Airwrk Hldings Limited 2017 Annual Results Presentatin August 2017
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, annual and interim reprts, Airwrk s 2013 investment statement, the 2017 target cmpany 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. This presentatin must be cnsidered 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 nn-gaap 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. 2
CONTENTS Executive Summary 2017 Result Financial Summary 2017 Divisinal Review Fixed Wing Review Helicpter Review Cash Flw Capex Net Debt Strategy and Outlk Appendices 3
EXECUTIVE SUMMARY Airwrk s result fr the 2017 financial year in line with expectatins NPAT $24.8m Final dividend f 9 cents per share, bringing ttal dividend fr the year t 17 cents (FY16: 17 cents) EBIT grwth f 6.4% due t significant expansin f the Fixed Wing divisin Cash flws remain strng The result highlights the benefits f Airwrk s diversified businesses, glbal ftprint and revenue streams Debt facilities refinanced in July 2017 with a newly syndicated debt facility f apprx. US$195m Outlk: cntinue t fcus n diversifying custmer base, redeplying unleased helicpters and expanding glbal ftprint The Directrs wuld like t acknwledge the significant effrts and dedicatin f the Airwrk team lcated arund the wrld wh have delivered this result, whilst managing a significant amunt f change, including the RIFA partial takever 4
2017 RESULT FINANCIAL SUMMARY FY17 FY16 Change Ttal Revenue 168,361 165,983 1.4% Ttal Incme 183,059 165,983 10.3% EBITDA 87,910 69,019 27.4% EBIT 39,677 37,292 6.4% NPAT 24,766 24,604 0.7% Return n Capital Emplyed 1 14.2% 14.0% 0.2 ppt Return n Capital Emplyed (excl. Capital WIP) 14.7% 16.8% (2.1 ppt) Return n Sharehlders' Funds 2 21.7% 23.0% (1.3 ppt) Earnings per share - basic (cps) 48.3 49.0 (1.4%) Dividends (cps) 17.0 17.0-1. Return n Capital Emplyed: EBIT / Average funds emplyed (sharehlders funds plus net debt) 2. Return n Sharehlders Funds: NPAT / Average sharehlders funds FY17 includes insurance prceeds f $14.7m and impairment expense f $13.0m fllwing an aircraft landing incident in August 2016; ffset by aircraft delivery delays, significant fleet inductin csts, and lss f revenue resulting frm the aircraft landing incident Expected reductin in ROCE as a result f the dwnturn in the helicpter divisin 5
OPERATING REVENUE FY17 shws the cnslidatin f the business fllwing a perid f significant investment and grwth 6
EBIT: GROUP PERFORMANCE EBIT grwth in FY17 driven by increased Fixed Wing activity and highlights the benefit f diversified businesses and revenue streams Nte: EBIT is a nn GAAP measure. It is determined based n reprted perating prfit after depreciatin, amrtisatin and impairment expenses 7
EBIT: DIVISIONAL REVIEW Increase in Fixed Wing earnings frm expansin f B737-400 fleet Reduced Helicpter earnings due t: market slwdwn; reduced aircraft yield due t the nn-recurrence f certain high yielding cntracts recgnised in the prir year; and a change in mix f MRO activity Nte: EBIT is a nn GAAP measure. It is determined based n reprted perating prfit after depreciatin, amrtisatin and impairment expenses 8
FIXED WING REVIEW FY17 FY16 FY15 Ttal revenue 93,172 80,364 59,463 EBITDA (excluding insurance incme) 56,799 44,063 25,631 EBIT 31,324 20,548 10,625 EBITDA Margin 61.0% 54.8% 43.1% Return n invested capital 1 17.9% 12.8% 11.3% Return n invested capital (excl Capital WIP) 2 19.0% 17.7% 15.6% Fleet: number f aircraft at end f perid (wned and perated) Being 737-400/300 19 18 17 Other - 5 10 Ttal 19 23 27 Percentage change f flying hurs frm prir perid 3 4% 34% (5%) 1. Return n Invested Capital: EBIT / Average Capital Emplyed 2. Capital WIP mstly relates t wrk in prgress n B737 passenger t carg cnversins 3. The change in flying hurs are shwn fr wned and leased aircraft, excluding fixed rate leases where flying hurs d nt impact revenue Fixed wing earnings include the full year impact f capex prgrammes initiated in prir years EBITDA margin imprvement reflects increased dry leasing v ACMI activity ACMI peratinal perfrmance reflects inductin f new aircraft int the fleet: 95% On Time Perfrmance FY17 EBIT includes insurance prceeds ($14.7m) less impairment expense ($13.0m) fllwing an aircraft landing incident in August 2016. Pilt negtiatins cncluded with cst increases in FY 17 and beynd nt fully recverable frm custmers. Lss f revenue resulting frm the aircraft landing incident, aircraft delivery delays, and significant fleet inductin csts als unfavurably impact EBIT 9
FIXED WING REVIEW Fleet cmpsitin NZ Aus Eurpe freight Being Fleet Eurpe passenger Africa Capital WIP Off lease 30 June 2017 3 6 4 4 2 - - 19 30 June 2016 3 5 4 3 1 2-18 Ttal One B737-400F aircraft purchased and delivered t ACMI custmer in New Zealand Tw B737-400F aircraft cnversins cmpleted and delivered t ACMI custmer in Australia, and dry lease custmer in Eurpe Tw B737-400 passenger aircraft purchased in Q2 and leased t dry lease custmer in Eurpe fr 24 mnths; prvides feeder stck fr future freighter cnversins Redeplyment f three B737-300F t new custmers: ne ACMI lease, tw dry lease Dispsal f ne end f life B737-300 passenger airframe One dry lease Being 737-400F aircraft damaged beynd ecnmic repair in August 2016 Further grwth achieved thrugh increased B737 engine leasing One B737-400 passenger aircraft lease expires in December 2017; expect aircraft t underg freighter cnversin therefre earnings resume in Q2 FY 19 10
HELICOPTER REVIEW FY17 FY16 FY15 Revenue - Engineering 45,844 47,640 54,448 Revenue - Leasing 29,276 37,924 30,957 Revenue - Ttal 75,120 85,564 85,405 EBITDA 22,994 31,678 28,876 EBIT 15,348 23,800 20,510 EBITDA Margin 30.6% 37.0% 33.8% Return n invested capital 1 13.9% 23.2% 22.8% Percentage f revenue generated frm new custmers Engineering 11% 19% 23% Leasing 6% 2% 4% Helicpter fleet (wned) 39 39 36 Helicpter fleet (wned, perated and leased) 45 45 41 Uncntracted helicpters at end f year 2 9 5 9 1. Return n Invested Capital: EBIT / Average Capital Emplyed 2. Includes tw helicpters that came ff cntract n 30 June 2017. At 28 August 2017, 6 helicpters are uncntracted Reductin in Helicpter EBIT reflects a difficult market, particularly in the resurces sectr. Expected recvery f Eurpean and Suth American lease earnings did nt materialise Leasing revenue reduced with significant reductin in PNG flying hurs, the nn-recurrence f certain high yielding shrt term cntracts in the prir year, terminatin f a significant African cntract in Q1 FY17, and prir year including $1.8m revenue recgnised fllwing cmmercial dispute reslutin Decline in Engineering external revenue reflects general market slwdwn and change f mix with increased internal supprt 11
HELICOPTER REVIEW Mining revenue reductin fllwing cnclusin f African cntract; fcus n redeplyment f uncntracted helicpters Increased il & gas revenues in Suth America negated by higher perating csts than expected Redeplyment f aircraft twards turism and EMS activities Cntinued challenges in the resurces sectr Extract value f cmpnent parts n end f life helicpters t avid capex and inventry purchases FY16 Revenue: $85.6m FY17 Revenue: $75.1m EBITDA: $31.7m EBITDA margin: 37.0% EBITDA: $23.0m EBITDA margin: 30.6% 12
CASH FLOW Strng underlying Cash Flws FY17 FY16 FY15 Reprted perating cash flws 62,474 45,928 40,025 Adjust fr: Insurance prceeds (14,698) - - Maintenance capex (10,878) (12,274) (9,736) Underlying perating cash flws 36,898 33,654 30,289 Scheduled debt repayment (12,155) (9,841) (4,967) Free cash flw 24,743 23,813 25,321 Underlying cash flws remain strng Increased debtr aging prfile reflects helicpter industry slw dwn, als reflected in a cnservative apprach t debtr prvisins Reductin in creditrs reflects timing f creditr payments (including maintenance capex), payment f parts purchased n deferred terms in the prir year, and certain fixed wing perating csts nw paid directly by the custmer (i.e. fuel, landing charges, airways charges) 13
CAPEX Ttal capex during FY17 ($57.6m), funded thrugh perating cash flws and debt Grwth capex: Helicpter ($6.7m): fleet purchases; Ardmre facility expansin; certificatin develpment Fixed Wing ($39.9m): aircraft purchases and freighter cnversins; MRO system implementatin FY17 FY16 FY15 Aircraft, prperty & ther assets 57,347 89,037 83,084 Certificatin and sftware 262 768 808 Grup capital expenditure 57,609 89,805 83,892 Cmprising: Maintenance capex 10,878 12,274 9,736 Grwth capex 1 46,731 77,531 74,156 Grup capital expenditure 57,609 89,805 83,892 1. 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. Maintenance capex is recrded net f transfers t/frm inventry. 14
NET DEBT Debt facility refinanced in July 2017 with a newly established syndicated debt facility f apprx. US$195m Balance sheet at 30 June 2017 recrds $54.2m f Lans as current liabilities based n the ld facility maturity dates; amunts due fr repayment within 12 mnths f balance date under the new facility is $14.7m Net debt as at 30 June 2017 was $156.8m, a decrease f $2.8m since 30 June 2016 ($159.6m): Includes $3.9m decrease due t FX with crrespnding decrease in B737 aircraft values Insurance prceeds ($14.7m) applied t debt repayment, and redrawn as grwth capex Balance due t grwth capex net f perating cash flws 30 Jun 17 30 Jun 16 30 Jun 15 Equity rati 1 40.1% 35.4% 37.5% Debt rati 2 59.9% 64.6% 62.5% 1. Equity rati is: Net Assets / (Ttal Assets less Cash) 2. Debt rati is: (Ttal liabilities less Cash) / (Ttal Assets less Cash) 15
STRATEGY AND OUTLOOK Fixed Wing: Assess further fleet expansin pprtunities Cntinue t deliver Wrld Class n-time perfrmance and fcus n cre custmer requirements Target cntinued grwth pprtunities in MRO business Expect FY18 earnings t be similar t current year (net f insurance prceeds less impairment), in view f scheduled passenger aircraft retirement and cst pressures in ACMI business Helicpters: Surce cntracts t redeply / sell uncntracted aircraft Cntinue t fcus n markets utside f resurces sectr (e.g. firefighting, utility, Gvernment services) Further extend certificatins t develp IP in areas f cre cmpetency Cntinue t partner with OEMs Prgressive fleet expansin in NZ (mainly turism peratins) and ffshre, including new and emerging markets Uncertain earnings utlk as challenges faced by resurces sectr cntinue t affect the helicpter industry Pursue new pprtunities that cmplement existing businesses Cntinue t evaluate future grwth strategy including pprtunities in China, and capital requirements 16
Appendix 1: 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 17
Appendix 2: GLOBAL PRESENCE AND CAPABILITY 18