7th Nov 2005 07:01
Ryanair Holdings PLC07 November 2005 RYANAIR PROFITS RISE BY 18% TO RECORD €237M. TRAFFIC GROWTH OF 29%, NET MARGIN OF 25% Ryanair, Europe's No. 1 low fares airline, today (Monday, 7th November 2005)announced record half year profits of €237m. Traffic grew by 29% to 18.0mpassengers, yields increased by 3% and as a result total revenues rose by 33% to€946.2m. Unit costs increased by 8% (excluding fuel they fell by 7%) as fuelcosts rose by 108% to €236.9m. As a result of these significantly higher fuelcosts, Ryanair's adjusted after tax margin for the half year fell by 3 points to25% as adjusted net profit increased by 18% to €237m. Summary Table of Results (IFRS) - in EuroHalf Year Ended Sept 30, Sept 30, % 2004 2005 IncreasePassengers 14.0m 18.0m 29%Revenue €710.3m €946.2m 33%Profit after Tax (note 1) €201.2m €237.0m 18%Basic EPS (Euro Cents) 26.49 31.00 17%(note1) Note 1:Adjusted profit after tax and EPS during the half year ended 30 September2005 excludes a receipt, net of tax, of €5.2m arising from the settlement of aninsurance claim for the scribing of 6 Boeing 737-200 aircraft. Announcing these results Ryanair's Chief Executive, Michael O'Leary, said: "These record traffic and profits reflect the continued successful roll-out ofRyanair's lowest fare model despite difficult trading conditions characterisedby record high fuel prices and intense competition. It also demonstrates therobustness of the Ryanair model, which delivers significant profits andpassenger growth even during turbulent periods while many competitors are losingmoney. "As anticipated, yields were 3% higher than last year despite a 29% increase inseat capacity. These slightly higher yields reflect the multiple fuel surchargesimposed by European flag carriers, which have continued to widen the gap betweentheir high fares and Ryanair's lowest fares. We have again reaffirmed ourcommitment not to impose fuel surcharges on our passengers and reaped thebenefits of this strategy in terms of significant traffic growth and slightlyhigher yields during the half year. Ancillary revenues grew by 40% significantlyfaster than the growth in passenger volumes and this year we expect that theywill continue to outpace passenger growth. "Unit costs increased by 8% primarily due to higher fuel costs. Excluding fuelall other unit costs were reduced by 7% thanks to the addition of more lowercost and efficient Boeing 737-800's, new lower cost airport and base agreementsand continuing tight control over all other cost lines. We continue to focusaggressively on costs and anticipate that the cost reductions achieved willcontinue to partially offset the significantly higher oil prices. "Our fuel costs rose by 108% to €237m as we were unhedged for almost the entirehalf year. For the remainder of this fiscal year, to March 2006, we are 90%hedged at rates equivalent to $49 per barrel. We are unhedged thereafter butcontinue to closely monitor forward prices with a view to hedging ourrequirements for summer of 2006. However, we expect that fuel prices willcontinue at these higher levels for some time. "Our new routes and bases have performed well over the summer with Luton andLiverpool performing strongly whilst yields at Shannon continue to be lower thanexpected. We recently commenced operations at Pisa, our 13th European base, inOctober with 10 routes, and announced our 14th base at Nottingham - EastMidlands which will open in March 2006 with two based aircraft and a total of 15routes. We achieved a significant milestone during August by carrying morepassengers on our shorthaul European network than British Airways did on theirentire worldwide network in one month. "During the half year, we exercised 14 Boeing 737-800 options for delivery in2007, at which date we plan to sell on 5 older Boeing 737-800's delivered in1999. This is a continuation of our strategy of operating the youngest fleet inEurope with the lowest unit operating costs and delivering the best on timeperformance. At our recent investor day conference Management highlighted thatwe plan to double passenger volumes and profits by 2012 and believe that we arestill now in the early stages of low fare development in Europe. The exercise ofthese net 9 options is part of our strategy to continue to increase seatcapacity to satisfy the growing demand for Ryanair's low fares. "We continue to fight the levy of unjust taxes on our passengers and we welcomethe recent announcement by the UK government that it would not impose a £1 taxon air tickets. This £1 tax was proposed by the CAA to cover their own failureto ensure that scheduled airlines had adequate financial resources to fly to andfrom the UK. We also oppose the £4bn BAA farce at Stansted Airport where the BAAairport monopoly propose to build facilities that the users at the airportunanimously oppose, as they are extravagant and over specified. The objective ofthis inflated proposal is to ensure that the BAA airport monopoly can claim ahigher return on this £4bn of capital expenditure rather than the £400m to£600m, which more accurately reflects the cost of the facilities that the userairlines actually want them to build. "In Ireland the recent decision by the Commission for Aviation Regulation toallow Dublin Airport to increase airport charges by 23% from January next to payfor a proposed 2nd terminal, 5 years before it is built and without anyconsultation with the airline users (despite previous government assurances) isbeyond belief. We now have the bizarre situation that an over specified futureairport development is being funded by increasing charges now even though not asod has been turned on the facility, and there is no plan for it to be turnedfor quite some time. "We continue to remain cautious in our outlook for the remainder of the fiscalyear. We anticipate that the fare differentials between Ryanair and the flagcarriers will be partially eroded as the fuel surchargers are forced to lowertheir underlying fares to compete with Ryanair's lower prices. We expect toachieve significant increases in passenger's volumes but also anticipate thatyields in Q3 will be broadly in line with last year and Q4 yields will fall by arange of -5% to -10%, as previously guided. Our full year net profit guidance isunchanged. This winter we expect that there will be continued intensecompetition and there will be fewer low fare carriers in the market as higherfuel prices force more carriers out of the industry. Ryanair's combination ofthe lowest fare in every market, our lowest cost base and industry leadingcustomer service will enable us to grow across Europe to the benefit of ourpassengers, our people and our shareholders". ENDS. Monday, 7th November 2005 For further Howard Millar Pauline McAlesterinformation Ryanair Holdings Plc Murray Consultantsplease contact: Tel: 353-1-8121212 Tel: 353-1-4980300www.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 15 bases and 266 low fareroutes across 21 countries. By the end of March 2006 Ryanair will operate anentire fleet of 107 new Boeing 737-800 aircraft with firm orders for a further127 new aircraft (net of planned disposals), which will be delivered over thenext 7 years. Ryanair currently employs a team of 3,000 people and expects tocarry approximately 35 million scheduled passengers in the current year. Ryanair Holdings plc and Subsidiaries Consolidated Income Statement in accordance with IFRS(unaudited) Quarter Quarter Half year Half year ended Ended ended ended Sept30, Sept30, Sept30, Sept30, 2005 2004 2005 2004 •'000 •'000 •'000 •'000Operating revenuesScheduledrevenues 470,494 358,585 816,781 617,644Ancillaryrevenues 71,027 52,103 129,379 92,634Totaloperatingrevenues-continuingoperations 541,521 410,688 946,160 710,278OperatingexpensesStaff 41,494 35,267 83,646 69,389costsDepreciationandamortisation 26,072 21,333 53,049 44,904Otheroperatingexpenses Fuel & Oil 126,967 61,908 236,873 113,750 Maintenance, 11,225 10,825 25,063 24,898 materials and repairs Marketing 3,387 3,509 8,729 10,775 and distribution costs Aircraft 10,679 8,152 20,737 16,236 rentals Route 42,563 34,721 83,933 67,926 charges Airport and 55,465 46,052 110,039 90,322 Handling charges Other 21,440 18,275 41,977 36,691Totaloperatingexpenses 339,292 240,042 664,046 474,891Operatingprofit beforeexceptionalitems 202,229 170,646 282,114 235,387AircraftInsuranceClaim - - 5,939 -Operatingprofit afterexceptionalitems 202,229 170,646 288,053 235,387Other(expenses)/incomeForeignexchangegains/(losses) (481) (879) 463 (759)(Losses)/gainon disposal offixed assets (16) - (16) 6Interestreceivable andsimilar income 9,211 6,759 17,821 12,818Interestpayable andsimilarcharges (18,364) (13,259) (36,799) (25,921)Total other(expenses)/income (9,650) (7,379) (18,531) (13,856)Profit beforetaxation 192,579 163,267 269,522 221,531Tax on profiton ordinaryactivities (20,046) (15,192) (27,347) (20,380)Profit forthe 172,533 148,075 242,175 201,151periodEarnings per ordinary share -Basic(Euro cent) 22.51 19.50 31.68 26.49 -Diluted 22.35 19.38 31.47 26.32 (Euro cent) Adjusted earnings per ordinaryshare* -Basic(Euro 22.51 19.50 31.00 26.49 cent) -Diluted 22.35 19.38 30.79 26.32 (Euro cent) Number of ordinary shares(in000's) -Basic 766,453 759,351 764,509 759,315 -Diluted 771,875 764,183 769,603 764,343* Calculated on profit for the period before exceptional items(net of tax). Ryanair Holdings plc and Subsidiaries Consolidated Balance Sheets in accordance with IFRS(unaudited) September 30, March 31, 2005 2005 •'000 •'000Non-current assetsIntangible assets 46,841 46,841Tangible assets 2,117,760 2,092,283Deferred tax 20,391 1,328Total Non-current assets 2,184,992 2,140,452Current assetsInventories 31,802 28,069Other assets 26,924 24,612Accounts receivable 25,930 20,644Deferred Tax 1,182 -Derivative financial instruments 109,356 -Restricted cash 204,040 204,040Financial assets: cash > 3months 406,752 529,407Cash and cash equivalents 1,195,555 872,258Total current assets 2,001,541 1,679,030Total assets 4,186,533 3,819,482Current liabilitiesAccounts payable 62,651 92,118Accrued expenses and otherliabilities 421,411 414,997Current maturities of long termdebt 125,014 120,997Derivative financial instruments 9,454 -Current tax 28,518 21,190Total current liabilities 647,048 649,302Other liabilitiesProvisions for liabilities andcharges 12,381 7,236Derivative financial instruments 152,488 -Deferred tax 134,075 105,509Other creditors 75,548 29,072Long term debt 1,246,584 1,293,860Total other liabilities 1,621,076 1,435,677Shareholders' funds - equityCalled - up share capital 9,735 9,675Share premium account 576,639 565,756Profit and loss account 1,400,759 1,158,584Other reserves (68,724) 488Shareholders' funds - equity 1,918,409 1,734,503Total liabilities and shareholders'funds 4,186,533 3,819,482 Ryanair Holdings plc and Subsidiaries Consolidated Cashflow Statement in accordance with IFRS(Unaudited) Sept 30, Sept 30, 2005 2004 •'000 •'000Operating activitiesProfit before taxation 269,522 221,531Adjustments to reconcile profitsbefore taxTo net cash provided by operatingactivitiesDepreciation 53,049 44,904(Increase) in inventories (3,733) (30)(Increase) in accounts receivable (5,286) (1,874)Decrease/(increase) in other current 1,342 (1,372)assets(Decrease)/increase in accounts (29,467) 7,426payableIncrease in accrued expenses 6,175 9,479Increase/(decrease) in other 19,294 (2,496)creditorsIncrease in maintenance provision 5,145 3,362Interest receivable (3,654) (635)Interest payable (51) 1,097Salary costs 289 47Share based payment 586 -Income tax (1,727) (38)Net cash provided by operating 311,484 281,401activitiesInvesting activitiesCapital expenditure (78,526) (208,496)Financial assets: cash > 3months 122,655 (355,479) 44,129 (563,975)Financing activitiesNet proceeds from shares issued 10,943 201(Repayment)/increase in long debt (43,259) 90,935Net cash used in financing activities (32,316) 91,136Increase in cash and cash equivalents 323,297 (191,438)Cash and cash equivalents atbeginning of 872,258 744,260periodCash and cash equivalents at end of 1,195,555 552,822period Ryanair Holdings plc and Subsidiaries Consolidated Statement of Changes in Shareholders' Funds - Equityin accordance with IFRS (unaudited) Share Profit Ordinary premium and loss Other shares account account reserves Total •'000 •'000 •'000 •'000 •'000Balance at April 1,2005 9,675 565,756 1,158,584 488 1,734,503Issue of ordinaryequity shares 60 10,883 - - 10,943Movement in reserves - - - (69,212) (69,212)Profit for the period - - 242,175 - 242,175Balance at September30, 2005 9,735 576,639 1,400,759 (68,724) 1,918,409 Reconciliation of adjusted earnings per share(unaudited) Quarter Quarter Half year Half year ended ended ended ended Sept 30, Sept 30, Sept 30, Sept 30, 2005 2004 2005 2004 •'000 •'000 •'000 •'000Profit for the periodunder IFRS 172,533 148,075 242,175 201,151AdjustmentsAircraftInsurance - - (5,939) -ClaimTaxation adjustmentfor above - - 742 -Adjusted profit underIFRS 172,533 148,075 236,978 201,151Number of ordinary shares(in 000's) -Basic 766,453 759,351 764,509 759,315 -Diluted 771,875 764,183 769,603 764,343 Adusted earnings per ordinaryshare -Basic(• 22.51 19.50 31.00 26.49 cent) -Diluted(• 22.35 19.38 30.79 26.32 cent) Ryanair Holdings plc and Subsidiaries Consolidated Income Statement in accordance with US GAAP (unaudited) Quarter Quarter Half year Half year ended ended ended ended Sept30, Sept30, Sept30, Sept30, 2005 2004 2005 2004 •'000 •'000 •'000 •'000Operating revenuesScheduledrevenues 470,494 358,585 816,781 617,644Ancillaryrevenues 71,027 52,103 129,379 92,634Total operatingrevenues-continuingoperations 541,521 410,688 946,160 710,278Operating expensesStaff costs 41,301 35,227 83,077 69,309Depreciationandamortisation 26,385 22,111 53,654 45,682Other operatingexpenses Fuel & Oil 126,967 61,908 236,873 113,750 Maintenance, 11,225 10,825 25,063 24,898 materials and repairs Marketing 3,387 3,509 8,729 10,775 and distribution costs Aircraft 10,679 8,152 20,737 16,236 rentals Route 42,563 34,721 83,933 67,926 charges Airport and 55,465 46,052 110,039 90,322 Handling charges Other 21,418 18,253 41,933 36,647Totaloperatingexpenses 339,390 240,758 664,038 475,545Operatingprofit beforeexceptionalitems 202,131 169,930 282,122 234,733AircraftInsuranceClaim - - 5,939 -Operatingprofit afterexceptionalitems 202,131 169,930 288,061 234,733Other (expenses)/incomeForeignexchangegains/(losses) (481) (879) 463 (759)(Loss)/gain ondisposal offixed assets (16) - (16) 6Interestreceivable andsimilar income 9,211 6,759 17,821 12,818Interestpayable andsimilarcharges (16,450) (11,323) (33,352) (22,085)Total other(expenses)/income (7,736) (5,443) (15,084) (10,020)Income beforetaxation 194,395 164,487 272,977 224,713Taxation (20,309) (15,439) (27,849) (20,869)Net income 174,086 149,048 245,128 203,844 Net income per ADS -Basic(Euro 113.57 98.14 160.32 134.23 cent)-Diluted 112.77 97.52 159.26 133.35 (Euro cent) Adjusted net income per ADS * -Basic(Euro 113.57 98.14 156.92 134.23 cent) -Diluted 112.77 97.52 155.88 133.35 (Euro cent) Weighted Average number of shares -Basic 766,453 759,351 764,509 759,315 -Diluted 771,875 764,183 769,603 764,343* Calculated on Net Income before non-recurring items(net of tax).(5 ordinary shares equal 1 ADR) Ryanair Holdings plc and Subsidiaries Summary of significant differences between IFRS and USgenerally accepted accounting principles (unaudited) (A) Net income in accordance with US GAAP Quarter ended Half year ended Sept 30, Sept 30, Sept 30, Sept 30, 2005 2004 2005 2004 €000 €000 •'000 •'000Net income inaccordancewith IFRS 172,533 148,075 242,175 201,151AdjustmentsPension (100) 40 (17) 80Share basedpayments 293 - 586 -Capitalised interest (net ofamortisation) regarding aircraftacquisitionprogramme 1,601 1,158 2,842 3,058DarleyInvestmentsLimited 22 22 44 44Taxation-effect ofaboveadjustments (263) (247) (502) (489)Net income inaccordancewith US GAAP 174,086 149,048 245,128 203,844 (B) Consolidated cashflow statement in accordance with US GAAP Sept 30, Sept 30, 2005 2004 •'000 •'000Cash inflowfrom operatingactivities 311,484 281,401Cashinflow/(outflow) frominvestingactivities 44,129 (563,975)Cash(outflow)/inflow fromfinancingactivities (32,316) 91,136Increase incash and cashequivalents 323,297 (191,438)Cash and cashequivalents atbeginning ofyear 872,258 744,260Cash and cashequivalents atend of period 1,195,555 552,822Cash and cashequivalentsunder US GAAP 1,195,555 552,822Restrictedcash 204,040 200,000Deposits witha maturity ofbetween threeand six months 406,752 668,224Cash andliquidresources inaccordancewith IFRS 1,806,347 1,421,046 Ryanair Holdings plc and Subsidiaries Summary of significant differences between IFRS and USgenerally accepted accounting principles (unaudited) (C) Shareholders' funds - equity Sept 30, Sept 30, 2005 2004 •'000 •'000Shareholders' equity as reported in theconsolidated balancesheets in accordance with IFRS 1,918,409 1,652,309Adjustments:Pension 11,720 9,953Capitalised interest( net ofamortisation) regarding aircraftacquisition programme 25,789 20,559Darley Investments Limited (19) (107)Minimum pension liability(net oftax) (6,496) (2,631)Unrealised losses on derivativefinancial instruments(net of tax) - (113,302)Tax effect of adjustments( excludingpension & derivative adjustments) (5,498) (3,077)Shareholders' equity as adjusted toaccord with US GAAP 1,943,905 1,563,704Opening shareholders' equity underUS GAAP 1,629,559 1,356,281Comprehensive incomeUnrealised gains on derivativefinancial instruments(net of tax) 58,275 3,379Net income in accordance with USGAAP 245,128 203,844Total comprehensive income 303,403 207,223Stock issued for cash 10,943 200Closing shareholders' equity inaccordance with US GAAP 1,943,905 1,563,704 Ryanair Holdings plc Management Discussion and Analysis of Results IntroductionFor 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 half year ended September 30, 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. Profit after tax increased by 20% to €242.2m during the six months compared tolast year. The adjusted profit for the half year, excluding exceptional items,increased by 18% to €237.0m. The results for the period 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 Half year ended Sept 30, 2005 Profit after tax increased by 18% to €237.0m, compared to €201.2m in theprevious half year ended September 30, 2004. These results were achieved bystrong growth in passenger volumes and continued tight cost control, excludingfuel, which was significantly higher than in previous periods. Total operatingrevenues increased by 33% to €946.2m, which is greater than the 29% growth inpassenger volumes, as average fares rose by 3% and ancillary revenues grew by40% to €129.4m. Total revenue per passenger as a result increased by 3% whilstPassenger Load Factor decreased by 1 point to 86% during the period. Total operating expenses increased by 40% to €664.0m, due to the increased levelof activity, and the increased costs, primarily fuel, route charges and airport& handling costs associated with the growth of the airline. Fuel, whichrepresents 36% of total operating costs compared to 24% last year, increased by108% to €236.9m due to substantial increases in the US$ cost per gallon,partially offset by the strengthening of the Euro to US$ exchange rate. Unitcosts excluding fuel declined by 7% as all other cost items increased at aslower rate than the growth in passenger volumes. Due to the significantlyhigher fuel costs operating margins declined by 3 points to 30%, whilstoperating profit increased by 20% to €282.1m. Profit before tax has increased by 19%, less than the growth in operating profitdue to the higher net interest charges arising from the increased level of debt,partially offset by foreign exchange gains which arose from the translation offoreign currency bank balances to Euro at the half year end exchange rates.Net Margins declined by 3 points to 25% for the reasons outlined above. Adjusted basic earnings per share has risen by 17% to 31.00 cent for the period. Balance Sheet The strong growth in profitability continues to positively impact the balancesheet with Total Cash increasing by €200.6m to €1,806.3m despite funding anadditional €78.5m in capital expenditure from internal resources. The companytook delivery of one 737-800 aircraft and funded additional aircraft depositsduring the period. Total debt declined during the period as repayments exceededdebt drawdowns by €43.3m. Shareholders' Funds at Sept 30, 2005 have increased by€183.9m to €1,918.4m, compared to March 31, 2005 reflecting the €242.2m increasein profitability during the period offset by a reduction of €69.2m resultingfrom changes in the accounting treatment for derivative financial instruments,pensions and stock options following the adoption of IFRS. Detailed Discussion and Analysis Half year ended Sept 30, 2005 Profit after tax, increased by 18% to €237.0m due to a 3% increase in averagefares, strong growth in ancillary revenues, and tight cost control which wasoffset by fuel costs increasing by 108% to €236.9m during the period. Operatingmargins, declined by 3% due to higher fuel costs whilst operating profitincreased by 20% to €282.1m compared to half year ended Sept 30, 2004. Total operating revenues increased by 33% to €946.2m due to the combination of a29% increase in passengers carried, an improvement in average fares and stronggrowth in ancillary revenues. Scheduled passenger revenues increased by 32% to €816.8m due to a 3% improvementin average fares, increased passenger volumes on existing routes, the successfullaunch of new routes and new bases at Shannon, Liverpool and Luton. Thestrengthening of the euro against sterling during the period negatively impactedfares by 1%. As expected Load factor also declined by 1 point to 86% during theperiod. Ancillary revenues continue to perform strongly with revenues growing by 40% to€129.4m in the period. This performance reflects the strong growth in on boardsales, non-flight scheduled revenues, and other ancillary products. Ancillaryrevenues continue to grow at a faster rate than passenger volumes and nowaccount for 14% of total revenues compared to 13% last year. Total operating expenses increased by 40% to €664.0m due to the increased levelof activity, and the increased costs primarily fuel, aircraft rentals, routecharges and airport and handling costs associated with the growth of theairline. Total operating costs were also adversely impacted by a 10% increase inthe average sector length, whilst higher US$ fuel prices were partly offset bythe strength of the Euro exchange rate against the US dollar. Staff costs have increased by 21% to €83.6m. This increase primarily reflects a14% increase in average employee numbers to 2,987 and the impact of payincreases of 3% granted during the period. Pilots, who earn higher than theaverage salary, accounted for 44% of the increase in employment during theperiod. Depreciation and amortisation increased by 18% to €53.0m. There are anadditional eight 'owned' 737-800 aircraft in the fleet this year compared tolast year. The resultant higher depreciation charge was offset by a combinationof lower amortisation due to the retirement of 737-200 aircraft and the positiveimpact of a new engine maintenance deal on the cost of amortisation of 737-800aircraft. The strengthening of the euro to US$ also had a positive impact on thedepreciation and amortisation charge. Fuel costs rose by 108% to €236.9m due to a 32% increase in the number of hoursflown, a significant increase in the average US$ cost per gallon of fuelpartially offset by the positive impact of the strengthening of the Euro to theUS dollar during the period. Maintenance costs increased by €0.2m to €25.1m reflecting an increase in thesize of the fleet operated, and an increase in the number of hours flown offsetby maintenance savings due to improved reliability arising from the higherproportion of 737-800 operated and the return of 6 leased 737-300's to ILFC. Marketing and distribution costs decreased by €2.0m to €8.7m due to thereduction in the level of marketing activity and related expenditure compared tothe previous year. Aircraft rental costs increased by 28% to €20.7m reflecting an additional 7aircraft on lease during the period partially offset by the savings arising fromthe return of 6 737-300 aircraft to ILFC. Route charges increased by 24% to €83.9m due to an increase in the numbersectors flown, an increase in the average sector length, offset by a reductionin enroute charges in certain EU countries and the benefit of a stronger euro tosterling exchange rate. Airport and handling charges increased by 22% to €110.0m, which is lower thanthe growth in passenger volumes and reflects the impact of increased costs atcertain existing airports offset by lower costs at new airports and bases, andthe positive impact of the strength of the euro exchange rate against sterlingduring the period. Other expenses increased by 14% to €42.0m, which is less than the growth inancillary revenues due to improved margins on some new and existing products,and cost reductions achieved on certain indirect costs. Operating margins have declined by 3 points to 30% for the period due to thereasons outlined above which has resulted in operating profits increasing by 20%to €282.1m. Interest receivable has increased by €5.0m to €17.8m due to the combined impactof a higher cash balance and increases in average deposit rates during theperiod. Interest payable increased by €10.9m due to the drawdown of debt to part fundthe purchase of new aircraft during the period. The Company's Balance Sheet continues to strengthen due to the strong growth inprofits during the period. The Company generated cash from operating activitiesof €311.5m. which part funded capital expenditure during the period with thebalance reflected in Total Cash of €1,806.3m. Capital expenditure of €78.5mprimarily comprised of the delivery of an aircraft and further advance paymentsfor future aircraft deliveries. Long term Debt, net of repayments decreased by€43.3m during the period. Shareholders' Funds at September 30, 2005 have increased by €183.9m to€1,918.4m, compared to March 31, 2005 reflecting the €242.2m increase inprofitability during the period offset by a reduction of €69.2m resulting fromchanges in the accounting treatment for derivative financial instruments,pensions and stock options following the adoption of IFRS. Detailed Discussion and Analysis Quarter Ended September 30, 2005Profit after tax, increased by 16% to €172.5m due to a 3% increase in averagefares and strong ancillary revenue growth, which was offset by fuel costs whichincreased by 105% to €127.0m reflecting the higher US$ cost per gallon.Operating margins, as a result, fell by 5 points to 37%, which in turn resultedin operating profit increasing by 18% to €202.2m compared to the previousquarter. Total operating revenues increased by 32% to €541.5m whilst passenger volumesincreased by 28% to 9.5m. Total revenue per passenger increased by 3% in thequarter due to a combination of higher average fares, strong ancillary revenuegrowth but was partially offset by the weakening of Sterling exchange rateagainst the Euro. Scheduled passenger revenues increased by 31% to €470.5m due to a combination ofincreased passenger volumes on existing routes, the successful launch of newbases at Luton, Liverpool and Shannon and a 3% increase in average fares,partially offset by the weakening of Sterling exchange rate against the Euro.Ancillary revenues increased 36% to €71.0m, a faster growth rate than passengervolumes, reflecting a strong performance in non-flight scheduled revenues,on-board sales and other ancillary products. Ancillary revenues continue to growat a faster rate than passenger volumes and remain at 13% of total revenuescompared to the same period last year. Total operating expenses increased by 41% to €339.3m due to the increased levelof activity, and the increased costs primarily fuel, aircraft rentals, routecharges and airport and handling costs associated with the growth of theairline. Total operating costs were also adversely impacted by an increase inthe average sector length, whilst higher US$ fuel prices were partially offsetby the strength of the Euro exchange rate against the US$. Staff costs have increased by 18% to €41.5m primarily due to a 14% increase inaverage employee numbers to 2,876 and the impact of pay increases of 3% comparedto the previous quarter ended September 30, 2004. Depreciation and amortisation increased by 22% to €26.1m. A higher depreciationcharge due to an increase in the size of the 'owned' fleet from 66 to 74, offsetby a lower amortisation charge due to the retirement of 737-200 aircraft and thepositive impact of a new engine maintenance deal on the cost of amortisation of737-800 aircraft. The strengthening of the Euro to US$ also had a positiveimpact on the depreciation and amortisation charge relating to new aircraftdeliveries. Fuel costs rose by 105% to €127.0m 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 period. Maintenance costs increased by 4% to €11.2m reflecting the improved reliabilityarising from the higher proportion of 737-800 operated and a lower level ofmaintenance costs incurred due to the return of six 737-300'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 10 to 17. Marketing and distribution costs decreased by 3% to €3.4m due to the reductionin the level of marketing activity and related expenditure compared to theprevious year. Aircraft rental costs increased by 31% to €10.7m reflecting an additional 7aircraft on lease during the quarter offset by the savings arising from thereturn of 6 737-300's to ILFC. Route charges increased by 23% to €42.6m 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 20% to €55.5m, which was slower thanthe growth in passenger volumes and reflects the impact of increased costs atcertain existing airports offset by lower costs and new airports and bases, andthe strengthening of the Euro exchange rate against Sterling. Other expenses increased by 17% to €21.5m, 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 5 points to 37% due to the reasons outlinedabove whilst operating profits have increased by 18% to €202.2m during thequarter. Interest receivable has increased by €2.4m to €9.2m for the quarter due to thecombined impact of higher levels of cash and cash equivalents and increases inaverage deposit rates earned in the quarter compared to last year. Interest payable increased by €5.1m to €18.4m due to the drawdown of debt topart fund the purchase of new aircraft. Foreign exchange losses have decreased during the quarter to €0.5m due to thepositive impact of changes in the Sterling exchange rate against the Eurocompared to last year. 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 either are adopted by the EU and effective (or available for early adoption) at 31 March 2006 or are expected to be adopted and effective (or available for early adoption) at 31 March 2006, the Group's first annual reporting date at which it is required to use accounting standards adopted by the EU. Based on these recognition and measurement requirements, management has made assumptions about the accounting policies expected to be applied, when the first annual financial statements are prepared in accordance with accounting standards adopted by the EU for the financial year ending 31 March 2006. These preliminary 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 half year ended Sept 30, 2005 on November 4th, 2005. 3. Generally Accepted Accounting Policies The Management Discussion and Analysis of Results for the half year ended Sept 30, 2005 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 €19.9 million with a corresponding reduction in costs in the period ended 30 September 2005 (30 September 2004: €10.8 million). This has resulted in an increase in net margin of 0.5% to 25.1% in the period ended 30 September 2005 (30 September 2004 0.4% to 28.3%). Going forward the Group intends to report ancillary revenues and costs on a basis consistent with the treatment described herein." Independent review report to Ryanair Holdings plc for the six months ended 30September 2005 IntroductionWe have been instructed by the company to review the consolidated balance sheetof Ryanair Holdings plc at 30 September 2005 and the related consolidatedstatements of income, changes in shareholders' funds - equity and cash flows forthe six month period then ended and the related notes as set out on pages 1 to7. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. Directors' responsibilitiesThe interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Irish Stock Exchange which require that the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where there are anychanges, and the reasons for them, are disclosed. As explained in note 3 to thedocument published by Ryanair on 2nd August 2005, entitled "Explanation of theFinancial Impact Following the Adoption of International Financial ReportingStandards", EU law requires that the next annual consolidated financialstatements of the company are prepared in accordance with accounting standardsadopted for use in the European Union further to IAS Regulation (EC 1606/2002). Therefore this interim financial information has been prepared on the basis ofthe recognition and measurement requirements of IFRS's in issue that either areadopted by the EU and effective (or available for early adoption) at 31 March2006 or are expected to be adopted and effective (or available for earlyadoption) at 31 March 2006. Review work performedWe conducted our review in accordance with guidance contained in Bulletin 1999/4"Review of Interim Financial Information" issued by the Auditing Practices Boardfor use in Ireland and the United Kingdom. A review consists principally ofmaking enquiries of group management and applying analytical procedures to thefinancial information and underlying financial data and, based thereon,assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with Auditing Standards and therefore provides a lower level ofassurance than an audit. Accordingly we do not express an audit opinion on thefinancial information. Emphasis of matterWithout qualifying our review conclusion, we draw attention to note 3 to thedocument published by Ryanair on 2nd August 2005, entitled "Explanation of theFinancial Impact Following the Adoption of International Financial ReportingStandards", that explains why there is a possibility that the company'smanagement may determine that changes to the accounting policies adopted inpreparing the consolidated interim financial information are necessary whenmanagement prepares its first annual financial statements in accordance withaccounting standards adopted by the EU as of 31 March 2006. Review conclusionOn the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2005, which is stated to have been prepared in accordancewith the basis of preparation note set out in note 3 to the "Explanation of theFinancial Impact Following the Adoption of International Financial ReportingStandards". This describes how the recognition and measurement requirements ofaccounting standards expected to be adopted by the EU for use at the next annualreporting date have been applied, including the assumptions management has madeabout the standards and interpretations expected to be effective, and thepolicies expected to be adopted, when management prepares its first annualfinancial statements in accordance with accounting standards adopted by the EUas of 31 March 2006. KPMG4 November 2005Chartered AccountantsDublin, Ireland This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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