Individual Report:

Airbus

By

Thomas Newcombe
Student No. 13810707
Corporate Analysis
Jerome Healy
Finance and Investment
Brighton Business School
University Of Brighton

Table of Contents
Introduction..............................................................................................................................................................1
Strategy and Significant Points................................................................................................................................1
Acquisitions..........................................................................................................................................................1
Disposals..............................................................................................................................................................2
SWOT Analysis.......................................................................................................................................................2
Core Analysis...........................................................................................................................................................3
Profitability...........................................................................................................................................................3
Underlying Future Profit...................................................................................................................................3
Revenue.............................................................................................................................................................4
Ratios ()...........................................................................................................................................................4
Investor Ratios ()................................................................................................................................................5
Other Ratios to Consider......................................................................................................................................5
Investment............................................................................................................................................................6
Finance.................................................................................................................................................................6
Corporate Governance and Regulatory Audit..........................................................................................................6
Corporate and Social Reporting...............................................................................................................................7
Appendices..............................................................................................................................................................7
Five Year Report...................................................................................................................................................7
Financial Statements.............................................................................................................................................7
Other Annual Reports and Global Market forecasts............................................................................................8
Ratio Calculation..................................................................................................................................................8
References..........................................................................................................................................................10

Introduction
Airbus is part of Airbus group NV, which is also known as EADS NV, the European Aeronautic Defense and
Space Company. It specializes in the manufacture of aircrafts, helicopters, missiles, defense systems and
defense electronics, satellites and commercial space launch vehicles (Reuters 2015). The company has four
main divisions; Airbus, which focuses on the Airbus commercial and military part of the company, Eurocopter,
which focuses on developing marketing and selling civil and military helicopters, Astrium, the part of the
company that provides space related services such as selling developing and manufacturing satellites and
launchers, and Cassidian, the part of the company specializing in military areas such as missile systems, training
aircraft and military combat.

The company was founded in 1967 and aimed to bring together various aviation companies within Europe to
compete against the large American companies such as Boeing. It was widely recognized that American aircraft
manufacturers were much larger and profitable mainly due to the size of America. The Airbus website (2015)
shows the history of the company and talks about the first breakthrough for them, which was the A300, the
worlds first twin engine widebody jet, which entered commercial service in 1974. This lead to a larger and one
of the most successful aircraft families in history, consisting of the A318, A319, A320 and A321.

Strategy and Significant Points

Acquisitions
Airbuss financial statement (2014) shows that there were 2 acquisitions during 2014. The first acquisition was
of 100% of shares in Salzburg Munchen Bank AG, a fully licensed bank based within Munich. This acquisition
was with the aim to support and provide additional financing options for the groups businesses. This company
has also reported revenues of 4.7M from the acquisition date to the year-end 2014.
The second acquisition the financial statement (2014) shows is an additional 58.49% shares in Alestis
Aerospace S.L. a Spanish company. This gave Airbus the majority shareholding within the company with a total
of 60.16% shares in the company. This acquisition was to secure the supply chain for civil and military
programmes. Alestis Aerospace reported revenues of 148M for 2014.

Disposals
The biggest disposal that Airbus has performed in 2014 and continuing through to 2015 is the disposal of
Dassault Aviation. The financial statements (2014) report that this started on 27 November 2014, when they
sold 810,072 shares at a price of 980 per share, a total amount of 794M pre transaction costs. This left Airbus
with 42.11% of shares with associated voting rights. However this disposal continued into 2015, where Reuters
(2015) reports that Airbus plans to sell additional shares in Dassault Aviation, reducing their stake to 27%.

SWOT Analysis
A SWOT analysis is one of the methods that has been used to analyze Airbus. The S refers to strengths of the
company internally. The W is weaknesses internally within the company. As opposed to this the O is
opportunity, the external wellness of the company. The T stands for threats, the harmful part of the external
aspect of the SWOT.

A key strength for Airbus over the years has been the
innovation of the company. The Airbus website (2014)
states that
airbus has always
been a leader
in the evolution of the
air transport
industry.
A second
strength for Airbus is
its internal
support system.
Burdick and
DiPonzio (2013)
highlight how
strong the internal
support
system is making it
easy to
communicate through
all offices, giving the company a strong sense of
efficiency.

The biggest opportunity for Airbus is the growth of the

air
transport
industry
(Airbus 2013).
This means
that as one of
the largest
companies
within the
industry, there
is a great
amount of
brand
recognition.
This can
also lead to
repeat
customers and
Burdick
and DiPonzio
(2013) point out.

One of the biggest weaknesses for Airbus is the

challenges facing the current largest aircraft the A380.
Originally
the
largest
aircraft in
the
skies, it
has
become
outdated
since
it has
been
around
for
almost 10
years,
according
to
Business
Insider
(2015).
The main threat for Airbus is its rival competitor
Boeing. As the air transport industry is generally seen as
a duopoly
according to the
economic
times (2015).
A second
threat for Airbus is
the current
state of the economy.
This means
that there are less
potential
customers than there
once was
meaning that orders
have
dropped, as
highlighted
by BBC news
(2015).

Your
text
here

Core Analysis
Profitability
The profitability of a company can be considered the most important part when analyzing it. This is because it
analyzes weather the company is effective and making a profit.
Underlying Future Profit
The current profit can be seen on the Airbus income statement (2014) as 2350 million in 2014 compared to
1483 million in 2013. This shows a rise in overall profit for the year. The underlying future profit can be
analyzed in the case of Airbus by mainly looking at aspects such as the passenger traffic growth and freight
traffic growth. The Airbus annual report (2014) predicts that the passenger traffic growth over the next 20 years
will be 4.7% (compound average growth rate) and the freight traffic growth over the next 20 years will be 4.5%
(compound average growth rate). Airbus (2014) also predicts that the passenger fleet will grow by 17,963 and
the freighter fleet to grow by 1,040 by 2033. This is more than double the current fleet for passenger aircraft and
almost double for freight aircraft. This shows that the company is predicting a large amount of underlying future
profit as they believe that orders for aircraft is due to grow substantially over the next 20 years therefore
increasing their underlying profit and ultimately, their profit is based on aircraft orders.

Revenue
The total revenue for Airbus (2014) was 60,713M in 2014, which had risen from 57,567M in 2013. This is a
significant rise and shows that Airbus are currently working hard to deliver all orders that are being made.

Ratios ()
Gross Margin Ratio 14.72%

5 year average: 14.04%

This ratio is better than the five year average which means that the company is performing above how it has
been generally over the last five years. This could mean that the company is growing more.
EBITD Margin Ratio 8.70%

5 year average: 6.87%

The EBITD margin ratio shows earnings before interest tax and depreciation within a ratio to revenue. It is
important to include an analysis of this as it is important when looking at profitability. It measures the
companys profitability before any legally required payments. The EBITD margin ratio for airbus is currently
higher than the five year average, which is beneficial to the company as it signals that profitability is high.
Operating Margin Ratio 6.57%

5 year average: 4.25%

The operating margin ratio measures what proportion of the companys revenue is remaining after paying for
variable costs of production. This is important when analyzing profitability as it gives an idea of the percentage
of profit the company makes per euro of sales. For Airbus, the current operating margin ratio is large compared
to the five year average and is a good sign that the company is currently very profitable.
Net Profit Margin 3.87%

5 year average: 1.24%

The net profit margin shows the percentage of remaining revenue after all operating expenses have been
deducted from the original revenue. This figure is important for profitability as it makes it easy to work out the
percentage of revenue that can be converted into profits. The NPM for Airbus is above the five year average
meaning that the profitability is currently very high in comparison to previous years.
Pre Tax Margin 6.57%

5 year average: 2.60%

This ratio shows the companys earnings before tax. It is shown in terms of total sales and revenues. A company
is more profitable the higher the pre tax margin. In the case of airbus, the current pre tax margin is very high in
comparison to the five year average making the company currently very profitable.

Investor Ratios ()
Earnings per Share (EPS) - 2013: 1.86

2014: 2.99

EPS is important to analyze for investors due to the close relationship it has with share pricing. This EPS is
beneficial to an investor as it has increased greatly since 2013 indicating that company is worth investing in.
Price/Earnings Ratio (PE) 19.17%

5 year high: 30.22%

5 year low: 17.93%

This ratio is important to have alongside the EPS as it analyzes the current share price of the company against
the EPS and predicts the amount of growth the company is likely to experience. The price earnings ratio shows
that the current PE is close to the 5 year high. This means that the companys growth is not as much as it has
been in the previous five years but is still likely to grow small amounts.
Dividend Yield- 1.83%

5 year average: 1.91%

The dividend yield is very important in an investors analysis of a company as it shows the payout from the
company each year in accordance with the share price. This yield shows that the company is performing closely
to how it has been over the past five years. This is a good sign as it has not dropped large amounts.

Other Ratios to Consider

Current ratio:

2014: 98.1%

5 year average: 78.53%

Gearing ratio:

2014: 0.98

5 year average: 0.97

Sales revenue to capital employed:

2014: 1.36

5 year average: 1.54

Sales revenue per employee:

2014: 43.8%

5 year average: 37.07%

Average settlement period for receivables:

2014: 806

5 year average: 691

Average inventories turnover period: 2014: -178

5 year average: -188

Interest cover ratio:

2014: 28.11

5 year average: 6.31

Acid test ratio:

2014: 45.43%

5 year average: 29.41%

Investment
When looking towards the future, Airbus is a company that stands out from the other companies in the air travel
industry. The Airbus website (2015) suggests that they have been innovating for over four decades. They also
write that they are looking forward to the next 40 years and finding ways to innovate more over these years.
Airbus (2015) are currently researching methods to make plane travel more eco-friendly, a big step for the
growth of the company and the industry in general. The company looks certain to grow in the future making
investment very appealing.

Secondly, the Financial Times (2015) has written in an article that Airbus has recently cut its cash outflow and
has confirmed that its jet programmes are on track. This has signaled that the current production programmes
which have been considered very challenging are on track. The Financial Times (2015) also writes that investor
expectations of a share buyback this year have been reinforced following this confirmation of programmes
being on track.

Finance
An important aspect to analyze within this core analysis is the finance of the company. Within the financial
statements for Airbus (2014) the cash flow statement notes that total cash and cash equivalents has risen since
2013 by a small amount. However the figure is large, at 7,289 million in 2014. This shows that the company is
currently performing well and has a very good cash flow. It is also worth noting that the cash flow for
acquisitions in 2014 is -47 million, which is almost insignificant in comparison to its total cash and cash
equivalents. A final point of consideration is the cash flow from disposals in 2013, which was 34 million. The

notes within the financial statements (2014) highlight that no disposal in 2013 had a significant impact on the
cash flow.

Corporate Governance and Regulatory Audit

The Airbus Group website (2015) writes about how the corporate governance within Airbus has evolved to
match the shareholders expectations. The website (2015) suggests that the Airbus corporate governance has
matched their ambition, met their obligations, achieved their missions and reached their goals that they have set.
Barmeyer and Mayrhofer (2014) write that one way in which this can be seen is by the way they always
consider the goals of the shareholders, and are always looking to issue dividends in their share buyback
programme. This programme is also brought up in the corporate governance report website (2015) where it
states that the owner of Airbus has put forward a change in strategy to hopefully benefit shareholders,
suggesting that shareholders will receive dividends this year.
The Airbus website (2015) also talks about its audit committee, which makes recommendations on the approval
of the annual financial statements and quarterly and half year accounts. This committee also support the board
of directors when appointing external auditors, ensuring that audit activities are correctly directed.

Corporate and Social Reporting

On the Airbus website (2015), they state that one of their priorities is enterprise risk management, which they
describe as a system for identifying potential events that may affect the company, managing risk so that it is
within the defined tolerance and providing reasonable assurance towards achieving targets. The Airbus website
(2015) also stresses the importance of their ethics and compliance, and that they always work to conform to all
applicable laws and regulations, including ethical business principles.
One of the most important parts of the corporate and social reporting analysis for Airbus is that it has an
important role as a corporate citizen. 247 Wall st (2015) writes that Airbus and Boeing combined would rank
13th on the 2013 world GDP list, ahead of countries such as Australia and Spain. This means that a company this
size has a large corporate and social responsibility. The Airbus website (2015) shows that they do this through
working with key stakeholders and local communities to build and maintain long term relationships across three
main areas; humanitarian assistance, youth development and research support.

Appendices
Five Year Report
The income statement and statement of financial position for Airbus has been compiled and submitted in an
email to go with this report.

Financial Statements
The financial statements used for this report can be found as a PDF at the following links

2014: http://www.airbusgroup.com/int/en/investors-shareholders/Annual-reports-and-registrationdocuments.html
2013: http://www.airbusgroup.com/int/en/investors-shareholders/Annual-reports-and-registrationdocuments.html
2012: http://www.airbusgroup.com/dam/assets/airbusgroup/int/en/investor-relations/documents/2013/AGM-annual-report/EADS-Financial-Statements-2012/EADS%20Financial%20Statements%202012.pdf
2011: http://www.airbusgroup.com/int/en/investors-shareholders/Annual-reports-and-registrationdocuments.html
2010: http://www.airbusgroup.com/int/en/investors-shareholders/Annual-reports-and-registrationdocuments.html
2009: https://www.airbusgroup.com/dam/assets/airbusgroup/int/en/investor-relations/documents/2009/AnnualReport-and-Registration-Document-2009/Financial-Statements-2009_en/Financial%20Statements
%202009_en.pdf

Other Annual Reports and Global Market forecasts

Various other annual reports, global markets forecasts and press releases were used to compile information, the
PDFs for these can be found here:
http://www.airbus.com/company/market/forecast/

Ratio Calculation
The ratios used in this report were calculated in an excel document provided in a separate email. The
calculations used to find these are shown below.
Gross Margin Ratio = Revenue Cost of goods sold
Revenue
EBITD Margin Ratio =

EBITD
Revenue

Operating Margin Ratio = Operating income

Net sales

Net Profit Margin = Net profit

Revenue
Pre Tax Margin = Earnings before tax

Net sales
Earnings Per Share = Net income Dividends on preferred stock
Average outstanding shares
Price/Earnings Ratio = Market value per share
Earnings per share
Dividend Yield = Annual dividends per share
Price per share
Current Ratio = Current assets
Current liabilities
Dividend payout ratio =

Dividend announced for the year

X 100

Earnings for the year available for dividend

Return on capital employed =

Net profit before interest and taxation

X 100

Share capital + Reserves + Long term loans

Return on ordinary shareholder funds = Net profit after taxation and preference dividends
Ordinary share capital + Reserves
Gearing ratio =

Non-current liabilities

Share capital + Reserves + Non-current liabilities

Sales revenue to capital employed =

Sales revenue

Share capital + Reserves + Non-current liabilities

Sales revenue per employee =

Sales revenue
Number of employees

Average settlement period for receivables = Trade receivables X 365

Credit sales

X 100

Average settlement period for payables = Trade payables

X 365

Credit purchases
Interest cover ratio = Profit before interest and tax
Interest payable
Acid test ratio = Current assets (excluding inventories)
Current liabilities

References

Airbus. (2015). Corporate Governance, How we are managed.Available:

http://www.airbusgroup.com/int/en/group-vision/governance.html. Last accessed 02/05/2015.
Airbus. (2015). Corporate Social Responsibility. Available: http://www.airbus.com/company/corporatesocial-responsibility/. Last accessed 02/05/2015.
Airbus. (2015). Ethics and Compliance. Available: http://www.airbus.com/company/corporate-socialresponsibility/ethics/. Last accessed 02/05/2015.
Airbus. (2015). Future by Airbus. Available: http://www.airbus.com/innovation/future-by-airbus/. Last
accessed 02/05/2015.
Airbus. (2015). Responsibility & Sustainability, Creating an added value. Available:
http://www.airbusgroup.com/int/en/group-vision/responsibility-and-sustainability.html. Last accessed
02/05/2015.
Anirban Chowdhury. (2015). Airbus and Boeing slug it out for top spot in Indian aviation sector. Available:
http://articles.economictimes.indiatimes.com/2015-04-07/news/60902714_1_airbus-wide-body-planemaker. Last accessed 02/05/2015.
Barmeyer, C. Mayrhofer, U. (2014). How has the French context shaped the organisation of the Airbus
group?. International journal of organizational analysis. 22 (4), 426-448.
BBC Business. (2015). Airbus profits rise while orders dip. Available:
http://www.bbc.co.uk/news/business-32530041. Last accessed 02/05/2015.
Benjamin Zhang. (2015). The giant Airbus A380 is ten years old, and facing major challenges. Available:
http://uk.businessinsider.com/as-the-airbus-a380-superjumbo-celebrates-its-10th-birthday--but-howmany-more-will-it-have-2015-4?op=1?r=US. Last accessed 02/05/2015.

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Corporate governance report. (2015). EADS says shareholders to get higher dividends in future. Available:
http://www.corporategovernancereport.com/investor-relations/eads-says-shareholders-to-get-higherdividends-in-future/. Last accessed 02/05/2015.
Paul Ausick. (2015). Airbus backlog of $1 trillion makes Boeing look smaller than it is. Available:
http://247wallst.com/aerospace-defense/2015/04/30/airbus-backlog-of-1-trillion-makes-boeing-looksmaller-than-it-is/. Last accessed 02/05/2015.
Peggy Hollinger. (2015). Airbus cuts cash outflow and confirms jet programmes are on track. Available:
http://www.ft.com/cms/s/0/8c209d84-ef0b-11e4-a6d2-00144feab7de.html#axzz3YudjgRqn. Last
accessed 02/05/2015.
Thomson Reuters. (2015). Airbus Group NV. Available: http://www.reuters.com/finance/stocks/overview?
symbol=AIR.PA. Last accessed 02/05/2015.
Thomson Reuters. (2015). Airbus Group NV To Sell Additional Shares in Dassault Aviation. Available:
http://www.reuters.com/finance/stocks/AIR.PA/key-developments/article/3179652. Last accessed
02/05/2015.
Thomson Reuters. (2015). Airbus key developments. Available:
http://www.reuters.com/finance/stocks/AIR.PA/key-developments. Last accessed 02/05/2015.

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