BSc Top UP Degree Business Management (Hons)  Financial Management – 2D205417W11John Lewis Partnership PlcCompany Performance Evaluation Report2017/2018Student # 20343632Supervising tutor – Anusha UmasuthanLevel HE6?IntroductionThe John Lewis Partnership is a visionary and successful way of doing business, boldly putting the happiness of Partners at the centre of everything it does.All 84,000-permanent staff are Partners who own 49 John Lewis shops across the UK (35 department stores, 12 John Lewis at home and shops at St Pancras International and Heathrow Terminal 2), 352 Waitrose supermarkets (www.waitrose.com), an online and catalogue business, johnlewis.com (www.johnlewis.com), a production unit and a farm. The business has annual gross sales of over £11bn. Partners share in the benefits and profits of a business that puts them first. The John Lewis Partnership is one of a growing number of businesses with an employee-owned structure and is a member of the Employee Ownership Association (EOA), the not-for-profit membership body representing the sector. (John Lewis Partnership – About us, n.d.)The results for 2016/17 reflect a strong performance for the Partnership and their brands. There was a rise of sales with an amount of £355.4m increase compared to the year 2016. Sales growth was good. Profits were also up on last year – by over 20% at a headline level, helped by lower pension accounting charges, but, after excluding these and long leave accounting charges, profits were up 1.9%. This figure is the best indicator of their trading performance. Debt position is greatly improved. There are also a number of exceptional items in the results this year, which reflect the steps taken to adapt the Partnership for the future. (online 2017)Principal activities The principal activity of John Lewis plc is retailing, with the main trading operations being the Waitrose and John Lewis businesses: John Lewis operates in a number of different formats including John Lewis department stores, John Lewis at home stores, johnlewis.com, a John Lewis liaison office in Gurgaon, India, an additional office in Chennai, India and a sourcing office in Hong Kong; Waitrose operates Waitrose supermarkets, Waitrose convenience stores, waitrose.com, Leckford Farm, business to business contracts in the UK and abroad and ancillary manufacturing activities. (Online 2017)Preliminary ObservationsThe John Lewis Partnership exists today because of the extraordinary vision and ideals of its Founder, John Spedan Lewis. He believed an ‘industrial democracy’ – where Partners shared knowledge, power and profit – was a better form of business. The Partnership’s ultimate purpose is the happiness of all its members, through their worthwhile and satisfying employment in a successful business. Because of the strength of its brand, effective customer service, free extended guarantees and efficient online presence, the firm enjoys growth and good profit in all sectors in the accounting year 2016/17.Financial results In 2016/17 the Group delivered sales growth, increasing their market shares and customer numbers. Group gross sales were £11.37bn, an increase of £355.4m, or 3.2%, on last year. Revenue was £10.03bn, up by £277.4m or 2.8%. Group operating profit before Partnership Bonus was £646.9m, up £118.2m or 22.4% on last year. This includes exceptional income of £171.2m (2015/16: exceptional income of £129.3m). Group operating profit before exceptional items and Partnership Bonus, was £475.7m, up £76.3m or 19.1% on last year. Profit before Partnership Bonus and tax was £540.2m, up £106.8m or 24.6% on last year. Excluding exceptional items, it was £369.0m, up by £64.9m or 21.3%.Outlook 2017/2018In the year ahead, trading pressures will continue because of the wider changes taking place in retail. The two major influences are pricing, where the rate of change in selling prices is likely to be significantly slower than the rate of change in input costs because of weakness in the sterling exchange rate, and the continued shift from shops to online. These factors are significant for the outlook where both inflationary cost pressures and competition will intensify in the market. Short-term profits will be impacted by significant one-off costs of change because of the strategy to ensure the Group’s success. Independent auditor’s report to the members of John Lewis plc We have audited the financial statements of John Lewis plc for the year ended 28 January 2017. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.Respective responsibilities of Directors and auditor The Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. their responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require them to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Auditor’s opinion on financial statements In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 28 January 2017 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU; • the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion the information given in the Strategic report and the Directors’ report for the financial year is consistent with the financial statements. Based solely on the work required to be undertaken in the course of the audit of the financial statements and from reading the Strategic report and the Directors’ report: • we have not identified material misstatements in those reports; and • in our opinion, those reports have been prepared in accordance with the Companies Act 2006. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent Company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. (Michael Maloney (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor) (online 2017)In this evaluation, I will consider the following,1. Profitability, will include, a. Net profit against sales, b. Gross profit against sales, c. Operating profit against sales and d. Return on capital employ (Appendix 1)2. Liquidity, will include, a. Current ratio, b. Quick ratio, c. Receivables collection period, d. Payable payment period and e. Inventory turnover period (Appendix 2)3. Shareholders ratio, will include, a. Earnings per share, b. Price earning ratio, c. Dividend cover and d. Dividend yield. ((Appendix 3)       4.   Gearing ratio, will include, a. Debt and Equity and b. Operating cycle. (Appendix 4)?AppendixJohn Lewis PlcConsolidated income statement for the year ended 28 January 2017Notes 2017 £m 2016 £m1.2, 2.1 Gross sales 11,374.2 11,018.82.1 Revenue 10,026.2 9,748.8 Cost of sales (6,633.1) (6,442.1) Gross profit 3,393.1 3,306.7 Other operating income 92.6 85.22.2 Operating expenses before exceptional items and Partnership Bonus (3,010.3) (2,992.5)3.3 Share of profit of joint venture (net of tax) 0.3 –2.1 Operating profit before exceptional items and Partnership Bonus 475.7 399.42.3 Exceptional items 171.2 129.32.1 Operating profit before Partnership Bonus 646.9 528.75.1 Finance costs (108.6) (99.5)5.1 Finance income 1.9 4.2 Profit before Partnership Bonus and tax 540.2 433.4 Partnership Bonus (89.4) (145.0)2.4 Profit before tax 450.8 288.42.7 Taxation (97.9) (66.0) Profit for the year 352.9 222.42.1 Profit before Partnership Bonus, tax and exceptional items 369.0 304.1John Lewis Partnership plc consolidated balance sheet online 2017?John Lewis Plc Consolidated income statement Notes 2017£m 2016£m Non-current assets Intangible assets 432.7 388.43.2 Property, plant and equipment 4,112.4 4,189.3 Trade and other receivables 61.2 65.7 Derivative financial instruments 0.1 – Investment in and loans to joint venture 3.9 – Deferred tax asset 48.2 33.6 4,658.5 4,677.0 Current assets Inventories 627.8 621.9 Trade and other receivables 242.6 223.7 Derivative financial instruments 15.3 11.5 Assets held for sale 8.1 – Short-term investments 60.0 10.0 Cash and cash equivalents 673.7 667.4 1,627.5 1,534.5 Total assets 6,286.0 6,211.5 Current liabilities Borrowings and overdrafts – (57.7) Trade and other payables (1,745.6) (1,725.4) Current tax payable (18.6) (26.8) Finance lease liabilities (1.2) (2.6) Provisions (167.7) (141.6) Derivative financial instruments (7.2) (2.3) (1,940.3) (1,956.4) Non-current liabilities Borrowings (862.7) (867.6) Trade and other payables (219.7) (209.3) Finance lease liabilities (23.3) (24.7) Provisions (171.8) (148.2) Derivative financial instruments (1.1) – Retirement benefit obligations (1,013.7) (941.6) (2,292.3) (2,191.4) Total liabilities (4,232.6) (4,147.8) Net assets 2,053.4 2,063.7 Equity Share capital 6.7 6.7 Share premium 0.3 0.3 Other reserves 9.0 10.4 Retained earnings 2,037.4 2,046.3 Total equity 2,053.4 2,063.7John Lewis Partnership plc consolidated balance sheet online 20171. Profitability In cost accounting, profitability analysis is an analysis of the profitability of an organisation’s output. (Profitability analysis, n.d.)1.1 – Net profit/Sale (revenue)  2017 2016 Net profit/revenue x 100       352.9 x 100 222.4   x 100 10026.2 9748.8 = 3.5197% = 2.2813%Percentage % rise = 2.2813 – 3.5197   x100 = 54.28%2.2813 A rise in profitability of 1.24% is recorded for the year 2017 against the year 2016      1.2.  Gross profit/sale (revenue) 2017 2016 Gross profit/revenue x 100       3393.1   x 100 3306.7    x 100 10026.2 9748.8 = 33.84% = 33.92%1.3. Operating Profit (Profit before tax and interest paid on loans)2017 2016 PBTI/Revenue x 100 649.4 x100 531.4 x100 10026.2 9748.8 = 6.477% = 5.45%1.4. Return on Capital Employ (ROCE) = Profit before tax and interest capital employ (CE)Where CE = non-current asset (non CA) + current asset (CA) – current liabilities (CL)Therefore, ROCE for 2017 (£m) 2016 (£m) = 649.4 531.4   4658.5 + 1627.5 – 1940.3    4677.0 + 1534.5 -1956.4 = 0.149   = 0.1252. Nongovernmental organizations (NGOs) are established3. not with the aim of making profits but rather to provide4. social values by implementing different projects and5. activities. Transmitting complete information about these6. projects to society is a key element of transparency, as7. they operate within an atmosphere of public trust.8. Although there is a large body of literature on transpar-9. ency in NGOs from a global perspective, very little10. research has been conducted on transparency within the11. area of projects and activities. This study takes a deeper12. look at this line and contributes to the literature on trans-13. parency in NGOs by proposing an index to measure the14. information transparency of the projects implemented by15. these organizations. The index captures three dimensions16. of the information about the projects (technical, financial,17. and scope) and makes it possible to: analyze the level of18. transparency of the portfolio of projects, detect the spe-19. cific aspects that could be improved in each organization,20. and carry out comparisons among organizations.2. LiquidityLiquidity is a measure of the ability of a debtor to pay their debts as and when they fall due. It is usually expressed as a ratio or a percentage of current liabilities. Liquidity is the ability to pay short-term obligations. (Accounting liquidity, n.d.)Current ratio = 2017 2016 Current Asset = 1627.5 1534.5 Current Liability 1940.3 1956.4 = 0.838 :1 0.784 :1 Quick ratio = Current Assets – Inventory Current liability = 1627.5 – 627.8 1534.5 – 621.9       1940.3          1956.4 = 0.515 :1 0.466 :1 Receivables collection period = Trade receivable x 365 Sales = 242.6 x 365 223.7 x 365 11374.2 11018.8 = 7.7days 7.4days Payable payment period = Total payables x 365 Credit purchase or cost of sales = 1745.6 x 365 1725.4   x 365 6633.1 6442.1 = 96 days 97.7 days Inventory turnover period = Average inventory x 365   Cost of Sales = 627.8 x 365 621.9 x 365 6633.1 6442.1 = 34.5 days 35 days3. Shareholders ratio Earnings per share (EPS)  = profit after interest and tax – dividends to preference shareholder   x 100 Number of shares in issue ranking for dividend = 352.9 – 0.2 x 100 222.4 – 0.2 100   6.7 6.7 = 5264.12 3316.4 Price earnings ratio = Share price x100 Earnings per share = Dividend cover = Profit after tax (Net income) Dividend paid Dividend yield = Dividend per share x 100 Market price per share4. Gearing ratio The gearing ratio is Debt/Equity Interest cover = Profit before interest and tax Interest payment Operating cycle = Inventory turnover period + receivable collection period – Payable payment period?ReferencesAccounting liquidity. (n.d.). Retrieved 1 11, 2018, from Wikipedia: The Free Encyclopedia: http://en.wikipedia.org/wiki/Accounting_liquidityJohn Lewis Partnership – About us. (n.d.). Retrieved 12 10, 2017, from John Lewis Partnership: http://www.johnlewispartnership.co.uk/about.htmlJohn Lewis Partnership. About Us. (n.d.). Retrieved 12 10, 2017, from John Lewis PLC: https://www.johnlewispartnership.co.uk/about.htmlProfitability analysis. (n.d.). Retrieved 1 11, 2018, from Wikipedia: The Free Encyclopedia: http://en.wikipedia.org/wiki/Profitability_analysis https://www.johnlewispartnership.co.uk/content/dam/cws/pdfs/financials/annual-reports/jlp-annual-report-and-accounts-2017.pdfhttp://www.johnlewispartnership.co.uk/content/dam/cws/pdfs/financials/annual-reports/jl-annual-report-and-accounts-2017.pdf