Qantas Airways Limited · ASX:QAN
Qantas Airways — H1 2018 Earnings Presentation
30 slides from Qantas Airways's earnings presentation, Feb 22, 2018
Slide 1: Qantas Airways Limited 1H18 Results Supplementary Presentation
For personal use only Qantas Airways Limited 1H18 Results Supplementary Presentation 22 February 2018 ASX:QAN US OTC:QABSY
Slide 2: Group Performance
For personal use only Group Performance
Slide 3: 1H18 Key Group Financial Metrics
1H18 Key Group Financial Metrics For personal use only 1H18 1H17 VLY %10 Comments Underlying PBT1 ($M) 976 852 15 Record result Underlying Earnings per Share2 (c) 38.7 32.5 19 Statutory Profit Before Tax ($M) 857 715 20 Statutory Earnings per Share (c) 34.0 27.3 25 Record EPS supported by on-market
Slide 4: Underlying Income Statement Summary
Underlying Income Statement Summary For personal use only $M 1H18 1H17 VLY % Comments Improved Unit Revenue of 3.5% driven by Group Domestic and Net passenger revenue 7,493 7,064 6 transformation benefits. Group capacity increased 2% largely driven by increased flying into Asian growth markets Net f
Slide 5: Items Not Included in Underlying PBT
Items Not Included in Underlying PBT For personal use only $M 1H18 1H17 Comments Ineffectiveness and non-designated derivatives relating to - (1) other reporting periods Redundancies, restructuring and other costs part of the Qantas Transformation costs 74 73 Transformation Program and 787-9 Introdu
Slide 6: Reconciliation to Underlying PBT
Reconciliation to Underlying PBT For personal use only $M 1H18 1H17 Statutory Ineffectiveness Other items Underlying1 Statutory Ineffectiveness Other items Underlying1 relating to not included in relating to not included in other reporting Underlying other reporting Underlying periods PBT periods PB
Slide 7: Revenue Detail
Revenue Detail For personal use only Net passenger revenue up 6% Revenue ($B) • Group Unit Revenue increased 3% − Group Domestic Unit Revenue up 8% − Group International Unit Revenue up 1% • Group capacity up 2%, increased International capacity achieved through 6% 8.7 cross fleet utilisation offset
Slide 8: Expenditure Detail
Expenditure1 Detail For personal use only Fuel costs up 4% Expenditure ($B) • Effective hedging reduced impact of higher jet fuel prices • Improvement in fuel efficiency from Qantas Transformation fuel initiatives • Offset by higher consumption from increased flying 5% 7.6 7.2 Manpower and staff-rel
Slide 9: Cash Flow
Cash Flow For personal use only $M 1H18 1H17 VLY % • Positive net free cash flow1 of $772m Operating cash flows 1,734 1,173 48 – Record operating cash flows of $1.7b Investing cash flows (excluding aircraft operating (962) (885) (9) – Investing cash flows of $962m excluding lease refinancing) aircra
Slide 10: Invested Capital Calculation
Invested Capital Calculation For personal use only $M 12 mths 12 mths • Increased Property, Plant and Equipment associated to Dec 17 to Dec 16 with 787-9 deliveries and impact of refinancing Receivables (current and non-current) 1,008 971 operating leases Inventories 364 352 • Refinanced operating l
Slide 11: ROIC Calculation
ROIC Calculation For personal use only 12 mths 12 mths $M to Dec 17 to Dec 16 Underlying EBIT 1,704 1,669 Add back: Non-cancellable aircraft operating 305 399 lease rentals Less: Notional depreciation1 (138) (177) ROIC EBIT 1,871 1,891 12 mths 12 mths $M to Dec 17 to Dec 16 Net working capital2 (6,6
Slide 12: Net Debt Target Range
Net Debt Target Range For personal use only • Net Debt Target Range = 2.0x – 2.5x ROIC EBITDAR where EBITDAR achieves a fixed 10% ROIC • At current Invested Capital of $8.9b, optimal net debt range is $5.0b to $6.2b • Targeting net debt to be within the range on a forward looking basis $b Invested C
Slide 13: Disciplined Allocation of Capital
Disciplined Allocation of Capital For personal use only Capital allocation prioritised to: Capital Allocation Priorities • Debt reduction (where required) >$6.2B $6.2B $5.0B <$5.0B to achieve optimal capital structure Greater returns to Debt reduction Capital Management shareholders • Base dividend
Slide 14: Net Debt
Net Debt For personal use only $M 1H18 FY17 VLY • Borrowings of $346m from A$ Corporate Debt Program Current interest bearing liabilities on balance sheet 420 433 13 • Repayment of $306m in short term amortising Non-current interest bearing liabilities on balance sheet 4,462 4,405 (57) debt, largely
Slide 15: Net Debt Movement
Net Debt Movement For personal use only $M 1H18 1H17 Opening Net Debt (30 June) (5,212) (5,646) Net cash from operating activities 1,734 1,173 Principal portion of aircraft operating lease rentals 86 119 Payment for treasury shares (146) (65) Funds From Operations 1,674 1,227 Net cash from investing
Slide 16: Total Unit Cost
Total Unit Cost For personal use only C/ASK 1H18 1H17 VLY % Total Unit Cost1 7.11 6.97 (2) Excluding: Fuel (2.00) (1.97) Change in FX rates - (0.06) Impact of changes in the discount rate and other actuarial assumptions (0.02) 0.06 Share of net profit/(loss) of investments accounted for under the eq
Slide 17: Group Operational Information
For personal use only Group Operational Information
Slide 18: Disciplined Hedging Program
Disciplined Hedging Program For personal use only Indicative Fuel and Foreign Currency Exposure Reducing Volatility of Earnings / Cash Flow • Net foreign currency revenues are offset against Examples of Operational Adjustments USD expenses Capacity adjustments and Fuel efficiency Invest in fuel • Re
Slide 19: Qantas Group Sustainability Framework
Qantas Group Sustainability Framework For personal use only 19
Slide 20: Fleet at December 2017
Fleet at 31 December 2017 For personal use only Aircraft Type 1H18 FY17 Change • Net addition of 1 aircraft in 1H18 A380-800 12 12 - 747-400 4 5 (1) – 2 x 787-9 additions 747-400ER 6 6 - A330-200 18 18 - – 1 x 747-400 retired in July 2017 A330-300 10 10 - • Domestic capacity reductions achieved by r
Slide 21: Fleet Age at December 2017
Fleet Age at 31 December 2017 Flexibility maintained For personal use only Regional Competitor Fleet Ages2 VARA3 ~18 years Fleet Age1 as at December 2017 Alliance ~25 years REX ~24 years Qantas International Qantas Jetstar Qantas Domestic average fleet age of 10.9 Domestic average fleet age of 7.9 R
Slide 22: Supplementary Segment Information
For personal use only Supplementary Segment Information
Slide 23: Jetstar Group
Jetstar Group For personal use only Jetstar Group – Network of Routes1 5 151 179 177 186 6 115 129 130 96 98 109 82 59 67 31 39 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 1H18 BUSINESS OWNERSHIP2 LAUNCH AIRCRAFT3 ❶Jetstar Australia 100% 2004 53 x A320s/A321s 4 2 ❷Jetstar I
Slide 24: Jetstar Domestic
Jetstar Domestic For personal use only • Record half year Underlying EBIT of $205m Jetstar Domestic 1H18 1H17 VLY % • Unit revenue up 7% on flat capacity and strong seat factor growth1 ASKs M 9,536 9,662 (1) • Growing earnings2 with improved operating margins3 RPKs M 8,246 8,080 2 • Continuing to le
Slide 25: Jetstar International
Jetstar International (Australia outbound and New Zealand) For personal use only • Strong earnings1 with optimisation of core markets Jetstar International (incl. New Zealand Domestic and Regional, 1H18 1H17 VLY % excl. Jetstar Asia) • Long-haul business focused on Asian markets where Jetstar is str
Slide 26: Jetstar in Asia
Jetstar in Asia For personal use only • Jetstar’s Asian airlines portfolio1 was profitable − Jetstar Asia (Singapore) remains profitable2 in highly competitive market due to network restructure to focus on key leisure markets, leading OTP and brand strength − Jetstar Japan earnings2 continue to impr
Slide 27: Diversification and Growth at Qantas Loyalty
Diversification and Growth at Qantas Loyalty One of the world’s most diverse airline loyalty programs For personal use only • 5.3% growth in credit card portfolio versus market growth of 0.05%1 • 48 new Coalition partners including Hoyts, Rockpool and Uber – many now with POS2 redemption; growth in
Slide 28: Overview of Qantas Loyalty Value Chain
Overview of Qantas Loyalty Value Chain For personal use only Business Model Sources of Value Coalition Loyalty 4 Other Verticals Marketing Revenue: portion of price per point Core earnings stream recognised upfront for the service Loyalty provides its Part of Coalition (QFF1 + QBR2) Earn Partners.
Slide 29: Glossary
Glossary For personal use only • Available Seat Kilometres (ASK) – Total number of seats available for passengers, • NPS – Net promoter score. Customer advocacy measure multiplied by the number of kilometres flown • Operating Margin – Underlying EBIT divided by Total Revenue • Capital expenditure (C
Slide 30: Disclaimer & ASIC Guidance
Disclaimer & ASIC Guidance For personal use only This Presentation has been prepared by Qantas Airways Limited (ABN 16 009 661 901) (Qantas). Summary information This Presentation contains summary information about Qantas and its subsidiaries (Qantas Group) and their activities current as at 22 Febr