full year results analyst & investoranalyst & investor...
TRANSCRIPT
Full year resultsAnalyst & InvestorAnalyst & Investor
presentationpresentation
Tuesday 15 November 2011Tuesday 15 November 2011
11
IntroductionCarolyn McCallChi f E tiChief Executive
2
Agenda
1. Review of F’11
2. Financial review
3. Looking forward
33
Operational performance fixed
• First wave focus
On Time Performance LGW and Network
70%
80%
90%
• Firebreaks in schedule
• Proactive disruption 30%
40%
50%
60%
70%
• Proactive disruption
management
I d t dbLGW Network
• Improved standby
levelsFlightstats.com 12 months to September
• Better communication
and engagement
44Note: No independent data for OTP available for Ryanair since May-11
Customer satisfaction improved
Summer 2010 vs. 2011• Overall satisfaction quarter on quarter has increased from 66% to 80%• Satisfaction with on time performance has increased from 60% to 80%• Increase in likelihood to recommend up from 74% to 83%
Overall satisfaction on this occasion
Likelihood torecommend
Satisfaction with punctuality
55Source: GfK customer satisfaction tracking. Base sizes : Qtr. 3 2010: 20,624 Qtr. 3 2011: 28,511
Robust operation
Customer satisfaction
Returns to share holders
Our people –driving performance
d d li i hand delivering the strategy
Cost reduction Marketing & CRM
RevenueRevenue growth
6
Finance reviewChris Kennedy
Chief Financial Officer
7
Summary• Revenue improvement driven by:
• Improvements in revenue
£ per seat
management
• Increase in customer satisfaction
St H2 ill f0.41
0.88 0.00 3.97
• Strong H2 ancillary performance
• Capacity investments maturing
• Fuel unit costs up £100m
3.36
0.07 1.801.59
2011 PBT per seat
Other c osts
DisruptionCrewFuel (inc c urrencyi t)
R ev enueCurrency imp act
( f l)
2010 PBT per seat *• Fuel unit costs up £100m
• Planned crew investment has delivered operational robustness
impact)(exc fuel)
and lower disruption costs
• Cost savings in ground handling and maintenance but increases atand maintenance but increases at regulated airports
• ROCE up 3.9ppt to 12.7%
88* 2010 profit before tax per seat excludes the impact of £27m cost of volcanic disruption and a £7m loss on the disposal of 4 A321 aircraft
Financial results£m F ’11 F ’10 Change
Total revenue 3,452 2,973 16.1%
Fuel (917) (733) (25.0)%
Operating costs excluding fuel * (2,067) (1,851) (11.7)%
EBITDAR 468 389 20.4%
Ownership costs * (220) (201) (6.1)%
Profit before tax (underlying) * 248 188 31.5%
Underlying cost adjustments * (34)Underlying cost adjustments - (34) -
Profit before tax (reported) 248 154 60.8%
Tax charge (23) (33) 29.4%
Profit after tax 225 121 86.0%
PBT margin 7.2% 6.3% 0.9 ppt
Earnings per share 52.5p 28.4p 84.9%
Dividend per share 45.4p - -
Return on capital employed 12 7% 8 8% 3 9 ppt
99
Return on capital employed 12.7% 8.8% 3.9 ppt
* Underlying cost adjustments:F’10 operating costs exclude £27m cost of volcanic disruptionF’10 ownership costs exclude £7m loss on the disposal of 4 A321 aircraft
Strong expansion in second half margins
£m F ’11 F ’10 Change
Total revenue 2,186 1,802 21.3%
Fuel (534) (428) (24.8)%
Operating costs* (1,139) (1,008) (12.9)%
EBITDAR* 513 366 40 2%EBITDAR* 513 366 40.2%
Finance and ownership* (112) (99) (13.2)%
Pre-tax profit* 401 267 50.2%
Seats - m 34.4 30.8 11.8%
Fuel cost per seat - £ 15.53 13.91 (1.62)
Pre-tax profit per seat* - £ 11.66 8.68 2.98
1010* Underlying number - operating costs ex fuel exclude the £27m of additional cost incurred due to volcanic disruption. Finance and
ownership excludes a £7m loss-on-disposal of 4 aircraft in 2010.
Currency impact
Currency split – total costs
Currency split – total revenue
35% 35%EuroUS Dollar
47% SterlingEuro 44%35%
1%
35%
7%Swiss Franc
2%
Other
5%
Sterling
1%
24%OtherSwiss Franc
Swiss Franc Sterling
F ‘11 currency impact favourable / (adverse)CHF EUR USD
Revenue 24 - -Fuel - - (17)Costs excluding fuel (21) - (8)
1111
Improved revenue performance
£m F ’11 F ’10 Change
Passengers (m) 54.5 48.8 11.8%
Load factor (%) 87.3% 87.0% 0.3ppt
Seats (m) 62.5 56.0 11.5%
Average sector length (km) 1,110 1,123 (1.2)%g g ( ) , , ( )
Total revenue (£m) 3,452 2,973 16.1%
Total revenue per seat (£) 55.27 53.07 4.1%
@ constant currency (£) 54 87 53 07 3 4%@ constant currency (£) 54.87 53.07 3.4%
Revenue per seat at constant currencyCapacity growth
9 4% 11.5%17.1%
14.6%7 7%
86.3%91.2%
87.3%84.1%86.7%
y gLoad factor
3.4%9.4%
4.6%
-4.5%
0.3%
7.3%7.7%
1212
Q3’11 Q4’11 F’11Q2’11Q1’11
Passenger and ancillary revenues
£m F ’11 F ’10 Change
Passenger revenue (net of passenger taxes) (£m) 2,732 2,402 13.8%
Gross passenger revenue per seat (£) 50.01 48.09 4.0%
Net passenger revenue per seat (£) 43.75 42.87 2.1%
Ancillary revenue incl. checked bag (£m) 719 571 25.9%y g ( )
Ancillary revenue per seat (£) 11.52 10.20 12.9%
£ change in ancillary revenue per seat vs. F ‘10
Bag charging 0.18
Fees and charges 1.27
Partner and in–flight revenues (0.13)
Total 1.32
Strong performance in the UK and improving performance in Europe
1313
Seat and non-seat revenue
£ per seat F ’11 F ’10 Change
Gross seat revenue 60.51 57.14 5.9%
Passenger taxes (6.26) (5.22) (19.8)%
Net seat revenue 54.25 51.92 4.5%
Non-seat revenue 1.02 1.15 (11.3)%( )
Total revenue 55.27 53.07 4.1%
Seat revenue
Ticket price
Non-seat revenue
Partner deals, e.g. Europcar
Booking fees
Checked bags
In-flight Sales
Insurance
Speedy boarding
1414
Impact of fuel
F’11 F’10Change
B/(W)
F l $ iFuel $ per metric tonne
Market rate 959 688 (271)
Effective price 818 732 (86)
US dollar rate
Market rate 1 61 1 55 6 centsMarket rate 1.61 1.55 6 cents
Effective price 1.61 1.64 (3 cents)
Actual cost of fuel £ per metric tonne 508 445 (63)
£63 t i t i l t £100 t £1 59 t£63 per metric tonne increase equal to £100m cost or £1.59 per seat, volume impact is additional £84m
1515
Fuel and foreign exchange hedging
Fuel requirement US dollar requirement
Euro surplus
Half year ending 31 March 2012 80% at $950/tonne 80% at $1.60/£ 76% at €1.13/£
Full year ending 30 September 2012 73% at $956/tonne 69% at $1.59/£ 71% at €1.13/£
Full year ending 30 September 2013 48% at $979/tonne 46% at $1.61/£ 50% at €1.14/£
Sensitivities:
• $10 movement per metric tonne impacts F’12 PBT by $4.7m
$ b• One cent movement in £/$ impacts F’12 PBT by £2.6m
1616
ETS Exposure
• Granted a level of free permits annually
• Free permits calculation based on 2010 Revenue Tonne KilometresFree permits calculation based on 2010 Revenue Tonne Kilometres (RTKs) and the EU benchmark
RTK (‘000s) * Benchmark (CO2 / RTK) = Free CO2 (metric tonnes)
• Exposure driven by excess requirement and the carbon price
RTK ( 000s) Benchmark (CO2 / RTK) Free CO2 (metric tonnes)
5.8 * 0.6797 = 4.0
• Exposure driven by excess requirement and the carbon price
• Estimate need to buy €16m (£14m) ETS credits in calendar 2012*
ETS exposure Carbon
(Metric tonnes)Value*
(Euro m)
Free permits 4.0 43
Requirement 5.4 59
Exposure 1.4 16
1717*Assuming €10.90 per tonne of carbon; and £/€ 1.15 exchange rate
Cost per seat excluding fuel - key driverscost increase shown as “+”; cost decrease as a “-”
Movement
F‘10Cost per seat (£)
Reported**Constant currency Drivers
versus F‘10 seat (£) currency
Ground Operations 14.79 +3.0% +1.5% Significant regulated price increases at LGW and AENA airports in Spain
Offset by ground handling and savings in non-regulated airports
Crew 6.51 +8.6% +6.9% Planned increase in standby levels
Pay increase averaging 2.75%
Navigation 4 56 0 2% 0 7% Regulated price increases offset byNavigation 4.56 -0.2% -0.7% Regulated price increases offset by changes in route mix
Maintenance 2.86 -9.3% -9.8% Cost reduction initiatives more than offset supplier price increases
Overhead * 4.31 -13.1% -12.8% 46% reduction in disrupted sectors (excluding volcanic eruption in 2010)
Brand licence 0.06 nm nm
Ownership * 3.53 -1.4% -4.9% Further exits of expensive leasedOwnership 3.53 1.4% 4.9% Further exits of expensive leased Boeing/GB aircraft
Continuing benefit from variable rate leases priced off USD LIBOR
Total CPS excluding fuel* 36 62 0 0% - 1 3% Cost reduction
1818* Underlying cost adjustments:F’10 overhead costs exclude £27m cost of volcanic disruptionF’10 ownership costs exclude £7m loss on the disposal of 4 A321 aircraft
Total CPS excluding fuel 36.62 0.0% 1.3% Cost reduction
Fleet profile
Sep ‘11 Sep ‘10 Change
A319 (operating lease) 56 46 10A319 (operating lease) 56 46 10
A319 (finance lease) 6 6 -
A319 (owned) 105 107 (2)
A320 (operating lease) 6 6 -
A320 (finance lease) 5 2 3
A320 (owned) 24 15 9
Main fleet 202 182 20
Sub-fleet (Boeing 737 and GB Airways) 2 14 (12)
Total fleet 204 196 8
O d fi l 69% 68% 1%Owned or finance lease 69% 68% 1%
Operating lease 31% 32% (1)%
1919
Flexibility in fleet planning
• easyJet has a high degree of flexibility in its fleet planning
270flexibility in its fleet planning
• Fleet capped at 204 aircraft
• Young fleet intrinsic to business d l
241
251
259
240
250
260 Max fleet
model• Maximise utilisation • Minimise maintenance costs
and fuel burn214 217
221
227
220
230
240
Fleet C
ount
214
and fuel burn
• Evaluating options for next generation of aircraft
Will d i i
206200 200
197 197
190
200
210
Min fleet204
• Will update progress at interim results180
FY11 H2 FY12 H1 FY12 H2 FY13 H1 FY13 H2 FY14 H1 FY14 H2 FY15 H1 FY15 H2
2020
Capital cash flow including overhauls
New capacity deliveries Replacement deliveries PDP Payments Maintenance/ESV Capex ¹
Disposal of ex-GB aircraft
193
64
150
$742m$773m
$586m
248
193
72
150
200Total
Total
$586m
303
421248
171
101Aircraft Capex: 796m
Total Aircraft Capex: 623m
Total Aircraft Capex:
182303
114
(118)
386m
FY2011 FY2012 FY2013
2121Source: easyJet management plan• Capex is shown pre-financing – current plan is to maintain 70%/30% owned/leased mix• $118 sales proceeds for disposals of A321’s
Continuing cash flow generation
£m
2011 proforma
Proposed special
dividend
Proposed ordinary dividend
2011*CapexFinancingOtherWorking capital
Dep’n and amort’n
Operating profit
2010*
2222* Includes money market deposits but excludes restricted cash
Strong balance sheet
£m Sep ‘11 Sep ‘10
Property, plant and equipment 2,149 1,928
Goodwill and other intangible assets 451 452
Other assets 465 451
Liabilities (excluding debt) (1,463) (1,290)
Net Assets 1,602 1,541
Debt 1 300 1 212Debt 1,300 1,212
Cash and money market deposits (1,400) (1,172)
Net debt / (cash) (100) 40
Shareholders’ equity 1,702 1,501
Capital employed 1,602 1,541
Gearing* 28% 33%**
2323*Gearing defined as (debt + 7 x annual lease payments – cash) divided by (shareholders’ equity + debt +7 x annual lease payments – cash)**Sep ‘10 gearing restated for current year methodology (i.e. excluding restricted cash)
Business review –Looking forwardLooking forward
Carolyn McCallCarolyn McCallChief Executive
2424
Focus on return on capital employed
• F’11 achieved 12.7% ROCE despite £100m increase in unit fuel cost12% ROCE increase in unit fuel cost
• F’12 headwinds from higher fuel
12% ROCE through the 5 year
planning cycle
L t i
• Driving revenue
Levers to improve margins
• Smart cost management
• Returns to shareholders
• New framework for capital allocation
• Flexibility in fleet planning
Capital discipline
2525
LEVERS TO IMPROVELEVERS TO IMPROVE MARGINSMARGINS
26
Passengers travelling on business
Where are we?
• Sales teams in place
• FlexiFare launched
• Deals with GDS contracts and TMC’s
• Pipeline of B2Bdeals
• Promotional and advertising campaign rolling outrolling out
2727
Passengers travelling on business
Our philosophy
Be flexible
Access the best faresOn time
make it easy
From any channel
At the right time
y
keep it simple
Speed through theFly to the
h l through the airportright place
2828
Passengers travelling on business
B i i
How we’ll track our progress
• Business passenger penetration
• Revenue uplift from passengers travelling on businesstravelling on business
• Incremental margin
KPI FY11 FY15
Business passenger between
penetration as % of easyJet seats sold
18%between
20% & 24%
RPS uplift from Business passengers
20%between
25% & 30%Business passengers 25% & 30%
Incremental margin £0m £100m
2929
Passengers travelling on leisure
Building on our strength in leisure
• New leisure route development
Impro ed in flight range• Improved in-flight range
• Family Friendly
• easyJet Holidays (UK)
3030
Driving revenue through easyJet.com and CRM
Rollout November 2011 to April 2012
• Targeted lead banners on• Targeted lead banners on easyJet.com
• Mobile apps to be rolled out H1
• Ancillary up-sell post-booking
• Improved targetingp g g
• By customer type
• By route searched
• By campaign
• By GEO IP
3131
Driving revenue through targeted campaign
Much more likely A little more likely
Europe by easyJet campaign is delivering
10 35Old
23 36
0 20 40 60 80 100
New
Impact of advertising on likelihood to book with easyJet
Customers describing themselves as ‘much more likelyCustomers describing themselves as much more likely to buy from easyJet’ has increased by nearly 250%.
3232Source: GfK Brand Tracking
Other revenue drivers
• Bags revenue grew +4.1% per seat
• Price increases Ancillary revenue per seatPrice increases
• Peak season pricing
• Price bands by sector length
30.1%
• Continuing benefit F’12
• Increase in booking and credit d f
17.0%
card fee
• Yield management of Speedy Boarding
2.7%
Boarding
• Allocated seating trial-3.7%
Q1 Q2 Q3 Q4
F’11 vs. F’10 % change
3333
Smart cost management
Off setting significant inflation and investment in F12 through £90m savings from easyJet lean
• Procurement deals at airport
g g y
+0.8ppt p
• Ground handling efficiency
• Continued focus on driving down‐3.9ppt
5% to 6%Continued focus on driving down maintenance costs
• Crew scheduling efficiencies
5% to 6%
2% to 3%
Underlying inflation increase
Investing in business traveller + allocation
easyJet lean initiatives
F12 cost per seat
seating
3434
CAPITAL DISCIPLINE
35
Returns to shareholders
Objectives Measures Achievement F11
Return targets • Earn returns in excess of cost of • Improve PBT per seat to GBP5 • PBT per seat £3.97gcapital through the cycle
• Invest in growth opportunities where returns are attractive
p p• Post tax ROCE of 12% through
the cycle
p• ROCE of 12.7%
Capital structure and liquidity
• Ensure robust capital structure• Return excess capital to
shareholders• Maintain sufficient level of liquidity
to manage through the cycle and
• Maximum gearing of 50%*• Cap of GBP 10m adjusted net
debt per aircraft• Minimum GBP 4m cash per
aircraft
• Gearing of 28%• Adjusted net debt of
£3.3m per aircraft• Cash per aircraft of
£6.9mto manage through the cycle and industry shocks
aircraft £6.9m
Dividend policy • Targeting consistent and continuous dividend payout
• 5 x cover subject to meeting gearing and liquidity targets
• Ordinary dividend of 10.5 pence per sharecontinuous dividend payout gearing and liquidity targets
• Consider one off returns in addition to 5x dividend cover to reduce excess liquidity
10.5 pence per share• Special dividend of
34.9 pence per share
3636
Portfolio approach to managing network performance
• easyJet’s network is a competitive advantage• Network managed as a portfolio• Network managed as a portfolio • Routes assessed against 12% ROCE target• In a dynamic market place important to constantly monitor route performance• Aim to raise network returns through initiatives such as passengers travelling• Aim to raise network returns through initiatives such as passengers travelling
business• New routes are not less profitable than old ones
3737
Network development
Average daily frequency on A/B routes H1 2012
2011• Building network for business
1
2
36
2011• Building network for business traveller
• Strengthen French position with i l b
9
2
11
2
4
5
ency
per
daynew regional bases
• Launching base at Lisbon
Clinical approach to reviewing
27
20
27
19
2
3
vera
ge
freq
ue• Clinical approach to reviewing route performance
2926
0 5 10 15 20 25 30
1
Av
A/B routes = high frequency, time-sensitive, low-seasonality routes typical of the business market
No. A/B routes
3838
Focused approach to H1 capacity growth
U it d Ki d GermanyNetherlands6.9%
Overall flat capacity for winter (before disruption)
United Kingdom1.5%
F
Germany0.1%
France2.6%
Italy1.3%
Switzerland2.7%
Spain
0.6%
3939
Measuring our progress
Our business passengersare contributing to our revenues
4040
Measuring our progress
• Consistent metrics across all bases and departments
• Bonus targets aligned: OTP, customer satisfaction, cost per seat and Profit before Tax
• Longer term incentives aligned to
Our business passengers are contributing to our revenues
• Longer term incentives aligned to ROCE
• United team pulling in the same p gdirection
4141
OUTLOOK
42
Forward bookings in line
• First half bookings in-line with prior year
• c 45% of available winter* seats now sold**
89% 88%
F'12 F'11% seats sold *
• c. 45% of available winter seats now sold
80% 79%
54% 53%
29%28%
17%12%
29%
17%12%
October November December January February March
+0 6% +13 8% 3 4% +2 7% +2 1%% monthly capacity
h +7 1%
4343
+0.6% +13.8% -3.4% +2.7% +2.1%p ychange +7.1%
* Winter = H1 (Oct ‘11 to Mar ‘11)** As at 13.11.11
Outlook
Capacity (seats flown)
• FY c.+4% reported
• H1 flat (assuming normal disruption levels)
Revenue per seat (constant currency)
H1 id i l di it• H1 up mid single digits
Cost per seat ex fuel (constant currency)
• FY up 2% to 3% (assuming normal disruption levels)p ( g p )
• H1 up 4% (assuming normal disruption levels)
Fuel bill anticipated to increased by around £220 million compared to prior year at current fuel and exchange ratesprior year at current fuel and exchange rates
“Despite the headwinds of higher fuel costs and a weak and uncertain economic outlook our focus t b t ti l f th t th f th J t’ t k bi d ithon customers, robust operational performance, the strength of the easyJet’s network combined with
cost control and capital discipline means that easyJet is well placed to succeed.”
4444
Summary
• Strategy is delivering strong operational and financial results
• Significant headwinds: fuel and weak consumer environment
• Key focus areas F’12:1. easyJet lean2 Driving revenue2. Driving revenue3. Capital discipline
• easyJet well positioned to deliver a 12% ROCE through the five year planning cycle
4545
Q & A
46
APPENDIX
47
Return on capital employed
Reported £m Sep ‘11 Sep ‘10
Earnings before interest and tax 269 174
Normalised operating profit after tax (NOPAT) * 199 127
Average shareholders’ equity 1,603 1,402
Average net debt / (cash) (30) 43
Average capital employed 1,573 1,445
Return on capital employed 12.7% 8.8%
Proforma (operating leases capitalised) £m Sep ‘11 Sep ‘10Proforma (operating leases capitalised) £m Sep 11 Sep 10
Earnings before interest and tax – reported 269 174
Interest element of operating lease payments ** 36 34
Earnings before interest and tax 305 208Earnings before interest and tax 305 208
Normalised operating profit after tax (NOPAT) 226 152
Average shareholders’ equity – reported 1,603 1,402
Average net debt / (cash) – reported (30) 43g ( ) p ( )
Average capitalised leases *** 360 331
Average capital employed 1,933 1,776
Return on capital employed 11.7% 8.6%
4848* NOPAT calculated using deferred UK tax rate of 26% (2010: 27%)** Assuming one-third of operating lease payments represents the interest element*** Estimated net present value, not seven times operating lease payment
Contracted fleet position
Sep’11 Sep’12 Sep’13
A319 167 158 151
A320 35 55 66
Boeing 2Boeing 2
Total 204 213 218
Change in fleet size +9 +5
4949
RASK and CASK
F‘11 F’10 Change B/(W)
Total revenue per seat 55.27 53.07 4.1%
at constant currency 54.87 53.07 3.4%
RASK at constant currency (pence) 4.94 4.72 4.7%
Total cost per seat ex fuel* 36.62 36.62 flat
at constant currency* 36.15 36.62 1.3%
CASK ex fuel at constant currency 3 26 3 31 1 7%CASK ex fuel at constant currency (pence)*
3.26 3.31 1.7%
5050* Underlying number – 2010 cost per seat and CASK exclude the impact of £27m of additional cost incurred due to volcanic disruption and a £7m loss on the disposal of 4 A321 aircraft .
DisclaimerThis 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 fallingPromotion) 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.
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