Comprehensive Analysis of Virgin Australia's Financial Performance

This report provides a comprehensive analysis of Virgin Australia's financial performance, focusing on its cash flow statement and profit data for the year ended June 30, 2017. The analysis examines the company's cash flow from operating, investing, and financing activities, highlighting key figures such as cash receipts from customers, payments to suppliers and employees, and net cash generated from operating activities. It also delves into the company's profit data, including revenue, operating expenditures, net finance costs, and earnings per share, as well as the impact of fleet simplification efforts. The report further evaluates the relevancy of these financial metrics in facilitating financial decisions, emphasizing the importance of cash flow statements in assessing the company's liquidity, solvency, and overall financial health. The analysis is supported by references to various financial resources and reports.

Contents
Introduction......................................................................................................................................2
Cash Flow statement analysis for the year ended 30 June 2017......................................................2
Evaluation of Profit data..................................................................................................................4
Relevancy to facilitate financial decisions......................................................................................5
Bibliography....................................................................................................................................6

Introduction
Virgin Australia Airlines Pty Ltd. is the second largest airline company of Australia. It was
incorporated in 1999, with the name Virgin Blue. It provides the customers with the services like
cargo, passenger transportation and charter services etc. The company is based in Bowen Hills,
Australia. It provides its services as a low cost barrier. The company provides airline services to
40 cities in Australia. The international range of the company includes New Zealand, Hong
Kong, USA, South Pacific Islands and Indonesia (Bloomberg, 2018).
Cash Flow Statement
Cash Flow Statement can be described as a summary of cash incomings and outgoings in a
business entity for an accounting period. It includes the cash flow generated from investing,
operating and financing activities. The cash flow statement is the measurement of company’s
ability to pay its debt obligations. It is an important part of company’s financial report as it
complements the income statement of the company.
A cash flow statement helps the investors, creditors and lenders in better understanding the
company’s financial position. It also presents the sources of funds. It can be defined as the cash
budget of the company (Debitoor, 2018).
Profit Data
Profit Data or Profit and Loss Statement is the summary of revenues, costs and expenses for a
business firm over an accounting period. It helps in determining the company’s ability to
increase profit or reduce cost. Net income is calculated by subtracting the cost from the revenues.
This statement is used to present the profitability or losses of the organization (Amisano, 2018).

Cash Flow statement analysis for the year ended 30 June 2017
The cash flow statement includes the Cash flow from operating activities, investing activities,
financing activities. The amount of cash receipts from customers is $5,6571.1 million and the
cash payments to suppliers and employees is $5,131.2 million. The net cash generated from
operating activities is $525.9 million. Cash payment for business restructuring expenses is
$121.8 million. Finance income received for the accounting period is $ 17 million and cost paid
is $ 147.2 million. The amount of net cash generated from operating activities is $ 273.9 million.
The cash flows from investing activities include acquisition of property, plant and equipment,
proceeds on disposal of fixed assets, acquisition of intangible assets, cash acquired, acquisition
of subsidiary, payments and proceeds from deposits and dividends from equity accounted
investee. The amount of net cash used in investing activities is $331.6 million (Virgin Australia,
2017).
The cash flow from financing activities includes proceeds and repayment of borrowings,
transaction cost related to borrowings, proceeds from share issue, equity distributions and
proceeds from non controlling interests. The amount of net cash from financing activities is
$338.2 million.
There has been an increase in cash and cash equivalents by $ 280.5 million. It also includes the
component of effect of exchange rate on cash and cash equivalents for the business entity. The
cash and cash equivalents at June 30 is $ 1396.1 million.
The net cash from operating activities includes the concept of depreciation, amortization, share
of net profit, deferred borrowing cost, payment expenses, changes in fair value, foreign exchange
movements, deferred loss on sale, lease back assets, losses on impairment of fixed and other
assets.

There has been net income growth for the organization by 17.31%. There has been growth in net
operating cash flow by 38.74%. Net operating cash flow of sales has received a growth rate of
5.46%.
In the calculation of net value of assets, the assets held for sale are calculated with the basis of
fair value concept at a lower price of their carrying amount. The fair value calculation is based
on recent similar financial activities with market regulators. The depreciation and amortization of
assets held for sale ceases from the date of announcement of their sale (Wall Street Journal,
2018).
In the current accounting period the assets like Embraer and Seven Fokker were sold. The
company received an impairment loss of $ 7.8 million. The company received cash proceeds by
$188.0 million. Deferred cost related to sales was recognized as $ 24.2 million (Equity Research,
2016).
The amount of cash on hand or liquid cash is $ 532.0 million. And the amount of deposits the
organization has for the current accounting period is $ 864.1 million.
The amount of cash on hand is required for any business entity to meet its short term obligations.
Cash in hand are held with some restrictions relating to distributions (Morning Star, 2018).
The company has received a positive cash flow result. The company received an improvement in
financial leverage by 14.1 percent. The company is also capable to maintain a strong cash
balance for the accounting period. The company has also implemented various programs to
improve operational and capital activities. The company received higher cash flow than the
targets.

Evaluation of Profit data
The profit and loss statement or profit data of the company includes revenue and income
calculation( revenue from passengers, ancillary revenue, income from foreign exchange or other
income), operating expenditures (lease expenses for aircraft operations, airport charges,
maintenance expenses, expenditure on fuel and oil, labor and staff salary, impairment losses on
long lived assets, expenses from miscellaneous activities, depreciation, amortization and impact
of cash flow hedges), finance income and expenses, all comprehensive income and losses for the
company, and earnings per share. It includes the concept of time value of money.
The company received revenue of $ 5047.3 million for the current accounting period. Net
operating expenditure was received $ 5171.2 million, net finance costs and tax of amount $ 167.8
million. The other comprehensive income amounts to $ 185.8 million and loss to $ 221.1 million.
The gross profit of the company amounts to $ 320.71 million. It received net income of $ 51.79
million. The entity has received an after tax loss of $ 220.3 million. There has been improvement
in the loss from the loss amount of $ 260.9 million in previous accounting year (Virgin Australia,
2017).
Revenue has increased by half percent. It indulged into fleet simplification efforts and removed
18 Embraer jets and 14 ATR Turboprops.
Earnings per share are calculated by dividing the profit or loss by number of shares. The total
number of ordinary share of the company is $ 7987.8 million. The calculation of value of
company’s share is based market price (Virgin Australia, 2017).
The company faced total lease rentals of amount $ 534.1 million. The other expenses for the
company includes aircraft cost, crew, maintenance and insurance cost. The company also

underwent some superannuation plans as post employment benefit to its employees. That led to
increase in expenses by $ 76.9 million (Chong, 2017; Virgin Australia, 2017).
Net finance cost is calculated using the interest rate method and amortization concept. Finance
costs are calculated using weighted average cost of capital concept and capitalized at a rate of
3.04 %.
The group carried tax losses of $ 2346.3 million. The airline passenger revenue is generated from
the income from ticket sales. If such revenue is received in advance it is carried forward in
consolidated financial statement. The company also received fee revenue from other parties for
the membership of velocity flyer program (FT, 2018; Virgin Australia, 2017).
There was an increase in company’s closing balance by $ 1396.1 million from $ 272.3 million.
The company has also improved the business savings by $ 350 million from $ 300 million. The
net operating expenditure of the company reduced to $ 5171.2 million from $ 5278.2 million.
This is the result of reduction in impairment losses (Migobulls, 2018; Market Watch, 2018).
The group also received profit from equity of $ 2.1 million. The group received a tax benefit of $
41.5 million. The business received growth in revenue and has committed to make efforts for
keeping revenue growth upward by expanding the market size and leveraging the benefits of
fleet, network and products (Virgin Australia, 2017).
The company made reduction in operation fleet by five percent. It also worked on identification
of loss making routes and optimum utilization of domestic and international networks. To
increase the revenue the company brought innovations in the industry like extra legroom sitting
product. It makes a large part of profit from its investing activities. After 2012, it received
positive cash flow in 2017. It suffered from a decline of sixty nine percent in Earnings before
interest and tax (Virgin Australia, 2017).

Relevancy to facilitate financial decisions
With the objective of making financial decisions the cash flow statements of any organization are
more helpful. The cash flow statements deals with the sources of cash for an accounting period.
It shows various activities like financing, operating and investing. It better depicts the liquidity
and solvency of the organization.
The Profit data of the company is prepared to show the annual operating result of a company. It
shows revenues, gains and expenses of the company. There can be situation when business is
having profit but not enough recurring income. The cash flow is important as it maintains the
continuity of any business. The cash flow includes the components that are beneficial for the
creditors, lenders and shareholders like its ability to settle debts, liquidity, return on equity and
all incomings and outgoings of the business. While the profit data just focus on taxable income
of the company (Morethanabookkeeper, 2013).
References
Amisano, C. (2018) What Is a Profit & Loss Statement? [Online] Available at:
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Bloomberg (2018) Company Overview of Virgin Australia Airlines Pty Ltd. [Online] Available
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[Accessed 16 May 2018].
Chong, J. (2017) Virgin Australia posts full year loss, says outlook improving. [online] Available
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16 May 2018].
Debitoor (2018) Statement of cash flows – What is a cash flow statement? [online] Available
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Equity Research (2016) Virgin Australia (VAH.AX / VAH AU). [online] Available from:
https://research-doc.credit-suisse.com/docView?

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FT (2018) Virgin group: Brand it like Branson. [online] Available from:
https://www.ft.com/content/4d4fb05e-64cd-11e4-bb43-00144feabdc0 [Accessed 16 May 2018].
Market Watch (2018) Virgin Australia Holdings Ltd. [online] Available from:
https://www.marketwatch.com/investing/stock/vbhlf/financials/cash-flow [Accessed 16 May
2018].
Migobulls (2018) Virgin America Revenue, Profits - VA Quarterly Income Statement. [online]
Available from: https://amigobulls.com/stocks/VA/income-statement/quarterly [Accessed 16
May 2018].
Morethanabookkeeper (2013) What’s The Difference Between Cashflow and Profit and Loss?
[online] Available from: https://morethanabookkeeper.com/whats-the-difference-between-
cashflow-and-profit-and-loss/ [Accessed 16 May 2018].
Morning Star (2018) Virgin Australia Holdings Ltd VAH. [online] Available from:
http://financials.morningstar.com/cash-flow/cf.html?t=VAH&region=aus&culture=en-US
[Accessed 16 May 2018].
Virgin Australia (2017) Annual Report 2017) Virgin Australia.
Wall Street Journal (2018) Earnings & Estimates Virgin Australia Holdings Ltd. [online]
Available from: https://quotes.wsj.com/AU/XASX/VAH/financials [Accessed 16 May 2018].