Financial Performance and Shareholder Analysis of Coles Group Limited

This report provides a comprehensive financial analysis of Coles Group Limited, a major Australian supermarket chain. It begins with an introduction to the company, its industry position, and strategic plans. The analysis then delves into shareholder structures, including types of shareholders and the chairman's views, followed by a risk-return analysis that identifies key risks and evaluates dividend performance. The report proceeds to examine the cost of capital, calculating the Weighted Average Cost of Capital (WACC) and analyzing equity. A significant portion of the report is dedicated to financial statement analysis, including time series analysis and Return on Assets (ROA) calculations. The report uses the 2018/2019 annual financial report to evaluate the current situation of Coles Group Limited, offering insights into its financial health and performance.

Student Name:
Course Name:
1.0 Introduction 2

1
1.1 Industry Situation and Company Plans 3
Supermarket industry current situation in Australia 3
1.2 Coles Group Limited plans 4
2.0 Shareholder analysis 5
2.1 Types of Shareholder 5
2.2 Chairman’s Views for the shareholder 6
3.0 Risk-return analysis 10
3.1 Different types of Risk 10
3.2 Dividend 11
4.0 Cost of capital15
4.1 Coles Group Total Stockholders Equity 15
4.2 Coles Group WACC % Calculation 18
5.0 Financial statement analysis 19
5.1 Time Series Analysis 20
5.2 Coles Group ROA22
References 30
1.0 Introduction
Coles Group Limited is a Supermarket situated in Australia, and it works and possesses
retail stores (Karen, 2011). The organization's CEO is Mr John Durkan. 2014. The Company
started working in 1914, and its home office is situated in Hawthorn East, Australia. This

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monetary report will utilize the 2018/2019 yearly budgetary report in investigating the present
circumstance of Coles Group Limited. The organization gives enormous assortments of retail
products. Some of the main items offered by the Coles Group Limited are; pastry shop items and
bread, vegetables and natural products, fish and meat, eggs, dairy, suppers, solidified
nourishments, family items, mixers, beverages, and washroom merchandise. Different items
incorporate; business merchandise, stationeries, infant items, tobacco, socks, gift vouchers,
mobiles, and media items. Organization's free evaluators are; Ernst and Young and Ds Lesen.
Reviewers state that the money related report of the Coles Group Limited is in concurrence with
the organization's demonstration of 2001, where it has incorporated a reasonable and genuine
perspective on the united monetary of the elements toward the finish of the financial year.
Additionally, they state that the money related report agrees to Australian Accounting Standards
and the organization's Regulation Act of 2001. They at long last infer that the budget reports are
by the Global Financial detailing Standards.
1.1 Industry Situation and Company Plans
Supermarket industry current situation in Australia
Basic food item and nourishment industry in Australia is encountering solid weight from
certain powers like rivalry in the grocery store retail stores, the latent assurance in the more
extensive monetary environment, changes in money valuations, and the significant expense of
setting up and dealing with a business in Australia when contrasted with different nations. The
quick advancement in the ALDI which offers results of high calibre at moderate prices to clients.
The Discount arrangements to clients have made ALDI progressively mainstream to customers
in Australia. (ColesGroup, 2020) The rise of ADLI has driven two grocery store Giants in

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Australia that is Coles, and Woolworths cut the prices of their items and extended its private
name merchandise ranges. Littler businesses, for example, Foodworks have been battling a ton in
the serious raising price firmly decided industry. Increasing business net revenues have dropped
essentially in the ongoing years as the organization's in the business have been bringing down the
prices of its merchandise to cause the organizations to stay in the market. This circumstance in
the nourishment and Grocery industry have made Coles Group industry bring down the prices of
its merchandise to keep up its clients. Different organizations in the business have been doing
likewise so they can keep their clients as well. (Morton, 2020)
1.2 Coles Group Limited plans
Coles Group Company continues offering great items to Australian residents by bringing
down the prices of the merchandise, improving the nourishment quality, guaranteeing that they
offer crisp nourishment and giving clients better shopping encounters brought about by colleague
preparing and store redesigns. (Haka and Heitger, 2012) To guarantee the above
accomplishments are reinforced the organization intends to do the accompanying in the
anticipated years; (Brown, 2011) First, Construct a superior system of the store and increment
the objective general store framework space advancement by 2-3% every year. Besides, in
guaranteeing the freshness of nourishments, the organization intends to convey top-notch
nourishment to each store inside Australia, look for long haul contracts and more prominent joint
efforts with the primary providers of the nourishments and elevate part preparing to animate help
conveyance to clients. Thirdly, to help the organization in turning into a believed pioneer
organization, the organization means to bring down the expense acquired in the week by week
shopping containers and support focused on showcasing utilizing client discernments and fly

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buys. Fourthly, to streamline the stockpile anchors the organization intends to convey better
production network efficiencies through improved long haul start to finish planning, progressed
direct inventory source abilities and exchange terms and conditions. (Aharony, Barniv, and
Falk, 2010).
2.0 Shareholder analysis
2.1 Types of Shareholder
The enormous shareholder group in Coles Group Limited (ASX: COL) have control over the
organization. Huge organizations generally have foundations as shareholders, and as a rule, see
insiders owning shares in litter organizations. Organizations that have been privatized will, in
general, have low insider possession. Coles Group is an entire large organization. It has a market
capitalization of AU$16b. Typically foundations would claim a critical bit of an organization this
size. Foundations commonly measure themselves against a benchmark when answering to their
financial specialists, so they frequently become progressively energetic about a stock once it's
remembered for a significant list. We would anticipate that most organizations should have a few
establishments on the register, particularly if they are developing. (ColesGroup, 2020)
We can see that Coles Group has institutional financial specialists, and they hold 12% of the
stock. This can demonstrate that the organization has a specific level of believability in the
venture network. In any case, it is ideal to be careful about depending on the alleged approval
that accompanies institutional speculators. They as well, fail to understand the situation in some
cases. At the point when various establishments possess a stock, there's constantly a risk that
they are in a 'swarmed exchange'. At the point when such an exchange turns out badly, different
gatherings may contend to sell stock quickly. This risk is higher in an organization without a

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background marked by development. (Coles CEO eyes return to profit growth by 2021, 2020)
You can see Coles Group's notable profit and income, underneath, however, remember there's in
every case more to the story. The overall population — generally retail speculators — possess
73% of Coles Group. With this size of proprietorship, retail financial specialists can, on the
whole, assume a job in choices that influence shareholder returns, for example, dividend
strategies and the arrangement of executives. They can likewise practice the ability to decay an
acquisition or merger that may not improve benefit. (St, 2020)
2.2 Chairman’s Views for the shareholder
As a huge Australian organization, Coles is focused on working in a way that is straightforward
and constructs trust with its group, its clients and its locale. They perceive the expanding desires
for every one of our partners whose help and commitment are basic to our suffering
achievement. With the help of the Board and supervisory crew, they anticipate the difficulties
ahead and expand upon the commitments of every one of the individuals who supported our first
century. (ColesGroup, 2020)
They are grateful to their Board for their help during a time of critical change and for applying
their significant abilities and bits of knowledge to the significant undertakings of administration
and setting our future course. Hence, the institutional investors and the big corporates are quite
satisfied with the company and the way they treat their shareholders. In fact, the chairman in
2019 has specially mentioned the corporation of the shareholder's efforts for the expansion plans.
This shows gratitude to their investors hence, big companies like CitiCorp, HSBC, etc are
satisfied to be a part of Coles Group.

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2.3 Top 20 Shareholdings
Coles Group Limited Number of
fully paid
shares
% of
issued
capital
Marginal and
Non -
Marginal
Investor
1. HSBC Custody Nominees
(Australia) Limited
268,471,371 20.13 Non- Marginal
2. Wesfarmers Retail Holdings Pty
Ltd
200,089,454 15.00 Non- Marginal
3. J P Morgan Nominees Australia Pty
Limited
184,124,225 13.80 Non- Marginal
4. Citicorp Nominees Pty Limited 82,237,368 6.17 Non- Marginal
5. National Nominees Limited 40,294,153 3.02 Non- Marginal

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6. BNP Paribas Nominees Pty Ltd <
Agency Lending DRP A/C>
21,010,992 1.58 Marginal
7. BNP Paribas Noms Pty Ltd <DRP> 16,969,772 1.27 Marginal
8. HSBC Custody Nominees
(Australia) Limited <NT-Comnwlth
Super Corp A/C>
9,984,003 0.75 Marginal
9. Australian Foundation Investment
Company Limited
6,722,500 0.50 Marginal
10. Citicorp Nominees Pty Limited
<Colonial First State
6,555,777 0.49 Marginal
11. HSBC Custody Nominees
(Australia) Limited- GSC
5,299,201 0.40 Marginal
12. ARGO Investments Limited 5,040,027 0.38 Marginal
13. Woodross Nominees Pty Ltd 3,707,841 0.28 Marginal

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14. AMP Life Limited 3,166,599 0.24 Marginal
15. HSBC Custody Nominees
(Australia) Limited
2,902,623 0.22 Marginal
16. Milton Corporation Limited 2,877,375 0.22 Marginal
17. Australian Executor Trustees
Limited <IPS Super A/C>
2,623,993 0.20 Marginal
18. Mutual Trust Pty Ltd 1,699,926 0.13 Marginal
19. Mr Peter Alexander Brown 1,552,825 0.12 Marginal
20. Netwealth Investments Limited
<Wrap Services A/C
1,502,739 0.11 Marginal
(St, 2020)
The marginal investors are expected to set prices, their appraisals of risk ought to oversee how
all of us consider risk. On the off chance that the marginal investors are differentiated
organizations, the main risk that they find in the organization is the risk that they can't enhance

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away, and supervisors ought to consider just that risk when making ventures. On the off chance
that the marginal investors are undiversified people, they will think about all risks in an
organization, and the firm ought to accordingly think about all risks when making speculations.
The market and monetary examination as performed by the marginal financial specialist, whose
activities decide the harmony stock price, is basic. The Marginal speculator who is at the edge
would buy the stock if the stock price was somewhat lower or sell it on the off chance that it was
somewhat higher. It is the marginal investor's assumptions regarding dividends, development,
and risk that are key in the valuation procedure of the firm. (ColesGroup, 2020)
The meaning of significant shareholders can be found in people having a higher stake in an
organization whereas marginal investors are the person who holds the immaterial measure of an
organization's stock. The significant shareholder/ non - marginal shareholders are HSBC
Australia with 20.59 % followed by JP MORGAN and CITICORP with 13.77% and 6.18%
individually. The marginal shareholders of the organization are Brazil cultivating, Aust
EXECUTOR, HOOKS ENTERPRISE, MR LEENDERT HOEKSEMA, HSBC NOMINEES
with 0.88,0.77,0.72, 0.71, 0.56 % stake individually. It likewise incorporates BNP Paribas and
chakram as marginal investors. People who have a significant stake in organization appreciate
casting ballot rights, go to executive gatherings and have a significant state in dynamic and
activities. though marginal shareholders loath the above rights. (Who are the marginal investors
in your company? - Farmantra, 2020)

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3.0 Risk-return analysis
3.1 Different types of Risk
The Risk Management Framework and Risk Management Policy detail is the way to deal with
distinguishing, surveying and overseeing risk, including atmosphere related risks. While they
have strategic designs to oversee atmosphere related risks and openings, as nitty-gritty in the
accompanying area, the Climate Change Steering Committee is setting up an increasingly
exhaustive Climate Change Strategy, which will be educated by further risk examination and
situation arranging and will incorporate new nursery emanation decrease targets. (Coles CEO
eyes return to profit growth by 2021, 2020)
The basic subject around retail is that the buyer moving on the web and what that implies for
store retailers – or nourishment retailers, for example, markets is that it's very expensive selling
these lower-esteemed things and a lot of them, picking them, bundling them, conveying them,
that is very cost-concentrated. Which implies that online deals right currently are dilutionary to
EBIT edges. Another risk to Coles edges – EBIT edge in nourishment is that they will have an
expansion in the compensation structure coming in as of January. Shares are overvalued at these
prices. Due to the demerger, the two fundamentally same organizations, the same methodology
they are in a similar market confronting similar headwinds, Coles apparently and the cost bit of
leeway of Woolies is simply giving the scale in sourcing their item.
3.2 Dividend
The Directors proclaimed a completely franked dividend of 35.5 pennies per share, involving the
last dividend of 24.0 cents per share corresponding to the period 31 December 2018 to 23 June

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2019 and a unique dividend of 11.5 cents per share according to the period 28 November 2018 to
30 December 2018 and 24 June 2019 to 30 June 2019. This dividend will be paid to shareholders
on 26 September 2019. (ColesGroup, 2020)
One of the significant risks of depending on dividend salary is the potential for an organization to
battle monetarily and cut its dividend. Not exclusively is your salary cut, however, the estimation
of your investment decreases too – awful. With an instalment history of under 2 years, we
believe it's a piece too early to consider living on the salary from its dividend. Its latest yearly
dividend was AU$0.24 per share. The dividend hasn't been contracting. Anyway, they are
cognizant that the organization hasn't got an excessively long reputation of dividend instalments
yet, which makes us care about its dividend salary.
Ex-Date Amount Franking Type Payable
27/02/2020 $0.300 100% Interim 27/03/2020
28/08/2019 $0.355 100% Final 26/09/2019
Total Return = ((17.22 - 11.38) + 0.355)/ 11.38
Total Return = 0.54
I have utilized the All Ordinaries Index portfolio as it is refreshed toward the finish of
consistently to guarantee that the organization is incorporated and keeps on meeting the criteria
for consideration. It is additionally refreshed when there are changes in the portfolio