Half Year Results Analyst and Investor presentation Wednesday 15 - - PowerPoint PPT Presentation

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Half Year Results Analyst and Investor presentation

Wednesday 15 May 2013

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Introduction

Carolyn McCall Chief Executive Officer

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Key messages

1. easyJet’s competitive advantages means it continues to be a structural winner in the European short-haul market despite a difficult economic environment

• 2. Significantly improved winter performance
• 3. Strategy is delivering strong results and returns for shareholders
• 5.47
• 3.87
• 2.04
• 12.1%
• 7.6%
• 3.8%
• 14%
• 12%
• 10%
• 8%
• 6%
• 4%
• 2%

0%

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2011 2012 2013

PBT margin PBT / seat

Loss / seat PBT margin

• 153
• 112

112

• 61

61 2011 2012 2013

Loss before tax

Reducing winter losses, down over 45% Improving loss per seat and margins

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Finance review

Chris Kennedy Chief Financial Officer

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Management action taken to offset headwinds

Loss per seat bridge

£ per seat

H1 2013

• 2.04

0.10 1.34 3.50 0.35 H1 2012 Cost increase FX excl Fuel easyJet lean incremental Easter 2.44

• 3.87

0.83 0.83 Fuel per Seat Revenue per Seat A320 Mix

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Financial Results

£m H1’13 H1’12 Change B/(W)

Total revenue 1,601 1,465 136 Fuel (496) (483) (13) Operating costs excluding fuel (1,042) (982) (60) EBITDAR 63

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Ownership costs (124) (112) (12) Loss before tax (61) (112) 51 EBITDAR margin 3.9% 0.0% 3.9ppt Loss before tax margin (3.8%) (7.6%) 3.8ppt

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Financial results

£m H1’13 H1’12 Change

Loss before tax (61) (112) 45.5% Tax credit 14 22 (36.6%) Loss after tax (47) (90) 47.8% Effective tax rate 23% 20% 3ppt Loss per share 12.0p 21.2p (43.4%) Return on capital employed* (0.9%) (2.8%) 1.9ppt

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

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Improved revenue performance

£m H1’13 H1’12 Change

Passengers (m) 26.6 25.2 5.3% Load factor (%) 88.6% 86.9% 1.7ppt Seats (m) 30.0 29.0 3.3% Average sector length (km) 1,042 1,061 (1.8%) Total revenue (£m) 1,601 1,465 9.3% Total revenue per seat (£) 53.39 50.47 5.8% @ constant currency (£) 54.80 50.47 8.6%

Source: Competitor capacity from OAG using an easyJet definition of overlapping markets. This excludes charter capacity.

• 2.4%

Q3’12

7.5% 4.7%

Q4’12 Q1’13 Q2’13

• 3.6%

5.2% 6.7% 8.0% 5.0%

• 2.3%

9.2% 1.5%

• 3.3%

Revenue per seat at constant currency easyJet capacity growth Competitor capacity on easyJet markets

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Revenue improvement driven by initiatives

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

0.09 1.64 3.23 0.59 0.83 50.47 53.39

H1 2012 Actual Revenue initiatives New Route maturity Non-seat Easter FX and hedge H1 2013 Actual

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Currency impact

Currency split – total costs Currency split – total revenue

H1‘13 currency impact favourable / (adverse)

EUR CHF USD Other Total Revenue - Euro rate €1.22 (2012: €1.16) (36) (6)

• (1)

(43) Fuel 3

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Costs excluding fuel - Euro rate €1.22 (2012: €1.18) 3 1 (1) (1) 2 Total (30) (5) 3 (2) (34)

8% 3% Swiss Franc Sterling 45% Euro 44% Other 31% 6% 25% Euro Swiss Franc Sterling 1% 37% Other US Dollar

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1.05 1.10 1.15 1.20 1.25 1.30

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

FY'12 FY'13

Timing of Euro: Sterling movement drove adverse fx

GBP: Euro rates:

Sharp decline in value of Sterling to Euro in January 2013 High level of forward bookings posted at above 1.20, cost incurred at lower rate

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Impact of fuel

H1'13 H1'12 Change B/(W) Fuel $ per metric tonne

Market price 1,041 1,028 (13) Effective price 988 972 (16)

US dollar rate

Market rate 1.59 1.59

• Effective rate

1.61 1.60 1c Actual cost of fuel £ per metric tonne 613 608 (5)

Year on year drivers of £ £(13) 3)m m fuel cost t increase

• £(2)m from £5 per metric tonne increase in fuel price, ETS and fx movements
• £(14)m volume related: increased sectors and load factor partially offset by reduced sector

length

• £3m saving from increased proportion of A320 aircraft

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Favourable/ (Adverse) £ cost per seat ex fuel £ var at Constant Currency % var at Constant Currency Drivers

Ground Operations 15.47 (1.57) (10.9%)

• Steep increase in airport charges in Spain & Italy
• Increase in de-icing costs due to adverse weather

conditions in winter 2012

Crew 7.17 (0.15) (2.1%) •

Pay increase of 1.8% & changes to performance related bonus schemes

Navigation 4.07 0.03 0.9%

• Increase in regulated charges
• Offset by cost savings achieved through fleet mix change

& reduction in average sector length

Maintenance 2.99 0.28 8.3%

• Underlying maintenance costs broadly flat
• One off adjustment to leased engine maintenance

provision in H1 2012 (not repeated in H1 2013)

Overhead 4.89 (0.06) (1.2%)

• Increase in disruption costs
• Investment in IT development resources
• Increase in proportion of performance-related pay

Brand Licence 0.16 (0.07) (88.2%)

• Royalty fee increased from £2.5m to £4.8m due to the

change from fixed royalty payments to a percentage of revenue

Ownership Costs 4.14 0.28 7.1%

• Decrease in interest cost due to repayment of more

expensive debt

• Decrease in lease costs due to lower average fleet lease

mix

Total cost (ex fuel) 38.89 (1.26) (3.4%)

Cost per seat – key drivers H1’13 vs. H1’12

Variances shown: red & bracketed = negative or an increase in cost, black = favourable or decrease in cost

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Increasing proportion of A320’s

Mar‘13 Mar‘12 Change

A319 (operating lease) 49 55 (6) A319 (owned / finance lease) 105 111 (6) A319 Total 154 166 (12) A320 (operating lease) 14 6 8 A320 (owned / finance lease) 42 32 10 A320 Total 56 38 18 Total fleet 210 204 6 Percentage of operating leases 30% 30%

• Percentage unencumbered

40% 21% 19ppt Percentage of A320s in fleet 27% 19% 8ppt

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Seasonal working capital benefit from summer bookings

883 40 56 390 34 85 97 239 193 131 36 1,194

Net Working Capital Depn & amort Operating Loss Sep 2012 * Mar 2013 FX Restricted Cash Sale & Leaseback Borrowings CAPEX Ordinary dividend paid Tax, net int & other

* Includes money market deposits but excludes restricted cash

£m

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Strong balance sheet

£m Mar ‘13 Mar ‘12

Property, plant and equipment 2,192 2,193 Goodwill and other intangible assets 456 452 Other assets 554 591 Liabilities (excluding debt) (1,968) (1,772) 1,234 34 1,464 464 Debt 761 1,169 Cash and money market deposits (1,194) (1,211) Net debt / (cash) (433) (42) Shareholders’ equity 1,667 1,506 Capit pital al emplo loye yed 1,234 34 1,464 464 Gearing* 11% 31%

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

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Fuel and foreign exchange hedging

Sensitivities

• $10 movement per metric tonne impacts F’13 PBT by +/-$1.3m
• One cent movement in £/$ impacts F’13 PBT by +/-£0.9m
• One cent movement in £/€ impacts F’13 PBT by +/-£0.4m

Fuel requirement US Dollar requirement Euro surplus

Six months to 30 September 2013 83% 80% 85% Average rate $980/ tonne 1.60 1.18 Full year ending 30 September 2013 85% 82% 85% Average rate $983/ tonne 1.60 1.18 Full year ending 30 September 2014 67% 62% 71% Average rate $984/ tonne 1.58 1.20

Rates as at 13 May 2013: Euro to sterling 1.18; US$ to sterling 1.54; Jet fuel cif US$923 per metric tonne . FX sensitivities shown relate to the impact of changes in the fx rate on the unhedged element of currency over and away from the outlook statement and the rates shown above

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Forward bookings

% seats sold *

H2 (Apr‘13 to Sept‘13) * As at 6 May 2013

H2 bookings in line with prior year

Easter Impact

89% 49% 87% 49%

Apr May Jun Jul Aug Sep H2

FY'12 FY'13

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Outlook

Capaci city y (seats s flown)

• Q3: c. +4% (before disruption)
• H2: c.+3.5% (before disruption)

Revenue per seat (constan ant currency)

• H2: c.+4%

Cost per seat ex fuel (constan ant currency)

• H2: c.+4% (assuming normal disruption levels and constant load factors)

Second half results

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

(including those related to fuel).

• H2: With fuel remaining within its recent $900/MT to $1,000/MT trading range, constant

currency fuel costs for the second half would be up to £10 million favourable.

“Whilst there is always the potential for unexpected events to impact short term financial performance, the outlook for the second half of the financial year combined with the strong reduction in first half losses means that easyJet expects to deliver improved returns and profitability for the year ending 30 September 2013.”

Rates as at 13 May 2013: Euro to sterling 1.18; US$ to sterling 1.54; Jet fuel cif US$923 per metric tonne .

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Business Review

Carolyn McCall Chief Executive

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Clear opportunity to deliver sustainable growth and returns for shareholders

Environment creating opportunity for easyJet

• Economic

uncertainty & sluggish growth

• Industrial unrest
• High fuel costs
• Sovereign debt

concerns

• Legacy carriers

incurring significant short haul losses

• Weaker carriers

retreating or exiting with 3% reduction in competitor capacity over winter

• Consumers

valuing low fares

• 1. Efficient, low

cost model

• 2. Strong network

and market positions

• 3. easyJet.com

and brand

• 4. Strong balance

sheet

+ + =

Indu dust stry ry Head adwinds winds Competitiv mpetitive envir vironme

• nment

Competitiv mpetitive ad advan antages tages Growi

• wing

ng retur turns ns

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

Profitable opportunities within existing markets

Share of traffic fic within in easyJet’s top 20 airport

• rts

Growt wth h in exist isting ng markets kets

• easyJet has approximately 22%

share of capacity at its top 20 airports – equating to around 46 m seat ats

• Other low cost carriers (LCCs) have

~25% share

• Non-LCCs account for 53%, with 12%

estimated to be for connections to long haul flights

• 41% or 86m seat

ats s oppo portu rtunity nity within easyJet’s top 20 airports

Source: Market size sourced from OAG data based on easyJet definition of short-haul routes; estimates of transfer traffic obtained from airport and company external announcements. P2P = point to point; LCC = Low-cost carrier.

23 23 4% 4% 13% 7% 3% 1%

• 2%
• 4%
• 9%
• 1%

2% 0% 4%

• 5%

0%

UK UK France Swiss Italy Market

easyJet change Competitors on easyJet markets Total change on easyJet markets

Continued competitor capacity retrenchment

Capacity growth H2‘ F’13 (OAG)

Capacity change (YOY) H2’12 capacity H1 ‘13 capacity H2’13 capacity Competitors on EZJ routes

• 3.0%
• 2.8%
• 1.0%

easyJet +7.5% +3.3% +3.5% Market on easyJet routes

• 0.1%
• 1.0%

+0.1% Competitors in total SH market

• 1.1%
• 4.6%

+0.1%

Rate of competitor capacity withdrawal expected to slow going into summer

Source: Market share data from OAG. easyJet routes based on internal easyJet definition. Based on April download for the six months to 31 March 2013. Forward looking data based on 6 months ending 30 September 2013. Adjustments made to forward looking capacity to remove outliers and conform with easyJet and analyst views.

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Strategy to drive growth and returns

1. Drive demand, conversion and yield across Europe

• 2. Build strong number 1

and 2 network positions

• 3. Maintain cost advantage
• 4. Disciplined use of capital
• Sustainable growth
• (slightly in excess of market c. 3%

to 5% per annum)

• Improved returns
• Tangible and regular cash

returns via 3x cover dividend Leverage easyJet’s cost advantage, leading market positions and brand to deliver point-to-point low fares with operational efficiency and friendly service for our customers

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• 1. Drive demand: Digital developments

1. Drive demand 1. Drive Demand

Developments

• easyJet is the 3rd most searched for

airline globally

• easyJ

syJet et App p now has 4.5m downloads

• Flight

ht tracker cker intr trodu

• duce

ced d used over 4 million times since launch

• Over 4,000 updates posted
• Inspi

spire me launched in October

• Mobile

le boar ardin ding g cards ds being trialled

Marketing strategy is increasing traffic to easyJet and improving conversion rates

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• 1. Drive demand: CRM improvements allow targeted upsell

Consolidated data sources to create a single customer view allowing improved targeting and allocation of marketing spend Inspire me

Departure Pre-booking

Allocated seating Additional products

• Hotels
• Car hire
• Allocated seating

Information to make journeys easier

• On departure and arrival

airport

• Info. for families
• Travel checklist
• Online check-in and

document reminders

Airport info 48 hours to go

1. Drive Demand

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98% 100% 90% 98% 88% 92% 12% 13% 6% 19% 7% 21% H1'12 H1'13 H1'12 H1'13 H1'12 H1'13 Total brand awareness Brand choice/preference

• 1. Drive demand: Brand recognition scores improving

Drive Demand 1. Drive Demand

Brand strength is building:

• Sustained strong brand awareness in all markets
• Consideration still growing, and Europe continuing to match strong UK levels
• 1 in 5 consumers in both France and Italy consider easyJet to be their first choice

airline, up from less than 1 in 10 a year ago.

UK UK Fran ance Italy aly

Source: 2013 data based on Millward Brown research commissioned by easyJet. 2012 data normalised based on GfK CSAT

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• 1. Drive demand: Allocated seating on track

*Source : Gfk & weighted Millward Brown for six months to March ‘13 vs 6 months to end March ‘12.

1. Drive Demand

Delivered against objectives

1. No impact on asset utilisation

• Strong operational performance, best in

class OTP

• 2. No negative impact on cost per seat
• 3. Drive increased customer satisfaction
• Satisfaction with boarding experience has

increased by 2.6 percentage points year on year to 70.5%*

• 4. Generating higher returns than speedy boarding
• Allocated seating drove an incremental £8 million

sales over Speedy Boarding in the first half

easyJet’s focus remains on minimising the operational impact of the change to allocated seating over the busy summer schedule

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• 1. Drive demand: Business travel

1. Drive Demand

Building blocks FY11 FY12 FY13 FY14 FY15

Proposition  improve punctuality

• add new network points
• increase frequency

Product  launch & develop flexi fare  deploy allocated seating

• enable Fast Track Security

Sales  recruit pan European sales force

• negotiate TMC incentives
• deliver corporate fares

Distribution

 agree new commercial terms with GDS

• standardise GDS booking process
• strengthen position on Self Booking Tools
• enhance online & mobile capability

Consideration  develop Business Sense campaign

• increase allocation of media weight

Delivered Delivered Delivered Ongoing Delivered Ongoing Ongoing Delivered Delivered Ongoing Ongoing In progress In progress Planned Planned

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• 2. Network: Optimising the network

United ed Kingdo gdom +5% Fran ance +4% Italy aly +7% Spain

• 16%

Switzer zerlan and +13% German many +4.5%

Overall c. 3.5% capacity growth in H2 (assuming minimal disruption)

Portuga gal +2% +2%

Source : Internal easyJet projection April 2013

2. Network

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3. Cost advantage

• 3. Cost: Innovating to reduce cost

Bendibelt

• New technology to load bags onto

aircraft

• Reduces headcount required to load

bags from 3 to 2 people Forced air de-icing

• T

rialling forced Air technology

• Potential to reduce de-icing fluid usage

by c. 40-50% Reducing weight & fuel burn

• Lightweight seats
• Lightweight trollies
• Lightweight carpets
• Sharklets

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3. Cost advantage

• Simplifying the

process without compromising safety

E.g.

• Refuelling in

Italy

• Ground

handling contracts

• 3. Cost: easyJet turn to reduce costs

‘easyJet turn’ logged 360 activities required to turn an aircraft round

Targeting reducing time on ground by 3 minutes

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• 4. Continued growth in network returns

Improving returns

• In 2012 - 56 routes were

delivering less than 40% of average ROCE; now only 20 routes

• 18 Improved
• 18 Dropped. E.g.
• Liverpool: Brussels
• Brest : Paris CDG
• Madrid closure implemented

efficiently

• June’12 – proposed closure
• Dec’12 – closure completed
• Q2’13 – improving returns
• Growing capacity on high

performing routes

4. Capital Discipline

Improving network returns year on year

Rolling 12 months returns: April – March ‘13 vs. April to March ‘12

Returns Routes Rolling 12 to March 12 Rolling 12m to March 13

12% ROCE 0% ROCE

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• 4. Evaluation of new generation aircraft
• Technical evaluation complete
• Competitive process
• Rigorous level of governance of the process
• No decision yet made and dependant on making an order that is in the

interests of all shareholders

4. Capital Discipline

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Summary: strategy continues to deliver

Strategy delivered strong performance

• ver winter

 Modest capacity growth  Strong unit revenue growth  Controlling costs  Capital discipline  Improving returns

Further opportunities to take profitable share

• 1. Efficient, low cost

model

• 2. Strong network and

market positions

• 3. easyJet.com and brand
• 4. Strong balance sheet

Clear opportunity to continue to deliver growing returns to shareholders Favourable competitive environment

• Legacy carriers’ losses
• Weaker carriers

retreating or exiting

• Consumers valuing

low fares

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Q&A

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Appendix

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ROCE Calculation – including 7x lease adjustment

Reported £m H1 2013 H1 2012

Loss before interest and tax – reported (40) (99) Interest element of operating lease payments 16 17 Loss before interest and tax - adjusted (24) (82) Tax 23% 24% Normalised operating profit after tax (NOPAT) (19) (62) Average shareholders’ equity – reported 1,731 1,606 Average net cash – reported (180) (71) Opening capitalised leases 665 763 Closing capitalised leases 644 713 Average capitalised leases 655 738 Average capital employed 2,206 2,273 Return on capital employed – 7x basis (0.9%) (2.8%)

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ROCE Calculation – NPV and Target liquidity

Proforma £m H1 2013 H1 2012

Loss before interest and tax – reported (40) (99) Interest element of operating lease payments 9 14 Loss before interest and tax – adjusted (31) (85) Tax 23% 24% Normalised operating profit after tax (NOPAT) (24) (65) Average shareholders’ equity – reported 1,731 1,606 Adjustment to shareholders’ equity (41) (37) Average shareholder’s equity – adjus justed ted 1,69 690 1,569 569 Average net cash – reported (180) (71) Increase in debt associated with capitalising leases 363 376 Target liquidity adjustment 848 816 Average ge net debt t – adjus justed ted 1,03 031 1,121 Average ge capit pital al emplo loye yed 2,721 2,690 90 Return on capital employed – NPV basis (0.9%) (2.4%)*

*2012 ROCE on NPV basis restated from -2.3% to -2.4% to reflect the same NPV calculation methodology used for FY 2012 statement

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RASK and CASK

£m H1 2013 H1 2012 Change B/(W)

Total revenue per seat 53.39 50.47 5.8% at constant currency 54.80 50.47 8.6% RASK at constant currency (pence) 5.26 4.76 10.5% Total cost per seat ex fuel 38.89 37.70 (3.1%) at constant currency 38.96 37.70 (3.4%) CASK ex fuel at constant currency (pence) 3.74 3.55 (5.2%)

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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; or (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

• n 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

• n 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

• f, or solicitation of 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 basis of, or be relied on in connection with, any contract or commitment whatsoever. This presentation does not constitute a recommendation regarding the securities of easyJet. Without limitation to the foregoing, these materials do not constitute an offer of securities for sale in the United States. Securities may not be

• ffered or sold into the United States absent registration under the US Securities Act of 1933 or an exemption there

from. easyJet has not verified any of the information set out in this presentation. Without prejudice to the foregoing, neither easyJet nor its associates nor any officer, director, employee or representative of any of them accepts any liability whatsoever for any loss however arising, directly or indirectly, from any reliance on this presentation or its contents. This presentation is not being issued, and is not for distribution in, the United States (with certain limited exceptions in accordance with the US Securities Act of 1933) or in any jurisdiction where such distribution is unlawful and is not for distribution to publications with a general circulation in the United States. By attending or reading this presentation you agree to be bound by the foregoing limitations.

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