AGM Statement

RNS Number : 9733X

easyJet PLC

23 February 2012

 



23 February 2012

easyJet Annual General Meeting 2012 Chairman's Statement

Speaking at the Company's Annual General Meeting in Luton today, Sir Michael Rake, Chairman of easyJet plc, said:

"Good morning everyone. It is with great pleasure that I address this meeting of shareholders today. When I became easyJet Chairman in 2010 I was convinced of the potential of a business that had achieved so much in 14 years and I am pleased two years later to report substantial further progress in the development of the business and in delivering tangible returns to shareholders

As you have seen the Company has had a record year in terms of financial results, earnings per share, and revenue per seat, with very strong on time performance, and customer satisfaction. 

You the shareholders will have received a dividend of approximately £200 million, the first since the Company went public and as promised when I became chairman in 2010.  You have also benefitted from a 29% increase in the share price in the last 12 months while the FTSE has fallen marginally.

And as we said at our Interim Management Statement on 26 January 2012:

"The good performance in the quarter has meant we are cautiously confident in our outlook for the business. Although the economic environment remains weak and easyJet is negatively impacted by the weakening of the euro, easyJet's affordable fares and our focus on making it easy for our customers combined with the actions that management is taking ensures that easyJet is well positioned to continue to succeed'

In a tough environment, easyJet's continued superior performance is a testament to the quality of our business model: Europe's premier air transport network, strong customer proposition and service delivery linked to a highly efficient operating model that is predicated on simplicity and low cost. Whilst there remain real opportunities for the Company, the economic environment is uncertain and we are being appropriately cautious by capping our fleet at 204 aircraft for 2 winters. 

At easyJet our people really do make the difference and I am continually impressed by the calibre, drive and commitment of everyone I work with at easyJet.  We have outstanding people, including our front line cabin crew and pilots who are highly trained and professional. They all make a crucial contribution to our success by I would like to thank them all for helping to deliver such a resilient performance in difficult economic circumstances.

I do not want the achievements of the past year and the future potential of the business to be overshadowed by the recent hostile comments of one shareholder. As founder and a fifteen per cent shareholder in his own right Stelios is of course entitled to his view and we would not normally comment upon such disagreements in public…..but as there has been significant coverage of the debate in the run up to this meeting I would like to clarify for you, the majority shareholders in this company, the facts on the points he has raised publicly on the fleet, the dividend, share issues and remuneration.

In January 2010, when I was appointed chairman following a period of significant instability in the Board, I moved to recruit a new Chief Executive, Carolyn McCall and Finance Director, Chris Kennedy. They were both personally approved by Stelios.  Carolyn, Chris and I then negotiated significant amendments to the brand agreement to give greater flexibility under the brand to the Company in return for a fair royalty.  We also negotiated protocols both with easyGroup and with Stelios to deal in private with issues that might arise to ensure that the facts were understood before matters were aired publicly.  Management significantly improved our operational and financial results, as you have seen. We have also strengthened the Board with three new independent directors who bring very significant skills and experience to the Board.

Whilst these arrangements with Stelios and easyGroup worked well initially, approximately a year ago Stelios instigated a series of increasingly personalised attacks on the Board and individual members involving a number of inaccurate and misleading statements, including the inappropriate and defamatory assertions and innuendo around the Board and individual members of the Board (past and present) and their relationship with a major supplier.

We have consistently refused to enter into this debate in public and have repeatedly encouraged Stelios to meet with us to discuss any issues that he might have.  This, apart from one brief meeting, primarily in relation to remuneration, he has refused to do. 

The fleet

All purchases of aircraft were in accordance with the master agreement negotiated with the involvement of Stelios in 2002. At the time Stelios said that "it could be the deal of the century".  This has since then been adjusted favourably by successive managements. 

No significant orders have been made since 2007 (when Stelios was on the Board).  In January 2011 we announced the exercise of 15 options to purchase aircraft under the very favourable 2002 agreement.  This transaction was explained to and discussed with Stelios on 14 December 2010 by myself, the Chief Executive and the Finance Director.  Stelios raised no objections.

We also converted, again at a very favourable rate, under the 2002 agreement, orders for 20 A319 aircraft to A320 aircraft.  This transaction was approved by the Board.

The cost of these conversions and orders, which are confidential within the terms of our agreement with Airbus, are less than half the $1.3 billion and $1.5bn variously asserted by Stelios.  All the purchases were approved in accordance with requirements of the Stock Exchange and the UK Listing Authority and by the Board.  In this context, we received on 11 July 2011 an 11 page letter from Stelios attempting to assert that the current and previous Board had not complied with Stock Exchange and legal requirements on the purchase of aircraft.  He chose to release this letter to the press and did not respect the protocol which required him to give us 7 days to respond. This letter was inaccurate, as we quickly demonstrated.  In this respect and in relation to certain other matters we have advised Stelios and easyGroup that we have reserved our rights to take legal action for potential defamation and repeated breaches of the brand agreement and associated comfort letter.

The dividend

I was clear when I became chairman that we were at a stage where we should pay a dividend.  This policy was confirmed during 2010 by the Board at a level of 20% of post-tax profits.  In view of the total gross cash of £1.4 billion and the very low returns on cash we also decided, with the input of external advisors, to declare a one off special dividend of £150 million.  Stelios asked for  a special dividend of £600 million, together with 50% of post-tax profits.  This the Board refused to do as it would prejudice the stability of the Company; and its ability to get appropriate financing for aircraft given the economic headwinds we have all seen.  An excessive dividend is one of the reasons why a travel company recently had so many difficulties in refinancing itself. 

Shares

Stelios suggests that in some way £160 m of shares were inappropriately issued by the Company. Nearly 75% of these shares were approved by him as chairman and controlling shareholder of the Company prior to the flotation of the Company. Of the balance granted after IPO, most came from schemes that were also put in place before floatation, at a price to employees including air crew, cabin crew and administrative staff.  Exactly the form of John Lewis approach to employee motivation that the government believe is important.  Since 2010 we have purchased shares in the open market to satisfy options under all share schemes other than those existing at IPO. 

Remuneration

We have proposed a remuneration scheme that  is a reward for success with challenging targets based on a transparent return on capital employed, the principle of which (ie the move from ROE to ROCE) was welcomed by shareholders in November 2010.  The facts are that on any basis of measurement there has been a significant improvement in return on capital and the Company is in the top quartile of performance, and very challenging targets will have to be met for these current awards to vest fully after 2013.

We have always stated that we would bring leases on to the balance sheet for the purposes of calculating ROCE as soon as the new accounting standard was issued.  Given the complexities of this issue and the delays expected in the issuance of a new accounting standard, and after discussion with a number of our shareholders, we have announced that we will consult on the methodologies to bring leases on to the balance sheet (as well as the treatment of cash) for the purposes of calculating ROCE during the current year.  We will also review the targets set for management for remuneration purposes." 

End

For further details please contact easyJet plc:

Investor:

Rachel Kentleton, Investor Relations     [phone]

Media:

Paul Moore, Communications               [phone]

Edward Simpkins   RLM Finsbury        [phone]

 

END

 

 

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