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Virgin Blue Holdings Limited Results for the 12 months ended 30 September 2005

16/11/2005

$105.2 million Net Profit after Tax

In line with previous guidance to the market, Virgin Blue Holdings Limited today announced a net profit after tax of $105.2 million for the 12 months ended 30 September 2005#.


The summary financial results for the year are as follows:

Financial Results
 

 12 months to 30 September 200512 months to 30 September 2004% change
Revenues

$1,756 million

$1,533 million+14.5%
EBITDAR$379 million$427 million-11.2%
EBIT$154 million$222 million-30.6%
Profit before Tax (PBT)$148 million$224 million-33.9%
Net Profit after Tax

$105 million

$157 million-33.1%
Basic earnings per share10.1 cents17.1 cents-40.9%
Cost per Available Seat Kilometre
- including fuel
- excluding fuel
7.84 cents
6.03 cents
7.47 cents
6.22 cents
+4.9%
-3.0%

    
“In our fifth year we finalised a number of significant strategic projects and continued the selective development of our Australian, trans-Tasman and South Pacific Island network,” Virgin Blue Chief Executive, Brett Godfrey said.


“Key projects delivered this year included our Velocity frequent flyer programme; branded credit cards with National Australia Bank; technology projects Web Check-In, an Application Programme Interface for corporates, new code-share technology; and the launch of Polynesian Blue our new joint venture airline with the Government of Samoa,” he said.


OPERATING PERFORMANCE


Capacity (as measured by ASKs) increased by 16.5% during the 12 months, as Virgin Blue increased its average aircraft for the 12 months by 10.2% (from 44.3 to 48.8 aircraft). Passenger numbers increased to 13.4 million, up 13.9% on the prior period.


“Following four years of unparalleled growth, the management had an opportunity in 2004-2005 to focus on consolidating its business. Consequently, from an operational perspective we have had a very pleasing performance,” said Brett Godfrey. “Our average on time performance of 90.4%* over the last six months exceeds our competitors (Qantas 83.9% and Jetstar 84.8%), and our cost per ASK (excluding fuel) has fallen for the third year running, decreasing by 3% to 6.03 cents. Importantly we remain the lowest cost carrier in Australia and expect that to continue as our competitor’s stated fuel advantage begins to dissipate in 2006.”

* Department of Transport and Regional Services


Frequencies were increased on existing domestic routes and 12 new markets were introduced. By 30 September, 2005, Virgin Blue offered more than 300 flights daily to 22 Australian and six overseas destinations.


FINANCIAL RESULTS HIGHLIGHTS


Revenue


Total revenue increased by 14.6% to $1.76 billion, with scheduled revenue up 14.7%, as passengers carried increased 13.9% to 13.4 million. Despite the difficult pricing environment throughout the year, scheduled yield rose 1.2% compared to the prior year.


Revenue Passenger Kilometres (RPKs) were 15.7 billion and ASKs were 20.4 billion, up 13.8% and 16.6% respectively from the prior year. Load factor was 77.3%, down 2.8 points from 2004.


Expenditure


Total operating costs were $1.60 billion, up 22.2% on the prior year due to the significant increase in fuel costs (up 68%) and airport, navigation and station operation costs (up 22.1%) compared to a 16.6% increase in production (ASK’s). Changes in charging regimes and deregulated pricing have seen airport charges to airlines increase dramatically – airport, terminal and landing fees alone now account for 18% of Virgin Blue’s operating cost base.


Fuel price per barrel increased by over 76% in the year, pushing CASK to 7.84 cents compared to 7.47 cents in the corresponding 12 months.  As stated, excluding fuel, CASK reduced for the third year in a row, a reflection of Virgin Blue’s inherent low cost culture together with the flow through benefit of cost saving strategies implemented in the last 12-18 months.


Some of these included the introduction of check-in Kiosks, new and enhanced scheduling systems, outsourcing of Virgin Blue’s catering requirements, savings related to tighter controls on catering wastage; a new three year heavy maintenance contract with Air New Zealand Engineering Services in Christchurch; and commencement of our ‘Fly-Smart Fuel Programme’ focusing on maximum fuel efficiency across Planning, Load, Flight and Maintenance disciplines.


Balance Sheet


Cash balances increased from $520 million to $616 million during the year prior to the dividend payment declared below, giving Virgin Blue 140 days operating cash reserves as at 30 September 2005.


Capital expenditure during the 12 month period was $303 million, principally in respect of new aircraft.


The company’s net debt to net debt plus equity ratio was 60%, down from 65% as at 30 September 2005.


Dividend


The Directors have resolved to adopt a Company dividend policy as follows:


“It is the Company’s intention to pay a substantial proportion of its after tax earnings as a dividend each year, subject to the need to retain funds for identified investment opportunities and taking into account any other factors the Directors may deem relevant at the time.”


The Company has been operating profitably since listing in 2003 and financed rapid growth, whist building up considerable cash reserves in excess of current requirements. The Company has not paid a dividend since listing.


Accordingly, the Directors have resolved to pay a final, fully franked dividend of 25 cents per ordinary share, totaling $262 million. The record date for the dividend will be 28 November 2005 with payment being made on 15 December 2005.  This dividend should not be treated as a guide to future payments as all future dividends will be assessed in line with the policy outlined above.


OUTLOOK


After 12 months of consolidation, including cost and productivity initiatives, withdrawal from unsustainable routes and investment in its business traveller strategy, Virgin Blue will continue to focus on improving the quality of its revenue streams.


“We are now well positioned to take advantage of the size, scale, and frequency achieved in our 2003-2004 expansion,” said Brett Godfrey.


“In the last quarter of 2004-2005 we have brought to fruition a number of significant strategic projects, culminating in the launch of our long considered frequent flyer programme yesterday.”


“Looking forward to 2005-2006, our primary focus remains on continuing to develop opportunities in the Australian market, including strengthening our appeal to the business sector, further product innovations and strategic development of our network,” he said.


# As a result of the acquisition by Plzen Pty Ltd (“Patrick”) of a controlling interest in Virgin Blue, the Company was required under the Corporations Act (“The Act”) to synchronize its financial end of year with Patrick’s end of financial year of 30 September. Whilst the statutory accounts are for the 18 month period ended 30 September 2005, the results shown above are for the 12 month period.