Financial Performance and Sustainability Reporting of Sainsbury and Morrison

This analysis evaluates the financial performance of Sainsbury and Morrison through ratio analysis and sustainability reporting. It compares their net profit ratio, current ratio, debtor collection period, creditor payment period, debt equity ratio, return on equity ratio, quick ratio, gross profit ratio, and EPS ratio. It also discusses their sustainability reporting and CSR policies.

COURSEWORK

Table of Contents
INTRODUCTION...........................................................................................................................3
ANALYSIS......................................................................................................................................3
Evaluation of financial performance...........................................................................................3
Sustainability reporting................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................1
APPENDIX......................................................................................................................................3
Calculation of financial ratios......................................................................................................3

INTRODUCTION
Morrison
It is one of 4th largest chain of supermarket in UK with a headquarter in Bradford (About
us, 2021). As per its history it was founded by William Morrison in 1899 with the starting of
business as selling of egg and butter It sales a large proportion of product that may include the
food and drinks, clothing, homeware, books and various other. The main purpose of the
Morrison is to make the availability of healthy food at affordable price.
Sainsbury
It is the 2nd largest supermarket chain in the UK. it was founded by John James Sainsbury
in 1869 with a shop in Drury lane. Its headquarter is in London, UK. The aim of the Sainsbury is
to provide food at the fair price (About us., 2021). It always works with the perspective of being
fair to suppliers and the environment. It sells its product through supermarket, convenience shop
and various other mode. Its main purpose is to sell the products to its customers at the reasonable
rates. It act as main competitor of the other firm.
Both the company operate in the form of physical stores as well as perform the business
operations in the form of online and digital or online website medium.
ANALYSIS
Evaluation of financial performance
Ratio analysis:
It is an important concept through which the financial performance of the company can
be evaluate and measured. With the aspect of financial ratio analysis, the performance of the
company and its financial aspect can be measured.
Evaluation of financial performance of Sainsbury and Morrison:
Net profit ratio:
The NP ratio measure the net profit earned by the company in the respected year
(Kusmayadi, Rahman and Abdullah, 2018). In case of Sainsbury the NP ratio in 2020 was 0.52
while in 2021 it declines and become (0.96). However, in case of Morrison the NP ratio in 2020
was 1.98 while in 2021 it become 0.54. This it be evaluated that the net profit ratio in case of
Morrison is high while making it compared with the Sainsbury. Thus it can be said that that the

Morrison shows the positive financial performance while making it compared with the
Sainsbury. The declining ratio can be related with them declining proportion of sales with an
increasing amount of expenses. This is also related with the negative impact of the covid which
have a direct impact towards the sales of the company and thus affect the NP ratio and the
profitability of the company.
Current ratio:
This is also called liquidity ratio which measures the liquidity of the company in respect
to payment of short term liability (Nuryani and Sunarsi, 2020). In case of Sainsbury the current
ratio in 2020 was 0.62 while in 2021 it become 0.60. However, in case of Morrison the Current
ratio in 2020 was 0.38 while in 2021 it become 0.47. Thus, it can be evaluating that the current
ratio in Sainsbury is high while making it compared with the Morrison. This need to be improved
because a persistence of high current ratio shows that the holding of liquidity and cash by
Sainsbury is high which restrict the funds in terms of making an investment and raising of
interest income.
Debtor collection period:
It refers to the period that is related with the collection of money from the debtors which
are due (Ibrahim, Usaini and Elijah, 2021). While analysing the financial performance of the
Sainsbury it is analysed that the Debtor collection period in 2020 was 10.20 while in 2021 it
become 9.10. However, in case of Morrison the ratio in 2020 was 7.34 and in 2021 it become
6.96. This also shows that the financial performance of Sainsbury is low in comparison of
Morrison because of the persistence of high collection period in Sainsbury which delay the
payment from the debtor and thus impact towards the availability of funds.
Creditor payment period:
It refers to the period of payment in respect to the company that how many days after the
company make the payment to its creditors (Tran, 2020). In case of Sainsbury the ratio in 2020
was 58.25 while in 2021 it become 60.27. However, in case of Morrison the ratio in 2020 was
66.07 but in 2021 it become 59.63. This shows that the financial performance of the Sainsbury is
better with an increase in the number of payment period. However, with a declining number of
days in case of the Morrison the company’s performance can also be counted as declining and
need to be improved. With the persistence of the high payment period the company can make

investment and thus earn the interest income which will support the profitability of the company.
But with the persistence of declining period in Sainsbury the financial performance is low.
Debt equity ratio:
This ratio measures the composition of debt and equity in the financial structure of the
company (Kurniawan, 2021). Its ideal ratio is 2.5 or 2 which shows that the debt of the company
must be more than equity. In case of Sainsbury the ratio in 2020 was 2.59 while in 2021 it
become 2.81. However, in case of Morrison the debt equity ratio in 2020 was 1.40 while in 2021
it become 1.61. Thus, from the above analysis it can be right to said that the financial
performance of the Morrison is low while making it compared with the Sainsbury because of the
persistence of low ratio while making it compared with the ideal ratio. Thus, it need to be
improved with the raising proportion of debt in case of equity.
Return on equity ratio:
This ratio measures the profitability of the business in relation with the equity (Hertina
and Saudi, 2019). While analysing the financial performance of Sainsbury it is analysed that the
ratio in 2020 was 0.01 while in 2021 it falls and become (0.04). However, in case of Morrison it
was found that in 2020 the ratio was 0.07 while in 2021 it become 0.02. Thus, it can be
interpreted that the financial performance of the Sainsbury is lower while making it compared
with the Morrison because of the persistence of the loss in 2020 by Sainsbury which has made
declining of the ratio.
Quick ratio:
This ratio measures the liquidity of the company. The ideal ratio is 1:1 (Wijaya and
Sedana, 2020). While making an analysis of the quick ratio it can be analysed that in 2020 the
ratio in Sainsbury was 0.48 which falls in 2021 and become 0.46. However, in case of Morrison
the ratio in 2020 was 0.19 which raise in 2021 and become 0.20. Thus, it can be evaluating that
the Sainsbury may face the issue in relation with the lack of cash and liquidity so that it can
make the repayment of short term liability. However, with a raising ratio in case of Morrison
shows better financial condition while making it compared with the Sainsbury.
Gross profit ratio:
This ratio measures the financial health of the company in respect to the return after the
deduction of cost in relation with sales (Nariswari and Nugraha, 2020). While making an
analysis of the GP ratio of Sainsbury it can be analysed that in 2020 it was 6.95 while in 2021 it

become 6.07. However, in case of Morrison the concerned ratio in 2020 was 3.58 while in 2021
it become 2.20. This clearly shows that with respect to measurement of the performance of both
the companies the financial health in terms of GP ratio of the Sainsbury is high in comparison of
the Morrison. Thus, Morrison need to lower down the cost of sales so that it can raise the return
and thus the gross profit ratio of the company will be improved.
EPS ratio:
This ratio defines the amount which is made by the company in respect to each share of
the stock. It is widely used matric by which an estimation of corporate value can be made. While
evaluating the financial performance of Sainsbury it was found that the ratio in 2020 was 19.8
which falls in 2021 and it becomes 11.7. However, in case of Morrison the ratio in 2020 was
14.60 which falls in 2021 and become 3.99. Thus it can be evaluated that the financial
performance of the Morrison is declining while making it compared with the Sainsbury.
Likewise, with the declining the EPS ratio the earning in respect to the equity decline.
Return on capital employed ratio:
With the aspect of this ratio the return in respect to the employment of capital can be
measured. In case of Sainsbury the ratio in 2020 was 7.4 while in 2021 it become 5.5. However,
in case of Morrison the financial ratio in 2020 was 7% while in 2021 it become 3.9%. This
shows that the financial performance in terms of declining ROCE can be identified in case of
Morrison which need to be improved in respect to focus towards the performance of
advertisement or the promotion of company that will ultimately raise the return of the company.
Thus, from the above analysis it can be said that the performance of Sainsbury and
Morrison may vary with respect to certain aspects. This is because there is certain financial ratio
like the net profit, current ratio, debt equity ratio, return on equity, GP and various other are
declining in case of Sainsbury which shows that the financial performance of the company is not
well and thus need to be improved. However, when this performance is measured with the
Morrison it can be analysed that the financial performance of Morrison is also good in certain
aspect like the persistence of favourable current ratio, debt equity ratio while at the same time the
declining remaining ratio. Thus, it can be evaluated that with respect to the covid pandemic and
its impact the financial performance of the companies has been affected which truly reflect in the
declining financial performance of the companies in 2021.

Thus, it is right to conclude that the financial performance of the companies has been
impacted with respect to the impact of the covid which need to be improved with the focus and
working towards the brand promotion and focus towards the sales aspect so that the sales and the
revenue of the company will be improved and thus raise the earning and the profitability aspect
of the company which raise the financial performance of the company along with meeting the
financial loss associated with the covid pandemic.
Sustainability reporting
Sainsbury:
The working practices of the Sainsbury is closely associated with the consideration
towards the focus over society success. The production of the food items and the products are
closely associated with the consideration towards the societal and environmental value. The
company set the baseline by 2018/19 as 14% reduction in absolute greenhouse gas reduction. As
per the goal of the committee it is assumed that by 2040 plan that focus toward the reduction of
the use of carbon, plastic along with focus towards the recycling, biodiversity along with
reducing the use of waste of food, health and various other aspect (Sustainability., 2022). The
working of the company has been made along with a compliance of CSR which shows that along
with working towards the meeting of goal of the company, it also takes consideration towards the
focus in respect to meeting of societal need and safeguarding of environment (Annual Report and
Financial Statements 2021, 2022). Sainsbury also adopt the practice of transparency under which
it makes a clear disclosure of the information and the performance so that the society and other
concerned stakeholders will get the information in relation with the working and operation of the
company.
Morrison:
Morrison also perform various function and operation in relation with the concept of
sustainability. This is justified with respect to the steps it takes in consideration with the focus
towards the 3 pillars that include the Purpose under which it performs right thigs for the
customers, farmers as well as towards those which produce food. In the same way it also makes
focus towards the Planet under which it works towards the reduction of waste, cutting of
greenhouse gases along with utilisation of resources with care. In respect to People which is the
3rd and the most important pillar the Morrison take all those steps that may lead to encourage and

initiate them to take action and steps which may lead to reduce the impact towards the
environment by taking of suitable steps like work towards the betterment of the society
(Sustainability, 2022). The Morrison also made various policies and the rules in relation with the
CSR so that the company and its employees will be well aware with respect to meeting the
sustainability aspect (Annual Report and Financial Statements 2020/21, 2022). Likewise, the
company has also set the performance target which will allow it to measure its performance in
relation with the sustainability aspect. This means that the Morrison take all those steps which
would allow the company to perform its marketing and the business operation along with taking
care of the environment and the society. Morrison also make focus towards the sustainable use of
natural resources so that the efficient utilisation of the natural resources will take place that will
lead to assist the company in meeting the sustainability compliances. The Governance Board has
also been set up in respect with CSR norms so that the safeguarding of activities of eco-friendly
production will take place along with complying the norms of sustainability. Focus towards the
giving of opportunity to the local traders and the farmers along with minimising the work with
the brand suppliers has work towards the emission of the greenhouse gas emission which is
related with the creation of pollution that is associated with the transportation activities and the
movement of goods and services that may produce ibn case of brand suppliers.
Thus, making a comparison with both the companies it can be right to said that both the
companies take most appropriate steps in relation with the CSR activities and the sustainability
norms by taking suitable steps in relation with the safeguarding of environment along with the
performance of the business operation. Both the companies have taken similar steps in relation
with reduction of the emission of the greenhouse gas emission by the end of 2040. This may also
include the similar steps in relation with the reduction of the plastic use along with the focus
towards the recycling and other procedure that may work towards the safeguarding of the
environment. Consideration towards the eco-friendly steps and production of those products
which are in accordance with the nature and meeting the concept of sustainability.
CONCLUSION
From the above report it can be concluded that while making a comparison between the
Morrison and Sainsbury the financial performance of both the company vary from each other.
However, in respect to sustainability aspect the steps of the both the companies match with each

other that work towards the safeguarding of environment along with business operation.
However, in case of financial performance the result of both the company vary with each other in
terms of fluctuation in financial performance.

REFERENCES
Books and journals
Hertina, D. and Saudi, M.H.M., 2019. Stock return: Impact of return on asset, return on equity,
debt to equity ratio and earning per share. International Journal of Innovation, Creativity
and Change. 6(12). pp.93-104.
Ibrahim, K.Y., Usaini, M. and Elijah, S., 2021. Working Capital Management and Business
Performance. Nigerian Journal of Marketing (NJM) Vol. 7(1).
Kurniawan, A., 2021. Analysis of the effect of return on asset, debt to equity ratio, and total asset
turnover on share return. Journal of Industrial Engineering & Management
Research. 2(1). pp.64-72.
Kusmayadi, D., Rahman, R. and Abdullah, Y., 2018. Analysis Of The Effect Of Net Profit
Margin, Price To Book Value, and Debt To Equity Ratio On Stock Return. International
Journal of Recent Scientific Research. 9(7). pp.28091-28095.
Nariswari, T.N. and Nugraha, N.M., 2020. Profit growth: impact of net profit margin, gross
profit margin and total assests turnover. International Journal of Finance & Banking
Studies (2147-4486). 9(4). pp.87-96.
Nuryani, Y. and Sunarsi, D., 2020. The Effect of Current Ratio and Debt to Equity Ratio on
Deviding Growth. JASa (Jurnal Akuntansi, Audit dan Sistem Informasi Akuntansi). 4(2).
pp.304-312.
Tran, Q.T., 2020. Creditor protection, shareholder protection and investment efficiency: New
evidence. The North American Journal of Economics and Finance. 52. p.101170.
Wijaya, D.P. and Sedana, I.B.P., 2020. Effects of quick ratio, return on assets and exchange rates
on stock returns. Am. J. Humanities Soc. Sci. Res. 4. pp.323-329.
Online references
About us., 2021. [Online]. Available through < https://www.about.sainsburys.co.uk/about-us>
About us., 2021. [Online]. Available through <https://www.morrisons-corporate.com/about-us/>
Annual Report and Financial Statements 2020/21., 2022. [Online]. Available through
<https://www.morrisons-corporate.com/investor-centre/annual-report/>
Annual Report and Financial Statements 2021., 2022. [Online]. Available through <
https://www.annualreports.com/HostedData/AnnualReports/PDF/LSE_GB0767628_2021.pdf>
1

Sustainability., 2022. [Online]. Available through <
https://www.about.sainsburys.co.uk/sustainability>
Sustainability., 2022. [Online]. Available through
<https://www.morrisons-corporate.com/morrisons-sustainability/sustainability/>
2

APPENDIX
Calculation of financial ratios
Ratio Sainsbury Morrison
2021 2020 2021 2020
Net profit ratio: Net
profit/Sales*100
=
(280)/29048*100
= (0.96)
=
152/28993*100
= 0.52
= 96/17598*100
= 0.54
=
348/17536*100
= 1.98
Current ratio:
Current
asset/Current
liability
= 7073/11717
= 0.60
= 7586/12047
= 0.62
= 1430/2981
= 0.47
= 1322/3396
= 0.38
Debtor collection
period: Trade
debtor/annual
sales*365
=
725/29048*365
= 9.10
=
811/28993*365
= 10.20
=
336/17598*365
= 6.96
=
353/17536*365
= 7.34
Creditor payment
period: Trade
creditors/annual
purchase*365
=
4488/27176*365
= 60.27
=
4275/26783*365
= 58.25
=
2837/17364*365
= 59.63
=
3051/16854*365
= 66.07
Debt equity ratio:
Total
liability/shareholder
equity
= 18558/6604
= 2.81
= 20164/7773
= 2.59
= 6820/4216
= 1.61
= 6379/4541
= 1.40
Return on equity
ratio: Net
earnings/Shareholder
equity
= 280/6604
= (0.04)
= 152/7773
= 0.01
= 96/4216
= 0.02
= 348/4541
= 0.07
Quick ratio: Current
assets-Inventories/Cu
rrent liability
= 7073-
1625/11717
= 7586-
1732/12047
= 1430-
814/2981
= 1322-
660/3396
3

= 0.46 = 0.48 = 0.20 = 0.19
Gross profit ratio:
Gross
profit/Sales*100
=
1765/29048*100
= 6.07
=
2016/28993*100
= 6.95
=
388/17598*100
= 2.20
=
629/17536*100
= 3.58
Notes:
Calculation of Purchase for Sainsbury for 2021 and 2020
COGS= Opening stock+ Purchase- Closing stock
2021:
27283= 1732+ Purchase- 1625
27283-1732+1625= Purchase
Purchase: 27176
2020:
26977= 1926 +Purchase-1732
26977-1926+1732 = Purchase
Purchase: 26783
Calculation of Purchase for Morrison for 2021 and 2020
2021:
17210= 660+Purchase-814
17210-660+814: Purchase
Purchase: 17364
2020:
16907= 713 +Purchase -660
16907-713+660: Purchase
Purchase: 16854
Sainsbury EPS ratio:
4

Morrison EPS ratio:
ROCE of Sainsbury:
5

ROCE of Morrison:
Sainsbury:
Income statement:
6

Balance sheet:
7

8

Morrison:
Income statement:
Balance sheet:
9

10