Discuss About The Consolidation Account Requirement Dividend?
The paper focused on the case of Sydney airport, which is a listed company in Australia. The company began its operations in 1933 with three runways. Sydney airport is located approximately 8 kilometers from the city center, and 10 kilometers from the major tourist attraction sites.
Sydney airport is a primary airport and an international getaway company based in Australia. The company contributes $ 30.8 billion annually to the national economy through its economic activity. The contribution is approximately 6.4% of the New South Wales economy, which offers 306,700 direct and indirect jobs(Michael, 2017). The business is located 8km from the city center and 10 km from major tourist attractions. The business consists of three runway networks, that is, main north-south runway (4.0km), parallel north-south runway (2.4km) and east-west runway (2.5 km). Also, there are 102 international terminal stores and 116 domestic terminal stores. Check-in service desks are 234 for terminal 1, 68 for terminal 2 and 85 for terminal three. The net cash flow from business activities has increased due to increased revenues and the offset of airport operating expenses(William, 2017).
Sydney airport assumes a disciplined approach while investing. The company earns a return on aeronautical and commercial infrastructure capital investments. Sydney airport investment activities involved the issuing of $ 900 million US144A/RegS bond to reinforce capital management approach. The amount raised from the issue was used in repaying drawn bank facilities. The net cash flow used in investing activities in 2016 are shown as ongoing investments while investments done in 2015 include the T3 transaction worth $535.0. The company has made investments in the terminus and airport precinct to target new business opportunities. Moreover, it has invested in the property and car business and lease sites, hotel sites, freight facilities, airline offices and airline lounges(Dickson, 2017).
The company has realized a revenue growth of 11% which is equivalent to $ 1.364.6. Earnings before interest and tax had a growth of 8.2% (1.085.7 million). The security-holder distribution growth is at 21% translating to 31.0 cents per stapled security. Also, the company has issued $900 million bonds at the rate of 4.9% which is fully hedged against currency exposure for ten years results that exceed treasury objectives. The aeronautical revenue has had a growth of 5.6% with 3.8% domestic while 8.9% international. Retail revenue stand at 12.2%, property and car revenue has a growth of 15%. Moreover, parking and transport revenue have grown by 3.6%(AU Government, 2017).
Sydney airport observes the following practices concerning the financial reporting.
The financial report is build up by consolidated financial statements of SAL group and SATI Group as stipulated by Accounting Standards.
The financial statements are prepared by the corporations’ act 2001, which is also in line with Australian Accounting Standards.
The financial report is prepared under historical cost convention based on the evaluation of financial assets and liabilities such as derivative instruments at fair value.
Also, the financial report represents the finances regarding Australian dollars which is the required currency by SATI and SAL. The values are rounded to the nearest thousands of dollars unless directed otherwise(Freed, 2017).
Sydney airport is an international airport, which is the busiest in Australia, and the world’s longest-serving airport. The airport handles a capacity of about 41,870,000 passengers with over 326,686 aircraft movements making it the 38th busiest airport in the world. The airport serves 43 international and 46 domestic destinations directly. The company operates in a highly concentrated industry whereby most aircraft movements go through Australia’s major airports such as Brisbane and Melbourne. Over the past five years, the industry has experienced significant growth due to the increase in the volume of passenger movements. This industry is segmented into the rental of airport retail space, rental of rental of airport property, air traffic control and navigation, and airport aeronautics (Silvester, 2017).
The Australian airline industry has witnessed major structural changes whereby the Commonwealth has adopted a policy, which permits more than one Australian owned international airlines to operate scheduled services to and from Australia. Also, the current trend in the industry of low-cost international carriers is now being felt in Australian industry. As a result of this trend, the Australian authority has developed the trade practice act that inhibits unfair competition throughout the industry. The growth of the industry has also seen the opening up of more destinations, with all the major international airlines operated by private owners under long-term lease from commonwealth (John, 2017).
The airline industry supply chain in Australia consist pertains activities of sourcing resources such as jet fuel, labor, and other supplies, to ensure the delivery of quality services to the customers. The supply of jet fuel has proved to be the largest cost item consuming over 40% of the operating cost, which in turn increases the industry cost and restrains growth. The largest cost contributor of the jet fuel is the transportation cost from the Australian ports to the aircraft. The second largest cost contributor in the airline industry is the aircraft maintenance. The supply chain is usually outsourced keeping in mind the issues of safety. This, however, compels the airlines to part away with a huge cost to get the quality services on maintenance(Brian, 2017).
The Australian airline industry consists of domestic and international airlines. Despite the domestic airline having minimal regulation, the international airline is heavily regulated by the commonwealth. The main industrial players in the Australian airline include Qantas, which comprehensive regional and international networks and feeder traffic in other overseas airlines. The second largest player is virgin blue, which despite having modest services compared to Qantas; it has managed to put up competition in the domestic industry through its low-cost travel budget. Other players include Sydney Marylebone and Brisbane. However, the domestic airport is the most populated and highly competitive compared to the international industry.
Qantas is the third oldest airline in the world founded in 1920. The airline has managed to acquire almost 30% of the market share in the international market. Sydney airport serves an approximate of 39.7 million, which consists about 13.7% of the total market; share(Mary, 2017).
The success factors in Australian airport industry include industry deregulation, increase in passengers both domestic and international as well as the emergence of cheaper airlines. Also, the industry has recently experienced an increase in the number of companies offering aircraft maintenance which in turn has drastically reduced the fee charged on their services to ensure that they can keep up with the competition. Moreover, the presence of companies like FedEx and UPS as well as manufacturing companies who arrange with the airport industry has contributed to the sustainable income of this industry through carriers and air cargo(Martin, 2017).
The airport industry serves as the window to the country, in the same case this window is exposed to terror attacks or even the entry of terrorists. Another threat is the possibility of entry of diseases from other countries through the airport.
Also, airports serve as the conduit for drug and other abusive substances that have been illegalized in Australia. Such entry of illegal substances from the foreign countries could lead to harm in the local society and economy.
Another threat involves the risk of accidents due to malfunction of aircraft control system; such a risk threatens the passenger’s life as well as the reputation of the company (Martin, 2017).
The legal environment in which Sydney airport operates in consist of regulations on financial reporting as well as the legal and political environment.
The Sydney airport abides by the airport lease rules and procedures regarding lease with the Commonwealth. One of the main regulation that the company abides by Sydney airport is the airport’s act 1996. This amendment strives to ensure the development of civil aviation in Australia, regulate the airports in the interest of its users and the general community. Promote efficiency and economic development in the operation of airports and facilitate the comparing of airports performance in a manner that is transparent. Also, the act serves to ensure the diversity of ownership and control of certain major airports remains in control by the domestic residence (Brian, 2017).
|
Political o Sydney airport operates in a stable political environment o The deregulation of the airline industry has brought many business opportunities to the company o The open skies policy ensures that the airport has frequent and different clients who help generate revenues o The foreign ownership rules ensure that the industry is maintained and majorly owned domestically |
Economic o The economic global financial crisis has also been felt in the airline industry which has led to reduced number of airports and airlines o The reduced disposable income as a result of increase in the cost of living has led to reduced freights due to reduced number of passengers hence reduced revenues o The increased devaluation of the Australian dollar against the dollar is making it hard for the airport to maintain the highest quality services. o Fuel cost has been on the rise, which is affecting the revenues of the company. |
|
Social o The change in consumer demographics has seen most passengers preferring to spend less during traveling thus making fewer profits from the passengers. o This change in consumer preference has also been influenced by consumer preferences as well as the increased travel lifestyle. |
Technological o The advancement of video conferencing has proven to cut on cost as well as enhance efficiency o More and more operation is now being handled over the internet at a reduced cost o The investment in surface transportation is now providing a secondary source of income that helps to compensate the reduced profit in the primary activities of the airport. o Modern and efficient aircraft has enabled the airport to save a lot on fuel and thus reduce the losses. |
|
Strength o Sydney airport has a strong dominance in the Australian market o It has also fostered its global presence through partnership o Has a stable income platform that is also growing o The airport has strong marketing and public relations. |
Weakness o The move to lower cost base through layoff may create tense industrial relations o The airport currently has a mismatch in capacity increase and market demand. o The company is reducing its non-core assets, which automatically reduces its value. |
|
Opportunities o More opportunities lie in digital marketing and loyalty program o The airport also has the advantage of big data analytics for operational efficiency and customer experience |
Threats o There is a lot of risk due to the volatility of foreign exchange as well as the fuel o The issues with regulations are hampering the efforts to expand the business. o There is a lot of competition from the Asian rivals. |
The Porter’s five forces affecting the airport industry include the following:
The bargaining power of buyers- the bargaining power of buyers, has continuously increased due to the availability of various options to select. Such options include low cost, traveling services and premium traveling services. Also other service providers in the industry offer services that increase the buyer’s purchasing power (Sydneyairport.com.au, 2017).
Bargaining power of suppliers- In the airline industry the suppliers bargaining power is relatively low due to a large number of suppliers who offer similar kind of services. Such suppliers include virgin airlines and Qantas airlines.
The threat of substitute- the threat of substitute is much lower in comparison to other transport means since air traveling is much faster. Long distance traveling cannot be much faster on roads or sea as on air. Thus the threat substitute is low.
Rivalry among existing firms- the competition is currently so server in the domestic market. Sydney airport is competing with Melbourne and other airports, which has led to losses during operations (Airport, 2017).
The threat of new entry- the threat of new entry is lower since newer players require huge investments in infrastructure.
In general, the airport industry has access to financing which is used to expand business despite the existing regulations regarding the expansion of businesses. Also, the finance accessibility is exposed to fluctuations in interest rate which might dent the airport business cash flow in the long run. Moreover, the Australian dollar has been continuously been devalued against the Australian dollar over time, which has made international business operations expensive.
With airport industry experiencing significant growth in the number of airports and technology, the current competitiveness requires the industry to cut down on its rate to get more clients. These changes have forced Sydney airport to change its operations strategy to keep up with the competition. The current state of the airport shows that the company might have to reconsider the complete change in their operations to manage in keeping afloat in the industry. Such changes could be through serious investment in technology and expansion of the airport. Other risk factors that might influence business operations in the airport include government regulations that limit the ownership of the airport to only 49% from foreign investors. This limits the number of new ideas brought to the table (Nyström and Asproth, 2013).
Sydney airport has currently invested in property and transport where is has introduced taxis to ferry passengers to their destinations from the airport as well as to the airport. The transport investment is currently being faced by fierce competition from other transport service providers. The competitors are offering much cheaper rates, which is likely to drive the Sydney airport transport out of business.
The consideration to expand the airport business might be a good idea in the long run for Sydney airport. However, the expansion might not be rewarding in the short run as the market size is currently small and has not yet exhausted the current resources available.
Sydney airport has experienced various changes in their income reports. These changes will continue to happen as the industry continues to shift. The recent reduction in rates charged on aircraft might also prompt the adjustments of costs associated with airport operations to ensure that the organization stays afloat. The changes may also affect service delivery, which poses a risk of poor marketing (Velez-Pareja, 2012).
The regulatory framework requires that all leased federal airports observe the airports act 1996 during their planning. The regulation requires the preparation of a master plan, which addresses the environmental strategy of 20 years renewable after every five years, the failure of the airport operations to observe the environmental strategy subjects the company to legal exposures.
Sydney airport is currently receiving financial gains from it primary operations as well as secondary operations. The primary operations involve the hosting of flights while secondary operations involve the transportation and hosting of passengers. These operations are currently being faced by fierce competition from rivals who are offering cheaper rates. This move could cripple Sydney airport business operations. This means that the business needs to strategize on its pricing strategy in the short run as well as consider new uncompetitive investments (Knapp, 2013).
The airport’s information technology infrastructure is as any other system, vulnerable to external as well as internal threats by hackers. The system can lead to loss of business profits or even damages in cases where the system has been compromised. Another alternative would be to upgrade the system, which in turn would require funds to see the process to completion.
The system upgrade means that almost all other systems and operations will be automated including the financial reporting systems. The automation of almost all operations means when a hacker manages to override the security system, he or she will be able to access the all the information and control including finance and other control information. This means the hacker can perform the act of terrorism with the help of company resources. Therefore, despite the upgrade of the system, the huge investment should be made on security measures to ensure the financial data, as well as the rest of company information, is safe(Sanders, 2011).
Current ratio = current assets /current liabilities
2014
Current ratio = $613.6/ $1222.9 = 0.5
2015
Current ratio = $524.7/$753.9 = 0.7
2016
Current ratio = $665.5/$833 = 0.8
The current ratio of the company s increasing constantly and by 2016 the company had almost experienced total efficiency.
Debt equity ratio = debt/ equity
2014
Debt equity ratio = $9938.6/$3280.2 = 3
2015
Debt equity ratio = 10864.1/ 3092.7 = 3.51
2016
Debt equity ratio =11365.9/2886.3 = 3.94
Debt equity ratio has shown a slight increase since 2014 meaning that the company is accumulating huge debts by leveraging its equity.
Return on equity = net income/ average shareholders’ equity
2014
Return on equity = 290.8/ ((3280.2+3687.2)/2)
Return on equity = 0.083 or 8.3%
2015
Return on equity = 537.4/ ((3092.7+ 3280.2)/2)
Return on equity = 0.17 or 17%
2016
Return on equity = 564.4/ ((2886.3+ 3092.7)/2)
Return on equity = 0.18 0r 18%
The return on equity ratio has shown a constant increase over the period of three years meaning that the net income is also growing.
Profit margin ratio = net income/ net sales
2014
Profit margin ratio = 290.8/1163.6
Profit margin ratio = 0.25 0r 25%
2015
Profit margin ratio= 537.3/ 1229
Profit margin ratio = 0.44 or 44%
2016
Profit margin = 564.4/1364.6
Profit margin = 0.41 or 41%
The profit margin ratio has increased from 2014 with a percentage of approximately 15%. This shows that the airport is experiencing growth in customers as well as its investments.
The above ratios are also reflecting the industrial performance over the period of three years whereby the industry started to realize significant growth shortly after commonwealth deregulated the domestic market. Much of the realized increase in revenue is due to domestic operations as well as from local investments (Schuster, 2009).
Sydney airport is a public company governed by the Australian constitution as well as the Commonwealth laws. Apart from these laws, the company has its internal policies, which guide ethics and conduct of the company. These policies are communicated to the staff through company handbooks as well as in weekly meetings.
The company also has strict guidelines concerning the hiring of employees as well as the sourcing of suppliers. The company requires that the employees possess the required skills and knowledge, and so are the suppliers. This is done so to ensure employees and suppliers exercise integrity in their dealings as the passengers is primary focus of the company is ensuring safety (De Neufville, 2012).
The decision-making process in the management of Sydney airport involves the board of directors as well as the two major investors. The two major investors are SAT and SAL. The mixture of several stakeholders in determining the direction of the airport helps to raise and scrutinize important issues that help ensure the success of the company. Moreover, the independence of the stakeholders ensures the management executes of all the stakeholders.
Sydney airport management ensures that activities are conducted within the scope stipulated by the operational risk matrix and policies and in line with the board directives. Financial reporting of the company follows the international accounting standards to allow the users interpret the data easily. Also, information processing follows the policies of the company that shapes up the information processing framework (Jackob, 2008).
The organization structure of the company consists of the CEO Directors, CFO, and COO who reports to the CEO and an investor’s relation who reports to the CFO and COO.
Sydney’s airport board of directors provides directions to the company, through the chief executive officer. The executive officer then directs the company employees towards the goals of the company. The chief financial officer, chief operations officer and the investor’s relations all of whom conduct the core duties of the company, report to the chief executive officer.
The human resource policy requires that a fixed annual remuneration consists of base salary and benefits, which include the minimum regulatory superannuation contribution.
Also, the human resource has set key performance targets in line with NRC at the beginning of the year. The key performance indicators are set to ensure long-term, and short-term objectives are met.
Conclusion
This paper shows that auditing does not only focus on the financial analysis but a holistic process that considers internal and external operations of an entity. The case of Sydney airport shows that the auditing is done by the directors to the staff, suppliers, and even the customers. This provides a clear picture of how the organization is managing to handle its issues with its stakeholders. In conclusion, auditing is a vital part of company processes as it provides unbiased feedback.
References
Airport, S. (2017). Org Chart Sydney Airport. [online] The Official Board. Available at: https://www.theofficialboard.com/org-chart/sydney-airport [Accessed 24 Sep. 2017].
AU Government (2017). Australian Airline Industry – Parliament of Australia. [online] Aph.gov.au. Available at: https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp0203/03RP10#eairports [Accessed 24 Sep. 2017].
Brian, K. (2017). ASA 315 – Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment – October 2009. [online] Legislation.gov.au. Available at: https://www.legislation.gov.au/Details/F2016C00028 [Accessed 24 Sep. 2017].
Brian, M. (2017). Melbourne Airport Annual Reports | Melbourne Airport. [online] Melbourneairport.com.au. Available at: https://melbourneairport.com.au/about-melbourne-airport/corporate-information/annual-reports.html [Accessed 24 Sep. 2017].
Chung, S. (2013). Alternative Investment Strategies Alternative Investment Strategies , Sohail Jaffer . Euromoney Books , 1998 . The Journal of Alternative Investments, 2(2), pp.92-93.
De Neufville, R. (2012). STRATEGIC PLANNING FOR AIRPORT CAPACITY. Australian Planner, 29(4), pp.174-180.
Dickson, B. (2017). Airport Operations in Australia Market Research | IBISWorld. [online] Ibisworld.com.au. Available at: https://www.ibisworld.com.au/industry-trends/market-research-reports/transport-postal-warehousing/support-services/airport-operations.html [Accessed 24 Sep. 2017].
Freed, J. (2017). Sydney Airport passenger numbers hit record in 2015. [online] The Sydney Morning Herald. Available at: https://www.smh.com.au/business/aviation/sydney-airport-passenger-traffic-climbs-to-record-20160119-gm9lp8.html [Accessed 24 Sep. 2017].
Industry Journal of Industrial Relations – Sarah Gregson, Ian Hampson, Anne Junor, Doug Fraser, Michael Quinlan, Ann Williamson, 2015. [online] Journals.sagepub.com. Available at: https://journals.sagepub.com/doi/abs/10.1177/0022185615582234?journalCode=jira [Accessed 24 Sep. 2017].
Jackob, M. (2008). Sydney Airport master plan 2009. [Sydney]: SACL.
John, F. (2017). Enhancing the customer experience. [online] Sydney Airport Sustainability Report 2016. Available at: https://sustainability.sydneyairport.com.au/enhancing-the-customer-experience/ [Accessed 24 Sep. 2017].
Julius, F. (2015). Sydney airport. Bondi Junction, N.S.W.: Focus Publishing.
Knapp, J. (2013). A Reconsideration of Consolidation Accounting Requirements and Pre-acquisition Dividends. Australian Accounting Review, 23(3), pp.190-207.
Kolisch, R., Brunner, J. and Larsen, J. (2016). Airport operations management. Computers & Operations Research, 65, p.163.
Mary, S. (2017). Airport Planning & Regulation. [online] Infrastructure.gov.au. Available at: https://infrastructure.gov.au/aviation/airport/planning/index.aspx [Accessed 24 Sep. 2017].
Martin, H. (2017). Profit Margin Ratio | Analysis | Formula | Example. [online] My Accounting Course. Available at: https://www.myaccountingcourse.com/financial-ratios/profit-margin-ratio [Accessed 24 Sep. 2017].
Michael, K. (2017). Supply chains, maintenance, and safety in the Australian airline William, S. (2017). Australian Airline Industry – Parliament of Australia. [online] Aph.gov.au. Available at: https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp0203/03RP10 [Accessed 24 Sep. 2017].
Nyström, C. and Asproth, V. (2013). Virtual Teams — Support for Technical Communication?. Journal of Organisational Transformation & Social Change, 10(1), pp.64-80.
Sanders, W. (2011). PLANNING SYDNEY’S AIRPORTS. Australian Planner, 29(4), pp.181-188.
Schuster, D. (2009). Australia’s approach to airport charges: The Sydney Airport experience. Journal of Air Transport Management, 15(3), pp.121-126.
Silvester, W. (2017). Airports Act 1996. [online] Legislation.gov.au. Available at: https://www.legislation.gov.au/Details/C2016C00709 [Accessed 24 Sep. 2017].
Stoner, J., Wankel, C. and Malleck, S. (2014). Global sustainability initiatives. Charlotte, N.C.: Information Age Pub.
Sydneyairport.com.au. (2017). Board and management team. [online] Available at: https://www.sydneyairport.com.au/corporate/about/management [Accessed 24 Sep. 2017].
Velez-Pareja, I. (2012). Financial Analysis and Control – Financial Ratio Analysis (Slides). SSRN Electronic Journal.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download