Financial Analysis of Virgin Australia Holdings Limited

RUNNING HEAD: FINANCE
financial analysis

Finance 1
Contents
Introduction................................................................................................................................2
Description of the company.......................................................................................................2
Structure of Governance and ownership....................................................................................3
Fundamental ratios.....................................................................................................................3
Short term solvency ratios......................................................................................................3
Long term Solvency ratios......................................................................................................4
Asset utilization......................................................................................................................5
Profitability ratios...................................................................................................................8
Market value ratios.................................................................................................................9
Share price analysis..................................................................................................................10
Graphical representation.......................................................................................................10
Comparison of the share price..............................................................................................11
Significant announcements......................................................................................................12
Stock analysis...........................................................................................................................12
Weighted Average Cost of Capital..........................................................................................13
Debt ratio analysis....................................................................................................................14
Dividend policy........................................................................................................................14
Recommendation......................................................................................................................15
Conclusion................................................................................................................................15
References................................................................................................................................15

Finance 2
Introduction
Financial analysis contains the overall evaluation and measurement of company’s
performance. It includes various factors and uses several techniques to evaluate the financial
performance of a company. This report contains an overall analysis of Virgin Australia
Holdings Limited. It includes a brief overview of the company, calculation of key
performance ratios, debt ratio analysis and estimation of WACC. Furthermore, the report also
concentrates on dividend policy of the company, its beta factor and the movements in stock
prices compared with the ordinaries indices. Lastly a conclusion and recommendation is
provided suggesting the overall position of Virgin Australia.
Description of the company
Virgin Australia Holdings Limited is an Australia based holding company which operates
Virgin Australia and Tigerair Australia. The company deals with providing domestic and
international airline services in Australia. It has various segments named as Virgin Australia
Domestic, Virgin Australia International, Velocity, and Tigerair Australia. It was formerly
known as Virgin Blue Airlines and is regarded as second largest airline of Australia, after
Qantas (Bloomberg.com. 2018). Founded in 1999, the organization started its business in
2000. The airline provides its services over 29 cities in Australia and it has its main hubs in
Melbourne, Brisbane and Sydney. Virgin Australia mainly has its airports operating in cities
like Perth, Adelaide and Gold coast (Reuters. 2018).
The vision of the company is to revolutionise the air travel across all its segments. In order to
do this, Virgin Australia is focused on providing seamless experience across all domestic and
international markets. The company is listed on Australian Securities Exchange and is traded
with a symbol ASX: VAH (Virgin Australia. 2018).

Finance 3
Structure of Governance and ownership
Main substantial shareholders
 20% or more shareholdings: Etihad Airways P.J.S.C. (21.83%), Singapore Airlines
Ltd (20.09%) and Nanshan Capital Holdings Limited,Nanshan Group
Co.Ltd,Nanshan Group Capital Investment Company with a holding of 19.98%.
 More than 5% shareholdings: HNA Tourism Group Co. Ltd (19.17%) and Corvina
Holdings Limited (10.42%).
Main people involved in firm governance
 The Chairman: Ms Elizabeth Bryan AM
 Board members: Ms Samantha Mostyn, The Hon. Mark Vaile AO, Mr Ken Dean, Mr
Trevor Bourne, Mr Mark Chellew, Mr Marvin Tan, Mr Robin Kamark, Mr Warwick
Negus, Mr Lan Xiang and Mr Zhang Kui. All these are independent and non-
executive directors.
 CEO: Mr John Borghetti AO (Virgin Australia. 2018).
Neither of these members are involved in more than 20% shareholding nor is any shareholder
of more than 5% holding involved in firm governance.
Fundamental ratios
Short term solvency ratios
1. Current ratio
It is one of the liquidity ratio which measure the short term solvency of a company. It
identifies the capability of an organisation to pay its current liabilities by properly utilizing its
current assets. The ideal current ratio is 2:1 which implies that a company must have its
current assets doubled of its liabilities (Vogel, 2014).