Full year results analyst and investor presentation. Tuesday 17 November 2015

Transcription

1 Full year results analyst and investor presentation Tuesday 17 November 2015

2 Introduction Carolyn McCall Chief Executive Officer

3 easyjet strategy delivers record results Profit before tax has increased for the fifth consecutive year Passengers + 6.0% 69 million Revenue + 3.5% 4,686m Profit before tax % 686m PBT margin +1.8ppts 14.6% EPS % 139.1p Operating cash flow % 895m DPS % 55.2p ROCE + 1.7ppt 22.2% TSR +28% 3 3

4 Financial review Andrew Findlay Chief Financial Officer

5 Strong financial performance FY 2015 m FY 2014 m Change % Change CC Total revenue 4,686 4, % 6.5% Fuel (1,199) (1,251) 4.2% 4.6% Costs excluding fuel (2,801) (2,695) (3.9%) (8.7%) Profit before tax % 20.2% Profit before tax margin 14.6% 12.8% 1.8ppt EBITDAR % 16.7% EBITDAR margin 20.0% 18.2% 1.8ppt Earnings per share % Dividend per share % Return on capital employed 22.2% 20.5% 1.7ppt 5 5

6 Profit before tax increased 18% Profit/(loss) bridge (38) 750 (68) FY 2014 Fuel Revenue Crew Other Costs FY 2015 resilience, de-icing and disruption Fx FY CC 6 6

7 Revenue performance m FY 2015 FY 2014 Change Passengers (m) % Load factor (%) 91.5% 90.6% +0.9ppt Seats flown (m) % Average sector length (km) 1,118 1, % Total revenue - reported ( m) 4,686 4, % Total revenue - constant currency ( m) 4,821 4, % Total revenue per seat - reported ( ) (1.3%) Total revenue per seat - constant currency ( ) % RPS growth at constant currency easyjet capacity growth 3.7% 2.9% 4.3% 4.7% 3.2% 7.0% 1.4% 1.5% 4.9% Q1 Q2 Q3 Q4 FY -2.8% 7 7

8 A strong focus on costs Total cost per seat bridge Cost per seat ex-fuel: -0.9% Cost per seat constant currency: +3.6% FY 2014 Regulated De-icing and Eurocontrol Other Before A320 mix Crew Load factor FY 2014 Net other airports disruption settlement inflation management resilience engine deal cost savings inflation Footer box on intersect of lines action line h= and v=8.75 with font 10pt Arial not bold Before movement in fuel and FX Fuel FX FY 2015 External factors Management action 8 8

9 Impact of fuel & currency FY 2015 fuel impact favourable / (adverse) FY 2015 FY 2014 Fuel $ per metric tonne Market rate Effective price US dollar rate Market rate Effective price Actual cost of fuel per metric tonne Change B/(W) (12 cents) (1 cent) 61 FY 2015 currency impact favourable / (adverse) EUR CH F USD Other Total m Revenue (131) (1) 4 (7) (135) Fuel 0 0 (6) 0 (6) Costs excluding fuel 127 (3) Total (4) (4) 3 (7) (12) 9 9

10 Strong cash generation underpins dividend policy and fleet growth * 435* Net cash Sep 2014 Operating profit Depn Footer & box on Net intersect of Tax lines line CAPEX h= and Own v=8.75 Restricted with font 10pt Arial FX not bold Other amort working shares cash capital Net cash before dividend Dividend paid Net cash Sep 2015 *Includes money market deposits but excludes restricted cash 10 10

11 Strong balance sheet m FY 2015 FY 2014 Goodwill and other intangible assets Property, plant and equipment 2,877 2,542 Derivative fiancial instruments (297) (21) Other assets Other liabilities (excluding debt) * (1,606) (1,637) Capital employed 1,814 1,750 Cash and money market deposits Debt (504) (563) Net cash Net assets 2,249 2,172 Gearing ** 14% 17% * Other liabilities (excluding debt) includes unearned revenue of 619m (FY 2014 : 572m). ** Gearing is defined as (debt + 7 x annual lease payments cash) divided by (shareholders equity + debt + 7 x annual lease 11 payments cash) 11

12 Future capital investment FY15 FY16 FY17 FY Additional aircraft 55% 58% 73% 53% 37% Replacement aircraft 18% 14% 4% 29% 43% Maintenance 27% 28% 23% 18% 20% Total 100% 100% 100% 100% 100% Total expected fleet acquisition and overhaul expenditure as a % of easyjet revenue 11% 11% 13% 17% 12% Fleet acquisition and overhauls will be funded through a combination of debt, easyjet s strong cash flow and sale and leaseback transactions 2015, based on actual revenue for the 2015 Financial Year Future years based on estimated revenue 12 12

13 Debt repayment profile Total debt: 504 million m m 74m 60m 54m 46m 0 FY16 FY17 FY18 FY19 FY20 FY

14 Outlook Capacity (seats flown) H1 c.+8.0% (before disruption ) FY c.+7% (before disruption) Revenue per seat (constant currency) H1: Slight decline (assuming normal levels of disruption and constant load factors) Cost per seat including Fuel (constant currency) FY c.-1% (assuming normal levels of disruption and constant load factors) Cost per seat ex fuel (constant currency) FY c.+2% (assuming normal levels of disruption and constant load factors) Weighted towards first half FX H1: c. 15 million adverse movement from foreign exchange rates FY: c. 40 million adverse movement from foreign exchange rates Fuel H1: unit fuel costs 75 million to 85 million favourable FY: unit fuel costs 140 million to 160 million favourable Rates at 13 November 2015 /USD: 1.522; /EUR: Unit fuel guidance based on Jet fuel trading range of $450 / metric tonne to $550 / metric tonne 14 14

15 Initial thoughts and areas of focus Initial Thoughts: Great people with passion and commitment to the business An enviable customer proposition A strategy that continues to deliver sustainable shareholder returns Significant opportunities for growth Areas of focus for me: Reinforce our cost focus Review of capital structure to balance risk and efficiency whilst maximising returns 15 15

16 Business Review Carolyn McCall Chief Executive Officer

17 Continuing to win easyjet has delivered another record performance in 2015 Delivering through the cycle favourable trends will support strong demand for easyjet Future growth and returns drivers Network offers significant opportunity Best customer proposition and sector-leading digital offering Operational excellence to deliver stable margins Capital discipline and strong financial footing Delivering sustainable shareholder returns 17 17

18 Real GDP Growth YoY (%) Consumer Confidence Index, standardised Favourable economic trends Positive outlook across key markets Recovery in consumer confidence UK France Spain Italy Switzerland Germany (0.5) (1.0) (1.5) (2.0) (2.5) 2000A 2002A 2004A 2006A 2008A 2010A 2012A 2014A 2016E UK France Spain Italy Switzerland Germany Business model outperforms through the cycle Source: IMF, Euromonitor, Capital IQ, Bloomberg as at 07-Oct

19 2015 outperformance in a competitive market FY15 easyjet constant currency RASK vs median Sector RASK, year on year change % rev. change Market capacity growth (%) Q1 Q2 Q3 Q4 Sector RASK growth easyjet Market capacity increase/(decrease) Note: RASK at constant currency. Sector median RASK includes IAG, LHA, AF-KLM, Ryanair & Norwegian. Note that Ryanair and Norwegian do not report constant currency, therefore reported data used 19 19

20 Exciting initiatives underway Embedded (with more to chase) Launch in FY2016 Launch in FY2017 Revenue - Business passenger - Base openings (Amsterdam, Naples) - Base in Venice - New leading edge website - New call centre online - Flight Club launch - New base openings - Continue RMS and Network optimisation development Cost - AJW maintenance agreement - Gatwick long term deal - CFM engine deal - New crew portal - New components supplier - New maintenance hanger - Gatwick consolidation - ADP passenger charges - 1st 186 seat A320-1st A320 NEO delivered Both - Oporto base opening - Mobile platform - Rome base closure - Barcelona base opening - Begin retrofit of extra 6 seats - Leading edge commercial platform - Based on easyjet financial year, October to September 20 20

21 easyjet operates in the right airports and markets Best Network - 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 21 Paderborn; 5) Zurich catchment includes Basel 21

22 Seats No 1 European network Positions built over time Strong share at key airports Best Network +38% +34% +14% easyjet has grown capacity by over 7m seats with a CAGR of c.5% at our top 10 airports over the past 5 years % growth in seats % LGW GVA MXP LTN SXF CDG AMS BSL BFS BRS 2011 easyjet Capacity 2015 easyjet Capacity Other +23% +4% +32% +68% No.1 & 2 positions drive returns easyjet No.1 +23% +10% Airport Market Share 1 easyjet No.2 Based aircraft Touching aircraft LGW 48% GVA 40% MXP 47% LTN 41% SXF 58% 9 15 CDG 11% 9 14 AMS 11% 3 14 BSL 54% 9 13 BFS 84% 5 13 EDI 28% easyjet capacity as a % of total short haul capacity at airport % of easyjet capacity currently holding a No.1, No.2 or other market share position Source: OAG 22 22

23 Returns Profitably growing our network Best Network easyjet capacity growth Market capacity growth ROCE % 1.3% 17.4% % 4.3% 20.5% 12% ROCE % 5.4% 22.2% Routes CPBH FY13 CPBH FY14 CPBH FY15 Improving returns in all market conditions 23 23

24 CPBH [ /BH] Seats [Millions] CPBH ( /BH) CPBH [ /BH] Seats [Millions] Profitably deepening our network Best Network Increasing share drives higher returns 1 Adding frequency increases contribution 2 Progression of returns with increased share over time (base illustration) ,000 3,500 3,000 2,500 2,000 1,500 1, ,000 4,000 Route A Route B 3,000 2,000 1,000 Market share (%) Seats (right axis) CPBH Increasing share and frequencies delivers higher returns 1. Based on performance of 2 easyjet bases through Based on the performance of 2 easyjet routes 24 24

25 We make rational capital allocation decisions Best Network Madrid Rome MXP 8 NAP 8 Madrid-based aircraft were moved to other bases Delivered an incremental network contribution of c. 25m We expect a similar outcome from reallocating the aircraft based in Rome FCO easyjet disciplined allocation of capital delivers higher returns 25 25

26 Much more to go for Best Network Portugal 13% Significant number of low risk opportunities to pursue 87% Number of aircraft Range of easyjet FY20 fleet size Netherlands 9% 91% Germany 4% 96% Italy 12% 88% 200 Switzerland 23% 77% France 14% 86% 50 3 UK 20% Market share 80% 0 Current easyjet fleet Route churn Natural market growth Invest in existing network Growth opps FY20 easyjet opportunity Minimum easyjet fleet easyjet case FY20 Maximum easyjet fleet easyjet share Other airlines (opportunities to grow) - As at 30 September Expected churn FY15 FY20 - Forecast passenger growth on easyjet current markets - Thickening routes - Join the dots - New bases - New network points - New routes 26 26

27 Utilising flexibility to take market opportunities Best Network Extra aircraft allows for greater flexibility in fleet planning New base case seat capacity Old base case seat capacity Contracted Max Base Case 257 Contracted Min 241 Previous Base Case Footer box on intersect 2016 of lines line 2017 h= and v= with font 10pt 2019 Arial not bold % 7.1% 8.7% 7.9% 6.3% 7.9% 6.0% 2.5% 4.9% 7.1% 8.7% 7.5% 5.3% 3.1% 2.1% 2.4% 27 27

28 % Consumer Ave spend by age Average booking value Favourable easyjet customer trends Customer proposition Increasing propensity to spend Customers spending more time online 25,000 20,000 15,000 10,000 5,000 easyjet Ave booking age 2010 easyjet Ave booking age 2015 Consumer Ave spend easyjet Ave booking value % 90% 80% 70% 60% 50% 40% Purchased Something on the Internet the last 12 Months, UK All % easyjet customers have higher propensity to spend Source: BLS, Association of National Advertisers, Barkley, SMG, BCG, Yupe, IPG Media Labs, ONS 28 28

29 Digital Leadership Customer proposition Over 500m visits across platforms in FY15 Value of Mobile YOY Mobile Revenue Global Recognition 83% Best Mobile Travel & Tourism Winner Innovation in direct marketing easyjet Mobile app 14.3m Downloads to date CRM increases customer value 32% Customers in CRM are of Footer box on intersect of lines line h=8.03 increasing 9 and v=8.75 value with to easyjet font 10pt Arial not bold Best Passenger Assistance Initiative Best Airline in Mobile New website launch in

30 Number of seats % from Returning customers Strengthening our customer relationships Customer proposition % seats booked by returning customers Brand consideration New Existing % Existing 80% 68% 69% 70% 72% 73% 74% 75% 70% 65% Value perceptions 60% 30 55% % Growth coming from valuable repeat customers Source: easyjet customer database Source: Millward Brown brand tracker FY15 vs FY13) 30 30

31 Rewarding our loyal customers Customer proposition FLIGHT CLUB Aim to recognise and retain our high frequency and loyal customers Simple and low cost to administer Will continue to encourage customer loyalty Hundreds of thousands of passengers to be part of flight club 31 31

32 Business opportunity continuing to develop Customer proposition TMC GDS sales grew 32% YOY Business fares grew at 58% YOY Average 38% Saving on top Business Routes Increased focus on FTSE/CAC & DAX companies Award winning Business Program Business Sense Marketing Campaign Increase in business passengers of 25% over next 3 years 32 32

33 Leisure leadership Customer proposition Launched almost 60 new leisure routes in 2016 easyjet holidays revenue per seat increased by 144% in summer 2015 easyjet has launched around 60 new leisure routes in the 2016 schedule

34 Mix of fleet (%) 110m opportunity from up-gauging by 2021 Cost Fleet up-gauging easyjet fleet mix Up-gauging delivering CPS savings 13% -14% 100% 90% 80% 70% 60% 50% 39% 3% 44% 33% 19% 8% 53% 18% 51% 24% 26% 26% 47% 46% 45% 71% A320 s 40% 30% 20% 10% 0% 61% 52% 47% 39% 32% 29% 28% 28% FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 A319 A320 A320 '186 A320 NEO Current generation A319 New generation A320neo 156 sets 186 seats 1. At the end of the relevant Financial Year 2. Based on fleet plan base case Maximum fleet does not include the purchase rights 34

35 easyjet lean c. 50 million savings in 2016 Cost Increased pipeline of initiatives easyjet lean continues to deliver and develop significant cost reductions across Maintenance : AJ Walters Airports/Handling: deals, automation, structure of charges Navigation - SESAR Process and efficiency savings enabled by Technology Productivity savings enabled by scale in our bases Short term <1yrs Medium term 2 4 yrs Long term 4yrs> Size of savings per annum (larger circle means bigger saving opportunity) 35 35

36 Operational excellence Cost 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% easyjet network OTP Building increased resilience 1. Network remains robust Gatwick north terminal consolidation 2. Gatwick improving 3. Opportunity for step change in operational excellence at Gatwick airport 36 36

37 What does this mean for our shareholders? Expected passenger growth of 7% - 8% CAGR Stable margins over the cycle Strong EPS growth 40% annual dividend payout 37 37

38 easyjet is a structural winner Europe's best network of primary airports Best customer and digital proposition Constant innovation to drive demand and loyalty Cost discipline, up-gauging will deliver savings of 110 million by 2021 Strong balance sheet 38 38

39 Q & A

40 appendix

41 Fuel and foreign exchange hedging Fuel requirement US dollar requirement Euro surplus CHF surplus Six months ending 31 March 2016 Full year ending 30 September 2016 Full year ending 30 September 2017 Sensitivities FY16 85% at $852 / metric tonne 83% at $830 / metric tonne 60% at $664 / metric tonne 89% at $1.62/ 75% at 1.20/ 69% at CHF1.46/ 81% at $1.63/ 80% at 1.22/ 67% at CHF1.46/ 61% at $1.55/ 54% at 1.33/ 51% at CHF1.43/ $10 per tonne change in fuel price will impact the full year pre-tax result by +/- $3.5 million One cent movement in the /$ 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 +/- 0.7 million One cent movement in the /CHF will impact the full year pre-tax result by +/- 0.4 million As at 13 November

42 H1 forward bookings H1 bookings in line with prior year % seats sold * 93% 91% Winter '15 Winter '16 49% 49% Oct Nov Dec Jan Feb Mar H1 H1 (October 2015 to March 2016) as at 13 November

43 Profitably growing our business in 2016 Overall c. 8.0% capacity growth over winter United Kingdom c. +9% Netherlands c. +27% France c. +6% Germany c. +7% Spain c. +4% Switzerland c. +8% Portugal c. +21% Italy c. +3% Source : OAG, scheduled data and Internal easyjet projection September Country capacity growth is based on network touching seats

44 Capacity environment H % split by carrier Winter 14/15 Winter 15/16 Other 7.0% 7.8% 7.7% 6.8% 6.8% 7.4% Vueling easyjet BA 5.2% 3.7% Ryanair Capacity change total SH Market easyjet capacity change Competitors on easyjet markets Capacity Change easyjet markets Short-haul market easyjet city to city pairs Source: Market capacity data from OAG scheduled data, as at 6 September2015 easyjet markets based on internal easyjet definition

45 Profit after tax m FY 2015 FY 2014 Change Profit before tax % Tax charge (138) (131) (5.3%) Profit after tax % Effective tax rate 20.1% 22.5% 2.4ppt 45 45

46 Revenue per seat per seat FY 2015 FY 2014 Change Seat revenue (1.4%) Non-seat revenue % Total revenue (1.3%) 46 46

47 Revenue, profit and margin growth in H2 Reported m H H Change Total revenue 2,919 2, % Fuel (683) (714) 4.3% Operating costs (excluding fuel) (1,426) (1,352) (5.5%) EBITDAR % Ownership costs (131) (125) (3.4%) Pre-tax profit % PBT margin 23.3% 22.4% 0.8ppt Seats (m) % Constant currency per seat H H Change Total revenue % Fuel (15.68) (17.64) 11.1% Operating costs (excluding fuel) (34.98) (33.44) (4.6%) EBITDAR % Ownership costs (3.14) (3.11) (1.0%) Pre-tax profit % 47 47

48 Cost per seat excluding fuel - key drivers Cost per seat excluding fuel Variance at constant currency Variance at constant currency % Weighted variance at constant currency Airports and ground handling (0.37) (2.4%) (1.0%) Drivers Regulated airport charges Impact of higher load factor Increase in de-icing costs due to colder weather Offset by savings of new contracts Overhead 5.06 (0.30) (7.3%) (0.7%) Higher disruption costs including FCO fire Crew 6.73 (0.25) (3.8%) (0.7%) Navigation 4.17 (0.22) (5.1%) (0.6%) Pay increase broadly in line with inflation Early recruitment in winter to meet summer demand Inflationary increases Settlement of the historic Eurocontrol dispute Maintenance 3.06 (0.11) (3.8%) (0.3%) One-off benefit of new engine deal in FY 2014 Ownership 3.46 (0.02) (0.4%) (0.0%) Depreciation on new aircraft purchased Offset against decreasing lease costs (1.27) (3.4%) (3.3%) Net Exchange (gains)/losses (0.09) (0.10) 100.0% (0.3%) Effect of movements in foreign exchange rates on Balance sheet revaluation Total CPS excluding fuel (1.37) (3.6%) (3.6%) 48 48

49 Increasing proportion of A320 s FY 2015 FY 2014 Change A319 (operating lease) (5) A319 (owned / finance lease) A319 Total (5) A320 (operating lease) A320 (owned / finance lease) A320 Total Total fleet Operating lease 28% 32% (4ppt) Number unencumbered Percentage of A320s in fleet 39% 32% 7ppt 49 49

50 Currency impact Revenue Costs FY 2015 FY 2014 FY 2015 FY 2014 Sterling 49% 47% 27% 26% Euro 40% 42% 32% 33% US dollar 1% 1% 35% 35% Other (principally Swiss franc) 10% 10% 6% 6% Average effective Euro rate for revenue for H1 15 was 1.24 (H1 14: 1.19) 50 Average effective Euro rate for costs for H1 15 was 1.30 (H1 14: 1.20) 50

51 ROCE calculation including 7x lease adjustment Reported m FY 2015 FY 2014 Earnings before interest and tax reported Interest element of operating lease payments Earnings before interest and tax - adjusted Tax 20% 21% Normalised operating profit after tax (NOPAT) Average shareholders equity reported 2,211 2,095 Average net cash reported (429) (490) Average capitalised leases Average capital employed 2,615 2,396 Return on capital employed 7x basis 22.2% 20.5% 51 51