Air Partner Plc: Detailed Financial Performance Analysis Report

This report provides a comprehensive financial performance analysis of Air Partner Plc from 2014 to 2018. The analysis encompasses profitability ratios (gross margin, net margin, ROCE), liquidity ratios (current ratio, quick ratio), working capital management (receivables turnover, payables turnover), and capital structure (debt ratio, equity ratio, debt/equity ratio, interest cover ratio). The report examines the trends in each financial metric, providing insights into the company's financial health and operational efficiency. The analysis reveals a stable profitability position with declining trends in liquidity and working capital management issues. Stock market performance is also discussed. Based on the analysis, the report concludes with an investment recommendation, suggesting investors consider the potential risks associated with investing in Air Partner Plc shares. The report uses data from Air Partner Plc's financial statements and provides recommendations for investors.

Running head: FINANCIAL PERFORMANCE OF AIR PARTNER PLC
Financial Performance of Air Partner Plc
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1FINANCIAL PERFORMANCE OF AIR PARTNER PLC
Executive Summary:
For this report, Air Partner Plc has been selected as the organisation, which is a global aviation
service provider having extensive operations in Europe, the Middle East, Asia and Africa. It is
analysed that Air Partner Plc has managed to maintain stable profitability position with a
balanced liquidity position although the trend is found to be declining over the years. However,
issues have been identified in terms of working capital management and capital structure due to
increased amount of both short-term and long-term liabilities leading to high investment risk.
The stock market performance analysis reveals the same scenario, which is further supported by
external research report and price/earnings ratio. By considering all the aspects, it is
recommended to the investors not to invest in the shares of Air Partner Plc, as the same might
minimise their overall return on investment.

2FINANCIAL PERFORMANCE OF AIR PARTNER PLC
Table of Contents
1. Introduction:................................................................................................................................3
2. Analysis of financial performance of Air Partner Plc for the years 2014-2018:.........................3
2.1 Profitability analysis:.............................................................................................................4
2.2 Liquidity analysis:.................................................................................................................5
2.3 Working capital management analysis:.................................................................................7
2.4 Capital structure analysis:......................................................................................................9
2.5 Stock market performance analysis:....................................................................................13
3. Recommendation for investment:..............................................................................................14
4. Conclusion:................................................................................................................................15
References:....................................................................................................................................16
Appendices:...................................................................................................................................18

3FINANCIAL PERFORMANCE OF AIR PARTNER PLC
1. Introduction:
Financial performance could be defined as a subjective measure of the efficiency of an
organisation in utilising assets from the primary business mode and revenue generation. It is used
in the form of a general measure of the overall financial standing of an organisation over a
specific timeframe (Atanasov and Black 2016). For this report, Air Partner Plc is selected as the
organisation, which is a global aviation service provider having extensive operations in Europe,
the Middle East, Asia and Africa. It mainly functions through four operating divisions that
include Private Jet Charter, Baines Simmons, Commercial Jet Air Charter and Air Freight having
its headquarter in UK (Airpartner.com 2019). The financial performance of the organisation
would be conducted for the past five years with the help of different financial ratios, based on
which recommendation would be provided regarding whether or not to invest in its shares.
2. Analysis of financial performance of Air Partner Plc for the years 2014-2018:
For analysing the financial performance of Air Partner Plc, financial ratios and stock
market performance have been taken into consideration. Ratio analysis is a type of financial
statement analysis, which is used for obtaining a quick indication of the financial performance of
an organisation in different key areas (Beatty and Liao 2014). In addition, with the help of stock
market performance analysis, it would be possible to identify the trends in share price of Air
Partners Plc over the years depending on which suitable investment decision could be
undertaken. The detailed analysis of the different financial ratios and stock market performance
of the concerned organisation is provided as follows:

4FINANCIAL PERFORMANCE OF AIR PARTNER PLC
2.1 Profitability analysis:
There are certain profitability ratios that have been used for carrying out the profitability
analysis of Air Partner Plc for the past five years. These ratios mainly constitute of gross margin,
net margin and return on capital employed. The detailed interpretation of these ratios is provided
as follows:
Table 1: Profitability ratios of Air Partner Plc for the years 2014-2018
(Source: Airpartner.com 2019)
2014 2015 2016 2017 2018
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Profitability Ratios
Gross margin
Net margin
Return on capital
employed (ROCE)
Figure 1: Profitability ratios of Air Partner Plc for the years 2014-2018
(Source: Airpartner.com 2019)

5FINANCIAL PERFORMANCE OF AIR PARTNER PLC
From the above figure, it could be seen that Air Partner Plc has experienced a significant
increase in gross margin from 10.43% in 2014 to 74.38% in 2018. Gross margin helps in
representing the profitability of an organisation when revenue is contrasted with the cost
involved in production (Bena and Li 2014). The reason behind such drastic improvement is the
promotional offers that assisted the organisation in increasing its revenue and its ability to find
suppliers providing products at lower costs, which has resulted in lower cost of sales. The same
trend is observed in case of net margin as well, which has risen from 1.15% in 2014 to 7.38% in
2018. The main reason behind such increase in net margin is the income generated by the
organisation from restructuring, merger and acquisition of Clockwork Research in 2016 and
SafeSkys in 2017 as well as other operating revenue.
Finally, in terms of ROCE, even though decline could be observed from 31.14% in 2014
to 18.60% in 2016, it has increased again to 37.83% in 2018, which is a favourable indication to
the shareholders. This is because it implies sound capital management policy adopted by Air
Partner Plc in generating maximum returns from the investments made by the shareholders
(Ehrhardt and Brigham 2016).
Therefore, in terms of overall profitability, Air Partner Plc is found to be in a stable
position in the travel and leisure industry in UK.
2.2 Liquidity analysis:
Liquidity ratios are considered as a significant group of financial metrics, which is used
for ascertaining the ability of an organisation in settling its debt obligations by not raising
external capital (Fracassi 2016). For Air Partner Plc, two liquidity ratios are considered that
include current ratio and quick ratio and their interpretation is provided as follows:

6FINANCIAL PERFORMANCE OF AIR PARTNER PLC
Table 2: Liquidity ratios of Air Partner Plc for the years 2014-2018
(Source: Airpartner.com 2019)
2014 2015 2016 2017 2018
-
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
Liquidity Ratios
Current ratio
Quick ratio
Figure 2: Liquidity ratios of Air Partner Plc for the years 2014-2018
(Source: Airpartner.com 2019)
Current ratio signifies gauges the ability of a firm to settle its short-term obligations
falling due within a year (Frino, Hill and Chen 2015). In case of Air Partner Plc, current ratio is
observed to fall from 1.35 in 2014 to 1.07 in 2018, which is well below the desired level of 2.
Even though Air Partner Plc has cleared its short-term debt in 2018, there has been significant
increase in accounts payable, taxes payable and other current liabilities. The increase in cash and

7FINANCIAL PERFORMANCE OF AIR PARTNER PLC
cash equivalents over the years has not been adequate in offsetting the rise in current liabilities
and therefore, the liquidity position of the organisation has deteriorated over the years. This
could be explained further with the help of quick ratio, which is a superior measure of liquidity.
Quick ratio is considered as a better measure of liquidity, since it considers only liquid
assets or in other words, it excludes prepaid expenses and inventories for analysing the liquidity
position of an organisation (Gassen 2014). The trend of this ratio for Air Partner Plc has
witnessed a decline from 1.12 in 2014 to 0.93 in 2018, which is similar to that of current ratio.
Since Air Partner Plc operates in travel and leisure industry, it is likely that the organisations
falling within the sector do not hold inventories. However, Air Partner Plc has significant amount
of prepaid expenses over the years and although the ratio has declined, it has been near to the
ideal standard of 1. Thus, the liquidity position is found to be just stable for Air Partner Plc and it
needs to focus on minimising its short-term obligations for maintaining better liquidity position
in future.
2.3 Working capital management analysis:
Working capital management denotes the managerial accounting strategy of an
organisation, which is formulated for monitoring and using two elements of working capital.
These elements mainly include current assets and current liabilities and working capital
management is conducted for designing for assuring the most financially efficient operations of
the organisation (Gullifer and Payne 2015). For conducting working capital management
analysis of Air Partner Plc, two ratios are considered and they include receivables turnover and
payables turnover expressed in terms of days. The detailed analysis of these ratios is depicted as
follows:

8FINANCIAL PERFORMANCE OF AIR PARTNER PLC
Table 3: Working capital management ratios of Air Partner Plc for the years 2014-2018
(Source: Airpartner.com 2019)
2014 2015 2016 2017 2018
-
50.00
100.00
150.00
200.00
250.00
Working Capital Management Ratios
Receivables turnover (in
days)
Payables turnover (in
days)
Figure 3: Working capital management ratios of Air Partner Plc for the years 2014-2018
(Source: Airpartner.com 2019)
Receivables turnover is a working capital management ratio, which gauges the time
consumed by an organisation in converting its trade receivables into cash in a year (Henderson et
al. 2015). In case of Air Partner Plc, the ratio is observed to increase drastically from 55.18 days
in 2014 to 195 days in 2018, which is not a favourable indication. This is due to the lenient

9FINANCIAL PERFORMANCE OF AIR PARTNER PLC
debtor policy adopted by the organisation. Moreover, since the amounts are collected lately from
the customers, it has minimised the working capital base of the organisation and thus, it has
experienced a fall in its ability to settle short-term obligations. Air Partner Plc needs to minimise
its debtor terms for retaining more cash in hand so that it could use the same for future
investments or improve the current business operations (Vernimmen et al. 2014).
Payables turnover signifies the amount of time consumed by an organisation in paying
off its debt balance during the course of a period ((Hillier et al. 2014). Similar trend is observed
in case of payables turnover as well. For Air Partner Plc, the ratio has increased significantly
from 16.30 days in 2014 to 119.39 days in 2018. This is not a good sign for the organisation,
since the suppliers might not be willing to extend credit terms in future due to delay in settling
their payments. The main reason behind the increase in this ratio is the inability of the
management of Air Partner Plc in collecting due amounts from the customers quickly and as a
result; it could not use a large amount of cash for investing in its existing business operations. In
addition, such inability has resulted in delayed payments to the suppliers and therefore, the
organisation needs to work on improving its working capital management policies for better
management of cash in future.
2.4 Capital structure analysis:
In the words of Hoyle, Schaefer and Doupnik (2015), capital structure analysis helps in
gauging the long-term structure and stability of an organisation. In other words, the analysis
provides insight of the financing techniques used by the organisation along with focusing on
long-term solvency position. In order to carry out capital structure analysis of Air Partner Plc,
four ratios are taken into consideration. The ratios constitute of debt ratio, equity ratio,

10FINANCIAL PERFORMANCE OF AIR PARTNER PLC
debt/equity ratio and interest cover ratio. The detailed analysis of these ratios is briefly discussed
as follows:
Table 4: Capital structure ratios of Air Partner Plc for the years 2014-2018
(Source: Airpartner.com 2019)
2014 2015 2016 2017 2018
-
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
Capital Structure Ratios
Debt ratio
Equity ratio
Debt/equity ratio
Figure 4: Capital structure ratios of Air Partner Plc for the years 2014-2018
(Source: Airpartner.com 2019)

11FINANCIAL PERFORMANCE OF AIR PARTNER PLC
2014 2015 2016 2017 2018
-
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
450.00
500.00
Interest cover ratio
Figure 5: Interest cover ratio of Air Partner Plc for the years 2014-2018
(Source: Airpartner.com 2019)
Debt ratio helps in gauging the degree of financial leverage of an organisation
(Narayanaswamy 2017). In other words, it could be interpreted as the proportion of assets of an
organisation financed by debt. The debt ratio is observed to increase significantly from 0.70 in
2014 to 0.82 in 2018 owing to increase in other non-current liabilities and fall in retained
earnings. As a result, Air Partner Plc seems to be highly leveraged from investment perspective.
Equity ratio, on the other hand, denotes the proportion of assets of an organisation financed by
equity. Contrary to the trend of debt ratio, it has declined from 0.30 in 2014 to 0.18 in 2018 due
to fall in retained earnings and Air Partner Plc has not issued any additional shares in the market.
Debt/equity ratio signifies the proportion of company financing coming from the
investors and creditors (Ozkan, Cakan and Kayacan 2017). In case of Air Partner Plc, the ratio
has shown a massive increase from 2.37 in 2014 to 4.49 in 2018, which is not a good indication
for the organisation. This is because it focuses heavily on raising funds through debt and it has