Virgin Australia Holdings Limited · ASX:VGN
Virgin Australia — H1 2020 Earnings Presentation
24 slides from Virgin Australia's earnings presentation, Feb 26, 2020
Slide 1: H1 FY20 Results Presentation
H1 FY20 Results Presentation 26 February 2020 This annoucement was authorised for release by the Virgin Australia Holdings Limited Board Virgin Australia Group results H1 FY20 | 1
Slide 2: 1H20 highlights
1H20 highlights FINANCIAL PERFORMANCE (All Pre-AASB16 unless otherwise stated) • Record 1H20 revenue of $3,116.3 million and 2.5 per cent RASK growth • Underlying Profit Before Tax of $14.5 million • Statutory Loss After Tax of $88.6 million (post-AASB 16) • Cash balance of $1,107.6 million UPDATE O
Slide 3: Group results
Group results Guest numbers continuing to increase and Revenue is at record levels VAH Group (pre-AASB 16) 1H20 1H19 Change KEY METRICS Guests (m) 13.3 13.1 +2.1% ASKs (m) 25,627 25,795 (0.7%) • Strong guest growth OPERATING PERFORMANCE • Fuel cost up $48.2 million reflecting strong hedging gains in
Slide 4: Group Underlying Profit performance
Group Underlying Profit performance Group performance impacted by rise in fuel, airport, Enterprise Agreement, and depreciation costs, and soft market conditions $200m $150m 46.8 (48.2) 111.9 $100m (13.5) (11.6) (4.5) (30.5) $50m 2.9 (20.7) 24.5 (18.1) 14.5 10.0 $0m 1H19 UPBT Group Fuel and Oil1 Air
Slide 5: Segment performance – domestic airlines
Segment performance – domestic airlines RASK growth achieved by both brands. Group domestic capacity reduced in line with strategic realignment and soft demand environment Virgin Australia Domestic 1H20 1H19 Change Total Revenue ($m) 2,114.2 2,082.3 +1.5% • Domestic capacity reduction responding to
Slide 6: Segment performance – Virgin Australia International and Velocity
Segment performance – Virgin Australia International and Velocity International performance affected by higher costs and challenging market conditions Virgin Australia International 1H20 1H19 Change Total Revenue ($m) 686.4 666.1 +3.0% • Revenue growth driven by Trans Tasman post end of Air New Zeal
Slide 7: Fleet simplification, network and capacity review
Fleet simplification, network and capacity review Continued discipline with network and fleet to reduce costs and adapt to softer market conditions and coronavirus impact FLEET – KEY CHANGES • Tigerair transition to all Boeing 737-800NG aircraft by October 2020 • Transition program will provide a si
Slide 8: Velocity Frequent Flyer acquisition
Velocity Frequent Flyer acquisition Reclaiming full ownership of frequent flyer program to drive significant benefits for the Group MEMBERSHIP GROWTH 1H18 1H19 1H20 10.1m 9.5m • Group will now retain 100% of cashflows and equity distributions from Velocity business 8.6m • Incremental revenue synergy
Slide 9: Organisational restructure, workforce reduction and supplier review
Organisational restructure, workforce reduction and supplier review Strategic transformation and cost initiatives remain on track, with financial benefits expected to materialise ORGANISATIONAL RESTRUCTURE + WORKFORCE REDUCTION SUPPLIER REVIEW • New structure introducing Group accountability and red
Slide 10: Improvements in customer experience
Improvements in customer experience Strong performance across customer satisfaction and OTP ratings, with the Group continuing to strive for excellence across all aspects of the customer experience • Achieved Virgin Australia’s highest first half Net Promoter Score (NPS) since FY16 • Strong OTP perf
Slide 11: Impact of coronavirus / Outlook
Impact of coronavirus / Outlook Coronavirus expected to negatively impact Group earnings by $50-75 million in 2H20 DOMESTIC DEMAND IMPACT INTERNATIONAL DEMAND IMPACT • Potential $50-55 million impact on Group domestic earnings in 2H20, with Tigerair $15 • Potential $10-20 million impact across Hong
Slide 12: Supplementary Slides
Supplementary Slides Virgin Australia Group results H1 FY20 | 15
Slide 13: Reconciliation of UPBT to Statutory result
Reconciliation of UPBT to Statutory result Costs associated with: workforce reduction program (redundancies), fleet simplification, one-off Velocity acquisition costs, and write-offs associated with property, plant and equipment no longer in use totalling $113.1 million $50m 24.5 (12.1) $0m (28.8) (
Slide 14: Statutory Financial Summary (post AASB 16)
Statutory Financial Summary (post AASB 16) Group Financial Summary ($m) 1H20 1H19 Change Revenue and income 3,118.2 3,071.0 47.2 Statutory profit / (loss) after tax (88.6) 73.8 (162.4) Add back: Income tax expense 0.0 13.9 (13.9) Statutory profit / (loss) before tax (88.6) 87.7 (176.3) Add back: Key
Slide 15: Statutory Cashflow Statement (post AASB 16)
Statutory Cashflow Statement (post AASB 16) Cash Flow Statement ($m) 1H20 1H19 Change Cash generated from operating activities 261.5 276.4 (14.9) • Investing activities includes $130 million proceeds on aircraft disposal driven by Cash payments for business restructuring expenses (62.4) (13.4) (49.0
Slide 16: AASB 16 Impact on Profit and Loss account
AASB 16 Impact on Profit and Loss account Pre-AASB Post-AASB Profit and Loss ($m) AASB16 16 16 Total Revenue 3,116.3 1.9 3,118.2 Operating Costs (2,603.1) 17.5 (2,585.6) EBITDAR 513.2 19.4 532.6 Aircraft Rentals (202.3) 196.5 (5.8) • Operating lease expenses replaced by interest and depreciation cha
Slide 17: AASB 16 impact on Cashflow Statement
AASB 16 impact on Cashflow Statement Cash Flow ($m) Pre-AASB16 AASSB16 Post- AASB16 Cash generated from operating activities 5.8 255.7 261.5 Cash payments for business restructuring expenses (62.4) 0.0 (62.4) • Operating lease payments removed and replaced by interest charge and principal repayment
Slide 18: Net Asset Reconciliation including AASB 16 and Velocity acquisition
Net Asset Reconciliation including AASB 16 and Velocity acquisition • Virgin Australia Group adopted AASB 16 with effect 1 July 2019 using the modified retrospective adoption approach and therefore there is no restatement of prior period. There has been an impact to retained earnings • Aircraft leas
Slide 19: Statutory Balance Sheet summary (post AASB 16)
Statutory Balance Sheet summary (post AASB 16) Balance Sheet and Liquidity ($m) 1H20 FY19 Change Cash and cash equivalents 1,107.6 1,740.0 (632.4) Other current assets 377.3 425.3 (48.0) Property, plant & equipment 4,323.3 3,202.1 1,121.2 • Creation of Right of Use Assets as part of AASB 16 implemen
Slide 20: Hedging and foreign exchange
Hedging and foreign exchange Operating Exposures Remaining FY20 FY21 Fuel (Brent) 100% 75% • Significant fuel and FX hedging in place for FY20 and FY21 with 33% participation to further falls in fuel prices for remainder of FY20 and 86% participation for FY21 FX (AUD/USD) 100% 75% • Continued to de-
Slide 21: Group Treasury and Funding
Group Treasury and Funding CAPITAL MANAGEMENT Adjusted Financial Leverage 1H15 – 1H20 • Strategic review being accelerated to improve free cash flow generation and improve leverage over time 7.1 6.2 6.4 • Generate free cash flow over time to target BB/Ba band credit rating 4.9 • No significant debt
Slide 22: Operating fleet
Operating fleet GROUP OPERATING FLEET1 As at 31 Dec 2019 As at 31 Dec 2019 As at 30 June 2019 As at 30 June 2018 Leased Owned B737-700/800 79 39 40 80 82 E190 - - - - - A330 6 6 - 6 6 B777 5 1 4 5 5 ATR72-500/600 8 8 - 8 8 Virgin Australia Airlines fleet 98 54 44 99 101 F100 13 - 13 14 14 A320 (Char
Slide 23: Disclaimers, definitions and ASIC guidance
Disclaimers, definitions and ASIC guidance Disclaimer The non-IFRS information has not been audited or reviewed by KPMG. This document has not been audited or reviewed by KPMG; however, IFRS data has been derived from the Virgin Australia Holdings Limited Interim Financial Report for the half-year e
Slide 24: Virgin Australia Holdings Limited contact details
Virgin Australia Holdings Limited ABN 54 100 686 226 56 Edmondston Road, Bowen Hills, QLD 4006 For further information please contact: Media - Jace Armstrong, Senior Manager Public Affairs M: 0481 420 765 / E: [email protected] Investor Relations - Steven Fouracre, Group Treasurer M:
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