Tesco Finance statements and analysis

Topics: Sainsbury's, Balance sheet, Tesco Pages: 7 (1385 words) Published: November 19, 2014

Financial Statements For Tesco Plc

Analysis of Tesco Plc Annual Financial Statements in Comparison with J Sainsbury Plc

By: Douglas Lonnroth, Vincent-Louis End, Niccoló Trivelli & Andrea Arnaud Module: 2013.4.ACC4A1.R_T1 – Financial Reporting
Seminar Teacher: Peter Thomas
Regents University of London
29th of November 2013

Word Count: 1415

Table of Content

1. Introduction3
2. Profitability & Efficiency Year on Year3-4
2.1 Liquidity4
2.2 ACID Test Ratio 4
2.3 Gearing4
2.4 Interest Cover4
2.5 Investor’s Ratio4
3. Profitability & Efficiency Comparison5
4. Competition5-6
5. Conclusion6
6. Recommendations6
7. References7
8. Appendix8

Tesco Finance Statements & Analysis Interpretation

This assignment is conducted through secondary research, intended for the purpose of analysing Tesco Plc financial statements. Comparing the organisation with one of their main competitors within the business sector, namely J Sainsbury Plc. This analysis bases on the company’s latest annual reports.

I will do so by evaluating the following statements

The performances by looking at the results for year ended 23rd of February 2013 and compare it with previous years financial statements.

By conducting a comparison between the latest results shown by Tesco’s annual report as well as one of their main competitors, specifically J Sainsbury Plc.

Tesco Plc Year on Year Result

Profitability & Efficiency
For more details about the ratio calculations for year on year, the information will be provided in Appendix 1.

The prime ratio of return on Capital Employed (ROCE) shows a return of 12.7% for year ended 23rd of February 2013, which is a decreased return compared to 14.7% in their previous year. The decreased return is a reflection from their trading profit performance.

This declined Return on Capital Employed (ROCE) is mainly due to the following data: The regression of Tesco Plc’s operating Margin, which declined from 6.54% in 2012 to 3.38% in the financial year of 2013 (Profitability). Their improvement in its Use of Assets Ratio decreased from £1.31 per £1 of investment in 2012 to £1.28 per £1 of investment in 2013 (Efficiency).

In 2013 Tesco recorded a decrease in its Net Margin, which reflected due to the reduced Gross Margin. Their Gross Margin declined from 8.44% in 2012 to 6.31% in 2013. It could be explained due to the higher increase of cost of sales by 3.79% than the increase of sales revenue of 1.42%. These higher costs of sales may be due to higher expenses of transportation, higher costs of raw materials and increased labouring expense.

Tesco’s turnover per £1 of investment in total assets has decreased from £1.31 in 2012 to £1.28 in 2013. The total fixed assets in 2013 has decreased compare to 2012, however the turnover has grown from £m 63,916 (2012) to £m 64,826 (2013). This data explains that the company even without increasing the fixed assets has managed to increase its turnover.

Tesco’s productivity of working capital in 2013 has improved from 1.93:1 (2012) to 2.12:1 (2013), on the subject of the stock turnover rate, which was 22.44 days in 2012 and 22.5 days in 2013. It is essential to notice an increase in debtors turnover rate from 24.06 in 2012 to 25.67 in 2013. The number of days credit given to debtors in 2012 was 15 days and in 2013 it has decreased to 14 days, this is most likely due to a decrease in its credit control.

Tesco’s Current Ratio has increased from 1.93 in 2012 to 2.12 in 2013. This can be seen as Tesco’s Short term liabilities have been down warded from £m 6.386 in 2012 to £m 5.889 in 2013.

ACID Test Ratio
Furthermore the ACID Test Ratio indicates that Tesco’s liquidity has improved from 1.37 in 2012 to 1.48 in 2013. This shows that Tesco had a growth in near liquid assets relative to its short-term liabilities....

References: Conclusion
Comparing the profitability & efficiency year on year (2013) for both companies, there is an indication to their annual performance difference
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