Lloyds: Net CFO negative for 2017, 2018
Posted: October 20th, 2019, 8:56 am
Hi folks,
Hopefully a very quick post. So I'm eyeing potential stocks to enter into limit orders (e.g. the kind which fall with sterling (LLOY, NXT), and the kind which rise when £ falls (ULVR, DGE)). I had a very quick scan at Lloyds Plc (LLOY). Not exactly a really exciting share, but has good DY and (IMHO) seems "unlikely to ever fail", and a big bank, I guess is kind of a moat. Continuing along these lines I fed a spreadsheet with some numbers, and whilst it's nice to see EPS and DPS grow over past couple of years, I did notice -ve net CFO, for last couple of years, and I'm currently trying to figure out the cause is, and for now that probably means a pretty low figure on my limit order list. Anyway the FA:
Since Net CFO is effectively the reconciliation of operational profit against movements in working capital and non-cash charges such as depreciation, I observe that the two big negative numbers in the "Consolidated cash flow statement" page 176 are, "change in operating assets (4,472)" and "change in operating liabilities (8673)". In explanation of the calcs. for the NetCFO, the reader is referred to note 53 page 268, for example on FY2018 Annual Report.
We can see two groups of figures which sum to the "change in operating assets" and "change in operating liabities" in the summarised consolidation in the main FS disclosures, with two very large figures given in the Note:
I'm assuming that, given their relationship to the reconciliation of profit to cash, these are presumably a Bank's equivalent of change in payables and receivables. Which seems reasonable. However it's alarming to see their effect on cash from ops. Alas I've not managed to find much information on them in the 2018's notes. Page 291 on FY2014 report, seems more illuminating since there is mention of "repos", "reverse repos", "loans to customers" etc.
So I guess that these figures reflect part and parcel of a bank's operations, however it seems fishy to me that EPS is happily rising, but cash input from business is apparently not.
Comments welcome,
Matt
Hopefully a very quick post. So I'm eyeing potential stocks to enter into limit orders (e.g. the kind which fall with sterling (LLOY, NXT), and the kind which rise when £ falls (ULVR, DGE)). I had a very quick scan at Lloyds Plc (LLOY). Not exactly a really exciting share, but has good DY and (IMHO) seems "unlikely to ever fail", and a big bank, I guess is kind of a moat. Continuing along these lines I fed a spreadsheet with some numbers, and whilst it's nice to see EPS and DPS grow over past couple of years, I did notice -ve net CFO, for last couple of years, and I'm currently trying to figure out the cause is, and for now that probably means a pretty low figure on my limit order list. Anyway the FA:
Since Net CFO is effectively the reconciliation of operational profit against movements in working capital and non-cash charges such as depreciation, I observe that the two big negative numbers in the "Consolidated cash flow statement" page 176 are, "change in operating assets (4,472)" and "change in operating liabilities (8673)". In explanation of the calcs. for the NetCFO, the reader is referred to note 53 page 268, for example on FY2018 Annual Report.
We can see two groups of figures which sum to the "change in operating assets" and "change in operating liabities" in the summarised consolidation in the main FS disclosures, with two very large figures given in the Note:
Note 53: Consolidated cash flow statement
(A) Change in operating assets
Change in financial assets held at amortised cost (27,038)
(B) Change in operating liabilities
Change in derivative financial instruments and liabilities
at fair value through profit or loss (24,606)
I'm assuming that, given their relationship to the reconciliation of profit to cash, these are presumably a Bank's equivalent of change in payables and receivables. Which seems reasonable. However it's alarming to see their effect on cash from ops. Alas I've not managed to find much information on them in the 2018's notes. Page 291 on FY2014 report, seems more illuminating since there is mention of "repos", "reverse repos", "loans to customers" etc.
So I guess that these figures reflect part and parcel of a bank's operations, however it seems fishy to me that EPS is happily rising, but cash input from business is apparently not.
Comments welcome,
Matt