Transat A.T. Inc. · TSX:TRZ
Transat A.T — Investor Presentation (December 2018)
32 slides from Transat A.T's investor presentation, December 2018
Slide 1: Margins Affected by Fuel Price in a Year of Strong Growth
MARGINS AFFECTED BY FUEL PRICE IN A YEAR OF STRONG GROWTH INVESTOR’S PRESENTATION DECEMBER 2018
Slide 2: Caution regarding forward-looking statements / non-IFRS financial measures
Caution regarding forward-looking statements / non-IFRS financial measures This presentation contains certain forward-looking statements with respect to the corporation. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to
Slide 3: Section 1: Business model
Section 1 Business model
Slide 4: One of the largest tour operators in North America
One of the largest tour operators in North America Services-at- Transat value chain Tour Hotel Airline Distributor destination operator provider provider Hotel division SALES & MARKETING HOLIDAY EXPERIENCES Focus on returning Winter Summer Protect performance Passengers distribution (May to October)
Slide 5: Section 2: Financial performance & Outlook
Section 2 Financial performance & Outlook
Slide 6: Transatlantic capacity breakdown, Summer 2018
Transatlantic capacity breakdown │Summer 2018 (1) Summer 2017 (Final) Summer 2018 (Final) 2.50 +7% 9 TOTAL SEATS 2.25 4 IN THE MARKET 5 2.00 6 43 SUMMER 2017 1.75 % (millions of seats) 1.50 4,760,000 11 (2) 1.25 +14% 1.00 21 TOTAL SEATS 0.75 IN THE MARKET +4% Air Canada Transat 0.50 Air France - KLM
Slide 7: Fourth quarter financial performance
Fourth quarter financial performance Q4 HIGHLIGHTS (vs. 2017) 4th quarter results ended October 31 ➢ Transatlantic industry capacity up by 9% (in thousands of C$) 2018 vs. 2017 2018 2017 ➢ On a like-for-like basis, revenues increased by $ % 8.7% ✓ Revenues reported decreased due to the sale of REVEN
Slide 8: Summer financial performance
Summer financial performance SUMMER HIGHLIGHTS (vs. 2017) Q3 Q4 Summer ➢ Comparable year: 2017 record summer results ➢ 2018 highlights vs. 2017 Adj. EBITDA 2017 (1) 59M 79M 138M ➢ Transatlantic industry capacity up by 9% as well as a significant fuel price increase of 36% Adj. EBITDA from businesses
Slide 9: Annual financial performance
Annual financial performance HIGHLIGHTS 12-month period ended October 31 (1) (in millions of C$, except per share amounts) ➢ Historical (2014-2018) 2018 2017 2016 2015 2014 ▪ Reached C$80-100M of adjusted EBITDA (2) 3 times in the last 5 years REVENUES 2,992.6 3,005.3 2,889.6 2,898.0 2,996.1 ▪ 3 rec
Slide 10: Sun destinations capacity breakdown, Winter 2018-19
Sun destinations capacity breakdown │Winter 2018-19 (1) (Based on scheduled and chartered flight deployed) Winter 2018 (Final) Winter 2019 (Forecast) 1.50 +9% TOTAL SEATS IN 4 THE MARKET 1.25 +16% 21 28 +2% WINTER 2018 1.00 +14% 4,330,000 % (millions of seats) 0.75 23 24 TOTAL SEATS IN 0.50 THE MARK
Slide 11: Winter financial outlook
Winter financial outlook HIGHLIGHTS (vs. 2018) Q1 Q2 Winter ➢ Sun destination industry capacity up by 8% ➢ Sun destination market Adj. EBITDA 2018 (1) (31M) 7M (24M) ✓ Transat capacity up by 2% ✓ 52% of inventory sold ∆ FX / Fuel on costs on sun destinations packages (2) (14M) (14M) (28M) ✓ Load fac
Slide 12: Section 3: Strategic plan
Section 3 Strategic plan
Slide 13: 2018-2022 cost-reduction and margin-improvement initiatives
2018-2022 cost-reduction and margin-improvement initiatives Cumulative impact Fleet and network Revenue management, 1 2 pricing (cost-reduction and margin-improvement initiatives) ▪ Fleet adapted to our two leisure markets and ancillary revenues ✓ 17 new A321neo and neo LRs: Reduce cost vs $100-150M
Slide 14: Aircraft fleet optimization
Aircraft fleet optimization 100% Airbus fleet by 2022 (Cockpit commonality and mixed-fleet flying) 15 new A321neo LRs Optimized crew scheduling Long range (autonomy) Versatile (South and Europe) Reduced maintenance and training costs Low fuel consumption and reduced maintenance costs Increased opera
Slide 15: Network: Strengthening our position in our markets
Network: Strengthening our position in our markets CANADA EUROPE SOUTH Increase network Growth robustness and depth in feeders Opportunities for external Focusing on Eastern Canada Adding point-to-point frequencies and new destinations Offering our customers more flexibility feeding/commercial allia
Slide 16: Ancillary revenues
Ancillary revenues Optimizing ancillary contribution (Airline and other) FY2017 $94M FY2018 $106M FY2019 FY2020 +40-50% FY2021 FY2022 $150M + FY2018: Increase ancillary revenues over C$100M Ancillary revenues included seat selection, different fares, airport revenues, buy-on-board, excess baggage, d
Slide 17: Optimizing our distribution and extending our digital footprint
Optimizing our distribution and extending our digital footprint Direct-sales evolution Data and digital strategy Flights Packages 15% 1 Creating a fully integrated centralized customer file accessible to all points of contacts FY2017 47% 50% 17% Direct Web, call 68% centre and wholly-owned 2 Launchi
Slide 18: Hotel development: Major business objectives of phase I
Hotel development: Major business objectives of phase I A total investment of ~US$750M required to establish a presence of 5,000 rooms in Transat’s major markets by end of 2024 • Financed using Transat’s excess cash and mortgage debt with local banks • Combination of land purchase+construction, acqu
Slide 19: Hotel development update
Hotel development update Investments and Opportunities Organization Product and Brand 1st land purchase in Puerto Morelos, Mexico Start hiring the permanent management to build a beachfront resort of ~800-900 Appoint an international marketing firm team (fixed costs) rooms specialized in the tourism
Slide 20: Section 4: Financial profile
Section 4 Financial profile
Slide 21: Current financial position
Current financial position HIGHLIGHTS EXCESS CASH (1) ➢ Free cash: C$594M (same as previous year) ✓ No variation compared to previous year explained by: $415 ▪ Proceeds from disposal of Jonview Canada of +C$ 50M ▪ Positive free cash flow of +C$ 10M $365 ▪ Acquisition of a land in Mexico to build a b
Slide 22: Financial performance targets
Financial performance targets LEVERAGE RATIO (1) RETURN ON INVESTED CAPITAL (ROIC) (2) 3.88x 10.9% 10.3% 10.6% Internal threshold 10.0% 3.00x Internal threshold 2.31x 1.60x 1.97x 1.71x 4.1% 3.2% FY2014 FY2014 FY2015 FY2015 FY2016 FY2016 FY2017 FY2017 Current LTM FY2022E FY2022E OPTIMIZING CAPITAL ST
Slide 23: Appendices
Appendices
Slide 24: Transatlantic capacity breakdown by destination and origin
Transatlantic capacity breakdown by destination and origin ORIGINS GLOBAL MARKET OVERVIEW 12 Europe: Largest tourism market in the world Quebec 5.2M seats in summer 2018 between Canada and Europe % 49 Ontario TRANSAT STRATEGY AND MARKET POSITION Summer 2018: Increase capacity and frequency on certai
Slide 25: 5-Year historical summer financial results
5-Year historical summer financial results (Results from continuing operations) 6-month period ended on October 31 (in thousands of C$, except per share amounts) 2018 2017 2016 2015 2014 REVENUES 1,364,819 1,431,703 1,275,702 1,338,848 1,320,401 Adjusted EBITDAR (1) 101,909 196,271 127,250 166,611 1
Slide 26: 5-Year historical summer financial position
5-Year historical summer financial position As at July 31 As at October 31 (in thousands of C$) 2018 2017 2016 (1) 2015 2014 2018 2017 2016 (1) 2015 2014 Free cash 867,247 580,739 470,065 515,552 497,072 593,654 593,582 363,664 336,423 308,887 Cash in trust or otherwise reserved 184,665 184,989 199,
Slide 27: Sun destinations capacity breakdown by destination and origin
Sun destinations capacity breakdown by destination and origin ORIGINS GLOBAL MARKET OVERVIEW 13 Quebec Mexico and Caribbean : One of the largest sun and beach market in 3 the world Ontario 4.7M seats in Winter 2018-2019 between Canada and Mexico and % 46 Atlantic Caribbean 38 Western TRANSAT STRATEG
Slide 28: 5-Year historical winter financial results
5-Year historical winter financial results (Results from continuing operations) 6-month period ended on April 30 (in thousands of C$, except per share amounts) 2018 2017 2016 2015 2014 REVENUES 1,627,763 1,573,642 1,613,944 1,559,102 1,675,704 Adjusted EBITDAR (1) 39,058 37,893 34,339 32,856 17,561
Slide 29: 5-Year historical winter financial position
5-Year historical winter financial position As at January 31 As at April 30 (in thousands of C$) 2018 2017 2016 (1) 2015 2014 2018 2017 2016 (1) 2015 2014 Free cash 749,342 454,827 427,541 393,631 359,596 903,300 566,288 440,559 441,536 404,554 Cash in trust or otherwise reserved 336,531 332,646 391
Slide 30: Experienced and results-driven executive team
Experienced and results-driven executive team Jordi Solé was appointed President of Transat’s hotel division in 2018. Since 2001, he Jean-Marc Eustache was the principal architect of the 1987 creation of Transat A.T. has overseen the operations of resorts belonging to several major international hot
Slide 31: Non-IFRS financial measures
Non-IFRS financial measures Non-IFRS financial measures included in this presentation are not defined under IFRS. Therefore, It is likely that the non-IFRS financial measures used by the Corporation will not be comparable to similar measures reported by other issuers or those used by financial analy
Slide 32: Margins Affected by Fuel Price in a Year of Strong Growth
MARGINS AFFECTED BY FUEL PRICE IN A YEAR OF STRONG GROWTH INVESTOR’S PRESENTATION DECEMBER 2018