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Strategic Audit
The current company Sainsbury's is one of the most popular food Supermarket chains situated in the UK and it has more than a thousand stores across the UK. According to the company website it has more than 600 supermarkets and there are 800 convenience stores identified that have owned by the company (Sainsburrys.co.uk, 2018). The company runs its business through offline stores mainly. However with the need for digitalization the company has started an online portal for businesses dealing with their grocery products to their consumer.
Financial statement of the Last three years of Sainsbury’s Company
Source: Sainsburrys.co.uk (2022).
According to the company report dated 5th March 2022, the gross revenue by the company is 29895 ?M, after covid-19 Pandemic make a significant impact has been affected due to the complete lockdown in terms of avoiding the contamination risk of the virus. However, by implementing the different statistical approaches in the business transactions the company has gained revenue growth in the year 2022. The loss of the gross earnings and the gross profit margin by the company during 2020 and 21 has been recovered with the strategic performance of 2021 and 22 by the company which has been reflected in their financial summary. In the following chart, it has been identified the profit margin before the compilation of tax payment Was 854 ?m, And after completion of tax providing to the shareholder, the Sainsbury company has positive output in terms of gross earning the company. Considering the previous three consecutive years, the percentage of gross earnings in the year 2022 has been significantly increased and it is also singular the previous performance before the Global pandemic. Considering the year 2020 and 2021, Basic earnings has raised to 367% as per the published report of Sainsbury’s company. The current year business statement also includes the figure of group sales including and excluding service tax, A very short gaining margin has been identified with the digit that has been published in the report. in the years 2019 and 20, the cross-group sale was 32,394 ?m. Due to the gross sale index experiencing a lower margin in the years 2020 and 2021The value came up with 32,285 ?m. With the new normal situation from overcoming the pandemic effect in the years 2021 and 22, the gross sales index has taken a growth Respective to the previous years and the value came up with 33,355 ?m. On the other hand, considering the performance of the employees, the return from the employee investment immensely deteriorated in the year 2020-21, from 7.4% to 5.6%. However, the company has managed the decreasing curve in the current year and it increased with an overcoming value of 8.4%.
A significant amount of economic challenge has been faced by the company in terms of revenue growth considering the previous year of Pre covid situation.
Comparative Chart of Three years of Financial Statement of the Sainsbury’s Company
Financial Years
2021 march
2020-2019
2019-2018
Revenue
106-105 Lm
28,993-29,007
29,007-28,456
Gross profit
98-94
2016-2288
2007-1882
Profit for the Financial Year
98-426
219-309
219-309
With the current comparative representation, a devastating impact of the covid-19 pandemic has been identified with the gross profit margin and the total profit for the financial year has been observed (Sainsburys.co.uk., 2021). All the considering the current context of 2022, the company has regained its Financial statement by implementing different modern strategies in the business to recover from the loss of the pandemic they have experienced. The output has also been discussed in the initial part of this current section of the assignment.
Analysis
Sainsbury's business primarily depends upon five things, those are- Good company products, service of products with a reasonable price, always available for the company's customers wherever and whenever, knowing and recognize the company's customers more than anyone else, colleagues of the company making difference, and the most important thing values of the company making them different.
Figure 1: Business model of Sainsbury
(Source: Sainsbury.co.uk, 2022)
Profit of the Company
The net margin for the year 2019 is around 7% that is as compared to an increase of about o.3% in the last year 2018. The primary concentration of the company is to gain delivery efficiency which has saved around 220 pounds. The saving has been used to increment the wages and also inflation the cost. However, Sainsbury’s digital marketing has been left infuriated after a mid-night technological issue saw buyers unable to reclaim their orders afore 11 pm. It caused many retailers set to accept partial meal stores for the Bank Holiday weekend. Sunbury’s online website went downcast at about 9 pm the previous night, wherever a communication showed on the display counselling consumers that important maintenance was an enchanting place. Sainsbury’s states it is now sighted robust digital demand for retail, current well next to the close of the previous lockdown.
Approximately 18% of its retail trades were completed digitally in the primary part of its economic year. Grocery trades through all networks increased by 0.8%, signifying that Sainsbury’s clients have made a substantial move in digital marketing. Digital marketing retail sales at the shop remained 142% up on previous years ago, afore the pandemic hit. The company also adopted International Financial Report Standards 9 which may imply that high charges of bad debt are increasing Sainsbury's bank saving cost. These also get directly impact interest rates of saving cost. The cause of increased cost impact on the lower price of profit range is regarding operation margin in the year 2019.
Governance Structure of Sainsbury
There exist some characteristics to the governance structure of Sainsbury during the time of accountability. The characteristics are-
The committee of pricing, the product of the company, and the conduct of the customer committee got merged with the customer divisional risk committee of the committee. The merge committee gets the formation of the conduct committee and divisional risk of the company.
The committee of the operational, financial crime risk, and conduct committees of the company purposely was stood down. Their responsibilities adequately are deemed and covered elsewhere, and outside of this particular committee.
Figure 2: Governance Body of Sainsbury
(Source: About.sainsburys.co.uk, 2022)
Governance of Board Level
In the governance body of the company the primary factor is the governance, which has authority to entire accountability decision making. As the result of this result adopted by the bank and specific subjects regarding matters that need the approval of the company (About.sainsburys.co.uk, 2022). The board can meet a minimum of around eight times with the company's chairman, executive, other non-independent executive directors, and all the company's key members. In this governance body, there exist multiple sub-committees. The scope and role of the sub-committee's authority are entirely outlined in a documented way. The sub-committees are the audit committee, the Remuneration Committee, the committee of nomination, and the committee board of risk management of the company.
Executive Level of Governance
The executive level of the board of government delegates the exact authorities, responsibilities, and accountability to the chief executive officer of the company. This also delivers to the strategy of the bank via correct committees of governance and chair executive committees and those are supported by a certain number of the committees of another executive level (About.sainsburys.co.uk, 2022). These committees provide appropriate balance, checking all financial works, and taking the decision in a transparent way.
Key Performance Indicator (KPI)
KPI is one of the financial key performances that work as an indicator and critically understanding the financial performance health measurement. The KPI initiative will help to identify and help to enhance the standards of the industry of the company. This KPI measures standards of industry that might predict corporate performances. There exist some differences between some measurements and establishing that measurements like industry standards and this KPI initiative to continue both.
Figure 3: KPI comparison active customer and net promotion FY20 and FY 21
(Source: About.sainsburys.co.uk, 2022)
Figure 4: KPI comparison of engagement team of the company
(Source: About.sainsburys.co.uk, 2022)
Figure 5: KPI comparison between profit purposes of the company in FY20 and FY21
(Source: About.sainsburys.co.uk, 2022)
Figure 6: KPI comparison of interest, income, and debt asset ratio in FY20 and FY21
(Source: About.sainsburys.co.uk, 2022)
Figure 7: KPI comparison of capital and liquidity coverage ratio in FY20 and FY21
(Source: About.sainsburys.co.uk, 2022)
Lease of the company
According to the time, many groups of the company enter into the suppliers and contracts must be created where the group of the company acts as an agent or principals while selling to their customers. For the performance analysis, groups of the company identify arrangements. Talking about the IFRS19 lease, this is issued in January 2019. The net margin for the year 2019 is around 7% that is as compared to an increase of about 0.3% in the last year 2018 (ukessay.com, 2022). The primary business of the company is the grocery store of the company. The grocery stores that caparison low form margin of the company because sales are high. For this reason, the company decides to do good always if their present any pressure situation exists. The primary concentration of the company is to gain delivery efficiency which has saved around 220 pounds. The committee of pricing, the product of the company, and the conduct of the customer committee got merged with the customer divisional risk committee of the committee. The merge committee gets the formation of the conduct committee and divisional risk of the company. The Group is needed to evaluate where benevolence has mourned any impairment defeat, depending on the recoverable portion of the cash-generating unit to that it is assigned (Guoet al., 2019). The recoverable parts of the CGUs contain been selected depending on the value in benefit estimates and these estimates need the use of appraisals in order to prospective cash flows and appropriate value rates.
Fig 8: Non-gap performance measures
(Source : About.sainsburys.co.uk, 2022)
Figure 9: Cash flow Statements
(Source : About.sainsburys.co.uk, 2022)
Fig 10: Segment Reporting
(Source : About.sainsburys.co.uk, 2022)
Financial Assessment of Assets, Liabilities, Total Cost of Equity
Being a Supermarket food chain the company has different Assets and liabilities that have to be maintained by the company in order to progress a sustainable growth in terms of production and in terms of earning as well. An ample amount of employees have dependent on the company revenue in terms of their own progress and career growth (World Bank, 2018). Not only the implied attention but the consumer retention is the key aspects of company liabilities that has concerned with the growth of the company in a sustainable way. To discuss about the assets, company has their own cash flow based on the consistent performance of the employee management and production. Due to their authentic and quality delivery to the customers and timely payments to the share holder the company has earned many sources to get a loan in terms of situational necessity (Alao, and Gbolagade, 2020). Getting loans and advanced payment from different bank is quite easier for the current company as it has achieved a reputation with their good quality of product delivery across the UK. There are many interested those who are associated with the current company have contributed a capital investment for the company to ensure a consistent business transaction run over. There are different properties and plants that has been who owned by the company is also Assets of the current company that is contributing a part of its financial statement in terms of their maintenance. The total assets value of the company in the year of 2021 February is 25,260, in the February, 2020, the amount of total asset was 27,937 and in the current year 2022, it has been reduced to 26912.
On the other hand, there are many liabilities companies have to pay for including the customer accounts in terms of providing the offer and benefits to catch the customer attention easily, the deposits regarding the employee salary. Any multinational company has their subordinate liabilities and the current company Sainsbury has also a share contribution for their subordinates. To run over an MNC company there are different taxes that has to be paid to the government in terms of getting trading license and continuing the business transaction (Sainsburys.co.uk., 2022). The tax is a part of company liabilities that has a quite large contribution for an MNC company. Considering the annual report of the company, the gross liability costs of the current company in consecutive three years of 2020, 2021, 2022 have been presented in the following chart. The total cost of equity in the corresponding three has been also discussed in the following chart.
The Comparison Analytics
Year 2022
Year 2021
Year 2020
Total Assets
26,912
25,260
27,937
Total Liabilities Cost
18,489
18,559
20,146
Total Costs of equity
8,423
6,701
7,791
Considering the value from the comparative chart it has been depicted that the company can restrict the investment cost in terms of total liabilities and assets cost management. On the contrary, the equity cost has increased in the current year of 2022 concerning the previous two years.
Risks Perception
Risk perception is one of the crucial aspects that have to be anticipated by the investors and the shareholder of the company. The financial statement can be affected significantly if the different risks have not been calculated previously before the investment. There is a certain risk that can create an impact on the cash flow of the company those are going to be discussed following:
Credit Risk is the most important aspect that has to be anticipated by the company owner or the administrators before lending the money to the different borrowers (Baker and Judge, 2020). Different cases suggest that most of the borrowers fail to refund the money that has been taken from the company as a loan. It is recommended to provide time duration to the borrower for the loan for an extended period by assuming a breath period that could not lead to any harm to the company due to the actions of the borrower to fail for return within the time.
Supplier Risk Is another risk factor that is associated with a big food business market change because maintaining hygiene is crucially important to sustain a food business for a longer period. Fresh and quality products are always required by the consumer and it is contributed to retaining the customer begins with the quality and freshness of a food product. A food business chain includes many suppliers to run over a big business chain and supplied chain effect a significant loss for the company if they fail to deliver a quality product to the company (Butt, 2021). It is quite impossible to check every product quality before representing to the consumer a company. Hence the risk of the supplier is an uncontrollable factor for the company that could affect the financial growth of the company and could lead to the destruction of the company as well.
A big food market chain involved a wide range of operational activities from product manufacturing to exportation through importation from suppliers. Operational risk is immense important and it is embedded in the process of the business chain that has to be controlled with did it supervision from the Managing or administrator theme of the company to avoid any hazards (Dutta et al., 2020). The timely delivery is usually important for the food product as it has a stipulated time to be expired to be consumed by the customers. An MNC business chain involves a wide range of financial transactions with the stakeholders, shareholders, customers, investors, government, employees, and many other sections. For every financial transaction, the finance transaction risk has been associated. A property digitalized representation of every transaction made by any person associated with the company has to be documented for identifying different conduct malpractices. Financial transaction tracking is significantly required to avoid any disaster like a large amount of profit loss, the closing of an outlet due to a cash scandal, and many more (Levi and Smith, 2021).
Critical Reflection
I have observed Sainsbury's financial growth as per the above-mentioned discussion.in addition, I think that Sainsbury's has always had the best profit margin, but its financial statement performance is poor, mainly because it decreased from 2.77 pence to 1.4 pence from 2017 to 2018. Furthermore, I feel that it can be seen in the company's decreasing net profits and big property purchases. Alongside, as per my observations, competitors are improving the stock market performance of Sainsbury. In addition, at the end of the fiscal period, the annual financial statements are prepared to highlight the company finances with company statistics as per my compliance. Furthermore, I believe that the principal activities of the company also include selling groceries and non-food items. The company is segmented into three sections: commerce, financial services, and financial investments. The company derives a portion of its revenue from its retail businesses. I have Found that the KPI value of the current company is significantly maintained for the consecutive three years even after the devastating impact of the covid-19 pandemic (Sainsburys.co.uk., 2022).
Figure: An Assumption of the Company performance
(Source: Sainsburys.co.uk., 2022)
The use of the gross domestic product in the year 2021, the march has reached its peak as the citizen of the UK effacing the effect of complete lockdown due to the covid-19 pandemic attack. It is expected to take a plateau in terms of gross domestic product building by the company within March 2025 if there will be no unprecedented situation like a pandemic is waiting in near future. Considering the aspects of customer price index, that has significantly fallen in the period of the covid-19 pandemic in the year 2021. I think that Sainsbury's expands its new look structure by joining all identify in the area and increasing goods like non-foods. Saints Buries focuses on producing new brands and cleaning.
I have addressed that introduced bakeries, fresh fish counters, gas stations, coffee shops, restaurants, book shops, bike shops, music stores, clothes shops, banks & banking, gardeners, nurseries, newspapers, high - tech electronic products. However, it is gradually increasing when it is expected that the company can recover its loss by the end of the year 2022 and again it will continue the consistent cash flow with the business transaction to the consumer. I have examined that the financial analysis should also be executed, which would let the progress on with Sainsbury's cash flow. Also, this same financial performance of most of Sainsbury's financial statements, like banking and financial facilities, will be related to the financial expansion.
Recommendation
1. This recommendation is based on the financial report, the renowned retail store Sainsbury should change its short-term and long-term strategies. Alongside, they can use Lewin’s change model for change their business structure as well as it is beneficial for gain the profit.
2. They should develop and maintain the marketing facility as well as a digital store for the long term global. In addition, in the competitive world, they need to collaborate with their competitors as well as they should focus on the product price.
3. It is recommended to maintaining proper system in terms of operating different channels and activity regarding the quality delivery to the consumer to avoid operational risk.
4. It is also suggested that to increase different online advertising representation to the consumer by implementing social media advertisement strategy (Li, et al. 2021).
5. Sainsbury should use innovative technology in every outlet to handle a vast range of consumers and their products and it can also help to increase the profit. Inadequate capital risk is another aspect that has been identified in terms of doing risk assessment of a MNC company (Dorcheh, et al., 2021).
6. Maintenance of proper financial transaction to the shareholders, subordinates and investors is required and it is suggested for the current company as well to avoid any capital risk that could lead to effect the sustainable economic growth of the company.
7. They should avoid the volatility in Sainsbury's of debit and support boost long-term sustainability.
8. Sainsbury’s should focus on their financial risk and allow much time to take helpful achievement if and when these prices start to grow. Furthermore, the Conduct of customer risk has commonly been bline dealing with the consumer.
9. It also is the potential for Sainsbury to trade many of its more important capital assets further and sell them back to them. This would allow the firm to become the lessee that would allow that to happen using the resource while the risk was moved to the lessor.
10. KPI is a financial key performance that works as an indicator and critically understands the financial performance health measurement.
11. The organisation must sustain its position as a responsible retailer, worker, and company.
Conclusion:
From the above discussion of the current article it can be concluded that the Sainbury’s is quite Advance Company that has been recovered its loss due to the pandemic impact. By analyzing different aspects of financial statement of the company a quality performance has been identified of the company that has maintained consistently and it is a contributing factor for its reputation. Considering the financial statement from 2018 to 2022, different ups and downs has been notified with the in that analysis of every important aspect involved in the audit and finance of the company.
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