This assignment aims at preparing an analytical review of the financial position and reporting of Easyjet plc from an investor’s viewpoint. Therefore an extensive analysis of the company’s financial strengths and weaknesses is carried out. Furthermore, the corporation’s accounting policies are analysed taking into account general practice as well as industry standards. Moreover, Easyjet’s perception by the financial markets is weighted against the company’s financial position.
Easyjet plc is the holding company of a low-cost passenger airline operating from 14 bases throughout Europe. Whereas also branded as part of Stelios Haji-Ioannou’s EasyGroup, there are no financial bounds between Easyjet and other Easycompanies. Easyjet plc is traded on the London Stock Exchange (LSE) and accounted for revenues of₤bn1,091 in the financial year 2004. Main competitors are other low-cost carriers including Ryanair, but also major scheduled airline operators as British Airways or British Midland (Datamonitor 2005). For peer group purposes in the financial analysis, the Irish-based low-cost carrier Ryanair as well as UK-based bmi and BA shall be used.
Table of Contents
- Summary
- Introduction
- Accounting policies
- Financial position
- Market perception
- Conclusion
- Appendix
- References
Objectives and Key Themes
This assignment analyzes EasyJet plc's financial position and reporting from an investor's perspective. It assesses the company's financial strengths and weaknesses, examines its accounting policies against industry standards, and compares its market perception to its financial performance.
- Financial Performance and Profitability of EasyJet
- Analysis of EasyJet's Accounting Policies and Compliance
- Comparison of EasyJet's Performance to Competitors (Ryanair, BA, bmi)
- Evaluation of EasyJet's Efficiency and Asset Utilization
- Assessment of EasyJet's Market Perception and Valuation
Chapter Summaries
Summary: This section provides a brief overview of EasyJet's financial performance, highlighting its relatively low return on capital employed (ROCE) compared to Ryanair, but superior asset utilization compared to major competitors. It also notes the company's high market perception despite lower profitability than the industry median.
Introduction: This chapter introduces the assignment's objective—to provide an analytical review of EasyJet plc's financial position and reporting from an investor's standpoint. It outlines the scope of the analysis, including a detailed examination of the company's financial strengths and weaknesses, accounting policies (in relation to general practice and industry standards), and market perception. It also establishes EasyJet's position within the low-cost airline market and identifies key competitors for comparative analysis (Ryanair, British Airways, and bmi).
Accounting policies: This chapter delves into EasyJet's accounting policies, emphasizing their adherence to UK Generally Accepted Accounting Principles (UK GAAP) and future compliance with International Financial Reporting Standards (IFRS). The discussion focuses on critical accounting entries such as aircraft valuation, depreciation, and maintenance costs. It highlights the differences in depreciation methods and residual values compared to competitors, particularly Ryanair, and notes the potential for improved valuation through yearly impairment tests. The chapter concludes by affirming the auditor's confirmation of the accuracy and fairness of EasyJet's financial reporting.
Financial position: This chapter analyzes EasyJet's financial position from an investor's viewpoint, focusing on key performance indicators like return on capital employed (ROCE), profit margins (before tax, EBIT, and EBITDA), and efficiency ratios. The analysis reveals EasyJet's lower profitability compared to Ryanair, despite its superior efficiency. It contrasts EasyJet's performance with that of British Airways (BA) and explores the reasons behind the differences, including fleet financing strategies and tax implications. The chapter also indicates EasyJet's financial turnaround in 2004 after a period of lower figures due to a growth strategy.
Keywords
EasyJet plc, low-cost airline, financial analysis, return on capital employed (ROCE), profitability, efficiency, accounting policies, UK GAAP, IFRS, Ryanair, British Airways, bmi, market perception, investor perspective, financial risk, market risk.
EasyJet plc Financial Analysis: Frequently Asked Questions
What is the purpose of this document?
This document provides a comprehensive preview of a financial analysis of EasyJet plc, intended for academic use. It includes a table of contents, objectives, key themes, chapter summaries, and keywords. The analysis examines EasyJet's financial position and reporting from an investor's perspective.
What are the key themes explored in this analysis?
The analysis focuses on EasyJet's financial performance and profitability, its accounting policies and compliance with UK GAAP and IFRS, a comparison of its performance to competitors (Ryanair, British Airways, and bmi), its efficiency and asset utilization, and its market perception and valuation.
What specific aspects of EasyJet's financials are analyzed?
The analysis delves into key performance indicators such as return on capital employed (ROCE), profit margins (before tax, EBIT, and EBITDA), and efficiency ratios. It also examines EasyJet's accounting policies, particularly concerning aircraft valuation, depreciation, and maintenance costs, and compares these to industry standards and competitors' practices.
How does EasyJet's performance compare to its competitors?
The analysis compares EasyJet's performance to Ryanair, British Airways, and bmi, highlighting differences in profitability, efficiency, and accounting practices. While EasyJet shows superior asset utilization compared to major competitors, its return on capital employed (ROCE) is relatively low compared to Ryanair.
What is the overall assessment of EasyJet's financial health?
The summary highlights EasyJet's relatively low ROCE compared to Ryanair but superior asset utilization. Despite lower profitability than the industry median, the company enjoys a high market perception. The analysis also notes a financial turnaround in 2004 after a period of lower figures due to a growth strategy.
What accounting standards are considered in this analysis?
The analysis considers EasyJet's adherence to UK Generally Accepted Accounting Principles (UK GAAP) and its future compliance with International Financial Reporting Standards (IFRS). The discussion focuses on the implications of these standards on key accounting entries and their impact on financial reporting.
What is the intended audience for this document?
This document is intended for academic use, focusing on analyzing themes in a structured and professional manner. The investor perspective is a key lens through which the analysis is conducted.
What are the key keywords associated with this analysis?
Key keywords include: EasyJet plc, low-cost airline, financial analysis, return on capital employed (ROCE), profitability, efficiency, accounting policies, UK GAAP, IFRS, Ryanair, British Airways, bmi, market perception, investor perspective, financial risk, and market risk.
- Quote paper
- Matthias Arnold (Author), 2005, Financial analysis easyjet plc, Munich, GRIN Verlag, https://www.grin.com/document/55702
