H 1 F Y 1 8 R E S U LT S P R E S E N TAT I O N 28 FEBRUARY 2018

Transcription

1 H 1 F Y 1 8 R E S U LT S P R E S E N TAT I O N 28 FEBRUARY 2018

2 2 H1 FY18 results presentation G R O U P H I G H L I G H T S DELIVERS STRONGEST H1 UNDERLYING PROFIT RESULT IN 10 YEARS 1 Underlying Profit / (Loss) Before Tax 1,2, $m Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Cash generated from operating activities, $m Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Financial Leverage 2 Dec 13 Dec 14 Dec 15 Dec 16 Dec x 6.8x x 4.5x 4.3x 10.2 (45.4) Highest reported H1 Underlying Profit / Loss Before Tax result in 10 years (since H1 FY08) 142.3% increase on H1 FY17 Second highest cash generated from operating activities in 10 years 88.6% increase on H1 FY17 Strongest Financial Leverage 31 December result in 10 years Strict capital management and positive earnings performance continue to drive improvement Note 1: Refers to Underlying Profit / Loss Before Tax, which is a measure of the company s underlying performance. Note 2: Underlying Profit / (Loss) Before Tax and Financial Leverage are non-statutory measures used by Management and VAH s Board to assess financial performance and are defined at the end of this presentation. 3: Results are based on the latest reported number for the period.

3 3 H1 FY18 results presentation K E Y F I N A N C I A L R E S U LT S Measure H1 FY18 H1 FY17 CHANGE Underlying Profit Before Tax 1 $102.5m $42.3m $60.2m Best result in 10 years Statutory Profit / (Loss) After Tax $4.4m $(21.5)m $25.9m Cash generated from operating $270.6m $143.5m $127.1m Second Best result in 10 years activities Financial Leverage 1 4.3x 4.5x (4.4%) Strongest Financial Leverage result (31 Dec) in 10 years despite significant investment in fleet Total cash $1,216.3m $1,595.8m $(379.5)m Largely used to reduce debt, including $92m of accelerated debt repayments 3 Total debt $2,401.9m $2,765.6m $(363.7)m Group revenue and income $2,791.0m $2,633.7m $157.3m Note 1: Underlying Profit / (Loss) Before Tax, Financial Leverage are non-statutory measures used by Management and VAH s Board to assess financial performance and are defined at the end of this presentation.2: Results are based on the latest reported number for the period.3 Covers 12 month period from 1 January 2017 to 31 December 2017.

4 4 H1 FY18 results presentation V I R G I N A U S T R A L I A D O M E S T I C STRONG SEGMENT EBIT GROWTH AND OPERATING MARGINS DELIVERED Virgin Australia Domestic performance Improved VA Domestic Segment EBIT($m) Measure H1 FY18 H1 FY17 CHANGE Segment EBIT ($m) % Segment EBIT Margin 8.2% 4.5% 3.7pts RASK % Yield % ASKs (2.2)% Revenue passengers % H1FY17 H1FY18 Note 1: RASK, Yield and ASKs are non-statutory measures used by Management and VAH s Board to assess financial performance and are defined at the end of this presentation.

5 5 H1 FY18 results presentation V I R G I N A U S T R A L I A D O M E S T I C DELIVERS RECORD UNIT REVENUE H1 VA Domestic RASK and Yield (on an earned revenue basis) (cents) Yield RASK Record RASK and Yield results 1 : Achieved highest ever RASK for the first half of a financial year Achieved highest ever Yield for the first half of a financial year Margin Growth: Segment EBIT Margin increased 3.7 points H1 FY7 H1 FY8 H1 FY9 H1 FY10 H1 FY11 H1 FY12 H1 FY13 H1 FY14 H1 FY15 H1 FY16 H1 FY17 H1 FY18 Note 1: On an earned revenue basis.

6 6 H1 FY18 results presentation V I R G I N A U S T R A L I A I N T E R N AT I O N A L PROFITABLE DESPITE BALI VOLCANO AND INVESTMENT IN HONG KONG LAUNCH Virgin Australia International performance Measure H1 FY18 H1 FY17 CHANGE Segment EBIT ($m) VA International Segment EBIT($m) +75.0% Segment EBIT Margin 0.2% 0.2% ~Flat RASK (1.2)% Yield % ASKs % Revenue passengers % H1FY17 H1FY18 Note 1: RASK, Yield and ASKs are non-statutory measures used by Management and VAH s Board to assess financial performance and are defined at the end of this presentation.

7 7 H1 FY18 results presentation T I G E R A I R A U S T R A L I A IMPACTED BY UNSCHEDULED BALI EXIT IN 2017 Tigerair Australia performance Measure H1 FY18 H1 FY17 CHANGE Segment EBIT ($m) (6.7) 6.2 (12.9) Segment EBIT Margin (2.2)% 2.1% (4.3)pts RASK % Yield % ASKs (7.5%) Revenue passengers % Performance impacted by unscheduled exit from Bali: Surplus aircraft temporarily deployed on the domestic network Performance expected to improve through network and fleet optimisation: Surplus aircraft exited the Tigerair fleet in February 2018 Reduced aircraft numbers and capacity withdrawals on underperforming routes (e.g. Brisbane Perth and Brisbane Whitsunday Coast) Expediting the replacement of Tigerair A320 fleet with B737 aircraft creating scale and efficient B737 operating platform Note 1: RASK, Yield and ASKs are non-statutory measures used by Management and VAH s Board to assess financial performance and are defined at the end of this presentation.

8 8 H1 FY18 results presentation V E L O C I T Y F R E Q U E N T F LY E R CHALLENGING FIRST HALF Velocity performance Velocity members (m) Measure H1 FY18 H1 FY17 CHANGE Revenue ($m) Segment EBIT ($m) (9.8) Segment EBIT Margin 29.4% 37.4% (8.0)pts Overall performance impacted by: Introduction of RBA changes to credit card interchange regime Investment in new business development initiatives to launch in FY19 Jun-14 Jun-15 Jun-16 Jun-17 Dec-17 Membership continues to grow, with 600K members added since 30 June 2017

9 9 H1 FY18 results presentation RECOGNITION FROM OUR CUSTOMERS AND INDUSTRY Best Airline in Australia/Pacific Best Airline Staff in Australia/Pacific Ranked 13th in World s Top 20 Airlines Best Business Class second consecutive year Ranked #4 overall in Top Ten Airlines Best Domestic Airline second consecutive year 5 Star Rating Inflight Airline of the Year

10 10 H1 FY18 results presentation V I R G I N A U S T R A L I A G R O U P F O C U S DELIVERING RESULTS On track Strengthening balance sheet Includes $405m of debt repayments, including $92m of accelerated debt repayments, cash generated from operating activities up $127.1m Financial Leverage 1 down 4.4% to 4.3x Consolidate domestic position VA Domestic passenger growth of 1.5% and RASK 1 growth of 7.4% Segment EBIT margin increased 3.7 points Leverage international growth opportunities Leverage Velocity investment to drive growth Better Business program International profitability maintained with 3.7% revenue passenger growth Sydney-Hong Kong services announced strengthening proposition in Greater China market Alliance with Hong Kong Airlines, Hainan Airlines and HK Express launched to expand global virtual network Membership base continues to grow additional 600k in FY18, now at 8.6 million members Revenue increased by 8.4% Investment in systems and resources to create a platform for sustainable growth Fleet consolidation as part of BBP well progressed E190 fleet exited operating service, ATR operating fleet reduced, one A320 exited fleet, four new B737 delivered & QLD ATR base closed Note 1: Financial Leverage and RASK are non statutory measures used by Management and VAH s Board to assess financial performance and are defined at the end of this presentation. 2: Results are based on the latest reported number for the period.

11 11 H1 FY18 results presentation OUTLOOK Based on the Group s recent positive performance trajectory, current market conditions and fuel headwinds net of foreign exchange for the second half, we expect the Group s underlying performance for the second half of the 2018 financial year to improve compared to the Group s underlying performance for the second half of the 2017 financial year. Note 1: Please refer to the Forward Looking Statements at the end of this presentation when considering this information.

12 12 H1 FY18 results presentation UNMARKETABLE PARCEL FACILITY Today, the Board also announced the implementation of an opt-out buy-back facility for unmarketable parcels of shares this applies to shareholdings that are valued at less than $500.

13 13 H1 FY18 results presentation S U P P L E M E N TA R Y F I N A N C I A L S L I D E S

14 14 H1 FY18 results presentation GROUP FINANCIAL PERFORMANCE SUMMARY H1 FY18 $m H1 FY17 $m Revenue and income 2, ,633.7 Statutory Profit / (Loss) after tax 4.4 (21.5) Income tax expense/(benefit) 4.0 (25.4) Statutory Profit / (Loss) before tax 8.4 (46.9) Add back Onerous contract expenses (from fleet simplification) Business and capital restructure and transaction costs Restructuring sub-total Share of net (profits) of equity-accounted investee (3.5) (1.5) Hedging and financial instruments loss Underlying Profit Before Tax Note 1: Refers to Underlying Profit / Loss Before Tax, which is a measure of the company s underlying performance. Note 2: Underlying Profit / (Loss) Before Tax is a non-statutory measures used by Management and VAH s Board to assess financial performance and are defined at the end of this presentation. 3: Results are based on the latest reported number for the period. 14

15 15 H1 FY18 results presentation CASHFLOW $127.1m improvement in cash generated from operating activities, driven by improved earnings, and successful implementation of the Better Business Program Cash flow statement H1 FY18 $m H1 FY17 $m 70% reduction in cash payments for transformation costs - outflow reduced significantly as fleet simplification largely complete Net cash from operating activities 8.3 times improvement on prior comparative period Net cash from investing activities includes 4 B737 deliveries in H1 FY18 and proceeds from E190 disposals in the prior comparative period Cash generated from operating activities Transformation costs (17.3) (58.3) Net finance costs (61.9) (62.0) Net cash from operating activities Net cash used in investing activities (325.1) (156.5) Net proceeds from share issue Net borrowings (8.5) (331.1) Net cash from financing activities (37.4) Effect of exchange rate (8.7) 43.9 Net cash inflow/(outflow) incl impact of FX (179.8)

16 16 H1 FY18 results presentation STRONG OPERATING CASH INFLOWS AND REDUCED NON-AIRCRAFT CAPEX Significantly improved free cash flow performance pre aircraft transactions 50 Pre-Debt Financing Cashflows (excl. equity distributions) H1FY17 to H1FY18 ($m) +$208m 46.7 Significant improvement in operating cash flows and 39.4 reductions in aircraft maintenance and non-aircraft capex 0 (114.8) Net result impacted by increase in aircraft capex and reduction in asset sales compared to prior comparative period (50) (100) Reduced aircraft capital expenditure over the next 18 (86) months Working with Boeing to further optimise the delivery timing of Boeing 737 MAX (150) (160.9) H1 FY17 Increase in net cash from operating activities Decrease in aircraft maintenance & non aircraft capex H1 FY18 CF pre aircraft capex / sales Increase in aircraft capex & PDP Decrease in proceeds from asset sales 0.4 Other (153.7) H1 FY18

17 17 H1 FY18 results presentation BALANCE SHEET AND LIQUIDITY Balance sheet Strong total and unrestricted cash balance Dec 17 $m Dec 16 $m 13% reduction in total interest bearing liabilities business continues drive towards reduced leverage with Financial Leverage 1 of 4.3x the lowest in 10 years (as at 31 December) Cash and cash equivalents 1, ,595.8 Total assets 6, ,701.4 Current interest-bearing liabilities Non-current interest-bearing liabilities 2, ,448.0 Working with Boeing on optimising delivery timing of Boeing 737 MAX - positive impact on the balance sheet expected from FY19. Continued to de-lever despite increased fleet investment Interest-bearing liabilities 2, ,765.6 Total liabilities 4, ,847.0 Total equity 1, ,854.4 Unrestricted cash balance ,232.4 XXXX Note 1: Financial Leverage is a non-statutory measure used by Management and VAH s Board to assess financial performance and is defined at the end of this presentation.

18 18 H1 FY18 results presentation DEBT FURTHER REDUCED AND LEVERAGE METRICS CONTINUE TO IMPROVE Financial Leverage (as at 31 Dec) 1 9.4x -54% Total Debt, $m 3, , % 2, , x 6.8x 2, x 5.7x 1, , , , , x 4.7x 4.8x 4.5x 4.3x Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Note 1: Financial Leverage is a non-statutory measure used by Management and VAH s Board to assess financial performance and is defined at the end of this presentation. 18

19 19 H1 FY18 results presentation FUNDING STRATEGY Funding strategy is designed to maximise financial flexibility and balance sheet strength Diverse sources of funding unsecured, secured and lease market Target Financial Leverage 2 consistent with a BB credit rating Flexibility to manage debt via prepayment rights and return or refinancing of leases Lower secured debt levels 3 down from 100% in 2014 to ~50% in 2017 Building equity in aircraft Benefit of lower fuel prices realised in FY17 partially offset by movements in exchange rates Note 1: Please refer to the Forward Looking Statements at the end of this presentation when considering this information. 2. Financial Leverage is a non-statutory measure used by Management and VAH s Board to assess financial performance and is defined at the end of this presentation.3. Ratio of secured debt to total debt.

20 20 H1 FY18 results presentation HEDGING UPDATE The Group is highly hedged against adverse movements in fuel prices and FX rates for the remainder of FY18 H2 FY18 hedging update Hedging includes positive offsets against expectations of higher fuel prices in H2 FY18, whilst maintaining participation to any favorable price movements. H2 FY18 Hedge Position Fuel (AUD Brent/bbl) 95% FX (AUD/USD) 95% Benefit of lower fuel prices realised in FY17 partially offset by movements in exchange rates Note 1: Please refer to the Forward Looking Statements at the end of this presentation when considering this information.

21 21 H1 FY18 results presentation VIRGIN AUSTRALIA GROUP OPERATING FLEET Group operating fleet 1 As at 31 December 2017 As at 31 December 2017 Leased Owned As at 30 June As at 30 June B / E A B ATR72-500/ Mainline fleet F A320 (Charter & Tigerair) B (Tigerair) Virgin Australia Group Revenue increased by ~[X]% with ~[11]% reduction in operating fleet since launch of the BBP Reducing Operating units and fleet types under Better Business Program without impacting market share Note 1: Excludes aircraft that have been removed from operational service.

22 22 H1 FY18 results presentation VIRGIN AUSTRALIA GROUP DRIVING GROWTH / AIRCRAFT UTILISATION 31 Dec Dec Dec Dec Dec 2013 Group Operating Fleet ASKs / Group Operating Fleet Units (yoy growth) 8.4% 2.7% 8.3% 3.8% Na Revenue Per Tail (yoy growth) 14.3% 9.0% 8.4% 2.7% Na Average Fleet Age (VA mainline fleet) Financial Leverage 2 4.3x 4.5x 5.7x 6.8x 7.3x Better Business Program delivery: A simplified and higher utilised fleet Benefit Revenue of lower increased fuel prices by ~[X]% realised with ~[11]% in FY16 reduction partially offset in operating by movements fleet since exchange launch of rates the BBP Significantly reduced fleet ownership cost base without compromising fleet age Earnings uplift and sustainable Financial Leverage improvements Note 1: Excludes aircraft that have been removed from operational service: 2: Financial Leverage is a non-statutory measure used by Management and VAH s Board to assess financial performance and is defined at the end of this presentation

23 23 H1 FY18 results presentation DISCLAIMERS, DEFINITIONS AND ASIC GUIDANCE Disclaimer The non-ifrs information has not been audited or reviewed by KPMG. 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 2017 that has been reviewed by KPMG. Definitions Underlying Profit / (Loss) Before Tax: is a non-statutory measure that represents statutory profit / (loss) before tax excluding the impact of onerous contract expenses, business and capital restructure and transaction costs (as defined below), share of net profit of equity-accounted investee and the impact of hedging and financial instruments (as defined below). This is a measure used by Management and Board of Virgin Australia Holdings Limited (VAH) to assess the financial performance of VAH. Business and capital restructure and transaction costs: is a non-statutory measure that includes business and capital restructure and transaction costs. Hedging and financial instruments: is a non-statutory measure that includes the following items outlined in Note 2 of the VAH Interim Financial Report. For the halfyear ended 31 December 2017: time value movement on cash flow hedges (loss of $20.6m), unrealised ineffectiveness on cash flow hedges and non-designated derivatives (gain of $0.1m). For the half-year ended 31 December 2016, this item includes: time value movement on cash flow hedges (loss of $21.0m) and unrealised ineffectiveness on cash flow hedges and non-designated derivatives (gain of $0.1m). Underlying Earnings Before Interest, Tax, Depreciation, Amortisation and Aircraft Rentals (EBITDAR): is a non-statutory measure per Note 2 of the VAH Interim Financial Report for the half-year ended 31 December It is used by Management and VAH s Board as a measure to assess the financial performance of VAH and its individual segments. It is defined as Underlying Profit / (Loss) Before Tax (as defined above) excluding the impact of depreciation, amortisation, aircraft rentals and net finance costs. Segment EBIT: is a non-statutory measure per Note 2 of the VAH Interim Financial Report for the half-year ended 31 December It is used by Management and VAH s Board as a measure to assess the financial performance of VAH and its individual segments. It is defined as Underlying Profit / (Loss) Before Tax (as defined above) excluding the impact of net finance costs. Benefit Revenue of lower increased fuel prices by ~[X]% realised with ~[11]% in FY16 reduction partially offset in operating by movements fleet since exchange launch of rates the BBP

24 24 H1 FY18 results presentation DISCLAIMERS, DEFINITIONS AND ASIC GUIDANCE Definitions (continued) Segment EBIT Margin: is a non-statutory measure derived from Underlying Earnings Before Interest & Tax (as defined above) divided by total segment revenue. RASK: is a non-statutory measure derived from segment revenue normalised for Cargo operations on a consistent basis divided by Available Seat Kilometres (defined below) of the regular passenger transport business. Yield: is a non-statutory measure derived from segment revenue normalised for Cargo operations on a consistent basis divided by Revenue Passenger Kilometres (defined below) of the regular passenger transport business. ASK or Available Seat Kilometre: Available Seat Kilometres or ASKs is a non-statutory measure derived from total number of seats available for passengers multiplied by the number of kilometres flown on Virgin Australia or Tigerair Australia operated flights. RPK or Revenue Passenger Kilometre: Revenue Passenger Kilometre is a non-statutory measure derived from number of paying passengers multiplied by the number of kilometres flown on Virgin Australia or Tigerair Australia operated flights. Financial Leverage: is a non-statutory measure and is defined as the ratio of Adjusted Net Debt (as defined below) to EBITDAR (as defined above). Adjusted Net Debt: is a non-statutory measure derived from Net Debt (as defined below) adding 7 times annual aircraft rentals. Net Debt: is a non-statutory measure derived from interest bearing liabilities less cash and cash equivalents. RBA: refers to Reserve Bank of Australia Benefit of lower fuel prices realised in FY16 partially offset by movements in exchange rates Revenue increased by ~[X]% with ~[11]% reduction in operating fleet since launch of the BBP

25 25 H1 FY18 results presentation DISCLAIMERS, DEFINITIONS AND ASIC GUIDANCE Definitions (continued) Forward Looking Statements: This document contains certain forward looking statements. Forward looking statements can generally be identified by the use of words such as project, foresee, plan, expect, aim, potential, goal, target, intend, anticipate, believe, estimate, may, could, should, will or similar expressions. Indications of, and guidance on, future earnings and financial position and performance are also forward looking statements. Forward looking statements, opinions and estimates provided in this document involve a number of risks, assumptions and contingencies, many of which are beyond the Virgin Australia Group s control and which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. It is believed that the expectations reflected in these forward looking statements, opinions and estimates are reasonable, but there can be no assurance that actual outcomes will not differ materially from these statements. Such forward looking statements, opinions and estimates are provided as a general guide only, should not be relied on as an indication or guarantee of future performance and speak only as of the date of this announcement. You should not place undue reliance on forward looking statements. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness, likelihood of achievement or reasonableness of any of the information, forward looking statements, opinions and estimates contained in this document. To the maximum extent permitted by law, none of the Virgin Australia Group, its directors, employees or agents, nor any other person accepts any liability for any loss arising from the use of the information contained in this document. Except as required by law and ASX Listing Rules, the Virgin Australia Group has no obligation to update publicly or otherwise revise any forward looking statement, opinion or estimate as a result of new information, future events or other factors. Nothing contained in this presentation constitutes investment, legal, tax or other advice. You should make your own assessment and take independent professional advice in relation to the information contained in this document and any action taken on the basis of that information. ASIC guidance In December 2011 ASIC issued Regulatory Guide 230. In order to comply with this Guide, Virgin Australia Holdings 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 2017 has been audited or reviewed in accordance with Australian Auditing Standards. Benefit Revenue of lower increased fuel prices by ~[X]% realised with ~[11]% in FY16 reduction partially offset in operating by movements fleet since exchange launch of rates the BBP The non-ifrs information has not been audited or reviewed by KPMG. 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 2017 which has been reviewed by KPMG.