Analysis of Woolworths Group: Finance and Performance Evaluation

HI5002: Finance for business
1

Table of Contents
Introduction....................................................................................................................................3
Portfolio..........................................................................................................................................4
1...................................................................................................................................................4
2...................................................................................................................................................5
3...................................................................................................................................................6
4...................................................................................................................................................8
5.................................................................................................................................................11
6.................................................................................................................................................13
7.................................................................................................................................................14
8.................................................................................................................................................16
9.................................................................................................................................................17
10...............................................................................................................................................18
Conclusion....................................................................................................................................19
References.....................................................................................................................................20
2

Introduction
The assignment consists of the Woolworths group and the Annual reports of the company. There
is brief about the company and its shareholding based on which it is justified as a family or non-
family company. There is the calculation of the performance ratio of 4 years to determine and
analyse the performance of the company. The assignment includes the comparison of the share
price of the company along with the All Ords Index along with the interpretation of the same.
The Announcements that affected the share price of the company are also stated in the
assignment. There is the calculation of the WACC cost in the assignment and the return on
equity that the company must provide in order to satisfy the Debt and equity component. There is
also brief about the capital structure and dividend policy of the company. The letter of
recommendation is also provided depending upon the various analysis that carried out.
3

Portfolio
1.
The Woolworths Limited is a retail chain company which is established in Australia and New
Zealand having headquartered in Bella Vista, Australia founded in 1924. It is engaged in various
businesses and segment such as liquor and food retail chains. The company is currently having
three brands Woolworth Food Group, Endeavour Drink and portfolio businesses (Woolworths
Group, 2018). The company focuses on making the life of the customer easy as the business is a
customer-led business. The company has followed many steps for maintaining the relationship
and trust among the stakeholders. They have also followed the corporate governance for the
transparency in the operation of the company (Woolworths Group, 2018).
The Woolworths Food group consist of Woolworth rewards, Woolworth Supermarkets,
Countdown, Petrol and Financial Services. The Endeavour drinks consist of Dan Murphy’s,
BWS, Cellarmasters, and Langtons. The Portfolio Businesses Consist of Big W and ALH Group
Hotels. The company P/E Ratio is 24.34 with a 1-year return of 11.88% providing EPS of 1.11
(Woolworths Group, 2018). The last dividend provided by the company was 0.5. The company
though incurred a loss in the financial year 2016 but the share price of the company has
increased and earned a Net profit after tax of $1593.400Million.
(Figure – Company Logo)
(Source – Woolworths Group, 2018)
4

2.
i)
The company does not consist of any shareholder having more than 20% of share.
There are only two companies that are having more than 5% shareholding in the WOW Group
Name Share Holding Percentage Number of shares
Perpetual Limited and
subsidiaries
5.05% 64,217,336
BlackRock Group 5% 64,766,473
ii)
The chairman of the company is Gordon Cairns.
The CEO of the Company is Mr. Bradford Leon Banducci
The board of directors of the company is (Woolworths Group, 2018):-
Name Designation
Gordon Cairns Chairman
Brad Banducci MD and CEO
Jillian Broadbent AO
Holly Kramer Non-Executive Director
Siobhan Mckenna Non-Executive Director
Scott Perkins Non-Executive Director
Kathee Tesija Non-Executive Director
Michael Ullmer Non-Executive Director
Richard Dammery Chief Legal Officer, Company Secretary
Since the company is not having any shareholding more than 20% and also shareholding of more
than 5% are of two companies and they don’t have any link or family relation with the directors
of WOW therefore it can be stated that the company is a non-family company and does not have
any involvement in the firm governance.
5

3.
i)
Profitability Ratios for 4 Years of Company
Sr.
No. Particular
Year 2017
($
Million)
Year 2016
($
Million)
Year 2015
($
Million)
Year 2014
($
Million)
1 Total Asset 22915.80
0
23502.20
0
25336.80
0
24136.50
0
2 Total Liability 13039.70
0
14720.30
0
14204.80
0
13611.10
0
3 Ordinary Equity 9876.100 8781.900 11132.00
0
10525.40
0
4 Net profit After Tax
(NPAT) 1593.400 -2347.900 2137.400 2458.400
5 EBIT 2326.000 1494.900 3322.500 3775.200
Return on Assets (ROA) = (NPAT /
Total Assets) 0.07 -0.10 0.08 0.10
Return on Equity (ROE) = (Net
Profit After Tax / Ordinary
Equity)
0.16 -0.27 0.19 0.23
Total Assets / Ordinary Equity 2.32 2.68 2.28 2.29
Debt Ratio = Total Liabilities /
Total Assets 0.57 0.63 0.56 0.56
EBIT x NPAT x TA = NPAT
TA EBIT OE OE
2626 x 1593.400 x 22915.800 = 1593.400
22915.800 2326.00 9876.100 9876.100
1593.400 = 1593.400
9876.100 9876.100
Hence proved
6