4th Feb 2008 07:01
Ryanair Holdings PLC04 February 2008 RYANAIR ANNOUNCES Q3 TRAFFIC GROWTH OF 21%, NET PROFITS FALL 27% TO €35M - IN LINE WITH GUIDANCE Ryanair, Europe's largest low fares airline today (Monday, 4th February 2008)announced third quarter after tax profits of €35m, a 27% decline over thecomparable quarter last year, and in line with previous guidance. This profitfigure excludes a €12.1m profit from aircraft disposals. Traffic grew by 21% to12.4m, yields fell by 4%, as revenues rose by 16% to €569m. The prior year Q3comparable was distorted by a one off €10m contract termination penalty receivedfrom a previous hotel partner. Excluding this one off prior year Q3 receiptreveals an underlying profit decline of 10%. Unit costs were flat in the quarterdue primarily to a doubling of airport charges at Stansted, significant costincreases at the Dublin Airport monopoly, combined with longer sector lengths,offset in part by lower cost fuel hedges. Summary Table of Results (IFRS) - in Euro Quarter Ended Dec 31, 2006 Dec 31, 2007 % Increase Passengers 10.3m 12.4m 21%Revenue €493m €569m 16%Adjusted Profit after Tax (Note 1) €48m €35m -27%Adjusted Basic EPS(EuroCents) (Note 1) 3.09 2.35 -24% Note 1: Quarter ended 31 December 07 excludes a gain of €12.1m net of taxarising from the disposal of 5 Boeing 737-800 aircraft. Announcing these results, Ryanair's CEO, Michael O'Leary said: "This net profit of €35m is a creditable performance in very adverse marketconditions. It reflects Ryanair's 21% traffic growth, a 4% decline in yields,flat unit costs and a strong ancillary sales performance. Ancillary revenues(excluding a one off €10m termination payment in the prior year) grew by 30% to€111m. Ancillary penetration continues to increase, and we are on target toachieve our ancillary sales objective of 20% of revenues over the next 3 years.Inflight mobile phone services will be tested on 25 aircraft - subject toregulatory approval - during the April-June quarter and we are optimistic thatpassengers will quickly adopt this service to make/receive calls and texts ontheir mobile phones and blackberries. "Whilst unit costs were flat during the quarter, excluding our fuel hedges theyrose by 6% due to the unjustified doubling of airport charges at the StanstedAirport monopoly, significantly higher charges at the even less competitiveDublin Airport monopoly and 7% longer sectors. Costs were positively impacted byour decision to reduce Winter capacity at Stansted by 7 aircraft, while staffcosts rose by 18% to €67m due to an increase in cabin crew ratios which willcontinue through the remainder of this fiscal year. "We welcome the UK Government's decision to reject the anti-consumer proposal bythe CAA Regulator to dedesignate the Stansted Airport monopoly. We continue tocampaign for the break up of the BAA Airport monopoly in London, and/or a moreeffective regulatory regime than that operated by the inept CAA Regulator. TheCAA stood idly by last year while Stansted Airport doubled passenger charges andat the same time delivered abject service to airlines and passengers. The London airports and consumers need a much tougher regulator than themisguided CAA which has repeatedly put the needs of the BAA Stansted airportmonopoly before the reasonable interests of passengers and airport users. "At Dublin, a similarly protected (Government owned) monopoly continues to raiseprices by up to 50% at a time when most other European airports are reducingthem. The DAA are pushing ahead with their crazy €800m second terminal, the costof which has escalated to more than four times its original €200m budget.Passenger charges at Dublin Airport are rising at many times the rate ofinflation, because the Irish Aviation Regulator (who is even more ineffectualthan the CAA in the UK) is asleep on the job. Ryanair has called for hisdismissal on grounds of incompetence. He can't even run his own officeefficiently or effectively, never mind regulate a powerful, abusive monopolylike the DAA. "Thankfully at most other airports, where competition exists, airport andhandling costs are falling. This is as it should be in an era of ever decliningair fares. Our new bases at Alicante and Valencia in Spain, Belfast City inNorthern Ireland, and Bristol in the UK have performed well during their firstWinter and we expect this trend to continue. We have recently announced two newbases at Bournemouth and Birmingham in the UK, where we expect to investsignificantly in new aircraft, new routes and new jobs in Summer 2008, as weroll out Ryanair's guaranteed lowest fares to more regional UK cities. Wecontinue to have more new base opportunities than we can handle at present, andexpect to be in a position to announce at least two further European basesshortly, both of which will launch in Winter 2008. GUIDANCE FOR 07/08 "Looking forward to the end of the current fiscal year ('07/'08) we now havesufficient visibility over Q4 bookings and yields to enable us to maintain ourprevious guidance of net profit growth of 17.5% to approx. €470m for the fullfiscal year, (07/08). We expect the decline in average fares this Winter will beclose to 5% and within the range previously guided. Our ability to grow netprofits, in a year when most of our competitors are suffering declines or losingmoney is testament to the continuing strength of Ryanair's guaranteed lowestfare business model across Europe. GUIDANCE FOR 08/09 "At this time it is too early to make any accurate forecasts in such volatilemarkets for 2008/09. However with oil prices at $90 a barrel and fear ofrecession in the UK and many other European economies, the current outlook forthe coming fiscal year is poor. We remain essentially unhedged for next year.Current oil prices, which have risen by nearly 40% to $90 a barrel, will imposesignificantly higher costs during a year when we are expanding capacity byalmost 20%. Costs will be hurt by a projected 5% increase in sector length. Tocompound this negative outlook, European consumer confidence is waning whichwould suggest that, unlike two years ago, (when higher yields compensated forhigher oil prices), next years yields may be flat or continue to fall, asconsumers become more price sensitive. Our earnings may also be impacted by the recent weakness of Sterling whichaccounts for a significant proportion of Ryanair's revenues. "The European airline sector is presently facing one of these cyclicaldownturns, with possibility of a "perfect storm" of higher oil prices, poorconsumer demand, weaker Sterling and higher costs at unchecked monopoly airportssuch as Dublin and Stansted which account for a significant proportion ofRyanair's traffic. While it is impossible to accurately forecast full year fuelprices and yields this far in advance, there is now a significant chance thatprofits may decline next year. At our most optimistic, a combination of flatyields and $75 oil would see profits grow by 6% to approximately €500m, but atour most conservative, if forward oil prices remain at $85, and consumersentiment/sterling weakness leads to a 5% reduction in yields, then profits inthe coming year could fall by as much as 50% to as low as €235m (excludingprofits from aircraft disposals). We would hope to be in a position to provide amore informed update on guidance with the release of our full year results onJune 3rd, 2008. "There can be only one competitive response to any consumer uncertainty, andthat is for Ryanair to slash fares and yields, stimulate traffic, encourageprice sensitive consumers, and promote new routes/base developments. The airlinebusiness is highly cyclical and we have seen these downturns before. They poseunique long term opportunities for the lowest cost producer - Ryanair - to growrapidly, open new markets, win share from competitors and speed up the pace ofindustry consolidation which will lead to flag carriers withdrawing capacityfrom certain markets and loss making competitors disappearing altogether. "This process has already started in Europe. For example, Aer Lingus has alreadywithdrawn services on routes from Dublin to Seville, Newcastle, Poznan, and fromShannon to London. We have also witnessed the withdrawal of British Airways fromBirmingham following the sale of its "Connect" subsidiary to Flybe and thesubsequent closure of 9 routes. Capacity has also been withdrawn by weaker socalled low fare carriers across Europe. Many of these carriers have cancelledtheir growth plans, while others are in significant retrenchment. High fuelcosts combined with rising losses mean that some of these carriers will notsurvive should this potential "perfect" storm materialise. "Ryanair has the lowest cost base in the European industry and even in arecession will continue to be substantially profitable. Despite the possibilityof a fall in profits next year, our airline continues to deliver the industry'shighest margins and will remain enormously cash generative, with a very strongbalance sheet. We continue to have over €2bn in cash despite spending over €700min the last twelve months acquiring a 29% stake in Aer Lingus and completing ashare buyback of €300m. €200M SHARE BUY BACK At our AGM in September 2007, shareholders authorised that directors couldre-purchase ordinary shares ("buyback") amounting to 5% of the company's issuedshare capital. The directors have decided, in the best interests of the companyand its shareholders as a whole, to undertake a second buyback programme of upto €200m. At the current market price of €3.60 this equates to a buyback ofapprox. 3% of the company's issued share capital. Whilst there is no guaranteethat this buyback will be completed, we would not anticipate initiating anybuyback programme until after at least February 6th 2008, if at all. Ordinary(and not ADR's) shares may be re-purchased under the programme in accordancewith the provisions of the company's annual re-purchase authority and therequirements of the Irish Stock Exchange and UK listing rules. The company'sbrokers, Davys, will conduct any share buyback programme and any sharesre-purchased will be cancelled immediately". Ends. Monday, 4th February 2008 For further information please contact: Howard Millar Pauline McAlesterRyanair Holdings Plc Murray ConsultantsTel: 353-1-8121212 Tel: 353-1-4980300 www.ryanair.com Certain of the information included in this release is forward looking and issubject to important risks and uncertainties that could cause actual results todiffer materially. It is not reasonably possible to itemise all of the manyfactors and specific events that could affect the outlook and results of anairline operating in the European economy. Among the factors that are subject tochange and could significantly impact Ryanair's expected results are the airlinepricing environment, fuel costs, competition from new and existing carriers,market prices for the replacement aircraft, costs associated with environmental,safety and security measures, actions of the Irish, U.K., European Union ("EU")and other governments and their respective regulatory agencies, fluctuations incurrency exchange rates and interest rates, airport access and charges, labourrelations, the economic environment of the airline industry, the generaleconomic environment in Ireland, the UK and Continental Europe, the generalwillingness of passengers to travel and other economics, social and politicalfactors. Ryanair is Europe's largest low fares airline with 25 bases and 627 low fareroutes across 26 countries. By the end of March 2008 Ryanair will operate afleet of 163 Boeing 737-800 aircraft with firm orders for a further 99 newaircraft (net of planned disposals), which will be delivered over the next 5years. Ryanair currently employs a team of 5,000 people and expects to carrycirca 50.5 million scheduled passengers in the current fiscal year. Ryanair Holdings plc and SubsidiariesCondensed Consolidated Interim Balance Sheetmeasured in accordance with IFRS (unaudited) At Dec 31, At Mar 31, 2007 2007 •'000 •'000 ------- -------Non-current assets Property, plant and equipment 3,252,192 2,884,053Intangible assets 46,841 46,841Available for sale financial assets 325,478 406,075 -------- --------Total non-current assets 3,624,511 3,336,969 -------- -------- Current assetsInventories 2,777 2,420Other assets 113,711 77,707Trade receivables 24,519 23,412Derivative financial instruments 57,907 52,736 -------- --------Restricted cash 171,728 258,808Financial assets: cash > 3 months 419,667 592,774Cash and cash equivalents 1,459,606 1,346,419 -------- --------Total current assets 2,249,915 2,354,276 -------- -------- Total assets 5,874,426 5,691,245 -------- -------- Current liabilitiesTrade payables 55,727 54,801Accrued expenses and other liabilities 676,863 807,136Current maturities of debt 194,834 178,918Derivative financial instruments 94,621 56,053Current tax 42,300 20,822 -------- --------Total current liabilities 1,064,345 1,117,730 Non-current liabilitiesProvisions 38,630 28,719Derivative financial instruments 49,440 58,666Deferred income tax liability 153,824 151,032Other creditors 113,218 112,177Non-current maturities of debt 1,874,165 1,683,148 -------- --------Total non-current liabilities 2,229,277 2,033,742 -------- -------- Shareholders' equityIssued share capital 9,465 9,822Share premium account 591,400 607,433Retained earnings 2,059,991 1,905,211Other reserves (80,052) 17,307 -------- --------Shareholders' equity 2,580,804 2,539,773 -------- -------- Total liabilities and shareholders'equity 5,874,426 5,691,245 -------- -------- Ryanair Holdings plc and SubsidiariesCondensed Consolidated Interim Income Statementmeasured in accordance with IFRS (unaudited) Quarter Quarter Period Period ended ended ended ended Dec 31, Dec 31, Dec 31, Dec 31, 2007 2006 2007 2006 •'000 •'000 •'000 •'000 ------- ------- ------- -------Operating revenues Scheduled revenues 458,664 397,595 1,760,662 1,489,697 Ancillary revenues 110,745 95,168 363,075 259,489 ------- ------- ------- ------- Total operating revenues-continuing operations 569,409 492,763 2,123,737 1,749,186 ------- ------- ------- ------- Operating expenses Staff costs 66,832 56,856 213,117 170,700 Depreciation 47,537 36,619 123,600 108,242 Fuel & oil 192,294 174,887 585,031 511,929 Maintenance, materials & repairs 14,265 10,846 41,205 32,159 Marketing & distribution costs 1,028 4,246 15,563 15,854 Aircraft rentals 18,343 15,457 55,050 40,851 Route charges 63,150 47,720 192,125 146,104 Airport & handling charges 94,003 65,584 302,886 204,682 Other 27,739 23,340 89,509 75,652 ------- ------- ------- ------- Total operating expenses 525,191 435,555 1,618,086 1,306,173 ------- ------- ------ ------- Operating profit - continuingoperations 44,218 57,208 505,651 443,013 Gain on disposal of property, plant & equipment 13,650 - 13,650 - Other income/(expenses) Finance income 21,415 14,854 62,909 43,777 Finance expense (25,317) (20,812) (70,182) (62,123) Foreign exchange gain/(losses) (3,486) (40) (1,999) (1,269) ------- ------- ------- ------- Total other income/(expenses) (7,388) (5,998) (9,272) (19,615) ------- ------- ------- ------- Profit before tax 50,480 51,210 510,029 423,398 Tax on profit on ordinary activities (3,302) (3,478) (55,255) (46,541) ------- ------- ------- -------Profit for the period-allattributable to equityholders of parent 47,178 47,732 454,774 376,857 ------- ------- ------- ------- Basic earnings per ordinary share (in euro cents) 3.16 3.09 29.94 24.41 Diluted earnings per ordinary share (in euro cents) 3.13 3.06 29.65 24.27 Weighted average number of ordinary shares (in 000's)* 1,494,201 1,545,490 1,519,030 1,543,718 Weighted average number of diluted shares (in 000's)* 1,508,550 1,559,984 1,534,001 1,552,738 * Adjusted for share split of 2 for 1 which occurred on February 26, 2007 Ryanair Holdings plc and Subsidiaries Condensed Consolidated Interim Cashflow Statementmeasured in accordance with IFRS (unaudited) Period Period ended ended Dec 31, Dec 31, 2007 2006 •'000 •'000 ------- -------Operating activities Profit before tax 510,029 423,398 Adjustments to reconcile profits before tax to netcash provided by operating activities Depreciation 123,600 108,242 (Increase)/decrease in inventories (357) 1,470 (Increase)/decrease in trade receivables (1,107) 9,141 (Increase) in other current assets (13,780) (25,776) Increase/(decrease) in trade payables 926 (15,057) (Decrease) in accrued expenses (165,654) (40,618) Increase in other creditors 1,041 72,571 Increase in maintenance provisions 9,911 9,769 (Gain) on disposal of property, plant and equipment (13,650) - (Increase)/decrease in interest receivable (4,857) 1,221 Increase in interest payable 2,138 7,047 Retirement costs 985 494 Share based payments 10,162 2,747 Income tax (paid)/refunded (17,902) 236 ------- ------- Net cash provided by operating activities 441,485 554,885 ------- ------- Investing activities Capital expenditure (purchase of property, plant and equipment) (578,444) (195,208) Proceeds from sale of property, plant and equipment 132,613 - Purchase of equities classified as available for sale (57,990) (342,410) Reduction/(investment) in restricted cash 87,080 (136) Reduction/(investment) in financial assets: cash > 3 months 173,107 (198,158) ------- -------Net cash used in investing activities (243,634) (735,912) ------- ------- Financing activities Cost associated with repurchase of shares (299,994) - Net proceeds from shares issued 8,397 10,055 Increase in long term borrowings 206,933 19,954 ------- ------- Net cash provided by financing activities (84,664) 30,009 ------- ------- Increase/(decrease) in cash and cash equivalents 113,187 (151,018)Cash and cash equivalents at beginningof the period 1,346,419 1,439,004 ------- -------Cash and cash equivalents at end of the period 1,459,606 1,287,986 ------- ------- Ryanair Holdings plc and SubsidiariesCondensed Consolidated Interim Statement of Recognised Income and Expensemeasured in accordance with IFRS (unaudited) Quarter Quarter Period Period ended ended ended ended Dec 31, Dec 31, Dec 31, Dec 31, 2007 2006 2007 2006 •'000 •'000 •'000 •'000 --- --- --- ---Cash flow hedge reserve-effective portion of fair value changes to derivatives:Net movements into/(out of)cash flow hedge reserve 1,305 12,740 (5,953) (20,066) Net decrease in fair valueof available for salefinancial asset (41,440) 18,063 (126,355) 18,063 ------- ------- ------- ------- Income and expenditurerecognised directly inequity (40,135) 30,803 (132,308) (2,003) ------- ------- ------- -------Profit for the period 47,178 47,732 454,774 376,857 ------- ------- ------- -------Total recognisedincome and expense 7,043 78,535 322,466 374,854 ------- ------- ------- ------- Ryanair Holdings plc and Subsidiaries Operating and Financial Overview Introduction For the purposes of the Management Discussion and Analysis ("MD&A") all figuresand comments are by reference to the adjusted income statement excluding theexceptional items referred to below. Exceptional items in the nine months ended December 31, 2007 amounted to €12.1m(net of tax) which arose from the sale of 5 Boeing 737-800 aircraft. Profit after tax increased by 21% compared to the previous nine months endedDecember 31, 2007 to €454.8m, whilst adjusted profit after tax increased by 17%to €442.6m. During the quarter ended December 31, 2007, profit after taxdecreased by 1% to €47.2m whilst adjusted profit after tax decreased by 27% to€35.0m. Summary Nine Months ended December 31, 2007 Profit after tax increased by 17% to €442.6m, compared to €376.9m in thecomparative nine month period ended December 31, 2006 reflecting a 20% increasein passenger numbers, a 2% decrease in fares (including checked in baggagerevenues) and strong growth in ancillary revenues. The growth in revenues wasoffset by a combination of higher fuel, airport charges, and staff costs. Totaloperating revenues increased by 21% to €2,123.7m, which was faster than the 20%growth in passenger volumes, as average fares decreased by 2% and ancillaryrevenues grew by 40% to €363.1m. Total revenue per passenger as a resultincreased by 1%, whilst Passenger Load Factor decreased by 1 point to 84% duringthe period. Total operating expenses increased by 24% to €1,618.1m, due to the increasedlevel of activity, and increased costs, associated with the growth of theairline. Fuel, which represents 36% of total operating costs compared to 39%last year, increased by 14% to €585.0m due to an increase in the number of hoursflown, offset by a decrease in the US dollar cost per gallon, a positivemovement in the US dollar exchange rate versus the euro, and a reduction in fuelconsumption arising from the installation of winglets. Staff costs rose by 25%reflecting the growth in the airline, a share option charge of €9.1m, and anincrease in cabin crewing ratios. Excluding the charge of €9.1m for the shareoption grant, staff costs would have increased by 20%. Airport and Handlingcharges increased by 48% to €302.9m arising from the doubling of airport chargesat Stansted and higher charges at Dublin Airport. Unit costs rose by 3% andoperating margins decreased by 1 point to 24%, whilst operating profit increasedby 14% to €505.6m. Net Margins decreased by 1 point to 21% for the reasons outlined above. Earnings per share increased by 23% to 29.94 cent for the period. Balance Sheet Total cash decreased by €147.0m to €2,051.0m as the growth in profitability wasoffset by the funding of, a €300m share buy back programme, an additional €58.0minvestment in Aer Lingus and €578.4m in capital expenditure largely frominternal resources. Total debt, net of repayments, increased during the periodby €206.9m. Shareholders' Equity at December 31, 2007 increased by €41.0m to€2,580.8m, compared to March 31, 2007 due to the €454.8m increase inprofitability during the period and by €8.4m due to the exercise of shareoptions, offset by, €122.1m due to the impact of the required IFRS accountingtreatment for derivative financial instruments, available for sale financialassets, stock options and a share buy back of €300m. Detailed Discussion and Analysis Nine Months Ended December 31, 2007 Adjusted Profit after tax, increased by 17% to €442.6m due to a 20% increase inpassenger numbers, a 2% decrease in fares (including checked in baggagerevenues) and strong growth in ancillary revenues. The growth in revenues wasoffset by a combination of, increased airport costs which rose by 48% to €302.9m(arising from the doubling of airport charges at Stansted and higher charges atDublin Airport) and increased staff costs primarily due to higher cabin crewingratios, which rose by 25% to €213.1m. Operating margins, as a result, decreasedby 1 point to 24%, which in turn resulted in operating profit increasing by 14%to €505.6m compared to the previous nine months ended December 31, 2006. Total operating revenues increased by 21% to €2,123.7m whilst passenger volumesincreased by 20% to 38.9m. Total revenue per passenger increased by 1% due tostrong ancillary revenue growth. Scheduled passenger revenues increased by 18% to €1,760.7m reflecting a 2%decrease in fares and a 20% increase in traffic due to increased passengernumbers on existing routes and the successful launch of new routes and bases.Load factor decreased by 1 point to 84% during the period due to a 22% increasein seat capacity. Ancillary revenues continue to outpace the growth of passenger volumes and roseby 40% to €363.1m in the period. This performance reflects the strong growth inonboard sales, excess baggage revenues, non-flight scheduled revenues, and otherancillary products. Total operating expenses rose by 24% to €1,618.1m due to the increased level ofactivity, and the increased costs associated with the growth of the airlineparticularly higher airport charges and staff costs. Total operating expenseswere also adversely impacted by a 7% increase in average sector length. Staff costs have increased by 25% to €213.1m. This primarily reflects a 29%increase in average employee numbers to 5,056, the impact of pay increasesgranted during the period, and a €9.1m charge for a share option grant made toeligible employees. Excluding the charge of €9.1m for the share option grant,staff costs would have increased by 20%. Employee numbers rose due to the growthof the business and an increase in cabin crewing ratios as a result of a new EUworking directive. Pilots, who earn higher than the average salary, accountedfor 24% of the increase in employees during the period. Depreciation and amortisation increased by 14% to €123.6m. This reflects, net ofdisposals, an additional 25 lower cost 'owned' aircraft in the fleet this periodcompared to December 31, 2006, offset by a revision of the residual value of thefleet to reflect current market valuations and the positive impact onamortisation of the stronger euro versus the US dollar. Fuel costs rose by 14% to €585.0m due to a 28% increase in the number of hoursflown offset by a 9% decrease in the euro equivalent cost per gallon of fuelhedged in addition to a reduction in fuel consumption due to the installation ofwinglets. Maintenance costs increased by 28% to €41.2m, due to a combination of the growthin the number of leased aircraft from 30 to 35, the increased level of activity,offset by the positive impact of a stronger euro versus US dollar exchange rate. Marketing and distribution costs decreased by 2% to €15.6m due to the tightcontrol on expenditure and the increased focus on internet based promotions. Aircraft rental costs increased by 35% to €55.1m as the weighted average numberof leased aircraft increased by 12 during the period compared to the same periodlast year. Route charges rose by 32% to €192.1m due to an increase in the number of sectorsflown and a 7% increase in the average sector length. Airport and handling charges increased by 48% to €302.9m, significantly fasterthan the growth in passenger volumes, and reflects the impact of the doubling ofunit costs at Stansted Airport and higher charges at Dublin Airport, offset bylower costs at new airports and bases. Other expenses increased by 18% to €89.5m, which is lower than the growth inancillary revenues due to improved margins on some existing products and costreductions on some indirect costs. Operating margins have declined by 1 point to 24% due to the reasons outlinedabove whilst operating profits have increased by 14% to €505.6m during theperiod. Interest receivable has increased by 44% to €62.9m for the period primarily dueto the increase in average deposit rates earned in the period, partially offsetby a lower average cash balance. Interest payable increased by 13% to €70.2m due to the drawdown of debt to partfinance the purchase of new aircraft and the adverse impact of higher interestrates. Foreign exchange losses during the period of €2.0m are primarily due to thenegative impact, on foreign currency deposits, of changes in the US dollar andsterling exchange rate against the euro. Gains on disposal of property, plant and equipment of €13.7m arose on the saleof 5 Boeing 737-800 aircraft. The Company's Balance Sheet continues to strengthen due to the strong growth inprofits during the period. The Company generated cash from operating activitiesof €441.5m and €132.6m from the sale of Boeing 737-800 aircraft which partfunded the €300m share buy back programme, €58.0m increased investment in AerLingus, and capital expenditure incurred during the period with the remainingbalance reflected in Total Cash of €2,051.0m. Capital expenditure amounted to€578.4m which largely consisted of advance aircraft payments for future aircraftdeliveries the delivery of nineteen aircraft and two simulators. Long term debt,net of repayments, increased by €206.9m during the period. Shareholders' Equity at December 31, 2007 increased by €41.0m to €2,580.8m,compared to March 31, 2007 due to the €454.8m increase in profitability duringthe period, €8.4m arising from the exercise of share options, offset by €122.1mreflecting the impact of IFRS accounting treatment for derivative financialassets, available for sale financial assets, stock options and share buy back of€300m. Detailed Discussion and Analysis Quarter Ended December 31, 2007 Adjusted Profit after tax, decreased by 27% to €35.0m due to a 21% increase inpassenger numbers, offset by a 4% decrease in fares (including checked inbaggage revenues). Excluding the one off €10.0m contract termination penaltyreceipt in the prior year comparative, profit after tax fell by 10%. The 16%growth in Total Revenues was offset by a combination of increased airport costswhich rose by 43% to €94.0m arising from the doubling of airport charges atStansted and higher charges at Dublin Airport, and a one off step up in staffcosts, primarily due to higher cabin crewing ratios, which rose by 18% to€66.8m. Operating margins, as a result, decreased by 4 points to 8%, which inturn resulted in operating profit decreasing by 23% to €44.2m compared to thecomparative quarter ended December 31, 2006. Total operating revenues increased by 16% to €569.4m whilst passenger volumesincreased by 21% to 12.4m. Total revenue per passenger decreased by 4% in linewith the decrease in average passenger fares. Scheduled passenger revenues increased by 15% to €458.7m due to a 21% increasein traffic reflecting increased passenger numbers on existing routes and thesuccessful launch of new routes and bases. During the period average fares(including checked baggage revenues) were down by 4% whilst load factor remainedflat at 81% during the quarter. Ancillary revenues increased by 16% to €110.7m in the quarter and excluding theone off €10.0m contract termination penalty receipt in the prior yearcomparative they rose by 29%. This performance reflects the strong growth inexcess baggage revenues, non-flight scheduled revenues, and other ancillaryproducts. Total operating expenses rose by 21% to €525.2m due to the increased level ofactivity, and the increased costs associated with the growth of the airlineparticularly higher airport charges and staff costs. Total operating expenseswere also adversely impacted by a 7% increase in average sector length. Staff costs have increased by 18% to €66.8m. This primarily reflects a 29%increase in average employee numbers to 5,056 and the impact of pay increasesgranted during the year. Employee numbers rose due to an increase in cabincrewing ratios as a result of a new EU working directive. Pilots, who earnhigher than the average salary, accounted for 15% of the increase in employeesduring the period. Depreciation and amortisation increased by 30% to €47.5m. This reflects, net ofdisposals, an additional 25 lower cost 'owned' aircraft in the fleet thisquarter compared to December 31, 2006, offset by a revision of the residualvalue of the fleet to reflect current market valuations and the positive impacton amortisation of the stronger euro versus the US dollar. Fuel costs rose by 10% to €192.3m due to a 27% increase in the number of hoursflown offset by an 11% decrease in the average euro equivalent cost per gallonof fuel hedged and a reduction in fuel consumption due to the installation ofwinglets. Maintenance costs increased by 31% to €14.3m, due to a combination of theincrease in the number of leased aircraft from 30 to 35, an increase in thelevel of activity, offset by the positive impact of stronger euro versus the USdollar exchange rate. Marketing and distribution costs decreased to €1.0m due to the tight control onexpenditure and increased focus on internet based promotions. Aircraft rental costs increased by 19% to €18.3m reflecting an additional 5leased aircraft operating during the quarter compared to the same quarter lastyear. Route charges rose by 32% to €63.2m due to an increase in the number of sectorsflown and a 7% increase in the average sector length. Airport and handling charges increased by 43% to €94.0m. This is higher than thegrowth in passenger volumes and reflects the impact of the doubling of costs atStansted Airport and higher charges at Dublin Airport, offset by lower costs atnew airports and bases. Other expenses increased by 19% to €27.7m, lower than the growth in ancillaryrevenues excluding the one off €10.0m contract termination receipt in ancillaryrevenues in the prior year comparative. Operating margins fell by 4 points to 8% due to the reasons outlined above andoperating profits have decreased by 23% to €44.2m during the quarter. Interest receivable has increased by 44% to €21.4m for the quarter primarily dueto the increase in average deposit rates earned in the period, offset somewhatby a lower average cash balance. Interest payable increased by 22% to €25.3m due to the drawdown of further debtto part finance the purchase of new aircraft and the adverse impact of higherinterest rates. Foreign exchange losses during the period of €3.5m are primarily due to thenegative impact, on foreign currency deposits, of changes in the US dollar andsterling exchange rate against the euro. Gains on disposal of property, plant and equipment of €13.7m arose on the saleof 5 Boeing 737-800 aircraft. Statement of the directors in respect of the nine month financial report We confirm our responsibility for the nine month financial statements and thatto the best of our knowledge: * the condensed set of financial statements comprising the condensed incomestatement, the condensed statement of recognised income and expense, thecondensed balance sheet and the related notes have been prepared in accordancewith IAS 34 Interim Financial Reporting; * the interim management report includes a fair review of the informationrequired by: (a) Regulation 8(2) of the Transparency (Directive 2004/109/EC) Regulations2007, being an indication of important events that have occurred during thefirst nine months of the financial year and their impact on the condensed set offinancial statements; and a description of the principal risks and uncertaintiesfor the remaining three months of the year; and (b) Regulation 8(3) of the Transparency (Directive 2004/109/EC) Regulations2007, being related party transactions that have taken place in the first ninemonths of the current financial year and that have materially affected thefinancial position or performance of the entity during that period; and anychanges in the related party transactions described in the last annual reportthat could do so. The Group's auditors have not reviewed these condensed financial statements. On behalf of the Board David Bonderman Michael O'LearyChairman Chief Executive February 4, 2008 Ryanair Holdings plc and Subsidiaries Notes 1. Reporting entity Ryanair Holdings plc (the "Company") is a company domiciled in Ireland. Thecondensed consolidated interim financial statements of the Company for the ninemonths ended December 31, 2007 comprise the Company and its subsidiaries(together referred to as the "Group"). The consolidated financial statements of the Group as at and for the year endedMarch 31, 2007 are available at www.ryanair.com 2. Statement of compliance These unaudited condensed consolidated interim financial statements ("theinterim financial statements") have been prepared in accordance withInternational Accounting Standard No. 34 ("IAS 34") "Interim FinancialReporting". They do not include all of the information required for full annualfinancial statements, and should be read in conjunction with the most recentpublished consolidated financial statements of the Group. The comparative figures included for the year ended March 31, 2007 do notconstitute statutory financial statements of the Group within the meaning ofregulation 40 of the European Communities (companies, group accounts)regulations, 1992. Statutory financial statements for the year ended March 31,2007 have been filed with the companies' office. The auditors' report on thesefinancial statements was unqualified. The Audit Committee approved the interim financial statements for the ninemonths ended December 31, 2007 on February 1, 2008. 3. Significant accounting policies Except as stated otherwise below, this quarter's financial information has beenprepared in accordance with the accounting policies set out in the Group's mostrecent published consolidated financial statements, which were prepared inaccordance with International Financial Reporting Standards ("IFRS"). 4. Generally Accepted Accounting Policies The Management Discussion and Analysis of Results (Operating and FinancialOverview) for the nine months ended December 31, 2007 and the comparative ninemonths are based on the results reported under the Group's IFRS accountingpolicies. 5. Estimates The preparation of financial statements requires management to make judgements,estimates and assumptions that affect the application of accounting policies andthe reported amounts of assets and liabilities, income and expense. Actualresults may differ from these estimates. Except as described below, in preparing these consolidated financial statements,the significant judgements made by management in applying the Group's accountingpolicies and the key sources of estimation uncertainty were the same as thosethat applied in the most recent published consolidated financial statements. During the period ended December 31, 2007 management reassessed its estimates ofthe recoverable amount of aircraft residual values following certain recent andforward aircraft disposals and trends in the market. 6. Seasonality of operations The Group's results of operations have varied significantly from quarter toquarter, and management expects these variations to continue. Among the factorscausing these variations are the airline industry's sensitivity to generaleconomic conditions and the seasonal nature of air travel. Accordingly the firsthalf-year typically results in higher revenues and results. 7. Income tax expense The Group's consolidated effective tax rate in respect of operations for thenine months ended December 31, 2007 was approximately 11 percent, in line withthe same period last year. 8. Capital and reserves Share buy back programme. The Company commenced a share buy back programme in June 2007 and 59.5m shares,at an approximate cost of €300m, have been purchased and cancelled. Thisrepresents approximately 3.8% of the pre existing share capital of the Company. 9. Share based payments The terms and conditions of the share option programme are disclosed in the mostrecent published consolidated financial statements. In June 2007 a further granton similar terms was made to eligible employees, with a consequent charge to theincome statement in the period of approximately €9.1m. 10. Contingencies The Group is engaged in litigation arising in the ordinary course of itsbusiness. The Group does not believe that any such litigation will individuallyor in aggregate have a material adverse effect on the financial condition of theGroup. Should the Group be unsuccessful in these litigation actions, managementbelieves the possible liabilities then arising cannot be determined but are notexpected to materially adversely affect the Group's results of operations orfinancial position. 11. Capital commitments During the nine months ended December 31, 2007 the Group announced the purchaseof 27 additional Boeing 737-800s. This brings Ryanair's total firm orders forB737-800s to 308 and the total fleet size (net of planned disposals) to 262 by2012. These additional aircraft are due for delivery in financial year endingMarch 31, 2010. 12. Available for sale financial assets (Aer Lingus) The following table sets out the movement in available for sale financial assetsin the nine month period. •'000 -------Balance at April 1, 2007 406,075Purchase of equities 57,990Net change in fair value (138,587) ----------Balance at December 31, 2007 325,478 ---------- As of December 31, 2007 the average cost per share of Aer Lingus was €2.52 andthe market value was €2.09, a decline of 17%. Accordingly the view at this timeunder accounting rules is that this is neither "significant" nor "prolonged", inparticular because there has been a recovery in the share price post period end,and therefore no impairment loss has been recorded. However in the event that the asset becomes impaired the difference between thecost of the shares and the market value is recorded as an impairment loss in theprofit and loss. At December 31, 2007 this amounted to €77.4m and on February 1,2008 this had fallen to €41.6m. The Group will review this matter at the end ofeach quarter. 13. Post balance sheet events There were no significant post balance sheet events. 14. Loans and borrowings The following is the movement in loans and borrowings (non-current and current)during the half year. •'000 -------Balance at April 1, 2007 1,862,066Loans raised to finance aircraft/simulator purchases 386,517Repayments of debt borrowed (179,584) ----------Balance at December 31, 2007 2,068,999 ---------- 15. Changes in shareholders' equity Other Reserves Share Capital Ordinary premium Retained redemption Other shares account earnings Shares reserves Total •'000 •'000 •'000 •'000 •'000 •'000 ------- ------- ------- ------- ------- -------Balance atMarch 31, 2006 9,790 596,231 1,467,623 - (81,659) 1,991,985 ------- ------- ------- -------- ------- -------Issue ofordinaryequity shares 32 11,202 - - - 11,234 Effective portion ofchanges infair value of cash flow hedges - - - - 46,105 46,105 Net changein fair valueof available for sale assets - - - - 48,926 48,926 Share basedpayments - - - - 3,935 3,935 Profit forthe financial year - - 435,600 - - 435,600 Retirementbenefits - - 1,988 - - 1,988 ------- ------- ------- -------- ------- -------Balance atMarch 31, 9,822 607,433 1,905,211 - 17,307 2,539,7732007 ------- ------- ------- -------- ------- ------- Repurchaseof ordinary equity shares - - (299,994) - - (299,994) Issue ofordinaryequity shares 21 8,376 - - - 8,397 Capitalredemptionreserve fund (378) (24,409) - 24,787 - - Effectiveportion ofchanges infair value of cash flow hedges - - - - (5,953) (5,953) Net changein fair valueof available for sale assets - - - - (126,355) (126,355) Share-basedpayments - - - - 10,162 10,162 Profit forthe period - - 454,774 - - 454,774 ------- ------- ------- -------- ------- -------Balance atDecember31, 2007 9,465 591,400 2,059,991 24,787 (104,839) 2,580,804 ------- ------- ------- -------- ------- ------- 16. Analysis of operating revenues and segmental analysis All revenues derive from the Group's principal activity and business segment asa low fares airline and includes scheduled services, car hire, internet incomeand related sales to third parties. Revenue is analysed by geographical area (by country of origin) as follows: Period Period ended ended Dec 31, Dec 31, 2007 2006 •'000 •'000 ------- -------United Kingdom 755,180 686,381Other European countries 1,368,557 1,062,805 -------- -------Balance at December 31, 2007 2,123,737 1,749,186 -------- ------- All of the Group's operating profit arises from low fares airline-relatedactivities, its only business segment. The major revenue earning assets of theGroup are comprised of its aircraft fleet, which is registered in Ireland andtherefore principally all profits accrue in Ireland. Since the Group's aircraftfleet is flexibly employed across its route network in Europe, there is nosuitable basis of allocating such assets and related liabilities to geographicalsegments. 17. Property, plant and equipment Acquisitions and disposals During the nine months ended December 31, 2007, the Group acquired assets with acost of €578.4m (nine months ended December 31, 2006: €195.2 million). Therewere five Boeing 737-800 aircraft disposed of during the nine month period, thesale proceeds of which amounted to €100.4m. Additional deposits have beenreceived in relation to forward sales. 18. US GAAP Reconciliation Following on from the issuance by the SEC of rule 3235 "Acceptance from ForeignPrivate Issuers of Financial Statements prepared in accordance withInternational Financial Reporting Standards without reconciliation to US GAAP",the Group has chosen to exclude a US GAAP Reconciliation from these interimfinancial statements. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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