myer presenentation

An attractive investment opportunity or a failing retailer?

By: Sophia, Moritz, Blake, Tremayne and Marc

Points of Analysis

• Company Overview

• Profitability

• Capital Structure

• Liquidity

• Cash-flow

• Future prospects

• Recommendation

Company overview Profitability Capital Structure Liquidity Cash flow Future prospects Recommendations

Company and industry overview


•Retailing•Annual growth rate: 3,3%

•Department store•Annual growth rate: -0,9%

Industry

•Largest department store•67 storesMyer

•One of the largest•Not on ASXDavid Jones

Financial Analysis


Dupont Analysis Dupont analysis• One of the most important metrics for

performance of course is the Return On Assets (ROA).

• General performance figures such as Profit margin, and asset turnover can be made

• Compared performance to the general department store industry & its closest competitor David Jones.

• David Jones was taken private in August of 2014

• Comparison based on annual reports for 2012 and 2013

• Data for 2014 and 2015 drawn from news articles and information from the annual report of the new owner.

Sources: Own analysis, Finanalysis

Financial Analysis


Growth Dupont analysis

Sources: Own analysis, Finanalysis, ASX announcements, Inside retail Australia, Company annual reports

• Myer’s operating revenue growth has only been 1.7 %

• Calculated Compound Annual Growth Rate of 0.42 % from 2012 to 2015.

• Growth rates for David Jones as being around 3-5 % from 2013 to 2014

• 6.38 % revenue increase from 2014 to 2015

• David Jones has significantly outgrown Myer in the last two years

• Myer is lacking growth and losing market share to David Jones.

• The Like for like measure is very important to the retail industry as a measure of growth in sales.

• 2012 and 2013 Myers had achieved superior growth than David Jones

• 2014, 2015 David Jones growth rate continues to grow at a rate of 3.7%

• Growth is extremely important to companies.

• Growing Revenues is valued much higher than cutting costs

-2%

0,40% 1,20%1,1%

-4,80%

-1,80%

2,40%3,70%

-6%-5%-4%-3%-2%-1%0%1%2%3%4%5%

2012 2013 2014 2015

Store for store annual growth

Store for store sales growth(MYR) Store for store sales growth(DJS)

A disappointing development in performance

16%14%

11%

3%

0%

5%

10%

15%

20%

2012 2013 2014 2015

Return on Equity

Unsatisfied shareholders

• Significant decrease in return 16%à3%

• Dividend yield fall from 12% to 10 %

• EPS from $0.24 to $0.13

Significant decrease in OPMDecreasing return on assets


• ROA decrease from 12 % to 7 %

• Decrease in ROA attributed only to worse

operating performance

Efficient asset management1,381,401,421,441,461,481,50

0%

5%

10%

15%

2012 2013 2014 2015

Return on Assets

ROA (%) OPM (%) ATO

6,97,07,17,27,37,47,57,67,7

0,0

0,5

1,0

1,5

2,0

2,5

3,0

2012 2013 2014 2015

Fixed Asset Turnover (Y1)

Days receiveable outstanding (Y1)

Inventory Turnover (Y2)

8,4% 7,9%5,8%

4,8%

0,0%2,0%4,0%6,0%8,0%

10,0%

2012 2013 2014 2015


From industry leader to underperformer


Leading in purchasing, loosing on company infrastructure

57,9% 60,7%53,2% 53,7%

16,0% 14,7%16,1% 17,4%

18,1% 16,7%22,6%

24,8%

2,1% 2,7% 3,0%3,0%5,9% 5,3% 5,1%1,1%

0,0%10,0%20,0%30,0%40,0%50,0%60,0%70,0%80,0%90,0%

100,0%

Industry DJS - 2012 Myer -2012

Myer -2015

COGS Employee expenses

S&A expenses Depreciation

Profit

Cost of doing business

• Significant increase in cost of doing business

• COGS kept around same level

• Staff cost increases significantly –

underperforming industry average

• S&G cost at index 112 in 2015 while revenue is

at index 101.7

959799

101103105107109111113

2012 2013 2014 2015In

dex

Rev.

COGS

Staff

S&G cost

Admin cost.

Depr. & Amort.

Net Profit Margin below industry

1,1%

5,9%

0,0%1,0%2,0%3,0%4,0%5,0%6,0%7,0%

Net Profit Margin (MYR)

Net Profit Margin (industry)

2015

• NPM without abnormals was 2.8% in 2015

• Still below industry average

Sources: Own analysis, Finanalysis, IBIS World 2015 report

Sufficient capital structure


Higher debt ratio than DJS Debt ratio

Sources Own analysis, Finanalysis

• Current ratio 1.0 during2015, up 14% from 2012

• Acid test ratio is 0.21

• This is up 90% over the 4 year period, and is higher than DJS

• High Level of debt versus equity employed within Myer (MYR)

1,19 1,14 1,16 1,19

0,60 0,55

-

0,20

0,40

0,60

0,80

1,00

1,20

1,40

2012 2013 2014 2015

Rat

io

Debt to Equity (MYR)

Debt to Equity (DJS)

Liquidity


Debt level affect ratio Interest Cover ratio


• High Level of debt is leading to low interest cover ratio

• Interest payments a large proportion of profits

• Interest expense / debt has decreased over time

• Equity issue in late 2015

6,71 7,29 6,99 5,68

14,12 16,45

-

5,00

10,00

15,00

20,00

2012 2013 2014 2015

Rat

io

Times Interest Earned (MYR)

Times Interest Earned (DJS)

Cash Flow



2012 2013 2014 2015Myer, Net Operating Cashflows 179.914.000 225.525.000 191.576.000 96.915.000

Myer, Net profit after tax after abnormals 141.067.000 129.877.000 98.542.000 29.826.000

David Jones,Net Operating Cashflows 101.103.000,00 95.184.000,00

David Jones, Net profit after tax after abnormals 196.737.000,00 180.036.000,00

0

50.000.000

100.000.000

150.000.000

200.000.000

250.000.000

Cash Flow



2012 2013 2014 2015Net investing cash flows -46.409.000 -66.956.000 -104.250.000 -62.350.000 Net financing cash flows -132.721.000 -115.157.000 -95.232.000 -54.806.000Net investing cash flows -46.409.000 -66.956.000 -69.250.000 -62.350.000

-140.000.000

-120.000.000

-100.000.000

-80.000.000

-60.000.000

-40.000.000

-20.000.000

0

2015 2020

Revenue

Ambitious turnaround with industry challenges


Strengths and weaknesses Turnaround plan Challenges ahead

✓

Revenue growth above

industry

Better Gross profit margin

than DJS

Unique position in industry

✗

Failing performance

Negativegrowth rate in

industry

Much lower operating cash

flows

3 % CAGR

＄

Sources: Turnaround plan announcement, IBIS World 2015 report

• David Jones posts best sales growth rate in 15 years

• Myer shares bounce on sales growth

Recommendations



• An attractive investment or a risky bet?• A significant decrease in profitability• Loosing ground to main competitor• Performing below industry average

• Record growth in sales in Q1-2016• Spring cleaning sale• Has to keep up growth rate for next 4 years in shrinking market

• Conclusion• Based on historic performance and outlook of industry, we believe that Myer will

have problems with executing the turnaround plan. Therefore an investment in Myer is not recommended.

Q&A



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myer presenentation

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