Virgin Australia Holdings Limited · ASX:VGN
Virgin Australia — FY2014 Earnings Presentation
29 slides from Virgin Australia's earnings presentation, Aug 29, 2014
Slide 1: FY14 results presentation - VAH
FY14 results presentation - VAH 29 August 2014
Slide 2: Introduction
Introduction • One of the most difficult operating environments in the history of Australian aviation ‒ Over-capacity in the domestic market ‒ Cost of the carbon tax ‒ Ongoing weak consumer sentiment and economic uncertainty • However, strategic repositioning on track ‒ Corporate and government reve
Slide 3: Financial summary
Financial summary • Underlying loss1 before tax of $211.7m (excluding share of equity accounted investments, restructuring costs and certain hedging and financial instruments) • Group yield2 growth of 1.2% • Underlying CASK3 growth of 3.4% (including fuel and foreign exchange) – strong benefits real
Slide 4: Group financial summary
Group financial summary Restated FY14 FY131 $m $m Revenue and income 4,306.6 4,020.3 Statutory loss after tax (355.6) (98.1) Addback Income tax benefit (128.5) (51.6) Statutory loss before tax (484.1) (149.7) Addback Impairment loss2 56.9 - Business restructuring and other expenses3 117.3 105.1 Shar
Slide 5: Group financial summary
Group financial summary Restated FY14 FY131 $m $m Pre-tax loss excluding one-off items and equity accounted losses2 (261.2) (44.7) Addback Losses / (gains) on unrealised ineffectiveness on cash flow hedges and 20.2 (37.6) non designated derivatives3 Losses on interest rate swap terminations associat
Slide 6: Segment revenue and EBIT summary
Segment revenue and EBIT summary Domestic International Restated Restated FY14 FY131 FY14 FY131 $m $m $m $m Segment revenue 3,199.9 2,951.6 1,149.8 1,121.1 Segment EBIT2 (86.9) (2.3) (80.2) 8.3 Segment EBIT excluding time value movement and unrealised ineffectiveness3 (59.2) (34.6) (66.8) (8.5) ASKs
Slide 7: Cash flow summary
Cash flow summary Restated FY14 FY131 $m $m Cash flow from operations (excluding business and capital restructure costs and net finance costs) 166.1 246.9 Business and capital restructure costs (108.6) (81.5) Net finance costs (65.2) (42.1) Net cash flow (used in) / from operating activities (7.7) 1
Slide 8: Balance sheet summary
Balance sheet summary Restated 30-Jun-14 30-Jun-131 $m $m Cash and cash equivalents 783.8 580.5 Property, plant and equipment and intangible assets 3,064.7 3,384.0 Other assets 830.8 582.6 Total assets 4,679.3 4,547.1 Interest bearing liabilities 1,950.7 1,889.9 Unearned revenue 807.7 736.1 Other li
Slide 9: Hedging policy
Hedging policy • AUD designated hedging policy provides a large degree of short term certainty and longer term participation and protection • Hedging policy delivering positive results – 5.9% saving compared to spot fuel prices • Non-fuel currency 84% hedged for remainder of FY15 at an average rate
Slide 10: Virgin Australia Group fleet
Virgin Australia Group fleet Actual Actual 30 Jun 2010 30 Jun 2014 B737-700/800 62 74 E170/190 21 18 A330 - 7 B777 4 5 ATR72-500/600 - 13 Mainline fleet 87 117 F50 - 8 F100 - 10 A320 - 152 Total Virgin Australia Group fleet 87 150 Note: 1 As at 11 April, 2011; 2 13 x A320s operated by Tigerair Austr
Slide 11: Game Change milestones have been achieved
Game Change milestones have been achieved 2010 2014 Premium customer experience Corporate & government share of VA domestic revenue 10% >25% Number of alliance partners (with ATI) 0 4 Global destinations 150 >460 Consolidation of brands 4 1 Velocity members 2.1m 4.5m Best-in-class awards 11
Slide 12: Australia's airline of choice
Australia’s airline of choice Airline Consideration1 Likelihood to Recommend2 (FY14) (FY143) % of guests who would consider flying with % of guests who would recommend flying the airline with the airline Virgin Australia 24% No preference 69% 60% 54% 22% Qantas Virgin Australia Qantas Note: 1 How li
Slide 13: Evolution towards Virgin Australia loyalty
Evolution towards Virgin Australia loyalty Dislodge loyal QF Expand loyal VA Create an indifference travellers travellers FY11 FY15 FY17 Indifferent Travellers VA Loyalists QF Loyalists From the point of indifference to the point of loyalty 13
Slide 14: Become Australia's favourite airline
Become Australia’s favourite airline Provides consistently exceptional travel experiences Maintains an Delivers seamless engaging brand and trusted personality interactions Australia’s Favourite Airline Group Committed to our Supports the people and partners community Focused on a progressive and su
Slide 15: Investment in the Velocity Program
Investment in the Velocity Program • Affinity to purchase a 35% stake in Velocity Transaction Structure (Simplified) • Expected to increase cash balance by $336m1 Distribution of equity and governance • Enterprise value of $960m Virgin Australia Affinity • Velocity will remain under the Virgin Austr
Slide 16: Driving accelerated growth in Velocity
Driving accelerated growth in Velocity • Opportunity to step-change the growth of the program for benefit of members, partners and shareholders • Access to additional capital and resources • Increased focus on Velocity business performance • Affinity brings a wealth of experience in driving rapid an
Slide 17: Charter and Freight
Charter and Freight Revenue Target (FY17) AUD Charter • Revenue growth of 30% in FY14 • Growth delivered from a combination of new contract $200m wins, growth from existing clients, and the launch of our first charter operations on the East Coast Freight • Launching a separate Freight division, to l
Slide 18: Transformation of Tigerair Australia
Transformation of Tigerair Australia • Opportunity to participate in the budget market segment • Transformation program set out clear path to achieve profitability ̶ Further improve customer satisfaction ̶ Drive incremental revenue growth ̶ Deliver cost synergies ̶ Develop an efficient operating pla
Slide 19: Corporate & government share of VA domestic revenue
Corporate & government share of VA domestic revenue Corporate and government share of VA domestic revenue (FY10 – FY17f) Percent 30% 25% 20% 15% ~30% 25% 10% 5% 10% 0% FY10 FY14 FY17 Source: ASX Market Releases 19
Slide 20: Fleet strategy
Fleet strategy • VA FY14 average age (excluding charter and Tigerair) of 4.8 years • Virgin Australia Group fleet of 150 aircraft • FY15 fleet initiatives ‒ Retiring two 12 year old A330 aircraft ‒ Increasing E190 fleet utilisation ‒ Continuing ATR growth to 13 aircraft • Bringing forward first B737
Slide 21: Fleet strategy
Fleet strategy • VA FY14 average age (excluding charter and Tigerair) of [4.8] years • Virgin Australia Group fleet of [150] aircraft • FY15 fleet initiatives ‒ Retiring of two 12 year old A330 aircraft ‒ Increasing E190 fleet utilisation ‒ Continuing ATR growth to 13 aircraft • Bringing forward fir
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Slide 24: Develop our people to their full potential
Develop our people to their full potential • Driver of our success will be our people • Committed to remaining the most attractive employer in the industry • Supporting staff development Our team have delivered the Game Change Program strategy 24
Slide 25: Virgin Vision 2017
Virgin Vision 2017 Strategic Priorities 2017 Velocity 7 million+ members Capitalise on Charter $200m+ revenue growth business opportunities Freight $150-$200m revenue Tigerair Australia Profitable Drive yield enhancement ~30% of VA domestic revenue from corp. & gov. Business cost efficiency program
Slide 26: Guidance
Guidance “Given the uncertain economic environment we are unable to provide guidance for the 2015 financial year at this time. Virgin Australia will not be providing guidance on capacity growth going forward.” 26
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Slide 28: Disclaimer, definitions and ASIC guidance
Disclaimer, definitions and ASIC guidance Disclaimer The following non-IFRS information has not been audited or reviewed by KPMG: Underlying loss before tax excluding impact of hedging and financial instruments (Underlying Loss), Group Yield, Underlying CASK, Pre-tax loss excluding one-off items and
Slide 29: Disclaimer, definitions and ASIC guidance (continued)
Disclaimer, definitions and ASIC guidance (continued) Definitions (continued) Segment EBIT excluding time value movement and unrealised ineffectiveness: is a non-statutory measure per Note 5 of the Virgin Australia Holdings Limited Preliminary Final Report for the Year Ended 30 June 2014 and adjusts
Virgin Australia Holdings — FY2014 Earnings Presentation on 6ix