Kenya Airways PLC · NSEKE:KQ
Kenya Airways — H1 2006/07 Earnings Presentation
30 slides from Kenya Airways's earnings presentation, November 2006
Slide 1: Business and Financial Review
Business and Financial Review Half Year Ended 30th September 2006
Slide 2: Agenda
Agenda Business Review Financial Review Future Outlook Questions & Answers
Slide 3: Global Economy
Global Economy Growth in world economy - High growth rate in Developing Nations - Africa in recovery stage Oil prices declining but remain high Terrorism activities low but high cost of security alerts
Slide 4: Airline Industry
Airline Industry Demand in 1st half of the year shows signs of slowing down -impacting economy class passengers. High fuel costs necessitated increased fuel surcharges. Fastest growing regions in passenger traffic:- -Middle East 15.7% - Africa 8.4% (8 months of 2006) Security alerts at UK ai
Slide 5: Industry Performance: International Passenger Statistics
Industry Performance International Passenger Statistics: Jan-Aug 2006 over Jan-Aug 2005 RPK% ASK% PLF % Growth Growth Africa 8.4 9.6 67.8 Asia/Pacific 5.7 3.1 74.8 Europe 5.3 4.3 77.3 Middle East 15.7 14.7 74.1 North America 5.8 4.8 81.2 South America (0.6) (1.8) 73.5 Industry 6.1 4.7 76.4 KQ 10.6 1
Slide 6: Industry Performance: International Cargo Statistics
Industry Performance International Cargo Statistics: Jan-Aug 2006 over Jan-Aug 2005 FTK% ATK% Growth Growth Africa 7.9 6.8 Asia/Pacific 5.2 3.6 Europe 2.1 3.9 Middle East 16.8 16.0 North America 6.2 6.8 South America 3.0 1.4 Industry 5.2 5.3 KQ 25.9 13.5 Source: IATA Website
Slide 7: Key Activities over the Past 6 Months
Key Activities over the Past 6 Months New destinations/additional Frequencies - LOS/FNA April X2 - ACC/FNA July X2 - 2nd Frequency to AMS over the peak period Order Of Boeing 787-8 Dreamliner for Yr 2010 Launch Of KQ On Time Initiative - KQ on Time every Time (OTET) Delivery Of Boeing 767 –
Slide 8: Key Activities over the Past 6 Months
Key Activities over the Past 6 Months Launch Of KQ Cargo Pharma Launch Of KQ Express Cargo PIP initiatives CSR -Makueni Water Wells With AMREF ( Khs 2m) -Mukuru Community School with KLM & Boeing (KShs 17m)
Slide 9: Financial Highlights
Financial Highlights 2006 2005 Var Var% Group turnover up (KShs mil) 28,466 25,341 3,125 12% Operating costs up (KShs mil) 23,375 21,260 (3,115) (15%) Operating Margin % 14.4% 16.1% (1.7%) Profit after tax up (KShs mil) 2,429 2,231 198 8.9% Net Margin % 8.5% 8.8% (0.3%) EPS up (KShs) 5.2
Slide 10: Financial Review
Financial Review Neil Canty Group Finance Director
Slide 11: Operating Statistics
Operating Statistics 2006 2005 Var % Var ATK's (mil) 747 656 90 13.8 RTK's (mil) 486 425 60 14.2 Load Factor 65.0% 64.8% 0.2% B/Even L/F% 59.5% 59.1% (0.4%) Passengers ('000s) 1,294 1,209 85 7.0 Yield per RTK (USc) 80.28 78.09 2.18 2.8 Yield per RTK (KShs) 58.62 59.59 (0.97) (1.6) Exchange Rate 73.0
Slide 12: Fleet in Service
Fleet in Service Seats 2006 2005 Wide body Boeing 777-200 322 3 3 Boeing 767-300 216 6 5 Narrow body Boeing 737-700 116 4 4 Boeing 737-300 116 4 4 Boeing 737-200 101 2 3 Saab 340 35 2 2 Total Fleet 21 21
Slide 13: Group Income Statement
Group Income Statement Ksh mil 2006 2005 Var Var % Total Revenue 28,466 25,341 3,125 12.3 Direct Operating Costs (16,557) (14,065) (2,492) (17.7) Fleet Own'ship(excl. int) (3,247) (3,099) (147) (4.8) Gross Profit 8,662 8,177 486 5.9 Overheads (4,572) (4,095) (477) (11.6) Operating Profit 4,091 4,081
Slide 14: Group Turnover
Group Turnover KShs mil 2006 2005 Var % Var Passenger 24,237 21,895 2,342 10.7 Cargo 2,812 2,477 336 13.6 Handling 541 587 (46) (7.8) Other e.g. unused tickets etc. 875 382 493 129.1 Total Revenue 28,466 25,341 3,125 12.3
Slide 15: Direct Operating Costs
Direct Operating Costs KShs mil 2006 2005 Var % Var Aircraft Fuel and Oil 7,648 6,054 (1,593) (26.3) Landing/Handling/Nav. 2,883 2,728 (155) (5.7) Aircraft Maintenance 1,124 719 (405) (56.3) Commission on sales 1,307 1,471 164 11.2 Pax Service e.g catering 1,459 1,412 (47) (3.3) Others 2,137 1,681 (
Slide 16: Fuel Issues
Fuel Issues Up 26% on prior year due to price increase of 15%, volume growth of 13% and partly mitigated by 4% exchange rate movement. Fuel now represents 30.6% of all costs, up from 27.3% last year Every 1% increase in the unit price of fuel reduced Profit after Tax by KShs 53.5m Currently
Slide 17: Fuel Cost as a % of Total Cost
Fuel Cost as a % of Total Cost 35.0% 30.0% 25.0% 20.0% 15.0% 2001/02 2002/03 2003/04 2004/05 2005/06 2006 Hf Yr Fuel Cost as a % of Total Cost
Slide 18: Fleet Ownership Costs
Fleet Ownership Costs KShs mil 2006 2005 Var % Var Hire of a/c & engines 1,619 1,686 68 4.0 Maintenance Reserve 587 504 (83) (16.5) Aircraft Purchase Credit (81) (70) 11 16.2 Dep'n a/c, engines 1,122 979 (143) (14.7) TOTAL 3,247 3,099 (147) (4.8)
Slide 19: Overheads
Overheads KShs mil 2006 2005 Var % Var Employee Costs 2,508 2,122 (385) (18.2) Property & Gen Maint 317 310 (7) (2.3) Depreciation non-aircraft 303 230 (73) (32.0) Advertising 216 172 (44) (25.8) Staff Travel 200 202 3 1.2 Communication 383 340 (43) (12.6) Others (eg Leave/Legal/Med) 645 719 74 10.3
Slide 20: Net Finance Costs
Net Finance Costs KShs mil 2006 2005 Var % Var Interest expense 867 805 (62) (7.7) Interest (Income) (275) (191) 84 44.1 TOTAL 592 614 22 3.6
Slide 21: Group Balance Sheet
Group Balance Sheet KShs mil ASSETS 2006 2005 Var Var % Aircraft 41,248 42,951 (1,703) (4.1%) Properties, Plant & Equip 5,245 4,450 795 15.2% Aircraft deposits 7,325 570 6,755 n/a Investments & Deferred exp 287 134 153 53.3% Total Non-Current Assets 54,105 48,105 6,000 11.1% Inventories 891 966 (75)
Slide 22: Group Balance Sheet
Group Balance Sheet KShs mil EQUITY AND LIABILITIES 2006 2005 Var Var % Capital 2,308 2,308 - 0.0% Cumulative Profits 15,655 11,024 4,631 29.6% Proposed dividends - - - n/a Hedge Reserve 1,360 1,324 36 n/a 19,323 14,656 4,667 24.2% Aircraft Loans 30,978 32,940 (1,962) (6.3%) Deferred Taxation 4,969
Slide 23: Group Cash Flow
Group Cash Flow KShs mil 2006 2005 Var Var % Cash from Trading 6,239 6,088 151 2.4% Taxes Paid (154) (1,184) 1,030 668.8% Net Cash from Ops 6,085 4,904 1,181 19.4% Aircraft Acquisitions (372) (22,129) 21,757 5,848.7% Aircraft Loans Raised - 17,610 (17,610) n/a Aircraft Deposits/Refunds (3,238) 6,773
Slide 24: Ratio Analysis
Ratio Analysis 2006 2005 EBITDAR Margin 23.7% 26.4% Return on Equity 12.9% 16.5% Debt : Equity - On Bal. Sheet 1.1 1.6 Debt : Equity - Off Bal. Sheet 1.8 2.5 Interest Cover 4.8 4.7
Slide 25: Share Performance: Kenya Airways vs. Peers
Share Performance Kenya Airways Vs. Peers STOCK PRICE CHART 200 INDEXED PRICE(As on 19/10/2006 180 Air France-KLM 160 Kenya Airw ays Ltd. 140 Deutsche Lufthansa 120 AG 100 British Airw ays PLC 80 Air Mauritius Ltd. 60 40 18/10/05 18/11/05 18/12/05 18/01/06 18/02/06 18/03/06 18/04/06 18/05/06 18/06/0
Slide 26: KQ Average Share Price Movement 2001 - 2006
KQ – Average Share Price Movement 2001 – 2006 140 120 100 80 60 40 20 0 0 1 0 1 n 0 2 r 0 2 y 0 2 l 0 2 0 2 0 2 n 0 3 r 0 3 y 03 l 03 0 3 0 3 n 0 4 r 0 4 y 04 l 04 04 . 04 . 05 r - 0 5 - 05 l- 05 -0 5 -0 6 - 06 -0 6 ep S No J v a a u p v a u p v a u . M M a J Se N o J a M M a J Se N o J a M M a J e
Slide 27: The Next 6 Months
The Next 6 Months
Slide 28: The Next Six Months
The Next Six Months Improve on Schedule Integrity Fleet Development - Introduction of 4th B777-200 - Replacement of ageing B737-200’s with new B737-800’s E-ticketing completion Launch of New Destinations - Paris - Mayotte - Brazzaville - Cotonou
Slide 29: The Next Six Months cont..
The Next Six Months cont.. Pilots & Engineers recruitment and training New Leadership Centre JKIA Expansion Fuel plus management programme Performance Improvement Project (PIP)
Slide 30: Questions? and Answers
Questions? and Answers (QQ Kenya Ai iways x POricle off 7Nificer