Introduction

Webjet Limited is major travel agencies of the New Zealand and Australia which provides various online services to the customers.  The services provided by the Webjet includes

• Flight Booking (Domestic and International)
• Hotel Accommodation (Both Domestic and International)
• Holiday Package deals. (Both Domestic and International)
• Car Hire Service i.e.renting a cab (worldwide).
• Travel Insurance for the customers and the passengers travelling

The founders of Webjet Limited are David Clarke, John Lemis and Allan Nahum. The head office of the company is located in Melbourne, Australia. The company was founded in the year 1988 and the same was listed in the Australian Stock exchange in the year 2000 through a reverse take-over deal with Roper river resources New Zealand. In between 2007 and 2010 the Webjet.com had been ranked as the most visited website by HITWISE TRAVEL AGENCIES.  One of the major competitor of Webjet Limited in the recent years is Wotif.com which is an Australian Based website providing online services to the customers which is in similar to services rendered by  Webjet. The head office of Wotif.com is located in Milton, Queensland.

Overview of the Company’s Operation for the year ended 2013

Webjet Limited and Wotif Limited are into the same line of business. The major areas of comparison will be from the financial statement of both the companies for the year 2012 and 2013. For the year 2013 Webjet Limited has shown a net profit before tax to the tune of $ 11.40 million as compared to the last year profit of $ 19.30 million. Further, the net profit after tax of the company is $ 6.5 million in 2013 as against the $13.6 million in the previous year 2012. Despite of the decline in the profit the revenue for the same has increased from $ 768 million’s to $ 884 million’s.The major reason for the decline in profit is $ 2.2 million pre-tax cost assigned to the launching of new hotels and initial traded losses incurred on the same, $ 5.4 million of the cost were incurred by Webjet for the transition and acquisition of Zuji business. Total transaction value of the company has increased by 15% as compared to the last year.

Wotif.comhas reported the net profit after tax of $ 51 million as compared to $ 58 million in the year 2012. The revenue for the year 2013 is similar as compared to 2012 i.e. $146.60 million in the year 2103 and $ 145.30 million in the year 2012. The same indicates that the revenue of the company has not increased much but the profit for the same has declined by $ 7 million in the current year as compared to the last year.The profit before depreciation and amortization and tax expense as reported is $ 79.90 million in the year 2013 as compared to the $ 86.30 million for the year 2012. It includes $ 2.30 million written off against redundant brands and related depreciation.

Change in state of affairs of the Financial Statement

In the month of July 2012 the consolidated organization of Webjet Limited entered into the new lots of hotel which was a business to business model hotel operation having its base in Dubai. The consolidation and the expansion were done with an expectation to diversify the company services and also expand its presence in the Middle East countries. On July 24^th 2012 the company entered into a franchisee agreement with the South African based Bidwest group Limited. The agreement provided consolidated entity with continuous annual payments for a minimum period of 10 years. On 20^th Dec 2013 Webjet Limited issued 69.45 lacs of shares to various professional institutional and sophisticated investors at the price of d $ 3.60 per share. The second issue of 13.87 lac shares were made to the existing shareholders on 25^th Jan’13 at the price of $ 3.60 under the share purchase plan. The proceeds of all the shares were utilized for the acquisition of Zuji holdings Limited and Zuji Pte Limited in the month of Dec’12.

Wotif holding Limited– The net asset position ofWotif Limited has remained almost similar for the year ended 2013 as co pared to year 2012. At the end of 2013 the net assets of the company for the year ended 2013 is$ 99.9 million and the same has increased by $1.4 million. This indicates that the company is planning in capital investment. The receivable of the company has increased as compared with the last year. The increase is $ 2.4 million leading to the blockage of working capital. The same was due to the timing difference of collection from the credit card receivables.The trade payable of the company has remained similar as compared with the previous year. This clearly indicates that the company has paid there payable but was unable to collect the receivables on time leading to a blockage in capital.

Key Ratio Analysis

The Liquidity Ratio of the companies usually covers the following Current ratio, Quick ratio and financial leverage.

Current Ratio is the ratio which states Current Assets / Current Liability. It indicates the company’s ability to pay its debt over the period to come usually 12 months. The ideal ratio for the industry may vary. In general practise the current of 2:1 indicates an ideal ratio. The higher the current ratio better is the company’s ability to pay the debt.

The current ratio of Webjet has decreased by 0.88 times as compared to the last year which is not a good sign. As it indicates that the company is not efficient enough as compared with the last year to pay its debt.

Wotif.com – The current ratio for the company has reduced as compared with the last year. However, the fall is just minimal. The same is almost same. So the Wotif.com is in a better position to pay its debt as compared with the Webjet Limited.

Quick Ratio– refers to the ratio that whether the assets can be converted quickly into cash or not to meet the debt of the company. The ideal ratio for the same is 1:1.Higher the quick ratio better is for the company. The lenders are interested in this ratio because it does not take in to account the inventory as the same cannot be converted into cash.

Webjet Limited quick ratio has decreased as compared to the last year by .91 times which is again not a good liquidity signal as compared with the last year.

Wotif.com quick ratio has been almost similar to the last year figures which indicate that the company is stable as far as the liquidity ratio is considered. The Wotif.com is in a better position as compared to Webjet Limited.

Financial Leverage usually measures the sensitivity of the earning per share as compared with the change in its operating income. The higher the financial leverage ratio the more volatile the EPS will be. It will be crucial when the operating profit is on a lower side.

Webjet Limited the financial leverage has increased by 0.57 times as compared with the last year. This indicates that the interest expense will be on a higher side and the shareholder’s will be dissatisfied.

For Wotif.com the financial leverage has decreased as compared with the last year. This indicates the burden of the interest expense on the company isless as compared with Webjet limited.

When compared the liquidity ratio of Wotif.com with Webjet Limited then the financial position of the Wotif.com is better as compared with the Webjet Limited.

Profitability ratio covers the ratio such as Return on Assets, Return on Investment, Return on Equity and Net Margin %.

Return on Assetssignifies how many dollars of earnings result from each dollar of assets. It indicates how the company is managing its assets to generate profit. Higher the return on asset better is the earning of the company by investing the money in the asset.

Webjet Limited Return on assets has decreased drastically to 7.01 % in the current year from 25.33 % in the last year. The same indicates that the company is not managing the assets in the best possible way to provide the optimum return.

.Wotif.com return on assets has also decreased from the previous year but the fall in percentage is lower than the fall in percentage of Webjet Limited. So the Wotif.com is in a better position as compared to Webjet Limited.

Return on Equityindicateshow much profit the company has earned by investing the money of the common stock holders. It varies a lot from industry to industry. The return is depended on the capital investment. This is indicative in percentage.

Webjet Limited Return on equity has decreased by 23.67 % as compared with the last year. On the Other hand Wotif being in the same kind of industry the return on equity for the same has also reduced but it has changed by 10.58%. It is half the percentage of the Webjet Limited. The same is not a positive indicator as far as Webjet Limited financials are concerned.

Net Margin measures how much of the profit has been by investing 1 dollar of money. Higher the ratio more efficient the company is as they are able to convert the revenue into actual profit and not just notional profit. It is usually used to compare the profit  of the company on over timebasis.

Webjet Limited net margin for the year has decreased by 14.82 % as compared with the last year profit which clearly indicates that the company is not able to convert their revenue into actual profit. The profit for Wotif.com has also reduced by 5.57% as compared with the last year but the fall in percentage of Webjet Limited in more than that of theWotif.com.

Market Performance of both the companies

The system of online bookings for the hotels and the flights were largely covered and dominated by the domestic companies of Australia. Wotif has been the leader in the hotel booking and Webjet has been the leader in flights.  The dominance has been takeover by Bookings.com. The monthly web visits for bookings.com is 5.3 million whereas for Webjet and Wotif.com is 4.2 million visits only as per the data revealed by Experian Hitwise.

The market performance in terms of the share price has also detoriated. The share price of Webjet Limited has gone done by 30% and that of the Wotif.com has gone done by 51% even if the market index has gone up by 13%.

Further, the price charged by Webjet limited is quite higher than that of its competitors such as Expedia and Wotif.com, which makes the company more vulnerable.

Conclusion

After going through the financial and marketanalysis of both the companies it can be said that both the companies has shown de-growth in terms of revenue or the profit. However, Wotif.com has performed better than the Webjet Limited in the financial year 2013 as compared to each other and simultaneously with each other. The shareholder should invest in Wotif.com rather than investing the money in Webjet Limited as per the performance stated in the year 2013.

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