Interim Results
British Airways PLC
08 November 2004
INTERIM RESULTS 2004-2005 (unaudited)
Three months ended Six months ended
September 30 Better/ September 30 Better/
2004 2003 (Worse) 2004 2003 (Worse)
Turnover £m 2,026 1,983 2.2% 3,951 3,815 3.6%
Operating profit £m 240 195 23.1% 390 235 66.0%
Operating margin % 11.8 9.8 2.0pts 9.9 6.2 3.7pts
Profit before tax £m 220 105 nm 335 60 nm
Retained profit for
the period £m 123 98 25.5% 193 35 nm
Net assets at period end £m 2,625 2,312 13.5% 2,625 2,312 13.5%
Earnings per share
Basic p 11.5 9.2 25.0% 18.0 3.3 nm
Diluted p 11.2 8.9 25.8% 17.6 3.3 nm
nm: Not meaningful
GROUP PROFIT AND LOSS ACCOUNT (unaudited)
Three months ended Six months ended
September 30 Better/ September 30 Better/
2004 £m 2003 £m (Worse) 2004 £m 2003 £m (Worse)
Traffic Revenue
Passenger 1,705 1,720 (0.9)% 3,330 3,296 1.0%
Cargo 118 111 6.3% 236 224 5.4%
1,823 1,831 (0.4)% 3,566 3,520 1.3%
Other revenue 203 152 33.6% 385 295 30.5%
TOTAL TURNOVER 2,026 1,983 2.2% 3,951 3,815 3.6%
Employee costs 561 521 (7.7)% 1,112 1,049 (6.0)%
Depreciation and amortisation 168 173 2.9% 333 337 1.2%
Aircraft operating lease
costs 27 29 6.9% 53 64 17.2%
Fuel and oil costs 271 241 (12.4)% 529 470 (12.6)%
Engineering and other
aircraft costs 118 126 6.3% 230 258 10.9%
Landing fees and en route
charges 145 147 1.4% 286 288 0.7%
Handling charges, catering and
other operating costs 238 250 4.8% 471 493 4.5%
Selling costs 126 153 17.6% 259 308 15.9%
Accommodation, ground equipment
costs and currency differences 132 148 10.8% 288 313 8.0%
TOTAL OPERATING EXPENDITURE 1,786 1,788 0.1% 3,561 3,580 0.5%
OPERATING PROFIT 240 195 23.1% 390 235 66.0%
Share of operating profits
in associates 34 5 nm 30 1 nm
TOTAL OPERATING PROFIT 274 200 37.0% 420 236 78.0%
INCLUDING ASSOCIATES
Other income and charges 1 4 (75.0)% 1 4 (75.0)%
(Loss)/Profit on sale of fixed assets and
investments (8) 15 nm (14) (57) 75.4%
Interest
Net payable (51) (56) 8.9% (99) (111) 10.8%
Retranslation credits/(charges)
on currency borrowings 4 (58) nm 27 (12) nm
PROFIT BEFORE TAX 220 105 nm 335 60 nm
Tax (93) (4) nm (135) (18) nm
PROFIT AFTER TAX 127 101 25.7% 200 42 nm
Non equity minority interest* (4) (3) (33.3)% (7) (7)
PROFIT FOR THE PERIOD 123 98 25.5% 193 35 nm
RETAINED PROFIT FOR THE PERIOD 123 98 25.5% 193 35 nm
nm: Not meaningful
* Cumulative Preferred Securities
OPERATING AND FINANCIAL STATISTICS (unaudited)
Three months ended Six months ended
September 30 Increase/ September 30 Increase/
2004 2003 (Decrease) 2004 2003 (Decrease)
TOTAL AIRLINE OPERATIONS (Note 1)
TRAFFIC AND CAPACITY
RPK (m) 28,749 27,540 4.4% 55,832 52,642 6.1%
ASK (m) 36,639 35,981 1.8% 72,789 70,943 2.6%
Passenger load factor (%) 78.5 76.5 2.0pts 76.7 74.2 2.5pts
CTK (m) 1,202 1,034 16.2% 2,419 2,091 15.7%
RTK (m) 4,080 3,796 7.5% 7,989 7,352 8.7%
ATK (m) 5,709 5,539 3.1% 11,361 10,856 4.7%
Overall load factor (%) 71.5 68.5 3.0pts 70.3 67.7 2.6pts
Passengers carried (000) 9,822 9,739 0.9% 19,110 19,508 (2.0)%
Tonnes of cargo carried (000) 213 183 16.4% 429 373 15.0%
FINANCIAL
Passenger revenue per RPK (p) 5.93 6.25 (5.1)% 5.96 6.26 (4.8)%
Passenger revenue per ASK (p) 4.65 4.78 (2.7)% 4.57 4.65 (1.7)%
Cargo revenue per CTK (p) 9.82 10.74 (8.6)% 9.76 10.71 (8.9)%
Total traffic revenue per RTK (p) 44.68 48.23 (7.4)% 44.64 47.88 (6.8)%
Total traffic revenue per ATK (p) 31.93 33.06 (3.4)% 31.39 32.42 (3.2)%
Average fuel price before hedging
(US cents/US gallon) 129.92 87.83 47.9% 122.32 90.00 35.9%
OPERATIONS
Average Manpower Equivalent (MPE) 46,179 47,702 (3.2)% 46,230 48,459 (4.6)%
ATKs per MPE (000) 123.6 116.1 6.5% 245.7 224.0 9.7%
Aircraft in service at period end 287 312 (25) 287 312 (25)
TOTAL GROUP OPERATIONS
FINANCIAL
Net operating expenditure
per RTK (p) 38.80 43.10 (10.0)% 39.75 44.68 (11.0)%
Net operating expenditure
per ATK (p) 27.73 29.54 (6.1)% 27.96 30.26 (7.6)%
Note 1 Excludes non airline activity companies, principally, Airmiles Travel
Promotions Ltd, BA Holidays Ltd, BA Travel Shops Ltd, Speedbird Insurance
Company Ltd and The London Eye Company Ltd.
CHAIRMAN'S STATEMENT
Group Performance
Group profit before tax for the three months to September 30 was £220 million;
this compares with a profit of £105 million last year.
Operating profit - - at £240 million - - was £45 million higher than last year.
The operating margin was 11.8%, 2.0 points higher than last year. The
improvement in operating profit primarily reflects improvements in turnover,
with costs in line with last year, despite fuel costs being up 12.4%.
Group profit before tax for the six months to September 30 was £335 million,
£275 million better than last year; operating profit - - at £390 million - - was
£155 million better than last year.
Operating margin for the half year - - traditionally the stronger of the two
halves - - was 9.9%, 3.7 points higher than last year.
Cash inflow before financing was £868 million for the six months, with the
closing cash balance of £1,910 million representing a £240 million increase
versus March 31. Net debt fell by £872 million (including £427 million from the
sale of our investment in Qantas) to £3,286 million, its lowest level since
1993.
The Board has decided that no interim dividend should be paid.
Turnover
For the three month period, group turnover - - at £2,026 million - - was up 2.2%
on a flying programme 3.1% larger in ATKs. This reflected the impact of fuel
surcharges and an increase in cargo revenue of 6.3%, with passenger revenue
declining by 0.9%. Passenger yields were down 5.1% per RPK (1.7% at constant
exchange); seat factor was up 2.0 points at 78.5% on capacity 1.8% higher in
ASKs.
For the six month period, turnover improved by 3.6% to £3,951 million on a
flying programme 4.7% larger in ATKs. Passenger yields were down 4.8% per RPK
with seat factor up 2.5 points at 76.7% on capacity 2.6% higher in ASKs.
Cargo volumes for the three month period (CTKs) were up 16.2% compared with last
year, with yields (revenue/CTK) down 8.6%. For the six month period, cargo
volumes were up 15.7%, with yields down 8.9%.
Overall load factor for the quarter was up 3.0 points at 71.5%, and for the half
year up 2.6 points at 70.3%.
Costs
For the three month period, unit costs (pence/ATK) improved by 6.1% on the same
period last year. This reflects a net cost reduction of 3.2% on capacity 3.1%
higher in ATKs.
Total operating expenditure was in line with last year. Fuel costs increased by
12.4% due to the increase in fuel price net of hedging partially offset by
exchange effects and employee costs increased by 7.7% as wage awards and
increased pension contributions were only partially offset by manpower
reductions. All other categories of operating costs improved, including a
notable fall in selling costs, which were down 17.6% (due to lower commission
costs and the continued increase in online bookings).
For the six month period, unit costs (pence/ATK) improved by 7.6% on the same
period last year. This reflects a net cost reduction of 3.3% on capacity 4.7%
higher in ATKs.
Non Operating Items
Net interest expense for the three month period reduced by £5 million from last
year to £51 million reflecting the higher cash balances and reduced debt.
Retranslation of currency borrowings generated a credit of £4 million, primarily
due to the retranslation of yen debt, compared to a charge the previous year of
£58 million. The retranslation - - a non-cash item required by standard
accounting practice - - results from the weakening of the yen against sterling.
Loss on disposals of fixed assets and investments was £8 million reflecting
primarily the sale of our investment in Qantas at a book loss in the period of
£11 million. This compares with a £15 million profit on disposal last year.
For the six month period net interest expense was £99 million, £12 million lower
than last year. The retranslation of currency borrowings generated a credit of
£27 million, compared with a charge of £12 million last year. Loss on disposals
of fixed assets and investments was £14 million. This compares with a loss on
disposal last year of £57 million, when the sale of dba generated a loss in the
period of £83 million.
Earnings Per Share
The profit attributable to shareholders for the three months was equivalent to
11.5 pence per share, compared with last year's profit per share of 9.2 pence.
For the six month period, the profit attributable to shareholders was £193
million, equivalent to 18.0 pence per share, compared with earnings of 3.3 pence
per share last year.
Net Debt / Total Capital Ratio
Borrowings, net of cash and short term loans and deposits, were £3,286 million
at September 30 - - the lowest since 1993 and down £872 million since the start
of the year. This reflects cash inflow more than offsetting movements in gross
debt, together with exchange gains of £11 million. The net debt/total capital
ratio reduced by 8.2 points from March 31 to 45.9%. The net debt/total
capital ratio including operating leases was down 7.0 points from March 31 to
51.4%.
Cash Flow
During the six months we generated a positive cash flow from operations of £598
million. After disposal proceeds, capital expenditure and interest payments on
our existing debt, cash inflow was £868 million. This represents a £501 million
increase on last year, primarily due to the improvement in operating cash flow
(£78 million), and the proceeds from the sale of the investment in Qantas (£427
million).
Performance Improvement Programmes
Progress on delivering the £450 million savings announced in the 2003/5 Business
Plan (including the £300 million of external spend savings) remains on track for
completion by March 2005. The £300 million employee cost savings announced in
the 2004/6 Business Plan have been delayed by the extended pay talks. The
successful conclusion of talks with most employee groups has resulted in
agreements lasting until October 2006. The focus for the remaining two years of
the agreement will be to implement working practice changes to deliver £300
million of employee cost savings.
Aircraft Fleet
During the quarter the group fleet in service reduced by 3 to 287 aircraft. This
reduction comprised 1 Boeing 737-400 aircraft stood down pending return to
lessor, and 2 Boeing 737-400 aircraft sub-leased to Air One (an Italian carrier
operating Italian domestic routes).
Associates
On September 9, 2004 the group completed the sale of its 18.25% holding in
Qantas through a book build sale of the shares, thereby reducing debt and
continuing to strengthen our balance sheet. The sale realised gross proceeds of
£427 million before tax. The loss on disposal of £11 million includes a write
off of goodwill of £59 million previously set off against reserves.
Prior to the sale of our investment, Qantas announced full year profits before
tax of A$965 million. Their second half profit was A$435 million, our share of
which was £28 million included in the quarter. This is the last period in which
our full share of their results will be reflected. Our profits for the second
half of last year included £42 million relating to Qantas.
An agreement has been signed with Qantas to continue with the Joint Service
Agreement (JSA), thereby maintaining our profit share arrangements on selected
routes.
Alliance Development
The British Airways benefit sharing with Iberia on the London routes to Madrid
and Barcelona is making good progress and planned for implementation in the near
future.
Industrial Relations
An agreement was reached with the Trades Unions on the company's pay offer. The
agreement was for a rise in pensionable pay over three years in line with rates
of inflation. This comprises an increase backdated to October 1, 2003 followed
by rises equal to inflation rates on October 1, 2004 and on October 1, 2005. In
addition there are non-pensionable lump sum payments totalling at least £1,000
per employee over the two years to September 2006.
The Trades Unions also agreed a new absence policy. The policy aims to
significantly reduce absence from the current average of 17 days, and is
expected to save the company approximately £30 million per annum.
Outlook
Market conditions have remained broadly unchanged since our last report. All
market segments remain price sensitive and yield declines are expected to
continue. The total revenue outlook for the year to March 2005 is unchanged with
a 2-3 per cent improvement driven by volume increases.
Fuel costs net of hedging are now expected to be some £245 million more than
last year (up £20 million from our last estimate). Passenger and cargo fuel
surcharges forecast at £160 million for this year partially offset this
increase.
Consequently, our focus will remain on reducing both controllable costs and
debt.
Note:
Copies of the summary Interim Statement will be issued to all shareholders
through the medium of the British Airways Investor newspaper. Copies of the full
Interim report are available from the company's registered office and on the
Internet at www.bashares.com.
Certain information included in these statements is forward-looking and involves
risks and uncertainties that could cause actual results to differ materially
from those expressed or implied by the forward looking statements.
Forward-looking statements include, without limitation, projections relating to
results of operations and financial conditions and the company's plans and
objectives for future operations, including, without limitation, discussions of
the company's Business Plan programs, expected future revenues, financing plans
and expected expenditures and divestments. All forward-looking statements in
this report are based upon information known to the company on the date of this
report. The company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise.
It is not reasonably possible to itemize all of the many factors and specific
events that could cause the company's forward looking statements to be incorrect
or that could otherwise have a material adverse effect on the future operations
or results of an airline operating in the global economy. Information on some
factors which could result in material difference to the results is available in
the company's SEC filings, including, without limitation the company's Report on
Form 20-F for the year ended March 2004.
GROUP BALANCE SHEET (unaudited)
September 30 March 31
2004 £m 2003 £m 2004 £m
Restated Restated
FIXED ASSETS
Intangible assets 163 159 168
Tangible assets 8,357 9,156 8,637
Investments 143 500 531
8,663 9,815 9,336
CURRENT ASSETS
Stocks 77 75 76
Debtors 1,115 1,126 1,019
Cash, short-term loans and deposits 1,910 1,786 1,670
3,102 2,987 2,765
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR (2,853) (2,954) (2,996)
NET CURRENT ASSETS/(LIABILITIES) 249 33 (231)
TOTAL ASSETS LESS CURRENT LIABILITIES 8,912 9,848 9,105
CREDITORS: AMOUNTS FALLING DUE AFTER MORE
THAN ONE YEAR
Borrowings and other creditors (4,850) (6,254) (5,374)
Convertible Capital Bonds 2005 (112) (112) (112)
(4,962) (6,366) (5,486)
PROVISION FOR DEFERRED TAX (1,244) (1,077) (1,137)
PROVISIONS FOR LIABILITIES AND CHARGES (81) (93) (85)
2,625 2,312 2,397
CAPITAL AND RESERVES
Called up share capital 271 271 271
Reserves 2,137 1,822 1,916
2,408 2,093 2,187
MINORITY INTEREST
Equity minority interest 11 10 10
Non equity minority interest 206 209 200
217 219 210
2,625 2,312 2,397
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (unaudited)
Six months ended Year Ended
September 30 March 31
2004 £m 2003 £m 2004 £m
Profit for the period 193 35 130
Other recognised gains and losses
relating to the period:
Exchange and other movements (31) 19 16
Total recognised gains and losses 162 54 146
These summary financial statements were approved by the Directors on November 5,
2004.
GROUP CASH FLOW STATEMENT (unaudited)
Six months ended Year Ended
September 30 March 31
2004 £m 2003 £m 2004 £m
CASH INFLOW FROM OPERATING ACTIVITIES 598 520 1,093
DIVIDENDS RECEIVED FROM ASSOCIATES 20 12 25
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (122) (121) (209)
TAX 1 (2) (4)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (48) 4 42
ACQUISITIONS AND DISPOSALS 419 (46) (73)
Cash inflow before management of liquid 868 367 874
resources and financing
MANAGEMENT OF LIQUID RESOURCES (203) (153) (198)
FINANCING (614) (237) (834)
Increase/(decrease) in cash in the period 51 (23) (158)
NOTES TO THE ACCOUNTS
For the period ended September 30, 2004
1 ACCOUNTING CONVENTION
The accounts have been prepared on the basis of the accounting policies set out
in the Report and Accounts for the year ended March 31, 2004 in accordance with
all applicable United Kingdom accounting standards and the Companies Act 1985.
Effective from April 1, 2004 the group applied the provisions of UITF Abstract
38 - 'Accounting for ESOP Trusts' and, as a result, the group's investment in
own shares held for the purpose of employee share ownership plans has been
reclassified from fixed asset investments and is now recorded as a reduction in
shareholders' equity. Comparative periods have been restated to reflect the
adoption of UITF 38.
Six months ended Year Ended
September 30 March 31
2004 £m 2003 £m 2004 £m
2 RECONCILIATION OF OPERATING PROFIT TO CASH INFLOW
FROM OPERATING ACTIVITIES
Group operating profit 390 235 405
Depreciation and amortisation 333 337 679
Other items not involving the movement of cash 11
Increase in stocks and debtors (109) (129) (23)
(Decrease) / increase in creditors (13) 92 43
Decrease in provisions for liabilities and charges (3) (15) (22)
Cash inflow from operating activities 598 520 1,093
3 RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET DEBT
Increase / (decrease) in cash during the period 51 (23) (158)
Net cash outflow from decrease in debt and
lease financing 614 237 834
Cash outflow from liquid resources 203 153 198
Change in net debt resulting from cash flows 868 367 874
New finance leases taken out and hire
purchase arrangements made (7) (87) (97)
Non cash refinancing 32
Exchange movements 11 62 182
Movement in net debt during the period 872 342 991
Net debt at April 1 (4,158) (5,149) (5,149)
Net debt at period end (3,286) (4,807) (4,158)
Three months ended Six months ended
September 30 September 30
2004 £m 2003 £m 2004 £m 2003 £m
4 OTHER INCOME AND CHARGES
Other 1 4 1 4
1 4 1 4
Other income and charges represented by:
Group 1 4 1 4
1 4 1 4
NOTES TO THE ACCOUNTS (Continued)
For the period ended September 30, 2004
Three months ended Six months ended
September 30 September 30
2004 £m 2003 £m 2004 £m 2003 £m
5 (LOSS)/PROFIT ON SALE OF FIXED ASSETS AND INVESTMENTS
Net loss on disposal of dba (4) (83)
Net loss on sale of investment in Qantas (note 1) (11) (11)
Net profit on disposal of other fixed
assets and investments 3 19 (3) 26
(8) 15 (14) (57)
Represented by:
Group (13) 14 (19) (58)
Associates 5 1 5 1
(8) 15 (14) (57)
Note 1:
On September 9, 2004, the group completed the sale of its 18.25% holding in
Qantas Airways Limited through a book build sale of the shares. The sale
realised gross proceeds of £427 million (A$1.1 billion) before tax. The loss on
disposal of £11 million includes the write-back of goodwill of £59 million
previously set off against reserves.
6 INTEREST
Net payable:
Interest payable less amount capitalised 72 70 138 139
Interest receivable (21) (14) (39) (28)
51 56 99 111
Retranslation (credits)/charges on currency
borrowings (4) 58 (27) 12
47 114 72 123
Net interest payable represented by:
Group 42 111 67 120
Associates 5 3 5 3
47 114 72 123
7 TAX
The tax charge for the quarter is £93 million, which represents current tax on
the sale of the Qantas shareholding of £14 million, £12 million overseas on the
group's share of income from associates, £1 million other overseas tax and £66
million by way of deferred taxes in the UK. The deferred tax provision on the
balance sheet at September 30, 2004, is £1,244 million (September 30, 2003:
£1,077 million, March 31, 2004: £1,137 million).
8 EARNINGS PER SHARE
Basic earnings per share for the quarter ended September 30, 2004 are calculated
on a weighted average of 1,070,471,000 ordinary shares (September 30, 2003:
1,069,895,000) and for the six months ended September 30, 2004, on a weighted
average of 1,070,323,000 ordinary shares (September 30, 2003: 1,069,891,000) as
adjusted for shares held for the purposes of employee share ownership plans
including the Long Term Incentive Plan. Diluted earnings per share for the
quarter ended September 30, 2004 are calculated on a weighted average of
1,118,470,000 ordinary shares (September 30, 2003: 1,117,939,000) and for the
six months ended September 30, 2004 on a weighted average of 1,118,338,000
ordinary shares (September 30, 2003: 1,069,891,000).
The number of shares in issue at September 30, 2004 was 1,082,903,000 (September
30, 2003: 1,082,795,000; March 31, 2004: 1,082,845,000) ordinary shares of 25
pence each.
NOTES TO THE ACCOUNTS (Continued)
For the period ended September 30, 2004
September 30 March 31
2004 £m 2003 £m 2004 £m
Restated Restated
9 INTANGIBLE ASSETS
Goodwill 91 96 93
Landing rights 72 63 75
163 159 168
10 TANGIBLE ASSETS
Fleet 6,886 7,549 7,104
Property 1,000 1,191 1,042
Equipment 471 416 491
8,357 9,156 8,637
11 INVESTMENTS
Associated undertakings 114 469 501
Trade investments 29 31 30
143 500 531
12 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Loans 125 63 102
Finance Leases 118 126 119
Hire Purchase Arrangements 297 369 461
540 558 682
Corporate tax 24 18 6
Other creditors and accruals 2,289 2,378 2,308
2,853 2,954 2,996
13 BORROWINGS AND OTHER CREDITORS FALLING DUE AFTER
MORE THAN ONE YEAR
Loans 1,037 1,295 1,123
Finance Leases 1,892 2,338 1,978
Hire Purchase Arrangements 1,615 2,290 1,933
4,544 5,923 5,034
Other creditors and accruals 306 331 340
4,850 6,254 5,374
14 RESERVES
Balance at April 1 1,916 1,756 1,756
Retained profit for the period 193 35 130
Exchange and other adjustments (31) 19 16
Goodwill written back on disposals 59 12 14
2,137 1,822 1,916
15 The figures for the three months and six months ended September 30, 2004 and
2003 are unaudited and do not constitute full accounts within the meaning of
Section 240 of the Companies Act 1985. The figures for the year ended March 31,
2004 have been extracted from the full accounts for that year, which have been
delivered to the Registrar of Companies and on which the auditors have issued an
unqualified audit report.
INDEPENDENT REVIEW REPORT TO BRITISH AIRWAYS Plc
Introduction
We have been instructed by the Company to review the financial information for
the three months and six months ended September 30, 2004, which comprises the
Group Profit and Loss Account, Group Balance Sheet, Group Cash Flow Statement,
Group Statement of Recognised Gains and Losses and Notes to the Accounts and we
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
This report is made solely to the Company in accordance with guidance contained
in Bulletin 1999/4 'Review of Interim Financial Information' issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company, for our work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of Group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the three months
and six months ended September 30, 2004.
Ernst & Young LLP
London
November 5, 2004
UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) INFORMATION
The accounts have been prepared in accordance with accounting principles
accepted in the United Kingdom which differ in certain respects from those
generally accepted in the United States. The significant differences are the
same as those set out in the company's report on Form 20-F for the year ended
March 31, 2004, filed with the SEC. The comparatives have been restated to
recognise the excess of the pension accumulated benefit obligation over the fair
value of the related plan assets, the implementation of FASB Interpretation No.
46 - Consolidation of Variable Interest Entities (FIN 46) and UITF Abstract 38.
FIN 46 was implemented after the comparative quarter end and resulted in The
London Eye Company Limited, in which the group is a primary beneficiary, being
consolidated as a variable interest entity. In addition, certain leases which
had been treated as operating leases under US GAAP were reclassified as capital
leases.
Under UK GAAP the group adopted UITF Abstract 38 - 'Accounting for ESOP Trusts'
effective from April 1, 2004 which resulted in the group's investment in own
shares being reclassified from fixed asset investments to a deduction from
shareholders' equity. Under US GAAP such shares were previously accounted for as
a deduction from shareholders' equity.
The adjusted net income and shareholders' equity applying US GAAP are set out
below:
Three months ended Six months ended
September 30 September 30
2004 £m 2003 £m 2004 £m 2003 £m
Restated Restated
Profit for the period as reported in the
group profit and loss account 123 98 193 35
US GAAP adjustments 62 45 32 120
Net income as so adjusted to
accord with US GAAP 185 143 225 155
Net income per Ordinary Share as so
adjusted
Basic 17.3p 13.4p 21.0p 14.5p
Diluted 16.7p 13.0p 20.5p 14.2p
Net income per American Depositary Share
as so adjusted
Basic 173p 134p 210p 145p
Diluted 167p 130p 205p 142p
September 30 March 31
2004 £m 2003 £m 2004 £m
Restated Restated
Shareholders' equity as reported in
the group balance sheet 2,408 2,093 2,187
US GAAP adjustments (381) (294) (413)
Shareholders' equity as so adjusted to accord with
US GAAP 2,027 1,799 1,774
AIRCRAFT FLEET
Number in service with group companies at September 30, 2004
On balance Operating leases Changes
sheet off balance sheet Since
Total Future
Aircraft Sep 2004 Jun 2004 deliveries Options
AIRLINE OPERATIONS (Note 1)
Boeing 747-400 57 57
Boeing 777 40 3 43
Boeing 767-300 21 21
Boeing 757-200 13 13
Airbus A319 (Note 2) 21 12 33 3 51
Airbus A320 9 18 27 3
Airbus A321 7
Boeing 737-300 5 5
Boeing 737-400 (Note 3) 18 1 19 (3)
Boeing 737-500 10 10
Turbo Props (Note 4) 10 10
Embraer RJ145 16 12 28 17
Avro RJ100 16 16
British Aerospace 146 5 5
GROUP TOTAL 200 87 287 (3) 13 68
Notes:
1. Includes those operated by British Airways Plc and British Airways
CitiExpress Ltd.
2. Certain future deliveries and options include reserved delivery positions,
and may be taken as any A320 family aircraft.
3. Excludes 1 Boeing 737-400 stood down pending return to lessor and 2 Boeing
737-400s sub-leased to Air One.
4. Comprises 10 de Havilland Canada DHC-8s. Excludes 3 British Aerospace ATPs
stood down pending return to lessor, 3 British Aerospace ATPs sub-leased to
Loganair and 12 Jetstream 41s sub-leased to Eastern Airways.
This information is provided by RNS
The company news service from the London Stock Exchange
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