Qantas Airways Limited · ASX:QAN
Qantas Airways — Investor Presentation (June 2020)
49 slides from Qantas Airways's investor presentation, Jun 25, 2020
Slide 1: Qantas Group Equity Raising Investor Presentation
25 June 2020 ASX Market Announcements Office Australian Securities Exchange Limited Lodged electronically via ASX Online Qantas Group Equity Raising Investor Presentation Qantas Airways Limited attaches the “Building for a strong future: Equity raising and operational initiatives” Investor Presentat
Slide 2: Building for a strong future: Equity raising and operational initiatives
Building for a strong future: Equity raising and operational initiatives 25 June 2020 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 3: Important notice
Important notice IMPORTANT NOTICE: This Presentation is provided subject to the matters set out in the Important Notice and Disclaimer on slides 42 to 48. Qantas advises you to carefully read and consider the Important Notice and Disclaimer as it contains material information regarding this Presenta
Slide 4: Executive summary
Executive summary Qantas Group takes further proactive measures to accelerate recovery from the COVID-19 crisis and create a stronger platform for future profitability, growth and long term shareholder value • Global airlines severely impacted by travel restrictions and border closures • Airline sec
Slide 5: Executive summary (continued)
Executive summary (continued) Qantas Group takes further proactive measures to accelerate recovery from the COVID-19 crisis and create a stronger platform for future profitability, growth and long term shareholder value • Qantas is seeking to raise $1,860m of equity (Equity Raising), comprising: – A
Slide 6: About the Qantas Group
About the Qantas Group Qantas is widely regarded as one of the world's leading airlines with a reputation for excellence in safety, operational reliability, engineering and maintenance and customer service − Qantas is the world’s second oldest airline with 100 years in operation − Founded in the Que
Slide 7: Investment proposition
Investment proposition Integrated portfolio of mutually reinforcing businesses continues to drive strategic priorities Airline business Loyalty business Brand strength − Domestic Dual Brand strategy with leading − High penetration with equivalent of half the − Qantas brands are a key source of compe
Slide 8: Track record of successful transformation
Track record of successful transformation Transformation is inherent to our business model and is expected to continue to underpin our future success and growth Total benefits delivered from FY15 to date Benefits $2.1b $463m $452m $188m $3.2b FY15 – FY17 FY18 FY19 1H20 − Reduced fleet types from 11
Slide 9: Strong financial track record
Strong financial track record Financial Framework supports disciplined decision-making to maximise long-term shareholder value 1 2 3 Maintaining an optimal capital structure ROIC > WACC2 through the cycle Disciplined allocation of capital Minimise cost of capital by targeting a net debt range of Gro
Slide 10: Impact of COVID-19
Impact of COVID-19 COVID-19 has presented challenges across the globe with the airline industry at the forefront Airline industry trends Government restrictions / support Competitive environment − COVID-19 pandemic and containment − Many governments have imposed travel − Australia has flattened the
Slide 11: Decisive COVID-19 response to date
Decisive COVID-19 response to date Qantas has taken decisive action to mitigate the impact of COVID-19 including a reduction in flight capacity, workforce stand-downs, operational cost-out measures and capex deferrals In response to COVID-19, Qantas has to date taken decisive and prompt measures to
Slide 12: Trading update and FY20 guidance
Trading update and FY20 guidance Consistent with the broader travel and airline industries, the last three months of FY20 have been significantly impacted by COVID-19, partially offset by strong revenue performance in Qantas Loyalty and Qantas Freight • Group Domestic capacity reduced to 5% until mi
Slide 13: Outlook
Outlook Qantas’ earnings expected to recover, supported by strong domestic market share, expected demand and Qantas Loyalty • Domestic demand expected to recover sooner than International demand 1H20 Underlying EBIT by Segment1 Group Domestic • Qantas expects average capacity of ~70% in FY21 and 100
Slide 14: Overview of Recovery Plan
Overview of Recovery Plan Building the foundations for the next century of Qantas Fleet & Network Ways of Working Digitalisation − Domestic fleet optimization − Footprint consolidation − Customer experience model − Fleet deliveries deferred to meet the Group’s requirement − Distribution transformati
Slide 15: Positioning for post-COVID-19 recovery
Positioning for post-COVID-19 recovery Recovery Plan and Equity Raising expected to position Qantas to adapt to a changed operating environment and enable an accelerated recovery post-COVID-19 − Decisive actions are being taken to maintain strong financial position − Announced Recovery Plan and init
Slide 16: Pro-forma capitalisation and liquidity
Pro-forma capitalisation and liquidity Following the Equity Raising, Qantas expects to be well capitalised with strong liquidity to respond to a range of potential recovery scenarios Sources $B Uses $B Funding rationale ‘Rightsizing’ and Qantas is raising equity in order to: Equity Raising 1.4 1.0 ‘
Slide 17: Maintaining an optimal capital structure
Maintaining an optimal capital structure Sustainable capital structure with balanced debt maturity profile and no financial covenants Pro-forma capital structure1 as at 31 May 2020 Debt maturity profile as at 31 May 2020 ($M)2 − Net debt $4.7b − Cash $3.6b, undrawn facilities $1.0b 120 110 113 Debt
Slide 18: Offer details
Offer details Fully underwritten Institutional Placement to raise approximately $1,360m and non-underwritten Share Purchase Plan to raise up to an additional $500m • Up to $1,860m Equity Raising, including: Offer size and – Fully underwritten institutional placement to raise approximately $1,360m 1
Slide 19: Offer timetable
Offer timetable Event Date1 Record date for the SPP 7:00pm (Sydney time), Wednesday, 24 June 2020 Trading halt and announcement of Equity Raising Thursday, 25 June 2020 Placement bookbuild Thursday, 25 June 2020 Announcement of outcome of Placement Friday, 26 June 2020 Trading halt lifted – trading
Slide 20: A: Key risks
Appendix A: Key risks Introduction This section describes the key business risks of investing in Qantas together with the risks relating to participation in the Equity Raising which may affect the value of Qantas shares. It does not describe all the risks of an investment. Before investing in the Is
Slide 21: A: Key risks (continued)
Appendix A: Key risks (continued) 2. General economic conditions post-crisis As international air travel is closely linked with economic growth, the Qantas Group’s operating and financial performance is influenced by a variety of general economic and business conditions in Australia and overseas. A
Slide 22: A: Key risks (continued)
Appendix A: Key risks (continued) 6. Key business partners and alliances risk The Qantas Group has relationships and strategic alliances with a number of key business partners which are a central aspect of its business strategy. These arrangements may require the Qantas Group to incur obligations an
Slide 23: A: Key risks (continued)
Appendix A: Key risks (continued) 8. Risk of increase in airport services related-costs or change in availability of airport facilities The Qantas Group is exposed to the risk of increases in airport services related costs (including air traffic control, airport, transit, take-off and landing fees a
Slide 24: A: Key risks (continued)
Appendix A: Key risks (continued) 10. Fuel and foreign exchange volatility The Qantas Group is subject to fuel and foreign exchange risks, which are an inherent part of the operations of an airline. Fuel constitutes a significant operating cost for the business and the Qantas Group’s earnings are im
Slide 25: A: Key risks (continued)
Appendix A: Key risks (continued) 12. Customer risk The ongoing success of the Qantas Group depends to a large degree on customer satisfaction and loyalty, particularly in light of the significant competition for passengers which characterises the aviation industry. The significant financial and ope
Slide 26: A: Key risks (continued)
Appendix A: Key risks (continued) 16. Competitive intensity Ordinarily, the international and domestic aviation markets in which the Qantas Group operates are highly competitive, and growth in market capacity ahead of underlying demand impacts profitability on an industry-wide basis. Its competitors
Slide 27: A: Key risks (continued)
Appendix A: Key risks (continued) The Qantas Group cannot predict with any certainty the potential direct physical consequences of climate change on its operations. While those impacts are likely to be geographically specific, these could include increases in the occurrence and intensity of extreme
Slide 28: A: Key risks (continued)
Appendix A: Key risks (continued) 23. Political, economic and social instability The Qantas Group operates across a network spanning Australia and New Zealand, Asia, North and South America, Africa and Europe, which exposes it to the various political, economic and social risks specific to those pla
Slide 29: A: Key risks (continued)
Appendix A: Key risks (continued) 25. Equity Raising and underwriting risk Qantas entered into an underwriting agreement with the Underwriters in respect of the Placement on 25 June 2020. The Underwriting Agreement contains representations, warranties, undertakings and indemnities in favour of the U
Slide 30: A: Key risks (continued)
Appendix A: Key risks (continued) 27. Dilution risk Existing shareholders who do not participate in the Equity Raising will have their percentage shareholding in Qantas diluted. Depending on the size of a shareholder’s existing holding, a participating shareholder may still be diluted even though th
Slide 31: B: International offer restrictions
Appendix B: International offer restrictions This Presentation does not constitute an offer of Placement Shares in any jurisdiction in which it would be unlawful. In particular, this Presentation may not be distributed to any person, and the Placement Shares may not be offered or sold in the Placeme
Slide 32: B: International offer restrictions (continued)
Appendix B: International offer restrictions (continued) The Issuer as well as its directors and officers may be located outside Canada and, as a result, it may not be possible for purchasers to effect service of process within Canada upon the Issuer or its directors or officers. All or a substantia
Slide 33: B: International offer restrictions (continued)
Appendix B: International offer restrictions (continued) Certain Canadian income tax considerations. Prospective purchasers of the Placement Shares should consult their own tax adviser with respect to any taxes payable in connection with the acquisition, holding or disposition of the Placement Share
Slide 34: B: International offer restrictions (continued)
Appendix B: International offer restrictions (continued) Japan The Placement Shares have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended (the FIEL) pursuant to an exemption from the registration
Slide 35: B: International offer restrictions (continued)
Appendix B: International offer restrictions (continued) Singapore This Presentation and any other materials relating to the Placement Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of Singapore. Accordingly, this Presentation and
Slide 36: B: International offer restrictions (continued)
Appendix B: International offer restrictions (continued) United Arab Emirates This Presentation does not constitute a public offer of securities in the United Arab Emirates and the Placement Shares may not be offered or sold, directly or indirectly, to the public in the UAE. Neither this Presentatio
Slide 37: B: International offer restrictions (continued)
Appendix B: International offer restrictions (continued) United States This Presentation may not be distributed or released in the United States. This Presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States or any other jurisdictio
Slide 38: C: Underwriting agreement summary
Appendix C: Underwriting agreement summary Equity Raising and underwriting risk Qantas entered into an underwriting agreement with the underwriters (Underwriters) in respect of the Placement on 25 June 2020 (Underwriting Agreement). Key terms of the Underwriting Agreement Each Underwriter’s obligati
Slide 39: C: Underwriting agreement summary (continued)
Appendix C: Underwriting agreement summary (continued) • there is introduced, or there is a public announcement of a proposal to introduce, into the Parliament of Australia, or any State or Territory of Australia a new law, or the Reserve Bank of Australia, or any Commonwealth or State government or
Slide 40: C: Underwriting agreement summary (continued)
Appendix C: Underwriting agreement summary (continued) Termination by an Underwriter will discharge Qantas’ obligation to pay that Underwriter any fees, costs, charges or expenses which as at termination are not yet incurred or accrued. If the remaining Underwriter or a newly appointed Underwriter e
Slide 41: D: Impairment and restructuring one-off costs
Appendix D: Impairment and restructuring one-off costs 1H20 Impact Estimated FY20 impact Items outside of Underlying FY20 (previously reported) (subject to review and audit process) Transformation costs and discretionary bonuses to non-executive employees awarded in prior years $123m ~$200m Recovery
Slide 42: E: Glossary
Appendix E: Glossary Capital expenditure (Capex) – Net investing cash flows included in the Net debt – includes net on balance sheet interest-bearing liabilities and capitalised Consolidated Cash Flow Statement (excluding aircraft lease refinancing) and the aircraft lease liabilities impact to Inves
Slide 43: Important notice and disclaimer
Important notice and disclaimer SUMMARY INFORMATION This Presentation has been prepared by Qantas Airways Limited (ABN 16 009 661 901) (Issuer). It is a presentation of general background information in summary form about the Issuer’s activities current at the date of this Presentation. The informat
Slide 44: Important notice and disclaimer (continued)
Important notice and disclaimer (continued) FINANCIAL DATA AND ROUNDING Investors should note that this Presentation contains pro forma financial information, which is provided for illustrative purposes only and is not represented as being indicative of the Issuer’s (nor anyone else’s) views on its
Slide 45: Important notice and disclaimer (continued)
Important notice and disclaimer (continued) PAST PERFORMANCE Past performance and pro forma historical financial information is given for illustrative purposes only. It should not be relied on and is not indicative of future performance, including future security prices. FORWARD-LOOKING STATEMENTS T
Slide 46: Important notice and disclaimer (continued)
Important notice and disclaimer (continued) DISCLAIMER To the maximum extent permitted by law, the Issuer, the Underwriters and their respective affiliates and related bodies corporate and each of their respective directors, officers, partners, employees, agents and advisers (together, the Beneficia
Slide 47: Important notice and disclaimer (continued)
Important notice and disclaimer (continued) You acknowledge and agree that: • determination of eligibility of investors for the purposes of the capital raising is determined by reference to a number of matters, including legal and regulatory requirements, logistical and registry constraints and the
Slide 48: Important notice and disclaimer (continued)
Important notice and disclaimer (continued) The Underwriters and their respective affiliates and related bodies corporate are full service financial institutions engaged in various activities, which may include, but is not limited to, underwriting, trading, investment banking, commercial banking, fi
Slide 49: Important notice and disclaimer (continued)
Important notice and disclaimer (continued) GENERAL Statements made in this Presentation are made only as at the date of this Presentation. The information in this Presentation remains subject to change without notice. The Issuer may in its absolute discretion, but without being under any obligation