Analyse and compare the operational and financial performance of Woolworths Ltd (WOW) to Coles Group Ltd (COL) and write a report either RECOMMENDING or NOT RECOMMENDING an investment of $1,000,000 in total to be invested in either or both companies.
Your conclusions and the amounts to be invested in either or both companies and in what proportion are to be justified by appropriate comments, which have been determined via the investigation and analysis of the three dimensions of sustainability comprising:
Economic (financial)Social, andEnvironmental
Additionally, you will need to review Governance issues with respect to:
Board CompensationExecutive compensationAuditor remuneration
The structure and presentation requirements for this assignment are as follows.
Annual Reports:
the ANNUAL reports for 2021 and 2022 for both companies will need to be accessed electronically from either the Company website (under Investor Relations) or if using Google or another search engine enter
Coles Group 2022 Annual ReportWoolworths 2022 Annual Report:
Alternately annual reports and other RELEVANT and DETAILED corporate information can be accessed from the UTS Library for both companies which contains additional information for both companies: Morningstar DatAnalysis Premium (Aspect DatAnalysis) via the link:
https://sso.lib.uts.edu.au/cas/login?service=https://www.lib.uts.edu.au/goto?url=https://datanalysis.morningstar.com.au&_casCheck=true
Sustainability Reports:
you will also need to access the Sustainability Reports for both WOW and COL to complete some of the requirements of this assignment. The sustainability reports can be accessed for both companies from the following website links:
https://www.woolworthsgroup.com.au/au/en/investors/our-performance/reports.html https://www.colesgroup.com.au/investors/?page=reports
Absolute and Relative Measures
In the following analysis, you will be required to report both ABSOLUTE and RELATIVE Results:
For example, if Total Profits for Company A = $100 and for Company B = $500, it is obvious that Company B has the higher profit. However, if Company A has Shareholders’ Equity of $500 and Company B has shareholders’ equity of $5,000 then for performance analysis, Return on Equity (ROE) for Company A (being $100 ÷ $500) = 20% will be higher than for Company B ($500 ÷ $5,000) = 10% – hence as an investor, I would prefer Company A to Company B as it has generated a greater return on funds invested.
In the following analysis, please ensure that you report both ABSOLUTE and RELATIVE measures as the two companies, Coles and Woolworths, are not the same size. Hence, in most instances, the relative measures will provide a better measure for comparison purposes.
Part 1: Executive Summary 10%
Company Operations:
Prepare a brief report about the historical business operations and future prospects for growth – be it, products, markets, processes, technologies etc. Discuss core business operations and the main drivers of REVENUE for the companies. (Maximum length = 200 words).
Part 2: 50%
1. Financial (Economic) Analysis 40%
Complete the financial analysis for both 2021 and 2020 using the ratios listed in the spreadsheet file (220800 Case Study 2 -Templates.xlsx) for the following areas of business activity:
ProfitabilityAsset EfficiencyLiquidityCapital StructureMarket based performance measures
Please ensure you summarise the ratios and provide relevant commentary in the Excel sheet labelled Comparison WOW – COL.
In addition to the completion of the Spreadsheet template provide summary comments on each of the areas listed being:
ProfitabilityAsset EfficiencyLiquidityCapital StructureMarket based performance measures
(Maximum length = 400 words).
2. Segment Operations 5%
Compare the SUPERMARKET operations results for WOW and COL and comment on the efficiency of operations for the years 2022 and 2021 disclosing:
Segment RevenuesSegment EBITSegment EBIT margins (EBIT ÷ Revenue)Growth = (2022 revenues – 2021 Revenues) ÷ 2021 revenues
Provide summary comments comparing the two company’s supermarket operations.
(Maximum length = 200 words).
3. Governance – Board, Executive and Auditor Compensation 5%
For the years 2022 and 2021 prepare a table summarising:
Total Board CompensationTotal Board Compensation ÷ Total Revenue (4 decimal places)Total Executive CompensationTotal Executive Compensation ÷ Total Revenue (4 decimal places)Auditor compensationAuditor compensation ÷ Total RevenueAuditor compensation ÷ Total Assets
For both WOW and COL highlight any significant differences in their approach to board, executive and employee remuneration.
Where differences exist, outline justifications.
Spreadsheet templates are available for your calculations and summary comments.
(Maximum length = 200 words).
Part 3:
Social Analysis 10%
The social analysis, which applies to all the stakeholders, will be examined from the employee perspective.
The following data, contained in the annual or sustainability reports for COL and WOW will need to be collected for the 2022 and 2021 year (if exact numbers are not available then use reported estimates):
Employee benefits expenseNumber of employeesEmployee Benefits Expense ÷ Total RevenueEmployee Benefits Expense ÷ Total Number of employees
Additionally, provide commentary on the makeup of the workforce by gender and indigenous employment numbers in total and as percentages of the total workforce.
(Maximum length = 200 words).
Part 4:
Environmental (the Planet) 10%
Using information from the Annual and Sustainability Reports for both Coles and Woolworths, rate the two companies on their environmental performance.
Use at least 2 measures and report both the absolute and relative performance measures in supporting your answer.
For example, use quantitative measures to report on any two of the following measures:
Carbon Emissions (Scope 1, 2 and 3)Plastic consumption/removalWaste managementPower consumption
(Maximum length = 200 words).
Part 5: 20%
Conclusions
Based on your results for Parts 1 to 4, how would you invest the $1,000,000. Provide commentary to support your decision.
(Maximum length = 200 words).
