WestJet Airlines Ltd Net Income dropped on 19.6% in 2016 while Revenue increased on 2.3%
07.02.2017 • About WestJet Airlines Ltd (
$WJA) • By InTwits
WestJet Airlines Ltd reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- WestJet Airlines Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 18.2%. At the same time it's a lot of higher than industry average of 7.8%.
- CAPEX is quite volatile: 925 in 2016, 906 in 2015, 741 in 2014, 715 in 2013, 269 in 2012
- The company has business model with average profitability: ROIC is at 11.2%
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
WestJet Airlines Ltd ($WJA) key annual financial indicators
| mln. CAD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 3,427 | 3,662 | 3,977 | 4,029 | 4,123 | 2.3% |
| Gross Profit | 1,460 | 1,578 | 1,738 | 2,478 | 2,561 | 3.4% |
| SG&A | 536 | 580 | 601 | 325 | 357 | 9.7% |
| EBITDA | 561 | 600 | 702 | 835 | 791 | -5.3% |
| Net Income | 242 | 269 | 284 | 368 | 295 | -19.6% |
Balance Sheet
|
|---|
| Cash | 1,408 | 1,256 | 1,358 | 1,184 | 1,521 | 28.5% |
| Short Term Debt | 165 | 189 | 160 | 142 | 145 | 2.5% |
| Long Term Debt | 574 | 689 | 1,029 | 1,033 | 1,902 | 84.0% |
Cash flow
|
|---|
| Capex | 269 | 715 | 741 | 906 | 925 | 2.0% |
Ratios
|
|---|
| Revenue growth | 11.6% | 6.9% | 8.6% | 1.3% | 2.3% | |
| EBITDA growth | 30.1% | 7.0% | 17.0% | 18.9% | -5.3% | |
| Gross Margin | 42.6% | 43.1% | 43.7% | 61.5% | 62.1% | 0.6% |
| EBITDA Margin | 16.4% | 16.4% | 17.7% | 20.7% | 19.2% | -1.5% |
| Net Income Margin | 7.1% | 7.3% | 7.1% | 9.1% | 7.2% | -2.0% |
| SG&A, % of revenue | 15.6% | 15.8% | 15.1% | 8.1% | 8.7% | 0.6% |
| CAPEX, % of revenue | 7.9% | 19.5% | 18.6% | 22.5% | 22.4% | -0.1% |
| ROIC | 14.7% | 15.0% | 15.7% | 16.9% | 11.2% | -5.8% |
| ROE | 17.1% | 17.6% | 16.9% | 19.7% | 14.7% | -5.0% |
| Net Debt/EBITDA | -1.2x | -0.6x | -0.2x | -0.0x | 0.7x | 0.7x |
WestJet Airlines Ltd ($WJA) key quoterly financial indicators
| mln. CAD | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,031 | 949 | 1,124 | 1,018 | -4.8% | 0.8% | 7.6% | 6.2% |
| EBITDA | 205 | 148 | 258 | 179 | -19.4% | -9.1% | 12.7% | -4.8% |
| Net Income | 88 | 37 | 116 | 55 | -37.7% | -40.5% | 13.9% | -13.0% |
Balance Sheet
|
|---|
| Cash | 1,407 | 1,698 | 1,773 | 1,521 | 0.1% | 27.7% | 24.9% | 28.5% |
| Short Term Debt | 140 | 141 | 141 | 145 | -13.3% | -11.5% | -6.2% | 2.5% |
| Long Term Debt | 1,347 | 1,871 | 1,884 | 1,902 | 28.0% | 75.8% | 79.9% | 84.0% |
Ratios
|
|---|
| Gross Margin | 64.5% | 60.0% | 63.3% | 60.4% | 0.7% | 2.2% | 1.4% | -16.2% |
| EBITDA Margin | 19.9% | 15.6% | 23.0% | 17.6% | -3.6% | -1.7% | 1.0% | -2.0% |
| Net Income Margin | 8.5% | 3.9% | 10.3% | 5.4% | -4.5% | -2.7% | 0.6% | -1.2% |
Revenue and profitability
The company's Revenue increased on 2.3%. Revenue growth showed acceleration in 16Q4 - it increased 6.2% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 9.0 pp from 38.7% to 47.7% in 2016.
Gross Margin increased slightly on 0.62 pp from 61.5% to 62.1% in 2016. SG&A as a % of Revenue increased slightly on 0.58 pp from 8.1% to 8.7% in 2016.
Net Income marign decreased slightly on 2.0 pp from 9.1% to 7.2% in 2016.
Capital expenditures (CAPEX) and working capital investments
In 2016 the company had CAPEX/Revenue of 22.4%. WestJet Airlines Ltd showed CAPEX/Revenue growth of 2.9 pp from 19.5% in 2013 to 22.4% in 2016. It's average level of CAPEX/Revenue for the last three years was 21.2%.The company maintained rich investment policy and has spent a lot to CAPEX (117% of EBITDA).
Return on investment
The company operates at good ROE (14.70%) while ROIC is low (11.17%). ROIC decreased on 5.8 pp from 16.9% to 11.2% in 2016. ROE decreased on 5.0 pp from 19.7% to 14.7% in 2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 0.7x and Debt / EBITDA is 2.6x. Net Debt / EBITDA surged on 0.7x from -0.011x to 0.7x in 2016. Debt surged on 74.2% while cash surged on 28.5%.
Management team
Gregg A Saretsky is a the company's CEO. Gregg A Saretsky is a founder and has spent 8 years at the company. The company's CFO Harry P Taylor has spent 3 years at the company.
Appendix 1: Peers in Consumer, Cyclical
Below you can find WestJet Airlines Ltd benchmarking vs. other companies in Consumer, Cyclical industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| New Flyer Industries Inc ($NFI) | | 38.6% | 21.0% | 6.1% | 47.8% |
| Hardwoods Distribution Inc ($HWD) | | 21.3% | 22.8% | 25.4% | 38.1% |
| Spin Master Corp ($TOY) | | 21.5% | 41.0% | 22.9% | 31.3% |
| Great Canadian Gaming Corp ($GC) | | -0.3% | 9.6% | 3.7% | 22.4% |
| CanWel Building Materials Group Ltd ($CWX) | | 2.1% | 4.6% | 8.6% | 18.6% |
| |
|---|
| Median (35 companies) | | 4.7% | 6.6% | 7.5% | 5.5% |
|---|
| WestJet Airlines Ltd ($WJA) | | 6.9% | 8.6% | 1.3% | 2.3% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Innova Gaming Group Inc ($IGG) | 89.3% | 82.4% | 85.3% | 92.9% | 88.1% |
| Second Cup Ltd/The ($SCU) | 86.6% | 85.1% | 72.7% | 81.1% | |
| New Look Vision Group Inc ($BCI) | 71.8% | 72.6% | 72.6% | 78.7% | |
| Cara Operations Ltd ($CAO) | | 79.2% | 78.9% | 78.4% | |
| Canlan Ice Sports Corp ($ICE) | 71.6% | 69.7% | 70.7% | 78.2% | |
| |
|---|
| Median (36 companies) | 34.1% | 30.8% | 31.9% | 30.6% | 33.5% |
|---|
| WestJet Airlines Ltd ($WJA) | 42.6% | 43.1% | 43.7% | 61.5% | 62.1% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Westshore Terminals Investment Corp ($WTE) | 49.7% | 65.9% | 60.9% | 59.6% | |
| Gamehost Inc ($GH) | 46.1% | 45.7% | 45.9% | 42.8% | 42.6% |
| Great Canadian Gaming Corp ($GC) | 16.8% | 41.1% | 40.1% | 36.6% | 34.4% |
| Restaurant Brands International Inc ($QSR) | | 51.1% | 20.8% | 33.9% | 44.4% |
| Cara Operations Ltd ($CAO) | | 9.6% | 22.6% | 32.6% | |
| |
|---|
| Median (38 companies) | 8.0% | 9.8% | 12.2% | 10.0% | 15.0% |
|---|
| WestJet Airlines Ltd ($WJA) | 16.4% | 16.4% | 17.7% | 20.7% | 19.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Holloway Lodging Corp ($HLC) | 8.2% | 6.7% | 14.8% | 26.7% | 9.3% |
| Westshore Terminals Investment Corp ($WTE) | 25.7% | 11.5% | 6.2% | 21.2% | |
| Innova Gaming Group Inc ($IGG) | 20.6% | 26.7% | 15.9% | 15.6% | 15.1% |
| Exchange Income Corp ($EIF) | 7.9% | 15.8% | 15.5% | 15.4% | 29.7% |
| Chorus Aviation Inc ($CHR.A) | 9.9% | 9.6% | 3.9% | 15.0% | 34.2% |
| |
|---|
| Median (41 companies) | 2.7% | 2.9% | 3.3% | 3.2% | 4.9% |
|---|
| WestJet Airlines Ltd ($WJA) | 7.9% | 19.5% | 18.6% | 22.5% | 22.4% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Spin Master Corp ($TOY) | | 19.2% | 56.9% | 48.2% | 44.5% |
| Magna International Inc ($MG) | 16.3% | 18.6% | 25.2% | 21.9% | 21.2% |
| Linamar Corp ($LNR) | 12.9% | 17.0% | 21.7% | 23.7% | 19.8% |
| Sleep Country Canada Holdings Inc ($ZZZ) | | | 9.7% | 12.7% | 19.0% |
| Air Canada ($AC) | | 37.0% | 23.2% | 28.4% | 18.8% |
| |
|---|
| Median (41 companies) | 10.2% | 12.4% | 10.8% | 10.2% | 11.2% |
|---|
| WestJet Airlines Ltd ($WJA) | 14.7% | 15.0% | 15.7% | 16.9% | 11.2% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Holloway Lodging Corp ($HLC) | | 5.8x | 8.4x | 17.1x | 8.6x |
| AutoCanada Inc ($ACQ) | 4.2x | 4.7x | 6.4x | 8.0x | 13.7x |
| Second Cup Ltd/The ($SCU) | 1.0x | 0.6x | 0.0x | 7.5x | 0.0x |
| Amaya Inc ($AYA) | 17.9x | 1.8x | 13.5x | 6.6x | 5.0x |
| Performance Sports Group Ltd ($PSG) | 2.6x | 3.5x | 12.2x | 6.5x | |
| |
|---|
| Median (34 companies) | 2.1x | 2.8x | 2.4x | 2.6x | 2.1x |
|---|
| WestJet Airlines Ltd ($WJA) | -1.2x | -0.6x | -0.2x | -0.0x | 0.7x |
