FINANCIAL STATEMENT ANALYSIS

Financial Statement Analysis

Overview

J Sainsbury Plc is one of the largest food retailer in the United Kingdom with the revenue of £21.2bn during the year of 2010 and employing over 1,38,000 people. They operate approximately 872 stores all over the country. According to J Sainsbury Plc (2010), Company generates its revenue from various venues established throughout the country which includes 537 supermarkets and 335 convenience stores. Sainsbury also owns Sainsbury`s Bank which was established in 1997, below is the working of different valuation of the company.

Valuation

Multiple valuation model shows that company enterprise value has been increased as compared to 2009 and so as price earnings ratio of the company, which shows a positive sign that investors are ready to invest in this company.

Multiple Model Comparison

2010(m)

2009(m)

EV

6,668(m)

21,421

20,383

EV/Sales

0.311

0.327

EV

6,668(m)

610

519

EV/EBIT

11

13

P/E

10.37

10.21

This DCF Valuation shows that in 2010 Company is expecting a net cash operating flow of 1595 million, which also shows that company is in strong position. Secondly company should increase its working capital requirements by 3243 million; in general we have applied very conservative income growth assumptions as shown in the table

Net Operating Free Cash flow

2010

2009

2008

2007

2006

Sales(in Millions)

21,421

20,383

19,287

18,518

17,317

% Change

7.45%

7.83%

7.45%

8.61%

9.21%

 

(in Millions)

1,595

1,595

1,595

1,595

1,595

EBITDA

610

519

434

339

244

% Change

38%

33%

27%

21%

15%

(in Millions)

working Capital

3,243

-

-

-

-

Net operating Cash flow

1,595

-

-

-

-

Discounted operating FCF

1,658

-

-

-

-

DCF or discounted cash flow valuation method is used for making an approximation of attractiveness of an investment opportunity. This model of Discounted cash flow uses future free cash flow which are projected and it discounts them (normally using the weighted average cost) to arrive at a present value, which is used to evaluate the chances for investment. If the value derived through discounted cash flow model, is greater than the present cost of the investment, the opportunity may become attractive for investment point of view.

Assuming Growth Rate

5%

Assuming Wacc

10%

Net operating cash flow:

 

Net income -Changes in Working capital -+ Depreciation -Repayment of long term debt

 

Data

(in Millions)

Net income

6

Changes In Working Capital

(3243)

Depreciation

4853

Repayments of Loan

(21)

Net Cash Flow

1595

Years

Beg Value

G.rate ...