Virgin Australia Holdings Limited (ASX: VAH) H1 FY18 Results 1

Transcription

1 Virgin Australia Holdings Limited (ASX: VAH) H1 FY18 Results 1 Summary of H1 FY18 Group Outcomes 2 Group Underlying Profit Before Tax of $102.5 million up 142.3% Group Statutory Profit After Tax of $4.4 million up $25.9 million Group Revenue of $2,791.0 million up 6.0% Cash Generated from Operating Activities of $270.6 million up 88.6% Financial Leverage of 4.3x as at 31 December 2017 improvement of 4.4% Total Debt reduced by $363.7 million 3 a reduction of 13.2% Key Highlights The Group reported its: highest first half Underlying Profit Before Tax result in ten years second highest Cash Generated from Operating Activities in ten years strongest Financial Leverage result as at 31 December in ten years Virgin Australia Domestic recorded its highest ever RASK and Yield 4 results, with growth of 7.4 per cent and 3.2 per cent respectively 5. The Group was recognised for quality of service and product offering: Best Business Class at the 2018 AirlineRatings Airline of the Year Awards; Best Domestic Airline at the 2017 Australian Federation of Travel Agents National Travel Industry Awards; Best Airline in Australia/Pacific and Best Airline Staff in Australia/Pacific at the 2017 Skytrax World Airline Awards. The Group continued its dominance in On Time Performance during the half, outperforming our major competitor in on time departures across Virgin Australia Domestic, Virgin Australia brand and Virgin Australia Group. New daily Virgin Australia Sydney-Hong Kong services announced. Outlook Based on the Group s recent positive performance trajectory, current market conditions and fuel headwinds net of foreign exchange for the second half, we expect the Group s underlying performance for the second half of the 2018 financial year to improve compared to the Group s underlying performance for the second half of the 2017 financial year. 1 For disclaimers and definitions of non-statutory financial terms and other capitalised terms, refer to page 6. This document should be read in conjunction with the Group s Interim Financial Report for the half ended 31 December 2017 and the document entitled H1 FY18 Results Presentation, which were released to the Australian Securities Exchange on 28 February All comparisons in this section relate to prior corresponding period in FY17. 3 From 1 January to 31 December On an earned revenue basis 5 On a total revenue basis

2 H1 FY18 Results Commentary 28 February 2018: Virgin Australia Holdings Limited (Virgin Australia Group or Group) Chief Executive Officer and Managing Director John Borghetti said: The Group has significantly improved its underlying financial performance compared to the prior corresponding period, recording one of our strongest ever first half results. This demonstrates the success of our long-term strategy to reposition the business and strengthen its financial foundation; however there is more work ahead to ensure we continue to deliver, Mr Borghetti said. Group Performance The Group delivered an Underlying Profit Before Tax result of $102.5 million, up by $60.2 million compared to the prior corresponding period. The improvement was driven by a number of factors including unit revenue and passenger growth, capacity and network optimisation and further progress in implementing the Better Business program. The Group s Statutory Profit After Tax result was up $25.9 million on the prior corresponding period, to $4.4 million. Further, the Group improved its Revenue Passenger Kilometres by 2.4 per cent and its Revenue Passengers by 2.3 per cent on the prior corresponding period. We also continued to enhance our balance sheet, reducing Total Debt by $ million and improving Financial Leverage by 4.4 per cent to 4.3x, with the Group recording its strongest Financial Leverage result as at 31 December in ten years. Further, Cash Generated from Operating Activities was $270.6 million, representing an 88.6 per cent improvement on the prior comparative period. Importantly, we have continued to invest in maintaining a young and efficient fleet while reducing our Financial Leverage. This has been achieved through delivering a strong operating cash flow and maintaining a disciplined approach to non-aircraft capital expenditure. The Group was highly hedged against adverse movements in fuel prices and therefore the impact of rising fuel prices during this period was limited. The increase in fuel costs was also partially offset by the impact of favourable foreign exchange movements with the stronger Australian Dollar. For the remainder of the 2018 financial year, the Virgin Australia Group has hedged 95 per cent of its foreign currency exposures and 95 per cent of its expected fuel consumption, Mr Borghetti said. Group Cost per Available Seat Kilometre increased by 1.0 per cent on the prior comparative period. 6 From 1 January to 31 December 2017

3 Segment Performance Virgin Australia Domestic Virgin Australia Domestic has delivered a strong performance, with Segment EBIT improving 91.4 per cent and Segment EBIT margins improving by 3.7 points on the first half of the 2017 financial year. This result was driven by capacity and network optimisation, the benefits of our fleet simplification program and improved corporate travel demand, including a pick-up in the resources market. Virgin Australia Domestic also achieved its highest Revenue per Available Seat Kilometre (RASK) and Yield results 7, with RASK improving by 7.4 per cent and the Yield improving by 3.2 per cent 8 on the prior corresponding period. Virgin Australia International Virgin Australia International has continued to benefit from the strategy implemented two years ago, with Segment EBIT up $0.6 million on the prior corresponding period. The business reported a decline in RASK of 1.2 per cent. Yield increased by 3.4 per cent on the prior corresponding period, despite the impact of the Bali volcano and investment in the launch of Hong Kong flights. Tigerair Australia Tigerair Australia s performance was affected by the impact of its unscheduled exit from Bali in 2017, which resulted in surplus aircraft that were temporarily deployed on the domestic network. These aircraft left the fleet earlier this month and Tigerair is fast tracking its fleet transition from Airbus A320 to Boeing 737 aircraft. Passengers carried by Tigerair increased by 4.6 per cent and RASK increased by 11.2 per cent. Tigerair s Available Seat Kilometres declined by 7.5 per cent following the unscheduled Bali exit. Velocity Velocity faced challenges in the first half due to the impact of the Reserve Bank of Australia (RBA) changes to the credit card interchange regime and due to Velocity s investment in new business development initiatives that will be launching in the 2019 financial year. Velocity reported a Segment EBIT of $56.2 million, representing a decline of $9.8 million when compared to the first half of the 2017 financial year. However Velocity membership grew by more than 600,000 members and revenue was up 8.4 per cent on the prior corresponding period, Mr Borghetti said. Focus and Outlook for the remainder of the 2018 financial year I would like to thank our people for continually going above and beyond for our company and our customers, ensuring we deliver an exceptional customer experience and helping to achieve success for the Group. Going forward, the Group remains focussed on its strategy to deliver future earnings growth and long-term value for all of our shareholders. We want to build on the progress we ve made in the domestic market, by continuing to consolidate Virgin Australia s position and expediting Tigerair s fleet transition and network optimisation. Internationally, we will 7 On an earned revenue basis 8 On a total revenue basis

4 continue to enhance our customer offering through our alliance partnerships and assess opportunities for expansion into Greater China. Today, I am pleased to announce another step forward in our strategy for Greater China, with Virgin Australia introducing a new daily Sydney to Hong Kong service from mid this year. This new route will build on the success of the Melbourne-Hong Kong services we launched last July and will allow us to open up more access to this important hub in Asia. The Group is focussed on growing Velocity s member engagement through building on its everyday earn proposition and improving efficiency to strengthen the overall capability of the business. We also remain focussed on improving balance sheet strength and continuing to deleverage the business, targeting a BB credit rating. This will allow the Group to further diversify its funding sources and reduce overall funding costs. Based on the Group s recent positive performance trajectory, current market conditions and fuel headwinds net of foreign exchange for the second half, we expect the Group s underlying performance for the second half of the 2018 financial year to improve compared to the Group s underlying performance for the second half of the 2017 financial year, Mr Borghetti said. ENDS

5 TIGERAIR AUSTRALIA DOMESTIC & INTERNATIONAL VIRGIN AUSTRALIA INTERNATIONAL VIRGIN AUSTRALIA DOMESTIC VIRGIN AUSTRALIA GROUP A S X R E L E A S E VIRGIN AUSTRALIA GROUP PRELIMINARY OPERATING STATISTICS For the period 1 July December 2017 Operating Statistics H1FY18 H1FY17 Change Revenue Passengers 12,831,292 12,541, % Revenue Passenger Kilometres (millions) 20,211 19, % Available Seat Kilometres (millions) 24,665 24, % Revenue Load Factor 81.9% 81.3% 0.6 pts Operating Statistics H1FY18 H1FY17 Change Revenue Passengers 9,047,888 8,912, % Revenue Passenger Kilometres (millions) 10,884 10, % Available Seat Kilometres (millions) 13,434 13,730 (2.2%) Revenue Load Factor 81.0% 77.9% 3.1 pts Operating Statistics H1FY18 H1FY17 Change Revenue Passengers 1,345,595 1,298, % Revenue Passenger Kilometres (millions) 6,353 5, % Available Seat Kilometres (millions) 7,898 6, % Revenue Load Factor 80.4% 84.1% (3.7 pts) Operating Statistics H1FY18 H1FY17 Change Revenue Passengers 2,437,809 2,331, % Revenue Passenger Kilometres (millions) 2,974 3,204 (7.2%) Available Seat Kilometres (millions) 3,332 3,604 (7.5%) Revenue Load Factor 89.3% 88.9% 0.4 pts Notes: (1) Operating statistics are issued on a preliminary basis and are subject to change. Any adjustments made will flow through to year to date results. (2) Revenue Passenger Kilometres or RPKs is a non-statutory measure derived from the number of paying passengers multiplied by the number of kilometres flown on Virgin Australia or Tigerair Australia operated flights. (3) Available Seat Kilometres or ASKs is a non-statutory measure derived from total number of seats available for passengers multiplied by the number of kilometres flown on Virgin Australia or Tigerair Australia operated flights. (4) Revenue Load Factor is a non-statutory measure derived from RPKs as a percentage of ASK

6 Disclaimer The non-ifrs information defined below has not been audited or reviewed by KPMG. This document has not been audited or reviewed by KPMG; however, IFRS data has been derived from the Virgin Australia Holdings Limited Interim Financial Report for the half-year ended 31 December 2017 that has been reviewed by KPMG. Definitions Virgin Australia Domestic: Please refer to the Group s ASX Appendix 4D and Interim Financial Report for the first half of the 2018 financial year for the definition of this term. Virgin Australia International: Please refer to the Group s ASX Appendix 4D and Interim Financial Report for the first half of the 2018 financial year for the definition of this term. Tigerair Australia: Please refer to the Group s ASX Appendix 4D and Interim Financial Report for the first half of the 2018 financial year for the definition of this term. Velocity: Please refer to the Group s ASX Appendix 4D and Interim Financial Report for the first half of the 2018 financial year for the definition of this term. On Time Performance: Reflects data from Bureau of Infrastructure, Transport and Regional Economics (BITRE) about the percentage of all VA, TT, QF and JQ designated services flown in Australia from July 2017 to December 2017 inclusive that departed within 15 minutes of scheduled departure times. Underlying Profit / (Loss) Before Tax: is a non-statutory measure that represents statutory profit / (loss) before tax excluding the impact of onerous contract expenses, business and capital restructure and transaction costs (as defined below), share of net profit of equity-accounted investee and the impact of hedging and financial instruments (as defined below). This is a measure used by Management and Board of Virgin Australia Holdings Limited (VAH) to assess the financial performance of VAH. Business and capital restructure and transaction costs: is a non-statutory measure that includes business and capital restructure and transaction costs. Hedging and financial instruments: is a non-statutory measure that includes the following items outlined in Note 2 of the VAH Interim Financial Report. For the half-year ended 31 December 2017: time value movement on cash flow hedges (loss of $20.6m), unrealised ineffectiveness on cash flow hedges and non-designated derivatives (gain of $0.1m). For the half-year ended 31 December 2016, this item includes: time value movement on cash flow hedges (loss of $21.0m) and unrealised ineffectiveness on cash flow hedges and non-designated derivatives (gain of $0.1m). Segment Earnings Before Interest & Tax or Segment EBIT: is a non-statutory measure per Note 2 of the VAH Interim Financial Report for the half-year ended 31 December It is used by Management and VAH s Board as a measure to assess the financial performance of VAH and its individual segments. It is defined as Underlying Profit / (Loss) Before Tax (as defined above) excluding the impact of net finance costs.

7 Segment Earnings Before Interest & Tax Margin or Segment EBIT Margin: is a non-statutory measure derived from Underlying Earnings Before Interest & Tax (as defined above) divided by total segment revenue. RASK: is a non-statutory measure derived from segment revenue normalised for Cargo operations on a consistent basis divided by Available Seat Kilometres (defined below) of the regular passenger transport business. Group Cost per Available Seat Kilometre or Group CASK: is a non-statutory measure derived from consolidated segment revenue less consolidated Segment EBIT (as defined above) excluding fuel, hedging gains / (losses) on fuel, Velocity Frequent Flyer (VFF) segment costs, foreign exchange gains / (losses) on nonfuel costs and normalising for Cargo operations on a consistent basis divided by Available Seat Kilometres (defined above) of the regular passenger transport business. Group CASK is reported on a sector length adjusted basis. Yield: is a non-statutory measure derived from segment revenue normalised for Cargo operations on a consistent basis divided by Revenue Passenger Kilometres (defined below) of the regular passenger transport business. Financial Leverage: is a non-statutory measure and is defined as the ratio of Adjusted Net Debt (as defined below) to EBITDAR (as defined above). Adjusted Net Debt: is a non-statutory measure derived from Net Debt (as defined below) adding 7 times annual aircraft rentals. Net Debt: is a non-statutory measure derived from interest bearing liabilities less cash and cash equivalents. RBA: refers to the Reserve Bank of Australia Forward Looking Statements: This document contains certain forward looking statements. Forward looking statements can generally be identified by the use of words such as project, foresee, plan, expect, aim, potential, goal, target, intend, anticipate, believe, estimate, may, could, should, will or similar expressions. Indications of, and guidance on, future earnings and financial position and performance are also forward looking statements. Forward looking statements, opinions and estimates provided in this document involve a number of risks, assumptions and contingencies, many of which are beyond the Virgin Australia Group s control and which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. It is believed that the expectations reflected in these forward looking statements, opinions and estimates are reasonable, but there can be no assurance that actual outcomes will not differ materially from these statements. Such forward looking statements, opinions and estimates are provided as a general guide only, should not be relied on as an indication or guarantee of future performance and speak only as of the date of this announcement. You should not place undue reliance on forward looking statements. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness, likelihood of achievement or reasonableness of any of the information, forward looking statements, opinions and estimates contained in this document. To the maximum extent permitted by law, none of the Virgin Australia Group, its directors, employees or agents, nor any other person accepts any liability for any loss arising from the use of the information contained in this document. Except as required by law and ASX Listing Rules,

8 the Virgin Australia Group has no obligation to update publicly or otherwise revise any forward looking statement, opinion or estimate as a result of new information, future events or other factors. Nothing contained in this presentation constitutes investment, legal, tax or other advice. You should make your own assessment and take independent professional advice in relation to the information contained in this document and any action taken on the basis of that information. ASIC guidance In December 2011, ASIC issued Regulatory Guide 230. In order to comply with this Guide, Virgin Australia Holdings Limited is required to make a clear statement about whether information disclosed in documents other than the Virgin Australia Holdings Limited Interim Financial Report for the half-year ended 31 December 2017 has been audited or reviewed in accordance with Australian Auditing Standards. The non-ifrs information has not been audited or reviewed by KPMG. This presentation has not been audited or reviewed by KPMG; however, IFRS data has been derived from the Virgin Australia Holdings Limited Interim Financial Report for the half-year ended 31 December 2017 which has been reviewed by KPMG.