Super Retail Group Financial Analysis

This assignment requires a financial analysis of the Super Retail Group Limited. Students are tasked with calculating key financial ratios such as net profit margin, return on assets, current ratio, interest coverage ratio, debt-to-equity ratio, and debt ratio. The analysis utilizes data from Super Retail Group's annual report for 2016 and external sources to evaluate the company's profitability, liquidity, and solvency.

Financial Analysis
Super Retail Group
[Type the abstract of the document here. The abstract is typically a short summary of the contents
of the document. Type the abstract of the document here. The abstract is typically a short
summary of the contents of the document.]

Contents
Part 2 : Company Research....................................................................................................................1
Part 3: Key Financial Data and Ratio Analysis........................................................................................4
Bibliography...........................................................................................................................................5
Appendix...............................................................................................................................................6
Part 2: Company Research
[A]
Super Retail Group is involved in the business of providing leisure, sports and auto products
to the consumers in Australia, New Zealand and China. The company provides the sports
equipment, apparel and accessories through its brands like Amart Sports, BCF, RAYS and
Rebel and the automotive parts and accessories are retailed under the brand Supercheap Auto.
Chief Executive Officer (CEO) Peter Birtles
Salary of CEO $1,548,169 (Group, 2016)
Net profit for 2016 $50 million (Group, 2016)
Last dividend paid 35.7 cents paid on 4th September, 2017
(Group, 2016)
Total assets $1569.5 million (Group, 2016)
Number of employees 11000 (Group, 2017)
Share price as on 8th September 2017 52 week high - $11
52 week low - $7.23 (Age, 2017)
[B]
All Ordinary Index
Date Closing Price
11-08-2017 5743.5
14-08-2017 5778.6
1

15-08-2017 5804
16-08-2017 5830.8
17-08-2017 5827.2
18-08-2017 5798.5
21-08-2017 5780
22-08-2017 5804.8
23-08-2017 5792.7
24-08-2017 5801.7
25-08-2017 5803.4
28-08-2017 5771.2
29-08-2017 5733.6
30-08-2017 5733.8
31-08-2017 5776.3
01-09-2017 5786.1
04-09-2017 5763.8
05-09-2017 5767.8
06-09-2017 5752.9
07-09-2017 5753.8
08-09-2017 5739.4
(Finance, All Ordinaries (^AORD), 2017)
8/11/2017
8/13/2017
8/15/2017
8/17/2017
8/19/2017
8/21/2017
8/23/2017
8/25/2017
8/27/2017
8/29/2017
8/31/2017
9/2/2017
9/4/2017
9/6/2017
9/8/2017
5680
5700
5720
5740
5760
5780
5800
5820
5840
All Ordinary Index
Closing Price
Super Retail
Date Closing Price
11-08-2017 7.881
14-08-2017 7.814
15-08-2017 7.871
2

16-08-2017 7.824
17-08-2017 7.900
18-08-2017 7.728
21-08-2017 7.709
22-08-2017 7.652
23-08-2017 7.546
24-08-2017 7.480
25-08-2017 8.024
28-08-2017 7.852
29-08-2017 7.871
30-08-2017 7.804
31-08-2017 7.738
01-09-2017 7.623
04-09-2017 7.670
05-09-2017 7.740
06-09-2017 7.780
07-09-2017 7.960
08-09-2017 8.000
(Finance, 2017)
8/11/2017
8/13/2017
8/15/2017
8/17/2017
8/19/2017
8/21/2017
8/23/2017
8/25/2017
8/27/2017
8/29/2017
8/31/2017
9/2/2017
9/4/2017
9/6/2017
9/8/2017
7.200
7.300
7.400
7.500
7.600
7.700
7.800
7.900
8.000
8.100
Super Retail Group
Closing Price
[c]
The share prices of Super Retail have remained in the range of $7.5 to $8 in the tracking
period. The prices have increased from 11th to 15th September, thereafter falling till 24th
September with a sudden increase of 7% on 25th August. The prices have surged as a result of
the release of the annual reports by the company for the year 2016-17. In the annual report,
the revenues have increased by 2% and the NPAT has increased by 62% (O'Neill, 2017).
3

Thereafter, the share price has moved down in the range of 7.7 to 7.9. The share price of the
company has remained more or less stable over the period.
The market index has been in the range of $5750 to $5830. The market index has increased in
the mid of August as a result of the big four banks performing well (Edwards, 2017).
Towards the end of August the market has fallen as a result of heavy losses from Telstra and
Commonwealth Bank (Turner & Commins, 2017). Overall we see that the market has fallen
over the tracking period. One of the reasons of a falling market index is also the
strengthening of the US dollar against the Australian dollar.
The shares of Super Retail have performed well as compared to the market index. When the
market index is falling, the share prices of Super Retail are increasing towards the beginning
of September.
[D] The gain or loss on the portfolio will be calculated using the returns for the tracking
period of all the three companies allocated to your group.
[E] Depending on the share price movement of Super Retail as compared to the market index,
we recommend a buy or hold for the shares because the shares are performing better than the
market. The company’s profits and revenue have increased for the last annual year, this has
strengthened the company’s fundamentals, and thus we can expect a further increase in the
share prices.
Part 3: Key Financial Data and Ratio Analysis
[A] The key financial data for Super Retail’s 2016 annual report from 1st July, 2016 to 30
June 2017 is given below:
Particulars $ million
Revenue / Sales 2423.8
Interest Expense 19.4
EBIT 107.2
Net Profit Before Tax 87.8
Net Profit After Tax 58
Current Assets 560.2
4

Total Assets 1569.5
Current Liabilities 329.8
Total Liabilities 835.5
Total Equity 734
(Group, 2016)
[B]
Ratio analysis
Profitability
Net Profit margin 2.4%
Return on assets 3.7%
Liquidity
Current ratio 1.70
Interest coverage ratio 5.53
Stability
Debt to Equity ratio 114%
Debt ratio 53%
The company has a good profitability with both its net profit margin and return on assets
being positive. The profit margin for a retail company is low owing to high investment in
merchandise.
The liquidity is measured by the current ratio. The current ratio is more than 1 which means
the current assets are sufficient to pay for the current obligations of the company. Also the
company has an interest coverage ratio of more than 5 times which means that the operating
profit of the company is five times the interest expense of the company and that the company
can easily pay for its finance costs. So the short term liquidity of Super Retail is good
enough.
Stability ratios measure the long term liquidity of the company. The company has a debt to
equity ratio of 114% which means it is highly leveraged as it has more debt than equity. This
makes the company risky. Also the debt ratio which the total liabilities as compared to total
assets, is more than 50% which means the company has more liabilities than assets making it
riskier.
To summarise we can say that Super Retail has good profitability and liquidity; however the
company has heavily taken on debt and thus is risky from a long term point of view.
5

Bibliography
Edwards, C. (2017, August 14). Australian sharemarket rises in ‘relief rally. Retrieved September 30,
2017, from The Australian: http://www.theaustralian.com.au/business/markets/australian-
sharemarket-rises-in-relief-rally/news-story/10ade2cbcf2863ec01e917b16749a633
Finance, Y. (2017, September 30). All Ordinaries (^AORD). Retrieved September 30, 2017, from
Finance.Yahoo: https://finance.yahoo.com/quote/%5EAORD/history?
period1=1502389800&period2=1504809000&interval=1d&filter=history&frequency=1d
Finance, Y. (2017, September 30). Super Retail Group Limited (SUL.AX). Retrieved September 30,
2017, from Finance.Yahoo: https://au.finance.yahoo.com/quote/SUL.AX/history?
period1=1502389800&period2=1504809000&interval=1d&filter=history&frequency=1d
Group, S. R. (2016). Super Retail Group: Annual Report 2016. Australia.
O'Neill, S. (2017, August 25). Results: Why the Super Retail Group Ltd share price jumped 8%.
Retrieved September 30, 2017, from The Motley Fool:
https://www.fool.com.au/2017/08/25/results-why-the-super-retail-group-ltd-share-price-
jumped-8/
Turner, S., & Commins, P. (2017, August 31). Markets Live: ASX ends torpid month on high note.
Retrieved September 30, 2017, from The Sydney Morning Herald:
http://www.smh.com.au/business/markets-live/markets-live-asx-to-creep-higher-20170830-
gy7nmw.html
Appendix
Ratio Formulae Calculation
Net profit margin Net income / net sales = 58/2423.8
= 2.4%
Return on assets Net income / total assets = 58 / 1569.5
= 3.7%
Current ratio Current assets / current
liabilities
= 560.2 / 329.8
= 1.7
Interest coverage ratio EBIT/ interest expense =107.2 / 19.4
= 5.53 times
6

Debt to equity ratio Total liabilities / total equity = 835.5 / 734
= 114%
Debt ratio Total liabilities / total assets = 835.5 / 1569.5
= 53%
7