Post on 04-Jun-2020
HY15 results presentation - VAH 19 February 2015
2
Year in review to date
• FY14 – one of the most difficult operating environments in the history of Australian aviation
• H1 FY15
– Ongoing weak consumer sentiment – total domestic passengers decline of 0.7%1
– Moderation in industry domestic capacity growth
– Decline in fuel price
• Significant improvement in financial performance
Notes: 1 Total revenue passengers, including domestic passengers on international flights, for six months to December 2014 compared to prior comparable period to December 2013 Source: Bureau of Infrastructure, Transport and Regional Economics (BITRE)
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VAH Group – H1 FY15 financial summary
• Underlying Profit Before Tax1 of $10.2m – improvement on loss of $45.4m
• Positive Group Yield2 and Domestic Yield growth
• Underlying Group CASK3 reduction of 3.2%, including fuel and foreign exchange – CASK reduction of 3.6%, excluding Tigerair and fuel
• Benefit of ~$3m in fuel costs compared to H1 FY14
• Total cash position of $1.1b – up from $783.8m as at 30 June 2014
• Reducing financial leverage4
• Underlying profit for Tigerair of $0.5m in Q2 FY15 – first quarterly profit since December 2010
Note: 1 Underlying profit before tax is a non-statutory measure used by Management and VAH’s Board as a measures to assess the financial performance of VAH and is defined on slide 26; 2 Yield is a non-statutory measure and is defined on slide 27; 3 Underlying CASK is a non-statutory measure and is defined on slide 27; 4 Financial leverage is a non-statutory measure and is defined on slide 27
4
Effective hedging policy – benefits of fuel price decrease to impact H2 FY15 performance
Effective fuel rate vs physical cost (H1 FY14 – H1 FY15) Index1
• Policy provides a degree of certainty and risk protection against market volatility
• Fuel unit cost broadly in line with market rates
• Benefit of ~$3m in H1 FY15
– Strong hedging benefit in H1 FY14
• Expect further benefit2 in H2 FY15
Note: 1 Indexed to H1 FY14 physical cost; 2 Based on current hedging position and market rates
90
95
100
105
H1 FY14 H2 FY14 H1 FY15
Average actual price, inclusive of hedging
Average market price, exclusive of hedging
Benefit achieved in FY14
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Virgin Vision – on track to achieve all targets
• Continued increase in Corporate and Government share of domestic revenue
• Completed Tigerair Australia acquisition
• Continued growth in Charter revenue
• Growing Velocity Frequent Flyer – membership now 4.8m
• Achieved $312.6m in cumulative cost reductions to date
• Raised US$300m through maiden issue of unsecured notes in debt capital markets
• Enhanced the customer experience – in top 10 airlines in the world for Business Travel1
Note: 1 Conde Nast, World’s Best Airlines for Business Travellers: Readers’ Choice Awards 2014
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Investing to deliver a superior customer experience
• New A330 Business class suites from mid-2015 • New B777 Business class suites and Premium Economy
cabin by end of 2015 • Introduction of Business class on Trans Tasman and
Pacific Island services – from February 2015 • New Perth terminal, with direct connection with
regional terminal, and Lounge in H2 2015 • Ongoing Lounge network expansion – new Lounge in
Darwin and Alice Springs in March 2015, and expansion of Brisbane from March 2015
• Expanded premium services – new Brisbane Premium Entry from August 2015
7
Successful initiatives to drive OTP1
On time performance1 by airline group2
(Jul 14 – Dec 14) Percent
On time performance1 – VA brand vs QF brand3
(Jul 14 – Dec 14) Percent
75
80
85
90
Jul-1
4
Aug-
14
Sep-
14
Oct
-14
Nov
-14
Dec-
14
VA brand QF brand
75
80
85
90
Jul-1
4
Aug-
14
Sep-
14
Oct
-14
Nov
-14
Dec-
14VA Group QF Group
Notes: 1 In accordance with the Bureau of Infrastructure, Transport & Regional Economics definitions, flight departure is counted as "on time" if it departs the gate within 15 minutes of the scheduled departure time shown in the carriers' schedule; 2 Compares the departure OTP results of Virgin Australia Group operations (Virgin Australia and Virgin Australia Regional Airlines) with Qantas Group operations (Qantas, QantasLink and Jetstar); 3 Compares the departure OTP results of Virgin Australia branded airlines with Qantas branded airlines.
Leading major carrier in OTP for Q2 FY15 – positive momentum moving into H2 FY15
8
Velocity delivering value to members
Velocity metrics (H1 FY11 – H1 FY15) Index (100 at H1 FY11)
0
50
100
150
200
250
300
350
H1 FY11 H1 FY12 H1 FY13 H1 FY14 H1 FY15
Members Billings Redemptions
• Increasing earn options – First loyalty program to launch
partnerships with Australia Post and Aussie Home Loans
– New BP partnership announced
• Improving redemption opportunities – New points transfer with KrisFlyer – Online store redemptions up 44% on
pcp1 in December 2014
• Continued strong member growth
– Growth of 20% since December 2013
Note: 1 Prior comparable period
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Charter and cargo on track to achieve strategic outcomes
Charter
• Won 3 new clients from competitors – services into the Pilbara and Kalgoorlie
• Acquisition of aircraft to support committed contracted growth under existing contracts
• Establishing F50 charter base in Queensland from March 2015 to support expansion in the east coast
Cargo
• Strategy on track to enable achievement of strategic vision
• Implementing new dedicated cargo IT system
10
Tigerair – positive momentum to achieve sustainable profitability
• Significant progress in driving revenue growth
• Maintaining low cost base
• Delivering cost synergies
• Improving aircraft utilization
• Restructured network footprint
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On target with $1b cost reduction program – $312.6m savings achieved to date
CASK growth (FY10 to FY14 & H1 FY15) Percent
2.6
(3.6) (3.2)
(6.0)
(4.0)
(2.0)
0.0
2.0
4.0
FY10 to FY14 H1 FY15 (exclTigerair &
fuel)
H1 FY15 (inclfuel & foreign
exchange)
Component Examples
Fleet • Retirement of older 2 x A330 aircraft
Operations • Fuel efficiency initiatives
Commercial • Optimised sales distribution channels
People • Labour costs
Procurement • Contract costs
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Ongoing improvements in balance sheet position
• Maintained strong total cash position – now $1.1b, up from $783.8m at 30 June 2014
• Unrestricted cash position of $838.8m, up from $541.0m at 30 June 2014
• Diversifying sources of funding – maiden issue in unsecured debt capital market
• Higher levels of liquidity
• Reducing financial leverage1
Note: 1 Financial leverage is a non-statutory measure and is defined on slide 27
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2017
Cargo
Charter
Velocity
Tigerair Australia
Optimising the balance sheet
Capitalise on growth business
opportunities
Setting a new standard in customer experience and developing our people to their full potential
$150-$200m revenue
$200m+ revenue
7 million+ members
Maintain a strong cash balance
Profitable
Strategic Priorities
Drive yield enhancement
Cost reduction program
~30% of VA domestic revenue from corp. & gov.
$1bn1
Virgin Vision 2017 scorecard
Progress
Building strong momentum as a result of our strategy
Ongoing
Note: 1 Cumulative over the five years to 30 June 2017
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Virgin Australia: delivering on a long term strategy
• Proven record in delivery of a consistent strategy – meeting targets ahead of schedule
Strong execution of strategy
• Delivering a new standard in customer experience and service excellence with the best people in the industry Customer focussed
• Diversifying earnings across growing business segments will deliver yield growth
Targeting revenue and yield growth
• Delivering business efficiencies, strengthening the balance sheet, and maintaining cost leadership
Improving business resilience
15
Guidance
“Expect an improved performance in the second half of the 2015 financial year compared to the second half of the 2014 financial year.
However, due to current market conditions, we are not able to provide more
specific guidance”
Financial results – H1 FY15
17
Pathway to growth and value creation
• Early completion of Game Change goals • Launch of next phase of strategic vision 2014
Transition from Game Change to Virgin
Vision
2015 Building momentum of success towards
Virgin Vision
2016-2017
Delivering value and sustainable outcomes
• Improving financial performance: yield1 growth, CASK2 decline, and improving profitability
• Stronger balance sheet – higher cash balance
• Long term revenue growth and margin expansion • Maintain cost leadership position • Positive cash generation and strong balance sheet
Note: 1 Yield is a non-statutory measure and is defined on slide 27; 2 Underlying CASK is a non-statutory measure and is defined on slide 27
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H1 FY15
$m
Restated H1 FY141
$m
Revenue and income 2,377.5 2,242.1
Statutory loss after tax (47.8) (74.3)
Addback Income tax benefit (13.7) (30.2)
Statutory loss before tax (61.5) (104.5)
Addback Restructuring and transaction costs2 42.9 58.3
Share of equity accounted losses3 15.8 19.3
Losses / (gains) on unrealised ineffectiveness on cash flow hedges and non designated derivatives4 9.8 (33.8)
Losses on time value movement on cash flow hedges4 3.2 15.3
Underlying profit / (loss) before tax excluding one-off items, equity accounted losses and hedging and financial instruments 5 10.2 (45.4)
Group financial summary
Note: 1 The Group has changed its accounting policy for heavy maintenance in the prior year and adopted AASB 9 – Financial Instruments from 1 July 2014 which has resulted in prior period restatements; 2 Restructuring and transaction costs is a non-statutory measure and is defined on slide 26; 3 Refers to Tiger Airways Australia Pty Limited and Virgin Samoa Limited. Results for Tiger Airways Australia Pty Limited have been equity accounted for the period from 1 July 2014 to 16 October 2014; 4 These items are non-statutory measures outlined in Note 6 of the Virgin Australia Holdings Limited Interim Financial Report for the half-year Ended 31 December 2014; 5 Underlying profit / (loss) before tax excluding one-off items, equity accounted losses and financial instruments is a non-statutory measure used by Management and VAH’s Board as a measure to assess financial performance of VAH and is defined on slide 26
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Domestic International
H1 FY15
$m
Restated H1 FY141
$m
H1 FY15
$m
Restated H1 FY141
$m
Segment revenue2 1,832.6 1,694.1 596.0 589.7
Segment EBIT 2,3 103.8 25.9 (49.5) (31.9)
ASKs (m) (excludes charter)2 14,594 13,568 8,187 7,972
Load factor2 78.2% 78.4% 82.0% 80.2%
Segment revenue and EBIT summary
Note: 1 The Group has changed its accounting policy for heavy maintenance in the prior year and adopted AASB 9 – Financial Instruments from 1 July 2014 which has resulted in prior period restatements; 2 Consolidated results for Tiger Airways Australia Pty Limited have been included from 17 October 2014 until 31 December 2014; 3 Domestic / International Segment EBIT is a non-statutory measure used by Management and VAH’s Board as a measure to assess financial performance of VAH and individual segments and is defined on slide 26
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Equity Accounted
Results 1- Jul-14 to 16-Oct-14
$m
Consolidated Results
17-Oct-14 to 31-Dec-14
$m
Tiger
Results H1
FY15 $m
Earned revenue 130.0 75.5 205.5
Statutory (loss)/profit before tax (26.3) 1.5 (24.8)
VAH Share of Tigerair Australia Equity Accounted Losses @ 60% (15.8)
Treatment of Tiger Airways Australia Pty Limited1
Note: 1 Results for Tiger Airways Australia Pty Limited (Tigerair Australia) have been equity accounted for the period from 1 July 2014 to 16 October 2014 and consolidated from 17 October 2014 until 31 December 2014
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31-Dec-14
$m
Restated 30-Jun-141
$m
Cash and cash equivalents 1,099.7 783.8
Property, plant and equipment and intangible assets 3,450.5 3,064.7
Other assets 953.4 830.8
Total assets 5,503.6 4,679.3
Interest bearing liabilities 2,522.4 1,950.7
Unearned revenue 786.9 807.7
Other liabilities 1,075.2 872.8
Total liabilities 4,384.5 3,631.2
Total equity 1,119.1 1,048.1
Balance sheet summary
Note: 1 The Group has changed its accounting policy for heavy maintenance in the prior year and adopted AASB 9 – Financial Instruments from 1 July 2014 which has resulted in prior period restatements
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H1 FY15
$m
Restated H1 FY141
$m
Cash flow from operations (excluding business and capital restructure and transaction costs and net finance costs) 133.5 124.7
Restructure and transaction costs (35.2) (36.4) Net finance costs (33.5) (24.7) Net cash flow from operating activities 64.8 63.6 Net cash (used in) / from investing activities (11.9) (281.8) Net cash from financing activities 234.0 527.7 Net cash inflow 286.9 309.5 Total Cash Balance at start of period 783.8 580.5 FX adjustments on cash balances 29.0 6.4
Total Cash Balance at end of period 1,099.7 896.4
Unrestricted Cash Balance at end of period 838.8 665.4
Cash flow summary
Note: 1 The Group has changed its accounting policy for heavy maintenance in the prior year and adopted AASB 9 – Financial Instruments from 1 July 2014 which has resulted in prior period restatements
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Hedging summary – fuel Brent
Remainder of FY151
Operating requirements hedged 81%
Participation in favourable price movements 25%
Worst case hedged rate (inclusive of option premium) AUD 110.34/ bbl2
Hedging policy
Note: 1 Figures as at 10 February 2015; 2 As at 10 February 2015, spot Brent price is AUD 73/ bbl (unhedged physical basis) and spot AUD:USD rate is 0.7771
Hedging summary – forex Non-fuel currency
Remainder of FY151
Operating requirements hedged 90%
Participation in favourable price movements 18%
Average AUD:USD hedged rate (inclusive of option premium) 0.902
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Actual
30 Jun 2014 Actual
31 Dec 2014
B737-700/800 74 76
E190 18 18
A330 7 6
B777 5 5
ATR72-500/600 13 14
Mainline fleet 117 119
F50 8 8
F100 10 12
A320 (VARA and Tigerair) 15 15
Total Virgin Australia Group fleet 150 154
Virgin Australia Group fleet
26
Disclaimer, definitions and ASIC guidance
Disclaimer The following non-IFRS information has not been audited or reviewed by KPMG: Restructuring and transaction Costs, Underlying profit/(loss) before tax excluding one-off items, equity accounted losses and hedging and financial instruments (Underlying Profit/(Loss)), Segment EBIT, Yield, Underlying CASK (CASK) and Hedging and Financial Instruments. This presentation 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 ended 31 December 2014 that have been reviewed by KPMG. Definitions Restructuring and transaction Costs: is a non-statutory measure that includes the following items outlined in Note 6 of the Virgin Australia Holdings Limited Interim Financial Report for the half-year ended 31 December 2014: Business and capital restructure and transaction costs ($35.6m) and net loss on disposal of assets ($7.3m). For the half-year ended 31 December 2013, this item included Business and capital restructure and transaction costs ($36.7m), Accelerated amortisation resulting from capital restructure ($12.3m), interest rate swap terminations associated with capital restructure (loss of $8.4m) and Accelerated depreciation due to changes in useful life of assets and net loss on disposal of assets ($0.9m). Underlying profit/(loss) before tax excluding one-off items, equity accounted losses and hedging and financial instruments (Underlying Profit/(Loss)): is a non-statutory measure that represents statutory loss before tax excluding the impact of restructuring and transaction costs (as defined above), share of equity accounted losses from Tiger Airways Australia Pty Limited and Virgin Samoa Limited and the impact of hedging and financial instruments (as defined on slide 27). This is a non-statutory measure used by Management and VAH’s Board as a measure to assess the financial performance of VAH. The Group has changed its accounting policy for heavy maintenance in the prior year and adopted AASB 9 – Financial Instruments from 1 July 2014 which has resulted in prior period restatements. Segment EBIT: is a non-statutory measure per Note 6 of the Virgin Australia Holdings Limited Interim Financial Report for the half-year ended 31 December 2014. It is used by Management and VAH’s Board as a measure to assess the financial performance of VAH and individual segments. The Group has changed its accounting policy for heavy maintenance in the prior year and adopted AASB 9 – Financial Instruments from 1 July 2014 which has resulted in prior period restatements.
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Disclaimer, definitions and ASIC guidance (continued)
Definitions (continued) Yield: is a non-statutory measure of revenue divided by Revenue Passenger Kilometres. Revenue excludes charter, freight and loyalty related revenue. Underlying CASK (CASK): is a non-statutory measure derived from consolidated segment revenue less consolidated segment EBIT excluding time value movement and unrealised ineffectiveness, charter business and non-Regular Passenger Transport costs divided by Available Seat Kilometres of the Regular Passenger Transport business. Financial leverage: is a non-statutory measure and is defined as the ratio of adjusted net debt (gross debt less cash plus 7x annual aircraft operating leases) to underlying annual Earnings Before Interest, Tax, Depreciation, Amortisation and aircraft Rental costs (EBITDAR). Hedging and Financial Instruments: is a non-statutory measure that includes the following items outlined in Note 6 of the Virgin Australia Holdings Limited Interim Financial Report for the half-year ended 31 December 2014: unrealised ineffectiveness on cash flow hedges and non-designated derivatives (loss of $9.8m) and time value movements on cash flow hedges (loss of $3.2m). For the half-year ended 31 December 2013, this item includes unrealised ineffectiveness on cash flow hedges and non-designated derivatives (gain of $33.8m) and time value movements on cash flow hedges (loss of $15.3m). The Group has early adopted AASB 9 Financial Instruments from 1 July 2014 which has resulted in prior period restatements. ASIC guidance In December 2011 ASIC issued Regulatory Guide 230. In order to comply with this Guide, Virgin Australia Limited is required to make a clear statement about whether information disclosed in documents other than the Virgin Australia Holdings Limited Interim Financial Report for the half-year ended 31 December 2014 has been audited or reviewed in accordance with Australian Auditing Standards. The following non-IFRS information has not been audited or reviewed by KPMG: Restructuring and transaction Costs, Underlying profit/(loss) before tax excluding one-off items, equity accounted losses and hedging and financial instruments (Underlying Profit/(Loss)), Segment EBIT, Yield, Underlying CASK (CASK) and Hedging and Financial Instruments. This presentation 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 ended 31 December 2014 that have been reviewed by KPMG.