This report will investigate the ratios, cash flows, and non-financial data of two companies to
analyze which company has positive financial trends that will provide stability for investors.
The two companies we are investigating are Auckland International Airport (AIA) and
Mainfreight (MFT). Firstly, we will analyze the financial position of both companies using
the statistical measure of ratios from years 2017, 2018, and 2019. Then we will analyze and
discuss our findings from the cash flow statements provided. Lastly, we will explore the non-
financial aspects of both companies to help provide an overall picture of how they are
performing and recommend which company would be best to invest in.
Auckland International Airport is New Zealand's leading national and international
connector, one of the country's most significant infrastructure assets, and the largest employer
in the Auckland area. The company was founded in 1966 and is now run by Dr. Patrick
Strange with its mission to build 'the airport of the future (Auckland Airport, n.d.) On the
other hand, 9Mainfreight is a global logistics company that began operations in 1978. The
company offers national transportation, air and ocean shipping, and warehousing services. It
honors itself in its three pillars of "Culture, Family and Philosophy," which integrate its
unique culture and create customer and supplier relationships (Mainfreight, n.d.).
Profitability ratios involve the evaluation of the firm’s financial performance during a certain
period, or over a number of periods. The results of such analysis allow the analyst to forecast
and evaluate the potential profitability of the organization. The net profit ratio (NP%)
measures the net profit generated from sales revenue. The return on assets ratio (ROA)
helps the organization analyze whether or not their assets have been used effectively to
generate profits. If the ratio is high this means that the return generated from assets is
sufficient. The return on equity ratio (ROE) measures a firm’s profitability in terms of the
return being generated for owners/shareholders. (Lawrence et al., 2012).
AIA is experiencing an increase in net profit from 55.16% in 2017 to 72.99% in 2019 with a
slight drop to 54.23% in 2018. With such a high percentage of net profits in 2019, this means
that this is a favourable trend as they have generated a good amount of profit from sales
revenue even after cost operating expenses and cost of sales has been deducted. The ROA
ratio for AIA has a slight increase from 5.90% in 2017 to 6.65% in 2019 with a small
decrease in 2018 of 4.96% this is a favourable trend as this means they have a better return
generated from assets. The ROE for AIA was 8.26% in 2017, then a small drop to 6.21% in
2018 then increasing again in 2019 to 8.68%. The increase in the ROE over these three years
is a positive trend as the owner/owners will be generating profits from their investments.
MFT’s net profit starts at 4.42% in 2017, slightly decreases in 2018 to 4.31% then makes a
small climb upwards in 2019 to 4.78%. Although they have increased slightly over the three
years their percentage of net profit is very low. This means that they are only making 4.78%
of actual profits generated from sales after operating expenses and the cost of sales has been
deducted. This trend is not favorable as although it has increased slightly because the net
profit percentage is so small this could affect the overall profitability of the company. It
indicates that the company could have future cash flow problems. However, Mainfreights
ROA Increases steadily over the three years, starting at 8.45% in 2017, then 8.59% in 2018,
and reaching 9.74% in 2019. This is a positive trend as it suggests that Mainfreight is using
its assets effectively and efficiently to generate profits. The ROE also slightly increases over
the three years starting at 15.98%, slightly dropping in 2018 to 15.85%, then increasing again
in 2019 to 16.83%. This increase signals a positive trend which indicates that there is an
increase in the return on the company's investments.
, Asset management ratios analyze how a business manages its assets to produce sales
efficiently and effectively. Total Assets turnover (TAT) measures the company's sales or
revenues compared to its assets, “The higher the asset turnover ratio, the more efficient a
company is at generating revenue from its assets”. (Investopedia, 2021).
AIA has a 0.09 TAT ratio in 2017 then experiences a slight dip to 0.08 in 2018 and stays the
same for 2019. This trend is unfavourable and indicates that the company could have issues
generating revenue from their assets but it depends on which sector AIA belongs in as an
airport can be slower due to having a large asset base.
MFT shows higher figures with a 1.82 TAT ratio and continuing to increase in 2018 at 1.90
and 1.97 in 2019. Although compared to AIA they have better results, it is still under the
usual favourable standard, meaning the company needs to improve on selling more of their
inventory and faster.
The Financial Structure Ratios are used to measure an organization's gearing level in terms of
how much of its assets have been financed by third parties. In this case, Financial Leverage
Multiplier (FLM) and Times Interest Earned (TIE) will be used to evaluate Mainfreight and
Auckland International Airport's financial position.
The FLM ratio for Mainfreight has decreased from $1.99 in 2017 to $1.93 in 2018 to $1.79 in
2019. The slight decrease of FLM indicates a favourable trend as the company is getting less
risky over the three years. As discussed under the other financial structure ratios, the slightly
increased Net Profit Margin and ROE imply a better return for shareholders. In contrast, the
increase in Asset Management Ratio indicates a good inventory turnover. Therefore, it shows
a decrease in FLM of Mainfreight. However, $1.79 of assets is still above the average
industry equity of $1, resulting in a $0.79 debt by the end of 2019, indicating that it is still a
high risk.
Auckland International Airport started at a risky $1.61 in 2017, decreasing to $1.44 in 2018,
and has remained unchanged by 2019. The decrease indicates a slight improvement regarding
having every $1 in equity to fund $1.44 of assets and needs an additional $0.44 in debt to
fund assets. The overall decrease is favourable. However, the unchanged $1.44 by 2019 can
be quite significant for the company considering the unchanged Asset Management Ratio by
2019. The Net Profit Margin and ROE, on the other hand, have shown a positive trend by
2019, which can mean that although the FLM has remained unchanged, shareholders can still
receive an adequate return.
Times Interest Earned Ratio indicates the proportion of earnings before interest and tax are
available to cover interest expense. Thus, it is an essential ratio as these concern lending
institutions.
The TIE ratio of Mainfreight started at 21.31 times in 2017, increasing to 23.76 times in
2018, and has also significantly increased to 29.69 times in 2019. The business shows a triple
of the general figure of 5, which means that the organization is comfortable meeting its
interest obligations. Hence, Mainfreight has an adequate EBIT to cover interest expenses or
the cost of borrowing. The continuation of the company's positive trend indicates a
favourable ratio resulting from the increased profitability.
Auckland Airport's TIE ratio has increased from 7.19 times in 2017 to 7.78 times in 2018 to
9.24 times by 2019. This is favourable because the TIE ratio remains above the public figure,
analyze which company has positive financial trends that will provide stability for investors.
The two companies we are investigating are Auckland International Airport (AIA) and
Mainfreight (MFT). Firstly, we will analyze the financial position of both companies using
the statistical measure of ratios from years 2017, 2018, and 2019. Then we will analyze and
discuss our findings from the cash flow statements provided. Lastly, we will explore the non-
financial aspects of both companies to help provide an overall picture of how they are
performing and recommend which company would be best to invest in.
Auckland International Airport is New Zealand's leading national and international
connector, one of the country's most significant infrastructure assets, and the largest employer
in the Auckland area. The company was founded in 1966 and is now run by Dr. Patrick
Strange with its mission to build 'the airport of the future (Auckland Airport, n.d.) On the
other hand, 9Mainfreight is a global logistics company that began operations in 1978. The
company offers national transportation, air and ocean shipping, and warehousing services. It
honors itself in its three pillars of "Culture, Family and Philosophy," which integrate its
unique culture and create customer and supplier relationships (Mainfreight, n.d.).
Profitability ratios involve the evaluation of the firm’s financial performance during a certain
period, or over a number of periods. The results of such analysis allow the analyst to forecast
and evaluate the potential profitability of the organization. The net profit ratio (NP%)
measures the net profit generated from sales revenue. The return on assets ratio (ROA)
helps the organization analyze whether or not their assets have been used effectively to
generate profits. If the ratio is high this means that the return generated from assets is
sufficient. The return on equity ratio (ROE) measures a firm’s profitability in terms of the
return being generated for owners/shareholders. (Lawrence et al., 2012).
AIA is experiencing an increase in net profit from 55.16% in 2017 to 72.99% in 2019 with a
slight drop to 54.23% in 2018. With such a high percentage of net profits in 2019, this means
that this is a favourable trend as they have generated a good amount of profit from sales
revenue even after cost operating expenses and cost of sales has been deducted. The ROA
ratio for AIA has a slight increase from 5.90% in 2017 to 6.65% in 2019 with a small
decrease in 2018 of 4.96% this is a favourable trend as this means they have a better return
generated from assets. The ROE for AIA was 8.26% in 2017, then a small drop to 6.21% in
2018 then increasing again in 2019 to 8.68%. The increase in the ROE over these three years
is a positive trend as the owner/owners will be generating profits from their investments.
MFT’s net profit starts at 4.42% in 2017, slightly decreases in 2018 to 4.31% then makes a
small climb upwards in 2019 to 4.78%. Although they have increased slightly over the three
years their percentage of net profit is very low. This means that they are only making 4.78%
of actual profits generated from sales after operating expenses and the cost of sales has been
deducted. This trend is not favorable as although it has increased slightly because the net
profit percentage is so small this could affect the overall profitability of the company. It
indicates that the company could have future cash flow problems. However, Mainfreights
ROA Increases steadily over the three years, starting at 8.45% in 2017, then 8.59% in 2018,
and reaching 9.74% in 2019. This is a positive trend as it suggests that Mainfreight is using
its assets effectively and efficiently to generate profits. The ROE also slightly increases over
the three years starting at 15.98%, slightly dropping in 2018 to 15.85%, then increasing again
in 2019 to 16.83%. This increase signals a positive trend which indicates that there is an
increase in the return on the company's investments.
, Asset management ratios analyze how a business manages its assets to produce sales
efficiently and effectively. Total Assets turnover (TAT) measures the company's sales or
revenues compared to its assets, “The higher the asset turnover ratio, the more efficient a
company is at generating revenue from its assets”. (Investopedia, 2021).
AIA has a 0.09 TAT ratio in 2017 then experiences a slight dip to 0.08 in 2018 and stays the
same for 2019. This trend is unfavourable and indicates that the company could have issues
generating revenue from their assets but it depends on which sector AIA belongs in as an
airport can be slower due to having a large asset base.
MFT shows higher figures with a 1.82 TAT ratio and continuing to increase in 2018 at 1.90
and 1.97 in 2019. Although compared to AIA they have better results, it is still under the
usual favourable standard, meaning the company needs to improve on selling more of their
inventory and faster.
The Financial Structure Ratios are used to measure an organization's gearing level in terms of
how much of its assets have been financed by third parties. In this case, Financial Leverage
Multiplier (FLM) and Times Interest Earned (TIE) will be used to evaluate Mainfreight and
Auckland International Airport's financial position.
The FLM ratio for Mainfreight has decreased from $1.99 in 2017 to $1.93 in 2018 to $1.79 in
2019. The slight decrease of FLM indicates a favourable trend as the company is getting less
risky over the three years. As discussed under the other financial structure ratios, the slightly
increased Net Profit Margin and ROE imply a better return for shareholders. In contrast, the
increase in Asset Management Ratio indicates a good inventory turnover. Therefore, it shows
a decrease in FLM of Mainfreight. However, $1.79 of assets is still above the average
industry equity of $1, resulting in a $0.79 debt by the end of 2019, indicating that it is still a
high risk.
Auckland International Airport started at a risky $1.61 in 2017, decreasing to $1.44 in 2018,
and has remained unchanged by 2019. The decrease indicates a slight improvement regarding
having every $1 in equity to fund $1.44 of assets and needs an additional $0.44 in debt to
fund assets. The overall decrease is favourable. However, the unchanged $1.44 by 2019 can
be quite significant for the company considering the unchanged Asset Management Ratio by
2019. The Net Profit Margin and ROE, on the other hand, have shown a positive trend by
2019, which can mean that although the FLM has remained unchanged, shareholders can still
receive an adequate return.
Times Interest Earned Ratio indicates the proportion of earnings before interest and tax are
available to cover interest expense. Thus, it is an essential ratio as these concern lending
institutions.
The TIE ratio of Mainfreight started at 21.31 times in 2017, increasing to 23.76 times in
2018, and has also significantly increased to 29.69 times in 2019. The business shows a triple
of the general figure of 5, which means that the organization is comfortable meeting its
interest obligations. Hence, Mainfreight has an adequate EBIT to cover interest expenses or
the cost of borrowing. The continuation of the company's positive trend indicates a
favourable ratio resulting from the increased profitability.
Auckland Airport's TIE ratio has increased from 7.19 times in 2017 to 7.78 times in 2018 to
9.24 times by 2019. This is favourable because the TIE ratio remains above the public figure,
