Virgin Blue Announces $124.3m Half Year Profit, 80.9% Improvement, Boeing 777s For International, More Domestic Jets And Profit Share Plan For “Our Team”20/02/2007
Virgin Blue Holdings Limited today announced a net profit after tax of $124.3 million for the half-year ended 31 December, 2006, up 80.9% on the prior period. Earnings per Share increased 80.3% to 11.9 cents. The full year 2006/7 forecast is now expected to be in excess of 60% higher than the previous corresponding result of $112 million.
“This is a great result and a fantastic performance by our Virgin Blue Team. It puts us in a sound position as we enter our next expansion phase,” said Virgin Blue Chief Executive Brett Godfrey.
“It’s a result achieved through continued focus on our low cost model, superior operational efficiencies and product advancements that have been well received by our Guests. It underlines the strength and resilience of our New World Carrier strategy introduced some 18 months ago,” he said.
During the period under review Virgin Blue completed major upgrades of airport lounges at Sydney, Melbourne, Brisbane and Adelaide and continued the installation of its live2air in-flight entertainment product.
These developments combined with an increasing uptake of new Corporate Traveller fares, Velocity frequent flyer programme, Self Check kiosks and Web Check continue to increase the airline’s appeal to the business traveller market, contributing to a 16.7% improvement in revenue on a 3.4% increase in production.
The summary financial results for the first half of the year are as follows:
|6 months to 31 Dec 2006||6 months to 31 Dec 2005||Change|
|Revenue||$1,121.3 million||$961.1 million||+16.7%|
|EBITDAR||$297.9 million||$208.3 million||+43.0%|
|EBIT||$186.6 million||$104.2 million||+79.1%|
|Profit before Tax (PBT)||$177.8 million||$101.3 million||+75.5%|
|Net Profit After Tax||$124.3 million||$68.7 million||+80.9%|
|Basic earnings per share||11.9 cents||6.6 cents||+80.3%|
|RASK * - total revenue||10.20 cents||9.04 cents||+12.8%|
|- scheduled revenue||9.60 cents||8.55 cents||+12.3%|
|CASK** - including fuel||8.51 cents||8.07 cents||+5.5%|
|- excluding fuel||6.13 cents||6.04 cents||+1.5%|
* RASK – Revenue per Available Seat Kilometre **CASK – Cost per Available Seat Kilometre
Production as measured by Available Seat Kilometres (ASKs) increased by 3.4% to 10.98 billion ASKs, compared to the 6 months ended 31 December 2005, whereas passengers carried grew 6.4% to 7.79 million.
During the period, Virgin Blue extended its leadership in On Time Performance and has now been Australia's most punctual airline for over two years, having beaten Qantas Group* every month in the period since late 2004.
Total revenue increased by 16.7% to $1.12 billion, with yield increasing by 9.3 % to 11.68 cents. Revenue Passenger Kilometres (RPKs) were 9.03 billion up 6.4% from the prior half year. Load factor improved to 82.2%, up 2.3 points for the same period in 2005.
Scheduled revenue per available seat kilometre (RASK) which measures ticket price and passenger load movements (quality of the revenue stream) increased to 9.60 cents per ASK, an improvement of 12.3%.
Total operating costs were $935 million, up by 9.1% on the prior period reflecting the increase in production and the ever present challenge of escalating fuel prices.
During the period the average price paid for jet fuel increased by 15.8% to over US$83 per barrel, pushing the total fuel bill for the period to $262 million. On a production adjusted basis fuel cost $29m more in this period than the corresponding six months. Cost per available seat kilometre (CASK) increased by 5.5% which included a $9 million write off related to the development of a new reservations system. Excluding fuel and this one off cost provision, CASK remained flat on the corresponding prior period at 6.04 cents.
Balance Sheet and cash flow
Capital expenditure for the period was $169 million, which included the purchase of three new Boeing 737-800 aircraft. Average days operating cash reserves improved from 124 to 136 as at 31 December 2006, as available cash balances increased $145 million to $543 million.
The Company has announced an Interim Dividend of 2 cents per share fully franked payable to all shareholders recorded on the register at 5.00pm (AEST) on 1 March, 2007. Payment will be made on 20 March, 2007. The Directors have resolved to pay dividends in future consistent with the capital requirements and expansion plans of the business.
* Including Qantas Domestic, Jetstar and QantasLink according to Department of Transport and Regional Services figures.
The Company now estimates that its reported profit after tax for the full year 2006/07 will be in excess of 60% higher than the previous corresponding period result of $112 million. The revised forecast reflects Virgin Blue’s increasing penetration of business traveller and Government markets, uptake of new products and services and the airline’s new fuel hedging position with 95% of fuel requirements capped at US$70bbl WTI for the remainder of the 06/07 fiscal year.
The Company today announced additional aircraft for its domestic fleet. In addition to its firm orders for three Embraer E-170 and eleven Embraer E-190 aircraft, Virgin Blue has this morning exercised options for a further six aircraft, being three Embraer E-190 and three Embraer E-170 aircraft for delivery in 2008/9.
The Company also advises it has placed firm orders with Boeing Corporation for five 737-800’s for delivery in 2010/11 as replacement capacity and the Board has approved the acquisition of an additional three leased 737- 800’s to enter service in Q3 and Q4 of this calendar year. The Company will also retain for a further 12 months, two leased Boeing 737 aircraft due for return in 2007.
Both the Embraer and Boeing 737 aircraft will be fitted with adaptable configurations to allow maximum flexibility from single class to a high density seating. Virgin Blue's new Boeing 737-800 aircraft will be typically configured with a one class 177-180 seat layout, with ability to increase seat capacity by over 5% up to a 189 seat configuration and deploy these aircraft on price sensitive or leisure routes.
International Long Haul Airline
Virgin Blue also confirms it has now commenced exclusive negotiations with Boeing Corporation to acquire seven Boeing 777-300ER aircraft at a total list price of USD$2.6billion and options for a further six aircraft. Subject to successful completion of the remaining contractual negotiations, long haul operations will be launched during the second half of 2008.
Profit Share Plan for Staff
Finally, in recognition of the contribution of the Virgin Blue team to the Company’s results, management has secured Board approval for introduction of a profit share plan to come into effect in the current 2006/7 year.
The programme will take into account required annual shareholder returns and will be based on Board approved annual targets. It will apply to Virgin Blue staff excluding Management in existing company sponsored plans.
“I am personally delighted to have gained Board approval for this initiative which has been in development for some time,” said Chief Executive, Brett Godfrey.
“We have an outstanding team who have a record of high achievement. It is absolutely appropriate to ensure their efforts are rewarded in line with company performance.”