Airwrk Hldings Limited Half Year 2015 Results Presentatin February 2015 Chris Hart Brian Fuhy Chief Executive Officer Chief Financial Officer
IMPORTANT NOTICE This presentatin cntains nt nly a review f peratins, but als sme frward lking statements abut Airwrk Hldings Limited (Airwrk) and the envirnment in which the cmpany perates. These frward lking statements are based n current expectatins, and invlve assumptins, risks and uncertainties. Airwrk s actual results culd be affected by a number f factrs and accrdingly culd differ materially. There can be n assurance that any result cntemplated in any frward lking statement will be realised and Airwrk gives n warranty r representatin as t future perfrmance. Media releases, management cmmentary, Airwrk s recent investment statement and ther infrmatin is available in respect f the cmpany and these cntain additinal infrmatin abut matters which culd cause Airwrk s perfrmance t differ frm any frward lking statements in this presentatin. Please read this presentatin in the wider cntext f material previusly published by Airwrk. The infrmatin in this presentatin is in a summary frm, and accrdingly is nt necessarily cmplete. N representatin r warranty is made as t the accuracy r cmpleteness f the infrmatin cntained. A number f nngaap financial measures are used in this presentatin due t the fact they are widely accepted financial indicatrs used by investrs and analysts t analyse and cmpare cmpanies. Yu shuld nt cnsider any f these in islatin frm, r as a substitute fr, the infrmatin prvided in the cnslidated financial statements. All amunts are in New Zealand dllars unless therwise stated.
AGENDA Interim HY 2015 Result Financial Highlights Financial Summary Cmparisn t Prspectus PFI Freign Exchange Sensitivity Depreciatin Operating Revenue Interim HY 2015 Divisinal Review Helicpter Review Fixed Wing Review Cash Flw and Net Debt Capex Outlk Appendices 3
HALF YEAR 2015 RESULT FINANCIAL HIGHLIGHTS Exceeded IPO frecast strng grwth frm cmparative perid Revenue grwth f $4.5m, up 6.8% n cmparative perid EBIT f $11.8m, up 20.0% n cmparative perid NPAT f $7.9m, up 73.0% n cmparative perid Underlying NPAT f $7.9m, up 19.3% n cmparative perid EPS f 15.7 cents (basic), up 48.1% n cmparative perid Interim dividend f 8.0 cents per share, fully imputed Increased full year FY15 guidance: NPAT $15.3m; EPS 30 cents; full year dividend 16 cents 4
HALF YEAR 2015 RESULT FINANCIAL SUMMARY Reprted Prspectus PFI Ttal Revenue 70,260 65,262 65,766 EBITDA EBIT 22,439 11,832 21,233 9,797 20,419 9,856 NPAT 7,885 5,939 4,559 Return n Capital Emplyed 1 15.2% 13.1% 13.2% Return n Capital Emplyed (excl. Grwth Capital WIP 2) 15.6% 13.1% 13.2% Return n Sharehlders' Funds 3 17.0% 12.9% 12.5% 15.7 11.8 10.6 Earnings per share basic (cps) Dividends (cps) 1. 2. 3. 8.0 H1 FY14 Reprted 7.0 Return n Capital Emplyed: Annualised EBIT / Average funds emplyed (sharehlders funds plus net debt) The Grup defines grwth capex as investments in new assets r prduct develpment t increase the Grup s earning capacity, all ther capex is defined as maintenance capex. Return n Sharehlders Funds: Annualised NPAT / Average sharehlders funds 5
COMPARISON TO PROSPECTUS PFI Incme EBITDA EBIT NPBT NPAT Reprted result 70,260 22,439 11,832 10,685 7,885 Prspectus PFI 65,262 21,233 9,797 8,410 5,939 2,035 F 2,275 F 1,946 F Variance t Prspectus PFI 4,998 F 1,206 F Adjusted fr mvement in fair value f derivatives Reprted result Prspectus PFI 530 371 Underlying Reprted result 70,260 22,439 11,832 10,685 7,885 Underlying Prspectus PFI 1 65,262 21,233 9,797 8,940 6,310 2,035 F 1,745 F 1,575 F Variance t underlying Prspectus PFI 4,998 F 1,206 F 1. Underlying Prspectus PFI is adjusted fr the impact f mvements in the fair value f derivatives (refer t page 42 f Investment Statement). The derivatives frecast in the Prspectus PFI t reverse in were settled in FY14 n early repayment f the lease. F Favurable t Prspectus Frecast 6
FOREIGN EXCHANGE SENSITIVITY The fllwing table prvides an indicatin f the impact n results due t variances in freign exchange rates frm thse used in the Prspectus PFI. An unfavurable variance indicates that the Grup s financial perfrmance wuld have imprved had the FX rates assumed in the Prspectus PFI prevailed. USD NZ AUD NZ EUR NZ TOTAL NZ Revenue 540 (145) 53 448 EBITDA 452 16 15 483 EBIT 266 16 15 297 NPAT 158 11 11 180 (573) (573) CAPEX Sensitivity excludes derivatives and FX in ther gains and lsses The FX sensitivity is largely as expected in the Prspectus PFI the average FX rates were clse t PFI assumptins and the strength f the USD has been mre ntable in 2015 7
DEPRECIATION The fllwing table prvides a summary f the impact n results due t a reassessment f Being 737 freighter aircraft residual values Reprted RV Reassessment PreRV reassessment Prspectus PFI H1 FY14 Reprted Depreciatin expense: Helicpters 3,952 3,952 2,980 2,927 Fixed Wing 6,596 589 7,185 7,321 7,609 59 59 1,135 27 10,607 589 11,196 11,436 10,563 EBIT 11,832 589 11,243 9,797 9,856 NPAT 7,885 424 7,461 5,939 4,559 Earnings per share basic (cps) 15.7 0.8 14.9 11.8 10.6 Grup TOTAL Prspectus PFI and market guidance achieved befre impact f residual value reassessment Fixed Wing depreciatin in the perid als affected by: Reduced depreciatin due t ne less B737 vs Prspectus PFI Increased depreciatin due t FX vs Prspectus PFI Retains cnservative apprach t depreciatin f Being fleet 8
OPERATING REVENUE Strng revenue grwth driven by Helicpter divisin $70m $60m $50m $40m Helicpters Fixed Wing $30m $20m $10m H1 FY10 H1 FY11 H1 FY12 H1 FY13 H1 FY14 9
H1 2015 DIVISIONAL REVIEW Prfitable Helicpter grwth with expansin f leasing fleet, including shrtterm leases and cntinued engineering earnings grwth Greater than expected reductin in Fixed Wing revenues in Australia reflecting difficult trading envirnment and ne fewer aircraft (vs Prspectus PFI) Reprted EBIT Helicpters Fixed Wing Crprate ($5m) $5m PFI $10m $15m H1 FY14 H1 FY14 includes IPO csts f $1.2 millin within Crprate EBIT Crprate csts reflect full perid impact f public cmpany csts and grwth requirements aligned t the strategy 10
HELICOPTER REVIEW Prspectus PFI H1 FY14 Revenue Engineering 26,536 21,827 21,010 Revenue Leasing 15,656 11,805 10,292 Revenue Ttal 42,192 33,632 31,302 EBITDA 13,854 10,855 9,568 EBIT 9,902 7,875 6,641 EBITDA Margin 32.8% 32.3% 30.6% Return n invested capital 23.3% 17.5% Return n invested capital (excluding THL & Allway) 25.6% 19.5% Percentage f revenue generated frm new custmers Engineering 2% 20% Leasing 4% 3% Ttal helicpter fleet 37 29 28 Engineering revenue increased by 26%; Leasing by 52% Percentage f revenue frm new custmers highlights strng level f recurring revenues Slight change f mix f engineering wrk (internal v external) due t helicpter leasing demand with imprved lngterm ROIC Significant upside frm incremental, high margin, shrtterm cntracts utilising existing assets Imprved EBITDA margin reflects greater Leasing revenue mix which is less labur intensive Prgressing THL legal actin, curt date set fr May 2015. Cnservative apprach cntinued t be applied in accunts, cnsistent with FY14 and Prspectus PFI 11
HELICOPTER REVIEW Leasing fleet ahead f Prspectus PFI expectatins and future demand lks strng Actual Perfrmance Prspectus PFI +1 (1) 35 +1 +1 32 +1 30Jun14 Africa: Mining 27 26 30Jun14 31Dec14 Prspectus PFI Prspectus PFI NZ: Utility Suth America: NZ: Turism Oil & Gas Dispsals 31Dec14 Further custmer diversificatin aligned with emerging mining, il & gas prjects Lease f tw BK117 helicpters t new NZ lessee; secnd aircraft t be delivered in February 2015 Refined pricing mdel gaining tractin 12
HELICOPTER REVIEW Gegraphic expansin New custmers signed ff the back f certificatin expansin: FY14 Eurpe, Africa, Canada, Asia FY15 Suth America, Suth Africa (H2) First Airwrk BK117 helicpter delivered int Suth America New Zealand market share expansin acrss leasing and maintenance activities Reduced revenue frm Eurpean Supprt Cntract as expected, in line with custmer fleet reductin schedule Capacity expansin f Ardmre Engineering facility t meet demand Stage 1 new hangar; cmpletin June 2015 Stage 2 verhaul capacity increase; cmpletin December 2015 13
FIXED WING REVIEW Prspectus PFI H1 FY14 Ttal revenue 28,007 31,623 34,475 EBITDA 12,144 13,042 14,531 5,548 5,721 6,922 EBITDA Margin 43.4% 41.2% 42.1% Return n invested capital 1 15.5% EBIT Fleet: number f aircraft at end f perid (wned and perated) 2 Percentage change f flying hurs frm prir perid 3 1. 2. 3. 17.3% 19 21 21 (17%) (7%) 12% Return n Invested Capital excludes Capital WIP assciated with Grwth Capex until the assets are peratinal Excludes aircraft purchased in and cmmitted t purchase, pending freight cnversin (ttal 7x B737400) Change in flying hurs fr wned aircraft nly and excludes aircraft leased at a fixed rate Significant dwnturn in Australian activity, largely frm passenger and freight charter flying Slight imprvement in margins frm repsitining assets ut f Australia, hwever resurces in Australia retained at abve current activity levels and remain under review Fleet reductin versus Prspectus PFI relates t ne B737 frm the January 2014 incident, plus ne minr charter aircraft returned t wner in FY14 14
FIXED WING REVIEW Cntinued exceptinal peratinal perfrmance: 98% On Time Perfrmance Flying hurs 9% belw Prspectus PFI and 17% belw prir perid, with ne fewer B737 aircraft and a reductin in unscheduled and charter flying hurs in Australia Fcus n expanding dry lease fleet and custmer base and further refining activity t exit lw yielding peratins Tw B737s remved frm Australian peratins fr repsitining t Eurpe n dry lease Revised assessment f B737 freighter residual values, retains cnservative apprach Wrk cntinues n imprving margins and cnslidating ACMI cntracts with the reductin in unscheduled flying Investment in B737 freighter dry leasing three leases signed s far in 2015 Full increased earnings impact t be recgnised frm the 2016 financial year 15
CASH FLOW AND NET DEBT Underlying cash flws generated by the business remain strng Reprted net cash flw frm perating activities ($14.6m) same as prir perid but belw Prspectus PFI ($18.6m) due t wrking capital mvements, including: Increase in debtrs ($5.5m) phasing f revenue and WIP clsure; custmer payment deferral and delays, including tighter crss brder currency cntrls Increase in inventry and WIP ($1.1m) phasing f trading inventry purchases Increase in creditrs ($4.0m) phasing f payments aligned t WIP clsure and revenue recgnitin Decrease in ther liabilities ($1.8m) custmer depsits: revenue recgnised in current perid vs cash received in prir perid Imprved wrking capital psitin expected by June 2015 Net debt as at 31 December 2014 was $76.9m: Increase f $24.6m since June 2014 due t high Grwth Capex, especially with respect t the expansin f the fixed wing dry leasing fleet Refinanced lan maturing in April 2015 with extensin f existing facilities and term Cmmitted US$60m facility with CBA apprval received in February 2015, subject t dcumentatin 16
CAPEX Maintenance capex well cntained in Fixed Wing ($4.2m) and Helicpters ($1.2m) Tw Fixed Wing heavy maintenance events deferred int frm FY14 led t higher than frecast maintenance capex in the perid Grwth capex: Helicpter ($7.4m): fleet grwth; Ardmre facility expansin Fixed Wing ($17.3m): dry lease fleet grwth; B737 freighter cnversin (peratinal frm August 2015) Grup: MRO, Finance and IT systems upgrade Prspectus PFI H1 FY14 30,383 10,281 19,247 307 518 600 30,690 10,799 19,847 5,555 4,466 6,198 Grwth capex 25,135 6,333 13,649 Grup capital expenditure 30,690 10,799 19,847 Prperty, plant & equipment capex Intangible asset capex Grup capital expenditure Cmprising: Maintenance capex 17
OUTLOOK Expect psitive perfrmance t cntinue, subject t factrs beynd ur cntrl FY15 full year NPAT: previus guidance $14.5m increases t $15.3m t reflect full year impact f revisin f B737 freighter aircraft residual values (EPS 30 cents; full year dividend 16 cents) Helicpters: fcus n rganic grwth f helicpter business Engineering/maintenance capacity expansin thrugh facility develpment Further extend certificatins (FAA certificatin underway) Cntinue t partner with OEMs Prgressive fleet expansin in NZ and emerging markets Challenges faced by Oil and Gas industry leading t slwdwn in helicpter trading, hwever ptential fr greater leasing pprtunities Fixed Wing: fcus n further refinement f fixed wing business Expand dry lease fleet and custmer base Cntinue t deliver Wrld Class ntime perfrmance and fcus n cre custmer requirements 18
Appendix 1: PERFORMANCE BY DIVISION Reprted Prspectus PFI H1 FY14 Reprted Perid Grwth Helicpters: 42,694 33,632 31,431 36% Fixed Wing: 28,574 31,623 34,475 (17%) Crprate & Other 1: (1,008) 7 (140) Ttal Revenue: 70,260 65,262 65,766 7% Helicpters: 13,854 10,855 9,568 45% Fixed Wing: 12,144 13,042 14,531 (16%) Crprate & Other 1: (3,559) (2,664) (3,680) (3%) Ttal EBITDA: 22,439 21,233 20,419 10% Helicpters: 9,902 7,875 6,641 49% Fixed Wing: 5,548 5,721 6,922 (20%) Crprate & Other 1: (3,618) (3,799) (3,707) (2%) Ttal EBIT: 11,832 9,797 9,856 20% Revenue: EBITDA: EBIT: 1. Crprate and Other includes head ffice csts, and the eliminatin f the results f intersegment trading. 19
Appendix 2: HELICOPTER FLEET Flying hurs and revenue per helicpter increase reflects: New leasing cntracts, including the impact f new leases signed in prir year; Shrtterm lease cntract in (including mbilisatin and dembilisatin); and Impact f declining New Zealand Dllar Prspectus PFI FY14 H1 FY14 Leasing fleet Number f helicpters at end f perid: Owned 32 25 32 24 Leased 3 2 2 2 Ttal leasing fleet 35 27 34 26 2 2 2 2 37 29 36 28 Average number f helicpters during the perid 35.7 28.5 30.8 30.2 Average revenue per helicpter equivalent ($'000s) 439 414 696 341 Operated (nt wned r leased) Ttal helicpter fleet Fleet flying hurs Percentage increase / (decrease) ver cmparative perid Fleet Ttal 25% 10% (30%) (26%) Excluding Allway and THL 40% 10% (5%) (5%) 20
Appendix 3: KEY ATTRIBUTES OF THE BUSINESS Integrated Business with Highly Regulated Envirnment Highly Diversified Operatins, Industries and Gegraphies Established Business Lng Term Cntracts Helicpter Engineering Niche Market with High Barriers t Entry Grwth Track Recrd and Significant Opprtunities Experienced Bard and Management Strng Cash Flw Business 21
Appendix 4: HELICOPTER MAINTENANCE CERTIFICATION Certificatin and IP expansin delivers new custmers 2010 NZCAA Apprval Limited apprvals cvering NZ, Australia and parts f Asia 55 2011 Add Canadian Overhaul Apprval 61 2013 2012 Add BK117 Engine Upgrade Prgram Apprval in NZ 61 Add BK117 Engine Upgrade Prgram apprval and Eurpean maintenance apprval Capability nw cvers: Eurpe, Canada, Suth America, rest f Asia and middleeast 2014 Future Add BK117 Engine Upgrade Prgram USA Apprval and Canadian (Tp 3) Majr Mdificatins Add FAA Part 145 (American) Maintenance Apprval Add Eurpean Aircraft Mdificatin Design Apprval Acquisitin f helicpter peratin in Africa extends engineering and perating capability 170 170 253 Available BK117 market size 22