work that forward. So that's the community's land parcel. On the international construction, we did call out, as Simon mentioned earlier, there was a risk around a project in the sold and exited parts of the business. We've now taken a provision of $44 million against that based on those known risks as of today. So that's the two key matters and the provisions we've taken this period.

Tony, just looking forward, you know, how do you think about the provision-related risk in the business? I would say, you know, things can be uncertain, but I just came to get a sense of, you know, whether there's any potential of businesses where you see some risk. I think there's something on that.

Look, again, I think it is breaking up a bit, Suraj, but in terms of your asking of go-forward risks, what I would say is based on the known risk we know today, we've taken the known and appropriate provisions for the organisation to cover that risk. What I would say is as we complete out a number of those contracts and different things that are ongoing, I'd say that risk is diminishing. You know, calling out that we recently completed the Melbourne Metro, main part of the project. There is still some works that are ongoing there, but again, that's remained within the provisions that we had provided for us as a group.

So similar with the Building Safety Act in the UK, similar story. Through the passage of time, those risks do diminish, but clearly we'll continue to monitor and assess any other emerging risks and the balance of the portfolio as we move forward. But through the passage of time, these risks either dissipate or they become real and accessible.

Thank you. The next question will come from Richard Jones with JP Morgan.

Sorry, just to follow up, is 15% gearing target, is that predicated on $2 billion or $3 billion of investments?

It's predicated on $3 billion, of which $2 billion is in the CRU and $1 billion in our IDC. But as I think there was a question asked, it's broken into three categories, $640 relating to contracted investments, JV with the Crown of States and then the TRX, we're completing CP. A billion dollars related to the exclusivities of both three things. That was retirement living, Keaton, A55PFR, recapitalisation, UK, Bill Durant. So that was over a billion. And then we are looking to recapitalise Victoria Cross now that it's completed and a number of other transactions that make up that $3 billion.

Okay, thank you for clarifying that. Can I then just ask on slide 42, you've got the breakdown on the CRU invested capital. There seems to be limited progress on international land and inventory. International JV projects look like you've invested about 500 mil once you adjust for the moving of... the Crown Estates Income Centre to development and then the team projects and other haven't shown any progress either. Can you just provide some colour as to what's happening in each of those buckets and when you might start getting some of that capital back as well?

Yeah, I mean there are a number of projects that we call that at the strategy day that said we needed some billion dollars of further capital that needed to be invested and they related to things like Habitat, that related to OneJava, that related to the Italian joint ventures that we've got underway where we've got various things occurring at Mind in partnership with Capital Partners and also Elephant and Park. So it's not a static balance, so you can't look at it that way, Richard, because there's capital and production capital that's being spent. Simon called out a further $200 million of production capital in the CRU that needs to be spent in the period. As we've called out previously, in this period alone, there are some $100 million of capital that we recycled from land holdings that sit within those joint ventures. Now, as a number of assets do complete, like Habitat and Java, we will be looking to work out ways to best recycle some of that capital, same with some of the assets that are under development at Mind.

Okay. Can you maybe give a bit more colour just in terms of when the timing on...

more of that capital is going to get released because it's something a big drag on growth earnings you know so I don't know if we can give us any more colour so Richard as we previously announced in the guidance two billion dollars of crew capital that we're aiming to recycle this year 500 million of that we've already announced in the period, and that was 400 relating to TRX and 100 relating to other land cells. So that was the 500 we've achieved. We're targeting another $1.5 billion in the second half of this year. Okay.

Thanks. There are no further questions at this time. I would like to hand the call back over to Mr. Lombardo for any closing remarks. Please go ahead, sir.

Again, thank you for joining today's half-year results call. And again, I just wanted to thank Simon for his support over the last four and a half years. And I look forward to catching up with our investors and analysts over the coming weeks. So thank you.