Qantas Airways Limited · ASX:QAN
Qantas Airways — Investor Presentation (February 2018)
28 slides from Qantas Airways's investor presentation, Feb 22, 2018
Slide 1: Qantas Airways Limited 1H18 Results
Qantas Airways Limited 1H18 Results 22 February 2018 ASX:QAN US OTC:QABSY
Slide 2: 1H18 Highlights
1H18 Highlights Another record performance • Record first half Underlying Profit Before Tax (PBT)1 $976m, Statutory PBT $857m • Continued strong Group Return on Invested Capital (ROIC) of 20.9%2 • All operating segments delivering ROIC > WACC3 • Effectively managing increases in fuel costs • Ongoing
Slide 3: Integrated Portfolio Provides a Stable Earnings Base
Integrated Portfolio Provides a Stable Earnings Base Operating Segment EBIT3 Maximising leading Dual Brand Domestic position with customer focused investments $1.2b Group Domestic1 Underlying EBIT of $652m Group International4 $ supported by proactive capacity management Group International4 Group I
Slide 4: 1H18 Key Group Financial Metrics
1H18 Key Group Financial Metrics Underlying PBT1 Underlying EPS3 12 Month ROIC% Cash Flow 38.7c $1,734m $976m Up 19%2 Operating cash flow, Up $561m2 Up $124m2 20.9% Statutory PBT $857m Statutory EPS 34.0c > WACC $772m Up 25%2 Net free cash flow4, Up $484m2 Unit Revenue5 Total Unit Cost6 Operating Ma
Slide 5: 1H18 Profit Bridge
1H18 Profit Bridge Underlying Profit Before Tax ($M) 58 99 19 47 339 125 58 976 100 3 852 Net revenue benefits2 $ 71m Fuel efficiency benefits3 $ 10m Non-fuel cost reduction $100m Transformation benefits $181m 1H17 Ticketed Fuel Expense Cost from FX on Net Depreciation & CPI5 Transformation Bond Rat
Slide 6: Maximising Leading Dual Brand Domestic Position
Maximising Leading Dual Brand Domestic Position Dual brand strategy at the core of Group’s portfolio strength Average Domestic Market Capacity Growth5 $652m Record Group Domestic1 Underlying EBIT in 1H18 2.2% -1.4% 0.7% -0.5% -0.9% >10% >10% ROIC2 for Qantas and Jetstar Domestic FY14 FY15 FY16 FY17
Slide 7: Building a More Resilient Qantas International
Building a More Resilient Qantas International 46% capacity growth in Asia markets since 1H156 including introduction of new routes and upgauges to improve customer >10% >10% ROIC1 since FY15 proposition Beijing Capacity growth since 1H152 achieved through Tokyo 17% increase in utilisation3 of exist
Slide 8: Segment Results
Segment Results Waoantas croup
Slide 9: Qantas Domestic
Qantas Domestic • Record1 first half Underlying EBIT and Operating Margin 1H18 1H17 VLY %9 • Unit Revenue up 8.6% Revenue $M 3,070 2,916 5.3 – Disciplined capacity management Underlying EBIT $M 447 371 20 – Leadership in corporate market share; growing SME2 share Operating Margin7 % 14.6 12.7 1.9pts
Slide 10: Qantas International
Qantas International1 • Strong Underlying EBIT and Operating Margin performance 1H18 1H179 VLY % – Unit revenue up 0.3%2 in competitive environment Revenue $M 3,439 3,204 7.3 • Dreamliner and new network structure will deliver benefits in FY19 Underlying EBIT $M 222 235 (5.5) – Commenced MEL-LAX3 Dr
Slide 11: Jetstar Group
Jetstar Group • Record first half Underlying EBIT and Operating Margin 1H18 1H17 VLY % • Record Domestic result1, Unit Revenue up 7% Revenue7 $M 1,936 1,859 4.1 • Strong International2 earnings1 Underlying EBIT $M 318 275 15.6 • Jetstar’s Asian airlines portfolio3 was profitable Operating Margin % 1
Slide 12: Qantas Loyalty
Qantas Loyalty • Record first half Underlying EBIT result 1H18 1H17 VLY % − Strategy to mitigate interchange fee regulatory change on track Revenue $M 763 743 2.7% • Coalition Business fundamentals strengthening Underlying EBIT $M 184 181 1.7% − Co-branded credit card growth outpacing market1; incre
Slide 13: Financial Framework
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Slide 14: Financial Framework Aligned with Shareholder Objectives
Financial Framework Aligned with Shareholder Objectives 1. Maintaining an Optimal 2. ROIC > WACC2 3. Disciplined Allocation Capital Structure Through the Cycle of Capital Minimise cost of capital by Deliver ROIC > 10%3 Grow invested capital with targeting a net debt range of through the cycle
Slide 15: Maintaining an Optimal Capital Structure
Maintaining an Optimal Capital Structure Leverage and liquidity Optimal capital structure • Net debt1 at $5.1b, towards the bottom of the range Debt Maturity Profile as at 31 December 2017 ($M)5 • Established innovative A$ Corporate Debt Program – First issuance - 8 year tenor; $350m Includes $350m
Slide 16: Delivering ROIC >10% Through the Cycle
Delivering ROIC >10% Through the Cycle Protecting ROIC through the disciplined hedging program • FY18 fuel cost is expected to be ~A$3.24b1 FY18 Fuel Cost Outlook (A$B) – Expected fuel cost is 81% hedged for the remainder of FY18, protection 3.23 3.241 in place against adverse movements in fuel and
Slide 17: Delivering ROIC >10% Through the Cycle
Delivering ROIC >10% Through the Cycle FY18 Transformation status • On track to deliver Transformation gross benefits of at least Transformation Initiatives Status $400m in FY18 – $181m delivered to date1; Completed initiatives include Development revenue management system, commercial sourcing and 2
Slide 18: Disciplined Capital Allocation
Disciplined Capital Allocation Disciplined capital expenditure • FY18 and FY19 aggregate net capital expenditure1 of $3.0b, net of asset sales, no change to prior guidance • Net capital expenditure of $962m in 1H18 • Net debt towards the bottom of the target range • Continued generation of sustainab
Slide 19: Disciplined Capital Allocation
Disciplined Capital Allocation Shareholder distributions • Completed on-market share buy-back of $373m in 1H18 Shares on Issue (M) ~24% reduction2 – 3.5% of issued capital purchased – 20.5%1 reduction in shares on issue since Oct 2015 at an average price of $3.90 2,196 2,062 1,919 1,832 1,808 1,745
Slide 20: Building Long-Term Shareholder Value
Building Long-Term Shareholder Value
Slide 21: Customer and Innovation
Customer and Innovation Looking forward • Complete redevelopment of Sydney International Business Lounge to increase capacity by 30% • Melbourne Domestic Lounge upgrade underway • Interior refresh of 45 QantasLink turboprops • Rollout of Wi-Fi on 737-800s – Installed on >30% of fleet to date; majori
Slide 22: Fleet Strategy
Fleet Strategy Jetstar • Commencing replacement of the current Jetstar A320/A321CEO fleet with A321LR NEOs in calendar year 2020 – Initial 18 aircraft of 99 aircraft firm order to be delivered over 2 year period • Benefits of A321LR NEO introduction to Jetstar – Scale and fuel efficiency in Domestic
Slide 23: People – Qantas Group Pilot Academy
People – Qantas Group Pilot Academy • Fleet renewal and network growth driving largest pilot recruitment and training initiative in the Qantas Group’s 97 year history • Since 2016, hired over 600 new pilots with ongoing recruitment to meet Group requirements • Qantas Group Pilot Academy to be establ
Slide 24: Outlook
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Slide 25: 2H18 Outlook – Domestic and International Operating Environment
2H18 Outlook – Domestic and International Operating Environment • Healthy consumer demand growth consistent with an improved global outlook • 2H18 planned Group capacity to increase by ~1%1 • Group Domestic capacity expected to decrease by ~1%1, expecting continued Unit Revenue growth1, albeit at a
Slide 26: FY18 Group Outlook
FY18 Group Outlook • Current Group operating expectations: – FY18 fuel cost expected to be no more than $3.24b1 – FY18 net depreciation and non-cancellable aircraft operating lease rentals expected to be ~$70m higher than FY17 FY18 depreciation and amortisation expense expected to be ~$150m higher
Slide 27: Questions?
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Slide 28: 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 February 2018, unless othe
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