Main Menu

My Account
Online Free Samples
   Free sample   Financial analysis report for coles group limited

Financial Analysis Report for Coles Group Limited

Question

Task

Select a company that is currently listed on the ASX. Write a Financial Analysis Report that interprets the company’s most recent annual report. This report will need to be written for a stakeholder (external investor or internal manager).

Answer

Executive Summary
Coles Group Limited is a chain of retail markets in Australia. It is publicly listed, and its operations cover the sale of grocery and food items. It has outlets throughout Australia. The sale of petrol and liquor is also made through its express outlets. It ranks the second most preferred retailer in Australia next to Woolworths Limited. Coles was first found in 1914 as a variety of stores and has come a long way and gone through a series of mergers to reach the position it currently enjoys. This assignment is an attempt to carry out a financial analysis of the company using the financial and non-financial indicators. It is useful for an external investor who is deciding upon the investment in the company. The annual report serves as a base for the financial analysis. In contrast, the media news and initiatives taken by the company available publicly are the non-financial indicators that have evolved over the years.

Analysis

Table 1 Financial Statements Summary

(A$’m)

FY 2020

FY 2019

FY 2018

Income Statement

     

Sales

37,408

38,176

38,934

Gross Profit

9,741

9,211

9,026

Net Profit

978

1,435

1,579

Balance Sheet

     

Assets

18,349

9,777

12,545

Liabilities

15,734

6,420

9,295

Equity

2,615

3,357

3,250

Cash flow

     

Operating CF

2,552

2,275

1,910

Investing CF

(658)

(280)

(503)

Financing CF

(1,842)

(1,611)

(1,237)

Net CF

52

384

170

The sales have been more or less similar over the last three years. The marginal decline in sales during 2020 can be attributed to the coronavirus pandemic. The Gross profit is increasing over the years, indicating that the company can manage its direct expenses well. The net profit has decreased significantly, which is due to the increased finance costs during the current year. The total assets have increased due to the addition of the right-to-use assets (Coles 2020). The total liabilities have also increased due to the addition of lease liabilities. The cash flows are managed well, and the company is not facing any difficulties in the working capital management.

Interpretation

Table 2 Ratio Analysis

Ratio Name

FY 2017

FY 2018

FY 2019

Profitability and Returns

     

Gross Profit Ratio

26%

24%

23%

Net Profit Ratio

3%

4%

4%

Asset management and efficiency

     

Assets Turnover Ratio

2.66 times

3.42 times

1.48 times

Inventory Turnover Ratio

13.58 times

10.82 times

7.12 times

Liquidity and Stability Ratios

     

Debt Equity Ratio

3.65

0.43

0.01

Current Ratio

0.67

0.79

0.53

Return on Investment

5%

15%

13%

Return on Equity

61%

88%

72%

       

Share Market Ratios

     

Price Earnings Ratio

0.24

0.22

0.23

       

Non-Financial Performance Indicators

     

Customers and community

   

Community activities 

Technology and sustainability

   

Doing business responsibly

The sales of the company have been more or less on similar lines, whereas the gross profit ratio has increased. The gross profit determines the ability of the company to meet the direct expenses. The gross profit ratio of Coles is rising, which is a good sign (Peirson et al 2015).

The indirect expenses represent the administration, selling and distribution expenses and the financing costs. The net profit ratio has decreased in the year 2020 due to the increase in the financing costs (Coles 2019).

A company uses its fixed assets to generate profits, and the assets turnover ratio indicates how efficiently the company has used its assets (Carlon 2019). The assets turnover ratio was higher in the year 2019 in comparison to the current year. In the case of inventory turnover ratio, it is higher in the year 2020 in contrast to the prior years. Thus there is the fast movement of the inventory which the company can translate into profits.

Every company has to borrow and take loans to run the business without cash flow difficulty. The debt-equity ratio of the company measures whether the company is stable enough to meet its liabilities. The latest debt-equity ratio is pretty strong, indicating the financial strength of the company. The current ratio measures whether the short term liabilities will be met by the company or not. The term current refers to the period within a year. As the current ratio of the company is less than 1, it is not considered to be very healthy, and the company has to work towards improving the same.

The return on investment has fallen drastically in the current year, which is due to the fall in the net profit for the year 2020 (Coles 2020). The same is the case with the return on equity which has fallen due to the fall in the net profit. The share price has enhanced over the last few years, indicating that investors will yield returns over the years (Deegan 2016).

The chief operations of the company are mainly related to the sale of food and groceries through the main supermarket chain Coles and through sale of liquor and petrol through the outlet of Liquor and Express outlets. The outlets of the company together with the online sales have boosted the sales performance. Hence, the liquor business is favorable and profitable for the company as a whole. The non-financial performance indicators are reflected in the form of the sustainability measures taken by the company and the market share and continued market presence.

Table 3 Trend Analysis

Item 1

FY 2020

FY 2019

FY 2018

Sales

      37,408 

      38,176 

      38,934 

- Change

 

            (768) 

            (758 )

- % Change

 

-2%

-2%

 

 

 

 

Item 2

 

 

 

Operating Expenses

        8,530 

        8,214 

        7,716 

- Change

 

          (316)

          (498)

- % Change

 

-4%

-6%

 

 

 

 

Item 3

 

 

 

Net Income

            978 

        1,435 

        1,579 

- Change

 

            (457) 

            (144 )

- % Change

 

-47%

-10%

The sales have been falling by 2% every year. The operating expenses have increased by 4% and % respectively. This indicates that the costs have raised more than the decrease in the sale. The net income has fallen drastically, which is a triggering point for the company. It has to take measures to reach a stage a reasonable profit earning.

Conclusion
The overall analysis of the company does not throw up any worrying factors. The analysis gives an insight that at present the company is facing slight issues in terms of profitability which is owing to the heavy expenses. The price at which the share is available is best for investment. Hence, going by the return on investment and debt capacity the company has enough potential to yield strong result. The share can be purchased currently with a view of long term investment as the fundamentals of the company are substantial. The management structure and the various committees formed to reflect the strength of the company. Thus the financial and non-financial analysis of the company gives a clear picture of the performance and market state of the company.

References
Carlon, S, 2019, Financial accounting: reporting, analysis and decision making. 6th ed. Milton, QLD John Wiley and Sons Australia, Ltd

Coles 2020, Coles 2020 annual report & accounts, viewed 31 October 2020, https://www.colesgroup.com.au/FormBuilder/_Resource/_module/ir5sKeTxxEOndzdh00hWJw/file/ Annual_Report.pdfAppendix

Deegan, C. M 2016, Financial accounting, McGraw-Hill Education. Peirson, G, Brown, R., Easton, S, Howard, P. & Pinder, S 2015, Finance, 12th ed. North Ryde: McGraw-Hill Australia.

Appendix

Coles Group Limited - Ratio Analysis

 

 

 

('$m)

Profitability Ratios

FY 2020

FY 2019

FY 2018

Sales 

37,408

38,176

38,934

Gross Profit

9,741

9,211

9,026

Net Profit

978

1,435

1,579

Gross Profit Ratio

26%

24%

23%

Net Profit Ratio

3%

4%

4%

 

 

 

 

 

 

 

('$m)

Asset Management Ratios

FY 2020

FY 2019

FY 2018

Sales 

37,408

38,176

38,934

Average Total Assets

14,063

11,161

26,330

Cost of Goods Sold

28,043

29,253

44,633

Average Inventory

2,066

2,704

6,271

Assets Turnover Ratio

2.66

3.42

1.48

Inventory Turnover Ratio

13.58

10.82

7.12

 

 

 

 

 

 

 

('$m)

Liquidity and Stability Ratios

FY 2020

FY 2019

FY 2018

Debt 

9,552

1,460

42

Equity

2,615

3,357

3,250

Current Assets

3,779

3,406

4,725

Current Liabilities

5,681

4,291

8,981

Debt Equity Ratio

3.65

0.43

0.01

Current Ratio

0.67

0.79

0.53

 

 

 

 

 

 

 

('$m)

 

FY 2020

FY 2019

FY 2018

Net Profit

978

1,435

1,579

Total Assets

18,349

9,777

12,545

Return on Investment

5%

15%

13%

 

 

 

 

 

 

 

('$m)

 

FY 2020

FY 2019

FY 2018

Net Income

            978 

        1,435 

        1,579 

Shareholders Equity

1,611

1,628

2,193

Return on Equity

61%

88%

72%

 

 

 

 

 

 

 

 

 

FY 2020

FY 2019

FY 2018

Market Price

17.75

17.75

17.75

Earnings Per Share

73.3

80.8

76.7

Price Earnings Ratio

0.24

0.22

0.23

 

 

 

 

Trend Analysis

 

 

 

Item 1

FY 2020

FY 2019

FY 2018

Sales

      37,408 

      38,176 

      38,934 

- Change

 

          (768)

          (758)

- % Change

 

-2%

-2%

 

 

 

 

Item 2

 

 

 

Operating Expenses

        8,530 

        8,214 

        7,716 

- Change

 

          (316)

          (498)

- % Change

 

-4%

-6%

 

 

 

 

Item 3

 

 

 

Net Income

            978 

        1,435 

        1,579 

- Change

 

            457 

            144 

- % Change

 

47%

10%

NEXT SAMPLE
Plagiarism free Assignment

FREE PARAPHRASING TOOL

PARAPHRASING TOOL
FREE PLAGIARISM CHECKER

FREE PLAGIARISM CHECKER

PLAGIARISM CHECKER
FREE PLAGIARISM CHECKER

FREE ESSAY TYPER TOOL

ESSAY TYPER
FREE WORD COUNT AND PAGE CALCULATOR

FREE WORD COUNT AND PAGE CALCULATOR

WORD PAGE COUNTER



AU ADDRESS
9/1 Pacific Highway, North Sydney, NSW, 2060
US ADDRESS
1 Vista Montana, San Jose, CA, 95134
ESCALATION EMAIL
support@totalassignment
help.com