Final Results
Dart Group PLC
16 June 2005
For Immediate Release 16 June 2005
DART GROUP PLC
PRELIMINARY RESULTS FOR YEAR ENDED 31 MARCH 2005
Dart Group PLC, the aviation services and distribution group, announces its
preliminary results for the year ended 31 March 2005.
CHAIRMAN'S STATEMENT
I am pleased to report on the Group's trading for the year ended 31 March 2005.
Profit before tax, goodwill amortisation and exceptional items, amounted to
£14.0m (2004 restated - £9.6m). Profit before tax after goodwill amortisation
and exceptional items amounted to £8.5m (2004 restated - £11.3m). Turnover was
£268m (2004 - £228.2m). Earnings per share before the amortisation of goodwill
and exceptional items were 27.96p (2004 - 19.04p restated). The Board is
recommending a final dividend of 4.70p (2004 - 4.26p), taking the total
dividend for the year to 6.74p (2004 - 6.11p), an increase of 10.3%. The
dividend, if approved, will be payable on 5 August 2005 to shareholders on the
register on 24 June 2005.
Capital expenditure for the year amounted to £51.6m (2004 - £28.4m) and mainly
related to the acquisition, maintenance and upgrade of the Boeing 737-300 fleet.
At 31 March 2005 the Group had net cash on deposit of £2.4m (net borrowings
at 31 March 2004 of £15.0m).
In excess of 90% of the 2005/06 Jet2.com fuel requirements have been hedged at
average rates lower than the current market price. No fuel has yet been hedged
in respect of the 2006/07 requirement. Neither the Aviation Services
Division's contract charter operations nor the Distribution Division currently
has any material exposure to oil price risk as this is substantially covered in
our commercial contracts.
In my letter to shareholders, dated 22 March 2005, I indicated that a full
review of the Group's aircraft intercompany leasing and maintenance arrangements
would be undertaken with KPMG. This exercise has now been completed and has
resulted in some accounting policy changes.
In previous years, the Group's policy has been to borrow US dollars to finance
US$ assets, namely Boeing 737-300 aircraft. We have reviewed this policy and
the Board has taken advantage of the relative weakness of the US$ against
Sterling and bought US$161m in order to pay off its US$ denominated debt.
Accordingly, the Board will now account for all of its aircraft in £ Sterling
and, where necessary, finance them in £ Sterling.
This policy change has given rise to a substantial realised currency gain on our
US$ borrowings which has been offset by additional depreciation charges and an
impairment charge on the carrying value of our Boeing 737 fleet, when translated
into Sterling. A number of detailed changes have also been made to our
internal aircraft maintenance accounting arrangements.
The total financial effect of these changes, including the exceptional gain on
the disposal of our Fokker F27 aircraft and the incremental Boeing 737
impairment in 2005, is a cumulative increase in pre-tax profit of £1.3m. The
changes have resulted in a current year exceptional charge of £5.0m and a prior
year exceptional credit of £2.3m. In addition, the policy changes contributed
£0.6m to the '2005 profit before exceptional items' and £0.5m to the '2004
profit before exceptional items restated'. The balance of £2.9m relates to 2003
and earlier years.
After careful consideration, the Board has concluded that the interests of the
Company are best served by a move from the Official List to AIM, a market
operated by the London Stock Exchange. Whilst the Company will continue to be
subject to the regulatory and disciplinary controls of the London Stock
Exchange, the Board believes that AIM's less onerous regulatory framework is
more suited to the entrepreneurial style of the Company. The transfer to AIM
should also reduce the Company's annual costs associated with having its shares
quoted and the potential future costs of some capital transactions. In
addition, shares traded on AIM are deemed to be unlisted for the purpose of
certain areas of taxation law, which may be of benefit to shareholders.
The Board has commenced the process to effect this transfer to AIM. Notice is
being given of our intention to cancel the listing of the Company's shares on
the Official List and application will be made as soon as practicable for the
shares to be admitted to trading on AIM. Cancellation of the listing and
admission to trading on AIM are expected to be effected on 15 August 2005. On
the transfer to AIM, Collins Stewart Limited will continue to be our stockbroker
and Smith & Williamson Corporate Finance Limited will also continue to advise
the Company, becoming nominated adviser under the AIM Rules.
The Group has continued to build its business-to-business services and to
develop Jet2.com - our low cost passenger airline business. The activities of
the Group's two divisions are more fully described in the Review of Operations
that follows this statement.
Aviation Services
The Group currently operates 24 Boeing 737-300 aircraft (20 owned) and three
Airbus A300 'Eurofreighters' (two owned). The recent Boeing 737-300 passenger to
freighter 'Quick Change' conversion programme is now complete, with our Quick
Change aircraft operating night-time postal flights for Royal Mail and charters
and scheduled passenger services during the day. We are very pleased to be a
prime provider of aircraft services to the Royal Mail Postal Air Network and
value our longstanding contractual relationship. At the same time our Airbus
A300 'Eurofreighters' give reliable and economical contract services to the
overnight express parcels industry, a business in which the Group has a
long-standing reputation.
Jet2.com (a trading name of Channel Express (Air Services)) continues to develop
its low cost services from Leeds Bradford International and Belfast
International Airports. In December 2004 it also commenced operations from
Manchester International Airport where seven aircraft now operate 13 UK domestic
and European city break, sun and ski routes. Competition at Manchester is
considerable, however, we believe that there are opportunities for profitable
development. Jet2.com carried over 1.3m passengers in the financial year and
made a useful contribution to the Group's profits.
On 16 May, the Group announced the purchase of two Boeing 757-200 aircraft which
will enter into service this autumn. These aircraft, which will carry 235
passengers as opposed to the 148 passenger capacity of the Boeing 737-300, will
be utilised on our most popular routes.
Benair Freight International, the Group's freight forwarder experienced an
excellent year of record sales and profits. The company's performance has
benefited from growth in its air and sea freight business with its key overseas
partners, particularly in the USA, and an increased focus on costs. The
business also continues to develop its niche sectors especially the importation
of ornamental and tropical fish and its other time-sensitive services.
Distribution
After two years of rationalisation and re-organisation by the management team,
Fowler Welch-Coolchain, the Group's temperature-controlled transportation and
distribution operation, has during the year gained substantial additional
business from both existing and new customers. The company is particularly
pleased to have recently won storage, picking and distribution contracts that
efficiently increase the utilisation of both its temperature-controlled storage
facilities and the distribution network.
With a 660 vehicle temperature-controlled fleet and an experienced management
team and workforce, committed to the provision of quality but cost effective
services for its customers, we believe that our Distribution operations are now
well positioned for future growth. Operations from Maasland (The Netherlands),
Portsmouth, Teynham (Kent), Spalding (Lincs) and Gateshead (Tyne & Wear) are
strategically located to provide temperature-controlled international
transportation and nationwide storage and distribution services. Opportunities
are being vigorously pursued and there is reason for considerable optimism for
the future.
The Group's Channel Islands' based business, Channel Express (CI), has had a
successful year but, subsequently, has lost some turnover. However, the
company has a good base for future development and opportunities for growth are
being explored.
Our Staff
The overall growth in the volume and profitability of the Group's activities is
a reflection of the enthusiasm and drive of our management and staff. We are
fortunate to have the services of excellent employees at every level and are
grateful to each of them for their individual contributions to our success.
Outlook
Whilst our businesses are generally buoyant, the longer term exposure of our low
cost airline business to the uncertainty of fuel prices is cause for some
concern. However, I am pleased to report that current trading remains in line
with our budgets and expectations.
Philip Meeson
Chairman
16 June 2005
For further information about Dart Group PLC and its subsidiary companies please
visit our website, www.dartgroup.co.uk
REVIEW OF OPERATIONS
Aviation Services
The Group now owns 20 Boeing 737-300 aircraft, six of which have been converted
to Quick Change (QC) configuration by the installation of a large cargo door and
a floor system that allows their rapid transformation from passenger aircraft to
freighters in under 40 minutes. Our QCs fly at night for the Royal Mail Postal
Air Network. During the day, Stansted aircraft operate charter flights for a
wide range of customers, our Edinburgh aircraft fly scheduled services for a
local airline as well as Jet2.com's Manchester to Edinburgh service whilst the
aircraft in Belfast flies services to Prague and Barcelona.
The operation of our QC aircraft both by day and by night enables us to give a
very competitively priced product to both Royal Mail and our charter and
scheduled passenger customers. The company holds a number of further QC
conversion options with Israel Aircraft Industries for use in the future.
With the growth of the Boeing 737-300 fleet, it was decided to cease operating
the turboprop Fokker F27s which had traditionally flown our scheduled cargo
services to the Channel Islands and UK domestic night mail services.
Arrangements were made for continued services to the Channel Islands by another
airline who also employed a number of our operating staff. Our last Fokker F27
was sold in January 2005 resulting in a book profit on the disposal of the
fleet.
The company continues its successful operation of its 45 tonne payload Airbus
A300 'Eurofreighters' on behalf of international express parcel companies.
Four aircraft, two of which are owned by the company have been in service
throughout the year. However, one aircraft will shortly be returned to its
lessor following the termination of a contract.
Jet2.com, a trading name of Channel Express (Air Services), expanded its low
cost passenger services during the year. An increased schedule was flown from
Leeds Bradford International Airport with Alicante, Amsterdam, Barcelona,
Belfast, Faro, Malaga, Murcia, Nice, Palma, Paris, Prague and Venice being
served at least daily over the summer. Increases in frequency included three
flights daily to Malaga and two to Alicante, Murcia and Palma this summer. Two
new destinations, Ibiza and Tenerife, have also been introduced with Ibiza which
commenced in May 2005 and Tenerife due to start in October 2005. Services to
Leeds Bradford, Barcelona and Prague are flown from Belfast International
Airport, with a daily flight to Bournemouth operating for the summer of 2005.
An increased schedule of eight ski flights per week to Geneva was flown between
December 2004 and April 2005 which was well supported. To build on this
success, a new ski destination, Chambrey, has been announced for the coming
winter.
On 29 September 2004, Jet2.com announced a new base at Manchester International
Airport. Over 22 million passengers pass through Manchester International each
year and, whilst there are established services to many European destinations,
we believe there are opportunities for Jet2.com's low cost product. Daily
services are now being flown to Alicante, Faro, Malaga, Murcia, Nice, Valencia
and Venice with Budapest and Pisa being served at a lesser frequency.
Amsterdam, Edinburgh and Gatwick are served either two or three times per day.
Geneva was served daily during the ski season and Chambrey has been added for
the coming ski season.
In order to publicise the start of services from Manchester, an extensive
advertising campaign was mounted in the greater Manchester area which has
resulted in an overall load factor of over 70% on the European routes. We are
encouraged with the results of our first six months of operation at Manchester
International Airport and look forward to developing our services further for
this large catchment area.
On 16 May 2005, Dart Group announced the acquisition of two Boeing 757-200
aircraft with a 235 passenger capacity which will be brought into service during
the autumn, initially on the company's flights from Leeds Bradford International
to Tenerife. Thereafter, the Boeing 757s will fly on the higher passenger
volume sun routes from Leeds Bradford International delivering a lower seat cost
and increased efficiency of operation.
The introduction of the 20 Boeing 737-300s and the start-up of Jet2.com in a
little over two years has been a considerable challenge for the company, with
all areas of the operation contributing to its success. There has, of course,
been a very large expansion in the numbers of aircrew, cabin crew and engineers
trained and employed and everyone's contribution and hard work has been very
much appreciated. Our Engineering operation is also greatly assisted by our
Parts Trading organisation which is a profit centre in its own right,
successfully trading in aircraft parts, as well as efficiently procuring parts
for the airline and selling the airline's surplus equipment, such as the Fokker
F27s.
Benair Freight International, the Group's freight forwarder, has offices located
at London Heathrow, Manchester, East Midlands, Newcastle and Singapore airports
together with a worldwide agency network. Benair, with its expertise in air,
sea and road freight enjoyed a second consecutive year of record sales and
profits. Progress was made in both the Singaporean and UK operations and the
company continued to invest in its Information Technology infrastructure to
generate improved management information which has contributed to the growth in
profits. The business with the USA grew significantly during the year through
the development of Benair's relationship with its agent who has branches located
throughout America. Further growth was also seen in both the Manchester and
London niche ornamental and tropical fish importing operations and the freight
business broadened its customer base with a number of new good quality accounts.
Distribution
Fowler Welch-Coolchain is one of the UK's leading temperature-controlled
distribution operations. The company has over 280,000 sq ft of refrigerated
cold stores, primarily at its two main sites at Spalding, Lincs and Teynham,
Kent. These are supported by satellite operations in Portsmouth and Gateshead,
Tyne & Wear. The international operation is based at Maasland, The
Netherlands, adjacent to the Dutch Flower Auctions and Schipol International
Airport.
Fowler Welch-Coolchain was formed by the amalgamation of the Group's UK produce
distribution business and the substantial distribution businesses of Fowler
Welch, based in the produce growing area of Spalding, and Coolchain, based in
the fruit growing area of Teynham. These two businesses were acquired by the
Group in 1994 and 1999 respectively. The company has over 750 staff and 660
temperature-controlled vehicles distributing over five million pallets of
time-sensitive chilled products annually on behalf of leading supermarkets,
growers, importers and manufacturers.
Much work has been done over the past two years to fully integrate the
distribution operations of Fowler Welch and Coolchain and to reduce costs
wherever possible. This has now largely been achieved and the resulting
organisation is very competitively placed in its market. Tesco and suppliers to
Safeway (now Wm Morrison) are substantial customers and Tesco, in particular,
has rewarded the company's efforts with additional business. We are undertaking
increasing numbers of deliveries both to Tesco distribution centres and to
their stores, whilst also gaining a closer involvement with their inter-depot
trunking network, thereby reducing unladen mileage and increasing overall
efficiency. A further innovation is the introduction of double-decked trailers
able to carry 40 pallets as opposed to the 26 pallets carried by traditional
vehicles.
Fowler Welch-Coolchain was very pleased to be awarded Somerfield Stores'
national produce and horticulture business. This will entail the collection,
consolidation and then delivery of approximately 225,000 pallets to their seven
regional distribution centres. Operations successfully commenced in April
2005. The company also won other substantial storage, picking and distribution
business, primarily from its Teynham site. This calls for approximately 6
million cases to be stored, picked and distributed annually.
Fowler Welch-Coolchain is also distributing growing volumes for Kerry Foods -
primarily from the Gateshead depot. Kerry Foods manufacture ready prepared
meals at their factory in Durham and have been increasingly using the company's
distribution network. Significantly, on 25 June 2005, the Spalding depot
commences the storage, picking and delivery of chilled prepared products for
Bernard Matthews Foods. This is an important contract with another leading
brand.
Further growth has also been experienced in the company's international business
and its ports operations particularly at Southampton and Bristol. The
international business, based in Holland, operates a temperature-controlled road
feeder network between Holland and Heathrow and Gatwick Airports for a leading
international airline as well as transporting large volumes of produce and
flowers to the UK for domestic distribution on behalf of our supermarket
customers.
Each of these business gains is a reflection of the success of the company's
two year integration and cost reduction programme. We look forward to
continued growth in the coming year.
Channel Express (CI) provides air and sea transportation links to and from the
UK mainland and the Islands of Guernsey and Jersey. Increasing amounts of
horticultural products, health foods and other goods are exported to the UK and
the company has been successful in gaining a considerable market share of these.
Large volumes of temperature-controlled products and general freight are
delivered to the Islands on behalf of manufacturers and retailers.
The Channel Islands business has always been much valued by the Group as a
consistent contributor to its profits. Recently, the trading environment has
experienced a period of some volatility but the longer term outlook for the
company remains for positive future trading.
For further information contact:
Dart Group PLC Tel: 01202 597676
Philip Meeson,
Group Chairman and Chief Executive Mobile: 07785 258666
Mike Forder,
Group Finance Director Mobile: 07721 865850
Group Profit And Loss Account (Unaudited)
for the year ended 31 March 2005
Notes 2005 2005 2005 2004 2004 2004
Before
Before Exceptional exceptional Exceptional
exceptional items items items Total
items (note 5) Total (restated) (note 5) (restated)
£'000 £,000 £'000 £'000 £'000 £'000
Turnover
Continuing operations 1 267,996 - 267,996 228,200 - 228,200
Net Operating Expenses
Continuing operations,
excluding goodwill amortisation (253,949) (8,206) (262,155) (218,275) (4,385) (222,660)
Goodwill amortisation (497) - (497) (497) - (497)
Total continuing operations (254,446) (8,206) (262,652) (218,772) (4,385) (223,157)
Operating Profit
Continuing operations,
excluding goodwill amortisation 14,047 (8,206) 5,841 9,925 (4,385) 5,540
Goodwill amortisation (497) - (497) (497) - (497)
Total continuing operations 13,550 (8,206) 5,344 9,428 (4,385) 5,043
Profit on disposal of fixed
assets - 795 795 - - -
(continuing operations)
Net interest (including
exchange gains) (78) 2,400 2,322 (353) 6,658 6,305
Profit on ordinary activities
before taxation 13,472 (5,011) 8,461 9,075 2,273 11,348
Taxation (4,351) 1,503 (2,848) (3,034) (682) (3,716)
Profit on ordinary activities
after taxation 9,121 (3,508) 5,613 6,041 1,591 7,632
Dividends (2,324) - (2,324) (2,099) - (2,099)
Retained profit for the year 6,797 (3,508) 3,289 3,942 1,591 5,533
Earnings per share
- basic 4 26.52p 16.32p 17.59p 22.22p
- basic, excluding the
amortisation of goodwill 4 27.96p 17.76p 19.04p 23.67p
- diluted 4 26.34p 16.21p 17.56p 22.18p
Statement of Total Recognised Gains and Losses
2005 2004
(restated)
£'000 £'000
Profit on ordinary activities after taxation 5,613 7,632
Exchange gain / (loss) on foreign equity investment 74 (63)
Total recognised gains and losses relating to the year 5,687 7,569
Prior year adjustments 4,002
Total recognised gains and losses since previous annual report 9,689
Balance Sheet (Unaudited)
at 31 March 2005
Group
2005 2004
(restated)
£'000 £'000
Fixed assets
Intangible assets 7,283 7,780
Tangible assets 99,292 80,393
Investments - -
106,575 88,173
Current assets
Stock 4,616 2,216
Debtors 25,532 31,221
Cash at bank and in hand 27,404 13,362
57,552 46,799
Current liabilities
Creditors: amounts falling due
within one year (90,417) (59,326)
Net current liabilities (32,865) (12,527)
Total assets less current liabilities 73,710 75,646
Creditors: amounts falling due after
more than one year (19,420) (25,093)
Provisions for liabilities and charges (5,944) (5,887)
(25,364) (30,980)
Net assets 48,346 44,666
Capital and reserves
Called up share capital 1,727 1,718
Share premium account 8,010 7,702
Profit and loss account 38,609 35,246
Shareholders' funds - equity interests 2 48,346 44,666
Group Cash Flow Statement (Unaudited)
for the year ended 31 March 2005
2005 2004
(restated)
Note £'000 £'000
Net cash inflow from operating activities 3 68, 246 36,171
Returns on investment and servicing of finance (97) (551)
Taxation (1,365) (506)
Capital expenditure and financial investment (49,133) (26,019)
Equity dividends paid (2,165) (2,099)
Cash inflow before financing 15,486 6,996
Financing (2,200) (2,471)
Increase in cash in the year 13,286 4,525
Reconciliation of net cash flow to movement in net cash/(debt)
2005 2004
(restated)
£'000 £'000
Increase in cash in the year 13,286 4,525
Cash outflow from decrease in net debt in the year 2,517 2,501
Change in net debt resulting from cash flows 15,803 7,026
Exchange differences 1,668 6,109
Net debt at 1 April (15,032) (28,167)
Net cash / (debt) at 31 March 2,439 (15,032)
NOTES
1. Turnover
Turnover to third parties by destination is not materially different to that by
source and relates to continuing activities.
Analyses of profit before taxation and net assets between the different segments
of the Group are not given as, in the opinion of the directors, such analyses
would be seriously prejudicial to the commercial interests of the Group.
2005 2004
£'000 £'000
Distribution 100,074 112,076
Aviation Services 167,922 116,124
267,996 228,200
Turnover arising within:
The United Kingdom and the Channel Islands 261,430 222,804
Mainland Europe 5,555 4,368
The Far East 1,011 1,028
267,996 228,200
2. Reconciliation of movements in shareholders' funds
Group
2005 2004
(restated)
£'000 £'000
Profit for the year 5,613 7,632
Dividends (2,324) (2,099)
3,289 5,533
Currency translation differences 74 (63)
Issue of shares under share option schemes 317 30
Net addition to
shareholders' funds 3,680 5,500
Opening shareholders' funds as previously reported 40,664 37,144
Prior year adjustments 4,002 2,022
Opening shareholders' funds as restated 44,666 39,166
Closing shareholders' funds 48,346 44,666
3. Reconciliation of operating profit to net cash flow from operating activities (Unaudited)
2005 2004
(restated)
£'000 £'000
Operating Profit 5,344 5,043
Depreciation and impairment 31,206 22,759
Amortisation of goodwill 497 497
Profit on disposal of fixed assets (177) (365)
(Increase) / Decrease in stock (2,400) 236
Decrease / (Increase) in debtors 5,689 (309)
Increase in creditors 28,087 8,310
Net cash inflow from operating activities 68,246 36,171
4. Earnings per share
The calculation of basic earnings per share is based on earnings
before exceptional items for the year ended 31 March 2005 of £9,121,000 (2004
restated - £6,041,000) and on 34,396,934 shares (2004 - 34,344,692) being the
weighted average number of shares in issue for the year.
The calculation of basic earnings per share, excluding the
amortisation of goodwill, is based on earnings before exceptional items of
£9,618,000, as calculated below, for the year ended 31 March 2005 (2004 restated
- £6,538,000) and on 34,396,934 shares (2004 - 34,344,692) being the weighted
average number of shares in issue for the year.
2005 2004
(restated)
£'000 £'000
Profit on ordinary activities after taxation (before exceptional items) 9,121 6,041
Amortisation of goodwill 497 497
9,618 6,538
The diluted earnings per share is based on earnings before
exceptional items for the year ended 31 March 2005 of £9,121,000 (2004 restated
- £6,041,000) and on 34,628,280 ordinary shares (2004 - 34,403,760) calculated
as follows:
2005 2004
000's 000's
Basic weighted average number of shares 34,397 34,345
Dilutive potential ordinary share:
Employee share options 231 59
34,628 34,404
5. Exceptional Items
2005 2004
£'000 £'000
Operating items
Impairment of fixed assets (8,206) (4,385)
Profit on disposal of fixed assets
Gain on disposal of F27 fleet 795 -
Net interest including exchange gains 2,400 6,658
Net exceptional items before taxation (5,011) 2,273
6. Accounting Policy Changes
The Group has undertaken a thorough review of its accounting
policies in consultation with its new auditors, KPMG Audit Plc and its legal
advisors. As a result of this review the Directors have adopted revised
accounting policies and restated amounts previously reported as described below.
Foreign currency branch
The Group has previously treated aircraft purchased in foreign
currency which are financed by foreign currency financial instruments as a
foreign currency branch using the closing rate method. Having reviewed the
Group's foreign currency exposures, the Directors consider that it is now more
appropriate to treat such aircraft as Sterling denominated assets based on
historic exchange rates. This change has been applied retrospectively with
depreciation being charged based on the historic £ sterling cost and previous
currency revaluations of the aircraft being eliminated. Where appropriate an
accelerated depreciation/impairment charge has been made to ensure that each
aircraft is carried at a book value which does not exceed the greater of its
value in use and its market value at any point in time.
Exchange differences on financial instruments used to finance
such aircraft have been included within Net interest and currency gains
receivable within the Group's profit and loss account rather than being netted
against equivalent exchange differences on retranslating fixed assets within
reserves.
Aircraft maintenance costs
The Group has obtained legal advice to clarify the status of the
maintenance arrangements, including intra-group arrangements, which Group
companies have entered into. That advice has been taken into account by the
Directors during their review of the Group's accounting policies.
Channel Express (Air Services) Limited (CEAS), a wholly-owned
subsidiary undertaking, has a legal obligation to undertake specific periodic
maintenance on the aircraft it operates whether those aircraft are leased from
its parent company, Dart Group PLC (the Company), or from third party aircraft
lessors. These obligations require CEAS to continue to maintain the aircraft
and its engines in accordance with the aircraft manufacturer's published
maintenance programmes during the term of the lease and to ensure that the
aircraft is returned to the lessor in a satisfactory condition. As there is a
legal and constructive obligation to return the aircraft in a specified
condition, a monthly profit and loss charge is made by CEAS.
The Company receives a monthly security deposit from CEAS based
on a monthly usage calculation. The deposit is refunded to CEAS once the
maintenance activity has been completed by CEAS.
Within the consolidated accounts, expenditure on the maintenance
of aircraft which lends enhancements to future periods is capitalised within
Tangible fixed assets irrespective of which Group company incurs such
expenditure. The amortisation of such expenditure (together with that part of
the initial cost of the aircraft attributed to prepaid maintenance) closely
equates to the maintenance charge arising on operating leased aircraft.
Previously the Company accounted for the above security deposits
as Deferred income within Creditors. The Directors consider that it is more
appropriate to classify these balances as Security deposits repayable to
subsidiary companies within Creditors. This change has had no impact on the
Group's financial statements.
The monthly security deposit payment is set at a level which is
estimated to cover the cost of future maintenance procedures when they occur,
matching the initial monthly maintenance charges on operating leased aircraft
and the amortisation of capitalised maintenance on owned aircraft. In the past
the Group has not immediately adjusted such charges to reflect actual
maintenance spend but instead maintained a charge in line with the security
deposits which are gradually refined over a number of years. The Directors
consider that it is more appropriate to immediately take into account any known
increases or reductions in maintenance spend in calculating the Group's
maintenance charge on operating leased aircraft and amortisation of capitalised
maintenance or owned aircraft.
Previously all expenditure on maintenance has been treated in a
similar way, irrespective of the nature of that expenditure. The Directors now
consider that it is more appropriate to distinguish between short term
maintenance activities (being those which are expected to occur at least
annually) and long term maintenance (relating to less frequent procedures which
lend enhancement to future periods). All short term maintenance is now expensed
as incurred rather than being capitalised and depreciated in respect of owned
aircraft or provided for in advance in respect of leased aircraft.
Previously the Group has charged additional depreciation
following the identification of a potential requirement to perform rectification
work to address airframe non routine maintenance procedures on its aircraft
fleet. The Directors now consider it more appropriate to account for any
expenditure of this nature as incurred unless it gives rise to a need to make an
immediate impairment provision against the carrying value of a particular
aircraft.
7. The financial information set out in the announcement does not
constitute the Group's statutory accounts for the financial years ended 31 March
2005 or 2004. The financial information for the year ended 31 March 2004 is
derived from the statutory accounts for that year, which have been delivered to
the Registrar of Companies. The Group's previous auditors, Ernst & Young LLP,
have reported on the accounts for the year ended 31 March 2004; their report was
unqualified and did not contain a statement under section 237(2) or (3) of the
Companies Act 1985. The statutory accounts for the year ended 31 March 2005,
which will include restated figures for 2004, are still subject to audit by KPMG
Audit Plc, but will be finalised on the basis of the financial information
presented by the directors in this preliminary announcement, and will be
delivered to the Registrar of Companies following the Group's annual general
meeting.
8. The proposed final dividend of 4.70 pence per share will, if
approved, be payable on 5 August 2005 to shareholders on the Company's register
at the close of business on 24 June 2005.
9. The 2005 Annual Report and Accounts (together with the Auditors
Report) will be posted to shareholders on 11 July 2005. The Annual General
Meeting will be held on 4 August 2005.
This information is provided by RNS
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