Interim Results
easyJet PLC
8 May 2002
**EMBARGOED UNTIL STOCK EXCHANGE RELEASE** 8 May 2001
easyJet
Interim results for the six months ended 31 March 2002
First-half Profits
Revenues and Passenger Numbers both up by 36%
easyJet plc, the fast growing low cost airline, today announces interim results
for the six months ended 31 March 2002.
easyJet plc generated a profit before tax for the six month period of £1.0m.
This is the first time in easyJet's history that a profit has been reported for
the first half which is traditionally loss making, due to the seasonality of the
business. This result is due to strong passenger demand, the timing of Easter
and few serious weather related disruptions.
Highlights of the half-year performance include:
• Revenues up 36% to £194m (2001: £143m)
• First half profit before tax of £1.0m (2001: £10.3m loss)
• Passenger numbers up 36% to 4.3m (2001: 3.2m)
• Load factor up 3.6% points to 84.2% (2001: 80.6%)
• Five new routes launched from Gatwick, where easyJet is now second largest
scheduled carrier, after the British Airways group
• Introduction of five new Boeing 737-700 aircraft
• Successful equity issue raised £93.3m
Commenting on the results, Ray Webster, Chief Executive, said:
'These results reflect the continued success and robustness of the easyJet
business model. We have been able to benefit from the major changes in the
European aviation industry. In the last twelve months 8.3 million passengers
flew with easyJet, with around 90% of customers continuing to book through the
internet.
'The introduction of five new routes from Gatwick linking existing destinations
demonstrates easyJet's continuing strategy of concentrating on network density.
Over the summer, easyJet will serve 45 routes from 19 airports.
'The recently-launched services from London Gatwick are proving popular with our
customers.
'Since the half-year end, services have been launched from Paris Charles de
Gaulle to Liverpool and three further services from the French capital are
starting later in the second half. Though demand is anticipated to be strong,
yields are expected to be immature and advertising expenditure higher as the
market is developed.
'My colleagues and I remain confident of achieving our expectations for the full
year.'
ENDS
For further information, please contact
easyJet plc
Toby Nicol, Head of Corporate Communications +44 1582 525 339
Grandfield
Charles Cook / Clare Abbot +44 20 7417 4170
A briefing for analysts will be held at 09.00 on Wednesday, 8 May 2002 at Credit
Suisse First Boston, City of London Office, 32nd Floor, Tower 42, International
Financial Centre, 25 Old Broad Street, London EC2N 1HQ. For further details
contact Clare Abbot at Grandfield on +44 20 7417 4170.
A press conference will be held at 10.30 on Wednesday, 8th May 2002 at
Bishopsgate Chancery, The Great Eastern Hotel, Liverpool Street, London EC2M
7QN. For further details contact Clare Abbot at Grandfield on +44 20 7417 4170.
There will be a conference call for fund managers and analysts at 14:30 on
Wednesday, 8 May 2002. For further details contact Nicola Heatley at CSFB on +44
20 7888 6367.
CHAIRMAN'S STATEMENT
I am pleased to report to shareholders that easyJet's interim results for the
six months ended 31 March 2002 reflect the continued success and robustness of
the easyJet business model.
Buoyant trading, aided by a mild winter and the timing of Easter has resulted in
easyJet reporting a first-half profit before tax of £1.0 million, compared to a
loss of £10.3 million over the same period last year.
The European aviation industry has been in a state of major change over the last
six months, accelerated by the events of 11 September, with many traditional
flag carriers announcing restructuring, capacity reductions and staff
redundancies. At the same time the low-cost product offering has been proving
popular. easyJet has been taking advantage of the market opportunities which are
emerging in Europe and has the opportunity to replace the uneconomic and
inappropriate services offered by many flag carrier airlines. As a consequence,
easyJet is accelerating its growth to capture these opportunities and in the
first half grew capacity by 36% compared to the same period last year.
On 18 April 2002, a restructuring of the easyJet plc board was announced. As a
part of this, I intend to resign as Chairman and as a director of easyJet plc at
the next Annual General Meeting (to be held in 2003) to be replaced by Sir Colin
Chandler who in the meantime has joined the Board as Deputy Chairman. Sir
Colin's long experience in the aerospace industry and track-record in running
major blue-chip public companies will be invaluable to easyJet as it continues
to grow. As a result of these changes, the Chairman will be independent from the
major shareholder and the majority of directors will be independent within the
meaning of the Combined Code. These changes demonstrate easyJet's commitment to
high standards of corporate governance.
easyJet's success over the past six months is in a large part due to our staff.
In a period of momentous industry change and stress, they have provided the
inspiration and resilience that makes easyJet the success that it is. I would
like to thank them for all their efforts.
Stelios Haji-Ioannou
Chairman
7 May 2002
CHIEF EXECUTIVE'S REVIEW
Overview
easyJet plc generated a profit before tax of £1.0m for the six months ended 31
March 2002. This is the first time in the company's history that a profit has
been reported for the first half. Historically, easyJet's business is seasonal,
with losses in the first half of its financial year and profits in the second
half. This result is due to strong passenger demand, the timing of Easter and a
mild European winter.
The repercussions of the events of 11 September, whilst occurring in the final
month of the last financial year, continue to affect many parts of the world
economy and the aviation industry in particular. Although many of the
traditional carriers have suffered over the last six months, easyJet has been in
a position to benefit from the opportunities arising from this industry
realignment.
easyJet's revenue increased 36 percent half-year on half-year, to £193.9 million
resulting from increased capacity and higher load factors. The number of
passengers increased 36 percent half-year on half-year to 4.3 million, driven by
the introduction of new aircraft and a 3.6 percentage point increase in average
load factor, up to 84.2 percent. The average fare decreased by 2.5 percent,
half-year on half-year. In the current market environment, easyJet has sought
increased passenger volume to compensate for the softer yields in the
marketplace.
Aircraft
Over the first six months of the financial year, easyJet took delivery of five
additional new Boeing 737-700s. These were purchased from Boeing and then
financed through operating leases. In addition, two aircraft, which had been
scheduled to be returned to lessors during the period, were retained on
favourable commercial terms. Thus at 31 March 2002, the total fleet comprised 30
aircraft. Over the period, the fleet averaged 27.5 aircraft, an increase of 35
percent compared to the same period last year. At the financial year-end, it is
anticipated that the fleet will consist of 36 aircraft.
In January 2002, easyJet announced that it was in discussions with Boeing and
Airbus concerning the possible acquisition of approximately seventy-five new
Boeing 737-700 or Airbus 319 aircraft and that it was reviewing the benefits of
potentially operating a mixed fleet. These discussions and reviews continue.
Routes
In February 2002, easyJet continued its expansion at London Gatwick and
commenced five new routes to Barcelona, Edinburgh, Malaga, Mallorca Palma and
Zurich. easyJet will commence flying to Athens from Gatwick from 1 July 2002.
easyJet will now operate up to 24 daily services from Gatwick and is the second
largest scheduled airline at the airport, after the British Airways group.
The introduction of these routes linking existing destinations demonstrates
easyJet's continuing concentration on network density and allows us to improve
marketing efficiencies and enhance services in our key London market. In the
summer, easyJet will serve 19 airports and operates 45 routes.
easyJet has also obtained slots at Paris Charles de Gaulle and Paris Orly
airports and will begin four new routes from the French capital in the summer.
easyJet will fly from Paris Orly to Geneva and from Paris Charles de Gaulle to
Luton, Liverpool and Nice. From mid-June, the airline will have four aircraft
operating a total of fifteen flights a day through Paris.
CHIEF EXECUTIVE'S REVIEW (continued)
Routes (continued)
By launching services through Orly and Charles de Gaulle, easyJet has the
opportunity to serve the entire city, north and south, as we currently do
successfully in London through Luton and Gatwick. I am confident that we will be
able to operate our low cost, high utilisation model through both airports and
hope to be able to fulfil our ambition of making Paris one of easyJet's major
European bases.
External factors affecting the first-half
The timing of Easter has had a major beneficial effect on the reported outcome
for the first half of the year, by drawing revenue forward from later in the
year. Last year, Easter occurred in the second half of the year, whereas this
year it occurred in late March.
During the first half ended 31 March 2002, the average fuel price fell 31
percent to 72 cents per US gallon, compared with an average price of 104 cents
for the half-year ended 31 March 2001. This has resulted in a £8.2 million
saving in fuel cost for the first half of this year compared with the prices
experienced during the same period last year.
Insurance costs rose dramatically after the events of 11 September 2001.
Half-year on half-year, easyJet's insurance costs rose by £5.9 million to £6.8
million. During the period, easyJet introduced an insurance surcharge of £1.60
per passenger per sector. The impact of increased insurance was more than offset
by the benefit from lower fuel prices over the period. Discussions are ongoing
between airlines, governments and the insurance industry over long-term
solutions to the problems of aviation insurance. In the short term, the UK
Government continues to provide the insurance market with a reinsurance
commitment for war and allied perils risks. This cover has recently been
extended to 31 May 2002. easyJet expects the full year net insurance cost to
remain substantially higher than last year.
Europe's weather has been relatively mild during the first half of this year and
as a result easyJet experienced few serious weather related disruptions over the
period. In contrast, in the six months ended 31 March 2001, weather disruptions
occurred in late December 2000. Our experience is that weather related
disruptions do occur each year, however the timings vary considerably. easyJet
notes that weather-related disruptions have occurred during the second half of
some previous financial years.
Cashflow
In November easyJet successfully raised net proceeds of £93.9 million by the
issue of 26 million new shares. This cash has strengthened the balance sheet and
has supported the acquisition and financing of new aircraft. As at 31 March 2002
easyJet had £381.9 million of cash and net funds of £300.6 million. The Group
continues to generate strong cashflow from its operations. Over the period net
cash inflow from operations was £45.2 million. The Directors believe that
easyJet's strong balance sheet and cashflow, provides it the flexibility to take
advantage of growth opportunities as they emerge.
CHIEF EXECUTIVE'S REVIEW (continued)
The Airline Group
easyJet is one of the seven shareholders in The Airline Group (TAG), a
consortium of airlines which owns a minority interest in the company which
operates the UK air traffic control system (NATS). The investment was made last
year for strategic reasons in order to be able to influence the direction of the
development of air traffic control services and the level of charges.
However given the long time period before an expected return would be realised,
the Board of easyJet has decided to be prudent and to provide for in full its
£7.2 million investment in TAG.
easyJet's future growth is critically dependent on the provision of efficient
air traffic control services and consequently easyJet remains vitally interested
in NATS and has no current intention to sell its stake in, or to cease its
involvement with, TAG.
Trading outlook
easyJet continues to see strong demand for low cost airline services.
Paris services began on 2 May 2002 and will be extended during the second half
of the financial year and, while demand is anticipated to be strong, the yields
are expected to be immature. In addition, as Paris is the first new destination
in almost three years and the largest city since easyJet launched in London in
1995, advertising expenditure is expected to be higher as the market is
developed.
The recently-launched routes from London Gatwick are proving popular with our
customers.
As demonstrated in the first six months, management maintains its ongoing focus
on cost control.
The aviation industry in Europe is undergoing major change. Consumer demand is
strong and growth opportunities are emerging for easyJet to provide the services
and prices that consumers want. However, Europe's politicians must have the
strength to allow these long-overdue changes to prevail so as to let the more
efficient airlines take advantage of these opportunities and to give Europe's
consumers what they want.
My colleagues and I remain confident of achieving our expectations for the full
year.
Ray Webster
Chief Executive
7 May 2002
Post Balance Sheet Events
The following events have occurred since 31 March 2002:
• in April 2002, the group took delivery of a new Boeing 737-700 aircraft,
which will be financed by sale and leaseback;
• easyJet has signed a letter of intent to dry lease an additional new
Boeing 737-700 from June 2002;
• easyJet has arranged committed lease financing for six scheduled Boeing
737-700 deliveries, including the delivery in April 2002;
• on 3 May 2002, easyJet announced that it was at an advanced stage in
exclusive negotiations with 3i Group plc and Go Fly Ltd, regarding the
possible acquisition of Go Fly Ltd. easyJet's intention is to conclude these
negotiations only if it believes that the acquisition would be in the
interests of shareholders, customers and staff; and
• easyJet has signed Heads of Terms with British Airways, under which
easyJet has acquired the option to acquire 100% of Deutsche BA, subject to a
number of conditions.
Selected consolidated operating data
(unaudited)
Period ended 31 March Year-on-year
change
2002 2001
Number of aircraft owned/leased at end of period 30 22 36%
Average number of aircraft owned/leased over the first six months 27.5 20.4 35%
Number of routes operated at end of period 40 29 11 routes
Number of airports served at end of period 17 17 -
Passengers over the first six months 4,338,975 3,199,349 36%
Load factor over the first six months 84.2% 80.6% 3.6% pts
Internet sales percentage during final month of financial period 90.9% 86.5% 4.4% pts
Definitions
Number of aircraft owned/leased at end of period
Represents the number of aircraft owned (including those held on lease
arrangements of more than one month's duration) at the end of the relevant
accounting period.
Passengers
Represents the number of earned seats flown by easyJet. Earned seats include
seats that are flown whether or not the passenger turns up, because easyJet is
generally a no-refund airline and once a flight has departed a no-show customer
is generally not entitled to change flights or seek a refund. Earned seats also
include seats provided for promotional purposes and to easyJet staff for
business travel.
Load factor
Represents the number of passengers as a proportion of the number of seats
available for passengers. No weighting of the load factor is carried out to
recognise the effect of varying flight (or 'stage') lengths.
Internet sales percentage
Represents the number of seats initially sold over the internet divided by the
total number of seats initially sold, during the final month of the relevant
financial period. Sales that are originally made via the internet, but are later
amended by phone, are included.
Independent review report to easyJet plc
1. Introduction
We have been instructed by the company to review the financial information
for the six months ended 31 March 2002 which comprises a consolidated profit
and loss account, balance sheet, cash flow statement, statement of total
recognised gains and losses and the related notes. 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.
2. Directors' responsibilities
The interim report, including the financial information contained therein,
is the responsibility of, and has been approved by, the directors. The
directors are responsible for preparing the interim report in accordance
with the Listing Rules of the Financial Services Authority which 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.
3. 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.
4. 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 six months
ended 31 March 2002.
KPMG Audit Plc
Chartered Accountants
London
EC4Y 8BB
7 May 2002
Consolidated profit and loss account
for the 6 months ended 31 March
Notes Unaudited Unaudited Year ended
Six months ended Six months ended 30 September
31 March 2002 31 March 2001 2001
£000 £000 £000
Revenue 2 193,942 142,844 356,859
Cost of sales (161,170) (124,939) (265,648)
Gross profit 32,772 17,905 91,211
Distribution and marketing expenses (18,478) (17,855) (31,692)
Administrative expenses 4 (10,338) (10,470) (21,396)
Operating profit/(loss)
Operating profit/(loss) before exceptional 3,956 (7,141) 41,900
administrative expenses
Exceptional administrative expenses - (3,279) (3,777)
Operating profit/(loss) 3,956 (10,420) 38,123
Interest receivable 5,565 4,341 10,205
Interest payable (1,349) (4,207) (8,195)
Amounts written off investments 5 (7,159) - -
Profit/(loss) on ordinary activities before 1,013 (10,286) 40,133
taxation
Tax on profit/(loss) on ordinary activities 6 (235) - (2,226)
Retained profit/(loss) for the period 778 (10,286) 37,907
Earnings/(loss) per share:
Basic 3 0.3p (4.3p) 15.2p
Diluted 3 0.3p (4.3p) 14.4p
Consolidated balance sheet
as at 31 March
Notes Unaudited Unaudited
31 March 2002 31 March 2001 30 September 2001
£000 £000 £000
Fixed assets
Intangible assets 2,911 3,079 2,995
Tangible assets 205,765 210,052 206,433
Investments 5 - 6,885 7,159
208,676 220,016 216,587
Current assets
Debtors 67,195 53,458 47,106
Cash at bank and in hand 381,898 228,755 244,435
449,093 282,213 291,541
Creditors: amounts falling due within one year (166,216) (123,551) (113,428)
Net current assets 282,877 158,662 178,113
Total assets less current liabilities 491,553 378,678 394,700
Creditors: amounts falling due after more than one
year (74,242) (106,136) (76,289)
Provisions for liabilities and charges (1,284) (1,348) (1,920)
Net assets 416,027 271,194 316,491
Share capital and reserves
Share capital 71,777 65,013 65,108
Share premium 286,912 195,073 196,638
Profit and loss 57,338 11,108 54,745
Shareholders' funds - equity 8 416,027 271,194 316,491
This Interim Report was approved by the Directors on 7 May 2002.
Cash flow information
Reconciliation of operating profit to net cash flow from operating activities
Unaudited Unaudited
Six months ended Six months ended Year ended
31 March 2002 31 March 2001 30 September 2001
£000 £000 £000
Operating profit/(loss) 3,956 (10,420) 38,123
Amortisation 84 84 168
Depreciation 9,295 8,880 18,457
Loss on sale of assets 40 - 236
Cost of share gifts 24 478 967
(Increase) in debtors (20,631) (12,499) (6,146)
Increase in creditors 52,385 39,301 31,571
Net cash inflow from operating activities 45,153 25,824 83,376
Consolidated cash flow statements
Unaudited Unaudited Year ended
Six months ended Six months ended 30 September 2001
31 March 2002 31 March 2001
£000 £000 £000
Net cash inflow from operating activities 45,153 25,824 83,376
Returns on investments and servicing of
finance 3,417 134 1,737
Taxation 541 - -
Capital expenditure and financial
investment (2,405) (16,293) (29,027)
Cash inflow before management of liquid
resources and financing 46,706 9,665 56,086
Management of liquid resources 15,000 (20,000) (15,000)
Financing 90,757 205,002 174,261
Increase in cash in the period 152,463 194,667 215,347
Cash flow information (continued)
Reconciliation of net cash flow to movements in net funds
Unaudited Unaudited Year ended
Six months ended Six months ended 30 September 2001
31 March 2002 31 March 2001
£000 £000 £000
Increase in cash in the period 152,463 194,667 215,347
Cash outflow for decrease in debt 4,631 5,751 37,893
Cash (inflow)/outflow for movement in liquid
resources (15,000) 20,000 15,000
Change in net funds resulting from cash flows
142,094 220,418 268,240
Exchange difference on loans (2,684) (4,316) (1,081)
Increase in net funds for the period 139,410 216,102 267,159
Net funds/(debt) at the start of the period 161,154 (106,005) (106,005)
Net funds at the end of the period 300,564 110,097 161,154
Net funds at the end of the period comprises:
Unaudited Unaudited 30 September 2001
31 March 2002 31 March 2001
£000 £000 £000
Cash at bank and in hand 381,898 228,755 244,435
Bank loans (81,334) (118,658) (83,281)
300,564 110,097 161,154
Consolidated statement of total recognised gains and losses
Unaudited Unaudited Year ended
Six months ended Six months ended 30 September 2001
31 March 2002 31 March 2001
£000 £000 £000
Retained profit/(loss) for the period 778 (10,286) 37,907
Foreign currency translation
differences 3,347 3,050 (254)
Total recognised gains and losses for
the period 4,125 (7,236) 37,653
Consolidated reconciliation in shareholders' funds
Unaudited Unaudited Year ended
Six months ended Six months ended 30 September 2001
31 March 2002 31 March 2001
£000 £000 £000
£000 £000
Retained profit for the period 778 (10,286) 37,907
Foreign currency translation
differences 3,347 3,050 (254)
Movement in reserves for employee
share scheme (1,532) (726) (1,978)
Shares issued by easyJet plc 96,943 213,439 215,099
Net addition to shareholders' funds
99,536 205,477 250,774
Opening shareholders' funds 316,491 65,717 65,717
Closing shareholders' funds 416,027 271,194 316,491
Notes to the Interim Statements
1. Basis of preparation of interim financial information
The financial information contained in this statement does not
constitute statutory accounts within the meaning of section 240 of the
Companies Act 1985.
The unaudited consolidated profit and loss and balance sheet for the half
years ended 31 March 2001 and 31 March 2002 have been prepared on a basis
consistent with the statutory accounts for the year ended 30 September 2001.
The comparative figures for the financial year ended 30 September 2001 are
not the company's statutory accounts for that financial year. Those accounts
have been reported on by the company's auditor and delivered to the
Registrar of Companies. The report of the auditor was unqualified and did
not contain a statement under section 237 (2) or (3) of the Companies Act
1985.
The group has adopted FRS18 'Accounting Policies' and FRS19 'Deferred Tax'
in this interim financial statement. This has not had a material effect on
the financial information included in this statement in either the current
or prior period.
2. Turnover and segmental analysis
All revenues derive from the easyJet's principal activity as an airline and
include scheduled services, in-flight and related sales. Substantially all
of easyJet's external revenues are earned by companies incorporated in the
United Kingdom.
The geographical analysis of turnover by destination is as follows:
Unaudited Unaudited Year ended
Six months ended Six months ended 30 September 2001
31 March 2002 31 March 2001
£000 £000 £000
Within the United Kingdom 49,055 42,481 86,545
Between the United Kingdom and the Rest of 130,970 91,361 244,764
Europe
Within the Rest of Europe 13,917 9,002 25,550
193,942 142,844 356,859
easyJet's operating profit principally arises from airline-related
activities.
The principal revenue earning assets of easyJet are its aircraft fleet.
Since easyJet's aircraft fleet is employed flexibly across its route
network, there is no suitable basis of allocating such assets and related
liabilities to geographical segments.
Notes to the Interim Statements (continued)
3. Earnings per share
Basic earnings per share has been calculated by dividing the (loss)/profit
for the period retained for equity shareholders by the weighted average
number of shares in issue during the period after adjusting for changes to
the capital structure of the group.
The calculation for diluted earnings per share uses the weighted average
number of ordinary shares in issue adjusted by the effects of all dilutive
potential ordinary shares. The dilution effect is calculated on the full
exercise of all ordinary share options granted by the group including other
share schemes, which the group consider to have been earned. The calculation
compares the difference between the exercise price of exercisable share
options, weighted for the period over which they were outstanding during the
year, with the average daily mid-market closing price over the period when
they were in existence as options. For the share option and other share
schemes in place at 31 March 2001, the loss per share is not dilutive as
conversion to ordinary shares would reduce net loss per share.
The earnings per share are based on the following:
Unaudited Unaudited Year ended 30
September 2001
Six months ended 31 Six months ended 31
March 2002 March 2001
Profit/(loss) for the period retained for
equity shareholders (£000's) 778 (10,286) 37,907
Number Number Number
Weighted average number of ordinary shares in
issue during the period used to calculate
basic earnings per share (000's) 279,973 238,447 249,322
Weighted average number of dilutive shares
options used to calculate dilutive earnings
per share (000's) 16,103 - 13,288
4. Administrative expenses
There are no exceptional items to be reported in the administrative
expenses for this half year. Included within administrative expenses
were the following exceptional items in the previous year:
• £1.3 million in 6 months ended 31 March 2001 (£1.8 million for year ended
30 September 2001), principally in respect of granting gifts of shares to
certain employees of the group.
• £2.0 million in 6 months ended 31 March 2001 (£2.0 million for year ended
30 September 2001), in respect of a court decision against easyJet
Switzerland, relating to VAT on tour operators for charter services provided
in the years before shares in easyJet Switzerland were purchased by the
group.
Notes to the Interim Statements (continued)
1. Amounts written off investments
easyJet is one of seven shareholders in The Airline Group, a consortium of
airlines which owns a minority interest in the company that operates the UK
air traffic control system (NATS). Given the long time period before a
return would be realised, the £7.2 million investment in The Airline Group
has been fully provided for.
2. Taxation
The taxation charge is made up as follows:
Unaudited Unaudited Year ended
Six months ended Six months ended 30 September 2001
31 March 2002 31 March 2001
£000 £000 £000
UK corporation tax - - 1,936
Overseas taxation 235 - 290
235 - 2,226
Effective tax rate 23.2% - 5.5%
The effective tax rate is lower than the standard rate of tax for a
number of reasons:
• an exemption exists from cantonal and communal taxes in Switzerland
for the business of easyJet Switzerland until 31 December 2006, which
reduces the effective rate of taxation in Switzerland to 7.8 per cent;
and
• tax allowances are available in the UK and Switzerland in respect of
share options granted to group employees.
Share options
A deduction is available for the difference between the market value of
the shares at the date of exercise of the share option (or the market
value at 31 March 2002 if the options remain unexercised) and the option
price for UK employees. This deduction has been available since 22
November 2000, the date that easyJet plc's shares were first admitted to
the Official List of the London Stock Exchange.
If the share price increases between 31 March 2002 and the date of
exercise of the outstanding options, then a further tax deduction will
be recognised in subsequent financial periods. However, if the share
price falls, then there will be a tax charge. Given the number of
options outstanding, movements in the share price could potentially
cause a significant variation in the tax charge and the effective tax
rate in future years. For example, a one penny reduction in the share
price will potentially reduce the deduction available against taxable
profits by £0.2 million. For Swiss employees, a similar tax deduction is
available, but only when the stock options have been exercised.
Notes to the Interim Statements (continued)
1. Dividends
No dividends have been paid or proposed in the period ended 31 March
2002 or during the comparative accounting periods.
8 Share capital and reserves
Share Share Profit and Total
capital Premium loss account
£000 £000 £000 £000
At 1 October 2001 65,108 196,638 54,745 316,491
Retained profit for the period - - 778 778
Foreign currency translation
differences - - 3,347
3,347
Issue of ordinary share capital 6,669 90,274 - 96,943
Movement in profit and loss
account for employee share - - (1,532) (1,532)
schemes
At 31 March 2002 71,777 286,912 57,338 416,027
The called up share capital was increased during the period by the issue
of 26,032,258 Ordinary Shares at a price of £3.75 under a Placing and
Open Offer. Of these shares, 19,532,258 new Ordinary Shares were the
subject of an Open Offer made to Qualifying Shareholders and the balance
of 6,500,000 new Ordinary Shares were placed with institutional
investors.
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