Virgin Australia Holdings Limited · ASX:VGN
Virgin Australia — FY2012 Earnings Presentation
27 slides from Virgin Australia's earnings presentation, Aug 28, 2012
Slide 1: Virgin Australia Airlines FY12 full year results
Virgin Australia Airlines FY12 full year results 28 August 2012
Slide 2: Introduction
Introduction • Turnaround in financial performance notwithstanding a high fuel price and tougher economic environment in H2 FY12 • Major elements of the Game Change Program now in place • Achieved over 20% of domestic revenue from Corporate and Government market – target reached one year ahead of sc
Slide 3: Financial highlights
Financial highlights • Statutory NPAT1 of $22.8m, a $90.6m turnaround on last financial year • Improvement in underlying PBT2 by $149.1m to $82.5m • Strong revenue growth +19.8% to $3,919.5m • Good yield growth, +12.2% on FY11 for domestic, +12.0% for Group • Underlying CASK3 increased by 4.5% notwi
Slide 4: Group Profit and Loss summary
Group Profit and Loss summary 12 months ended 30 June 2012 2011 Variance $m $m % Underlying Profit / (Loss) before Tax1 82.5 (66.6) 223.9% Transformation Program - Accelerated depreciation (14.4) - - Transformation Program - Asset write downs (6.3) - - International restructure (6.3) - - Other items
Slide 5: Underlying Group results
Underlying Group results 12 months ended 30 June 2012 2011 Variance $m $m % Revenue 3,919.5 3,271.0 19.8% Segment EBIT1 151.0 (14.0) - Net interest (39.7) (48.2) 17.6% Net loss on disposal / write down of property, plant and (18.7) (4.4) - equipment2 Hedging ineffectiveness3 (10.1) - - Underlying Pr
Slide 6: Domestic – EBIT summary
Domestic – EBIT summary 12 months ended 30 June 2012 2011 Variance $m $m % Revenue 2,947.9 2,402.0 22.7% Domestic EBIT1 115.6 (36.4) - ASKs (m) 24,343.7 22,215.8 9.6% Yield 13.07 11.65 12.2% Note: 1 Segment EBIT is a non-statutory measure per note 5 of the Virgin Australia Holdings preliminary final
Slide 7: International – EBIT summary
International – EBIT summary 12 months ended 30 June 2012 2011 Variance $m $m % Revenue 1,053.4 953.8 10.4% International EBIT1 35.4 22.4 58.0% ASKs (m) 15,415.8 14,876.5 3.6% Yield 7.87 7.28 8.1% Note: 1 Segment EBIT is a non-statutory measure per note 5 of the Virgin Australia Holdings preliminary
Slide 8: Cashflow summary
Cashflow summary 12 months ended 30 June 2012 2011 Variance $m $m % Operating 277.9 213.5 30.2% Investing (198.3) (285.4) 30.5% Financing (0.8) 3.0 (126.7%) Net cash inflow / (outflow) 78.8 (68.9) 214.3% Balance at start of period 731.3 814.7 (10.2%) Exchange rate changes (7.5) (14.5) 48.3% Balance
Slide 9: Balance sheet summary
Balance sheet summary As at 30 June 2012 30 June 2011 $m $m Cash and cash equivalents 802.6 731.3 Property, plant and equipment 2,769.0 2,742.9 Other assets 423.6 367.1 Total Assets 3,995.2 3,841.3 Interest bearing liabilities 1,674.1 1,639.9 Unearned revenue 691.9 699.9 Other liabilities 699.5 575.
Slide 10: Hedging policy
Hedging policy • AUD designated hedging policy since 2011 provides a large degree of short term certainty and longer term optionality • Fuel cost increases of 15% on ASK growth of 7.2%1 Hedging summary Brent Remainder of FY132 Operating requirements hedged 71% Participation in favourable price movem
Slide 11: Network and capacity strategy – maintain flexibility based on demand
Network and capacity strategy – maintain flexibility based on demand Domestic • No capacity share target – focused on yield and margin improvements • Short sectors: focused on high frequency, narrow body services • Long sectors (Trans Continental): operate wide body aircraft, replacing narrow body •
Slide 12: Current and future fleet plan
Current and future fleet plan • Capacity growth has been on strategy; aligning right aircraft type for each segment – Fleet simplification: exit of E170 and progressive retirement of B737-700 – Introduction of wide body aircraft on Trans Continental – Introduction of ATR-72 turboprop on new and exis
Slide 13: Fleet growth in FY13 unchanged – average age 4.2 years
Fleet growth in FY13 unchanged – average age 4.2 years at 30 June 2013 Jun 2012 Deliveries Retirement / Jun 2013 Jun 2015 lease return Narrow body B737-700 7 0 4 3 2 B737-800 61 10 3 68 76 E170 0 0 0 0 0 E190 18 0 0 18 18 Wide body A330-200 5 1 0 6 8 B777-300ER 5 0 0 5 5 Turboprop ATR-72 6 6 0 12 16
Slide 14: Leading major brand for OTP
Leading major brand for OTP1 12 months ended 30 June 2012 2011 Variance (PPT) Virgin Australia 82.8% 79.9% +2.9 Virgin Australia – regional operations2 80.0% n/a n/a Total Virgin Australia 82.7% 79.9% +2.8 Qantas 84.4% 83.8% +0.6 QantasLink 77.7% 78.5% - 0.8 Total Qantas3 81.2% 81.4% - 0.2 Note: 1 O
Slide 15: Continuing investment in product and service
Continuing investment in product and service • Completing fleet renewal program – domestic and international – Launched B737 business class in FY12 and introduction of E190 business cabin by 3Q FY13 – Introduced new A330 aircraft, with improved cabin interior – Commenced cabin refresh of Boeing 777
Slide 16: Game Change Program has delivered
Game Change Program has delivered • Accessed new market segments Corporate and government revenue growth (FY11-FY12) – Corporate and government revenue increased by 62% +62% – 68 new and 68 renewed corporate accounts (60% at majority share1); new contracted revenue over $110m – Interline and codesha
Slide 17: International turnaround strategy has been successful – EBIT profitable
International turnaround strategy has been successful – EBIT profitable • Virtual international network now in place – further enhancements to follow • Over 400 international destinations in quality alliance network • Provides growing source of inbound international passengers – more than doubled pa
Slide 18: Velocity Frequent Flyer will be a key growth driver
Velocity Frequent Flyer will be a key growth driver • Named Best Frequent Flyer Program for Australian Velocity Frequent Flyer business travellers1 key performance metrics (FY12) • Value growth driven through: – Superior earn and burn capability increasing airline usage Performance metric FY12 – Inc
Slide 19: Game Change Program scorecard
Game Change Program scorecard % completed Today Invest in our team Continuous Enhance in-flight and on-the-ground guest experience Develop comprehensive Ahead of global virtual network schedule Integrate and align the airline operations Ahead of and brands schedule Maintain cost advantage and effici
Slide 20: Game Change Program – the next phase, Game On
Game Change Program – the next phase, Game On Phase I Phase II “Revenue diversification” “Driving earnings growth” Delivering Game Change Program ahead of schedule Bringing “Game On” forward FY11 FY12 FY13 FY14 FY15 19
Slide 21: "Game On" key initiatives
“Game On” key initiatives • Deliver efficiencies in productivity gains of Implement business efficiency project $400m over 3 years (run rate of over $200m per annum by end of FY15) • Achieve over 5 million members by end of Build a transformational loyalty business FY15 • Increase codeshare and inte
Slide 22: Business project to improve efficiency and maintain cost advantage
Business project to improve efficiency and maintain cost advantage • Launched a “fitness” program to build sustainable outcomes as the business continues to grow over the next 3 years • Focused on delivering a step change to efficiency benchmarks – Examples include fuel efficiency and aircraft utili
Slide 23: Key to our achievements is our people
Key to our achievements is our people Skytrax 2012 top 20 airlines Ranking Company 2011 ranking 1 Qatar Airways 1 2 Asiana Airlines 3 3 Singapore Airlines 2 • Best airline in Australia / Pacific region 4 Cathay Pacific Airways 4 5 ANA All Nippon Airways 11 • Best airline staff service Australia / 6
Slide 24: Consolidation and growth plan – 5 year journey
Consolidation and growth plan – 5 year journey Sustainability Growth Lead & leverage Reposition • Positioned to • Build upon continue strategic re- • Drive future sustainable and Plan & implement positioning on a earnings growth resilient earnings • Conclude roll out strengthened through Game On gro
Slide 25: Outlook
Outlook “Virgin Australia has delivered an improved result for the 2012 Financial Year, notwithstanding higher fuel prices. Given the uncertain economic environment we are unable to provide clear 2013 Financial Year guidance at this stage. With the Game Change Program largely embedded, we are confid
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Slide 27: Definitions and ASIC guidance
Definitions and ASIC guidance Definitions: Underlying Cost per Available Seat Kilometre (CASK): Total revenue less underlying Profit Before Tax and the following: fuel, hedging ineffectiveness of $10.1 million (FY11: nil) and net loss on disposal / write down of property, plant and equipment of $18.
Virgin Australia Holdings — FY2012 Earnings Presentation on 6ix