H Analyst & investor presentation. Tuesday 10 May 2016

Transcription

1 H Analyst & investor presentation Tuesday 10 May 2016

2 Introduction Carolyn McCall Chief Executive Officer

3 easyjet s resilient model continues to deliver Robust performance despite the impact from external shocks Continued focus on building strong network positions Increased revenue and passenger growth at stable load factors Strong cost performance secured flat PBT and PBT margin at constant currency Capital structure review delivers proposed 50% payout ratio Strong H1 performance despite shocks 3 3

4 Financial review Andrew Findlay Chief Financial Officer

5 Financial performance H H Change* Change* m m % CC Total revenue 1,771 1, % 2.9% Fuel (462) (516) 10.5% 9.7% Costs excluding fuel (1,333) (1,244) (7.2%) (7.9%) (Loss) / profit before tax (24) 7 Profit before tax at constant currency 5 7 ** EBITDAR (14.8%) 9.3% EBITDAR margin 6.2% 7.3% Earnings per share (pence) (5.1) 1.3 *Favourable / (adverse) 5 ** Profit before tax at constant currency after balance sheet revaluations 5

6 Revenue performance H H Change* Seats flown (m) % Load factor (%) 89.7% 89.7% 0.0ppt Passengers (m) % Average sector length (km) 1,054 1,072 (1.7%) Total revenue - reported ( m) 1,771 1, % Total revenue - constant currency ( m) 1,817 1, % Total revenue per seat - reported ( ) (6.6%) Total revenue per seat - constant currency ( ) (4.2%) * Favourable / (adverse) 6 6

7 Resilient revenue performance Revenue per seat bridge (2.7%) 0.72 (1.3%) 1.04 (1.9%) 0.48 (0.9%) (0.9%) H Paris Sharm el-sheikh Underlying Easter Other Before FX Footer box on intersect of lines line softness h= and v=8.75 with font 10pt Arial not bold FX H

8 A strong focus on costs Total cost per seat bridge Total cost per seat at constant currency: 4.3% decrease Cost per seat ex fuel at constant currency: 0.5% increase H Regulated airports inflation Disruption Balance Inflation* Before A320 mix Lean Other cost Before sheet management engineering savings movement in Footer box revaluations intersect of lines line action h= and v=8.75 contract with font 10pt Arial not fuel bold and FX Fuel P&L FX H External factors Management action * Operational price increases including unregulated airports, ground handling, navigation and crew costs 8 8

9 Impact of fuel & currency H fuel impact favourable / (adverse) H H Fuel $ per metric tonne Market rate Effective price US dollar rate Market rate Effective price Actual cost of fuel per metric tonne Change (7 cents) 2 cents 92 H currency impact favourable / (adverse) EUR CH F USD Other Total m Revenue (47) 2 1 (2) (46) Fuel Prior year balance sheet revaluations (3) 1 (2) - (4) Costs excluding fuel and prior year balance sheet Footer box on intersect of lines line h= and 18 v=8.75 with font (2) revaluations 10pt Arial not bold (2) (1) 13 Total (32) 1 1 (3) (33) 9 9

10 Strong cash generation Cash flow bridge Net cash: 296m (FY15: 435m) Adjusted net debt: 474m (FY15: 363m) Cash generated from operations (excl dividends): 461m , ,057* * 23 1 October 2015 Operating loss Depn & amort Net working capital Other operating Increased borrowings Tax paid CAPEX Other FX Before dividend Ordinary dividend 31 March 2016 *Includes money market deposits but excludes restricted cash 10 10

11 Strong balance sheet m H H Goodwill and other intangible assets Property, plant and equipment 3,089 2,720 Derivative financial instruments (338) (281) Other assets (excluding cash and money market deposits) Unearned revenue (1,080) (1,091) Other liabilities (excluding debt) (883) (856) Capital employed 1,656 1,323 Cash and money market deposits 1, Debt (761) (560) Net cash Net assets 1,952 1,

12 Gross capital expenditure 1,000m c. 900m c. 850m c. 800m c. 650m 556m 536m c. 550m 500m 392m 421m 449m 0m FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY Assumes base case fleet plan 12 12

13 Capital Structure Review The scope of the review entailed: Liquidity buffer Gearing Residual Values Dividend Policy A strong balance sheet is a core part of easyjet s strategy and is fully aligned with shareholder interests 13 13

14 Capital Structure Review Key Changes Current Position Updated Position Liquidity buffer Cash position of 4 million per aircraft Liquidity buffer including cash and revolving credit facility Cover peak unearned revenue Minimum position of 2.6 million per 100 seats Funding Mortgage funding secured on aircraft Unsecured funding via EMTN programme Mortgage funding secured on aircraft Revolving credit facility to support liquidity Gearing Target gearing between 15% and 30% No specific gearing target Intend to maintain current credit rating (subject to events outside easyjet s control) Residual Value Hedging Downside flexibility through leasing arrangements Move from 70/30 owned vs leased split to 80/20 to reduce ownership costs Semi-active fuel and foreign exchange hedging Simple forward contracts Rolling sale and leaseback programme on A319 fleet No material change to 80/20 fleet mix outcome Downside flexibility maintained No change Dividend 40% payout ratio of post-tax income Increase in payout ratio to 50% of post-tax income Board to keep Balance sheet under review 50% PAT dividend ratio 14 14

15 Business Review Carolyn McCall Chief Executive Officer

16 Gearing Europe s most successful airline Market leading network Customer excellence Number of market pairs flown between primary airports Customer loyalty Customer satisfaction 74% of easyjet passengers have flown with us previously 8/10 customers say we are great value 74% 80% - Leading brand 9/10 consumers consider easyjet in travel plans 90% Top quartile operational excellence Balance sheet strength 1 Asset utilisation 11.1 hours per day 2 OTP 82% Average turn time 29 min 130% Footer box on intersect of lines line h= and v= % with font 10pt Arial not bold Lufthansa 10% Reliability (TDR 3 ) 99.3% 110% 90% 70% 50% Air Berlin Norwegian AF-KLM -10% -5% 0% 5% 10% 15% 20% 25% 30% ROCE Ryanair 1. Source: Airline Analyst. AF KLM and Norwegian had negative EBIT during the last 12 months to September Air Berlin had negative EBIT in both periods, 12 months to 30 Sep FY Technical dispatch reliability IAG easyjet

17 easyjet - Delivering growth and returns to shareholders Growth Passenger growth of 7%-8% CAGR Margin Stable margin Strong cost underpin Returns Top quartile ROCE 50% PAT pay-out ratio 17 17

18 Resilient H1 trading Growth Trading by traffic flow Flow Trading UK- Beach Paris touching Sharm el Sheikh touching UK Ski City City 18 18

19 Investment in the network in H1 Growth 7.4% easyjet capacity growth over winter Market growth easyjet growth in the market Netherlands +27% 27% Market share on easyjet routes United Kingdom +9.4% 7% 7% 9% Germany +7 % France +6.5 % 5% 7% 7% 4% Spain +4.5% 12% Switzerland +8.1% 8% 5% easyjet Ryanair Vueling Air France KLM British 5% Thomson Monarch Portugal +21.3% 21% Italy 11.7% * 12% 9% Alitalia other 12% Source : OAG, scheduled data and Internal easyjet projection April Country capacity growth is based on network touching seats. * Excludes Rome capacity 19 19

20 Depth in high GDP markets Growth - Number 1 or 2 position in the primary airport in 12 of Europe s top 25 catchment areas by GDP 1 easyjet network 1) Catchment areas defined as population living within 50km of airports within the market and ranked according to GDP for that area; 2) Rank of short haul capacity for the 12 months to September 2015; 3) Manchester catchment includes Liverpool airport; 4) Dusseldorf catchment includes Cologne, Dortmund, Friedrichshafen, Nuremburg and 20 Paderborn; 5) Zurich catchment includes Basel 20

21 Weekly Frequency Addition YoY A network that is difficult to replicate Growth Strong positions at key airports Increasing frequencies Airport Current morning peak utilisation? 1 easyjet touching aircraft 2 London Gatwick 69 Geneva For flights previously with at least a daily frequency, easyjet added YoY on average 1.2 frequencies per week. Bristol 14 Luton 21 Basel 14 Manchester Average Topups Per Week Average Schiphol 13 Milan Malpensa Number of Daily Flights Edinburgh 11 Belfast 9 1 >90% utilised 80-90% utilised <80% utilised 1) Based on theoretical max runway capacity at airport, Peak = first wave departures (before 8.30am) on weekdays in IATA Summer season. For leisure destinations may also include weekend peak demand periods 2) Based on summer 2016 schedule 21 21

22 Investing in our network Growth Deepening the network London Luton New bases Venice Marco Polo Amsterdam Schiphol 22 22

23 Leading in digital Growth 23 23

24 Leading in data Growth FLIGHT CLUB 25m marketable customers 74% returning customers 41.5 average age 24 24

25 Grow revenue Growth 25 25

26 CPS ex fuel Cost review delivers flat CPS target Margin Relentless focus on an efficient cost base Lean Principles Embed Lean programme across all functions Lean programme offsets inflation Innovation led approach to lean savings Continue to maintain industry leading utilisation Efficient and effective cost base

27 Strong pipeline of cost saving initiatives Margin Focus area Savings* Airports & ground handling (eg: LGW) Supplier relationship management Maintenance efficiency Fleet up-gauging Lean bases & smart scheduling Invest in people Detailed focus on overheads IT investment Porto Maintenance Barcelona Use of data to drive efficiency Ground handling Lean Target - Flat CPS ex-fuel between *Size of savings More signs means larger saving Lean target assumes pre abnormal levels of disruption 27 27

28 Up-gauging our fleet New A320 cabin, 186 seats Margin Up-gauging delivering CPS savings 13% -14% Current New generation generation A319 A320neo 156 seats 186 seats - CPS savings based on fuel price quoted in original plan 28 28

29 Operational excellence Margin Increased customer satisfaction Greater operational efficiency Delivering cost savings (single ground handling fleet) 29 29

30 Outlook in 2016 Capacity (seats flown) H2 c.+6.5% (before disruption) FY c.+7% (before disruption) Revenue per seat at constant currency Q3 revenue per seat: down c. 7% H2 revenue per seat: down low to mid single digits Cost per seat at constant currency FY cost per seat excluding fuel: down c. 1% (assuming normal levels of disruption) FX H2: c. 20 million adverse movement from foreign exchange rates FY: c. 55 million adverse movement from foreign exchange rates Fuel H2: unit fuel costs 85 million to 90 million favourable FY: unit fuel costs 170 million to 180 million favourable Expected total fuel cost 1,120 million Rates at 9 May 2016 /USD: ; /EUR: Unit fuel guidance based on Jet fuel trading range of $350 / metric tonne to $450 / metric tonne 30 30

31 easyjet is a structural winner Europe's best network that is difficult to replicate Best customer proposition Constant innovation to drive demand and loyalty Cost plan to deliver flat CPS ex-fuel 50% profit after tax pay-out ratio 31 31

32 Q & A

33 appendix

34 Fuel and foreign exchange hedging Fuel requirement US dollar requirement Euro surplus CHF surplus Six months ending 30 September 2016 Full year ending 30 September 2016 Full year ending 30 September 2017 Sensitivities FY16 87% at $793/ metric tonne 87% at $814/ metric tonne 76% at $626 / metric tonne 76% at $1.61/ 79% at 1.25/ 73% at CHF1.46/ 80% at $1.62/ 86% at 1.23/ 81% at CHF1.46/ 70% at $1.53/ 71% at 1.32/ 68% at CHF1.42/ $10 per tonne change in fuel price will impact the full year pre-tax result by +/- $1.5 million One cent movement in the /$ will impact the full year pre-tax result by +/- 1.3 million One cent movement in the / will impact the full year pre-tax result by +/- 0.6 million As at 6 May

35 H2 forward bookings H2 bookings in line with prior year % seats sold * Summer '15 Summer '16 Apr May Jun Jul Aug Sep H2 H2 (April 2016 to September 2016) as at 6 May

36 Competitive capacity environment in H2 Summer 15 Summer % 7.6% 7.6% split by carrier Other 6.5% 6.3% 6.3% 6.4% AF-KLM easyjet 5.6% 5.4% BA Vueling Ryanair Capacity change total SH easyjet capacity change Competitors on easyjet Capacity Change easyjet Market Footer box on intersect of lines line h=8.03 markets 9 and v=8.75 with font 10pt markets Arial not bold Short-haul market easyjet city to city pairs Source: Market capacity data from OAG scheduled data, as at 6 May 016 easyjet markets based on internal easyjet definition. easyjet growth based on H schedule vs H flown capacity 36 36

37 Investment in the network Overall c. 6.6% capacity growth over summer Market growth easyjet growth in the market United Kingdom +6% 8% 6% Netherlands +21% 21% 7% France +10 % 5% 10% Germany +2 % 5% 2% Spain +6% 10% 6% Switzerland +5% 5% 0% Portugal +15% 14% 15% Italy 0% 6% 0% Source : OAG, scheduled data and Internal easyjet projection April Country capacity growth is based on network touching seats

38 Profit before tax Profit before tax per seat bridge H Easter Paris and Underlying Other Regulated Disruption Balance Cost A320 Mix Lean Other cost Sharm Footer softness box on revenue intersect airports of lines line h=8.03 sheet 9 and v=8.75 inflation* with font 10pt engineering Arial not savings bold el-sheikh inflation revaluations contract Fuel H1 CC P&L Fx H Revenue Costs * Operational price increases including unregulated airports, ground handling, navigation and crew costs 38

39 Loss after tax m H H Change (Loss) / profit before tax (24) 7 (31) Tax credit / (charge) 4 (2) (6) (Loss) / profit after tax (20) 5 (25) Effective tax 18.1% 20.4% 2.3ppt 39 39

40 Revenue per seat per seat H H Change Seat revenue (6.8%) Non-seat revenue % Total revenue (6.6%) 40 40

41 Fleet flexibility Extra aircraft allows greater flexibility in fleet planning 400 Contracted Max 350 Downside case Base Case FY16 FY17 FY18 FY19 FY20 FY

42 Cost per seat excluding fuel - key drivers Cost per seat excluding fuel Variance at constant currency Crew Variance at constant currency Weighting of variance % % Maintenance % 0.1% Total CPS excluding fuel Footer box on intersect of lines line h= and v=8.75 with font 10pt Arial not bold Efficiency gained from upgauging our fleet from an average of 164 to 166 seats per aircraft Decrease in average sector length Improved crew scheduling Offset by pay increases Reduction in number of leased aircraft in the fleet Savings from new maintenance contract Offset by Inflationary increases Overhead 5.46 (0.14) (2.8%) (0.4%) Higher disruption costs Airports and Ground handling Rate increases and investment in ground handling at Gatwick Offset by volume savings and savings from new contracts Navigation % - Decrease in average sector length Ownership ex revaluations* Net Exchange (gains)/losses (0.07) 1.6% 0.3% (0.19) (1.3%) (0.5%) (0.18) (0.5%) (0.5%) Drivers Depreciation on new aircraft purchased Offset against decreasing lease costs * Excludes foreign exchange gains and losses on balance sheet revaluations 42 42

43 Increasing proportion of A320 s H H Change A319 (operating lease) (5) A319 (owned / finance lease) A319 Total (5) A320 (operating lease) A320 (owned / finance lease) A320 Total Total fleet Percentage unencumbered 52% 44% 8ppt Percentage operating lease 26% 30% -4ppt Percentage of A320s in fleet 42% 35% 7ppt Average seats per aircraft % 43 43

44 Currency impact Revenue Costs H H H H Sterling 47% 46% 29% 27% Euro 41% 43% 33% 31% US dollar 1% 1% 32% 35% Other (principally Swiss franc) 11% 10% 6% 7% Average effective Euro rate for revenue for H was 1.32 (H1 2015: 1.24) 44 Average effective Euro rate for costs for H was 1.34 (H1 2015: 1.30) 44

45 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 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 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= 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