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Report area chosen To achieve Oxford Brookes University BSc in Applied Accounting I have chosen the report area topic number 8. I will report on the business and financial performance of X&Y Group over three years ranging from year 2006 to year 2008.

In addition I will also have a look on Interim report in the year 2009. In the Annual Report 2008 X&Y Group then CEO Exxxx, Rxxxx commented, ‘. . . we continued to increase our market shares in increasingly competitive markets’ 1 . I will have a look on financial statements and other reports and publications to understand the true financial and business picture of X&Y. I will apply my knowledge gathered from my ACCA studies and from reading various books, newspapers, magazines, press releases and other publications. This report will give an intensive view from current and prospective shareholders.

I will mention ‘X&Y’ as to indicate ‘X&Y X&Y Group’ from now on unless otherwise stated. I have selected Inditex Group for comparison with X&Y in terms of business and financial performance. 1. 2 Reasons behind choosing this area The financial statements give a picture of how well or bad a business is performing. If you are a bank, or insurance company, or local authority, or prospective shareholder, or supplier, or mere employee and if you want to know if you are safe to get involved with this business the first step is to look at its financial statements. Looking at financial statements i. . the evaluation of financial and business performance of an entity gives the picture of that entity’s management performance. This is like drawing a portrait of that entity. Mori, Akira once said, ‘You have to know accounting. It’s the language of practical business life’2. I always liked accounting and finance; and looking forward 1 2 Check Harvard Referencing system Check Harvard Referencing system 3 to build up a career in finance sector where number crunching is not everything; where I can use business and financial performance measurement techniques and make effective decisions.

I will use this report writing opportunity to practice and practically implement my learning in evaluating business and financial performance of a business which spreads its activities from one continent to another. 1. 3 Reasons behind choosing X&Y For me and for my family’s clothing needs I found X&Y as a better place to buy as it sells better and fashionable cloths at lower price. But, this is not what attracted my attention. I got interested on X&Y because in this time of recession and money crisis while all high street giants struggling to survive I found X&Y continuing to open new stores in different locations in every few months.

Not only that, Interbrand ranked in their latest 2009 report X&Y as the world’s 2X no. brand with 11% increasing brand value from last year to 15,375m USD. Last year X&Y was ranked number 2X. X&Y is in the top position as a high street apparel brand. It seems X&Y is becoming more popular hence means greater market. 1. 3. 1 X&Y history Present is the result of history; I always enjoy it so decided to look back where everything really begun. A former Swedish salesman, named Exxx Pxxxx, discovered an amazing clothing retail concept during his trip to the United States.

He noticed high turnover can be achieved by lowering the sales price. After came back home; in 1947, he opened a store exclusively for women’s clothing in Vxxx, Sxxx. He named the store ‘X’. Swedish for hxxx. In 1968 Exxx Pxxxx brought men’s concept in his retail store and changed its name to ‘X&Y’. He continued to add new concepts like clothing for children, young people, trendy people and sportive people. To stimulate growth in home and abroad, X&Y went public with a listing in Sxxxx Stock Exchange in 1974.

X&Y started its business using concept ‘fashion at low price’ but later developed to ‘fashion and quality at best price’ The Pxxxx family still 4 holding the largest share of the company stock, leaving control securely in the family’s hands. 1. 3. 2 X&Y at present day ‘Before you can really start setting financial goals, you need to determine where you stand financially. ’ – Bach, David X&Y is a rapidly growing business. Every year it is expending its market, i. e. stores, steadily. According to X&Y annual report 2008; by the end of financial year 2008 X&Y Group had 1,738 stores globally.

In the year 2008 X&Y opened 216 stores worldwide and entered in five new different markets (Japan, Egypt, Oman, Bahrain and Saudi Arabia). In 2009 X&Y Group planning to open 225 new stores. Though X&Y mainly provide clothing at competitive price but they also have PST range which offers exclusive and expensive clothing collection. Around 73,000 employees helping X&Y to run and grow. Source: X&Y Group Annual Report 2008 1. 3. 3 Business to compare I was thinking around which organisation I shall choose to compare.

I browsed through websites of top clothing retailer’s e. g. Primark, Gap, Topshop, and Zara. 5 Then I found Inditex Group (owner of Zara) as the most appropriate business for comparison with X&Y Group as, in terms of revenue, Inditex is the top largest clothing retailer in the Europe and X&Y is the second. Though clothing ranges of Inditex mainly includes high priced items unlike X&Y’s main ranges but both of them highly expended their operation beyond their originate country. Inditex have 4,430 stores in 73 countries while for X&Y the number is 1,738 in 34 countries.

Inditex Group includes fashion brands Zara, Massimo Dutti, Pull and Bear, Bershka, Stradivarius, Oysho and Uterque. Zara is the most popular brand among others of Inditex Group. Interbrand, in their year 2009 report, ranked Zara in no. 50 according to brand value (6,789m USD) while X&Y ranked number 2X with 15,375m USD brand value. 1. 4 Aims and objectives The aim of this research and analysis project is to establish an evaluation of the business and financial performance of X&Y Group based on financial reports, comments and projections made by board members and using the views of other stakeholders.

My project will evaluate the financial performance of X&Y over financial year-ending 2006 to 2008 and assess its future prospect. Economic decisions taken by stakeholders are highly dependent on the financial performance of the relevant company. Now-a-days stakeholders are getting more and more interested on management’s performance and internal control. Management’s ability in taking effective long-term decisions is very important as taking efficient short-term decisions. Shareholders are concerned about short-term return e. g. ividend and share price but they are also very concerned about managements’ plan on future growth, expansion, roadmap on how to deal with expected or not-expected adverse conditions. I will use various rations e. g. profitability ratios, efficiency ratios, investment rations during my report writing process. In addition, I will do SWOT analysis, as it is a key 6 instrumental framework to assess the overall business position, to identify the strength, weaknesses, threats and opportunities for X&Y. 2. INFORMATION As this report is the first of its kind I am doing so I had to start from the very beginning.

I had to understand what type of report I was going to do, what type of format I shall use, how can I gather information and how can I use those in writing this report and on above all of these where will I find relevant information. I discussed about the report writing techniques I shall use and information source I shall use with my senior and fellow students who already wrote this type of report for their university degree. I attended an introductory meeting in …… where Mr …… pointed out possible sources of information.

I browsed through websites of X&Y and Inditex. I downloaded and printed out the annual report of last three years. I also read through the Chairman’s report and CEO’s report to understand business and financial performance from their point of view. I also read through newspaper reports on X&Y and Inditex. I used Google search engine and Yahoo Finance to find out news related to these two businesses. 2. 1 Source of information I divided my source of information in two groups; primary source and secondary source.

As far as this business and financial performance report concern I really not necessarily had to collect information through primary source. More importantly, the secondary source of information was so strong that it made using primary source insignificant. The main sources I used during preparation of this report are as follows: 7 Published financial statements of X&Y Group and Inditex Group (Year ending 2006, 2007, 2008) I found financial statements as the main source of information as this gives us the financial knowledge of the both companies and very relevant to my chosen topic area.

But, more importantly financial statements are audited by independent auditors and provides high level of assurance and great deal of reliability. Chairman, CEO and Directors statements These statements gives information which highlights business performance, i. e. specific areas where the business done well or areas where business is finding difficulties. These statements also give future strategies and plans business willing to and going to adopt and implement. These statements also ensure stakeholders on business plan on how they will adopt or eliminate expected or unexpected risks.

Independent reports and reactions I had an intensive look on independent reports and reactions published in various newspapers and magazines. I found these information more reliable and relevant than published accounts as these are the external sources and general stakeholders are highly effected by these reports. Present and potential shareholders investment decision may change based on these reports. Text books and notes To set an appropriate approach towards the report writing I read through ACCA texts, of BPP and Kaplan Publishing, which are relevant to financial and business performance measurement e. . F5-Performance Management, F7-Financial Reporting, F9-Financial Management, P2-Crporate reporting and P5-Advanced Performance Management. I found my ACCA texts very helpful as those covered almost all aspects in measuring performance of a business and these books are very much practical scenario oriented. I also took help from Measuring Business Performance by Andy 8 Neely and Key Management Ratios by Ciaran Walsh. These texts helped me to select appropriate ratios and to make SWOT analysis during this report writing. Newspapers and websites As I mentioned earlier comments on independent publications e. . newspapers has an significant impact on company’s share price as those reveal company’s hidden truth. Newspapers also publish reports on competitors as this helps to understand how the overall business situation on particular business sector. Goodway, Nick reported on high street cloth retailer Next, ‘Shoppers’ passion for fashion sees Next put up profit forecasts again’. (Evening Standard, 04 November 2009). This showed general people’s attitude towards shopping. Though people are still struggling to recover from recent credit crunch but they continued to spend money in fashion. . 2 Methodology used I went through websites, downloaded information, read books and newspaper articles. As I mentioned earlier I used mainly secondary source of information as I found those sufficient enough and very relevant for this business and financial performance report writing. Internet and websites Nowadays the internet became primary and great source for information related to any topic. News from distance past can easily be found by some clicks. As I am writing the report on past three years performance of X&Y and Inditex I found internet a great deal of help.

Primarily I downloaded annul reports of X&Y and Inditex for 2006 to 2008 from their websites. I also downloaded and read through chairman’s and CEO’s statement and also had a look on corporate and social responsibility (CSR) statement of both companies. 9 Library Research Though I found most of the business related information from internet and websites but I still had to go to the libraries for specific needs. Initially I needed to refer to some books to understand the report writing process as this is first report of its kind I am writing.

I found Barking Library in London is very useful for initial steps of my report writing as I found a number of books on how to write research projects, and how to evaluate business and financial performance of a company. In later steps of this report writing I visited City Business Library in London which has a large collection of books, journals, newspapers, magazines and lot other full of resources. Specially newspaper reports and articles on current economic and business environment was very helpful as that gives an idea volatile is market is and what is going on investors’ i. e. hareholders’ minds. 10 3. PERFORMANCE ANALYSIS 3. 1 Company profile X&Y has enjoyed a substantial growth in recent years. Especially because of recent economic crisis general public are more leaned towards cheaper garments. X&Y operates embedding the business concept ‘fashion and quality at best price’ and that’s what helping X&Y to grab the higher market share. With around 183,000 shareholders X&Y shares were among NASDAQ OMX Nordic’s most traded shares. X&Y was the largest company on the Stockholm Stock Exchange at the end of financial year 2008 in terms of share’s market value. 3. Financial performance analysis Presentation currency for X&Y is Swedish Krona and Euro for Spanish Inditex. As my objective is to analysis business and financial performance of X&Y and for comparison Inditex; I will deal with per cent figures and ratios rather straight financial statement figures. So, I found it irrelevant to translate every financial statement figures of X&Y and Inditex in any other common currency, unless very relevant and very necessary, as that will add no value to my business and financial performance analysis. I will use www. x-rates. com website’s ‘Historic Lookup’ section to identify the relevant exchange rates.

Furthermore, financial year of X&Y runs from 01 December to 30 November and for Inditex the range is 01 February to 31 January. For effective comparison between X&Y and Inditex financial and business performance I will deal with financial year ending 2006, 2007 and 2008 for X&Y and for Inditex financial year ending 2007, 2008 and 2009 as those are mostly in similar time range. To simplify the comparison, and as Inditex reported themselves in annual report, I will mention year ending 31 January 2006, 31 January 2007 and 31 January 2008 as year 2007, 2008 and 2009 respectively. 11 . 2. 1 Sales growth X&Y: Year Sales, SEK m Growth from previous year, % 1 SEK to GBP Sales, GBP m 2005 61,262 0. 0715115 4,381 2006 68,400 11. 65 0. 074314 5,083 2007 78,346 14. 54 0. 0762022 5,970 2008 88,532 13 0. 0813499 7,202 NOTE: Rates are as at 30 November or as at next earliest available. Inditex: Year Sales, Euro m Growth from previous year, % 1 Euro to GBP Sales, GBP m 2005 6,741 0. 682267 4,599 2006 8,196 21. 58 0. 662792 5,432 2007 9,435 15. 12 0. 745967 7,038 2008 10,407 10. 30 0. 903351 9,401 NOTE: Rates are as at 31 January or as at next earliest available. 12

Sales Growth Comparison 25 20 15 14. 54 15. 12 11. 65 13 10. 3 H&M Inditex 21. 58 % 10 5 0 2006 2007 Year 2008 NOTE: The graph is prepared based on reported actual figures in the financial statements of X&Y and Inditex; not based on the translated figures X&Y and Inditex both had increase in sales every year from 2006 to 2008. In the year ending 2006, X&Y sales were up by SEK 7,138 m which was 11. 65% higher than previous year while top competitor Inditex had staggering increase of 21. 58%. In the year 2006 X&Y lost its position as Europe’s biggest fashion retailer to Inditex.

The reason of Inditex’s stunning sales growth in 2006 probably because their growth in commercial area as they opened new stores at an aggressive rate which apparently contributed to this amazing sales growth. Crawford, Leslie and Munter, Paivi reported, ‘. . . Inditex, which opens a new store every day of the year and has target of 4,000 stores by the end of 2009, compared with 2,700 stores at present. ’ (Financial Times, 29 March 2006). Unlike Inditex X&Y kept opening new stores at a steady 10 per cent to per cent every year. X&Y opened 168 new stores in 2006 while for Inditex the number was 439.

Another main reason of X&Y’s lower sales growth over 2006 compared to Inditex that X&Y experienced colder weather in its central European market than analysts had predicted. In contrast, Inditex was in more favourable situation as its around 43% sales are in Spain where sun was sunnier. After loosing the top position to Inditex X&Y’s head of investor relations Vinge, Nils commented, ‘For us, it’s not a goal in itself to be the biggest in terms of turnover. Our mission is always to give our 13 customer value for money by giving them fashion and quality at the best price. (Cited by Crawford, Leslie and Munter, Paivi. Financial Times, 29 March 2006). In the following year, year 2007, X&Y and Inditex both had almost similar growth in sales; 14. 54% for X&Y and 15. 12% for Inditex. This year X&Y added new store chain, called COS – Collection of Style, as an effort to find different avenues for growth in its more mature markets. COS products are 40 per cent more expensive than X&Y products and which obviously targeted to wealthier shopper. Retail correspondent Rigby, Elizabeth reported, ‘The move suggests that X&Y may be following Inditex’s lead by developing different sub-brands. (Financial Times, 25 January 2007). In 2008, X&Y had a sales growth of 13% but for Inditex the growth was lowest over last year years as only 10. 30%. This result may be because of the biggest inflationary pressure in a decade in this year. Consumers turned their shopping habituate from expensive range like Zara (main range of Inditex) to more competitive priced items like X&Y’s. 3. 2. 2 Profitability ratio Gross profit margin: X&Y: Year Sales, SEK m Cost of sales, SEK m Gross profit, SEK m Gross profit, % Gross profit growth, % 2005 61,262 -25,080 36,182 59. 6 2006 68,400 -27,736 40,664 59. 45 12. 38 2007 78,346 -30,499 47,847 61. 07 17. 66 2008 88,532 -34,064 54,468 61. 52 13. 84 14 Inditex: Year Sales, Euro m Cost of sales, Euro m Gross profit, Euro m Gross profit, % Gross profit growth, % 2005 6,741 -2,953 3,788 56. 19 2006 8,196 -3,589 4,607 56. 21 21. 62 2007 9,435 -4,086 5,349 56. 69 16. 11 2008 10,407 -4,493 5,914 56. 83 10. 56 Gross Profit Margin 62 61 60 59 58 57 56 55 54 53 2006 2007 Year 2008 59. 45 H&M Inditex 61. 07 61. 52 % 56. 21 56. 69 56. 83 15 Gross Profit Growth 25 20 16. 1 15 H&M Intidex 21. 62 % 10. 56 10 5 0 2006 2007 Year 2008 12. 38 17. 66 13. 84 MacNamara, William mentioned in one of his articles as the, ‘Gross profit margin is the key measure that assesses retailers’ financial health. ’ (Financial Times, 30 September 2008). In the year ending 2006, X&Y had a gross profit margin of 59. 45 per cent and for Inditex the rate is 56. 21 per cent. We have to carefully look at gross profit margin of Inditex as they had a staggering sales growth, unlike X&Y, of 21. 58 per cent in the same period.

Though quotas on imports from China gave a negative effect on this year’s gross profit but X&Y still tried and achieved to boost company’s profitability by cutting costs and by introducing well known designer ranges. X&Y sources about 30 per cent of its clothes from China. X&Y had a 61. 07 per cent gross profit margin of SEK 47,847 m in the year ending 2007. X&Y achieved this 17. 66 per cent gross profit growth by switching sourcing of garments to cheaper locations. To keep the cost lowest possible X&Y operates a big in-house design and buying team.

Moreover, X&Y splits its buying department into a buying and production unit in this year to bring more efficiency in buying and/or production decisions and process; which may also contributed to put the costs down and profit up. In this year Inditex had a gross profit of Euro 5,349 m which is 56. 69 per cent of sales figure. X&Y had a gross profit margin of 61. 52 per cent in the year 2008 while for Inditex the rate was 56. 83 per cent. But, X&Y and Inditex both faced disappointed gross profit margin growth over previous year on 2008. Production and logistics costs rose 16 n this year in south-east Asia which affected X&Y more than Inditex as X&Y’s 60 per cent supply comes from this region. X&Y was also worried on sales and profit figure as the level of consumptions declined in their end market. But, these adverse affects were offset in some level by less price discounting, better stock control and currency effects. Drop in dollar value over 2008 helped X&Y to show a better gross profit as it hedges currencies six moths ahead and this eventually reduced the cost of the cloths it buys from Asian suppliers. Net profit margin: X&Y: Year Sales, SEK m Net profit, SEK m Net profit, % 2006 68,400 10,797 15. 9 2007 78,346 13,588 17. 34 2008 88,532 15,294 17. 28 Inditex: Year Sales, Euro m Net profit, Euro m Net profit, % 2006 8,196 1,002 12. 23 2007 9,435 1,250 13. 25 2008 10,407 1,253 12. 04 NOTE: Please lookup at appendix 01 for workings. 17 Net Profit Margin 20 18 16 14 12 10 8 6 4 2 0 17. 34 15. 79 12. 23 13. 25 12. 04 H&M Inditex 17. 28 % 2006 2007 Year 2008 Net profit margin of both X&Y and Inditex had a steady level over years from 2006 to 2008. Though Inditex in terms of store number and turnover crossed X&Y in the year 2006 but X&Y managed to achieve higher net profit margin in 2006 and consecutive years by tight cost control.

This reflects X&Y’s more mature business attitude. Wrigley, Phil, the executive chairman of New Look, the fashion chain, commented, ‘you have either got to grab market share more aggressively to get the same cash margin or you have got to put prices up’. (Cited by Braithwaite, Tom. Financial Times, 11 July 2008). While Inditex tried to grab the market aggressively by opening more than a store everyday; X&Y tried to grab the market more steadily by continuing opening 10 to 15 per cent new stores every year. In 2007 X&Y saw a sharp rise in the net profit margin to 17. 34 per cent as sales increased by 14. 4 per cent and in the same time better cost control. Year 2008 was not a happy year for X&Y, particularly for Inditex. X&Y’s net profit margin downed from 17. 34 per cent to 17. 28 which is not relatively lower but not better than year 2007. For Inditex the situation is worse as net profit margin downed from 13. 25 per cent to 12. 04 per cent. The main reason of this uncomfortable net profit margin is inflationary pressure was the biggest in a decade. Weakening pound sterling caused an extra problem for this year. Consumer slowdown in spending and offering higher discounts also stimulated the adverse effect.

One of the JPMorgan author Chamberlain, Richard reported, ‘we think inflation has come at a bad time, and is another reason to be cautious on the sector short term. ’ (Cited by 18 Braithwaite, Tom. Financial Times, 11 July 2008). X&Y tried to beat the problem i. e. keep the net profit margin high by increasing the end market product price by 10 to 15 per cent. ROCE (Return on Capital Employed): Year X&Y, % Inditex, % 2006 58. 7 43 2007 63. 7 43 2008 61. 1 36 ROCE trend 70 60 50 63. 7 58. 7 43 43 36 61. 1 % 40 30 20 10 0 H&M Inditex 2006 2007 Year 2008

ROCE (Return on Capital Employed) is defined as the ratio between the EBIT and the total net average assets. This ratio indicates how efficiently a business is using the funds available (equity and long-term debt) and also measures how much is earned per $1 invested. It is thus a measures of the efficiency and effectiveness with which the managers have made use of the resources available to them. In terms of ROCE X&Y was in better position than Inditex during year 2006 to 2008 as this indicates X&Y made better and wise use of fund available to generate returns. The main reason of X&Y and Inditex’s quite different result is sourcing.

While 19 X&Y’s main sourcing are from south-east Asia where costs are relatively lower; Inditex’s main sourcing are from Europe. X&Y enjoyed an increase of ROCE from 2006 (58. 70 per cent) to 2007 (63. 70 per cent) as X&Y did better use of money available by switching garments sourcing to cheaper locations. X&Y also boosted its ROCE by cheaper leasing agreements instead of buying its selling premises. In addition of tight cost control X&Y also split its buying department into production and buying so that more efficiency comes to the operation which gave a better profit margin and eventually resulted a better ROCE.

Inditex maintained same ROCE level in 2007 as the previous year of 43 per cent. By the year 2008 X&Y and Inditex both experienced a decline in ROCE as recession and inflation hit all retailers. X&Y’s fixed assets were increased by SEK 5,183 m during 2008 which made the fixed assets 48. 49 per cent higher than previous year. This is also responsible for ROCE downturn. Though Inditex’s fixed assets were increased by only 9. 43 per cent; probably overall slowdown in sales, increased costs and inefficient cost control unlike X&Y led them to ROCE decline. X&Y’s ROCE downed to 61. 0 per cent in year 2008 and for Inditex the rate was to 36 per cent from 43 per cent in previous year. 3. 2. 3 Liquidity ratios X&Y: Year Total current asset, SEK m Total current liabilities, SEK m Current ratio Stock-in-trade, SEK m Quick ratio 2006 27,522 6,996 3. 93 : 1 7,220 2. 90 : 1 2007 31,045 8,834 3. 51 : 1 7,969 2. 61 : 1 2008 35,371 11,879 2. 98 : 1 8,500 2. 26 : 1 20 Inditex: Year Total current asset, Euro m Total current liabilities, Euro m Current ratio Inventories, Euro m Quick ratio 2006 2,148 1,885 1. 14 : 1 824 0. 70 : 1 2007 2,982 2,458 1. 21 : 1 1,007 0. 0 : 1 2008 3,264 2,391 1. 37 : 1 1,055 0. 92 : 1 The current and quick ratios are short-term term liquidity measurement. Both of the ratios measures if the business has sufficient current assets to cover its current liabilities. For calculating quick ratio stock-in-trade/inventories are deducted from total current asset figures as these are assumed as not very liquid. Recommended level is 2:1 for current ratio and 1:1 for quick ratio. X&Y maintained a safe liquidity level during year 2006 to 2008. Its current ratio and quick ratio both are well above recommended level.

May be this is because of holding substantive amount of liquid fund, i. e. cash, compared to current liabilities over these years. This high liquid asset indicate that X&Y can invest more in opening new stores and thus increasing sales and profit and eventually maximising shareholders’ wealth. Decline trend in current ratio and quick ratio level over 2006 to 2008 may indicate that X&Y actually investing its liquid asset to open new stores. Inditex is not in a comfortable level as X&Y as their liquidity ratios are below recommended level.

Probably this is because Inditex is opening stores in an aggressive rate unlike X&Y (X&Y maintained a steady 10 to 15 per cent new store opening every year) and that’s why using up liquid assets to finance fixed investments. But, Inditex is showing improvements in liquidity level year on year probably because they are not as aggressive as before in fixed investments. 21 3. 2. 4 Risks ratios Financial gearing ratio X&Y: Year Long-term liabilities, SEK m Equity and reserves, SEK m Financial gearing, % 2006 780 27,779 2. 81 2007 807 32,093 2. 51 2008 2,414 36,950 6. 53

H&M: Debt to Equity 100 80 60 % 40 20 0 2006 Year 2007 2008 Equity and reserves Long-term liabilities Inditex: Year Long-term liabilities, Euro m Equity and reserves, Euro m Financial gearing, % 2006 387 3,471 11. 15 2007 430 4,217 10. 20 2008 637 4,749 13. 41 22 Inditex: Debt to Equity 100 80 60 % 40 20 0 2006 Year 2007 2008 Equity and reserves Long-term liabilities Financial gearing is used to describe the relationship between the Company’s debt and equity shareholders funds. Gearing is normally calculated by dividing the Company’s long-term liabilities by its equity and reserves.

A highly geared company is one where there is a high proportion of debt to equity, and can be considered a risky investment as there is a higher likelihood of the company being unable to pay its large debts. From the table above we can see X&Y maintained a very low financial gearing level all the year under consideration. For Inditex the though the financial gearing level is higher than X&Y’s but still the level is quite low and in safe zone. These low levels of gearing made both X&Y and Inditex very safe place to invest as they are in quite strong position to pay back debts when necessary.

This low gearing helps to keep up the share price high for both X&Y and Inditex. In the year 2008 the gearing level was highest in last three years of 6. 53 per cent compared to last year’s 2. 51 per cent and 2. 81 per cent for year 2006. This is mainly because significant increase in long-term liabilities over year 2008; from SEK 807 m in 2007 to SEK 2,414 m. Increase in gearing probably in some extent may present X&Y is becoming riskier investment. 23 Interest cover: X&Y: Year Profit before interest and tax, SEK m Interest expense, SEK m Interest cover, times 006 15,298 -5 3,060 2007 18,382 -5 3,676 2008 20,138 -8 2,517 Inditex: Year Profit before interest and tax, Euro m Interest expense, Euro m Interest cover, times 2006 1,340 -11 122 2007 1,636 -5 327 2008 1,571 -9 175 The interest cover shows whether the company’s profit before interest and tax well enough to pay the interest expenses comfortably. Interest cover ratio is a very important risk ratio as inability to pay interest may lead a company to administration or probably liquidation. According to www. investopedia. com, ‘When a company’s interest coverage ratio is 1. or lower, its ability to meet interest expenses may be questionable. ’ X&Y and Inditex both had unusually high level of interest cover ability during 2006 to 2008. This is because both of them are highly dependent on equity finance and they use their high profit to run the business (from both operational and strategic point of 24 view) other than taking interest bearing loans and liabilities. The situation is unusual but true! 3. 2. 5 Investors’ ratios Earnings per share (EPS): Year X&Y: EPS, SEK EPS, GBP Inditex: EPS, Euro EPS, GBP 2006 2007 2008 13. 05 0. 97 16. 42 1. 5 18. 48 1. 50 1. 61 1. 07 2. 01 1. 50 2. 02 1. 82 NOTE: Please lookup at appendix 01 for workings. EPS indicates how much profit per share available to the company to distribute to the general shareholder. www. investopedia. com explains, ‘Earnings per share is generally considered to be the single most important variable in determining a share’s price. ’3 Financial management of a quoted company always try hard to report an increase of earning per share. X&Y’s earning per share was SEK 13. 05 in the year 2006 and that was increased by 25. 82 per cent for year 2007 to

SEK 16. 42 and for the year 2008 reported earning per share was SEK 18. 48 with an increase of 12. 55 per cent from previous. X&Y maintained same amount of shares during 2006 to 2007 of 827,536,000. 3 Check for Harvard Referencing system 25 Though Inditex had more earning per share then X&Y during 2006 to 2008 but they had a lower rate of increase in EPS; 24. 84 per cent to 2007 and 0. 50 per cent to 2008 from previous year. Dividend per share (DPS): Year X&Y: DPS, SEK DPS, GBP Inditex: DPS, Euro DPS, GBP 2006 2007 2008 11. 50 0. 85 14. 00 1. 07 15. 50 1. 26 . 84 0. 56 1. 05 0. 78 1. 06 0. 96 NOTE: Please lookup at appendix 01 for workings. DPS to EPS Comparison 2 1. 8 1. 6 1. 4 1. 2 1 0. 8 0. 6 0. 4 0. 2 0 2006 2007 Year 2008 H&M EPS H&M DPS Inditex EPS Inditex DPS NOTE: DPS to EPS comparison table is based on translated currency. ?/Share 26 Dividend per share indicates how much of profit is distributed to the per share holder. Growing dividend per share signals confidence and can be a sign that the company’s management believes the growth can be sustained. Dividend per share can highly influence share price.

X&Y maintained a dividend per share growth from 2006 to 2008 which is obviously a very good news for its shareholders. But, Inditex’s dividend per share remained almost same in year 2007 and in year 2008 after a 25 per cent growth in 2007. Dividend payout ratio: Dividend Payout Ratio 100 80 60 % H&M Inditex 40 20 0 H&M Inditex 2006 88. 14 52. 3 2007 85. 26 52. 16 2008 83. 87 51. 83 NOTE: Dividend payout ratio is calculated based on presentation currency not on translation. Dividend payout ratio shows how much of the earnings available to distribute are actually distributed. Higher dividend payout atio indicates a mature a company performance. X&Y distributed 88. 14 per cent of earning per available to per share holder in 2006. This high rate of divided payout ratio might indicate that as a family owned business X&Y is distributing most its profits to its family members other than investing in business expansion. In 2008 the rate was downed to 83. 87 per cent. This is probably 27 because of they are retaining more earnings to finance business growth as they did not issued any new shares. Inditex tried to maintain a balanced dividend payout rate and that ranged from 51. 3 per cent (in 2008) to 52. 30 per cent (in 2006). The reason of their lower payout ratio is that they are retaining a good portion of earnings to finance (in addition share issues, borrowings) their investments i. e. expansions. 4. STRATIGIC EVALUATION 4. 1 SWOT analysis SWOT analysis is a widely practiced method during strategic planning to identity strengths, weaknesses, opportunities and threats a business has. 4. 1. 1 Strengths Strong brand name and X&Y was the largest cloths retailer of Europe till 2006 in terms of revenue earned.

Now in Europe its position is number two and in the world number three. Interbrand ranked X&Y as the world’s 21 no. brand in their latest 2009 report and that is one step forward from last year. Worldwide presence X&Y has 1,738 stores in 33 different countries and the number is increasing by 10 to 15 per cent every year. Though X&Y’s main market is in European countries but X&Y reached from Japan to United States via China, Saudi Arabia, Oman, Egypt and so forth. This diversification gave X&Y a great flexibility to deal with the adverse geo-political, economic and demand fluctuations.

Strong revenue growth Despite the fact that X&Y lost its top position to Inditex in 2006 (in terms of revenue earnings), X&Y maintained its growth on revenue earnings. X&Y hit by recession 28 and weaken pound sterling during 2008 but it had a 13 per cent increase in sales compared to last year to SEK 88,532 m. 4. 1. 2 Weaknesses Weather forecast As a clothing retailer X&Y has to rely highly on weather forecast. Wrong forecast can result a very adverse sales which happened in 2006. Adetunji, Lydia cited X&Y, ‘the start of the season has been delayed due to the cold weather in March’. (Financial Times, 18 April 2006). Weather forecast cannot always be accurate and the source is always sophisticated. Family owned X&Y is viewed as a family run business. Its substantial amount of shares is owned by Persson family. Present chairman Stefan Persson alone holding 186,274,400 shares which is 22. 51 per cent of the total issued share. His related parties are holding another 100,400,000 shares which is extra 12. 13 per cent of the total. This very high level of family control may cause divested share price if problem comes to the family relationship.

High dividend payout ratio (more than 80 per cent from year 2006 to 2008) of X&Y also indicates that as largely family owned business X&Y paying too much to its shareholders, i. e. mostly to the Persson family, while it should invest more in expansion as its top rival Inditex. Over reliance on south-east Asia X&Y’s 60 per cent sourcing are from countries in south-east Asia which are basically developing countries. In these places monitoring of child labour, minimum payment, working environment, health and safety, environmental pollution etc. re not always well regulated or very hard to keep an eye always. Though X&Y constantly trying their best to make sure that there is no offensive act which may make their garments 4 Check for Harvard Referencing system 29 unethical but recent acquisitions of using child labour against Nike and Primark showed that operating in this region always requires constant care and monitoring. 4. 1. 3 Opportunities New markets Because of current economic downturn end-consumers changed their test to cheaper priced items.

As X&Y’s business theme is, ‘fashion and quality at best price’ and as they practically do so; there is a wide market still to reach. X&Y’s increase in year on year sales indicates its growing demand. By 2009 X&Y planned to open 225 new stores worldwide including in two new cities Beijing and Moscow. Online Shopping Though X&Y is operating its stores in 34 countries but it has online shopping facility only in few of these countries. Today’s extreme competition requires businesses to use all medium to grab the market. X&Y still has to work a lot more to become a first choice to the online shoppers.

New range X&Y has wide range of clothing collections for the whole family. Their garments are considered as best value for money. But, even though, X&Y garments are mostly considered as bargain priced items and mainly targeted to vast middle-class market. In 2007 X&Y added a new store chain called COS which targeted ‘. . . a slightly older and wealthier shopper’. (Rigby, Elizabeth. Financial Times, 15 March 2007). But, by the end of 2008 the number of COS stores were only 13 which is very few compared to X&Y’s total 1,738.

There is still a different but big market to grab for X&Y. 30 4. 1. 4 Threats Textile quotas Textile quotas are capable to bring extreme affect X&Y’s performance and profitability as change in sourcing can cause make rise in production cost. This is something X&Y cannot control and highly dependent on political decisions. X&Y’s 60 per cent sourcing are from countries in south-east Asia of which 50 per cent is from China. Changes in textile import quotas can highly affect the production costs. Foreign currency X&Y is highly affected by currency exchange rate ups and downs.

X&Y benefited from weaken US dollar in year 2006 and 2007 as it is the main currency to pay suppliers but also felt trouble because of weaken pound sterling in 2008. Purchasing behaviour X&Y always affected by geo-economic conditions. For example, recent economic downturn pushed consumers to bring change in purchasing behaviour e. g. cut unnecessary buying. Fashion Fashion is a perishable item and there is always a risk that customers may not welcome any particular collection. X&Y always has to act one step ahead to determine a right mix between fashion and volume expected to sell. 1 5. CONCLUSION X&Y X&Y Group gained a constant growth over 2006 to 2008. Though X&Y lost its position as Europe’s biggest cloth retailer to Inditex in 2006 but head of investor relations Nils Vinge told not to worry as their goal is not becoming the biggest but to provide customers value for money garments and thus maximising profit. As an attempt to boost sales X&Y collaborated with a number of leading fashion designers to bring some exclusive range. In 2007 X&Y had collection form Italian designer Roberto Cavalli and in 2008 from Japanese company Comme des Garcons.

Recently X&Y had collection from British designer Matthew Williamson and Jimmy Choo Ltd. Customers had to queue up outside participating stores to buy these collections. X&Y’s performance over last three periods are very satisfactory and the way they recovered from recent recession that shows their mature business strategy. Their profitability ratio to liquidity ratio, risk ratio to investment ratio all presents outstanding performance and, moreover, its overall business environment and business strategy, makes it a lot safer place to invest.

X&Y’s plan is to grab the market share gradually in a steady 10 to 15 per cent new stores opening every year. They indeed are doing so as they opened net 152 stores in 2006, 177 in 2007 and 216 in 2008. In this time of credit crunch people are more likely prone to buy bargain priced items like X&Y’s. ‘We continue to favour X&Y where cost issues are less pronounced and exposure to problem economies is less. We would not expect X&Y forecasts to erode as quickly, nor stay depressed for as long, as at Inditex,’ said Shiret, Tony at Credit Suisse. (Cited by Morarjee, Rachel. Financial Times, 11 December 2008). 2 6. BIBLOGRAPHY Books: F5 Performancen Management; by Kaplan Financial; 2008 edition F5 Performancen Management; by BPP Learning Media Ltd; 2008 edition F7 Financial Reporting; by Kaplan Financial; 2008 edition F7 Financial Reporting; by BPP Learning Media Ltd; 2008 edition P2 Corporate Reporting; by Kaplan Financial; 2009 edition P5 Advanced Performance Managemetn; by Kaplan Financial; 2009 edition Measuring Business Performance; by Andy Neely; 1998 edition Key Management Ratios (Financial Times Series); by Ciaran Walsh; October 2008 edition WebPages: – http://moneyterms. co. uk/ http://www. nvestopedia. com/? viewed=1 http://www. hoovers. com/X&Y/–ID__100801–/free-co-profile. xhtml http://www. hoovers. com/free/co/news/detail. xhtml? ID=100801&ArticleID=2 00910151126M2______NORDIC___f1dc00000138d0e7_3600. 7&source_typ e%5B%5D= – http://www. hoovers. com/X&Y/–ID__100801–/free-co-profile. xhtml http://www. hm. com/gb/abouthm/factsabouthm/thehmbrand__thhmbrand. nhtm l – http://www. x-rates. com/cgi-bin/hlookup. cgi 33 – http://bx. businessweek. com/hm/view? url=http%3A%2F%2Fwww. sbpost. ie% 2Fpost%2Fpages%2Fp%2Fstory. aspx-qqqt%3DIRELAND-qqqm%3Dnewsqqqid%3D38484-qqqx%3D1. asp – ttp://bx. businessweek. com/hm/view? url=http%3A%2F%2Fc. moreover. com %2Fclick%2Fhere. pl%3Fr1855896761%26f%3D9791 – http://www. allheadlinenews. com/articles/7013355516 http://bx. businessweek. com/hm/view? url=http%3A%2F%2Fwww. businesswe ek. com%2Fglobalbiz%2Fcontent%2Fdec2006%2Fgb20061212_949380. htm – http://www. ft. com/cms/s/0/0020d242-ee2f-11dd-b791-0000779fd2ac. html http://www. ft. com/cms/s/0/440dce96-ac4c-11db-9318-0000779e2340. html http://www. ft. com/cms/s/0/82c061b8-8f11-11dd-946c-0000779fd18c. html http://www. ft. com/cms/s/0/ebc8a3d4-ee6e-11dd-b791-0000779fd2ac. html http://www. ft. om/cms/s/0/7b38831e-d29b-11db-a7c0-000b5df10621. html http://www. ft. com/cms/s/0/89fd2f0a-ace2-11db-9318-0000779e2340. html http://www. ft. com/cms/s/0/cbe27960-c776-11dd-b611-000077b07658. html http://www. ft. com/cms/s/0/59539d04-a8a3-11dc-ad9e-0000779fd2ac. html http://www. ft. com/cms/s/0/f6d51b82-4f7b-11dd-b050-000077b07658. html http://www. ft. com/cms/s/0/21b88446-8498-11dd-b148-0000779fd18c. html http://www. ft. com/cms/s/0/1e835b98-1419-11dc-88cb-000b5df10621. html http://www. ft. com/cms/s/0/7c897bd4-3d97-11dd-bbb5-0000779fd2ac. html http://www. brookes. ac. uk/library/resources/harvard. pdf http://www. nvestopedia. com/terms/i/interestcoverageratio. asp http://www. investopedia. com/terms/e/eps. asp 34 7. REFERENCES: A Adetunji, Lydia Financial Times. 18 April 2006. Article heading: ‘Cold weather hits March sales at X&Y’ Retrived from: http://www. ft. com/cms/s/0704f8d6-ceb6-11da-925d- 0000779e2340,Authorised=false. html? _i_location=http%3A%2F%2Fwww. ft. com%2F cms%2Fs%2F0%2F0704f8d6-ceb6-11da-925d0000779e2340. html&_i_referer=http%3A%2F%2Fsearch. ft. com%2Fsearch%3Fquery Text%3DCold%2Bweather%2Bhits%2BMarch%2Bsales%2Bat%2BH%2526M%2B Accessed: 17 October 2009 B Bach, David is a financial author.

His books includes: Start Late, Finish Rich and The Automatic Millionaire. – Braithwaite, Tom Financial Times. 11 July 2008. Article heading: ‘Low-cost clothes era could be nearing end’. Retrived from: http://www. ft. com/cms/s/0/f6d51b82-4f7b-11dd-b050- 000077b07658. html Accessed: 17 October 2009 C Crawford, Leslie and Munter, Paivi Financial Times. 29 March 2006. Article heading: ‘Inditex ousts X&Y as clothes leader’ Retrived from: http://www. ft. com/cms/s/0/0af43308-bf02-11da-9de7- 0000779e2340. html Accessed: 17 October 2009 35 E Eriksen, Rolf X&Y Annual Report 2008 (Part-1). Page: 7. Retrived from: http://www. y. com/filearea/corporate/fileobjects/pdf/en/ANNUAL_REPORT _ARCHIVE2008__ITEM_3_1237462089192. pdf Accessed: 21 November 2009 G Goodway, Nick. Evening Standard. 04 October 2009 Article heading: ‘Shoppers’ passion for fashion sees Next put up profit forecasts again’ Retrived from: http://www. thisislondon. co. uk/standard-business/article- 23764174-shoppers-passion-for-fashion-sees-next-put-up-profit-forecastsagain. d o Accessed: 05 October 2009 H X&Y Annual Report: Retrieved from: http://www. hm. com/gb/investorrelations__investor. nhtml Accessed: 20 November 2009 – X&Y Sales Development: Retrieved from: http://www. y. com/gb/investorrelations/financialreports/salesdevelopment__i nvestorsalesdevelopment. nhtml Accessed: 16 October 2009 – X&Y Share: Retrieved from: http://www. xy. com/gb/investorrelations/theshare/theshare__aktiekurs. nhtml? b hje=1&bhqs=1 Accessed: 16 October 2009 36 – X&Y highest trading share: Retrieved from: http://www. xy. com/gb/abouthm/factsabouthm/thehmbrand__thhmbrand. nhtml Accessed: 11 October 2009 I Inditex: http://www. inditex. com/en/who_we_are/our_group M MacNamara, William Financial Times. 30 September 2008. Article heading: ‘X&Y shares fall 10% as its profits disappoint’ Retrived from: http://www. t. com/cms/s/0/82c061b8-8f11-11dd-946c0000779fd18c. html Accessed: 25 October 2009 – Morarjee, Rachel Financial Times. 11 December 2008. Article heading: ‘European rally fades as recession fears return’ Retrieved from: http://www. ft. com/cms/s/0/cbe27960-c776-11dd-b611- 000077b07658. html Accessed: 20 October 2009 R Rigby, Elizabeth Financial Times. 25 January 2007. Article heading: ‘X&Y plans premium chain’ Retrieved from: http://www. ft. com/cms/s/0/440dce96-ac4c-11db-9318Mori, Akira is the President and CEO of Mori Trust Co. , Ltd 0000779e2340. html Accessed: 20 October 2009 Financial Times. 5 March 2007. 37 Article heading: ‘X&Y launches upmarket brand’ Retrieved from: http://www. ft. com/cms/s/0/7b38831e-d29b-11db-a7c0000b5df10621. html Accessed: 20 October 2009 8. APPENDICES: 38 Appendix: 01 2006 X&Y Sales, SEK m Net Profit, SEK m Dividend, SEK m Number of share Net profit margin, % DPS, SEK EPS, SEK Dividend Payout Ratio, % SEK to GBP rate* Sales, GBP m DPS, GBP EPS, GBP Inditex Sales, Euro m Net Profit, Euro m Dividend, Euro m Number of shares Net profit margin, % DPS, Euro EPS, Euro Dividend Payout Ratio, % Euro to GBP rate** Sales, GBP m DPS, GBP EPS, GBP 8,196 1,002 524 620,900,000 12. 3 0. 84 1. 61 52. 30 0. 662792 5432 0. 56 1. 07 9,435 1,250 652 620,900,000 13. 25 1. 05 2. 01 52. 16 0. 745967 7038 0. 78 1. 50 10,407 1,253 662 621,700,000 12. 04 1. 06 2. 02 52. 83 0. 903351 9401 0. 96 1. 82 68,400 10,797 9,517 827,536,000 15. 79 11. 50 13. 05 88. 14 0. 074314 5,083 0. 85 0. 97 78,346 13,588 11,586 827,536,000 17. 34 14. 00 16. 42 85. 26 0. 0762022 5,970 1. 07 1. 25 88,532 15,294 12,827 827,536,000 17. 28 15. 50 18. 48 83. 87 0. 0813499 7,202 1. 26 1. 50 2007 2008 * Rate as at 30 November or next earliest date ** Rate as at 31 January or next earliest date 1

Appendix: 02 2006 X&Y Sales, SEK m Net Profit, SEK m Dividend, SEK m Number of share Net profit margin, % DPS, SEK EPS, SEK Dividend Payout Ratio, % SEK to GBP rate* Sales, GBP m DPS, GBP EPS, GBP Inditex Sales, Euro m Net Profit, Euro m Dividend, Euro m Number of shares Net profit margin, % DPS, Euro EPS, Euro Dividend Payout Ratio, % Euro to GBP rate** Sales, GBP m DPS, GBP EPS, GBP 8196 1002 524 620900000 =(B28/B27)*100 =(B29*1000000)/B31 =(B28*1000000)/B31 =(B35/B36)*100 0. 662792 =B27*B39 =B35*B39 =B36*B39 9435 1250 652 620900000 =(C28/C27)*100 =(C29*1000000)/C31 =(C28*1000000)/C31 =(C35/C36)*100 0. 45967 =C27*C39 =C35*C39 =C36*C39 68400 10797 9516. 66 827536000 =(B7/B6)*100 =(B8*1000000)/B10 =(B7*1000000)/B10 =(B14/B15)*100 0. 074314 =B6*B18 =B14*B18 =B15*B18 78346 13588 11585. 5 827536000 =(C7/C6)*100 =(C8*1000000)/C10 =(C7*1000000)/C10 =(C14/C15)*100 0. 0762022 =C6*C18 =C14*C18 =C15*C18 2007 * Rate as at 30 November or next earliest date ** Rate as at 31 January or next earliest date 1 2 SKILLS AND LEARNING STATEMENT OXFORD BROOKES UNIVERSITY Prepared by: Registration no: 1,995 words 3 CONTENTS: 1. Introduction 2. Meeting and presentation experience 2. 1 First meeting 2. 2 Second meeting 2. Third meeting 3. Self performance evaluation 4. Interpersonal and communication skills 5. Development in accountancy studies 6. Conclusion 4 1. INTRODUCTION Writing a research and analysis report for my long waiting and expecting Oxford Brookes University BSc degree was not a straightforward thing for me. I had to overcome a number of hurdles for this research report. But, when I finished my research and analysis project I found that this gave my ACCA study a compact form. I also felt that I had a considerable improvement in my interpersonal communication, analytical, decision making and time management skills.

I found this report writing a great deal of help for my study and very hopefully for my future career. 2. MEETING AND PRESENTATION EXPERIENCE 2. 1 First meeting After my results published for June 2009 exams, which confirmed my completion of ACCA Skills module, I was so delighted that now I can start my final step to get the BSc, the writing of research and analysis project. I browsed ACCA website’s BSc degree section to get information and report writing guidelines. I carefully browsed through all twenty topic areas and tried to understand and evaluate which one is the most relevant for my prior study and for my future career.

I found topic number eight ‘The business and financial performance of an organisation over a three year period’ is the most relevant one. I selected X&Y as the primary business which’s performance I evaluated and selected Inditex as X&Y’s cometitor to compare performance. Before my very first meeting I attended a seminar organised by …… on Oxford Brookes University BSc. The seminar was presented by Mr ……, a ….. tutor. As I never wrote any research and analysis report, I was very tensed how exactly I am goning to start. ….. resentation gave me some level of confidence as he mentioned that I already gained necessary knowledge through my ACCA studies; now I have to organise my knowlegde in an effective way and implement those in a real life scenario. From the ACCA website’s BSc degree section I got the idea that I will have to complete three possible areas for the report. I decided before my first meeting with 5 my mentor I will complete the first part of the report which is setting project objectives and determine overall research approach. My mentor advised me to email him my progress three days before our first meeting.

I was confident to do so but as always waited for the very last minute to send him the email. Unfortunately something turned up in the personal life and I failed to send him any mail at all as I had very poor progress and eventually I had to cancel our first meeting. This situation gave me a very good lesson as I shall always make my plan taking consideration of possible adverse situaltions and should not wait for the very last minute. I gave my apologies for cancelling the appointment and requested for another apointment. This time I emailed my progress three days before our first meeting as I should have done.

During the first meeting, I mentioned to my mentor that I am struggling to gather information on X&Y and Inditex over last three and half years. I found their websites are not sufficient anough and I need some independent source. My mentor Mr Mark Cleary gave me some possible sources e. g. Financial Times, London Stock Exchange, Yahoo Finance, City Business Library. He instructed me not to over rely on business’s own websites as they are not going to say what is wrong about them. I found weaknesses of my information gathering and knew what to do now.

Finally, I was cleared my objectives that it is not only to evalute financial performance but also business performance. 2. 2 Second meeting As I learnt from my first meeting I choosed my second meeting date keeping in hand enough time. I sent my progress three days before through email as advised. Before meeting with the mentor for the second time I browsed through websites after websites, took print out of necessary webpages, visited local library to get books on report writing and visited City Business Library to gather information. 6 Presentation currency of X&Y is in Swedish Krona and for Inditex that is in Euro.

During my second meeting I discussed with my mentor on possibility and effectiveness on converting both currency in a common one. And then, I decided upon that, as I am now in the UK, whereever necessary I will converte both in GBP to present a better understanding. Moreover, I also understood that I shall also emphasis on non-fiancail matters and external factors which may effected the business and financial performance. 2. 3 Third meeting For the third meeting, which comprises a fifteen minute presentation, I prepared a MS Power Point slide show and made a plan how I will do the presentation and which areas I will cover.

During the presentation I said more than I planned to say because I knew a lot about the two companies and felt over enthusiastic and eventually crossed the time limit. I learnt that I should have stick with the plan because my mentor has his own schedule to follow. This presentation was a very good experience for me as this was the first time I made any presentation this long and now I am more confident on my ability. At the end of presentation there was a Q&A session where my mentor asked me couple of questions on which he needed clarification.

Answering his questions also helped me to be more aware of my research area. After the all three meetings I found that I had good command in financial and analytical techniques but was weak in time management and with better planning this problem can be improved. But, still, I think I would be happy if I had one more meeting. 3. SELF PERFORMANCE EVALUATION 7 After coming across this long-way if I look back then I realise that evaluating business and financial performance of a very big business like X&Y was not easy. But, choosing topic number 8 was relevant to my study and future career plan.

This report writing gave me an opportunity to apply my learning in real life scenario. I am more confident on my learning now that I believe I can now deal with any given situation to make performance appraisal from business and financial perspective. This was the first research and analysis project I had written so far. That’s why I was confused and tensed at the beginning. My meetings with my mentor and consulting with fellow students gave me a great deal of help. I had almost forgotten my MS Excel knowledge because of not using the software for a very long-time.

This project gave me the opportunity to refresh my knowledge on MS Excel. During my research I also had to prepare for my ACCA professional level study. I had to do the research under a great deal of time pressure and information limitations. I emailed to both X&Y and Inditex to get some information which I was lacking during my research but they replied, ‘any information not published in the website is confidential’. During my research and analysis I enjoyed very much to learn the wide perspective of an organisation and lot different issues, e. . currency matter to weather issues which could affect the financial and business performance. At the end, I am satisfied that I completed the research and analysis project on time. I am happy that I was able to evaluate the financial and business performance of X&Y from both internal and independent views. As an ACCA student; appraising business and financial performance is not the end, I also looked at X&Y’s trading if it is ethical or not. My research extended to if X&Y is using child labour or making environmental pollution.

But, I found out that they have effective control in place to monitor and prevent any unethical issues which may cause any damage to the society. 4. INTERPERSONAL SKILLS AND COMMUNICATION SKILLS 8 Demonstrating interpersonal skills and communication skills were an integral part for my research and analysis report writing. I had to communicate with my friends, fellow students to get an understanding on how to do a research project. I also had three meetings with my mentor including a fifteen minute presentation. I had to email my progress three days prior of my meeting with my mentor.

During my report writing process if I found any problem or got a question which I could ask to my mentor I wrote those down in my diary and sequenced those to ask to my mentor during meetings. My meetings with my mentor were not one sided; it was communicative from both sides. Every meeting length was around more than half an hour. I described my situation, my lacking and my plan and my objective to my mentor. On the other hand, my mentor pointed out areas where I needed to improve and ways of doing so. During my meetings I always kept a pen and paper handy to take notes of important points my mentor made.

English is not my first language. So I had or still having problems with best word choose or using right grammar. Using spell check helped me to overcome wrong spelling. I also wrote two emails to investor relationship department of X&Y and Inditex. Both of the companies thanked me for showing my interest on them and for choosing them as my research topic. But, though, they refused to provide any additional information. While I came across this research and analysis report writing I had to demonstrate not only my writing skills but also my listening, communication and presentation skills.

All of which are very important for a university graduate. The presentation I made during my third and final meeting was with a multimedia projector. My mentor gave me feedback at the end and, among other thighs, he pointed out that I should look more behind to see the big screen because sometimes slides may not change in the big screen and audience will get confused. 9 5. DEVELOPMENT IN ACCOUNTANCY STUDIES By doing this research and analysis project I had a chance to apply my acquired knowledge in a real life situation.

I had to use all of my knowledge from ACCA studies in same time, e. g. from ration calculation and interpretation to non-financial performance appraisals. I had to browse through annual reports including financial statements of Europe’s ranked one and two clothing retailers. I had to understand accounting jargons used in the financial statements. I met with some entries of the financial statements, e. g. foreign currency exchange gain or loss, forward contract, hedging, etc. , on which I have had very little or no knowledge.

I also had to understand factors affecting multi-national companies like volatility of currency exchange rates, weather variations, different consumer demand, and different business strategy. In some point I felt I took a great challenge by choosing two very big multinational companies like X&Y and Inditex. But, at the end I am very confident and happy that I completed the report as I should have been. This research and analysis project gave me confidence of making an appraisal of a big organisation from business and financial perspective which I think will give a great deal of help in my future career.

I am now more aware of how the companies publish annual reports and their contents. After doing the presentation I believe I will find it easier and comfortable to make a presentation in front of my colleagues in the future. 6. CONCLUSION Finally, I should say that I have learnt and applied so many different skills and techniques in this project that this will help me to be a better accountant. The amount of research work I had done during last three months I believe this will fulfil the lacking of my no work experience at least in some extent. 10 1 2 3 4 5 6



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