Virgin Australia Holdings Limited · ASX:VGN
Virgin Australia — Virgin Blue Holdings — FY2007 Earnings Presentation
21 slides from Virgin Australia's earnings presentation, Aug 21, 2007
Slide 1: Results for the Year Ended 30th June 2007
Results for the Year Ended 30th June 2007 Brett Godfrey Chief Executive Officer 21 August 2007
Slide 2: New World Strategy Delivering
New World Strategy Delivering ¾ RASK up 13.0% 10.02 ¢ ¾ CASK (underlying) up 2.6% 8.24 ¢ ¾ Net Profit up 92.9% $216M ¾ PBT Margin up 5.4pts 14.2% ¾ Operating Cash Days up 15 Days 139 days 1
Slide 3: Financial Highlights
Financial Highlights 2007 2006 Increase / 12 months to 30 June $m $m Decrease Total Revenue 2,169 1,865 + 16.3 % EBITDAR 548 388 + 41.2 % EBIT 324 176 + 84.0 % Profit Before Tax 309 165 + 87.3 % Net Profit After Tax 216 112 + 92.9 % Earnings Per Share 20.6 ¢ 10.7 ¢ + 92.5 % Dividends Per Share 4.0 ¢
Slide 4: Operating Highlights
Operating Highlights % Increase/ 12 months to 30 June 2007 2006 Decrease ASK’s – capacity 21.6 bn 21.0 bn + 2.9 % Aircraft – average held 53.0 50.8 + 4.3 % RPK’s - demand 17.6 bn 16.4 bn + 7.3 % Guests carried 15.3 m 14.2 m + 7.7 % Load Factor 81.2% 77.9% + 3.3 pts RASK 10.02 ¢ 8.87 ¢ + 13.0 % CASK
Slide 5: Quality of Revenue Stream – RASK Growth
Quality of Revenue Stream – RASK Growth AN exits 10.5 10.17 VB capacity +56% 10 9.74 9.39 9.5 JQ launch Cents 9 NWC 8.5 8.29 8.34 8.17 8 7.5 7 FY02 FY03 FY04 FY05 FY06 FY07 Note: Net Scheduled revenue RASK FY02, 03, 04 MAR. FY05 SEP, FY06, 07 JUN 4
Slide 6: The Bottom Line - Profitability
The Bottom Line - Profitability Profit Margin Before Tax 25% 21.0% 20.2% 20% PBT Margin (%) 15% 14.2% 13.5% 11.1% 9.3% 10% 8.7% 8.0% 6.8% 4.9% 5% 0.4% 0% GOL Ryanair Virgin AirAsia Emirates WestJet Southwest easyJet Qantas Air New JetBlue Blue Zealand Note: Virgin Blue, Qantas for year ended 30 June
Slide 7: Virgin Blue - Domestic
Virgin Blue - Domestic ¾ Expanding rapidly into traditional corporate markets – yield growth ¾ Underlying cost base well controlled, but remains flexible ¾ Margin growth ahead of competition ¾ Embraer platform to maximise returns, matching capacity and demand by flight. First aircraft in service Oct
Slide 8: “A market” that is unprofitable…
“A market” that is unprofitable… B737-700 with 144 seats x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x Embraer 190 with 104 seats1 x x x x x x x x x x x x x x x x x x x x x x x x
Slide 9: Jet and Large Turboprop Routes Not Presently ‘Contested’
Jet and Large Turboprop Routes Not Presently ‘Contested’ Large Turboprop Routes Jet Routes Not Contested by Virgin Blue 8 Note: Shows existing routes only. New route possibilities (e.g. Kalgoorlie-Melbourne, Adelaide-Launceston not shown)
Slide 10: Virgin Blue’s Competitors In Domestic Market
Virgin Blue’s Competitors In Domestic Market Virgin Blue’s Competitive Landscape (Domestic Australia) 120% (Proportion of Our Capacity Competing Against Them) How Important Competitors are to Virgin Blue Bubble Size Virgin Blue 10b 100% ASKs 80% Qantas 60% 40% Jetstar 20% Rex Tiger Skywest 0% 0% 20%
Slide 11: Driving RASK - Product Initiatives
Driving RASK - Product Initiatives ¾ High frequency on trunk routes and increased interlining ¾ Flexible fares and smarter revenue management ¾ Higher market share in corporate and government markets ¾ Velocity – Over 1 million members in 18 months ¾ The 4 Lounges cover 80% of our traffic streams –
Slide 12: Virgin Blue Increased YIELD Faster Than Qantas’ Domestic Businesses
Virgin Blue Increased YIELD Faster Than Qantas’ Domestic Businesses Change In YIELD From Prior Year 10% 8.1% Change from prior year (%) 8% 6% 3.5% 4% 2% -1.7% 0% -2% Virgin Blue - Full Qantas Domestic - Jetstar A320 - Half Year Half Year Year 11 Source: Estimates from Qantas Results for the half yea
Slide 13: Our Two Models provide Flexibility…
Our Two Models provide Flexibility… Airline CASK 'opportunites' Cask ¢ ¾ One Targets Revenue. 9.0 8.24 ¾ And The Other Cost. 8.0 ¾ PBH is a Pure LCC – 7.0 management has 5.93 already done it once 6.0 5.0 4.0 3.0 2.0 1.0 0.0 VB PB 12
Slide 14: Pacific Blue
Pacific Blue ¾ Profitability up again – in the black from launch ¾ Outsource strategy preserves LCC business model - CASK remains below 6 cents (including fuel) ¾ Close integration with wider Group (flying) network ¾ Domestic Network - Announcement in Wellington Thursday ¾ Polynesian Blue – strong p
Slide 15: V Australia
V Australia ¾ On target for 4Q08 launch, and within budget ¾ Regulatory approval process underway – strong support ¾ Product and network planning advanced ¾ Integration with domestic network ¾ Interline and alliance opportunities 14
Slide 16: Ancillary Revenue
Ancillary Revenue ¾ Freight partnership with Toll launched – maximise return on belly space ¾ Lounge membership & casual visits exceeding expectations ¾ Launched new website – enhanced functionality ¾ Velocity membership past 1.1 million - new Tiering structure will drive further penetration 15
Slide 17: Fleet Summary - Group
Fleet Summary - Group At 30 June 2007 + - 2008 2009 737- 700 NG 22 - 1 21 20 737- 800 NG 31 6 - 37 38 EMB-170 LR - 4 - 4 6 EMB-190 LR - 5 - 5 14 777- 300 ER - - - - 3 53 15 1 67 81 Leased 30 2 1 31 - Owned 23 13 - 36 - 53 15 1 67 81 16
Slide 18: Capital Management
Capital Management ¾ Final dividend 2 cents per share. Record date - September 5, 2007 ¾ Net cash inflow from operations up 74% to $406 million ¾ Capital expenditure FY07 $317m, up 43%. Forecast for 2008 $674m, including pre-delivery payments ¾ Gearing, including operating leased aircraft, was 57.5%
Slide 19: Risk Management - Hedging
Risk Management - Hedging ¾ Currency Hedging FY08 - cover for 77% using swaps and options at rates in excess of 0.77 (after premiums) ¾ Fuel Hedging FY08 – currently 49% hedged using mainly options with caps on crude oil in range US$63-75 bbl 18
Slide 20: Outlook
Outlook ¾ Embraer/737 platform enables right sizing - by flight as opposed to by market ¾ Significant growth in next 18 months, but over three years in line with historic demand growth rate ¾ Underlying non-fuel cost base, under control but significant expenditure on new platforms underway. ¾ ULCC r
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