Virgin Australia Holdings Limited · ASX:VGN
Virgin Australia — Virgin Blue Holdings — FY2005 Earnings Presentation
27 slides from Virgin Australia's earnings presentation, May 18, 2005
Slide 1: Interim Financial Results for the six and 12 months ended 31 March 2005
Interim Financial Results for the six and 12 months ended 31 March 2005 Brett Godfrey Managing Director 18 May 2005
Slide 2: Overview
Overview Result in line with guidance given in January, 2005 40% capacity increase Difficult yield environment Cost base under control, excluding fuel No market share ceded to competition – remains around 30% of total domestic market Product and service developments continuing 1
Slide 3: Result
Result Net profit after tax of $138.1 million EBITDAR and PBT margins of 25.0% and 11.6% respectively Cost per ASK of 7.49 cents, compared to 8.16 cents in 2004 Remains lowest in country Achieved despite increasing domestic competition and a 40% increase in production 2
Slide 4: Financial Performance
Financial Performance % 2005 2004 Increase / 12 months to 31 March $ millions $ millions Decrease Revenue $1,668.6 $1,362.3 + 22% EBITDAR $417.4 $409.5 + 2% Profit Before Tax $193.8 $226.2 -14% Net Profit After Tax $138.1 $158.5 -13% Earnings Per Share 13.4 cents 17.3 cents -23% 3
Slide 5: Operating Performance Highlights
Operating Performance Highlights % 12 months to 31 March 2005 2004 Increase/ Decrease Passengers carried 12.8 million 10.1 million + 27% RPKs 15.0 billion 11.6 billion + 30% ASKs 19.6 billion 14.0 billion + 40% Load Factor - revenue 77.7% 82.6% - 4.9 pts Average Aircraft 47.5 34.9 + 36% Yield – sche
Slide 6: Uncertain Revenue Environment … but non-fuel costs under control
Uncertain Revenue Environment … but non-fuel costs under control Pressure on margins Cost per ASK (cents) EBITDAR margin down 5.1 pts 10 to 25.0% 9 8.72 NPAT margin down 3.3 pts to 8 1.28 7.73 7.71 8.3% 7.26 7 1.25 1.63 Average cost per barrel of Jet Fuel 1.26 6 has increased more than 56% 5 As a re
Slide 7: Domestic Operations
Domestic Operations Overview Will continue to be our main focus Represents 92% of revenue Key routes continue to perform Market share exceeds capacity share on many key routes Yield however was under pressure Penetration of business market key focus Government market remains a challenge Product and
Slide 8: International Operations
International Operations Pacific Blue Pacific Blue performed above expectations Generates about 8% of revenue Continues to expand and now operates 10 routes between 8 destinations Commenced flights to Fiji, Vanuatu and the Cook Islands Currently 3 aircraft operate Pacific Blue routes Pacific Blue pr
Slide 9: Strategy
Strategy Become a major player in the higher yielding Corporate and Government travel sectors whilst maintaining Virgin Blue’s position as the Leisure Market Leader. Improve quality of revenue streams Focus on Product Development – Kiosks, Live TV, Blue Plus etc Focus on Service – ‘Australia’s No 1
Slide 10: Outlook
Outlook 2004/05 was difficult 2005/06 a period of consolidation, but will be a challenge Yield and cost control crucial Fuel and airport charges remain a serious concern Market stimulation opportunities limited Economic outlook Moderate growth planned Net two aircraft on order in next 12 months 49 a
Slide 11: Airports – One Sparrow does not a Summer make
Airports – “One Sparrow does not a Summer make” ACCC Price Monitoring & Financial Report (Feb 2005) Aeronautical Revenue per passenger – 97/98 to 00/01 was relatively stable – 00/01 to 03/04 increased between 46 and 201% By 03/04 most airports are exceeding 00/01 passenger levels On an ASK basis Air
Slide 12: Thank You
Thank You 11
Slide 13: Financial Review Keith Neate
Financial Review Keith Neate Chief Financial Officer 12
Slide 14: Results Overview FY05
Results Overview FY05 12 months to 31 March 2005 2004 % variance $ millions $ millions Revenues $1,668.6 $1,362.3 + 22% EBITDAR $417.4 $409.5 + 2% PBT $193.8 $226.2 - 14% NPAT $138.1 $158.5 - 13% EBITDAR margin 25.0% 30.1% - 5.1 pts NPAT margin 8.3% 11.6% - 3.3 pts CASK 7.49 cents 8.16 cents - 8.2%
Slide 15: Results Overview 2H05
Results Overview 2H05 6 months to 31 March 2H05 2H04 % variance $ millions $ millions Revenues $881.7 $745.6 + 18% EBITDAR $226.1 $235.9 - 4.2% PBT $103.8 $134.2 - 23% NPAT $75.1 $94.3 - 20% EBITDAR margin 25.6% 31.6% - 6.0pts NPAT margin 8.5% 12.6% - 4.1pts CASK 7.71 cents 7.73 cents - 0.01% 14
Slide 16: Revenue Overview
Revenue Overview Scheduled passenger A$ Millions revenue up 21.2% 1800 Yield down 5.6% 1600 Other revenue up 50.0% 1400 1200 Freight 1000 On board sales 800 600 Other 400 200 0 2004 2005 Scheduled Revenue Other Revenue 15
Slide 17: Expenditure Overview
Expenditure Overview Cost per ASK (CASK) Item Change from 2004 10 1,600 Aircraft operating costs (1) - 20.0% 1,400 9 Airport charges, - 2.7% navigation, and station 8.16 1,200 operations 8 Cost per ASK (cents) 7.49 A$ Millions Contract and other - 28.5% 1,000 7 maintenance costs 800 Commission and o
Slide 18: Key Expenditure Items: Aircraft operating costs
Key Expenditure Items Aircraft operating costs Total expenditure up 12.1%, CASK down 20.0% – Change of fleet mix 2004 2005 Owned 8 16 Leased 36 33 44 49 700 NG’s 22 20 800 NG’s 22 29 44 49 – Component accounting – additional $8m charge in 2005 – Currency benefit 17
Slide 19: Key Expenditure Items: Airport charges
Key Expenditure Items Airport charges, navigation and station operations Total expenditure up 36.2%, CASK down 2.7% – Increase in line with production – Appealing decision by Sydney Airport to change charging methodology – Efficiencies in station operations and scale 18
Slide 20: Key Expenditure Items: Maintenance costs
Key Expenditure Items Contract and other maintenance costs Total expenditure up 0.1%, CASK down 28.5% – Economies of scale and fleet mix – Three year ANZES contract – Exceptional performance of NG aircraft type 19
Slide 21: Key Expenditure Items: Commissions and marketing
Key Expenditure Items Commissions, other marketing and reservation costs Total Expenditure up 4.9%, CASK down 25.1% – Impact of changes to travel agents commission structure – Marketing/advertising spend on cost/benefit basis – Other discretionary spend reduced 20
Slide 22: Key Expenditure Items: Fuel and oil
Key Expenditure Items Fuel and oil Total expenditure up 60.5%, CASK up 14.6% – Average US$bbl price jet fuel up 56% against 2004 – Fuel costs account for almost 20% of cost base compared to 15% in 2004 – Price increase has cost $99 million in 2004/05, excluding hedging gains 21
Slide 23: Key Expenditure Items: Labour and staff costs
Key Expenditure Items Labour and staff related costs Total expenditure up 40.6%, CASK up 0.4% – In line with production increase – EBA award 6% – Continued productivity benefits through rostering and scheduling enhancements 22
Slide 24: Hedging
Hedging FX Forward contract and option cover for 2005/06 Fuel No hedging in place for 2005/06 23
Slide 25: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow Year end 31 March 2005 2004 Capital Expenditure $425.7 M $505.2 M Available cash $661.7 M $469.3 M Days cash cover 164 days 150 days Total equity $739.6 M $601.5 M Net Debt/ Net debt plus equity (1) 61% 66% (1) Net debt adjusted to include annual aircraft rental expense c
Slide 26: Other business
Other business Change of Financial Year End to 30 September with immediate effect In line with Corporations Act requirement Interim accounts for 12 months to 31 March 2005 Audited accounts for 18 months to 30 September 2005 25
Slide 27: Thank You
Thank You 26