Performance Analysis of Flight Centre Travel

Performance Analysis 1
Flight Centre Travel (ASX: FLT) Performance Analysis
by Student Name
Class & Course
Professor
University
The City & State
Date

Performance Analysis 2
Abstract
The report analyses the Flight Centre Travel Company as a potential investment
opportunity for an international company. The analysis focuses more on FLT’s working
capital, financial structure, activity, and profitability. The study is divided into two main
parts, namely the financial analysis of the Flight Centre Travel Group Limited and a
recommendation letter based on findings of the performance analysis. The financial
report is further divided into several sections. Based on the comparative financial
performance analysis, FLT has an unfavourable but a promising future. The company is
not worth investing in as a single investment option. However, the company has a
positive performance outlook, which is encouraging to investors. FLT will be in a position
to sustain its cash requirements in the future. FLT pays 40-60% dividends from its net
income annually after taking future cash and investment requirements into
consideration. The company has paid out a dividend in the past three consecutive years.
The risk associated with the company can be managed by adding it in the diversified
investment portfolio. In conclusion, BACA consultancy recommends that FLT should be
part of the diversified investment portfolio. Further investigation should be conducted on
the company’s valuation and its management team.

Performance Analysis 3
I. Introduction
Financial performance analysis report represents a summarised version of a company’s
annual reports. Performance reports help investors to understand the financial health of
a company before making investment decisions. In this scenario, an international
investor is interested in investing in the Australian market. The investor is particularly
interested in an ASX listed company. BACA Consultancy has been contracted to choose
a potential investment company for the investor. The consultancy has settled for the
Flight Centre Travel (ASX: FLT). However, the BACA has to conduct a financial
performance analysis on the company to evaluate whether or not it is a viable
investment option. The performance analysis relies on the three latest financial
statements of the company-income statements, cash flow statements, and balance
sheets to make an informed opinion about investing in the company as well as
projecting the future performance. The analysis focuses more on FLT’s working capital,
financial structure, activity, and profitability.
The paper is divided into two main parts, namely the financial analysis of the Flight
Centre Travel Group Limited and a recommendation letter based on findings of the
performance analysis. The financial analysis is further divided into several sections. The
sections are;
a) Description of FLT,
b) Performance ratios calculation and analysis,
c) Cash management analysis,
d) Perform a sensitivity analysis,
e) Systemic risks and un-systemic risks,
f) And, dividend payout ratio and dividend policy.
The Consultancy firm believes that the investor will benefit from the report by making the
right investment decision based on the informed opinion presented in this report.
1.0. Financial Analysis of FLT Company
Financial analysis refers to the process of analysing suitability and performance of
businesses. The process applies several analysis techniques such as ratio, risk, cash
management, and sensitivity to evaluate whether or not a business is liquid, stable,
profitable, or solvent enough to invest in (English, 2011, p. 67). This section relies on
2016, 2017, and 2018 financial statements of FLT to conduct a financial analysis.
1.1. Description of FLT Company
Flight Centre Travel Group Ltd (FLT) is an ASX listed company which operates in the
traveling industry. FLT was established in 1982 and had its headquarters in South
Brisbane. The company offers services such as corporate travel management, retail,
and wholesale travelling. FLT offers thirty brands in four business segments, which are
Retail, Wholesale, Corporate, and Leisure across over 50 countries (Flight Centre Travel
Group Limited, 2019, p. 14). The key global destinations for the company are Australia,
Europe, the United States, Africa, the United Kingdom, Asia, and New Zealand. FLT has
over 20,200 employees you have been employed on a full-time basis. Moreover, the
company engages indirectly in the employment of over one million people. The company

Performance Analysis 4
posted a 2.9billion during the 2018 financial year which a 10.35% compared to the
revenue realised in 2017.
Several investment decisions contributed to the company's group in recent years. First,
the introduction of low-cost new systems that improved productivity. Second, the
introduction of unique brands and products to the customers. Third, the introduction of
flexible working programs for employees to enhance their performance. Fourth, high
presence on the online and digital market which enhanced the company’s capability to
deliver. And fifth, expanding the organic growth strategy by acquiring in the Mexico,
Netherland, and Malaysia markets (Flight Centre Travel Group Limited, 2018).
1.2. Calculation and analysis of selected performance ratios
The profitability and market efficiency ratios are the most appropriate in evaluating the
performance of the company. The financial ratio analysis is based on 2016, 2017, and
2018 financial statements.
a) Profitability ratios
Profitability ratios evaluate the ability of a company to raise income. The ratios are
calculated by comparing the revenue generated are the expensed incurred while
generating them. The profitability level of FLT is evaluated using the gross margin,
return on assets, return on equity, and net profit (Bailey, 2005, p. 78).
Ca (Harrison, 2016)lculations
Ratios Formula 2016 2017 2018
Gross
Margin
Gross Profit/Net
Sales * 100%
345,043/
2,677,336 *100%
= 12.89%
325,445/2,641,7
75 *100%
= 12.32%
363,493/2,949,955
*100
= 12.32%
Return on
Assets
Net Income /
Assets
244,556/
3,003,211
= 0.08
230,773/
3,195,488
= 0.07
264,213/
3,405,219
=0.078
Return on
Equity
Profit After tax / Net
worth
244,556/
1,345,945
= 0.09
230,773/
1,428,755
= 0.16
264,213/
1,554,442
= 0.17
Net Profit
Margin
Net Profit /
Sales*100%
244,556/
2,677,336 *100%
=9.1%
230,773/2,641,7
75 *100%
= 8.7%
264,213/2,949,955
*100%
= 8.9%