Analysis of a Listed Retail Company in 2019

Introduction to ASOS and the Retail Sector in 2019

Unit Learning Outcomes Assessed. Learning Outcome: Analyse and interpret corporate reports and other financial information and draw appropriate conclusions in a variety of business situations

1. Apply critical thinking to practical and theoretical problems.

2. Be effective communicators using a wide range of media.

3. Demonstrate an awareness of ethical, corporate social responsibility and Covid-19 issues appropriate to the level of study and the discipline context.

AOL Programme learning outcomes Assessed:

1. Identify and explain professional and commercial/corporate issues
2. Critically evaluate professional and commercial/corporate issues
3. Critically reflect upon own development as a current or future professional
4. Identify and explain debates in their global and/or international context
5. Critically discuss the global and/or international context Assignment Details and Instructions. For the purpose of this assignment, you are a financial journalist working for the online investment magazine ‘InvestIt!’

You have been asked to analyse a selected listed company in the retail sector and write an article that explains whether you would advise investing in this business.

The specific areas for consideration are:

• Overview of the retail sector in the country in which your chosen company operates in 2019, and an introduction to your chosen company within it.

• Analysis of the performance of your chosen company for the financial year ended 2019, and in comparison to the sector/ previous year.

• Analysis of investor information of your chosen company for the financial year ended 2019, including share price movements to 31st December 2019, and comparison to the sector/ previous year.

• Impact of Covid-19 on your chosen company and the retail sector for 2020. A conclusion as to whether you would currently invest in your chosen company. My notes how to do each section of assignment (article).

Spread over sections (1-4) and how many words required for each section. I would like to get a draft for each section as and when completed. More details for section 3 and 4 will be provided next week, but basic requirement is there if you want a head start for section 3-4. Section 1-2, all details of requirement are provided.

Section 1 Sector Company: (500 words introduction)

Overview of the retail sector in the country in which your chosen company operates in 2019, and an introduction to your chosen company within it. Need to write 500 words of the following (bulletpoint):

• My chosen retail company: ASOS

Financial Analysis of ASOS for FY2019 Compared to Competitors

• Introduction to ASOS

• Overview of the retail sector in the country (Check below heading: How to construct the introduction) Sources for section 1 1. Where can I find information: ? Mintel.com ? Search: Retail Sector > executive summary And, also search for: ? Search: ASOS 2. Other sources: Website: Business sources premier, also known as or hosted by EBSCO.

Search retail rector/ industry Search: ASOS Retail profile of retail in the UK Second search box:

• ASOS SWOT analysis How to construct the introduction

• Use above sources to write a brief (500 words) introduction on ASOS and retail sector.

• The challenges retail sector is having.

• Are there any current regulations or new regulations impacting the sector or ASOS?

• Is it a growing sector or declining industry – what is the sectors future prospect.

Section 2 Analysis of financial performance (1000 words)

Analysis of the performance of your chosen company for the financial year ended 2019, and in comparison, to the sector/ previous year and competitor ( my chosen competitor: BOOHOO).

• Financial Analysis is a key role performed within organisations. It is an important aspect of corporate reporting.

• The purpose of this assignment is to develop your analysis skills, and give you a wider understanding of business and commercial issues. What is analysis?

• Analysis is the use of financial statements or other financial information to evaluate the past, current and expected future performance of a company.

• We perform analysis both internally and externally. Internally, businesses will compare results to budgets, or prior periods. Externally, business analysts analyse the results of large Plcs and look for reasons for profit/ revenue variances etc.

• We see business analysis all the time on the business news, in the press etc. What have you seen/ read recently? How do we perform analysis?

• Take the financial statements and compare: o To prior year (in our case we will compare 2019 with 2018)(not 2020) o To competitor o To industry averages (Retail sector average)

• Can also use interim/ other internal financial information if work for a company Important points

• Always use group financial statements (contains everything)

• Think about format/ presentation (may not be same as in ‘exam world’) How do we calculate ratios, and what do they tell us?

Analysis of Investor Information Including Share Price Movements

• Various ratios, in different categories. This time will consider performance/ profitability.

• Note – you do NOT need to calculate your own ratios (available via databases e.g FAME, or in the financial statements). You may want to calculate if considering the impact of one-offs or for some more unusual figures.

Sources for section 1

• FAME webpage is recommended to find ASOS plc ratio’s for ROCE and Operating profits.

• Use the ratio’s from one source and not from multiple sources. Other information: ASOS Annual report (AR): contains important information. Recommended to pick highlights from (AR):

1. Chairmans message, Chief Executives review and financial reviews.

• What went wrong and what went right for ASOS plc.
• Look for results produced
• Revenue, costs and off sets (Why have these increased/ decreased. Provide reasons. Are there any off sets that won’t happen in future years?
• Outlook: plans for 2020 or future

2. Only use competitors information to compare ratio performance.

3. Can be compared quarterly basis (with previous year, competitor (Boohoo) retail sector). Section 3 and 4 more information will be provided week commencing 21st September 2020 Section 3 Analysis of investor information. (1000 words)

Analysis of investor information of your chosen company for the financial year ended 2019, including share price movements to 31st December 2019, and comparison to the sector/ previous year.

Investor Ratios Q – What are the areas of interest for investors? Solvency Gearing Long term debt Long term debt + Equity How business financed – debt or equity. No perfect method but need to ensure sustainable.

Interest Cover Profit before interest Finance Costs How far can cover finance/interest costs with profits. Investor ratios P/E Ratio Share Price Latest EPS Indicates risk and confidence in investment.

High = high confidence. Used in the real world by analysts. Dividend yield Dividend per share Market price per share Return on investment in shares, relative to market price.

Dividend cover Earnings per share Dividend per share Ability of entity to maintain existing dividends (use in conjunction with yield). If high, likely entity can maintain level of dividends.

Share price Share price fluctuations occur for many reasons:

• General business events.

• Sector specific events.

• Company specific events – external and internal.

• For large fluctuations, look for explanations. See the following for Easyjet, compared to Ryanair (from 1 October- 31 December 2019):

Source:

London Stock Exchange What would you look at here? Explain Section 4 Impact of Covid-19 (500 words conclusion) Impact of Covid-19 on your chosen company and the retail sector for 2020. A conclusion as to whether you would currently invest in your chosen company. Covid-19

• Impact across all business sectors

• Some suffered, some benefited

• What is the impact on retailers?