Lend Lease Group

Cash Flows Statement

Discuss about the Annual Report For the Lend Lease Group.

The Lend Lease Group is a leading property and infrastructure group which is based in Sydney, Australia. The company was founded in 1973 by Dick Dusseldrop. The company’s core objective is to create places which is best for the world. The company had reported revenue of AUD 16,669.0 and the net profit was AUD 758.7 in 2017 (Lend Lease, 2017).

The purpose of this assignment is to perform complete analysis of Lend Lease Group for past three years that is 2017, 2016 and 2015. The analysis is done from the statement of financial (balance sheet, income statement, statement of changes in owner’s equity, cash flow statement). The report includes cash flow statement analysis of three categories (operating, investing and financing) with any changes in the figures and the reasons for such change. Moreover, items covered under comprehensive income statement are completely explained. The Company’s income tax expense, deferred tax / liabilities and any change in the numbers from the past years are also commented.

• Cash receipts in the course of operations:

Cash receipts means the collection of money by the company from the external parties such as customers, investors, bank etc. and it is recognised as a rise to the cash account (Lend Lease, 2017; 2016). Thus in this case, company has reported AUD 16254.6 million in 2017 financial year and AUD 16028.4 million in FY 2016. There was a rise in cash receipts in the course of operations by AUD 226.4 million.

• Cash payments in the course of operations:

Cash payments means the payment of money by the company for the purpose of purchasing of inventories, payment made for operating expenses, payment to employees and others etc. and it is recognised as a decrement to the cash account. Thus in this case, company has reported AUD 15928.7 million in 2017 financial year and AUD 15154.9 million in FY 2016. There was a rise in cash payments in the course of operations by AUD 773.8 million (Lend Lease, 2017; 2016).

• Interest received

Any interest received is recognised in cash flow statement only when the interest income is converted to cash basis. The numbers are decreased when there is increment in interest receivable or vice versa. In this case, AUD 9.9 million and AUD 12.8 million was reported in FY 2017 and 2016 respectively. This means that in current year interest has decreased by AUD 2.9 million (Lend Lease, 2017; 2016).

• Interest Paid

Any decrease in interest payable are added or vice versa from accrual based interest expenses in the cash from operations (Lend Lease, 2017; 2016). In this case, company had reported AUD 120.4 million and AUD 134.8 million was reported in FY 2017 and 2016 respectively. This means that in current year interest paid has decreased by AUD 14.4 million.

• Dividend received

Cash Flows from Operating Activities

Any dividend received is recognised in cash from operations only when the dividend income is converted to cash basis. The numbers are decreased when there is increment in interest receivable or vice versa. In this case, AUD 75.4 million and AUD 90.0 million was reported in FY 2017 and 2016 respectively. This means that in current year interest has decreased by AUD 14.6 million (Lend Lease, 2017; 2016).

• Income tax paid/received

Likewise, interest and operating expenses are adjusted in cash flow statement the same adjustment is for income tax. In this case, any decrease in income tax payable are added or vice versa from the income tax expenses shown in Profit and loss statement. In this case, AUD 144.8 million is income tax paid and AUD11.5 million is income tax received from operations was reported in FY 2017 and 2016 respectively (Lend Lease, 2017; 2016).

Thus, after the complete description of every item recognised in cash flow from operating activities it has been found that company had reported net cash provided by operating activities is AUD 146.0 million reported in 2017 and AUD 863.0 million reported in 2016 (Lend Lease, 2017; 2016).

• Sale/redemption of investments

Sale / redemption of investments are covered under cash flow from investing activities. This means how much the company had made money from the investments thus in other words, this section is vital for growth. In this case, the company had reported AUD 164.9 million and AUD 330.5 million in 2017 and 2016 respectively (Lend Lease, 2017; 2016).

• Acquisition of investments

This section covers the investments purchased by the company during the accounting period. In this case, Lend Lease Group had reported AUD 257.3 million and AUD 563.2 million in FY 2017 and 2016 respectively. These numbers indicate that the company acquired the investments less from the previous year (Lend Lease, 2017; 2016).

• Capital expenditure on investment properties

This item in cash from investing activities indicate the capital amount spent in investment for example acquisition of land etc. (Lend Lease, 2017; 2016). In this case, AUD 244.4 million and AUD 25.7 million spent in FY 2017 and 2016 respectively.

• Net loans from associates and joint ventures

This item signifies that cash inflows from the associate and joint ventures in form of net loans. In this case, AUD 5.7 million reported in FY 2017 whereas AUD 38.6 million reported in FY 2016 (Lend Lease, 2017; 2016).

• Disposal of consolidated entities

This item covers cash inflows from the sale of subsidiaries, joint ventures and associates during the reporting year. In this case, company had disposed consolidated entities worth of AUD 548.4 million and AUD 382.5 million in 2017 and 2016 respectively (Lend Lease, 2017; 2016).

• Acquisition and Disposal of Plant, property and Equipment

Cash Flows from Investing Activities

Plant, property and Equipment are fixed assets of a company. The company had acquired Plant, property and Equipment worth of AUD 136.4 million and AUD 132.7 million in FY 2017 and 2016. Further the company had disposed Plant, property and Equipment worth of AUD 13.1 million and AUD 16.7 million in FY 2017 and 2016 (Lend Lease, 2017; 2016).

• Acquisition of intangible assets

Intangible assets are those assets which cannot be touched. The examples can be know-how, patent right, trademark etc. In this case, company had acquired intangible assets worth of AUD 23.9 million and AUD 46.1 million in FY 2017 and 2016 (Lend Lease, 2017; 2016).

Thus, after the complete description of every item recognised in cash flow from investing activities it has been found that company had reported net cash provided by investing activities is AUD 70.1 million reported in 2017 and AUD 0.6 milion reported in 2016.

• Proceeds and repayment of borrowings

These are covered in this category of cash flow activity because the company focuses on raising a capital and pays back to its investors. In this case, reported proceeds from borrowings are AUD 2800.6 million and AUD 5327.6 million which indicate that the in 2017 there was decrement in borrowings from last year by AUD 2527 million (Lend Lease, 2017; 2016). Further, reported repayment of borrowings are AUD 2576.8 million and AUD 5626.0 million which indicate that the in 2017 there was decrement in repayment from last year by AUD 3049.2 million (Lend Lease, 2017; 2016).

• Dividends paid

Any dividend paid is recognised in cash from financing activities. In this case, AUD 337.9 million and AUD 293.2 million was reported in FY 2017 and 2016 respectively. This means that in current year dividend has increased by AUD 44.7 million (Lend Lease, 2017; 2016).

Thus, after the complete description of every item recognised in cash flow from financing activities it has been found that company had reported net cash provided by financing activities is AUD 8.5 million reported in 2017 and AUD (620.4) million reported in 2016.

The comparative analysis of cash flows for 2017, 2016 and 2015 are done by performing horizontal analysis below:

(Refer: MS-Excel sheet).

1. Cash receipts in course of operations were increased in 2017 by36.63% as compare to an increment in 2016 by 34.73%.
2. Interest received and interest paid both had decreased from 2016 to a great extent.
3. Dividend received was only 22.80% in 2017 as compare to 46.58% in 2016 whereas dividend paid also decreased by 9.7% as compare to 21.65% in 2016 (Lend Lease, 2017; 2016; 2015).
4. Proceeds from borrowings was only 23.02% in 2017 while it was 134.02% in 2016. Similarly, repayment of borrowings was only 10.43% while it was 141.11% in 2015 (Lend Lease, 2017; 2016; 2015).
5. Acquisition and sale of investments were decreased enormously from 2016.
6. Company had acquired around 137.63% in property, plant and equipment whereas disposal of property, plant and equipment was only 11.97%.
7. Capital expenditure on investment properties was in positive number that is it was increased to 16.83% in 2017 (Lend Lease, 2017; 2016; 2015).

The statement of comprehensive income is classified into two categories:

Items that may be reclassified to P&L account:

• Movement in fair value revaluation reserve

In this case, company had reported before tax fair value revaluation reserve was AUD 12.1 million and after receiving tax benefit of AUD 12.1 million, the movement in current year was zero while in 2016, the fair value revaluation reserve was an outflow of AUD 1.7 million (Lend Lease, 2017; 2016).

• Movement in Hedging reserve

Cash Flows from Financing Activities

In this case, company had reported before tax Hedging reserve was AUD 17.7 million and after receiving tax benefit of AUD 1.3 million, the inflow in current year was AUD 19.0 million while in 2016, the hedging reserve was an inflow of AUD 8.9 million (Lend Lease, 2017; 2016).

• Movement in Foreign currency translation reserve

In this case, company had reported before tax expense of Foreign currency translation reserve was AUD 58.6 million and after receiving tax benefit of AUD 17.6 million, the net outflow in current year was AUD 41.0 million while in 2016, the Foreign currency translation reserve was an inflow of AUD 16.0 million (Lend Lease, 2017; 2016).

Hence, the total items that may be reclassified to P&L account was an outflow of AUD 22.0 million.

• Movements in non-controlling interest acquisition reserve

In this case, company had reported before tax Movements in non-controlling interest acquisition reserve was AUD 2.8 million whereas in 2016, the amount was AUD 0.5 million.

• Movements in defined benefit plan re-measurements

In this case, company had reported before tax Movements in defined benefit plan re-measurements was AUD (14.4) million and after receiving tax benefit of AUD 2.8 million, the net outflow in current year was AUD 11.6 million whereas in 2016, the amount was AUD 38.3 million.

Hence, the total items that will not be reclassified to P&L account was an outflow of AUD 8.8 million.

Thus, as a whole total comprehensive income after tax amounting to AUD 727.9 million. These are attributable to Members of Lend Lease Corporation Limited of AUD 615.0 million and to Unitholders of Lend Lease Trust of AUD 112.9 million (Lend Lease, 2017; 2016).

The statement of comprehensive income is prepared after the income statement which includes profits and/or losses but may neglect to include changes in net assets due to transfer of equity shareholdings, ownership change or other circumstances. In addition to this, another reason of not including the items in Income statement is because these items are not regular in nature to report and because of which users of financial report are mis-leaded.

The Income tax expense reported in Income statement in Financial Year 2017 was AUD 248.3 million (Lend Lease, 2017).

(Lend Lease, 2017).

The figure of income tax expense is not same as the company tax rate times your firm’s accounting income because many adjustments have been done to calculate reported income tax expense. Adjustments are:

(Lend Lease, 2017).

The deferred tax asset is an asset recorded in the financial statement for the purpose to reduce assessable income of an entity. These assets are created when the entity has overpaid the tax amount and the amount will return to the entity through tax relief. Another reason for recording deferred tax asset is when there is a difference in tax rules and accounting rules. Further Deferred tax liability is totally opposite to deferred tax assets where the entity would require to pay tax s per accounting rules but have deferred to the future. In other words, these liabilities are created when the entity has underpaid the tax.

Thus in this case, Lend Lease Group has reported Deferred tax assets of worth AUD 129.4 million and deferred tax liabilities of worth AUD 238.2 million in Financial Year 2017 (Lend Lease, 2017).                                  

In Financial year ended 30^th June 2017, the company had not reported current tax assets in statement of financial position. The income tax expense and the income tax payable are not same because income tax expense is calculated as per the accounting rules whereas income tax payable is the actual amount owed by the company and it is recorded in Balance sheet whereas income tax expense is recorded in income statement (Lend Lease, 2017).

No, the income tax expense shown in the income statement is not same as the income tax paid shown in the cash flow statement. In financial year 2017, the company had reported income tax expense of worth AUD 248.3 million and the income tax paid was AUD 144.8 million (Lend Lease, 2017). The reason for difference between them is that the income tax expense is calculated as per the accounting policies by multiplying Profit before tax to income tax corporation rate (i.e. 30%) and the amount of income tax paid is the actual amount paid by the company during the financial year.

I found it interesting to understand about the treatment of tax in Lend Lease Group financial statements.

References

Lend Lease, 2017, About us, viewed on 14 May 2018 from https://www.lendlease.com/company/about-us/

Lend Lease, 2017, Annual report 2017. viewed on 14 May 2018 from https://www.lendlease.com/-/media/llcom/investor-relations/annual-reports-and-securityholder-reviews/2017/2017-annual-report-for-lendlease-group.ashx.

Lend Lease, 2016, Annual report 2016, viewed on 14 May 2018 from https://www.lendlease.com/-/media/llcom/investor-relations/annual-reports-and-securityholder-reviews/2016/2016-lendlease-annual-report.ashx.

Lend Lease, 2015, Annual report 2015, viewed on 14 May 2018 from https://www.lendlease.com/-/media/llcom/investor-relations/annual-reports-and-securityholder-reviews/2015/2015-lendlease-annual-report.ashx.

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