Financial Analysis of Sainsbury PLC

Topics: Financial statements, Sainsbury's, Tesco Pages: 17 (4587 words) Published: October 19, 2013
Financial Analysis Of
Sainsbury’s Plc
2010/2011

(Sainsbury supermarket, Blake 2012)

10105011

18/10/2012

Contents of Document
Section

Page

Contents.......................................................................................................................2 Introduction..................................................................................................................3 Subject company and history........................................................................................3 Profitability...................................................................................................................4 Liquidity.......................................................................................................................7 Efficiency.....................................................................................................................9 Gearing Ratios.............................................................................................................10 Working Capital Management.....................................................................................11 Conclusion...................................................................................................................13 References...................................................................................................................15

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Financial analysis of Sainsbury’s PLC
Introduction
This report will focus upon the financial performance over a two year period of a FTSE 100 company. It will seek to ascertain how well the company has performed by scrutinizing profitability, liquidity, efficiency, gearing ratios and working capital. In addition to the aforementioned points, it will dwell upon economic factors to discuss the impact they have had upon the performance of the business.

The FTSE 100 started in the year of 1984 and was based upon the 100 largest companies on the London Stock Exchange, and it is seen as an emblematic indicator for the strength of the British economy (iforex, trading section). FTSE 100 companies represent about 81% of the market capitalization of the London Stock Exchange (Nationwide Building Society, glossary section). Within it lies a substantial contribution to the UK economy and the economic power of these firms mean they would have a fairly large ripple effect upon the nation’s economy should there financial performance reach a state of discontentment.

Subject company and history
The subject company for this report will be J Sainsbury Plc which was founded in 1869 by John Sainsbury and his wife, Mary Ann Sainsbury in London (Sainsbury Plc, history section). The organization has grown to be one of the UK’s most eminent supermarkets. Some of its remarkable aspects include launching TU clothing in 2004, launching Try Something New Today in 2005 to promote healthy eating, and becoming the world’s largest fairtrade retailer in the year 2010 (it is understood that almost one in every four pounds spent on fairtrade products is at Sainsbury), in 2012 the organization became the proud sponsor to the Paralympic games (this will be diligently examined later in the report to see what effect, if any it has had upon the company’s revenue) (Sainsbury Plc, history section).

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In an industry predominantly owned by Tesco (a market share of 29.9% as of January 2012 according to BBC Business News), Sainsbury has had to work hard to stay in competition. Its persistency has been a key component to its contrivance in the industry and other ventures to which Sainsbury has embarked upon, namely, its banking venture (a 50/50 venture with Lloyds TSB) which commenced trading on the 19th day of February 1997 (Sainsbury Bank plc).

The firm lost its position as market leader in the year of 1995 to its rival Tesco and subsequently dropped to third in market share after ASDA experienced a 5% rise...

References: Datta, S. (2011) Economics, Making sense of the modern economy. Third edition. Profile Books.
Images
James Blake (2012) Sainsbury Supermarket
Lecture Notes
Agyei-Boapeah, H (2012)
Agyei-Boapeah, H (2012). Working Capital Management 1. Lecture notes distributed in the topic
BMAIE001AZ2012/3 Managing Finance
Agyei-Boapeah, H (2012). Working Capital Management 2. Lecture notes distributed in the topic
BMAIE001AZ2012/3 Managing Finance
Websites
BBC News (2004) Sainsbury Loses Out To Rivals
BBC News (2012) Tesco Market Share Dips Below 30%. [ONLINE] Available at: http://
www.bbc.co.uk/news/business-16817254 [Accessed: 18 October 2012].
BBC News (2008) Thousands Stranded By XL Collapse. [ONLINE] Available at: http://
news.bbc.co.uk/1/hi/7611639.stm [Accessed: 21 October 2012].
Bank Of England (2009) Statistical Interactive Database - Official Bank Rate History. [ONLINE]
Available at: http://www.bankofengland.co.uk/boeapps/iadb/Repo.asp [Accessed: 19 October
Guardian (2011) British Farmers Forced To Pay The Cost Of Supermarket Price Wars. [ONLINE]
Available at: http://www.guardian.co.uk/environment/2011/jul/02/british-farmers-supermarketprice-wars [Accessed: 23 October 2012].
Gokwan (2011) Sainsbury Collection Press . [ONLINE] Available at: http://www.gokwan.com/
goks-video-blog/sainsbury-collection-press-launch/ [Accessed: 23 October 2012].
iforex (2012) FTSE 100. [ONLINE] Available at: http://www.iforex.com/ftse-100 [Accessed: 18
October 2012].
Independent (2012) Small Store Openings Boost Sainsbury 's Profits. [ONLINE] Available at: http://
www.independent.co.uk/news/business/news/small-store-openings-boost-sainsburysprofits-7579664.html [Accessed: 20 October 2012].
J Sainsbury (2012) About Us, Store Portfolio. [ONLINE] Available at: http://www.jsainsbury.co.uk/about-us/store-portfolio/ [Accessed: 25 October 2012].
J Sainsbury (2011) Annual Report 2011. [ONLINE] Available at: http://annualreport2011.jsainsbury.co.uk/downloads/pdf/sainsburys_ar11_note_26_notes_to_the_cash_flow_statements.pdf
[Accessed: 18 October 2012].
J Sainsbury (2011) Financial Statements, Annual Report, Balance Sheet. [ONLINE] Available at:
http://annualreport2011.j-sainsbury.co.uk/financialstatements/balancesheets.shtml [Accessed: 18
J Sainsbury (2011) Financial Statements, Annual Report, Cashflow. [ONLINE] Available at: http://
annualreport2011.j-sainsbury.co.uk/financialstatements/cashflow.shtml [Accessed: 18 October
J Sainsbury (2011) Financial Statements, Financial Review. [ONLINE] Available at: http://
annualreport2011.j-sainsbury.co.uk/businessreview/financialreview5.shtml [Accessed: 18 October
J Sainsbury (2012) Interim Results For The 28 Weeks Up To 1 October 2011. [ONLINE] Available
at: http://www.j-sainsbury.co.uk/media/385958/interims11_rns.pdf [Accessed: 22 October 2012].
J Sainsbury (2012) Media, Latest Stories. [ONLINE] Available at: http://www.j-sainsbury.co.uk/
media/latest-stories/2012/20121005-gok-wan-one-year-on-and-five-more-gok-for-tu-collections-tocome/ [Accessed: 20 October 2012].
J Sainsbury (2011) Media, Report. [ONLINE] Available at: http://www.j-sainsbury.co.uk/media/
171813/a2r011_report.pdf [Accessed: 27 October 2012].
J Sainsbury (2012) Sainsburys Story. [ONLINE] Available at: http://www.j-sainsbury.co.uk/aboutus/sainsburys-story/20th-century/#tabbed_section [Accessed: 18 October 2012].
Nationwide (2012) Glossary. [ONLINE] Available at: http://www.nationwide.co.uk/search/
Glossary.aspx?letter=F [Accessed: 18 October 2012].
Tesco (2011) Annual Report 2011. [ONLINE] Available at: http://www.tescoplc.com/files/pdf/
reports/tesco_annual_report_2011.pdf [Accessed: 26 October 2012].
Telegraph (2012) Fundamentals For Sainsbury (J). [ONLINE] Available at: http://
shares.telegraph.co.uk/fundamentals/?epic=SBRY [Accessed: 22 October 2012].
Thisismoney (2011) Sainsbury 's delivers profit rise and guarded forecast. [ONLINE] Available at:
http://www.thisismoney.co.uk/money/markets/article-1722821/Sainsburys-delivers-profit-riseand-guarded-forecast.html [Accessed: 18 October 2012].
Vanquis (2012) UK Consumer Spending 'increased in September '. [ONLINE] Available at: http://
www.vanquis.co.uk/news/Credit-Card-News/Oct-2012/UK-consumer-spending-increased-inSeptember [Accessed: 19 October 2012].
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