Qantas Airways Limited · ASX:QAN
Qantas Airways — Investor Presentation (August 2019)
34 slides from Qantas Airways's investor presentation, Aug 22, 2019
Slide 1: Qantas Airways Limited FY19 Results Supplementary Presentation
Qantas Airways Limited FY19 Results Supplementary Presentation 22 August 2019 ASX:QAN US OTC:QABSY
Slide 2: Group Performance
Group Performance Yacantas GROUP
Slide 3: FY19 Key Group Financial Metrics
FY19 Key Group Financial Metrics FY19 FY1810 VLY %11 Comments Underlying PBT1 ($M) 1,302 1,565 (17) Impacted by higher fuel, low AUD and other cost increases Underlying Earnings per Share2 (c) 56.2 63.0 (11) Share buy-back helped to offset decrease in earnings Statutory Profit Before Tax ($M) 1,265
Slide 4: Underlying Income Statement Summary
Underlying Income Statement Summary $M FY19 FY182 VLY %3 Comments Improved Group Unit Revenue of 5.3% and decreased capacity of Net passenger revenue 15,696 14,944 5.0 (0.7)% Net freight revenue 971 895 8.5 Increased global demand for freight forwarding Other revenue 1,299 1,289 0.8 Total Revenue 17
Slide 5: Items Not Included in Underlying PBT
Items Not Included in Underlying PBT $M FY19 FY18 Comments Redundancies, restructuring, 787-9 introduction, accelerated depreciation Transformation costs 218 162 on 747s and A320s, and other costs which form part of the transformation program Discretionary bonuses to non-executive employees 27 53 Ne
Slide 6: Reconciliation to Underlying PBT
Reconciliation to Underlying PBT $M FY19 FY182 Statutory Other items not included Underlying1 Statutory Other items not included Underlying1 in Underlying PBT in Underlying PBT Net passenger revenue 15,696 - 15,696 14,944 - 14,944 Net freight revenue 971 - 971 895 - 895 Other revenue 1,299 - 1,299 1
Slide 7: Revenue Detail
Revenue Detail Net passenger revenue up 5% Revenue ($B) • Group Unit Revenue increased 5.3% – Group Domestic1 Unit Revenue increased 4.1% 18.0 – Group International2 Unit Revenue increased 6.4% 17.1 5% • Group capacity down 0.7%, disciplined capacity management in high fuel environment • Net Revenue
Slide 8: Expenditure Detail
Expenditure1 Detail Fuel up 19% Expenditure1 ($B) • Higher USD jet fuel prices • Impact of low AUD 16.5 • Offset by effective hedging and fuel efficiency initiatives 7% 15.4 Manpower and staff-related flat • Wage increases following the completion of the 18 month wage freeze • Reduction following sa
Slide 9: Cash Flow
Cash Flow Operating Cash flow ($M) $M FY19 FY18 VLY %3 Operating Cash flow Statutory EBITDA 3,413 3,062 3,115 2,819 2,867 2,704 2,752 2,807 Operating cash flows 2,807 3,413 (18) Investing cash flows (excluding aircraft (1,563) (1,971) 21 operating lease refinancing) FY16 FY17 FY18 FY19 Net free cash
Slide 10: Invested Capital Calculation
Invested Capital Calculation $M FY19 FY183 • Increased property, plant and equipment: Receivables (current and non-current) 1,178 950 – Three 787-9 deliveries and impact of refinancing operating leases Inventories 364 351 offset by the disposal of the Melbourne Airport Terminal assets Other assets (
Slide 11: ROIC Calculation
ROIC Calculation $M FY19 FY185 Underlying PBT 1,302 1,565 Add back: Underlying net finance costs 185 182 Add back: Non-cancellable aircraft operating lease 264 272 rentals Less: Notional depreciation1 (107) (124) ROIC EBIT 1,644 1,895 $M FY19 FY185 Net working capital2 (7,393) (6,905) Fixed assets3
Slide 12: Net Debt Target Range
Net Debt Target Range • Net Debt Target Range = 2.0x – 2.5x ROIC EBITDAR where EBITDAR achieves a fixed 10% ROIC • At current average Invested Capital of $8.9b, optimal net debt range is $5.2b to $6.5b • Targeting net debt to be within the range on a forward looking basis $b Invested Capital 8.9 Ave
Slide 13: Disciplined Allocation of Capital
Disciplined Allocation of Capital Capital allocation prioritised to: Capital Allocation Priorities • Debt reduction (where required) to achieve optimal capital structure >$6.5B $6.5B $5.2B <$5.2B Greater returns to • Base dividend Debt reduction Capital Management shareholders • Reinvestment Conside
Slide 14: Net Debt
Net Debt $M FY19 FY18 VLY $M4 • Borrowings of $825m from $A Corporate Secured Debt Program and Current interest bearing liabilities on balance A$325m from Syndicated Loan Facility 635 404 (231) sheet • Repayment of $744m of debt including Non-current interest bearing liabilities on 4,589 4,344 (245)
Slide 15: Net Debt Movement
Net Debt Movement $M FY19 FY18 • The Financial Framework considers aircraft operating leases as part of net debt Opening Net Debt (4,903) (5,212) ‒ Principal portions of rentals are treated as debt reduction Net cash from operating activities 2,807 3,413 ‒ Purchase of aircraft operating leases are t
Slide 16: Total Unit Cost
Total Unit Cost Group Unit Cost FY19 FY18 VLY %3 Total Unit Cost1 7.99 7.37 (8.4) Excluding: Fuel (2.54) (2.12) Change in FX rates - 0.11 Impact of changes in the discount rate and other actuarial assumptions (0.06) (0.00) Share of net profit/(loss) of investments accounted for under the equity meth
Slide 17: Impact of AASB 15 Adoption from 1 July 2018
Impact of AASB 15 Adoption from 1 July 2018 The adoption of AASB 15 in FY19 requires restatement of the FY18 result for comparative purposes. There is a net increase in opening retained earnings before tax and a net reduction in FY18 Underlying PBT as a result of retrospectively applying AASB 15 to
Slide 18: AASB 15 Impacts – Income Statement
AASB 15 Impacts – Income Statement $M 1H18 FY18 6 months Reclassifications Remeasurements 6 months 12 months Reclassifications Remeasurements 12 months ended 31 ended 31 ended 30 ended 30 Dec 2017 Dec 2017 Jun 2018 Jun 2018 (Reported) (Restated) (Reported) (Restated) Net passenger revenue 7,493 115
Slide 19: Summary of Impact of AASB 16 Adoption from 1 July 2019
Summary of Impact of AASB 16 Adoption from 1 July 2019 The adoption of AASB 16 in FY20 will require restatement of the FY19 • Based on the impact assessment completed to date, the main changes from existing accounting standards to the result for comparative purposes. The Group expects a net decrease
Slide 20: Impact of AASB 16 on Financial Statement Presentation
Impact of AASB 16 on Financial Statement Presentation The adoption of AASB 16 has a number of impacts on financial statement metrics as outlined below. New Metric Lease Comments standard Statutory EBIT Higher EBIT under AASB 16 as Interest on Leases excluded Income Statement Varies depending on wher
Slide 21: Group Operational Information
Group Operational Information
Slide 22: Disciplined Hedging Program
Disciplined Hedging Program Indicative Fuel and Foreign Currency Exposure Reducing Volatility of Earnings / Cash Flow • Net foreign currency revenues are offset against USD expenses Examples of Operational Adjustments • Remaining USD exposure is funded by net AUD revenue Capacity adjustments and Fue
Slide 23: Qantas Group Long-term Value Framework
Qantas Group Long-term Value Framework 23
Slide 24: Fleet Strategic Priorities
Fleet Strategic Priorities Qantas Group Fleet Strategy Current Priorities Renewal Right aircraft • Grow 787-9 Dreamliner fleet to 14 aircraft Right route • All 747s retired by end of 2020 • Ordered 18 x A321LR NEOs to replace A320 aircraft and provide flexibility • Now have options for up to 36 x A3
Slide 25: Fleet as at 30 June 2019
Fleet as at 30 June 2019 Aircraft Type FY19 FY18 Change • Group fleet3 of 314 aircraft as at 30 June 2019. Movements in FY19 include: A380-800 12 12 - 747-400 1 4 (3) – Three 787-9 additions 747-400ER 6 6 A330-200 18 18 - – Three 747-400 retirements A330-300 10 10 - 737-800NG 75 75 - – One A320-200
Slide 26: Passenger Fleet Strategy
Passenger Fleet Strategy Retiring Sustaining and Investing in Adopting Next Generation Evaluating Future Fleet Type1 Mainstream Technology2 Technology3 Technology4 A380 12 747-4 7 787-8 11 Accelerated retirement A330 28 777X 2020 A350ULR Project Sunrise A320 2 A320/21 CEO 78 A321LR NEO 18 737 MAX A3
Slide 27: Economic Contribution to Australia
Economic Contribution to Australia Economic contribution1 to the total Australian Economy >$22b including >$1.6b to regional Australia Total contribution2 to employment in Australia, >26,000 >50k employees in Australia Contribution to Tourism including nearly $4b3 for regional Australia. >$10b 1 in
Slide 28: Supplementary Segment Information
Supplementary Segment Information
Slide 29: Jetstar Group
Jetstar Group Jetstar Group – Network of Routes1 6 5 179 177 179 181 151 129 130 109 115 96 98 67 82 59 31 39 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 BUSINESS OWNERSHIP2 LAUNCH AIRCRAFT3 4 2 ❶Jetstar Australia 100% 2004 52 x A320s/A321s ❷Jetstar International
Slide 30: Jetstar in Asia
Jetstar in Asia1 • Growing the Jetstar leisure brand in Asian markets, taking advantage of strong regional tourism demand2 • Improved connectivity across Asia between Jetstar Group and Qantas airlines in Australia, Japan, Singapore and Vietnam • Jetstar Japan record profit3 whilst impacted by fuel i
Slide 31: Diversification and Growth at Qantas Loyalty
Diversification and Growth at Qantas Loyalty One of the world’s most diverse airline loyalty programs • 5% growth1 in QFF membership; 25% growth in QBR2 membership (>250,000 SME members3) • >500 Coalition Partners4 within everyday earn and shopping; 11 new QBR partners onboarded • Launch of new ret
Slide 32: Improve Member Engagement Through Biggest Frequent Flyer Program Overhaul
Improve Member Engagement Through Biggest Frequent Flyer Program Overhaul More Seats • ~1 million more Qantas Classic Flight Rewards seats on Qantas and partner airlines • ~30% increase in International Premium Cabin reward seats1 More Rewards • Rewarding our highest flyers with the launch of Lifeti
Slide 33: Glossary
Glossary Available Seat Kilometres (ASK) – Total number of seats available for passengers, multiplied by Net Working capital – Net total of the following items disclosed in the Group’s Consolidated Balance the number of kilometres flown Sheet: receivables, inventories and other assets reduced by pay
Slide 34: Disclaimer & ASIC Guidance
Disclaimer & ASIC Guidance This Presentation has been prepared by Qantas Airways Limited (ABN 16 009 661 901) (Qantas). Summary information This Presentation contains summary information about Qantas and its subsidiaries (Qantas Group) and their activities current as at 22 August 2019, unless otherw