Financial Analysis and Evaluation of Myer and Kathmandu Holding Limited

Executive Summary
This report document focuses on the analysis and evaluation of statement of equity, cash flow,
income statement, and balance from comparing business health for Myer and Kathmandu
Holding Limited, listed companies in Australian Security Exchange (ASX). The methods
employed in the analysis include leverage ratio, free cash flow method among others.
Further direct evaluation was done by comparing those companies against each other, the
services they offer and their market segmentation.
The result on analysis drawn from the two company's data indicates the need for restructuring
and performance improvement regarding profit margin and liquidity.
Lastly, this analysis report gives an overall overview of the financial position of the two
companies regarding cash flow, taxes and going concern.
Table of Contents

Introduction.................................................................................................................................................2
i) Items of Equity....................................................................................................................................3
Reasons for changes in the item of equity...............................................................................................4
Myer Equity Screenshot..........................................................................................................................5
Kathmandu Equity Screenshot.................................................................................................................6
Comparative analysis of the debt and equity position for the two firms..................................................6
ii) List of cash flow items.........................................................................................................................7
Reasons for changes in cash flow items...................................................................................................8
Comparative analysis and evaluation of the companies for the three years.............................................9
Corporative analysis of the two Companies...........................................................................................10
iii) Other comprehensive income statements.......................................................................................10
Reasons why other comprehensive income are not reported in the income statement...........................11
Effect of other comprehensive income to profit and loss statement.......................................................11
Comparative analysis of the two companies on regards comprehensive income analysis......................11
iv) Accounting for corporate income tax.............................................................................................11
Effective tax rate....................................................................................................................................12
Comment on the deferred tax rate..........................................................................................................12
Deferred tax increase or decrease on the both companies......................................................................12
Cash tax amount using book tax amount, change in deferred tax assets and deferred tax liability........13
Different between cash tax and book tax...............................................................................................13
Conclusion.................................................................................................................................................13
Introduction
In this report, I will focus on the two companies listed on the Australian Securities Exchange,
which are Myer Holding Limited and Kathmandu Holding Limited. Both companies operate in
the same line of business.
Myer Limited Company was founded in the year 1900 by Sidney Myer and is based in
Docklands, Australia. The company has approximately 60 stores in Australia and offers different
products for women, men youth and children. Myer main products include clothes, intimate

apparels, electrical goods, footwear, handbags and accessories, and general merchandise. Myer
Holding Limited is ranked number 145 out of top 2000 Australian companies. Myer has over
eleven thousand employees including staff from subsidiaries under Myer control.
Kathmandu Holding Limited was founded in 1987 by John Pawson and Jan Cameron in New
Zealand. The company has a proximately 163 chain of stores in the United Kingdom and New
Zealand. Kathmandu specializes in travel and adventure outdoor apparel and equipment.
Ordinary shares – these are share which owners are entitled to the right to vote, right to receive
dividend after preferred shares and the right to attend meetings. They also represent common
ownership of the company. Kathmandu has at least a minimum of 2000 employees,
http://www.kathmandu.co.nz/.
As I have mentioned, focuses here will be on evaluation and analysis of the financial statement
for the two companies, comparing their performance and market adaptability.
First, I will begin by defining what owners' equity is, items of the equity and reasons for the
equity changes of the two companies. This will be followed by solvency analysis for both
companies to measure the extent to which each is using debt and impact on the shareholders and
stakeholder.
Secondly, I will consider cash flow items as reported in the financial statement, then, discuss the
changes of such items as reported by both companies and further do the financial evaluation
using free cash flow method to determine the company's business health.
Also, I will consider the items of other comprehensive income and give reasons why they are not
included in profit and loss statement and their effect on inclusion.
Lastly, this analysis gives the broad overview on how the capable investor should look at the
investment company and also guide the company’s management on the areas they need to work
on and improve to remain going concern.
i) Items of Equity
Equity also is known as owners’ equity is described as the capital stocks for the corporation

Treasury Shares – These consist of outstanding shares and float which are bought back by the
issuing company. They have entitled no dividend or right to vote.
Employee Share – These are shares owned by the employees of the company they work for.
They give employees a sense of the company’s ownership.
Option Scheme – It's a right but not an obligation was given to someone especially an employee
to buy a certain number of shares at a fixed price in future within the company he/she is working
for.
Dividends – These are money paid or distribution of a portion of earnings to the shareholders by
a corporation. Dividends can be paid in the form of share stocks or cash payment form.
Reasons for changes in the item of equity
Fn Item of Equity Myer Holding Limited Kathmandu Holding Limited
1 Ordinary Shares The increase of Ordinary shares
was as a result of issuing new
shares on September 2015 –
Issued under Entitlement offer
(See Screenshot below)
The change resulted from the
issue of shares under executive
and senior management long-term
incentives plan for the year 2017
(See Screenshot)
2 Treasury Shares The changes were as a result of
the acquisition of shares on the
market by Myer Equity trust
plan, and at the same time issue
of shares under short-term
incentive plan and performance
rights grant on the year 2017.
The lapses of performance right
on 2015 which affected the
ordinary shares in 2016.
3 Dividends There was increased dividends
payout on the financial year
ending 2016 compared to 2015.
This was due to increased
earnings for 2016. Dividends
payout depends on corporate
Dividend paid in 2016 was more
compared to the dividend paid on
2015,