By Carla Torres
Word count:
Sydney, Australia
November
2019
Executive Summary
Contents
Recommendations and overall assessment 3
Has year 1 been better than year 2 for the company? 3
Will the company succeed in the future? 3
The likelihood of a merger or acquisition? 4
Consider the relevant ethical considerations if the organisation becomes insolvent 4
Suggest what should the company be doing help it succeed? 4
Would you invest in this company? 4
Appendices – attached excel spreadsheet 6
Introduction
Background and Business
Woolworths is one of the largest companies in Australia with more than 3200 stores located between Australia and New Zealand, including its auxiliary companies (Big W, Endeavor Drinks and Hotels). It is positioned as the second largest company by revenue, according to the company’s annual report, its leading position has been achieved thanks to its mission of delivering the best in quality of products and services to its customers. Since 1924, with the opening of its first store in Sydney, they have provided their facilities within the area of food and customer service under different modalities, managing to expand and be recognized as a leading brand in the Australian and New Zealand market.
This report will evaluate and analyse the 2019 financial performance of Woolworth Group. The group ended the year with a revenue of AU$59 billion and a total growth market of approximately 34%, this is up 5,3% compare to the year before. This report is intended to provide an analysis on the performance of the company during the period of the previous fiscal year. To perform this analysis, the financial statements provided by the company through the Annual Report have been considered. In addition, the financial health of the company has been evaluated with the help of horizontal and vertical analysis as well as profitability, liquidity, efficiency and gearing ratios.
Company Analysis
Financial statements, Current Financial performance, economic outlook
The financial analysis of the company begins in the homogeneous financial statements of two or more consecutive periods, such as the horizontal analysis, to determine the increases and reductions or variations of the accounts, from one period to another (Birt et al., 2012, p. 112). The horizontal analysis of the balance sheet show clearly how 2019 had an increase on the assets and liabilities. This analysis is of great importance for the company, because it informs if the changes in activities and results have been positive or negative; It also allows defining deserve greater attention because they are relevant changes in the march. Income Statement:
Reveals the income and expenses of the company that allow determining the profitability of it over a period of time. (Birt et al., 2012, p. 112).
Ratio Analysis
Profitability and Market ratios
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| 2019 | 2018 | Average for Industry |
| Return on Assets | EBIT/ Average total assets | Profit / ((Year 1 Total A + Year 2 Total A)/2) | Profit /Year 2 Total A |
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| Profit | 2,353.00 | 2,548.00 |
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| Assets | 23,491.00 | 23,391 |
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| 10.04% | 10.89% | result % | |
| Return on Equity | EBIT / Average equity | Profit / ((Year 1 OE + Year 2 OE)/2) | Profit /Year 2 OE |
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| Total Equity | 10,669 | 10,849 |
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| 0.218700623 | 0.234860356 |
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| 21.87% | 23.49% |
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| Net Profit Margin | Net profit / Sales or revenue | NP/ Revenue | NP/ Revenue |
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| Net Profit | 2,227 | 2,394 |
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| Sales or revenue | 59,984 | 56,944 |
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| 3.71% | 4.20% | result % | |
| Gross Profit Margin | Gross profit / Sales or revenue | GP/ Sales | GP/ Sales |
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| Gross profit | 17,442 | 16,709 |
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| Sales or revenue | 59,984 | 56,944 |
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| 29.08% | 29.34% | result % | |
| Net Interest Income | Net Interest Income / Average Earning Assets | NII / ((Year 1 earning A + Year 2 earning A)/2) | NII / Year 2 earning A |
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| for banks only | 0 | 0 |
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| result % | |
| Expense ratio | Expenses (excluding tax) / Net sales | Exp / Revenue | Exp / Revenue |
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| (using operating expenses/operating income) | 0 | 0 |
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| Expenses (excluding tax) | (15,377.00) | (14,383.00) |
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| Net sales | 59,984.00 | 56,944.00 |
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| -25.64% | -25.26% | result % | |
| Cash return on sales | Net cash flow from operating activity / meSales or Revenue | $ op activities / REV | $ op activities / REV |
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| Net cash flow from operating activity (pag 72) | 2948 | 2994 |
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| Sales or Revenue | 59,984.00 | 56,944.00 |
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| 4.91% | 5.26% | result % | |
| Earnings per share | Profit for shareholders / Number of ordinary shares | $2.06 per share | 1.33 per share |
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| EPS taken from annual report |
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| 2.06 | 1.33 |
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| Price earnings ratio | Share price 30 June / Earnings per share | $XX / EPS | $XX / EPS |
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| share price 30 June taken from annual report | 0.0000 | 0.0000 |
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| Share price 30 June | 33.20 | 30.45 |
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| Earnings per share | 206.20 | 132.60 |
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| 0.1610 | 0.2296 | result times | |
| Earnings yield | EPS / Share price 30 June | EPS / $XX | EPS / $XX |
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| share price 30 June taken from annual report | 0 | 0 |
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| EPS | 206.20 | 132.60 |
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| Share price 30 June | 33.20 | 30.45 |
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| 621.05% | 435.47% | result % | |
| Dividends per share (determined) | Dividends – Special dividends/ No of shares | 102 | 103 | $xx per share |
| DPS taken from annual report |
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Table as image
Discussion
Efficiency ratios
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| 2019 | 2018 | Average for Industry |
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| Asset turnover | Sales / Average total assets | revenue / ((Year 1 Total A + Year 2 Total A)/2) | revenue / Year 2 Total A | |
| Sales | 59,984.00 | 56,944.00 | ||
| Average total assets | 23,491.00 | 23,391.00 | ||
| 2.56 | 2.43 | 2.10 times | ||
| Cashflow return on assets | Net cash from op activities / Average total assets | $ op activities/ A | $ op activities/ A | |
| Net cash from op activities | 2,948.00 | 2,994.00 | ||
| Average total assets | 23,491 | 23,391 | ||
| 0.1255 | 0.1280 | result times | ||
| Fixed-Asset Turnover Ratio | Sales / Total non current assets | revenue / Total NCA | revenue / Total NCA | |
| Sales | 59,984.00 | 56,944.00 | ||
| Total non current assets | 17,193 | 16,377 | ||
| 3.49 | 3.48 | result times |
Discussion
Liquidity ratios
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| 2019 | 2018 | Average for Industry |
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| Current Ratio | Total current assets / Total current liabilities | CA / CL | CA / CL |
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| 0.73062645 | 0.776830214 |
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| 0.731 | 0.777 | 0.81:1 |
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| Quick Ratio | (Total current assets – Inventory) / Total current liabilities | (CA – INV) / CL | (CA – INV) / CL |
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| 6297.50 | 7013.53 |
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| result:1 | result:1 | XX:1 |
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| Receiveables turnover | Credit sales rev / Avg receivables | (Credit sales rev/ ((Year 1 Acc rec + Year 2 Acc rec)/2)/100) *365 | (Credit sales rev/Acc rec)/100*366 |
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| NO | (can only calculate if credit sales specified or provided) | 0 | 0 |
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| result days | result days | result days |
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| Average collection period | Average receiveables x 365 / Net credit sales rev | (Acc rec *365) / Rev | (Acc rec *365) / Rev |
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| (can only calculate if credit sales specified or provided) | 0 | 0 |
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| NO |
| xx days | xx days | result days |
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Discussion
Gearing ratios
Discussion
Recommendations and overall assessment
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| 2019 | 2018 | Average for Industry |
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| Debt to Equity | Total debt / Total equity or Total liabilities / Total equity | Debt / Equity | Debt / Equity |
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| or Actual debt / Total equity | 1.201799606 | 1.156051249 |
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| 120.18 | 115.61 | result% |
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| Debt ratio | Total debt / Total assets | Debt / Total Assets | Debt / Total Assets |
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| 0.545826061 | 0.536189133 |
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| 55% | 54% | result% |
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| Equity Ratio | Total equity / Total assets | OE / A | OE / A |
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| 0.454173939 | 0.463810867 |
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| 45% | 46% | result% |
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| Cash debt coverage | Cash flow from op activities/Avg total liabilities | operating activities/ ((Year 1 Total L + Year 2 Total L)/2) | operating activities/ ( Year 2 Total L2) |
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| Cash flow from op activities | 2948 | 2994 |
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| Avg total liabilities | 12682 | 12682 |
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| 23% | 24% | result% |
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| Interest coverage ratio | EBIT / Interest expense | EBIT / Interest Exp | EBIT / Interest Exp |
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| EBIT |
| -3.548746518 |
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| Interest expense |
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| -352% | -35487% | result times |
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Discussion
ENSURE YOU COVER THE BELOW IN YOUR DISCUSSION, USE EACH LINE AS A HEADING
Discuss all the below in relation to ratios and information from reports.
Has Year 1 been better than Year 2 for the company?
Where you invest
Will the company succeed in the future?
The likelihood of a merger or acquisition?
Consider the relevant ethical considerations if the organisation becomes insolvent
Suggest what should the company be doing help it succeed?
The impact of the political competitive environment on the business external factors that need to be taken into consideration
Would you invest in this company?
References/Bibliography
Birt, J., Chalmers, K., Byrne, S., Brooks, A., & Oliver, J. (2012). Accountig. Business reporting for decision making. Australia: Wiley.