24th May 2005 07:01
easyJet PLC24 May 2005 easyJet Plc Interim results for the 6 months to March 2005 24 May 2005 25% INCREASE IN PASSENGERS. MARGINS MAINTAINED. • Revenues up by 26% to £553m with the pre-tax margin before goodwill maintained. • Seasonal pre-tax loss before goodwill of £22m (2004: £19m). Reported pre-tax loss of £31m (2004: £27m). • Passenger numbers up 25% to 13.5 m. Slight improvement in load factor to 83.8%. • Total revenue per passenger up 1.1%. Per ASK down 5% reflecting longer stage length. • Total cost per ASK down 5%. • Strong cash generation with gross cash increasing by £127m to £637m. • Balanced growth in network to 187 routes and 57 airports utilising 103 aircraft. Commenting on the results and prospects, Ray Webster, Chief Executive, said: "This performance is in line with expectations. Much has been achieved in thelast six months - growing passengers by a quarter, launching 40 new routes andinaugurating service to 14 new airports. We have just taken delivery of our100th operational aircraft and welcomed our 100 millionth passenger. Both aremajor achievements in our 10th anniversary year. "We have made steady progress on costs and, so far, mitigated the impact of ahigher fuel price. But there is more to do as we seek balanced growth, extendingour reach in Europe while protecting our margins. easyJet is a financiallystrong company and is in a good position to capitalise on the opportunities inthe European airline market. "Based on our current trading outlook, total revenue per seat for the year toSeptember 2005 is likely to be unchanged compared to the same period last year. "At prevailing fuel prices and exchanges rates, we continue to expect reportedpre-tax profit to be below last year but in line with current expectations."For further details please contact: easyJet plc Press:Toby Nicol, Corporate Communications +44 (0) 1582 525 339 Analysts:Andrew Barker, Investor Relations +44 (0) 1582 525 274 There will be an analyst presentation at 9:30 hours BST on 24 May 2005 at CSFB,32nd floor, Tower 42, EC2M 4AA. A live webcast of the presentation will beavailable at www.easyJet.com. There will be an analyst and investor conference call at 14:00 hours BST on 24May 2005. For further details, contact Sara Freeman at Financial Dynamics on020 7269 7134. Chairman's statement I am happy to report that easyJet has come through a challenging period in goodshape, our business remains strong with impressive growth despite a veryvolatile fuel market and continuing competitive pressures. Fuel now represents 18 per cent of our cost base and the high prices experiencedover the winter months show little sign of abating. The additional cost of fuelin the period was £18 million. The management team has responded to thechallenge with a successful programme to reduce costs elsewhere. As a resultour cost per ASK has reduced by 5 per cent over the same period last year. Our average fares remained stable compared with the previous year, demonstratingthe attraction of the easyJet business model to our customers. We continue towork to improve the quality and number of ancillary offerings we make availableto our customers. Consequently our ancillary revenue per passenger increased by16 per cent, bringing an increase in total revenue per passenger of 1 per cent. This is in line with the outlook given in March. We continue to enjoy high load factors, and 25% more passengers were carried inthe period compared with the previous year. easyJet remains both Europe'slargest low cost carrier and the low cost carrier of choice for Europe's airtravellers. On 16 May we announced that Ray Webster, the Chief Executive Officer, will bestepping down once the company has identified and appointed a successor,whereupon he will resign from the Board. Following this, he will then reportdirect to me, carrying out specified tasks for the company until 30 November2006. Ray's leadership of the easyJet team for almost ten years has underpinnedthe sustained achievement of the business. We shall greatly miss his talents. On the same day easyJet announced that Amir Eilon, who joined easyJet in 1999and represents easyGroup on the board, will not offer himself for re-election atthe next annual general meeting. I want to thank Amir for his guidance andcounsel. We have also decided to invite Stelios Haji-Ioannou, founder and majorshareholder, to rejoin the board as a non-executive director with immediateeffect. I am delighted that Stelios has accepted our invitation. Hisentrepreneurial skills and business acumen will be of great value to easyJet. In March, Jeff Carr replaced Chris Walton as Group Finance Director. I amdelighted that Jeff has joined our team and wish him well in his new role. Much has been achieved in the last six months but the fuel price remains highand we continue to operate in a highly competitive marketplace. However, I amconfident that easyJet has the right business model to meet these challenges andultimately deliver improved returns to our shareholders. Sir Colin Chandler Chairman 23 May 2005 Chief Executive's review During the first six months of the 2005 financial year, easyJet has continued togrow successfully across Europe, saving consumers both time and money byproviding low fare, direct point to point services between attractive Europeanairports. Key highlights in the growth of the business were as follows: • 13.5 million passengers were carried, an increase of 25.0 per cent onthe prior half year. In the period from January to March 2005, only Air France/KLM and Lufthansa carried more intra European passengers; • Available Seat Kilometres (ASKs) increased by 32.2 per cent to 14,526millions, as a result of an increase in sectors of 22.0 per cent, the effect ofthe larger Airbus A319 aircraft and an increase in stage length by 6.9 per centto 903 kilometres; • 40 new routes have been commenced, with a total of 187 at 31 March2005. This included the addition of 14 new destinations (Almeria, Asturias,Bratislava, Cork, Grenoble, Knock, Krakow, Pisa, Riga, Shannon, Tallinn, Turin,Valencia and Warsaw). With four further new cities already announced for thesummer (Cagliari, Maastricht, Murcia and Olbia), and Basel to be established asa new base, we have 61 airports on the easyJet network in 18 European countries; • Our operating performance has continued to be strong, with 80% offlights arriving within 15 minutes of scheduled arrival (2004: 79 per cent) and95 per cent of flights arriving within an hour (2004: 94 per cent); • We took delivery of a further 16 new Airbus A319 aircraft, increasingthe Airbus fleet size to 37 by 31 March 2005. Our operational fleet sizereached 100 aircraft in April 2005; and • The balance sheet was further strengthened: at 31 March 2005, we held£637 million of cash on the balance sheet, £127 million higher than at 30September 2004. Revenues remained resilient. Average net fares showed a small increase of 0.1%.This was partly attributable to the timing of Easter, which in 2004 was inApril, but in 2005 was in March. A 16.1% increase in per passenger ancillaryrevenues resulted from a number of steps taken during the period to improveperformance. The average sector length increased by 6.9 per cent to 903kilometres. As a result, total revenue per ASK reduced by 4.8 per cent to 3.81pence. We have made good steady progress on cost. As a result of the efforts of ourteam and our increasing scale, we were able to reduce our cost per ASK by 5.4per cent from 4.25 pence to 4.02 pence. This is despite a markedly higher fuelprice. As a result, the loss for the period before tax was £31 million, 14.2 per centhigher than last year. As a percentage of revenue the scale of the lossesreduced from 6.2 per cent to 5.6 per cent. easyJet is a company that constantly leads the industry by innovation and a fewinitiatives particularly stand out in the period: • We took great steps in developing our website, easyJet.com. The siteis now available in 15 languages; we added the facility for booking up to 40passengers and introduced dynamic packaging of travel insurance. Our goal is forthe easyJet website to always be the best airline web site available and notsurprisingly, easyJet.com was recently voted the number one travel website byThe Independent newspaper and was the only airline in the top 10. • In March we were widely praised by the Air Transport Users Council fordoing more than any other airline to be transparent with our pricing. But thenwe went one step further by being the first airline to announce a move toall-inclusive pricing later this summer. We expect others to follow us in thispro-consumer move.Chief Executive's review (continued) • Also in March, we announced an innovative deal with BTI, the leadingcorporate travel arranger, which will give its clients access to our bookinginventory and certain back-office systems which should result in an increase ineasyJet's penetration of the lucrative corporate travel market. • Throughout the half we have introduced self-check-in kiosks intoGeneva and Berlin; this follows the successful trial in Nottingham (EastMidlands). To date, more than one million customers have used the kiosks tocheck-in. Outlook Based on our current trading outlook, total revenue per seat for the year toSeptember 2005 is likely to be unchanged compared to the same period last year. At prevailing fuel prices and exchanges rates, we continue to expect reportedpre-tax profit to be below last year but in line with current expectations. Ray Webster Chief Executive 23 May 2005 Operational and financial review The following tables set forth certain consolidated operating and profit andloss account data: Selected consolidated operating data Six month period ended Change 31 March(unaudited) 2005 2004 % Number of aircraft owned/leased at end of period (1) 103.0 83.0 24.1Average number of aircraft owned/leased during period 96.1 77.7 23.7(2)Number of aircraft operated at end of period (3) 92.0 77.0 19.5Average number of aircraft operated during period (4) 88.0 72.9 20.7Sectors (5) 106,705 87,453 22.0Block hours (6) 184,426 145,518 26.7Number of routes operated at end of period 187 115 62.6Number of airports served at end of period 57 39 46.2Owned/leased aircraft utilisation (hours per day) (7) 10.6 10.2 3.9Operated aircraft utilisation (hours per day) (8) 11.4 10.9 4.6Available seat kilometres ("ASK")(millions) (9) 14,526 10,991 32.2Passengers (millions) (10) 13.5 10.8 25.0Load factor (11) 83.8% 83.3% 0.6Revenue passenger kilometres ("RPK")(millions) (12) 12,150 9,175 32.4Average internet sales percentage during the period 95.5% 95.3% 0.2(13)Average sector length (kilometres) 903 845 6.9Average fare (14) £38.08 £38.06 0.1Revenue per ASK (pence) (15) 3.81 4.00 (4.8)Cost per ASK (pence) (16) 4.02 4.25 (5.4)Cost per ASK before goodwill and non-recurring items 3.94 4.15 (5.1)(pence) (17) Footnotes can be found at the end of this section. Operational and financial review (continued)Results of operations Six months ended 31 March(unaudited) 2005 2004 Change £ million % £ million % %Passenger revenue 513.6 92.8 412.3 93.8 24.6Non ticket revenue (18) 39.7 7.2 27.4 6.2 44.9 Revenue (19) 553.3 100.0 439.7 100.0 25.8 Ground handling charges, including salaries (62.8) 11.4 (52.9) 12.0 18.7Airport charges (105.3) 19.0 (85.4) 19.4 23.3Fuel (98.6) 17.8 (65.4) 14.9 50.8Navigation charges (49.9) 9.0 (37.7) 8.6 32.4Crew costs, including training (including £2.7 (66.6) 12.0 (58.1) 13.2 14.6million Airbus crew training costs in 2004)Maintenance (57.9) 10.5 (47.3) 10.8 22.4Advertising (18.7) 3.4 (13.9) 3.2 34.5Merchant fees & incentive pay (7.5) 1.4 (6.5) 1.5 15.4Aircraft insurance (9.6) 1.7 (9.4) 2.1 2.1Other costs(20) (39.1) 7.1 (29.6) 6.7 32.1EBITDAR(21) 37.3 6.7 33.5 7.4 11.4 Depreciation (8.5) 1.5 (10.5) 2.3 (19.0)Accelerated depreciation of certain owned (2.7) 0.5 (3.4) 0.8 (20.6)aircraftGoodwill amortisation (8.8) 1.6 (8.8) 2.0 0.0Aircraft dry lease costs (58.5) 10.7 (42.5) 9.7 37.6Group operating loss (EBIT) (41.2) 7.4 (31.7) 7.2 29.9 Share of operating profit of The Big Orange 0.1 0.0 0.0 0.0 n/aHandling CompanyNet interest receivable 9.9 1.8 4.4 1.0 125.0Loss before tax (31.2) 5.6 (27.3) 6.2 14.2Tax 8.9 1.6 7.6 1.7 17.1Retained loss for the period (22.3) 4.0 (19.7) 4.5 13.1 Earnings per share (pence)Basic (5.59) (4.97) 12.5Diluted (5.59) (4.97) 12.5 Basic, before goodwill amortisation (3.38) (2.75) 22.9Diluted, before goodwill amortisation (3.38) (2.75) 22.9 Basic, before goodwill amortisation and (2.92) (2.14) 36.4accelerated depreciation of certain ownedaircraftDiluted, before goodwill amortisation and (2.92) (2.14) 36.4accelerated depreciation of certain ownedaircraft Footnotes can be found at the end of this section Footnotes (1) Represents the number of aircraft owned (including those held onlease arrangements of more than one month's duration) at the end of the relevantfinancial year. (2) Represents the average number of aircraft owned (including thoseheld on lease arrangements of more than one month's duration) during therelevant financial year. (3) Represents the number of owned/leased aircraft in service at theend of the relevant financial year. Owned/leased aircraft in service excludethose in maintenance and those which have been delivered but have not yetentered service. (4) Represents the average number of owned/leased aircraft in serviceduring the relevant financial year. Owned/leased aircraft in service excludethose in maintenance and those, which have been delivered but have not yetentered service. (5) Represents the number of one-way revenue flights. (6) Represents the number of hours that aircraft are in actualservice, measured from the time that each aircraft leaves the terminal at thedeparture airport to the time that such aircraft arrives at the terminal at thearrival airport. (7) Represents the average number of block hours per day per aircraftowned/leased during the relevant financial year. (8) Represents the average number of block hours per day per aircraftoperated during the relevant financial year. (9) Represents the sum by route of seats available for passengersmultiplied by the number of kilometres those seats were flown. (10) Represents the number of earned seats flown by easyJet. Earnedseats include seats that are flown whether or not the passenger turns up,because easyJet is generally a no-refund airline and once a flight has departeda no-show customer is generally not entitled to change flights or seek a refund.Earned seats also include seats provided for promotional purposes and to easyJetstaff for business travel. (11) Represents the number of passengers as a proportion of the numberof seats available for passengers. No weighting of the load factor is carriedout to recognise the effect of varying flight (or "stage") lengths. (12) Represents the sum by route of passengers multiplied by the numberof kilometres those passengers were flown. (13) Represents the number of seats initially sold over the internetdivided by the total number of seats initially sold, during the relevantfinancial year. Sales that are originally made via the internet, but are lateramended by phone, are included. (14) Represents the passenger revenue divided by the number ofpassengers carried. (15) Represents the total revenue divided by the total number of ASK's. (16) Represents the difference between total revenue and profit beforetax, divided by the total number of ASK's. (17) Represents the difference between total revenue and profit beforetax less the amounts charged in respect of goodwill amortisation and accelerateddepreciation of owned aircraft. (18) Includes revenue from in flight sales, excess baggage charges,booking charge fees, credit card booking fees and commissions received fromproducts and services sold such as hotel and car hire bookings and travelinsurance. (19) When easyJet makes refunds to customers, it records refunds made inthe pre-flight period as reductions in revenue and any refunds made post-flightas marketing expenses, included in "Other costs", above. (20) Includes principally administrative and operational costs notincluded elsewhere, the costs associated with short-term aircraft wet leases,insurance and any post-flight refunds, together with certain other items, suchas currency exchange gains and losses and profit or loss on the disposal offixed assets. (21) EBITDAR is defined by the company as earnings before interest,taxes, depreciation, amortisation and lease payments (excluding the maintenancereserve component of operating lease payments). Maintenance reserve costs arecharged to the cost heading, "Maintenance". Operational and financial review (continued) Half year 2005 compared with half year 2004 Revenue easyJet's revenue increased by 25.8 per cent from £439.7 million to £553.3million, from half year 2004 to half year 2005, driven by a 24.5 per cent growthin passenger numbers from 10.8 million to 13.5 million, and a 0.1 per centincrease in average fares. The number of passengers carried reflected anincrease in the size of the easyJet fleet in operation from an average of 72.9aircraft to an average of 88.0, and an increase in the average load factorachieved from 83.3 per cent to 83.8 per cent. Revenue from non-ticket sources, within ongoing operations, includes in-flightsales of food and beverages, excess baggage charges, change fees, credit cardbooking fees and commissions received from products and services sold such ashotel and car hire bookings and travel insurance. In half year 2005, £39.7million was earned from non-ticket sources, up 44.9 per cent from the prior halfyear. The average sector length increased by 6.9 per cent to 903 kilometres. As aresult, total revenue per ASK reduced by 4.8 per cent to 3.81 pence. Ground handling charges, including salaries easyJet's ground handling charges increased by 18.7 per cent from £52.9 millionto £62.8 million, from half year 2004 to half year 2005. The increase inthird-party ground handling charges reflects the increase in the number ofsectors flown, set off against a change in mix towards less expensive airports,where easyJet's growth has recently been centred. Airport charges easyJet's external airport charges increased by 23.3 per cent from £85.4 millionto £105.3 million from half year 2004 to half year 2005. This increase wasattributable to the increase in the number of sectors flown. Fuel easyJet's fuel costs increased by 50.8 per cent from £65.4 million to £98.6million from half year 2004 to half year 2005. There has been a 41 per centincrease in easyJet's effective average unit US dollar fuel cost, compared withthe previous year, resulting in additional costs to easyJet of approximately£29.8 million. The strengthening of the value of sterling against the USdollar, the currency in which fuel prices are denominated, over the course ofhalf year 2005 provided a set off benefit of approximately £11.9 million.Therefore the cost increase net of foreign exchange was £17.9 million. The fuel price, while declining from its peak over the last few weeks, remainshigh. Assuming an average market price of $500 per metric tonne and prevailingforeign exchange rates, fuel costs in the second half would increase byapproximately £41 million before the impact of additional flying, fleet changesand management action to reduce the cost base to mitigate the impact. Navigation charges easyJet's navigation charges increased by 32.4 per cent from £37.7 million to£49.9 million from half year 2004 to half year 2005. This increase wasprincipally attributable to the increased number of ASKs flown. Cost savingsfrom lower unit charges were offset by on average heavier aircraft and therelative strength of the Euro compared to Sterling. Operational and financial review (continued) Crew costs, including training easyJet's crew costs increased by 14.6 per cent from £58.1 million to £66.6million from half year 2004 to half year 2005. The increase in crew costsresulted from an increase in headcount during the half year 2005 to service theadditional sectors and aircraft operated by easyJet during the year, set offagainst a reduction in the additional crew required during the migration ofcertain operations from Boeing to Airbus aircraft, which amounted to £2.7million in half year 2004. Maintenance Maintenance expenses increased by 22.4 per cent from £47.3 million to £57.9million from half year 2004 to half year 2005. easyJet's maintenance expensesconsist primarily of the cost of routine maintenance and spare parts andprovisions for the estimated future cost of heavy maintenance and engineoverhauls on aircraft operated by easyJet pursuant to dry operating leases. Theextent of the required annual maintenance reserve charges is determined byreference to the number of flight hours and cycles permitted between each engineshop visit and heavy maintenance overhaul on aircraft airframes. The increasein maintenance costs was largely due to the addition of further leased aircraftto the fleet during the year. Aircraft financed by operating lease incur reserves for maintenance, while thecorresponding maintenance effect for owned aircraft is dealt with through adepreciation charge under aircraft ownership. Advertising Advertising costs increased by 34.5 per cent per cent from £13.9 million to£18.7 million from half year 2004 to half year 2005. Spend per passenger wasapproximately 6.5 per cent higher than the previous year which is principallydue to the costs of redesigning the easyJet brand with the new 'Come on, let'sfly' campaign. Significant investment was also made supporting awareness in theGerman market, particularly in Berlin and Dortmund. Merchant fees and incentive pay Merchant fees and incentive pay increased by 15.4 per cent from £6.5 million to£7.5 million from half year 2004 to half year 2005. Merchant fees and incentivepay includes the costs of processing fees paid to credit card companies on allof easyJet's credit and debit card sales and the per-seat sold/transferredcommission paid as incentive pay to easyJet's telesales staff. The increase isdue to the increase in the numbers of passengers, set off against a reduction inunit costs as a result of contract renegotiation. Aircraft insurance Aircraft insurance costs increased by 2.1 per cent from £9.4 million to £9.6million from half year 2004 to half year 2005. The increase is due primarily tothe growth in passengers of 25.0 per cent. Set off against this is thestrengthening of sterling against the US dollar, which provided a benefit of£1.1 million and a reduction of £1.0 million due to renegotiated unit rates. Other costs Other costs increased by 32.1 per cent from £29.6 million to £39.1 million fromhalf year 2004 to half year 2005. Items in this cost category includeadministrative and operational costs (not included elsewhere) including somesalary expenses. Also this cost category includes short-term aircraft wetleases, compensation paid to passengers, certain other items, such as currencyexchange gains and losses and the profit or loss on the disposal of fixedassets. The major influence of this category of costs was the growth in thescope of the operation, and increased compensation costs caused by relativelypoor winter weather and the new EU compensation arrangements. Operational and financial review (continued) Depreciation Depreciation charges reduced by 19.0 per cent from £10.5 million to £8.5 millionfrom half year 2004 to half year 2005. The depreciation charge reflectsdepreciation on owned aircraft and capitalised aircraft maintenance charges, andalso includes depreciation on computer systems and other assets. easyJet hasowned an average of 6 B737-300 aircraft and 8 A319 aircraft during the half year2005 (2004: 10 B737-300 aircraft and 6 A319 aircraft). The increase indepreciation reflects the additional number of owned aircraft set off againstthe 10.8 per cent improvement in the value of sterling against the US dollar,the currency in which the majority of easyJet's assets are denominated, and theadditional depreciation of other assets such as spares and leaseholdimprovements. Accelerated depreciation In half year 2005, accelerated depreciation was charged on easyJet's remaining737-300 aircraft, continuing the acceleration recognised in financial year 2004. One of the six 737-300 aircraft was sold during half year 2004. In half year2004, the acceleration related to certain older 737-300 aircraft which have nowbeen sold. Goodwill amortisation Goodwill amortisation charges were unchanged at £8.8 million in half year 2005(half year 2004: - £8.8 million). The amortisation relates to the goodwillarising on the acquisitions of Go Fly and easyJet Switzerland. Aircraft dry lease costs easyJet's aircraft dry lease costs comprise the lease payments paid by easyJetin respect of those aircraft in its fleet operated pursuant to dry operatingleases. Aircraft dry lease costs increased by 37.6 per cent from £42.5 millionto £58.5 million from half year 2004 to half year 2005. This increase wasprincipally due to a high proportion of new aircraft being introduced to thefleet during the period under operating lease rather than being retained as anowned aircraft. During the period 13 new leased aircraft were added to thefleet and five were retired. Over the period, easyJet has benefited from thestrengthening of the value of sterling against the US dollar, the currency inwhich lease costs are denominated, and low dollar interest rates. Net interest Net interest reflects interest received or receivable by easyJet net of interestpaid or payable. easyJet's net interest receivable increased from £4.4 millionin half year 2004 to £9.9 million in half year 2005. Interest rates in the UK(the currency in which most interest is received) increased by approximately 1.0percentage points between half year 2005 and half year 2004. Dollar interestrates, in which most interest is paid increased by approximately 1.2 percentagepoints between half year 2005 and half year 2004. Whilst the amount of loansincreased, from £110.3 million to £128.7 million, due to strong cash generation,the cash balance increased from £340.4 million at 31 March 2004 to £636.9million at 31 March 2005. Operational and financial review (continued) Taxation In half year 2005, easyJet recognised a tax credit of £8.9 million (half year2004: tax credit of £7.6 million). The increase in the tax credit recognised isdue to the increase in pre-tax losses. Retained profit for the year For the reasons described above, easyJet's retained loss after interest andtaxes increased by 13.1 per cent from £19.7 million in half year 2004 to £22.3million in half year 2005. Earnings per share The basic loss per share increased by 12.5 per cent from 4.97 pence in the halfyear 2004 to 5.59 pence in half year 2005. The basic loss per share, before goodwill amortisation, increased by 22.9 percent from 2.75 pence in half year 2004 to 3.38 pence in half year 2005. The basic earnings per share, before goodwill amortisation and accelerateddepreciation of certain owned aircraft increased by 36.4 per cent from 2.14pence in half year 2004 to 2.92 pence in half year 2005. kpmg KPMG Audit Plc PO Box 695 8 Salisbury Square London Independent review report by KPMG Audit Plc to easyJet plc Introduction We have been engaged by the company to review the financial information set outon pages 12 to 22 and we have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. This report is made solely to the company in accordance with the terms of ourengagement to assist the company in meeting the requirements of the ListingRules of the Financial Services Authority. Our review has been undertaken sothat we might state to the company those matters we are required to state to itin this report and for no other purpose. To the fullest extent permitted bylaw, we do not accept or assume responsibility to anyone other than the companyfor our review work, for this report, or for the conclusions we have reached. Directors' responsibilities The 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 which require that the accounting policies and presentation applied to theinterim figures should be consistent with those applied in preparing thepreceding annual accounts except where they are to be changed in the next annualaccounts in which case any changes, and the reasons for them, are to bedisclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4: Review of interim financial information issued by the Auditing PracticesBoard for use in the United Kingdom. A review consists principally of makingenquiries 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 is substantially lessin scope than an audit performed in accordance with Auditing Standards andtherefore provides a lower level of assurance than an audit. Accordingly, we donot express an audit opinion on the financial information. Review conclusion On 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 31 March 2005. KPMG Audit Plc 23 May 2005Chartered AccountantsLondonEC4Y 8BB Consolidated profit and loss account Unaudited Unaudited Six months Six months Year ended ended ended 31 March 31 March 30 September Notes 2005 2004 2004 £ million £ million £ million Turnover: Group and share of joint ventures 2 554.3 440.2 1,092.4Less : share of turnover of joint ventures (1.0) (0.5) (1.4) Group turnover 553.3 439.7 1,091.0Cost of sales (530.5) (421.6) (929.3) Gross profit 22.8 18.1 161.7 Distribution and marketing expenses (35.6) (27.3) (55.7)Administrative expenses (28.4) (22.5) (55.5) Group operating (loss)/ profit (41.2) (31.7) 50.5 Share of operating profit of joint venture 0.1 - 0.2 Total operating (loss)/profit: group and share (41.1) (31.7) 50.7of joint ventures Interest receivable and similar income 12.0 5.7 14.2Interest payable (2.1) (1.3) (2.7) (Loss)/profit on ordinary activities before (31.2) (27.3) 62.2taxationTax on (loss)/profit on ordinary activities 4 8.9 7.6 (21.1) Retained (loss)/profit for the financial period (22.3) (19.7) 41.1 Pence Pence PenceEarnings per shareBasic 3 (5.59) (4.97) 10.34Diluted 3 (5.59) (4.97) 10.11 Basic, before goodwill amortisation 3 (3.38) (2.75) 14.64 Diluted, before goodwill amortisation 3 (3.38) (2.75) 14.33 Basic, before goodwill amortisation and 3 (2.92) (2.14) 15.71accelerated depreciation of certain ownedaircraft Diluted, before goodwill amortisation and 3 (2.92) (2.14) 15.38accelerated depreciation of certain ownedaircraft All activities relate to continuing operations in the current and previous year. Consolidated balance sheet Notes Unaudited Unaudited 31 March 2005 31 March 2004 30 September 2004 (re-stated) £ million £ million £ millionFixed assetsIntangible assets 300.8 321.0 309.6Tangible assets 335.1 363.9 330.4Investments Joint venture arrangements: Share of gross assets 0.5 0.4 0.6 Share of gross liabilities (0.2) (0.3) (0.4) 0.3 0.1 0.2 ________ _______ 636.2 685.0 640.2Current assetsDebtors 174.1 151.0 174.4Cash at bank and in hand 636.9 340.4 510.3 811.0 491.4 684.7Creditors: amounts falling due within one year (425.6) (309.7) (314.7) Net current assets 385.4 181.7 370.0 Total assets less current 1,021.6 866.7 1,010.2liabilities Creditors: amounts falling due after more than one year (182.3) (101.2) (157.7) Provisions for liabilities and (80.4) (41.2) (63.1)charges Net assets 758.9 724.3 789.4 Capital and reservesCalled up share capital 6 99.8 99.8 99.8Share premium account 6 554.2 554.2 554.2Profit and loss account 6 104.9 70.3 135.4 Shareholders' funds - equity 758.9 724.3 789.4 This Interim Report was approved by the Directors on 23 May 2005. Cash flow information Reconciliation of operating profit to net cash flows from operating activities Unaudited Unaudited Six months ended Six months ended Year ended 31 March 2005 31 March 2004 30 September 2004 £million £million £ million Group operating (loss)/profit (41.2) (31.7) 50.5Goodwill amortisation 8.8 8.8 17.1Depreciation of tangible fixed assets 11.2 13.9 25.3Increase in debtors (0.1) (10.7) (36.1)Increase in creditors and provisions 148.6 58.3 103.7 Cash flow from operating activities 127.3 38.6 160.5 Consolidated cash flow statement Unaudited Unaudited Six months ended Six months ended Year ended 31 March 2005 31 March 2004 30 September 2004 £ million £ million £ million Cash flow from operating activities 127.3 38.6 160.5Returns on investments and servicing of 10.4 4.7 12.6financeTaxation 3.4 (5.7) (6.2)Capital expenditure (29.1) (90.9) (61.9)Acquisitions and disposals - - 3.4 Cash inflow/(outflow) before managementof liquid resources and financing 112.0 (53.3) 108.4 Management of liquid resources (18.1) (1.1) 4.8Financing 14.6 58.3 66.5 Increase in cash in the period 108.5 3.9 179.7 Cash flow information (continued) Reconciliation of net cash flow to movements in net funds Unaudited Unaudited Six months ended Six months ended Year ended 31 March 2005 31 March 2004 30 September 2004 £ million £ million £ million Increase in cash in the period 108.5 3.9 179.7Cash inflow from the increase in debt (14.6) (49.6) (57.5)Cash outflow/(inflow) for increase in 18.1 1.1 (4.8)liquid resources Change in net funds resulting from cash 112.0 (44.6) 117.4flowsExchange difference on loans 5.7 12.1 10.5 Increase/(decrease) in net funds for the 117.7 (32.5) 127.9periodNet funds at the start of the period 390.5 262.6 262.6 Net funds at the end of the period 508.2 230.1 390.5 Net funds at the end of the period comprises: Unaudited Unaudited 31 March 2005 31 March 2004 30 September 2004 £ million £ million £ million Cash at bank and in hand 636.9 340.4 510.3Bank loans (128.7) (110.3) (119.8) 508.2 230.1 390.5 £32.4 million (31 March 2004 - £20.2 million; 30 September 2004 - £14.3 million)of the cash at bank and in hand is subject to restrictions governing its use. Consolidated statement of total recognised gains and losses Unaudited Unaudited Six months ended Six months ended Year ended 31 March 2005 31 March 2004 30 September 2004 £ million £ million £ million Retained (loss)/profit for the year (22.3) (19.7) 41.1Foreign currency translation differences (8.2) (22.8) (18.8)Total recognised gains and losses for the period (30.5) (42.5) 22.3 Consolidated reconciliation of movements in shareholders' funds Unaudited Unaudited Six months ended Six months ended Year ended 31 March 2005 31 March 2004 30 September 2004 £ million £ million £ million Retained (loss)/ profit for the year (22.3) (19.7) 41.1Foreign currency translation differences (8.2) (22.8) (18.8)Shares issued by easyJet plc - 15.9 15.9Movement in shares held by easyJet trustees - - 0.2Movement in reserves for employee share scheme - (7.2) (7.1) Net addition to shareholders' funds (30.5) (33.8) 31.3Opening shareholders' funds 789.4 758.5 758.1 Closing shareholders' funds 758.9 724.7 789.4 Notes to the Interim Statements 1 Basis of preparation of interim financial information The financial information contained in this statement does not constitutestatutory accounts within the meaning of section 240 of the Companies Act 1985. The unaudited consolidated profit and loss account and balance sheet for thehalf years ended 31 March 2004 and 31 March 2005 have been prepared on a basisconsistent with the statutory accounts for the year ended 30 September 2004.The comparative figures for the period ended 30 September 2004 are not thecompany's statutory accounts for that financial year. Those accounts have beenreported on by the company's auditor and delivered to the Registrar ofCompanies. The report of the auditor was unqualified and did not contain astatement under section 237 (2) or (3) of the Companies Act 1985. Implementation of UITF 38 The Accounting Standards Board issued UITF Abstract 38 - "Accounting for ESOPtrusts" in December 2003. The abstract is effective for accounting periodsending on or after 22 June 2004. The abstract requires that shares which havebeen issued, but which are held by the employee share trusts, are deducted fromequity rather than shown as an asset on the balance sheet. As a result, anadjustment of £0.4 million has been made at 31 March 2004 to re-state 195,737shares previously disclosed within debtors. There is no impact on the profitand loss account in either the current or prior financial year. 2 Turnover and segmental analysis All revenues derive from the group's principal activity as an airline andinclude scheduled services, in-flight and related sales. Substantially all ofthe group's external revenues are earned by companies incorporated in the UnitedKingdom. The geographical analysis of turnover is as follows: Unaudited Unaudited Six months Six months ended Year ended ended 31 March 2005 31 March 2004 30 September 2004 £ million £ million £ million Within the United Kingdom 103.6 104.0 224.1Between the United Kingdom and the Rest of 353.0 280.5 728.5EuropeWithin the Rest of Europe 96.7 55.2 138.4 553.3 439.7 1,091.0 All revenue from easyJet's joint ventures (share £1.0 million in six monthsended 31 March 2005) was derived within the United Kingdom. All the group's operating profit arises from airline-related activities. The only revenue earning assets of the group are its aircraft fleet. Since thegroup's aircraft fleet is employed flexibly across its route network, there isno suitable basis of allocating such assets and related liabilitiesgeographically. 3 Earnings per share Basic earnings per share has been calculated by dividing the profit or loss forthe period retained for equity shareholders by the weighted average number ofshares in issue during the year after adjusting for changes to the capitalstructure of the group. Notes to the Interim Statements(continued) 3 Earnings per share (continued) The calculation for diluted earnings per share uses the weighted average numberof ordinary shares in issue adjusted by the effects of all dilutive potentialordinary shares. The dilution effect is calculated on the full exercise of allordinary share options granted by the group including other share schemes, whichthe group considers to have been earned. The calculation compares the differencebetween the exercise price of exercisable share options, weighted for the periodover which they were outstanding during the year, with the average dailymid-market closing price over the period when they were in existence as options. The earnings per share are based on the following: Unaudited Unaudited Six months ended Six months ended Year ended 31 March 2005 31 March 2004 30 September 2004(Loss)/profit for the period retained forequity shareholders (£ million) (22.3) (19.7) 41.1 Number Number NumberWeighted average number of ordinary shares in issue during the period used to calculatebasic earnings per share (000's) 399.1 396.3 397.7 Weighted average number of dilutive share options used to calculate dilutive earningsper share (000's) N/A N/A 8.7 The derivation of profit for the calculation of adjusted EPS before goodwillamortisation is as follows. This measure has been chosen to show theperformance excluding goodwill amortisation, which is a significant non cashbalance in the profit and loss account: Unaudited Unaudited Six months ended Six months ended Year ended 31 March 2005 31 March 2004 30 September 2004 £ million £ million £ million (Loss)/profit for the period retained for (22.3) (19.7) 41.1equity shareholdersAdd back: goodwill amortisation 8.8 8.8 17.1 (13.5) (10.9) 58.2 Notes to the Interim Statements (continued) 3 Earnings per share (continued) The derivation of profit for the calculation of adjusted EPS before goodwillamortisation and accelerated depreciation of certain owned aircraft is asfollows. This measure has been chosen because it removes the effects ofnon-recurring items, significant non-cash items and items which have had adisproportional effect on the earnings of the business during the year: Half year ended 31 March 2005 (unaudited): Pre-tax Post-tax amount Tax effect amount £ million £ million £ million Loss for the period retained for equity (31.2) 8.9 (22.3)shareholdersAdd back:Goodwill amortisation 8.8 - 8.8Accelerated depreciation of certain owned aircraft 2.7 (0.8) 1.9 (19.7) 8.1 (11.6) Half year ended 31 March 2004 (unaudited): Pre-tax Post-tax amount Tax effect amount £ million £ million £ million Loss for the period retained for equity (27.3) 7.6 (19.7)shareholdersAdd back:Goodwill amortisation 8.8 - 8.8Accelerated depreciation on certain owned aircraft 3.4 (1.0) 2.4 (15.1) 6.6 (8.5) Year ended 30 September 2004: Pre-tax Post-tax amount Tax effect Amount £ million £ million £ millionProfit for the year retained for equity 62.2 (21.1) 41.1shareholdersAdd back:Goodwill amortisation 17.1 - 17.1Accelerated depreciation of certain owned aircraft 6.1 (1.8) 4.3 85.4 (22.9) 62.5 Notes to the Interim Statements(continued) 4 Taxation The taxation charge is made up as follows: Unaudited Unaudited Six months ended Six months ended Year ended 31 March 2005 31 March 2004 30 September 2004 £ million £ million £ millionCurrent taxation:UK corporation tax (9.3) (8.0) 9.2Overseas taxation 0.4 0.4 1.2Total current taxation (8.9) (7.6) 10.4Deferred taxation - - 10.7Total taxation (credit)/charge (8.9) (7.6) 21.1Effective tax rate 28.5% 27.8% 33.9% The effective tax rate in the six months ended 31 March 2005 is different fromthe standard rate of tax principally due to the overall loss making position ofthe group. Whilst overseas profits have been taxed at the relevant effectivetax rates in those countries, in the UK easyJet has made taxable losses. Inaddition, easyJet Switzerland, a group member, has the benefit of an exemptionfrom communal and cantonal taxes in Switzerland until 1 January 2008, subject tomeeting certain conditions. The effective tax rate in Switzerland at present is7.8%, but will rise to 26.0% from 1 January 2008 assuming that tax rates remainunchanged. Notes to the Interim Statements (continued) 5 Dividends No dividends have been paid or proposed in the period ended 31 March 2005 orduring the comparative accounting periods. 6 Share capital and reserves Share Share Profit and capital premium loss account Total £ million £ million £ million £ million At 1 October 2004 99.8 554.2 135.4 789.4 Retained loss for the period - - (22.3) (22.3)Foreign currency translation - - (8.2) (8.2)differences At 31 March 2005 99.8 554.2 104.9 758.9 As described in note 1, in accordance with UITF 38, 207,904 shares (31 March2004: - 195,737 shares; 30 September 2004: - 194,842 shares) which have beenissued, but have not vested unconditionally with the employees, have beenexcluded from equity. These shares are held by easyJet Trustees, the trustmanaging employee share schemes. 7 Post balance sheet events In April 2005, easyJet entered into a binding agreement with companies owned byOak Hill Special Opportunities Fund LP for the sale of four owned Boeing 737-300aircraft. The net sales value was broadly equivalent to book value. 8 Contingent liabilities In 2002, Navitaire Inc. ("Navitaire"), a former supplier of airline reservationsoftware to easyJet Airline Company Limited, a group company, issued proceedingsagainst that group company alleging copyright infringement in relation toairline reservations software. easyJet Airline Company Limited vigorouslydefended the claims. In July 2004, judgment was given on the proceedings inthe UK, which found that in all material respects, easyJet had not infringed anycopyrights. Since then, easyJet has become entitled to an interim award ofcosts. However, Navitaire may take leave to appeal, or refer the case to theEuropean Court of Justice. Proceedings have also been brought in the UnitedStates. The directors consider that, in the event of Navitaire being successfulin any claim, any award of damages is unlikely to be material to the group. Certain easyJet cabin crew, in conjunction with Amicus and the Transport andGeneral Workers Union, have claimed that a proportion of their sector pay shouldbe included in calculating holiday pay entitlement. easyJet is vigorouslydefending these claims. The directors consider that the costs of any adversejudgement are unlikely to be material. The group is involved in a number of other various disputes or litigation in thenormal course of business. Whilst the results of such disputes cannot bepredicted with certainty, the Company believes that the ultimate resolution ofthese disputes will not have a material effect on the Group's financial positionor results. Notes to the Interim Statements(continued) 9 International Financial Reporting Standards ('IFRS') easyJet is preparing for the adoption of IFRS. At 30 September 2005, easyJetwill include an update on its progress in the annual report and financialstatements. easyJet will produce IFRS compliant accounts reconciled to UK GAAPin early 2006. For the year ending 30 September 2006, easyJet will producefully IFRS compliant interim and final financial statements. Progress on theproject is on time according to the project plan set out in the financialstatements for the year ended 30 September 2004. 10 Shareholdings The percentage of easyJet shares owned by non-UK parties was 38.94% at 23 May2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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