Icelandair Group: Good results in 2016 – strong balance sheet

07-Feb-2017

• Net profit in 2016 USD 89.1 million, as compared to USD 111.2 million in 2015
• Q4 EBITDA USD 2.5 million, as compared to USD 22.9 million in Q4 2015
• A fall in average air fares and unfavourable currency trends largely account for the reduced results
• Total revenue increased by 12% in Q4 2016
• Strong financial position: 44% equity ratio and cash and marketable securities USD 250.1 million at year-end 2016
• Increased uncertainty in the global airline industry
• EBITDA forecast for 2017 at USD 140-150 million

Björgólfur Jóhannson, President and CEO

"The results for the year are the second best in the Company's 80-year history, and on the whole operations were successful over the year in challenging conditions. The Company carried just short of 3.7 million passengers on international flights, which represents an increase from the preceding year of 20%, or 600 thousand passengers. Hotel operations showed significant growth, with good hotel room occupancy, at just short of 82%. Regional flights also showed success, with a 9% increase in passenger numbers between years; it is a matter of satisfaction to see foreign tourists increasingly making use of domestic flight services. Cargo operations were also successful.

At the beginning of this year, however, it is clear that circumstances are very challenging. As we reported last week, Icelandair's flow of bookings has taken a negative turn. Bookings are slower than expected, and average airfares in the market have fallen below projected levels. In the last few days we have seen news confirming that this development is affecting the airline industry in general. This trend can principally be traced to increased competition, but it can also be argued that uncertainty resulting from changes in international politics has affected demand. The seamen's strike in Iceland has had a negative impact on the Company's cargo operations. Currency trends have been unfavourable for the Company compared to last year; in addition, fuel prices are rising. Prospects in our hotel operations are positive.

We need to look to the future and determine how we intend to meet these changed circumstances acting in the Company's long term interest. Actions have already been taken in the Group's operations, which are expected to improve efficiency and increase revenue. Icelandair will make adjustments in the structure of its air fares and increase the diversity of its product offerings. This adaptation, which has been in preparation since last fall, is intended to meet increased competition and changed patterns of consumer behaviour. The purpose with the changes is to enable the Company to reach out to new customers, enhance the Company's visibility to certain target groups in internet search engines and broaden the Company's revenue base. Since last fall cost containment measures have also been significantly reinforced in the Company.

It is the Company´s goal that the actions relating to revenue and expenditure will improve financial results by USD 30 million annually when they are fully implemented in the beginning of 2018.

The Company's balance sheet remains strong, with the equity ratio at 44% and cash and marketable securities at well over USD 250 million. The Company's strategy of maintaining financial strength has always rested on the reasoning that the operating environment of air carriers is highly subject to fluctuations. The Company is therefore well placed to address the fluctuations in its operating environment. We are projecting moderate organic growth over the year, and the Company's long-term prospects are favourable."

Refer to full documentation in attachments box, located at the top left, below the headline.