22nd Nov 2005 07:02
easyJet PLC21 November 2005 Preliminary results for the 12 months to September 2005 GOOD GROWTH REFLECTED IN 21% RISE IN PASSENGERS AND REVENUES UP 23% PROFITS BENEFIT FROM ACCELERATION IN COST REDUCTIONS • Profit before tax up 11% in H2, up 9% for full year to £68m (£62m) • Reported earnings per share up by 3% to 10.7p • Passenger numbers up 21% to 29.6m with load factor improved to 85.2% from 84.5% • Total revenue per seat up 2% to £38.66 • Ancillary revenue per seat ahead by 17% reflecting our continued focus in this area • Fuel cost per seat up 68% in H2, up 47% for full year • Reduction in cost base accelerated with cost per seat ex-fuel and goodwill amortisation down 7% in H2 and 4% for the year, with reductions achieved in all key areas. • Network developing rapidly with 72 new routes added in last year, giving a total of 212. • Strong growth in continental Europe, revenue up 78% with Germany on track Commenting on the results and prospects, Ray Webster, Chief Executive, said: "We've made sound progress in the year with good growth in passenger numbers andrevenue. Despite the fuel price increases we've minimised the rise in costs and,excluding fuel, our cost base per seat has fallen by a useful 4.4%: indeed weaccelerated our reduction in ex-fuel costs during the year, clearly benefitingour profits. I'm pleased also with the expansion of our network and with 72 newroutes added we are in good shape for future growth. "In the current financial year we expect to deliver capacity growth, measured byavailable seats, of 15%. Our strong focus on controllable costs will continueand should result in a 3-5% reduction in cost per seat, before fuel. While weanticipate a slight reduction in total revenue per seat, ancillary revenues willimprove with double digit percentage growth supported by a series of newinitiatives. Overall, we therefore expect to achieve mid to high single-digitpercentage profit growth." For further details please contact: easyJet plc Andrew Barker, Investor Relations +44 (0) 1582 525982 Press: Toby Nicol, Corporate Communications +44 (0) 1582 525 339 There will be an analyst presentation at 9:00 hours GMT on 22 November 2005 atABN AMRO, 250 Bishopsgate, London, EC2M 4AA. A live webcast of the presentationwill be available at www.easyJet.com. There will be an analyst and investor conference call at 14:00 hours GMT on 22November 2005. For further details, contact Sara Freeman at Financial Dynamicson 020 7269 7134. Chairman's statement During the last financial year, easyJet has begun the process of building a newmanagement team. Where possible, this process was conducted in a phased manner,so as to ensure that sufficient continuity has been maintained to retain therequired focus on the business. In 2005 our financial performance improved with a 9.1% increase in profit beforetax. This has been achieved due to a strong emphasis on revenue and costmanagement. We recognise the need to continue to enhance shareholder value anda new long term incentive plan for management based on increases in return onequity was introduced. This received shareholder approval at the ExtraordinaryGeneral Meeting held on 15 September 2005. A key feature of this plan is therequirement for share ownership by senior management. In March, we welcomed Jeff Carr as Group Finance Director. Jeff's previousexperience in companies in highly competitive markets is already bringingbenefits to easyJet. In May, Ray Webster announced he would be stepping down from the Board on 1December 2005. Ray's contribution to the growth of easyJet over the last tenyears has been immense and he will be greatly missed. A rigorous search processresulted in the appointment of Andrew Harrison to the Board as our new ChiefExecutive Officer, and I am sure that he will make a significant contribution toimproving easyJet's performance. Andrew will take over from Ray on 1 December. Additionally, Ed Winter, our Chief Operating Officer, and Stephen Connock, ourPeople Director, retired in September 2005. Mike Szucs has been promoted from within the Group to Chief Operating Officer.Mike has more than ten years' airline experience and has been with easyJet since2003. Mike Campbell has joined the management team as People Director. Mikerecently held a number of senior management roles at the Waterford WedgwoodGroup. Our search for a Chief Commercial Officer has recently concluded and I amdelighted to announce the appointment of Saad Hammad who joined the managementteam on 7 November. Managing increased profitability from easyJet's continued growth as a highvolume business necessitates the formation of a high quality senior managementgroup. The building of the top team along with the long term incentive plan,with its emphasis on share ownership and its availability to our top 50managers, give me confidence in our ability to grow shareholder returns. As previously announced, Colin Day and Tony Illsley both stood down from theBoard on 30 September 2005, and Amir Eilon, representing easyGroup on the Board,will not be offering himself for re-election. All three have been excellentparticipants in Board deliberations and I am most grateful for theircontributions. In May 2005, following the announcement that Amir Eilon would be stepping down,Stelios Haji-Ioannou rejoined the Board as a Non Executive Director. We arefortunate to have appointed as an Independent Non Executive Director DavidBennett, the Finance Director of Alliance and Leicester plc, a FTSE 100 company.David's appointment was effective from 1 October 2005. I look forward toDavid's contribution to Board matters and his stewardship of the AuditCommittee. Despite high fuel prices, we have continued the trend from the first half andmade significant reductions in our non-fuel cost base. In highly competitivemarkets, the challenge of simply improving shareholder value is unrelenting, butthe quality of our team throughout the whole Group gives me confidence in ourfuture. We would not have achieved what we have without the dedication of allour staff, and on behalf of the board I offer them many thanks and muchappreciation. Sir Colin ChandlerChairman21 November 2005 Chief Executive's review When I first joined easyJet we'd set ourselves some big targets - increasing ouraircraft numbers ten-fold (to 20!), achieving our own operating licence, andreaching profitability. It seems a very long time since 1995 when we had two leased Boeing 737-200s andessentially acted as a "virtual airline" contracting everything from pilots tocheck-in staff. The first booking was taken on 18 October 1995, from a small,rented tin shed in a corner of Luton airport, called easyLand. Our concept ofeliminating travel agents was at the time radical and untested, but proved to besuccessful. On 10 November 1995, when the inaugural flight took to the skiesfrom London Luton airport to Glasgow it was carrying 120 passengers. The business has come a very long way in the last ten years. We acquired, withgreat excitement, our first owned aircraft in 1996 and began our firstinternational routes in the same year. Our much prized Air OperatorsCertificate was granted in 1997, the year we also reached break-even for thefirst time, and placed an order for 12 brand new Boeing 737-300s for delivery by2000. In 1998, the first seat was sold online at easyJet.com, we introduced our "Theweb's favourite airline" strapline and led the airline industry in developingthe internet as the preferred distribution channel. In addition that year wepurchased 40% of the Swiss Charter operation, TEA Basel AG, based in Basel. The business continued to grow, and was floated on the London Stock Exchangefive years ago on 22 November 2000. We acquired Go Fly in 2002 to createEurope's number one low-cost airline. A well planned and successfultransformation followed. Airbus was appointed as our preferred aircraftsupplier and we ordered a massive 120 aircraft for delivery over five years.Our first Airbus went into service in Geneva in 2003, and since that date noother airline has taken Airbus aircraft at the rate that we have. From our small and often difficult beginnings, we now have a huge presenceacross Europe with 212 routes across 64 of Europe's best-placed and most popularairports. Getting there wasn't an easy ride - and not for those with weak stomachs!easyJet was a small fish in a very large bowl. However, commitment anddetermination drove our people to believe and recognise that they had a productthat would change the lives of consumers forever. Along the way, we pickedfights with bigger airlines which tried or threatened to try to useanti-competitive behaviour to block our way. I remember with pride our battleswith KLM, British Airways and most of all Swissair, when we operated a charterservice (complete with bus ticket and a tent) to beat their monopoly on theGeneva Barcelona service and deliver low prices to customers. I would like tothank our employees for their professionalism and dedication to our uniquevalues and customer service. Today, easyJet is still growing. During 2005 we've reached several majormilestones: we flew our 100 millionth passenger, and we took delivery of our100th Aircraft, as well as our 50th Airbus A319. In the past ten years we havegrown to an airline which carries 30 million passengers a year: a feat whichtook Ryanair twice the time to achieve. Consistent with our values ofdelivering excellent service to our customers through our people, we havecelebrated our 10th birthday which has been marked by 15 parties at our 15 basesand a number of competitions for passengers. I am proud of having led easyJet as it shook up the industry in the last tenyears. We have provided a huge increase in the range of services available, allat lower prices and the customer has rewarded us by travelling in numbers thatwould have seemed impossible a few years ago. easyJet has led the way, but thecustomer is the clear winner and they have responded by travelling morefrequently, expanding the market. We have changed the way that people think about travel, and, in doing so, haveopened up the continent by making it cheaper for people to fly. Europe is nowavailable to everyone whenever they want - both for business and leisure travel.We've been responsible for thousands of life enhancing experiences andjourneys made; made millions of introductions and forged countless friendships.We've launched long distance love affairs; mended broken hearts and helpedpeople to realise their dreams. I wish easyJet and my successor, AndrewHarrison, all the best for the future as easyJet continues to grow. Results I believe the airline is in good shape for Andrew. These are commendableresults in difficult conditions delivered partly through a very strongyear-round focus on costs. Safety is our primary concern, and our internal procedures and processes ensuredthat there were no significant incidents during the year. The operation has runsuperbly during the year - with on-time performance remaining excellent at 80.2%of all flights arriving within 15 minutes of scheduled arrival time. In the year ended 30 September 2005, easyJet made a profit before tax of £67.9million, an increase of 9.1% on the prior year. Profit before tax and goodwillamortisation for the year was £85.3 million, an increase of 7.6% by comparisonto 2004. Basic earnings per share for the year were 10.68 pence (10.34 pence in2004). Return on equity before goodwill amortisation was 7.4% (7.5% in 2004). Despite increasing levels of competition, we managed to increase our revenue perseat from £37.88 in 2004 to £38.66, with our load factor rising from 84.5% in2004 to 85.2% in 2005. With the increasing load factor and increase in revenueper seat, total revenues grew 23.0% to £1,341.4 million. The number ofpassengers rose 21.4% to 29.6 million. The average number of aircraft operatedduring the year increased 17.7% to 94. Fuel costs were 50.5% higher on average than they were during the previousfinancial year - costing us £90.0m in the year after taking growth into account.In fact unrelenting fuel prices caused our cost per seat, before goodwillamortisation, to increase from £35.12 in 2004 to £36.20 in 2005. So, I am particularly pleased with the results of the very strong focus in allother areas of the business this year. Cost per seat excluding goodwillamortisation and fuel decreased 4.4% from £30.03 to £28.71 with a 6.7% reductionin the second half of the year. During the year we have finalised a number ofinitiatives - including the signing of a major new long term maintenanceagreement with SR Technics which is expected to lower our Airbus maintenancecosts, excluding engines, by 25% over the life of the contract. We increasedcrew efficiency, reduced ground handling costs and we continue to benefit fromthe introduction of the Airbus A319. This is the result of an exceptional amount of hard work by our people. But,despite the tangible progress, there is still more to do to provide animprovement to the underlying performance. We continue to fight againstunjustifiable above inflation increases at airports across Europe and for lowerhandling charges in Spain. While we commend the UK government for resistingcalls for a £250m subsidy from financially healthy airlines to the financiallyweak, I wish that other European governments would demonstrate suchbroadmindedness - too many national governments still seem intent on protectingtheir national airlines - whatever the cost. Outlook easyJet has a new management team in place which is clearly incentivised todeliver shareholder value through return on equity targets, as agreed byshareholders at our EGM on 15 September 2005. In the current financial year weexpect to deliver capacity growth, measured by available seats, of 15%. Ourstrong focus on controllable costs will continue and should result in a 3-5%reduction in cost per seat, before fuel. While we anticipate a slight reductionin total revenue per seat, ancillary revenues will improve with double digitpercentage growth supported by a series of new initiatives. Overall, wetherefore expect to achieve mid to high single-digit percentage profit growth. Ray WebsterChief Executive21 November 2005 Operational and financial review Strategy and business model During the year, management reviewed with the Board the implementation ofeasyJet's strategy and made changes to ensure that the business remains wellpositioned in an increasingly competitive marketplace. The business modelrequired no change. It is tried and tested and has withstood the challenges ofthis difficult year. Being mindful of the business environment, our strategy has three cornerstones:'focus on our customers', 'own our markets' and 'reduce our costs'. Focus on our customers We know what our customers value, and we design our core product and ancillaryservices accordingly. Every year, we aim to create better value for ourcustomers, whilst decreasing our costs to maintain or improve competitiveness. Own our markets We will develop and aggressively defend our chosen markets against competitors.This means quickly establishing a strong base, offering numerous routes withmultiple frequencies to existing and new points on the network, and establishinga strong brand in the market. Reduce our costs Management is focused on increasing the return on equity. In order to achievethis, we will continue to challenge industry norms and further reduce our costbase through being highly productive, innovative and taking advantage of ourscale and local knowledge in procuring goods and services. For example, in thecoming year we will see benefit from the long term maintenance contract that wesigned with SR Technics in August 2005. We will withdraw capacity from any existing markets that are poorly performingor airports which are over priced. We are confident that this strategy will bring clarity and focus to the effortsof our people and will provide easyJet with its unique strength to remain bestin class, with a leading position in the growing European air travel market. Network We have continued to develop the network during the year in a manner thatabsorbed the 18.8% growth in new capacity, measured by sectors operated, withoutaffecting operational performance. At 30 September 2005, the easyJet networkcovered 212 routes and 64 airports, compared to 153 and 44 at the same time lastyear. Thirteen routes ceased operations in the year due to their poorperformance. During the year, we have added 21 new cities to the easyJet network: Almeria,Asturias, Bratislava, Cagliari, Cork, Grenoble, Hamburg, Knock, Krakow,Maastricht, Mahon, Milan, Murcia, Olbia, Pisa, Riga, Shannon, Tallinn, Turin,Valencia, and Warsaw. Basel opened as a new base during the year. Further growth is planned for the forthcoming season and we have alreadyannounced four new cities: Bournemouth, Doncaster, Lisbon, and Bremen. Weannounced last month the addition of a sixteenth base in Milan: our firstItalian base. Operational and financial review (continued) Fleet and aircraft financing At the end of the financial year, the fleet comprised 54 Boeing 737s and 55Airbus 319s, giving a total of 109 aircraft. The fleet at the start of the yearcomprised 71 Boeing 737s and 21 Airbus A319s . Details of the fleet at 30September 2005 are as follows: Under Changes in Future Options Owned operating Total year deliveries (note 1) lease Airbus A319s 18 37 55 34 65 120Boeing 737-700s - 32 32 (1) - -Boeing 737-300s (note 2) - 22 22 (16) - - ------ ------ ------ ------ ------ ------ 18 91 109 17 65 120 ====== ====== ====== ====== ====== ====== Notes: 1. Options may be taken as any Airbus A320 family aircraft and are valid until 2012. 2. Excludes one Boeing 737-300 which is held for sale at 30 September 2005. A further 65 Airbus A319 aircraft are planned to be delivered through toFebruary 2009. This will give us a modern fleet of aircraft that will underpinour high levels of asset utilisation and increase our operational efficiency.The average fleet age, currently 3.0 years (2004: 4.5 years), is expected tofall to approximately 2.3 years by 30 September 2006. Fleet changes: The total fleet over the period to 30 September 2008 based on contractualcommitments is as follows: Airbus A319s Boeing 737-700s Boeing 737-300s Total aircraft At 30 September 2004 21 33 38 92At 30 September 2005 55 32 22 109 At 30 September 2006 87 32 3 122At 30 September 2007 106 32 - 138At 30 September 2008 118 31 - 149 Whilst we are very confident of growing the business at this rate, we havecontractual rights with Airbus that allow us to moderate or accelerate ourcapacity growth within certain constraints. Aircraft financing Of the 34 aircraft that were delivered to easyJet during the year, 22 were soldto lessors and leased back under operating leases, and 12 were financed by debt. During the year, we continued to secure financing through mortgages and sale andleasebacks for the majority of the Airbus delivery stream. We have now committedfacilities available for 97 of the 120 Airbus aircraft ordered. Thearrangements include facilities for deliveries in 2006 and 2007. Our people At 30 September 2005 there were 4,152 employees in easyJet, an increase of 11.4%during the year from 3,727 at 30 September 2004, well below the overall growthrate in the business. This is because of management action to increase theefficiency of our crew, and our focus on a more efficient easyLand. Operational and financial review (continued) The following tables set forth certain consolidated operating and profit andloss account data. Internally at a company level, we look at both revenue and cost per seat flown.Each seat flown incurs a cost of capital: we try and minimise the cost of debtthrough effective financing; we incentivise our top management to deliver higherreturns on equity We continue to publish other operating data and performance measures, tofacilitate comparison with other airlines Selected consolidated operating data Year on year Year ended 30 September change(unaudited) 2005 2004 % Key performance indicatorsReturn on equity before goodwill amortisation (1) 7.4% 7.5% (0.1)ppProfit before tax and goodwill amortisation per seat (2) 2.46 2.75 (10.7)Revenue per seat (3) £38.66 £37.88 2.1Cost per seat excluding goodwill amortisation (4) £36.20 £35.12 3.1Cost per seat excluding goodwill amortisation and fuel (5) £28.71 £30.03 (4.4)Seats flown (millions) (6) 34.7 28.8 20.5 Output measuresNumber of aircraft owned/leased at end of year(7) 109 92 18.5Average number of aircraft owned/leased during year(8) 102.6 85.0 20.7Number of aircraft operated at end of year(9) 103 90 14.4Average number of aircraft operated during year(10) 94.0 79.9 17.7Sectors(11) 229,068 192,742 18.8Block hours(12) 401,588 328,074 22.4Number of routes operated at end of year 212 153 38.6Number of airports served at end of year 64 44 45.5Passengers (millions)(13) 29.6 24.3 21.4 Other performance measuresOperated aircraft utilisation (hours per day)(14) 11.7 11.2 4.5Owned/leased aircraft utilisation (hours per day)(15) 10.7 10.5 2.2Available seat kilometres ("ASK") (millions) (16) 32,141 25,448 26.3Load factor(17) 85.2% 84.5% 0.7ppRevenue passenger kilometres ("RPK")(millions)(18) 27,448 21,566 27.3Average sector length (kilometres) 926 884 4.8Average fare(19) £42.43 £42.28 0.4Revenue per ASK (pence)(20) 4.17 4.29 (2.7)Cost per ASK before goodwill amortisation (pence)(21) 3.91 3.95 (1.1) Footnotes can be found at the end of the operational and financial review. Operational and financial review (continued)Results of operations (unaudited) Year ended 30 September Year 2005 2004 on year change £ % £ % % million million Passenger revenue 1,254.2 93.5 1,029.3 94.3 21.8Ancillary revenue (22) 87.2 6.5 61.7 5.7 41.3 ------- -------Revenue(23) 1,341.4 100.0 1,091.0 100.0 23.0 Ground handling charges, including salaries (130.5) 9.7 (111.3) 10.2 17.2Airport charges (230.1) 17.2 (191.4) 17.5 20.2Fuel (260.2) 19.4 (146.9) 13.5 77.1Navigation charges (108.6) 8.1 (87.7) 8.0 23.8Crew costs (136.2) 10.2 (126.8) 11.6 7.4Maintenance (119.2) 8.9 (102.0) 9.3 16.9Advertising (32.8) 2.4 (30.5) 2.8 7.4Merchant fees & incentive pay (15.6) 1.2 (13.6) 1.2 15.0Aircraft insurance (19.3) 1.4 (19.8) 1.8 (2.6)Other costs(24) (80.0) 5.9 (71.7) 6.6 11.6 ------- -------EBITDAR(25) 208.9 15.6 189.3 17.4 10.4 Depreciation (16.4) 1.2 (19.2) 1.8 (14.4)Accelerated depreciation of 737-300 aircraft (2.7) 0.2 (6.1) 0.6 (55.7)Goodwill amortisation (17.4) 1.3 (17.1) 1.6 1.7Aircraft dry lease costs (123.7) 9.2 (96.4) 8.8 28.3 ------- -------Group operating profit (EBIT) 48.7 3.7 50.5 4.6 (3.6) Share of operating profit of The Big Orange Handling Company 0.2 0.0 0.2 - 15.9 Interest receivable 27.2 2.0 14.2 1.3 91.2Interest payable (8.2) 0.6 (2.7) 0.2 202.5 ------- -------Net interest receivable 19.0 1.4 11.5 1.1 65.2 Profit before tax 67.9 5.1 62.2 5.7 9.1 Tax (25.3) 1.9 (21.1) 1.9 19.7 ------- -------Retained profit for the year 42.6 3.2 41.1 3.8 3.7 ======= =======Earnings per share (pence)Basic 10.68 10.34 3.3 Diluted 10.43 10.11 3.1 Basic, before goodwill amortisation 15.03 14.64 2.7Diluted, before goodwill amortisation 14.68 14.33 2.4 Footnotes can be found at the end of the operational and financial review. Operational and financial review (continued) Financial year 2005 compared with financial year 2004 Revenue easyJet's revenue increased 23.0% from £1,091.0 million to £1,341.4 million,from financial year 2004 to financial year 2005. Revenue per seat increased2.1% from £37.88 to £38.66. Passenger revenue, the largest component, comprises the price paid for the seatless government taxes, such as Air Passenger Duty and VAT. It increased by21.8% from £1,029.3 million to £1,254.2 million, driven by a 21.4% growth inpassenger numbers from 24.3 million to 29.6 million, and a 0.4% increase inaverage fares. The number of passengers carried reflected a 17.7% increase inthe size of the easyJet fleet in operation from an average of 79.9 aircraft toan average of 94.0 aircraft and a small increase in the average load factorachieved from 84.5% to 85.2%. Growth was particularly strong in continental Europe, with intra-Europeanrevenues growing by 78%. The performance at our German bases was the key driverto this growth. Ancillary revenue includes credit card fees, excess baggage charges, sportingequipment fees, infant fees, change fees and rescue fees, profit share fromin-flight sales of food, beverages, and boutique items, commissions receivedfrom products and services sold such as hotel bookings, car hire bookings andtravel insurance, less chargebacks. In 2005, £87.2 million was earned fromancillary revenues, up 41.3% from 2004. This has been driven by renegotiationof key contractual arrangements and more consistent application of policies onadditional charges. Ground handling charges, including salaries easyJet's ground handling charges increased by 17.2% from £111.3 million to£130.5 million, from financial year 2004 to financial year 2005. The increasein ground handling charges reflects the 18.8% increase in the number of sectorsflown, set off against mix savings as a result of network expansion decisionsand our continued efforts to work with our suppliers. We exited expensiveairports such as Zurich, and expanded at lower cost locations such as Basel andBerlin. Airport charges easyJet's external airport charges increased by 20.2% from £191.4 million to£230.1 million from financial year 2004 to financial year 2005. This increasewas attributable to the growth in passengers carried of 21.4%, inflationary costincreases at regulated airports offset by the beneficial impact of growthcentred at lower cost airports such as Basel and Berlin. Fuel easyJet's fuel costs increased by 77.1% from £146.9 million to £260.2 millionfrom financial year 2004 to financial year 2005. The increase was significantlyhigher than the 22.4% increase in number of block hours flown. This change isprimarily due to a 50.5% increase in easyJet's average US dollar fuel cost pertonne, compared with the previous year, resulting in additional costs to easyJetof £90.0 million. The strengthening of the value of sterling against the USdollar, the currency in which fuel prices are denominated, over the course offinancial year 2005 provided a set off benefit of approximately £8.0 million.In addition, a 4.8% increase in sector length, the introduction of new aircraftand increased optimisation of route planning aided the efficiency of easyJet'sfuel consumption. Benefits obtained from Group fuel hedging activities were£12.3 million. Navigation charges easyJet's navigation charges increased by 23.8% from £87.7 million to £108.6million from financial year 2004 to financial year 2005. This increase wasprincipally attributable to a 26.3 % increase in the ASKs flown in financialyear 2005, set off against reductions in cost per kilometre flown in Germany,France and the UK. Operational and financial review (continued) Crew costs easyJet's crew costs increased by 7.4% from £126.8 million to £136.2 millionfrom financial year 2004 to financial year 2005. The increase in crew costsresulted from an increase in headcount during the financial year 2005 to servicethe additional sectors and aircraft operated by easyJet during the year, theincrease in salaries, and the costs of recruitment. The increase in crew costsis less than the rate of growth in block hours of 22.4%. This is due to moreefficient use of crew across the network, and because £6.4 million was incurredin 2004 during the migration of certain operations from Boeing to Airbusaircraft. Maintenance Maintenance expenses increased by 16.9% from £102.0 million to £119.2 millionfrom financial year 2004 to financial year 2005. easyJet's maintenance expensesconsist primarily of the cost of routine maintenance and spare parts andprovisions for the estimated future cost of heavy maintenance and engineoverhauls on aircraft operated by easyJet pursuant to dry operating leases. Theextent of the required annual maintenance reserve charges is determined byreference to the number of flight hours and cycles permitted between each engineshop visit and heavy maintenance overhaul on aircraft airframes. The increasein maintenance costs was largely due to a 22.1% increase in the average numberof leased aircraft from 72.0 to 87.9, offset by the benefits of the new SRTechnics maintenance contract. Advertising Advertising costs increased by 7.4% from £30.5 million to £32.8 million fromfinancial year 2004 to financial year 2005. Spend per passenger wasapproximately 11.7% lower than the previous year which is principally due tomaturity of markets, particularly in the UK. This set off the additional costsincurred by entering into new markets in eastern Europe during the year. Costsin 2004 reflected the costs of establishing the easyJet brand in Germany,particularly in Berlin and Dortmund. While continued investment has beenrequired in these markets in the current year, they have been at a lower level. Merchant fees and incentive pay Merchant fees and incentive pay increased by 15.0% from £13.6 million to £15.6million from financial year 2004 to financial year 2005. Merchant fees andincentive pay includes the costs of processing fees paid for all of easyJet'scredit and debit card sales and the per-seat sold/transferred commission paid asincentive pay to easyJet's telesales staff. The increase reflects an increasein passenger revenues of 21.8% since 2004. This is offset by a decrease in thenumber bookings made using credit cards from 72% of bookings in 2004 to 66% ofbookings in 2005 due to wider card schemes enabling purchase by debit card inadditional European countries. Incentive pay paid to telesales personneldecreased slightly year-on-year due to the full year effect of allowing onlinechanges. 84% of changes were made online in 2005, compared to 73% in 2004. Operational and financial review (continued) Aircraft insurance Aircraft insurance costs reduced from £19.8 million in financial year 2004 to£19.3 million in financial year 2005, despite a 21.4% increase in passengernumbers. This was as a result of lower rates being negotiated and also due tothe beneficial effect of the strengthening of sterling against the US dollar. Other costs Other costs increased by 11.6% from £71.7 million to £80.0 million fromfinancial year 2004 to financial year 2005. Items in this cost category includeadministrative costs and operational costs not included elsewhere including somesalary expenses. This cost category also includes compensation paid topassengers, and certain other items, such as currency exchange gains and lossesand the profit or loss on the disposal of fixed assets. The major influence ofthis category of costs was the growth in the scope of the operation. Depreciation Depreciation charges decreased by 14.4% from £19.2 million to £16.4 million fromfinancial year 2004 to financial year 2005. The depreciation charge reflectsdepreciation on owned aircraft and capitalised aircraft maintenance charges, andalso includes depreciation on computer systems and other assets. easyJet hasowned an average of 4.1 Boeing 737-300 aircraft and 10.6 Airbus A319 aircraftduring the financial year 2005 (2004: 8.0 Boeing 737-300 aircraft and 4.9 AirbusA319 aircraft). Due to the relative costs of acquisition, Boeing aircraftattract a higher absolute annual depreciation charge than Airbus aircraft. Thedecrease in depreciation reflects the disposal of most of the owned Boeing737-300 aircraft and the 3.8% improvement in the average value of sterlingagainst the US dollar, the currency in which the majority of easyJet's assetsare denominated, and the additional depreciation of other assets such as sparesand leasehold improvements. Accelerated depreciation of 737-300 aircraft In 2004, management provided £3.4 million of additional depreciation in respectof the four oldest owned Boeing 737-300 aircraft to align the aircraft carryingvalue with the residual value. These aircraft were all disposed of in the yearended 30 September 2004. The residual values of six owned Boeing 737-300 aircraft were reassessed in 2004which led to an additional £2.7 million of accelerated depreciation beingrecognised on these aircraft during 2004 and £2.7 million in 2005. All of theaircraft have now been sold, with five being sold prior 30 September 2005. Goodwill amortisation Goodwill amortisation charges increased slightly from £17.1 million to £17.4million from financial year 2004 to financial year 2005. Aircraft dry lease costs Aircraft dry lease costs increased by 28.3% from £96.4 million to £123.7 millionfrom financial year 2004 to financial year 2005. During the period 22 newAirbus A319 aircraft were added to the fleet on lease agreements, and theaverage number of leased aircraft during the year increased by 22.1% to 87.9.Over the period, easyJet has been impacted by increasing US dollar interestrates which have increased lease payments. This has been offset by the benefitof the strengthening of the value of sterling against the US dollar, thecurrency in which lease costs are denominated. As a consequence, easyJet hasseen its average leasing cost per aircraft increase by around 4.5%,year-on-year. Operational and financial review (continued) Share of operating profit of The Big Orange Handling Company The Big Orange Handling Company Limited is a joint venture company owned byMenzies Aviation Limited and easyJet. It was set up in January 2004 to provideground handling services at London Luton airport. During the financial year2005, the share (26%) of the turnover attributable to easyJet was £ 2.0 million(2004: £1.4 million), and the share of operating profit was £0.2 million (2004:£0.2 million). Interest receivable Interest receivable increased by 91.2% from £14.2 million in 2004 to £27.2million in 2005. This increase is because of an increase in the cash balanceduring the year from £510.3 million to £695.5 million and the higher sterlinginterest rates, since most of the Group's cash is retained in sterling. Interest payable Interest payable increased 202.5% from £2.7 million to £8.2 million. Thisprimarily reflects an increase in bank loans from £119.8 million to £220.4million due to the financing of new Airbus aircraft, and the increase in USdollar and sterling interest rates. Taxation In financial year 2005, easyJet incurred a tax charge of £25.3 million, aneffective tax rate of 37% (2004: - £21.1 million charge, being 34% effective taxrate). The effective tax rate is higher than the UK standard rate of taxprincipally due to goodwill amortisation not being tax deductible. A moredetailed explanation may be found in note 3 to the preliminary announcement. The deferred tax liability increased by £7.3 million from £20.2 million to £27.5million, primarily due to capital allowances taken being in excess ofdepreciation charges. Retained profit for the year For the reasons described above, easyJet's retained profit increased by 3.7%from £41.1 million in financial year 2004 to £42.6 million in financial year2005. Earnings per share The basic earnings per share increased by 3.3% from 10.34 pence in the financialyear 2004 to 10.68 pence in the financial year 2005. The basic earnings per share, before goodwill amortisation, increased by 2.7%from 14.64 pence in the financial year 2004 to 15.03 pence in the financial year2005. Operational and financial review (continued) Capital expenditure Group capital expenditure on tangible assets is set out in Note 5 to thefinancial information below. Aircraft expenditure includes purchases of newAirbus aircraft, and the cost of purchased rotable spares and aircraftimprovements. Aircraft deposits include the amount expended on pre-deliverypayments to Airbus (and in 2004 Boeing in addition). Fixtures, fittings andequipment includes, amongst other things, IT hardware and software developmentcosts and office fixtures and fittings. Total capital expenditure in the two years ended 30 September 2005 is summarisedas follows: 2005 2004 £million £million Aircraft 159.2 262.3Prepayments on account - aircraft deposits 83.9 103.7Leasehold improvements - buildings 2.0 0.5Fixtures fittings and equipment 2.8 3.9 ------- ------- 247.9 370.4 ======= ======= In addition, aircraft spare parts totalling £8.5 million were received free ofcharge during 2005. As a result of a purchase agreement approved by shareholders in March 2003, theGroup is contractually committed to the acquisition of a further 65 new AirbusA319 aircraft with a list price of approximately US$2.9 billon, or £1.6 billion(before escalations, discounts and deposits already paid) (2004: 99 AirbusA319s, US$ 4.4 billion; £ 2.4 billion). In respect of those aircraft,prepayments on account amounting to US$262.0 million (£148.1 million) had beenmade as at 30 September 2005 (2004: US$299.4 million, £165.4 million). It isintended that these aircraft will be financed partly by cash holdings andinternal cash flow and partly through external financing including committedfacilities arranged prior to delivery. In addition certain of the aircraft willbe sold and leased back under operating leases. Working capital At 30 September 2005, net current assets were £495.1 million, up £125.1 millionfrom £370.0 million at 30 September 2004. This change principally reflects anincrease in cash, an increase in debtors due to increased sales volumes offsetby an increase in creditors, and an increase in the current portion of deferredprofits on sale and leasebacks due to an additional 22 Airbus aircraft beingsold and leased back during the year. Unearned revenue (including Government taxes) increased from £143.0 million to£160.3 million due to increased volumes of passenger bookings. Operational and financial review (continued) Cash flow Net cash inflow from operating activities totalled £169.8 million, an increaseof £9.3 million from £160.5 million in 2004. The principal components of thenet cash inflow were the operating profit and movements in the working capitalcycle, in addition to movements in the maintenance provision of £27.1 millionand an increase in long term deferred profits on sale and leaseback of aircraftof £27.5 million. Net cash inflow before management of liquid resources and financing decreased£21.1 million from £108.4 million in 2004 to £87.3 million in 2005, due toincreases in net cash inflow from operating activities offset by capitalexpenditure. Financing arrangements The following table sets out the movements in loans for the two years ended 30September 2005: 2005 2004 £million £million Balance at 1 October 119.8 72.8New loans raised 146.2 65.8Repayment of amounts borrowed (46.9) (8.3)Financing fees (3.2) -Effect of exchange rates 1.4 (10.5) -------- --------Balance at 30 September 217.3 119.8 ======== ======== 34 Airbus A319s were delivered during the year. 12 of the aircraft werefinanced through US dollar or sterling mortgage loans with the remaining beingsold and leased back for a period of between seven and ten years. For the purposes of the financial statements, foreign currency debt istranslated into sterling at year-end exchange rates. Gains and losses ontranslation on loans which finance US dollar denominated fixed assets are takento reserves, together with the differences arising on the translation of therelated assets. The debt translation loss taken to reserves in 2005 was £1.4million (2004: gain of £10.5 million). Share capital The number of shares allotted, called up and fully paid on 30 September 2005 was400.4 million (2004: 399.2 million). During 2005, 1.2 million shares wereissued on exercise of options under employee share option schemes (2004: 5.2million). Footnotes (1) Represents the profit after tax and before goodwill amortisation divided by the average shareholders' funds (2) Represents profit before tax and goodwill amortisation divided by the number of flown seats available for passengers (3) Revenue per seat represents total revenues divided by the number of seats flown available for passengers (4) Represents the difference between total revenues less profit before tax plus goodwill amortisation, divided by the number of seats flown available for passengers (5) Represents the difference between total revenues less profit before tax plus goodwill amortisation plus fuel costs, divided by the number of seats flown available for passengers (6) Represents the number of seats flown available for passengers (7) Represents the number of aircraft owned plus those held on lease arrangements of more than one month's duration at the end of the relevant financial year. (8) Represents the average number of aircraft owned plus those held on lease arrangements of more than one month's duration during the relevant financial year. (9) Represents the number of owned/leased aircraft in service at the end of the relevant financial year. Owned/leased aircraft in service exclude those in maintenance and those which have been delivered but have not yet entered service or those out of service prior to disposal or return. (10) Represents the average number of owned/leased aircraft in service during the relevant financial year. Owned/leased aircraft in service exclude those in maintenance and those, which have been delivered but have not yet entered service or those out of service prior to disposal or return. (11) Represents the number of one-way revenue flights. (12) Represents the number of hours that aircraft are in actual service, measured from the time that each aircraft leaves the terminal at the departure airport to the time that such aircraft arrives at the terminal at the arrival airport. (13) Represents the number of earned seats flown by easyJet. Earned seats include seats that are flown whether or not the passenger turns up, because easyJet is generally a no-refund airline and once a flight has departed a no-show customer is generally not entitled to change flights or seek a refund. Earned seats also include seats provided for promotional purposes and to easyJet staff for business travel. (14) Represents the average number of block hours per day per aircraft operated during the relevant financial year. (15) Represents the average number of block hours per day per aircraft owned / leased during the relevant financial year. (16) Represents the sum by route of seats available for passengers multiplied by the number of kilometres those seats were flown. (17) Represents the number of passengers as a proportion of the number of seats available for passengers. No weighting of the load factor is carried out to recognise the effect of varying flight (or "stage") lengths. (18) Represents the sum by route of passengers multiplied by the number of kilometres those passengers were flown. (19) Represents the passenger revenue divided by the number of passengers carried. (20) Represents the total revenue divided by the total number of ASK's. (21) Represents the difference between total revenue and profit before tax, plus goodwill amortisation, divided by the total number of ASK's. (22) Includes credit card fees, excess baggage charges, sporting equipment fees, infant fees, change fees and rescue fees, profit share from in-flight sales of food, beverages, and boutique items, commissions received from products and services sold such as hotel bookings, car hire bookings and travel insurance, less chargebacks. (23) When easyJet makes refunds to customers, it records refunds made in the pre-flight period as reductions in revenue and any refunds made post-flight as marketing expenses, included in "Other costs". (24) Includes principally administrative costs and operational costs not included elsewhere, including some salary expenses, compensation paid to passengers, and certain other items, such as currency exchange gains and losses and the profit or loss on the disposal of fixed assets. (25) EBITDAR is defined by the group as earnings before interest, taxes, depreciation, amortisation and lease payments (excluding the maintenance reserve component of operating lease payments). Maintenance reserve costs are charged to the cost heading, "Maintenance". Consolidated profit and loss account for the year ended 30 September Notes 2005 2004 £ million £ million Turnover : Group and share of joint ventures and associates 2 1,343.4 1,092.4Less: share of turnover of joint ventures and associates (2.0) (1.4) ------- ------- Group turnover 2 1,341.4 1,091.0 Cost of sales (1,166.4) (929.3) ------- ------- Gross profit 175.0 161.7 Distribution and marketing expenses (66.5) (55.7)Administrative expenses (59.8) (55.5) ------- ------- Group operating profit 48.7 50.5 Share of operating profit of joint venture 0.2 0.2 ------- ------- Total operating profit: Group and share of joint ventures and associates 48.9 50.7 Interest receivable and similar income 27.2 14.2Interest payable (8.2) (2.7) ------- ------- Profit on ordinary activities before taxation 67.9 62.2Tax on profit on ordinary activities 3 (25.3) (21.1) Retained profit for the financial year 10 42.6 41.1 ======= ======= Pence PenceEarnings per shareBasic 4 10.68 10.34 Diluted 4 10.43 10.11 Basic, before goodwill amortisation 4 15.03 14.64 Diluted, before goodwill amortisation 4 14.68 14.33 ======= ======= All activities relate to continuing operations in the current and previous year. Consolidated balance sheet as at 30 September Notes 2005 2004 £ million £ million £ million £ millionFixed assetsIntangible assets 292.2 309.6Tangible assets 5 425.8 330.4Investments - Joint venture arrangements: Share of gross assets 0.5 0.6 Share of gross liabilities (0.3) (0.4) ------- ------- 0.2 0.2 ------- ------- 718.2 640.2 Current assetsDebtors 197.2 174.4Cash at bank and in hand 695.5 510.3 ------- ------- 892.7 684.7Creditors: amounts falling due 6,8 within one year (397.6) (314.7) ------- ------- Net current assets 495.1 370.0 ------- ------- Total assets less current liabilities 1,213.3 1,010.2 Creditors: amounts falling 7,8due after more than one year (276.1) (157.7) Provisions for liabilities and charges 9 (97.5) (63.1) ------- ------- Net assets 839.7 789.4 ======= ======= Capital and reservesCalled up share capital 10 100.1 99.8Share premium account 10 557.2 554.2Profit and loss account 10 182.4 135.4 ------- ------- Shareholders' funds - equity 839.7 789.4 ======= ======= These financial statements were approved by the Board of Directors on 21November 2005 and were signed on its behalf by: R WebsterDirector J CarrDirectorCash flow informationfor the year ended 30 September Reconciliation of operating profit to net cash flow from operating activities 2005 2004 £ million £ million Group operating profit 48.7 50.5Goodwill amortisation 17.4 17.1Depreciation of tangible fixed assets 19.1 25.3Loss on sale of fixed assets 2.0 -Increase in debtors (17.0) (36.1)Increase in creditors and provisions 99.6 103.7 ------- -------Cash flow from operating activities 169.8 160.5 ======= ======= Consolidated cash flow statement 2005 2004 £ million £ million Cash flow from operating activities 169.8 160.5Returns on investments and servicing of finance 23.1 12.6Dividends received from joint venture 0.2 -Taxation 2.9 (6.2)Capital expenditure (108.9) (61.9)Acquisitions and disposals - 3.4 ------- -------Cash inflow before management of liquid resources and financing 87.1 108.4 Management of liquid resources (14.2) 4.8Financing 98.1 66.5 ------- -------Increase in cash in the year 171.0 179.7 ======= ======= Financing cash flow includes £2.0 million (2004: - £8.8 million) in respect ofthe exercise of employee share options. Cash flow information (continued) Reconciliation of net cash flow to movements in net funds 2005 2004 £ million £ million Increase in cash in the year 171.0 179.7 Cash inflow from the increase in debt (96.1) (57.5)Cash outflow / (inflow) for the increase / (decrease) in liquid resources 14.2 (4.8) ------- -------Change in net funds resulting from cash flows 89.1 117.4Exchange difference on loans (1.4) 10.5 ------- -------Increase in net funds for the year 87.7 127.9Net funds at the start of the year 390.5 262.6 ------- -------Net funds at the end of the year 478.2 390.5 ======= ======= Net funds at the end of the year comprises: 2005 2004 £ million £ million Cash at bank and in hand 695.5 510.3Bank loans (217.3) (119.8) ------- ------- 478.2 390.5 ======= ======= £28.5 million (2004 - £14.3 million) of the cash at bank and in hand is subjectto restrictions governing its use. Consolidated statement of total recognised gains and lossesfor the year ended 30 September 2005 2004 £ million £ million Retained profit for the year 42.6 41.1Currency translation differences on foreign currency net investments 5.4 (18.8) ------- ------- Total recognised gains and losses for the year 48.0 22.3 ======= ======= Consolidated reconciliation of movements in shareholders' fundsfor the year ended 30 September 2005 2004 £ million £ million Retained profit for the year 42.6 41.1Currency translation differences on foreign currency net investments 5.4 (18.8) Shares issued by easyJet plc 3.3 15.9Movement in shares held by easyJet trustees 0.3 0.2Movement in reserves for employee share scheme (1.3) (7.1) ------- -------Net addition to shareholders' funds 50.3 31.3Opening shareholders' funds 789.4 758.1 ------- -------Closing shareholders' funds 839.7 789.4 ======= ======= Notes (forming part of the financial statements) 1 Accounting policies The financial information set out does not constitute the statutory accounts for easyJet plc ('easyJet') for the two years ended 30 September 2005 but is derived from those accounts. Statutory accounts for 2004 have been delivered to the Registrar of Companies, and those for 2005 will be delivered following easyJet's annual general meeting. The auditors have reported on those accounts: their reports were unqualified and did not contain a statement under section 237(3) of the Companies Act 1985. The consolidated financial statements comply with applicable accounting standards (UK GAAP) and have been prepared on the basis of accounting policies set out in easyJet's Report and Accounts. 2 Segmental information All revenues derive from the Group's principal activity as an airline and include scheduled services, in-flight and related sales. Substantially all of the Group's external revenues are earned by companies incorporated in the United Kingdom. The geographical analysis of turnover is as follows: 2005 2004 £ million £ million Within the United Kingdom 224.5 224.1Between the United Kingdom and the Rest of 869.9 728.5EuropeWithin the Rest of Europe 247.0 138.4 ------- ------- 1,341.4 1,091.0 ======= ======= All revenue from easyJet's joint venture was derived within the United Kingdom.easyJet's share of joint venture revenue for the year was £2.0 million (2004:£1.4 million). All the Group's operating profit arises from airline-related activities. The only revenue earning assets of the Group are its aircraft fleet. Since theGroup's aircraft fleet is employed flexibly across its route network, there isno suitable basis of allocating such assets and related liabilities togeographical segments. Notes 3 Taxation The taxation charge is made up as follows: 2005 2004 £ million £ millionCurrent taxation:UK corporation taxCorporation tax at 30% (2004: 30%) 13.6 13.9Adjustments in respect of prior years 2.8 (4.7) ------- ------- 16.4 9.2 Overseas taxationCorporation tax 1.5 1.2Adjustments in respect of prior years 0.1 - ------- ------- 1.6 1.2 ------- -------Total current taxation 18.0 10.4 Deferred taxation:Capital allowances in advance of depreciation 10.9 11.1Future credits not taxable (1.6) 1.8Other fixed asset timing differences (2.0) (2.2) ------- -------Total deferred taxation 7.3 10.7 ------- -------Total taxation 25.3 21.1 ======= =======Effective tax rate 37.2% 33.9% The standard rate of current tax for the year, based on the UK standard rate ofcorporation tax is 30%. The actual current tax charge for the current and theprevious year differs from the charge as calculated using the standard rate forthe reasons set out in the following reconciliation: 2005 2004 £ million £ million Profit on ordinary activities before tax 67.9 62.2 ======= ========Tax charge at 30% (2004: 30%) 20.4 18.6 Expenses not deductible for tax purposes 4.1 1.8Lower tax rates in certain overseas jurisdictions (3.4) (2.3)Movement in share option scheme deduction (0.4) 2.0Purchased goodwill not deductible 5.2 5.1Fixed asset timing differences (10.8) (10.1)Adjustments in respect of prior periods 2.9 (4.7) ------- -------Total current taxation 18.0 10.4Deferred tax 7.3 10.7 ------- -------Total taxation 25.3 21.1 ======= ======= Notes (continued) 3 Taxation (continued) Tax losses There are no UK tax losses available for use in future periods. The amount offoreign tax losses available for use was less than £0.1 million in both thecurrent and previous financial years. easyJet Switzerland easyJet Switzerland, a Group member, has the benefit of an exemption fromcommunal and cantonal taxes in Switzerland until 1 January 2008, subject tomeeting certain conditions. The effective tax rate in Switzerland at present is7.8%, but will rise to 27.5% from 1 January 2008 assuming that tax rates remainunchanged. 4 Earnings per share Basic earnings per share has been calculated by dividing the profit for the yearretained for equity shareholders by the weighted average number of shares inissue during the year after adjusting for changes to the capital structure ofthe Group and shares held by the Group in employee share option trusts. For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all dilutive potential ordinaryshares. Share options granted to employees where the exercise price is lessthan the average market price of the Company's ordinary shares during the yearare considered to be dilutive potential shares. Where share options areexercisable based on performance criteria and those performance criteria havebeen met during the period, those options are included in the calculation ofdilutive potential shares. The earnings per share are based on the following: 2005 2004 Profit for the year retained for equity shareholders (£ million) 42.6 41.1 ======= ======= Number NumberWeighted average number of ordinary shares in issue during the year used to calculate basic earnings per share(millions) 399.3 397.7 ======= =======Weighted average number of dilutive share options used to calculate dilutive earnings per share (millions) 9.6 8.7 ======= ======= The derivation of profit for the calculation of adjusted EPS before goodwillamortisation is as follows. This measure has been chosen to show theperformance excluding goodwill amortisation, which is a significant non cashbalance in the profit and loss account: 2005 2004 £ million £ million Profit for the year retained for equity shareholders 42.6 41.1Add back: goodwill amortisation 17.4 17.1 ------- ------- 60.0 58.2 ======= ======= Notes (continued) 5 Tangible fixed assets Payments on account- Leasehold Fixtures, aircraft improvements - fittings and Aircraft deposits buildings equipment Total £ million £ million £ million £ million £ millionCostAt 1 October 2004 207.6 165.4 4.0 14.8 391.8Exchange differences 4.0 2.4 - - 6.4Additions 167.7 83.9 2.0 2.8 256.4Disposals (71.8) (103.6) - (0.6) (176.0)Transfer to debtors (14.4) - - - (14.4) ------- ------- ------- ------- -------At 30 September 2005 293.1 148.1 6.0 17.0 464.2 ------- ------- ------- ------- -------DepreciationAt 1 October 2004 48.3 - 2.3 10.8 61.4Exchange differences - - - - -Charge for year 15.5 - 0.7 2.9 19.1Disposals (34.8) - - (0.2) (35.0)Transfer to debtors (7.1) - - - (7.1) ------- ------- ------- ------- -------At 30 September 2005 21.9 - 3.0 13.5 38.4 ------- ------- ------- ------- -------Net book value At 30 September 2005 271.2 148.1 3.0 3.5 425.8 At 30 September 2004 159.3 165.4 1.7 4.0 330.4 ======= ======= ======= ======= ======= At 30 September 2005, aircraft with a net book value of £225.5 million (2004:£120.7 million) were mortgaged to lenders as security for loans (see note 8). easyJet reviewed the carrying value of its aircraft at September 2003 andconcluded that the four oldest Boeing 737-300 aircraft required an accelerationin depreciation which caused an additional depreciation charge of £3.4 millionprior to their disposal in 2004. easyJet performed a similar residual value review of its aircraft during theyear ended 30 September 2004 and concluded that the six remaining owned Boeing737-300 aircraft required an acceleration in depreciation. This led to anadditional charge of £2.7 million in 2005 (2004: £2.7 million). Five of theseaircraft were disposed of during the year. One Boeing 737-300 aircraft wastransferred to debtors in September 2005 as a contract had been signed for itssale. The aircraft was delivered in November 2005. Notes (continued) 6 Creditors: amounts falling due within one year 2005 2004 £ million £ million Bank loans (note 8) 16.3 9.7Trade creditors 6.6 17.6Other taxes and social security 3.7 3.6Other creditors 16.9 9.8Corporation tax 38.9 18.0Unearned revenue (including Government taxes) 160.3 143.0Accruals and deferred income 154.9 113.0 ------- ------- 397.6 314.7 ======= ======= 7 Creditors: amounts falling due after more than one year 2005 2004 £ million £ million Bank loans (note 8) 201.0 110.1Accruals and deferred income 75.1 47.6 ------- ------- 276.1 157.7 ======= ======= Accruals and deferred income includes the non-current excess of sales price overfair value of certain assets that were subject to sale and operating leasebacktransactions. These amounts will be released to the profit and loss accountover the respective asset's lease term. 8 Loans 2005 2004 £ million £ millionAmounts falling due:Within one year 16.3 9.7Due within one to two years 17.0 10.1Due in two to five years 68.4 37.2Due after five years 118.7 62.8 ------- ------- 220.4 119.8 Less deferred financing costs (3.1) - ------- ------- 217.3 119.8 Included within amounts falling due within one year (16.3) (9.7) ------- ------- 201.0 110.1 ======= ======= The bank loans financed the acquisition of certain aircraft by the Group. Theaircraft acquired with the loans are provided as security against theborrowings. Notes (continued) 9 Provisions for liabilities and charges 2005 2004 £ million £ million Maintenance liabilities 70.0 42.9Deferred taxation 27.5 20.2 ------- ------- 97.5 63.1 ======= ======= 10 Share capital and reserves Share Profit and Share capital premium loss account Total £ million £ million £ million £ million At 1 October 2004 99.8 554.2 135.4 789.4 Issue of ordinary share capital: Share option schemes 0.3 3.0 - 3.3Movement in shares held by - - 0.3 0.3trustees Movement in profit and loss - - (1.3) (1.3)account for employee share schemesRetained profit for the year - - 42.6 42.6Currency translation differences on foreign currency netinvestments - - 5.4 5.4 ------- ------- ------- -------At 30 September 2005 100.1 557.2 182.4 839.7 ======= ======= ======= ======= At 30 September 2005 there were no shares issued held in Employee Share OptionTrusts which have not vested unconditionally with employees. At 30 September2004 there were 194,842 unallocated shares which were excluded from equity.These shares are held by easyJet Trustees, the trust managing employee shareschemes. 11 Contingent liabilities The Group is involved in various disputes or litigation in the normal course ofbusiness. Whilst the result of such disputes cannot be predicted with certainty,the Company believes that the ultimate resolution of these disputes will nothave a material affect on the Group's financial position or results. In 2002, Navitaire Inc. ("Navitaire"), a former supplier of airline reservationsoftware to easyJet Airline Company Limited, a Group company, issued proceedingsagainst that Group company alleging copyright infringement in relation toairline reservations software. In November 2005, the parties reached anamicable agreement fully resolving the dispute, bringing the litigation to anend. 12 Post balance sheet events David Bennett was appointed to the Board as a Non Executive Director on 1October 2005. One Boeing 737-300 aircraft was transferred from fixed assets to debtors inSeptember 2005 as a contract had been signed for its sale. The aircraft wasdelivered in November 2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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