Qantas Airways Limited 1H20 Results Supplementary Presentation 20 February 2020 ASX: QAN US OTC: QABSY
Group Performance
1H20 key Group financial metrics 1H 1H19 19 1H 1H20 VLY LY % % 11 11 Comments ts tated) 10 10 (R (Resta Underlying Profit Before Tax 1 ($M) 771 771 775 (0.5) Strong result despite significant headwinds Underlying Earnings per Share 2 (c) 34. 4.3 31.3 9.6 Accretive benefit of share buy-backs 1H19 included $88m benefit of gain on the sale of assets and Statutory Profit Before Tax ($M) 64 648 691 (6.2) reversal of impairment of an associate Statutory Earnings per Share (c) 28.8 27.9 3.2 Accretive benefit of share buy-backs offset decline in earnings Rolling 12 month ROIC 3 (%) 19.6 .6 19.5 0.1 pts Continued strong Group ROIC Revenue ($M) 9, 9,464 64 9,206 2.8 Modest recovery in domestic market in the second quarter Strong 1H20 cashflow despite ~$300m of Australian tax Operating cash flow ($M) 1,4 ,475 1,435 2.8 instalments Net debt 4 ($B) 5.3 5.2 (1.9) Cash outflows for capex and tax skewed to the first half Unit Revenue 5 (RASK) 9.19 19 8.94 2.8 Total unit cost 6 (c/ASK) 8.18 18 7.93 (3.2) (0.7%) after normalising for domestic terminals transfer of Ex-fuel unit cost 7 (c/ASK) 5.6 .60 5.43 (3.1) ownership and freight revenue Available Seat Kilometres 8 (ASK) (M) 76 76,88 880 76,854 – Revenue Passenger Kilometres 9 (RPK) (M) 65,437 37 64,958 0.7 1. Underlying PBT is a non-statutory measure and is the primary reporting measure used by the Chief Operating Decision-Making bodies, being the Chief Executive Officer, Group Management Committee and the Board of Directors, for the purpose of assessing the performance of the Qantas Group. All items in the 1H20 Results Presentation are reported on an Underlying basis unless otherwise stated. Refer to slide 5 of this Presentation for a reconciliation of Underlying to Statutory PBT. 2. Underlying Earnings per Share is calculated as Underlying PBT less tax expense (based on the Group’s effective tax rate 31.3% (1H19: 33.0%) divided by the weighted average number of shares during the year (consistent with the Statutory Earnings per Share calculation). 3. Return on Invested Capital (ROIC). For a detailed calculation of ROIC please see slide 10. 4. Net debt under the Group’s Financial Framework includes net on balance sheet debt and capitalised aircraft lease liabilities. For a detailed calculation of net debt, please see slide 12. 5. Ticketed passenger revenue divided by ASKs. Subject to rounding. 6. Underlying PBT less ticketed passenger | 3 revenue per ASK. 7. Underlying PBT less ticketed passenger revenue, fuel and share of profit/(loss) of investments accounted for under the equity method, adjusted for the impact of changes in FX rates, non-cash impact of discount rate changes on provisions per ASK. 8. Total number of seats available for passengers multiplied by the number of kilometres flown. 9. Total number of passengers carried multiplied by the number of kilometres flown. 10. 1H19 restated for the impact of the adoption of AASB 16 and the September 2019 IFRIC decision in relation to the accounting treatment of fair value hedges of foreign currency risk on non-financial assets. 11. Variance to 1H19. Unfavourable variance shown as negative amount.
Underlying Income Statement summary 1H19 1H 19 % 3 Comments $M $M 1H 1H20 VLY LY % ts (R (Resta tated) 2 3.5 Group Unit Revenue increase of 2.8%, strong ancillary revenue Net passenger revenue 8,305 8,027 growth Net freight revenue 496 525 (5.5) Weak global demand for freight forwarding due to trade wars Other revenue 663 654 1.4 9, 9,464 64 9,206 9, 2.8 Tot otal R l Reven enue (4.6) FX impact on non-fuel costs, impact of terminal sales, airport Operating expenses excluding fuel (5,593) (5,347) charge increases and costs supporting revenue growth Fuel (1,975) (1,963) (0.6) Increase in AUD fuel price offset efficiency improvements (2.3) Three additional 787-9 Dreamliners received in 1H20, A380 Depreciation and amortisation (1,006) (983) reconfiguration Share of net profit of investments accounted for 10 3 >100 under the equity method (8 (8,564) (8,290 90) (3.3) 3) Tot otal E l Expen enditure Under erlyi lying E EBIT 1 900 90 916 16 (1 (1.7) 7) Net finance costs (129) (141) 8.5 Under erlyi lying P PBT 771 771 775 775 (0 (0.5) 1. Underlying Earnings Before Net Finance Cost and Income Tax Expense (Underlying EBIT). 2. 1H19 restated for the impact of the adoption of AASB 16 and the September 2019 IFRIC decision in relation to the accounting treatment of fair value hedges of foreign currency risk on non- | 4 financial assets. 3. Unfavourable variance shown as negative amount.
Reconciliation to Underlying PBT ated) 2 $M $M 1H 1H20 1H 1H19 19 ( (Restat Underlying 1 Underlying 1 Statutory Other items not Statutory Other items not included in included in Underlying PBT Underlying PBT Net passenger revenue 8,305 – 8,305 8,027 – 8,027 Net freight revenue 496 – 496 525 – 525 Other revenue 663 – 663 654 – 654 9, 9,464 64 – 9,464 9, 64 9,206 9, – 9, 9,206 Tot otal R l Reven enue Manpower and staff related (2,212) 34 (2,178) (2,205) 37 (2,168) Aircraft operating variable (2,262) – (2,262) (1,992) 2 (1,990) Fuel (1,975) – (1,975) (1,963) – (1,963) Depreciation and amortisation (1,025) 19 (1,006) (1,025) 42 (983) Share of net profit of investments accounted for under the equity method 10 - 10 3 - 3 Other (1,223) 70 (1,153) (1,192) 3 (1,189) (8, 8,687 87) 123 12 (8 (8,564) (8,374 74) 84 (8,290 90) Tot otal E l Expen enditure EBIT BIT 777 777 123 12 90 900 832 32 84 916 16 Net finance costs (129) – (129) (141) – (141) PBT BT 64 648 12 123 771 771 691 69 84 775 775 1. Underlying PBT is a non-statutory measure and is the primary reporting measure used by the Chief Operating Decision-Making bodies, being the Chief Executive Officer, Group Management Committee and the Board of Directors, for the purpose of assessing the performance of the Qantas | 5 Group. All items in the 1H20 Results Presentation are reported on an Underlying basis unless otherwise stated. 2. 1H19 restated for changes associated with the first time adoption of AASB 16 and the September 2019 IFRIC decision in relation to the accounting treatment of fair value hedges of foreign currency risk on non-financial assets.
Revenue detail Net et pas passen enger ger reven enue u e up p 3% Group Unit Revenue increased 2.8% • Group Domestic 1 Unit Revenue increased 0.5% – Reve evenue ( ($B) Group International 2 Unit Revenue increased 4.8% – Group capacity flat, disciplined capacity management in high fuel environment 9.5 3% • 9.2 Net Revenue transformation benefits of $56m • Net et fr frei eigh ght reven enue e do down 6% Driven by softening in global demand due to USA/China trade war • Frequ equen ent fly flyer er r redem edempti tion, m mar arketi eting, g, s sto tore an e and d oth ther er r reven enue u e up p 16% Increased redemptions in the core Loyalty business • Increased points issuances from partners • Growth in New Businesses • 1H19 1H20 Reven enue e fr from o oth ther er sources es do down 9 9% 0.7% RPKs (m) 64,958 65,437 Decrease in third party service revenue following sale of the catering business • Partially offset by increase in other revenue sources, loss of other revenue from – • ASKs (m) 76,854 76,880 terminal sales (e.g. retail, advertising, valet etc) 1. Includes Qantas Domestic and Jetstar Domestic. 2. Group International includes Qantas International, Jetstar International Australian operations, Jetstar New Zealand (including Jetstar Regionals) and Jetstar Asia (Singapore). | 6
Expenditure detail Fuel u el up p 1% Impact of low AUD • diture 1 ($B) Expen Ex pendi B) Lower USD jet fuel prices • 8.6 Offset by fuel efficiency initiatives and lower activity related consumption 3% • 8.3 Man anpo power er an and s d staff taff-relat elated ed fla flat Increased flying and non-flying activity • Offset by reduction following sale of the catering business • Aircraft aft o oper perati ating g var ariabl able ( e (AOV) costs ts up p 14% Impact of network changes, fleet transition and increased passengers • Impact of low AUD • CPI partially offset by Transformation benefits • Increase from transition to new catering contract from in-house • Increase in airport charges and taxes; includes impact of domestic terminal sales • 2 1H19 1H20 Depr eprec eciat ation an and d am amorti tisati ation u up p 2% 2% Passengers 1.3% 28,500 28,876 787-9 aircraft additions, investment in Wi-Fi and aircraft reconfigurations • (‘000) Investment in lounges and technology – • ASKs (m) 76,854 76,880 Other Oth er expen pendi ditu ture do e down 4% Property costs transferred to AOV due to sale of domestic terminals • | 7 1. All expenditure is presented on an Underlying basis which excludes other items not included in Underlying PBT. 2. 1H19 restated for changes associated with the first time adoption of AASB 16 and the September 2019 IFRIC decision in relation to the accounting treatment of fair value hedges of foreign currency risk on non-financial assets.
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