easyJet plc · LSE:EZJ
easyJet — H1 2006 Earnings Presentation
40 slides from easyJet's earnings presentation, May 3, 2006
Slide 1: 2006 Interim Results
2006 Interim Results 03 May 2006 1
Slide 2: Unlocking our potential
Unlocking our potential 4 Strong foundation – Powerful business model – Great brand – Strong market presence and scale 4 The key to the future – Building a strong leadership team – Clarity of customer proposition and network – Rigorous detailed management on individual route performance and costs 4
Slide 3: Priorities and focus
Priorities and focus Revenue Costs People Network Rigorous detailed review of individual route performance and cost management 3
Slide 4: Highlights
Highlights 4 Good first half performance despite high fuel costs: pre-tax loss better than expectations at £40m 4 Cost reduction momentum continues: cost per seat ex-fuel down 6% in H1 4 Revenue performance better than expected: passenger revenue -1.5% per seat, flat adjusting for Easter; ancillary
Slide 5: Profit and loss account
Profit and loss account £m H1 2006 H1 2005 Change Total revenue 630 553 + 14% Operating costs (602) (520) + 16% EBITDAR 27 34 - 19% Finance and ownership (68) (55) + 22% Pre-tax loss (40) (22) + 86% Margin (6.4%) (3.9%) -2.5pp Encouraging H1 but impact of fuel & Easter resulting in margin dilution 5
Slide 6: Profit build-up: contribution per seat
Profit build-up: contribution per seat £m 60 £20m 30 112p £19m 102p (£5m) 0 £14m (28p) 76p -30 (£22m) (£3m) (£9m) (£55m) (47p) (301p) (£40m) -60 06 05 v ev d e st p el re ea m hi Fu co lr 20 20 lu rs x rh ci Pa Vo ps ne 1 H1 ve An H O w O O 6
Slide 7: Passenger revenue: Easter impact largely offset
Passenger revenue: Easter impact largely offset H1 2006 H1 2005 Change Passengers (m) 14.9 13.5 + 10% Load factor 81.8% 83.8% -2.0pp Seats (m) 18.2 16.1 + 13% Pax revenue (£m) 571 514 + 11% Per seat £31.44 £31.91 - 1.5% 7
Slide 8: Ancillary revenues: strong performance
Ancillary revenues: strong performance H1 2006 H1 2005 Change Ancillary revenue (£m) 59 40 +47% Per seat £3.23 £2.47 +31% Partner revenues show significant improvement Change per seat H1 2006 Card fees + 15% Change fees / Rescue fees + 27% Partner + 70% Excess baggage / Sporting goods + 64% In-fligh
Slide 9: Cost per seat: falling costs amid significant fuel rise
Cost per seat: falling costs amid significant fuel rise Cost/seat Change vs Change vs H1 2006 H1 2005 H1 2005 Other costs £ 2.32 - 28% - £ 0.92 Maintenance £ 2.83 - 21% - £ 0.77 Better Selling £ 1.43 - 12% - £ 0.20 Airports / handling £ 10.29 - 2% - £ 0.16 Navigation £ 3.01 - 3% - £ 0.09 Crew £ 4.14
Slide 10: Managing costs: selling and other
Managing costs: selling and other Change in selling and other cost per seat £1.50 £0.75 - £1.12 £- -£0.75 -£1.50 2002 2003 2004 2005 H1 2006 4 Q1 restructuring completed: 10% fall in head office headcount 4 Continued benefit from reduced rates for aircraft insurance 4 Reduction in consultancy costs
Slide 11: Managing costs: maintenance
Managing costs: maintenance Change in maintenance cost per seat £1.50 £0.75 £- -£0.75 - 77p -£1.50 2002 2003 2004 2005 H1 2006 4 SRT contract delivering significant savings on A319 maintenance 4 Reduction in fleet mix of 737-300s continuing: all 300s will have left the fleet by early FY 2007 4 Highe
Slide 12: Managing costs: airports
Managing costs: airports Change in airport / handling cost per seat £1.50 £0.75 £- - 16p -£0.75 -£1.50 2002 2003 2004 2005 H1 2006 4 Continued efforts to offset inflation at airports 4 Volume and growth discount savings at Geneva and Basel 4 Progress made on self-handling in Spain: currently self-ha
Slide 13: Managing costs: crew
Managing costs: crew Change in crew / training cost per seat £1.50 £0.75 0p £- -£0.75 -£1.50 2002 2003 2004 2005 H1 2006 4 Crew pay deal underway: above inflation increases offered reflecting productivity improvements and market adjustments 4 Proposed 2 year deal will increase unit costs 11p / seat
Slide 14: Managing costs: aircraft ownership
Managing costs: aircraft ownership Change in aircraft ownership cost per seat £1.50 £0.75 + 28p £- -£0.75 -£1.50 2002 2003 2004 2005 H1 2006 4 +46p from increase in US interest rates and strengthening USD 4 Improved financing and fleet mix helping to offset 4 Better end of lease management deliverin
Slide 15: Managing costs: fuel hedging
Managing costs: fuel hedging Jet A1 price per tonne (US$) 750 Collar ceiling weighted averages 700 H2 $676 / mt 650 600 H2 $603 / mt 550 500 Collar floor weighted averages 450 400 350 Amount hedged: 300 H2 44% 250 Oct 04 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06 Apr 06 Jul 06 15
Slide 16: Managing costs: US$ hedging
Managing costs: US$ hedging US$:£ 2.00 Collar ceiling weighted averages 1.90 H2 $1.83 1.80 H2 $1.78 1.70 Collar floor weighted averages 1.60 Amount hedged: H2 80% 1.50 Oct 04 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06 Apr 06 Jul 06 16
Slide 17: Net income and EPS
Net income and EPS £m H1 2006 H1 2005 Change Pre-tax loss (40) (22) + 86% Tax 11 6 + 84% Net loss (29) (15) + 87% EPS (fully diluted) (7.2p) (3.9p) + 86% 4 Full year effective tax rate 28% FY 2006 17
Slide 18: Strong balance sheet
Strong balance sheet £m Mar 06 Sep 05 Aircraft (inc. deposits) 512 421 Cash 726 667 Goodwill 310 310 Other assets 303 232 Total assets 1,851 1,630 Debt 299 217 Other liabilities 695 550 Shareholders’ funds 857 863 Total equity and liabilities 1,851 1,630 Gearing 32% 31% Gearing defined as (debt + 7
Slide 19: Good cash generation
Good cash generation* £68m 850 £126m £8m £726m 750 £667m (£107m) £11m 650 (£47m) 550 450 350 IT x 06 05 t t l g ta es or pe in EB 3/ 9/ pi m er nc ca ca /a h h nt na as as et /i k n Fi W N C C ep x Ta D * March 2006 and September 2005 cash balances are shown as reported under IFRS. 19
Slide 20: Conclusion
Conclusion 4 Encouraging performance for H1 4 Excellent progress on ancillary revenues 4 Relentless approach to costs now and going forward 4 Fuel exposure continues; 44% H2 cover but limited cover beyond 4 Balance sheet and cash flow remain strong 20
Slide 21: Business Review
Business Review Andy Harrison 21
Slide 22: Priorities and focus: network
Priorities and focus: network Revenue Costs People Network Rigorous detailed review of individual route performance and cost management 22
Slide 23: Network development: capacity growth
Network development: capacity growth Aircraft owned / leased at end of financial year 109 122 138 154 Seats flown + 15% + 15% + 15% Actual Expected Expected Expected FY 2005 FY 2006 FY 2007 FY 2008 23
Slide 24: Network development: operated fleet by base
Network development: operated fleet by base Base 9/05 9/06 Base 9/05 9/06 Gatwick 16 +2 Belfast 5 Luton 15 +2 Dortmund 3 +1 Stansted 13 Basel 3 +1 Bristol 8 +1 Glasgow 3 +1 Berlin 7 +1 Edinburgh 3 Liverpool 7 +1 E Midlands 3 Newcastle 6 Malpensa +3 Paris Orly 5 Tactical 7 -1 Geneva 5 +1 Total 109 12
Slide 25: Network development: European expansion continues
Network development: European expansion continues Base opened March 2006 25
Slide 26: Network development: new non-EU routes
Network development: new non-EU routes Seats on sale from March 2006 26
Slide 27: Network development: key priorities
Network development: key priorities 4 2003 - 2005 network development concentrated on new airports: looking forward we expect a higher proportion of growth through added frequencies and depth to the existing network 4 Ongoing review looking at quality of schedule and active management of route by ro
Slide 28: Priorities and focus: revenue
Priorities and focus: revenue Revenue Costs People Network Rigorous detailed review of individual route performance and cost management 28
Slide 29: Revenue: attractive options for business
Revenue: attractive options for business 4 Internet check-in: 4No charge 4Hand baggage only 4Straight to security 4At gate 15 minutes before flight 4Apr 2006 available on 50% of departures 4 Unlimited hand luggage allowance 4 Change to earlier flight for free 4 Fixed rescue fee with automatic transf
Slide 30: Revenue: product innovation
Revenue: product innovation 4 Speedy boarding trial: started March 2006, extended to 10 new routes from May 2006 4£10 return to board before category A 4Freedom to choose your seat 4Uptake at point of sale or through ‘manage my booking’ 4 Small scale early trial demonstrating potential 30
Slide 31: Revenue: maximising ancillaries
Revenue: maximising ancillaries 4 Dynamic packaging resulting in year on year improvement to conversion rates: 4insurance conversions up significantly since spring 2005 4car conversions doubled in same period 4 Improved collection process throughout the network: 4excess luggage 4change fees 4rescue
Slide 32: Revenue: fare optimisation
Revenue: fare optimisation 4 In absolute terms fares remain low: median £38, mean £45 4 Low pricing optimised by route 4Increasing resource focused on yield management 4Route by route reviews Typical Fare Average Fare 50 40 30 20 £38 £45 10 0 Median Mean easyJet Fare: Apr 05 - Mar 06 32
Slide 33: Priorities and focus: people
Priorities and focus: people Revenue Costs People Network Rigorous detailed review of individual route performance and cost management 33
Slide 34: People: a key point of difference
People: a key point of difference 34
Slide 35: 2006 outlook
2006 outlook 4 Passenger revenue: we now anticipate full year passenger revenue per seat to be broadly in line with 2005 4 Ancillary revenue: continued focus and new initiatives should result in around 20% growth per seat for the full year 4 Cost ex-fuel: down by approximately 5% per seat 4 Fuel: we
Slide 36: Appendix
Appendix
Slide 37: Operating statistics
Operating statistics H1 2006 H1 2005 Change Seats (m) 18.2 16.1 + 13% Load Factor (%) 81.8 83.8 - 2.0pp Passengers (m) 14.9 13.5 + 10% ASKs (m) 16,672 14,526 + 15% RPKs (m) 13,642 12,150 + 13% Stage Length (km) 918 903 + 2% Sectors 118,782 106,705 + 11% 37
Slide 38: Calculated amounts
Calculated amounts H1 2006 H1 2005 Change Total Revenue per pax (£) 42.39 41.03 + 3% Cost / ASK (p) 4.02 3.96 + 2% Cost / ASK (ex fuel) (p) 3.02 3.28 - 8% 38
Slide 39: H1 2005 profit & loss: summary IFRS adjustments
H1 2005 profit & loss: summary IFRS adjustments* £m UK GAAP Change IFRS Total revenue 553 - 553 Operating costs (516) +3 (519) EBITDAR 37 -3 34 Finance and Ownership (60) -5 (55) Pre-tax loss (31) +9 (22) Margin (5.6%) 1.7pp (3.9%) Elimination of goodwill amortisation is the key difference * Further
Slide 40: This communication is directed only at (i) persons having professional experience in matters relating
This communication is directed only at (i) persons having professional experience in matters relating to investments who fall within the definition of “investment professionals” in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001; or (ii) high net worth b