Financial Analysis Report: MBA403 on Wesfarmers Performance

This report provides a financial and economic interpretation of Wesfarmers' performance, based on its 2019 annual report. The analysis includes an executive summary outlining Wesfarmers' diverse operations and its contribution to the Australian economy. The report then presents a detailed analysis of key financial indicators, such as revenue, net profit, EBIT, EPS, DPS, total assets, interest coverage, equity, net debt, and gearing ratio, comparing the data from 2018 and 2019. The interpretation section assesses the company's profitability, dividend payouts, and capital structure, highlighting both improvements and areas of concern. Non-financial performance is also examined, focusing on customer satisfaction, growth enablers, and strategic initiatives. The report concludes with an overall evaluation of Wesfarmers' financial and non-financial performance, offering insights for stakeholders, including potential investors, and emphasizing the company's commitment to core values and strategic goals.

Financial & Economic Interpretation and
Communication

Executive summary
Wesfarmers is the company that is operating in Australia and has been incorporated in 1914.
There are diverse functions that are carried by the company including home improvement,
office supplies, and industrial business in the energy, fertilizers, and chemicals. The largest
number of jobs is provided by this company and this helps the economy to gain the benefit
(Wesfarmers, 2019). The main aim is given on the determination of the needs of customers
and then providing them with the required services. All of the aspects in relation to the
performance of the company will be discussed by which the proper analysis will be made.
Analysis
In the business, there are various aspects which need to be evaluated and for that, all of the
required information is collected. The results which have been provided in the annual report
of the company have been identified and provided below in an adequate manner for further
evaluation.
Particulars 2019 2018
Revenue 27920 26763
Net profit after tax 1940 1409
EBIT 2974 2344
EPS $1.72 $1.25
DPS $2.78 $2.23
Total assets 18333 36933
Interest coverage 30.6 30.4
Equity 9971 22754
Net debt 2500 3933
Gearing 25.1% 17.3%
All of the important results which are identified have been mentioned and there is the
collection for the two years. The results provide that the revenue of the company has
increased and with that, the profits which are earned by the company have also raised. This
has led to an increase in the earnings per share which are made and the amount of dividend
which is paid has also been made on the higher level (Wesfarmers, 2019). There is a decline
in the total assets of the company and with that, the equity and debt are also reducing. The
gearing ratio has been raised with the changes in the connected elements.

Interpretation
The financial performance of the company is evaluated with the help of the indicators which
are available in this respect and all of them have been identified above. It is noted that the
profitability position of the company has improved. There is the impact of the same on the
dividends which will be attracting more investors as their returns will be increased (Almazari,
2012). The position of the company in terms of the earnings has increased but there is an
adverse impact which is noted on the capital gearing ratio. The amount of equity and debt has
reduced and there is a high decline in the amount of equity. Due to that the gearing ratio has
increased as the proportion of the debt in the equity has been raised.
The financial performance is measured with the help of the identified results but the non-
financial performance is to be evaluated with the help of the non-financial performance
indicator. There is the main objective of the company in which focus is made on increasing
the satisfaction of the consumers (Kylili, Fokaides and Jimenez, 2016). There are certain
growth enablers who are involved and by them, the growth in the company is maintained.
They include commercial excellence, outstanding people, innovation, robust financial
capacity, and various others. With the help of them the improvement will be made and also
the measurement of the performance will be made. The company is following various
strategies by which the value of the business will be enhanced (Dewachter et al., 2015). They
ensure that sustainability is maintained and this is done with the help of responsible long-term
management. There are entrepreneurial initiatives by which the growth opportunities will be
secured. The satisfaction of the consumer needs will be made and by that the existing
business will be strengthened. The core values which are involved in the system of the
company are integrity, accountability, openness and entrepreneurial spirit (Song et al., 2018).
With the help of honesty is developed and there is the adoption of the open mindset in which
the changes and mistakes made by people are accepted and they add value to the business.
The company is performing well and this has been noted with a high level of consumer
satisfaction. There are various steps that are taken in this respect and they include the
lowering of the prices, maintaining customer relationships and investing in the digital means.
The teams are managed in a proper manner and there is the improvement that is made in the
safety performance (Teeratansirikool et al., 2013). The programs which are involved in the
succession and retention have been developed. There are appropriate remuneration policies
which are followed and with that, it is determined that the improvement in the same is made

and there is an upward trend which is identified in this respect. The highest amount is paid to
the managing director RG Scott and the same has also increased in the current year. By all of
this, it is identified that the improvement in the overall position of the business has been
made.
Conclusion
The proper evaluation of the financial and non-financial aspects in relation to the business has
been made. In that, all of the identified elements which are mentioned in the annual report
have been identified. They are used by the stakeholder to analyze the position of the company
which will be helping them in taking decisions for the making of the investments. The proper
analysis is carried and in that the upward trend of the company has been determined in which
the earnings which are made by the company are increasing and there is a rise in the EPS and
DPS which are involved in relation to the current year. The company has increased the
payment to the investors with an increase in the earnings that are obtained. The other
indicator by which the non-financial position is evaluated has been taken into account and in
that, all the strategies which are adopted by the company have been taken into account.

References
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the DuPont system of financial analysis. International Journal of Economics and
Finance, 4(4), 86-94.
Dewachter, H., Iania, L., Lyrio, M. and de Sola Perea, M. (2015) A macro-financial analysis
of the euro area sovereign bond market. Journal of Banking & Finance, 50, 308-325.
Kylili, A., Fokaides, P.A. and Jimenez, P.A.L. (2016) Key Performance Indicators (KPIs)
approach in buildings renovation for the sustainability of the built environment: A
review. Renewable and Sustainable Energy Reviews, 56, pp.906-915.
Song, M.L., Fisher, R., Wang, J.L. and Cui, L.B. (2018) Environmental performance
evaluation with big data: Theories and methods. Annals of Operations Research, 270(1-2),
pp.459-472.
Teeratansirikool, L., Siengthai, S., Badir, Y. and Charoenngam, C. (2013) Competitive
strategies and firm performance: the mediating role of performance
measurement. International Journal of Productivity and Performance Management, 62(2),
pp.168-184.
Wesfarmers. (2019) Annual report. [Online] Available at:
https://www.wesfarmers.com.au/docs/default-source/reports/wesfarmers-annual-report-
2019.pdf?sfvrsn=2 [Accessed 6 October 2019]
Wesfarmers. (2019) WHO WE ARE. [Online] Available at:
https://www.wesfarmers.com.au/who-we-are/who-we-are [Accessed 6 October 2019]