Half Year Results Analyst and Investor Presentation Tuesday 13 May - - PowerPoint PPT Presentation

Half Year Results Analyst and Investor Presentation

Tuesday 13 May 2014

Introduction

Carolyn McCall Chief Executive Officer

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Strategy is delivering

 Revenue performance in line with expectations  Relentless focus on maintaining cost advantage  Continuing to develop customer

• ffering

 Focus on #1 and #2 network positions  Rigorous approach to capital discipline, £308 million returned to shareholders in the period Improving loss per seat and margins

• 5.47
• 3.87
• 2.04
• 1.70
• 12.1%

1%

• 7.6%
• 3.8%
• 3.1%

1%

• 14%
• 12%
• 10%
• 8%
• 6%
• 4%
• 2%

0%

• 6
• 5
• 4
• 3
• 2
• 1

2011 2012 2013 2014 Loss per seat PBT margin

PBT / seat PBT margin

Improved winter performance

4

Financial review

Chris Kennedy Chief Financial Officer

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Loss before tax reduced

H1 2014

• 1.70

A320 Mix 0.07 easyJet Lean 0.45 FX 0.07 De-icing and disruption 0.29 Costs 0.93 Fuel 0.38 Revenue 1.60 Easter 0.83 H1 2013

• 2.04

Loss per seat bridge

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Financial results

H1’14 H1’13 Change Total revenue 1,702 1,601 6.3% Fuel (537) (496) (8.3%) Operating costs excluding fuel (1,101) (1,042) (5.6%) EBITDAR 64 63 1.2% Ownership costs (117) (124) 6.1% Loss before tax (53) (61) 13.6% EBITDAR Margin 3.7% 3.9% (0.2ppt) Loss before tax margin (3.1%) (3.8%) 0.7ppt

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Financial results: Loss after tax reduced

£m £m H1’14 H1’13 Change

Loss before tax (53) (61) 13.6% T ax charge 12 14 (20.2%) Loss after tax (41) (47) 11.5% Loss per share 10.4p 12.0p 13.3% Return on capital employed* (1.2%) (0.9%) (0.3ppt)

* Return on capital employed (ROCE) measure includes leases capitalised at 7 times The NPV ROCE measure with target liquidity included is shown in the appendix

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Continuing revenue per seat growth

£m H1’14 H1’13 Change

Passengers (m)

27.6 26.6 4.0%

Load factor (%)

89.0% 88.6% +0.4ppt

Seats (m)

31.1 30.0 3.6%

Average sector length (km)

1,074 1,042 3.1%

T

• tal revenue (£m)

1,702 1,601 6.3%

T

• tal revenue per seat (£)

54.80 53.39 2.6%

@ constant currency (£)

54.16 53.39 1.5%

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easyJet strategy delivers further revenue growth

Year on year drivers of revenue per seat change (£/Seat)

• Disciplined capital

allocation

• Revenue Management

System initiatives

• Longer sector length
• Increased load factor
• Business
• Digital

0.64 0.28 1.32 0.83 FX H1 14 54.80 Allocated Seating Underlying Trading Easter H1 13 53.39

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Neutral currency impact

Currency split – total costs Currency split – total revenue

USD 1% Other 3% Swiss Franc 8% Sterling 44% Euro 44% 34% 1% 25% 35%

H1’14 currency impact favourable / (adverse)

£m £m EUR CHF USD Total Revenue 17 3

• 20

Fuel (1)

• (14)

(15) Costs excluding fuel (6)

• 3

(3) Total 10 3 (11) 2

Average effective Euro rate for revenue for H1’14 was €1.19 (H1’13: €1.22) Average effective Euro rate for costs for H1’14 was €1.20 (H1’13: €1.22)

USD 35% Other 1% Swiss Franc 5% Sterling 26% Euro 33%

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Impact of fuel

H1’14 H1’13 Change B/(W) Fuel $ per metric tonne

Market rate 994 1,041 47 Effective price 993 988 (5)

US dollar rate

Market rate 1.64 1.59 5 cents Effective price 1.58 1.61 (3 cent) Actual cost of fuel £ per metric tonne 629 613 (16)

Cost per metric tonne is broadly flat, however changes in exchange rates have driven an increase in the actual cost per tonne

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Cost per seat excluding fuel - key drivers

Favourable/ (Adverse) £ Cost per seat ex fuel £ var at constant currency % var at constant currency Drivers

Airports and Ground Handling 15.20 0.38 2.5%

• Decrease in de-icing costs following the

milder weather conditions

• Lean initiatives savings
• Annualisation of airport charges in Italy
• Cost impact of higher load factor

Crew 7.43 (0.23) (3.2%)

• Increase in salaries
• Longer average sector lengths
• Partially offset by lean initiative savings

Navigation 4.23 (0.10) (2.4%)

• Longer average sector lengths

Maintenance 3.34 (0.35) (11.8%)

• Increase in leased aircraft
• Increase in average fleet age

Overhead 5.25 (0.17) (3.4%)

• Higher share price related employee costs
• IT and business related development

investment.

Ownership 3.75 0.27 6.4%

• Increasing lease costs
• Offset by ‘other financing’

Total CPS excluding fuel 39.20 (0.20) (0.5%)

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Management actions taken to control costs

Cost per seat bridge

Exter terna nal factor

• rs

0.09 0.07 0.45 0.57 0.38 0.29 0.44 0.40 Inflation Fuel Market price Regulated Airports H1 2013 55.43 56.93 93 FX H1 2014 easyJet Lean A320 Mix Other 56.50 Before Management Action De-icing & disruption

Airports & Ground Handling – £0.29 Fuel burn initiatives - £0.07

Mana nage gemen ment acti tion

• ns

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Increasing proportion of A320’s

H1’14 H1’13 Change

A319 (operating lease)

54 49 5

A319 (owned / finance lease)

99 105 (6)

A319 T

• tal

153 154 (1)

A320 (operating lease)

18 14 4

A320 (owned / finance lease)

49 42 7

A320 T

• tal

67 67 56 56 11 11

T

• tal fleet

220 220 210 10 10

Operating lease

33% 30% 3ppt

Percentage unencumbered

39% 40% (1ppt)

Percentage of A320s in fleet

30% 27% 3ppt

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Flexibility in fleet planning

Maximum, minimum and base case fleet size under new framework agreement Flexible fleet arrangements to respond to appropriately to market conditions

• 1. At the end of the relevant Financial Year
• 2. Based on fleet plan – base case
• 3. Maximum fleet does not include the purchase rights

226 239 248 263 269 289 290 303 300 226 239 248 263 269 272 277 284 284 235 234 238 191 177 187 170 173 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Contracted Max Base Case Contracted Min

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Strong balance sheet, low gearing

*Gearing defined as (debt + 7 x annual lease payments – cash) divided by (shareholders’ equity + debt +7 x annual lease payments – cash)

£m £m H1’14 H1’13

Property, plant and equipment

2,416 2,192

Goodwill and other intangible assets

477 456

Other assets

399 554

Liabilities (excluding debt)

(2,080) (1,968) 1,212 1,234

Debt

620 761

Cash and money market deposits

(1,069) (1,194)

Net cash

(449) (433) 3)

Shareholders' equity

1,661 1,667

Capital employed yed

1,212 1,234

Gearing*

18% 11%

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Cashflow

20 2 43 175 218 133 42 457 57 53 Mar 2014 Net working capital Depn & amort Operating loss Borrowings Restricted Cash Sep 2013 1,237* FX CAPEX Ordinary dividend 1,069* Tax, net int & other Special dividend

* Includes money market deposits but excludes restricted cash

£m £m Self funding ordinary dividend and capex

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Fuel and foreign exchange hedging

Sensitivities

• $10 per tonne change in fuel price will impact the second half pre-tax result by +/- $1.8 million
• One cent movement in the £/$ will impact the second half pre-tax result by +/- £0.3 million
• One cent movement in the £/€ will impact the second half pre-tax result by +/- £0.5 million

Table data as of 9 May 2014

Fuel requirement US dollar requirement Euro Surplus Six months ending 30 September 2014 80% @ $963 / metric tonne 91% @ $1.58/£ 77% @ €1.20/£ Full year ending 30 September 2014 79% @ $980 / metric tonne 89% @ $1.58/£ 78% @ €1.20/£ Full year ending 30 September 2015 67% @ $950 / metric tonne 75% @ $1.58/£ 61% @ €1.17/£

Business review

Carolyn McCall Chief Executive Officer

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Macro-economic environment in Europe is improving

Strong opportunity for easyJet to continue to deliver sustainable growth and returns for shareholders

4.0% 2.9% 2.5% 2.2% 2.0% 1.1% 0.7% 0.6% 0.6% 4.7% 2.8% 2.7% 2.1% 2.1% 1.5% 1.2% 1.1% 1.0% 4.7% 3.0% 3.0% 2.2% 1.9% 1.7% 1.7% 1.4% 1.2% Scandinavia UK CEE Switzerland Germany Eurozone France Spain Italy Scandinavia CEE UK Germany Switzerland Eurozone Spain France Italy UK CEE Germany Switzerland Eurozone Spain France Italy

2014 2015 2016

(+3.3%) (+3.3%) (+3.3%)

98 220 268 283

2003 2007 2010 2013

17 2% 124% 22% 6%

LCC # Intra European Seats (m)

Real GDP Growth for easyJet markets Low-cos

• st carrie

iers rs European an growth

Source: Bloomberg

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Structural growth opportunities remain available

Supply pply and dem emand and in balan ance ce in Europe

• pean

n short rt-ha haul ul aviatio ion

Low cost carriers remain structural leaders and will drive growth in European short-haul aviation

200 400 600 2015 2014 2018 2016 2017

c.+3% Passengers on European short-haul

2,000 4,000 6,000 2015 2018 2017 2014 2016

c.+3% Narrow-body aircraft growth in Europe

• Currently in balance and

expected to remain so for some time

• IATA forecast an incremental 60

and 70 million passengers by 2018 in European short-haul aviation

• An additional 450 narrow body

equivalent aircraft expected to enter the market by 2018

Source: IATA Source: easyJet

(Million) (Number of aircraft)

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• 5.0%
• 5.0%

10.0% 15.0% 20.0% 25.0%

• 20.0%
• 20.0%

40.0% 60.0% 80.0% 100.0% 120.0%

ROCE Gearing

easyJet is best positioned

1.Based upon OAG data. Departure capacity for 12 months ending 31/03/2014 2.Aircraft utilisation is based average block hours per aircraft per day. 3 Vueling and Air Berlin results are based upon y/e 31/12/2012.

Market et posit ition ions Balance nce shee eet t streng ength th Asset set utilisation isation Drive e demand and – Brand d Affinity nity

70% 72% 74% 76% 78% 80% 82% 84% 86% 88% 90% 92% 2 4 6 8 10 12 14

Load factor

• r

Aircra craft t utilisatio tion2

Load Factor Aircraft Utilisation

2012 2013 2014 100 95 90 85 80 75 Switzerland Germany Italy France UK

Brand awareness (%) Majority of easyJet’s capacity is in airports where it has No.1 and No.2 positions1

33m 17m 19m

No.1 No.2 Other

48% 27% 24%

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Capacity increasing but still disciplined

Source: Market share data from OAG scheduled data, as at 30th April 2014, easyJet routes based on internal easyJet definition.

Cap apaci acity ty growth

• wth H2’14 vs. H2’13 (OAG)

Increased capacity on easyJet routes

+3.0ppt +3.9ppt +3.0ppt

Short haul market easyJet markets (city to city pairs rs)

5.8% 3.7%

• 1.0%

0.6% 5.0% 6.7% 2.9% 4.1%

Capacity change total Short haul market easyJet capacity change Competitors on easyJet markets Capacity on easyJet markets

Summer 13 Q3 Summer 14

Flybe be slots

• ts

2.6%

+ 3.5 ppt + 3.9 ppt + 3.0 ppt

• 0.8 ppt

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easyJet continues to make travel easy and affordable

Platform to deliver growing and sustainable returns

• 1. Build strong number 1 and 2

network positions

• 2. Maintain cost advantage
• 3. Drive demand, conversion

and yield across Europe

• 4. Disciplined use of capital

Strategy ategy relevan elevant t for curr rren ent t envir vironmen

• nment

CAUSE

Make travel easy & affordable

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• 1. Strength of the network - Gatwick

(1) Airlines displayed represent >90% of capacity at LGW in 2013. Source: OAG, easyJet

easyJet’s perf rforma

• rmance

nce at Gatwi wick ck provid ides es clear ar evidenc dence e that a #1 positi ition

• n

provi vides des the platfor tform m to deli liver growth th and susta tain inable able retu turns rns

• 2

4 6 8 10 12 14 16 Millions

• ns

Short haul capacity movements at Gatwick(1)

Aer Lingus Thomson Airlines Thomas Cook Airlines Ryanair Norwegian Air Shuttle Monarch Airlines Easyjet British Airways

Oppor portun unit ity

• Cost advantage vs. key

competitors

• Slot portfolio
• Strong brand

Growth

• wth
• Continue to optimise slot

portfolio

• Develop Flybe slots

Retur turns ns

• Continue to allocate capacity

to routes with highest potential for returns

• 7 year commercial deal with

airport

easyJet at Gatwick

• Large and affluent core catchment area –

c.12.2 m passengers

• easyJet carries c.45% of total passengers
• Strong slot position - first wave

1. Network

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• 1. Building presence - France

easyJ syJet et has grown and transformed sformed its prese esence nce and percep cepti tion

• n in France

ce

1. Network

Strong public and political reputation Increasing brand affinity and perception

90% 98% 98% 2013 2014 2012 Brand awareness %* (H1 2012-2014)

*Source: 2013 and 2014 data based on Millward Brown research commissioned by easyJet. 2012 data normalised based on Gfk Csat

Oppor portun unit ity

• Built a strong presence in

international and domestic market

• Outbound demand in regional

France Growth

• wth
• Now operate 5 bases in

France

• Passenger growth of 48%
• ver last 5 years

Retur turns ns

• Continues to be core market

and strong focus for easyJet

• Further opportunities for

growth

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• 1. New opportunities across Europe

LCC

1. Network

Discip iplined ined growth th in core e markets kets at the heart rt of easyJet’s strategy

Oppor portun unit ity

• Opportunities available in

core markets for easyJet

• Recent base openings in

Naples and Hamburg Growth

• wth
• 2 aircraft in Naples and 2 in

Hamburg

• Now operate 3 bases in Italy

and 2 in Germany Retur turns ns

• Platform for further growth

across Europe

• Focus on capital allocation

and disciplined profitable growth

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United Kingdom +6.3 .3 % France +7.4 4 % Italy +9.0 .0 % Spain +4.1 % Switzerland +8.8% Germany +10.0 %

Source : OAG, scheduled data and Internal easyJet projection April 2014. Country capacity growth is based on network touching seats.

1. Network

• 1. Investing for growth

Overall c. 6.7% capacity growth over Summer 14 (before disruption)

0.6% 6.3% 2.6% 4.4% 7.4% 3.1% 5.0% 6.3% 9.0% 4.1% 3.5% 3.7% 8.8% 5.8% 7.4% 5.5% 10.0% 6.9%

Market growth Competitor growth on easyJet’s markets easyJet growth in the market

EZJ 46m seats Non-LCC P2P (est) 86m seats Non-LCC transfer (est) 26m seats Other LCC 51m seats

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2. Cost Advantage

• 2. Maintain cost advantage - Airports

Commercial deals at key airports

• 7 year deal
• 10% increase in traffic in next 12 months
• 10 year growth deal
• Double passengers using the airport to over 9 million per year
• Long term growth deal
• Ensuring price certainty over 5 year period

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50 100 150 200 250 300

FY13 FY14 FY15 FY16 FY17 FY18 FY19

Fleet et Size ze A320 NEO A320 Shk A320 A319

Continued innovation

• 2. Maintain cost advantage - Fleet

Innovative thinking to drive long-term, sustainable savings, benchmarked against the best in class Delivering sustainable cost savings Improving the fleet mix

• A320 aircraft providing a 7% -

8% cost per seat saving over an A319

• New generation A320neos to

enter the fleet in 2017 providing a further 4%-5% cost per seat saving over a current generation A320

Ligh ght-weigh ght seats Ligh ght-weigh ght troll

• lleys

Shar arklet klets 2. Cost Advantage

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• 3. Continuing to lead the way in Digital

Delivering an enhanced customer experience

3. Demand

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• 7 new websites in key markets with extensive

portfolio of hotels across the 7 countries

• Large UK market of 24 million holidaymakers

(9 million package)

• Large European potential (85% of all European holidaymakers

remain within Europe)

• Product supply from the European leader in car rental
• ffering coverage at all easyJet current and future locations
• Unique customer benefits available exclusively to easyJet

customers, offering flexibility and speed of service

• 3. Developing the product

Key partnerships helping develop the easyJet product

Opportunity to develop the easyJet product offering

3. Demand

&

• Excellent choice and competitive prices for easyJet

customers from the world leading accommodation provider

• Convenience for customers with best in class website user

experience and ongoing innovation

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• 3. Continuing to drive Business travel

Platform in place to develop the business passenger initiative

3. Demand

Network Distribution Capability

• Enhanced route offerings including additions such as Gatwick to

Brussels, Paris and Tel Aviv

• Base openings at Hamburg and Naples, increasing capacity and

adding new routes

• All 3 GDS partners are actively driving adoption of their improved

booking solutions for easyJet with the travel management companies

• Agreements with all the major travel management companies across

Europe

• New Director of Business started 1 March 2014
• New European Head of Sales

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ROCE 12% CPBH performance by route weighted by capacity - FY 2013-14 (rolling 12m to Mar-14) < 3 Years > 3 Years

• 4. Track record of disciplined use of capital

Improved returns year on year Route performance

ROCE for route performance and improved returns analysis defined as normalised profit after tax divided by average net debt plus average shareholders’ equity Age of routes

4. Capital Discipline

Capital returns to shareholders ROCE progr gres essi sion

• n

£85m £308m

2012 2011

£196m

2013

Special dividend (m) Ordinary dividend (m)

Returns Routes

H13 (12 m/e March 13) H14 (12m/e March 14)

17.4% 11.3% 9.8% 6.9% 3.6%

2011 2012 2009 2013 2010

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H2 forward bookings

% seats sold *

H2 (Apr’ 14 to Sep‘14) as at 9 May 2014

H2 bookings slightly ahead of prior year

87% 50% 90% 51% Apr May Jun Jul Aug Sep H2

Summer 13 Summer 14

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Outlook

Capaci city y (seats s flown)

• H2 c.+6.7% (before disruption)

Revenue p per seat (constan ant currency)

• H2: low single digits percentage increase

Cost per seat ex fuel (constan ant currency)

• H2 c.+ 2% (assuming normal disruption levels and constant load factors)

FX FX

• H2: £5 million to £10 million favourable movement from foreign exchange rates

Fuel

• H2: unit fuel costs up to c.£10 million adverse (assuming within $900 – $1,000 metric

tonne range)

Rates at 9 May 2014 £/USD: 1.6896; £/EUR: 1.2245; Jet USD 964 per metric tonne

easyJet will continue to invest in its core markets so that it can offer its customers low fares to great destinations with friendly service and it can continue to win in a more competitive market. This means easyJet is well placed to continue to deliver sustainable returns and growth for shareholders

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Summary - growth opportunities available to easyJet

Strong opportunity for easyJet to continue to deliver sustainable growth and returns for shareholders

• Demand and supply in European short-haul aviation are in balance and expected to

remain so for some time

• easyJet’s strong #1 and #2 network positions continue to deliver sustainable returns
• Disciplined growth at the heart of easyJet’s strategy
• easyJet has the winning model with more structural opportunities available in core

markets

Q & Q & A A

38

APPENDIX PPENDIX

39

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ROCE Calculation – including 7x lease adjustment

Reported £m H1’14 H1’13

Earnings before interest and tax – reported (53) (40) Interest element of operating lease payments 20 16 Earnings before interest and tax - adjusted (33) (24) Tax 21% 23% Normalised operating profit after tax (NOPAT) (26) (19) Average shareholders’ equity – reported 1,839 1,731 Average net cash – reported (504) (180) Opening capitalised leases 714 665 Closing capitalised leases 805 644 Average capitalised leases 760 655 Average capital employed 2,095 2,206 Return on capital employed – 7x basis (1.2%) (0.9%)

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ROCE Calculation – NPV and Target liquidity

Proforma £m H1’14 H1’13

Earnings before interest and tax – reported (53) (40) Interest element of operating lease payments 12 9 Earnings before interest and tax – adjusted (41) (31) Tax 21% 23% Normalised operating profit after tax (NOPAT) (32) (24) Average shareholders’ equity – reported 1,839 1,731 Adjustment to shareholders’ equity (13) (41) Average shareholder’s equity – adjus justed ted 1,826 1,690 Average net cash – reported (504) (180) Increase in debt associated with capitalising leases 401 363 Target liquidity adjustment 874 848 Average ge net debt t – adjus justed ted 771 1,031 Average ge capit pital al emplo loye yed 2,597 2,721 Return on capital employed – NPV basis (1.2%) (0.9%)

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RASK and CASK

£m H1’14 H1’13 Change B/(W)

Total revenue per seat

54.80 53.39 2.6%

at constant currency

54.16 53.39 1.5%

RASK at constant currency (pence)

5.04 5.12 (1.6%)

Total cost per seat ex fuel

39.20 38.89 (0.8%)

at constant currency

39.09 38.89 (0.5%)

CASK ex fuel at constant currency (pence)

3.64 3.73 2.5%

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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 forward- looking 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;

• r (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 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. 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

• f 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

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