Audit Plan for Metcash

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Audit Working Paper of Specified Planing Issue For Metcash Limited. Auditors Pu Yang Shuning Yao Wenting Liu Anqi Dong Lin Chai 1. SWOT analysis a) Strengths: • Metcash is Australia’s largest independent wholesaler of food, liquor and general merchandise products by market capitalization (IBIS World 2014). • Metcash owns a well-diversified portfolio with core business in food & grocery, whilst strengthening its exposure to resilient areas of hardware and liquor as well as higher-margin area automotive (Hoey 2013). Referring to its segment disclosure notes, sustained growth is achieved by the network expansion in food & grocery (53 new stores and 63 extensions), 14.2% profits growth in liquor, and 23.6% sales increases in hardware and automotive sectors (Metcash 2014). • Unlike its giant supermarket competitors, i.e. Westfarmers and Woolworths (IBISWorld 2014), Metcash seizes a niche market to wholesale to independent retailers (Metcash 2014). The business model helps Metcash differentiate itself in the fierce competition and achieve cost effective. • The world-class logistic system arms Metcash with supply chain efficiency (Metcash 2014) while the geographical diversification reduces the business risks on profits and generate high level in economics of scale (Hoey 2013). • Metcash expands its divisions and achieves synergy through a series of acquisitions according to Interim 2014 Metcash Limited Earnings Conference Call – Final (2013), evidenced by its acquisition of 75.1% Automotive Brands Group (ABG) (Burton 2012) and an estimated $5.6 billion synergy over acquisition of Australian Truck and Auto Parts Group (ATAP) (Hoey 2013). b) Weaknesses: • Metcash’s its largest segment (67%); food & grocery, experiences $73.6 million profit decrease in 2014, therefore resulting in 11.7% decline of EBITA and 10.9% shrink of underlying profit

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