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Company Review: Woolworths Group Limited Assessment Answer

Group Report – guidelines for consideration

(Group report-approximately 1,500 words, professionally presented, and formatted for report style.)

I have considered the Woolworths report in looking at key issues you may consider in preparing your report.

Part A- background and review

Provide a short background:

Background of company can be found on the internet. Sometimes, the annual report also provides some info about the history of the company.


For Woolworths (example)- main operations in Director’s Report, p42. Main areas- p14. Page 17 provides summary of financial performance of main areas of operation. Also Section 2 of the report provides a review of the main areas of operations of the Woolworths Group.

Ethical Environment:

Pages 2, 3 identify some ethical areas seen as important to Woolworths. Also, p5 (health of food), p8 (sustainability), p9 (responsible sourcing). 

On internet generally, just type in ‘Woolworths ethical environment’. Info on environmentally friendly? Socially responsible? Sustainability practices?

Regulatory Environment:

See p35 re legal, regulatory and governance. See p43 re environmental regulation.

Review Director’s Report: (authenticity and ethical issues)

You might start by providing an overview of the structure of the Director’s Report (Section 3 pp36 to 44)

Ethical issues mentioned – Board committees (eg risk management committee; Sustainability committee). Safety – p50. With risk management – sustainability, product and food safety, people and culture (mentioned on p34 under ‘material risks’.

You might also consider the Board Chairman’s Report p10, with its focus on sustainability and governance.

Authenticity – you might consider the Board Chairman and CEO comments with respect to their summary of the financial performance. Is it consistent with actual results? Is the Board genuinely fulfilling the ethical aims it identifies? (Any information in the media to the contrary?)

Note that your textbook discusses the Director’s Report on p31.

Auditor’s Statement

Your textbook talks about the Auditor’s report (see p 31).

See page 132 of the Woolworth’s annual report for the Auditor Report.

Governance Statement

See your text, p33 for information about Governance Statement.

With respect to Woolworths, information about Corporate Governance can be found in the Board Chairman’s report, p11. Governance information can be found in the Directors’ Report, pp36 to 44.

Strengths include:

Identification of board members on committees such as the audit committee, risk management committee and the sustainability committee.

Identification of the skills and experience of board members relating to different areas associated with effective governance.

Governance is also specifically addressed in pages 57, 58 of the Board Remuneration Report. It mentions (i) the role of the Board, (ii) the role of the PCC and (iii) other governance requirements.

Woolworth’s Board remuneration governance principles are identified on p46.

Part B- Review financial statements and differences

Review financial statements and differences

Some of the things you may wish to consider when completing Part B:-

Review and explain the figures and structure of the current year’s financial statements.

-With respect to the income statement, how has the profit changed this year compared with last year? Is the difference significant, and if so, what were the main reasons for the change in profit. (You may find discussion about performance in the CEO or Managing Director’s report, usually near the start of the Annual Report.)

- With respect to the balance sheet, have there been significant changes to any assets (eg due to discontinued operations) or liabilities (eg loans taken out or repaid)?

- In the Statement of Changes in Equity, what was the amount of dividend paid this year and last year?

- With respect to the notes to the Annual Report:

  • Which Note provides a summary of accounting policies?
  • How is Revenue shown in the Income Statement? Is there a Note providing more information as to sources of revenue?
  • The Income statement may only show single line items for Expenses and Finance costs. Where did you find information about (i) interest expense, (ii) cost of sales, (iii) depreciation? (In the Income Statement or in a Note?)
  • Where did you find information about the number of shares on issue? Where did you find information about EPS (or did you have to calculate it yourself)?
  • Do Notes to the Statement of Financial Position provide additional information regarding (i) cash and cash equivalents, (ii) Receivables, (iii) Inventories, (iv) Property, Plant and Equipment, (v) Borrowings?
  • Were you able to calculate Accounts Receivable turnover? (For a company such as Woolworths or QANTAS, sales revenue is likely to be a poor substitute for credit sales, as most sales are cash.)
  • Were you able to find cost of sales to determine inventory turnover? Does your annual report have a Cost of Sales line in the Income Statement? (Companies selling inventory, such as Woolworths and CSG, should).

Identify and explain major differences between the performance and position of the current year and the previous year?

  • Read through the Annual Report, including Highlights, CEO or Managing Directors reports etc to identify major differences in performance and position this year, compared with last year. Also undertake research through the internet to find analysts’ reports and assessments with respect to your company.
  • Perform Horizontal Analysis with respect to significant items in the Income Statement and Statement of Financial Position. (eg Sales, Gross Profit (if available), Profit for the Period, Total Comprehensive Income for the period,current assets, total assets, current liabilities, , Borrowings, Retained Earnings.)
  •  Undertake ratio analysis, calculating profitability, liquidity and solvency ratios for the current year and the previous year. Identify whether the ratio has strengthened or weakened.

Explain why you would/would not recommend investing in the company.

  1. Research through the internet and find analyst assessments of your company with another in the industry. (eg compare Woolworths with Coles Group Ltd..) You may like to calculate a few key ratios for each and compare. You might consider the Price to Earnings ratio (P/E ratio) of each. Take into consideration current market conditions with respect to the industry in which your company operates.
  2. Your calculations in b. will also help you in explaining why you would/would not recommend investing in the company.


Company Review: Woolworths


The below report reviews Australian Company, Woolworths Group Limited (ASX: WOW) which is one of the largest retail players in Australia and New Zealand. The Company has retail interests in multiple industries.

Hence, the report will discuss company background, various lines of business, the Board members and their competence, governance, sustainability, ethical environment. The report will also throw some light on legal and regulatory aspects as well as auditor’s independent report.

The report will then move to financial aspects that involve discussion of major line items such as revenue, profit, dividend, equity stake, major movement during the year etc. The report will also perform a brief horizontal and vertical analysis so as to determine how the company has performed.

Based on this analysis, a recommendation will be made whether the Company is a good investment or not.

Part A: Background

Company Overview

Woolworths Group Limited (ASX: WOW) was founded in 1924 and is headquartered in New South Wales, Australia. It is one of the largest retail players in Australia and New Zealand. The Company has retail interests in multiple industries such as, supermarket (under the brand of Woolworths and Countdown), discount department store (under the brand name of Big W), takeaway liquor (under the brand name of BWS and Dan Murphy), hospitality (under the brand name of Australian Leisure and Hospitality Group). In terms of revenue, the Company is the second largest retail player in Australia and New Zealand, after Wesfarmers (Company Annual Report, 2019).

As of 2019, the Company reported $59.98billion of revenue, an increase of 5.3% from previous year and a net profit for equity holders of $2.69billion, an increase of 56.1% from previous year. As of 2019, the Company had 196,000 employees working through more than 3,200 outlets and hotels (Company Annual Report, 2019).


As of 2019, the 3200+ retail operations of the group can be categorised as follows (Company Annual Report, 2019):

Number of Outlets
Operational Activity
Woolworths Supermarkets & Metros
Dan Murphy, BWS, Summergate
Cellarmasters, Langtons,   winemarket,
Countdown Supermarket
New Zealand
Big W Discount Store
Hotels including bars, dining, gaming,   accommodation

Ethical Environment

Community: The Company takes its responsibility towards community seriously with an investment of round $44.3mn in 2019 attributed directly to the community. This is equivalent of 1.40% of the company’s earnings before interest and taxes. Around 18.8million meals were distributed through relief programs (Company Annual Report, 2019).

Health: As far as customer preferences regarding healthy food are concerned, the Company is trying to cater to that as well through launch of 640 new Own Brand products across the Macro and Free-From ranges. These products have attained double digit growth indicating acceptance by the people who want healthy and convenient food options. The George Institute for Global Health also awarded the healthiest Own Brand award to the company with majority of products rated 3.5 health stars or above on a scale of 1-5 health star rating (Company Annual Report, 2019).

Sustainability: The Company focuses on Climate-change related risks and to this end, the Company has reduced carbon emission by 18%, generated more than 10,500 megawatts of solar energy and diverted waste from landfill to the tune of almost 369,000 tons (Company Annual Report, 2019).

Responsible Sourcing: The Company launched responsible sourcing program in 2018 whereby the objective is to promote workers’ rights, in all parts of supply chain and also source its materials in a responsible fashion. For this purpose, the Company trains and briefs the staff, supply chain members and also holds periodic audits and investigations on need basis (Company Annual Report, 2019).

Legal & Regulatory Environment

The legal and regulatory compliance is adhered to as applicable to the business of the Company. The Group’s Compliance Framework and Code of Conduct assist in this regard. The Company also has an in-house legal team to handle various conflicts and litigations that the Company may be involved in. 

Director’s Report Review

The members of the Board of Directors are as follows:

Member   of:
Director Name
Audit, Risk, Management & Compliance   Committee
People Performance Committee
Sustainability Committee
Nomination Committee
Gordon Cairns
√ (Chairman)

√ (Chairman)
Jillian Broadbent

√ (Chairman)

Jennifer Carr Smith


Holly Kramer

√ (Chairman)

Siobhan McKenna


Scott Perkins

√ (Chairman)

Kathee Tesija


Michael Ullmer


The above members have diverse range of skills and experience as required for running the business. The Board is also well diversified with 56% females and 44% males. 

Auditor’s Statement

The independent Auditor of the Company is Deloitte Touche Tohmatsu. The Independent Auditor’s Report is available as part of the Company Annual Report, 2019. For the year ending June 2019, Deloitte has given an unqualified report for the Company stating that the Financial Report of the Company, comprising of the Consolidated Statement of Financial Position, Consolidated Statement of Profit or Loss, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows for the year ending June 2019 gives true and fair picture of the Group’s financial position and performance for the year and is in accordance with Australian Accounting Standards and the Corporation Regulations, 2001.

The Report also mentioned $166 million impairment charge with respect to the Big W stores losses. After completing the review of Big W, the Company will be closing 30 stores and 2 distribution centres in the next three years. Additional onerous leases also have been provided for.  

Part B: Financial Statement Review

Figures & Structure of Financial Statement

  • Sales: The Company reported sales of $59.984 million in 2019, an increase of 3.4% from previous year. The report also provides a breakup of sales for various activities of the Company. The major revenue is from Australian Food ($39,568 million). 
  • Gross Profit Margin: The Company reported a margin of 29.1% in 2019, decline of 23 bps from previous year. This was mainly attributed to higher stock loss in Australian food sales mix.
  • EBIT: The Company reported EBIT of $2,724 million in 2019, an increase of 5.0% from previous year. The major increase was on account of 10% increase in second half of the year. This also includes impairment charge against Summergate and a one-off payment from Caltex.
  • Profit for Equity Shareholders: The Company reported NPAT of $1,752 million in 2019, an increase of 7.2% from previous year. This is normalised increase while the statutory increase was 56.1%.
  • Fixed Assets: The addition of $2,040 million was mainly on account of store refurbishments, supply chain and infrastructure.
  • Net Assets held For Sales: The decline of $575 million was mainly on account of sale of Petrol Business to EG Group.
  • Operating Cash Flow: Net CF from operating activities was in-line with previous year with an increase of 0.5% to reach $3,858 million.
  • Shares: In May 2019, the Company initiated $1.7 billion off-market share buy-back. 
  • Dividend: A total of $1.4 billion was paid in dividend to equity shareholders during the year.

Difference between Performance & Position of Current & Previous Year 

Horizontal Analysis

(In $million)
% Change
Gross Profit
Profit for the Equity stakeholders
Profit from continued operations
Profit from discontinued operations
Total Comprehensive Income
Current Assets
Total Assets
Current Liabilities
Retained Earnings

The above analysis indicates increase in revenue, gross profit, profit for equity stakeholders and total comprehensive income. The current assets reduced mainly on account of sale of petrol business to EG Group. The borrowings increased by almost 30% on account of bank loans and also securities worth $500 which matured and were refinanced with $400 million medium-term notes.

Ratio Analysis

Current Assets
Current Liabilities
Liquid Assets (excluding inventory)
Current Ratio
Liquid Ratio
Gross Profit
Profit for the Equity stakeholders
Gross Profit Margin
Net Profit Margin

The above ratio analysis indicates that solvency and liquidity ratios of the company indicate a slight decline from 2018. Current Ratio reduced from 0.78 to 0.73 in 2019 while liquid ratio reduced from 0.31 to 0.23 in 2019. This is mainly on account of assets held for sale that declined on account of sale of petrol business. While the Gross profit margin declined slightly from 29.34% to 29.08%, the net profit margin improved from 3.03% to 4.49%.

Part C: Conclusion & Recommendation

We saw above that Woolworths is an established Company which is almost 100 years old and remains one of the largest retail players in Australian and New Zealand Markets. It has multiple brands in its kitty with diverse lines of business. The Board is experienced and has requisite skills. The Company is also aware of its social responsibility towards community, environment and society as a whole.

The newly launched brands have performed successfully and the Company seems to have the finger on market pulse. The Company is also actively seeking out loss-making lines of business and closing them down or selling them out so as to be able to focus on its core strength. 

Financially, the Company has outperformed in 2019 with increase in profit and revenue. The dividends are strong and Company also bought back its shares. The P/E ratio is 17.10 times indicating high earning expectation of investors. The stock price is also stable as seen below (Australian Financial Review, 2020):

stock price history of Australian market

Hence, it is recommended that Woolworth is a good investment and can be bought with a long-term perspective.

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