Virgin Australia Holdings Limited · ASX:VGN
Virgin Australia — HY 2016 Earnings Presentation
30 slides from Virgin Australia's earnings presentation, Feb 11, 2016
Slide 1: Half Year 2016 Results Presentation
Half Year 2016 Results Presentation February 11, 2016
Slide 2: Key highlights
Key highlights HY 16 HY 15 Change Underlying Profit Before Tax1 $81.5m $10.2m $71.3m Statutory Profit /(Loss) After Tax2 $62.5m ($47.8m) $110.3m Group Underlying EBIT1 $161.4m $54.3m $107.1m ROIC1 8.0% 2.9% 5.1pts Financial Leverage1 5.7x 6.8x (16.7%) VA RASK1 3.9% VA Yield1 4.3% Group CASK1 (1.5%)
Slide 3: $97.7m like-for-like performance improvement
$97.7m like-for-like performance improvement (72.1) 105.9 (31.4) 81.5 25.6 Net fuel & FX benefit of $33.8m 29.3 $10.2m 40.3 (26.3) ($16.1m) HY 15 HY 15 HY 15 VA airline Tigerair Velocity Fuel FX Net interest HY16 UPBT1 Tigerair pre- like-for- UPBT consolidated like ULBT1 earnings Note 1: Underlying
Slide 4: Domestic: Strong HY performance
Domestic: Strong HY performance HY 16 HY 15 Change Domestic Underlying EBIT1 Underlying $m $130.0m $69.7m $60.3m +60.3 EBIT1 Underlying 7.1% 4.1% 3.0pts EBIT Margin1 RASK1 7.1% 130.0 69.7 Yield1 9.1% HY 15 HY 16 Note 1: Underlying EBIT, Underlying EBIT Margin, RASK & Yield are non-statutory measures
Slide 5: Domestic: Leading airline operating performance
Domestic: Leading airline operating performance On time performance leader for 13 of the past 14 months1 % 94 92 90 VA brand 88 QF brand 86 84 0 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Dec-15 Note 1: In accordance with definitions from the Bureau of Infrastructure, Transport & Regional Econ
Slide 6: Domestic: Improving the customer experience
Domestic: Improving the customer experience Continuously improving the customer experience in H11 Opened state-of-the-art Perth terminal and lounge 7.6% improvement in satisfaction with terminal post-launch 8.3% increase in lounge satisfaction post-launch 83% of customers surveyed prefer ‘The La
Slide 7: International: Continued positive trajectory
International: Continued positive trajectory HY 16 HY 15 Change International turnaround despite Bali impact Underlying Underlying EBIT,1 $m ($30.8m) ($39.5m) $8.7m EBIT1 Underlying (5.4%) (6.9%) 1.5pts EBIT Margin1 RASK1 5.1% (19.2) 27.9 Yield1 2.9% (30.8) (39.5) HY 15 HY 16 Bali disrupt HY 16 impr
Slide 8: Tigerair: Profitable with ongoing improvement
Tigerair: Profitable with ongoing improvement HY 16 HY 15 Change Strong turnaround Underlying Underlying EBIT1, $m $13.9m ($24.8m) $38.7m EBIT1 +38.7 Underlying 5.7% (12.1%) 17.8pts 13.9 EBIT Margin1 RASK1 9.2% (24.8) Yield1 12.0% HY 15 HY 16 Note 1: All metrics calculated for Tigerair are on a stan
Slide 9: Tigerair: Maintaining strong operating metrics
Tigerair: Maintaining strong operating metrics Leading the low cost carrier market1 in reliability and punctuality Scheduled flights flown On time performance2 % % 100 90 99 Tigerair 85 Tigerair 80 98 75 97 70 96 65 Jetstar Jetstar Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-1
Slide 10: Velocity: Continued strong performance
Velocity: Continued strong performance HY 16 HY 15 Change Revenue $154.8m $122.6m $32.2m Underlying $70.8m $45.2m $25.6m EBIT1 Underlying 45.7% 36.9% 8.8pts EBIT Margin1 5.7 million members at end of Average of 2,595 new H1 FY16, up 21.7% on H1 members joining per day in H1 FY15 FY16 Widest online r
Slide 11: VARA & Cargo: Good potential for growth
VARA & Cargo: Good potential for growth Virgin Australia Regional Airlines (including Charter) • Good performance in light of resources downturn • Simplified fleet structure in H1, decommissioning F50s and flying more F100s Cargo • Launched as a new business in H1 to seize opportunities for medium a
Slide 12: Our people are key to our performance
Our people are key to our performance Recent awards The Australian Financial Review – ‘Most Respected Company’ The Hay Group – ‘Most Respected Company for Corporate Culture’ AirlineRatings.com – ‘Best New World Carrier’ ‘Best Cabin Crew’ One of the world’s 20 safest airlines Australian Business Trav
Slide 13: Group on time performance
Group on time performance Virgin Australia Group on time performance leader for 15 consecutive months1 % 94 92 90 88 VA Group 86 84 82 QF Group 0 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Note 1: In accordance with definitions from the Bureau of Infrastructure, Transport & Regional Eco
Slide 14: On track to meet FY17 targets
On track to meet FY17 targets1 Virgin Vision Our target1 Status objective VA Domestic: VA Velocity: Capitalise on Tigerair: Underlying Underlying International: growth EBIT Margin2 Profitable by Profitable by EBIT2 growth On track opportunities FY17 >15%, 7m+ growth 6-9% FY17 members Drive Yield2
Slide 15: H2 FY16: Actions for success
H2 FY16: Actions for success • Translate growing customer loyalty into revenue growth through Velocity • Execute International recovery plan: − Introducing over 35,000 more seats on our trans-Tasman routes − Adding A330 with ‘The Business’ from MEL and BNE to Fiji during peak times − Aligning networ
Slide 16: Optimising fleet to capture efficiencies
Optimising fleet to capture efficiencies Group operating fleet 31 Dec 2015 30 Jun 2015 • 3 major fleet optimisation initiatives targeted at further cost efficiencies, paying down debt and improving fleet utilisation: B737-700/800 78 77 o Decommissioning of F50 fleet by end of E190 18 18 FY16; A330 6
Slide 17: Return on Invested Capital on track to meet WACC target
Return on Invested Capital on track to meet WACC1 target Return on Invested Capital (ROIC1) ≈ WACC1 8.0% 6.1% 2.9% 1.7% FY 14 12m to FY 15 12m to FY 16 HY 15 HY 16 target2 Note 1: WACC & ROIC are non-statutory measures used by Management and VAH’s Board as measures to assess financial performance an
Slide 18: Outlook statement
Outlook statement1 “Based on current market conditions, all fundamental business metrics are on track for the Group to report a profit in the 2016 financial year and report a Return on Invested Capital in line with its Cost of Capital2.” Note 1: Please refer to the “Forward Looking Statements” secti
Slide 19: Supplementary financial slides
Supplementary financial slides 19
Slide 20: Group financial summary
Group financial summary HY 16 HY 15 $m $m Revenue and income 2,658.2 2,377.5 Statutory profit / (loss) after tax 62.5 (47.8) Addback Income tax benefit (49.3) (13.7) Statutory profit / (loss) before tax 13.2 (61.5) Addback Restructuring and transaction costs1 21.9 42.9 Impairment losses on assets he
Slide 21: Cash flow
Cash flow • Operating cash flows traditionally weaker HY 16 HY 15 in H1 $m $m • H1 working capital movement impacted Net cash from operating 10.2 64.8 by increased receivables from corporate activities travel agents and reduced forward sales Net cash used in investing on account of lower H2 internat
Slide 22: Balance sheet
Balance sheet • Financial Leverage1 decrease to 5.7x at HY 16 FY 15 31-Dec-15, from 6.8x at 31-Dec-14 , a $m $m 16.7% decrease, notwithstanding adverse Cash and cash equivalents 906.7 1,028.5 FX impact on capitalised aircraft rentals and USD debt balances Total assets 5,848.7 5,779.6 • FY 17 refinan
Slide 23: Expected fuel and FX impact in FY16
Expected fuel and FX impact in FY16 • H2 16 fuel pricing benefit to be Remainder of FY 161,2 significantly offset by lower effective FX Effective Participation rate across non-fuel costs rate rate • Virgin Australia to gain increasing Fuel (AUD Brent/bbl) 77.00 14% exposure to recent decline in oil
Slide 24: Cost program tracking ahead of plan
Cost program tracking ahead of plan 738 Annual run rate benefit HY 16 in-year benefits $51m Cumulative program benefits HY 16 cumulative program benefits $738m 514 Annual run rate benefit since FY13 408 $408m 345 launch 188 195 98 46 FY13 FY14 FY15 HY 16 On track to exceed $1.2bn target by end of FY
Slide 25: Virgin Australia Group fleet
Virgin Australia Group fleet 31 Dec 2015 Group 31 Dec 30 Jun operating fleet 2015 2015 Leased Owned • 4 x B737 deliveries in FY 16, 3 x lease B737-700/800 78 77 38 40 returns E190 18 18 7 11 A330 6 6 6 - • 14th A320 for Tigerair in H1 FY 16 B777 5 5 1 4 ATR72-500/600 14 14 14 - • In line with fleet
Slide 26: Targeted return framework
Targeted return framework1 • Last 12 months’ Underlying EBIT • Add back last 12 months’ aircraft rentals ROIC EBIT • Less notional depreciation on capitalised value of aircraft leases (7x annual aircraft rental cost), or ~4% pa • Net debt • Total equity (including non-controlling interests) Invested
Slide 27: Disclaimer, definitions and ASIC guidance
Disclaimer, definitions and ASIC guidance Disclaimer The following non-IFRS information has not been audited or reviewed by KPMG: Underlying Profit / (Loss) Before Tax, Underlying Performance, Restructuring and transaction costs, Impairment losses on assets held for sale, Share of equity accounted p
Slide 28: Disclaimer, definitions and ASIC guidance
Disclaimer, definitions and ASIC guidance Definitions (continued) Underlying Earnings Before Interest, Tax, Depreciation, Amortisation and Aircraft Rentals (EBITDAR): is a non-statutory measure per Note 2 of the VAH Interim Financial Report for the half-year ended 31 December 2015. It is used by Man
Slide 29: Disclaimer, definitions and ASIC guidance
Disclaimer, definitions and ASIC guidance Definitions (continued) Invested Capital: is a non-statutory measure which provides an indication as to the invested capital within VAH, and is derived from adding average Adjusted Net Debt (as defined above) and total equity as reported in the consolidated
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