Wizz Air Holdings Plc

Good morning, everyone, and welcome to the full year 2020 preliminary results. In a moment, we'll be handing over to... Following that Q&A session, for the benefit of those dialing in online, there'll be a microphone hanging around the room. Don't worry, it won't amplify your voice. Just remember, we'll be taking questions from the room first before going online. And with that, I'll hand over to Joseph.

Thank you. Good morning, everyone. Thank you for coming. So this is reporting the results of the last financial year, fiscal 24. And I hope the way you come across with that is that we delivered what we told you to deliver. So this year was delivered in line with our expectations and our guidance to the market. Could we move, please, the slide to the next one? Okay. So net profit, 366 million euros. This is a turn of 900 million euros year over year. And this is net profit. But if you look at operating profit, it is the same number. So the business has turned 900 million euros over the year. And we are delivering it in line with guidance. Capacity, quantity, and growth, despite... The challenges arising from the supply chain on an ASK basis, we were up nearly 25%. And with that, we delivered a record traffic, of course, with 62 million passengers in the financial year. Previous record was fiscal 23 with 51 million passengers. We benefited from the revenue environment. ROSC went up mid-single-digit. 4.6% year on year, much driven by improvement on ticket revenue. COSC, we think it was a very strong performance. You recall that we were explaining that last two years or so we were operating business at suboptimal levels in terms of utilization and some of the operational kpis the financial year significantly improved on all the cons we will deep dive into into those and as a result you see cost improved significantly 15 and it is interesting to put it in perspective vis-a-vis the rest of the industry you will see that Some of our competitors actually have gone to the opposite direction with regard to cost creep, but we've been able to put cost under control. And as a result, we are now the lowest cost producer in the industry on par with the previous cost leader. And we're seeing that we are well set for building cost advantage, unit cost advantage from here on a structural basis. Operational metrics, much improved. Completion rate is back to standards, 99.4%. And we've actually got a head start in the current financial year. We said it's the best performing airline in the whole of Europe with regard to flight completion. On-time performance has improved a lot, still a way to go. But some of it is the function of the supply chain. Some of it is our own internal improvements, which we are... Working on utilization, went back to standards. Now we have reached fiscal 20 levels, pre-COVID utilization levels, and certainly be much improved versus the previous financial year. Total cash, 1.6 billion. We maintained our investment grade rating with Fitch. We have talked a lot about the Brett and Whitney issues, so I think you are fully aware of that. At the end of the financial year, we had 45 aircraft on the ground resulting from the GTF matters. As you were also guided, the company received compensation for that. So that was kind of a wash in terms of excess cost and compensation watching each other. Now, the good thing, just to put it off the front, is that Now we start seeing a turn as we speak. We are now receiving clean engines on the one side and we are also seeing improvements at Pratt & Whitney with regard to shop visit time needed to push through the engine, the shop. We received our second consecutive award from CAPA for leadership on global sustainability. And as you are aware, we just celebrated our 20th anniversary with actually a record day for sales. We managed to sell. a revenue of 37 million euros over one day, which is a new daily record. And during that 20 years of operating history, we carried nearly 400 million passengers. And I remember when I was in London on the day of the first flight, so that's 19th of May 2004, and I was interviewed by Richard Quest at CNN, and he Put it out like, Luca, you are the 57th airline just recently created. Who the hell do you think you are needed for? And, well, 400 million people decided to need this air, which, of course, makes us very proud. Could we please move the slide? So just to give you a snapshot where the business is at the end of the financial year, as you can see, capacity was growing significantly on C terms, 18%. ASK terms, that was 20-25%. As you recall, we are up 21% on passenger traffic. The fleet has been growing actually significantly. We haven't really seen kind of the full benefit of that due to the engine inspections. But at the end of the financial year, the fleet reached 208 aircraft. The age of the fleet continues to come down. That is important for operating unit cost purposes. The renewal rate is now over 60%, which is significant. So I would say that probably of any airlines on the planet with scale, Wizz Air is the most renewed carrier. Every seat count is now up to 224. That gives us a significant competitive advantage. Gauge comes with unit economics. So the higher the gauge, the lower the unit economics will become. And I think that gives us a structure advantage versus the rest of the industry. And upgaging continues to unfold going forward as we will essentially exclusively take deliveries of all the AC-21neos in the future. We are operating to nearly 200 airports over 50 countries. across 33 operating bases. And of course, with the growth of the business, our employee base also grew. We added 600 million jobs inside the company, of course, a lot more outside the company serving the business. We remain focused on sustainability, our carbon footprint, and we further reduced that to 52 grams. I mean, you will see that with a huge advantage, we are the leading airline when it comes to carbon footprint. Could we please move the slide? We talked a lot about operations and the challenges we face. we encountered over the years. I mean, you now see that significant turnaround has been happening across the operating metrics. Probably the most important one is fleet utilization. Fleet utilization is back to standards actually above fiscal 2011 when we operated the airline with 12 hours. of utilization. Now it's more like 12 and a half and it's a huge improvement versus fiscal 23. As you can imagine, given the The logic of the business model we implement, this is a very significant factor and cornerstone to the cost performance of the business because we have a lot of fixed cost in terms of fleet, in terms of employees, pilots coming through, etc. And we have to be able to spread the fixed cost and the higher the utilization we achieve, the better we can spread the cost. So the lower the unit cost will become. Completion rate, as said, Back to standards, big improvement versus previous year, but also above fiscal 2011, 99.4%. And as I said, we just had a head start in the current financial year and completion rate is 99.8%. And with that, we are the best operating airline in Europe. On-time performance keeps improving. I think we have to take note of the fact that we are in a more challenging supply chain environment still. That hampers our ability to perform on time. Nevertheless, given all the investments we have put in place for enhancing the resilience of the business model and the operating model, you now start seeing improvements actually happening. All in all, we're seeing that the fundamentals of the business are back in place. Operations have been turned around and now financially businesses benefiting from those investments and turnarounds. So with that, I would hand it over to Jan. Could you please move the slide?

Thank you, Youssef. So in terms of financial performance, very strong revenue results, 30.2% higher versus F23. And that's based on 25% capacity growth. So we're growing our revenue faster than that. And that's because of higher unit revenue. 4.6% higher unit revenue. At the same time, our fuel costs reduced year on year, despite the higher capacity. And that's a combination of price. So our fuel price on average was 18% lower year on year. The hedging program that we reinstated in fiscal year, F-24, and fuel efficiency driven by the market-leading aircraft in the A321neo. Non-fuel costs increased by 15%, which of course is lower than the 25% capacity growth, implying that there's a unit cost savings there, which we'll talk about in subsequent slides. In terms of EBITDA, we swung at 1.2 billion year on year. So 1.2 is the total EBITDA for the year, which is a very healthy number and helps towards our leverage. In terms of operating profit, as Joe mentioned at the beginning, we see a $900 million swing, so similar results in terms of EBITDA operating profit and reported profit. It's a very proud moment to talk about having a $535 million loss last year in the and a $366 million profit this year. So it's something that we're all proud of, and we thank the team for delivering this. In terms of cash, we ended up roughly the same as last year, slightly ahead, and that's despite a $500 million bond repayment that took place in January. That payment was paid out of cash on hand, and so no additional debt was required to service that. If I could go to the next slide, please. As mentioned, ASKs grew 25%. That's our capacity. Our revenue grew 4.6% in line with guidance. Guidance was mid to high single digits. In fact, all of our guidance metrics were met this year. But unfortunately, it was on the lower end of guidance. And so there's certainly work to be done and causes for that. We provided an indication as to where Revenue was under pressure this year, so ticket risk was strong, double-digit growth there, but ancillary declined, and most notably in H2, F24, due to challenges that we saw in the Middle East and in Israel due to the latest Israel-Hamas war. and then having to redeploy high insulated revenue capacity into other markets that were impacted by the seasonality, you know, November and then into Q4, as well as a shorter booking window for the holiday season. So there's a lot of opportunity there to bring that back in line. And as you'll see from our guidance later on, you know, we expect that to come back in F25. load factor we talked about. And so I think we can go to the next slide on this one. So in terms of unit cost, I think this is where we start to get really exciting and really punchy. And so as you can see, basically, most lines are either flat or have reduced. Fuel, we talked about staff increased, 9.1% increase in staff, although I point out that that's a much lower growth number than our competitor who saw staff costs increased by 20%. Depreciation went up slightly, and that's a line item that continues to be under pressure in the business due to the fact that we're taking on As many aircraft as we are, they're more expensive aircraft, and we're grounding a lot of our aircraft currently, so there's an inefficiency that comes through that. I would point out, however, that the cost impact on ex-fuel cask is mitigated by total cask, which we'll look at in a subsequent slide. Overall, the cost base was supported by the other cost line, And in there, we've provided a hopeful breakdown, which gives you some color as to what's happening. So you can see that there was an increase year on year in unit cost benefit on the sale-leaseback line. So there's two elements to that. There's an aircraft element. And so the aircraft sale-leaseback gains follow the fleet profile and the delivery profile. But what happened in F-24 and will happen to some extent in F-25 is that we started ramping up on spare engines. And the rationale for that is strategic. So we have the benefit of the Pratt & Whitney compensation arrangement, and that helps for... for parked aircraft, but we're, as I might remind everybody in the business of flying aircraft. And so what we wanted to do is make sure that we had support for the outer years so that we can continue the growth plan, which resumes after this fiscal year. And so we made a strategic choice to invest into engines, engines that we would otherwise need as our fleet grows, but that we could benefit from now. And so we've started securing as many engines as we could, either from from sale leasebacks or from third-party lessors or, in fact, leasing engines from Pratt as part of a strategic desire to build up our spare engine bank. That investment will pay off in F-25, 26, and 27. And there is, in fact, a payoff in F-24 because consistent with our aircraft financing strategy, we sale leaseback our engines. And if there's a benefit in F-24, so be it because at the end of the day, Having more engines available to us will allow us to put more aircraft back in the sky sooner and make us less reliant on compensation, even though, of course, we continue to benefit from that and expect to in the future. There's also the supplier compensation line there. And I would caution you to assume that all of that is attributable purely to Pratt. There are other suppliers in there that move the numbers around. So it's not going to be as easy to try and work out what our confidential arrangement is with Pratt. As you can see, disruption increased. And that is solely due to the engine challenges and the disruptions we had in the Middle East. over the fiscal year. And so you need to look at the combination of all these elements when it comes to our overall P&L and understand that we wouldn't have compensation without groundings. I think it's also important to point out that everyone focuses on the cost increase or the cost impact from disruptions, whether it's engine related or geopolitical related. But there's also a revenue impact, as we mentioned, in the form of the challenge we face when having to redeploy capacity. And so there's a one perspective would be to say if there was no disruption, you wouldn't have the benefit from the engine sale leasebacks or from the from the supplier compensation, but then at the same time, you'd have higher revenue. So what we're doing is basically trying to lock in our profit margin to a level where once we start flying again, we can take that margin and expand it. So that's the background behind this call out on the other. And I'm sure that there'll be lots of questions as we move to that phase of the conversation. So with that, could I ask we go to the next slide? This is a slide that we're very pleased to point out. What we've done is we've taken our total CASC, because at the end of the day, while we challenge our divisions to focus on ex-fuel CASC to make sure that we're bringing down the areas of the business that the line management can control, at the end of the day, we need to look at the overall difference between RASC and CASC when it comes to maintaining profitability, driving profitability, and delivering shareholder value. And you can see that in fiscal year 23 to 24, either unadjusted or adjusted to 1600 kilometer stage length. Either way, WIS saw a decline year on year in ex-fuel cask, whereby Ryanair saw an increase, a dramatic increase year on year. And then looking at the arrows on the top, you see that compared to fiscal year 20, so pre-pandemic, both of our cost bases are growing, which is expected in an inflationary environment. Ours is just growing slower. And that comes down to superior aircraft capacity, so the higher gauge. It comes down to the efficiency in terms of fuel, and it comes down to many of the cost lines where we are back to where we were pre-pandemic. So we're pretty pleased to be the lowest cost producer out there and to rebut any assertions otherwise. Next slide. In terms of cash, as mentioned, we maintain strong cash levels, roughly 30% to 35% liquidity in terms of what the ratio is versus revenue. Our net debt did increase this year, and that's driven by a combination of having more aircraft delivered, total aircraft in the fleet, including those that are grounded, as well as there was a working capital swing this year. And that is driven by the way that the Pratt & Whitney and other supplier credits are accounted for. When we agree on the credits, but they haven't actually been applied yet, they end up in a working capital swing. So it ends up driving up the overall net debt number. But as you can see, the leverage ratio has come down as you wouldn't expect it would. And it will continue to come down. And at this point, we're thinking that we should be down below 2 by the second half of F26. So that deleveraging will continue. And that's what's supporting the investment grade rating from Fitch. And we expect now with these results out in the public that we will re-engage with Moody's to recover that rating as well. Ultimately, the cash balance was driven by operating cash. And to some extent, some of the smaller loan facilities, the PDP facility will be fully repaid in the next 12 months. And we will be repaying our ETS facility in September at the same time that we surrender those emissions credits. So overall, pretty pleased with the cash position. And based upon our forecast, we see that balance increasing, assuming, of course, that there are no further unexpected events, which would be nice for a change. And with that, I'll hand it back over to you, Joe, on the ESG.