Qantas Airways Limited

Prepared by: VINCENT MICAH

FARRUKH, MUHAMMAD BABURBUSAYO FEMI OJO KORNILOV VITALY

COMPANY PROFILE

• Established in 1920, • Australia’s largest domestic and international

airline• Employs approximately 32,500 personnel

Business and Investment

• Primary Business is transportation of passengers • Divided into three groups.• Commercial group:- Includes sales and

distribution, commercial planning and alliances• Customer and Marketing:- Includes customer

experience, cabin crew, in-flight services and marketing

• Operations Group:- Comprises of engineering, airports, catering, flight operations, operations planning and control and Qantas Aviation Services.

Flight route• Operating around 5,600 flights a week to 59

cities and regional destinations in all states and mainland territories

Fleets• Operates a fleet of 252 aircraft, comprising of

Boeing 747s, 767s, 737s and 717s, Airbus A380s, A330s and A320s, Bombardier Dash 8s and Bombardier Q400s

Cooperate Social Responsibilities

• The Qantas foundation, established as a charitable trust in 2008.

• The foundation also aims to consolidate and expand on some of the Qantas Groups existing charitable and community endeavours

• Others environment social involves reducing the impact of carbon emissions on the environment, sponsors sports, health foundations

Strategies

5 year strategic plan.• Changes are expected to strip tens of millions of

dollars of operating costs • These include Cutting :1000 jobs from its 36000

workforce• Shifting its base closer to Asia• Changing its fleet plan by buying lots of the fuel

efficient Airbus• Seeking more strategic alliances

Profitability Ratio

• Profitability ratios show how well a company is able to perform and return profits to the business

• Qantas profitability increases in 2010 and 2011

• showing that the company is better prepared to handle downtrends brought on by adverse conditions of the global financial meltdown

Year/ Ratio 2007 2008 2009 2010 2011

Return on total assets

(ROA) 4.01% 3.77% 0.71% 0.86% 1.26%

Return on ordinary

shareholders' funds(ROSF) 8.56% 8.19% 1.66% 1.95% 2.89%

Return on capital

Employed (ROCE) 10.70% 8.44% 2.15% 2.82% 3.86%

Gross profit margin 7.34% 7.21% 1.57% 2.27% 1.76%

Net profit Margin 5.18% 4.71% 0.98% 1.24% 1.76%

Return on Equity 12.68% 12.94% 2.48% 2.89% 4.26%

Profitability Ratio

2007 2008 2009 2010 20110

2

4

6

8

10

12

Profitabilty

Return on ordinary shareholders' funds(ROSF)Return on total assets (ROA)Return on capital Employed (ROCE)Gross profit marginNet profit Margin

Financial Gearing Ratio

• The gearing ratio is the proportion of a company's debt to its equity

• where a high gearing ratio represents a high proportion of debt to equity and Vice-versa

• The interest cover ratio as at 2007 was at the high end which was 75% nevertheless in the year 2008

• Higher interest ratio returned in the year 2009 and went low again in the year 2010 to 2011.

• The financial leverage throughout the 5 years were on the average level but the net gearing ratio keep increasing from 2009 to 2011

• This indicates that that the airline has used more debt than the amount invested by its owners.

Gearing

Year/ Ratio 2007 2008 2009 2010 2011

Financial

leverage

3.16476 3.43513 3.47771 3.32887 3.39099

Interest

Cover Ratio

74.718 -24.8904 10.409 4.16 3.9646

NET

Gearing

ratios

27.6303 27.2193 32.7147 33.6733 41.2128

2007 2008 2009 2010 2011

-40

-20

0

20

40

60

80

100

Gearing

Financial leverage Interest Cover Ration NET Gearing ratios

Efficiency Ratio

• Efficiency ratios are used to analyse how well a company uses its assets and liabilities internally

• Qantas asset turn over period decline from 2009 to 2011 after an increment in the year 2008 which indicates that the company experience low turnover in utilizing it asset to generate sales

• PPE turnovers as well steadily decline from the year 2009 to 2011,this indicates the company effectiveness in using the investment in fixed assets to generate revenues declines at this years

• The working capital all through the year shows is on the negative side,

• That means Qantas is currently unable to meet its short-term liabilities with its current assets which indicate that Qantas is performing is not liquid.

EFFICIENCY

Year/ Ratio 2007 2008 2009 2010 2011

Asset turnover

period(days) 282 292 265 252 261

PPE Turnover 1.23 1.28 1.20 1.10 1.09

Working Capital

Turnover -17.432 -7.9231 -19.455 -33.672 -25.074

LIQUIDITY RATIO / SOLVENCY RATIO

• Liquidity Ratio is the ability of an entity to earn profit, pay its debts

• The better a company's solvency, the better it is financially.

• The Current Ratios shows Qantas Airways had a higher current ratio during the fiscal year 2009, 2010, and year 2011 respectively, ranging from 0.89, 0.93 and 0.90

• Quick ratio as well shown higher ratio in fiscal year 2007, 2010 and 2011 shows Qantas Airways had higher liquidity

• Operating Cash Flow Ratio at Qantas Airways is less than 1.0 throughout its fiscal years from 2007 – 2011.

LIQUIDITY RATIO / SOLVENCY RATIO

Year/ Ratio 2007 2008 2009 2010 2011

Current Ratio 0.86624 0.73859 0.88859 0.93447 0.90473

Acid Test Ratio 0.83851 0.71023 0.85136 0.88335 0.84507

Cash Flow

Operation Ratio 0.36184 0.27991 0.16816 0.20942 0.27137

2007 2008 2009 2010 20110

0.10.20.30.40.50.60.70.80.9

1

Liquidity

Current Ratio Acid Test RatioCash Flow Operation Ratio

Investment Ratio

• A ratio that helps to determine whether an investment in a particular entity is likely to be profitable and safe, from the ratio derived from Qantas

• Dividend per share increased drastically at 2008 but later went down at 2009, dividend pay-out ratio

• Dividend yield high in 2008 and dropped in 2009• No dividend payments for the year 2010 and 2011.• Earnings per share as Fiscal year 2007 to 2008 were high but

depreciated drastically at 2009 till 2011• price earnings Ratio was high 2009 till 2010 before it fell at 2011• This indicates that the company were more valued at the stock

market at 2009 till 2011.

INVESTMENT RATIO

2007 2008 2009 2010 2011

Dividend per share 6.69199 16.9651 2.50482 - -

Dividend payout ratio 37.8898 89.5013 81.8182 - -

Dividend yield ratio 1.71 7.97 1.78 - -

Earnings per share 24.69091 30.15966 4.431599 5.069519 7.193472

Operating cash flow per share 0.52902 0.543722 0.241704 0.279572 0.363324

Price earnings ratio 0.23 0.1 0.45 0.43 0.26

2007 2008 2009 2010 20110

10

20

30

40

50

60

70

80

90

100

Dividend per shareDividend payout ratioDividend yield ratio

2007 2008 2009 2010 20110

5

10

15

20

25

30

35

Earnings per shareOperating cash flow per sharePrice earning ratio

Company Performance Gross profit margin, Net Profit, Return on Investment

• The gross profit margin ratio indicates Qantas Airway’s financial health; this shows investors how much gross profit every AUD of revenue the company is earning

• Compared with company average, there was a slight fall at the year 2008, then a sharp decline in the gross profit at 2009 till 2011

• caused by lost in revenue / sale and Expenses, which was attributed to higher fuel prices, rising costs and falling demand as the global economy slows.

• Natural disasters and “major weather events” cost the airline A$224 million, including severe flooding and cyclones in Queensland, the Christchurch earthquake, the earthquake and tsunami in Japan and the Chilean volcanic ash cloud

Gross profit margin, Net Profit, Return on Investment

• Net Profit margin of the company also follows the same trend.

• The Return on investment using our ROE and ROA we could see that the returns fell drastically at 2009 from Net profit of 7.4 million of the previous year to 1.4million against 5.7 billion of Equity invested thought the ROE increase by 2% at the end of the 2011 fiscal year

• As higher the ratios shown in year 2010 and 2011, the more effective the company is at cost control. Compared with company control in previous 2 years

Liquidity

• The Current Ratios shows Qantas Airways had a higher current ratio during the fiscal year 2009, 2010, and year 2011 respectively, ranging from 0.89, 0.93 and 0.90

• Quick ratio also reflects the company's financial strength or weakness, higher ratio shown in fiscal year 2007, 2010 and 2011 shows Qantas Airways had higher liquidity, and lower ratio during year 2008 shows a lower liquidity

• Operating Cash Flow Ratio less than 1.0 throughout 2007 – 2011

20072008

20092010

2011

00.10.20.30.40.50.60.70.80.9

1

Liquidity

Current Ratio Acid Test RatioCash Flow Operation Ratio

Peer AnalysisQantas and Air-NZ

• Air NZ and Qantas, had low turnout profits in 2008.

• Comparing ROE Ratios, both have drastically decremented in the year 2009 due to the Economic meltdown

• Improvement has been observed in 2010 and much growth in 2011

• Average growth is faster, for Qantas than Air NZ, in the last 2 financial Years

NET PROFIT MARGIN:

Year/ Company 2007 2008 2009 2010 2011

Air New

Zealand 4.981378 4.671095 0.45563 2.026693 1.86593

Qantas 5.18077 4.71147 0.98268 1.24165 1.7591

2007 2008 2009 2010 20110

1

2

3

4

5

6

Net Profit Margin

Air New Zeland Qantas

NET PROFIT MARGIN:

Year/ Company 2007 2008 2009 2010 2011

Air

NewZealand 12.24% 13.82% 1.30% 5.24% 5.39%

Qantas 12.69% 12.95% 2.50% 2.88% 4.26%

2007 2008 2009 2010 20110.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%Return On Equity (ROE)

Air New Zeland Qantas

FUTURE EXPECTATION

• Based on the analysis and ratios, Qantas revenue has increased from 2010.

• Growth recorded in gross profit and net profit in 2010 and 2011.

• New 5 years strategic plan is based on cutting cost to reduce it expenses and increase its revenue,

• Growth in revenue and profit expected in future years, increasing return on investment and reduce current liabilities.

• Return on shareholder fund expected to increase

• Market share price expected to appreciate in future.

RECOMMENDATIONS AND CONCLUSION

• With the future forecast, the new strategic plans by Qantas

• The existing Shareholders are advised to hold the share

• The potential share holder are recommended to buy.

Thank youfor attention!