Virgin Australia Holdings Limited · ASX:VGN
Virgin Australia — FY2010 Earnings Presentation
18 slides from Virgin Australia's earnings presentation, Aug 26, 2010
Slide 1: Full year results 12 months ended 30 June 2010
Full year results 12 months ended 30 June 2010 John Borghetti, CEO Keith Neate, CFO 26 August 2010
Slide 2: Overview
DRAFT Overview Demonstrated capability to ride through market and economic volatility - Maintained strict cost control - Domestic operation remained profitable - Exiting unprofitable routes - Capex cycle turning - Strong balance sheet Well placed to extend reach in key and new markets and captur
Slide 3: Financial highlights
DRAFT Financial highlights Statutory PBT $34 million Operating cash flow $369 million Cash balance $815 million Yields recovering - Domestic up 2.9%, Long Haul up 4.8% - Group down 7.1% as lower yielding long haul increases weight in the mix Underlying CASK down 7.7% to 8.51 cents - CASK e
Slide 4: Impressions from the First Days
DRAFT Impressions from the First 100 Days A great platform upon which to build the business Great staff – highly motivated A big opportunity exists with the group’s new strategy A simple and logical approach - Move away from reliance on competitive, lower yielding leisure routes - Exit loss-
Slide 5: First days – kickstarting the game change programme
DRAFT First 100 days – kickstarting the game change programme Network review - V Australia exit from Africa, Thailand and Fiji - Right aircraft, right routes, right frequency – wide body A330’s Strengthened management team with specialised expertise - Yield management - Government relations - Me
Slide 6: Competitive positioning and the strategic opportunity
DRAFT Competitive positioning and the strategic opportunity Shares of Major Market Segments 100% 90% 80% 70% 60% Qantas Virgin Blue 50% Jetstar 40% Tiger 30% 20% 10% 0% Leisure/SME Corporate/Government CONFIDENTIAL 5
Slide 7: Yield premium dynamics
DRAFT Yield premium dynamics competition and economic conditions VBA enters corporate market Competitive cost base, with yield premium over Jetstar and Tiger Further movement into corporate market will ensure our premium is improved 1% capture of corporate market expected to provide over 1 poi
Slide 8: Segment results
DRAFT Segment results AUD millions 2010 2009 VLY Underlying EBIT Short Haul 128 68 +88% Effective redeployment, despite difficult trading in Q4, cost control. EBIT and PBT positive in both halves FY10 Long Haul (43) (70) +39% Improved utilisation and revenue loads, strong cost control Corporate/elim
Slide 9: Short haul
DRAFT Short haul Underlying EBIT $128 million, up from $68 million - 2H10 EBIT result of $20m despite difficult yield environment - Decisive network changes and cost management Capacity up 5.7% - Domestic down 1.9% - International up 38% on network redeployment in FY09 and sector length Yield
Slide 10: Long haul
DRAFT Long haul Underlying EBIT loss reduced 39% to $43 million - break even expected end of FY11 Capacity growth 387% - Trans-Pacific remains core market - 5th aircraft in 1H11, delivers network and operational benefits RASK growth in second half up 12.7% over 1H Cost base ahead of plan S
Slide 11: Financial results summary
DRAFT Financial results summary AUD millions 2010 2009 VLY Revenue 2,982 2,635 +13% Increased capacity 22% ,offset by yield decline 8% Underlying EBIT 87 14 +521% Strong cost control and lower fuel prices Net finance costs (56) (64) -12% Lower financing costs and higher cash balances Underlying PBT
Slide 12: Cash flow summary
DRAFT Cash flow summary AUD millions 2010 2009 VLY Operating 369 101 +265% Strong cost control and cash management Investing (271) (562) +52% Eight new aircraft acquired ( 3 sale and leasebacks), two lease returns Financing 242 335 -28% Capital raising Net cash inflow/(outflow) 340 (126) - Cash at 3
Slide 13: Fleet summary
DRAFT Fleet summary 2010 2009 VLY Future orders B737NG 62 59 +3 69 Includes 700/800/900 variants. 5 deliveries, 2 lease returns. B777-300ER 4 3 +1 1 Delivering Q2FY11 E-170/190 21 19 +2 3 87 81 +6 73 Leased 36 35 Owned 51 46 Taking delivery of 14 new aircraft in FY11 – 8x737, 3xE190 2xA330 and 1x7
Slide 14: Capital management
DRAFT Capital management Capex cycle turning Modest capex requirement for implementing strategic product review - less than the cost of a 737 Strong cash position - $815 million at year end Debt facilities covenant free and no refinancing obligations Funding for majority of aircraft delive
Slide 15: Risk management
DRAFT Risk management Foreign exchange Fuel FY11 Operating requirements hedged 61% 59% Worst case rate 0.87 USD93/bbl Participation in rate/price movements 51% 88% At current spot prices, effective rates for FY11 for fuel US$84.4/bbl, foreign exchange 0.88 AUD/USD Hedging cover weighted to 1H10,
Slide 16: The alliance will significantly enhance Virgin's international network
DRAFT The alliance will significantly enhance Virgin’s international network Virgin Blue Group Etihad code share Etihad interline Delta code share Delta interline Manchester Indianapolis Columbus Minsk From Dublin Amsterdam Cincinnati Vancouver AUH London Brussels Moscow Minneapolis Detroit Frankfur
Slide 17: Outlook
DRAFT Outlook Trading conditions improving but still early days - Well positioned to capture future strengthening in leisure market - Real opportunity to make inroads in corporate and government market Capacity growth to protect strategic network - Domestic growth flexible, expected to be 6-8% F
Slide 18: Q&A
DRAFT Q&A Virgin Blue Full Year Results 2010 17 CONFIDENTIAL
Virgin Australia Holdings — FY2010 Earnings Presentation on 6ix