Virgin Australia AGM Summary: Virgin Australia reports profit improvement in Q1FY2018, group revenue up 5.7%

Virgin Australia hosted its annual general meeting yesterday, 7-Jun-2017. The Blue Swan Daily has pulled together some of the key news items from the meeting.

Key FY2017 outcomes included:

  • Improved balance sheet and an AUD126.4 million (USD97.1 million) improvement in free cash flow;
  • Introduced new business efficiencies to generate long-term savings and build a foundation for sustainable profitability;
  • Reduced net debt by AUD839 million (USD645 million);
  • Reduced loss after tax by AUD38.9 million (USD29.9 million), although this included upfront restructuring costs which are expected to diminish as programme continues. Underlying loss before tax of AUD3.7 million (USD2.8 million).

 

Highlights for Q1FY2018:

  • Achieved a Q1FY2018 underlying profit before tax improvement of approximately AUD18 million (USD13.8 million) compared to Q1FY2017;
  • Group revenue increased 5.7% year-on-year for the quarter;
  • Virgin Australia Domestic business unit revenue up 8.8%;
  • Virgin Australia Domestic load factor up 3.8 ppts to 81.4%;
  • Virgin Australia Domestic traffic up 1%;
  • Virgin Australia Domestic capacity down 3.3%.

 

Update on ‘Better Business Programme’:

  • ‘Better Business Programme’ is ahead of schedule at the end of its first year.
  • Revised its annualised net free cash flow savings target from AUD300 million to AUD350 million (USD230 million to USD269 million).
  • Free cash flow and financial leverage targets are also on target.
  • The programme consists of:
    • Fleet simplification;
    • Network/capacity optimisation;
    • Operating efficiencies;
    • Maintenance and engineering.

 

Outlook for FY2018:

  • Remain focused on plan to improve financial performance;
  • Will continue to implement ‘Better Business Programme’ with expectations that implementation will continue ahead of schedule;
  • Continue to work on improving balance sheet metrics and positive momentum on cash and debt performance;
  • Build on established position in the Australian domestic market and leverage growth opportunities, particularly in North America and Asia.

 

Priorities and expectations for FY2018 are:

  • Free cash flow and leverage will be a key focus for the business. Virgin Australia “remain[s] on track to register improvements in these areas” in FY2018 said Mr Borghetti;
  • Will continue capacity discipline, and strict capital management, with the expectation of stronger earnings;
  • Five Boeing 737-800 aircraft to be added to fleet, including four in H1FY2018;
  • Group underlying performance for Q2/Q3FY2018 to continue to improve on a year-on-year basis;
  • Overall four consecutive quarters of business improvement anticipated.