Interim Results
easyJet PLC
05 May 2004
5 May 2004
easyJet PLC
Interim Results Announcement for the 6 months ended 31 March 2004
Commenting on the results, Ray Webster, Chief Executive Officer said:
'easyJet has performed well and continues to grow strongly, as we continue to
save consumers both time and money by providing low fare and direct
point-to-point services between major European airports.'
6 months to 6 months to % Rolling 12 months
31 March 2004 31 March 2003 Change to 31 March 2004
Revenue £m 439.7 372.6 18.0 998.9
(Loss)/ profit
before tax and
goodwill £m (18.5) (24.4)* 24.2 92.0*
Reported
(loss)/ profit
before tax £m (27.3) (48.1) 43.2 72.3
Average fare £ 38.06 37.45 1.6 43.19
Load factor % 83.3 82.2 1.1 pts 84.5
Ancillary
revenue per
passenger £ 2.52 2.41 4.6 2.59
Total revenue
per passenger £ 40.58 39.86 1.8 45.78
Cash at end of
period £m 340 346 (1.7) 340
Passengers m 10.8 9.3 15.9 21.8
Average
aircraft in
fleet 77.7 64.8 19.9 74.3
Average
operating
aircraft 72.9 63.7 14.4 70.7
ASKs bn 11.0 9.6 14.6 22.4
RPKs bn 9.2 7.9 15.6 19.0
* before goodwill and non-recurring items ( amounts written off investments,
Deutsche BA and Go integration costs) and tax.
• Revenues of £440 million up 18% while yields and load factors improved
1.6% and 1.1% pts respectively
• Passenger numbers up 15.9% to 10.8 million, in line with the planned and
controlled growth in capacity over the period of 15%.
• Results reflect the seasonality of the business and the exclusion of
Easter. While we increased capacity by 15% during the period, we reduced the
loss before goodwill amortisation and tax (and in 2003 non recurring items
*), by 24.2% to £18.5 million.
• Cost* per ASK is stable at 4.17p. The marginal increase on the prior
year is primarily due to £2.7 million of additional crew costs for the new
Airbus.
• Strong cash position - £340 million cash at 31 March 2004.
• Dense point-to-point network continues to develop - at 31 March 2004
easyJet operated 115 routes, in 13 countries to 39 convenient airports.
• A further 38 routes including five new destinations (Berlin, Dortmund,
Budapest, Cologne and Ljubljana) announced for the second half of the year.
• The successful introduction of the first nine Airbus A319 aircraft
during the seven months to 31 March 2004.
• Successfully agreed financing for 82 of the 120 Airbus aircraft.
Commenting on current trading, Ray Webster, Chief Executive Officer said:
Our business model continues to capitalise on its strong market position and the
growing demand for low-cost air travel in Europe. Given our scale, the company
is clearly positioned to benefit well into the future.
Demand in the first half of April was in line with our expectations, but
softened in the second half due to continued competitive pressure and a
weaker-than-expected Easter. Consequently, for the full month of April the load
factor was down 3 percentage points although passenger numbers were up 14% at
1,947,675 and fares were down 5%, partially accounted for by timing differences
between Easter and the May Bank Holiday. For May, passenger numbers are tracking
slightly lower than our expectations, but are currently as we anticipated for
June.
We are currently seeing unprofitable and unrealistic pricing by airlines, across
all sectors of the European industry, seeking to grow or maintain their market
share. We are reacting vigorously to this activity, continuing to extend our
reach, growing capacity by some 20% this year, maintaining our leading market
position and optimising the use of our scale.
At the time of our AGM in February we were cautiously optimistic about the full
year result. However, given the increasingly competitive marketplace it is
appropriate now to be cautious about the performance for the full financial
year. Nevertheless, easyJet continues to strengthen its leading position and we
expect to make continued and sustainable progress.
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
Presentation and Teleconference
A presentation for fund managers and analysts will be given this morning at 9.30
at UBS Ground Floor Conference Centre, 1 Finsbury Avenue, London, EC2M 2PP. For
further details please contact Catherine Segrave at UBS Investment Bank on +44
(0) 20 7568 1458.
There will be a live video web cast of the presentation of the results on the
web address www.easyJet.com (select 'about us' and then 'investor relations')
which will remain on this website for the foreseeable future.
There will be a teleconference for fund managers and analysts this afternoon at
14:30 London time. To join us for this conference call, contact Abigail Forbes
at Financial Dynamics on +44 (0) 20 7269 7211.
Chairman's statement
easyJet has performed well and continues to grow strongly, providing further
evidence of the strength and durability of our business model. Load factors
remain high across the industry and the demand for low cost carriers continues
to be strong. In recent months, the low-cost airline industry has seen a period
of intense competition. easyJet will continue to be a major driver of
competitive tension, as price continues to be a stimulant for European travel.
In the six months ended 31 March 2004 the company generated revenues of £440
million, an increase of 18%, and improved its average fare and load factor
compared to the prior year by 1.6% and 1.1% pts respectively.
Reflecting the seasonality of our business and the late timing of the 2004
Easter holiday, the company generated a loss during the period as it has done in
every first half that excludes Easter. However, I am pleased to report that
while we increased capacity by 15% (measured by growth in ASK) during the
period, we reduced the loss before goodwill amortisation and tax (and in 2003,
non recurring items of Deutsche BA and costs of integrating the businesses of
easyJet and Go Fly), by 24.2% to £18.5 million.
In February, the Charleroi ruling by the European Commission clarified the
relationship between airlines and publicly owned airports. easyJet welcomes the
ruling and we see it as supportive of the low-cost airline industry. This acted
as a catalyst for us to begin working with the European Commission in respect of
the requirement for airports to become more responsive to the needs of their
different airline customers. Airports should be allowed to charge different
amounts for the use of infrastructure with different costs of provision.
In line with the potential for growth in our business, the Board is not
recommending the payment of an interim dividend.
In April we announced the appointment of Dawn Airey as an independent
non-executive director to the easyJet plc Board. Dawn is Managing Director of
Sky Networks at British Sky Broadcasting and I am delighted that she is joining
the Board.
Finally, I would like to take this opportunity to acknowledge the strength of
our people at all levels. The extent of their initiative and determination
continues to both surprise and delight me. The Company's progress is a
reflection of their commitment.
Sir Colin Chandler
Chairman
4 May 2004
Chief Executive's review
easyJet continues to save consumers both time and money by providing low fare
and direct, point-to-point services between major European airports. This focus,
combined with our dedication to developing our people and services has enabled
us to build further on our position as the leading low cost airline in Europe.
Reflecting our focus and the strength of our business, yields and load factors
have improved compared to the same period last year and passenger numbers have
increased by 15.9% to 10.8 million, in line with the planned and controlled
growth in capacity over the period of 15%. These results are a direct
consequence of the good progress made across all areas of our strategy and
business model, both of which remain unchanged.
• Our dense point-to-point network continues to develop and readily
absorbed the 15% growth in capacity during the period. At 31 March 2004,
easyJet operated 115 routes, in 11 countries to 39 convenient airports. A
further 38 routes including five new destinations (Berlin, Dortmund,
Budapest, Cologne and Ljubljana) have been announced for the second half of
the year, bringing the total number of routes for Summer 2004 to 153. The
Central and East European market represents an area of considerable growth
potential for both the business and leisure traveller.
• Our operating performance during the first six months has been strong,
reflected in the percentage of flights arriving within 15 minutes of
scheduled arrival increasing from 75% to 79%, while the percentage of
flights arriving within an hour rose from 93% to 94%.
• During the seven months to 31 March 2004, the first nine Airbus A319
aircraft entered service furthering our move towards a two-type 'new
technology' fleet. Their introduction has been successful.
• The key to sustaining high levels of growth remains the scalability of
operations. This is reflected in the increased number of routes and
destinations and in lower unit costs in areas such as advertising, sales and
distribution, insurance and maintenance. Cost control remains a primary
focus of management and overall unit costs for the period are stable on last
year at 4.17p per ASK.
• At the period end we held £340m of cash on the balance sheet. Our strong
balance sheet supports our future organic growth plans.
Outlook
Our business model continues to capitalise on its strong market position and the
growing demand for low cost air travel in Europe. Given our scale, the company
is clearly positioned to benefit well into the future.
Demand in the first half of April was in line with our expectations, but
softened in the second half due to competitive pressure and a
weaker-than-expected Easter. Consequently, for the full month of April the load
factor was down 3 percentage points (passenger numbers up 14% at 1,947,675) and
fares were down 5%, partially accounted for by timing differences between Easter
and the May bank holiday. For May, passenger numbers are tracking slightly lower
than our expectations, but are currently as we anticipated for June.
We are currently seeing unprofitable and unrealistic pricing by airlines, across
all sectors of the European industry, seeking to grow or maintain their market
share. We are reacting vigorously to this activity, continuing to extend our
reach, growing capacity by some 20% this year, maintaining our leading market
position and optimising the use of our scale.
At the time of our AGM in February we were cautiously optimistic about the full
year result. However, given the increasingly competitive marketplace it is
appropriate now to be cautious about the performance for the full financial
year. Nevertheless, easyJet continues to strengthen its leading position and we
expect to make continued and sustainable progress.
Ray Webster
Chief Executive
4 May 2004
Operational and financial review
The following tables set forth certain consolidated operating and profit and
loss account data:
Selected consolidated operating data Six month period ended Change
31 March
(unaudited) 2004 2003 %
Number of aircraft owned/leased at end of
period (1) 83.0 68.0 22.1
Average number of aircraft owned/leased
during period (2) 77.7 64.8 19.9
Number of aircraft operated at end of
period 77.0 65.0 18.5
(3)
Average number of aircraft operated during
period (4) 72.9 63.7 14.4
Sectors (5) 87,453 76,504 14.3
Block hours (6) 145,518 127,400 14.2
Number of routes operated at end of period 115 95
Number of airports served at end of period 39 36
Owned/leased aircraft utilisation (hours
per 10.2 10.8 (5.6)
day) (7)
Operated aircraft utilisation (hours per
day) (8) 10.9 11.0 (0.9)
Available seat kilometres ('ASK')
(millions) 10,991 9,594 14.6
(9)
Passengers (millions) (10) 10.8 9.3 15.9
Load factor (11) 83.3% 82.2% 1.1 points
Revenue passenger kilometres
('RPK')(millions) (12) 9,175 7,938 15.6
Average internet sales percentage during
the 95.3% 92.4% 2.9 points
period (13)
Internet sales percentage during final
month 96.0% 93.8% 2.2 points
of period (14)
Average sector length (kilometres) 845 844 0.1
Average fare (15) £38.06 £37.45 1.6
Revenue per ASK (pence) (16) 4.00 3.88 3.1
Cost per ASK (pence) (17) 4.25 4.38 (3.0)
Cost per ASK before goodwill and
non-recurring items (pence) (18) 4.17 4.14 0.7
Footnotes can be found at the end of this section.
Operational and financial review (continued)
Results of operations Six months ended 31 March
(unaudited) 2004 2003 Change
£ million % £ million % %
Passenger revenue 412.3 93.8 350.1 94.0 17.8
Non ticket revenue (19) 27.4 6.2 22.5 6.0 21.4
-------- ------
Revenue (20) 439.7 100.0 372.6 100.0 18.0
Ground handling charges,
including (52.9) 12.0 (44.7) 12.0 18.5
salaries
Airport charges (85.4) 19.4 (65.6) 17.6 30.2
Fuel (65.4) 14.9 (57.3) 15.4 14.1
Navigation charges (37.7) 8.6 (31.8) 8.5 18.7
Crew costs, including training
(including £2.7 million Airbus
crew (58.1) 13.2 (45.7) 12.3 26.9
training costs)
Maintenance (47.3) 10.7 (43.4) 11.6 9.0
Advertising (13.9) 3.2 (16.1) 4.3 (13.6)
Merchant fees & incentive pay (6.5) 1.5 (7.3) 2.0 (11.7)
Costs of integrating
businesses of - - (5.6) 1.5 (100.0)
easyJet and Go Fly
Other costs(21) (39.0) 8.9 (39.6) 10.6 (1.3)
-------- ------
EBITDAR(22) 33.5 7.6 15.5 4.2 116.1
Depreciation (13.9) 3.2 (11.2) 3.0 24.1
Goodwill amortisation (8.8) 2.0 (8.9) 2.4 -
Aircraft dry lease costs (42.5) 9.6 (41.4) 11.1 2.7
-------- ------
Group operating loss (EBIT) (31.7) 7.2 (46.0) 12.3 (31.1)
Net interest receivable/ 4.4 1.0 7.1 1.9 (38.7)
(payable)
Committed contribution to
Deutsche - - (1.3) 0.4 100.0
BA
Amounts written off - - (7.9) 2.1 100.0
investments -------- ------
Loss before tax (27.3) 6.2 (48.1) 12.9 (43.2)
Tax 7.6 1.7 1.2 0.3 533.3
-------- ------
Retained loss for the period (19.7) 4.5 (46.9) 12.6 (58.0)
======== ======
Earnings per share (pence)
Basic (4.97) (11.94) (58.4)
Diluted (4.97) (11.94) (58.4)
Basic, before goodwill (2.75) (9.67) (71.6)
amortisation
Diluted, before goodwill
amortisation (2.75) (9.67) (71.6)
Basic, before goodwill (2.14) (5.91) (63.7)
amortisation, committed
contribution to Deutsche BA,
amounts written off
investments,
costs of integrating
businesses of
easyJet and Go Fly and
accelerated
depreciation of certain owned
aircraft
Diluted, before goodwill (2.14) (5.91) (63.7)
amortisation, committed
contribution to Deutsche BA,
amounts written off
investments,
costs of integrating
businesses of
easyJet and Go Fly and
accelerated
depreciation of certain owned
aircraft
Footnotes can be found at the end of this section
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 year.
(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 year.
(3) Represents the number of owned/leased aircraft in service at the end of the
relevant financial year. 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 year. 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 year.
(8) Represents the average number of block hours per day per aircraft operated
during the relevant financial year.
(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 year.
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 year. 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 difference between total revenue and profit before tax less
the amounts charged in respect of goodwill amortisation, committed contribution
to Deutsche BA, amounts written off investments, costs of integrating the
businesses of easyJet and Go Fly and accelerated depreciation of owned aircraft,
divided by the total number of ASK's.
(19) Includes revenue from in flight sales, excess baggage charges, booking
charge 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'.
Operational and financial review (continued)
Half year 2004 compared with half year 2003
Revenue
easyJet's revenue increased by 18.0 per cent from £372.6 million to £439.7
million, from half year 2003 to half year 2004, driven by a 15.9 per cent growth
in passenger numbers from 9.3 million to 10.8 million, and a 1.6 per cent
increase in average fares. The number of passengers carried reflected an
increase in the size of the easyJet fleet in operation from an average of 63.7
aircraft to an average of 72.9, and an increase in the average load factor
achieved from 82.2 per cent to 83.3 per cent.
Revenue from non-ticket sources, within ongoing operations, includes in-flight
sales of food and beverages, excess baggage charges, change fees, credit card
booking fees and commissions received from products and services sold such as
hotel and car hire bookings and travel insurance. In half year 2004, £27.4
million was earned from non-ticket sources, up 21.4 per cent from the prior half
year.
Ground handling charges, including salaries
easyJet's ground handling charges increased by 18.5 per cent from £44.7 million
to £52.9 million, from half year 2003 to half year 2004. The increase in ground
handling charges reflects the increase in the number of sectors flown,
inflationary increases in charges at certain airports and a change in mix
towards more expensive primary airports.
Airport charges
easyJet's external airport charges increased by 30.2 per cent from £65.6 million
to £85.4 million from half year 2003 to half year 2004. This increase was
attributable to the increase in the number of sectors flown and higher rates
charged at certain primary airports where much of easyJet's organic growth was
centred in 2004.
Fuel
easyJet's fuel costs increased by 14.1 per cent from £57.3 million to £65.4
million from half year 2003 to half year 2004. Whilst the increase was
consistent with the 14.2 per cent increase in number of block hours flown, there
were two key variances. There has been a 10 per cent increase in easyJet's
average unit US dollar fuel cost, compared with the previous year, resulting in
additional costs to easyJet of approximately £6.5 million. The strengthening of
the value of sterling against the US dollar, the currency in which fuel prices
are denominated, over the course of half year 2004 provided a set off benefit of
approximately £3.9 million.
Navigation charges
easyJet's navigation charges increased by 18.7 per cent from £31.8 million to
£37.7 million from half year 2003 to half year 2004. This increase was
principally attributable to the increased number of sectors flown in half year
2004 as well as an increase in unit charges.
Crew costs, including training
easyJet's crew costs increased by 26.9 per cent from £45.7 million to £58.1
million from half year 2003 to half year 2004. The increase in crew costs
resulted from an increase in headcount during the half year 2004 to service the
additional sectors and aircraft operated by easyJet during the year and the
recruitment and training necessary for aircraft not yet delivered. It also
resulted from the need to hire additional crew during the migration of certain
operations from Boeing to Airbus aircraft. These costs amounted to some £2.7
million in the half year 2004.
Operational and financial review (continued)
Maintenance
Maintenance expenses increased by 9.0 per cent from £43.4 million to £47.3
million from half year 2003 to half year 2004. easyJet's maintenance expenses
consist primarily of the cost of routine maintenance and spare parts and
provisions for the estimated future cost of heavy maintenance and engine
overhauls on aircraft operated by easyJet pursuant to dry operating leases. The
extent of the required annual maintenance reserve charges is determined by
reference to the number of flight hours and cycles permitted between each engine
shop visit and heavy maintenance overhaul on aircraft airframes. The increase in
maintenance costs was largely due to the addition of further leased aircraft to
the fleet during the year. The strengthening of the value of sterling against
the US dollar, the currency in which a significant proportion of maintenance
costs are denominated, over the course of the half year 2004 provided a set off
benefit.
Aircraft financed by operating lease incur reserves for maintenance, while the
corresponding maintenance effect for owned aircraft is dealt with through a
depreciation charge under aircraft ownership.
Advertising
Advertising costs reduced by 13.6 per cent per cent from £16.1 million to £13.9
million from half year 2003 to half year 2004. Spend per passenger was
approximately 26 per cent lower than the previous year which is principally due
to the synergistic benefits resulting from the integration of the businesses of
Go Fly and easyJet. Additional costs were incurred in half year 2003 developing
the easyJet brand in former Go Fly markets. Set off against the synergistic
benefits were increases in costs promoting the easyJet brand in new markets,
most notably Berlin.
Merchant fees and incentive pay
Merchant fees and incentive pay reduced by 11.7 per cent from £7.3 million to
£6.5 million from half year 2003 to half year 2004. Merchant fees and incentive
pay includes the costs of processing fees paid to credit card companies on all
of easyJet's credit and debit card sales and the per-seat sold/transferred
commission paid as incentive pay to easyJet's telesales staff. Costs reduced due
to the effect of additional internet functionality, such as on-line changes,
which reduced the quantity of transactions on which incentive pay was paid.
There was also a reduction in the average merchant fee paid per transaction.
Cost of integrating businesses of easyJet and Go Fly
Costs of integrating the businesses of Go Fly and easyJet were £5.6 million in
half year 2003. There were no material costs during half year 2004 as the
process of integrating the two businesses had been substantially completed by 30
September 2003.
Other costs
Other costs reduced by 1.3 per cent from £39.6 million to £39.0 million from
half year 2003 to half year 2004. Items in this cost category include
administrative and operational costs (not included elsewhere) including some
salary expenses. Also this cost category includes short-term aircraft wet
leases, compensation paid to passengers, certain other items, such as currency
exchange gains and losses and the profit or loss on the disposal of fixed
assets. The major influence of this category of costs was the growth in the
scope of the operation.
The movement is significantly less than the growth in capacity. This was as a
result of administrative efficiencies and lower insurance costs. Lower insurance
rates have been negotiated and coupled with the strengthening of sterling
against the US dollar, in which aircraft insurance costs are denominated,
aircraft insurance costs reduced from £11.1 million in half year 2003 to £9.4
million in half year 2004.
Operational and financial review (continued)
Depreciation
Depreciation charges increased by 24.1 per cent from £11.2 million to £13.9
million from half year 2003 to half year 2004. The depreciation charge reflects
depreciation on owned aircraft and capitalised aircraft maintenance charges, and
also includes depreciation on computer systems and other assets. easyJet has
owned an average of 10 B737-300 aircraft and 5.7 A319 aircraft during the half
year 2004 (2003: 10 B737-300 aircraft). The increase in depreciation reflects
the additional number of owned aircraft set off against the 10.8 per cent
improvement in the value of sterling against the US dollar, the currency in
which the majority of easyJet's assets are denominated, and the additional
depreciation of other assets such as spares and leasehold improvements.
Goodwill amortisation
Goodwill amortisation charges were virtually unchanged at £8.9 million in half
year 2003 and £8.8 million in half year 2004. The amortisation relates to the
goodwill arising on the acquisitions of Go Fly and easyJet Switzerland.
Aircraft dry lease costs
easyJet's aircraft dry lease costs comprise the lease payments paid by easyJet
in respect of those aircraft in its fleet operated pursuant to dry operating
leases. Aircraft dry lease costs increased by 2.7 per cent from £41.4 million to
£42.5 million from half year 2003 to half year 2004. This increase was
principally due to new aircraft being introduced to the fleet during the period
under operating lease. Between 1 April 2003 and 31 March 2004, 9 new leased
aircraft were added to the fleet and three were retired. Over the period,
easyJet has benefited from the strengthening of the value of sterling against
the US dollar, the currency in which lease costs are denominated, and low dollar
interest rates. As a consequence, easyJet has seen its average leasing cost per
aircraft fall by around 10 per cent, year-on-year.
Net interest
Net interest reflects interest paid or payable by easyJet net of interest
received or receivable by easyJet. easyJet's net interest receivable decreased
from £7.1 million in half year 2003 to £4.4 million in half year 2004. In half
year 2003, easyJet recognised a non-operating exchange gain of £1.5 million,
which has not been repeated in the current half year. Interest rates in the UK
(the currency in which most interest is received) were approximately flat during
half year 2004 compared to half year 2003. Dollar interest rates, in which most
interest is paid decreased by approximately 0.25 percentage points. This
widening differential led to more net interest receivable. Set against this is
the reduction in cash balances as a result of investment in Airbus A319
aircraft, not all of which had been financed at 31 March 2004.
Committed contribution to result of Deutsche BA
Costs during half year 2003 related to the payment of monthly capital
contributions to British Airways in respect of an option to acquire Deutsche BA.
This option was terminated in March 2003.
Amounts written off investments
In the half year 2003, easyJet wrote off its investment of £7.9 million in
Deutsche BA after deciding not to exercise its option to purchase.
Operational and financial review (continued)
Taxation
In half year 2004, easyJet recognised a tax credit of £7.6 million (half year
2003 - tax credit of £1.2 million). This reflects the tax which could be
recovered through carry back even if easyJet fails to make future profits, less
a small amount of overseas tax paid.
Retained loss for the period
For the reasons described above, easyJet's retained loss after interest and
taxes decreased by 58.0 per cent from £46.9 million in half year 2003 to £19.7
million in half year 2004.
Earnings per share
The basic loss per share reduced by 58.4 per cent from 11.94 pence in the half
year 2003 to 4.97 pence in half year 2004.
The basic loss per share, before goodwill amortisation, reduced by 71.6 per cent
from 9.67 pence in half year 2003 to 2.75 pence in half year 2004.
The basic loss per share, before goodwill amortisation, committed contribution
to Deutsche BA, amounts written off investments, costs of integrating the
businesses of easyJet and Go Fly, and accelerated depreciation of certain owned
aircraft reduced by 63.7 per cent from 5.91 pence in half year 2003 to 2.14
pence in half year 2004.
kpmg
KPMG Audit Plc
PO Box 695
8 Salisbury Square
London
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 12 to 21 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Financial Services Authority. 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 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 2004.
KPMG Audit Plc
4 May 2004
Chartered Accountants
London
EC4Y 8BB
Consolidated profit and loss account
Unaudited Unaudited
Six months Six months Year
ended ended ended
31 March 31 March 30
September
Notes 2004 2003 2003
£ million £ million £ million
Turnover 2 439.7 372.6 931.8
Cost of sales (421.6) (357.3) (775.0)
--- --- ---
Gross profit 18.1 15.3 156.8
Distribution and
marketing expenses (27.3) (34.6) (61.0)
Administrative expenses (22.5) (26.7) (47.4)
--- --- ---
Group operating
(loss)/profit 4 (31.7) (46.0) 48.4
===
Loss from interest in associated
undertaking:
- committed contribution
to Deutsche BA - (1.3) (1.3)
--- --- ---
Total operating
(loss)/profit: (31.7) (47.3) 47.1
group and share of associate
Amounts written off
investments 5 - (7.9) (7.8)
Interest receivable and
similar income 5.7 8.0 13.7
Interest payable (1.3) (0.9) (1.5)
--- --- ---
(Loss)/profit on
ordinary activities
before taxation (27.3) (48.1) 51.5
Tax on (loss)/profit on
ordinary activities 6 7.6 1.2 (19.1)
--- --- ---
Retained (loss)/profit
for the financial period (19.7) (46.9) 32.4
=== === ===
Pence Pence Pence
Earnings per share
Basic 3 (4.97) (11.94) 8.24
Diluted 3 (4.97) (11.94) 8.04
Basic, before goodwill
amortisation 3 (2.75) (9.67) 12.72
Diluted, before goodwill
amortisation 3 (2.75) (9.67) 12.40
Basic, before goodwill 3 (2.14) (5.91) 18.01
amortisation, committed
contribution to Deutsche
BA, amounts written off
investments, costs of
integrating the
businesses of easyJet
and Go Fly, and
accelerated depreciation
of certain owned
aircraft
Diluted, before goodwill 3 (2.14) (5.91) 17.56
amortisation, committed
contribution to Deutsche
BA, amounts written off
investments, costs of
integrating the
businesses of easyJet
and Go Fly, and
accelerated depreciation
of certain owned
aircraft
=== === ===
All activities relate to continuing operations in the current and previous
period.
Consolidated balance sheet
Notes Unaudited Unaudited
31 March 31 March 30 September
2004 2003 2003
£ million £ million £ million
Fixed assets
Intangible assets 321.0 341.2 329.8
Tangible assets 363.9 268.3 320.8
Investments 0.1 - -
________ _______ ________
685.0 609.5 650.6
Current assets
Debtors 151.4 130.0 141.6
Cash at bank and in
hand 340.4 345.8 335.4
________ _______ ________
491.8 475.8 477.0
Creditors: amounts
falling due (309.7) (307.9) (260.9)
within one year
________ _______ ________
Net current assets 182.1 167.9 216.1
________ _______ ________
Total assets less
current liabilities 867.1 777.4 866.7
Creditors: amounts
falling (101.2) (59.1) (65.3)
due after more than one
year
Provisions for
liabilities and charges (41.2) (34.7) (42.9)
________ _______ ________
Net assets 724.7 683.6 758.5
=== === ===
Capital and reserves
Called up share capital 8 99.8 98.4 98.5
Share premium account 8 554.2 538.8 539.6
Profit and loss account 8 70.7 46.4 120.4
________ _______ ________
Shareholders' funds -
equity 724.7 683.6 758.5
=== === ===
This Interim Report was approved by the Directors on 4 May 2004.
Consolidated cash flow information
Reconciliation of operating profit to net cash flows from operating activities
Unaudited Unaudited
Six months Six months Year ended
ended ended
31 March 2004 31 March 2003 30 September
2003
£million £million £ million
Group operating
(loss)/profit (31.7) (46.0) 48.4
Goodwill amortisation 8.8 8.9 17.6
Depreciation of tangible
fixed assets 13.9 11.2 30.1
Increase in debtors (10.7) (33.7) (43.4)
Increase in creditors and
provisions 58.3 83.6 24.5
-------------- -------------- --------------
Cash flow from operating
activities 38.6 24.0 77.2
============== ============== ==============
Consolidated cash flow statement
Unaudited Unaudited
Six months Six months Year ended
ended ended
31 March 2004 31 March 2003 30 September
2003
£ million £ million £ million
Cash flow from
operating activities 38.6 24.0 77.2
Committed contribution
to associate - (1.9) (1.9)
Returns on investments
and servicing of
finance 4.7 6.8 11.8
Taxation (5.7) (13.9) (16.5)
Capital expenditure (90.9) (96.7) (175.3)
Acquisitions and
disposals - (0.4) 1.1
________ _______ ________
Cash outflow before
management of (53.3) (82.1) (103.6)
liquid resources and
financing
Management of liquid
resources (1.1) 45.4 68.6
Financing 58.3 - 11.1
________ _______ ________
Increase/(decrease) in
cash in the period 3.9 (36.7) (23.9)
====== === ===
Consolidated cash flow information (continued)
Reconciliation of net cash flow to movements in net funds
Unaudited Unaudited
Six months ended Six months Year ended
ended
31 March 2004 31 March 2003 30 September
2003
£ million £ million £ million
Increase/(decrease) in
cash in the period 3.9 (36.7) (23.9)
Cash (inflow)/outflow from
the (increase)/ decrease
in debt (49.6) 3.3 (7.3)
Cash outflow/(inflow) for
increase in liquid
resources 1.1 (45.4) (68.6)
-------------- -------------- --------------
Change in net funds
resulting from cash flows (44.6) (78.8) (99.8)
Exchange difference on
loans 12.1 0.4 4.2
-------------- -------------- --------------
Decrease in net funds for
the period (32.5) (78.4) (95.6)
Net funds at the start of
the period 262.6 358.2 358.2
-------------- -------------- --------------
Net funds at the end of
the period 230.1 279.8 262.6
============== ============== ==============
Net funds at the end of the period comprise:
Unaudited Unaudited
31 March 2004 31 March 2003 30 September
2003
£ million £ million £ million
Cash at bank and in hand 340.4 345.8 335.4
Bank loans (110.3) (66.0) (72.8)
-------------- -------------- --------------
230.1 279.8 262.6
============== ============== ==============
£20.2 million (31 March 2003 - £42.3 million; 30 September 2003 - £19.1 million)
of the cash at bank and in hand is subject to restrictions governing its use.
Consolidated statement of total recognised gains and losses
Unaudited Unaudited
Six months Six months Year ended
ended ended
31 March 2004 31 March 2003 30 September
2003
£ million £ million £ million
Retained (loss)/profit for
the period (19.7) (46.9) 32.4
Foreign currency
translation differences (22.8) (0.5) (5.5)
-------------- -------------- -------------
Total recognised gains and
losses for the period (42.5) (47.4) 26.9
============= ============= =============
Consolidated reconciliation of movements in shareholders' funds
Unaudited Unaudited
Six months Six months Year ended
ended ended
31 March 2004 31 March 2003 30 September
2003
£ million £ million £ million
Retained (loss)/profit
for (19.7) (46.9) 32.4
the period
Foreign currency
translation differences (22.8) (0.5) (5.5)
Shares issued by easyJet
plc 15.9 6.0 7.0
Movement in reserves for
employee share scheme (7.2) (2.7) (3.1)
------------------ ---------------- -------------
Net movement in
shareholders' funds (33.8) (44.1) 30.8
Opening shareholders'
funds 758.5 727.7 727.7
------------------ ---------------- --------------
Closing shareholders'
funds 724.7 683.6 758.5
================== ================ ==============
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 account and balance sheet for the
half years ended 31 March 2003 and 31 March 2004 have been prepared on a basis
consistent with the statutory accounts for the year ended 30 September 2003. The
comparative figures for the financial year ended 30 September 2003 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 group's principal activity as an airline and
include scheduled services, in-flight and related sales. Substantially all of
the group's external revenues are earned by companies incorporated in the United
Kingdom.
The geographical analysis of turnover is as follows:
Unaudited Unaudited
Six months Six months Year ended
ended ended
31 March 2004 31 March 2003 30 September
2003
£ million £ million £ million
Within the United Kingdom 104.0 89.3 206.3
Between the United
Kingdom 280.5 254.4 646.1
and the Rest of Europe
Within the Rest of Europe 55.2 28.9 79.4
---------------- ----------------- ----------------
439.7 372.6 931.8
================ ================= ================
All the group's operating profit arises from airline-related activities.
The only revenue earning assets of the group are its aircraft fleet. Since the
group'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.
3 Earnings per share
Basic earnings per share has been calculated by dividing the profit or loss for
the period retained for equity shareholders by the weighted average number of
shares in issue during the year 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 considers 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.
Notes to the Interim Statements (continued)
3 Earnings per share (continued)
The earnings per share are based on the following:
Unaudited Unaudited Year ended
Six months Six months ended 30 September
ended 2003
31 March 2004 31 March 2003
(Loss)/profit for
the period retained
for equity
shareholders (£
million) (19.7) (46.9) 32.4
=== === ===
Number Number Number
Weighted average
number of ordinary
shares in issue
during the period
used to calculate
basic earnings per
share (000's) 396.3 392.8 393.2
=== === ===
Weighted average
number of dilutive
share options used
to calculate
dilutive earnings
per share (000's) N/A N/A 10.1
=== === ===
The derivation of (loss)/profit for the calculation of adjusted EPS before
goodwill amortisation is as follows. This measure has been chosen to show the
performance excluding goodwill amortisation, which is a significant non cash
balance in the profit and loss account:
Unaudited Unaudited Year ended
Six months Six months 30 September
ended ended 2003
31 March 2004 31 March 2003
£ million £ million £ million
(Loss)/profit for
the period retained
for equity
shareholders (19.7) (46.9) 32.4
Add back: goodwill
amortisation 8.8 8.9 17.6
---- ---- ----
(10.9) (38.0) 50.0
=== === ===
Notes to the Interim Statements (continued)
3 Earnings per share (continued)
The derivation of (loss)/profit for the calculation of adjusted EPS before
goodwill amortisation, committed to contribution to Deutsche BA, amounts written
off investments, costs of integrating the businesses of easyJet and Go Fly and
accelerated depreciation of certain owned aircraft is as follows. This measure
has been chosen because it removes the effects of non-recurring items,
significant non-cash items and items which have had a disproportional effect on
the earnings of the business during the period:
Half year ended 31 March 2004 (unaudited):
Pre-tax Tax effect Post-tax
amount amount
£ million £ million £ million
Loss for the period retained for equity
shareholders (27.3) 7.6 (19.7)
Add back:
Goodwill amortisation 8.8 - 8.8
____ ___ _____
(18.5) 7.6 (10.9)
Accelerated depreciation of certain owned
aircraft 3.4 (1.0) 2.4
____ ___ ____
(15.1) 6.6 (8.5)
=== === ===
Half year ended 31 March 2003 (unaudited):
Pre-tax Tax effect Post-tax
amount amount
£ million £ million £ million
Loss for the period retained for equity
shareholders (48.1) 1.2 (46.9)
Add back:
Goodwill amortisation 8.9 - 8.9
Committed contribution to Deutsche BA 1.3 - 1.3
Amounts written off investments 7.9 - 7.9
Costs of integrating the businesses of
easyJet and Go Fly 5.6 - 5.6
Accelerated depreciation of certain owned - - -
aircraft
---- ---- ----
(24.4) 1.2 (23.2)
=== === ===
Year ended 30 September 2003:
Pre-tax Tax effect Post-tax
amount amount
£ million £ million £ million
Profit for the year retained for equity
shareholders 51.5 (19.1) 32.4
Add back:
Goodwill amortisation 17.6 - 17.6
Committed contribution to Deutsche BA 1.3 - 1.3
Amounts written off investments 7.8 (0.9) 6.9
Costs of integrating the businesses of
easyJet and Go Fly 7.9 (2.4) 5.5
Accelerated depreciation of certain owned
aircraft 10.2 (3.1) 7.1
---- ---- ----
96.3 (25.5) 70.8
=== === ===
Notes to the Interim Statements (continued)
4 Group operating (loss)/profit
Included within the group operating loss for the six months ended 31 March 2004
is £2.7 million in respect of additional crew costs arising as a result of the
introduction of the Airbus A319 fleet.
In the six months ended 31 March 2003, costs of £5.6 million were incurred in
respect of the integration of the businesses of easyJet and Go Fly. There were
no material costs during half year 2004 as the process of integrating the two
businesses had been substantially completed by 30 September 2003.
5 Amounts written off investments
In the six months ended 31 March 2003, easyJet announced that 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.
6 Taxation
The taxation (credit)/charge is made up as follows:
Unaudited Unaudited
Six months Six months Year ended
ended ended
31 March 2004 31 March 2003 30 September
2003
£ million £ million £ million
Current taxation:
UK corporation tax (8.0) (1.5) 11.7
Overseas taxation 0.4 0.3 0.5
------------------ ----------------- --------------
Total current taxation (7.6) (1.2) 12.2
Deferred taxation - - 6.9
------------------ ----------------- --------------
Total taxation (7.6) (1.2) 19.1
================== ================= ==============
Effective tax rate 27.8% 2.5% 37.1%
The effective tax rate in the six months ended 31 March 2004 is different from
the standard rate of tax. Overseas profits have been taxed at the relevant
effective tax rates in those countries, but 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 future profits are
made in the remaining period to 30 September 2004. In addition, easyJet
Switzerland, a group member, has the benefit of an exemption from communal and
cantonal taxes in Switzerland until 1 January 2008, subject to meeting certain
conditions. The effective tax rate in Switzerland at present is 7.6%, but will
rise to 27.5% from 1 January 2008 assuming that tax rates remain unchanged.
7 Dividends
No dividends have been paid or proposed in the period ended 31 March 2004 or
during the comparative accounting periods.
Notes to the Interim Statements (continued)
8 Share capital and reserves (unaudited)
Share Share Profit and Total
capital premium loss
account
£ £ £ million £
million million million
At 1 October 2003 98.5 539.6 120.4 758.5
Issue of ordinary share capital:
Share option schemes 1.3 14.6 - 15.9
Movement in profit and loss
account for employee share
schemes - - (7.2) (7.2)
Retained loss for the period - - (19.7) (19.7)
Foreign currency translation
differences - - (22.8) (22.8)
-
---- --- ----- ----
At 31 March 2004 99.8 554.2 70.7 724.7
==== === === ====
Between 1 October 2003 and 31 March 2004, a further 5.1 million new Ordinary
shares have been issued pursuant to the terms of the easyJet share option
schemes.
9 Post balance sheet events
On 6 April 2004, the company announced that it had appointed Dawn Airey as an
additional independent non-executive director. Dawn is currently Managing
Director of Sky Networks at British Sky Broadcasting.
On 26 April 2004, the easyJet board approved the financing of a significant
proportion of the 120 Airbus A319 fleet, subject to the completion of
satisfactory documentation.
At 30 April 2004, the fleet had expanded to 88 aircraft with the delivery of
five additional new aircraft.
10 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.
Supplementary Information
3 months to 31 March 2004 3 months to 31 March 2003 %
Change
Average fare £ 36.33 36.32 -
Load factor % 84.3 83.9 0.4pts
Passengers m 5.5 4.8 14.6
Average
aircraft 78.4 65.8 19.1
in fleet
Sectors 44,268 38,496 15.0
ASKs m 5.5 4.8 14.6
RPKs Km 840 843 (0.4)
--------------- --------------- --------------- -------
6 months to 31 March 2004 6 months to 31 March 2003 %
Change
Average
aircraft 77.7 64.8 19.9
in fleet
Average
operating 72.9 63.7 14.4
aircraft in
fleet
Operating
aircraft
utilisation 10.9 11.0 (0.9)
(hours)
--------------- --------------- --------------- -------
Rolling 12 months to 31 March 2004 %
Change
Average aircraft in fleet 74.3 37.8
Average operating aircraft in 70.7 33.1
fleet
Operating aircraft utilisation
(hours) 11.3 0.9
This information is provided by RNS
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