Slide 1: Full year results Analyst & Investor presentation
Full year results Analyst & Investor presentation Tuesday 20 November 2012 1 1
Slide 2: Agenda
Agenda 1. Review of F’12 2. Financial review 3. Business review 2
Slide 3: Introduction
Introduction Carolyn McCall Chief Executive Officer 3
Slide 4: Review of F'12
Review of F’12 Industry leading on-time performance(1) Excellent customer satisfaction (2) 89% 87% 87% 87% 82% 82% 84% 85% 79% 80% 82% 83% 80% 80% 76% 77% 77% 76% FY'11 FY'12 FY'11 FY'12 FY'11 FY'12 FY'11 FY'12 KLM Lufthansa Air France British Airways Ryanair easyJet Overall Satisfaction Likelihood
Slide 5: Financial review
Financial review Chris Kennedy Chief Financial Officer 5
Slide 6: Summary
Summary • Returns improved due to: PBT £ per seat 4.14 (2.77) • management action; (0.18) (0.69) • benign operating 0.22 4.81 3.97 0.12 environment • easyJet lean continuing to deliver cost savings • Tough decisions taken on asset FY 11 FX (ex Revenue Fuel Crew Disruption Other FY 12 fuel) (inc FX)
Slide 7: Financial results
Financial results £m F ’12 F ’11 Change Total revenue 3,854 3,452 11.6% Fuel (1,149) (917) (25.3)% Operating costs excluding fuel (2,174) (2,067) (5.1)% EBITDAR 531 468 13.5% Ownership costs (214) (220) 2.7% Profit before tax 317 248 27.9% PBT margin 8.2% 7.2% 1.0 ppt 7
Slide 8: Financial results
Financial results £m F ’12 F ’11 Change Profit before tax 317 248 27.9% Tax charge (62) (23) (169.6)% Profit after tax 255 225 13.3% Effective tax rate 19.6% 9.3% (10.4) ppt Earnings per share 62.5p 52.5p 19.0% Ordinary dividend per share 21.5p 10.5p 104.8% Special dividend per share - 34.9p - Retur
Slide 9: H2 margins stable despite increased fuel costs
H2 margins stable despite increased fuel costs £m H2 ’12 H2 ’11 Change Total revenue 2,389 2,186 9.2% Fuel (666) (534) (24.7)% Operating costs (1,192) (1,139) (4.6)% EBITDAR 531 513 3.4% Ownership costs (102) (112) 9.3% Pre-tax profit 429 401 7.0% PBT margin 18.0% 18.3% (0.3) ppt Seats - m 36.8 34.4
Slide 10: Currency impact
Currency impact Currency split Currency split – total revenue – total costs US Dollar Euro 35% 35% Euro 43% Sterling 47% 1% Other 5% 2% Swiss Franc 24% 8% Other Sterling Swiss Franc F ‘12 currency impact favourable / (adverse) EUR CHF USD Other Total Revenue - Euro rate €1.19 (2011: €1.15) (65) 9 1
Slide 11: Improved revenue performance
Improved revenue performance £m F ’12 F ’11 Change Passengers (m) 58.4 54.5 7.1% Load factor (%) 88.7% 87.3% 1.4 ppt Seats (m) 65.9 62.5 5.5% Average sector length (km) 1,096 1,110 (1.3)% Total revenue (£m) 3,854 3,452 11.6% Total revenue per seat (£) 58.51 55.27 5.9% @ constant currency (£) 59.41 5
Slide 12: Significant increase in taxes absorbed
Significant increase in taxes absorbed £ per seat F ’12 F ’11 Change Change @ CC Gross seat revenue 64.37 60.51 6.4% 8.1% Passenger taxes (6.76) (6.26) (8.0)% (10.7)% Net seat revenue 57.61 54.25 6.2% 7.8% Non-seat revenue 0.90 1.02 (10.8)% (8.4)% Total revenue 58.51 55.27 5.9% 7.5% Gross ticket per
Slide 13: Impact of fuel
Impact of fuel F’12 F’11 Change B/(W) Fuel $ per metric tonne Market rate 1,020 959 (61) Effective price 982 818 (164) US dollar rate Market rate 1.58 1.61 (3 cents) Effective price 1.59 1.61 (2 cents) Actual cost of fuel £ per metric tonne 618 508 (110) £110 per metric tonne increase equal to £182m
Slide 14: Management action taken to offset headwinds
Management action taken to offset headwinds Profit per seat bridge £ per seat 0.21 0.05 4 .8 1 0.60 3 .97 -2.77 4.14 -1.51 0.12 -0 .19 2011 PBT per Fuel Inflation FX (excl fuel) Before Revenue Incremental Incremental Other 2012 PBT per seat management easyJet Lean A320 mix seat action 14
Slide 15: Maintain cost advantage: easyJet lean
Cost Maintain cost advantage: easyJet lean Advantage Headwinds Delivered to date • Increased fuel costs c. £100m • Cost pressure from regulated airports • Ground handling inflation and relationships • Crew costs and flexibility • Increasing systems complexity Lean Savings • Fleet age increasing Airp
Slide 16: Cost per seat excluding fuel - key drivers
Cost per seat excluding fuel - key drivers Cost per Reported Constant Movement versus F‘11 Drivers seat (£) currency Ground Operations 14.49 -2.1% +1.6% • Significant increases in charges in Spain and Italy partially offset by relatively benign winter. Crew 6.55 +0.6% +2.8% • Average 2% increase in
Slide 17: Increasing proportion of A320's
Increasing proportion of A320’s Sep ‘12 Sep ‘11 Change A319 (operating lease) 49 56 (7) A319 (owned / finance lease) 111 111 - A319 Total 160 167 (7) A320 (operating lease) 6 6 - A320 (owned / finance lease) 48 29 19 A320 Total 54 35 19 Main fleet 214 202 12 Sub-fleet (Boeing 737) - 2 (2) Total flee
Slide 18: Flexibility in fleet planning
Flexibility in fleet planning Fleet count 260 254 252 250 Max fleet 244 240 236 Growth of. 241 c.3% to 5% 228 p.a. 230 231 232 220 220 217 225 223 210 210 213 209 200 201 199 190 19 6 19 4 Min fleet 180 FY13 H1 FY13 H2 FY14 H1 FY14 H2 FY15 H1 FY15 H2 FY16 H1 FY16 H2 Maximum fleet - Lease extensions;
Slide 19: Strong balance sheet
Strong balance sheet £m Sep ‘12 Sep ‘11 Property, plant and equipment 2,395 2,149 Goodwill and other intangible assets 456 451 Other assets 561 469 Liabilities (excluding debt) (1,544) (1,464) 1,868 1,605 Debt 957 1,300 Cash and money market deposits (883) (1,400) Net debt / (cash) 74 (100) Sharehol
Slide 20: Aircraft cashflows including overhauls
Aircraft cashflows including overhauls Aircraft 2012 2013 Number of aircraft deliveries 19 10 2012 2013 Capital expenditure (USD) $m $m Final delivery payments 479 268 Pre delivery payments 35 5 Heavy maintenance - owned fleet 14 39 Total $528m $312m Heavy maintenance - leased fleet 120 93 Total cas
Slide 21: Cashflow
Cashflow 45 28 109 46 389 331 £m 1,400 364 150 25 883 Sep 2011 * Operating Depn & Net Working Tax, net Ordinary CAPEX Financing Special FX Sep 2012 * Profit amort Capital int & other dividend dividend paid paid * Includes money market deposits but excludes restricted cash 21
Slide 22: 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 GBP5 PBT improved by capital through the cycle • Post tax ROCE of 12% through the • Invest in growth opportunities 84p to £4.81 Return Targets cycle* (1)
Slide 23: Fuel and foreign exchange hedging
Fuel and foreign exchange hedging Fuel US dollar Euro requirement requirement surplus Half year ending 31 March 2013 86% at $986/tonne 86% at $1.61/£ 76% at €1.18/£ Full year ending 30 September 2013 78% at $985/tonne 81% at $1.60/£ 68% at €1.18/£ Full year ending 30 September 2014 55% at $993/tonne
Slide 24: Forward bookings
Forward bookings H1 bookings in line with prior year 89% 88% Wi nte r 11 /12 Wi n te r 12/1 3 % seats sold * 45% 46% Oct Nov Dec Jan Feb Mar H1 H1 (Oct ‘12 to Mar ‘13) 24 * As at 08.11.12
Slide 25: Outlook
Outlook Capacity (seats flown) • FY c.+3.5% (before disruption) • H1 c.+3.5% (before disruption) Revenue per seat (constant currency) • H1 up low to mid single digits Cost per seat ex fuel (constant currency) • FY c.+3 to 4% (assuming normal disruption levels and constant load factors) • H1 c.+4 to
Slide 26: Business review
Business review Carolyn McCall Chief Executive Officer 26 26
Slide 27: Headwinds for European aviation – but growth expected
Headwinds for European aviation – but growth expected Headwinds Annual number of flights (m) Intra-European flying volume(1) • Austerity measures 9.0 • Slowing economic growth 8.5 • Industrial unrest 8.0 • High fuel costs • Increased taxation on 7.5 High Low aviation Base • Rising costs at regulated
Slide 28: Unique structural opportunity for easyJet
Unique structural opportunity for easyJet Capacity growth H1 ‘ F’13 (OAG) Competitors - on EZJ routes H1 capacity YOY Chg 11% easyJet change Competitors on -1.8% 9% EZJ routes 6% Competitors in -3.6% 4% 4% total market 3% easyJet +3.6% UK France Swiss Italy Spain Market -1% -1% -2% -6% -6% -8% Key t
Slide 29: Continued structural advantage against legacies
Continued structural advantage against legacies On-going cost advantage Market share – EZJ vs legacy carriers '05 vs'12 against legacies and charter Market share - EZJvs legacy carriers '05 vs'12 airlines UK vs. BA France vs. AF Switzerland vs. Swiss Italy vs. Alitalia • Seat density 61% • Load fact
Slide 30: Winning against low-cost competition
Winning against low-cost competition • Strength of network Presence in top 100 market pairs 60 • Pan-European network 50 3 Non primary airports and market presence Primary airports 40 14 2 • No. 1 or 2 positions at 30 2 primary airports 20 46 34 24 26 • 23 Peak slots 10 19 18 17 14 13 - 3 • Strong b
Slide 31: Strategy to drive growth and returns
Strategy to drive growth and returns Leverage easyJet’s cost advantage, leading market positions and brand to deliver point-to-point low fares with operational efficiency and friendly service for our customers 1. Build strong number 1 and • Sustainable growth 2 network positions • (slightly in exces
Slide 32: Build strong number 1 & 2 network positions
1. Network Build strong number 1 & 2 network positions positions Building strong number 1 or 2 positions at major airports(1) Airport Share Position London Gatwick 46% No.1 Geneva 38% No.1 Milan Malpensa 37% No.1 Paris Orly 13% No.2 Lisbon 13% No.2 Paris CDG 11% No.2 Amsterdam 10% No.2 • Highest ret
Slide 33: Actions planned to offset cost headwinds
2. Actions planned to offset cost headwinds Cost Advantage Cost per seat excluding fuel - at constant currency 5 to 6% Other (Disruption, Crew, Brand Royalty) c.3% 1 to 2% 3 to 4% c.1% Airports c.3% F'13 Cost headwinds Incremental Lean Incremental A320 F'13 cost per seat (excl. fuel) Actions planned
Slide 34: Maintain cost advantage: easyJet lean
2. Maintain cost advantage: easyJet lean Cost Advantage F’13 target areas Targeting an additional £35m in FY’13 c.£5m c.£135m • Optimise turn-time further c.£11m • Further optimise Ground Operations contracts and costs c.£6m • Opportunities from mini-base c.£13m openings • Merchant acquisition fees
Slide 35: Driving demand, conversion & yield across Europe
3. Drive Driving demand, conversion & yield across Europe Demand • Network optimisation • Progressing the business initiative • Allocated seats • Driving leisure • Brand • Digital / Web • Revenue management 35
Slide 36: Network optimisation
3. Network optimisation Drive demand Overall 3.6% capacity growth in H1 (adjusting for disruption(1)) Netherlands United Kingdom flat Germany 2.7% flat France 8.8% Italy Switzerland 5.9% 11.5% Portugal 5.0% Spain -5.8% Source : OAG for 6 months to end March 2013 36
Slide 37: Progressing Business initiative
3. Drive Progressing Business initiative Drive Demand Demand Building blocks being put in place • Business routes added to network • Partnerships with Global Distribution System providers (GDS) • Agreements with Travel Management Companies (TMC) • Large scale customers signed • In-country Sales team
Slide 38: Allocated seating roll-out is on plan
3. Drive Allocated seating roll-out is on plan Drive Demand Demand ‘Up front’ seats A319 • ‘Extra Legroom’ = 18 seats • ‘Up front’ = 24 seats • Remaining = 114 seats ‘Extra Legroom’ seats A320 • ‘Extra Legroom’ = 18 seats • ‘Up front’ = 30 seats • Remaining = 132 seats ‘Up front’ seats Allocating se
Slide 39: Driving leisure
3. Drive Driving leisure Drive Demand Demand Exciting new destinations • E.g. Reykjavik Improved product • Inflight offer • Partner offers • Allocated seating Innovative distribution • Inspire Me • Series seat sales 39
Slide 40: Brand: europe by easyJet
3. Drive Brand: europe by easyJet Drive Demand Demand Pan-European campaign Increasingly stronger Significant growth in New advertising Brand messaging awareness in our consideration, both taking effect – high getting stronger newer markets: among business and ad recall and 86% Italy, 92% France lei
Slide 41: Conversion drivers
3. Drive Conversion drivers Drive Demand Demand US homepage Swiss homepages Inspire Me Abandon Basket Email Step 5 Destination Guides 41
Slide 42: Revenue management system
3. Drive Revenue management system Drive Demand Demand • Cutting edge, bespoke revenue management system • Further benefit from yield managing ancillaries • Improved effectiveness using latest artificial intelligence techniques Prices as at per 19 November 2012 42
Slide 43: Disciplined use of capital
4. Disciplined use of capital Capital Discipline Key principles • Strong balance sheet is a source of competitive advantage • easyJet committed to covering cost of capital • easyJet will self fund dividend, fleet replacement and growth • Rigorous approach to capital allocation embedded throughout ea
Slide 44: Fleet order framework
4. Fleet order framework Capital Discipline • Commercial and technical evaluation progressing well • New gen offer significant cost saving opportunities • RFP to five suppliers: • Engines: Pratt & Whitney, CFMi (GE & Snecma) • Aircraft: Airbus, Boeing, Bombardier • No further update expected before
Slide 45: Summary
Summary 1. Record of delivery Delivery against strategy • Financial & operational performance Operational resilience 2. Structural winner Dividend • Against legacies Improving network returns • Against charters easyjet lean • Against low cost Driving revenue 3. Opportunity to deliver susta
Slide 46: Q&A
Q&A 46
Slide 47: Appendix
APPENDIX 47
Slide 48: ROCE Calculation – including 7x lease adjustment
ROCE Calculation – including 7x lease adjustment Reported £m Sep ‘12 Sep ’11 Earnings before interest and tax – reported 331 269 Interest element of operating lease payments 32 36 Earnings before interest and tax - adjusted 363 305 Tax 24% 26% Normalised operating profit after tax (NOPAT) 276 226 Av
Slide 49: ROCE Calculation – NPV and Target liquidity
ROCE Calculation – NPV and Target liquidity Proforma £m Sep ‘12 Sep ’11 Earnings before interest and tax – reported 331 269 Interest element of operating lease payments 25 27 Earnings before interest and tax – adjusted 356 296 Tax 24% 26% Normalised operating profit after tax (NOPAT) 270 219 Average
Slide 50: RASK and CASK
RASK and CASK £m F ’12 F ’11 Change B/(W) Total revenue per seat 58.51 55.27 5.9% at constant currency 59.41 55.27 7.5% RASK at constant currency (pence) 5.42 4.98 8.9% Total cost per seat ex fuel 36.25 36.62 1.0% at constant currency 37.28 36.62 (1.8%) CASK ex fuel at constant currency (pence) 3.40
Slide 51: Disclaimer
Disclaimer This communication is directed only at (i) persons having professional experience in matters relating to investments who fall within the definition of “investment professionals” in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001; or (ii) high