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ACC10007-GRoup Assignment
Financial Information for Decision Making (Swinburne University of Technology)
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ACC10007: Financial Information for
Decision Making
Company Analysis -Group Assignment
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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EXECUTIVE SUMMARY
The following report is an analysis of the financial information of Premier Investments
Limited, we have analysed the company performance using accounting formulas and the use
of appropriate ratio to evaluate the Profitability, Operations’ Efficiency, Liquidity and Gearing
and provide recommendation to the company.
The financial analysis we have provided you covers a three-years period from 28th of July
2016 until 28th of July 2018.
With the analyses of the cash flow statements provided by the company we have recognised
that the year 2018 and still going has shown an amelioration and improvement in regards to
their profitability.
You will find that we have used other relevant non-financial information to make
recommendations and provide the company with enough information for them to create
strategies to strengthen their trading position within the retailing industry but to as well
keep the profitable financial outcome over the years.
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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TABLE OF CONTENTS
Title page
Executive Summary
Table of contents
Introduction and Purpose of Analysis
1.Company and Industry Background
2. Analysis of Financial Report Data
2.1 Profitability
2.2 Efficiency of Operations
2.3 Liquidity
2.4 Gearing
3. Cash flow analysis over the 3 years
4. Assessment of other Relevant Information
5. Summary and Conclusion
6. Appendices
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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7. Bibliography
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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Introduction and Purpose of Analysis
The aim of our report is to analyse and interpret the last 3 financial years statement of
Premier Investments Limited.
In our report, we will use accounting theories and formulas to create our reports in regard to
the Profitability, Efficiency of Operations, Liquidity, Cash flow over the three years and
gearing.
We will be analysing and interpreting the financial performance, position and market
standing of Premier Investments Limited over the past three financial years ending July
2016, 2017 and 2018.
In our report, you will also be able to gain knowledge in regard to other relevant information
that have helped us assessing the company position in its global analyse, including issues
and changes that may need to be discussed if it has a negative impact on the operational
requirements of the company.
We will then, based on our analysis of our findings, make recommendations to the company
for future decision-making processes.
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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1. Company and Industry Background
Premier Investments Limited (PMV) is an Australian Public Company limited by shares. It was
founded and listed on the Australian Securities Exchange on the 15th of December 1987.
According to DatAnalyis Premium,” Premier Investments Limited (PMV) operates a number
of specialty retail fashion chains in Australia, New Zealand, Asia and Europe. The group also
has investments in listed securities and money market deposits”.
The company head office is based at 101 Collins Street in Melbourne city, Premier
Investments Limited (PMV) is directed by a Chairman Mr Solomon Lew since 2008, a Chief
Executive Officer (CEO) Mr Mark McInnes since 2012 and 7 Non-Executive Directors; the
company is managed by a Chief Financial Officer J S Bryce from Just Group Limited and a
Company Secretary; including as well three to four substantial shareholders.
Premier investments Limited has subsidiary company called Just Group, which is a fashion
retail company with seven retail brands, consisting of Just Jeans, Jay Jays, Jacqui, Portmans,
Dotti, Peter Alexander and educational supplies brand Smiggle.
On a financial side of the company, each year they have been improving their sales as they
took advantage of the internet of things. The year 2018 has a significant improvement in
regard to cash revenue at the end of the year. As well, Smiggle’s brand expansion has
continued to deliver record results in year 2018 which has resulted in an expansion in store
locations.
The company is finalising and closing their accounts on the 28th of July of each year to
prepare their financial statement.
The revenue from sales of goods over the past 5 years has improved of 33% which is
considerable .
Premier Investments Limited is focused on Retailing more particularly Fashion Retailing in
men’s clothing as well as women’s and girl’s wear, but they also have invested in the
stationery good retailing with Smiggle. All of the retailing goods are present and available in
stores across Australia, New Zealand, Europe and Asia , and online as well with worldwide
shipping options.
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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2. Analysis of Financial Report Data
Manual calculation of specific ratios
To calculate these ratio we used the three key financial statements of the
company “Premier Investments Limited” which are the balance sheet, the
profit or loss statement and the cash flow statement. Our analysis is
established on three years, since 2016 to 2018. The ratios are classified in
four categories based on the type of information they provide.
Information used for ratio’s formulas
2.1 Profitability
To provide information on the profitability and the efficiency of the
company we made margins and returns ratios.
From 2016 to 2018, we can see that all margin and return ratios are slowly
decreasing. In a way, it is a bad sign for the profitability and the efficiency
of the company but on the other hand, each year the sales increased and
the gross profit too. The cost of goods sold increased a little bit more than
the sales. The COGS negatively affects the gross profit margin. The
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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company have to negotiate harder with his suppliers or look for
alternative providers…
The gross profit margin average 63%, which is high, but the net profit
margin average 13% so there are many indirect charges.
The company is more effective to generate profit with its assets than its
equity. In 2018, the return on assets was 7,5% and 6,2% for equity.
2.2 Efficiency of Operations
The efficiency ratios will show us how effectively the company is utilizing
its assets.
The asset turnover ratio indicate us that the company is more efficient
each year in generating revenue with its asset. It is confirm by the asset
turnover period because the number of days are decreasing.
Inventory turnover period: the average period of holding is increasing so
the turnover is decreasing. It is not a bad thing; it depends of the type of
products the company is selling.
The results for the accounts receivable settlement period are bad. There
are increasing each year from 54 days in 2016 to 70 days in 2018,
therefore a business would generally want to minimize the amount of
money tied up in inventory and receivables.
The same results for account payable settlement period. Each year we
have less time to pay our supplier and the account receivable is increasing
so the company has to negotiate better business terms to do not have
cash issues. (don’t be available to pay our supplier because our customer
didn’t pay us)
2.3 Liquidity
All the liquidity ratios decreased in 2017 and increased in 2018.
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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Current ratios are good; they average 3 so the enterprise has liquidity and
is able to meet current obligations in time.
Higher quick ratios are more favorable for companies because it shows
there are more quick assets than current liabilities. With an acid ratio of 2
the company could pay off its current liabilities without selling any long-
term assets. They will have even twice as many quick assets than current
liabilities.
In 2016 and 2017 the operating cash flow ratios are less than 1, the
company has generated less cash in the period than it needs to pay off its
short-term liabilities. This may signal a need for more capital. However, in
2018 the operating cash flow ratio increased and equals 1 so this time the
company was able to pay off its short-term liabilities.
2.4 Gearing
To know how to finance the business between debt and equity, we use
gearing ratios to indicate financial risks.
The gearing ratios between 2016 and 2018 are decreasing and are low
averaging 10%. It means the company has a small proportion of debt
versus equity, which helps to have a greater financial stability.
The debt to asset ratio increased in 2017 but it stabilized at 23%.
Therefore, we have 23% of total asset financed by external debt.
The interest cover ratio decreased almost half from 2016 to 2018, of 30,1
to 17,4. Smaller the interest cover ratio compared to similar businesses,
the worse it is. The amount of profit available to cover interest expense is
decreasing.
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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3. Cash Flow analysis over the 3 years
To better understand all the numbers, please find in the appendix 1 to 7 the different tables
referred to the part Analysis of the cash flow statements.
First, the 3 years indicate us that the company is a cash cow company, it means a
mature one, since their operating activities finance the investing and the financial activities.
This firm is at the final stage, and they need to stay at long as they can, because it’s the
profitable one, and give them the opportunity to do a lot of benefits, pay dividends to the
shareholders, making it profitable.
As we can see during the 3 years, the receipts from customers increase each year,
which is a good point, because it shows the company is selling more. It’s a good growth for
the company, of 12% in 3 years.
As a result, they have to buy more stocks, and increase the employee’s wages, so it
explains the increase in the payment, that probably lead to a better relationship with the
suppliers, and so better trading terms. The increase of 9% is a good thing, compare to the
12% of the sales, confirm the good relationship with the suppliers.
During the year 2017, the company invest a lot in their asset with an expense of
102,365$, finance in a big part by the operating activities, but also by an increase of the loan
of 44,000$. The objective of this loan was to be able to finance all the investment and still
have cash by the end of the year.
The company’s dividend increases each year, giving back more and more to their
shareholders each year, with an increase of 128% over the 3 years, from 68,969$ to 88,468$.
This result will encourage investors to come to the company and so increase the equity.
In the free cash flow statement, we can notice that the only year that’s negative is
the 2017, due to the big investment of the asset inside of the company. But if we look the
bigger picture, we can see an increase of the free cash flow between 2016 and 2018, which
is a good sign for the health of the company. With this money, they invest such as in 2017,
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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but they also reduce their debt. At the end of 2018, they almost pay all their borrowings
back, which is a good sign, they use their liquidity to pack back their borrowings and invest,
that’s a sign of the well-managed company.
During the year 2017, they were a net decrease in operating activities, due to an
increase in income taxes paid, because the company didn’t invest during 2016, leading to
any tax back for the year after.
With a big invest in 2017, the taxes were lower than 2016 even if they made more
profits.
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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4. Assessment of other Relevant Information
To begin, during theses 3 years, the board members didn’t change, only one non-
executive director has been added to the tram. This stability along the head of the company
is rare in the big company. This stability allows the company to follow the same guideline
during this time, with a vision share continuously. Indeed, the same guideline and objective
are repeat each year, giving the opportunity to the company to grow in a good way, without
any change of direction or objective, making it easier for the employees to understand the
vision of the company, and what they need to do to realize it, making everybody more
performant.
The firm and all of its brand negotiate the numeric turn more than well, as they
increase their percentage of sales a lot more than the average of the industry. The objective
in term of sales on the internet was to be 100 million in 2020, a number reach in 2018 with
118 million, showing their success in this field.
The company try their best to avoid any scandals, for example when you search for
scandal in google you don’t find any on the first page, which is impressive for a company this
big. With a really strict code of conduct on the different law, they respect in all the country,
while insisting on the worker legal right and empowerment. They take a great pride to
always defend and work against the child labor, tolerance and bribery and animal cruelty.
The company want to be a model in this different
To link they statement with the reality, they are a very philanthropic brand with Peter
Alexander, in the respect of the animal’s life and protection, in New Zealand and Australia
where Mr. Alexander has been recognized for his work as RSPCA ambassador.
They also have the Smiggle community partnership that support a large numbers of children
charities, organization and educational programs.
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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The environment is an important concern for the company. They always try to
reduce their waste, recycling as much as they can. In the same time, they do their best to
use the energy as efficiently as possible, with the change to LED light for example, to reduce
their impact on the planet. All the packaging is optimized, they increase the collection of old
one, implementing a strategy of sustainable packaging guideline.
With all that has already been say, they still try to reduce the racial difference inside
the company, as well as the gender difference. The company employ more than 9000
persons, and 90% of them are women, who occupy 80% of the manager position.
All of the above give a great power to the company. In a time where the information
and the scandal are easy to find, the firm keep a good image for the consumer, giving an
important “soft power”. The company staying true to these principles will certainly give
them an advantage over the competitors within the industry , as they do their best to make
the world a better place.
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
lOMoARcPSD|6699662
5. Summary and Conclusion
With our Cash Flow Analysis, we have discovered that the company is in good hands, the
business is growing, as we see on the operating activities, the company still invest in a lot of
assets, which explain the negative result for the 2017. But the head of the company have a
clear view of the future, paying back their debts and making the company a symbol of
success.
Our recommendation is that the Premier Investments Limited financial team should find a
way to reduce their indirect charges by reducing the costs so it could improve and increase
again their net profit, they could also increase their sale price for chosen products by using
different marketing strategies and target market as well.
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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6. Appendices
Analyse of Cash Flow Statement
Appendix 1
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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Appendix 2.
Appendix 3.
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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Appendix 4.
Free cash flows
statement 2016 2017 2018
Operating Cash Flow 103,663 97,837 133,851
(capital Expenditures) 42,677 103,525 50,781
FCF 60,986 -5,688 83,07
Appendix 5.
2016 2017 2018
Dividends paid 68,969 80,352 88,468
Increase in percentage 100% 117% 128%
Appendix 6.
2016 2017 2018
Customers receipt 1162,989 1211,741 1303,577
Increase in percentage 100% 104% 112%
Appendix 7.
2016 2017 2018
Payment to suppliers and
employees 1024,78 1063,463 1120,075
Increase in percentage 100% 104% 109%
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
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7. Bibliography
Company Full Report, Premier Investments Limited, 2019, Morningstar, Inc., All rights
Reserved, retrieved from Swinburne Library, DatAnalysis Premium, https://datanalysis-
morningstar-com-au.ezproxy.lib.swin.edu.au/af/company/fullcompanyreport?
ASXCode=PMV&licensee=datpremium&xsl-printfriendly=yes&xsl-printfullreport=yes,
Financial Information for Decision Making, ACC10007, Group Assignment Template, 2019,
Canvas, Swinburne University of Technology
The Australian Financial Review, Sue, Mitchell, 20 September 2018, Premier Investments
profit falls 20 percent after brand write-downs, Copyright 2019 The Australian Financial
Review
Lecture 7, ACC10007, Financial Information for Decision Making, viewed April 2019,
Canvas, Swinburne University of Technology
file:///D:/ACC10007_Week%207_DW_one%20to%20a%20page%20(1).pdf
Premier Investments Limited, Website, https://www.premierinvestments.com.au/about-us/
Copyright 2014 Premier Investments Ltd
Premier Investments Limited, Annual Report to Shareholders, 2018 file:///D:/2018-Annual-
Report-to-Shareholders.pdf Copyright 2014 Premier Investments Ltd
Premier Investments Limited, Annual Reports, 2017
http://www.annualreports.com/HostedData/AnnualReports/PDF_ASX_PMV_2017.pdf
Premier Investments Limited, Annual Report, 2017
File:///D:/PremierInvestments2016-Annual-Report.pdf
Ines Grasdepot(102410494), Gaetan Maurin (102404976), Nicolas Walbaum(102404921)
