Financial Analysis Of Woolworths Limited And Metcash Limited
Equity Analysis
The company taken into account is Woolworths Limited which deals in the food and retailing items. The company specialises in the selling of the groceries and also sells some of the household products. The company is one of the largest supermarket chains in the world and functions with around 1000 stores all over the world. The company further has many supermarket and also has some additional convenience stores which carries the same logo. The company is very much proud of itself since it is able to provide its customers with the most superior sort of the services and also ensures the best quality of the products. The company offers the best products and ranges from the 96% of all of the fresh fruits and vegetables with about 100% of the fresh meat from the Australian market.
The next company is Metcash which is again a leading distribution and a marketing company which has the revenue of about $ 14 billion. The company is very successful when it comes to the carrying of the business operations and is owned by the family. There are many of the independent retailers that support in the local communities. The company is helped by them for restoring in the local communities. The company provides in the best merchandise and the operational and marketing support that helps in building the food, liquor and the hardware pillars (Metcash, 2018).
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Owner’s equity: |
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(Amounts in $ in millions) |
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|
Information |
Figures in year 2017 |
Figures in year 2016 |
Understanding |
Change |
Change in % |
|
Contributed equity |
5,615.00 |
5,252.20 |
amounts invested into the company for business operations |
new shares must have been issued by the company |
6.91% |
|
Reserves |
113.80 |
93.90 |
amounts kept aside from the current year’s profits |
last year’s profits added |
21.19% |
|
Retained earnings |
3,797.20 |
3,124.50 |
amounts kept aside from the current year’s profits |
last year’s profits added |
21.53% |
|
Non-controlling interests |
350.10 |
311.30 |
shares beyond the control of the company |
new non controlling shares issued |
12.46% |
|
Total |
9,876.10 |
8,781.90 |
|
Information |
Figures in year 2017 |
Figures in year 2016 |
Understanding |
Change |
Change in % |
|
Contributed and other equity |
1,719.30 |
1,626.00 |
amounts invested into the company for business operations |
new shares must have been issued by the company |
5.74% |
|
Non-controlling interests |
8.80 |
8.30 |
shares beyond the control of the company |
new non controlling shares issued |
6.02% |
|
Retained earnings |
-87.70 |
-259.60 |
amounts kept aside from the current years profits |
last years profits added |
-66.22% |
|
Reserves |
-3.00 |
-5.60 |
amounts kept aside from the current years profits |
last years profits added |
-46.43% |
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Total |
1,637.40 |
1,369.10 |
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Woolsworth |
Metcash Limited |
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Particulars |
2017 |
2017 |
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Contributed equity |
5,615.00 |
1,719.30 |
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Reserved shares |
– |
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Reserves |
113.80 |
-3.00 |
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Retained earnings |
3,797.20 |
-87.70 |
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Non-controlling interests |
350.10 |
8.80 |
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Total |
9,876.10 |
1,637.40 |
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Cash flow statement: |
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(Amounts in $ in millions) |
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Particulars |
2017 |
2016 |
Understanding |
Change in % |
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Cash flows from operating activities: |
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Receipts from customers |
65,498.90 |
65,329.80 |
cash received in terms of sales revenue generated by the company |
0.26% |
|
Payments to suppliers and employees |
-61,474.80 |
-61,834.50 |
cash paid for the raw materials putchased by the company |
-0.58% |
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Net interest paid |
-234.00 |
-289.30 |
interest paid on the money borrowed from outside |
-19.12% |
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Income tax paid |
-668.10 |
-848.50 |
taxes paid on the revenue genarted during the year |
-21.26% |
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Net cash provided by operating activities |
3,122.00 |
2,357.50 |
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Cash flows from investing activities: |
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Proceeds from the sale of property, plant and equipment and assets held for sale |
279.80 |
722.00 |
cash received in return of the fixed assets sold by the company during the year |
-61.25% |
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Payments for property, plant and equipment – property development |
-253.20 |
-473.30 |
cash paid in repsect of the fixed assets purchased during the year |
-46.50% |
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Payments for property, plant and equipment (excluding property development) |
-1,633.60 |
-1,465.00 |
cash paid in repsect of the fixed assets purchased during the year |
11.51% |
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Payments for intangible assets |
-23.00 |
-44.60 |
cash paid in repsect of the intangible assets purchased during the year |
-48.43% |
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Proceeds from the sale of subsidiaries and investments, net of cash disposed |
200.70 |
15.00 |
cash received in terms of sale of the joint ventures etc of the company |
1238.00% |
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Payments for the purchase of businesses, net of cash acquired |
-5.60 |
-22.70 |
cash paid in repsect of the intangible assets purchased during the year |
-75.33% |
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Payments for the purchase of investments |
– |
-1.30 |
cash paid for the purchase of the investments |
-100.00% |
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Dividends received |
3.50 |
3.20 |
amounts received in respect of the dividends |
9.37% |
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Net cash used in investing activities |
-1,431.40 |
-1,266.70 |
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Cash flows from financing activities |
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Proceeds from issue of shares – underwrite of DRP |
55.50 |
– |
cash received from the issue of the shares |
#DIV/0! |
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Proceeds from the issue of equity securities in subsidiary to non-controlling interest |
– |
120.00 |
cash received due to the issue of shares and securities |
-100.00% |
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Transactions with non-controlling interests |
– |
-12.10 |
amounts paid towards the shares that are beyond the control of the company |
-100.00% |
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Proceeds from borrowings |
184.10 |
628.50 |
amounts received from the money borrowed during the year |
-70.71% |
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Repayment of borrowings |
-1,406.50 |
-994.10 |
cash paid for the money borrowed by the company |
41.48% |
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Dividends paid |
-540.90 |
-1,184.80 |
cash paid on the shares issued of the company |
-54.35% |
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Dividends paid to non-controlling interests |
-21.50 |
-32.40 |
cash paid towards the interest beyond control of the company |
-33.64% |
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Net cash used in financing activities |
-1,729.30 |
-1,474.90 |
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Net decrease in cash and cash equivalents |
-38.70 |
-384.10 |
Total of the activities during year |
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Cash and cash equivalents at start of period |
955.40 |
1,340.10 |
Opening cash balance |
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Cash and cash equivalents at end of period |
916.70 |
956.00 |
Ending cash balance |
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Particulars |
2017 |
2016 |
Understanding |
Change |
Change in % |
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Cash flows from operating activities |
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Payments to suppliers and employee |
-15,079.20 |
-14,620.80 |
cash paid for the raw materials putchased by the company |
could be due to increase in income during the year |
3.14% |
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Interest and dividends, net |
-12.60 |
-14.30 |
interest paid on the money borrowed from outside |
could be due to repayment of some of the borrowings |
-11.89% |
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Income tax paid, net of tax refunds |
-62.30 |
-63.70 |
taxes paid on the revenue genarted during the year |
could be due to some of the tax refunds received during the year |
-2.20% |
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Net cash flows used in operating activities |
304.60 |
165.80 |
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Cash flows from investing activities |
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Proceeds from sale of businesses |
1.80 |
242.10 |
cash received in terms of sale of the joint ventures etc of the company |
new business purchased during the year |
-99.26% |
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Proceeds from sale of business assets |
36.30 |
57.30 |
cash received in terms of sale of the joint ventures etc of the company |
new business sold |
-36.65% |
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Payments for acquisition of business assets |
-44.40 |
-64.90 |
cash paid towads the acquisition of the business |
new assets purchase |
-31.59% |
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Payment on acquisition of businesses, net of cash acquired |
-195.40 |
-15.60 |
cash paid towards the loans repayment |
new pbusiness purchased |
1152.56% |
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Proceeds from loans repaid by other entities |
10.40 |
30.20 |
cash received from the loans repaid |
loans taken |
-65.56% |
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Loans to other entities |
-7.30 |
-11.70 |
cash paid for the laons given to others |
loans given |
-37.61% |
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Net cash flows used in investing activities |
-198.60 |
237.40 |
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Cash flows from financing activities |
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Proceeds from equity raising, net of share issue costs |
92.80 |
-0.60 |
cash received for equity raised during the year |
loans taken during the year |
-15566.67% |
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Repayments of borrowings, net |
-127.30 |
-453.70 |
loans repaid during the year |
loans repaid during the year |
-71.94% |
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Payment of dividends to non-controlling interests |
-1.40 |
-5.80 |
cash paid towards the interest beyond control of the company |
dividends paid on the shares that are beyond control of the company |
-75.86% |
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Net cash flows used in financing activities |
-35.90 |
-460.10 |
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Net decrease in cash and cash equivalents |
70.10 |
-56.90 |
Total of the activities during year |
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Cash and cash equivalents at start of period |
26.40 |
83.30 |
Opening cash balance |
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Cash and cash equivalents at end of period |
96.50 |
26.40 |
Ending cash balance |
The following is the desired comparative statement:
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Woolsworth |
Metcash Limited |
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Particulars |
2017 |
2016 |
2015 |
2017 |
2016 |
2015 |
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Net cash from operating activities |
3,122.00 |
2,357.50 |
3,345.10 |
304.60 |
165.8 |
231.7 |
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|
Net cash from financing activities |
-1,431.40 |
-1,266.70 |
-1,333.90 |
-198.60 |
237.4 |
-74.9 |
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Net cash from investing activities |
-1,729.30 |
-1,474.90 |
-1,610.80 |
-35.90 |
-460.1 |
-98.2 |
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Total |
-38.70 |
-384.10 |
400.40 |
70.10 |
-56.90 |
58.60 |
The company Woolworth would have bene facing some shortage of cash due to which it would have become difficult for it to cater to the short term needs of the company.
Metcash on the other hand has improved over the years and this could be seen from the increase in the amount of the cash in hand over the years.
Woolworths:
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Comprehensive income statement |
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(Amounts in $ in millions) |
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Particulars |
2017 |
2016 |
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Profit/(Loss) for the period |
1,593.40 |
-2,347.90 |
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Other comprehensive income |
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Items that may be reclassified to profit or loss |
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Hedging reserve |
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Movement in the fair value of cash flow hedges |
3.80 |
-2.70 |
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Income tax effect |
1.00 |
-1.70 |
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Foreign currency translation reserve (FCTR) |
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Movement in translation of foreign operations taken to equity |
-3.90 |
207.90 |
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Income tax effect |
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Items that will not be reclassified to profit or loss |
-3.00 |
-24.50 |
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Equity instrument reserve |
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Movement in the fair value of investments in equity securities |
2.20 |
13.50 |
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Retained earnings |
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Actuarial gain/(loss) on defined benefit superannuation plans |
3.20 |
-5.60 |
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Income tax effect |
-1.00 |
1.70 |
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Other comprehensive income (net of tax) |
2.30 |
188.60 |
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Total comprehensive income from continuing operations |
1,480.00 |
955.40 |
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Total comprehensive income/(loss) from discontinued operations |
115.70 |
-3,114.70 |
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Total comprehensive income/(loss) for the period |
1,595.70 |
-2,159.30 |
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Comprehensive income statement |
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(Amounts in $ in millions) |
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Particulars |
2017 |
2016 |
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Other comprehensive income |
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Items that may be reclassified subsequently to profit or loss: |
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Foreign currency translation adjustments |
0.60 |
-1.00 |
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Cash flow hedge adjustment |
0.90 |
1.60 |
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Income tax expense |
-0.30 |
-0.60 |
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Other comprehensive income for the year, net of tax |
1.20 |
– |
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Total comprehensive income for the year |
174.90 |
218.20 |
In the term of financial accounting, the term of the corporate income is further segregated or is divided between the recognition and the reporting of the earnings and the income. In order to overcome this, the FASB had collected and reported some of the information that would help in the providing of some meaningful information to the investors and the analysts.
The statement of comprehensive income is used for the purposes of measuring the interest of the owner in the business. The same is done by the non-owner sources which went on to include in the incomes and the expenses that usually bypass in the statement of income and expenses. There are few of the items that are not reported in the statement of profit or loss since these are not realised. The examples of the same include the gains and the losses from the derivative instruments, debt security unrealised gains etc (Accounting basics, 2018).
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Woolsworth |
Metcash Limited |
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|
Information |
Figures in year 2017 |
Figures in year 2016 |
|
Earnings before taxes |
3067.7 |
-368.8 |
Debt and Equity Comparison
It would not be fair to include these expenses or the incomes in the statement of profit or loss since these are not realised yet.
In the term of financial accounting, the term of the corporate income is further segregated or is divided between the recognition and the reporting of the earnings and the income. In order to overcome this, the FASB had collected and reported some of the information that would help in the providing of some meaningful information to the investors and the analysts.
The statement of comprehensive income is used for the purposes of measuring the interest of the owner in the business. The same is done by the non-owner sources which went on to include in the incomes and the expenses that usually bypass in the statement of income and expenses. There are few of the items that are not reported in the statement of profit or loss since these are not realised. The examples of the same include the gains and the losses from the derivative instruments, debt security unrealised gains etc.
Deferred tax liability is the amount of the tax which is assessed or is due for the current period but the same has not been paid. The deferral of these incomes or the expenses is due to the timing difference which records in the fact that the stated expense would not be charged in the current year but it would be liable for deduction in the next year and that would reduce in the amount of the revenue and hence, a lesser tax and so, is considered as an asset (Taxmann, 2018).
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Woolworths |
Metcash Limited |
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|
Information |
Figures in year 2017 |
Figures in year 2016 |
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Effective income tax rate |
0.30325651 |
-0.03796095 |
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Incomes taxes |
930.3 |
14 |
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Earnings before taxes |
3067.7 |
-368.8 |
Metcash Has reported a loss and hence, there is a negative income tax.
Deferred tax liability is the amount of the tax which is assessed or is due for the current period but the same has not been paid. The deferral of these incomes or the expenses is due to the timing difference which records in the fact that the stated expense would not be charged in the current year but it would be liable for deduction in the next year and that would reduce in the amount of the revenue and hence, a lesser tax and so, is considered as an asset.
The deferred tax assets for Woolsworth has increased when compared with the previous year.
The deferred tax assets for Metcash has not changed when compared with the previous year.
The following is the desired computation:
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Particulars |
Woolsworth |
Metcash Limited |
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Net income |
1,533.50 |
-368.80 |
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Less: deferred tax assets |
-264.00 |
50.00 |
|
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Income on which taxes would have been paid |
-1,797.50 |
-418.80 |
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Particulars |
Woolsworth |
Metcash Limited |
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Income tax provision |
– |
– |
|
|
Increase in deferred tax assets |
-264.00 |
50.00 |
|
|
Current income taxes |
-264.00 |
– |
|
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Other income |
193.60 |
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Taxes paid on other income |
-80.04 |
– |
|
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Unlevered cash taxes |
-183.96 |
– |
|
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EBITA |
3,067.70 |
2,132.40 |
|
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Cash tax rate |
-6.00% |
0.00% |
The cash rate is always different from the effective tax rate since the cash rate is the rate which the company pays the income tax authorities but the effective tax rate is the rate at which the company actually pays the income taxes, which would include the exempted incomes etc.
Conclusion:
The company Woolworths Limited has more amount of capital invested in itself. In respect of the cash flows, Woolworths is again at a better position. Metcash on the other hand needs to work on its cash flow amount since a negative cash flow would mean problems for the company since it would not be able to meet its short term liabilities which would hinder its success and progress. Woolworths has a negative cash rate which is mainly due to the reason of an increase in the amount of the deferred tax assets or liabilities.
References:
Accounting Basics for Students. (2018). Income Statement vsProfit and Loss Account. [online] Available at: https://www.accounting-basics-for-students.com/-income-statement-vs-profit-and-loss-account-.html [Accessed 24 Sep. 2018].
Asx200list.com. (2018). ASX 200 List of Companies – Directory. [online] Available at: https://www.asx200list.com/ [Accessed 24 Sep. 2018].
https://www.taxmann.com. (2018). What is Deferred Tax?. [online] Available at: https://www.taxmann.com/blogpost/2000000434/what-is-deferred-tax.aspx [Accessed 24 Sep. 2018].
Woolworthsgroup.com.au. (2018). Woolworths Supermarkets – Woolworths Group. [online] Available at: https://www.woolworthsgroup.com.au/page/about-us/our-brands/supermarkets/Woolworths [Accessed 24 Sep. 2018].
www.annualreports.com. (2018). annual report 2015. [online] Available at: https://www.annualreports.com/HostedData/AnnualReportArchive/m/ASX_MTS_2015.pdf [Accessed 24 Sep. 2018].
www.metcdn.com. (2018). Annual report 2017. [online] Available at: https://mars-metcdn-com.global.ssl.fastly.net/content/uploads/sites/101/2017/11/29120408/Metcash-Limited-FY2017-Full-Year-Results-2017.pdf [Accessed 24 Sep. 2018].
www.woolworthsgroup.com.au. (2018). Annual report 2015. [online] Available at: https://www.woolworthsgroup.com.au/icms_docs/183565_Annual_Report_2015.pdf [Accessed 24 Sep. 2018].
www.woolworthsgroup.com.au. (2018). Annual report 2017. [online] Available at: https://www.woolworthsgroup.com.au/icms_docs/188795_annual-report-2017.pdf [Accessed 24 Sep. 2018].