Comprehensive Analysis of Woolworths Group Financial Performance 2017

This report provides a comprehensive analysis of the Woolworths Group's financial performance in 2017. It begins with an introduction to the company, its market position, and its customer-centric approach. The analysis delves into the financial statements, highlighting key figures such as profit, revenue, and dividend payouts. The report then examines various financial ratios, including receivable turnover, payables turnover, asset turnover, return to equity, return on assets, and debt-equity ratio, to assess the company's financial strength and efficiency. The analysis also incorporates insights from the managing director's report, focusing on areas of progress like customer service, sustainable food performance, and portfolio business empowerment. The report concludes by offering an overall assessment of the company's financial health and performance in the given year.

WOOLWORTHS GROUP FINACIAL PERFORMANCE IN 2017 1
ANALYSIS OF WOOLWORTHS GROUP FINANCIAL PERFORMANCE REPORT FOR THE YEAR
2017
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Introduction
Woolworth’s group is among the major companies listed in the Australian Stock Market. The company
operated both in New Zealand and Australia. It has developed a culture that gives priority to customers
wants and desires over anything else making it one of the most customers oriented companies in the
region(ROI Case Study: Woolworths and Episys’ 2004, p.47). Woolworths Group is an employer of
millions of farmers originating from New Zealand and Australia (Stephens 2017, p 159). The concept of
partnership is one of the key tools that the company uses to ensure the smooth operations of the various
departments. According to Parkinson (2018), the entity has put in place various strategies in an effort to

WOOLWORTHS GROUP FINACIAL PERFORMANCE IN 2017 2
increase the generation of revenue to ensure the growth of the company. The strategies that have the
company has implemented include diversification of product, innovation, and the introduction of fresh
products to the market. Moreover, they have also made an effort to increase the portfolio business via
techniques and strategies that are aimed at increasing the value of shareholders (Woolworths takes the
lead’ 2009.p 53). Changes in business strategies are also highly encouraged by the entity to modify the
business to align up with customers’ expectations and the emerging patterns of demand. Additionally, the
strategies should also aim at minimizing costs and increase efficiency in production. Woolworth group
has made steps adhere to the corporate governance principles that are formulated by the Australian Stock
Exchange (Lama and Anderson 2015, p.379). Some of the corporate governance principles that the
company has adhered to include making public the Group Executive Committee, the Board Committees,
and the Board Charter. Furthermore, the group management also entails risk management and their
governance report points at the ways and forms of stakeholder engagement. That is not all as the report
also entails the transparency and information disclosure at the correct time (Woolworths Holdings
Limited 2018, p.16). The Group also has principles of diversity and inclusion in place. However, the
Group does not comply with all the regulations as it falls short on some of the regulations established by
ASX. Some of the regulations that the company report include how the entity assists in recognition of the
managers, the board of directors to bust the growth of the company. Additionally, they did not adhere to
the policies that are based on the employee’s productivity and capacity development. Moreover, they
should have also mentioned the steps that the company has taken to improve trust and appeal to the
interests of stakeholders. As a result of the combination of the policies that the company adheres to and
those that it does not adhere to, Woolworths Group is categorized as a Semi-Strong Corporate
Governance Oriented Firm. This paper analyses the analyses the company’s general 2017 annual report.
Woolworths Group 2017 Financial Analysis

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According to the financial Woolworths Group 2017 report, the company reported a profit of $1,534
attributed to the shareholder. The profit was an increase as compared to the profits made in the year 2016.
The earning of the company before taxation and interest amounted to $ 2,326 million. Despite the
increase in the profit attributed to the shareholders, the earning before tax and interest was a 4.9% decline
from 2016. The sales growth was an increase of 3.6% from the year 2016 while the net cash from all
operating activities increased by 32% to $ 3.1 billion in the year 2016. During the financial year 2016,
the revenue per share dropped by 5.1% whiles the fully ranked dividend per share experienced and an
increase of 9.1% (Woolworths Group 2017). The summation of the dividend payout in the financial year
2017 amounted to $1.1billion.
In order to relate the strength of the company with other companies in the stock market, it is essential to
take into consideration the financial ratios of the company. The financial ratios indicate the financial
strength of the company (Mankin, Jewell and Rivas 2017, p. 97). In the financial year 2017, the financial
ratios of the company were as follows.
Receivable turnover rate
The receivable turnover ratio through which accounts use in the measurement of how effective a firm can
be in terms of extending credit and also collecting debts on credit. According to accounting procedures,
the receivable turnover rate is computed by dividing the net credit sales by the average accounts
receivable for the year. Most companies prefere the calculation of the receivable turnover rate on annual
basis to the calculation based on monthly basis. However, it is vital to note that, both options are
acceptable in accounting. A firm that keeps account receivable records is assumed to have given out
loans at zero interest rate. The longer it takes for the company to get the money back the more the
company loses as the face value on the money may depreciate with time as the company waits to collect
the sales. The Receivables turnover rate was at 133.90. The rate means that the company collects sales
133.90 in a year. This rate gives an indication of the efficiency at which the company collected the

WOOLWORTHS GROUP FINACIAL PERFORMANCE IN 2017 4
outstanding bills during the financial year 2017(Matsumoto, Shivaswamy, and Hoban, 2015, p.47).
Higher receivable turnover ratios indicate higher efficiency levels of collecting sales. This might be as a
result of having good customers who make payments promptly or a company policy that discourages
credit sales. Low ratios on the other hand are an indication of poor debt collection process or poor
company policy and in some cases the absence of a company policy. It therefore means that a company
with low receivable turnover ratio has a large amount of if debts to collect from various debtors.
Payables turnover rate
While the receivable turnover rate help in measuring the efficiency at which the company collects its
debts, the payable turnover rate measures the efficiency with which the company settles it debts. This
includes payments to supplier and service providers. The ratio is calculated by dividing the total
purchases by the average accounts payable (Anderson and Buchholz 2008, p.33). It is the measurement
of the frequency at which the company makes payments to creditors and other debtors. Lower turnover
rate means that the company takes longer to settle debts while high payable turnover rates indicate prompt
payments by the company to their suppliers and service providers. The Payables turnover rate stood at
0.3.
Asset turnover rate
The assets turnover rate is the ratio that uses that compares net assets with net sales to measure the
efficiency at which the company generates sales from the assets. Companies therefore use assets turn over
rates as an indicator of the efficiency level of how they use the assets to generate sales. The ration looks at
the net sales a percentage of the value of the assets. The resulting ratio therefore tells us the number of
sales that the company makes from each dollar asset that the company poses. The ratio is calculated by
dividing the net sales by the average total assets. The asset turnover rate of Woolworths group stood at the
rate of 2.43 in 2017. The ratio is a considerable increase in the previous financial year. It therefore means

WOOLWORTHS GROUP FINACIAL PERFORMANCE IN 2017 5
that during the financial year 2017, the company generated 24.3 cents from every one dollar worth of
asset that the company had during the financial year. Low assets turn over ratios is indication of low
production in the company while high rate indicate a higher rate of sales generation using available assets.
High turnover rates are desirable by companies. If the ratio is 1 it means that the nets sales of the
company equate to the average total assets for that particular year.
Return to equity ratio
The return to equity ratio is the ratio that measures the amount of returns on income as a percentage of the
shareholder’s equity. It is the profitability level of the company based on the investments made by
shareholders. The ratio is calculated dividing the net income of the company during the financial year
divided by the shareholders. In calculation of the return to equity ratio, it is vital to note that the net
income for a financial year after payments of preferred stock but before the payment of dividend to the
ordinary stakeholders. It also measures the efficiency at which the company makes use of its funds in the
company’s operations. The return on equity in the financial year 2017 was at 16.04. High returns to
equity ratios are admirable as they indicate high efficiency of the company when it comes to utilization of
the money injected into the company by the share holders.
Return on Assets
Like the previously mentioned ratios, the return on assets ratio is an important ration in the analysis of
company’s financial performance. The ratio measures the percentage of the profit that the company has
earned in connection with the overall resources of the company. The ratio is used in combination with
the other financial ratios to measure the progress of the company. However, the Returns on assest is often
not given attention by most share holders since in the calculation, total assets are used ruther than the net
assets. However, the ratios are important in determining the efficiency of the strategy that the company
has employed in the effort to generate revenue from the assets. The return on assets registered a negative

WOOLWORTHS GROUP FINACIAL PERFORMANCE IN 2017 6
of -6.60. It, therefore, point out that the investments made during the financial year did not yield as
expected but brought loses to the company.
Debt – Equity ratio
Debt to equity ratio is also commonly referred to as leverage or gearing ratio. The ratio is important in the
analysis of the risk levels of the company. It gives an indication of how much of the assets of the
company are supported by the debts. The company’s debt-equity ratio was at 40.25% while the asset-
liability ratio was at 0.19. Given the ratios as mentioned above, it is evident that despite the company
making an effort of growth and increase in revenue generation; it still has some shortfall which includes
wrong investment plans and decisions that resulted to loss during the financial year 2017. The company
should, therefore, consider a change in the investment strategy and develop a new investment plan for the
subsequent financial years (Wu et al.2012, p.301). On the other hand, the remuneration for the CEO in
the financial year 2017 was $2,348,405 providing a competitive picture of the company.
Report by the Manager
The report by the managing director highlights five areas in which the company has made strides during
the financial year 2017. These areas included the development of customer and Store-led Culture and
team, generation of sustainable performance in food, ensure that their endeavourer drinks produce good
results on a competitive market; empowerment of portfolio business and initiation of processes to become
a lean retailer in the industry.
The report indicates that the company’s key objective during the FY 2007 was to build trust with their
customers and for that; they had made notable strides by the end of the financial year. The financial year
has an improvement in customer store across the branches. They have 116,000 employees charged with
the mandate of responding to customer claims a step that aide the company to attain an 81% score. A
recent survey also indicates that the customer response rate of the company has improved by five points

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over the previous year to 82%. Furthermore, the company has also committed itself to improve not only
the physical safety but also the mental health of the team. At the beginning of the financial year, the
company also launched a corporate responsibility strategy for the year 2020. That is no all; the manager
also indicates that they are focused the on diversity especially on attaining gender diversity in the
company.
When it comes to sustainable performance, the food sales of the company had increased by 4.5% within
the year with the fourth quarter registering a high performance of 7.2%. The company continues to
optimize customer transaction and is also experiencing an increase in the number of items per basket of
the customers. Woolworths has also invested in repositioning and rebranding of an approximate of over
3000 food brands in an aim to show their commitments to improve on nutrition by the year 2020 and also
inspire their customers to consume the healthy products more sustainably.
The director also indicated that the fourth priority of Woolworths was on empowerment of the company
portfolio business. In this area, the final results were a disappointment to the company. The
disappointment is reflected in the investment that the company made in the second half of the financial
year as the company aimed at making a turnaround plan. The new plan has the approval of the board and
communication has been made to the stakeholders.
Away from the disappointment of a failed plan, the company continues to make steps towards becoming a
lean retailer via end to end systems and process. According to the director, the company is on the right
track of growth as they have taken measures and employed techniques to see the company increase
revenue generation. He also admits that some of the plans that were put in place during the financial year
2017 failed and that the company had to come up with alternative plans. The directors’ reports portray
the correct picture of the company which has a semi-strong financial performance. I, therefore, agree with
the analysis of the Director.

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Corporate Governance of Woolworths' Group
Woolworth Group is keen on annual publication of Corporate Governance Policy as approves and
updated by the Australian Stock Exchange principles. The company is listed in the Australian Stock
Exchange (ASE) and therefore is expected to observe and apply the eight Corporate Governance
regulations and requirements (Lama and Anderson 2015, p.382). The regulations and requirements as
revised in the year 2014 are as follows;
I. The listed company should have a strong foundation of oversight and management. This requirement
needs the company to make public the specific roles of the board of management of the company (Fox
2014,p.157). Additionally, it should also elaborate the how the performance of the board will be
monitored. It is therefore vital for a listed company to provide an evaluation framework for its board of
management.
II. The board of the company should be of good composition. The members of the board should have
the required skills and commitment that add value to the company. The size of the board should also be
adequate to enable to charge its duties with efficiency (Shimeld, Williams and Shimeld 2017, p.340).
III. A listed company is expected to uphold ethical consideration in their operations when dealing with
their customers and stakeholders (McCollum 2007 p.20). It therefore essential that a listed company
provides an ethical framework for its operations. The frameworks may include strategies to eliminate
biasness based on gender, religion, color, etc. Moreover; it may also include the company’s strategies to
prevent and to handle corruption cases in the company’s operations.
IV. The fourth requirement involves the company’s reporting criteria. It is required for all listed
companies to have a reliable, properly constructed and safeguarded reporting structure. The reporting
structure should be clear on who does the reporting for the company, when the reporting should be done

WOOLWORTHS GROUP FINACIAL PERFORMANCE IN 2017 9
and when the reporting should be done as well as the mechanisms of doing the reporting (Sheehy
2013,p.21). The reporting system should be independent and adequately safeguards its independence.
V. The fifth requirement of the ASE listed companies is timely and balanced disclosure. Information on
issues affecting the value or the price of the company’s securities should be made available to all
concerned parties at an adequate time (Henry 2008,p. 931). Timely disclosure of any material information
that would be considered to have a material impact on the value of the shares by a reasonable person
should is vital for all the listed companies.
VI. It is also a requirement for the listed company to show respect for the right of the security holders
(De Forest 2015, p. 15). The company should provide the necessary information and facilities to aid their
stakeholders to exercise their rights.
VII. The second last requirement of the ASE involves risk management (Buckby Gallery and Ma 2015,
p.859). Other than the establishment of risk management framework, it is also required of the listed
company to exercise periodical evaluation of the risk management framework to determine its
effectiveness and make adjustments where necessary.
VIII. The last requirement is the fair remuneration requirement. All the listed companies are expected to
offer an attractive remuneration for its executives to attract qualified and efficient managers and senior
executives. This aids in the creation of trust among the stakeholders (Xu et al. 2017, p.928). The company
is therefore expected to publish its remuneration rates and considerations based on the qualifications and
the responsibilities of its employees.
The Board of the company is responsible for the formulation of the Corporate Governance policies
taking into consideration the financial interests of the company and the shareholders (Cuomo, Mallin and
Zattoni 2016, p. 235). Furthermore, the board also plans the financial objectives of the Woolworths Group
as an entity. Furthermore, the board is also charged with the mandate of ensuring ha the actions of the

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10
company ate ethical and responsible for giving back to the community in which it operates. Additionally,
the board addresses the issue of a code of conduct which is vital for the operations of the company. The
principles and policies governing matters of inclusion and diversity are captured in the same document as
well.
The structure of good corporate governance as recommended by the Australian Stock exchange (2003)
has a primary focus on the responsibilities of the management which includes the board of directors. The
framework and the structure are always as robust as the number of years that the company has operated.
Even though is not easy for the Australian corporate entities to be at the same level with other companies
in the world, they do have a set of governance principals that guide their corporate framework. The
Woolworth Groups, through their financial year 2017 report, demonstrate adherence to some of the
corporate governance framework laid by the Australian Stock Exchange.
It is a requirement that a corporate entity should provide precise responsibilities of the members of the
Board Directors. The Board of Directors is always looked at as the main support of the entity as the
company is always directed by them (Yang Pan, Peng Huang, and Gopal,2018, p.982). The year 2017
financial report, on its constitution section outlines the responsibilities of the Directors of the Group, the
Executive committee, the Board Committees, and the Board charter. The sections form a foundation for
ethical responsibility as well structured decision-making structure.
The next requirement by the ASE is the principle that guides the ethical decision-making process within
the corporate entity. The requirements dictate the decisions of the company should only be made based on
well researched and analyzed conclusions as well as past experiences. In line with this requirement, the
company outlines methods and ways of stakeholder engagement. The report gives a list of requirements
and needs of stakeholders that aids in meeting the interests of the stakeholders and in the maintenance of

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11
strong shareholder relations to help in ensuring not only a stable but also a holistic growth of the company
(Woolworths Group 2017).
The next requirement of the ASE that of the formulation of a financial budget as well as setting the
financial objectives of in a way that aids in ensuring that the process of financial reporting is carried out
ethically. To meet this requirement, the financial reporting of the company provides the financial
structuring of the organization as well as the financial objectives that company intends to achieve (Pérez-
Rave, Muñoz-Giraldo, and Correa-Morales, 2017, p.77). Furthermore, the report provides an outline of
the risk management techniques as indicated in the risk management section of the report. This section of
the reports also complies to the requirement of risk mitigation and management within the corporation.
Furthermore, it required the company to make available any crucial information. It involves publishing of
company information at the right time and to the recommended extent (Christopher 2016, p.1). The
company reports fulfill this requirement through the provision of a detailed explanation of the
transparency mechanism through with the company utilizes to disclose information at the appropriate and
required time. Moreover, the company is expected to demonstrate an understanding of the value, needs,
and interest of various stakeholders in the firm. To adhere to this requirement, the company report
indicates the core values with a special focus on the customers’ interest and making changes in line with
the customers’ demands.
On the other hand, there are some requirements that the company did not adhere to in the 2017 general
report. Some of these requirements include the requirements to come up with rules and regulations on a
framework that recognizes the hard work of its employees providing them with adequate remunerations,
incentives and salaries according to their productivity and responsibilities (Kolk, and Perego 2014, p. 7).
Furthermore, while the report mentions the directors and the board, it fails to give the initiatives and the
strategies undertaken by the company to help in boosting the growth of the company. Additionally, the

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12
company should have provided more information on the remuneration of the employees as well as well as
the measures that the company intend o put in place to help in the maintaining trust and appeal to the
stakeholders’ interests. There is a light mention of the measures for ensuring ethical and sustainable
measures by it to achieve the financial objectives of the firm. The company should have provided more
details in the report as supported by their actions and strategies put in place during the financial year
(Woolworths Group 2017). Even though the company has made efforts to ensure compliance with the
ASX Corporate Governance principals and guidelines, it still falls shot in a few of the guidelines. This
shortfall is also reflected in the financial performance indicators as the company maintains a semi-strong
level of performance.
Chairperson’s report
The chairman’s report point south that the focus of the board during the financial year 2017 was on three
major areas. Firstly, the board has focused on the development of a strategy that would fix the Australian
Supermarkets. The strategy to achieve this goal involved realignment of the company’s portfolio of the
company and exiting the masters business to reset the strategy known to the company as the Big W
strategy. In this, the chairperson indicates that there has been significant progress (Woolworths Group
2017). However, the reports also admit that there is still much to be done for the company to achieve this
objective. In the report, the chairperson also acknowledges the existence of threats from there different
quarters. The threats indicated by the chairperson are the traditional competitors, digital entrants, and the
discounters. The second item that was given attention by the chairman’s report is the efforts of the
company in building the culture of achievement in the organization. The perceived culture should see the
employees operating according to the values of the company. Furthermore, the report elaborates on how
important the leadership of the company values not only the welfare of the employees but also the health