ASOS annual report questions PDF

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Asos Plc Prof A. Marshall 2020

TUTORIAL AG151 WEEK

Week 9 – Tutorial 5 Additional Multiple Choice Question on Dividend Valuation Models. Q1.

Next year’s earnings per share of firm Z are expected to be 12p. The firm retains 60% of earnings in perpetuity for business investment generating a return of 15%. Investors in Z’s shares require a rate of return of 10%. What is the current share price? a. b. c. d. e.

Q2.

32p 80p 160p 200p None of the above.

You expect KT Industries (KTI) will have earnings per share of £4 this year and expect that they will pay out £1.50 of these earnings to shareholders in the form of a dividend. KTI's return on new investments is 15% and their equity cost of capital is 12%. What should be the value of a share of KTI's stock?

Q3. – Agency problem At a recent board meeting of your company, a non-executive director suggested that the company’s remuneration committee should consider scrapping the company’s current share option scheme, since executive directors could be rewarded by the scheme even when they did not perform well. A second non-executive director disagreed, saying the problem was that even when directors acted in ways which decreased the agency problem, they might not be rewarded by the share option scheme if the stock market were in decline. Required: Explain the nature of the agency problem and discuss the use of share option schemes as a way of reducing the agency problem in your stock-market listed company. Conflict of interest between the different directors as one would get a pay-out and one wouldn’t.

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Asos Plc Prof A. Marshall 2020

TUTORIAL AG151 WEEK

Understanding the contents of an Annual Report – ASOS PLC 2020 Note - You should consult the full copy of the annual of Asos Plc on Myplace to answer all the questions. Note this is nearly 130 pages so do not print out!

Questions on Asos Plc Group What is the mission of the company?

Page numbers and Notes To be the world’s number 1 fashion destination for fashion-loving 20-somethings

What are the financial and non-financial highlights?

Financial – revenue: 3263.5m. cash generation: 258.6m. gross margin: 47.4%. profit before tax: 142.1m. Non financial – influencer content gets huge engagement from customers.

What was the revenue of the company and what is its gross margin under the key financial measures?

Revenue - £3263.5mil Gross margin – 47.4%

What is the gender diversity of the Board?

67% men 33% women

How many active customers does ASOS have?

23mil active customers worldwide

How does the company show that it is aware of the users of this annual report?

They talk about social goals and things that are unnecessary in the financial report, this is the parts for the customers.

What international sales did the company make in 2020? What were the sales in UK in 2020?

Retail sale int – EU: £1005.3m. US: £401.9m Retail sale UK: £1175.9m

How many employees (staff) does the 4000+ company have in 2020?

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Asos Plc Prof A. Marshall 2020

TUTORIAL AG151 WEEK

How much did the chief executive director make in fees and emoluments in 2020?

Base salary - £571,000 Benefits - £23,036 Pensions - £73,828

Who is the largest shareholder of Asos in 2020?

The holding company is the largest shareholder with The Capital Group Companies, which holds a 10.38% stake being the 2nd largest.

How many shares do the directors’ hold?

What are the main features corporate governance report?

of

the

Describe some of the main operational risks that Asos identifies.

Who is the Chair of the remuneration committee?

Board structure – sets out governance framework and outlines the division of responsibilities between the chair and the CEO as agreed by the board and highlights the roles of the senior independent director, executive directors and non exec directors, and the committees. Pandemic second wave – a more harsher lockdown could be bad for the countries where asos have fulfilment centres and trading territories. Stock shortage – uncertainty around covid causes disruptions in the supply chain, leading to inability to invest. Foreign exchange rate exposure – as company is UK based everything is in £, but increase in sales in other countries could mean FERE, the exchange rates creates increased risk of profitability. Karen Geary

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