Overview Of Myer Holdings Limited Finance Essay

Myer Holdings Limited is founded by Sidney Myer in Bendigo, Australia in 1900 ( Myer 2012 ) . It is the Australia ‘s largest section shop group with some merchandise classs including: menswear, childrenswear, womenswear, immature manner, manner accoutrements, homewares, playthings, electrical good, general ware and confidant dress ( cosmetics, aroma, and beauty ) . Myer has owned more than 50 sole trade names including Blaq, Basque and Vue. This Myer Exclusive Brands ( MEBs ) represents 17.4 per centum of the entire gross revenues in 2011. The company has besides established two planetary sourcing offices in Hong Kong and Shanghai which is to better company profitableness. Myer Holdings Limited has held the involvement in entities which includes: Warehouse Solutions Pty Ltd, NB Lonsdale Pty Ltd, ACT Employment Services Pty Ltd and NB Elizabeth Pty Ltd ( Ninemsn Finance 2012 ) .

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Besides that, the company has 67 shops in premier retail locations across Australia with employs more than 14,000 employers ( Myer 2011 ) . Furthermore, the company has a trueness plan which called as MYER One. By introduce this trueness card, it helps Myer to maintain their client records, track their client ‘s purchasing wonts and promote their clients to shop at Myer. This trueness card has three degrees which are Myer one, Myer one Ag and Myer one Gold. On 17 March 2011, Myer had more than 3.9 million members which besides contributed 69 % of the entire gross revenues for the first half twelvemonth 2011 ( Myer Holdings Limited 2011 ) . Not merely that, Myer has besides Myer Visa card plan which is besides a portion of its client trueness scheme.

Furthermore, Myer has launched an on-line gift shop in October 2007 which includes girl store vesture, aromas, gift cards and electronic goods. In 2011, Myer besides launched an online shopping site which makes people in Australia easier to shop at Myer. Not merely that, Myer besides had its online shopping for iPhone and iPad. In add-on, Myer has three chief rivals which are David Jones Ltd, Target Australia Ltd and Kmart Australia Ltd. These three rivals will be farther discoursing under Industry Analysis portion.

Company History

Myer Holdings Limited is listed on Australia Stock Exchange ( ASX ) on 2 November 2009 with the codification of MYR ( ASX 2012 ) . In 1911, Sidney Myer was established a section shop on site which called The Myer Emporium. As the concern grew, the company was opening the first Myer mill in 1915. When the Australia went to the war, The Myer becomes a chief vesture provider for the military. Over the clip, Myer has some development and variegation of its concern which the company went into new chances such as forte manner retail merchants, price reduction section shops, fast nutrient mercantile establishments and ventures in finance, travel, movie production and land development. In 1985, the amalgamation of Myer and Coles for AUD 1.07 billion was the largest trade in Australia corporate history. However, in 2006, Myer was sold to Blum Capital, Newbridge Capital, Texas Pacific Group ( TPG ) and the Myer household for AUD 1.4 billion.

Recent Company History / Development

In 2010, the CEO of Myer Holdings Limited, Bernie Brookes had successful in runing Myer as its gross revenues was increase by 0.7 per centum to AUD3,284 million and its net incomes before involvement and revenue enhancement ( EBIT ) was besides increase by 14.9 per centum ( Myer Holdings Limited 2011 ) . Besides that, there is besides a important betterment which is the net net income after revenue enhancement addition by 55.1 per centum to AUD 169 million compared to last twelvemonth that merely had AUD 109 million. By release this information to populace, the portion monetary value of Myer Holdings Limited ( MYR ) is besides increased by 12 cents to $ 3.22 ( ABC 2011 ) . However, due to unstable planetary economic system, Myer Holdings Limited is affected as in 2012, its full twelvemonth cyberspace net income down 14.3 per centum to AUD 139.365 million compared from last twelvemonth ( Esther 2012 ) . Its entire gross revenues besides fall 1.3 per centum to AUD 3.119 billion compared from a twelvemonth ago.

Industry Analysis

DEPARTMENT STORE ANALYSIS

The retail industry has been reported to be in to be a fighting industry in the twelvemonth 2011.It was an utmost challenging environment as the clients assurance was impacted by an increased cost of populating force per unit area such as wellness attention, instruction, new revenue enhancements in inundation levy and proposed C revenue enhancement. Furthermore the section shop as they act as intermediate by buying from the jobbers and industries and sell to clients without altering the merchandise the research shows that it has incurred a diminution in gross revenues due to the above mentioned grounds other factors ( Australian Bureau of Statistics 2012 ) .

Cardinal SENSITIVITIES ( RISK ) OF THIS INDUSTRY

Harmonizing to Industry Risk Rating study from IBIS universe ( evaluated that there are 3 hazards associated with industry are hazards associated within the industry ( structural ) , hazards originating from expected future public presentation ( growing hazard ) and those associated with the external factors ( external sensitiveness ) . The structural hazards include competition and industry volatility, growing hazard includes growing analysis and sensitiveness analysis includes involvement rates hazards and exchange rate hazards ( International Business 2012 ) .

KEY SUCCESS FACTORS ( STRENGTH )

The cardinal success factor of the section shop market in the industry is to be engaged in the abroad completions as they have to develop on-line shops that sell internationally with free transportation. The industry besides has to keep its trade name equity making so by repetition purchase, competitory advantage through monetary value unity and long term profitableness through trueness. In add-on it is necessary for the section shops to hold system that create a successful, efficient and happy client experience and the supply concatenation efficiency in order to rush to market and continual reclamation of the latest manner and engineering.

COMPETATIVENESS OF THE INDUSTRY

As lineation by Ramirez ( 1986 ) section shop have shape up in order to crush the competition from forte store as they develop a clear image and a repute. The fact that it is selling the basic trade goods makes it more competitory as they are besides based on clients satisfaction and loyally, improved engineering, diversify, purchase and being involved in promotional runs and implementing the best schemes that will outweighs the other industries.

DOMESTIC AND INTERNATIONAL OUTLOOK

In recent epoch it has be indicated that the section shop is face with troubles due to recession and planetary fiscal crisis as clients were loath to pass their hard earned money and they were really cautious on the disbursement. Harmonizing to Taylor Woodings ( 2012 ) , there will be a slow growing of 1.0 % per annum over the 5 twelvemonth. The increased competition overseas through online shops causes non -food retailing industry has incurring this diminution as by 1.2 % in October 2011. Hence in the nutrient retailing was 4.4 % as the nutrient is a basic trade good in the market. The hazard of low turnover, lessening trade name trueness and lessening net income will impact the adoption company in a negative manner as it will be faced with troubles in the industry.

Extenuation OF RISK

The hazard can be mitigated in several ways such as keeping a strong focal point on decreased cost, pull off promotional plans, and better the operational gross net income border. They should besides hold to keep a strong balance sheet and they besides have to diversify such as planetary variegation such as sourcing in Shanghai and Hong Kong and buying new trade name that complements the adult female wear.

FINANCIAL ANALYSIS

While doing the loaning determination, it is of import for the loaner to analyze the fiscal statements of the company in order to hold valuable apprehension of fiscal public presentation of concern.

Short-run LIQUIDITY

MYER HOLDINGS LIMITED

Current Ratio

2009 ( $ ‘000 )

2010 ( $ ‘000 )

Current Assetss

601,786

482,692

Current Liabilitiess

594,215

557,414

Current Ratio: Current Assetss / Current Liabilitiess

1.01

0.87

Liquidity ratio is can supply the thought of the capableness of MYR Company to run into its short term duties. The current ratio could be used to foretell the liquidness place of a company. Based on the informations gather from the MYER Holdings Limited ‘s one-year study ( Appendix 2 ) , its current ratio of fiscal twelvemonth stoping 2009, 2010 and 2011 are 1.01, 0.87 and 0.81 severally. A current ratio that is lower than 1 show that it is hazardous since there is non adequate current assets to run into its current liabilities. In this instance, the latest current ratio is 0.81 which is derived from $ 446,751,000 ( current assets in 2011 ) / $ 552,190,000 ( current liabilities in 2011 ) . This indicates that in the consequence of default, the current assets merely covers 80.9 %[ 1 ]of the current liabilities when the current assets need to be realised.

The current ratio of these three old ages have been falling each twelvemonth from 1.01 in 2009 to 0.87 in 2010 and fall once more to 0.81 in 2011 ( Appendix 2 ) . The current ratios of 2010 and 2011 have even fall lower than 1. The autumn in current ratio in every twelvemonth might do concern as it shows that there has been decline in the company ‘s liquidness place ( NetMBA 2010 ) . As the current ratio lessenings, the loaner ‘s hazard is increased due to the diminution in footings of capableness at run intoing the short-run duties. However, stockholders normally prefer a lower current ratio as this shows that more of the house ‘s assets are used to better the concern.

Long-run SOLVENCY

MYER HOLDINGS LIMITED

Current Ratio

2009 ( $ ‘000 )

2010 ( $ ‘000 )

Debt

879,005

419,919

Equity

380,122

857,440

Debt-Equity Ratio: Debt / Equity

2.31

0.49

The long-run solvency of the concern is depends on the proportion of proprietor ‘s equity compared to debt that being used to finance the concern. When the equity funding part is larger than the debt funding part, means the funding is good. As the tabular array shows, the debt sum is larger than equity sum in 2009 but at 2010 and 2011, the state of affairs changed which the equity sum is greater than debt sum. This besides means that this company has improved in term of funding.

Using the debt-equity ratio method allow the comparing of debt sum to equity sum. A low debt-equity ratio consequence from higher equity compare to debt sum will do creditors to experience secured. The larger the equity means more financess are invested into the company to guarantee concern to be success. The opportunities of loan refund will besides increase due to the concern successful degree.

In the instance of MYER, the ratio of 2.31 times is considered hazardous since the company depends on debt funding instead than equity funding during the twelvemonth 2009. However, at the twelvemonth 2010 and 2011, the company has changed its funding attack from debt to equity. In these both old ages, there is important betterment from the debt-equity ratio which reduced to 0.49 times. In the latest information ( 2011 ) , the debt-equity ratio of 0.49 times indicates that out of the entire funding, 67.2 %[ 2 ]was equity funding and 32.8 %[ 3 ]was debt funding. This company will be safe for loaner to impart money to since the equity part is much greater than debt part which lead to greater concern public presentation.

Business PERFORMANCE – Net PROFIT-SALES Ratio

MYER HOLDINGS LIMITED

Net Profit-Sales Ratio

2009 ( $ ‘000 )

2010 ( $ ‘000 )

Net Net income

108,749

67,182

Net Gross saless

2,798,916

2,825,034

Net Profit-Sales Ratio: Net Net income / Net Gross saless

3.89 %

2.39 %

*refer to Appendix 2

DAVID JONES LIMITED

Net Profit-Sales Ratio

2009 ( $ ‘000 )

2010 ( $ ‘000 )

Net Net income

155,297

170,766

Net Gross saless

1,985,490

2,053,087

Net Profit-Sales Ratio: Net Net income / Net Gross saless

7.82 %

8.32 %

*refer to Appendix 3

WESTFARMERS LIMITED

Net Profit-Sales Ratio

2009 ( $ ‘000 )

2010 ( $ ‘000 )

Net Net income

1,522,000

1,565,000

Net Gross saless

49,023,000

49,865,000

Net Profit-Sales Ratio: Net Net income / Net Gross saless

3.10 %

3.14 %

*refer to Appendix 4

Net Profit-Sales Ratio

Companies

2009 ( $ ‘000 )

2010 ( $ ‘000 )

2011 ( $ ‘000 )

MYER HOLDINGS LIMITED

3.89 %

2.39 %

5.99 %

DAVID JONES LIMITED

7.82 %

8.32 %

8.57 %

WESTFARMERS LIMITED

3.10 %

3.14 %

3.63 %

To find the fiscal stableness of concern, loaner can compare the concern ‘ cyberspace net income by twelvemonth with rivals of the same industry. The net net income of MYER Company in the twelvemonth 2009, 2010 and 2011 are $ 108,749,000, $ 67,182,000 and $ 159,665,000 severally. From the twelvemonth 2009 to 2010, there is a diminution in net net income for MYER by 38.22 %[ 4 ]which is unfavorable since this might impact the refund to lender. However, during the twelvemonth 2010 to 2011, the net net income has betterment which is a brilliant increase of 137.66 %[ 5 ]. In this instance, MYER shows that the company has a strong and good concern public presentation which is favorable for loaner and able to repayment its loan without jobs.

Sing from the net-profit gross revenues ratio comparing with the rivals, MYER Company is less stable comparison with other rivals. This is because the alterations in the net-profit gross revenues ratio are excessively greater comparison to other rivals which merely have slight alterations in per centum. Therefore, this might concern the loaner ‘s determination whether to O.K. the loan since it is hazardous due to unstable alterations of net net income.

Security

Collateral security is a really of import facet in supplying a loan as it offers security for the loan in instance a borrower defaults ( investopedia.com ) . Collateral here is a secondary beginning of payment, that is any plus that the loaners normally take ownership of and dispose it to utilize the returns to countervail the outstanding sum on a loan that a borrower failed to payback.

A security on a loan can be in signifier of assets illustration house in a mortgage loan, vehicle in an car loan, or stock lists, receivables and machinery ( Sathye et al, 2003 ) . MYER besides as a corporation when using for loan funding is expected to bring forth or province some signifier of security against the loan they inquiring for. Harmonizing to media-corporate.com the one-year study of MYER in 2010 until 2011 shows that this corporation possesses some assets that can be collateralized as security for the loan in instance of loan default.

Securities that are used as indirect possess certain qualities such as the monetary value of the security which is supposed to be stable and non capable to much fluxes, should be extremely liquid, security should be lasting every bit good as portable for easy motions from one country to another ( Sathye et al. 2003 ) .

KEY EXISTING ISSUES FROM EXISTING SECURITIES

Liability

2010

2011

2012

Current Liabilitiess

Trade and other payables

AUD $ 437,568

AUD $ 416,032

AUD $ 394, 137

Derivative Financial Instruments

AUD $ 1,208

AUD 7,476

AUD $ 2,490

Current revenue enhancement liabilities

AUD $ 9,446

AUD $ 33, 897

AUD $ 15,191

Commissariats

AUD $ 104,451

AUD $ 90,586

AUD $ 85, 957

Non-Current Liabilitiess

Entire Borrowings

Bank Loans

AUD $ 419, 919

AUD $ 419, 919

AUD $ 419,591

AUD $ 419, 591

AUD $ 421, 193

AUD $ –

Deferred Income

AUD $ 57,792

AUD $ 62,448

AUD $ 69, 821

Commissariats

AUD $ 60, 494

AUD $ 49, 391

AUD $ 15, 439

Harmonizing to afr.com the current liabilities of this corporation are, trade and other payables, derivative fiscal instruments, current revenue enhancement liabilities and commissariats. The Group uses derivative fiscal instruments in their normal class of concern to fudge against exposure to fluctuations in involvement and foreign exchange rates. Afr.com in the notes to fiscal statements inside informations that Bank loans of the Group presently bear an mean variable involvement rate of 6.66 % ( 2010: 6.97 % ) . It is policy to protect portion of the loans from exposure to lifting of involvement rates in the group ‘s involvement rate barter contracts, but based from table above, the group presently does non has bank loans owing hence no securities pledged in instance of a default in payment.

The adoption payments were started in 2010 at a 6.7 % involvement rate and completed in 2011 at an involvement of 7 % . It can hence be concluded that as of 2012 MYER has no bank loans to pay and hold a sound fiscal place therefore measure uping for a $ 20 million loan because harmonizing to afr.com MYER borrowed over $ 400 million debt support and has a clean record in payments, hence can be considered as a good borrower based on its recognition worthiness.

DETAILS ON DIFFERENT ITEM OF SECURITY AVAILABLE & A ; Lending Margin

Asset

2010

2011

2012

Current Asset

Cash and hard currency equivalents

AUD $ 38, 058

AUD $ 37,274

AUD $ 105,834

Inventories

Retail stock lists

AUD $ 352, 813

AUD $ 381, 261

AUD $ 385, 702

Trade & A ; Other Receivable

Prepayment

AUD $ 24, 045

AUD $ 4, 131

AUD $ 28, 216

AUD $ 7, 210

AUD $ 17, 712

AUD $ 8, 085

Non-Current Asset

Property, land & A ; equipment

AUD $ 468, 050

AUD $ 535, 139

AUD $ 515, 482

Derivative fiscal instruments

AUD $ 549

AUD $ 258

AUD $ –

Deferred Tax Assetss

AUD $ 70, 837

AUD $ 47, 380

AUD $ 21, 115

Intangible Assetss

AUD $ 922, 020

AUD $ 943,880

AUD $ 936, 149

The above tabular array illustrates the assets of MYER which are available which can be volatilized as security for the loan being kind for. The available assets are hard currency at bank and hard currency equivalents, stock lists, trade and other receivables obtained from media.corporate-ir.net from a prepared balance sheet of MYER. This corporation besides has non-current assets such as belongings, land and equipment, derivative fiscal instruments, deferred revenue enhancement assets every bit good as intangible assets. The research worker compiled a three twelvemonth clip frame of recordings in order to measure the tendency and public presentation of the corporation from the fiscal twelvemonth 2010 until 2012. The figures for 2010 and 2011 public presentation were obtained from Media.corporate-ir.net while for 2012 were derived from afr.com.

Key Strengths & A ; Weakness

Strengths

MYER ever have events including the 2011 Spring/Summer Fashion Launch to beef up their trade name consciousness to procure their gross revenues ( MYER Holdings Limited Annual Report 2011 ) .

The company has changed the fiscal attack from debt to equity ( mention to Appendix 2 ) . This means the company is more unafraid to be invested in. More possible investors might put in the company.

The Company applies hazard direction in a chiseled, incorporate model that promotes consciousness of hazards and an apprehension of the Company ‘s hazard tolerances. This enables a systematic attack to put on the line designation, purchase of any chances and provides intervention schemes to pull off, transportation and avoid hazards ( MYER Holdings Limited Annual Report 2011 ) .

Improved engineering in the company that increase the efficiency of put to deathing administrative activities in shops. Resulting in larger, more seeable dealing Centres which staffed at all times during trading hours that improve client experience ( MYER Holdings Limited Annual Report 2011 ) .

MYER ‘s concern theoretical account is flexible and sustainable. This means it assist to pull off the volatile of retail trading conditions ( MYER Holdings Limited Annual Report 2011 ) .

MYER one trueness plan is a cardinal competitory advantage for the concern. This alone plan provides particular penetrations into client shopping penchants and besides effectual manner of pass oning with the clients. This means will extremely fulfill the client experience and keep the client sum ( MYER Holdings Limited Annual Report 2011 ) .

Failing

The scheme is non diversified and may neglect.

Costss to retail concerns are increasing significantly due to higher tenancy costs, higher pay costs and rising prices of other surpassing including public-service corporation charges. This will impact the net income of the concern.

Extenuation: MYER announces occupation cuts to cut down the cost ( Business Spectator 2012 ) .

MYER has the issue confronting unprecedented trading environment and weak consumer sentiment which reduced entire gross revenues.

Extenuation: MYER should reflect on the issue and come out with a solution.

Taxation alteration may happen. Any alterations in the current rate of company income revenue enhancement in legal power where MYER operates will impact on the stockholders return.

Customers penchants may alter because the gross are generated from the manner related merchandises which are capable to rapid and unpredictable alterations.

Extenuation: MYER should ever better their market research and keep the loyal plan.

Recommendation

MYER Holdings Limited has delivered a solid consequence in the twelvemonth 2011 even under the tough retail environment. However, the gross revenues went down 3.8 % and down 5.5 % on like-for-like footing in 2011. The net net income after revenue enhancement besides declined by 3.6 % in 2011 comparison to the old twelvemonth. However this little shrunk in net net income will non be have a immense impact on loan determination.

Based on the informations collected ( Appendix 2 ) , the current ratio and speedy ratio for the company for the last two old ages have improved. This means the company is able to keep the improved place for another twelvemonth and predict they will be keeping for in the approaching hereafter. MYER besides still has $ 37,274 of hard currency at the terminal of the twelvemonth 2011 to run into its short-run duties. Debtors turnover have besides improved which shows the aggregation efficiency has improved. In short-run liquidness wise, it is favourable as the ratios show that the company is bettering. It is an of import index as to whether MYER is able to run into its involvement payments in the short-run but this does non demo refund in the long term period.

As for the long term period, the debt to equity ratio shows an betterment since the company has changed its funding attack from debt to equity. The debt coverage ratio is less than 1 agencies that the company may non be able to do rule refunds to refund its current debt duties in the long term. In the twelvemonth 2010, the company ‘s debt coverage ratio is lower than 1 which is a hazardous mark. However, in the twelvemonth 2011, it has improved more than 1 which indicated the company has improved and pull off to refund its debt. In the long term, this company will hold ability to refund its loan since the company is doing net income. Therefore it is besides a favourable in a long term in refunds of loans.

Even though, there might be opportunities of acquiring default, MYER possesses a security of ( AUD $ 369,392,600 ) and is greater than the $ 20million loan being proposed. Based on this loaning standard it would be concluded that it should be given the loan but there are besides other countries of loaning to be assessed before reasoning and giving out the loan, because the figure in Appendix 1 provides a 2nd manner out of paying the loan.

In overall, MYER is favorable in using this loan proposal of $ 20 million. There are apparent shows that MYER is capable to refund the loan with involvement with the good fiscal place and strong concern public presentation. With all these in head I think that our Bank would be prepared to take the degree of hazard that imparting to this company.

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