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Financial Analysis of Hennes & Mauritz Ab

Autor:   •  December 16, 2017  •  5,641 Words (23 Pages)  •  574 Views

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Comparing to the cost of marketing, we can say that to promote the company and its product, the company will use video advertisements, print advertisements and the concept of e-marketing. This strategy is really smart because tend to meet a lot of consumers form different places with cost contained.

-Administrative Expenses are costs associated with the management, administrative, clerical an general functions within an organization. It was SEK 3,987 m in 2013 and In 5 years It increased by 53%. It represents just the 7% of the cost that we have to take away from Gross Profit.

d. Net Income

The net income for the fiscal year was SEK 17,152 m compared to SEK 13,588 of 2007 It grew up by 26% in 6 years. We can see from the graph that the Net Income was highest in 2010 about SEK 18,600 m. [pic 4]It was so high because the revenue was SEK 128,562 m, with an profit after financial items about SEK 25,000 m and tax to pay of SEK 6,327. The percentage of tax to pay is decreasing from about 26% in 2008 to 23,56% in 2013, It means that the company It is expanding their business in other countries more convenient. We know that in every countries the tax rates is really different how we could understand from the table:

By the way we should ask what was going on in 2011?

The profit decrease in 2011 is in fact mostly due to the strength of the Swedish krona because most of the sales countries’ currencies depreciated against SEK compared with the previous year. For H&M this has a significant negative effect when converting sales from local currencies into the company’s reporting currency, which is Swedish kronor. Although sales in local currencies increased by 8 percent, the increase in SEK was only 1 percent because of the stronger krona.

The Wall Street Journal reported that Hennes & Mauritz had net profit for the second quarter of SEK 4,26 m, down 18% from SEK 5,21 m in the year-ago period, with profit affected by a strong krona and high cost inflation in sourcing markets. The Sales excluding value added tax rose 2,2% to SEK 27,63 m against SEK 27,03 m.

Therefore the CEO said “Increasing interest rates, higher energy prices and austerity measures in many economies have decreased consumer spending power”. The company said these factors led to price campaigns and special offers during the spring. Strong comparable sales of 11% in April was considered to have a dampening effect on May sales, the group said. The company also chose not to pass on increasing purchasing costs to customers.

[pic 5]

The cost of goods is always about 40% in relation to the revenue while the revenue is growing up every year, so our opinion is that the net income could improve as our graph is going to show:

[pic 6]

E. Shares

H&M is listed on the Stockholm Stock Exchange. The number of shares was till June 2010 of 827,536,00. But In June 2010 H&M implemented a 2:1 share split in which each share was split into two share of the same class. The first day of trading in the split shares was 1 June 2010. After the split the number of shares was 1,655,072,000, of which 194,400,000 are series A and 1,460,672,00 series B.

Why they decide to split the shares?

Because the price was too high comparing with other companies listed on the Stockholm Stock Exchange. In fact the price was about SEK 440 per share. So we know that when the amount per share is consistent, it represents a problem because it is hard to trade. The company decided to split giving 1 share more to every shareholder. The earnings per share went down from to SEK 19,8 to SEK 11,29 between 2010 and 2011, and we can see thanks the next table what it was the impact of this operation:

Date

Number of shares

Earnings x share

Total

%

2008

827,536,000

SEK 18.48

SEK 15.292.865.280,00

13%

2009

827,536,000

SEK 19.8

SEK 16.385.212.800,00

7%

2010

1,655,072,000

SEK 11.29

SEK 18.685.762.880,00

14%

2011

1,655,072,000

SEK 9.56

SEK 15.822.488.320,00

-15%

2012

1,655,072,000

SEK 10.19

SEK 16.865.183.680,00

7%

2013

1,655,072,000

SEK 10.36

SEK 17.146.545.920,00

2%

What happened in 2011?

The group's profit for the 2011 financial year after applying a tax rate of 24.5 percent was SEK 15,821 m which represents earnings per share of SEK 9,56, so It means that It was a decreased of 15%.

3. Comments on the consolidated Balance Sheet:

H&M’s consolidated balance sheet totaled SEK 65,6 m at year-end 2013, representing a 9% increase from year-end 2012. At the same time the Current Assets was SEK 39,2 m and represented 60% of total asset, while we compare at the year 2012 it represented the 61% of total asset. We are going to explain the Balance Sheet step by step, starting from the Asset:

a.Asset

-Tangible fixed asset grew by SEK 4 m in 2013 that is the 18% comparing to the 2012. It is composed above all by Machinery and Equipment that was growing up by 16% between

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