Flight Centre Travel Group: An Overview

Business Operations

Flight Centre Travel Group is an Australian travel agency company, where its headquarters is in Brisbane, Australia. Moreover, the operations of Flight Centre Travel Group are spread to Australia, New Zealand, United States, Canada, United Kingdom, South Africa, Hong Kong, India, China, Singapore, United Arab Emirates, and Mexico. In addition, Flight Centre Travel Group has licenses to operate in 80 countries or more, which can indicates that the organisation is operational in worldwide (Fctgl.com, 2022). The company has been known for its wide variety of operation conducted around the world, which helped in maximising the overall revenue from operations. Along with the wide history of the company, the organisation mainly faces controversies, which can negatively affect potations of the company and hinder its profit generation capability.

Flight Centre Travel Group operates in different business segments, which are Discova, StudentUniverse, FCM Travel Solutions, Liberty Travel, Aunt Betty and Flight Centre Exclusives. These are subsidiary businesses of Flight Centre Travel Group, which has been conducted to ensure the relevant operations of the organisation to maximise profits from operations (Fctgl.com, 2022). Therefore, the organisation has been increasing their exposure in different fields to ensure that the continuous revenues are generated even during peril times, which can enhance income and net profit.

The financial performance of the organization for the current year is considered to be negative as it faced high levels of losses during the current financial year in comparison to the previous year. The company has faced losses in 2020 and 2021 due to reduction in its overall revenue generation capability while having similar expenses on the overall operations. These extreme losses have directly reflected on the balance sheet of the company which has declined its cash expensively along with equity assets and liabilities. Therefore, degradation in the overall balance sheet valuation of the company directly indicates the performance of the organisation has deteriorated to new levels, which are negatively affecting company’s future growth prospects.

The key Financial highlights of Flight Centre Travel Group operations are as follows.

• Decline in revenue from 1,897,272 in 2020 to 395,907 in 2021 (Fctgl.com, 2022).
• Net loss incurred for the financial year of 2021, where a total loss of 433,456,000 was incurred due to the lower revenue generated in the financial year.
• The improvements are seen in the Profit before income tax, as the overall expenses declined to compensate for the reducing revenues of the organisation. This is the main reason why the Profit before income tax improved to levels of -601,710 in 2021, whereas the values in 2020 were at -848,586.
• Balance sheet values declined in 2021 in comparison to 2020, where Total assets reduced from 3,965,848 in 2020 to 3,264,876 in 2021, which indicates that the overall losses eroded assets of the organisation (Fctgl.com, 2022).

The economic Outlook of Australia is relatively at a decline due to the negative impact of pandemic and deteriorating supply chain, which is negatively affecting operations of companies in the country. Moreover, the current economic Outlook also indicates about the Ukraine war is negatively affecting the financial sector along with the commodity sector around the world. This is Henry the operations of businesses and negatively affecting the future prospect of companies in different sectors. Therefore, the current economic outlook of Australia is not adequate where major concerns of pricing prices and economists around the world mainly anticipate inflation due to rising oil prices and supply crunch. Therefore, investors utilising the economic influence need to address the problems that are faced by travel companies, which are mainly dependent on revenues from selling tickets (Fctgl.com, 2022). The pandemic and Ukraine war is reducing the possibility of selling airline tickets and travel packages which can negatively affect future prospects of the organisation.

The above table provides information on profitability ratio and market ratio of Flight Centre Travel Group for the financial year of 2021 and 2020. The profitability ratio mainly comprises calculations such as return on equity return on assets, net profit margin expense ratio and cash flow to sales of the organisation. Therefore, analysis of each of the overall ratios directly indicates that the performance of the company was negative during 2021 and 2020 due to losses incurred from operations. Return on equity has improved in 2021 in comparison to 2020, as the losses decline whereas the current return and equity is in negative, which states that the performance of the company is not up to the industry average (Faello, 2015). The return on assets of the organisation is at negative value due to the losses incurred from operations during 2021. The company faced losses, which directly reflected on the assets of the organisation, whereas due to the lower levels of loss the return on assets improved in 2021, which indicates that the organisation is trying to improve its operational conditions by minimising the expenses and reducing the total net loss from operations. The control on expenses was not seen during 2020, which is why the overall return on assets value was at -17.68% in 2020 than -11.99% in 2021.

Subsidiaries

Similar to the valuation of return on equity and return on assets, the overall net profit margin of the company has been in negative values during 2021. The overall loss of the company when compared with net profit margin is relatively higher, as the negative valuation of 2020 increased from -34.90% to -109.48% into 2021. This indicates that the overall revenues of the company declined during 2021, which is the main reason where regardless of the decline in losses of the organisation, the negative value in net profit margin has increased. Further analysis is based on the Expense ratio and Cash flow to sales of Flight Centre Travel Group, which mainly portrayed adverse valuation in 2021, the expense ratio of the company increased from 131.08% in 2020 to 283.25%, which is almost double. On the other hand, the cash flow to sales declined from -0.56% in 2020 to -230.42% in 2021, which indicates that the performance of the organisation in ensuring profitable operations declined during 2021 (Kanapickien? & Grundien?, 2015).

This directly indicates that the performance of the organisation is not adequate where it is not able to sustain continued increment in revenues, which is the main reason why abrupt losses when incurred forced the company to become in operational during 2021. The combination of the overall profitability ratios directly indicates that the performance of the organisation was not adequate in 2021, where it losses during the period when compared with 2020. The operations of the company were not appropriate during 2021, which is the main reason why revenues of the client plastic and forced the organisation to minimise its expenses and in losses even with some operations.

Further analysis is based on the overall market ratios of the organisation, which is calculated by utilising the earnings Persia dividend per share dividend payout ratio and price earnings ratio of the company. The earnings per share are rightly recorded from the annual report, which is currently at negative levels due to the losses incurred by the company over the period of 2020 and 2021. Negative valuation of earnings per share directly suggests that the company is not able to provide adequate valuation for its operations to the investors according to the market ratios. The company does not pay any kind of dividend, which forces the dividend per share and dividend payout ratio to be zero (Musallam, 2018). This indicates that the total operations of the organisation does not portray any kind of financial attribute towards investors according to the market ratios as no dividends are being paid due to losses incurred by the company. Further analysis of the market ratio is conducted by utilising the price on the ratio, which is negative during the period of 2 years. The company has price earnings ratio of -2.0138 in 2020, which further declined to the levels of -6.8276 times in 2021. The decline in the overall price earnings ratio is due to reduction in the levels of earnings per share and increment in the share price value of the organisation. Moreover, the decline in earnings per share and the overall share price of the company increased from the levels of 11.12 to 14.85 in the financial year of 2021. That investment in the organisation is futile, as it will not provide any kind of higher returns to the investors as it does not pay any dividends and has negative earnings per share valuation.

Financial Highlights

The data presented in the above table directly provides data regarding the efficiency ratio of the organisation for the two-year period. This information directly helps in understanding the overall management conditions of the company, which directly evaluated the available working capital to complete adequate operations. Hence, the efficiency ratio evaluates calculations such as a turnover-based receivable and times receivable turnover of the organisation. Analysis it is dictated asset turnover ratio of the company declined from the levels of 0.5 09 Times 20.110 Times in 2010, which directly states that the performance of the company was not adequate which post the organisation to into lower ratio due to reduction in revenue of the company. Analysis indicates that the day’s receivable has increased drastically from the levels of 61.48 days to 276.07 days, which is due to the reduction in revenue of the company during the period of 2021. Further analysis is based on times receivable turnover is which has declined to new laws from 5.94 in 2020 to 1.32 in 2021 view to the reduction in the sales revenue of the company (Restianti & Agustina, 2018). Thus, it can be understood that the overall efficiency position of the organisation is not adequate where it is dependent on the sales revenue of the company, which was not high during 2021 when compared with 2020 data.

Therefore, the efficiency ratio of the organisation has declined in 2021, which mainly indicates that the performance of the management in curbing the overall working capital has reduced. This has mainly occurred due to the falling sales and of the organisation, which is the main source of income and measurement of the overall efficiency. The management was not able to adequately analyse the demand and conduct operations to ensure higher growth prospects and revenue, which is the main reason why the overall sales declined in 2021 and post the management to incurred losses and reduce the efficiency conditions of the organisation.

Further analysis is based on the overall liquidity ratios of the organisation for the period of 2021 and 2020. The analysis directly indicates that the performance of the organisation has slightly adjusted during 2021 due to the alterations in the operations. Ratio of the company has increased from the levels of 1.31 in 2020 to 1.45 into 2021, which is mainly due to the increment in the levels of account receivables of the company. The values of current assets and current liabilities have drastically declined in 2021 when compared to 2020, which is due to the reduction in the operation capabilities of the company in 2021. This is the reason why the overall current assets and current liabilities of the company declined, which in turn enhanced the current ratio position of the company when compared with industry average (Adam, 2014). The ratios of the company faced loss from – 0.01 in 2020 to – 0.72 in 2021. This was mainly done due to the increment in the levels of negative values in net cash from operating activities of the organisation. Thus, the decline was mainly due to the reduction in sales and increment in overall expenses of the company in 2020 one when compared with 2020 data.

Economic Outlook

Moreover, the above table provides data regarding the hearing ratios of the organisation for the to your period along with some industry averages to identify the current trajectory of the company. Analysis it is detected that the debt equity ratio of the company has increased from the levels of 33.98% to 59.40% whereas it is within the industry average. Indicates the performance of debt to equity position of the company is appropriate and there are no possible chances of future insolvency due to proper levels of combination maintained by the organisation to support its operations. Furthermore the depression of the company has increased from the levels of 65.17 1% to 70.72% which is a relatively negative attribute as industry average is relatively lower than the valuations of the company. The debt of the company needs to be reduced. The possibility of insolvency directly increases due to higher accumulation of debt to support operations and assets of the company. Additionally, equity ratio conditions of the company are declining, which indicates that the focus of the organisation is debt, which is not appropriate in the current circumstances where the organisation losses and use the client seals revenue due to the negative business environment (Rashid, 2018). Moreover, the debt cover ratio and interest coverage show are both at negative levels, which portray that the company cannot take on additional debt as it would its future progress and force the company to become insolvent in due to continuous decline in the cash position of the company that is conducted by paying interest payments on the debt.

The rising levels of debt at the company incurs to support its operation is relatively astonishing, as higher accumulation of debt could lead to insolvency and force the company to declare bankruptcy. The above gearing ratio directly suggests that the organisation is not in a position to acquire additional debt whereas the company needs to reduce the debt composition by acquiring equity capital and reducing the debt exposure from its overall operations. The debt reduction is essential, as it would force the company to maximise the level of gearing position, as debt would decline along with interest payments, which is profitable for the organisation in the long run.

The analysis of the overall financial ratios of the organisation has directly indicated the performance in 2021 was not adequate and better in comparison to 2020. That the performance of the organisation declines in profitability ratio, liquidity ratio, gearing ratio, market ratio and efficiency ratio. The organisation’s overall performance reduced to different levels due to the decline in its own sales and revenue generation capability while the overall expense remained more or less similar. Thus, it could be understood that with the help of financial ratios it can be detected the financial performance of the company is not a property for investment as investors seeking any kind of future benefits from the organisation would only identify financial problems within the organisation.

Hence, the analysis of the overall financial ratios directly indicates that the future of the organisation is not appropriate, as the pandemic is not over. In addition to the overall negative impact of pandemic, there is a war in Europe along with supply crunch, which can negatively affect income generation of consumers and sales of the organisation. The company focuses on selling airline packages to review restrictions and problems in the economy, where the possibility of future operational success is relatively lower for the company. The gearing ratio indicates that the company to support its operations, which can negatively affect its future growth conditions and increase the possibility of insolvency in future, obtains a high level of debt.

There is no news regarding the FLT merge with another company or be acquired by another company, where the possibility is high, due to the declining operations of the organisation. The ratios do not convey any relation towards a merger or acquisition for FLT. The impact of the political competitive environment on the business is relevant high, where due to the lockdowns imposed by the government the overall operations of FLT declined drastically in 2020 and 2021. Hence, the political pressures and external environment on FLT increases the possibility of declining operations in future of the pandemic continues to hinder public movements.

Therefore, the ratios require improvement and/or maintenance are profitability ratio, cash ratio, gearing ratio, market ratio and efficiency ratio, as the organisation facing issues in all sections of its operations (Arkan, 2016). Therefore, improving sales and reducing losses would ensure the organisation to minimise the possibility of loss in future.

Consequently, investors conduct the analysis of the overall financial ratios and market sentiments the investment in FTL should be not, as it would be highly risky. The company does not pay dividends, while the overall losses increase due to decline in sales, which can negatively affect the share price in future and valuation of the organisation.

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