Virgin Australia Holdings Limited · ASX:VGN
Virgin Australia — FY2016 Earnings Presentation
32 slides from Virgin Australia's earnings presentation, Aug 5, 2016
Slide 1: 2016 Financial Year Results Presentation
2016 Financial Year Results Presentation August 5, 2016
Slide 2: Key highlights
Key highlights FY16 FY15 Change Underlying Profit / (Loss) Before Tax1,2 $41.0m ($49.1m) $90.1m Statutory (loss) after tax2 ($224.7m) ($93.8m) ($130.9m) Group Underlying EBIT1,2 $210.6m $65.9m $144.7m Net cash from operating activities2 $198.5m $218.1m ($19.6m) ROIC1,2 8.9% 6.1% 2.8pts Financial Lev
Slide 3: Group earnings improvement
Group earnings improvement Group revenue, $m Group Underlying Profit / (Loss) Before Tax2, $m CAGR1 +8% 5,021 41 4,749 4,307 (49) (212) FY14 FY15 FY16 FY14 FY15 FY16 Consistent improvement in underlying financial performance Note 1: CAGR means Compound Annual Growth Rate from FY14 to FY16. 2: Underl
Slide 4: VA Domestic: Continued strong year-on-year improvement
VA Domestic: Continued strong year-on-year improvement Domestic performance Underlying EBIT1, $m & Underlying EBIT Margin1 FY16 FY15 Change 4.7% Underlying 162.0 111.1 50.9 EBIT1 ($m) 3.4% Underlying EBIT 4.7% 3.4% 1.3pts Margin1 162 RASK1 growth 4.7% 111 Yield1 growth 3.4% ASK1 growth (0.6%) FY15 F
Slide 5: VA Domestic: Enhancing the customer experience
VA Domestic: Enhancing the customer experience “The Business” on A330s New terminal and lounge at Perth Airport New lounge and Premium Entry at Brisbane Airport Improvements in satisfaction with key aspects of the VA Domestic travel experience including Booking Process, Lounges, Terminals, In-Flight
Slide 6: VA Domestic: Outstanding operating performance
VA Domestic: Outstanding operating performance On time performance1, % 94 92 90 88 VA brand 86 QF brand 84 82 0 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jun-16 VA setting new standard in domestic OTP for the past 2 years Note 1: In accordance with definitions from the Bureau of Infras
Slide 7: VA International: Continued positive trajectory
VA International: Continued positive trajectory International performance International Underlying EBIT1, $m FY16 FY15 Change Underlying (48.8) (68.9) 20.1 EBIT1 ($m) Underlying EBIT (4.8%) (6.2%) 1.4pts Margin1 (19) RASK1 growth (1.1%) 39 (49) Yield1 growth (3.3%) (69) ASK1 growth (7.6%) FY15 Impro
Slide 8: VA International: Executed improvement strategy
Status of VA International: Executed improvement strategy completion • Revolutionising long-haul offering with installation Sep-16 of new Business Class suites, Premium Economy Virgin Australia – seats and Economy Space+ on B777s operational improvements and • Introduction of A330 on selected Pacifi
Slide 9: Revolutionising the long-haul premium experience
Revolutionising the long-haul premium experience 8
Slide 10: Tigerair: Profitable with ongoing improvement
Tigerair: Profitable with ongoing improvement Tigerair performance Tigerair Underlying EBIT1, $m FY16 FY15 Change 0.5% Underlying 2.2 2.2 (37.1) 39.3 EBIT1 ($m) Underlying EBIT 0.5% (9.0%) 9.5pts Margin1 (37.1) RASK1 growth 1.0% Yield1 growth 1.4% (9.0%) ASK1 growth 13.8% FY15 FY16 Underlying EBIT1
Slide 11: Tigerair: Consolidating position in low cost carrier market
Tigerair: Consolidating position in low cost carrier market1 On time performance2, % Improving the customer experience 95 • Enhanced website, mobile app and call centre 90 • New booking platform 85 Tigerair • Commenced operations in brand new 80 Terminal 4 at Melbourne Airport 75 • Launched internat
Slide 12: Velocity: Continued strong performance
Velocity: Continued strong performance Velocity performance Program milestones FY16 FY15 Change • Loyalty Program of the Year in Middle East/Asia/Oceania for 4th consecutive year at Revenue ($m) 327.6 238.4 89.2 Freddie Awards Underlying • Australian-first initiative: Redemption of 139.7 81.2 58.5 E
Slide 13: On track to meet FY17 targets
On track to meet FY17 targets1 Virgin Vision Our target1 Status objective Velocity: Capitalise on VA VA Domestic: Tigerair: Underlying International: growth Underlying EBIT Profitable by Profitable by EBIT2 growth On track opportunities Margin2 6-9% FY17 >15%, 7m+ FY17 members Drive Yield2 30% of
Slide 14: Capital structure review
Capital structure review • The board of the Virgin Australia Group completed a capital structure review to optimise the Group’s balance sheet • Outcomes of the review: − Equity raising through fully underwritten $852m entitlement offer, supported by major shareholders. Together with $159m placement
Slide 15: Better Business program to drive efficiency and significant savings
Better Business program to drive efficiency and significant savings As an outcome of the capital structure review, the Group commenced the Better Business program of capital and operational efficiency initiatives • Reduction in ATR aircraft over 3 years • Removal of E190 and Tigerair-branded A320 ai
Slide 16: Simplify the RPT fleet
Simplify the RPT fleet FY15 FY19 ATR72 ATR72 F50 F100 F100 E190 B737 B737 A330 A320 A330 B777 B777 Reduction in RPT fleet from 8 to 5 by FY191 Note 1: Please refer to the “Forward Looking Statements” section on slide 30 when considering this information. All forward projections on this page are at t
Slide 17: Our people drive our success
Our people drive our success Our team and company have been recognised with multiple awards Best Domestic Airline Australian Federation of Travel Agents Awarded July 2016 Most Respected Company The Australian Financial Review and Hay Group Best Cabin Crew | Best Frequent Flyer Scheme Australian Busi
Slide 18: In conclusion
In conclusion Positive momentum in • Significant improvement in underlying performance financial performance • Continued earnings growth across all segments Stronger balance sheet, • Completion of capital structure review improved liquidity, reduction of debt • Completion of fully underwritten e
Slide 19: Outlook
Outlook “Based on current business performance, the Group’s positive momentum is expected to continue. However, due to market uncertainty, we are unable to provide further detail at this time1.” Note 1: Please refer to the “Forward Looking Statements” section on slide 30 when considering this inform
Slide 20: Supplementary financial slides
Supplementary financial slides 19
Slide 21: Group financial summary
Group financial summary FY16 FY15 $m $m Revenue and income 5,021.0 4,749.2 Statutory profit / (loss) after tax (224.7) (93.8) Add back Income tax benefit (201.9) (69.5) Statutory profit / (loss) before tax (426.6) (163.3) Add back Impairment losses on assets classified as held for sale 107.3 - Impai
Slide 22: Better Business program and other restructuring charges
Better Business program and other restructuring charges Guidance1 FY16 FY17 – FY192 $m $m $m Cash 200 – 250 100 100 – 150 Non-cash 150 - 200 164 0 – 36 Better Business program restructuring charges 350 - 450 264 100 – 186 Non-Better Business program restructuring charges - 177 - Total restructuring
Slide 23: Cash flow
Cash flow Cash flow statement • Approximately 36% improvement in cash generated from operating activities in H2 FY16 FY16 FY15 compared to H2 FY15 $m $m Cash generated from 448.8 391.1 • Improved cash conversion, including the operating activities unwind of adverse working capital from H1 Transforma
Slide 24: Balance sheet
Balance sheet Balance sheet • Financial Leverage1 decreased by 11.9% to FY16 FY15 5.2x at 30-Jun-16, from 5.9x at 30-Jun-15, $m $m notwithstanding adverse FX impact Cash and cash equivalents 1,123.8 1,028.5 • Excludes $852m entitlement offer proceeds and $89m top-up placement to HNA2 Total assets 6,
Slide 25: Balance sheet metrics improving
Balance sheet metrics improving Further improvements in balance sheet metrics expected through debt amortisation, improved free cash flow generation and benefits of fleet simplification under the Better Business program1 Adjusted Net Debt1,2, $m Financial Leverage1,2 4,400 7.5x 3,673 3,459 5.9x 2,94
Slide 26: Hedging update
Hedging update FY17 hedging update • The Group continues to benefit favourably from FY171 lower oil prices as historical hedging positions expire and additional hedging is implemented Hedge off lower market conditions Position • During H2 FY16, the Group accelerated its Fuel (AUD Brent/bbl) 90% FY17
Slide 27: $1.2bn cost program tracking ahead of plan
$1.2bn cost program tracking ahead of plan Cost program benefits to date Cost program, $m FY16 in-year benefits $114m Annual run rate benefit 973 Cumulative program benefits FY16 cumulative program benefits $973m Annual run rate benefit since FY13 514 489 $489m launch 345 188 195 98 46 FY13 FY14 FY1
Slide 28: Virgin Australia Group fleet
Virgin Australia Group fleet As at 30 As at 30 Jun 2016 As at 30 Group operating fleet Jun 2016 Leased Owned Jun 2015 B737-700/800 75 38 37 77 E1901 16 7 9 18 A330 6 6 - 6 B777 5 1 4 5 ATR72-500/600 14 14 - 14 Mainline fleet 116 66 50 120 F501 - - - 8 F100 14 7 7 14 A320 (Charter & Tigerair) 16 15 1
Slide 29: Disclaimers, definitions and ASIC guidance
Disclaimers, 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, Hedging and financial instruments, Underlying Earnings Before Interes
Slide 30: Disclaimers, definitions and ASIC guidance
Disclaimers, 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 Preliminary Final Report for the year ended 30 June 2016. It is used by Management
Slide 31: Disclaimers, definitions and ASIC guidance
Disclaimers, definitions and ASIC guidance Definitions (continued) Invested Capital: is a non-statutory measure that provides an indication as to the invested capital within VAH, and is derived by adding average Adjusted Net Debt (as defined above) and total equity as reported in the consolidated st
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Virgin Australia Holdings — FY2016 Earnings Presentation on 6ix