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Virgin Australia Posts $225m Loss for FY16

Virgin Australia Posts $225m Loss for FY16
The statutory result was impacted by restructuring costs to “simplify” and “improve” the business model of Virgin.
Aug 05, 2016 By Simon Herrmann Tags: VAH

Virgin Australian Holdings (ASX:VAH) posted a statutory loss of $225 million for FY16 on the back of $5 billion in revenues.

Revenue increased 5.7 per cent or $272 million resulting in an underlying profit before tax of $41 million for the airline. The statutory result was impacted by restructuring costs to “simplify” and “improve” the business model of Virgin. The costs for these efficiency activities totalled $440.5 million before tax.

The Group’s cash balance has improved to $1.1 billion excluding $852 million from the entitlement offer, to be received in August.

Statutory Loss Severe, But There are Improvements

Even though the statutory loss overshadows the results, the Company states they made progress in a number of areas.

Firstly the underlying business model experienced growth across most areas. If the strategic review improves the operational business, the airline may find a way to deliver sustainable profitability. Virgin Australia Domestic and International posted growth, despite what the company calls a “weak operating environment.”

Tigerair Australia posted its first ever full year profit and Velocity continues to “deliver consistent growth.”

Chief Executive Officer John Borghetti said: “In the 2016 financial year, the Virgin Australia group delivered a stronger underlying performance, growing Underlying EBIT by $144.7 million to $210.6 million. This result was driven by continued improvements in earnings across all business segments notwithstanding a weak operating environment.”

He also commented on the progress of the restructure: “During the 2016 financial year, the Group completed a capital structure review in order to strengthen its balance sheet, improve liquidity, reduce debt and build a lower, sustainable cost base to improve earnings and cash flow. This was followed by the launch of a fully underwritten entitlement offer to raise equity.”

VAH lost 46 per cent since the beginning of the year but gained 2 per cent at 11:30 am following release of the FY16 results.

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Simon Herrmann Author: Simon Herrmann Aug 05, 2016

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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