Kenya Airways PLC · NSEKE:KQ
Kenya Airways — H1 2005/06 Earnings Presentation
32 slides from Kenya Airways's earnings presentation, November 2005
Slide 1: Financial Review: Half Year Ended 30th September 2005
FINANCIAL REVIEW HALF YEAR ENDED 30TH SEPTEMBER 2005
Slide 2: Global Economy
GLOBAL ECONOMY ¾Growth in world economy ¾China & India high growth rates ¾Africa in recovery stage ¾East African region growing at approx 5% ¾Oil prices continue to rise (supply/demand) ¾Terrorism activities low
Slide 3: Key Industry Issues
KEY INDUSTRY ISSUES 1 BUSINESS ¾High fuel prices ( up from US$61bn to US$83bn in 2004 – 40% ¾In 2005 fuel will be 22% of operating costs (KQ 28.5%) ¾Passenger and Cargo ¾Capacity
Slide 4: Key Industry Issues (cont.) - Safety
KEY INDUSTRY ISSUES (CONT.) 2 SAFETY ¾IATA target (2004) of 25% accident reduction rate by end 2006. ¾IATA’s Six Point Safety Plan 9Safety Auditing (IOSA) 9Infrastructure Safety 9Safety Data Management & Analysis 9Safety Training 9Cabin Safety 9Cargo & Dangerous Goods Safety
Slide 5: Key Industry Issues (cont.) - Simplifying the Business
KEY INDUSTRY ISSUES (CONT.) 3 SIMPLIFYING THE BUSINESS (IATA) ¾ E-ticketing by 2007 ¾ CUSS (Common Use Self Service Kiosks) ¾ Bar Code Standards ¾ RFID baggage tags ¾ E-freight by 2010 4 HUMAN RESOURCES ¾ Qualified Pilots availability tight ¾ Cabin Crew high mobility ¾ Training facilities stretched
Slide 6: Africa
AFRICA Protectionism still strong (Traffic Rights) Travel Advisories in low note Tourism recovering Economies recovering (Malawi and Zim opposite) Large Middle East Carriers onslaught Civil unrest reducing
Slide 7: Kenya
KENYA Tourism High Growth Sudden Collapse of Competition More Conferences in Mombasa Middle East Carriers Infrastructure Limitations Qualified Pilots Shortage
Slide 8: Key Activities for Past 6 Months
KEY ACTIVITIES FOR PAST 6 MONTHS 1New Routes –CAIRO/ISTANBUL 10 JUNE x2 –BAMAKO/DAKAR 01 JULY x2 –HARARE/MAPUTO 02 OCTOBER x2 –DUBAI/GUANZHOU 15 OCTOBER x3 2 IOSA Audit –Preparation –Successfully done (17th to 21st October 2005) –Awaiting Registration decision by IATA
Slide 9: Key Activities for Past 6 Months (cont.)
KEY ACTIVITIES FOR PAST 6 MONTHS 3 CREW RECRUITMENT AND TRAINING –Continued Ab-Initio Pilot Training (62) –Recruited 28 direct entry pilots –Recruited 322 Cabin Crew 4 PIP Implementation 5 E-TICKETING IMPLEMENTATION (17% done in KQ) 6 OCC START UP
Slide 10: Industry Performance: International Passenger Statistics
INDUSTRY PERFORMANCE International Passenger Statistics: 2005 Over 2004 RPK% ASK% PLF % Growth Growth Africa 10.8 8.4 68.6 Asia/Pacific 7.7 7.0 72.9 Europe 6.3 4.6 76.5 Middle East 13.8 11.2 73.6 North America 10.0 8.9 80.4 South America 12.5 11.1 73.1 Industry 8.3 7.0 75.4 KQ 22.8 16.9 76.6 Source:
Slide 11: Industry Performance: International Cargo Statistics
INDUSTRY PERFORMANCE International Cargo Statistics: 2005 Over 2004 FTK% ATK% Growth Growth Africa 8.1 11.0 Asia/Pacific 5.0 7.1 Europe 1.4 4.7 Middle East 12.8 12.4 North America 1.1 7.2 South America (3.0) 7.7 Industry 3.6 6.8 KQ 25.7 16.9 Source: IATA Website
Slide 12: Financial Highlights 2005/06
FINANCIAL HIGHLIGHTS 2005/06 2004 2005 Var Var% Group turnover up (KShs mil) 19,625 25,341 5,716 29% Operating costs up (KShs mil) 17,407 21,255 (4,208) (25%) Operating Margin% up 13.4% 16.1% 2.7% Profit after tax up (KShs mil) 1,511 2,231 720 48% Net Margin% up 7.7% 8.8% 1.1% EPS up (KS
Slide 13: Mr Neil Canty, Finance Director
MR NEIL CANTY FINANCE DIRECTOR
Slide 14: Operating Statistics
Operating Statistics 2004 2005 Var % Var ATK's (mil) 561 656 95 16.9 RTK's (mil) 346 425 79 22.8 Load Factor 61.7% 64.8% 3.1% B/Even L/F% 56.9% 59.1% (2.2%) Passengers ('000s) 986 1,209 223 22.6 Yield per RTK (USc) 71.69 78.09 6.40 8.9 Yield per RTK (KShs) 56.69 59.59 2.90 5.1 Cost per ATK (USc) 40.
Slide 15: Fleet in Service
Fleet in Service 2004 2005 Aircraft in Service Boeing 777-200 1 3 Boeing 767-300 6 5 Boeing 737-700 4 4 Boeing 737-300 4 4 Boeing 737-200 3 3 Saab 340 2 2 TOTAL 20 21
Slide 16: Group Income Statement
Group Income Statement Ksh mil 2004 2005 Var Var % Total Revenue 19,625 25,341 5,716 29 Direct Operating Costs (10,856) (14,065) (3,210) (30) Fleet Own'ship(excl. int) (2,918) (3,099) (182) (6) Gross Profit 5,852 8,177 2,325 40 Overheads (3,274) (4,091) (817) (25) Operating Profit 2,578 4,086 1,508
Slide 17: Group Turnover
Group Turnover KShs mil 2004 2005 Var % Var Passenger 16,720 20,569 3,849 23 Cargo 1,832 2,477 645 35 Handling 429 587 158 37 Other e.g. unused tickets, surcharges etc. 644 1,708 1,064 165 Total Revenue 19,625 25,341 5,716 29
Slide 18: Passenger Turnover by Region
Passenger Turnover by Region KShs mil 2004 2005 % Tot Var % Var Europe 5,002 6,687 33 1,685 34 Mid-East / Asia 3,473 3,455 17 (18) (1) West/Cent. Africa 2,481 2,982 14 501 20 East Africa 2,055 2,360 11 305 15 Southern Africa 2,028 2,675 13 647 32 North Africa 749 1,034 5 285 38 INTERNATIONAL 15,788
Slide 19: Direct Operating Costs
Direct Operating Costs KShs mil 2004 2005 Var % Var Aircraft Fuel and Oil 3,555 6,054 (2,499) (70) Landing/Handling/Nav. 2,338 2,728 (389) (17) Aircraft Maintenance 847 719 128 15 Commission on sales 1,565 1,471 94 6 Pax Service e.g catering 1,184 1,412 (228) (19) Others 1,365 1,681 (316) (23) TOTAL
Slide 20: Fuel Issues
Fuel Issues Mainly due to volume growth of 16% and price increase of 58% over prior year Fuel now represents 27.3% of all costs, up from 20.6% last year Every 1% increase in the unit price reduced Profit after Tax by KShs 42.4m Currently hedged 75% of requirements for Oct 05 to Mar 2006.
Slide 21: Fuel Prices
Fuel Prices 250 200 Price (cag) 15 0 10 0 50 0 A pr- 0 5 M ay- 0 5 Jun- 0 5 Jul- 0 5 A ug - 0 5 Sep - 0 5 Oct - 0 5 N o v- 0 5 D ec- 0 5 Jan- 0 6 F eb - 0 6 M ar - 0 6 Month Actual Actual prior year
Slide 22: Fleet Ownership Costs
Fleet Ownership Costs KShs mil 2004 2005 Var % Var Hire of a/c & engines 1,780 1,686 93 5 Maintenance Reserve 589 504 85 14 Aircraft Purchase Credit (19) (70) 51 261 Dep'n a/c, engines 568 979 (411) (72) TOTAL 2,918 3,099 (182) (6)
Slide 23: Overheads
Overheads KShs mil 2004 2005 Var % Var Employee Costs 1,806 2,122 (317) (18) Property & Gen Maint 229 310 (81) (35) Depreciation non-aircraft 220 230 (9) (4) Advertising 155 172 (17) (11) Staff Travel 116 202 (86) (74) Communication 279 337 (58) (21) Others (eg Leave/Legal/Med) 468 718 (250) (53) TO
Slide 24: Net Finance Costs
Net Finance Costs KShs mil 2004 2005 Var % Var Interest expense 381 805 (424) (111) Interest (Income) (21) (191) 170 800 TOTAL 360 614 (254) (71)
Slide 25: Group Balance Sheet
Group Balance Sheet KShs mil ASSETS 2004 2005 Var Var % Aircraft 22,053 42,951 20,898 48.7% Properties, Plant & Equip 3,719 4,450 731 16.4% Aircraft deposits 6,502 570 (5,932) n/a Investments, Goodwill etc 180 134 (46) (34.3%) Total Non-Current Assets 32,454 48,105 15,651 32.5% Inventories 997 966 (
Slide 26: Group Balance Sheet
Group Balance Sheet KShs mil EQUITY AND LIABILITIES 2004 2005 Var Var % Capital 2,308 2,308 - 0.0% Cumulative Profits 6,905 11,024 4,119 37.4% Proposed dividends 346 - (346) n/a Hedge Reserve 626 1,324 698 n/a 10,185 14,656 4,471 30.5% Aircraft Loans 21,333 32,940 11,607 35.2% Deferred Taxation 2,09
Slide 27: Group Cash Flow
Group Cash Flow KShs mil 2004 2005 Var Var % Net Cash from Ops 4,200 4,904 704 14.4% Aircraft Acquisitions (10,662) (22,129) (11,467) (51.8% ) Aircraft Loans Raised 11,113 17,610 6,497 36.9% Aircraft Deposits/Refunds 1,197 6,773 5,576 82.3% Other Capex (514) (567) (53) (9.3% ) Loans Paid (1,887) (2,
Slide 28: Ratio Analysis
Ratio Analysis 2004 2005 EBITDAR Margin 27.1% 26.4% Return on Invest 4.5% 4.6% Return on Equity 16.5% 16.5% Debt : Equity 3.8 3.9 Interest Cover 7.1 4.7
Slide 29: The Next Six Months
THE NEXT SIX MONTHS Improve on Schedule Integrity Obtain IOSA Registration E-ticketing progression Paris & Freetown Routes London-Mombasa-London – Dec 2005 Pilots recruitment and training
Slide 30: KQ - Average Share Price Movement 2001-2005
Ap r 0 10 20 30 40 50 60 70 80 01 Ju n 01 Au g 01 O ct 01 D ec 01 Fe b 02 Ap r0 2 Ju n 02 Au g 02 O ct 02 D ec 02 Fe b 03 Ap r0 3 Ju n 03 Au g 03 O ct 03 D ec 03 Fe b 04 Ap r0 4 Ju n 04 Au g 04 O ct .0 D 4 ec .0 4 Fe b. 05 Ap r- 05 Ju n- 0 Au 5 g- 05 KQ – Average Share Price Movement 2001 – 2005
Slide 31: Relative 1-yr Share Performance
Relative 1-yr Share Performance 700 600 500 Kenya Airways British Airways 400 Air France-KLM Lufthansa 300 Dow Jones Airlines Index Air Maurities 200 100 - 8/ 8/ 9/ 1/ 2/ 3/ 4/ 5/ 6/ 7/ 10 11 12 2/ 31 29 25 23 24 22 23 21 20 /2 /2 /2 20 /2 /2 /2 /2 /2 /2 /2 /2 /2 8 6 7 /2 /2 /2 04 00 00 00 00 00 00
Slide 32: Thank You!
THANK YOU! (QQ Kenya Airways