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How Financially Strong Is Flybe Group PLC (LON:FLYB)?

While small-cap stocks, such as Flybe Group PLC (LON:FLYB) with its market cap of UK£87.20m, are popular for their explosive growth, investors should also be aware of their balance sheet to judge whether the company can survive a downturn. Since FLYB is loss-making right now, it’s vital to understand the current state of its operations and pathway to profitability. I believe these basic checks tell most of the story you need to know. However, this commentary is still very high-level, so I recommend you dig deeper yourself into FLYB here.

How much cash does FLYB generate through its operations?

Over the past year, FLYB has ramped up its debt from UK£109.20m to UK£188.30m , which is made up of current and long term debt. With this growth in debt, FLYB’s cash and short-term investments stands at UK£115.10m , ready to deploy into the business. Moreover, FLYB has produced cash from operations of UK£34.90m over the same time period, resulting in an operating cash to total debt ratio of 18.53%, signalling that FLYB’s operating cash is not sufficient to cover its debt. This ratio can also be a sign of operational efficiency for loss making companies since metrics such as return on asset (ROA) requires positive earnings. In FLYB’s case, it is able to generate 0.19x cash from its debt capital.

Can FLYB pay its short-term liabilities?

At the current liabilities level of UK£252.60m liabilities, it seems that the business has been able to meet these commitments with a current assets level of UK£255.40m, leading to a 1.01x current account ratio. For Airlines companies, this ratio is within a sensible range since there is a bit of a cash buffer without leaving too much capital in a low-return environment.

LSE:FLYB Historical Debt June 25th 18
LSE:FLYB Historical Debt June 25th 18

Is FLYB’s debt level acceptable?

Since total debt levels have outpaced equities, FLYB is a highly leveraged company. This is not uncommon for a small-cap company given that debt tends to be lower-cost and at times, more accessible. But since FLYB is presently unprofitable, sustainability of its current state of operations becomes a concern. Running high debt, while not yet making money, can be risky in unexpected downturns as liquidity may dry up, making it hard to operate.

Next Steps:

FLYB’s debt and cash flow levels indicate room for improvement. Its cash flow coverage of less than a quarter of debt means that operating efficiency could be an issue. Though, the company exhibits proper management of current assets and upcoming liabilities. This is only a rough assessment of financial health, and I’m sure FLYB has company-specific issues impacting its capital structure decisions. You should continue to research Flybe Group to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for FLYB’s future growth? Take a look at our free research report of analyst consensus for FLYB’s outlook.

  2. Valuation: What is FLYB worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether FLYB is currently mispriced by the market.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

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