31st Jul 2007 07:02
Ryanair Holdings PLC31 July 2007 RYANAIR ANNOUNCES RECORD Q1 PROFITS PROFITS RISE 20% TO €139M - TRAFFIC GROWS BY 18%. Ryanair, Europe's largest international airline, today (31 July) announcedrecord first quarter profits of €139m, a 20% increase over last year. Trafficgrew by 18% to 12.6m passengers and revenues rose by 22% to €693m. Unit costsincreased by 5% mainly due to higher fuel, staff, and airport costs. Despitethese higher costs, Ryanair maintained an industry leading after tax margin of20%. Summary Table of Results (IFRS) - in Euro Quarter Results June 30, 2006 June 30, 2007 % IncreasePassengers 10.7m 12.6m 18%Revenue €566.6m €693.0m 22%Profit after Tax €115.7m €138.9m 20%Basic EPS(EuroCents) 7.50 8.98 20% Announcing these results Ryanair's CEO, Michael O'Leary, said: "These record Q1 profits reflect an 18% growth in passenger volumes, flatyields, and strong growth in ancillaries. Ancillary Revenues grew by 53% to€117.1m, due to improved penetration of car hire, hotels, travel insurance,onboard sales and excess baggage revenues. Ancillaries account for 17% of totalrevenues and we expect this will rise to 20% over the next 3 years. Unit costs rose by 5% due primarily to the doubling of airport charges atStansted and higher charges at Dublin airport. Staff costs rose by 34% to €75.9mdue to volume growth and increased cabin crewing ratios. We continue to focusaggressively on costs and anticipate that unit costs for the remainder of theyear will grow by 5%, somewhat lower than the 6% to 7% previously guided. We continue to oppose the BAA airport monopoly's plans to waste £4bn on buildinga second runway and terminal at Stansted. BAA Stansted doubling of airportcharges since April 07 have caused traffic declines at Stansted for the firsttime in 15 years. The current service provided by the BAA at Stansted is nothingshort of appalling. Many of the 17 security machines are regularly unmannedduring peak morning periods, and understaffing at passport control continues tocause long queues and frequent passenger delays. We continue to press for thebreak up of the BAA airport monopoly which provides abject facilities, a thirdrate service and charges extortionate prices, particularly at Stansted. Thiswinter we will sit 7 of our 40 Stansted based aircraft on the ground becauseStansted's higher airport charges make it more profitable to ground theseaircraft during the winter rather than fly them. We remain opposed to the DAA's plans to build an €800m second terminal inDublin, a cost which has escalated four fold over the past 18 months. Thisterminal has now been identified by the regulator as being the wrong size. It isalso in the wrong location, and grossly overpriced. We have called upon theAviation Regulator to ensure that only those airlines who use T2 will pay forit. Ryanair passengers cannot be expected to pay higher charges to crosssubsidise a second terminal they do not want and will never use. The DAA havespent almost €50m on consultants reports over the past year, and now plan towaste "about €450m" on extending/refurbishing Terminal One, while at the sametime reducing its capacity by 40% from 25m passengers to just 15m passengers.The proposed expenditure at Dublin is out of control and sadly the Irishaviation regulator continues to do nothing to restrain this waste or to protectairport users. We intend to appeal the EU Commissions recent decision (to prohibit our offerfor Aer Lingus) to the European Court of First Instance. We are confident thatthis decision will be overturned because this is the first ever prohibitionbetween two companies which combined will have less than 5% of the EU market.The EU Commission has for the last 20 years been encouraging EU airlines tomerge, and they have already approved much larger mergers such as Air France/KLMand Lufthansa/Swiss. We look forward to the European court overturning thisunprecedented, and we believe nakedly political decision. We will continue to grow over the winter period, however, due to the softness inyields, and the doubling of both UK APD and costs at Stansted, we plan to reducethe number of aircraft operated ex Stansted this winter by almost 20% from 40 to33. This will mean reduced frequency or temporary cessation of services onroutes which would be loss making due to Stansted's higher airport charges.Consequently passenger volumes this winter will now grow at a slower rate (by18% to 50m) than the 24% to 52m previously guided. These capacity reductionsshould bring more stability to yields, whilst, at the same time, reducingoperating costs and eliminating losses on these non profitable winter routes atStansted. Our outlook remains cautious for the fiscal year due to the softness of trafficand yields. Although we have little visibility beyond the next 2 months weexpect this weaker demand to continue. We anticipate that yields in Q2 will beslightly down, and winter (H2) yields be down by as much as -5% to -10% comparedto last year. However, the reduction in capacity on non profitable winterroutes, and the significant airport cost savings this cut back will generate,will enable us to slightly increase our previous guidance. We now expect thatNet Profit will increase by (+10%) for the fiscal year compared to (+5%)previously guided, although, we caution that this guidance will be heavilydependent upon the accuracy of our forecast decline in yields for the secondhalf of the year. During the last two months we undertook a series of share buy backs amounting toa total of 37.6m shares at a cost of approx. €187m. This share buy backrepresents 2.5% of the pre-existing issued share capital of the company. Theshareholder authority for such a buy back expires at AGM on September 20th,2007. Ends. For further information please contact: Howard Millar Pauline McAlesterRyanair Holdings Plc Murray Consultants Tel: 353 1 812 1212 Tel: 353 1 498 0300 www.ryanair.com 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 the 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 20 bases and 516 low fareroutes across 25 countries. By the end of March 2008 Ryanair will operate afleet of 163 Boeing 737-800 aircraft with firm orders for a further 99 newaircraft (net of planned disposals), which will be delivered over the next 5years. Ryanair currently employs a team of 4,800 people and expects to carrycirca 50 million scheduled passengers in the current fiscal year. Ryanair Holdings plc and SubsidiariesCondensed Consolidated Interim Income Statement measured in accordancewith IFRS (unaudited) Period Period ended ended Jun-30 Jun-30 2007 2006 •'000 •'000 ------- ------- Operating revenuesScheduled revenues 575,948 490,012Ancillary revenues 117,058 76,621 --------- ------- Total operating revenues - continuingoperations 693,006 566,633 --------- ------- Operating expenses Staff costs 75,927 56,736 Depreciation 34,778 35,587 Fuel & oil 190,389 167,462 Maintenance, materials & repairs 12,630 10,700 Marketing & distribution costs 8,314 5,724 Aircraft rentals 18,182 12,398 Route charges 63,173 48,079 Airport & handling charges 101,807 67,875 Other 30,344 25,370 --------- ------- Total operating expenses 535,544 429,931 --------- ------- Operating profit - continuing operations 157,462 136,702 --------- ------- Other income/(expenses) Finance income 20,056 12,854 Finance expense (22,924) (20,613) Foreign exchange gain/(loss) 1,366 (322) --------- ------- Total other income/(expenses) (1,502) (8,081) --------- ------- Profit before tax 155,960 128,621Tax on profit on ordinary activities (17,046) (12,941) --------- -------- Profit for the year - all attributableto equity holders of parent 138,914 115,680 ========= ======== Basic earnings per ordinary share euro 8.98 7.50 cent * Diluted earnings per ordinary share 8.88 7.46 euro cent * Number of ordinary shares (in 000's) * 1,547,099 1,542,201 Number of diluted shares (in 000's) * 1,564,182 1,551,683 *Adjusted for Share Split of 2 for 1 which occurred on February 26th, 2007. Page 1 Ryanair Holdings plc and SubsidiariesCondensed Consolidated Interim Balance Sheetmeasured in accordance with IFRS (unaudited). Jun-30 Mar-31 2007 2007 •'000 •'000 ------- -------Non-current assetsProperty, plant and equipment 2,945,897 2,884,053Intangible assets 46,841 46,841Available for sale financial assets 354,151 406,075Derivative financial instruments 989 - ----------- -----------Total non-current assets 3,347,878 3,336,969 ----------- ----------- Current assetsInventories 2,260 2,420Other assets 76,292 77,707Trade receivables 25,335 23,412Derivative financial instruments 56,258 52,736 ---------- -----------Restricted cash 327,092 258,808Financial assets: cash > 3 months 617,184 592,774Cash and cash equivalents 1,345,064 1,346,419 ----------- ------------Total current assets 2,449,485 2,354,276 ----------- ------------Total assets 5,797,363 5,691,245 =========== ============ Current liabilitiesTrade payables 48,744 54,801Accrued expenses and otherliabilities 846,011 807,136 Current maturities of debt 221,422 178,918Derivative financial instruments 42,208 56,053Current tax 33,901 20,822 ---------- -----------Total current liabilities 1,192,286 1,117,730 ---------- ----------- Non-current liabilitiesProvisions 31,014 28,719Derivative financial instruments 49,724 58,666Deferred income tax liability 147,569 151,032Other creditors 125,239 112,177Non-current maturities of debt 1,617,413 1,683,148 ---------- -----------Total non-current liabilities 1,970,959 2,033,742 ---------- ----------- Shareholders' equityIssued share capital 9,829 9,822Share premium account 610,414 607,433Treasury shares (40,053) -Retained earnings 2,044,125 1,905,211Other reserves 9,803 17,307 ---------- -----------Shareholders' equity 2,634,118 2,539,773 ---------- ----------- Total liabilities and shareholders'equity 5,797,363 5,691,245 ========== =========== Page 2 Ryanair Holdings plc and SubsidiariesCondensed Consolidated Interim CashflowStatement measured in accordance with IFRS (unaudited) June-30 Jun-30 2007 2006 €000 €000 ------ ------ Operating activities Profit before tax 155,960 128,621 Adjustments to reconcile profits before tax to net cash provided by operating activities Depreciation 34,778 35,587 Decrease/(increase) in inventories 160 (812) (Increase)/decrease in trade receivables (1,923) 2,699 Decrease in other current assets 10,313 7,111 (Decrease) in trade payables (6,057) (27,503) Increase in accrued expenses 36,260 92,271 Increase in other creditors 13,062 25,215 Increase in maintenance provisions 2,295 2,930 (Increase) in interest receivable (7,096) (315) Increase in interest payable 2,468 2,014 Retirement costs 147 165 Share based payments 8,076 1,043 Income tax (186) (51) --------- -----------Net cash provided by operatingactivities 248,257 268,975 --------- ----------- Investing activities Purchase of property, plant and (96,622) (21,277) equipment (Investment) in restricted (68,284) - cash (Investment)/reduction in financial (24,410) (609,025) assets: cash > 3 months --------- -----------Net cash used in investing activities (189,316) (630,302) --------- ----------- Financing activities Cost associated with repurchase (40,053) - of shares Net proceeds from shares 2,988 1,038 issued Decrease in long term debt (23,231) (36,346) --------- -----------Net cash provided by financing activities (60,296) (35,308) --------- ----------- (Decrease) in cash and cash equivalents (1,355) (396,635)Cash and cash equivalentsat beginning of year 1,346,419 1,439,004 --------- -----------Cash and cash equivalentsat end of period 1,345,064 1,042,369 ========= =========== Page 3 Ryanair Holdings plc and SubsidiariesCondensed Consolidated Interim Statement of Recognised Incomeand Expense measured in accordance with IFRS (unaudited) June-30 Jun-30 2007 2006 •'000 •'000 ------- ------- Cash flow hedge reserve Effective portion of changesin fair value of cash flow hedges 25,463 5,715 ------- --------Net movements into cash flow hedge reserve 25,463 5,715 ------- --------Net change in fair value of available forsale financial asset (41,043) - ------- --------Income and expense recognised directlyin equity (15,580) 5,715 ------- -------- ------- --------Profit for the period 138,914 115,680 ------- -------- ------- --------Total recognised income and expense 123,334 121,395 ======= ======== Other itemsCondensed Consolidated Interim changes in shareholders' equity Share Ordinary premium Retained Treasury Other shares account earnings Shares reserves Total •'000 •'000 •'000 •'000 •'000 •'000 ------- ------- --------- ------- ------- ---------- Balance at April 1, 2007 9,822 607,433 1,905,211 - 17,307 2,539,773 Repurchase of ordinary equity shares - - - (40,053) - (40,053) Issue of ordinary equity shares 7 2,981 - - - 2,988 Effective portion of changes infair value of cash flow hedges - - - - 25,463 25,463 Net change in fair value ofavailable for sale financialasset - - - - (41,043) (41,043) Share based payments - - - - 8,076 8,076 Profit for the period - - 138,914 - - 138,914 ------- ------- --------- ------- ------- ---------- Balance at June 30, 2007 9,829 610,414 2,044,125 (40,053) 9,803 2,634,118 ======= ======= ========= ======= ======= ========== Page 4 Ryanair Holdings plc and SubsidiariesCondensed Consolidated Interim Income Statementmeasured in accordance with US GAAP (unaudited) Period Period ended ended Jun-30 Jun-30 2007 2006 €000 €000 Operating revenues Scheduled revenues 575,948 490,012 Ancillary revenues 117,058 76,621 --------- ---------Total operating revenues-continuing operations 693,006 566,633 --------- --------- Operating expenses Staff costs 75,927 56,844 Depreciation 35,325 35,969 Fuel & oil 190,389 167,462 Maintenance, materials & repairs 12,630 10,700 Marketing & distribution costs 8,314 5,724 Aircraft rentals 18,182 12,398 Route charges 63,173 48,079 Airport & handling charges 101,807 67,875 Other 30,344 25,371 --------- --------- Total operating expenses 536,091 430,422 --------- --------- Operating profit - continuing operations 156,915 136,211 --------- --------- Other income/(expenses) Finance income 20,056 12,854 Finance expense (18,426) (18,414) Derivative financial instruments (2,738) - Foreign exchange gain/(loss) 1,366 (321) --------- ---------Total other income/(expenses) 258 (5,881) --------- --------- Income before taxation 157,173 130,330 Taxation (17,196) (13,155) --------- ---------Net income attributable to equityholders of parent 139,977 117,175 ========= ========= Basic earnings per ADS (euro cent)* 45.24 37.99 Diluted earnings per ADS (euro cent)* 44.74 37.76 No. of ordinary shares (in 000's)* 1,547,099 1,542,201 Diluted no. of ordinary shares (in 000's)* 1,564,182 1,551,683 (5 ordinary shares equal 1 ADS) Page 5 *Adjusted for share split of 2 for 1 which occurred on February 26, 2007 Ryanair Holdings plc and SubsidiariesSummary of significant differences between IFRS and US generallyaccepted accounting principles(unaudited) (A) Net income under US GAAP Jun-30 Jun-30 2007 2006 •'000 •'000 Net income in accordance with IFRS 138,914 115,680AdjustmentsPensions - (108)Capitalised interest re aircraftacquisition programme 3,952 1,817Derivative financial instruments (2,738) -Taxation- effect of above adjustments (151) (214) -------- --------Net income in accordance with US GAAP 139,977 117,175 ======== ======== (B) Consolidated cashflow statement inaccordance with US GAAP Jun-30 Jun-30 2007 2006 •'000 •'000 Cash inflow from operating activities 252,209 270,792Cash (outflow) from investing activities (193,268) (632,119)Cash (outflow) from financing activities (60,296) (35,308) ---------- ----------(Decrease) in cash and cash equivalents (1,355) (396,635)Cash and cash equivalents at beginning of period 1,346,419 1,439,004 ---------- ----------Cash and cash equivalents at end of period 1,345,064 1,042,369 ========== ========== Cash and cash equivalents under US GAAP 1,345,064 1,042,369Restricted cash 327,092 204,040Deposits with a maturity of > three months 617,184 937,952 ---------- ----------Total cash 2,289,340 2,184,361 ========== ========== Page 6 Ryanair Holdings plc and SubsidiariesSummary of significant differences between IFRS and US generallyaccepted accounting principles(unaudited) (C) Shareholders' funds - equity Jun-30 Jun-30 2007 2006 •'000 •'000 ------- ------- Shareholders' equity as reported in the consolidated balance sheets in accordancewith IFRS 2,634,118 2,109,861 Adjustments:Pension - 9,134Capitalised interest (net of amortisation)regarding aircraft acquisition programme 44,273 31,265Derivative financial instruments (16,078) -Minimum pension liability (net of tax) - (4,295)Tax effect of adjustments (excluding (3,525) (6,145)pension) --------- ---------Shareholders' equity as adjusted to accordwith US GAAP 2,658,788 2,139,820 ========= ========= Opening shareholders' equity under US GAAP 2,567,522 2,020,449 Comprehensive incomeUnrealised gains on derivative financialinstruments (net of tax) 21,321 115Available for sale financial asset (41,043) -Net income in accordance with US GAAP 139,977 117,175 --------- ---------Total comprehensive income 120,255 117,290 Share based payments 8,076 1,043Stock issued for cash 2,988 1,038Repurchase of stock (40,053) - --------- ---------Closing shareholders' equity in accordancewith US GAAP 2,658,788 2,139,820 ========= ========= Page 7 Ryanair Holdings plc Management Discussion and Analysis of Results Quarter ended June 30, 2007 Profit after tax increased by 20% to €138.9m, compared to €115.7m in the quarterended June 30, 2006. These results reflect an 18% increase in passenger numbers,flat fares (including checked in baggage revenues) and very strong growth inancillary revenues. The growth in revenues was offset by a combination ofincreased airport costs which rose by 50% to €101.8m arising from the doublingof airport charges at Stansted and higher charges at Dublin Airport and a oneoff step up in staff costs, due to higher cabin crewing ratios, which rose by34% to €75.9m. Total operating revenues increased by 22% to €693.0m, which wasfaster than the 18% growth in passenger volumes, as average fares remained flatand ancillary revenues grew by 53% to €117.1m. Total revenue per passenger as aresult increased by 4%, whilst Passenger Load Factor decreased by 2 points to82% during the quarter. Total operating expenses increased by 25% to €535.5m, due to the increased levelof activity, and the increased costs, associated with the growth of the airline.Fuel, which represents 36% of total operating costs compared to 39% last year,increased by 14% to €190.4m due to a decrease in the US dollar cost per gallon,a positive movement in the US dollar exchange rate versus the euro and areduction in fuel consumption arising from the installation of winglets. Staffcosts rose by 34% reflecting an increase in cabin crewing ratios and Airport andHandling charges increased by 50% to €101.8m arising from the doubling ofairport charges at Stansted and higher charges at Dublin Airport. As a resultunit costs increased by 5% and operating margins decreased by 1 point to 23%,whilst operating profit increased by 15% to €157.5m. Net Margins remained flat at 20% for the reasons outlined above. Earnings per share have increased by 19.7% to 8.98 cent for the quarter. Balance Sheet The strong growth in profitability continues to positively impact the balancesheet with Total Cash increasing by €91.3m to €2,289.3m despite funding a €40mshare buy-back programme and an additional €96.6m in capital expenditure largelyfrom internal resources. Total debt net of repayments decreased during thequarter by €23.2m. Shareholders' Equity at June 30, 2007 increased by €94.3m to€2,634.1m, compared to March 31, 2007 due to the €138.9m increase inprofitability during the quarter, the €2.9m exercise of share options and afurther €7.5m arising from the impact of the IFRS accounting treatment forderivative financial assets, pensions and stock options offset by the sharebuyback of €40m. Detailed Discussion and Analysis Quarter ended June 30, 2007 Profit after tax, increased by 20% to €138.9m due to an 18% increase inpassenger numbers, flat fares (including checked in baggage revenues) and stronggrowth in ancillary revenues. The growth in revenues was offset by a combinationof increased airport costs which rose by 50% to €101.8m arising from thedoubling of airport charges at Stansted and higher charges at Dublin Airport anda one off step up in staff costs, due to higher cabin crewing ratios, which roseby 34% to €75.9m. Operating margins, as a result, decreased by 1 point to 23%,which in turn resulted in operating profit increasing by 15% to €157.5m comparedto quarter ended June 30, 2006. Total operating revenues increased by 22% to €693.0m whilst passenger volumesincreased by 18% to 12.6m. Total revenue per passenger increased by 4% due tostrong ancillary revenue growth. Scheduled passenger revenues increased by 18% to €575.9m due to an 18% increasein traffic reflecting increased passenger numbers on existing routes and thesuccessful launch of our new routes and bases. During the quarter average fares(including checked baggage revenues) were flat reflecting the soft yieldenvironment. Load factor decreased by 2 points to 82% during the quarter due toa combination of softer market conditions and the 21% increase in seat capacity. Ancillary revenues continue to grow faster than passenger volumes with revenuesincreasing by 53% to €117.1m in the quarter. This performance reflects thestrong growth in on board sales, excess baggage revenues, non-flight scheduledrevenues, and other ancillary products. Total operating expenses rose by 25% to €535.5m due to the increased level ofactivity, and the increased costs associated with the growth of the airlineparticularly higher airport charges and staff costs. Total operating expenseswere also adversely impacted by a 6% increase in average sector length. Staff costs have increased by 34% to €75.9m. This primarily reflects a 29%increase in average employee numbers to 4,726, the impact of pay increasesgranted during the quarter and a €7m charge for a share option grant made toeligible employees. Employee numbers rose due to an increase in cabin crewingratios as a result of a new EU working directive. Pilots, who earn higher thanthe average salary, accounted for 34% of the increase in employees whilst cabincrew accounted for 56% of the increase during the quarter. Depreciation and amortisation decreased by 2% to €34.8m. This reflects theaddition of 16 lower cost 'owned' aircraft in the fleet this quarter compared toJune 30, 2006, offset by a revision in the residual value of our fleet toreflect current market valuations and the positive impact on amortisation of thestronger euro versus the US dollar. Fuel costs rose by 14% to €190.4m due to a 29% increase in the number of hoursflown offset by a 10% decrease in the average US dollar cost per gallon of fuelhedged and the positive impact of the strengthening of the euro versus the USdollar in addition to a reduction in fuel consumption due to the installation ofwinglets on our entire Boeing 737-800 fleet. Maintenance costs increased by 18% to €12.6m, due to a combination of theincrease in the number of leased aircraft from 21 to 35, and the positive impactof the strengthening of the euro versus the US dollar exchange rate. Marketing and distribution costs increased by 45% to €8.3m due to the growth ofthe airline and the number of routes operated which rose by 54% to 441 at thequarter end and the number of bases which increased by 4 to 20. Aircraft rental costs increased by 47% to €18.2m reflecting an additional 14leased aircraft operating during the quarter compared to the same period lastyear. Route charges rose by 31% to €63.2m due to an increase in the number of sectorsflown and an increase of 6% in the average sector length. Airport and handling charges increased by 50% to €101.8m. This is higher thanthe growth in passenger volumes and reflects the impact of the doubling of costsat Stansted Airport and higher charges at Dublin Airport, offset by lower costsat new airports and bases. Other expenses increased by 20% to €30.3m, which is lower than the growth inancillary revenues due to improved margins on some existing products and costreductions on some indirect costs. Operating margins have declined by 1 point to 23% due to the reasons outlinedabove whilst operating profits have increased by 15% to €157.5m during thequarter. Interest receivable has increased by 56% to €20.1m for the quarter due to acombination of higher levels of cash on hand and increases in average depositrates earned in the quarter. Interest payable increased by 11% to €22.9m due to the drawdown of further debtto part fund the purchase of new aircraft and the adverse impact of higherinterest rates. Foreign exchange gains during the quarter of €1.4m are primarily due to thepositive impact of changes in the US dollar exchange rate against the euro. The Company's Balance Sheet continues to strengthen due to the strong growth inprofits during the quarter. The Company generated cash from operating activitiesof €248.3m which part funded our €40m share buy back programme and capitalexpenditure incurred during the quarter with the balance reflected in Total Cashof €2,289.3m. Capital expenditure amounted to €96.6m which largely consisted ofadvance aircraft payments for future aircraft deliveries and the delivery of oneaircraft. Long term debt, net of repayments, decreased by €23.2m during thequarter. Shareholders' Equity at June 30, 2007 increased by €94.3m to €2,634.1m, comparedto March 31, 2007 due to the €138.9m increase in profitability during thequarter, the €2.9m exercise of share options and a further €7.5m arising fromthe impact of the IFRS accounting treatment for derivative financial assets,pensions and stock options offset by the share buyback of €40m. Notes to the Financial Statements 1. Statement of compliance These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the most recent published consolidated financial statements of the Group. The Audit Committee approved the consolidated financial statements for the quarter ended June 30, 2007 on July 27, 2007. 2. Significant accounting policies Except as stated otherwise below, this quarter's financial information has been prepared in accordance with the accounting policies set out in Ryanair's most recent published consolidated financial statements, which were prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the EU. 3. Generally Accepted Accounting Policies The Management Discussion and Analysis of Results for the quarter ended June 30, 2007 and the comparative year are based on the results reported under the group's IFRS accounting policies. 4. Estimates The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. Except as described below, in preparing these consolidated financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied in the most recent published consolidated financial statements. During the quarter ended June 30, 2007 management reassessed its estimates of the recoverable amount of aircraft residual values following certain recent aircraft disposals. 5. Seasonality of operations The Company's results of operations have varied significantly from quarter to quarter, and management expects these variations to continue. Among the factors causing these variations are the airline industry's sensitivity to general economic conditions and the seasonal nature of air travel. Accordingly the first half-year typically results in higher revenues and results. 6. Income tax expense The Group's consolidated effective tax rate in respect of operations for the three months ended June 30, 2007 was approximately 11 percent, in line with the same period last year. 7. Capital and reserves Share buy back programme. During the last two months we completed a share buy back of 37.6m shares at a cost of approx. €187m. This share buy back represents 2.5% of the pre-existing issued share capital of the company. The shareholder authority for such a buy back expires at AGM on September 20, 2007. 8. Share based payments The terms and conditions of the share option programme are disclosed in the most recent published consolidated financial statements. In June 2007 a further grant on similar terms was made to eligible employees, with a consequent charge to the income statement in the quarter of approximately €7.0m. 9. Contingencies The Group is engaged in litigation arising in the ordinary course of its business. Management does not believe that any such litigation will individually or in aggregate have a material adverse effect on the financial condition of the Group. Should the Group be unsuccessful in these litigation actions, management believes the possible liabilities then arising cannot be determined but are not expected to materially adversely affect the Group's results of operations or financial position. Capital commitments During the quarter ended June 30, 2007 the Group announced the purchase of 27 more Boeing 737-800s. This brings Ryanair's total firm orders for B737-800s to 308 and the total fleet size (including planned disposals) to 262 by 2012. These additional aircraft are due for delivery in financial year ending March 31, 2010. 10. Post balance sheet events Aer Lingus Appeal Ryanair is in the process of preparing an appeal to the European Court of First instance against a decision by the European Commission prohibiting its proposed acquisition of Aer Lingus, following the partial floatation of the Irish flag carrier airline. In October 2006, Ryanair notified the European Commission that it had acquired 19.16% of the ordinary share capital in Aer Lingus (this was subsequently increased to 25.2%). Ryanair offered remedies to the Commission in the first phase of the Commission's merger investigation, something that has not been done in other previous airline mergers-including Air France/KLM. Despite demonstrating that the merger of these two airlines would have significant consumer benefits and efficiencies, and despite offering substantial remedies - including guaranteed fare and fuel levy reductions/eliminations, and large numbers of slot surrenders - the Commission nevertheless prohibited the merger in June 2007. Ryanair has two months from the date of decision to submit an appeal. 11. Loans and borrowings The following is the movement in loans and borrowings (non-current and current) during the quarter. •'000 Balance at April 1, 2007 1,862.1 Decrease in long term debt (23.2) ------- Balance at June 30, 2007 1,838.9 ------- 12. Fin 48 "Accounting for uncertainty in income taxes" (US GAAP) The Company adopted the provisions of FIN 48 on April 1, 2007. The implementation of FIN 48 did not have a material impact on the Company's financial statements. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RYA.L