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Tesco 2012

FINANCIAL ANALYSIS AND MANAGEMENT INTRODUCTION OF MARKET AND INDUSTRY FINANCIAL ANALYSIS RECOMMENDATION

Retail Industry
TRADITIONAL RETAILING BUSINESS HAS BECOME TO BE A FAST-GROWING INDUSTRY WITH GLOBALISATION AND INFORMATION TECHNOLOGY DEVELOPMENT AT CURRENT STEP, IT IS WISE TO INVEST IN A FAMOUS MULTINATIONAL RETAILING COMPANY THAT HAS A WORLDWIDE CUSTOMER MARKET, STRONG COMPETITION ABILITY, STABLE OPERATION CONDITION AND GOOD POTENTIAL PROSPECT

Supermarkets have been rolled out all over the globe,

with supermarket chains securing their place at the top of the worlds retail chain. Obstacle of stricter legislation on expansion, superstore retailers have sought different formats 1. Using in store services 2. Downsizing stores 3. Promoting click and collect services

Trend
Global Industry Analyst Global supermarket food

products sales are predicted to generate revenue in excess of $1.7 trillion by 2015 Market growth has been driven by the rising importance of consumerism. Economic recession number of consumer visits to supermarkets has fallen over recent years. However, average spends-per-visit have risen.

Tesco at a glance
Founded in 1919

Developed as a self-service market


One of the worlds largest retailers with operations in

14 countries Employing almost 520000 people and serving millions of customers every week Multi-format

Positioning
Customer relationship management

Added value services

Finance 2. Telecom 3. Express


1.

Core business model

Tesco 2012 core strategy


To grow the UK core

To be an outstanding international retailer in stores


and online To be as strong in everything we sell as we are in food To grow retail services in all our markets To put our responsibilities to the communities we serve at the heart of what we do To be a creator of highly valued brands To build our team so that we create more value

Performance in 2012
VERTICAL ANALYSIS HORIZONTAL ANALYSIS

DATA FROM THE INCOME STATEMENT


(figures in millions) 2012 2011

1 REVENUE
2 OPERATING PROFIT 3 NET PROFIT AFTER TAX

64,539
3,985 2,965

60,455
3,917 2,777

4 NET FINANCE CHARGES


5 DIVIDENDS PAID

241
1,183

333
1,083 SEN PER SHARE

6 EPS (WHERE APPLICABLE)

14.8

7 NO. OF ORDINARY SHARES


8 PRICE PER SHARE 377.40

SHARES

DATA FROM STATEMENT OF FINANCIAL POSITION (BALANCE SHEET)


(figures in millions)
2012 2011

1 TOTAL ASSETS 2 CURRENT ASSETS

50,781 12,863

47,206 12,039

3 ALL INVENTORIES
4 ALL ACCOUNTS RECEIVABLE 5 CASH & CASH EQUIVALENTS 6 CURRENT LIABILITIES

3,598
2,657 2,305 19,249

3,162
2,330 2,428 17,731

7 TOTAL LIABILITIES
8 TOTAL EQUITY 9 TOTAL BORROWINGS

32,980
17,801 11,749

30,583
16,623 11,075

Key Ratios: Profitability


2012 2011

OPERATING PROFIT MARGIN NET PROFIT MARGIN OPERATING ROI NET ROI

6.2 4.6 7.9 5.8

6.5 4.6 8.3 5.9

ASSET UTILISATION

1.3

1.3

million

Interpretation
Profit margin business was not that good as last year

There was a slide fall due to economic recession in

the main market like USA an London Revenue of sale also decline relative to total assets that is "1.28 to 1.27" Overall profitability base on return on investment has declined according to the previous years.

Key Ratios: Liquidity


2012 2011

CURRENT RATIO CASH RATIO AR RATIO

0.66 12.0 13.8

0.68 13.7 13.1

INVENTORY DAYS AR DAYS

20.4 15.0

19.1 14.1

WORKING CAPITAL DAYS

35.4

33.2

Interpretation
The company cash resource can't meet up to it

current liabilities as cash is less than 1 Need to increase cash resources because this could cause instability to the cash flow system. Working capital period is good since is lesser than 90 days, indicating a healthy turnover All transaction in the retails industry or Tesco precisely is done by cash on delivery or cash before service

Key Ratios: Debt Management Ratios


2012 2011

GEARING

66.0

66.6

ASSET FINANCING

23.1

23.5

INTEREST COVER

16.5

8.3

Interpretation

The company borrowing level is

Conservative due to low gearing ratios 2. Normal level of borrowing (between 10-30)
1.

Key Ratios: Investor Ratios

2012

2011

ROE
DIVIDEND PAYOUT EPS P/E RATIO

16.6
40.0 14.8

16.7
39.0

Interpretation
Return to shareholder is a double digit

Fairly healthy though there is a slide decline with

decline in the general profit.

Overall Performance
Decline in profitability

Low working capital days


Cash flow to be enhanced Normal level of borrowing, with conservative

attitude Fairly healthy returns to investor

Tesco vs Walmart (2012)


Tesco Walmart

OPERATING PROFIT MARGIN NET PROFIT MARGIN OPERATING ROI NET ROI

6.2 4.6 7.9 5.8

6.0 3.7 13.7 8.5

ASSET UTILISATION
CURRENT RATIO

1.3
0.7

2.3
0.9

million

CASH RATIO AR RATIO INVENTORY DAYS

12.0 13.8 20.4

10.5 9.5 33.2

Tesco vs Walmart (2012)


Tesco Walmart

AR DAYS WORKING CAPITAL DAYS GEARING ASSET FINANCING INTEREST COVER ROE DIVIDEND PAYOUT EPS P/E RATIO

15.0 35.4 66.0 23.1 16.5 16.6 40.0 14.8

4.9 38.1 255.3

21.7

Market Outlook
Still suffering the negative impact of economic

recession Related decline in levels of disposable income Consumer demand for better value for money and greater interest in discount supermarkets Global Industry Analysts predicts recovery from economic recession will put the spotlight back on supermarket industrys growth fundamentals.

Recommendation
Shares are currently not doing better so HOLD Bonds Invest because it gives 5% interest . Overall outlook for investment is NEGATIVE
Balance Sheet: A financial statement that summarizes a company's

assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders. idea for the investment.

Averaging the growth over the past 5 to 10 years can give you a better