2006 interim results - easyjet/media/files/e/easyjet/... · 2016-11-11 · 4balance sheet and cash...
TRANSCRIPT
1
2006 Interim Results
03 May 2006
2
Unlocking our potential
Strong foundation– Powerful business model– Great brand– Strong market presence and scale
The key to the future– Building a strong leadership team– Clarity of customer proposition and network– Rigorous detailed management on individual route
performance and costs
Encouraging early signs
3
Priorities and focus
Revenue Costs
NetworkPeople
Rigorous detailed review of individual route performance and cost management
4
Highlights
Good first half performance despite high fuel costs: pre-tax loss better than expectations at £40m
Cost reduction momentum continues: cost per seat ex-fuel down 6% in H1
Revenue performance better than expected: passenger revenue -1.5% per seat, flat adjusting for Easter; ancillary revenue growth excellent +31% per seat
Detailed review underway of network development and yield management
Guidance upgraded with full year pre-tax profit growth now projected at 10% - 15%
5
Profit and loss account
£m H1 2006 H1 2005 Change
Total revenue 630 553 + 14%
Operating costs (602) (520) + 16%
EBITDAR 27 34 - 19%
Finance and ownership (68) (55) + 22%
Pre-tax loss (40) (22) + 86%
Margin (6.4%) (3.9%) -2.5pp
Encouraging H1 but impact of fuel & Easter resulting in margin dilution
6
Profit build-up: contribution per seat
-60
-30
0
30
60
H1 200
5Volu
mePax
rev
Ancil r
evOps
cost
Overhe
adOwne
rship
Fuel
H1 200
6
(£22m)
(£5m)£19m
£20m
(£55m)
£14m
(£9m)(£3m)(47p)
76p
(301p)
112p
(28p)102p
(£40m)
£m
7
Passenger revenue: Easter impact largely offset
H1 2006 H1 2005 Change
Passengers (m) 14.9 13.5 + 10%
Load factor 81.8% 83.8% -2.0pp
Seats (m) 18.2 16.1 + 13%
Pax revenue (£m) 571 514 + 11%
Per seat £31.44 £31.91 - 1.5%
8
Ancillary revenues: strong performance
H1 2006 H1 2005 Change
Ancillary revenue (£m) 59 40 +47%
Per seat £3.23 £2.47 +31%
Change per seat H1 2006Card fees + 15%
Excess baggage / Sporting goods + 64%
Change fees / Rescue fees + 27%
Partner + 70%
In-flight - 8%
Partner revenues show significant improvement
Ancillary revenue per seat in order of revenue contribution
9
Cost per seat: falling costs amid significant fuel rise
Better
Worse
Cost/seat H1 2006
Change vs H1 2005
Change vs H1 2005
Other costs £ 2.32 - 28% - £ 0.92Maintenance £ 2.83 - 21% - £ 0.77Selling £ 1.43 - 12% - £ 0.20Airports / handling £ 10.29 - 2% - £ 0.16Navigation £ 3.01 - 3% - £ 0.09Crew £ 4.14 0% - £ 0.00Ownership £ 3.72 + 8% + £ 0.28Fuel £ 9.14 + 49% + £ 3.01
Total £ 36.89 + 3% + £ 1.17Total (ex fuel) £ 27.75 - 6% - £ 1.84
10
Managing costs: selling and other
-£1.50
-£0.75
£-
£0.75
£1.50
2002 2003 2004 2005 H1 2006
Q1 restructuring completed: 10% fall in head office headcountContinued benefit from reduced rates for aircraft insuranceReduction in consultancy costs of £3m compared to H1 2005
- £1.12
Change in selling and other cost per seat
Focus on efficient low cost head office
11
Managing costs: maintenance
-£1.50
-£0.75
£-
£0.75
£1.50
2002 2003 2004 2005 H1 2006
SRT contract delivering significant savings on A319 maintenanceReduction in fleet mix of 737-300s continuing: all 300s will have left the fleet by early FY 2007Higher proportion of owned A319s reduces maintenance reserves
- 77p
Change in maintenance cost per seat
Engine maintenance contracts being reviewed
12
Managing costs: airports
-£1.50
-£0.75
£-
£0.75
£1.50
2002 2003 2004 2005 H1 2006
Continued efforts to offset inflation at airportsVolume and growth discount savings at Geneva and BaselProgress made on self-handling in Spain: currently self-handling in Asturias and Almeria; Palma, Malaga and Alicante self-handling will commence in H2
- 16p
Change in airport / handling cost per seat
Focus on quality of contribution going forward
13
Managing costs: crew
-£1.50
-£0.75
£-
£0.75
£1.50
2002 2003 2004 2005 H1 2006
Crew pay deal underway: above inflation increases offered reflecting productivity improvements and market adjustmentsProposed 2 year deal will increase unit costs 11p / seat over term: impact of this in H1 offset by efficiency improvements
0p
Change in crew / training cost per seat
Pilot and cabin crew pay negotiations continuing
14
Ongoing challenge to optimise fleet mix and financing
Managing costs: aircraft ownership
-£1.50
-£0.75
£-
£0.75
£1.50
2002 2003 2004 2005 H1 2006
+46p from increase in US interest rates and strengthening USDImproved financing and fleet mix helping to offsetBetter end of lease management delivering further savingsIncrease in owned A319s from 18 to 26 (17% to 23%); 3 A319s funded from operating cashflow
Change in aircraft ownership cost per seat
+ 28p
15
250
300
350
400
450
500
550
600
650
700
750
Oct 04 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06 Apr 06 Jul 06
Managing costs: fuel hedging
Jet A1 price per tonne (US$)Collar ceiling weighted averages
Collar floor weighted averages
H2 $676 / mt
H2 $603 / mt
Amount hedged:H2 44%
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1.50
1.60
1.70
1.80
1.90
2.00
Oct 04 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06 Apr 06 Jul 06
US$:£
Managing costs: US$ hedging
Amount hedged:H2 80%
H2 $1.83
H2 $1.78
Collar ceiling weighted averages
Collar floor weighted averages
17
Net income and EPS
£m H1 2006 H1 2005 Change
Pre-tax loss (40) (22) + 86%
Tax 11 6 + 84%
Net loss (29) (15) + 87%
EPS (fully diluted) (7.2p) (3.9p) + 86%
Full year effective tax rate 28% FY 2006
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Strong balance sheet
£m Mar 06 Sep 05Aircraft (inc. deposits) 512 421Cash 726 667Goodwill 310 310Other assets 303 232Total assets 1,851 1,630
Debt 299 217Other liabilities 695 550Shareholders’ funds 857 863Total equity and liabilities 1,851 1,630
Gearing 32% 31%
Gearing defined as (debt + 7 x annual lease payments – cash) divided by (shareholders funds + debt + 7 x annual lease payments – cash)
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Good cash generation*
350
450
550
650
750
850
Cash 9
/05 EBITDep
n / am
ortW
k cap
ital
Tax / i
nteres
tFina
ncing
Net ca
pex
Cash 3
/06
£667m
£726m
(£107m)
£68m
£8m£126m
£11m
(£47m)
* March 2006 and September 2005 cash balances are shown as reported under IFRS.
20
Conclusion
Encouraging performance for H1
Excellent progress on ancillary revenues
Relentless approach to costs now and going forward
Fuel exposure continues; 44% H2 cover but limited cover beyond
Balance sheet and cash flow remain strong
21
Business ReviewAndy Harrison
22
Priorities and focus: network
Revenue Costs
NetworkPeople
Rigorous detailed review of individual route performance and cost management
23
Network development: capacity growth
Aircraft owned / leased at end of financial year
FY 2005 FY 2006 FY 2007 FY 2008Actual ExpectedExpectedExpected
109 122 138 154
+ 15%Seats flown + 15% + 15%
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Network development: operated fleet by base
Base 9/05 9/06 Base 9/05 9/06
Gatwick 16 + 2 Belfast 5
Luton 15 + 2 Dortmund 3 + 1
Stansted 13 Basel 3 + 1
Bristol 8 + 1 Glasgow 3 + 1
Berlin 7 + 1 Edinburgh 3
Liverpool 7 + 1 E Midlands 3
Newcastle 6 Malpensa + 3
Paris Orly 5 Tactical 7 - 1
Geneva 5 + 1 Total 109 122
25
Network development: European expansion continues
Base opened March 2006
26
Network development: new non-EU routes
Seats on sale from March 2006
27
Network development: key priorities
0%
20%
40%
60%
80%
100%
2003 2005
Frequency increase Join the dots New airports
69%
16%
27%
43%
41%4%
2003 - 2005 network development concentrated on new airports: looking forward we expect a higher proportion of growth through added frequencies and depth to the existing network
Ongoing review looking at quality of schedule and active management of route by route performance
Focus on managing the diversity of the network: primary airports, secondary airports, sun and ski routes
New Capacity Growth 2003 and 2005
28
Priorities and focus: revenue
Rigorous detailed review of individual route performance and cost management
Revenue Costs
NetworkPeople
29
Revenue: attractive options for business
Internet check-in:
No charge
Hand baggage only
Straight to security
At gate 15 minutes before flight
Apr 2006 available on 50% of departures
Unlimited hand luggage allowance
Change to earlier flight for free
Fixed rescue fee with automatic transfer to next flight
30
Revenue: product innovation
Speedy boarding trial: started March 2006, extended to 10 new routes from May 2006
£10 return to board before category A
Freedom to choose your seat
Uptake at point of sale or through ‘manage my booking’
Small scale early trial demonstrating potential
31
Revenue: maximising ancillaries
Dynamic packaging resulting in year on year improvement to conversion rates:
insurance conversions up significantly since spring 2005
car conversions doubled in same period
Improved collection process throughout the network:
excess luggage
change fees
rescue fees
Addressing in-flight
Introduction of debit card charge in line with other low cost carriers
32
Revenue: fare optimisation
In absolute terms fares remain low: median £38, mean £45
Low pricing optimised by route
Increasing resource focused on yield management
Route by route reviews
0
10
20
30
40
50
Median Mean
easyJet Fare: Apr 05 - Mar 06
£38 £45
Typical Fare Average Fare
33
Priorities and focus: people
Revenue Costs
NetworkPeople
Rigorous detailed review of individual route performance and cost management
34
People: a key point of difference
35
2006 outlook
Passenger revenue: we now anticipate full year passenger
revenue per seat to be broadly in line with 2005
Ancillary revenue: continued focus and new initiatives should
result in around 20% growth per seat for the full year
Cost ex-fuel: down by approximately 5% per seat
Fuel: we assume the price of Jet fuel will stay around current
levels
Profit before tax: we expect pre-tax profit growth for the full
year to be in the range of 10% to 15%
Appendix
37
Operating statistics
H1 2006 H1 2005 Change
Seats (m) 18.2 16.1 + 13%
Load Factor (%) 81.8 83.8 - 2.0pp
Passengers (m) 14.9 13.5 + 10%
ASKs (m) 16,672 14,526 + 15%
RPKs (m) 13,642 12,150 + 13%
Stage Length (km) 918 903 + 2%
Sectors 118,782 106,705 + 11%
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Calculated amounts
H1 2006 H1 2005 Change
Total Revenue per pax (£) 42.39 41.03 + 3%
Cost / ASK (p) 4.02 3.96 + 2%
Cost / ASK (ex fuel) (p) 3.02 3.28 - 8%
39
H1 2005 profit & loss: summary IFRS adjustments*
£m UK GAAP Change IFRS
Total revenue 553 - 553
Operating costs (516) + 3 (519)
EBITDAR 37 - 3 34
Finance and Ownership (60) - 5 (55)
Pre-tax loss (31) + 9 (22)
Margin (5.6%) 1.7pp (3.9%)
Elimination of goodwill amortisation is the key difference
* Further details of the changes under IFRS are given in the full accounts and in the 20 January 2006 release “Explanation of the financial impact following adoption of International Financial Reporting Standards (“IFRS”)”
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