Analysis and interpretation
Table of Contents
INTRODUCTION AND PURPOSE OF ANALYSIS 2
EXECUTIVE SUMMARY
INTRODUCTION AND PURPOSE OF ANALYSIS
COMPANY AND INDUSTRY BACKGROUND
Company
Brodie Arnhold, Shaver Shop chairman, said in the first annual general meeting of shareholders as men's electric shaver maintenance and service centre, razor shop is now entering the market, razor group, operates more than 30 years. Considering this period, Australia and New Zealand employ more than 550 team members in the network in over 110 stores. They are sure to see more growth and more progress in the coming years. As of June 30, 2017, shaver stores had acquired 43 franchises and opened 36 new stores.
At the beginning of the five years, we had 56 franchises, and by the end of the year, we had 13 left in our portfolio of razor stores — last fiscal year. Many franchises are located in an upmarket urban shopping centre such as Sydney CBD, Parramatta, Penrith, Chatswood, Doncaster, Eastland.
Industry
Shaver Shop is a specialist retailer of personal care items from Australia to New Zealand, and is an emerging industry leader in 'all hair removal related matters.' The Shaver shop is vying with niche supermarkets, convenience stores, discount shops, supermarket stores as well as online supermarkets and professional salons. As a consequence of measures taken by established rivals, the arrival of new entrants (including manufacturers and retailers who want to offer goods directly to end consumers) or Shaver Shop's inability to comply with improvements to the industry effectively.
Retail environment and general economic conditions may deteriorate.
ANALYSIS OF FINANCIAL REPORT DATA
EFFICIENCY RATIO
ANALYSIS AND INTERPRETATION
Profitability Analysis
Return on Shareholder’s equity
Return on equity (ROE) is a ratio that brings investors a deeper understanding of how the business or organization utilizes the money they have invested in. In other words, this ratio indicates a firm's profitability based on shareholder's equity. According to the above statistics, the enterprise's ROE heightened significantly from 9.84% in 2019 to 16.19% in 2017. These figures point out that for every $1 of shareholders investing in the business, they will receive a 6.35 cent profit. However, this ratio dramatically declined in 2018, to 11.12%. As a result, the investor's benefit would be reduced by 5.07 cents for every $1 investment. To improve this situation, marketing strategies for promoting sales need to be implemented to bring more profits to investors.
Net profit margin (NPM) is defined as the percentage of the remaining revenue of the company after all expenses have been deducted from sales. More clearly, this ratio exemplifies the rate of interest on the total sales of a company. NPM was 6.11% in 2019, and then this number experienced a severe fluctuation when increasing to 9.44% in 2017 and then decreasing to 6.54% in 2018. This fluctuation is interpreted in more detail that the percentage Shaver shop generated profit from every dollar of revenue grew by 3.33% between 2019 and 2017. However, there was a robust descending trend in the company's capability to profit from sales during the remaining period of 2017-2018 when it decreased by 2.9%. It can be seen that sales in 2018 were much higher than in 2017 while NPM in 2018 was contrastingly lower than it in 2017. This could show an issue that the high cost of goods sold and operating expenses resulted in poor management of values which in turn means lower profit for growth and re- investment. Gross profit margin (GPM) is a ratio used to evaluate a company's business model and financial health by per cent of the remaining money after subtracting the cost of goods from the sales of the enterprise. GPM rate moderately diminished from 42.49% in 2019 to 41.32% in 2018. Although the company's sales broadened continuously during the reporting period, remarkable changes in inventories of finish goods were the reason for the minimization of the GPM figure.
Efficiency Analysis
Asset turnover
By overlooking at how Shaver Shop generate sales using its assets, it has been clearly indicated that the level of efficiency has the same fixed continuity which swing between 1.71 per annum to 1.78 per annum. For instances, it took Shaver Shop 213 days to generate sales from net sales with average total sales in 2019 while in 2018, Shaver Shop generates sales in just 209 days from assets into revenue which is 4 days shorter. To be simply speaking, there has been one slight changes within those three years of business which is cash and cash equivalents, peaked in 2019 and dropped dramatically in 2018. Even though the company has a steady rise and the continuity of sales increase, the company still manages to remain the asset turnover ratio more than 50 percent and it is shown as a good side of the business. Moreover, with the asset turnover more than 50 percent, Shaver Shop is considered to have a standard in business’s efficiency. To sum up, the business shows a small change between those three years and cash and cash equivalent will keep on increasing.
Liquidity Analysis
Gearing Analysis
The gearing ratio measures a company's proportions of borrowed funds to its equity. Lenders are particularly worried about the gearing ratio as a high gearing ratio will put their loan at risk of not being repaid. Fortunately for shavers shop, it has a low gearing ratio for the year 2019 and 2017 respectively as 11.99% and 19.47%. But there is a whopping increase in the following year, i.e. 2018, which shows a gearing ratio of 49.9% debt. Which means that there is nearly 50% chance that Shaver shop would not be able to return the loaned money to the lenders.
CASH FLOW ANALYSIS
The purpose of cash flow analysis is to attain the cash inflows and outflows for the company. A cash flow analysis can help the company in making many major decisions in the coming financial years. The business had a strong performance over the fiscal year as the investments in, and improvements to, their omni channel approach drove total sales growth of 8.0% and annual underlying like for like sales growth of 4.8%. For the six months ended 31 December 2019, Shaver Shop Group Ltd revenues increased 12% to A$107.5M. Net income increased 26% to A$7.6M. Franchise increase from -8.6 to 12.3%, Retail Sales benefited from total increase of 12% to A$107.5M. Net income benefited from Occupancy Expenses decrease of 79% to A$1.6M (expense), Other Expenses decrease of 11% to A$5.1M (expense). Dividend per share remained flat at A$0.02.
Operational
Investment
It includes the outflow of cash for long term assets such as land, buildings, equipment, etc., and the inflows from the sale of assets, businesses, securities, etc. Shaver Shop has been consistent with its investing outflows in the years 2019 with $10,499,797 and 2017 with $10,058,899, but in 2018 they decreased their investing outflow to $7,766,878 even though their cash flow from operations was highest in 2018. Having a negative cash flow from investing activities is not always bad and needs further evaluation before decisions are made on investing activities. Since there is negative cash outflow in all the three years, it means that shaver shop is investing in properties, which explains its 120+ stores across Australia. It is not uncommon for a growing company to have a negative cash flow. Shaver Shop is still a relatively small company compared to its competitor JB HI-FI which has a collective of 311 stores across Australia and New Zealand. But in hindsight, it can be noticed that Shaver Shop is more specialised in terms of what they sell compared to JB HI-FI.
Financing
Cash flow from finance activities is the cash outflow to the entity’s investors (interest to bondholders) and shareholders (dividends) and cash inflows from sales of bonds or issuance of stock equity. Cash outflow to the investors was reduced tremendously and stayed consistent for the years 2017 and 2018, respectively, i.e. $2,389,271 and $2,926,951. This shows that the net flows of cash which are used to fund the company is decreasing every year, but there is a slight increase in the year 2018, which could be a positive sign for Shaver Shop considering that it is a big, mature company which needs cash loans from investors to carry out its operations successfully . Cash flows from financing activities could be positive or negative in a healthy company. Moreover, they are likely to switch back and forth.
Net worth ratio ((Total assets – Total liabilities)/Total assets)
There will be no net effect to the consolidated statement of cashflows as a result of adopting the new standard, however
ASSESSMENT OF OTHER, RELEVANT INFORMATION
SUMMARY AND CONCLUSION
The demands of the society and men themselves for the appearance of the image are increasing day by day, and the razor as the first choice for male grooming tools highlighting its incremental space. The annual sales and consumption of shaving products, including razors, increased by 30% year-on-year, with razors accounting for over 95%. Especially for men who have experienced shaving for the first time in adulthood, manual razors are more likely to be scratched on the face for unskilled people. Electric shavers are clearly more suitable as an "entry-level" shaving tool for young men. Judging from the habits and scenes, the popularity of shaving and other habits such as dry shaving, as well as the frequent use of male business travel and the jumping of the electric shaver, also provide a broad market for electric shavers (Shop, 2018).
