Air Canada Net Income jumped on 189% in 2016 and EBITDA Margin decreased slightly on 0.75 pp from 15.6% to 14.9%
17.02.2017 • About Air Canada (
$AC) • By InTwits
Air Canada reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Air Canada has high CAPEX intensity: 5 year average CAPEX/Revenue was 11.1%. At the same time it's a lot of higher than industry average of 7.8%.
- CAPEX is quite volatile: 2,921 in 2016, 1,815 in 2015, 1,501 in 2014, 962 in 2013, 444 in 2012
- The company has highly profitable business model: ROIC is at 18.8%
- It operates with medium-size leverage: Net Debt/EBITDA is 2.7x while industry average is 2.8x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Air Canada ($AC) key annual financial indicators
| mln. CAD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 12,114 | 12,382 | 13,272 | 13,868 | 14,677 | 5.8% |
| Gross Profit | 7,561 | 7,865 | 8,494 | 9,965 | 11,539 | 15.8% |
| SG&A | 2,826 | 2,847 | 3,025 | 3,188 | 2,174 | -31.8% |
| EBITDA | 1,111 | 1,197 | 1,358 | 2,167 | 2,184 | 0.8% |
| Net Income | -140 | 6 | 100 | 303 | 876 | 189.1% |
Balance Sheet
|
|---|
| Cash | 754 | 750 | 661 | 572 | 787 | 37.6% |
| Short Term Debt | 499 | 374 | 484 | 524 | 707 | 34.9% |
| Long Term Debt | 3,259 | 3,959 | 4,732 | 5,870 | 5,911 | 0.7% |
Cash flow
|
|---|
| Capex | 444 | 962 | 1,501 | 1,815 | 2,921 | 60.9% |
Ratios
|
|---|
| Revenue growth | 4.3% | 2.2% | 7.2% | 4.5% | 5.8% | |
| EBITDA growth | 22.5% | 7.7% | 13.5% | 59.6% | 0.8% | |
| Gross Margin | 62.4% | 63.5% | 64.0% | 71.9% | 78.6% | 6.8% |
| EBITDA Margin | 9.2% | 9.7% | 10.2% | 15.6% | 14.9% | -0.7% |
| Net Income Margin | -1.2% | 0.0% | 0.8% | 2.2% | 6.0% | 3.8% |
| SG&A, % of revenue | 23.3% | 23.0% | 22.8% | 23.0% | 14.8% | -8.2% |
| CAPEX, % of revenue | 3.7% | 7.8% | 11.3% | 13.1% | 19.9% | 6.8% |
| ROIC | | 37.0% | 23.2% | 28.4% | 18.8% | -9.6% |
| ROE | | | | | 142.2% | 142.2% |
| Net Debt/EBITDA | 2.7x | 3.0x | 3.4x | 2.7x | 2.7x | -0.0x |
Air Canada ($AC) key quoterly financial indicators
| mln. CAD | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 3,343 | 3,458 | 4,451 | 3,425 | 2.9% | 1.3% | 10.6% | 7.6% |
| EBITDA | 341 | 485 | 1,122 | 236 | -4.5% | -3.8% | 14.0% | -26.7% |
| Net Income | 101 | 186 | 768 | -179 | | -36.9% | 76.6% | |
Balance Sheet
|
|---|
| Cash | 908 | 882 | 1,017 | 787 | -12.3% | -18.1% | 11.8% | 37.6% |
| Short Term Debt | 457 | 549 | 627 | 707 | -17.7% | 4.0% | 11.6% | 34.9% |
| Long Term Debt | 5,991 | 6,401 | 6,350 | 5,911 | 14.1% | 25.7% | 13.9% | 0.7% |
Ratios
|
|---|
| Gross Margin | 80.7% | 78.7% | 78.5% | 74.0% | 4.7% | 3.5% | 1.4% | -0.8% |
| EBITDA Margin | 10.2% | 14.0% | 25.2% | 6.9% | -0.8% | -0.7% | 0.7% | -3.2% |
| Net Income Margin | 3.0% | 5.4% | 17.3% | -5.2% | 12.6% | -3.3% | 6.4% | -1.5% |
Revenue and profitability
Air Canada's Revenue increased on 5.8%. Revenue growth showed acceleration in 16Q4 - it increased 7.6% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 7.8 pp from 21.4% to 29.2% in 2016.
Gross Margin increased on 6.8 pp from 71.9% to 78.6% in 2016. SG&A as a % of Revenue decreased on 8.2 pp from 23.0% to 14.8% in 2016.
Net Income marign increased on 3.8 pp from 2.2% to 6.0% in 2016.
Capital expenditures (CAPEX) and working capital investments
The company's CAPEX/Revenue was 19.9% in 2016. Air Canada showed fast CAPEX/Revenue growth of 12.1 pp from 7.8% in 2013 to 19.9% in 2016. Average CAPEX/Revenue for the last three years was 14.8%.Air Canada maintained rich investment policy and has spent a lot to CAPEX (134% of EBITDA).
Return on investment
The company operates at high and attractive ROE (142.21%) while ROIC is a bit lower (18.85%). ROIC decreased on 9.6 pp from 28.4% to 18.8% in 2016.
Leverage (Debt)
Debt level is 2.7x Net Debt / EBITDA and 3.0x Debt / EBITDA. Net Debt / EBITDA decreased slightly on 0.017x from 2.7x to 2.7x in 2016. Debt increased on 3.5% while cash surged on 37.6%.
Appendix 1: Peers in Consumer, Cyclical
Below you can find Air Canada 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) | | 5.2% | 6.6% | 7.5% | 4.6% |
|---|
| Air Canada ($AC) | | 2.2% | 7.2% | 4.5% | 5.8% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Innova Gaming Group Inc ($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% |
|---|
| Air Canada ($AC) | 62.4% | 63.5% | 64.0% | 71.9% | 78.6% |
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Westshore Terminals Investment Corp ($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% | 10.2% | 12.4% | 10.0% | 15.4% |
|---|
| Air Canada ($AC) | 9.2% | 9.7% | 10.2% | 15.6% | 14.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Holloway Lodging Corp ($HLC) | 8.2% | 6.7% | 14.8% | 26.7% | 9.3% |
| WestJet Airlines Ltd ($WJA) | 7.9% | 19.5% | 18.6% | 22.5% | 22.4% |
| Westshore Terminals Investment Corp ($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% |
| |
|---|
| Median (41 companies) | 2.7% | 2.9% | 3.3% | 3.2% | 4.9% |
|---|
| Air Canada ($AC) | 3.7% | 7.8% | 11.3% | 13.1% | 19.9% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Spin Master Corp ($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 ($ZZZ) | | | 9.7% | 12.7% | 19.0% |
| Uni-Select Inc ($UNS) | 4.8% | 3.4% | 9.6% | -11.1% | 17.0% |
| |
|---|
| Median (41 companies) | 10.5% | 12.4% | 10.8% | 10.2% | 11.0% |
|---|
| Air Canada ($AC) | | 37.0% | 23.2% | 28.4% | 18.8% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Holloway Lodging Corp ($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) | 1.7x | 2.5x | 2.3x | 2.4x | 1.9x |
|---|
| Air Canada ($AC) | 2.7x | 3.0x | 3.4x | 2.7x | 2.7x |
