1st Quarter Results
Ryanair Holdings PLC
01 August 2006
RYANAIR ANNOUNCE RECORD Q.1 RESULTS
NET PROFIT RISES 80% TO €116m - TRAFFIC GROWS 25% TO 10.7m
Ryanair, Europe's No.1 low fares airline, today (August 1, 2006) announced
record profits of €115.7m for its first Quarter ended June 30, 2006. Traffic
grew by 25% to 10.7m passengers, yields increased 13%, ancillary revenues
climbed 31%, and consequently total revenues rose by 40% to €566.6m. Unit costs
excluding fuel fell by 2% (including fuel they rose by 6%) as fuel costs rose by
52% to €167.5m. The increase in profitability boosted cash balances which rose
by €212.4m to €2.18bn. As a result, Ryanair's adjusted after tax margin for the
Quarter rose by 4 points to 20% as Q.1 Adjusted Net Profit increased by a record
80% to €115.7m.
Summary Table of Results (IFRS) - in Euro
Quarter Ended June 30, 2005 June 30, 2006 % Increase
Passengers 8.5m 10.7m +25%
Revenue €404.6m €566.6m +40%
Profit after tax (Note 1) €64.4m €115.7m +80%
Basic EPS (Euro Cents) (Note 8.47c 15.00c +77%
1)
Note 1:Adjusted profit after tax and EPS during the Quarter ended 30 June, 2005
excludes a receipt, net of tax, of €5.2m arising from the settlement of an
insurance claim for the scribing of 6 Boeing 737-200 aircraft.
Announcing these results Ryanair's Chief Executive, Michael O'Leary, said:
'These bumper Q.1 profits - which were strongly signalled at the time of our
full year results in June - reflect a much stronger yield environment despite
substantially higher oil prices. We would caution however, based on advanced
bookings, that we do not expect this yield buoyancy to be maintained at similar
levels during the second quarter or indeed the second half of the fiscal year.
The underlying causes of these stronger Q.1 yields was primarily the presence of
Easter in the quarter (and its absence from the prior year comparable), many
more 'sun' destinations, the impact of competitors fuel surcharges which
continue to drive traffic towards Ryanair, the initial impact of our baggage
charging initiative, and the earlier launch of our new bases and routes, much of
which took place in the fourth quarter last year.
We are pleased that ancillary revenues grew by 31% from an already significant
base, as the growth of ancillary sales continues to outpace that of scheduled
traffic. As we stimulate further traffic growth with lower fares, we find that
passengers are more willing to spend some of their savings on additional
products and services such as car hire, hotels and travel insurance.
Our new bases at Liverpool, East Midlands and Shannon continue to perform well,
with strong bookings over the Summer months, albeit that fares at Shannon
continue to be lower than expected. We plan to announce two new bases over the
coming months with launch dates in early 2007, as well as further expansion of
our existing bases.
During the quarter fuel costs rose by 52% to €167.5m. Excluding fuel unit costs
fell by 2% as we continue to aggressively manage costs in all other areas. Fuel
prices continue to be high and volatile. We have recently extended our hedging
position, so that we are 90% hedged to the end of October at $70 per barrel and
90% hedged for November and December at $74 per barrel. Thereafter we remain
unhedged for the January to March 2007 quarter, but we continue to monitor
forward rates and will try to avail of any suitable opportunity to hedge out our
outstanding requirement for the fiscal year.
During the quarter we exercised options for delivery of ten further Boeing
737-800 series aircraft in 2008. The addition of these new aircraft will enable
us to continue to drive down our aircraft and operating costs. The penetration
of web based check-in continues to improve with some flights achieving 50% of
web check-in. We will aggressively promote web check-in and priority boarding
for passengers travelling with hand luggage. We intend to continue to exploit
initiatives such as web check-in to reduce our costs, whilst at the same time
providing passengers with superior service such as avoiding check-in queues and
priority boarding.
We strongly welcome the take-over of the BAA airport monopoly by Ferrovial and
look forward to their review of plans and costings for the second runway at
Stansted. We anticipate that this review will confirm that a second runway and
terminal can be built at a more realistic cost of £1bn, rather than the £4bn
gold plated Taj Mahal proposed by the BAA airport monopoly. The Ferrovial
takeover highlighted that the BAA were able to fund a £1bn 'pay-off' to its
shareholders just three months after it was telling the CAA Regulator that 'it
couldn't afford' to pay for the second terminal at Stansted without doubling
passenger charges. This revelation should encourage the Regulator to take a much
more sceptical approach to the BAA's submissions and finalise a regulatory
review which meets the needs of users rather than featherbedding the BAA's
monopoly profits. We also welcome the OFT probe into the present monopoly
ownership of Heathrow, Gatwick and Stansted airports. Monopolies don't work and
don't serve the needs of consumers. Real competition between these three
airports will lead to lower airport charges and better facilities for
passengers, and Ryanair will continue to strongly campaign for the break-up of
the BAA airport monopoly, which has for many years delivered high passenger
charges and abysmal facilities at the London airports.
Our outlook for the remainder of this fiscal year remains cautious. As we
emphasised at the time of our full year results in June, we expected a bumper
set of Q.1 results, and a strong second quarter, but we believe that the
forthcoming Winter will be characterised by much more difficult trading
conditions. Ryanair will increase its fleet by 27 aircraft this Winter (compared
to last year's net increase of just 15) during which we will launch many more
new routes and bases. This combination of substantial Winter capacity expansion,
higher oil prices (now $74 per barrel compared to our original forecast of $70)
and price dumping by loss making competitors will mean another very difficult
Winter trading period and if oil prices are higher than $74, we may even sustain
losses during the fourth quarter this year. Based on our current fuel hedges and
the forward price of oil for the unhedged quarter, we anticipate that the
increase in net profit after tax for the fiscal year will still be within the
range of our previous guidance of +5% to +10% increase and that almost all of
these profits will be generated in Q.1 and Q.2, with a consequent reduction in
profitability during Q.3 and Q.4 compared to last year.
We remain on target to achieve our objective of becoming the world's largest
international scheduled airline by passenger traffic, whilst at the same time
growing profitability and reducing costs for the benefit of our passengers, our
people and our shareholders. We continue to believe that this growth in traffic
and profits will be achieved thanks to Ryanair's unique combination of lowest
costs, lowest fares and industry leading customer service'.
Dublin 01.08.06
ENDS.
For further information please contact: Howard Millar Pauline McAlester
Ryanair Holdings plc Murray Consultants
www.ryanair.com Tel: 353-1-8121212 Tel: 353-1-4980300
Certain of the information included in this release is forward looking and is
subject to important risks and uncertainties that could cause actual results to
differ materially. It is not reasonably possible to itemise all of the many
factors and specific events that could affect the outlook and results of an
airline operating in the European economy. Among the factors that are subject to
change and could significantly impact Ryanair's expected results are the airline
pricing environment, fuel costs, competition from new and existing carriers,
market prices for replacement aircraft, costs associated with environmental,
safety and security measures, actions of the Irish, U.K., European Union ('EU')
and other governments and their respective regulatory agencies, fluctuations in
currency exchange rates and interest rates, airport access and charges, labour
relations, the economic environment of the airline industry, the general
economic environment in Ireland, the UK and Continental Europe, the general
willingness of passengers to travel and other economics, social and political
factors.
Ryanair is Europe's largest low fares airline with 16 bases and 351 low fare
routes across 23 countries. By March 2007 Ryanair will operate an entire fleet
of 134 new Boeing 737-800 aircraft with firm orders for a further 115 new
aircraft, which will be delivered over the next 6 years. Ryanair currently
employs a team of 3,700 people and expect to carry approximately 42 million
scheduled passengers in the current year.
Ryanair Holdings plc and Subsidiaries Page 1
Consolidated Income Statement in accordance with IFRS (unaudited)
Quarter Quarter
ended ended
June 30, June 30,
2006 2005
€'000 €'000
Operating revenues
Scheduled revenues 490,012 346,286
Ancillary revenues 76,621 58,352
Total operating revenues - continuing
operations 566,633 404,638
Operating expenses
Staff costs 56,736 42,152
Depreciation and amortisation 35,587 31,665
Other operating expenses
Fuel & oil 167,462 109,906
Maintenance, materials and repairs 10,700 9,150
Marketing and distribution costs 5,724 5,342
Aircraft rentals 12,398 10,058
Route charges 48,079 41,370
Airport and Handling charges 67,875 54,574
Other 25,371 20,537
Total operating expenses 429,932 324,754
Operating profit before exceptional items 136,701 79,884
Aircraft insurance claim - 5,939
Operating profit after exceptional items 136,701 85,823
Other (expenses)/income
Foreign exchange (losses)/gains (321) 944
Interest receivable and similar income 12,854 8,610
Interest payable and similar charges (20,613) (18,435)
Total other (expenses)/income (8,080) (8,881)
Profit before taxation 128,621 76,942
Tax on profit on ordinary activities (12,941) (7,301)
Profit for the period 115,680 69,641
Earnings per ordinary share
-Basic(Euro cent) 15.00 9.16
-Diluted(Euro cent) 14.91 9.12
Adjusted earnings per ordinary share*
-Basic(Euro cent) 15.00 8.47
-Diluted(Euro cent) 14.91 8.44
Number of ordinary shares(in 000's)
-Basic 771,101 760,519
-Diluted 775,842 763,554
* Calculated on profit for the quarter before exceptional items(net of tax).
Ryanair Holdings plc and Subsidiaries Page 2
Consolidated Balance Sheets in accordance with IFRS (unaudited)
June 30, March 31,
2006 2006
€'000 €'000
Non-current assets
Property, plant & equipment 2,484,828 2,499,138
Intangible assets 46,841 46,841
Derivative financial instruments - 763
Deferred tax 9,792 11,321
Total Non-current assets 2,541,461 2,558,063
Current assets
Inventories 4,234 3,422
Other assets 67,159 63,303
Accounts receivable 27,210 29,909
Deferred tax 3,861 3,427
Derivative financial instruments 3,464 18,872
Restricted cash 204,040 204,040
Financial assets: cash > 3 months 937,952 328,927
Cash and cash equivalents 1,042,369 1,439,004
Total current assets 2,290,289 2,090,904
Total assets 4,831,750 4,648,967
Current liabilities
Accounts payable 51,780 79,283
Accrued expenses and other
liabilities 665,063 570,614
Current maturities of long term
debt 154,677 153,311
Derivative financial instruments 40,416 27,417
Current tax 21,790 16,663
Total current liabilities 933,726 847,288
Other liabilities
Provisions for liabilities and charges 19,652 16,722
Derivative financial instruments 70,791 81,897
Deferred tax 147,277 140,592
Other creditors 63,738 46,066
Long term debt 1,486,705 1,524,417
Total other liabilities 1,788,163 1,809,694
Shareholders' funds - equity
Called - up share capital 9,793 9,790
Share premium account 597,266 596,231
Profit and loss account 1,583,303 1,467,623
Other reserves (80,501) (81,659)
Shareholders' funds - equity 2,109,861 1,991,985
Total liabilities and
shareholders' funds 4,831,750 4,648,967
Ryanair Holdings plc and Subsidiaries Page 3
Consolidated Cashflow Statement in accordance with IFRS (unaudited)
June 30, June 30,
2006 2005
€'000 €'000
Operating activities
Profit before taxation 128,621 76,942
Adjustments to reconcile profits
before tax to net cash provided by
operating activities
Depreciation 35,587 31,665
(Increase) in inventories (812) (1,598)
Decrease in accounts receivable 2,699 1,230
Decrease in other current assets 7,111 4,626
(Decrease) in accounts payable (27,503) (25,071)
Increase in accrued expenses 92,271 108,145
Increase in other creditors 25,215 19,988
Increase in maintenance provision 2,930 2,372
Interest receivable (315) (4,149)
Interest payable 2,014 994
Retirement costs 165 139
Share based payment 1,043 293
Income tax (51) (1,860)
Net cash provided by operating activities 268,975 213,716
Investing activities
Capital expenditure (purchase of property,
plant and equipment) (21,277) (13,418)
(Investment)/reduction in financial
assets: cash > 3months (609,025) 97,796
(630,302) 84,378
Financing activities
Net proceeds from shares issued 1,038 9,188
Decrease in long term debt (36,346) (28,736)
Net cash used in financing activities (35,308) (19,548)
(Decrease)/Increase in cash and cash
equivalents (396,635) 278,546
Cash and cash equivalents at beginning of
period 1,439,004 872,258
Cash and cash equivalents at end of
period 1,042,369 1,150,804
Ryanair Holdings plc and Subsidiaries Page 4
Consolidated Statement of Changes in Shareholders' Funds - Equity
in accordance with IFRS (unaudited)
Ordinary Share Profit Other Total
shares premium and loss reserves
account account
€'000 €'000 €'000 €'000 €'000
Balance at
April 1, 2006 9,790 596,231 1,467,623 (81,659) 1,991,985
Issue of
ordinary
equity shares 3 1,035 - - 1,038
Movement in
reserves - - - 1,158 1,158
Profit for the
period - - 115,680 - 115,680
Balance at
June 30, 2006 9,793 597,266 1,583,303 (80,501) 2,109,861
Reconciliation of adjusted earnings per share (unaudited)
Quarter Quarter
ended ended
June 30,2006 June 30, 2005
€'000 €'000
Profit for the period under IFRS 115,680 69,641
Adjustments
Aircraft Insurance Claim - (5,939)
Taxation adjustment for above - 742
Adjusted profit under IFRS 115,680 64,444
Number of ordinary shares (in 000's)
-Basic 771,101 760,519
-Diluted 775,842 763,554
Adjusted earnings per ordinary share
-Basic (€ cent) 15.00 8.47
-Diluted (€ cent) 14.91 8.44
Ryanair Holdings plc and Subsidiaries Page 5
Consolidated Income Statement in accordance with US GAAP (unaudited)
Quarter Quarter
ended ended
June 30,2006 June 30, 2005
Operating revenues
Scheduled revenues 490,012 346,286
Ancillary revenues 76,621 58,352
Total operating revenues - continuing
operations 566,633 404,638
Operating expenses
Staff costs 56,844 41,776
Depreciation and amortisation 35,969 31,957
Other operating expenses
Fuel & oil 167,462 109,906
Maintenance, materials and repairs 10,700 9,150
Marketing and distribution costs 5,724 5,342
Aircraft rentals 12,398 10,058
Route charges 48,079 41,370
Airport and Handling charges 67,875 54,574
Other 25,371 20,515
Total operating expenses 430,422 324,648
Operating profit before exceptional
items 136,211 79,990
Aircraft insurance claim - 5,939
Operating profit after exceptional
items 136,211 85,929
Other (expense)/income
Foreign exchange (losses)/gain (321) 944
Interest receivable and similar income 12,854 8,610
Interest payable and similar charges (18,414) (16,902)
Total other (expenses)/income (5,881) (7,348)
Income before taxation 130,330 78,581
Taxation (13,155) (7,540)
Net income 117,175 71,041
Net income per ADS (5 ordinary shares
equals 1 ADS)
-Basic(Euro cent) 75.98 46.71
-Diluted(Euro cent) 75.51 46.52
Adjusted net income per ADS *
-Basic(Euro cent) 75.98 43.29
-Diluted(Euro cent) 75.51 43.12
Weighted Average number of shares
-Basic 771,101 760,519
-Diluted 775,842 763,554
* Calculated on net income before non-recurring items (net of tax).
Ryanair Holdings plc and Subsidiaries Page 6
Summary of significant differences between IFRS and US generally accepted
accounting principles (unaudited)
(A) Net income under US GAAP
<----Quarter ended---->
June 30, June 30,
2006 2005
€'000 €'000
Net income in accordance with IFRS 115,680 69,641
Adjustments
Pensions (108) 83
Share based payments - 293
Capitalised interest (net of amortisation)
regarding aircraft acquisition programme 1,817 1,241
Darley Investments Limited - 22
Taxation-effect of above adjustments (214) (239)
Net income in accordance with US GAAP 117,175 71,041
(B) Consolidated cashflow statement in
accordance with US GAAP
June 30, June 30,
2006 2005
€'000 €'000
Cash inflow from operating activities 268,975 213,716
Cash (outflow) from investing activities (630,302) 84,378
Cash inflow from financing activities (35,308) (19,548)
Increase in cash and cash equivalents (396,635) 278,546
Cash and cash equivalents at beginning of
period 1,439,004 872,258
Cash and cash equivalents at end of period 1,042,369 1,150,804
Cash and cash equivalents under US GAAP 1,042,369 1,150,804
Restricted cash 204,040 204,040
Deposits with a maturity of between three
and six months 937,952 431,611
Cash and liquid resources in accordance
with IFRS 2,184,361 1,786,455
Ryanair Holdings plc and Subsidiaries Page 7
Summary of significant differences between IFRS and US generally accepted
accounting principles (unaudited)
(C) Shareholders' funds - equity Quarter ended Quarter ended
June 30, 2006 June 30, 2005
€'000 €'000
Shareholders' equity as reported in the
consolidated balance sheets in accordance with
IFRS 2,109,861 1,699,020
Adjustments:
Pension 9,134 11,788
Share based payments - 293
Capitalised interest (net of amortisation)
regarding aircraft acquisition programme 31,265 24,188
Darley Investments Limited - (41)
Minimum pension liability (net of tax) (4,295) (6,496)
Tax effect of adjustments (excluding pension
& derivative adjustments) (6,145) (5,235)
Shareholders' equity as adjusted to accord
with US GAAP 2,139,820 1,723,517
Opening shareholders' equity under US GAAP 2,020,449 1,629,819
Comprehensive income
Unrealised gains/(losses) on derivative
financial instruments(net of tax) 115 13,469
Net income in accordance with US GAAP 117,175 71,041
Total comprehensive income 117,290 84,510
Share based payments 1,043 -
Stock issued for cash 1,038 9,188
Closing shareholders' equity in accordance with
US GAAP 2,139,820 1,723,517
Ryanair Holdings plc
Management Discussion and Analysis of Results ('MD&A')
Introduction
For the purposes of the MD&A all figures and comments are by reference to the
adjusted profit and loss account excluding the exceptional items and goodwill
referred to below.
Exceptional items in the quarter ended June 30, 2005 consist of a receipt of
€5.2m (net of tax) arising from the settlement of an insurance claim for the
scribing of 6 Boeing 737-200 aircraft.
Profit after tax increased by 66% to €115.7m compared to €69.6m in the quarter
ended June 30, 2005, whilst adjusted profit after tax increased by 80% to
€115.7m
Summary Quarter ended June 30, 2006
Profit after tax increased by 80% to €115.7m, compared to €64.4m in the quarter
ended June 30, 2005. These results were achieved by strong growth in passenger
volumes and continued tight cost control, excluding fuel costs, which were
significantly higher than in the comparative quarter. Total operating revenues
increased by 40% to €566.6m, which was faster than the 25% growth in passenger
volumes, as average fares rose 13% and ancillary revenues grew 31% to €76.6m.
Total revenue per passenger as a result increased by 12%, whilst Passenger Load
Factor increased by 1 point to 84% during the quarter.
Total operating expenses increased by 32% to €429.9m, due to the increased level
of activity, and the increased costs: primarily fuel, route charges, staff
costs, and airport & handling costs associated with the growth of the airline.
Fuel, which represents 39% of total operating costs compared to 34% in the
quarter to June 30, 2005, increased by 52% to €167.5m due to substantial
increases in the cost per gallon of fuel partly offset by a positive movement in
the US$ exchange rate and a 2% reduction in fuel consumption due to the
installation of winglets on a portion of our Boeing 737-800 fleet. It is
expected that the remaining retro-fit winglets will be installed across the
fleet by year end. Unit costs excluding fuel declined by 2% as all other cost
items, other than staff costs, increased at a slower rate than the growth in
passenger volumes. Staff costs rose by 35% reflecting an increase in our crewing
ratios primarily as a result of increases in our average sector length. Despite
the significantly higher fuel costs incurred, operating margins increased by 4
points to 24%, and operating profit increased by 71% to €136.7m.
Net Margins increased by 4 points to 20% for the reasons outlined above.
Adjusted earnings per share have increased by 77% to 15.00 Euro cent for the
quarter.
Balance Sheet
The Company's profit growth continues to generate strong cashflow from
operations which for the quarter to June 30, 2006 amounted to €269.0m. This
cashflow part funded additional aircraft deposits and debt repayments, whilst
the balance remaining is reflected in the €212.4m increase in Total Cash to
€2,184.4m since March 31, 2006. Capital expenditure net of sales proceeds
amounted to €21.3m during the quarter which largely consisted of aircraft
deposits. Long Term Debt, net of repayments, decreased by €36.3m with no new
debt drawndown in the quarter.
Shareholders' Funds at June 30, 2006 have increased by €117.9m to €2,109.9m,
compared to March 31, 2006.
Detailed Discussion and Analysis Quarter ended June 30, 2006
Profit after tax, increased by 80% to €115.7m due to average fares increasing by
13% and strong ancillary revenue growth, which was partially offset by fuel
costs increasing by 52% to €167.5m reflecting the higher US$ cost per gallon.
Operating margins, as a result, increased by 4 points to 24%, which in turn
resulted in operating profit increasing by 71% to €136.7m compared to the
previous quarter ended June 30, 2005.
Total operating revenues increased by 40% to €566.6m whilst passenger volumes
increased by 25% to 10.7m. Total revenue per passenger increased by 12% in the
quarter due to a combination of higher average fares, and strong ancillary
revenue growth.
Scheduled passenger revenues increased by 42% to €490.0m due to a combination of
increased passenger volumes on existing routes, the successful launch of new
routes and a 13% increase in average fares reflecting the positive impact of
Easter on fares. Easter is not included in the June 30, 2005 quarter comparative
as it occurred earlier.
Ancillary revenues increased 31% to €76.6m, a faster growth rate than passenger
volumes, reflecting a strong performance in non-flight scheduled revenues
(primarily car hire, hotels and travel insurance), on-board sales and other
ancillary products.
Total operating expenses increased by 32% to €429.9m due to the increased level
of activity, and the increased costs: primarily fuel, aircraft rentals, route
charges, staff costs and airport and handling costs associated with the growth
of the airline. Total operating costs were also adversely impacted by an
increase in the average sector length, whilst higher US$ fuel prices were
partially offset by the strength of the Euro exchange rate against the US$ and
lower fleet fuel burn resulting from the newly installed winglets.
Staff costs have increased by 35% to €56.7m primarily due to a 32% increase in
average employee numbers to 3,655 and the impact of pay increases granted.
Employee numbers rose due to an increase in our aircraft crewing ratios as a
result of continued increases in average sector length.
Depreciation and amortisation increased by 12% to €35.6m due to an increase in
the size of the 'owned' fleet from 74 to 86, offset by a lower amortisation
charge due to the retirement of Boeing 737-200 aircraft and the positive impact
of a new engine maintenance deal on the cost of aircraft amortisation. The
strengthening of the Euro to US$ also had a positive impact on the depreciation
and amortisation charge on new aircraft deliveries.
Fuel costs rose by 52% to €167.5m due to an increase in the number of sectors
flown, a 5% increase in sector length, and a significantly higher average US$
cost per gallon of fuel. The increased costs were partially offset by the
positive impact of the strengthening of the Euro to the US$ during the quarter
and a 2% reduction in fuel consumption due to newly installed winglets on part
of our Boeing 737-800 fleet.
Maintenance costs increased by 17% to €10.7m reflecting improved reliability of
the Boeing 737-800's operated and a lower level of maintenance costs incurred
due to the retirement of the Boeing 737-200's, and the positive impact of the
strengthening of the Euro exchange rate, partially offset by an increase in the
number of leased Boeing 737-800 aircraft from 17 to 21.
Marketing and distribution costs increased by 7% to €5.7m reflecting a lower
level of spend compared to the previous quarter.
Aircraft rental costs increased by 23% to €12.4m reflecting an additional 4
aircraft on lease during the quarter.
Route charges increased by 16% to €48.1m due to an increase in the number of
sectors flown and an increase of 5% in the average sector length, offset by a
reduction in enroute charges in certain EU countries.
Airport and handling charges increased by 24% to €67.9m, which was slower than
the growth in passenger volumes and reflects the impact of increased costs at
certain existing airports offset by lower costs at new airports and bases.
Other expenses increased by 24% to €25.4m, which is lower than the growth in
ancillary revenues due to improved margins on some existing products, and cost
reductions achieved on indirect costs.
Operating margins have increased by 4 points to 24% due to the reasons outlined
above whilst operating profits have increased by 71% to €136.7m during the
quarter.
Interest receivable has increased by 49% to €12.9m for the quarter due to the
combined impact of higher levels of cash and cash equivalents and increases in
average deposit rates earned in the quarter compared to the previous quarter.
Interest payable increased by 12% to €20.6m due to the increase in the level of
debt to part fund the purchase of new aircraft.
The Company's Balance Sheet reflects the increased profitability of the group.
The Company generated cash from operating activities of €269.0m that part funded
the capital expenditure programme and long term debt repayments, whilst the
balance is reflected in the €212.4m increase in Total Cash to €2,184.4m. Total
Debt, net of repayments declined by €36.3m to €1,641.4m during the quarter.
Shareholders' Funds at June 30, 2006 have increased by €117.9m to €2,109.9m,
compared to March 31, 2006 reflecting the €115.7m increase in profitability
during the quarter, the exercise of share options which increased funds by
€1.0m, and the positive impact on reserves of €1.2m arising from the revaluation
of financial instruments, pensions and stock options.
Notes to the Financial Statements
1. Accounting Policies
This quarter's financial information has been prepared on the basis of the
recognition and measurement requirements of International Financial
Reporting Standards ('IFRS') in issue that were are adopted by the EU and
effective (or available for early adoption) at March 31, 2006. These
accounting policies are set out in the document titled 'Explanation of the
financial impact following adoption of IFRS' published in August, 2005.
2. Approval of the Preliminary Announcement
The Audit Committee approved the consolidated financial statements for the
quarter ended June 30, 2006 on July 28, 2006.
3. Generally Accepted Accounting Policies
The Management Discussion and Analysis of Results for the quarter ended June
30, 2006 and the comparative quarter are based on the results reported under
the group's IFRS accounting policies, as adjusted for certain exceptional
items.
4. Accounting for Aircraft Spare Parts Maintenance
Under IAS 16 spare parts held by an entity are classified as Property, Plant
and Equipment if they are expected to be used for more than one period. In
this quarter's financial information this has resulted in a reclassification
of the maintenance expense incurred relating to the stock of spare aircraft
parts owned from 'Maintenance, materials and repairs' to 'Depreciation and
amortisation'.
5. Accounting for Share-Based Payments
Under SFAS No. 123R, which was adopted by the Company on April 1, 2006,
the Company is required to account for share-based employee compensation
using a fair value based method. The Company has elected to use the
Binomial Lattice option pricing model to determine the fair-value of
share-based awards under SFAS No. 123R, consistent with that previously
used for pro forma disclosures under SFAS No. 123 ('Accounting for
Stock-Based Compensation').
The Company has elected to use the modified prospective transition
method as permitted by SFAS No. 123R and accordingly prior quarter's
have not been restated to reflect the impact of the revised standard. In
this quarter's financial information, the Company has, as a result of
the adoption of SFAS No. 123R, recorded incremental share-based
compensation expense of €1.043 million in its US GAAP income statement.
Prior to the adoption of SFAS No. 123R, the Company measured
compensation expense for its employee share-based compensation plans
using the intrinsic method prescribed by APB Opinion No. 25. The Company
applied the disclosure provisions of SFAS No. 123, as if the fair value
based method has been applied in measuring compensation expense. Under
APB Opinion No. 25, when the exercise price of the Group's employee
share options was equal to the market price of the underlying share on
the date of grant, no compensation expense was recognised. If the
Company had applied the fair value recognition provisions of SFAS No.
123 to share-based compensation during the three month quarter ended
June 30, 2005, reported income under US GAAP would have been reduced by
€0.291m from €71.041m to €70.750m with resulting Net income per ADS,
basic and diluted, of 46.51 Euro cent and 46.33 Euro cent respectively.
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