1st Aug 2006 07:02
Ryanair Holdings PLC01 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) announcedrecord profits of €115.7m for its first Quarter ended June 30, 2006. Trafficgrew by 25% to 10.7m passengers, yields increased 13%, ancillary revenuesclimbed 31%, and consequently total revenues rose by 40% to €566.6m. Unit costsexcluding fuel fell by 2% (including fuel they rose by 6%) as fuel costs rose by52% to €167.5m. The increase in profitability boosted cash balances which roseby €212.4m to €2.18bn. As a result, Ryanair's adjusted after tax margin for theQuarter rose by 4 points to 20% as Q.1 Adjusted Net Profit increased by a record80% 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, 2005excludes a receipt, net of tax, of €5.2m arising from the settlement of aninsurance 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 ourfull year results in June - reflect a much stronger yield environment despitesubstantially higher oil prices. We would caution however, based on advancedbookings, that we do not expect this yield buoyancy to be maintained at similarlevels 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 ofEaster in the quarter (and its absence from the prior year comparable), manymore "sun" destinations, the impact of competitors fuel surcharges whichcontinue to drive traffic towards Ryanair, the initial impact of our baggagecharging initiative, and the earlier launch of our new bases and routes, much ofwhich took place in the fourth quarter last year. We are pleased that ancillary revenues grew by 31% from an already significantbase, as the growth of ancillary sales continues to outpace that of scheduledtraffic. As we stimulate further traffic growth with lower fares, we find thatpassengers are more willing to spend some of their savings on additionalproducts 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 Shannoncontinue to be lower than expected. We plan to announce two new bases over thecoming months with launch dates in early 2007, as well as further expansion ofour existing bases. During the quarter fuel costs rose by 52% to €167.5m. Excluding fuel unit costsfell by 2% as we continue to aggressively manage costs in all other areas. Fuelprices continue to be high and volatile. We have recently extended our hedgingposition, so that we are 90% hedged to the end of October at $70 per barrel and90% hedged for November and December at $74 per barrel. Thereafter we remainunhedged for the January to March 2007 quarter, but we continue to monitorforward rates and will try to avail of any suitable opportunity to hedge out ouroutstanding requirement for the fiscal year. During the quarter we exercised options for delivery of ten further Boeing737-800 series aircraft in 2008. The addition of these new aircraft will enableus to continue to drive down our aircraft and operating costs. The penetrationof web based check-in continues to improve with some flights achieving 50% ofweb check-in. We will aggressively promote web check-in and priority boardingfor passengers travelling with hand luggage. We intend to continue to exploitinitiatives such as web check-in to reduce our costs, whilst at the same timeproviding passengers with superior service such as avoiding check-in queues andpriority boarding. We strongly welcome the take-over of the BAA airport monopoly by Ferrovial andlook forward to their review of plans and costings for the second runway atStansted. We anticipate that this review will confirm that a second runway andterminal can be built at a more realistic cost of £1bn, rather than the £4bngold plated Taj Mahal proposed by the BAA airport monopoly. The Ferrovialtakeover highlighted that the BAA were able to fund a £1bn "pay-off" to itsshareholders just three months after it was telling the CAA Regulator that "itcouldn't afford" to pay for the second terminal at Stansted without doublingpassenger charges. This revelation should encourage the Regulator to take a muchmore sceptical approach to the BAA's submissions and finalise a regulatoryreview which meets the needs of users rather than featherbedding the BAA'smonopoly profits. We also welcome the OFT probe into the present monopolyownership of Heathrow, Gatwick and Stansted airports. Monopolies don't work anddon't serve the needs of consumers. Real competition between these threeairports will lead to lower airport charges and better facilities forpassengers, and Ryanair will continue to strongly campaign for the break-up ofthe BAA airport monopoly, which has for many years delivered high passengercharges and abysmal facilities at the London airports. Our outlook for the remainder of this fiscal year remains cautious. As weemphasised at the time of our full year results in June, we expected a bumperset of Q.1 results, and a strong second quarter, but we believe that theforthcoming Winter will be characterised by much more difficult tradingconditions. Ryanair will increase its fleet by 27 aircraft this Winter (comparedto last year's net increase of just 15) during which we will launch many morenew 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 difficultWinter trading period and if oil prices are higher than $74, we may even sustainlosses during the fourth quarter this year. Based on our current fuel hedges andthe forward price of oil for the unhedged quarter, we anticipate that theincrease in net profit after tax for the fiscal year will still be within therange of our previous guidance of +5% to +10% increase and that almost all ofthese profits will be generated in Q.1 and Q.2, with a consequent reduction inprofitability during Q.3 and Q.4 compared to last year. We remain on target to achieve our objective of becoming the world's largestinternational scheduled airline by passenger traffic, whilst at the same timegrowing profitability and reducing costs for the benefit of our passengers, ourpeople and our shareholders. We continue to believe that this growth in trafficand profits will be achieved thanks to Ryanair's unique combination of lowestcosts, 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 Consultantswww.ryanair.com Tel: 353-1-8121212 Tel: 353-1-4980300 Certain of the information included in this release is forward looking and issubject to important risks and uncertainties that could cause actual results todiffer materially. It is not reasonably possible to itemise all of the manyfactors and specific events that could affect the outlook and results of anairline operating in the European economy. Among the factors that are subject tochange and could significantly impact Ryanair's expected results are the airlinepricing 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 incurrency exchange rates and interest rates, airport access and charges, labourrelations, the economic environment of the airline industry, the generaleconomic environment in Ireland, the UK and Continental Europe, the generalwillingness of passengers to travel and other economics, social and politicalfactors. Ryanair is Europe's largest low fares airline with 16 bases and 351 low fareroutes across 23 countries. By March 2007 Ryanair will operate an entire fleetof 134 new Boeing 737-800 aircraft with firm orders for a further 115 newaircraft, which will be delivered over the next 6 years. Ryanair currentlyemploys a team of 3,700 people and expect to carry approximately 42 millionscheduled 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 revenuesScheduled revenues 490,012 346,286Ancillary revenues 76,621 58,352 Total operating revenues - continuingoperations 566,633 404,638 Operating expensesStaff costs 56,736 42,152Depreciation and amortisation 35,587 31,665Other 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)/incomeForeign 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 assetsProperty, plant & equipment 2,484,828 2,499,138Intangible assets 46,841 46,841Derivative financial instruments - 763Deferred tax 9,792 11,321 Total Non-current assets 2,541,461 2,558,063 Current assetsInventories 4,234 3,422Other assets 67,159 63,303Accounts receivable 27,210 29,909Deferred tax 3,861 3,427Derivative financial instruments 3,464 18,872 Restricted cash 204,040 204,040Financial assets: cash > 3 months 937,952 328,927Cash 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 liabilitiesAccounts payable 51,780 79,283Accrued expenses and other liabilities 665,063 570,614Current maturities of long term debt 154,677 153,311Derivative financial instruments 40,416 27,417Current tax 21,790 16,663 Total current liabilities 933,726 847,288 Other liabilitiesProvisions for liabilities and charges 19,652 16,722Derivative financial instruments 70,791 81,897Deferred tax 147,277 140,592Other creditors 63,738 46,066Long term debt 1,486,705 1,524,417 Total other liabilities 1,788,163 1,809,694 Shareholders' funds - equityCalled - up share capital 9,793 9,790Share premium account 597,266 596,231Profit and loss account 1,583,303 1,467,623Other reserves (80,501) (81,659) Shareholders' funds - equity 2,109,861 1,991,985 Total liabilities andshareholders' 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 activitiesProfit before taxation 128,621 76,942 Adjustments to reconcile profitsbefore tax to net cash provided by operating activitiesDepreciation 35,587 31,665(Increase) in inventories (812) (1,598)Decrease in accounts receivable 2,699 1,230Decrease in other current assets 7,111 4,626(Decrease) in accounts payable (27,503) (25,071)Increase in accrued expenses 92,271 108,145Increase in other creditors 25,215 19,988Increase in maintenance provision 2,930 2,372Interest receivable (315) (4,149)Interest payable 2,014 994Retirement costs 165 139Share based payment 1,043 293Income tax (51) (1,860) Net cash provided by operating activities 268,975 213,716 Investing activitiesCapital expenditure (purchase of property, plant and equipment) (21,277) (13,418)(Investment)/reduction in financialassets: cash > 3months (609,025) 97,796 (630,302) 84,378Financing activitiesNet proceeds from shares issued 1,038 9,188Decrease 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 - Equityin accordance with IFRS (unaudited) Ordinary Share Profit Other Total shares premium and loss reserves account account •'000 •'000 •'000 •'000 •'000 Balance atApril 1, 2006 9,790 596,231 1,467,623 (81,659) 1,991,985 Issue ofordinaryequity shares 3 1,035 - - 1,038 Movement inreserves - - - 1,158 1,158 Profit for theperiod - - 115,680 - 115,680 Balance atJune 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 AdjustmentsAircraft Insurance Claim - (5,939)Taxation adjustment for above - 742Adjusted 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 revenuesScheduled revenues 490,012 346,286Ancillary revenues 76,621 58,352 Total operating revenues - continuingoperations 566,633 404,638 Operating expensesStaff costs 56,844 41,776Depreciation and amortisation 35,969 31,957Other 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 exceptionalitems 136,211 79,990 Aircraft insurance claim - 5,939 Operating profit after exceptionalitems 136,211 85,929 Other (expense)/income Foreign exchange (losses)/gain (321) 944Interest receivable and similar income 12,854 8,610Interest payable and similar charges (18,414) (16,902) Total other (expenses)/income (5,881) (7,348) Income before taxation 130,330 78,581Taxation (13,155) (7,540) Net income 117,175 71,041 Net income per ADS (5 ordinary sharesequals 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 acceptedaccounting principles (unaudited) (A) Net income under US GAAP June 30, June 30, 2006 2005 •'000 •'000 Net income in accordance with IFRS 115,680 69,641AdjustmentsPensions (108) 83Share based payments - 293Capitalised interest (net of amortisation)regarding aircraft acquisition programme 1,817 1,241Darley Investments Limited - 22Taxation-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 268,975 213,716Cash (outflow) from investing activities (630,302) 84,378Cash inflow from financing activities (35,308) (19,548) Increase in cash and cash equivalents (396,635) 278,546Cash and cash equivalents at beginning ofperiod 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 1,150,804Restricted cash 204,040 204,040Deposits with a maturity of between threeand six months 937,952 431,611 Cash and liquid resources in accordancewith 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 11,788Share based payments - 293Capitalised interest (net of amortisation) regarding aircraft acquisition programme 31,265 24,188Darley 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 incomeUnrealised gains/(losses) on derivative financial instruments(net of tax) 115 13,469Net 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 theadjusted profit and loss account excluding the exceptional items and goodwillreferred 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 thescribing of 6 Boeing 737-200 aircraft. Profit after tax increased by 66% to €115.7m compared to €69.6m in the quarterended 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 quarterended June 30, 2005. These results were achieved by strong growth in passengervolumes and continued tight cost control, excluding fuel costs, which weresignificantly higher than in the comparative quarter. Total operating revenuesincreased by 40% to €566.6m, which was faster than the 25% growth in passengervolumes, 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 LoadFactor increased by 1 point to 84% during the quarter. Total operating expenses increased by 32% to €429.9m, due to the increased levelof activity, and the increased costs: primarily fuel, route charges, staffcosts, and airport & handling costs associated with the growth of the airline.Fuel, which represents 39% of total operating costs compared to 34% in thequarter to June 30, 2005, increased by 52% to €167.5m due to substantialincreases in the cost per gallon of fuel partly offset by a positive movement inthe US$ exchange rate and a 2% reduction in fuel consumption due to theinstallation of winglets on a portion of our Boeing 737-800 fleet. It isexpected that the remaining retro-fit winglets will be installed across thefleet by year end. Unit costs excluding fuel declined by 2% as all other costitems, other than staff costs, increased at a slower rate than the growth inpassenger volumes. Staff costs rose by 35% reflecting an increase in our crewingratios primarily as a result of increases in our average sector length. Despitethe significantly higher fuel costs incurred, operating margins increased by 4points 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 thequarter. Balance Sheet The Company's profit growth continues to generate strong cashflow fromoperations which for the quarter to June 30, 2006 amounted to €269.0m. Thiscashflow part funded additional aircraft deposits and debt repayments, whilstthe 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 proceedsamounted to €21.3m during the quarter which largely consisted of aircraftdeposits. Long Term Debt, net of repayments, decreased by €36.3m with no newdebt 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 by13% and strong ancillary revenue growth, which was partially offset by fuelcosts 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 turnresulted in operating profit increasing by 71% to €136.7m compared to theprevious quarter ended June 30, 2005. Total operating revenues increased by 40% to €566.6m whilst passenger volumesincreased by 25% to 10.7m. Total revenue per passenger increased by 12% in thequarter due to a combination of higher average fares, and strong ancillaryrevenue growth. Scheduled passenger revenues increased by 42% to €490.0m due to a combination ofincreased passenger volumes on existing routes, the successful launch of newroutes and a 13% increase in average fares reflecting the positive impact ofEaster on fares. Easter is not included in the June 30, 2005 quarter comparativeas it occurred earlier. Ancillary revenues increased 31% to €76.6m, a faster growth rate than passengervolumes, reflecting a strong performance in non-flight scheduled revenues(primarily car hire, hotels and travel insurance), on-board sales and otherancillary products. Total operating expenses increased by 32% to €429.9m due to the increased levelof activity, and the increased costs: primarily fuel, aircraft rentals, routecharges, staff costs and airport and handling costs associated with the growthof the airline. Total operating costs were also adversely impacted by anincrease in the average sector length, whilst higher US$ fuel prices werepartially offset by the strength of the Euro exchange rate against the US$ andlower fleet fuel burn resulting from the newly installed winglets. Staff costs have increased by 35% to €56.7m primarily due to a 32% increase inaverage 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 aresult of continued increases in average sector length. Depreciation and amortisation increased by 12% to €35.6m due to an increase inthe size of the 'owned' fleet from 74 to 86, offset by a lower amortisationcharge due to the retirement of Boeing 737-200 aircraft and the positive impactof a new engine maintenance deal on the cost of aircraft amortisation. Thestrengthening of the Euro to US$ also had a positive impact on the depreciationand amortisation charge on new aircraft deliveries. Fuel costs rose by 52% to €167.5m due to an increase in the number of sectorsflown, a 5% increase in sector length, and a significantly higher average US$cost per gallon of fuel. The increased costs were partially offset by thepositive impact of the strengthening of the Euro to the US$ during the quarterand a 2% reduction in fuel consumption due to newly installed winglets on partof our Boeing 737-800 fleet. Maintenance costs increased by 17% to €10.7m reflecting improved reliability ofthe Boeing 737-800's operated and a lower level of maintenance costs incurreddue to the retirement of the Boeing 737-200's, and the positive impact of thestrengthening of the Euro exchange rate, partially offset by an increase in thenumber of leased Boeing 737-800 aircraft from 17 to 21. Marketing and distribution costs increased by 7% to €5.7m reflecting a lowerlevel of spend compared to the previous quarter. Aircraft rental costs increased by 23% to €12.4m reflecting an additional 4aircraft on lease during the quarter. Route charges increased by 16% to €48.1m due to an increase in the number ofsectors flown and an increase of 5% in the average sector length, offset by areduction in enroute charges in certain EU countries. Airport and handling charges increased by 24% to €67.9m, which was slower thanthe growth in passenger volumes and reflects the impact of increased costs atcertain 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 inancillary revenues due to improved margins on some existing products, and costreductions achieved on indirect costs. Operating margins have increased by 4 points to 24% due to the reasons outlinedabove whilst operating profits have increased by 71% to €136.7m during thequarter. Interest receivable has increased by 49% to €12.9m for the quarter due to thecombined impact of higher levels of cash and cash equivalents and increases inaverage 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 ofdebt 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 fundedthe capital expenditure programme and long term debt repayments, whilst thebalance is reflected in the €212.4m increase in Total Cash to €2,184.4m. TotalDebt, 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 profitabilityduring 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 revaluationof 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. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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