TABLE OF CONTENTS
Assignment Cover Sheet ......................................................................................... 1
Section A .................................................................................................................... 3
1.
Introduction
2.
Financial Analysis ............................................................................................... 5
John Lewis Partnership ................................................................ 3
2.1 Overview ........................................................................................................... 5
2.2 Ratios and Evaluation ....................................................................................... 6
2.2.1 Profitability Ratios ...................................................................................... 7
2.2.2 Efficiency Ratios......................................................................................... 7
2.2.3 Liquidity Ratios ........................................................................................... 8
2.2.4 Working Capital Management Ratios ......................................................... 8
2.2.5 Long Term Financial Stability Ratios .......................................................... 8
3.
Conclusion ........................................................................................................ 10
Section B .................................................................................................................. 11
4.
Investment Appraisal
The Waitrose Edge of Town (EOT) Project.................. 11
4.1 Overview ......................................................................................................... 11
4.2 Viability Analysis ............................................................................................. 11
4.3 Conclusion and Recommendation .................................................................. 13
5.
Appendix A........................................................................................................ 14
6.
Appendix B........................................................................................................ 15
7.
Appendix C ....................................................................................................... 16
8.
Appendix D ....................................................................................................... 18
9.
References ........................................................................................................ 19
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SECTION A
1. INTRODUCTION
JOHN LEWIS PARTNERSHIP
In 2019 the UK retail industry saw a total sale of £394bn with 19% coming from online sales,
which enjoyed a 324% increase over the last 10 years. The industry has 306655 retail
outlets, employees 2.9m people, and has seen a growth 3.4% (RetailEconomics, 2019).
John Lewis Partnership (JLP) is in the top-10 retailers in the UK (retailappointment, 2019)
and is
-owned business. It controls two cherished retail brands: John
Lewis & Partners (JL&Partners) and Waitrose & Partners (W&Partners), which are owned in
Trust for their 83,900 Partners (employees).
With the rebranding to & Partners in September 2018, JLP made a bold statement about the
Partnership and their future. Partner and Chairman Sir Charlie Mayfield states that More
g a truth that
always been part of our unique
Partners and
business. That the people who work here are more
ut people at the heart of our business.
JLP s unique business model revolves around 3 main pillars
Empowering Partners,
Inspiring Customers, and Operational Excellence. As of January 2019, JLP operated 400
shops, 3 head offices, 3 international offices, 21 customer delivery hubs, 11 distribution
centres, 5 partnership hotels, 1 soft furnishing factory, 1 heritage centre, 1 farm, 1 plant
nursery, and 2 cookery schools.
The retail industry that JLP operates in is highly competitive, volatile and has seen
unprecedented change in the last 12 months particularly in non-food, affected by the
oversupply of physical space and subdued consumer demand, largely due to near term
uncertainty, politically and in the economy, which is having a major impact on consumer
confidence, but JLP do not believe the market conditions to be cyclical.
Revenue growth, corporate awards and multiple channel retail are the JLP s major strengths,
whereas concentrated geographic base and product recalls remain areas of concern.
Expanding retail market in the UK, positive outlook for the global online retail market,
strategic initiative and rebranding are likely to offer growth opportunities to JLP. However,
Brexit, intense competition, stringent regulation and increasing manpower costs in the UK
could affect its business operations.
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JLPs Corporate Strategy is to create stronger brands and new growth by product
differentiation. This initiative will enable JLP to invest and develop their own unique products
and services with an emphasis on their own brand and innovation to deliver an exceptional
experience. The company also anticipates the retail market to make informed decisions in
future. As per t s Your Business 2028
(IYB 2028), JLP has limited its investments
on purchasing retail spaces for new shops to reduce further debts and has shifted its focus
on investing on its core business to strengthen its balance sheet and maintain investments in
future by focusing on investing in its own brands and exclusives and being more customercentric (MarketLine, 2020).
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2. FINANCIAL ANALYSIS
2.1 Overview
JLP s annual report and accounts for 2018/19 saw gross sales at £11724.1m (W&Partners £6835m and JL&Partners - £4889.1m) and revenue at £10316.7m (W&Partners - £6429.5m
and JL&Partners - £3887.2m) increase by ~1% as compared to the 2017/18 figure for gross
sales at £11609.5m and revenue at £10215.8m.
Operating profit before exceptional items and partnership bonus decreased by 37.7% from
£364.4m in 2017/18 to £227m in 2018/19. Operating profit before partnership bonus at
£229.1m for 2018/19 was lower than £253.1m for 2017/18, but it was very strong (66.28%
increase) for W&Partners (2018/19 - £199.2m and 2017/18 - £119.8m), mainly due to
improved gross margin which benefited from 24 range reviews, as well as stronger
operational performance and wastage and costs that were well controlled; whereas it was
substantially down (60.1% decrease) in JL&Partners (2018/19 - £92.6m and 2017/18 £236.5m) due to weaker home sales, gross margin pressure, higher IT costs, the property
impact of new shops and lower profit on sale of assets.
The profit for the year increased to £77.3m in 2018/19 from £77m in 2017/18. Despite lower
profits, JLP is holding their financial direction through careful cash management by
maintaining total investment and reducing total net debts by over £400m, allowing them to
keep their debt ratio steady at 4.3x for 2018/19 thereby providing an indication of JLP
ability to repay their debts.
Total assets for JLP increased by 0.93% from £6,253.7m in 2017/18 to £6,312.1m in
2018/19 with total current assets increasing by 14.1% from £1,690.6m in 2017/18 to
£1,929.0m in 2018/19 driven by short-term investments and cash and cash equivalents.
Total non-current assets reduced by 3.94% from £4563.1m in 2017/18 to £4383.1m in
2018/19 on account of reduction in property, plant and equipment and trade and other
receivables.
Total liabilities decreased by 6.58% from £3,952.0m in 2017/18 to £3,692.1m in 2018/19 with
total current liabilities increasing by 5.7% from £1,945.1m in 2017/18 to £2,055.9m in
2018/19 driven by borrowings and overdrafts. Total non-current liabilities reduced by 18.47%
from £2,006.9m in 2017/18 to £1,636.2m in 2018/19 on account of borrowings.
Total equity increased by 13.83% from £2301.7m in 2017/18 to £2620.0m in 2018/19 on
account of the £318.3m added to the retained earnings.
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During the year, JLP built up a strong liquidity position at nearly £1.5bn up from £1.3bn in
2017/18 indicating that they have the financial headroom to mitigate future risks and make
sure they can continue investing for the future. This included the addition of £125m of
medium-term bank debt, and have repaid a £275m bond that matured in April 2019 out of
cash reserves.
JLP s annual report includes Alternative Performance Measures, key highlights being return
on invested capital (ROIC) at 7.3% in 2018/19 lower than 9.1% in 2017/18; total net debts
reduced by £401.3m from £3,083.5m in 2017/18 to £2,682.2m in 2018/19; decrease of
27.5% in the profit per average FTE partner from £6900 in 2017/18 to £5000 in 2018/19; and
a decrease of 1.87% in the number of partners from 85500 in 2017/18 to 83900 in 2018/19.
This year JLP had a number of exceptional items which resulted in a net £2.1m income
compared to a net £111.3m expense in 2017/18. These were primarily due to strategic
restructuring and redundancy programmes aligned with IYB 2028, branch impairments at
W&Partners and JL&Partners; JL&Partners supply chain; pay provision; legal settlement;
and profit on disposal of items previously recognised as exceptional.
The following policies were adopted by the Partnership for the year ended 26 January 2019
and have had a significant impa
disclosures
IFRS 1
for the year, equity and
,
Rev
, and
.
Refer Appendix A and Appendix B for the consolidated balance sheet and income statement
respectively for JLP and Marks and Spencer (M&S).
2.2 Ratios and Evaluation
Financial ratios provide a quick and relatively simple means of assessing the financial health
of a business. They can be difficult to interpret but help us to identify which questions to ask
(Atrill and McLaney, 2017).
The financial ratios (APPENDIX C) have been calculated for JLP and have been compared
with M&S, another leading retailer of general merchandise and food in the UK which has
similar revenue and employee base as JLP.
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Some of the key financial ratios are evaluated below
2.2.1 Profitability Ratios
These are used to assess the business's ability to generate earnings relative to its revenue,
operating costs, assets, and shareholders' equity over time, using data from a specific point
in time (Kenton, 2019).
The return on capital employed (ROCE) measures a company's profitability and the
efficiency with which its capital is used. In other words, the ratio measures how well a
company is generating profits from its capital. For JLP the ROCE was at 5.33 for 2018/19, a
decrease of 36.94% on account weaker home sales, gross margin pressure, higher IT costs,
the property impact of new shops and lower profit on sale of assets for JL&Partners as
compared to 8.46 for 2017/18. M&S enjoyed a better ROCE of 12.09 for 2018/19.
The operating profit margin measures how much profit a company makes for every £100 of
sales. A higher margin indicates more profitability and is therefore good. JLP saw a decline
of 38.32% from 3.57 for 2017/18 to 2.2 for 2018/19; whereas M&S fared better at 5.79 for
2018/19.
The operating expense ratio is one measure of how efficient a company is. It indicates how
much each pound in sales revenue cost the company to achieve. For JLP it was alomost the
same for both the years at 31.70 cents for every pound of sale and was similar to M&S s
31.52 cents for 2018/19.
2.2.2 Efficiency Ratios
These are used to measure the efficiency with which particular resources such as
inventories or employees have been used within the business. It measures a company's
ability to use its assets and manage its liabilities effectively in the current period or in the
short-term.
The sales revenue to capital employed ratio measures the efficiency in generating sales
revenue relative to the value of its assets, also known as asset turnover. A higher ratio
indicates a more efficient use of capital employed. For JLP it showed a marginal
improvement of 2.23% from 2.37 in 2017/18 to 2.42 in 2018/19, and fared better than M&S s
2.09 for 2018/19.
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2.2.3 Liquidity Ratios
Sufficient liquid resources are vital for the survival of the business and these ratios are used
to evaluate a company
ability to pay off current debt obligations without raising external
capital.
The current ratio measures a company's ability to pay short-term obligations or those due
within one year through its short-term assets. A current ratio greater than 1 is considered
necessary for traditional manufacturing companies though not necessarily a good thing
it
could indicate that inventories are stock piling, may be obsolete or not sellable, customers
are unable to pay or just slow paying. If the ratio = 1 it means that there is just enough
current asset to pay off current liabilities. Service and retail companies often have a current
ratio less than 1.0 and this does not indicate liquidity problems. This can be related to the
. For JLP it improved by 7.95% from 0.87 in 2017/18 to 0.94
in 2018/19, and was much better than M&S s 0.67 for 2018/19.
2.2.4 Working Capital Management Ratios
Working capital management is a business strategy designed to ensure that a company
operates efficiently by monitoring and using its current assets and liabilities to the best effect.
The primary purpose is to enable the company to maintain sufficient cash flow to meet its
short-term operating costs and short-term debt obligations (Tuovila, 2019).
The inventory turnover days measures how long the business takes to sell its inventory, on
average. For manufacturing companies an inventory turnover period of 30-60 days is
considered normal, but if they are operating a just-in-time system this would be expected to
be lower. Generally, businesses will try to keep inventory days as short as possible, to
ensure sales are made quickly. Retailers usually have lower inventory turnover periods than
manufacturers, as they do not hold raw material or work in progress. For JLP this improved
by 1.78% as it fell from 35.26 days in 2017/18 to 34.63 days in 2018/19, and is better than
M&S s 39.05 days for 2018/19.
2.2.5 Long Term Financial Stability Ratios
These ratios give the relationship between the contribution to financing a business made by
owners and that made by others in the form of loans. They help to reveal the extent to which
loan finance is utilised and consequent effect on the level of risk borne by the business. It
helps investigate how much debt can be supported by the company and whether debt and
equity are balanced.
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The gearing ratio
the degree to which a firm's activities are funded by shareholders' funds versus creditor's
funds. A ratio of less than 30% is often considered to indicate a safe level of gearing, and
some suggest that a ratio of more than 50% indicates high (risky) levels of financial gearing.
For JLP the gearing ratio showed an improvement by 17.48% and was at 38.44 in 2018/19
as compared to 46.59 in 2017/18 on account of reduced non-current liability and increased
equity base, and fared much better than M&S 46.08 for 2018/19.
The debt to equity ratio is an important metric used in corporate finance. It is a measure of
the degree to which a company is financing its operations through debt versus wholly-owned
funds. More specifically, it reflects the ability of shareholder equity to cover all outstanding
debts in the event of a business downturn. For JLP it saw an improvement of 28.4% from
87.22 in 2017/18 to 62.45 in 2018/19, and is better than M&S s 84.45 in 2018/19.
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3. CONCLUSION
Given the current level of uncertainty, JLP expects 2019 trading conditions to remain
challenging with slower sales growth and margin pressure still affecting John Lewis &
Partners. Overall, the financial analysis of JLP indicates that the business is stable and is
poised to achieve its strategic and stakeholders objectives.
The Directors, after reviewing JLPs operating budgets, investment plans and financing
arrangements, consider that the Company and Partnership have sufficient financing and
adequate liquid resources at the date of approval of the 2018/2019 financial report, to meet
its obligations as they fall due in the next 12 months; and are able to continue as a going
concern for a minimum of 12 months. JLP s The One Partnership Strategy , which is built
on the IYB 2028 Strategy, is designed to develop and strengthen our business over the longterm, whatever the economic or political environment by placing greater focus on
differentiation rather than scale, by offering customers unique products and services, thereby
ensuring that JLP remains commercially viable over the three-year period to January 2022.
Now, due to Covid-19 pandemic, it is anticipated that the business will start the recovery
process post Q2 in 2021 (Craven Mysore, Singhal, and Wilson, 2020), so it makes sense for
JLP to follow IYB2028 by embedding resilience through diversification, flexibility and rightsizing; capitalising on accelerating trends such as digital solutions, product category shifts,
low contact commerce, and brand with purpose; and integrating different models such as
direct customer engagement, partnerships across value-chain and complementary
commercial models (Strategy&, 2020).
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SECTION B
4. INVESTMENT APPRAISAL
THE WAITROSE EDGE OF TOWN
(EOT) PROJECT
4.1 Overview
JLP is exploring an opportunity to repurpose an existing piece of estate into a Waitrose EOT
store of 1853m² at the Big Town Retail Park, Big Town at a total cost of £12m which includes
capital expenditure of £9m, £2.5m of internal capitalised costs and £500k of one-off revenue
expenditure, £150k of which has already been incurred on a feasibility study.
The park is an established retail destination, anchored by a B&Q and Smyths Toy
Superstore. Complementary retailers include Boots, Next, Argos and Halfords. It is located
on a busy arterial route into the Big Town town centre with good access from the motorway
network. Shopping in the town centre is difficult due to the heavy traffic. No other food
specific competition exists within the immediate vicinity of the retail park. The competition
(Tesco Superstore, Aldi and Lidl) is all contained within a ½ mile radius on the other side of
the Big Town town centre, just over 2km away. So, repurposing this unit creates an
opportunity to capture sales and increase market share and the unit will be ready for fit out
on 1st September 2020 with trade commencing on 1st December 2020.
4.2 Viability Analysis
The financial analysis of the opportunity has been conducted with data being extrapolated
from review of similar stores located in other parts of the UK.
To evaluate the viability of the EOT store it is critical to factor in the Net Present Value (NPV)
of the project. NPV is the difference between the present value of cash inflows and the
present value of cash outflows over a period of time. It is used in capital budgeting and
investment planning to analyse the profitability of a projected investment or project (Kenton,
2020) and a positive NPV is indicative of a viable investment. Full cash flow analysis for a
period of 10 years can be found in the Appendix D. The cost of capital has been taken
based on using the weighted average cost of capital at 8% as per the annual report.
The current analysis, shows that the beak-even point for the new project will be in the 8 th
year, which is termed risky as the typical payback period for an investment in a regular
supermarket is around 5-6 years (Steenkamp and Sloot, 2019). The NPV of the project is
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valued at £4174m, which is a positive value, indicating that the investment will be bring
wealth to JLP and its shareholders. However, in addition to the long payback period, a
number of other underlying factors as mentioned below question the investment proposal
1. Sales Growth
The projected sales for the new store, from the current analysis,
takes into account sales growth rates of 17%, 13%, 9% and 7% per annum in years
2, 3, 4 and 5, which seems highly unrealistic given that the sales growth for
W&Partners which at £6760.1m as of 21st April 2020 has shown a decline of 1% from
the 2018/2019 figure of £6835m, and historically has seen sales growth of 1% to 2%
year-on-year. The realistic sales growth will further increase the payback period and
reduce the NPV.
2. Gross Profit
The gross profit, from the current analysis, is calculated at 50% of the
revenue, whereas historically for JLP and W&Partners the gross profit is around
30%-35% of the revenue for the last 3 financial years. Lower actual gross profit from
the projected will further impact the payback period and the NPV negatively.
3. Customer Demography
The proposed store catchment has a total resident
population of 161,410 and is based on a 10-minute drive time from the retail park,
which is further reduced to reflect the belief that heavy traffic in this area will mean
that a standard 10-minute drive-time might be over-estimating the size of the
catchment that can reach the retail park in this time. That said the demography of the
catchment is weighted towards the lower-income demographic groups, with 58% of
the proposed catchment within these groups compared to the UK average of 37%.
W&Partners is typically considered an up-market supermarket, and price-sensitive
residents who are always on the lookout for discounts will translate to lower sales
and/or lower footfalls in the proposed store thereby further impacting the revenue,
payback period and NPV negatively.
4. Coronavirus and the change in shopping habits
Retail is changing at an
unprecedented speed, and with it come big challenges and opportunities. 2019 had
the slowest rate of spending growth since 2010, largely driven by Brexit uncertainty.
The industry faced large-scale business restructuring: 85,000 jobs lost, a third of
FTSE 350 CEOs changing, and 9,169 store closures. Despite this, online sales
continued to grow, reaching 21% of total sales (Deloitte, 2020). And it has been well
documented that the coronavirus pandemic has already been hugely damaging to
the retail sector (Coker, 2020). Now, with more than half of UK consumers shopping
online, UK online spend is forecasted to increase 29.6% between 2019 and 2024,
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according to retail analysts at GlobalData (Williams, 2019), and this accelerated shift
to online is reflected as sales growth was 13% up for waitrose.com.
5. JLP s Strategy
As per IYB2028 the company has limited its investments on
purchasing retail spaces for new shops to reduce further debts and has shifted its
focus on investing on its core business to strengthen its balance sheet and maintain
investments in future primarily by optimisation of expenses, organisational
restructuring and online channels. Early this year, the new chairwoman Dame
Sharon White
who took the helm at the group behind John Lewis department
stores and Waitrose supermarkets
outlined a plan to return the group to profit
its store estate and slimming down its head office as
JLP announces plans to close shops including three Waitrose stores and cut staff
bonus after profits drop (Collie, 2020). Having said that, given the current coronavirus
lockdown JLP may never reopen some stores post lockdown as chairwoman Dame
Sharon White hopes to introduce further strategic changes in response to the
pandemic (Nazir, 2020).
4.3 Conclusion and Recommendation
Given the financial and non-financial analysis as highlighted in section 4.2 it is advisable that
JLP do not pursue the repurposing investment.
And with the impact of Covid-19 which saw a reduction of 34.81% year-on-year change in
footfall in retail locations, wherein as of 8th April 2020, 29.69% consumers stopped shopping
and 61.92% with reduced shopping at physical stores and with 22.3% of all retail sales made
online (Statista, 2020) it makes prudent sense that JLP divert its resources towards investing
in building and strengthening its online and digital offerings that complements in-store
shopping.
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5. APPENDIX A
Consolidated Balance Sheet
JLP
Particulars
Non-current assets
Intangible assets and goodwill
Property, plant and equipment
Trade and other receivables
Derivative financial instruments
Investment in and loans to joint
venture
Deferred tax asset
Investment property
Other financial assets
Retirement benefit asset
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Assets held for sale
Short-term investments
Cash and cash equivalents
Other financial assets
Total assets
Current liabilities
Borrowings and overdrafts
Trade and other payables
Current tax payable
Finance lease liabilities
Provisions
Derivative financial instruments
Percentage
2019 (£m)
Change
M&S
Change
2018 (£m)
(£m)
Percentage
Change
512.10
3,809.70
58.40
0.20
495.70
3,971.20
65.30
-
16.40
-161.50
-6.90
-
3.31%
-4.07%
-10.57%
-
499.90
4,028.50
200.70
19.80
599.20
4,393.90
209.00
27.10
-99.30
-365.40
-8.30
-7.30
-16.57%
-8.32%
-3.97%
-26.94%
2.70
2.90
-0.20
-6.90%
4.00
7.00
-3.00
-42.86%
4,383.10
28.00
4,563.10
-180.00
-3.94%
15.50
9.90
931.50
5,709.80
15.50
9.90
970.70
6,232.30
0.00
0.00
-39.20
-522.50
0.00%
0.00%
-4.04%
-8.38%
657.60
259.30
6.80
23.10
265.40
716.80
1,929.00
6,312.10
661.50
261.70
5.20
166.00
596.20
1,690.60
6,253.70
-3.90
-2.40
1.60
99.40
120.60
238.40
58.40
-0.59%
-0.92%
30.77%
59.88%
20.23%
14.10%
0.93%
700.40
322.50
40.30
285.40
141.80
1,490.40
7,200.20
781.00
308.40
7.10
207.70
13.70
1,317.90
7,550.20
-80.60
14.10
33.20
77.70
128.10
172.50
-350.00
-10.32%
4.57%
467.61%
37.41%
935.04%
13.09%
-4.64%
331.20
1595.70
8.70
0.50
112.30
7.50
68.70
1677.30
10.70
0.70
167.90
19.80
262.50
-81.60
-2.00
-0.20
-55.60
-12.30
382.10%
-4.86%
-18.69%
-28.57%
-33.11%
-62.12%
513.10
1461.30
26.20
148.60
7.30
125.60
1405.90
50.00
98.80
73.80
387.50
55.40
-23.80
49.80
-66.50
308.52%
3.94%
-47.60%
50.40%
-90.11%
-
-
-
-
71.90
71.90
0.00
0.00%
2055.90
1945.10
110.80
5.70%
2228.40
1826.00
402.40
22.04%
716.00
258.60
20.60
134.70
2.00
468.10
36.20
-
868.10
252.10
22.60
122.70
4.00
731.30
6.10
-
-152.10
6.50
-2.00
12.00
-2.00
-263.20
30.10
-
-17.52%
2.58%
-8.85%
9.78%
-50.00%
-35.99%
493.44%
-
1279.50
322.40
250.10
2.80
218.40
17.20
1670.60
333.80
193.10
30.70
255.70
22.50
-391.10
-11.40
57.00
-27.90
-37.30
-5.30
-23.41%
-3.42%
29.52%
-90.88%
-14.59%
-23.56%
-
-
-
-
200.50
263.60
-63.10
-23.94%
1636.20
3692.10
2620.00
2006.90
3952.00
2301.70
-370.70
-259.90
318.30
-18.47%
-6.58%
13.83%
2290.90
4519.30
2680.90
2770.00
4596.00
2954.20
-479.10
-76.70
-273.30
-17.30%
-1.67%
-9.25%
0.60
5.90
2613.50
2620.00
0.60
-10.60
2311.70
2301.70
0.00
16.50
301.80
318.30
0.00%
-155.66%
13.06%
13.83%
406.30
-6542.20
6237.10
416.90
2210.50
-2.90
-44.70
2681.00
406.20
-6542.20
6560.40
416.40
2210.50
-65.30
-29.30
2956.70
0.10
0.00
-323.30
0.50
0.00
62.40
-15.40
-275.70
0.02%
0.00%
-4.93%
0.12%
0.00%
-95.56%
52.56%
-9.32%
Partnership liability to the Marks
& Spencer UK Pension Scheme
Total liabilities
Net assets
Equity
Share capital
Other reserves
Retained earnings
Share premium account
Capital redemption reserve
Hedging reserves
Foreign exchange reserve
Total equity
2018 (£m)
2019 (£m)
Partnership liability to the Marks
& Spencer UK Pension Scheme
Non-current liabilities
Borrowings
Trade and other payables
Finance lease liabilities
Provisions
Derivative financial instruments
Retirement benefit obligations
Deferred tax liability
Retirement benefit deficit
Change
(£m)
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6. APPENDIX B
Consolidated Income Statement
JLP
Particulars
Gross sales
Revenue
Cost of sales
Gross profit
Other operating income
Operating expenses before
exceptional items and
Partnership Bonus
Share of loss of joint venture
(net of tax)
Operating profit before
exceptional items and
Partnership Bonus
Exceptional items
Operating profit before
Partnership Bonus
Finance costs
Finance income
Profit before Partnership
Bonus and tax
Partnership Bonus
Profit before tax
Taxation
Profit for the year
Profit before Partnership
Bonus, tax and exceptional
items
2019 (£m)
2018 (£m)
M&S
Change Percentage
Change Percentage
2019 (£m) 2018 (£m)
(£m)
Change
Change
(£m)
114.60
0.99%
100.90
0.99%
10,377.30
10,698.20
-320.90
-3.00%
83.30
1.22%
6,547.20
6,650.90
-103.70
-1.56%
17.60
0.52%
3,830.10
4,047.30
-217.20
-5.37%
0.80
0.72%
42.00
49.50
-7.50
-15.15%
11,724.10
10,316.70
6,931.00
3,385.70
112.10
11,609.50
10,215.80
6,847.70
3,368.10
111.30
3,270.10
3,114.00
156.10
5.01%
3,271.10
3,426.20
-155.10
-4.53%
0.70
1.00
-0.30
-30.00%
-
-
-
-
227.00
364.40
-137.40
-37.71%
601.00
670.60
-69.60
-10.38%
2.10
111.30
-109.20
-98.11%
438.60
514.10
-75.50
-14.69%
229.10
253.10
-24.00
-9.48%
162.40
156.50
5.90
3.77%
80.60
13.60
85.70
14.10
-5.10
-0.50
-5.95%
-3.55%
111.60
33.80
113.80
24.10
-2.20
9.70
-1.93%
40.25%
162.10
181.50
-19.40
-10.69%
-
-
-
-
44.70
117.40
40.10
77.30
74.00
107.50
30.50
77.00
-29.30
9.90
9.60
0.30
-39.59%
9.21%
31.48%
0.39%
84.60
47.30
37.30
66.80
37.70
29.10
17.80
9.60
8.20
26.65%
25.46%
28.18%
160.00
292.80
-132.80
-45.36%
-
-
-
-
Student ID Number: 1967001
Page 15 of 20
7. APPENDIX C
Profitability Ratios
JLP
M&S
Percentage
Percentage
2019
2018
Change
2019
2018
Change
Change
Change
Profit after tax / equity *100
Return on equity
Profit after tax (£m)
77.30
77.00
0.30
0.39%
37.30
29.10
8.20
28.18%
Equity (£m)
2620.00
2301.00
319.00
13.86%
2681.00
2956.70
-275.70
-9.32%
Result
2.95
3.35
-0.40
-11.83%
1.39
0.98
0.41
41.36%
Operating profit / capital employed * 100
Return on capital employed
Operating profit (£m)*
227.00
364.40
-137.40
-37.71%
601.00
670.60
-69.60
-10.38%
Capital employed (£m)
4256.20
4308.60
-52.40
-1.22%
4971.80
5724.20
-752.40
-13.14%
Result
5.33
8.46
-3.12
-36.94%
12.09
11.72
0.37
3.18%
Gross profit / sales revenues * 100
Gross profit margin
Gross profit (£m)
3385.70
3368.10
17.60
0.52%
3830.10
4047.30
-217.20
-5.37%
Sales revenues (£m)
10316.70
10215.80
100.90
0.99%
10377.30
10698.20
-320.90
-3.00%
Result
32.82
32.97
-0.15
-0.46%
36.91
37.83
-0.92
-2.44%
Operating profit / sales revenues *100
Operating profit margin
Operating profit (£m)*
227.00
364.40
-137.40
-37.71%
601.00
670.60
-69.60
-10.38%
Sales revenues (£m)
10316.70
10215.80
100.90
0.99%
10377.30
10698.20
-320.90
-3.00%
Result
2.20
3.57
-1.37
-38.32%
5.79
6.27
-0.48
-7.61%
Operating expenses / sales revenues * 100
Operating expenses to sales
Operating expenses (£m)
3270.80
3115.00
155.80
5.00%
3271.10
3426.20
-155.10
-4.53%
Sales revenues (£m)
10316.70
10215.80
100.90
0.99%
10377.30
10698.20
-320.90
-3.00%
Result
31.70
30.49
1.21
3.97%
31.52
32.03
-0.50
-1.57%
*Note: Operating profit before exceptional items and Partnership Bonus
Particulars
Calculation for capital employed
JLP
Particulars
Total assets (£m)
Less: current liabilities (£m)
Capital Employed
2019
6312.10
2055.90
4256.20
2018
6253.70
1945.10
4308.60
M&S
Percentage
Change
Change
58.40
0.93%
110.80
5.70%
-52.40
-1.22%
2019
7200.20
2228.40
4971.80
2018
Percentage
Change
-350.00
-4.64%
402.40
22.04%
-752.40
-13.14%
Change
7550.20
1826.00
5724.20
Efficiency Ratios
JLP
Particulars
Sales revenue to capital
employed
Sales revenues (£m)
Capital employed (£m)
Result
Sales revenue to non-current
assets
Sales revenues (£m)
Non-Current assets (£m)
Results
2019
2018
10316.70
4256.20
2.42
10215.80
4308.60
2.37
M&S
Change
Percentage
Change
2019
2018
Change
Percentage
Change
Sales revenues / capital employed
100.90
-52.40
0.05
0.99%
-1.22%
2.23%
10377.30
4971.80
2.09
10698.20
5724.20
1.87
-320.90
-752.40
0.22
-3.00%
-13.14%
11.68%
-320.90
-522.50
0.10
-3.00%
-8.38%
5.88%
Sales revenues / non-current assets
10316.70
4383.10
2.35
Student ID Number: 1967001
10215.80
4563.10
2.24
100.90
-180.00
0.11
0.99%
-3.94%
5.13%
10377.30
5709.80
1.82
10698.20
6232.30
1.72
Page 16 of 20
Liquidity Ratios
JLP
Particulars
Current ratio
Current assets (£m)
Current liabilities (£m)
Result
Quick ratio
Quick assets (£m)
Current liabilities (£m)
Result
2019
2018
1929.00
2055.90
0.94
1690.60
1945.10
0.87
1271.40
2055.90
0.62
1029.10
1945.10
0.53
M&S
Percentage
Percentage
Change
2019
2018
Change
Change
Change
Current assets / current liabilities
238.40
14.10%
1490.40
1317.90
172.50
13.09%
110.80
5.70%
2228.40
1826.00
402.40
22.04%
0.07
7.95%
0.67
0.72
-0.05
-7.33%
Quick assets / current liabilities
242.30
23.54%
790.00
536.90
253.10
47.14%
110.80
5.70%
2228.40
1826.00
402.40
22.04%
0.09
16.89%
0.35
0.29
0.06
20.57%
Calculation for quick assets
JLP
Particulars
Current assets (£m)
Inventory (£m)
Quick assets
2019
1929.00
657.60
1271.40
2018
1690.60
661.50
1029.10
M&S
Percentage
Change
Change
238.40
14.10%
-3.90
-0.59%
242.30
23.54%
2019
1490.40
700.40
790.00
2018
1317.90
781.00
536.90
Percentage
Change
172.50
13.09%
-80.60
-10.32%
253.10
47.14%
Change
Working Capital Management Ratios
JLP
Particulars
Inventory turnover days
Inventory (£m)
Cost of sales (£m)
Result
Settlement period for trade
receivable
Trade receivables (£m)
Sales revenues (£m)
Result
Settlement period for trade
payables
Trade payables (£m)
Cost of sales (£m)
Result
2019
657.60
6931.00
34.63
2018
661.50
6847.70
35.26
M&S
Percentage
Percentage
2019
2018
Change
Change
Change
Change
Inventory / cost of sales * 365
-3.90
-0.59%
700.40
781.00
-80.60
-10.32%
83.30
1.22%
6547.20
6650.90
-103.70
-1.56%
-0.63
-1.78%
39.05
42.86
-3.81
-8.90%
Trade receivables / sales revenues * 365
259.30
10316.70
9.17
261.70
10215.80
9.35
-2.40
100.90
-0.18
-0.92%
0.99%
-1.89%
322.50
10377.30
11.34
308.40
10698.20
10.52
14.10
-320.90
0.82
4.57%
-3.00%
7.81%
55.40
-103.70
4.31
3.94%
-1.56%
5.59%
Trade payables / cost of sales * 365
1595.70
6931.00
84.03
1677.30
6847.70
89.40
-81.60
83.30
-5.37
-4.86%
1.22%
-6.01%
1461.30
6547.20
81.47
1405.90
6650.90
77.16
Long Term Financial Stability Ratios
JLP
Particulars
Gearing ratio
Non-current liabilities (£m)
Non-current liabilities +
equity (£m)
Result
Debt to equity ratio
Non-current liabilities (£m)
Equity (£m)
Result
Interest cover ratio
Operating profit (£m)
Financial charges (£m)
Result
2019
1636.20
M&S
Percentage
Percentage
2018
Change
2019
2018
Change
Change
Change
Non-current liabilities / (non-current liabilities + equity) * 100
2006.90
-370.70
-18.47%
2290.90
2770.00
-479.10
-17.30%
4256.20
4307.90
38.44
46.59
1636.20
2620.00
62.45
2006.90
2301.00
87.22
227.00
80.60
2.82
364.40
85.70
4.25
Student ID Number: 1967001
-51.70
-1.20%
4971.90
5726.70
-8.14
-17.48%
46.08
48.37
Non-current liabilities / equities * 100
-370.70
-18.47%
2290.90
2770.00
319.00
13.86%
2681.00
2956.70
-24.77
-28.40%
85.45
93.69
Operating profit / financial charges
-137.40
-37.71%
601.00
670.60
-5.10
-5.95%
111.60
113.80
-1.44
-33.76%
5.39
5.89
-754.80
-13.18%
-2.29
-4.74%
-479.10
-275.70
-8.24
-17.30%
-9.32%
-8.79%
-69.60
-2.20
-0.51
-10.38%
-1.93%
-8.61%
Page 17 of 20
8. APPENDIX D
Student ID Number: 1967001
Page 18 of 20
9. REFERENCES
1. Atrill, P. and McLaney, E. (2017), Accounting and Finance for Non-Specialists (11th
edn), London: Pearson.
2. (Craven Mysore, Singhal, and Wilson, 2020), Matt Craven, Mihir Mysore, Shubham
Singhal, and Matt Wilson, April 2020, COVID-19: Briefing note, April 13, 2020 - Our
latest
perspectives
on
the
coronavirus
pandemic.
[online]
Available
from:
https://www.mckinsey.com/business-functions/risk/our-insights/covid-19-implications-forbusiness (Accessed 25 April 2020).
3. (Coker, 2020), James Coker, March 2020, Covid-19: Could the coronavirus change
consumer
behaviour
forever?.
[online]
Available
from:
https://www.essentialretail.com/features/covid19-coronavirus-change/ (Accessed 25 April
2020).
4. (Collie, 2020), Jason Collie, March 2020, John Lewis announces plans to close shops
including three Waitrose stores and cut staff bonus after profits drop. [online] Available
from:
https://www.standard.co.uk/business/john-lewis-waitrose-store-closures-staff-
bonus-a4379106.html (Accessed 25 April 2020).
5. (Deloitte, 2020), Deloitte, Retail Trends 2020 - Retail finds its purpose. [online] Available
from:
https://www2.deloitte.com/uk/en/pages/consumer-business/articles/retail-
trends.html (Accessed 25 April 2020).
6. John Lewis Partnership Plc, April 2019, JOHN LEWIS PARTNERSHIP PLC ANNUAL
REPORT
AND
ACCOUNTS
2019.
[online]
Available
from:
https://www.johnlewispartnership.co.uk/content/dam/cws/pdfs/financials/annualreports/john-lewis-partnership-annual-report-and-accounts-2019.pdf (Accessed 10 April
2020).
7. John Lewis Partnership Plc, April 2020, JOHN LEWIS PARTNERSHIP PLC ANNUAL
REPORT
AND
ACCOUNTS
2020.
[online]
Available
from:
https://www.johnlewispartnership.co.uk/content/dam/cws/pdfs/Juniper/ARA2020/JLP2020-Annual-Report-and-Accounts.pdf (Accessed 24 April 2020).
8. (Kenton, 2019), Will Kenton, April 2019, Profitability Ratios Definition - What Are
Profitability
Ratios?.
[online]
Available
from:
https://www.investopedia.com/terms/p/profitabilityratios.asp (Accessed 25 April 2020).
9. (Kenton, 2020), Will Kenton, April 2020, Net Present Value (NPV). [online] Available
from: https://www.investopedia.com/terms/n/npv.asp (Accessed 25 April 2020).
Student ID Number: 1967001
Page 19 of 20
10. (MarketLine, 2020), MarketLine, April 2020, MarketLine
Lewis
Partnership
Plc.
[online]
Available
from:
Company Information: John
https://0-advantage-marketline-
com.pugwash.lib.warwick.ac.uk/HomePage (Accessed 25 April 2020).
11. Marks and Spencer Plc, May 2019, Annual Report 2019. [online] Available from:
https://corporate.marksandspencer.com/documents/reports-results-andpublications/annual-reports/m-and-s_ar2019_full_online_190528.pdf (Accessed 10 April
2020).
12. (Nazir, 2020), Sahar Nazir, April 2020, John Lewis may never reopen some stores post
lockdown. [online] Available from: https://www.retailgazette.co.uk/blog/2020/04/johnlewis-may-not-reopen-certain-stores-post-lockdown/ (Accessed 25 April 2020).
13. (retailappointment, 2019), retailappointment, 2019, UK RETAIL: FACTS AND FIGURES.
[online] Available from: https://www.retaileconomics.co.uk/library-retail-stats-and-facts
(Accessed 25 April 2020).
14. (RetailEconomics, 2019), RetailEconomics, 2019, UK RETAIL STATS & FACTS. [online]
Available from: https://www.retailappointment.co.uk/career-advice/talking-shop/uk-retailfacts-and-figures (Accessed 25 April 2020).
15. (Statista, 2020), Statista, April 2020, Coronavirus: impact on the retail industry in the UK.
[online]
Available
from:
https://0-www-statista-
com.pugwash.lib.warwick.ac.uk/study/72445/coronavirus-impact-on-the-retail-industry-inthe-uk/ (Accessed 25 April 2020).
16. Steenkamp, JB. and Sloot, L. (2019). Retail Disruptors: The Spectacular Rise and
Impact of the Hard Discounters: Kogan Page Limited.
17. (Strategy&, 2020), Strategy& - Part of the PwC Network, April 2020, COVID-19: UK
industry
focus
-
Where
next
for
retail?.
[online]
Available
from:
https://www.strategyand.pwc.com/uk/en/reports/strategyand-where-next-retail.pdf
(Accessed 25 April 2020).
18. (Tuovila, 2019), Alicia Tuovila, October 2019, Working Capital Management - What Is
Working
Capital
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[online]
Available
https://www.investopedia.com/terms/w/workingcapitalmanagement.asp
from:
(Accessed
25
April 2020).
19. (Williams, 2019), Deborah Williams, August 2019, UK online shopping spend to grow
30% by 2024. [online] Available from: https://www.retail-insight-network.com/features/ukonline-shopping-growth/ (Accessed 25 April 2020).
Student ID Number: 1967001
Page 20 of 20