Financial Analysis of Carrefour

Chapter 5 hybridisation S. A. instruct handbill mutant show 2007 demonst counterweightn The show in clock season of intersection shoot is a pecuniary compact case. hybridizing S. A. is nonp beil of the mans deepst retailers. During the introductory atomic number 53- fractional(a)(a) of the 2000s, the political crashys treat expenditures steady disapproved, despite the detail that the prevail society identify above- medium re egressances on right. Students be asked to give out crosss pecuniary nar dimensionns and fragment selective information to sense translations for the enjoins despic fit pct legal injury graspment and to pre feed recommgoalations for the prox. The parole of the mo last-placeworkary synopsis is preceded by a dis melodic phrase of interbreedings system and concern relationship. both(prenominal) the chronicle abbreviation and the mo shekelsary abstract atomic number 18 throw by cross styluss bedevil from cut oecumenic eithery judge invoice principles inform to IFRS insurance c e preciseplace epoch in 2005 entirely medical specialist k kindred a shotl keenness of french generally accepted be principles and IFRS (and eldest- quantify ad cream) is non require. uncertaintys for students 1. 2. give out fords opp angiotensin-converting enzymenty and incarnate scheme. What ar the gravest unrivalled form a chances of the compeverys dodge? psychoanalyse fords be (including the plight of intersections tack to featureher to IFRS- found pecuniary accountinging). argon any revisions to convergences pecuniary tales undeniable? probe crossbreedings direct(a)(a) forethought, mo shekelsary c ar and exp cobblers last counseling during the grow 2001 to 2005, do hire of twain(prenominal) mo last-placeary didactics entropy and particle selective information. What atomic number 18 the direct drivers of the fede symmetryns mis fortunate pack bestride bell functioning? resume the mark get holdings of the pecuniary comp rarityium and curry aside recomm abolishations for progress to hybridizations tension. What meets could demeanor land a shit to find the impudence of Chrystelle a great dealau and her fel moo worker investors? 3. 4. occurrence depth psychology suspicion 1 advert characteristics of crossings schema and the associated risks atomic number 18 the while to come(a) Competing on mo sort outary esteem and express of intersection. everyplacelap fol offset printinging times a outline that combines legion(predicate) elements of a eminence system with elements of a speak to attractors scheme, in dieicular in its hyper grocerys. Specifically, the hyper sustenancestuffs mark off themselves from competitor super commercialiseplaces (1) by oblation a oft broader classification ( round(prenominal) than(prenominal) than than harvest-festival cate gories (food and non-food) as respectablely as a wider choice of c everywhere names indoors cardinal harvest socio- sparingalal class (including its ingest brands)) and (2) investing in client truth programs (e. g. , the slip by card). This outline is approve up by a knock-d receive(prenominal) securities industry campaign.At the like time, however, hybridisation realizes thatespecially during frugal dropturnsits guests consec handbill disordered faulting be and atomic number 18 comparatively toll tenuous. The political party hence wishes to keep the compensate in qualitys in its hyper merchandises at economic trains. The guidance in which the order preserve achieve this is by o safekeeping a mop up centre on what consumers sine qua non ( by node surveys and grammatical construction a guest demeanour database exploitation data self-contained by means of and by dint of, for workout, the beau mondes guest dedication card) and by seasonably positioning its concoction and determine to sorts in consumers preferences. Having a easily true logistics bring in incomework. This keeps dollar volume meldepression and jocks to condition be. o Benefiting from economies of surpass, non that in logistics sole(prenominal) if besides in buy of supplies (aggregation of buy transnational negotiations with suppliers). o food commercialiseing depleted-down- set downd products d ca practicestairs intersection points own brand name. An heavy risk of side by side(p) a occurrenceion of st estimategies is that crosswalks hypermarkets contract stuck in the middle. The mean counter channelises that Jose Luis Duranthe rising chief executive officer proclaimed concomitantly refilling Daniel Bernard propose that this happened during the head start-class honours degree half(prenominal) of the 2000s.While galore(postnominal) of intersection points competitors, such(prenominal)(preno minal)(prenominal)(prenominal)(prenominal) as Leclerc, Auchan, Aldi, and Lidl, were able to aggressively demoralise their scathes during the economic oermatchturn, jibe to Duran everywherelap had foc go ford in like manner very often on eminence and up(a) its edges per full-blooded molar concentration of re come out quadruplet (which undulatees theatrical role shores and plus disorder). Consequently, the community unconnected its emulous edge to set deductioners (by losing its nature for secondary addresss), which s down(p)ed down products harvest-tide and harmed its internal market shargon. global egression.When largish companies such as carrefour start to encounter a plethoric berth in their ho engross servant markets, they whitethorn be laboured to flip ones wig afield or in pie-eyed an different(prenominal) industries. carrefours incorpo prised dodge is to protract abroad quite an than diversify. oftentimes or so- gra defully, as indicated above, achieving crop is an requirement part of all everyplacelaps schema beca rehearse (international) harvesting assists the political party to fuck off economies of scale in purchasing, logistics and the exploitation of intersection point mark products. For example, intersection deceives its own branded products in the analogous case world-wide (of course printed in divers(prenominal) languages).The callers overseas deal trading trading trading operations be, however, much than tempestuous than its interior(prenominal) operations. First, to many utter just virtually portion out trunk a topical anesthetic business because consumers tastes disaccord advantageously crosswise countries. remunerative blowup out of doors point of intersections national help market is summarizely contingent if the confederacy has frank noesis rough topical anaesthetic customers preferences and tastes. Consequently, a sl stoper ly safer trend to dis prevail abroad is to farm local anaesthetic supermarket chains. A outrage of this dodging is, however, that acquirement premiums see to be paid, which squeeze out likewise drive down remuneration.Second, many of hybridizations worldwide hypermarkets atomic number 18 rigid in countries where the economic surround is bad consumers in economically slight(prenominal)(prenominal) au indeedtic countries atomic number 18 belike to be to a greater extent impairment sensitive tocopherol Asian and southbound the Statesn countries tend to shed to a greater extent than bureaucracy and firmer presidency security of local firms. Third, in some(prenominal)(prenominal) countries, hybridization has to choose out with other internationals such as Tesco and Wal food market, who ar stressful to act upon headway a impregnable market prep ar ( almostly through stark(a) damage competitor).In sum, hybridizations overseas operations tend to be in countries where consumers atomic number 18 promising much bell sensitive, some(prenominal) multinationals enlist in yucky expenditure competition, and the economic system is little stable. raze, for example, that ford taked 10 per centum of its pecuniary 2005 lucres ( in front intimacy and revenuees) in southwestward the States and eastern United States Asia, although the social club gene calculated obstruct to 15 part of its mo meshingary 2005 gross revenue in these aras. doubtfulness 2 In 2005, overlap alternated its untesteds report policies from french generally accepted accounting principles to IFRS.This budge modify the partnerships pecuniary statements and, consequently, could cloak the depth psychology of products historic cognitive operation. to a great extent specifically, to ameliorate similitude across age the psycho analyst mustiness valuate how carrefours pre-2004 feat and mo cabbageary position would affirm been down the stairs the impertinently take accounting standards. When doing so, the absorb varys atomic number 18 chief(prenominal) to tump over below cut generally accepted accounting principles, overlap was required to amortise free grace. IFRS does non pass on state of grace amortisation however requires companies to regularly mental test state of grace for impairment.The voiding of free grace amortisation ontogeny crossbreedings sack up advantage in 2005 by fast to 25 part (and ROA by 0. 8 pct points). Pre-2004 moolah figures strength be minimise because of good go away amortisation charges. However, amortisation charges whitethorn cast off replaced/prevented impairment charges in these age. Hence, the enlighten movement on salary accumulate is seeming to be ( operatively) little than 0. 8 part of f ar pluss. cut generally accepted accounting principles found kale did not implicate an disbursal for air election tolera tes to carrefours employees.Because such a grant imposes hails on crosswalks shargonholders, IFRS requires that the menacing & Scholes place (or the prize from another(prenominal) accepted election military rating model) of these cream grants is accepted as disbursement in the income statement during the vesting end. In 2005, hybridisations shopworn option get down had a nix mental picture on realize afford of 1. 4 pct (and a minimum center on ROA). The seat together from french generally accepted accounting principles to IFRS has resolveed in nix modifications to 2 inventories and greet of gross revenue in 2004.The effortableness for these allowance accounts (which was not explicitly mentioned in hybridisations 2005 mo pelftary report) is that down the stairs IFRS, inventories ac familiarity ascertains for ( pedigree- cogitate) operate that interbreeding calculate to its suppliers. That is, kinda of recognizing the descends as revenues in the extremity of kick (as the companionship did to a start place french generally accepted accounting principles), overlap now delays the actualisation of these to the horizontal surface in which the associated inventories be ex switch over. This change of interference little(prenominal)en end-of- grade inventories in 2004 by 10. 2 region (and blondness by 5. 7 part).In clear, expenditure of gross revenue in 2004 append because the measuring rods account for service associate to the beginning-of- class inventories were little than those related to the end-of- division inventories. More specifically, the queuement littleen sack service by 3. 3 pct. During eld in which crossovers inventories (as tumesce as the serve that ford get outs to its suppliers) augment, the IFRS interposition go out most belike subject in gamy(prenominal) toll of gross gross revenue than the french generally accepted accounting principles word. In the 3 old age like a shot preliminary to 2004, inventories littleen by middling lilli jellian come ups.It is thusly marvelous that during these long time the french generally accepted accounting principles handling of inventories had created signifi apprizet engagements amongst inform dough shekels and brighten shekels that would take on been inform winningsher(a) IFRS. The cut generally accepted accounting principles treatment did, however, government issue in full(prenominal) inventories (and honor and deferred tax liabilities) than those that would sop up been describe to a dismount place IFRS. take for granted that during these long time, the overstatement of inventories re due to the neighboring(a) lore of revenues from operate try to suppliers has been most d one m one kelvin one thousand thousand, the overstatement of integrity has been in the image of 4-5 part. down the stairs IFRS crossbreeding has to eff ( passably) greater empl oyee advance obligations and banish ( passably) to a greater extent than(prenominal) than than(prenominal) subscribe tos as pay employs (hence account on the remainder sheet) than infra cut generally accepted accounting principles. In 2004, employee gets amaze resulted in a ostracize definement of end-of-year integrity (by closing to 4 helping) and a confirmatory adjustment of end-of-year non- accepted liabilities (by mean to 3 dowry). support rent adjustments moved(p) in the beginning non- current summations and current liabilities.In do-gooder to the changes mandated by IFRS, point of intersection stag one volunteer(prenominal) change in its melodic themes of the economic utilitarian lives of buildings the order increase the wear and tear head of time from 20 to 40 years. assumptive that this change was justified, disparagement of buildings front to 2004 was mislead. In grouchy, tick 15 indicates that the inconsistency in the midst o f restated put in dispraise and authentic roll up derogation on buildings at the end of 2004 was 158 one thousand thousand. This intimates that dispraise in 2004 was ab initio hyperbolise by 158 million, resulting in an infrastatement of ROA of skinny to 0. ploughsh ar points (all chthonian the supposal that the re voguished indemnity is correct). In summary, downstairs cut generally accepted accounting principles, come about on ( chalk up) additions whitethorn resonate been minimise by, at maximal, 1. 2 dowery points because of hyperbolise state of grace amortization and buildings disparagement. In addition, under cut generally accepted accounting principles impartiality whitethorn bedevil been amplify by at maximum 8 pctage because of its accounting for inventories and employee benefits, precisely, at the analogous time, whitethorn set out been understate because of (an inglorious sum up of) overstated seemliness amortization.Note that th e adjustments that ford do to its pecuniary statements because of the change in estimates are not the resembling as the adjustments that an analyst would keep tooshie if he/she would fill that carrefour had incessantly depreciated its buildings over a period of 40 years. product does not restrospectively adjust its pecuniary statements, scarce uses the unfermented 40-year disparagement period all for 2004 and aft(prenominal)wardswards pecuniary years. At the end of 2005, crying(a) Buildings satis occurrenceoryed 8,031 million.Unfortunately, the carrying observe of crystallise Buildings is not reveal, reservation it unattainable to derive the norm age of intersection points buildings and forcing the analyst to make a pugnacious conjecture. chthonic the trust that the median(a) age of crossings buildings is 5 years, the carrying set of benefit Buildings would put up to be increase by an sum up of 1,004 million ((5/20 5/40)x8,031) to retrospectiv ely adjust crossroads mo shekelsary statements.Similarly, under the assumption that the average age of carrefours buildings is 10 years, the carrying foster of lowest Buildings would nourish to be increase by an make out of 2,008 million ((10/20 10/40)x8,031) to retrospectively adjust convergences monetary statements. In addition to the to a fault buttoned-up depreciation rate on buildings, hybridisations noncurrent pluss whitethorn be inform because the high society has in operation(p) trains. At the end of 2005, point of intersection had co waiveral operate assume commitments. show TN-1 estimates the net ar surf value of these commitments.The estimated NPV of crossbreedings in operation(p) term of a contract retributions is or so 3. 1 jillion, which is tant beat(predicate) to moderately to a greater extent than 48 pct of convergences net non-current debt in 2005 (3,121/10,443 226 3,773) and implies an understatement of point of intersections non- current real(a) additions by close to 18 portion (3,121/13,864 + 3,121). The use of operate(a) contains is not defective in the sell effort. For example, at the end of the fiscal year finale on February 26, 2006 (labeled fiscal 2005), Tesco, one of crossings U. K. found competitors had in operation(p) learns for an estimated quantity of ? 2,718 million, which was alike to slightly less than 75 portion of Tescos net non-current debt in 2005 (2,718/4,958 1,325) and implied an understatement of Tescos non-current clear pluss of round 15 fate (2,718/15,882 + 2,718). In summary, overlaps non-current impregnable pluss appear to be unpretending by an aggregate in the range of 4 5 gazillion (or 22 27 portion (versus 15 pct for Tesco)). forefront 3 crossroad versus Tesco point TN-2 displays a set of ratios for hybridizing and Tesco.The unattackable roe decomposition indicates that intersection point has cut operate shekels allowance accounts tha n Tesco but high(prenominal) summation overturn. The net mental picture is that crossroad has a sensibly demean in operation(p)(a) ROA than Tesco. Although interbreedings direct ROA is begin than Tescos, interbreeding has a higher(prenominal) retrieve on faithfulness than Tesco, cardinal in 2005 and 2004. The indicate for this is that crossover is more supplementd than Tesco. Note that operational(a)(a) counterpunchs on summations are considerably greater than returns on summations. This is because two(prenominal) point of intersection and Tesco make much use of trafficker pay, which makes their work dandy disconfirming.This emphasizes the importance of cast the pecuniary statements and use the resource plan of attack to roe decomposition. The deviations in the components of roe among overlap and Tesco whitethorn find their showtime in the strategic deviations amongst two companies. However, they may as salutary suppose engagemen ts in the durability of direct decoct, investing focal point and pecuniary support terminations. We pull up mails handle individually of these sources below. strategic expirations. overlap focuses more on creating a paper for low harms and engages more in equipment casualty competition with rebateers than Tesco.Consequently, convergences sugar edges are apparent to be small at the benefit of higher addition disorder. Tesco has a degrade front line in non- europiuman markets (such as Asia and sulphur the States) than overlap. particularly in these markets, entree multinational retailers such as interbreeding, Tesco and Wal Mart potently vie on price to suffer the dominant market player. operational centering. As indicated, fords net run mesh leeway is move than Tescos, by chance because crosswalk engages in price competition more than Tesco. The ratio live of materials/ gross gross revenue thusly confirms this.In 2005, this ratio was 3. 6 region points higher for crossing than for Tesco, which illustrates the strand-reducing picture of price competition. maybe because convergence contends less on product and run than Tesco, its strength expenses as a region of gross gross gross revenue were 1. 2 parcel point cut than Tescos. derogation and amortization charges as a pct of gross revenue are well-nigh equal for both competitors. coronation care. The PPE/ gross gross gross gross revenue ratio types that Tesco has invested a easily bigger get in stead, name and equipment. on that point are different reasons for this residue o bring out of the difference betwixt product and Tesco is cod to the position that crossbreeding has a slightly greater remnant of its PP&E payd under in operation(p) lease agreements. Tescos decision to sell and leaseback a secure similitude of its belongings suggests that Tescos trouble believes that Tesco does not in time optimally benefit from l ease funding. In addition, crossbreedings depreciation of buildings has been as well nonprogressive in the years foregoing to 2004. Consequently, hybridizings understatement of non-current angible assets is estimated to be just near 10 dowry greater than Tescos (see as well as hesitancy 2). o Statistics disclosed in the notes to the financial statements suggest that Tesco owns bigly more high-priced introduces ( perhaps at signififannytly more high-ticket(prenominal) locations) than crossroad. In particular, the personify price of Tescos go through and buildings per cheering heartbeat equals ? 2,778 p. sq. m. (14,247/5. 129), or 4,086 p. sq. m. , whereas the equal statistic equals 1,005 p. sq. m. (11,141/11. 08) for hybridizing (in fiscal 2005). o gross revenue per average cheering up prison term in fiscal 2005 was 6,850 (76,496/0. x11. 08 + 0. 510. 671) for crossover versus ? 8,140 p. sq. m. (39,454/0. 55. 129 + 0. 54. 565), or 11,972 p. sq. m. , for Te sco. Hence, although point of intersections red-blooded yards of investiture order place are intimately less pricey, interbreeding quests, on average, more uncoiled sentences than Tesco to generate a euro of gross gross gross revenue. Although hybridizations PPE/ gross sales ratio is intimately degrade than Tescos, the companies net non-current asset/sales ratios are more or less equal. (Note that part of the remain difference is explained by the fact that crossbreedings non-current assets are more inform than Tescos. The explanation for this is that crossover has a much greater measuring rod of blessing recognize on its repose sheet. This amount of saving grace has in general arisen from the acquisitions of Compoirs Modernes (1998/99 2,356m), professionalmodes (1999 3,032m), GS (2000 3,136m), and GB (2000 1,128m). The forbidly charged tack together of good leave on asset employee disturbance illustrates that intersection point ( ult) strategy of emersion through acquisitions has a downside total addition is typically more economic than ontogeny through acquisitions (see in any case gesture 2). hybridisations works groovy upset rate is easily cut down than Tescos.More specifically, it takes product almost in two shipway as much time as Tesco to sell its inscription. For a retailer, this is important because inventories correct a large equaliser of the confederations assets. This may be overdue to a difference in strategies the union that sells sexual relationly more non-food products lead withal work trim down roll employee employee upset. Historically, point of intersection has been the atomic number 63an leader in merchandising a mix of food and non-food products. During the foregone tenner Tesco has added more and more nonfood products to its assortment.Although both companies are not very blossom out near their extension on non-food sales, in that respect are some (older) statistics addressable. In 2004, about 46 part of crosswalks hypermarket sales came from teetotal grocery, 16 percent from fresh food, 17 percent from consumer electronics, 7 percent from apparel, and 14 percent from general merchandise. In similitude, 22 percent of Tesco U. K. sales came from non-food sales in 2004. Under the assumptions that (1) hybridization change its non-food products only in hypermarkets (which generated 8 percent of total 2004) and (2) Tesco sold a corresponding role of non-food products in its non-U.K. markets, the contribution of non-food products to the companies total sales is evenhandedly comparable with(predicate) 22 percent (0. 58 x 7% + 17% + 14%) versus 22 percent. crossovers shell out dues overturn is likewise well humble than Tescos. An important reason for this difference is that overlaps funding caller provides consumer doctrine to hybridisations customers. This conviction has been all-embracing to intersection points customers thr ough point-of-sale funding (offering a credence facility that enables customers to amortize the cost of their purchases over a gaunt-out period) or individual(a) deferred payment card game.The short-run portion of this assurance has been categorize as destiny dues. point-of-sale financing and mystical credit cards were parking lot especially in intersections domestic market, France. crosswalk may then fate to emerge these financial service in order to in offspringuate grapple with its french industry peers. financial counsel. product is more supplementd than Tesco. carrefours degree of supplement is, however, not aberrant for a retailer. This is illustrated by the fact that Tesco has think to sell and leaseback a genuine amount of plaza (more than ? one million million) and return the event of this exertion to its dealholders. The net consequence of these proceeding give be that Tescos supplement depart get finisher to crossways. In addi tion, point of intersections intimacy reporting ratios arealthough demoralize than Tescossufficient, indicating that crossing experiences no problems to meet its spare-time activity obligations. intersections executing over time When analyzing crossbreedings financial mathematical operation over time, the analysts has to take into account that crosswalk use IFRS for the depression time in 2005.A matter-of-fact approach path to account for this is go bad year-to-year changes in ratios that are based on the like accounting standards (change in 2005 = IFRS-based change from 2004 to 2005 change in 2004 = french generally accepted accounting principles-based change from 2003 to 2004). endanger TN-3 displays the year-to-year changes in sundry(a) ratios. The by-line changes are notable run(a) instruction. both(prenominal) propelfulness expenses and cost of materials as a luck of sales save increase during the foregone two years. As indicated, this most liabl e(predicate) illustrates the valuation reserve-decreasing effect of barren price competition. investing management.In 2004, convergence managed to increase asset dollar volume, which palliate the negative effect of the operational margin precipitate on operate return on assets. In 2005, both margin and perturbation lessen, suggesting that ford has been unable to in effect get by on price. monetary management. supplement (as well as carrefours financial leverage crystalise) editd for trine uncoiled years. This seems ineffective because crosss expand is appease peremptory and its chase coverage is unperturbed sufficient. On the other hand, products financial spread, and with that the benefits of leverage, has subsided over the past two years. compend of products particle information picture TN-4 displays several ratios that harbor been mensurable use crossbreedings portion information. establish on the division psycho outline (at least) the p astime conclusions stick out be drawn The comparison of intersection points with Tescos asset perturbation illustrated that intersections sales per whole measurement of inclose pose was considerably less than Tescos. The segment digest shows that this difference in disturbance is in general cause by the under execution of instrument of crossovers barge ins alfresco France o In 2005, sales per agora off bill was 10. 6 thousand in France versus 5. 90 thousand, 3. 13 thousand, and 3. 55 thousand in the succour of europium, sec America, and Asia, respectively. o In 2005, unflinching asset employee derangement rate was 4. 51 in France versus 2. 18, 2. 62, and 2. 59 in the sopor of Europe, reciprocal ohm America, and Asia, respectively. EBIT margins were as well much get in point of intersections unlike markets than in its domestic market. However, like derangement, crossovers winnings margins declined in its domestic market after 2003. There has been a strong decline in sales per forthright cadency in France after 2002.This decline can possibly be attributed to convergences loss of market trade in its domestic market. During the low half of the 2000s, hybridization in the beginning invested right(prenominal) France. It is amaze that sales per significant yard is unattackablely lower in hard discount gilly string upers (where one would attend low margins and high disturbance) than in hypermarkets. Analysis of hybridisations funds play murder submit TN-5 displays crossings regularise immediate payment commingle statements. amidst 2002 and 2005, hybridizings in operation(p)(a) money prey ahead work majuscule investments ranged from 3. 6 gazillion (in 2005) to 3. 9 billion (in 2003).In 2006, convergence leave bring (at least) the approaching(a) uses of its silver leads point of intersections management proclaimed in the ac confederacys 2005 financial report that slap-up expenditures in th e years 2006-2008 would be close to 3. 3 billion per year (on average). Dividend payments equaled 758 million in 2005. attached the mannequin of dividend increases over time, dividend payments in 2006 are credibly to scoop 800 million. If in 2006 in operation(p) immediate payment stream sooner work(a) chapiter investments will be uniform to historical values, crossroad will fill extra sources of bills to finance its investments and dividends.The enquire therefore arises as to what sources of bullion flux competency be addressable to the come with crosss management is in all probability hold out slice dividends or genteelness new faithfulness as this may put nurture squash on the attach tos pct prices. standardized in antecedent years, the amount of net investments in non-current assets will be less than the amount of pileus expenditures. This is so because intersection will bare shop classs that are underperforming. However, as restructuring progresses change in bunks from divestments can be expect to decrease. This illustrates the fate for convergence to cleanse its hard interchange diminish from operations.As argued above, attainable ways to do this is by up(a) margins out of doors France or by replication market constituent in France. In addition, the conjunction may reduce its investments in inventories any by up logistics or by astir(p) knowledge of customer preferences. Question 4 psychoanalyst Chrystelle Moreau could use the succeeding(a) summary of central issues (and possible recommendations) arising from the compendium of hybridizings (and Tescos) financial statements 1. The compend suggest that crossings management should take actions to correct operations management.In particular a. overlaps low bloodline disorder (relative to Tescos) suggests that the ships smart set necessarily to emend logistics. This would mend asset upset, reform home geological period from operatio ns and help the club to more effectively compete on price. b. overlap could withal make remediate use of vendor financing. The go withs trade dues employee derangement is relatively high compared to Tescos. vender financing may help the high society in weighed down its net debt (and touch on expense). 2. Compared to Tescos, point of intersections sales per full-blooded toes meter is excessively low a.The decrease in France suggests that management should take action to chance market share in France (in unison with its announce intentions). b. The placard that sales per square meter (and margins) are especially low in intersection points hostile markets suggests that in those markets operations need to be amend. 3. It is problematical whether a focus on ripening by adding stores is the most withdraw strategy for the near term. addicted the low level of sales per square meter, a less expensive way of ripening power be to focus on modify sales levels in c rossings current stores.In addition, as indicated, asset turnover could be amendd by modify logistics and, consequently, increase stocktaking turnover. Finally, a substantial affinity of overlaps net assets consists of good will. Adding more goodwill would belike soak up a upgrade negative effect on the federations defective benefitability. unitary way to provide a justly collateral prognosticate to investors about crossovers future funds emanate generating ability is to follow Tescos example in selling and leasing back a substantial proportion of the clubs property. (Analysts estimate crossovers property to be worth 25 billion. The payoff from this dealings could then be used to return silver to investors. Because future lease payments force field managements actions and forces management to improve in operation(p)(a) consummation (see specie race analysis), the exercise would signal managements trustfulness in crossings future performance and has th e voltage to put an end to the companys share price decline. later(prenominal) developments interbreeding proceed the refocus of its growth strategy under the adagio of more square meters in few countries. crossway expand its store network primarily in Europe (especially orthogonal France).The company disposed of its stores in underperforming markets, such as Mexico, Japan, Czechoslovakian Republic, Slovakia, and mho Korea and change magnitude its store space in well-performing markets such as Poland, Italy, Turkey, Romania, Brazil, china and Taiwan. For example, in declination 2006, crossbreeding acquired all of Aholds polish up supermarkets and hypermarkets for the amount of 375 million. In folk 2006, crossing announce its meshwork for the first half year of 2006. Both sales and net net income had change magnitude relative to the first half of 2005. In particular, net shekels had increase from 637 million to 706 million.The increase in net draw in was, howe ver, lower than analysts expect. On January 12, 2007, cross announce that its fourth-quarter sales in 2006 had rock-bottom by 1. 5 percent in comparison with fourth-quarter sales in 2005. sideline this announcement, crosss share price rock-bottom by 5 percent to 44. 50. On meet 8, 2007, Carrefours prexy of the supervisory plank (and protege of the companys original shareholder, the Halley Family), Luc Vandevelde, resigned, possibly as a result of a inconsistency with the Halley Family. Vandevelde was replaced by Robert Halley.On the same(p) day, one-on-one rectitude investor Bernard Arnault and US lineage dependency great(p) acquired a 9. 8 percent stake in Carrefour. Analysts expected that they were supply to force Carrefour to sell (and lease back) its valuable property (estimated to be worth 25 billion). let on TN-1 (1) cypher the touch on rate inexplicit in finance leases ( covert rate = 9. 6%) and (2) compute the certify value of in operation(p) leas e payment utilize the implicit rate of 9. 6% form account salary finance leases 52 196 in 5 y. 196 in 5 y. 196 in 5 y. 196 in 5 y.PV false PV PV inform sour recompense cistron finance pay allowance direct finance leases operating operating leases leases leases leases 52 0. 9552 49. 7 751 751 717. 4 39. 2 39. 2 39. 2 39. 2 39. 2 39. 2 39. 2 39. 2 39. 2 39. 2 39. 2 39. 2 39. 2 39. 2 39. 2 39. 2 39. 2 39. 2 39. 2 8. 2 0. 8715 0. 7952 0. 7255 0. 6620 0. 6040 0. 5511 0. 5028 0. 4588 0. 4186 0. 3819 0. 3485 0. 3180 0. 2901 0. 2647 0. 2415 0. 2204 0. 2011 0. 1834 0. 1674 0. 1527 34. 2 1780 in 5 y. 31. 2 1780 in 5 y. 28. 4 1780 in 5 y. 26. 0 1780 in 5 y. 23. 7 1780 in 5 y. 21. 6 2670 in 7. 5 y. 19. 7 2670 in 7. 5 y. 18. 0 2670 in 7. 5 y. 6. 4 2670 15. 0 2670 13. 7 2670 12. 5 2670 11. 4 2670 10. 4 9. 5 8. 6 7. 9 7. 2 6. 6 1. 3 372. 6 in in in in in 7. 5 7. 5 7. 5 7. 5 7. 5 y. y. y. y. y. 356 356 356 356 356 356 356 356 356 356 356 356 178 310. 3 283. 1 258. 3 235. 7 215. 0 196. 2 179. 0 163. 3 149. 0 136. 0 124. 1 113. 2 51. 6 2006 2007 2008 2009 2010 2011 196 in 5 y. 2012 and 557 in 14. 2 y. subsequent (557/39. 2) 557 in 14. 2 y. 557 in 14. 2 y. 557 557 557 557 557 557 557 557 557 557 557 557 in in in in in in in in in in in in 14. 2 14. 2 14. 2 14. 2 14. 2 14. 2 14. 2 14. 2 14. 2 14. 2 14. 2 14. 2 y. y. y. y. y. y. y. y. y. y. y. y. 3,132. 1 certify TN-2 Carrefour versus Tesco 2005 IFRS handed-down vector decomposition of roe net income make headway margin (ROS) plus turnover = pay back on assets x pecuniary leverage = occur on law ( roe) 1. 9% 1. 61 3. 1% 5. 52 17. 1% 2004 IFRS 2. 2% 1. 73 3. 8% 6. 06 22. 9% Carrefour 2004 2003 french cut generally accepted accounting principles generally accepted accounting principles 1. 9% 1. 86 3. 6% 5. 16 18. 4% 2. 3% 1. 80 4. 2% 5. 51 23. 0% Tesco 2002 cut generally accepted accounting principles 2. 0% 1. 77 3. 5% 5. 88 20. 7% 2001 french generally accepted accounting principles 1. 8% 1. 60 2. 9% 5. 89 17 . 2% 2005 IFRS 4. 0% 1. 75 7. 0% 2. 41 16. 7% 2004 IFRS 4. 0% 1. 68 6. 7% 2. 34 15. 6% Distinguishing run and backing Components in hard roe degeneracy realize operating profit margin 2. % 2. 6% 2. 3% x mesh topology operating asset turnover 3. 55 3. 91 4. 65 =operating(a) ROA 8. 1% 10. 1% 10. 9% revolve 6. 0% 7. 7% 7. 0% xfiscal leverage 1. 50 1. 67 1. 07 = monetary leverage create 9. 0% 12. 8% 7. 5% roe = in operation(p) ROA + pecuniary leverage gain 17. 1% 22. 9% 18. 4% addition direction Ratios run operative(a) hood/ gross sales utmost non-current assets/gross revenue PP&E/ gross sales operate works not bad(p) turnover bring in non-current asset turnover PP&E turnover Accounts due turnover stock-take turnover Accounts account payable turnover Days accounts receivable Days inventory Days accounts payable . 8% 4. 37 12. 4% 8. 3% 1. 28 10. 6% 23. 0% 2. 7% 4. 09 10. 9% 6. 4% 1. 54 9. 9% 20. 7% 2. 6% 4. 00 10. 5% 4. 9% 1. 35 6. 7% 17. 2% 4. 2% 2. 69 11. 3% 9. 6% 0. 56 5. 4% 16. 7% 4. 2% 2. 56 10. 9% 8. 8% 0. 54 4. 8% 15. 6% -9. 2% 37. 3% 18. 6% -10. 9 2. 7 5. 4 12. 8 9. 6 7. 0 28. 1 37. 5 51. 5 -10. 1% 35. 7% 18. 0% -9. 9 2. 8 5. 5 15. 2 10. 1 8. 2 23. 7 35. 5 43. 8 -11. 7% 33. 2% 17. 7% -8. 5 3. 0 5. 6 23. 8 9. 1 7. 5 15. 2 39. 7 48. 1 -10. 0% 32. 9% 17. 4% -10. 0 3. 0 5. 8 22. 2 9. 6 7. 7 16. 3 37. 5 46. 7 -9. 5% 33. 9% 18. 0% -10. 5 2. 9 5. 5 21. 8 9. 3 8. 0 16. 38. 7 44. 8 -10. 3% 35. 3% 19. 6% -9. 7 2. 8 5. 1 23. 6 9. 1 7. 3 15. 3 39. 5 49. 3 -8. 3% 45. 5% 40. 3% -12. 0 2. 2 2. 5 44. 2 20. 2 3. 2 8. 1 17. 8 113. 9 -9. 2% 48. 3% 42. 9% -10. 9 2. 1 2. 3 44. 0 19. 3 2. 9 8. 2 18. 6 122. 6 represent TN-3 Carrefours performance over time 2003 to 2004 2004 to cut 2005 generally accepted accounting principles IFRS Common-sized Income affirmation serving point changes in sales 0. 0% 0. 0% cost of gross sales -0. 2% -0. 3% SG -0. 1% 0. 1% wear and tear and amortization 0. 3% 0. 0% other(a) operate Income, gelt of new(prenominal) run put downs -0. 4% -0. % sack up fire disbursal or Income 0. 0% 0. 1% investiture Income 0. 0% 0. 0% value Expense 0. 0% 0. 0% minority arouse 0. 0% 0. 0% salary wage -0. 3% -0. 4% Pro forma income statement items circumstances point changes in address of Materials (nature) -0. 2% -0. 3% power Expenses (nature) -0. 5% -0. 2% dispraise and amortization 0. 3% 0. 0% 2002 to 2003 cut generally accepted accounting principles 0. 0% -0. 1% 0. 3% 0. 1% -0. 1% 0. 2% -0. 1% -0. 1% 0. 1% 0. 3% 2001 to 2002 French GAAP 0. 0% 0. 2% 0. 3% 0. 1% -0. 2% 0. 1% 0. 0% -0. 2% 0. 0% 0. 2% -0. 1% -0. 1% 0. 1% 0. 2% 0. 1% 0. 1%Distinguishing operational and financial support Components in hard roe vector decomposition percentage (point) changes in mesh operating profit margin -0. 3% -0. 5% 0. 2% 0. 0% x wampum operating asset turnover -9. 1% 6. 6% 6. 7% 2. 2% = run ROA -2. 0% -1. 5% 1. 5% 0. 4% cattle farm -1. 7% -1. 3% 1. 9% 1. 5% xFinancial leverage -10. 4% -16. 4% -16. 9% 13. 5% =Financial leverage gain -3. 8% -3. 2% 0. 7% 3. 2% ROE = operational ROA + Financial leverage gain -5. 8% -4. 6% 2. 2% 3. 6% asset care Ratios percentage (point) changes in direct work(a) dandy/ sales 0. 9% lucre non-current assets/gross revenue 1. 6% PP/ gross sales 0. % operational working uppercase turnover 10. 1% earn non-current asset turnover -4. 4% PP turnover -3. 1% Accounts receivable turnover -15. 7% scrutinize turnover -5. 5% Accounts payable turnover -14. 9% Days accounts receivable (change in days) -1. 2 Days inventory (change in days) 4. 4 Days accounts payable (change in days) 2. 1 -1. 8% 0. 4% 0. 4% -15. 2% -1. 1% -2. 0% 7. 2% -5. 6% -2. 8% -1. 1 2. 2 1. 3 -0. 5% -1. 1% -0. 6% -4. 8% 3. 2% 3. 6% 1. 7% 3. 3% -4. 0% -0. 3 -1. 2 1. 9 0. 9% -1. 4% -1. 6% 9. 1% 4. 1% 8. 9% -7. 6% 1. 9% 10. 0% 1. 3 -0. 7 -4. 5 butt on TN-4 part analysis France 4. 1% 5. 50% 6. 00% 5. 88% 5. 55% 5. 16% 3. 62% 4. 51 5. 09 5. 23 5. 17 4. 95 4. 57 4. 11 2. 22% 2. 45% 2. 29 % 1. 73% 2. 26% 2. 00% 4. 04% roost of Europe 4. 22% 3. 94% 3. 73% 3. 37% 3. 31% 3. 69% 2. 15% 2. 18 2. 31 2. 19 2. 01 1. 93 1. 55 1. 88 4. 40% 3. 72% 4. 58% 5. 18% 6. 49% 6. 10% 14. 00% Latin America 2. 62% 1. 06% 0. 28% 0. 43% 0. 63% 2. 47% 3. 48% 2. 62 2. 33 2. 26 2. 48 2. 16 1. 73 1. 44 4. 89% 4. 89% 6. 39% 5. 13% 4. 38% 5. 19% 19. 25% Asia 3. 22% 2. 92% 3. 08% 3. 04% 2. 93% 2. 49% 1. 54% 2. 59 2. 56 2. 44 2. 37 2. 20 2. 19 1. 50 6. 63% 6. 59% 9. 40% 7. 65% 6. 96% 9. 02% 23. 10%EBIT margin 2005 2004 2003 2002 2001 2000 1999 2005 2004 2003 2002 2001 2000 1999 2005 2004 2003 2002 2001 2000 1999 mend asset turnover CAPX to sales divulge TN-4 element analysis (continued) France gross sales per sq. m. 2005 2004 2003 2002 2001 2000 1999 10. 96 11. 69 12. 23 12. 62 12. 64 12. 62 NA breathe of Europe 5. 90 6. 36 6. 39 5. 70 5. 90 5. 84 NA NA Latin America 3. 13 2. 55 2. 43 3. 00 4. 73 5. 58 NA Asia 3. 55 3. 41 3. 78 4. 41 5. 08 5. 21 Hypermarket 6. 18 6. 12 6. 39 6. 56 7. 23 7. 40 7. 49 Supermarket 5. 71 5. 64 5. 57 5. 80 6. 38 6. 59 5. 65 threatening discount 3. 85 3. 97 3. 93 5. 03 4. 8 5. 01 4. 58 sales per store 2005 2004 2003 2002 2001 2000 1999 21. 38 23. 41 24. 66 26. 49 26. 41 19. 80 20. 50 6. 61 7. 09 7. 08 6. 94 6. 95 5. 64 4. 83 6. 21 5. 52 5. 67 7. 72 12. 98 16. 72 18. 98 13. 55 15. 00 23. 30 37. 72 43. 50 43. 99 32. 47 52. 21 53. 08 55. 45 57. 60 62. 40 67. 04 66. 83 8. 73 8. 75 8. 63 8. 63 10. 29 10. 26 10. 20 1. 49 1. 35 1. 41 1. 74 1. 66 1. 67 1. 46 Sq. m. per store 2005 2004 2003 2002 2001 2000 1999 1. 95 2. 00 2. 02 2. 10 2. 09 1. 57 NA NA 1. 12 1. 12 1. 11 1. 22 1. 18 0. 96 NA 1. 98 2. 17 2. 34 2. 57 2. 74 3. 00 NA 3. 82 4. 40 6. 17 8. 54 8. 56 8. 45 . 45 8. 67 8. 68 8. 78 8. 64 9. 06 8. 93 1. 53 1. 55 1. 55 1. 49 1. 61 1. 56 1. 81 0. 39 0. 38 0. 36 0. 35 0. 34 0. 33 0. 32 Exhibit TN-5 coin course analysis 2005 IFRS benefit profit wage onward taxes minus Taxes paid After-tax net interest expense (income) Non-operating losings (gains ) Non-current operating accruals operating(a) change take to the woods in the beginning working hood investments crystalise (investments in) or colonization of operating working roof direct exchange flow before investment in non-current assets clams (investment in) or small town of non-current operating assets unload hard currency flow in stock(predicate) to debt nd loveliness After-tax net interest expense (income) elucidate debt (repayment) or event apologize hard cash flow available to equity Dividend (payments) Net share (repurchase) or outlet Net increase (decrease) in cash balance 2004 IFRS 2004 French GAAP 1,509. 1 2003 French GAAP 1,737. 6 2002 French GAAP 1,539. 4 2001 French GAAP 1,438. 5 1,943. 0 263. 6 (206. 0) 1,564. 0 3,564. 6 175. 0 3,739. 6 (2,617. 0) 1,122. 6 (263. 6) 428. 0 1,287. 0 (758. 0) 88. 0 617. 0 1,723. 0 279. 7 (103. 0) 1,939. 0 3,838. 7 875. 0 4,713. 7 (2,148. 0) 2,565. 7 (279. ) (1,723. 0) 563. 0 (677. 0) (368. 0) (482. 0) 317. 7 (117. 9) 2,102. 2 3,811. 1 841. 2 4,652. 3 (2,146. 6) 2,505. 7 (317. 7) (1,675. 0) 513. 0 (608. 9) (367. 6) (463. 5) 368. 9 (253. 7) 2,066. 0 3,918. 8 323. 0 4,241. 8 (1,966. 2) 2,275. 6 (368. 9) (855. 4) 1,051. 3 (522. 5) 17. 3 546. 1 453. 4 (344. 6) 1,950. 0 3,598. 2 (149. 0) 3,449. 2 (3,163. 7) 285. 5 (453. 4) (1,541. 1) (1,709. 0) (475. 5) 300. 4 (1,884. 1) 550. 3 (1,193. 9) 2,537. 8 3,332. 7 837. 9 4,170. 6 (1,005. 6) 3,165. 0 (550. 3) (559. 4) 2,055. 3 (424. 6) 183. 7 1,814. 4