Accounting &Financial Management Report
From: Mo Jian hui
To: Board of director
According to the Global Powers of Retailing Report in 2011, Ahold now lies at the number 25 of world. It is making the plan to achieve the goal to be No.10 by acquisition Delhaize Group (DG) or WM Morrison Supermarkets Plc. (Morrisons).This report will analyze and compare these three companies by using CORE to find out their advantages and disadvantages of financial performance, then give advice to help Ahold choose the best one acquisition target company. Firstly, this report gives the general contexts about three companies, including the internal and external environment. These companies are retailers, whose headquarters lie in the Netherlands, Belgium and UK; they all get or are going to get benefits convenient shopping market. However they all have suffered from the 2008 financial crisis. Secondly, the report will analyze the overview performance of three companies by using the key figures. Ahold had a best performance in terms of profits, followed by Morrisons and DG. As for the cash flows, the abilities of Ahold and DG to generate cash from operating activities were becoming weak, while Morrison had the increasing operating cash flow. For the total debt, Ahold had a good new compared to DG and Morrison. Thirdly, the report will compare the different ratios to evaluate their financial performances. In profitability, Morrisons is good at collect operating profit but does not have competitive product price. The costs of sale is low in Ahold and DG,the difference is that this advantage of DG is become weak. In liquidity and solvency, Morrisons has the strongest ability in liquidity, while Ahold and DG is expected to be bad in the future. In working Capital, both Ahold and Morrisons are good at manager the source, while DG is less ability to do that. As for investment, Ahold and Morrisons had increasing earnings per share but DG showed opposite trend. However, DG paid less cost for dividend. At last, the report conclude the performances of these three companies, then give advice that Ahold should choose Morrisons to be its acquisition target as it can make up the weak liquidity of Ahold. Context
Ahold is a multinational retailer whose headquarters lie in the Netherlands, and has many branches in Europe and the USA. At the end of 2011, it had 3,008 stores, 218,000 employees and €30.3 billion sales. The foundation of it is to sell high quality food to customers and give them more convenience. So it operates different formats to reach these goals such as supermarkets, online, convenience stores and fuel stations. However Ahold employs a large number of employees covering defined benefit pension plans in the Netherland and USA, which causes more costs. The private label market has been growing in recent years as it can provide cheaper prices and equal to or better than the national brands. The market is expected to be expended fast, which will give opportunities to Ahold, because it sells a variety of private label products to customers in different formats. In addition, the sale of Etos which is one of Ahold’s drugstores has been increasing as healthcare gain more attention. On the other hand, the financial performance is sensitive to the turnover which relies on the customers’ spending. But consumer spending has been weak in the US and the Netherlands since global economics have suffered from the financial crisis in 2008, which is a huge risk for Ahold. Delhaize Group is a food retailer based in Belgium, with sub companies in eight countries. It has many private brands which improve its turnover. It is one of the food retailers to supply customers’ quality food with its own brands in UK. Also, through the acquisition of Delta Maxi, it has expanded its scale in Balkans immediately. However, there are nearly one of five of the stores in DG are franchised. So it is hard for it to control the stores’ operations,...
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