Interim Results
easyJet PLC
07 May 2003
EMBARGOED UNTIL 07.00 WEDNESDAY 7TH MAY 2003
easyJet plc, Europe's largest low-cost airline, today announces interim results
for the six months ended 31 March 2003.
easyJet reports record revenues of £373m for the first half, up 92% from the
same period in the prior year. On a proforma basis, assuming a combined easyJet
and Go Fly in 2002, the underlying revenue increase is 25%.
easyJet plc generated a loss before tax, goodwill and non-recurring items for
the six month period of £24m which compares to a reported profit of £8.3m for
the same period in the prior year. The loss after tax for the period was £46.9m,
which compares to a reported profit of £0.8 million in the same period of the
prior year.
In the first half net cash inflow from operating activities was £24m.
Highlights of the results (with comparisons on a pro forma basis, assuming a
combined easyJet and Go Fly on 2002) include:
•Passenger numbers up 40% to 9.3m
•Load factor up 1.1% pts to 82.2%
•Average fare £37.45, 10.7% lower than last year
•Revenue up 25% to £373m
•Aggressive cost control reduced cost per ASK by 8% (before tax, goodwill
and non-recurring items and tax)
•Loss before tax, goodwill and non-recurring items £24m
•Loss after tax of £46.9m
•Strong cash generation - net cash inflow from operating activities £24m
•£346m cash on balance sheet
•Airbus deal for 120 A319 ratified by shareholders
•Integration of Go Fly ahead of schedule
easyJet Chief Executive, Ray Webster, said:
'Our excellent growth in the first half demonstrates the continued
attractiveness to passengers of the easyJet low cost business model. In addition
to an almost 40% increase in capacity we have increased load factors by 1.1%
pts, although at some cost in yields. The impact of external events, such as the
conflict in Iraq, has placed further pressure on yields, which were consequently
down 10.7% over the period.
'The loss for the first half primarily results from the normal seasonality of
the business. In the first half demand is traditionally weaker, we schedule most
of our planned maintenance and we experience more weather-related delays. In
this half-year we also lost most of the benefit of the Easter period, as it has
fallen in the second half.
'We have made better-than-expected progress with the integration of Go Fly and
are below budget in respect of the anticipated costs of the integration, which
amounted to £5.6million in the half year. In addition, we are realising greater
benefits than originally expected. On 17th March 2003 we terminated the option
to acquire Deutsche BA, which has caused £9.2million of costs to be realised in
the period.
'The continued expansion at Paris Orly, London Gatwick and East Midlands, and
the development of Newcastle as a base demonstrates easyJet's continuing
strategy of concentrating on network density. easyJet will operate 105 routes
between 38 destinations in 11 countries over the summer period, an increase of
21 routes compared to summer 2002.'
Commenting on the trading outlook, Ray Webster said:
'Our business model remains robust and it is clear, as we move towards the busy
summer period, that passengers are still willing to travel within Europe and
they are responsive to price. Since the end of the half-year, our April
passenger volumes were up 34% and yields were down approximately 3% year on
year. This month benefited from the Easter holiday and from pent-up demand from
the period of hostilities in Iraq.'
'Forward bookings indicate that revenue per flight in May is tracking close to
last year, whereas June appears weaker, although a much lower proportion of
June's seats have currently been booked. At this point in time it is too early
to have visibility regarding the financial outcome for the full year, as the
strength of fares over our crucial summer period is not likely to be clear for a
couple of months. However, we expect to maintain high load factors, albeit with
yields continuing to be under some pressure compared to last year, offset to an
extent by the reduction in the rate of growth of capacity which occurs in the
second half of the year.
'In summary, the trading environment is challenging, but the propensity for
travel within Europe remains strong and the number of passengers flying with
easyJet continues to grow.'
A full copy of this release will be available on the investor relations section
of the easyJet website (http://www.easyjet.com/EN/about/investorrelations.html).
There will be a meeting for analysts at 10.00am this morning at the offices of
UBS Warburg at 1 Finsbury Avenue, London, EC2M 2PP. For further information
please contact Grandfield on the telephone number given below. A copy of the
presentation will be available on the investor relations section of the easyJet
website later today.
There will be a conference call for fund managers and analysts this afternoon at
14.30 London time. To participate in the conference call, contact Catherine
Segrave at UBS Warburg +44 20 7568 1458.
For further details please contact
easyJet plc
Toby Nicol, Corporate Communications +44 (0) 1582 525 339
Chris Walton, Finance Director +44 (0) 1582 525 336
For easyJet media enquiries please contact:
Grandfield
Charles Cook +44 (0) 20 7417 4170
Gareth Penn
END
Chairman's statement
I am pleased to report that in the six months ended 31 March 2003 easyJet plc
has generated revenues of £373 million, an increase of 25 per cent over the
figure for the comparable period of the prior financial year, calculated on a
proforma basis to include the business of Go Fly, acquired in August 2002.
Growth in passenger numbers was 40 per cent.
Reflecting the seasonality of our business and the timing of Easter this year,
the Company has generated a loss of £24.4 million before goodwill, non-recurring
items and tax, and £46.9 million after goodwill, non-recurring items and tax, in
the first half of the year. The loss before non-recurring items and tax, but
after goodwill, was £33.3 million. In line with our usual practice the Board is
not recommending the payment of an interim dividend.
The period has been a very difficult one for the airline industry, with concerns
over the economic outlook and geo-political concerns relating to the Middle East
having seriously impacted many carriers. Nonetheless, our low cost model has
attracted passengers who continue to travel within Europe and remain responsive
to price. We remain confident that easyJet will continue to achieve strong
organic growth.
Complementing the organic growth, easyJet acquired Go Fly in August 2002.
Integration has occurred faster than envisaged in the period with the two major
milestones (selling under a single brand and operating under a single Air
Operator's Certificate) being achieved earlier than originally planned.
On 12 March 2003 shareholders ratified the contract to purchase 120 Airbus A319
aircraft. This contract and the favourable pricing achieved, provides the
capacity to underpin our future growth at much reduced operating costs.
The period has also seen the publication of the Higgs Report on Corporate
Governance. Most of what is recommended is common sense and easyJet already
conducts its business in a manner that is in line with the principles of the
report. However, the Board of easyJet in common with the boards of most other
companies is concerned that the overly prescriptive nature of the
recommendations unreasonably restricts that margin of flexibility required by
any board of directors for the proper conduct of its business. We look forward
to the concerns expressed by the business community being recognised when the
Financial Reporting Committee reports later this month.
In conclusion, easyJet has proved robust and competitive despite a tough market
environment over the past six months. This is due largely to the qualities of
dedication and persistence of our people, for which my colleagues and I are most
appreciative and grateful.
Sir Colin Chandler
Chairman
6 May 2003
Chief Executive's review
Overview
easyJet continues to demonstrate that its business model is robust and that
there continues to be strong demand for low fare, point-to-point services
between major European airports.
During the life of the company it has shown rapid growth and we believe that
there is considerable scope for this growth to continue. We have benefited from
taking market share from other, higher cost, airlines, as well as from creating
a whole new market segment as the low cost model has opened up air travel to a
new set of value conscious consumers. This is a proven business model which has
a long track record of success in North America and has a great deal further to
go in Europe. Furthermore, it is a model which is more resilient in difficult
economic times, such as these.
The business has grown strongly this year with 9.3 million passengers being
carried in the first half, a 40 per cent increase on the same period in 2002, on
a proforma basis assuming a combined easyJet and Go Fly in 2002. (Unless
otherwise stated, all comments below relating to year-on-year performance
compare current year actuals with prior year figures on a proforma basis.) This
growth has been enabled by the introduction of aircraft to the fleet and by
driving a 1.1 percentage point increase in average load factor, up to 82.2 per
cent. Over this period, the 50 per cent growth in available seat kilometres
(ASKs) flown was accompanied by a fall in average fare of 10.7 per cent, to
£37.45.
The growth during the half-year was driven primarily by easyJet's entry into
Paris, London Gatwick and East Midlands and the increase of frequency on
existing routes. This demonstrates easyJet's continuing concentration on network
density, based on primary airports, rather than 'flag planting'.
easyJet's growth in revenue has continued, increasing 25 per cent half-year on
half-year, to £373 million. Over the six months easyJet has reduced costs
through aggressive cost control and the company has benefited from cost
synergies arising through the acquisition of Go Fly. easyJet's total cost per
ASK before goodwill, non-recurring items and tax fell by 8 per cent, half-year
on half-year to 4.14 pence.
Over the period, the operations have run well. This is despite the integration
of the businesses of easyJet and Go Fly that occurred over this period. We are
now operating as a single airline, offering a common easyJet-branded product
across the entire network.
Historically, easyJet's business is seasonal, with losses in the first half of
its financial year and profits in the second half, as the second half includes
the high volume, high yield European summer. This trend continues, but has been
exacerbated by the timing of Easter, the anticipation and onset of hostilities
in Iraq and the slowing of European economies. As a consequence, the loss for
the half year, before goodwill, non-recurring items and tax, was £24.4 million.
After goodwill of £8.9 million and non-recurring expenses relating to the
integration of the low cost airline Go Fly of £5.6 million and the costs
associated with the option to purchase the airline Deutsche BA of £9.2 million,
the loss before tax was £48.1 million for the six months ended 31 March 2003.
Aircraft
As at 31 March 2003, the easyJet fleet comprised 68 Boeing 737 aircraft with an
average age of less than six years. Over the first six months of the financial
year, easyJet took delivery of four additional new Boeing 737-700's, financed
through operating leases.
A further ten new Boeing 737-700's are to be delivered by May 2004, with four of
these aircraft scheduled to arrive in the second half of this financial year. A
further Boeing 737-300 aircraft will be brought into the fleet under favourable
operating lease terms in the second half.
In March 2003, shareholders ratified the contract to purchase 120 Airbus A319
aircraft to be delivered through to September 2007. Under this agreement, the
first two A319's will be delivered in September 2003. These aircraft have been
secured on exceptionally favourable terms, reflecting the size of the order and
the strategic attractiveness of the low cost sector to Airbus. This factor, and
the operating efficiencies that we will achieve, more than offset the small
increase in complexity that will result from operating a dual fleet.
At the financial year-end, it is anticipated that the fleet will consist of 75
aircraft.
Routes
At 31 March 2003, the easyJet network covered 95 routes and 36 airports in 11
countries. A further 10 routes and 2 new destinations have been announced for
the second half. Thus over the summer season, easyJet will serve 38 airports and
operate 105 routes.
easyJet sees considerable growth potential within the European market. The
company already has a strong position in the UK market and has made good
progress in continental Europe, particularly France. Our continued focus will
therefore be on organic growth within the major economies of Western Europe
where we see a great deal more opportunities than restrictions.
easyJet continues to concentrate on building network density with the additional
capacity added over the period appearing as increased frequencies on existing
routes and infilling between existing destinations ('joining the dots').
Increasing network density enables us to maximise returns from established and
busy routes as well as building up a strong defensive position. Network density
is also attractive to the customer who seeks choice over travel times. The
second growth lever of 'joining the dots' increases the efficiency of our
operations in those destination cities and helps to improve asset utilisation
and reduce unit costs. The established consumer awareness in these cities
provides a receptive target market for the new routes.
Combining the easyJet and Go Fly networks has provided easyJet with a much
enhanced market presence, completely in alignment with the organic growth
strategy. It has also increased the average sector length which further improves
fuel efficiency and helps to reduce unit costs.
At the end of March, Newcastle was established as a new base with the
commencement of three routes to Alicante, Barcelona and Belfast. A further three
routes to Bristol, Paris CDG and Prague are scheduled to start in the second
half, bringing the number of destinations served from Newcastle to seven.
Expansion at East Midlands, which was established as a base in March 2002,
continued in the first half with the addition of three routes to Barcelona,
Geneva and Venice. This brings the number of destinations served from East
Midlands to nine.
easyJet was allocated 7,300 slots at Paris Orly airport following the
redistribution of slots after the liquidation of Air Lib. easyJet will commence
three French domestic routes to Marseille, Nice and Toulouse as well as to
Barcelona and Milan in the second half. Marseille and Toulouse are important
business centres and represent new destinations for easyJet, bringing the number
of airports served to 38. These new routes are in addition to the Orly-Geneva
route and the four routes from Paris Charles de Gaulle to Luton, Liverpool, Nice
and Newcastle over the summer season. Paris remains a strategically important
market and easyJet looks forward to being able to build on the existing route
base to grow the business even more over the coming years.
easyJet now serves 14 destinations from London Gatwick with the addition of
three new routes, to Belfast and Inverness in February and to Milan in May. Four
other new routes for fiscal year 2003 are Bristol to Venice (started in October
2002), Liverpool to Alicante (January 2003) and Luton to Alicante (March 2003)
and Faro (April 2003).
Revenue
Our rate of passenger growth is broadly determined by the rate of addition of
aircraft and the level of utilisation of these assets. The business model is
then predicated on achieving the desired load factors and maximising revenues
through the application of our proprietary yield management system. In general
we would expect growth in yields to be moderated by the rate of addition of new
capacity.
Over the first half passenger numbers have increased 40 per cent and ASKs by 50
per cent. This growth and other external factors has impacted our ability to
sustain yield growth.
easyJet began the financial year in an environment of slowing European
economies, increasing low fare competition, the fear of terrorism and the Iraq
conflict. Also, over the period, easyJet has sold additional seats at lower
fares to lift the load factor of the Go Fly network, which over the same period
in 2002 was 75.9 per cent, closer to the easyJet network level which over the
same period last year was 84.2 per cent.
The financial year began with average fares tracking below the same period last
year. This was exacerbated in the last two months of the period by the increased
uncertainty, followed by the actual outbreak, of hostilities in Iraq and the
timing of Easter, which has moved a period of relatively high fares into the
second half of this year.
Furthermore, the company ran a one week promotion in March which has had an
impact on yields but was an important demonstration that the market still
existed and that the public will travel at the right price. The basis of the
easyJet pricing model therefore continues to be robust.
As a result of promoting passenger volumes over fare levels, easyJet's revenue
increased by 25.4 per cent to £372.6 million, in the half year, despite average
fares falling by 10.7 per cent to £37.45.
Non-fare revenue rose by 37.2 per cent to £22.5 million and total revenue per
passenger fell 10.2 per cent to £39.86. The expansion in routes resulted in an
increase in average sector length of 8.6 per cent to 844 kilometres. This
resulted in total revenue per ASK falling 16.2 per cent.
Costs
The tight control of costs is a key feature of the easyJet business model and I
am pleased to report further progress in this respect. As the largest low cost
operator in Europe we gain considerable economies of scale and this factor has
been further enhanced by cost synergies arising through the acquisition of Go
Fly. The most significant adverse factor in the half-year was the high price of
fuel, although this was partially offset by the relative weakness of the US
dollar.
easyJet's total cost per ASK before goodwill, non-recurring items and tax fell
by 8.0 per cent half-year on half-year to 4.14 pence. After goodwill and
non-recurring items, total cost per ASK fell 5.0 per cent to 4.38 pence.
Fuel prices were negatively affected by industrial action in Venezuela and the
Iraq conflict. During the first half ended 31 March 2003, the average fuel price
per US gallon rose 25 per cent to 96 cents, compared with an average price of 77
cents for the half-year ended 31 March 2002. This equates to an approximate
£11.7 million additional fuel cost for the half-year. The results were partly
mitigated by an approximate £5.8 million benefit due to a weaker average US
dollar/Sterling exchange rate and by increased usage efficiencies driven by the
introduction of new aircraft and a longer average sector length.
Non-fuel costs benefited from the weaker average US/Sterling exchange rate by
approximately £8.4 million.
As a legacy of the events of 11 September 2001, insurance costs remain high.
However, the renegotiation of contracts following the Go Fly acquisition and the
weaker average US/Sterling exchange rate has resulted in an approximate 20 per
cent fall in rates on a per passenger basis.
Maintenance costs fell approximately 6 per cent on a block hour basis due to
renegotiated maintenance contracts following the Go Fly acquisition and the
weaker average US/Sterling exchange rate. Further benefits are being achieved as
the balance of the fleet moves towards more modern, more efficient aircraft with
the introduction of more Boeing 737-700s and this will be even further enhanced
by the introduction of the new Airbus 319s.
Over the period easyJet continued to benefit from relatively low aircraft lease
rates and the new Airbus contract has secured our ability to grow for a number
of years at very favourable prices and with increases in efficiency at many
levels.
Due to the higher rates charged at certain primary airports where much of
easyJet's growth has been centred in the last year and some adverse currency
effects, airport and ground handling charges have risen faster than the rate of
growth. Navigation charges have also increased substantially year-on-year due to
price increases, longer stage length and adverse currency effects.
Cashflow
As at 31 March 2003, easyJet had £346 million of gross cash. easyJet continues
to generate strong cashflow from its operations. Over the period net cash inflow
from operations was £24 million, aided by improvements in the working capital
management. The payment profile of the business results in significant negative
working capital. Over the period, improved credit card arrangements and the
growth in unearned revenue has improved the working capital position.
Even though significant deposit payments are to be made to aircraft
manufacturers, I expect that the Group will continue to hold substantial cash
balances at its financial year-end.
Integration of Go Fly
The integration of Go Fly has proceeded much faster than originally planned with
the two major milestones (selling under a single brand and operating under a
single Air Operator's Certificate) being achieved some months earlier than
originally planned.
The new routes this year highlight the complementary nature of the two networks
and the opportunities to 'join the dots'. Benefits of applying the easyJet yield
management system to flights on the Go Fly network are being observed with load
factors increasing, but with a reduction in yields.
The group has also benefited from cost synergies arising through the acquisition
of Go Fly. Maintenance and insurance contracts have been renegotiated at more
favourable terms and advertising spend is lower. Savings will arise from the
combination of the head office in Luton and the announcement in March of the
closure of the Stansted call centre. Significant benefits were also obtained in
the negotiations for new aircraft and these savings will start to be realised
with the introduction of the new Airbus aircraft.
Operations of the combined network are running well and the transition to a
single airline has been smooth.
The integration expense in the first half is £5.6 million. The Circular at the
time of purchase anticipated a total of £14 million of integration costs this
financial year. I believe that the full year spend will be less than this.
Airbus contract
During the first half of the year, easyJet gained shareholder approval for the
purchase of 120 Airbus 319 aircraft and for options over an additional 120
aircraft. The first two A319s will be delivered in September 2003. As disclosed
in the Circular to shareholders, the easyJet Board expects significant benefits
to arise from the advantageous terms obtained in this contract as well as the
inherent efficiency of the aircraft.
The scale of the order, which was increased as a result of the Go Fly
acquisition, led to a very competitive tendering process and as a result a very
favourable outcome has been achieved. The operational benefits of the new fleet
will be an important factor in maintaining a low cost base in the future as the
A319s will offer improved fuel efficiency as well as maintenance and ground
handling efficiencies. The significant benefits will more than offset any
increase in costs arising from operating a dual fleet.
Termination of option to purchase Deutsche BA
In March 2003, easyJet announced that it would not be proceeding with its option
to purchase the German domestic airline Deutsche BA due to two insurmountable
hurdles. Firstly, the rigidity of German labour laws made it impossible to get
acceptance of easyJet conditions of employment from key staff groups, despite
numerous attempts and different approaches. Secondly, since the option had been
negotiated, there had been a substantial deterioration in the financial
performance of airlines in the German market, including Deutsche BA.
While it was disappointing that the economics could not be made to work, easyJet
had always made it clear that the easyJet business model would not be
compromised. The total costs relating to this option were £9.2m in this
financial year.
Germany remains the largest economy in the European Union, with a relatively
high propensity to travel and good penetration from low cost carriers and
charters. We will continue to pursue organic growth in this attractive market
place.
Goodwill and non-recurring items
For the half-year ended 31 March 2003, goodwill and non-recurring costs of £23.6
million are represented by:
• Goodwill - primarily from the acquisition of the airline Go Fly - £8.9 million
This represents the first full half year of goodwill relating to the acquisition
of the airline Go Fly.
• Option to purchase the airline Deutsche BA - £9.2 million
In March 2003, easyJet announced that it would not be proceeding with its option
to purchase the German airline Deustche BA. All expenses relating to this deal
have been expensed in this half year.
• Integration costs relating to the purchase of the low cost airline Go Fly -
£5.6 million
The integration of the airline Go Fly has occurred successfully and much faster
than management had originally planned.
Trading Outlook
Our business model remains robust and it is clear, as we move towards the busy
summer period, that passengers are still willing to travel within Europe and
they are responsive to price. Since the end of the half-year, our April
passenger volumes were up 34% and yields were down approximately 3% year on
year. This month benefited from the Easter holiday and from pent-up demand from
the period of hostilities in Iraq.
Forward bookings indicate that revenue per flight in May is tracking close to
last year, whereas June appears weaker, although a much lower proportion of
June's seats have currently been booked. At this point in time it is too early
to have visibility regarding the financial outcome for the full year, as the
strength of fares over our crucial summer period is not likely to be clear for a
couple of months. However, we expect to maintain high load factors, albeit with
yields continuing to be under some pressure compared to last year, offset to an
extent by the reduction in the rate of growth of capacity which occurs in the
second half of the year.
In summary, the trading environment is challenging, but the propensity for
travel within Europe remains strong and the number of passengers flying with
easyJet continues to grow.
Ray Webster
Chief Executive
6 May 2003
Prior Year Financial Comparatives
The table below summarises revenue and loss before tax for the half-year ended
31 March 2003 and the comparative half-year periods to 2002, 2001, 2000, 1999
and 1998, on a statutory basis.
--------------------------------------------------------------------------------
Six month ended Six month ended
31 March 30 September Full Year
£ million £ million £ million
--------------------------------------------------------------------------------
1998 Revenue 28.4 48.6 77.0
(Loss)/Profit before Tax (1.3) 7.2 5.9
1999 Revenue 50.3 89.5 139.8
(Loss)/Profit before Tax (8.9) 10.2 1.3
2000 Revenue 100.1 163.6 263.7
(Loss)/Profit before Tax (2.3) 24.4 22.1
2001 Revenue 142.8 214.1 356.9
(Loss)/Profit before Tax (10.3) 50.4 40.1
2002 Revenue 193.9 357.9 551.8
(Loss)/Profit before Tax 1.0 70.6 71.6
2003 Revenue 372.6
(Loss)/Profit before Tax (48.1)
--------------------------------------------------------------------------------
Selected Consolidated Operating and Profit and Loss Account Data
The following tables set forth certain unaudited consolidated operating and
profit and loss account data. The information provided for 2002 is provided on a
proforma basis, assuming a combined easyJet and Go Fly in 2002.
--------------------------------------------------------------------------------
Unaudited Six month Six month
period ended period ended
31 March 2003 31 March 2002
--------------------------------------------------------------------------------
Number of aircraft owned/leased at end of period (1) 68.0 54.0
Average number of aircraft owned/leased during 64.8 47.0
period (2)
Number of aircraft operated at end of period (3) 65.0 50.0
Average number of aircraft operated during 63.7 44.7
period (4)
Sectors (5) 76,504 55,557
Block Hours (6) 127,400 86,112
Number of routes operated at end of period 95 75
Number of airports served at end of period 36 34
Owned/leased aircraft utilisation (hours per 10.8 10.1
day) (7)
Operated aircraft utilisation (hours per day)(8) 11.0 10.6
Available seat kilometres ('ASK') (millions) (9) 9,594 6,417
Passengers (10) 9,347,269 6,694,941
Load factor (11) 82.2% 81.1%
Revenue passenger kilometres ('RPK') (millions)(12) 7,938 5,403
Average internet sales percentage during the 92.4% 86.9%
period (13)
Internet sales percentage during final month of 93.8% 88.0%
financial period (14)
Average sector length (kilometres) 844 777
Average fare (£) (15) 37.45 41.93
Revenue per ASK (pence) (16) 3.88 4.63
Cost per ASK (pence) (17) 4.38 4.61
Cost per ASK before Goodwill and non-recurring 4.14 4.50
items (pence) (18)
--------------------------------------------------------------------------------
Footnotes can be found at the end of this section.
---------------------------------------------------------------------------------------
Unaudited Unaudited Year on
proforma (23)
Six months Six months year change
ended ended
31 March 2003 % 31 March 2002 % %
£000 £000
---------------------------------------------------------------------------------------
Passenger revenue 350,044 94.0 280,729 94.5 24.7
Non-ticket revenue (19) 22,533 6.0 16,426 5.5 37.2
------------ ------------ ---------
Revenue (20) 372,577 100.0 297,155 100.0 25.4
Ground handling (44,651) 12.0 (29,633) 10.0 50.7
charges, including
salaries
Airport charges (65,611) 17.6 (43,113) 14.5 52.2
Fuel (57,301) 15.4 (36,020) 12.1 59.1
Navigation charges (31,770) 8.5 (18,354) 6.2 73.1
Crew costs, including (45,733) 12.3 (34,654) 11.7 32.0
training
Maintenance, including (43,399) 11.6 (31,262) 10.5 38.8
reserves
Advertising (16,110) 4.3 (17,139) 5.8 (6.0)
Merchant fees & (7,319) 2.0 (5,596) 1.9 30.8
incentive pay
Costs of integrating (5,600) 1.5 - 0.0 -
businesses of easyJet
and Go Fly
Other costs (21) (39,588) 10.6 (36,758) 12.4 7.7
------------ ------------ ---------
EBITDAR (22) 15,495 4.2 44,626 15.0 (65.3)
Depreciation (11,208) 3.0 (10,533) 3.5 6.4
Goodwill (8,853) 2.4 (84) 0.0 10,439.3
amortisation
Aircraft dry lease (41,448) 11.1 (31,827) 10.7 30.2
costs ------------ ------------ ---------
Total operating (loss) (46,014) 12.4 2,182 0.7 (2,208.8)
/profit (EBIT)
Net interest 7,128 1.9 6,063 2.0 17.6
receivable/(payable)
Committed contribution (1,323) 0.4 - 0.0 -
to Deutsche BA
Amounts written off (7,863) (2.1) (7,159) 2.4 9.8
investments ------------ ------------ ---------
(Loss)/profit before (48,072) 12.9 1,086 0.4 (4,526.5)
tax ============ ============ =========
Footnotes
(1) 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
financial period.
(2) Represents the average number of aircraft owned (including those
held on lease arrangements of more than one month's duration) during the
relevant financial period.
(3) Represents the number of owned/leased aircraft in service at the
end of the relevant financial period. Owned/leased aircraft in service exclude
those in maintenance and those, which have been delivered but have not yet
entered service.
(4) Represents the average number of owned/leased aircraft in service
during the relevant financial period. Owned/leased aircraft in service exclude
those in maintenance and those, which have been delivered but have not yet
entered service.
(5) Represents the number of one-way revenue flights.
(6) Represents the number of hours that aircraft are in actual
service, measured from the time that each aircraft leaves the terminal at the
departure airport to the time that such aircraft arrives at the terminal at the
arrival airport.
(7) Represents the average number of block hours per day per aircraft
owned/leased during the relevant financial period.
(8) Represents the average number of block hours per day per aircraft
operated during the relevant financial period.
(9) Represents the sum by route of seats available for passengers
multiplied by the number of kilometres those seats were flown.
(10) Represents the number of earned seats flown by easyJet. Earned
seats include seats that are flown whether or not the passenger turns up (except
for those passengers which have purchased flexible fare seats), 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. For those passengers, which have purchased flexible fare
seats, the seat is only recognised on the earlier of the date the passenger
flies and the date on which the flexible fare expires.
(11) 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.
(12) Represents the sum by route of passengers multiplied by the
number of kilometres those passengers were flown.
(13) Represents the number of seats initially sold over the internet
divided by the total number of seats initially sold, during the relevant
financial period. Sales that are originally made via the internet, but are later
amended by phone, are included.
(14) 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.
(15) Represents the passenger revenue divided by the number of
passengers carried.
(16) Represents the total revenue divided by the total number of
ASK's.
(17) Represents the difference between total revenue and profit
before tax, divided by the total number of ASK's.
(18) Represents the total revenue less profit before tax before
goodwill and non-recurring items. Non-recurring items includes amounts written
off investments, costs relating to the DBA option and costs relating to the
integration of easyJet and Go Fly Ltd.
(19) Includes revenue from in flight sales, excess baggage charges,
booking change fees, credit card booking fees and commissions received from
products and services sold such as hotel and car hire bookings and travel
insurance.
(20) When easyJet makes refunds to customers, it records refunds made in the
pre-flight period as reductions in revenue and any refunds made post-flight as
marketing expenses, included in 'Other costs', above.
(21) Includes principally administrative and operational costs not
included elsewhere, the costs associated with short-term aircraft wet leases,
insurance and any post-flight refunds, together with certain other items, such
as currency exchange gains and losses and profit or loss on the disposal of
fixed assets.
(22) EBITDAR is defined by the company as earnings before interest,
taxes, depreciation, amortisation and lease payments (excluding the maintenance
reserve component of operating lease payments). Maintenance reserve costs are
charged to the cost heading, 'Maintenance'.
(23) The proforma accounts for 2002 include the aggregation of Go Fly Ltd,
the operating company of the Go Group for the similar period. However, we have
excluded share symmetry expenses recorded in that period of £3.0 million. The
proforma does not include any goodwill or other charges arising following the
acquisition by easyJet. These charges commenced on 1 August 2002.
Independent review report by KPMG Audit Plc to easyJet plc
Introduction
We have been engaged by the company to review the financial information set out
on pages 14 to 22 for the six months ended 31 March 2003 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.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules. Our review has been undertaken so that we might state to the company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company for our review work, for this
report, or for the conclusions we have reached.
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 they
are to be changed in the next annual accounts in which case any changes, and the
reasons for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4: Review of interim financial information 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 is substantially less
in scope than an audit performed in accordance with 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 six months
ended 31 March 2003.
KPMG Audit Plc 8 Salisbury Square
Chartered Accountants London
Registered Auditor EC4Y 8BB
6 May 2003
Consolidated profit and loss account
--------------------------------------------------------------------------------
Notes Unaudited Unaudited
Six months Six months Year ended
ended ended
31 March 2003 31 March 2002 30 September
2002
£000 £000 £000
--------------------------------------------------------------------------------
Revenue 2 372,577 193,942 551,844
Cost of sales (357,268) (161,170) (413,209)
------------ ------------ -------------
Gross profit 15,309 32,772 138,635
Distribution and (34,579) (18,478) (40,634)
marketing expenses
Administrative 4 (26,744) (10,338) (28,429)
expenses ------------ ------------ -------------
Group operating (loss) (46,014) 3,956 69,572
/profit
Loss from interest in (1,323) - (1,359)
associated
undertaking: committed
contribution to
Deutsche BA
------------ ------------ -------------
Total operating (loss) (47,337) 3,956 68,213
/profit
Amounts written off 5 (7,863) (7,159) (7,159)
investments
Interest receivable 7,973 5,565 15,751
Interest payable (845) (1,349) (5,228)
------------ ------------ -------------
(Loss)/profit on (48,072) 1,013 71,577
ordinary activities
before taxation
Tax credit/(charge) on 6 1,187 (235) (22,568)
(loss)/profit on ------------ ------------ -------------
ordinary activities
Retained (loss)/profit (46,885) 778 49,009
for the period ============ ============ =============
(Loss)/earnings per
share:
Basic 3 (11.9)p 0.3 p 14.6 p
Diluted 3 (11.9)p 0.3 p 13.9 p
============ ============ =============
Consolidated balance sheet
--------------------------------------------------------------------------------
Notes Unaudited Unaudited
31 March 2003 31 March 2002 30 September
2002
£000 £000 £000
--------------------------------------------------------------------------------
Fixed assets
Intangible assets 341,183 2,911 349,685
Tangible assets 268,354 205,765 185,098
Investments 5 - - 6,624
----------- ----------- ------------
609,537 208,676 541,407
Current assets
Debtors 129,947 67,195 96,005
Cash at bank and in 345,810 381,898 427,894
hand ----------- ----------- ------------
475,757 449,093 523,899
Creditors: amounts (307,854) (166,216) (260,614)
falling due within one ----------- ----------- ------------
year
Net current assets 167,903 282,877 263,285
----------- ----------- ------------
Total assets less 777,440 491,553 804,692
current liabilities ----------- ----------- ------------
Creditors: amounts (59,122) (74,242) (48,600)
falling due after more
than one year
Provisions for (34,750) (1,284) (28,388)
liabilities and ----------- ----------- ------------
charges
Net assets 683,568 416,027 727,704
=========== =========== ============
Share capital and
reserves
Share capital 98,391 71,777 97,919
Share premium 538,749 286,912 533,263
Profit and loss 46,428 57,338 96,522
----------- ----------- ------------
Shareholders' funds - 8 683,568 416,027 727,704
equity =========== =========== ============
--------------------------------------------------------------------------------
This Interim Report was approved by the Directors on 6 May 2003.
Cash flow information
Reconciliation of operating profit to net cash flow from operating activities
--------------------------------------------------------------------------------
Unaudited Unaudited
Six months Six months Year ended
ended ended
31 March 2003 31 March 2002 30 September
2002
£000 £000 £000
--------------------------------------------------------------------------------
Operating (loss)/profit (46,014) 3,956 69,572
Goodwill amortisation 8,853 84 3,091
Depreciation of tangible fixed 11,208 9,295 18,677
assets
Loss on sale of assets - 40 834
Cost of share gifts - 24 -
(Increase) in debtors (33,675) (20,631) (16,615)
Increase in creditors 83,584 52,385 8,672
----------- ----------- -----------
Net cash inflow from operating 23,956 45,153 84,231
activities =========== =========== ===========
--------------------------------------------------------------------------------
Consolidated cash flow statements
--------------------------------------------------------------------------------
Unaudited Unaudited
Six months Six months Year ended
ended ended
31 March 2003 31 March 2002 30 September
2002
£000 £000 £000
--------------------------------------------------------------------------------
Net cash inflow from operating 23,956 45,153 84,231
activities
Cash payments for interest in (1,924) - (759)
associated undertaking:
committed contribution to
Deutsche BA
Returns on investments and 6,823 3,417 10,703
servicing of finance
Taxation (13,910) 541 489
Capital expenditure and (96,685) (2,405) (3,392)
financial investment
Acquisitions and disposals (351) - (267,233)
----------- ----------- -----------
Cash (outflow)/inflow before (82,091) 46,706 (175,961)
management of liquid resources
and financing
Management of liquid resources 45,340 15,000 (72,712)
Financing 7 90,757 359,420
----------- ----------- -----------
(Decrease)/increase in cash in (36,744) 152,463 110,747
the period =========== =========== ===========
--------------------------------------------------------------------------------
Reconciliation of net cash flow to movements in net funds
--------------------------------------------------------------------------------
Unaudited Unaudited
Six months Six months Year ended
ended ended
31 March 2003 31 March 2002 30 September
2002
£000 £000 £000
--------------------------------------------------------------------------------
(Decrease)/increase in cash in (36,744) 152,463 110,747
the period
Cash outflow for decrease in 3,292 4,631 8,293
debt
Cash (inflow)/outflow for (45,340) (15,000) 72,712
movement in liquid resources
----------- ----------- -----------
Change in net funds resulting (78,792) 142,094 191,752
from cash flows
Exchange difference on loans 416 (2,684) 5,289
----------- ----------- -----------
(Decrease)/increase in net funds (78,376) 139,410 197,041
for the period
Net funds at the start of the 358,195 161,154 161,154
period
----------- ----------- -----------
Net funds at the end of the 279,819 300,564 358,195
period =========== =========== ===========
--------------------------------------------------------------------------------
Net funds at the end of the period comprises:
--------------------------------------------------------------------------------
Unaudited Unaudited
31 March 2003 31 March 2002 30 September
2002
£000 £000 £000
--------------------------------------------------------------------------------
Cash at bank and in hand 345,810 381,898 427,894
Bank loans (65,991) (81,334) (69,699)
----------- ----------- -----------
279,819 300,564 358,195
=========== =========== ===========
--------------------------------------------------------------------------------
Consolidated statement of total recognised gains and losses
--------------------------------------------------------------------------------
Unaudited Unaudited
Six months Six months Year ended
ended ended
31 March 2003 31 March 2002 30 September
2002
£000 £000 £000
--------------------------------------------------------------------------------
Retained (loss)/profit for the (46,885) 778 49,009
period
Foreign currency translation (550) 3,347 (5,509)
differences ---------- ---------- ----------
Total recognised gains and (47,435) 4,125 43,500
losses for the period ========== ========== ==========
--------------------------------------------------------------------------------
Consolidated reconciliation in shareholders' funds
--------------------------------------------------------------------------------
Unaudited Unaudited
Six months Six months Year ended
ended ended
31 March 2003 31 March 2002 30 September
2002
£000 £000 £000
--------------------------------------------------------------------------------
Retained (loss)/profit for the (46,885) 778 49,009
period
Foreign currency translation (550) 3,347 (5,509)
differences
Movement in reserves for (2,659) (1,532) (1,723)
employee share scheme
Shares issued by easyJet plc 5,958 96,943 369,436
---------- ---------- ----------
Net (decrease)/addition to (44,136) 99,536 411,213
shareholders' funds
Opening shareholders' funds 727,704 316,491 316,491
---------- ---------- ----------
Closing shareholders' funds 683,568 416,027 727,704
========== ========== ==========
--------------------------------------------------------------------------------
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 2002 and 31 March 2003 have been prepared on a basis consistent
with the statutory accounts for the year ended 30 September 2002. The
comparative figures for the financial year ended 30 September 2002 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.
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
Six months Six months Year ended
ended ended
31 March 2003 31 March 2002 30 September
2002
£000 £000 £000
--------------------------------------------------------------------------------
Within the United Kingdom 89,271 49,055 120,453
Between the United Kingdom and 254,397 130,970 388,877
the Rest of Europe
Within the Rest of Europe 28,909 13,917 42,514
---------- ---------- ----------
372,577 193,942 551,844
========== ========== ==========
--------------------------------------------------------------------------------
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 2003, 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
Six months Six months Year ended
ended ended 30 September
31 March 2003 31 March 2002 2002
--------------------------------------------------------------------------------
(Loss)/profit for the period (46,885) 778 49,009
retained for equity shareholders ========== ========== ==========
(£000's)
Number Number Number
Weighted average number of 392,801 279,973 335,493
ordinary shares in issue during
the period used to calcuate basic
earnings per share (000's)
Weighted average number of N/A 16,103 17,232
dilutive share options used to
calculate dilutive earnings per
share (000's)
========== ========== ==========
--------------------------------------------------------------------------------
4 Group operating (loss)/profit
Included within the group operating loss for the six months ended 31 March 2003
is £5.6 million in respect of the costs of integrating the businesses of easyJet
and Go Fly.
5 Amounts written off investments
In March 2003, easyJet announced it would not be proceeding with its option to
purchase the German domestic airline Deutsche BA. As a result, the net book
value of the investment, which was £7.9 million, was written off. This comprised
of £6.6 million capitalised in the previous financial year and £1.3 million
capitalised in the current financial period.
Notes to the Interim Statements (continued)
6 Taxation
The taxation charge is made up as follows:
--------------------------------------------------------------------------------
Unaudited Unaudited
Six months Six months Year ended
ended ended
31 March 2003 31 March 2002 30 September
2002
£000 £000 £000
--------------------------------------------------------------------------------
UK Corporation tax (1,500) - 15,155
Overseas taxation 313 235 312
---------- ---------- ----------
(1,187) 235 15,467
Deferred tax - - 7,101
---------- ---------- ----------
(1,187) 235 22,568
========== ========== ==========
Effective tax rate 2.5% 23.2% 31.5%
--------------------------------------------------------------------------------
The effective tax rate in the six months ended 31 March 2003 is lower than the
standard rate of tax principally due to the overall loss making position of the
group. Whilst overseas profits have been taxed at the relevant effective tax
rates in those countries, in the UK easyJet has made taxable losses. A tax
credit has been recognised, but only to the extent that the losses would be
available for carry back regardless of whether any further profits are made in
the remaining period to 30 September 2003.
The effective tax rate in previous periods 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 2003 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 2003 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.
These factors are expected to remain during the remaining period to 30 September
2003.
Notes to the Interim Statements (continued)
7 Dividends
No dividends have been paid or proposed in the period ended 31 March 2003 or
during the comparative accounting periods.
8 Share capital and reserves
--------------------------------------------------------------------------------
Share Share Profit and
capital premium loss account Total
£000 £000 £000 £000
--------------------------------------------------------------------------------
At 1 October 2002 97,919 533,263 96,522 727,704
Retained loss for the - - (46,885) (46,885)
period
Foreign currency translation - - (550) (550)
differences
Issue of ordinary share 472 5,486 - 5,958
capital
Movement in profit and loss - - (2,659) (2,659)
account for share schemes
---------- ---------- ---------- ----------
At 31 March 2003 98,391 538,749 46,428 683,568
========== ========== ========== ==========
--------------------------------------------------------------------------------
Between 1 October 2002 and 31 March 2003, a further 1.9 million new Ordinary
shares have been issued pursuant to the terms of the easyJet share option
schemes.
9 Contingent liabilities
On 15 May 2002, Navitaire inc. ('Navitaire'), a former supplier to easyJet
Airline Company Limited, a group company, of airline reservation software,
issued proceedings against that group company alleging copyright infringement in
relation to airline reservations software. easyJet Airline Company Limited is
vigorously defending the claims. The directors consider that, in the event of
Navitaire being successful in any claims, any award of damages is unlikely to be
material to the group.
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