myer presenentation
DESCRIPTION
AccountingTRANSCRIPT
An attractive investment opportunity or a failing retailer?
By: Sophia, Moritz, Blake, Tremayne and Marc
Points of Analysis
• Company Overview
• Profitability
• Capital Structure
• Liquidity
• Cash-flow
• Future prospects
• Recommendation
Company overview Profitability Capital Structure Liquidity Cash flow Future prospects Recommendations
Company and industry overview
Company overview Profitability Capital Structure Liquidity Cash flow Future prospects Recommendations
•Retailing•Annual growth rate: 3,3%
•Department store•Annual growth rate: -0,9%
Industry
•Largest department store•67 storesMyer
•One of the largest•Not on ASXDavid Jones
Financial Analysis
Company overview Profitability Capital Structure Liquidity Cash flow Future prospects Recommendations
Dupont Analysis Dupont analysis• One of the most important metrics for
performance of course is the Return On Assets (ROA).
• General performance figures such as Profit margin, and asset turnover can be made
• Compared performance to the general department store industry & its closest competitor David Jones.
• David Jones was taken private in August of 2014
• Comparison based on annual reports for 2012 and 2013
• Data for 2014 and 2015 drawn from news articles and information from the annual report of the new owner.
Sources: Own analysis, Finanalysis
Financial Analysis
Company overview Profitability Capital Structure Liquidity Cash flow Future prospects Recommendations
Growth Dupont analysis
Sources: Own analysis, Finanalysis, ASX announcements, Inside retail Australia, Company annual reports
• Myer’s operating revenue growth has only been 1.7 %
• Calculated Compound Annual Growth Rate of 0.42 % from 2012 to 2015.
• Growth rates for David Jones as being around 3-5 % from 2013 to 2014
• 6.38 % revenue increase from 2014 to 2015
• David Jones has significantly outgrown Myer in the last two years
• Myer is lacking growth and losing market share to David Jones.
• The Like for like measure is very important to the retail industry as a measure of growth in sales.
• 2012 and 2013 Myers had achieved superior growth than David Jones
• 2014, 2015 David Jones growth rate continues to grow at a rate of 3.7%
• Growth is extremely important to companies.
• Growing Revenues is valued much higher than cutting costs
-2%
0,40% 1,20%1,1%
-4,80%
-1,80%
2,40%3,70%
-6%-5%-4%-3%-2%-1%0%1%2%3%4%5%
2012 2013 2014 2015
Store for store annual growth
Store for store sales growth(MYR) Store for store sales growth(DJS)
A disappointing development in performance
16%14%
11%
3%
0%
5%
10%
15%
20%
2012 2013 2014 2015
Return on Equity
Unsatisfied shareholders
• Significant decrease in return 16%à3%
• Dividend yield fall from 12% to 10 %
• EPS from $0.24 to $0.13
Significant decrease in OPMDecreasing return on assets
Company overview Profitability Capital Structure Liquidity Cash flow Future prospects Recommendations
• ROA decrease from 12 % to 7 %
• Decrease in ROA attributed only to worse
operating performance
Efficient asset management1,381,401,421,441,461,481,50
0%
5%
10%
15%
2012 2013 2014 2015
Return on Assets
ROA (%) OPM (%) ATO
6,97,07,17,27,37,47,57,67,7
0,0
0,5
1,0
1,5
2,0
2,5
3,0
2012 2013 2014 2015
Fixed Asset Turnover (Y1)
Days receiveable outstanding (Y1)
Inventory Turnover (Y2)
8,4% 7,9%5,8%
4,8%
0,0%2,0%4,0%6,0%8,0%
10,0%
2012 2013 2014 2015
Sources: Own analysis, Finanalysis
From industry leader to underperformer
Company overview Profitability Capital Structure Liquidity Cash flow Future prospects Recommendations
Leading in purchasing, loosing on company infrastructure
57,9% 60,7%53,2% 53,7%
16,0% 14,7%16,1% 17,4%
18,1% 16,7%22,6%
24,8%
2,1% 2,7% 3,0%3,0%5,9% 5,3% 5,1%1,1%
0,0%10,0%20,0%30,0%40,0%50,0%60,0%70,0%80,0%90,0%
100,0%
Industry DJS - 2012 Myer -2012
Myer -2015
COGS Employee expenses
S&A expenses Depreciation
Profit
Cost of doing business
• Significant increase in cost of doing business
• COGS kept around same level
• Staff cost increases significantly –
underperforming industry average
• S&G cost at index 112 in 2015 while revenue is
at index 101.7
959799
101103105107109111113
2012 2013 2014 2015In
dex
Rev.
COGS
Staff
S&G cost
Admin cost.
Depr. & Amort.
Net Profit Margin below industry
1,1%
5,9%
0,0%1,0%2,0%3,0%4,0%5,0%6,0%7,0%
Net Profit Margin (MYR)
Net Profit Margin (industry)
2015
• NPM without abnormals was 2.8% in 2015
• Still below industry average
Sources: Own analysis, Finanalysis, IBIS World 2015 report
Sufficient capital structure
Company overview Profitability Capital Structure Liquidity Cash flow Future prospects Recommendations
Higher debt ratio than DJS Debt ratio
Sources Own analysis, Finanalysis
• Current ratio 1.0 during2015, up 14% from 2012
• Acid test ratio is 0.21
• This is up 90% over the 4 year period, and is higher than DJS
• High Level of debt versus equity employed within Myer (MYR)
1,19 1,14 1,16 1,19
0,60 0,55
-
0,20
0,40
0,60
0,80
1,00
1,20
1,40
2012 2013 2014 2015
Rat
io
Debt to Equity (MYR)
Debt to Equity (DJS)
Liquidity
Company overview Profitability Capital Structure Liquidity Cash flow Future prospects Recommendations
Debt level affect ratio Interest Cover ratio
Sources: Own analysis, Finanalysis
• High Level of debt is leading to low interest cover ratio
• Interest payments a large proportion of profits
• Interest expense / debt has decreased over time
• Equity issue in late 2015
6,71 7,29 6,99 5,68
14,12 16,45
-
5,00
10,00
15,00
20,00
2012 2013 2014 2015
Rat
io
Times Interest Earned (MYR)
Times Interest Earned (DJS)
Cash Flow
Company overview Profitability Capital Structure Liquidity Cash flow Future prospects Recommendations
Sources: Own analysis, Finanalysis
2012 2013 2014 2015Myer, Net Operating Cashflows 179.914.000 225.525.000 191.576.000 96.915.000
Myer, Net profit after tax after abnormals 141.067.000 129.877.000 98.542.000 29.826.000
David Jones,Net Operating Cashflows 101.103.000,00 95.184.000,00
David Jones, Net profit after tax after abnormals 196.737.000,00 180.036.000,00
0
50.000.000
100.000.000
150.000.000
200.000.000
250.000.000
Cash Flow
Company overview Profitability Capital Structure Liquidity Cash flow Future prospects Recommendations
Sources: Own analysis, Finanalysis
2012 2013 2014 2015Net investing cash flows -46.409.000 -66.956.000 -104.250.000 -62.350.000 Net financing cash flows -132.721.000 -115.157.000 -95.232.000 -54.806.000Net investing cash flows -46.409.000 -66.956.000 -69.250.000 -62.350.000
-140.000.000
-120.000.000
-100.000.000
-80.000.000
-60.000.000
-40.000.000
-20.000.000
0
2015 2020
Revenue
Ambitious turnaround with industry challenges
Company overview Profitability Capital Structure Liquidity Cash flow Future prospects Recommendations
Strengths and weaknesses Turnaround plan Challenges ahead
✓
Revenue growth above
industry
Better Gross profit margin
than DJS
Unique position in industry
✗
Failing performance
Negativegrowth rate in
industry
Much lower operating cash
flows
3 % CAGR
$
Sources: Turnaround plan announcement, IBIS World 2015 report
• David Jones posts best sales growth rate in 15 years
• Myer shares bounce on sales growth
Recommendations
Company overview Profitability Capital Structure Liquidity Cash flow Future prospects Recommendations
Sources: Own analysis, Finanalysis
• An attractive investment or a risky bet?• A significant decrease in profitability• Loosing ground to main competitor• Performing below industry average
• Record growth in sales in Q1-2016• Spring cleaning sale• Has to keep up growth rate for next 4 years in shrinking market
• Conclusion• Based on historic performance and outlook of industry, we believe that Myer will
have problems with executing the turnaround plan. Therefore an investment in Myer is not recommended.
Q&A
Company overview Profitability Capital Structure Liquidity Cash flow Future prospects Recommendations
Sources: Own analysis, Finanalysis
Questions?