Virgin Blue Holdings Limited Results For The 9 Months Ended 30 June 2006 Up 12% To $84 Million Net Profit After Tax23/08/2006
Virgin Blue Holdings Limited today reported a net profit after tax of $84 million for the 9 months ended 30 June, 2006, 12.0% up on the previous corresponding period.
Excluding $7 million (after tax) in one-off set up costs related to the Velocity frequent flyer programme, the underlying result of $91 million is up 21%.
Yield improved 2.6%, Passenger Load Factor increased 1.9pts to 77.9%, resulting in an increase in Revenue per Available Seat Kilometre (RASK) of 4.7%. The airline’s costs CASK (Cost per Available Seat Kilometre) increased by 3.4% to 8.02 cents, while CASK excluding fuel reduced by 2.0% to 5.92 cents.
As a result of the acquisition by Toll Holdings of Patrick Corporation, Virgin Blue was required under the Corporations Act to synchronize its financial year end with Toll’s end of financial year. As such the audited results shown here are for the nine month period ended 30th June, 2006.
The summary financial results for the period are as follows:
|9 months to 30 June 2006||9 months to 30 June 2005||Change|
|Revenue||$1,392 million||$1,283 million||+ 8.5%|
|EBITDAR||$291 million||$281 million||+ 3.6%|
|EBIT||$133 million||$110 million||+20.9%|
|Profit before Tax||$123 million||$106 million||+16.0%|
|Profit before Tax - margin||8.8%||8.2%||+0.6pts|
|Net Profit After Tax||$84 million||$75 million||+12.0%|
|Basic earnings per share||8.1 cents||7.2 cents||+12.5%|
|ASK’S (Production)||15.7 billion||15.1 billion||+ 3.9%|
|Scheduled Revenue per Available Seat Kilometre (RASK)||8.44 cents||8.06 cents||+ 4.7%|
|Cost per Available Seat Kilometre (CASK)|
|including fuel||8.02 cents||7.76 cents||+ 3.4%|
|excluding fuel||5.92 cents||6.04 cents||- 2.0%|
Virgin Blue Chief Executive Officer Brett Godfrey said the increase in profit was a credit to his team.
“Given the difficult trading environment, and in particular punitive current fuel price levels, to have maintained margins in this environment is a pretty fair result,” he said.
“Virgin Blue’s business model has proven resilient during this period, and thanks to the efforts of our entire
Virgin Blue team, again we have managed to reduce our controllable unit costs to record levels, and have achieved improved performance despite a $70 million increase in fuel costs, during the period,” he said.
“While it’s early days and the results of initiatives introduced under our New World Carrier strategy are just starting to kick in, we are now better positioned to face the challenges ahead,” he added.
Capacity (as measured by ASKs) increased by 3.9% during the 9 months, whilst RPK’s were up 6.1% on the prior period, driving revenue load factor up 1.6pts to 77.0%.
The airline maintained its position as Australia’s number one major airline for on-time performance with more than 89 per cent of flights departing on time in the nine months ended 30 June 2006. Virgin Blue has now beaten the Qantas Group's domestic services for the past 19 consecutive months (since November 2004).
Financial Results Highlights
Total revenue increased by 8.5% to $1.39 billion, with scheduled revenue up 8.9%, as Guests carried increased 7.5% to 10.5 million for the nine months. Despite the competitive environment throughout the period, scheduled yield rose 2.6% compared to the prior period.
The financial performance of the Company continued to be challenged by the rising cost of jet fuel, however RASK growth, combined with a series of highly effective cost containment initiatives mitigated this exposure.
Total operating expenditure increased to $1,260 million, up $87 million or 7.4% on the prior period, driven mainly by a 35% increase in the average price of jet fuel. Excluding fuel, total operating costs increased by only $18 million against a 3.9% increase in production (ASK’s), resulting in a decrease in unit costs of 2%.
The total fuel cost for the period increased $70 million, and was the principal driver for the increase in overall CASK to 8.02 cents compared to 7.76 cents in the corresponding 9 months.
Excluding the Velocity one off set up costs, total commissions, marketing and reservation costs decreased 5% to $71.5 million as benefits from the ongoing initiatives in the area were realised. Labour and staff costs increased 6%, reflecting EBA awards of 3% and the 3.9% increase in production, offset by productivity initiatives such as self check-in.
Payment of the $259.8 million fully-franked dividend in December 2005 saw cash balances decrease from $788.1 million at 30 September 2005 to $573.0 million at 30 June 2006, giving Virgin Blue 125 days operating cash reserves as at 30 June 2006, down 62 days over 2005.
Capital expenditure for the Group during the 9 month period was $141.9 million. This included deposits on 9 future aircraft commitments, expenditure on existing aircraft and completion costs associated with the Brisbane hangar. The Company’s net debt to net debt plus equity ratio was 59.7% up from 55.8% at 30 June 2005.
The Company's new Board of Directors is currently reviewing the dividend policy, and has resolved that no dividend will be declared or paid at this time.
In the past nine months Virgin Blue introduced a series of product initiatives designed to appeal to business travellers which have been achieved without adding undue complexity to the business model.
These included the Velocity frequent flyer programme; the relaunch of lounges at major airports, Web Check-In, new flexible fares for business and Government travellers, completion of new code-share technology and an Application Programme Interface facility for corporate accounts.
Benefits from revenue and cost initiatives are in line with expectations and are expected to deliver further value in the coming year, however management remain cautious with regard to continued escalation of fuel prices and related household inflationary pressures which may lead to softening consumer sentiment.
During the reporting period to June 2006, fuel price averaged $76 per barrel and subsequent to this period, fuel has cost the company around $87 per barrel.