Half Year Results Analyst and Investor Presentation Tuesday 13 May 2014
Introduction Carolyn McCall Chief Executive Officer
PBT / seat Strategy is delivering Revenue performance in line with expectations Improving loss per seat and margins Relentless focus on maintaining cost advantage Continuing to develop customer offering Focus on #1 and #2 network positions Rigorous approach to capital discipline, 308 million returned to shareholders in the period 0-1 -2-3 -4-5 -6 2011 2012 2013 2014-2.04-1.70-3.1% -3.8% -3.87-5.47-7.6% -12.1% Loss per seat PBT margin 0% -2% -4% -6% -8% -10% -12% -14% PBT margin Improved winter performance 3
Financial review Chris Kennedy Chief Financial Officer 4
Loss before tax reduced Loss per seat bridge 0.38 0.07-1.70-2.04 0.07 0.45 0.93 0.29 0.83 1.60 H1 2013 Easter Revenue Fuel Costs De-icing and disruption FX easyjet Lean A320 Mix H1 2014 5
Financial results H1 14 H1 13 Change Total revenue 1,702 1,601 6.3% Fuel (537) (496) (8.3%) Operating costs excluding fuel (1,101) (1,042) (5.6%) EBITDAR 64 63 1.2% Ownership costs (117) (124) 6.1% Loss before tax (53) (61) 13.6% EBITDAR Margin 3.7% 3.9% (0.2ppt) Loss before tax margin (3.1%) (3.8%) 0.7ppt 6
Financial results: Loss after tax reduced m H1 14 H1 13 Change Loss before tax (53) (61) 13.6% Tax charge 12 14 (20.2%) Loss after tax (41) (47) 11.5% Loss per share 10.4p 12.0p 13.3% Return on capital employed* (1.2%) (0.9%) (0.3ppt) * Return on capital employed (ROCE) measure includes leases capitalised at 7 times The NPV ROCE measure with target liquidity included is shown in the appendix 7
Continuing revenue per seat growth m H1 14 H1 13 Change Passengers (m) 27.6 26.6 4.0% Load factor (%) 89.0% 88.6% +0.4ppt Seats (m) 31.1 30.0 3.6% Average sector length (km) 1,074 1,042 3.1% Total revenue ( m) 1,702 1,601 6.3% Total revenue per seat ( ) 54.80 53.39 2.6% @ constant currency ( ) 54.16 53.39 1.5% 8
easyjet strategy delivers further revenue growth Year on year drivers of revenue per seat change ( /Seat) 0.64 54.80 0.28 1.32 53.39 0.83 Disciplined capital allocation Revenue Management System initiatives Longer sector length Increased load factor Business Digital H1 13 Easter Underlying Trading Allocated Seating FX H1 14 9
Neutral currency impact Currency split total revenue Currency split total costs Euro 33% 34% Euro 44% 44% Sterling Sterling 26% 35% 1% 3% USD Other 8% Swiss Franc 1% 35% 25% USD 5% 1% Swiss Franc Other H1 14 currency impact favourable / (adverse) m EUR CHF USD Total Revenue 17 3-20 Fuel (1) - (14) (15) Costs excluding fuel (6) - 3 (3) Total 10 3 (11) 2 Average effective Euro rate for revenue for H1 14 was 1.19 (H1 13: 1.22) Average effective Euro rate for costs for H1 14 was 1.20 (H1 13: 1.22) 10
Impact of fuel H1 14 H1 13 Change B/(W) Fuel $ per metric tonne Market rate 994 1,041 47 Effective price 993 988 (5) US dollar rate Market rate 1.64 1.59 5 cents Effective price 1.58 1.61 (3 cent) Actual cost of fuel per metric tonne 629 613 (16) Cost per metric tonne is broadly flat, however changes in exchange rates have Footer driven box on intersect an of increase lines line h=8.03 in 9 and the v=8.75 actual with font 10pt cost Arial not per bold tonne 11
Cost per seat excluding fuel - key drivers Favourable/ (Adverse) Airports and Ground Handling Cost per seat ex fuel var at constant currency % var at constant currency 15.20 0.38 2.5% Crew 7.43 (0.23) (3.2%) Drivers Decrease in de-icing costs following the milder weather conditions Lean initiatives savings Annualisation of airport charges in Italy Cost impact of higher load factor Increase in salaries Longer average sector lengths Partially offset by lean initiative savings Navigation 4.23 (0.10) (2.4%) Longer average sector lengths Maintenance 3.34 (0.35) (11.8%) Overhead 5.25 (0.17) (3.4%) Increase in leased aircraft Increase in average fleet age Higher share price related employee costs IT and business related development investment. Ownership 3.75 0.27 6.4% Total CPS excluding fuel 39.20 (0.20) (0.5%) Increasing lease costs Offset by other financing 12
Management actions taken to control costs Cost per seat bridge 0.57 56.93 0.45 Airports & Ground Handling 0.29 Fuel burn initiatives - 0.07 0.07 0.09 56.50 0.44 0.29 0.38 0.40 55.43 H1 2013 Regulated Airports Inflation De-icing & disruption Fuel Market price FX Before easyjet Lean A320 Mix Other H1 2014 Management Action External factors Management actions 13
Increasing proportion of A320 s H1 14 H1 13 Change A319 (operating lease) 54 49 5 A319 (owned / finance lease) 99 105 (6) A319 Total 153 154 (1) A320 (operating lease) 18 14 4 A320 (owned / finance lease) 49 42 7 A320 Total 67 56 11 Total fleet 220 210 10 Operating lease 33% 30% 3ppt Percentage unencumbered 39% 40% (1ppt) Percentage of A320s in fleet 30% 27% 3ppt 14
Flexibility in fleet planning Maximum, minimum and base case fleet size under new framework agreement Contracted Max Base Case Contracted Min 289 290 303 300 226 226 263 239 248 248 263 239 235 234 238 269 269 272 277 284 284 191 187 177 170 173 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Flexible fleet arrangements to respond to appropriately to market conditions 1. At the end of the relevant Financial Year 2. Based on fleet plan base case 3. Maximum fleet does not include the purchase rights 15
Strong balance sheet, low gearing m H1 14 H1 13 Property, plant and equipment 2,416 2,192 Goodwill and other intangible assets 477 456 Other assets 399 554 Liabilities (excluding debt) (2,080) (1,968) 1,212 1,234 Debt 620 761 Cash and money market deposits (1,069) (1,194) Net cash (449) (433) Shareholders' equity 1,661 1,667 Capital employed 1,212 1,234 Gearing* 18% 11% *Gearing defined as (debt + 7 x annual lease payments cash) divided by (shareholders equity + debt +7 x annual lease payments cash) 16
Cashflow m Self funding ordinary dividend and capex 457 42 133 218 175 1,237* 53 57 43 2 20 1,069* Sep 2013 Operating loss Depn & Net working Tax, net Ordinary CAPEX Special Borrowings Restricted amort capital int & other dividend dividend Cash FX Mar 2014 * Includes money market deposits but excludes restricted cash 17
Fuel and foreign exchange hedging Six months ending 30 September 2014 Full year ending 30 September 2014 Full year ending 30 September 2015 Sensitivities Fuel requirement 80% @ $963 / metric tonne 79% @ $980 / metric tonne 67% @ $950 / metric tonne US dollar requirement Euro Surplus 91% @ $1.58/ 77% @ 1.20/ 89% @ $1.58/ 78% @ 1.20/ 75% @ $1.58/ 61% @ 1.17/ $10 per tonne change in fuel price will impact the second half pre-tax result by +/- $1.8 million One cent movement in the /$ will impact the second half pre-tax result by +/- 0.3 million One cent movement in the / will impact the second half pre-tax result by +/- 0.5 million Table data as of 9 May 2014 18
Business review Carolyn McCall Chief Executive Officer
Macro-economic environment in Europe is improving Real GDP Growth for easyjet markets 2014 2015 Scandinavia 4.0% (+3.3%) UK CEE Switzerland Germany 2.9% 2.5% 2.2% 2.0% Eurozone France Spain Italy 1.1% 0.7% 0.6% 0.6% Scandinavia 4.7% (+3.3%) CEE UK 2.8% 2.7% Germany Switzerland 2.1% 2.1% Eurozone Spain France Italy 1.5% 1.2% 1.1% 1.0% LCC # Intra European Seats (m) 98 Low-cost carriers European growth 17 2% 124% 22% 6% 220 268 283 2016 UK CEE Germany Switzerland Eurozone Spain France Italy 1.4% 1.2% 1.9% 1.7% 1.7% 2.2% 3.0% 3.0% 4.7% (+3.3%) 2003 2007 2010 2013 Strong opportunity for easyjet to continue to deliver sustainable growth and returns for shareholders Source: Bloomberg 20
(Number of aircraft) (Million) Structural growth opportunities remain available Supply and demand in balance in European short-haul aviation Currently in balance and expected to remain so for some time IATA forecast an incremental 60 and 70 million passengers by 2018 in European short-haul aviation An additional 450 narrow body equivalent aircraft expected to enter the market by 2018 600 400 200 0 6,000 4,000 Passengers on European short-haul c.+3% 2014 2015 2016 2017 2018 Source: IATA Narrow-body aircraft growth in Europe c.+3% 2,000 0 2014 2015 2016 2017 2018 Footer box on intersect of lines line h=8.03 9 and v=8.75 Source: with font easyjet 10pt Arial not bold Low cost carriers remain structural leaders and will drive growth in European short-haul aviation 21
Brand awareness (%) ROCE Load factor easyjet is best positioned Market positions No.1 No.2 Other 19m 27% 33m 48% 17m 24% Aircraft utilisation 2 Asset utilisation 14 Load Factor 12 10 8 6 4 2 0 Aircraft Utilisation 92% 90% 88% 86% 84% 82% 80% 78% 76% 74% 72% 70% Majority of easyjet s capacity is in airports where it has No.1 and No.2 positions 1 Drive demand Brand Affinity UK Italy France Germany 100 95 Switzerland 25.0% 20.0% Balance sheet strength 90 85 80 75 EZJ 15.0% RYA LHA 10.0% Footer box on intersect of lines line h=8.03 9 and v=8.75 with 5.0% font 10pt Arial not bold IAG Vuel 3 Norw Gearing 0 2012 2013 2014 - AFKLM AB -20.0% - 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% -5.0% 1.Based upon OAG data. Departure capacity for 12 months ending 31/03/2014 2.Aircraft utilisation is based average block hours per aircraft per day. 3 Vueling and Air Berlin results are based upon y/e 31/12/2012. 22
Capacity increasing but still disciplined Capacity growth H2 14 vs. H2 13 (OAG) + 3.0 +3.0ppt - 0.8 ppt 6.7% Summer 13 5.8% 5.0% 3.7% Flybe slots 2.6% Q3 Summer 14 + +3.9ppt 2.9% +3.0ppt + 3.5 ppt 4.1% 0.6% -1.0% Capacity change total Short haul market Short haul market easyjet capacity change Competitors on easyjet markets easyjet markets (city to city pairs) Increased capacity on easyjet routes Capacity on easyjet markets Source: Market share data from OAG scheduled data, as at 30 th April 2014, easyjet routes based on internal easyjet definition. 23
easyjet continues to make travel easy and affordable Strategy relevant for current environment CAUSE Make travel easy & affordable 1. Build strong number 1 and 2 network positions 2. Maintain cost advantage 3. Drive demand, conversion and yield across Europe 4. Disciplined use of capital Platform to deliver growing and sustainable returns 24
Millions 1. Strength of the network - Gatwick 1. Network easyjet s performance at Gatwick provides clear evidence that a #1 position provides the platform to deliver growth and sustainable returns easyjet at Gatwick Large and affluent core catchment area c.12.2 m passengers easyjet carries c.45% of total passengers Strong slot position - first wave 16 14 12 10-8 6 4 2 Short haul capacity movements at Gatwick (1) Aer Lingus Thomson Airlines Thomas Cook Airlines Ryanair Norwegian Air Shuttle Monarch Airlines Easyjet British Airways Opportunity Growth Returns Cost advantage vs. key competitors Slot portfolio Strong brand Continue to optimise slot portfolio Develop Flybe slots Continue to allocate capacity to routes with highest potential for returns 7 year commercial deal with airport (1) Airlines displayed represent >90% of capacity at LGW in 2013. Source: OAG, easyjet 25
1. Building presence - France 1. Network easyjet has grown and transformed its presence and perception in France Strong public and political reputation Opportunity Built a strong presence in international and domestic market Outbound demand in regional France Growth Now operate 5 bases in France Passenger growth of 48% over last 5 years Increasing brand affinity and perception Brand awareness %* (H1 2012-2014) 90% 98% 98% Returns Continues to be core market and strong focus for easyjet Further opportunities for growth 2012 2013 2014 *Source: 2013 and 2014 data based on Millward Brown research commissioned by easyjet. 2012 data normalised based on Gfk Csat 26
1. New opportunities across Europe 1. Network Disciplined growth in core markets at the heart of easyjet s strategy LCC Opportunity Opportunities available in core markets for easyjet Recent base openings in Naples and Hamburg Growth 2 aircraft in Naples and 2 in Hamburg Now operate 3 bases in Italy and 2 in Germany Returns Platform for further growth across Europe Focus on capital allocation and disciplined profitable growth 27
1. Investing for growth 1. Network Other LCC 51m seats Non-LCC transfer (est) 26m seats EZJ 46m seats Non-LCC P2P (est) 86m seats Overall c. 6.7% capacity growth over Summer 14 (before disruption) United Kingdom +6.3 % 2.6% 0.6% 6.3% Market growth Competitor growth on easyjet s markets easyjet growth in the market Germany +10.0 % 6.9% 5.5% 10.0% France +7.4 % 4.4% 3.1% 7.4% Switzerland +8.8% 7.4% 5.8% 8.8% Spain +4.1 % 3.7% 3.5% 4.1% Italy +9.0 % 6.3% 5.0% 9.0% Source : OAG, scheduled data and Internal easyjet projection April 2014. Country capacity growth is based on network touching seats. 28
2. Maintain cost advantage - Airports 2. Cost Advantage Commercial deals at key airports 7 year deal 10% increase in traffic in next 12 months 10 year growth deal Double passengers using the airport to over 9 million per year Long term growth deal Ensuring price certainty over 5 year period 29
Fleet Size 2. Maintain cost advantage - Fleet 2. Cost Advantage Delivering sustainable cost savings 300 250 200 Improving the fleet mix A320 aircraft providing a 7% - 8% cost per seat saving over an A319 150 100 50 0 FY13 FY14 FY15 FY16 FY17 FY18 FY19 A320 NEO A320 Shk A320 A319 Continued innovation New generation A320neos to enter the fleet in 2017 providing a further 4%-5% cost per seat saving over a current generation A320 Light-weight seats Light-weight trolleys Sharklets Innovative thinking to drive long-term, sustainable savings, benchmarked against the best in class 30
3. Continuing to lead the way in Digital 3. Demand Delivering an enhanced customer experience 31
3. Developing the product 3. Demand Key partnerships helping develop the easyjet product 7 new websites in key markets with extensive portfolio of hotels across the 7 countries Large UK market of 24 million holidaymakers (9 million package) Large European potential (85% of all European holidaymakers remain within Europe) & Excellent choice and competitive prices for easyjet customers from the world leading accommodation provider Convenience for customers with best in class website user experience and ongoing innovation Product supply from the European leader in car rental offering coverage at all easyjet current and future locations Unique customer benefits available exclusively to easyjet customers, offering flexibility and speed of service Opportunity to develop the easyjet product offering 32
3. Continuing to drive Business travel 3. Demand Network Distribution Enhanced route offerings including additions such as Gatwick to Brussels, Paris and Tel Aviv Base openings at Hamburg and Naples, increasing capacity and adding new routes All 3 GDS partners are actively driving adoption of their improved booking solutions for easyjet with the travel management companies Agreements with all the major travel management companies across Europe Capability New Director of Business started 1 March 2014 New European Head of Sales Platform in place to develop the business passenger initiative 33
Returns 4. Track record of disciplined use of capital 4. Capital Discipline Route performance Improved returns year on year Age of routes < 3 Years H13 (12 m/e March 13) CPBH performance by route weighted by capacity - FY 2013-14 (rolling 12m to Mar-14) > 3 Years H14 (12m/e March 14) ROCE 12% Routes Capital returns to shareholders ROCE progression Special dividend (m) 308m 17.4% Ordinary dividend (m) 196m 85m 3.6% 6.9% 9.8% 11.3% 2011 2012 2013 2009 2010 2011 2012 2013 ROCE for route performance and improved returns analysis defined as normalised profit after tax divided by average net debt plus average shareholders equity 34
H2 forward bookings H2 bookings slightly ahead of prior year % seats sold * 87% 90% Summer 13 Summer 14 50% 51% Apr May Jun Jul Aug Sep H2 H2 (Apr 14 to Sep 14) as at 9 May 2014 35
Outlook Capacity (seats flown) H2 c.+6.7% (before disruption) Revenue per seat (constant currency) H2: low single digits percentage increase Cost per seat ex fuel (constant currency) FX H2 c.+ 2% (assuming normal disruption levels and constant load factors) H2: 5 million to 10 million favourable movement from foreign exchange rates Fuel H2: unit fuel costs up to c. 10 million adverse (assuming within $900 $1,000 metric tonne range) easyjet will continue to invest in its core markets so that it can offer its customers Footer low box fares on intersect to of great lines line h=8.03 destinations 9 and v=8.75 with with font 10pt friendly Arial not bold service and it can continue to win in a more competitive market. This means easyjet is well placed to continue to deliver sustainable returns and growth for shareholders Rates at 9 May 2014 /USD: 1.6896; /EUR: 1.2245; Jet USD 964 per metric tonne 36
Summary - growth opportunities available to easyjet Demand and supply in European short-haul aviation are in balance and expected to remain so for some time easyjet s strong #1 and #2 network positions continue to deliver sustainable returns Disciplined growth at the heart of easyjet s strategy easyjet has the winning model with more structural opportunities available in core markets Strong opportunity Footer box on intersect for easyjet of lines line h=8.03 to 9 and continue v=8.75 with font 10pt to Arial deliver not bold sustainable growth and returns for shareholders 37
Q & A 38
APPENDIX 39
ROCE Calculation including 7x lease adjustment Reported m H1 14 H1 13 Earnings before interest and tax reported (53) (40) Interest element of operating lease payments 20 16 Earnings before interest and tax - adjusted (33) (24) Tax 21% 23% Normalised operating profit after tax (NOPAT) (26) (19) Average shareholders equity reported 1,839 1,731 Average net cash reported (504) (180) Opening capitalised leases 714 665 Closing capitalised leases 805 644 Average capitalised leases 760 655 Average capital employed 2,095 2,206 Return on capital employed 7x basis (1.2%) (0.9%) 40
ROCE Calculation NPV and Target liquidity Proforma m H1 14 H1 13 Earnings before interest and tax reported (53) (40) Interest element of operating lease payments 12 9 Earnings before interest and tax adjusted (41) (31) Tax 21% 23% Normalised operating profit after tax (NOPAT) (32) (24) Average shareholders equity reported 1,839 1,731 Adjustment to shareholders equity (13) (41) Average shareholder s equity adjusted 1,826 1,690 Average net cash reported (504) (180) Increase in debt associated with capitalising leases 401 363 Target liquidity adjustment 874 848 Average net debt adjusted 771 1,031 Average capital employed 2,597 2,721 Return on capital employed NPV basis (1.2%) (0.9%) 41
RASK and CASK m H1 14 H1 13 Change B/(W) Total revenue per seat 54.80 53.39 2.6% at constant currency 54.16 53.39 1.5% RASK at constant currency (pence) 5.04 5.12 (1.6%) Total cost per seat ex fuel 39.20 38.89 (0.8%) at constant currency 39.09 38.89 (0.5%) CASK ex fuel at constant currency (pence) 3.64 3.73 2.5% 42
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 performance, financial condition and business is or may be a forward-looking statement. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected or implied in any forwardlooking statement. These risks and uncertainties include, among other factors, changing economic, financial, business or other market conditions. These and other factors could adversely affect the outcome and financial effects of the plans and events described in this presentation. As a result, you are cautioned not to place any reliance on such forward-looking statements. The forward-looking statements reflect knowledge and information available at the date of this presentation and the Company undertakes no obligation to update its view of such risks and uncertainties or to update the forward-looking statements contained herein. Nothing in this presentation should be construed as a profit forecast or profit estimate and no statement in this presentation should be interpreted to mean that the future earnings per share of the Company for current or future financial years will necessarily match or exceed the historical or published earnings per share of the Company. 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 net worth bodies corporate, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. Persons within the United Kingdom who receive this communication (other than those falling within (i) and (ii) above) should not rely on or act upon the contents of this communication. Nothing in this presentation is intended to constitute an invitation or inducement to engage in investment activity for the purposes of the prohibition on financial promotion contained in the Financial Services and Markets Act 2000. This presentation has been furnished to you solely for information and may not be reproduced, redistributed or passed on to any other person, nor may it be published in whole or in part, for any other purpose. This presentation does not constitute or form part of, and should not be construed as, an offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities of easyjet plc ( easyjet ) in any jurisdiction nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. This presentation does not constitute a recommendation regarding the securities of easyjet. Without limitation to the foregoing, these materials do not constitute an offer of securities for sale in the United States. Securities may not be offered or sold into the United States absent registration under the US Securities Act of 1933 or an exemption there from. easyjet has not verified any of the information set out in this presentation. Without prejudice to the foregoing, neither easyjet nor its associates nor any officer, director, employee or representative of any of them accepts any liability whatsoever for any loss however arising, directly or indirectly, Footer from box on any intersect reliance of lines on this line presentation h=8.03 9 and v=8.75 or its contents. with font 10pt Arial not bold This presentation is not being issued, and is not for distribution in, the United States (with certain limited exceptions in accordance with the US Securities Act of 1933) or in any jurisdiction where such distribution is unlawful and is not for distribution to publications with a general circulation in the United States. By attending or reading this presentation you agree to be bound by the foregoing limitations. 43