Virgin Australia Holdings Limited · ASX:VGN
Virgin Australia — FY2015 Earnings Presentation
27 slides from Virgin Australia's earnings presentation, Aug 7, 2015
Slide 1: Financial Year 2015 Results Presentation
Financial Year 2015 Results Presentation August 7, 2015
Slide 2: Key highlights
Key highlights FY15 vs. FY141 Underlying Loss Before Tax2 ($49m) $163m Statutory Loss After Tax ($94m) $260m Return on Invested Capital2 6.1% 4.7pts Group unit cost ex fuel ex FX (CASK)2 6.8c 6.4% Operating cash flow $218m $226m VA Domestic EBIT2 $111m $210m VA International EBIT2 ($69m) ($23m) Note
Slide 3: Financial highlights
Financial highlights FY15 vs FY14 Underlying Loss Before Tax1 Domestic unit revenue (RASK)1 3.5% $m Group unit cost ex fuel ex FX (49) 6.4% (CASK)1 Operating cash flow $226m (212) Financial leverage1 (20.4%) FY17 Cost savings target $0.2bn Closing cash balance $1.03bn FY14 2 FY15 Note: 1 RASK, Group
Slide 4: Virgin Australia Domestic
Virgin Australia Domestic Domestic EBIT1 FY15 vs FY14 $m EBIT1 Growth $210m EBIT Margin1 Growth 6.5pts 111 RASK1 Growth 3.5% (99) Yield1 Growth 5.2% 2 FY14 FY15 Strong improvement in margins and healthy momentum Note: 1 EBIT, EBIT Margin, RASK & Yield are non-statutory measures and are defined on sl
Slide 5: Virgin Australia Domestic – leading the pack
Virgin Australia Domestic – leading the pack On time performance leader for the Record customer satisfaction2 past 10 months1 % 92 VA brand End to end customer experience 90 QF brand 88 Domestic business class service 86 84 Lounge experience 82 0 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Note
Slide 6: Virgin Australia International
Virgin Australia International International EBIT1 FY15 vs FY14 $m EBIT1 ($23m) (46) H2 EBIT1 Growth $2m (69) RASK1 Decline (2.8%) (25) 2 2 FY14 H1 EBIT H2 EBIT FY15 Decline Improvement Initiatives generating improvement in second half Note: 1 EBIT and RASK are non-statutory measures and are defined
Slide 7: International improvement plan
International improvement plan 1st Phase - Business Class on Tasman and Pacific Islands - Management integration of NZ operations - LAX Flying Consolidation - B777 Business Class Suites 2nd Phase Route Changes - Jan-16 PER-HKT withdrawal - Mar-16 PER-DPS; MEL-DPS and ADL-DPS withdrawal - Selected fr
Slide 8: Cargo & Charter
Cargo & Charter Cargo Domestic Cargo Market • Officially launched 1st July 2015 VA Cargo • Opportunity to directly compete in Opportunity domestic market • New customers already signed Charter • Continued revenue growth1 • Increased Charter fleet by 4x F100’s Others New unconstrained growth opportun
Slide 9: Velocity
Velocity FY15 vs FY14 Revenue 18.5% Members Revenue m $m EBIT1 8.0% Members 20% 5.3 238 Ave daily join rate 24% 4.4 201 FY14 FY15 FY14 FY15 BP Partnership has driven substantial FY15 a year of investment in people & increase in members systems Acquisition of Torque Data in July 2015 Expecting >15% E
Slide 10: Tigerair
Tigerair1 FY15 vs FY14 EBIT2 $43m Strong H2 performance -82% EBIT Margin2 14.1pts (9) H2 EBIT A$m Load Factor 1.8pts (51) RASK2 8.5% Guest Satisfaction3 11pts FY14 FY15 Tigerair expected to be profitable for FY16 Note 1 All metrics calculated for Tigerair are on a standalone full year underlying bas
Slide 11: Customer Satisfaction
Tigerair performance metrics improving Strong Customer Satisfaction Taking the lead on budget OTP in H21 +11.0 % % 80 75% 90 Tigerair 70 64% Customer Satisfaction 60 85 50 40 Jetstar 80 30 20 10 75 0 0 FY14 FY15 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Tigerair performance metrics improving
Slide 12: Our people successfully deliver Virgin Vision
Our people successfully deliver Virgin Vision Recent awards Conde Nast – ‘top 10 airlines in the world for Business Travel’ Skytrax World Airline Awards – ‘Best Airline Staff’ for Australia/Pacific Freddie Awards – ‘Program of the Year’, ‘Best Customer Service’ and ‘Best Redemption Ability’ for Midd
Slide 13: VA Domestic - closing the margin gap
VA Domestic - closing the margin gap Qantas domestic RASK premium Domestic CASK – Virgin Australia vs. over Virgin Australia1 Qantas H1FY151 RASK CASK (¢) -25% premium Qantas Domestic % 16 50 CASK is 25% 46% 14 higher 45 40 12 35 31% 10 30 8 25 20 6 15% 15 4 10 5 2 0 0 FY13 1HFY15 Target Qantas Virg
Slide 14: Outlook
Outlook1 FY16 FY17 ROIC ≈ WACC > WACC Return on Invested Capital (ROIC) Tigerair Profitable Profitable 12.0% WACC 10% 10.0% Velocity EBIT >15% >15% 8.0% Growth 6.1% 6.0% Financial 4.0x - 4.5x 4.0% Leverage 2.0% 1.4% VA 6% - 9% EBIT Margin Domestic 0.0% FY14 FY15 FY16 VA Profitable International Busi
Slide 15: Outlook statement
Outlook statement “Based on current market conditions, all fundamental business metrics are on track for the Group to return to profitability and report a Return on Invested Capital in line with its cost of capital for the 2016 financial year” 15
Slide 16: Supplementary financial slides
Supplementary financial slides 16
Slide 17: Group financial summary
Group financial summary FY15 FY141 $m $m Revenue and income 4,749 4,307 Statutory loss after tax (94) (354) Addback Income tax benefit 69 128 Statutory loss before tax (163) (482) Addback Restructuring and transaction costs 2 70 183 Share of equity accounted losses2 17 49 Hedging and financial instr
Slide 18: Cash flow
Cash flow FY15 FY14 $m $m • $226m improvement in operating Net cash from / (used in) 218 (8) cash flows operating activities • Strong cash flow conversion Net cash used in investing activities (246) (174) • FY16 investing capex likely to be Net cash from financing activities 254 380 ~$400m, inclusiv
Slide 19: Balance Sheet
Balance Sheet FY15 FY141 $m $m • June year end cash balance of $1.03bn Cash and cash equivalents 1,029 784 • Interest bearing liabilities and aircraft assets have been impacted by FX movements Total assets 5,780 4,679 • Financial leverage2 decrease from 7.5x to Interest bearing liabilities 2,762 1,9
Slide 20: Expected fuel and FX impact in FY16
Expected fuel and FX impact in FY16 FY15 FY161 • FY15 non fuel effective FX was 9.7% Annual impact of fuel and currency $m $m better than spot Fuel pricing benefit on prior year 60 162 • $162m of expected fuel pricing gains Adverse impact of FX on prior year (35) (99) in FY16 likely to be offset by
Slide 21: Cost program tracking ahead of plan
Cost program tracking ahead of plan Cumulative Annual Run Rate Cost Saves Cumulative Program Cost Saves $m 600 514 500 Annualised run rate benefits in FY15 $135m 400 345 Cumulative benefits by FY15 $514m 300 Run rate benefit since FY13 launch $345m 188 195 200 98 100 46 0 FY13 FY14 FY15 Increasing c
Slide 22: Virgin Australia Group fleet
Virgin Australia Group fleet 30 30 June June Leased Owned 20141 2015 • 17 NG aircraft due for delivery in FY15-17 B737-700/800 74 77 37 40 have been converted to MAX orders E190 18 18 7 11 • 737MAX order book now 40, 1st delivery 2018 A330 7 6 6 - • 14th A320 for Tigerair Australia in 1HFY16 B777 5
Slide 23: Targeted return framework
Targeted return framework1 • Underlying Earnings before Interest and Tax • Add back non-cancellable aircraft operating leases ROIC EBIT • Less notional depreciation on capitalised value of aircraft leases (7x annual operating lease cost), or ~4% pa • Net debt • Total Equity (including non-controllin
Slide 24: Disclaimer, definitions and ASIC guidance
Disclaimer, definitions and ASIC guidance Disclaimer The following non-IFRS information has not been audited or reviewed by KPMG: Underlying Loss Before Tax, Underlying performance, Restructuring and transaction Costs, Share of equity accounted losses, Hedging and financial instruments, Earnings Bef
Slide 25: Disclaimer, definitions and ASIC guidance
Disclaimer, definitions and ASIC guidance Definitions (continued) Earnings Before Interest & Tax (EBIT): is a non-statutory measure per Note 4 of the Virgin Australia Holdings Limited Preliminary Final Report for the Year Ended 30 June 2015. It is used by Management and VAH’s Board as a measure to a
Slide 26: Disclaimer, definitions and ASIC guidance
Disclaimer, definitions and ASIC guidance Definitions (continued) Forward Looking Statements: This presentation contains certain forward looking statements. Forward looking statements can generally be identified by the use of words such as ‘project’, ‘believe’, ‘foresee’, ‘plan’, ‘expect, ‘aim’, ‘po
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