A. Analysis of Financial Health: Cash Flow Health Dimension

Qantas’ cash flow statement for 2022 shows a net cash outflow from operating activities of AUD 1,431 million, which is an improvement from the prior year’s net cash outflow of AUD 3,614 million. The main drivers of the improvement were lower payments for employee benefits and taxes and higher receipts from customers.

The net cash outflow from investing activities was AUD 752 million in 2022, compared to a net cash outflow of AUD 777 million in the prior year. This was mainly due to lower purchases of property, plant and equipment.

The net cash inflow from financing activities was AUD 2,438 million in 2022, compared to a net cash inflow of AUD 2,125 million in the prior year. This increase was primarily due to higher proceeds from borrowings and government grants.

Overall, Qantas’ cash flow health has improved compared to the prior year. The company generated positive free cash flow of AUD 255 million in 2022 (compared to negative free cash flow of AUD 4,391 million in the prior year). This indicates that Qantas had sufficient funds to cover its capital expenditures and pay dividends.

B. Analysis of Financial Health: Other Dimensions

Profitability Ratios:

• Gross profit margin: In FY22, Qantas’ gross profit margin increased to 24% from 14% in FY21. This indicates that the company was able to generate more revenue per dollar spent on production costs.
• Operating profit margin: In FY22, Qantas’ operating profit margin improved significantly to -6%, compared to -38% in FY21. This suggests that the company was able to control its operating expenses better.
• Net profit margin: In FY22, Qantas reported a net loss margin of -11%, which is an improvement over the prior year’s net loss margin of -57%.

Efficiency Ratios:

• Asset turnover: In FY22, Qantas’ asset turnover increased to 0.53 from 0.40 in FY21. This indicates that the company was able to generate more revenue per dollar invested in assets.
• Inventory turnover: Qantas does not hold significant inventory, so this ratio is not applicable.
• Receivables turnover: In FY22, Qantas’ receivables turnover improved to 1.78 from 1.73 in FY21. This suggests that the company was able to collect its outstanding debts faster.

Liquidity Ratios:

• Current ratio: In FY22, Qantas’ current ratio improved to 0.88 from 0.75 in FY21, but it is still below the industry average of around 1.2. This indicates that the company may have difficulty paying its short-term obligations with its current assets.
• Quick ratio: In FY22, Qantas’ quick ratio also improved to 0.52 from 0.38 in FY21, but it is still below the industry average of around 0.8.

Capital Structure Ratios:

• Debt-to-equity ratio: In FY22, Qantas’ debt-to-equity ratio increased slightly to 3.15 from 3.07 in FY21, which indicates that the company has a high level of debt relative to equity.
• Interest coverage ratio: In FY22, Qantas’ interest coverage ratio improved significantly to -1x (from -7x in FY21), indicating that the company was able to cover its interest expenses with operating earnings.

Market Performance Ratios:

• Price-to-earnings (P/E) ratio: As of June 30th, 2022, Qantas had a P/E ratio of N/A due to negative earnings.
• Earnings per share (EPS): In FY22, Qantas reported a loss of AUD 1.59 per share, which is an improvement over the prior year’s loss of AUD 9.86 per share.
• Dividend yield: In FY22, Qantas did not pay any dividends due to financial difficulties caused by the COVID-19 pandemic.

Overall, Qantas’ financial health has improved in most dimensions compared to the prior year. The company was able to control its operating expenses better and generate more revenue per dollar spent on production costs, resulting in improved profitability ratios. However, Qantas still faces challenges with its liquidity and debt levels.