6th Jun 2006 07:01
Ryanair Holdings PLC06 June 2006 RYANAIR FULL YEAR RESULTS AHEAD OF EXPECTATIONS RECORD NET PROFIT OF €302M AS TRAFFIC GROWS TO 35M Ryanair, Europe's No.1 low fares airline today (Tuesday, 6 June 2006) announcedrecord after tax profits of €302m, some €7m ahead of previous expectations.Traffic grew by 26% to 35m passengers, yields were up 1%, as total revenues grewby 28% to €1.69 billion. Excluding fuel, unit costs fell by 6% (including fuelthey rose by 5%). Fuel costs rose by 74% to €462m. Despite these substantiallyhigher fuel costs, Ryanair achieved an 18% after tax margin, as adjusted netprofits increased for the year by 12% to €302m. Summary Table of Results (IFRS) - in Euro Year Ended Mar 31, 2005 Mar 31, 2006 % IncreasePassengers 27m 35m 26%Revenue €1,319m €1,693m 28%Adj. Profit after Tax (note 1 &2) €268m €302m 12%Basic EPS (Euro Cents) (note1 & 2) 35.28 39.32 11% Note 1: Adjusted profit and EPS to March 31, 2005 excludes an amount of €11.9m(net of tax) resulting from changes in the accounting treatment for Goodwillarising on the Buzz acquisition following the adoption of IFRS (InternationalFinancial Reporting Standards) Note 2: Adjusted profit after tax and EPS for theyear ended March 31, 2006 excludes an amount of €5.2m ( net of tax) arising fromthe settlement of an aircraft insurance claim. Announcing these results Ryanair's Chief Executive, Michael O'Leary, said: "Ryanair has again delivered record traffic and profits despite substantiallyhigher oil prices, intense competition and the absence of Easter from the fourthquarter. This robust performance validates our lowest fare/lowest cost modelwhich continues to grow profitably in Europe even during adverse marketconditions, when many of our competitors are reporting losses. Highlights of the past 12 months include: • After tax profit of €302m, an increase of 12% despite a 74% increase in fuel costs. • Cost discipline continues with a 6% unit cost reduction excluding fuel. • Average yields increased by 1% despite a 27% increase in capacity. • Significant traffic growth of 26% to 35m passengers, across 330 routes with 103 aircraft. • The retirement of our remaining B737-200's, reduced the average age of Ryanair's fleet to 21/2 years, the youngest in Europe. • 46 new routes and 1 new base have already been announced for the remainder of 2006. • Our balance sheet has been further strengthened with cash increasing €366m to €1.97 billion. "The key to Ryanair's traffic and profit growth was our refusal to levy fuelsurcharges on our passengers at a time when most other airlines in Europe areintroducing or increasing them. In some cases other airline surcharges exceedour average fares. This is driving millions of passengers to Ryanair. We willcontinue to absorb significantly higher oil prices thanks to the benign yieldenvironment and continuing unit cost reductions. "We have taken advantage of the recent short-term fall in oil prices to hedge90% of our needs from June to October 2006 at an average price of $70 a barrel.The recent weakness in the dollar will help us to partially offset these higheroil prices. We remain unhedged from October onwards, and will continue to lookfor opportunities to hedge further into the future, but only if suitable pricingopportunities present themselves. As always hedging will eliminate near-termuncertainty and risk, it will not deliver lower costs during periods of risingoil prices. "Ryanair's inexorable growth in aircraft, routes and passengers continues. Overthe coming year we expect traffic to grow by 20% to 42m passengers. Traffic atour new bases in Liverpool, Nottingham East Midlands and Shannon is performingwell, with strong advance bookings into the Summer months. The passengerresponse to our new French base at Marseille which will open in November hasbeen very positive. We also expect to announce one or possibly two further basesfor Spring 2007 and expansion of some of our existing bases before the end ofthe Summer. "We refuse to allow higher oil prices distract us from aggressively pursuingunit cost reductions and operating efficiencies. A number of recent initiativeswill help our drive for lower costs and fares. Web based check-in and chargingfor bags are both running ahead of expectations. After some initial delays withthe roll out of web check-in we are now seeing flights with over 50% ofpassengers using our web check-in and priority boarding facility. Charging forcheck-in bags has encouraged passengers to travel with fewer and in some caseszero check-in bags. Indications over the past two months suggest that thisinitiative may offset the anticipated decline in overall yields by more than €1per passenger. "The winglet modification programme on our 737 fleet is proving effective withbetter aircraft performance and a 2% reduction in fleet fuel consumption, asaving which we believe can be improved over the coming year. Our operatingperformance continues to make Ryanair the No. 1 customer service airline inEurope. No other major or low cost airline can match Ryanair's record forconsistently high punctuality, with fewest lost bags and least flightcancellations. "Ancillary revenues continue to grow strongly. From an already high base weexpect these revenues will grow at a faster rate than scheduled traffic for thecoming year. We are close to finalising new initiatives to offer our customersmobile phone services on board in 2007 and website gambling which we believewill give a further boost to ancillary revenues in this fiscal year. "Negotiations on pilot pay were successfully concluded at 14 of our 15 bases(excluding Dublin) at the end of April. Pilots at 13 bases have voted for a oneyear deal with a basic pay increase of 1.8%, whilst the Luton base voted for a 4year deal which incorporated a 5% pay increase this year, as well as improvedrosters. The Dublin pilots continued to absent themselves from these directnegotiations with the company, as is their right and consequently they have notyet negotiated any pay increase this year. "We are also continuing to campaign for the breakup of the BAA airport monopolyin the UK. We welcome the OFT's recent announcement that it is consideringlooking into the BAA's monopoly over the main London Airports. It should examinewhy the BAA is pushing ahead with plans to spend some £4 billion on a secondrunway at Stansted that should only cost around £1 billion. The contradictionbetween the BAA's position 3 months ago - that it couldn't afford to build thisrunway in Stansted without doubling passenger charges - with its recentannouncement that it will return over £1 billion to its shareholders this year,is typical of the overcharging monopoly. This clearly demonstrates how the BAAhas been featherbedding its balance sheet, at the expense of airline users andthe travelling public. It also proves that the CAA has failed to regulate thisovercharging monopoly in the interests of users. Competition between the Londonairports will improve facilities and reduce costs. Regulation has clearlyfailed. "Ryanair's fleet will increase by 30 aircraft between September 2006 and April2007. We will launch a large number of new routes and bases at the worst time ofthe year, and we expect that Winter trading will be negatively effected by acombination of this capacity expansion, much higher oil prices (compared to lastyear) and further price dumping by loss making competitors who will be trying tosurvive next Winter. "Accordingly we remain cautious about our profit guidance for the coming year.Whilst we are confident that traffic will grow by 20% to 42m passengers andyields will be flat, we expect that profit growth will be more modest in the +5%to +10% range if oil prices remain at $70 a barrel. Profitability will also bemore seasonally pronounced due to the presence of Easter in Q.1, the impact ofcompetitor fuel surcharges, and the higher proportion of "sun" routes operatedthis Summer. We expect that in excess of 85% of annual profits (compared to 80%last year) will be earned in the first half of this fiscal year, and thereafterprofitability in Q.3 and Q.4 will be reduced (against last years comparables) asthe proportion of annual profits earned in the last two quarters falls to lessthan 15% of the annual total. "It is Ryanair's resolute commitment to offering the lowest fares in everymarket which has made us Europe's largest low fares airline. Shortly we willbecome the "World's Favourite" airline, as we expect to overtake Lufthansa'sinternational passenger traffic later this year, thereby making Ryanair theworld's largest international scheduled airline by passenger numbers. Ryanairwill continue to deliver the lowest costs and the lowest air fares in Europe forthe benefit of our customers, our people and our shareholders". Ends. Tuesday, 6 June 2006 For further information Howard Millar Pauline McAlesterplease contact: Ryanair Holdings Plc Murray Consultantswww.ryanair.com Tel: 353-1-8121212 Tel: 353-1-4980300 Certain of the information included in this release is forward looking and issubject to important risks and uncertainties that could cause actual results todiffer materially. It is not reasonably possible to itemise all of the manyfactors and specific events that could affect the outlook and results of anairline operating in the European economy. Among the factors that are subject tochange and could significantly impact Ryanair's expected results are the airlinepricing environment, fuel costs, competition from new and existing carriers,market prices for 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 16 bases and 341 low fareroutes across 22 countries. By the end of March 2007 Ryanair will operate anentire fleet of 134 new Boeing 737-800 aircraft with firm orders for a further100 new aircraft (net of planned disposals), which will be delivered over thenext 5 years. Ryanair currently employs a team of 3,300 people and expects tocarry approximately 42 million scheduled passengers in the current year. Ryanair Holdings plc and Subsidiaries Consolidated Income Statement in accordance with IFRS(unaudited) Year Year ended ended March 31, March 31, 2006 2005 •'000 •'000Operating revenuesScheduled revenues 1,433,377 1,128,116Ancillary revenues 259,153 190,921Total operating revenues-continuing operations 1,692,530 1,319,037 Operating expensesStaff costs 171,412 141,673Depreciation and amortisation 112,856 98,703Other operating expensesFuel & oil 462,466 265,276Maintenance, materials and repairs 48,966 37,934Marketing and distribution costs 13,912 19,622Aircraft rentals 47,376 33,471Route charges 164,577 135,672Airport and Handling charges 216,301 178,384Other 85,557 79,489Total operating expenses 1,323,423 990,224 Operating profit before exceptional items 369,107 328,813Purchase accounting adjustment - 11,925Aircraft insurance claim 5,939 - Operating profit after exceptional items 375,046 340,738Other (expenses)/incomeForeign exchange (losses) (1,234) (2,302)Gain on disposal of fixed assets 815 47Interest receivable and similar income 38,219 28,342Interest payable and similar charges (73,958) (57,629)Total other (expenses)/income (36,158) (31,542)Profit before taxation 338,888 309,196Tax on profit on ordinary activities (32,176) (29,153)Profit for the year 306,712 280,043 Earnings per ordinary share -Basic(Euro cent) 40.00 36.85 -Diluted(Euro cent) 39.74 36.65 Adjusted earnings per ordinary share* -Basic(Euro cent) 39.32 35.28 -Diluted(Euro cent) 39.07 35.09 -Basic 766,833 759,911-Diluted 771,781 764,003 * Calculated on profit for the year before exceptional items(net of tax). Page 1 Ryanair Holdings plc and Subsidiaries Consolidated Balance Sheets in accordance with IFRS(unaudited) March 31, March 31, 2006 2005 •'000 •'000 Non-current assetsProperty, plant & equipment 2,532,988 2,117,892Intangible assets 46,841 46,841Derivative financial instruments 763 -Deferred tax 11,321 1,328Total Non-current assets 2,591,913 2,166,061Current assetsInventories 3,422 2,460Other assets 29,453 24,612Accounts receivable 29,909 20,644Deferred tax 3,427 -Derivative financial instruments 18,872 -Restricted cash 204,040 204,040Financial assets: cash > 3months 328,927 529,407Cash and cash equivalents 1,439,004 872,258 Total current assets 2,057,054 1,653,421 Total assets 4,648,967 3,819,482Current liabilitiesAccounts payable 79,283 92,118Accrued expenses and other liabilities 570,614 418,653Current maturities of long term debt 153,311 120,997Derivative financial instruments 27,417 -Current tax 16,663 17,534Total current liabilities 847,288 649,302Other liabilitiesProvisions for liabilities and charges 16,722 7,236Derivative financial instruments 81,897 -Deferred tax 140,592 105,509Other creditors 46,066 29,072Long term debt 1,524,417 1,293,860Total other liabilities 1,809,694 1,435,677Shareholders' funds - equityCalled - up share capital 9,790 9,675Share premium account 596,231 565,756Profit and loss account 1,467,623 1,158,584Other reserves (81,659) 488Shareholders' funds - equity 1,991,985 1,734,503Total liabilities and shareholders' funds 4,648,967 3,819,482 Page 2 Ryanair Holdings plc and Subsidiaries Consolidated Cashflow Statement in accordance with IFRS(unaudited) March 31, March 31, 2006 2005 •'000 •'000Operating activitiesProfit before taxation 338,888 309,196 Adjustments to reconcile profits before taxto net cash provided by operating activitiesDepreciation 112,856 98,703(Increase) in inventories (962) (424)(Increase) in accounts receivable (9,265) (5,712)(Increase) in other current assets (882) (4,855)(Decrease)/increase in accounts payable (12,835) 24,182Increase in accrued expenses 150,083 89,406Increase/(decrease) in other creditors 11,402 (11,603)Increase in maintenance provision 9,486 714Gain on disposal of fixed assets (815) (47)Interest receivable (3,959) (505)Interest payable 1,159 3,420Retirement costs 507 167Share based payment 2,921 488Income tax 437 (3,581) Net cash provided by operating activities 599,021 499,549 Investing activitiesCapital expenditure (purchase of property, plant (534,676) (620,340)and equipment)Proceeds from sale of property, plant and 8,460 2,234equipment(Investment) in restricted cash - (4,040)Reduction/(investment) in financial assets: cash > 200,480 (216,662)3months (325,736) (838,808)Financing activitiesNet proceeds from shares issued 30,590 5,382Increase in long term debt 262,871 461,875 Net cash used in financing activities 293,461 467,257Increase in cash and cash equivalents 566,746 127,998Cash and cash equivalents at beginning of year 872,258 744,260Cash and cash equivalents at end of year 1,439,004 872,258 Page 3 Ryanair Holdings plc and Subsidiaries Consolidated Statement of Changes in Shareholders' Funds - Equity in accordance with IFRS (unaudited) Share Profit Ordinary premium and loss Other shares account account reserves Total •'000 •'000 •'000 •'000 •'000 Balance at April 1, 2005 9,675 565,756 1,158,584 488 1,734,503 Issue of ordinary equity shares 115 30,475 - - 30,590 Movement in reserves - - 2,327 (82,147) (79,820) Profit for the year - - 306,712 - 306,712 Balance at March 31, 2006 9,790 596,231 1,467,623 (81,659) 1,991,985 Reconciliation of adjusted earnings per share(unaudited) Year Year ended ended March 31, March 31, 2006 2005 •'000 •'000 Profit for the year under IFRS 306,712 280,043 AdjustmentsPurchase accounting adjustment (11,925)Aircraft Insurance Claim (5,939) -Taxation adjustment for above 742 - Adjusted profit under IFRS 301,515 268,118Number of ordinary shares(in 000's) -Basic 766,833 759,911 -Diluted 771,781 764,003 Adjusted earnings per ordinary share -Basic(• cent) 39.32 35.28 -Diluted(• cent) 39.07 35.09 Page 4 Ryanair Holdings plc and Subsidiaries Consolidated Income Statement in accordance with US GAAP (unaudited) Year Year ended ended March 31, March 31, 2006 2005 •'000 •'000Operating revenuesScheduled revenues 1,433,377 1,128,116Ancillary revenues 259,153 190,921Total operating revenues -continuing operations 1,692,530 1,319,037Operating expensesStaff costs 168,920 141,427Depreciation and amortisation 114,327 101,103Other operating expenses Fuel & oil 462,466 265,276Maintenance, materials and repairs 48,966 37,934Marketing and distribution costs 13,912 19,622Aircraft rentals 47,376 33,471Route charges 164,577 135,672Airport and Handling charges 216,301 178,384Other 85,494 79,401Total operating expenses 1,322,339 992,290 Operating profit before exceptional items 370,191 326,747Purchase accounting adjustment - 11,925Aircraft insurance claim 5,939 -Operating profit after exceptional items 376,130 338,672Other (expenses)/incomeForeign exchange (losses) (1,234) (2,302)Gain on disposal of fixed assets 815 47Interest receivable and similar income 38,219 28,342Interest payable and similar charges (65,986) (49,784)Total other (expenses)/income (28,186) (23,697)Income before taxation 347,944 314,975Taxation (33,111) (31,561) Net income 314,833 283,414Net income per ADS -Basic(Euro cent) 205.28 186.48 -Diluted(Euro cent) 203.97 185.48Adjusted net income per ADS * -Basic(Euro cent) 201.89 178.63 -Diluted(Euro cent) 200.60 177.68Weighted Average number of shares -Basic 766,833 759,911 -Diluted 771,781 764,003 * 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 generally accepted accounting principles(unaudited) (A) Net income under US GAAP March 31, March 31, 2006 2005 •'000 •'000 Net income in accordance with IFRS 306,712 280,043 AdjustmentsPensions (430) (242)Share based payments 2,922 488Capitalised interest (net of amortisation)regarding aircraftacquisition programme 6,501 5,445Darley Investments Limited 63 88Taxation- effect of above adjustments (935) (2,408) Net income in accordance with US GAAP 314,833 283,414 (B) Consolidated cashflow statement in accordancewith US GAAP March 31, March 31, 2006 2,005 •'000 •'000Cash inflow from operating activities 599,021 499,549Cash (outflow) from investing activities (325,736) (838,808)Cash inflow from financing activities 293,461 467,257 Increase in cash and cash equivalents 566,746 127,998Cash and cash equivalents at beginning of year 872,258 744,260 Cash and cash equivalents at end of year 1,439,004 872,258 Cash and cash equivalents under US GAAP 1,439,004 872,258Restricted cash 204,040 204,040Deposits with a maturity of between three and six 328,927 529,407months Cash and liquid resources in accordance with IFRS 1,971,971 1,605,705 Page 6 Ryanair Holdings plc and Subsidiaries Summary of significant differences between IFRS and US generally Accepted accounting principles(unaudited) (C) Shareholders' funds - equity March 31, March 31, 2006 2005 •'000 •'000Shareholders' equity as reported in the consolidatedbalance Sheets in accordance with IFRS 1,991,985 1,734,503 Adjustments:Pension 9,241 11,998Capitalised interest( net of amortisation) regarding 29,448 22,947aircraft acquisition programmeDarley Investments Limited - (63)Minimum pension liability(net of tax) (4,295) (6,496)Unrealised losses on derivative financial instruments - (128,074)(net of tax)Tax effect of adjustments( excluding pension & (5,931) (4,996)derivative adjustments) Shareholders' equity as adjusted to accord with US 2,020,448 1,629,819GAAP Opening shareholders' equity under US GAAP 1,629,819 1,356,281 Comprehensive incomeMinimum pension liability(net of tax) 2,201 (3,865)Unrealised gains/(losses) on derivative financial 43,005 (11,393)instruments(net of tax)Net income in accordance with US GAAP 314,833 283,414Total comprehensive income 360,039 268,156 Stock issued for cash 30,590 5,382 Closing shareholders' equity in accordance with US 2,020,448 1,629,819GAAP 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 profit and loss account excluding the exceptional items and goodwillreferred to below. Exceptional items in the year ended March 31, 2006 consist of a receipt of €5.2m(net of tax) in quarter 1 arising from the settlement of an insurance claim forthe scribing of 6 Boeing 737-200 aircraft. Following the adoption of IFRS (International Financial Reporting Standards) theCompany was obliged to change its accounting treatment for Businessacquisitions. This has resulted in a one-off, non-cash release of €11.9m in theyear ended March 31, 2005. (see note 5 attached). Profit after tax increased by 10% to €306.7m compared to €280.1m in the previousyear ended March 31, 2005, whilst adjusted profit after tax increased by 12% to€301.5m The results for the year and comparative year have been prepared in accordancewith International Financial Reporting Standard ("IFRS") accounting policiesexpected to be adopted in the annual financial statements for the year ended 31March 2006, and a detailed explanation of the financial impact of the adoptionof these policies was set out in a separate document issued with the quarterlyfinancial results for the period to 30 June 2005. Summary Year ended March 31, 2006 Profit after tax increased by 12% to €301.5m, compared to €268.1m in theprevious year ended March 31, 2005. These results were achieved by strong growthin passenger volumes and continued tight cost control, excluding fuel costs,which were significantly higher than in the comparative period. Total operatingrevenues increased by 28% to €1,692.5m, which was faster than the 26% growth inpassenger volumes, as average fares rose by 1% and ancillary revenues grew by36% to €259.2m. Total revenue per passenger as a result increased by 2%, whilstPassenger Load Factor decreased by 1 point to 83% during the year. Total operating expenses increased by 34% to €1,323.4, due to the increasedlevel of activity, and the increased costs, primarily fuel, route charges, staffcosts, and airport & handling costs associated with the growth of the airline.Fuel, which represents 35% of total operating costs compared to 27% last year,increased by 74% to €462.5m due to substantial increases in the cost per gallonof fuel partly offset by a positive movement in the US$ exchange rate. Unitcosts excluding fuel declined by 6% as all other major cost items increased,other than maintenance and aircraft rentals, at a slower rate than the growth inpassenger volumes. This is despite the impact on last year's comparative figuresof the release of maintenance provisions of €5.2m arising from the return of 6leased Boeing 737-300's to the lessor. Due to the significantly higher fuelcosts incurred, operating margins declined by 3 points to 22%, whilst operatingprofit increased by 12% to €369.1m. Net Margins declined by 2 points to 18% for the reasons outlined above. Adjusted earnings per share have increased by 11% to 39.32 cent for the year. Balance Sheet The Company's profit growth continues to generate strong cashflow fromoperations which for the year to March 31, 2006 amounted to €599.0m. Thiscashflow part funded the extensive aircraft delivery programme, and additionalaircraft deposits, whilst the balance remaining is reflected in the €366.3mincrease in Total Cash since March 31, 2005. Capital expenditure net of salesproceeds amounted to €526.2m during the year made up predominantly of the costof delivery of 21 737-800 aircraft. Long Term Debt, drawndown to part fundaircraft deliveries, increased by €262.9m, net of repayments. Shareholders' Funds at March 31, 2006 have increased by €257.5m to €1,992.0m,compared to March 31, 2005. Detailed Discussion and Analysis Year ended March 31, 2006 Profit after tax, increased by 12% to €301.5m due to average fares increasing by1% and strong ancillary revenue growth, which was offset by much higher fuelcosts that increased by 74% to €462.5m reflecting the higher US$ cost pergallon. Operating margins, as a result, fell by 3 points to 22%, which in turnresulted in operating profit increasing by 12% to €369.1m compared to theprevious year ended March 31 2005. Total operating revenues increased by 28% to €1,692.5m whilst passenger volumesincreased by 26% to 34.8m. Total revenue per passenger increased by 2% in theyear due to a combination of slightly higher average fares and strong ancillaryrevenue growth. Scheduled passenger revenues increased by 27% to €1,433.4m due to a combinationof increased passenger volumes on existing routes, the successful launch of newbases at Liverpool, Shannon, East Midlands, Pisa, Cork and a 1% increase inaverage fares. Ancillary revenues increased 36% to €259.2m, a faster growth rate than passengervolumes, reflecting a strong performance in non-flight scheduled revenues(primarily car hire, hotels and travel insurance), on-board sales and otherancillary products. Ancillary revenues continue to grow at a significantlyfaster rate than passenger volumes. Total operating expenses increased by 34% to €1,323.4m due to the increasedlevel of activity, and the increased costs primarily fuel, aircraft rentals,route charges, staff costs and airport and handling costs associated with thegrowth of the airline. Total operating costs were also adversely impacted by anincrease in the average sector length, whilst higher US$ fuel prices werepartially offset by the strength of the Euro exchange rate against the US$. Staff costs have increased by 21% to €171.4m primarily due to an 18% increase inaverage employee numbers to 3,063 and the impact of pay increases granted of 3%. Depreciation and amortisation increased by 14% to €112.9m. A higher depreciationcharge due to an increase in the size of the 'owned' fleet from 74 to 86, wasoffset by a lower amortisation charge due to the retirement of 737-200 aircraftand the positive impact of a new engine maintenance deal on the cost of aircraftamortisation. The strengthening of the Euro to US$ also had a positive impact onthe depreciation and amortisation charge on new aircraft deliveries. Fuel costs rose by 74% to €462.5m due to an increase in the number of sectorsflown, an 8% increase in sector length, and a significantly higher average US$cost per gallon of fuel partially offset by the positive impact of thestrengthening of the Euro to the US$ during the year. Maintenance costs increased by 29% to €49.0m reflecting improved reliability ofthe 737-800s operated and a lower level of maintenance costs incurred due to thereturn of six 737-300's, the retirement of the 737-200's, and the positiveimpact of the strengthening of the Euro exchange rate, partially offset by anincrease in the number of leased 737-800 aircraft from 13 to 17. Marketing and distribution costs decreased by 29% to €13.9m due to the reductionin the level of marketing activity and related expenditure compared to theprevious year. Aircraft rental costs increased by 42% to €47.4m reflecting an additional 4aircraft on lease during the year, €5.5m incurred on short term leases duringthe 4th quarter offset by the savings arising from the return of 6 737-300's toILFC. Route charges increased by 21% to €164.6m due to an increase in the number ofsectors flown and an increase of 8% in the average sector length, offset by areduction in enroute charges in certain EU countries. Airport and handling charges increased by 21% to €216.3m, which was slower thanthe growth in passenger volumes and reflects the impact of increased costs atcertain existing airports offset by lower costs at new airports and bases. Other expenses increased by 8% to €85.6m, which is lower than the growth inancillary revenues due to improved margins on some existing products, and costreductions achieved on indirect costs. Operating margins have declined by 3 points to 22% due to the reasons outlinedabove whilst operating profits have increased by 12% to €369.1m during the year. Interest receivable has increased by 35% to €38.2m for the period due to thecombined impact of higher levels of cash and cash equivalents and increases inaverage deposit rates earned in the period compared to last year. Interest payable increased by 28% to €74.0m due to the drawdown of further debtto part fund the purchase of new aircraft. Foreign exchange losses have decreased during the year to €1.1m due to thepositive impact of changes in the Sterling and US Dollar exchange rates againstthe Euro compared to last year. The gain on disposal of fixed assets of €0.8m arises from the disposal of theremaining nine 737-200 aircraft during the year. The Company's Balance Sheet continues to reflect the significant capitalexpenditure programme being undertaken by the group. An additional 21 aircraftwere delivered during the year which in conjunction with the payment of depositson future deliveries accounted for the bulk of €534.7m spent on capitalexpenditure during the year. During the same period the Company generated cashfrom operating activities of €599.0m that part funded the capital expenditureprogramme which the balance reflected in Total Cash of €1,972.0m. The exerciseof share options, primarily by pilots generated a further €30.6m cash for theGroup. Total Debt, net of repayments increased by €262.9m during the year. Shareholders' Funds at March 31, 2006 have increased by €257.5m to €1,992.0m,compared to March 31, 2005 reflecting the €306.7m increase in profitabilityduring the year, and the exercise of share options which increased funds by€30.6m, offset by a reduction of €82.1m resulting from changes in the accountingtreatment for derivative financial instruments, pensions and stock optionsfollowing the adoption of IFRS. Notes to the Financial Statements 1. Accounting Policies This period's financial information has been prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards ("IFRS") in issue that were are adopted by the EU and effective (or available for early adoption) at 31 March 2006. These accounting policies are set out in the document titled "Explanation of the financial impact following adoption of IFRS" published in August 2005 with the first quarter financial results. 2. Approval of the Preliminary Announcement The Audit Committee approved the consolidated financial statements for the year ended March 31, 2006 on 1st June, 2006. 3. Generally Accepted Accounting Policies The Management Discussion and Analysis of Results for the year ended March 31,2006 and the comparative period are based on the results reported under the group's preliminary IFRS accounting policies, as adjusted for certain exceptional items. 4. Ancillary Products and Services In order to more accurately reflect the structure of certain ancillary contracts and to provide more meaningful information to users the Group has taken the opportunity to reclassify certain ancillary revenues and costs (primarily car hire and travel insurance). This has resulted in a reduction in revenues of €25.8 million with a corresponding reduction in costs in the period ended March 31, 2006 (March 31, 2005: €17.5 million). This has resulted in an increase in net margin of 0.3% to 17.8% in the period ended March 31, 2006 (March 31, 2005 0.3% to 20.3%). Going forward the Group intends to report ancillary revenues and costs on a basis consistent with the treatment described herein. 5. Purchase Accounting Adjustment Subsequent to the acquisition of Buzz Stansted in April 2003 Ryanair renegotiated the terms and conditions of onerous aircraft leases and agreed to return the aircraft to the lessors in late 2004, thereby releasing Ryanair from any remaining lease obligations at that time. Irish GAAP permitted that such an adjustment could be made to the provisional value of the assets and liabilities acquired as part of the original business combination; provided that the adjustment was made either in the reporting period that the combination took place or the first full financial period following the transaction. IFRS 3, however, only allows such an adjustment to be made in the 12 month period following the acquisition, and accordingly, as the event occurred more than 12 months after the acquisition date, under IFRS this adjustment is made to the Group's income statement instead. This gives rise to a credit of €11.9m to the income statement in the year to March 31, 2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RYA.L