Instructions The basic requirement is to undertake a general financial analysis, comparing financial position and performance over the two most recent financial years, of an ASX listed company. Your...

TELSTRA
Student name – ID
FIN600/FINA6017 T3 2020
Assignment – WES
Executive Summary
This report reflects the performance of the company Wesfarmers describing the business activities as conducted by the company. The report hereby describes the various business segments in which the company operates along with the revenue structure in the same. The report calculates various ratios hereby describing the change in such ratio when compared with the previous year and the also compares the ratio with the industry average thereby displaying whether the company is performing better than the companies in same industry or the company has to make improvements in the regard.
Wesfarmers is a conglomerate which has been constantly diversifying its business in various segments such as retails, industrial parts, housing and many more. The company started off as a cooperative but over the years the company has been constantly expanding its business and has become the largest company providing employment in the private sector. The company aims at providing the best service to the end consumers with integrity and objectivity and having two largest retail stores across the country with over 500 stores, the company has to maintain the level of service and facilities. With the retail outlets, the interaction with the end consumers is direct and therefore the company has to maintain the best business activities so that the consumes keep visiting such stores.
Contents
Page Numbe
1
Introduction - Background and Business
2
2
Company Analysis - Cu
ent financial performance, Key financial highlights,
Economic outlook
3
Ratio Analysis
3.1
Profitability ratios
3.2
Efficiency ratios
3.3
Liquidity ratios
3.4
Gearing ratios
4
Recommendations and overall assessment
5
References/Bibliography
Appendices – attached Excel Spreadsheet
1
Introduction - Background and Business
Wesfarmers was established as a corporative society in 1914 as Wesfarmers Australian Farmers’ cooperative with the headquarters in Perth. The company is diversified in the business of Chemicals, retail, fertilizers, and mining of coal and industrial and safety products. In terms of revenue, it is the largest company in Australia and also the largest employer in the private sector with more than 107000 members and 487000 shareholders. The company got listed in the year 1984 in Australian Securities Exchange. Wesfarmers has a lead in the retail business in the name of Kmart and Target having more than 500 stores.
The segments and divisions of the company are organized and managed separately based on the nature of products and services as provided by the company. The operating segments of the company are Bunnings that is retail in building material and home along with servicing project builders and the housing industry. K-mart is
and of Wesfarmers in the retailer in apparel, general merchandise along with goods for leisure, entertainment home and consumables. K-mart also includes Target and Catch which is retailer like k-mart and Catch is an online retailer offering
anded products on first party basis. In the Officeworks segment which is a retailer and supplier of office products and solutions for home and businesses.
The chemicals, energy and Fertilizers division of Wesfarmers is called as WesCEF wherein the company manufactures and markets chemicals for industry and mining along with horticultural fertilizers. The company also extracts LPG and CNG and also exports the same. The Wesfarmers industrial and safety division, the company manufactures distributes and supplies operating products, industrial gases and equipment. The company is also in the business of food and staples retailing, forest products, property, investment banking and corporate support services as well.
The net profit of the company has decreased in the cu
ent year although the revenue of the company has increased. The profitability ratios of the company have therefore reduced in most of the cases. Although the profit of the company has decreased company paid the dividend to maintain the trust of the shareholders. The dividend payout ratio of the company has improved. The efficiency ratios regarding the inventory and receivables has increased as the holding amount of such assets have been decreased which has freed the working capital invested in the cu
ent assets. The liquidity status of the company has improved in terms of quick ratio but decreased in terms of cu
ent ratio which shows that a major improvement in inventory part is yet to be done. The gearing ratios of the companies have grossly improved making the company less risky.
2
Company Analysis - Cu
ent Financial performance, Key financial highlights, Economic outlook
Financial highlights/events of 2020
· The revenue of the company was at $ 30.8 billion which increased by 10.5% in terms of continuing operations. The net profit of the company was $ 1.6 billion from continuing operations which fell by 16.4% and the profit excluding significant items increased by 8.2% reaching $ 2.1 billion.
· The company generated a wealth of $ 31.7 billion and a value distribution of $ 9.1 billion.
· The Net profit of the company fell when compared to the previous year from $ 1940 million to $ 1622 million. The main reason for decline was the effect of pandemic of Covid-19.
· The return on equity was at 22.1% which has increased from 2019 when the return on equity was at 19.2%.
· The company generated a free cash flow of $ 5188 million in the year whereas the same was at $ 4239 million in the year 2019.
Economic Outlook
· The company invested more than $ 1.9 billion across the globe in various businesses in the year 2020 including the acquisition of Catch Group Holdings in the month of August and Kidman Resources Limited in the month of September.
· The economy of Australia is in recession for the first time in 30 years due to the pandemic of Covid-19 due to which the customers’ demand has been grossly affected. The retail stores call for fixed...