Qantas will deliver a dividend to shareholders for the first time since 2009 after reporting a near doubling of full year net profit in 2015/16 to more than $1 billion.
The airline group said net profit after tax for the 12 months to June 30 2016 came in at $1.03 billion, up 84.7 per cent from $557 million in the prior corresponding period. It was the largest profit in the airline’s history.
The result was a little below market expectations of a $1.11 billion result, according to a median of 10 analysts forecasts obtained by Australian Aviation.
Revenue rose 2.4 per cent to $16.2 billion, Qantas said in a regulatory filing to the Australian Securities Exchange on Wednesday.
Qantas chief executive Alan Joyce said the company will pay a seven cents per share fully franked final ordinary dividend to shareholders, equalling about $134 million.
A $366 million share buy-back has also been proposed, subject to shareholder approval.
Although shareholders had not received a dividend since 2009, Qantas returned $1 billion to shareholders in 2015/16, which comprised of a $505 million capital return in the first half of 2015/16 and a $500 million share buyback that was concluded in mid June.
Meanwhile, underlying profit before tax (PBT), which removes one-off items and is regarded as the best indication of financial performance, came in at $1.53 billion, up from a reported $975 million in the prior year.
Again, the figure was marginally below market expectations of $1.58 billion underlying PBT.
Joyce said the transformation plan, which aims to reduce costs and improve operating efficiencies in the business through higher aircraft utilisation, staff cuts and other measures, has been crucial in delivering the lift in profit.
“Our transformation plan is paying dividends for our shareholders, our customers and our employees,” Joyce said in a statement.
“Transformation has made us a more agile business, created value for our shareholders and given us a platform to invest for the future.”
Qantas said its $2 billion cost reduction target by June 2017 for the transformation plan had been lifted to $2.1 billion.
All Qantas’s operating segments bar Qantas Freight reported a lift in underlying earnings before interest and tax (EBIT).
Qantas said its total fuel bill for 2015/16 was $3.2 billion, down $664 million from the prior year. And it expected underlying fuel costs to be “no more than $3.2 billion” in the current year.
Qantas Domestic lifted underlying EBIT 20 per cent to $578 million despite a two per cent decline in revenue, while Qantas International posted a near doubling of underlying EBIT to $512 million, from $267 million in the prior corresponding period.
Underlying EBIT at the Jetstar group of airlines rose 97 per cent to $452 million, Qantas said, with Jetstar Japan delivering a maiden full year profit and Jetstar Asia lifting its profit result compared with the prior year.
Qantas Loyalty had a 9.8 per cent improvement in underlying EBIT at $346 million.
However, Qantas Freight suffered a 44 per cent drop in underlying EBIT to $64 million, which the company said reflected flat cargo demand amid a six per cent increase in global cargo capacity.
In terms of the outlook, Joyce said the domestic and international markets were “still mixed” given ongoing softness in the resources sector.
The company declined to provide profit guidance for 2016/17, with Joyce noting oil prices, current movements and the global economy all remained volatile.
“The Qantas Group expects to continue its strong financial performance in the first half of financial year 2017, in a more competitive revenue environment,” Joyce said.
“We are focused on preserving high operating margins through the delivery of the Qantas transformation program, careful capacity management, and the benefit of low fuel prices locked in through our hedging.”
To that end, Qantas has guided the market to domestic capacity across its Qantas and Jetstar brands contracting one per cent in the first half of 2016/17, while international capacity across the airline group was forecast to grow about four per cent.
“Unit revenue is expected to be below the first half of financial year 2016, with competitive industry pricing and resources sector weakness.”
“This will be offset by a total unit cost improvement from the Qantas transformation program and lower fuel costs.”
In terms of the fleet, Qantas said tickets for its 787-9 services would go on sale before Christmas. The flights would be initially on Qantas’s “existing network”, Joyce said.
“And shortly after that, we’ll be announcing other international destinations that this state-of-the-art aircraft will fly to,” Joyce said.