本文是金融专业的paper范例，题目是“Sainsbury’s Group Financial Analysis（森宝利集团财务分析）”，Sainsbury拥有多个不同领域的业务，从杂货店到金融服务，比如Sainsbury(杂货店)、Argos和Tu服装(网上购物)、Sainsbury银行、Nectar and Habitat(家具店)。Sainsbury的目标是为消费者提供各种各样的产品，最好的质量和公平的价格，无论他们想要的时间和地点。他们的主要战略是通过高质量、高价值和优质的服务在竞争对手中脱颖而出;增加百货和服装部门的销售;为客户提供便捷的金融服务;投资数字市场;加强资产负债表。
Business Model and Strategy商业模式与策略
Sainsbury has several businesses across different sectors, from grocery stores to financial services such as Sainsbury (grocery store), Argos and Tu clothing (online shopping), Sainsbury bank, Nectar and Habitat (furniture store). Sainsbury aims to provide a variety of products with the best quality and fair price for the consumer, ideally whenever and wherever they want. Their main strategies are to differentiate themselves among competitors through high quality, value and excellent service; increase sales in general merchandise and clothing sector; convenient financial service for the customer; invest in digital market; strengthen the balance sheet.
The gross margin for year 2019 is 6.92%, which has a slightly increase of 0.31% compared with 6.61% in year 2018. The main business is grocery store which commonly low in gross margin due to the high cost of sales, hence the company is considered doing good even under the pressure of discounter (Aldi, Lidl). The company’s focus to increase efficiencies delivered has saved 220m pounds (p. 05) but the saving has been used to offset the wage’s increment (p. 38) and cost inflation, hence did not affect the statement. The company determined to become the industry leader in terms of salary, therefore Argos’ employee’s pay has been increased for a total of 18% since September 2016 and Sainsbury’s store employees increased total 30% over the last 4 years (p. 70). The company also adopted IFRS 9 (International Financial Reports Standard) which lead to higher bad debt charges and there is an increase in the saving cost (Sainsbury bank) as the interest rate increased (p.14). Due to the cost increase as above, the operation profit margin is lower in year 2019 is 1.08% compared with 1.82% in year 2018, a decrease of 0.76%. Albeit the company has deferred the tax credit of 50m pounds (note 8) which lead to 80m pounds different shown in the income tax expense (see income statement), the post-tax profit margin in year 2019 remains lower than year 2018, which is 0.75% compared to 1.09%. Both ROCE and ROE has declined as the operation profit is affected by the higher admin cost and the company has increased the retained earnings (note 23). Although the company keens on long term debt reduction policy, this has not shown effect for now but perhaps in the future as the company will benefit from the lower interest rate.
2019年毛利率为6.92%，比2018年的6.61%略有增长0.31%。主要业务是杂货店，由于销售成本高，通常毛利率低，因此公司被认为做得很好，即使在折扣(Aldi, Lidl)的压力下。公司提高效率的重点已经节省了2.2亿英镑(p. 05)，但节省已经被用来抵消工资的增加(p. 38)和成本膨胀，因此没有影响声明。公司决心在工资方面成为行业的领导者，因此Argos的员工的工资自2016年9月以来总共增加了18%，Sainsbury的商店员工在过去4年里总共增加了30% (p. 70)。该公司还采用了IFRS 9(国际财务报告标准)，这导致了更高的坏帐费用和储蓄成本(Sainsbury银行)随着利率的增加(第14页)。由于上述成本增加，2019年的经营利润率从2018年的1.82%下降到1.08%，下降了0.76%。尽管公司递延了5000万英镑的税收抵免(注8)，导致所得税费用中显示的8000万英镑差异(见利润表)，但2019年的税后利润率仍低于2018年，为0.75%，而2018年为1.09%。ROCE和ROE都下降了，因为运营利润受到更高的管理成本的影响，公司增加了留存收益(注释23)。虽然该公司热衷于长期的债务削减政策，但目前尚未显示出效果，但未来可能会受益于较低的利率。
The EPS has significantly decreased from 13.3 pence in year 2018 to 9.1 in year 2019. This is because of the lower pre-tax profit and debt reduction policy where cash was used for repayment (p. 99). Although EPS is decreased, the company has increased the DPS from 10.2 pence to 11 pence which can be deemed as the action to keep the shareholder’s confidence. Dividend cover is reduced to 0.83 times as most of the cash flow used for debt repayment, and this commonly indicated as a danger of dividend cut. Another factor is Brexit which caused pound weaker, as dividend cover normally perceived as an economy’s effect (strong or weak economy). However, the company managed to turn it around and increased the DPS. The main reason behind this could be the company able to generate a higher retail free cash flow of 461m pounds (p. 42) to cover.
The P/E ratio has drastically increased from 18.27 times in year 2018 to 24.59 times in year 2019 as Sainsbury’s and Asda confirmed to merge in year 2018. Merge of the second and third largest retailers in the UK would take over more than 30% market share (Statista.com, 2019) and this certainly increases the competitiveness and better economic scale. Hence, the market expects a better return in investing Sainsbury’s and leads to a higher P/E ratio. However, the merge has been blocked by CMA in year 2019 and the P/E ratio is likely to decrease in year 2020. Investors might want to buy shares when the P/E ratio decreased, though the great factor to increase the P/E ratio such as merger is less likely to happen within few years as CMA has applied merger blocked to major retailers. For investor who would like to earn the dividend or expect big bounce in the future market price after Brexit, it could be a great timing to invest now as the company is consistent with dividend yield (average 4.65% in 5 years according to the rate on LSE) and the current market price is lower than the peak in year 2018 (341.50 pence in August 2018 according to LSE). Brexit certainly will impact the market price as majority investors are sitting on the fence until the change has been confirmed, therefore the market price is expected to decline. Investor could speculate this opportunity for a greater return in the future.
Sainsbury’s has a weak liquidity position and the situation is weaker in year 2019. Though the company aim to generate strong, consistent cash flow (p. 09) but it has been utilized for long term debt reduction. Therefore, according to the ratio, the company seems less capable to cover short-term liabilities. Retail business mode commonly has low ACT (acid test ratio) as the business heavily depends on the inventory, hence it is considered doing great in the retail industry. Compared to Tesco UK (Investing.com, 2019), Sainsbury has a better ACT. Additionally, the company has more customer saving (note 18b) which might benefit the capital turnover but also lead to higher interest paid. Albeit the liquidity position seems weak, Sainsbury is capable to pay off the short-term liabilities as the company has a lump sum of retained earnings (p. 98) to utilize when deemed necessary.
Average inventory days is 26 days, which is considered long for a retailer. As per previous stated, retailer heavily depends on the inventory to generate cash and pay off expenses, hence it is less favourable. Though the inventory days is less favourable, Sainsbury’s maintained the inventory days without huge change under the pressure of consumer behaviour shifts to Aldi and Lidl. Furthermore, Sainsbury has longer payable days than inventory day hence they have more time to sell the goods and cover the payable. Due to the retailer’s characteristic, it just takes 2 days for Sainsbury’s to collect receivables. The key element to take into consideration for an investor is inventory days as it determines how fast the company can generate cash and reduce inventory loss.
Sainsbury’s has scored a low gearing of 21.62% in year 2018 and lower to 11.23% in year 2019 as a result of business strategy to reduce net debt (p. 17). Equity mainly formed by retained earnings (p. 98) which is up to 56.33% of total equity, and next is share issue which is 21%. The remeasurement on defined benefit pension schemes is increased to 1053m in year 2019 (note 23) which affected the retained earnings. Overall, the company has a greater ability to re-invest the business in a long-term run. As we can see, Sainsbury’s aim to increase investment in the supermarket in 2019/20 (p. 10) by partnering with different sectors such as Timpson and Specsavers which will increase their profitability and market share. The net debt to equity ratio in year 2019 is -2.02%, which represents that the company could fully repay the long term borrowing whilst have cash on hands.
As the company has lesser borrowing which leads to low interest payable, therefore the ICR (interest cover ratio) is 3.15 times in year 2019. It has shown the ability to generate cash to cover interest and the financial stability of the business. Though some argued that high ICR could represent that the business is neglecting the chances to maximize earning through leverage (CFI.com, n/a). Another possible issue is the company issues more share to generate more equity, which leads to higher dividend pay-out.
由于公司借款较少，应付利息较低，因此2019年的ICR (interest cover ratio)为3.15倍。它已显示出产生现金以支付利息的能力和业务的财务稳定性。尽管有些人认为，较高的ICR可能代表企业忽视了通过杠杆实现收益最大化的机会(CFI.com, n/a)。另一个可能的问题是，公司发行更多的股票以产生更多的股本，这将导致更高的股息派息。
Sainsbury’s is capable to generate more cash from the share issued. The company has high revenue but also the high cost of sales which leads to low gross profit, but it is considered great for the retail industry. Albeit the pre-tax profit has reduced in year 2019 which affected by the debt reduction policy, the company is generating net cash and has lesser net finance cost (p. 99).
Overall, Sainsbury’s is performing well and financial stable. Although under the pressure of discounter and consumer behaviour shift, Sainsbury’s able to maintain the revenue whilst repaying the long term borrowing and increase retained earnings. Albeit it is a loss that the merger of Sainsbury’s and Asda is blocked, Sainsbury’s is a safe investment and is giving out dividends consistently. Additionally, Sainsbury’s aim to partner with different sectors to provide a one-stop shopping experience which will make a great profit in the future.
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