VIRGIN CONFIRMS FULL YEAR LOSS, EXPECTS PROFIT NEXT YEAR
Written on the 5 August 2016 by James Perkins
VIRGIN Australia (ASX:VAH) has reported an underlying profit before tax of $41.0 million for the 2016 financial year, an improvement of $90.1 million on FY2015.
Group revenue was $5.02 billion, a 5 per cent improvement on the previous year, while the group underlying EBIT was $210.6 million, an improvement of $144.7 million.
The group's restructure, though, meant the airline ended the year with a $224.7 million loss. This includes decommissioning the Fokker 50 aircraft, removal of all Embraer 170and Tigerair-branded A320 aircraft, reduction in Embraer 190 jets, and some ATR capacity.
Virgin Australia Group CEO, John Borghetti (pictured), played up the group's stronger underlying performance, which was an underlying EBIT growth of $144.7 million, to $210.6 million.
He says the restructure has cost $440.5 million this year, but that will be outweighed by ongoing savings.
"The group remains on track to exceed its existing target of $1.2 billion in cumulative cost savings by the end of the 2017 financial year," says Borghetti.
"Additionally, the group is targeting net free cash flow savings increasing to $300 million per annum by the end of the 2019 financial year through the Better Business program."
The domestic arm of the airline has brushed off the challenges caused by the end of the mining boom, relacing this segment with the corporate and government segment, which now makes up 30 per cent of domestic revenue.
It is the international arm that is putting the biggest drag on the airline. Underlying EBIT for this section was a loss of $48.8 million, which was a 30 per cent improvement on FY15. Borghetti says the international business is expected to return to profitability by the end of FY17.
Meanwhile, Tigerair, which VAH acquired during the financial year, achieved a profit (underlying EBIT profit of $2.2 milion), one year ahead of schedule.
The airline is raising $1.011 billion through a $159 placement to HNA Innovation alongside a $852 million capital raising venture from existing shareholders. The recent completion of the capital raising, where the majority of retail shareholders did not take up their entitlements, has led to speculation the airline could privatise.
Currently, it is majority privately owned, as the airline is now backed by HNA Innovation (13 per cent) and Nanshan Group (19.9 per cent), alongside Virgin Group (8 per cent), Singapore Airlines (19.8 per cent), Etihad (21% per cent) and Air New Zealand (2.5 per cent).
Highlights for VAH