Virgin Australia Holdings Expects $100 Million Profit In 1H FY19

  • Dec 10, 2018 AEDT
  • Team Kalkine
Virgin Australia Holdings Expects $100 Million Profit In 1H FY19

Airlines Group, Virgin Australia concluded its recent week on the higher levels after the company announced 9.7% growth in revenue for the first three months of Fiscal 2019. The news sent the shares to jump by 8.33%, settling at $0.195 on Friday. The stock however plunged 2.5% on December 10, 2018, around mid-day trading.

Richard Branson’s company Virgin Australia Holdings Limited (ASX: VAH) revealed its year-to-date performance and the outlook at the 2018 Annual General Meeting held recently. The company stated that it expects the group revenue for the second quarter of Fiscal 2019 to grow by 10% underpinned by current booking trends especially in the domestic business. The guidance has been provided in comparison to the previous corresponding period.

Looking to the entire first six months of FY19, i.e. 1 July 2018 to 31 December 2018, Virgin Australia forecast its Underlying Profit Before Tax to be at least $100 million. It represents an improvement of 22% on H1 FY18 result of $81.9 million. Moreover, the year-on-year fuel price hikes have also been included in the outlook. Net of Forex and hedging, the company has estimated its Y-o-Y fuel price increase to be $88 million which has reportedly been included in the 1H FY19 guidance.

During 2018, the company’s Virgin Australia Domestic business together with the broader Group has outperformed its industry competitor on the front of ‘On Time Performance’. It outlines one of the most important factors that every player in tourism industry strives to achieve. As a result, the customer’s traction turned out to be such that the Group flagged highest EBITDA, EBIT and EBIT margin from the Virgin Australia Domestic business in FY18. The earnings before interest and tax margin of Virgin Australia domestic business grew two and half times higher than it was in the previous financial year.

But on the negative side, the Virgin Australia International business was hit by EBIT loss of $12.8 million driven by fuel price rise, volcanic activity in Bali and start-up costs in connection with Hong Kong services launch.

Overall, summing up the loss in international fleet business, the impact on Tigerair’s earnings ahead of depreciation costs, and the other one-off costs associated to fleet transition program, the Group reported statutory loss after tax of $653.3 million in FY18. This reflects a further loss of $467.5 million on previous corresponding period’s loss of $185.8 million.

However, coming to the underlying results of the company, we can see the company has strong fundamentals as it reported record FY18 underlying PBT of $109.6 million, up $113.3 million on pcp loss of $3.7 million. It reflects the highest Group EBIT of $259.5 million, up 58.1%, for the year ended 30 June 2018.

Further, the company aims to keep this growth trajectory going forward. For this purpose, the Group has been enhancing its airport experience to customers, launching self-service check in at Adelaide and Sydney Airports as well as offering low cost travel through Tigerair. Virgin Australia Holdings now also have WiFi in its flights. It has been the only Australian airline to offer WiFi on flights to North America.

VAH’s Chief Executive Officer John Borghetti told that more than 60 per cent of the company’s domestic fleet has been fitted with WiFi, with the balance planned to be completed by February 2019. He added that company’s A330 fleet will be fitted with WiFi by September 2019.

In today’s trading session, VAH share price declined to trade at $0.19 on December 10, 2018 (1:27 PM AEST).


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