CIMIC and Lendlease are two of Australia’s and the world’s top engineering and construction firms. It has been possible for both of these organizations to withstand and thrive through a great deal of change and growth throughout the years. While sales and profitability data show a favourable head-to-head comparison, other important measures such as crucial market ratios, cash flow analyses, and daily operational efficiencies set these two companies apart from one another. Overall, the Lendlease group has a modest advantage in terms of quantitative indicators, as well as corporate social responsibility and management qualities. There are several variables to consider when deciding whether or not to buy, hold or sell a stock, including personal preferences, financial data, and current economic situations. According to an in-depth assessment and comparison of both companies, and taking into account the current Australian economic landscape, the Lendlease Company would be a better choice to invest in, albeit not much.
Lendlease and the CIMIC organizations, which are involved in asset management as well as building and engineering projects, are the ones who are responsible for providing all of these services. In addition to mining and mineral processing, the CIMIC group also provides environmental services as part of its additional offerings. The Lendlease Group is comprised of several subsidiaries (Pászthory,2015).
The following companies are part of the CIMIC group. In addition to Leighton Asia and Broad, CPB Contractors include (construction), the Thiess Corporation (mining), Sedgman (mining), UGL Holdings Inc. (services), Partnerships in the Pacific (public-private partnerships) and activities of the EIC (consultancy).
Analysis of CIMIC
Following are some highlights of our FY21 financial performance:
- Underlying NPAT of $405 million, statutory NPAT of $402 million
- Group revenue2 increased by 8.3% on an annualized basis to $14.7 billion.
- NPAT margins4 of 4.2 percent versus 4.7 percent in FY20; profit before tax margins of 5.2 percent versus 3.9 percent in FY20;
- The refactoring of operating cash flow increased by $603 million over the previous year.
- 4 billion dollars in readily available cash; good financial position.
- Debt reduction from $542 million to $498 million, after including repayments and dividend payments of $318 million
With our first foray into the Eurobond market, we were able to improve our capital structure while also broadening our funding options and maturities. We agreed to a three-year, $1.4 billion syndicated performance bond facility as a means of assisting us in fulfilling our commitments under the robust tender pipeline.
Money Comes In And Out
- An operating cash flow of $516.2 million, an increase of $602.5 million over FY20 on a comparable basis.
- Pre-factoring EBITDA cash conversion for FY21 is 57%.
On at 31 December 2020, the factoring balance was $434.1 million, a decrease of $541.7 million from the previous year’s $975.8 million high (Das,2020).
THE ECONOMIC SITUATION
- 4 billion dollars in liquid assets consist of $1.94 billion in cash and $2.44 billion in undrawn bank facilities, indicating a strong position on the books.
- In the nine months leading up to September 2021, the $144.0 million loan balance was fully repaid, and the program was shut down.
An eight-year corporate Eurobond (equal in value to $982.5 million at the time of issuance) was issued to diversify the company’s funding sources (Band,2013).
Liabilities with a fixed rate of interest
At the end of December 2021, the company had a total of $2,442.1 million in interest-bearing obligations. May 2021 marked the launch of CIMIC’s EUR500.0 million eight-year corporate Eurobond, which will remain outstanding until May 2029. Due to the increased demand in the market, an additional 125.0 million Eurobonds were issued on June 7, 2021, bringing the total face value up to EUR625.0 million. As a component of its strategy for managing its capital, CIMIC will continue to have access to the Eurobond market thanks to this offering (Evans & Whitby,2015).
Financial Activities Generate Cash Flows
Financing activities cost the company $973.5 million in FY21. As a precautionary measure to support our group during COVID-19, we had to repay a significant portion of our debt, which included working capital facilities that had previously been partially drawn upon. This was after deducting cash inflows from our EUR625.0 million corporate Eurobond (equivalent to A$982.5 million at the issuance date).
There were $88.5 million in payments for financing leases and $15.6 million for the forcible purchase of Devine during this period. Financial guarantees granted by CIMIC for certain BICC liabilities and other costs paid by financial liabilities and other amounts due recognized on 31 December 2019 were $84.5 million (FY20: $1,398.4 million).
According to the 2021-22 NSW State Budget, an investment package in the infrastructure of $108.5 billion would be implemented over the next four years. Sydney Metro West (PPP), Sydney Metro – Western Sydney Airport (PPP), West Harbour Tunnel and Beaches Link Scheme and Warringah Freeway Upgrade (totalling $6.3 billion), M6 Extension Stage 1 ($2.7 billion), and Great Western Highway Phase 1 ($2.0 billion) are all included in the program. The State Government’s commitment to early works and site preparation for Sydney’s third city, Bradfield, which will be built adjacent to the Western Sydney International (Nancy-Bird Walton) Airport and connected to the Sydney Metro, both of which are currently under construction, is also outlined in the Budget (Band & Gerafi,2013).
Over the next four years, the Queensland State Government’s capital investment program will provide $52.2 billion in infrastructure, including funding for schools, hospitals, roads, rails, and new sources of renewable energy. A large program of construction on M1 Pacific Motorway, a $1 billion investment in Gold Coast Light Rail – Stage Three, and ongoing work on a $13.3 billion Bruce Highway upgrade – which includes the Rockhampton Ring Road – are all included in this budget. As part of the state budget’s push for more investment in the renewable energy industry, the Queensland Renewable Energy and Hydrogen Jobs Fund were given a $2 billion budget boost .
To assist the many projects being undertaken by State and Territory Governments all around Australia, the Federal Government of Australia has committed to investing $110 billion in infrastructure over the following decade. It includes funding for the $14.5 billion Inland Rail project, which will create a 1,700 km freight corridor from Melbourne to Brisbane, the $4 billion Geelong Fast Rail in Victoria, the $14.5 billion North-South Corridor in South Australia, the $565 million Midland Highway Upgrade in Tasmania, and the $4.4 billion Western Sydney Infrastructure Plan (WSIP) and $1 billion M80 in Sydney. In addition, it includes funding for the Western Sydney Infrastructure Plan (WSIP), which will create a freight corridor from Sydney’s western
These improvements are supported by the Long-Term Emission Reduction Plan that was developed by the Federal Government of Australia. This plan outlines Australia’s technology approach for achieving net-zero emissions by the year 2050. The plan calls for public and private investments totalling over $80 billion to be made in low-emissions technologies by the year 2030. These investments will include significant new financing and investment programs supported by the government. Australia’s clean hydrogen industry may attract an investment of 350 billion dollars over the next few decades. 62,63, as an illustration of such a technology, CIMIC has the intention of playing a significant part in the expansion of this market and believes that it has the potential to significantly improve the efforts that our industry does to lower carbon emissions.
Donations to political campaigns
We will not make or solicit payments from organizations that mainly act as conduits for the funding of political parties, and we will not make or solicit donations from organizations that primarily serve as conduits for the funding of political parties and candidates for public office. It is against the rules for the Group to give a political party the use of its facilities or equipment for free or at a heavily discounted rate as a form of political contribution. Our methodology is laid out in great detail in both the Code of Conduct and the Corporate Affairs Policy.
CIMIC does not have any defined benefit superannuation plans and does not have any unfunded pension liabilities. This information should be known by international investors who are not familiar with Australia’s compulsory superannuation94 (or pension) program. The super guarantee (SG) program in Australia compels employers to contribute at least ten percent of their workers’ base salary to guarantee their workers’ financial stability in retirement (Parle et al.,2017). The only duty that CIMIC has about the money that workers have invested with the firm is to make the SG payment; apart from that, the corporation has no additional responsibilities.
The members of the Committee are all the Managing Directors that are in charge of CIMIC’s Executive and Operating Companies. The Group places a high priority on and invests heavily in significant technological advancements and digital technologies that will improve IDD and be to the company’s advantage. On the Council, there are individuals known as Innovation Leads who are accountable for the Innovation Roadmap of their respective operating firms. Sharing knowledge and experience, collaborating, conducting research, and analysing and recommending to the Steering Committee for financing innovative technologies that have the potential to bring value on a large scale or across the Group, all to increase operating company investments. The Council is responsible for locating, analysing, validating, and developing brilliant ideas. It then provides support for the ideas’ execution while also monitoring their development and reporting on their progress.
Because we are unable to provide additional funding for campaigns, special causes, or other activities taken on behalf of members, the only way for CIMIC members to participate is by paying the required annual subscription fees. We will not join any industry organizations unless doing so is consistent with both the Code and our commitment to being honest. CIMIC is in charge of managing the entire procedure, and all corporate memberships need to be approved by the organization’s Executive Chairman and CEO.
On November 19, 2021, this joint venture that was established by Apollo Global Management LLC (“Apollo”) and funds that were managed by affiliates of the Group completed its initial public offering (IPO) on the Australian Securities Exchange. As a result of this, new shares were issued to support a drop in debt at better terms. As a direct consequence of this, thirty percent of Ventia’s share capital was listed. To reach their goal of having 30 percent of the company’s shares be freely traded, Ventia’s existing principal owners, CIMIC and Apollo, each sold an additional 2 percent of their shares, for a total sell-down of 4 percent. Even though it still owns 32.8 percent of the firm, AASB 10: Consolidated Financial Statements and AASB 11: Joint Arrangements say that CIMIC no longer has joint control over Venetia. This is the case even if CIMIC is subject to AASB 11: Joint Arrangements. Although a joint venture has been classified as an associate by the accounting policy of the Group, CIMIC continues to have a significant amount of control over the organization.
Our approach is based on the belief that maximizing long-term value creation through accomplishing social, environmental, and economic goals is the best way to go about things. Customers, investment partners, governments, and the communities in which we operate all have a role in this process of teamwork.
Our end-to-end capabilities in all elements of real estate, from idea and planning to design and delivery, to finance and investment management, sets us apart from our competitors. Our ability to handle all aspects of real estate, from concept to completion, sets us apart from our competition.
This segment contains the Group’s leading investment and asset management platform in addition to holdings in a variety of property types, including residential, commercial, retail, and industrial real estate as well as retirement communities. From sovereign wealth funds to huge public and private pension funds, we have worked with some of the world’s top money managers for decades. We have experience with both unlisted and listed property funds and mandates. Our research-driven investing approach is backed up by active asset management, and we take sustainability very seriously. Our competitive advantage comes from the wide range of high-quality products that integrated strategy creates for our investors (Jenkins,2014).
Finance Corporation for Reconstruction and Development’s Hardship and Well-Being Fund. The Financial Corporation for Reconstruction and Development’s (Finance Corporation) Hardship and Well-being Fund Lendlease was particularly heavily hit by the epidemic in several locations. This year, we tapped into the Fund to send out a one-time reward to certain employees who went to considerable efforts to help consumers during the epidemic.
We had a difficult year in FY21 as we learned to operate in new ways. We’ve made it our mission to help those affected by the epidemic. It doesn’t matter where you work or how distant you are; we’re invested in the health and well-being of our employees. See the Hardship & Wellbeing Fund on page 35 for more information. The Group was able to make significant headway in the direction of achieving its strategic goals.
The management of future funds will benefit from the progress made on investment partner projects totalling $5 billion, which has already been accomplished. Six further urbanization projects with a combined value of 7.4 billion dollars were successfully funded. The closing of the deal on the sale of the Engineering company, as well as the sale of the US Telecommunications and Energy enterprises, was accomplished. After the close of the financial year, it was decided to sell the Services division, and the transaction is likely to be finalized by the end of the current year.
Despite the impact of COVID, the Investments section generated an EBITDA of $276 million, a decrease of 8% from the previous year. As expected, the segment’s ROIC was 5.9%, barely shy of the 6-9 percent mark. The Investments platform’s management EBITDA, which is produced from fund and asset management operations, fell from $198 million to $165 million. Profitability from the Paya Lebar Quarter, which was completed in the previous year, dwindled to $145 million in funds management revenue, down from $212 million.
Revenue from asset management increased from $105 million to $139 million. The total rise in asset management fees was supported by a $1.3 billion renovation activity secured throughout the US residential portfolio. A decrease in retail asset management costs, along with the impact of COVID, hurt performance. As a result, residential asset management fees are now the primary source of asset management revenue (Barrett,2017). The most important operating measures are the amount of money and assets under management, as well as the investment portfolio. The new financial year began with $39.6 billion in funds under administration, an increase of 10%.
New multisector investment mandates in Australia, the United States, and Europe, as well as acquisitions throughout the Australian Funds Management platform, fuelled the company’s expansion. The increase of the Australian dollar has a negligible influence on the translation of foreign currency. Future secured FUM based on development projects now being delivered via managed funds or mandates adds another $2.7 billion to the current funds under administration.
A change in any of the assumptions used in budgeting and forecasting might have a significant influence on the Group’s future profitability, hence management considers this to be an area of estimate uncertainty. Finances and predictions for five years are examined every month by the Group, which develops budgets and forecasts For the deferred tax assets, these estimates and budgets serve as the foundation for future profitability. Inflation, interest rates, currency exchange rates, commodity prices, the company’s capacity to access capital, oversupply and demand circumstances, and government fiscal, monetary, and regulatory policies all have an impact on the group’s profitability.
The group’s present and future profitability are being driven by a combination of factors, including its development pipeline, joint ventures in property projects, investments in the retirement sector, and passive assets such as property funds. This component of the Statement of Financial Position includes both direct and indirect property assets. Direct property assets include things like investments that are equity-accounted for, while indirect property assets include things like inventories.
Working capital and liquidity
The Group has to have adequate cash on hand, undrawn credit facilities, and access to external capital to meet all of its responsibilities, including keeping up with the development pipeline, pursuing new possibilities, and meeting existing commitments. In this section, a summary of the financial resources that are required to support the activities of the group is provided, together with information on existing commitments and the liquidity risk that is presented by financial obligations. This section also includes disclosures of the Group’s trading assets and liabilities, excluding inventories, which were created as a result of trading activities and were used to determine the Group’s performance. Inventories were not included in this disclosure.
Cash, undrawn credit facilities, and access to external capital are essential if the Group is ever going to keep pace with the development pipeline and stay up with its current obligations. This section provides a summary of the company’s financial resources, as well as existing obligations and the liquidity risk that financial liabilities provide. Trade assets and liabilities are also included in this section of the financial statement. They are used to calculate a company’s performance, and they are included in this section as well (POPESCU,2019).
For now, we have taken care of our people’s urgent financial needs, but we also want to help them succeed over time. It was in FY21 that we collaborated on a series of webinars that provided our employees with the tools and information they needed for making smart financial decisions. Partners with organizations, non-profits, and c.16,000 suppliers and a wide spectrum of institutional investors are part of our B2B relationship portfolio. Across all of our business lines, we work with and for companies. Two-thirds of third-party cash is invested in our Investments platform by our top 10 investors. Canada Pension Plan, Mitsubishi Estate, GIC, APG, NPS, and Aware Super are only a few of the world’s most well-known pension and sovereign wealth funds that make up this group.
- Band, J. (2013). Profitability of Firms in Copyright-Intensive Industries. Available at SSRN 2333844.
- Band, J., & Gerafi, J. (2013). Profitability of Copyright Intensive Industries. InfoJustice working papers. http://infojustice. org/wp-content/uploads/2013/06/Profitability-of-Copyright-Industries. pdf.
- Barrett, K. (2017). Commonwealth bank: How the saga unfolded. Company Director, 33(11), 20-21.
- Das, A. K. (2020). Thiess Secures $79 M Caval Ridge Extension.
- Energy, C. O. N. S. O. L. Thiess Will Expand Sangatta in Indonesia.
- Evans, S., & Whitby, N. (2015). 2015 Notice of Meetings and Proxy Form.
- Jenkins, L. (2014). A CIMIC contribution to assessing progress in peace support operations. International Peacekeeping, 10(3), 121-136.
- Parle, G., Joubert, M., & Laing, G. (2017). Measuring economic performance of Real Estate Developers in Australia:(A Longitudinal Study). Journal of New Business Ideas and Trends, 15(1), 43-52.
- Pászthory, D. B. (2015). A CIMIC csoport, mint harctámogató elem integrálásának szükségessége a Magyar Honvédség küldetésrendszerébe= The Necessity to Integrate the CIMIC Group as a Component of Combat Support, within the Mission System of the Hungarian Army. Hadtudományi Szemle.
- POPESCU, E. (2019). THOUGHTS CONCERNING CIVIL-MILITARY COOPERATION AND DEVELOPMENT TRENDS IN TODAY’S SECURITY ENVIRONMENT. TECHNOLOGIES–MILITARY APPLICATIONS, SIMULATION AND RESOURCES, 173.
- Stake, F. A. Cleveland-Cliffs Selling Australian Iron Ore Assets.