In this assignment operating and financial health of Woolworths Limited is analysed which is registered in Australian stock market. The chosen company Woolworths limited of Australia covered under Supermarket or Grocery Store Chain. The financial performance is evaluated and assessed considering latest last six years. The data required for the analysis is extracted from the Data Analysis Premium. This assignment covers background and mission of the company and the assessment of the financial health is based on common size and horizontal analysis, cash flow analysis, liquidity analysis, income analysis, capital structure analysis, key coverage ratios and growth and risk analysis and on the basis of mentioned criteria conclusions are drawn that the Woolworths limited are fundamentally better company and it is advised to existing investors should continue to hold the stock and prospective investors should consider buying the stock.
The Woolworths Limited was opened in the year 1924 in Sydney’s Imperial Arcade. The company covered under Food and staples Retailing industry. It is one of the largest company in terms of broad retail interest across New Zealand and Australia. It was approximately more than 92 years of existence and around 20 years of being listed in Australian market. Its stock ticker is WOW (Woolsworth Limited, 2018). The company mostly specialises in grocery products such as vegetables, fruits, packaged foods etc. also deals in selling magazines, health and household products, pet supplies, stationery items etc. Further the company is also a largest retailer of liquor. In addition to above, company also owns petrol divisions and also offers financial services in terms of credit cards, gift cards etc. The company has approximately 1000 stores through Australia with nearly 202000 workforces. The Woolworths Limited works with an objective of serve exceptional services and products to the customers and also deliver shareholders better value. The main highlight of Woolworths group in 2017 financial year was an enhancement in customer scores in Australian food which has resulted in transactions force all over the year. Woolworths Limited created the culture that cheers expansion, image and reward boldness.
There are five main aims and objectives of the company (Woolsworth Limited, 2018):
- Building Customer’s value by providing best class shopping experience.
- Empowering portfolio business to maximise shareholders return.
- Another objective is to become a lean retailer through system excellence.
- To develop solid brand with the family-friendly culture.
- Better services only with reduced costs and changed values.
- Horizontal Analysis:
|
Item |
2017 (%) |
2016 (%) |
2015 (%) |
2014 (%) |
2013 (%) |
|
Operating Revenue |
0.41% |
5.11% |
9.79% |
9.94% |
5.83% |
|
Other Revenue |
316.72% |
373.55% |
379.52% |
327.65% |
336.35% |
|
Total Revenue Excluding Interest |
0.74% |
5.50% |
10.18% |
10.28% |
6.18% |
|
Operating Expenses |
3.70% |
8.42% |
10.97% |
11.30% |
6.97% |
|
EBITDA |
-30.46% |
-25.34% |
1.82% |
-0.50% |
-2.17% |
|
Depreciation and Amortisation |
14.78% |
15.70% |
29.27% |
12.74% |
9.26% |
|
EBIT |
-40.66% |
-34.59% |
-4.37% |
-3.48% |
-4.74% |
|
Interest Revenue |
-100.00% |
-100.00% |
-100.00% |
-63.43% |
-17.16% |
|
Interest Expense |
-39.18% |
-22.84% |
-19.95% |
-12.72% |
28.84% |
|
Pre-tax Profit |
-41.23% |
-36.10% |
-3.71% |
-3.11% |
-7.78% |
|
Tax Expense |
-26.51% |
-19.48% |
18.43% |
19.40% |
12.38% |
|
Net Profit after Tax Before Abnormals |
-45.97% |
-41.47% |
-10.85% |
-10.38% |
-14.29% |
|
Abnormals |
-100.00% |
71.27% |
-23.91% |
-100.00% |
-76.59% |
|
Abnormals Tax |
#DIV/0! |
#DIV/0! |
#DIV/0! |
#DIV/0! |
#DIV/0! |
|
Reported NPAT After Abnormals |
-12.32% |
-229.20% |
17.62% |
35.29% |
24.62% |
(Data Analysis Premium, 2018).
Balance Sheet:
|
Item |
2017 (%) |
2016 (%) |
2015 (%) |
2014 (%) |
2013 (%) |
|
Current Assets |
|
|
|
|
|
|
Cash |
9.12% |
13.76% |
60.00% |
10.70% |
1.90% |
|
Receivables |
-31.96% |
-28.15% |
-3.20% |
2.22% |
15.78% |
|
Prepaid Expenses |
25.36% |
23.93% |
12.98% |
15.90% |
1.31% |
|
Inventories |
10.33% |
23.26% |
31.74% |
26.90% |
13.71% |
|
Investments |
-32.35% |
135.29% |
692.02% |
-46.64% |
127.73% |
|
NCA Held Sale |
230.13% |
192.14% |
1.30% |
64.75% |
-60.53% |
|
Total Current Assets |
20.55% |
28.01% |
32.04% |
23.66% |
7.31% |
|
Non-Current Assets |
|
|
|
|
|
|
Receivables |
194.29% |
250.61% |
376.33% |
341.63% |
-32.24% |
|
Investments |
112.27% |
167.25% |
108.38% |
27.60% |
50.21% |
|
PP&E |
-12.01% |
-13.83% |
4.93% |
0.12% |
-3.58% |
|
Intangibles(Ex GW) |
12.44% |
13.63% |
17.38% |
19.05% |
15.69% |
|
Goodwill |
30.87% |
12.90% |
18.76% |
20.50% |
5.56% |
|
Future Tax Benefit |
-42.25% |
72.17% |
17.11% |
5.75% |
-4.08% |
|
Total NCA |
0.90% |
1.88% |
12.02% |
7.93% |
1.55% |
|
Total Assets |
6.18% |
8.90% |
17.40% |
12.16% |
3.10% |
|
Current liabilities |
|
|
|
|
|
|
Account Payable |
30.44% |
22.27% |
20.62% |
17.21% |
3.03% |
|
Short-Term Debt |
365.99% |
802.02% |
2924.63% |
303.49% |
211.40% |
|
Provisions |
47.02% |
59.41% |
1.88% |
5.02% |
0.44% |
|
NCL Held Sale |
-89.70% |
0.85% |
-100.00% |
-100.00% |
-100.00% |
|
Other |
-100.00% |
-90.73% |
-57.99% |
-100.00% |
21.00% |
|
Total Curr. Liabilities |
30.42% |
32.91% |
35.51% |
11.71% |
1.47% |
|
Non-Current liabilities |
|
|
|
|
|
|
Long-Term Debt |
-40.86% |
-17.56% |
-34.42% |
-11.91% |
-8.79% |
|
Provisions |
14.89% |
56.16% |
66.66% |
75.67% |
-16.13% |
|
Other |
-54.97% |
-53.02% |
-53.43% |
-62.03% |
41.30% |
|
Total NCL |
-33.81% |
-10.07% |
-20.92% |
-3.88% |
-4.47% |
|
Total Liabilities |
-0.72% |
12.07% |
8.15% |
4.15% |
-1.41% |
|
Equity |
|
|
|
|
|
|
Share Capital |
31.32% |
22.83% |
14.81% |
8.31% |
1.55% |
|
Reserves |
-145.32% |
-137.40% |
-137.87% |
-178.93% |
-110.00% |
|
Retained Earnings |
-8.80% |
-24.95% |
40.03% |
30.26% |
11.95% |
|
Outside Equity |
35.65% |
20.61% |
15.38% |
5.73% |
5.42% |
|
Total Equity |
16.93% |
3.97% |
31.80% |
24.62% |
10.11% |
|
Total liabilities + Total Equity |
6.18% |
8.90% |
17.40% |
12.16% |
3.10% |
(Data Analysis Premium, 2018).
|
Item |
2017 (%) |
2016 (%) |
2015 (%) |
2014 (%) |
2013 (%) |
|
Receipts from Customers |
6.34% |
6.06% |
6.93% |
6.97% |
3.64% |
|
Payments to Suppliers and Employees |
7.08% |
7.70% |
6.52% |
6.11% |
3.96% |
|
Interest Received |
-100.00% |
-100.00% |
-100.00% |
-63.43% |
-17.16% |
|
Interest Paid |
-40.92% |
-26.96% |
-21.66% |
-12.14% |
20.35% |
|
Tax Paid |
-29.03% |
-9.87% |
12.14% |
23.49% |
3.81% |
|
Net Operating Cash flows |
8.64% |
-17.97% |
16.40% |
20.84% |
-5.36% |
|
Payment for Purchase of PPE |
-10.79% |
-7.37% |
1.49% |
-12.05% |
-7.97% |
|
Proceeds From Sale of PPE |
40.25% |
261.90% |
321.30% |
-2.81% |
352.68% |
|
Investments Purchased |
-100.00% |
116.67% |
316.67% |
-100.00% |
4566.67% |
|
Payments for Purchase of Subsidiaries |
-96.14% |
-84.37% |
-38.91% |
155.85% |
62.12% |
|
Proceeds from Sale of Subsidiaries |
#DIV/0! |
#DIV/0! |
#DIV/0! |
#DIV/0! |
#DIV/0! |
|
Loans Granted |
-100.00% |
-100.00% |
-100.00% |
-100.00% |
-100.00% |
|
Other Investing Cash flows |
-55.13% |
-58.97% |
-41.03% |
-202.56% |
193.59% |
|
Net Investing Cash flows |
-31.19% |
-39.11% |
-35.88% |
-2.35% |
-42.23% |
|
Proceeds from Issues |
-82.87% |
-62.95% |
-45.51% |
-32.36% |
29.08% |
|
Proceeds from Borrowings |
-98.51% |
-94.92% |
-59.23% |
-36.42% |
-51.67% |
|
Repayment of Borrowings |
-89.04% |
-92.25% |
-59.12% |
-38.22% |
-49.33% |
|
Dividends Paid |
-57.80% |
-8.67% |
17.60% |
14.28% |
6.30% |
|
Other Financing Cash flows |
-100.00% |
-240.70% |
-262.79% |
-106.98% |
-34.88% |
|
Net Financing Cash flows |
17.70% |
0.39% |
9.64% |
-6.62% |
3.48% |
|
Net Increase in Cash |
-94.27% |
-43.16% |
-159.26% |
-110.27% |
-99.67% |
|
Cash at Beginning of Period |
-37.09% |
-12.25% |
-39.29% |
-44.12% |
-44.38% |
|
Exchange Rate Adj |
-146.15% |
415.38% |
700.00% |
207.69% |
376.92% |
|
Cash at End of Period |
8.46% |
13.11% |
57.76% |
9.16% |
0.47% |
(Data Analysis Premium, 2018).
- Common Size Analysis:
Profit and loss statement:
|
Item |
2017 (%) |
2016 (%) |
2015 (%) |
2014 (%) |
2013 (%) |
2012 (%) |
|
Operating Revenue |
99.89% |
99.57% |
99.59% |
99.54% |
99.53% |
99.56% |
|
Other Revenue |
0.11% |
0.43% |
0.41% |
0.46% |
0.47% |
0.44% |
|
Total Revenue Excluding Interest |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
|
Operating Expenses |
91.35% |
92.03% |
92.19% |
92.00% |
93.88% |
94.03% |
|
EBITDA |
8.65% |
7.97% |
7.81% |
8.00% |
6.12% |
5.97% |
|
Depreciation and Amortisation |
1.59% |
1.64% |
1.63% |
1.87% |
1.75% |
1.81% |
|
EBIT |
7.06% |
6.34% |
6.18% |
6.13% |
4.38% |
4.16% |
|
Interest Revenue |
0.05% |
0.04% |
0.02% |
0.00% |
0.00% |
0.00% |
|
Interest Expense |
0.57% |
0.70% |
0.45% |
0.42% |
0.42% |
0.35% |
|
Pre-tax Profit |
6.54% |
5.68% |
5.74% |
5.71% |
3.96% |
3.81% |
|
Tax Expense |
1.59% |
1.69% |
1.73% |
1.71% |
1.22% |
1.16% |
|
Net Profit after Tax Before Abnormals |
4.94% |
3.99% |
4.02% |
4.00% |
2.74% |
2.65% |
|
Abnormals |
1.01% |
0.22% |
0.00% |
0.70% |
1.64% |
0.00% |
|
Abnormals Tax |
0.00% |
0.06% |
0.00% |
0.19% |
0.33% |
0.00% |
|
Reported NPAT After Abnormals |
3.27% |
3.84% |
4.02% |
3.50% |
4.01% |
2.85% |
Balance Sheet:
|
Item |
2017 (%) |
2016 (%) |
2015 (%) |
2014 (%) |
2013 (%) |
2012 (%) |
|
Current Assets |
|
|
|
|
|
|
|
Cash |
3.86% |
3.82% |
3.81% |
5.26% |
4.03% |
3.97% |
|
Receivables |
2.80% |
3.14% |
2.55% |
2.30% |
1.84% |
1.79% |
|
Prepaid Expenses |
1.24% |
1.21% |
1.28% |
1.19% |
1.41% |
1.46% |
|
Inventories |
17.14% |
18.90% |
19.39% |
19.23% |
19.40% |
17.81% |
|
Investments |
0.11% |
0.24% |
0.05% |
0.74% |
0.24% |
0.07% |
|
NCA Held Sale |
1.75% |
0.67% |
2.56% |
1.51% |
4.68% |
5.43% |
|
Total Current Assets |
26.89% |
27.98% |
29.64% |
30.24% |
31.60% |
30.52% |
|
Non-Current Assets |
|
|
|
|
|
|
|
Receivables |
0.11% |
0.07% |
0.45% |
0.46% |
0.37% |
0.31% |
|
Investments |
1.11% |
1.61% |
1.26% |
1.96% |
2.72% |
2.21% |
|
PP&E |
44.43% |
41.56% |
39.66% |
39.71% |
35.16% |
36.82% |
|
Intangibles(Ex GW) |
9.55% |
10.71% |
10.13% |
9.54% |
9.96% |
10.11% |
|
Goodwill |
14.93% |
15.28% |
16.04% |
15.10% |
15.48% |
18.40% |
|
Future Tax Benefit |
2.99% |
2.78% |
2.82% |
2.98% |
4.72% |
1.62% |
|
Total NCA |
73.11% |
72.02% |
70.36% |
69.76% |
68.40% |
69.48% |
|
Total Assets |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
|
Current liabilities |
|
|
|
|
|
|
|
Account Payable |
23.75% |
23.73% |
24.81% |
24.40% |
26.66% |
29.17% |
|
Short-Term Debt |
0.25% |
0.76% |
0.91% |
6.49% |
2.09% |
1.11% |
|
Provisions |
5.88% |
5.73% |
5.50% |
5.10% |
8.61% |
8.14% |
|
NCL Held Sale |
0.93% |
0.00% |
0.00% |
0.00% |
0.86% |
0.09% |
|
Other |
0.54% |
0.64% |
0.00% |
0.19% |
0.05% |
0.00% |
|
Total Current Liabilities |
31.35% |
30.86% |
31.23% |
36.19% |
38.26% |
38.51% |
|
Non-Current liabilities |
|
|
|
|
|
|
|
Long-Term Debt |
21.76% |
19.25% |
17.09% |
12.15% |
16.47% |
12.12% |
|
Provisions |
4.54% |
3.70% |
7.12% |
6.45% |
6.52% |
4.92% |
|
Other |
3.21% |
4.40% |
1.09% |
1.27% |
1.38% |
1.36% |
|
Total NCL |
29.51% |
27.34% |
25.29% |
19.88% |
24.37% |
18.40% |
|
Total Liabilities |
60.86% |
58.20% |
56.52% |
56.06% |
62.63% |
56.90% |
|
Equity |
|
|
|
|
|
|
|
Share Capital |
19.81% |
19.52% |
19.13% |
19.37% |
22.35% |
24.50% |
|
Reserves |
-1.16% |
0.11% |
0.82% |
0.38% |
0.40% |
0.50% |
|
Retained Earnings |
19.29% |
20.95% |
22.40% |
23.01% |
13.29% |
16.57% |
|
Outside Equity |
1.20% |
1.22% |
1.13% |
1.18% |
1.32% |
1.53% |
|
Total Equity |
39.14% |
41.80% |
43.48% |
43.94% |
37.37% |
43.10% |
|
Total liabilities + Total Equity |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
(Data Analysis Premium, 2018).
Cash Flow Statement:
|
Item |
2017 (%) |
2016 (%) |
2015 (%) |
2014 (%) |
2013 (%) |
2012 (%) |
|
Receipts from Customers |
7287.80% |
7517.29% |
7141.96% |
4939.66% |
6833.66% |
7145.07% |
|
Payments to Suppliers and Employees |
-6792.71% |
-7028.39% |
-6602.89% |
-4586.34% |
-6468.04% |
-6706.10% |
|
Interest Received |
3.17% |
2.61% |
1.06% |
0.00% |
0.00% |
0.00% |
|
Interest Paid |
-46.86% |
-56.14% |
-37.72% |
-23.27% |
-30.26% |
-25.53% |
|
Tax Paid |
-111.38% |
-115.08% |
-126.00% |
-79.17% |
-88.76% |
-72.88% |
|
Net Operating Cash flows |
340.01% |
320.29% |
376.40% |
250.87% |
246.60% |
340.57% |
|
Payment for Purchase of PPE |
-253.28% |
-231.99% |
-204.08% |
-162.94% |
-207.42% |
-208.33% |
|
Proceeds From Sale of PPE |
23.60% |
106.35% |
21.02% |
63.03% |
75.52% |
30.52% |
|
Investments Purchased |
-0.07% |
-3.30% |
0.00% |
-0.19% |
-0.14% |
0.00% |
|
Payments for Purchase of Subsidiaries |
-17.18% |
-27.72% |
-40.27% |
-6.65% |
-2.37% |
-0.61% |
|
Proceeds from Sale of Subsidiaries |
0.00% |
12.46% |
4.01% |
6.37% |
1.57% |
21.89% |
|
Loans Granted |
-0.13% |
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
|
Other Investing Cash flows |
0.92% |
2.70% |
-0.87% |
0.34% |
0.33% |
0.38% |
|
Net Investing Cash flows |
-246.13% |
-141.51% |
-220.18% |
-100.04% |
-132.50% |
-156.15% |
|
Proceeds from Issues |
38.32% |
49.23% |
23.75% |
13.24% |
12.55% |
6.05% |
|
Proceeds from Borrowings |
1462.60% |
703.54% |
851.92% |
377.96% |
65.74% |
20.08% |
|
Repayment of Borrowings |
-1518.08% |
-765.64% |
-859.21% |
-393.40% |
-103.99% |
-153.43% |
|
Dividends Paid |
-157.69% |
-166.84% |
-165.09% |
-117.55% |
-127.32% |
-61.35% |
|
Other Financing Cash flows |
1.02% |
0.66% |
-0.07% |
-1.05% |
-1.27% |
0.00% |
|
Net Financing Cash flows |
-173.83% |
-179.04% |
-148.70% |
-120.80% |
-154.28% |
-188.64% |
|
Net Increase in Cash |
-79.95% |
-0.26% |
7.52% |
30.03% |
-40.18% |
-4.22% |
|
Cash at Beginning of Period |
179.79% |
99.53% |
92.04% |
69.19% |
139.48% |
104.29% |
|
Exchange Rate Adj |
0.15% |
0.73% |
0.43% |
0.78% |
0.70% |
-0.07% |
|
Cash at End of Period |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
100.00% |
(Data Analysis Premium, 2018).
- In terms of PPE and intangibles, we have observed from below pie chart and graph that PPE was lowest in 2016 as compared to 2012 year whereas PPE was highest in 2015 in comparison to 2012. In other words, in 2015 PPE was increased by 4.93% from 2012 and in 2016, it was decreased by 13.83% from 2012. This is due to additions made by the company in Plant and Equipment was highest in 2015 in comparison to other 6 years. In addition to this, Intangibles are highest in 2014 that is 19.05% as compared to other years due to business acquisition and positive movement in foreign exchange rates
- In terms of sales and Net profit, it is analysed that Revenue of Woolworths are highest in 2014 whereas it was lowest in 2012 that means revenue of 2014 was 10.28% more from 2012. Similarly, the net profit and EBIT was also highest in 2014 by 35.29% from 2012. This is mainly due to company has earned highest $ 9.8 million in interest revenue among 6 years. Further there are no abnormal items shown in 2014. Considering 2016 and 2017, there were net loss in 2016 of $ 2347.9 million and for 2017, it was seen that net profit lower by 12.32% from 2012 and on the other hand, there is only 0.74% increment in revenue in 2017 from 2012.
EBIT was lowest in 2017 due to depreciation and amortisation expense was highest in 2017. Also the company has not earned an interest revenue in 2017.
- In terms of Debt and Equity, it was observed that Share capital had increased every year from past 6 years. However, retained earnings was highest in 2015 that is 40.03% which has resulted highest increment in total equity by 31.80%. However, in terms of debt we have observed from the below graph that the company has least long term debt in 2017 however at the same time, accounts payable was highest in 2017 which signifies that in FY 2017 total liabilities was decreased by 0.72% from 2012.
The purpose of Cash flow analysis is to show the actual picture of the company’s cash that is from where the cash has been generated or where the cash has been spent over the period of time that is 6 years in this case (2012-2017). This analysis is performed to gauge the company’s liquidity and long-term solvency position.
Comments:
- Receipts from customers: It is seen from the below table that in 2014, the company has increased its receipts from customers by 6.97% in comparison to 2012 which is highest. The reason is due to highest revenue earned in 2014.
- Payments to suppliers and employees: According to below table, it is seen that in 2016, the company has paid more to their suppliers and employees by 7.7% which is highest among six years.
- Interest received and interest paid: According to below table, it is seen that Woolworths has not received any interest from past three years but the interest has been paid during these years. Interest paid by the company was highest in 2013 that is $ 476.7 million.
Hence, net cash generated from operating activities was highest in 2014 of $ 3472.7 million. However, in 2017, the net cash generated from operating activities was $ 3122 million which has only increased 8.64% from 2012.
|
Item |
06/12 |
06/13 |
06/14 |
06/15 |
06/16 |
06/17 |
|
Receipts from Customers |
615965,00,000.00 |
638368,00,000.00 |
658917,00,000.00 |
658654,00,000.00 |
653298,00,000.00 |
654989,00,000.00 |
|
Payments to Suppliers and Employees |
-574120,00,000.00 |
-596851,00,000.00 |
-609183,00,000.00 |
-611543,00,000.00 |
-618345,00,000.00 |
-614748,00,000.00 |
|
Interest Received |
268,00,000.00 |
222,00,000.00 |
98,00,000.00 |
0.00 |
0.00 |
0.00 |
|
Interest Paid |
-3961,00,000.00 |
-4767,00,000.00 |
-3480,00,000.00 |
-3103,00,000.00 |
-2893,00,000.00 |
-2340,00,000.00 |
|
Tax Paid |
-9414,00,000.00 |
-9773,00,000.00 |
-11625,00,000.00 |
-10557,00,000.00 |
-8485,00,000.00 |
-6681,00,000.00 |
|
Net Operating Cash flows |
28738,00,000.00 |
27199,00,000.00 |
34727,00,000.00 |
33451,00,000.00 |
23575,00,000.00 |
31220,00,000.00 |
Liquidity analysis is performed to gauge the company’s liquidity position. In this analysis, company’s ability to pay its short term dues is gauged. In this analysis, current ratio, liquid ratio, receivables and payables and inventories are considered,
|
Item |
06/12 |
06/13 |
06/14 |
06/15 |
06/16 |
06/17 |
|
Current Ratio |
0.86 |
0.91 |
0.95 |
0.84 |
0.83 |
0.79 |
|
Quick Ratio |
0.31 |
0.29 |
0.33 |
0.30 |
0.32 |
0.33 |
|
Days Receivables |
1.44 |
1.46 |
1.48 |
1.70 |
0.78 |
0.70 |
|
Days Payables |
33.74 |
32.85 |
35.97 |
37.07 |
39.25 |
43.83 |
|
Inventory |
$36983,00,000.00
|
$ 42054,00,000.00
|
$ 46932,00,000.00
|
$ 48722,00,000.00
|
$ 45585,00,000.00
|
$ 40804,00,000.00
|
Comments:
- Current Ratio: According to the above table, it is seen that current ratio of the company was in decreasing order. This means that the CA has increased every year but CL is also increased every year but the percentage of increment of CL is more than CA. Hence in this case, in 2017 liquidity position is not sound.
- Liquid Ratio: According to the above table, it is seen that liquid ratio of the company was in increasing order. This means that the Liquid assets are more in 2017 as compared to past years. This means that the company is able to convert its liquid assets into cash more easily.
- Receivables and payables: In this case, days receivables are in decreasing order which is a good sign because it signifies that lower the days’ receivables less is the time taken by the company to collect cash from its credit sales. On the other hand, days’ payables are in increasing order which is a not a good sign because it signifies that company has taken more time in repayment of its purchases. Hence, the company has efficient collection department.
- Inventories: In this case, inventories are highest in 2015 and after that the same was showing a decreasing trend which means that the company is not able to maintain the stock level properly.
Income analysis is performed to gauge the company’s profitability position. In this analysis, EBIT margin analysis, a gross profit margin analysis, net income analysis and EPS and ROA analysis and EBIT ROA are considered,
|
Item |
06/12 |
06/13 |
06/14 |
06/15 |
06/16 |
06/17 |
|
Net Profit Margin (%) |
4.95 |
4.00 |
4.02 |
4.03 |
4.67 |
2.55 |
|
EBIT Margin (%) |
7.07 |
6.36 |
6.21 |
6.16 |
4.40 |
4.18 |
|
EPS Aft. Abs. |
147.93 |
181.80 |
195.60 |
170.30 |
-97.73 |
119.10 |
|
ROA |
4.78% |
3.50% |
3.17% |
3.62% |
-4.50% |
3.51% |
|
EBIT ROA |
18.16% |
16.78% |
15.63% |
14.79% |
10.91% |
10.15% |
Comments:
- Net profit margin: This ratio assesses the profitability position of the company. As seen from the above table, net profit margin was least in 2017 due to least net profit earned in 2017 and least operating revenue in 2017 from past years.
- EBIT margin: This ratio also assesses the profitability position of the company before interest and tax expenses. As seen from the above table, EBIT margin was also least in 2017 due to least EBIT earned in 2017 and least operating revenue in 2017 from past years.
- EPS: This ratio depicts the profitability position where earnings are gauged from per value of share. It is noticed that after the losses in 2016 company has earned profits in latest year and at the same time share capital increased every year. Thus, as per above table it shows that the efficient position of the company in 2017.
- ROA: This ratio is also depicting the profitability positon wherein returns are computed from the total assets of the company. From the above table, it shows that effective and sound returns are earned by the company in 2017 in comparison to losses of 2016.
- EBIT ROA: In this case, profits before interest and taxes are computed from total assets. Hence, in this case, EBIT ROA is least in 2017.
In this analysis, level of business risks is identified. Through capital structure analysis, market value of firm is increased and overall firm is decreased. In this case, debt ratio and financial leverage are considered to evaluate the business risks.
|
Item |
06/12 |
06/13 |
06/14 |
06/15 |
06/16 |
06/17 |
|
Debt to equity ratio |
1.56 |
1.39 |
1.30 |
1.28 |
1.68 |
1.32 |
|
Financial Leverage |
2.56 |
2.39 |
2.30 |
2.28 |
2.68 |
2.32 |
Comments:
- Debt to Equity ratio: This is computed to identify the percentage of company’s financing that comes from creditors and shareholders. Hence in this case, lower ratio is always favourable to the company indicating lower level of risk. Hence as per the above table, debt to equity ratio has decreasing trend which means the company has financed its more from shareholders and less from external parties.
- Financial leverage: As seen from the above table, financial leverage also shows decreasing trend which means company has not used its debts to acquire additional assets. Hence in this case, decreasing graph shows less risk of failure, less interest payments which depicts the sound financial stability and performance.
In this category, interest coverage ratio is examined to evaluate the company’s ability to meet its interest obligations on timely basis.
- Interest Coverage ratio: This ratio is calculated to conclude the company’s productivity to pay interest expenses on the outstanding liability on consistent basis. Hence, in this case, 2017 showing an increasing trend which signifies that Woolworths is paying its interest obligations in a timely basis which indicates satisfactory financial health as compared to 2016 financial year.
|
Item |
06/12 |
06/13 |
06/14 |
06/15 |
06/16 |
06/17 |
|
Net Interest Cover |
13.45 |
9.63 |
14.12 |
14.71 |
10.44 |
12.01 |
In this case, business risk and growth of the company is evaluated. For this purpose, company’s business risk and conditions are mentioned.
Business Risk is computed as follows: Total assets/standard deviation of EBIT.
|
Item |
06/12 |
06/13 |
06/14 |
06/15 |
06/16 |
06/17 |
|
Business Risk |
33.54 |
34.58 |
37.61 |
39.37 |
36.52 |
35.61 |
Hence, as per the above case it is evaluated that upto 2015 the graph showing an increasing trend and afterwards the graph is declined. Hence, in current financial year it shows that Woolworths has optimum capital structure. In other words, the company has best use of its debt and equity financing to use for expansions and operations. In addition to this, Woolworths focuses on to improve the shopping experiences to the customers and also delivers best shareholders value. Hence, low business risk of the company confirms that financial commitments will be fulfilled at all times.
It is concluded that the company’s operating and financial health is sound because as per the above calculations we have observed from common size and horizontal analysis, cash flow analysis, liquidity analysis, income analysis, capital structure analysis, key coverage ratios and growth and risk analysis that Woolworths are continuing to improve the offers for their customers and best shopping experience to them. Also focusses on the increment of shareholders’ value through maximum returns.
In addition to this, extracting the share price of the company we further noticed that the graph is in increasing trend. which simply concludes that Woolworths Limited created the culture that cheers expansion, image and reward boldness. Thus, it is opined that Woolworths limited are fundamentally better company and it is advised to existing investors should continue to hold the stock and prospective investors should consider buying the stock.
Woolworths Limited, 2012, Annual Report 2012, viewed on 06 October 2018 from https://www.aspecthuntley.com.au/asxdata/20120924/pdf/01336226.pdf.
Woolworths Limited, 2013, Annual Report 2013, viewed on 06 October 2018 from https://www.aspecthuntley.com.au/asxdata/20130927/pdf/01448091.pdf.
Woolworths Limited, 2014, Annual Report 2014, viewed on 06 October 2018 from https://www.aspecthuntley.com.au/asxdata/20140922/pdf/01554929.pdf.
Woolworths Limited, 2015, Annual Report 2015, viewed on 06 October 2018 from https://www.aspecthuntley.com.au/asxdata/20150911/pdf/01661001.pdf.
Woolworths Limited, 2016, Annual Report 2016, viewed on 06 October 2018 from https://www.aspecthuntley.com.au/asxdata/20160825/pdf/01771153.pdf.
Woolworths Limited, 2017, Annual Report 2017, viewed on 06 October 2018 from https://www.aspecthuntley.com.au/asxdata/20170823/pdf/01886519.pdf.
Data Analysis Premium, 2018, WOW: Price History, viewed on 06 October 2018 from https://datanalysis-morningstar-com-au.ez.library.latrobe.edu.au/af/company/pricehistory-default?ASXCode=WOW&page=1&resultsperpage=25&active=PRC_Sec1&xsl-graphtype=tr10&xtm-licensee=datpremium.
Data Analysis Premium, 2018, WOW: Financial Data, viewed on 06 October 2018 from https://datanalysis-morningstar-com-au.ez.library.latrobe.edu.au/ftl/company/profitloss?ASXCode=WOW&rt=A&sy=2008-01-01&ey=2018-12-31&xtm-licensee=datpremium.
Woolworths Group, 2018, Strategies and objectives, viewed on 06 October 2018 from https://www.woolworthsgroup.com.au/page/about-us/our-approach/strategy-and-objectives/.
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