5th Feb 2007 07:01
Ryanair Holdings PLC05 February 2007 RYANAIR ANNOUNCES RECORD Q3 RESULTS NET PROFIT RISES 30% TO €48M FULL YEAR GUIDANCE RAISED FROM €350M TO €390M Ryanair, Europe's biggest low fares airline, today (Monday, 5th February 2007)announced record Q3 results. Net profit rose 30% to €48m., traffic grew 19% to10.3m., yields were up 7% as total revenues increased 33% to €493m. Unit costsrose by 14% as fuel costs increased 52% to €175m. Despite much higher oil costs,Ryanair maintained a net margin of 10% in Q3, which is significantly ahead ofexpectations. Summary Table of Results (IFRS) - in Euro Third Quarter Ended Dec 31, 2005 Dec 31, 2006 % IncreasePassengers 8.6m 10.3m 19%Revenue €370.7m €492.8m 33%Profit after Tax • 36.8m • 47.7m 30%Basic EPS (Euro Cents) 4.79 6.18 29% Announcing these results, Ryanair's CEO, Michael O'Leary, said: "This exceptional 30% increase in Q3 profits during a period of higher oilprices, intense competition, and 21% seat capacity growth demonstrates, yetagain, the robustness of Ryanair's lowest fare model. "Scheduled revenues rose by 28%, thanks to a 19% growth in traffic and a betterthan forecasted 7% rise in average yields. The 7% rise in yields largelyreflects the impact of competitors excessive and unjustified fuel surcharges aswell as revenues from checked baggage charges which were introduced in March '06and lack of a prior year comparative in this quarter's numbers. We anticipatethat the baggage charges will encourage passengers to travel with fewer checkedbags thereby reducing the revenues from this source, and more importantly,reducing baggage handling costs. "Ancillary revenues grew by 61%, significantly faster than traffic growth,thanks to a higher passenger spend, increased service penetration and receipt ofa one off settlement arising from an early contract termination by our hotelpartner. We expect to announce the selection of a replacement hotel serviceprovider before the end of March. "Unit costs rose by 14% largely due to a 52% increase in fuel - which nowaccounts for 40% of our total cost base. We are 90% hedged to 31st March '07 at$73 per barrel. Our low cost base allows us to absorb these higher oil prices -without imposing fuel surcharges - while still reporting record profits. We tookadvantage of the recent oil price weakness to extend our hedging position forfiscal 2008. We are now just over 50% hedged through H1'08, and 90% hedgedthrough H2 08 at 10% less than we are paying this year. Hedging at these rateshas enabled us to lock in significant fuel savings of approx €60m for the comingfiscal year. "Our new bases at Marseilles and Madrid are performing well. Advance bookingsfor the Bremen base which starts in April are strong. We will increase ourDublin base from 15 to 20 aircraft this Summer and the 22 new routes are alreadybooking strongly. We expect to announce a 19th base - which will be inContinental Europe - before the end of February. "Ryanair's customer service continues to deliver real benefits for passengers.While our competitors maintain high and unjustified fuel surcharges, Ryanairguarantees no fuel surcharges. Our on time performance is the best of any majorEuropean airline. Our baggage charges are beginning to have the desired effectwith fewer passengers travelling with check in baggage. A growing number ofpassengers are using our on line check in/ priority boarding facility, arrivinglater at airports, bypassing check in queues and proceeding directly to theboarding gate, where they are priority boarded and have their choice of seats.We expect that the quantum of passengers opting for this service will continueto grow, and we are looking to extend this service to passengers travelling withchecked in luggage to broaden its appeal. "The recent hysteria in the UK about the impact of aviation on climate changehas been misguided and misplaced. Aviation accounts for less than 1.6% ofgreenhouse gas emissions and, we expect, in time that the media and Governmentswill focus on the causes of 98% of greenhouse gas emissions and not the aviationindustry. By investing in a fleet of brand new aircraft, valued at $10bn, overthe past eight years, we have reduced our noise and CO2 emissions by almost 50%on a per passenger kilometre basis. The recent decision by the UK's Chancellorof the Exchequer, Gordon Brown, to double the rate of departure tax in the UKfrom £5 to £10 per ticket is bad news for British tourism and visitors. This isjust another tax on tourists. The fact that it represents a 35% rate of tax onRyanair's average fare of £28 shows how regressive, unfair, and penal it is.Ryanair will continue to oppose these taxes on passengers travelling on Europe'sgreenest, cleanest airline, and we will continue to highlight the fact thataviation, at 1.6% of greenhouse gas emissions, is neither the cause of, nor thesolution to, climate change. "We welcome the OFT's recent decision to refer the BAA airport monopoly to theCompetition Commission, and we hope that this review will lead to the break upof this over-spending, inefficient monopoly. Despite the opposition of mostStansted airline users (and the local community), the BAA continues to pressahead with its gold plated second runway and terminal proposals. While theyadmit that the runway itself will cost just £100m., the BAA propose to waste afurther £2.1bn. (three times the cost of Wembley Stadium) building a secondterminal and associated facilities. Ryanair believes that a second runway andsecond terminal can and should be built at Stansted for approx £1bn., less thanhalf of the cost proposed by the BAA. Competition is the only way to deliverthese efficiencies, and the sooner BAA's monopoly over the London airports isbroken up the better. "In November, Ryanair increased its stake in Aer Lingus, bringing its holding to25.2% at a total cost of €342m. The EU Commission has decided to refer Ryanair'soffer to a Phase 2 review. Ryanair remains confident that its offer - which willsee lower fares, reduced fuel surcharges, and improved fleet and passengerservice - will be good for Aer Lingus' passengers, and good for competition. Ata time when the European Union is encouraging airlines to consolidate, we remainconfident that our offer for Aer Lingus will obtain EU Commission approvalfollowing this phase 2 review. "In the current (fourth) quarter, Ryanair continues to roll out substantialcapacity expansion. We expect passenger volumes to rise by 25%. Fuel costs willremain high compared to last year. We now have some visibility over Q4 bookingsand anticipate that yields will be in line with last year, a better outturn thanthe small decline we had previously expected. Our earnings in the fourth quarterwill also be positively impacted by the weakness of spot oil prices, whichsignificantly reduces the cost of the 10% of our volumes which were not alreadyhedged at $73 per barrel. As a result of this better than expected performancein H2, we now expect that Ryanair's net profit after tax for the fiscal yearended 31st March 2007 (which we previously guided to rise 16% to €350m) will infact rise by approx 29% to €390m. "Ryanair recently received shareholder approval to complete a 2 for 1 stocksplit, and we plan to implement this split on 26th February 2007. The purpose ofthis stock split is to improve the marketability and liquidity of Ryanair'sshares, and the existing ratio of five ordinary shares to one ADR will beretained". Ends. Monday, 5th February 2007 For further information please contact: Howard Millar Pauline McAlester Ryanair Holdings Plc Murray Consultants Tel: 353 1 812 1212 Tel: 353 1 498 0300 www.ryanair.com The directors of Ryanair accept responsibility for the information contained inthis announcement, save that the only responsibility accepted by the directorsof Ryanair in respect of the information contained in this announcement relatingto Aer Lingus and the Aer Lingus Group, which has been compiled from publishedsources, has been to ensure that such information has been correctly and fairlyreproduced or presented (and no steps have been taken by the directors ofRyanair to verify this information). To the best of the knowledge and belief ofthe directors of Ryanair (who have taken all reasonable care to ensure that suchis the case), the information contained in this announcement for which theyaccept responsibility is in accordance with the facts and does not omit anythinglikely to affect the import of such information. 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 18 bases and 440 low fareroutes across 24 countries. By the end of March 2007 Ryanair will operate afleet of 134 new Boeing 737-800 aircraft with firm orders for a further 117 newaircraft (net of planned disposals), which will be delivered over the next 5years. Ryanair currently employs a team of 4,200 people and expects to carryapproximately 42 million scheduled passengers in the current fiscal year. Sub-division of Ordinary Shares At the Extraordinary General Meeting of the Company on 14 December, 2006Shareholders approved a stock split whereby each Ordinary Share with a currentnominal value of 1.27 cent each would be divided into 2 new Ordinary Shares witha nominal value of 0.635 cent each ("New Ordinary Shares"). Ryanair nowannounces that the Sub-division will be implemented with effect from the startof business on Monday, 26 February, 2007. Details of the Sub-division The effect of the proposal is that each shareholder will own two New OrdinaryShares for every one existing Ordinary Share (or ADS as the case may be) held ona record date of 23 February, 2007. Except for this change, the New OrdinaryShares will in all other respects be the same as the existing Ordinary Shares.Subject to market conditions, the aggregate value of each shareholder's holdingof shares should remain the same following the Sub-division. The underlyinginterests of Shareholders in the profits and net assets of the Group will not beaffected by the proposed Sub-division and shareholders will have the same rightsand be subject to the same restrictions as under their existing holding ofOrdinary Shares. The Sub-division will not result in any new shares being issued by the Companyor becoming available in whole or in part to the public. Certificated Holders New share certificates reflecting the New Ordinary Shares following theSub-division will be issued to Ryanair Shareholders on request in exchange fortheir existing share certificates and as the Company's Registrars receive oldshare certificates for the purpose of processing share disposals or transfers inthe normal course of business. Existing share certificates for Ordinary Sharesremain valid, but will represent twice the number of Ordinary Shares stated onthe certificate. With regard to the Company's American Depository Shares(''ADS's''), the existing ADS ratio, where one ADS represents five OrdinaryShares will remain. Following the Sub-division the number of ADS's held by anADR holder will be doubled. Uncertificated holders For holdings in uncertificated form, it is expected that the appropriate shareaccounts in CREST will be credited with entitlements to the New Ordinary Shareson 26 February, 2007. New ISIN Code The New Ordinary Shares have been allocated a new ISIN Code. This isIE00B1GKF381. The SEDOL code is B - 1GK - F38 . These new codes will beeffective from commencement of dealings on Monday, 26 February, 2007. Dealing and Trading in New Ordinary Shares Application will be made in due course to both the Irish Stock Exchange and theUK Listing Authority for the New Ordinary Shares to be admitted to dealing onthe Official List of the Irish Stock Exchange and the Official List of the UKListing Authority and application will also be made to the London Stock Exchangefor the New Ordinary Shares to be admitted to trading on the main market forlisted securities of the London Stock Exchange. Dealings in the New Ordinary Shares are expected to commence on Monday, 26February, 2007. Accordingly, the last day of dealing in the existing OrdinaryShares will be Friday, 23 February, 2007. Stock Split Timetable Last day for dealing in existing shares Friday, February 23rd 2007 Listing Application Hearings Friday, February 23rd 2007 Record Date (6.00 p.m.) Friday, February 23rd 2007 Dealings in sub-divided shares commence (8.00a.m.) Monday, February 26th 2007 CREST Accounts Credited Monday, February 26th 2007 Ryanair Holdings plc and Subsidiaries Consolidated Income Statement in accordance with IFRS(unaudited) Quarter Quarter Period Period ended ended ended ended Dec 31, Dec 31, Dec 31, Dec 31, 2006 2005 2006 2005 Operating revenues •'000 •'000 •'000 •'000 ------- ------- ------- ------- Scheduled revenues 397,595 311,728 1,489,697 1,128,508 Ancillary revenues 95,168 58,972 259,489 188,352 -------- -------- ------- ------- Total operating revenues - continuingoperations 492,763 370,700 1,749,186 1,316,860 -------- -------- ------- ------- Operating expensesStaff costs 56,856 41,071 170,700 124,717Depreciation 36,619 31,300 108,242 92,637Operating expenses Fuel & oil 174,887 114,890 511,929 351,763 Maintenance, materials and repairs 10,846 7,663 32,159 24,438 Marketing & distribution costs 4,246 2,405 15,854 11,134 Aircraft rentals 15,457 10,279 40,851 31,016 Route charges 47,720 40,771 146,104 124,704 Airport & handling charges 65,584 54,009 204,682 164,048 Other 23,340 19,133 75,652 61,110 -------- -------- ------- ------- Totaloperatingexpenses 435,555 321,521 1,306,173 985,567 -------- -------- ------- ------- Operating profit beforeexceptional items 57,208 49,179 443,013 331,293 Aircraft insurance claim - - - 5,939 -------- -------- ------- ------- Operating profit afterexceptional items -continuing operations 57,208 49,179 443,013 337,232 -------- -------- ------- ------- Other (expenses)/income Foreign exchange (losses)/gains (40) (658) ( 1,269) (195)Gains on disposal of property,plant & equipment - 911 - 895 Finance income 14,854 9,456 43,777 27,277Finance expense (20,812) (18,324) (62,123) (55,123) -------- -------- ------- ------- Total other (expenses)/income (5,998) (8,615) (19,615) (27,146) -------- -------- ------- ------- Profit before taxation 51,210 40,564 423,398 310,086 Tax on profit on ordinary activities (3,478) (3,746) (46,541) (31,093) -------- -------- ------- ------- Profit for the period 47,732 36,818 376,857 278,993 ======== ======== ======= ======= Earnings per ordinary share -Basic(euro cent) 6.18 4.79 48.82 36.43 -Diluted(euro cent) 6.12 4.76 48.54 36.23 Adjusted earnings per ordinary share* -Basic(euro cent) 6.18 4.79 48.82 35.75 -Diluted(euro cent) 6.12 4.76 48.54 35.55 Number of ordinary shares (in 000's) -Basic 772,745 768,029 771,859 765,831 -Diluted 779,992 773,326 776,369 770,125 * Calculated on profit for the year before exceptional items (net of tax). Page 1 Ryanair Holdings plc and Subsidiaries Consolidated Balance Sheet in accordance with IFRS (unaudited) Dec 31, Mar 31, 2006 2006Non-current assets •'000 •'000 ------- ------- Property, plant & equipment 2,619,955 2,532,988Intangible assets 46,841 46,841Available for sale financial asset 364,989 -Derivative financial instruments - 763 ------- -------Total non-current assets 3,031,785 2,580,592 ------- ------- Current assetsInventories 1,952 3,422Other assets 54,007 29,453Trade receivables 20,768 29,909Derivative financial instruments 228 18,872 ------- -------Restricted cash 204,176 204,040Financial assets: cash greater than 3months 527,085 328,927Cash and cash equivalents 1,287,986 1,439,004 ------- -------Total current assets 2,096,202 2,053,627 ------- -------Total assets 5,127,987 4,634,219 ======= ======= Current liabilitiesTrade payables 64,226 79,283Accrued expenses and other liabilities 537,536 570,614Current maturities of long term debt 165,359 153,311Derivative financial instruments 81,037 27,417Current tax 43,920 15,247 ------- -------Total current liabilities 892,078 845,872 ------- ------- Non-current liabilitiesProvisions 26,491 16,722Derivative financial instruments 68,256 81,897Deferred tax liability 147,014 127,260Other creditors 82,181 46,066Long term debt 1,532,325 1,524,417 ------- -------Total non-current liabilities 1,856,267 1,796,362 ------- ------- Shareholders' equityIssued share capital 9,817 9,790Share premium account 606,260 596,231Retained earnings 1,844,480 1,467,623Other reserves (80,915) (81,659) ------- -------Shareholders' equity 2,379,642 1,991,985 ------- -------Total liabilities and shareholders' equity 5,127,987 4,634,219 ======= ======= Page 2 Ryanair Holdings plc and Subsidiaries Consolidated Cashflow Statement in accordance with IFRS (unaudited) Dec-31 Dec-31 2006 2005 •'000 •'000 ------- -------Operating activities----------------------Profit before taxation 423,398 310,086 Adjustments to reconcile profits before taxto net cash provided by operating activities Depreciation 108,242 92,637Decrease/(increase) in inventories 1,470 (5,570)Decrease/(increase) in trade receivables 9,141 (5,222)(Increase) in other current assets (25,776) 6,770(Decrease) in trade payables (15,057) (33,596)(Decrease) in accrued expenses (40,618) (45,283)Increase in other creditors 72,571 16,052Increase in maintenance provisions 9,769 7,118Interest receivable 1,221 (7,654)Interest payable 7,047 1,227Retirement costs 494 441Share based payment 2,747 879Income tax 236 (2,440) ------- ------- Net cash provided by operating activities 554,885 335,445 ------- ------- Investing activities----------------------Capital expenditure (purchase of property, plant and equipment) (195,208) (315,005)Purchase of shares classified asavailable for sale (342,410) -Movement in restricted cash (136) -(Investment)/reduction in financial assets: cash greater than 3months (198,158) 114,156 ------- ------- Net cash provided by investing activities (735,912) (200,849) ------- ------- Financing activities----------------------Net proceeds from shares issued 10,055 28,920Increase in long term debt 19,954 120,134 ------- -------Net cash used in financing activities 30,009 149,054 ------- ------- (Decrease)/increase in cash and cashequivalents (151,018) 283,650 Cash and cash equivalents atbeginning of period 1,437,847 871,354 Effects of exchange rates on foreigncurrency balances 1,157 904 ------- -------Cash and cash equivalents at end of period 1,287,986 1,155,908 ======= ======= Page 3 Ryanair Holdings plc and Subsidiaries Consolidated Statement of Recognised Income and Expense in accordance withIFRS (unaudited) Dec 31, Dec 31, 2006 2005 •'000 •'000 ------- -------Cash flow hedge reserveNew movements into cash flow hedge reserve 23,934 58,278Movements from cash flow hedge reserve (44,000) (22,960) ------- --------- Net movements into cash flow hedge reserve (20,066) 35,318 ------- ---------Net change in fair value of available for sale financial asset 18,063 - ------- ---------Income and Expense recognised directly in equity (2,003) 35,318 ------- ---------Profit for the period 376,857 278,993 ------- --------- ------- ---------Total recognised income and expense 374,854 314,311 ======= ========= Reconciliation of adjusted earnings per share (unaudited) Dec 31, Dec 31, 2006 2005 •'000 •'000 ------- -------Profit for the period under IFRS 376,857 278,993 Adjustments-------------Aircraft insurance claim - (5,939)Taxation adjustment for above - 742 ------- ---------Adjusted profit under IFRS 376,857 273,796 ======= ========= Number of ordinary shares (in 000's) - Basic 771,859 765,831 - Diluted 776,369 770,125Adjusted earnings per ordinary share - Basic (• cent) 48.82 35.75 - Diluted (• cent) 48.54 35.55 Consolidated changes in shareholders' equity Share Ordinary premium Retained Other shares account earnings reserves Total •'000 •'000 •'000 •'000 •'000 ------- ------- ------- ------- ------- Balance at April 1, 2006 9,790 596,231 1,467,623 (81,659) 1,991,985 Issue of ordinary equity shares 27 10,029 - - 10,056------------------------- ------- ------- ------- ------- ---------New movements intocash flow hedge reserve - - - 23,934 23,934 Movements from cashflow hedge reserve - - - (44,000) (44,000)-------------------------- ------- ------- ------- ------- ---------Movement in reserves - - - (20,066) (20,066)-------------------------- ------- ------- ------- ------- ---------Net change in fair value of available for sale financial asset - - - 18,063 18,063 Share -based payments - - - 2,747 2,747Profit for the period - - 376,857 - 376,857 ------- ------- ------- ------- ---------Balance at December, 2006 9,817 606,260 1,844,480 (80,915) 2,379,642 ======= ======= ======= ======= ========= Page 4 Ryanair Holdings plc and SubsidiariesConsolidated Income Statement in accordancewith US GAAP (unaudited) Quarter Quarter Period Period ended ended ended ended Dec 31, Dec 31, Dec 31, Dec 31, 2006 2005 2006 2005Operating revenues •'000 •'000 •'000 •'000Scheduled revenues 397,595 311,728 1,489,697 1,128,508Ancillary revenues 95,168 58,972 259,489 188,352 -------- -------- ------- ------- Total operating revenues - continuingoperations 492,763 370,700 1,749,186 1,316,860 -------- -------- ------- -------Operating expensesStaff costs 56,963 40,878 171,022 123,955Depreciation 37,075 31,635 109,495 93,750Operating expenses Fuel & oil 174,887 114,890 511,929 351,763 Maintenance, materials & repairs 10,846 7,663 32,159 24,438 Marketing & distribution costs 4,246 2,405 15,854 11,134 Aircraft rentals 15,457 10,279 40,851 31,016 Route charges 47,720 40,771 146,104 124,704 Airport & handling charges 65,584 54,009 204,682 164,048 Other 23,340 19,114 75,652 61,047 -------- -------- ------- ------- Total operating expenses 436,118 321,644 1,307,748 985,855 -------- -------- ------- ------- Operating profit before exceptional items 56,645 49,056 441,438 331,005 Aircraft insurance claim - - - 5,939 -------- -------- ------- -------Operating profit afterexceptional items - continuingoperations 56,645 49,056 441,438 336,944 -------- -------- ------- -------Other (expenses)/incomeForeign exchange (losses)/gain (40) (658) (1,269) (195)Derivative financial instruments (12,187) - (12,187) - Gains on disposal of property,plant & equipment - 911 - 895 Finance income 14,854 9,456 43,777 27,277Finance expense (17,026) (16,299) (53,099) (49,262) -------- -------- ------- -------Total other (expenses)/income (14,399) (6,590) (22,778) (21,285) -------- -------- ------- ------- Income before taxation 42,246 42,466 418,660 315,659Taxation (3,777) (3,876) (47,472) (31,725) -------- -------- ------- -------Net income 38,469 38,590 371,188 283,934 ======== ======== ======= =======Net income per ADS -Basic(euro cent) 24.89 25.12 240.45 185.38 -Diluted (euro cent) 24.66 24.95 239.05 184.34 Adjusted net income per ADS * -Basic (euro cent) 24.89 25.12 240.45 181.98 -Diluted (euro cent) 24.66 24.95 239.05 180.97 Weighted Average number of shares -Basic 772,745 768,029 771,859 765,831 -Diluted 779,992 773,326 776,369 770,125 * Calculated on net income before non-recurring items(net of tax).(5 ordinary shares equal 1 ADS) Page 5 Ryanair Holdings plc and Subsidiaries Summary of significant differences between IFRS and US generallyaccepted accounting principles(unaudited) (A) Net income under US GAAP --Quarter ended-- Nine months ended Dec 31, Dec 31, Dec 31, Dec 31, 2006 2005 2006 2005 •'000 •'000 •'000 •'000 Net income inaccordance with IFRS 47,732 36,818 376,857 278,993 AdjustmentsPensions (107) (100) (322) (117)Share based payments - 293 - 879 Capitalised interest (netof amortisation) regardingaircraft acquisition programme 3,330 1,690 7,771 4,748 Derivative financialinstruments (12,187) - (12,187) - Darley Investments Limited - 19 - 63 Taxation- effect ofabove adjustments (299) (130) (931) (632) -------- -------- ------- ------- Net income in accordance with US GAAP 38,469 38,590 371,188 283,934 ======== ======== ======= ======= (B) Consolidated cashflowstatement in accordance with US GAAP Dec 31, Dec 31, 2006 2005 •'000 •'000 Cash inflow fromoperating activities 562,656 340,193 Cash (outflow) from investing activities (743,683) (205,597) Cash inflow from financing activities 30,009 149,054 ------- ------- (Decrease)/increase in cash and cashequivalents (151,018) 283,650 Cash and cash equivalents atbeginning of period 1,439,004 872,258 ------- ------- Cash and cash equivalents at end ofperiod 1,287,986 1,155,908 ======= ======= Cash and cash equivalents under US GAAP 1,287,986 1,155,908Restricted cash 204,176 204,040Deposits with amaturity of greater than three months 527,085 415,251 ------- -------Cash and liquid resources inaccordance with IFRS 2,019,247 1,775,199 ======= ======= Page 6 Ryanair Holdings plc and Subsidiaries Summary of significant differences between IFRS and USgenerally accepted accounting principles (unaudited) (C) Shareholders' funds - equity Dec 31, Dec 31, 2006 2005 •'000 •'000 ------- ------- Shareholders' equity as reported in theconsolidated balance sheets in accordance with IFRS 2,379,642 1,950,538 Adjustments:Pension 8,919 11,620Capitalised interest( net of amortisation)regarding aircraft acquisition programme 37,219 27,695Derivative financial instruments (12,187) -Minimum pension liability (net of tax) (4,295) (6,496)Tax effect of adjustments( excluding pension& derivative adjustments) (6,862) (5,628) ------- -------Shareholders' equity as adjusted to accordwith US GAAP 2,402,436 1,977,729 ======= ======= Opening shareholders' equity under US GAAP 2,020,448 1,629,559 Comprehensive incomeUnrealised (losses)/gains on derivativefinancial instruments(net of tax) (20,066) 35,315 Net income in accordance with US GAAP 371,188 283,934 ------- -------Total comprehensive income 351,122 319,249 Share based payments 2,747 - Available for sale financial asset 18,063 - Stock issued for cash 10,056 28,921 ------- ------- Closing shareholders' equity in accordancewith US GAAP 2,402,436 1,977,729 ======= ======= Page 7 Ryanair Holdings plc Management Discussion and Analysis of Results Introduction For the purposes of the MD&A all figures and comments are by reference to theadjusted income statement excluding exceptional items referred to below. Exceptional items for the nine months ended December 31, 2005 consist of areceipt of €5.2m (net of tax) arising from the settlement of an insurance claimfor the scribing of 6 Boeing 737-200 aircraft. There are no Exceptional items inthe current year to date. Profit after tax increased by 35% to €376.9m during the nine months endedDecember 31, 2006 compared to last year. The adjusted profit for the nine monthsincreased by 38% to €376.9m. Summary Quarter Ended December 31, 2006 Profit after tax increased by 30% to €47.7m, compared to €36.8m in the quarterended December 31, 2005. These results reflect a 7% increase in average fares(including checked in baggage charges) and strong growth in ancillary revenues,offset higher fuel costs, which increased by 52% to €174.9m, and a one off stepup in staff costs which rose by 38% to €56.9m due to an increase in pilotcrewing ratios. Total operating revenues increased by 33% to €492.8m, which isgreater than the 19% growth in passenger volumes, as average fares rose by 7%and ancillary revenues grew by 61% to €95.1m. Total revenue per passenger as aresult, increased by 12% whilst passenger load factor, due to the 21% increasein seat capacity, decreased by 2 points to 82% during the quarter. Total operating expenses increased by 35% to €435.6m, due to the increased levelof activity, and the increased costs, associated with the growth of the airline.Fuel, which represents 40% of total operating costs compared to 36% last year,increased by 52% to €174.9m due to substantial increases in the US dollar costper gallon, partially offset by a weaker US dollar and a 3% reduction in fuelconsumption due to the installation of winglets on the majority of our Boeing737-800 fleet. The remaining retro-fit winglets will be installed across thefleet by fiscal year end. Unit costs, excluding fuel and staff costs, increasedby 4%. Staff costs rose by 38%, reflecting an increase in pilot crewing ratiosprimarily as a result of increases in sector length. As a result, operatingmargins decreased by 1 point to 12%, whilst operating profit increased by 16% to€57.2m. Net margins remained flat at 10% for the reasons outlined above. Adjusted basic earnings per share have risen by 29% to €6.18 cent for theperiod. Balance Sheet The strong growth in profitability continues to positively impact the balancesheet with Total cash increasing by €47.3m to €2,019.2m despite acquiring a25.2% stake in Aer Lingus for €342.2m and funding an additional €193.9m incapital expenditure largely from internal resources. The Company debt financedfour Boeing 737-800 aircraft and funded additional aircraft deposits during theperiod. Total debt, net of repayments, increased during the period by €10.1m.Shareholders' funds at December 31, 2006 have increased by €392.7m to €2,384.7m,compared to March 31, 2006 reflecting the €376.9m increase in profitabilityduring the period and the exercise of share options which increased shareholderfunds by €10.1m, offset by a reduction of €5.3m resulting from the IFRSaccounting treatment for derivative financial instruments, financial assets,pensions and stock options. Detailed Discussion and Analysis Quarter Ended December 31, 2006 Profit after tax, increased by 30% to €47.7m due to a 7% increase in averagefares (including checked baggage charges) and strong growth in ancillaryrevenues, offset by fuel costs increasing by 52% to €174.9m primarily reflectingthe higher US dollar cost per gallon a 38% increase in staff costs due to higherpilot crewing ratios, to €56.9m. Operating margins, as a result decreased by 1point to 12%, which in turn resulted in operating profit increasing by 16% to€57.2m compared to quarter ended December 31, 2005. Total operating revenues increased by 33% to €492.8m due to the combination of a19% increase in passengers carried, a 7% rise in average fares, and the growthof ancillary revenues. Scheduled passenger revenues increased by 28% to €397.6m due to a 7% increase inaverage fares (including checked baggage charges) reflecting the benign yieldenvironment supported by competitor fuel surcharges. Passenger volumes increasedby 19% to 10.3m reflecting increased passenger numbers on existing routes, thesuccessful launch of our new routes and expansion of our bases. Load factordecreased by 2 points to 82% during the period due to a 21% increase in seatcapacity. Ancillary revenues continue to grow faster than passenger volumes with revenuesgrowing by 61% to €95.1m in the period. This performance reflects the stronggrowth in on board sales, non-flight scheduled revenues, other ancillaryproducts and a one-off receipt of an early termination payment from our hotelprovider. Ancillary revenues continue to grow at a faster rate than passengervolumes. Total operating expenses rose by 35% to €435.6m due to the increased level ofactivity and the increased costs associated with the growth of the airline,particularly higher fuel and staff costs. Total operating costs were alsoadversely impacted by a 6% increase in the average sector length, whilst higherUS dollar fuel prices were partially offset by the strength of the Euro to theUS dollar. Staff costs have increased by 38% to €56.9m. This primarily reflects a 34%increase in average employee numbers to 4,209 and the impact of pay increasesgranted during the period. Employee numbers rose due to an increase in our pilotcrewing ratios reflecting increases in sector length. Pilots, who earn higherthan the average salary, accounted for 40% of the increase in employees duringthe period. Depreciation increased by 17% to €36.6m. There are an additional 13 'owned'Boeing 737-800 aircraft in the fleet this year compared to last year. Theresultant higher depreciation charge was offset by a combination of loweramortisation due to the retirement of Boeing 737-200 aircraft and the positiveimpact of a new engine maintenance deal on the cost of amortisation of Boeing737-800 aircraft. The strengthening of the euro versus the US dollar also had apositive impact on the depreciation and amortisation charge. Fuel costs rose by 52% to €174.9m due to a 25% increase in the number of hoursflown and a significant increase in the average US dollar cost per gallon offuel partially offset by the positive impact of the strengthening of the euroversus the US dollar and a 3% reduction in fuel consumption due to theinstallation of winglets on the majority of our Boeing 737-800 fleet. Maintenance costs increased by 42% to €10.9m, faster than the increase in thenumber of hours flown, due to a rise in the number of leased Boeing 737-800aircraft from 17 to 30, partially offset by the improved reliability of theBoeing 737-800's operated, a lower level of maintenance costs incurred due tothe retirement of the Boeing 737-200's and the positive impact of thestrengthening of the euro versus the US dollar exchange rate. Marketing and distribution costs increased by 77% to €4.2m due to a higher levelof marketing activity and related expenditure compared to the previous year asthe number of routes operated rose by 64% to 381 at the period end and thenumber of bases increased by 2 to 17. Aircraft rental costs increased by 50% to €15.5m reflecting an additional 13aircraft on operating lease during the period. Route charges rose by 17% to €47.7m due to an increase in the number sectorsflown and a longer average sector length, offset by a reduction in enroutecharges in certain EU countries. Airport and handling charges increased by 21% to €65.6m. This is higher than thegrowth in passenger volumes and reflects the impact of increased costs at someof our airports and in particular at our Dublin base, which has a significantlyhigher cost per passenger, offset by lower costs at new airports and bases. Other expenses increased by 22% to €23.3m, which is lower than the growth inancillary revenues, due to improved margins on some new and existing productsand cost increases on some indirect costs. Operating margins have decreased by 1 point to 12% for the period due to thereasons outlined above which has resulted in operating profits increasing by 16%to €57.2m. Interest receivable has increased by 57% to €14.8m due to a combination ofhigher levels of cash and cash equivalents and increases in average depositrates earned in the period. Interest payable increased by €2.5m due to the drawdown of debt to part fund thepurchase of new aircraft during the period and higher floating interest rates. The Company's Balance Sheet continues to strengthen due to the strong growth inprofits during the period. The Company generated cash from operating activitiesof €423.4m which part funded the investment in financial assets (Aer Lingus) of€342.2m and capital expenditure during the period with the balance reflected intotal cash of €2,019.2m. Capital expenditure amounted to €193.9m which largelyconsisted of advance payments for future aircraft deliveries and the delivery offour aircraft. Long term debt, net of repayments, increased by €10.1m during theperiod. Shareholders' equity at December 31, 2006 has increased by €392.7m to €2,384.7m,compared to March 31, 2006 reflecting the €376.9m increase in profitabilityduring the period and the exercise of share options which increased shareholderfunds by €10.1m, offset by a reduction of €5.3m resulting from the IFRSaccounting treatment for derivative financial instruments, pensions and stockoptions. Detailed Discussion and Analysis Nine Months Ended December 31, 2006 Profit after tax, increased by 38% to €376.9m due to average fares (includingchecked in baggage charges) rising by 9% and strong ancillary revenue growth,which was offset by fuel costs which rose 46% to €511.9m reflecting the higherUS dollar cost per gallon and the one off step up in pilot crewing ratios whichled to staff costs rising by 37% to €170.7m. Operating margins remained flat at25%. Strong cost control on other line items coupled with increases in totaloperating revenues resulted in operating profit increasing by 34% to €443.0mcompared to the nine months ended December 31, 2005. Total operating revenues increased by 33% to €1,749.1m whilst passenger volumesincreased by 22% to 32.4m. Total revenue per passenger increased by 9% in theperiod due to a combination of higher average fares (including checked inbaggage charges) and strong ancillary revenue growth. Scheduled passenger revenues increased by 32% to €1,489.7m due to a combinationof higher passenger numbers on existing routes, the successful launch of newroutes and a 9% improvement in average fares (including checked in baggagecharges). Ancillary revenues increased 38% to €259.5m, a faster growth rate than passengervolumes, reflecting a strong performance in non-flight scheduled revenues,on-board sales, other ancillary products and a one off receipt of a n earlytermination payment from our hotel provider. Total operating expenses increased by 33% to €1,306.2m due to the increasedlevel of activity and, in particular, higher fuel and staff costs. Totaloperating costs were also adversely impacted by an increase in the averagesector length, whilst higher US dollar fuel prices were partially offset by thestrength of the euro versus the US dollar exchange rate and lower fuel burnresulting from the newly installed winglets. Staff costs have increased by 37% to €170.7m primarily due to a 32% increase inaverage employee numbers to 3,915 during the period and the impact of payincreases granted. Employee numbers rose due to an increase in pilot crewingratios as a result of continued increases in average sector length. Pilots, whoearn higher than the average salary, accounted for 42% of the increase inemployment during the period. Depreciation increased by 17% to €108.2m due to an increase in the size of the'owned' fleet from 77 to 90, offset by a lower amortisation charge due to theretirement of Boeing 737-200 aircraft and the positive impact of a new enginemaintenance deal on the cost of aircraft amortisation. The strengthening of theeuro against the US dollar exchange rate also had a positive impact on thedepreciation and amortisation charge relating to new aircraft deliveries. Fuel costs rose by 46% to €511.9m due to an increase in the number of sectorsflown, a 5% increase in sector length, and a significantly higher average USdollar cost per gallon of fuel. The increased costs were partially offset by thepositive impact of the strengthening of the euro versus the US dollar during theyear and a 2% reduction in fuel consumption due to the installation of wingletson part the majority of our Boeing 737-800 fleet. Maintenance costs increased by 32% to €32.1m, faster than the increase in thenumber of hours flown, due to an increase in the number of leased Boeing 737-800aircraft from 17 to 30, partially offset by the improved reliability of theBoeing 737-800's operated, a lower level of maintenance costs incurred due tothe retirement of the Boeing 737-200's and the positive impact of thestrengthening of the euro exchange rate against the US dollar. Marketing and distribution costs increased by 42% to €15.9m due to a higherlevel of marketing activity and related expenditure compared to the previousyear as the number of routes operated rose by 64% to 381 at the period end andthe number of bases increased by 2 to 17. Aircraft rental costs increased by 32% to €40.9m reflecting an additional 13aircraft on operating lease during the period. Route charges rose by 17% to €146.1m due to an increase in the number of sectorsflown and an increase of 5% in the average sector length, offset by a reductionin enroute charges in certain EU countries. Airport and handling charges increased by 25% to €204.7m, which was higher thanthe growth in passenger volumes and reflects the impact of increased costs atcertain existing airports, particularly at our Dublin base which has a muchhigher average cost per passenger, offset by lower costs at new airports andbases. Other expenses increased by 24% to €75.6m, which is lower than the growth inancillary revenues, due to improved margins on some existing products and costincreases on some indirect costs. Operating margins remain flat at 25% due to the reasons outlined above whilstoperating profits have increased by 34% to €443.0m during the period. Interest receivable has increased by 60% to €43.8m in the period due to thecombined impact of higher levels of cash and cash equivalents and increases inaverage deposit rates earned compared to the same period last year. Interest payable increased by 12% to €62.1m due to the drawdown of debt to partfund the purchase of new aircraft and higher floating interest rates. Notes to the Financial Statements 1. Accounting Policies This period's financial information has been prepared in accordance with the accounting policies set out in Ryanair's consolidated financial statements for the year ended March 31, 2006, which were prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the EU. The comparative financial information for the nine month period ended December 31, 2005 has been restated on a consistent basis. 2. Approval of the Preliminary Announcement The Audit Committee approved the consolidated financial statements for the half year ended December 31, 2006 on February 2, 2007. 3. Generally Accepted Accounting Policies The Management Discussion and Analysis of Results for the period ended December 31, 2006 and the comparative period are based on the results reported under the Group's IFRS accounting policies, as adjusted for certain exceptional items. 4. Available for Sale Securities During the period the Company acquired a 25.2% stake in Aer Lingus at a cost of €342.2m. This is reflected at market value at December 31, 2006 at €364.8m. 5. Accounting for Share-Based Payments Under SFAS No. 123R, which was adopted by the Company on April 1, 2006, the Company is required to account for share-based employee compensation using a fair value based method. The Company has elected to use the Binomial Lattice option pricing model to determine the fair-value of share-based awards under SFAS No. 123R, consistent with that previously used for pro forma disclosures under SFAS No. 123 ("Accounting for Stock-Based Compensation"). The Company has elected to use the modified prospective transition method as permitted by SFAS No. 123R and accordingly prior periods have not been restated to reflect the impact of the revised standard. In this period's financial information, the Company has, as a result of the adoption of SFAS No. 123R, recorded incremental share-based compensation expense of €2.7m in its US GAAP income statement. Prior to the adoption of SFAS No. 123R, the Company measured compensation expense for its employee share-based compensation plans using the intrinsic method prescribed by APB Opinion No. 25. The Company applied the disclosure provisions of SFAS No. 123, as if the fair value based method has been applied in measuring compensation expense. Under APB Opinion No. 25, when the exercise price of the Group's employee share options was equal to the market price of the underlying share on the date of grant, no compensation expense was recognised. If the Company had applied the fair value recognition provisions of SFAS No. 123 to share-based compensation during the three month period ended December 31, 2005, reported income under US GAAP would have changed from €37.6m to €37.4m with resulting Net income per ADS, basic and diluted, of 24.52 euro cent and 24.35 euro cent respectively. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RYA.L