Easyjet Plc · LSE:EZJ
Easyjet — FY2013 Earnings Presentation
49 slides from Easyjet's earnings presentation, Nov 19, 2013
Slide 1: Full Year Results Analyst and Investor Presentation
Full Year Results Analyst and Investor Presentation Tuesday 19 November 2013
Slide 2: Introduction
Introduction Carolyn McCall Chief Executive Officer
Slide 3: Continued strong performance
Continued strong performance Strong performance Platform for growth 17.4% 17% ROCE Efficient, low cost model 11.3% Strong network and market positions 9.8% easyJet.com and pan-European brand Strong balance sheet Management innovation & execution 2011 2012 2013 Cash returns to shareholders
Slide 4: Financial review
Financial review Chris Kennedy Chief Financial Officer 4
Slide 5: Strong performance in the year
Strong performance in the year External factors – largely favourable Strong performance Benign competitor capacity • 51% rise in PBT Buoyant demand in UK • £7/seat PBT Weather • 11% PBT margins FX rate movements • £1 EPS Cost increases at regulated airports • £616m operating cashflow • 17%
Slide 6: Financial results
Financial results £m F '13 F '12 Change Change Total revenue 4,258 3,854 404 10.5% Fuel (1,182) (1,149) (33) (2.9%) Operating costs excluding fuel (2,365) (2,174) (191) (8.8%) EBITDAR 711 531 180 33.8% Ownership costs (233) (214) (19) (8.6%) Profit before tax 478 317 161 50.9% EBITDAR Margin 16.7% 1
Slide 7: Financial results: £1 EPS, 17% ROCE
Financial results: £1 EPS, 17% ROCE £m F '13 F '12 Change Profit before tax 478 317 50.9% Tax charge (80) (62) (28.4%) Profit after tax 398 255 56.1% Effective tax rate 16.7% 19.6% 2.9ppt Earnings per share 101.3p 62.5p 62.1% Ordinary dividend per share 33.5p 21.5p 55.8% Special dividend per share 4
Slide 8: Strong unit revenue growth
Strong unit revenue growth £m F '13 F '12 Change Passengers (m) 60.8 58.4 4.0% Load factor (%) 89.3% 88.7% +0.6ppt Seats (m) 68.0 65.9 3.3% Average sector length (km) 1,091 1,096 (0.5%) Total revenue (£m) 4,258 3,854 10.5% Total revenue per seat (£) 62.58 58.51 7.0% @ constant currency (£) 62.65 58.
Slide 9: RPS: strong growth in seat revenue
RPS: strong growth in seat revenue £ per seat F '13 F '12 Change Gross seat revenue 68.66 64.37 6.7% Passenger taxes (7.02) (6.76) (3.9%) Net seat revenue 61.64 57.61 7.0% Non-seat revenue 0.94 0.90 3.8% Total revenue 62.58 58.51 7.0% 9.2% 8.0% 8.5% 7.7% 6.7% 7.1% 7.0% 6.1% 6.3% 3.9% Q1 Footer box o
Slide 10: Timing of Euro: Sterling movement drove adverse fx
Timing of Euro: Sterling movement drove adverse fx GBP: Euro rates (spot) 1.30 FY13 FY12 Impact of € /£ rate on P&L £m H1 H2 1.25 Rev (36) 31 Fuel 3 (2) Cost ex. Fuel 3 (36) 1.20 To t al (3 0 ) (7 ) P&L impact shown after 1.15 effects of hedging cashflows Key booking Peak 1.10 period expenditure 1.0
Slide 11: Currency impact
Currency impact Currency split – total revenue Currency split – total costs USD Euro 34% 35% Euro 41% 48% Sterling 1% Other 5% 3% Swiss Franc 8% 25% Other Swiss Franc Sterling F '13 currency impact favorable / (adverse) £m EUR CHF USD Other Total Revenue (5) (3) 1 1 (6) Fuel 1 Arial not bold Footer
Slide 12: Impact of fuel
Impact of fuel F’13 F’12 Change B/(W) Fuel $ per metric tonne Market rate 992 1,020 28 Effective price 980 982 2 US dollar rate Market rate 1.55 1.58 (3 cents) Effective price 1.58 1.59 (1 cent) Actual cost of fuel £ per metric tonne 619 618 (1) Footer box on intersect of lines line h=8.03 9 and v=8
Slide 13: Cost per seat excluding fuel - key drivers
Cost per seat excluding fuel - key drivers £ var at % var at Favourable/ £ Cost per constant constant Drivers (Adverse) seat ex fuel currency currency • Significant increases in airport charges in Airports and Ground 15.84 (1.14) (7.9%) Spain and Italy Handling • Increased de-icing related costs • I
Slide 14: Management action taken to offset headwinds
Management action taken to offset headwinds Cost per seat bridge Airports & Ground Handling – £0.25 0.57 56.61 0.64 Fuel - £0.19 Maintenance - £0.12 0.08 0.31 0.14 0.29 0.11 0.39 55.55 1.44 Spain & Italy - £0.86 Other Airports - £0.58 53.70 2012 Airports Inflation Disruption Fuel Brand FX Before eas
Slide 15: Increasing proportion of A320's
Increasing proportion of A320’s F '13 F '12 Change A319 (operating lease) 54 49 5 A319 (owned / finance lease) 99 111 (12) A319 Total 153 160 (7) A320 (operating lease) 18 6 12 A320 (owned / finance lease) 46 48 (2) A320 Total 64 54 10 Total fleet 217 214 3 Operating lease 33% 26% 7ppt Percentage un
Slide 16: Strong balance sheet
Strong balance sheet £m F '13 F '12 Property, plant and equipment 2,280 2,395 Goodwill and other intangible assets 467 456 Other assets 428 561 Liabilities (excluding debt) (1,716) (1,544) 1,459 1,868 Debt 679 957 Cash and money market deposits (1,237) (883) Net (cash) / debt (558) 74 Shareholders'
Slide 17: Flexibility in fleet planning
Flexibility in fleet planning Maximum, minimum and base case fleet size under new framework agreement 300 301 302 298 279 262 282 282 247 275 237 267 270 262 226 247 237 229 220 220 187 183 173 171 168 FY'14 FY'15 FY'16 FY'17 FY'18 FY'19 FY'20 FY'21 FY'22 Base Footer box on intersect caseline h=8.03
Slide 18: Cashflow
Cashflow £m Self funding ordinary dividend and capex 161 69 85 112 416 497 148 25 £m 2 1,237 316 283 883 Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold Sep 2012 * Operating Depn & Net Tax, net Ordinary CAPEX Borrowings Sale & Restricted Other FX Sep 2013* Pro
Slide 19: Progress against financial objectives and measures
Progress against financial objectives and measures Objectives Measures Progress • Earn returns in excess of cost of • Improve PBT per seat to £5 PBT improved by £2.22 Return capital through the cycle • Post tax ROCE of 12% through the cycle* to £7.03 (1) Targets • Invest in growth opportunities
Slide 20: Fuel and foreign exchange hedging
FY’14 Fuel and foreign exchange hedging Outlook US dollar Fuel requirement Euro Surplus requirement Half year ending 31 March 2014 76% @ $991/tonne 82% @ $1.57/£ 76% @ €1.19/£ Full year ending 30 September 2014 72% @ $982/tonne 79% @ $1.57/£ 73% @ €1.20/£ Full year ending 30 September 2015 56% @ $95
Slide 21: Forward bookings: impact of Easter
FY’14 Forward bookings: impact of Easter Outlook H1 bookings in line with prior year % seats sold * 88% 89% Wi nte r 12/1 3 Wi nte r 13/1 4 49% 49% Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold Oct Nov Dec Jan Feb Mar H1 Easter 2013: 31 March Easter 2014 : 2
Slide 22: Outlook
FY’14 Outlook Outlook Capacity (seats flown) • H1 c.+3.5% (before disruption) • FY c.+5% (before disruption) Revenue per seat (constant currency) • H1: very slightly up on the prior year (including 1.5 percentage point adverse YOY impact from timing of Easter and the 0.7 percentage point impact from
Slide 23: Business review
Business review Carolyn McCall Chief Executive Officer
Slide 24: Delivering growing and sustainable returns
Delivering growing and sustainable returns Strategic objectives 1. Build strong number 1 and 2 network positions 2. Drive demand, conversion and yield across Europe 3. Maintain cost advantage 4. Disciplined use of capital Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial
Slide 25: 1. Less benign capacity environment this winter
1. 1. Less benign capacity environment this winter Network Capacity growth H1’14 vs H1’13 (OAG) c.3 .5% +6ppt 3% 2% +2ppt 1% +2ppt -1% -1% Winter 12/13 -3% Winter 13/14 -4% Capacity change - Capacity change - Competitors on easyJet capacity total S H market easyJet markets easyJet markets change Sho
Slide 26: 1. Continued opportunity for easyJet
1. 1. Continued opportunity for easyJet Network Capacity growth H1‘ F’14 (OAG) Total capacity change - easyJet markets Competitors on easyJet markets easyJet capacity change 4% 4% 3% 3% 2% 2% 2% 2% 1% 0% -0% -2% -2% -4% -4% -4 % -6% -9% % of easyJet UK France Italy S witzerland S pain Germany capaci
Slide 27: Leading position in top market pairs
1. 1. Leading position in top market pairs Network Presence in top 100 market pairs Airports where easyJet has Presence in top 100 market pairs number 1 or 2 market share 1 Non primary airports 1 Number of market pairs Other operated between 2 primary 16m 18 airports 24% 48 2 No.1 37 31m 24 24 46% 2
Slide 28: 1. Further opportunities in core markets
1. 1. Further opportunities in core markets Network Share of traffic at Growth in existing markets easyJet’s top 20 airports • easyJet has c. 22% share of capacity at its top 20 airports – equating to around 46m seats • Other low cost carriers (LCCs) have ~25% share • Non-LCCs account for 53%, with
Slide 29: 1. Seizing the opportunity
1. 1. Seizing the opportunity Network Overall c. 3.5% capacity growth over Winter 13/14 (before disruption) Edinburgh: +13% Berlin: +3% Manchester: +17% London: +6% Basel: +7% Geneva: +3% Regional France: +3% Milan:+4% Madrid: -22% Other Spain: +2% Footer box on intersect of lines line h=8.03 9 and
Slide 30: 2. Demand: Understanding evolving customer base
2. 2. Demand: Understanding evolving customer base Demand Great service: “consider flying easyJet again?” Increased proportion customers re-booking 98% 97% 96% Customer 95% 96% Volumes 55% New 50% Exising 50% 45% FY'10 FY'13 UK France Italy Switzerland Germany Older passengers, higher disposable inc
Slide 31: 2. Drive demand: how we sell
2. 2. Drive demand: how we sell Demand How we sell Areas of focus High volume Demand based • Network optimisation Conversion Pricing Model focused • Brand awareness e-Commerce engine • Digital / Web • Revenue management system Proposition Demand • Proposition redesign re-design and based segmentatio
Slide 32: 2. Drive demand: generation easyJet
2. 2. Drive demand: generation easyJet Demand Proposition redesign Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold 32
Slide 33: 2. Allocated seating has been a success
2. 2. Allocated seating has been a success Demand Most popular seats H2 performance Allocated seating Impact on revenue per seat c.62p increase % of RPS growth c.+1 percentage point Satisfaction with boarding +4.5 pp experience Now 73% Footer box on intersect of lines line h=8.03 9 and v=8.75 with f
Slide 34: 2. Drive demand: Business travel
2. 2. Drive demand: Business travel Demand Building blocks FY11 FY12 FY13 FY14 FY15 Proposition improve punctuality Delivered • add new network points Ongoing • increase frequency Ongoing Product launch & develop flexi fare Delivered deploy allocated seating / yield manage Delivered • enable F
Slide 35: 2. Business travel: industry response
2. 2. Business travel: industry response Demand Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold 35
Slide 36: 3. Lowest cost base on the routes we fly
3. 3. Lowest cost base on the routes we fly Cost Advantage EBIT Cost per ASK (excl. fuel) (1) easyJet cost advantage easyJet 1 .6 • easyJet Lean • Continued focus on on-time Ryanair 0.8 performance and asset utilisation Vueling • New fleet order 2.0 • new generation aircraft expected to reduce today
Slide 37: 3. easyJet Lean – lowest cost for our network
3. Cost 3. easyJet Lean – lowest cost for our network Advantage 1. Areas of focus for FY’14 Fuel • On-going delivery of key initiatives: efficiency Airports • Ground ops: ground handling & & ground Crew non-regulated airports handling • Crew settlements & flexibility • Engineering easyJet Sales and
Slide 38: 3. Cost: Engineering and maintenance
3. 3. Cost: Engineering and maintenance Cost Advantage • Already a source of competitive advantage to easyJet and continually improving through lean process management • 95% of the annual easyJet E&M spend is up for re-tender by 2015 • Opportunity to make a step change in maintenance costs, reviewin
Slide 39: 4. Disciplined use of capital
4. 4. Disciplined use of capital Capital Discipline FY13 route performance Improved returns year on year Age of routes < 3 Years > 3 Years CPBH performance by route - FY 2013 CPBH FY12 CPBH FY13 Returns 0% ROCE FY13 ROCE 12% Routes Actions to improve returns • Closing the Madrid base • Culling under
Slide 40: 4. Balance sheet strength
4. 4. Balance sheet strength Capital Discipline Gearing vs. PBT Margin(1) 20% 15% PBT Margin RYA 10% EZJ Norwegian 5% LHA Vueling - -20% - 20% 40% 60% 80% 100% 120% IAG AF-KLM -5% AirBerlin Footer box on intersect of lines line h=8.03 9 and v=8.75 with font 10pt Arial not bold -10% Gearing easyJet i
Slide 41: Summary: strategy continues to deliver
Summary: strategy continues to deliver Strong performance Platform for growth Strategy delivering Strong unit revenue Fleet order Sustainable and flexible growth growth easyJet Lean Controlling costs Improved returns Allocated seating Capital discipline Tangible and regular FlyBe
Slide 42: Q&A
Q&A 42
Slide 43: Appendix
APPENDIX 43
Slide 44: H2 margin growth
H2 margin growth £m H2 '13 H2 '12 Change Total revenue 2,657 2,389 11.2% Fuel (686) (666) (3.0%) Operating costs (1,323) (1,192) (11.0%) EBITDAR 648 531 22.0% Ownership costs (109) (102) (6.8%) Pre-tax profit 539 429 25.7% PBT margin 20.3% 18.0% 2.3ppt Seats (m) 38.0 36.8 3.3% £ Per Seat H2 '13 H2 '
Slide 45: Aircraft cashflows including overhauls
Aircraft cashflows including overhauls Aircraft 2014 2013 Number of aircraft deliveries 9 10 Cashflows (USD) $m 2014 2013 Final delivery payments 250 267 Pre delivery payments 53 250 Heavy maintenance - owned fleet 43 9 Total 346 526 Heavy maintenance - leased fleet 119 110 Total cash flows 465 636
Slide 46: ROCE Calculation – including 7x lease adjustment
ROCE Calculation – including 7x lease adjustment Reported £m F '13 F '12 Earnings before interest and tax – reported 497 331 Interest element of operating lease payments 34 32 Earnings before interest and tax - adjusted 531 363 Tax 23% 24% Normalised operating profit after tax (NOPAT) 409 276 Averag
Slide 47: ROCE Calculation – NPV and Target liquidity
ROCE Calculation – NPV and Target liquidity Proforma £m F '13 F '12 Earnings before interest and tax – reported 497 331 Interest element of operating lease payments 31 25 Earnings before interest and tax - adjusted 528 356 Tax 23% 24% Normalised operating profit after tax (NOPAT) 407 270 Average sha
Slide 48: RASK and CASK
RASK and CASK F '13 F '12 Change Total revenue per seat 62.58 58.51 7.0% at constant currency 62.65 58.51 7.1% RASK at constant currency (pence) 5.74 5.34 7.6% Total cost per seat ex fuel 38.17 36.25 5.3% at constant currency 37.66 36.25 (3.9%) CASK ex fuel at constant currency (pence) 3.45 3.31 (4.
Slide 49: Disclaimer
Disclaimer Certain statements in this presentation constitute or may constitute forward-looking statements. Any statement in this presentation that is not a statement of historical fact including, without limitation, those regarding the Company’s future expectations, operations, financial performanc