6th Feb 2006 07:01
Ryanair Holdings PLC06 February 2006 -------------------------------------------------------------------------------- RYANAIR DELIVERS INCREASED 3RD QUARTER PROFITS NET PROFIT OF €37M - TRAFFIC GROWTH OF 26%-------------------------------------------------------------------------------- Ryanair, Europe's No. 1 low fares airline, today (Monday, 6th February 2006)announced increased third quarter profits of €37m. Traffic grew by 26% to 8.6mpassengers, whilst yields were almost flat, as expected, as total revenues roseby 27% to €370.7m. Unit costs increased by 3% (excluding fuel they fell by 6%)as fuel costs rose by 59% to €114.9m. As a result of these significantly higherfuel costs, Ryanair's after tax margin, on an adjusted basis for the thirdquarter fell by 2 points to 10% as adjusted net profit increased by 6% to €37m. Summary Table of Results (IFRS) - in Euro-----------------------------------------Quarter Ended Dec 31, 2004 Dec 31, 2005 % IncreasePassengers 6.9m 8.6m 26%Revenue €291.8m €370.7m 27%Adjusted Profit after Tax (note 1) €34.8m €36.8m 6%Basic EPS (Euro Cents) (note1) 4.58 4.79 5% Note 1: Adjusted profit after tax for the quarter ended December 31, 2004excludes an amount of €11.9m (net of tax) resulting from changes in theaccounting treatment for Goodwill arising on the Buzz acquisition following theadoption of IFRS (International Financial Reporting Standards). Announcing these results Ryanair's Chief Executive, Michael O'Leary, said: "Ryanair's lowest fare model, yet again, delivered increased profits andpassenger growth for the quarter despite the intense competition and the drag onprofitability of very high fuel prices. Underlying profit growth was strong at22% as the comparative included the once off release of maintenance provisionsrelated to the return of leased aircraft in November 2004. The Ryanair model hasproven that during difficult trading conditions that it can increaseprofitability and generate significant passenger growth while many of ourcompetitors are reporting falling profits or losing money. "As anticipated, yields were flat during the quarter despite a 27% increase inseat capacity and continued intense price competition across the route network.The multiple fuel surcharges imposed by European flag carriers remain, and havemaintained the wide gap between their high prices and Ryanair's low fares. Our"no fuel surcharges" guarantee to our passengers has enabled us to launch morenew routes, deliver significant traffic growth and higher profits. Load factors,as expected, were 1 point lower driven by the 27% increase in seat capacity aswe launched 34 new routes( total routes 303) and announced a significantexpansion at our Dublin base, ( total bases 15). Ancillary revenues grew by 31%significantly faster than the growth in passenger volumes and we expect thatthey will continue to outpace traffic growth this year. "Unit costs increased by 3% primarily due to higher fuel costs. Excluding fuel,unit costs were reduced by 6% thanks to the addition of lower cost and efficientBoeing 737-800's (we retired the last older Boeing 737-200 in December 2005),new lower cost airport and base agreements and continuing tight control over allother cost lines. We continue to focus aggressively on costs and anticipate thatthe cost reductions will continue to partially offset the significantly higheroil prices. "Our fuel costs rose by 59% to €115m despite being almost fully hedged duringthe quarter reflecting the high fuel prices. We are hedged to the end of March06 at rates equivalent to $49 per barrel. We are unhedged thereafter butcontinue to monitor forward prices with a view to hedging our futurerequirements for fiscal 2007 should an appropriate opportunity arise. Our viewremains unchanged insofar as we expect that fuel prices will continue at thesehigher levels for some time. "Our new routes and bases (Luton, Liverpool and Pisa) have performed well intheir first winter whilst our yield performance at Shannon continues to be lowerthan originally expected. Our 14th base at Nottingham - East Midlands which wasdue to launch in March has been postponed to April due to the late aircraftdeliveries arising from the Boeing strike. We also announced a major expansionof our Dublin base which commences in April with 5 additional aircraft and 18new routes and these are already booking strongly. Ryanair continues to benefitfrom the cost savings and the economies of scale arising from our routedevelopment strategy of "connecting the dots". We also continued to extend ourlead over British Airways by carrying more passengers each month than they didon their entire worldwide network. "We continue to oppose the £4bn "marble palace" being proposed by BAA atStansted. All the main airlines support a second runway, but believe that thisshould be delivered at a cost of £1bn or less. The recent dialogue with the BAAhas conclusively demonstrated that their 76m passenger forecast for Stansted(current capacity 25m) has no basis in reality. The BAA £4bn budget is amonumental waste of passengers money and the BAA are also looking for across-subsidy from passengers at Heathrow and Gatwick to pay for this Taj-Mahal.If the CAA were an effective regulator, these plans would be shelved as theyfail to meet the reasonable requirements of airport users, but sadly the CAA isa weak regulator whose bark is even more ineffectual than its toothless bite. "Our relentless focus on cost reduction continues. The launch of our WebCheck-In, hand luggage only facility on March 16 will continue the low farerevolution pioneered by Ryanair in the early 1990's. Web check-in will encouragepassengers to travel with fewer bags and will enable Ryanair to reduce airporthandling charges as we will need fewer check-in agents, desks, and baggagehandlers. We plan to pass on these savings upfront to our passengers by reducingour average fare by £2.50 or €3.50 from 16th of March onwards. Web check-inpassengers will further benefit by avoiding airport check-in and boarding gatequeues. Passengers who wish to check-in bags will also benefit from these farereductions and shorter queues at check-in but will pay £2.50 or €3.50 perchecked in bag. We anticipate that the introduction of web check-in and at thesame time increasing passengers baggage allowance to an industry leading 30kgs,will substantially reduce excess baggage charges. We estimate that theintroduction of web check-in will be revenue neutral; however, we believe itwill enable us to reduce Airport & Handling costs by up to €30m per annum. "We remain cautious in our outlook for the remainder of the fourth quarter. Weexpect to achieve significant increases in passenger volumes but also anticipatethat yields in Q4 will fall reflecting our large capacity growth in this weakestwinter quarter as well as the impact of Easter falling in April (it was in Marchlast year). These factors should result in yields being towards the middle ofthe range of -5% to -10%, previously guided. Our full year net profit guidanceis therefore unchanged. Intense competition in the market continues, however,Ryanair's unique combination of the lowest fare in every market, lowest costbase and industry leading customer service including our recently announced webcheck-in initiative will enable us to continue to pioneer the next phase of thelow fares revolution". ENDS. Monday, 6th February 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 15 bases and 303 low fareroutes across 22 countries. By the end of March 2006 Ryanair will operate anentire fleet of 103 new Boeing 737-800 aircraft with firm orders for a further131 new aircraft (net of planned disposals), which will be delivered over thenext 6 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 SubsidiariesConsolidated Income Statement in accordancewith IFRS(unaudited) Quarter Quarter Period Period ended ended ended ended December December December December 2005 2004 2005 2004 •'000 •'000 •'000 •'000 -------- -------- -------- --------Operating revenuesScheduled revenues 311,728 246,712 1,128,508 864,356Ancillary revenues 58,972 45,066 188,352 137,700Total operating revenues-continuing operations 370,700 291,778 1,316,860 1,002,056 -------- -------- -------- --------Operating expensesStaff costs 41,071 35,066 124,717 104,419Depreciation and 28,674 26,056 81,723 70,960amortisationOther operating expenses Fuel & Oil 114,890 72,486 351,763 186,236 Maintenance, 10,289 2,323 35,352 27,221 materials and repairs Marketing and 2,405 2,625 11,134 13,400 distribution costs Aircraft rentals 10,279 7,400 31,016 23,636 Route charges 40,771 33,389 124,704 101,315 Airport and 54,009 44,243 164,048 134,565 Handling charges Other 19,133 19,762 61,110 56,453 -------- -------- -------- --------Total operating expenses 321,521 243,350 985,567 718,205 -------- -------- -------- --------Operating profit before 49,179 48,428 331,293 283,851exceptional items Purchase accounting - 11,925 - 11,925adjustmentAircraft Insurance Claim - - 5,939 - -------- -------- -------- --------Operating profit after 49,179 60,353 337,232 295,776exceptional items -------- -------- -------- --------Other (expenses)/incomeForeign exchange (658) (2,071) (195) (2,820)(losses)Gain on disposal of 911 - 895 6fixed assetsInterest receivable and 9,456 7,379 27,277 20,197similar incomeInterest payable and (18,324) (15,103) (55,123) (41,088)similar charges -------- -------- -------- --------Total other (expenses)/ (8,615) (9,795) (27,146) (23,705)income -------- -------- -------- --------Profit before taxation 40,564 50,558 310,086 272,071Tax on profit on (3,746) (3,868) (31,093) (24,230)ordinary activities -------- -------- -------- --------Profit for the period 36,818 46,690 278,993 247,841 ======== ======== ======== ========Earnings per ordinaryshare -Basic(Euro cent) 4.79 6.15 36.43 32.63 -Diluted(Euro cent) 4.76 6.11 36.23 32.43Adjusted earnings perordinary share* -Basic(Euro cent) 4.79 4.58 35.75 31.06 -Diluted(Euro cent) 4.76 4.55 35.55 30.87Number of ordinaryshares(in 000's) -Basic 768,029 759,775 765,831 759,499 -Diluted 773,326 764,438 770,125 764,127 * Calculated on profit for the period before exceptional items Page 1(net of tax). Consolidated Balance Sheets in accordance withIFRS(unaudited) December 31, March 31, 2005 2005 •'000 •'000 --------- ---------Non-current assetsIntangible assets 46,841 46,841Tangible assets 2,314,651 2,092,283Derivative financial instruments 3,231 -Deferred tax 14,776 1,328 --------- ---------Total Non-current assets 2,379,499 2,140,452 --------- ---------Current assetsInventories 33,639 28,069Other assets 25,497 24,612Accounts receivable 25,866 20,644Deferred Tax 3,943 -Derivative financial instruments 55,216 -Restricted cash 204,040 204,040Financial assets: cash > 3months 415,251 529,407Cash and cash equivalents 1,155,908 872,258 --------- ---------Total current assets 1,919,360 1,679,030 --------- --------- Total assets 4,298,859 3,819,482 ========= =========Current liabilitiesAccounts payable 58,522 92,118Accrued expenses and other liabilities 375,037 418,653Current maturities of long term debt 139,925 120,997Derivative financial instruments 31,548 -Current tax 23,228 17,534 --------- --------- Total current liabilities 628,260 649,302 --------- ---------Other liabilitiesProvisions for liabilities and charges 14,354 7,236Derivative financial instruments 107,587 -Deferred tax 132,611 105,509Other creditors 70,443 29,072Long term debt 1,395,066 1,293,860 --------- --------- Total other liabilities 1,720,061 1,435,677 --------- --------- Shareholders' funds - equityCalled - up share capital 9,783 9,675Share premium account 594,568 565,756Profit and loss account 1,437,577 1,158,584Other reserves (91,390) 488 --------- --------- Shareholders' funds - equity 1,950,538 1,734,503 --------- ---------Total liabilities and shareholders' funds 4,298,859 3,819,482 ========= ========= Page 2 Ryanair Holdings plc and Subsidiaries Consolidated Cashflow Statement in accordance with IFRS(Unaudited) Dec 31, Dec 31, 2005 2004 •'000 •'000 --------- ---------Operating activities--------------------Profit before taxation 310,086 272,071 Adjustments to reconcile profits before taxto net cash provided by operating activitiesDepreciation 81,723 70,960(Increase) in inventories (5,570) (720)(Increase)/decrease in accounts receivable (5,222) 465Decrease in other current assets 6,770 1,203(Decrease)/increase in accounts payable (33,596) 21,503(Decrease) in accrued expenses (45,283) (26,372)Increase/(decrease) in other creditors 16,052 (7,089)Increase/(decrease) in maintenance provision 7,118 (1,105)Interest receivable (7,654) (559)Interest payable 1,227 2,087Salary costs 441 141Share based payment 879 195Income tax (2,440) 3,418 --------- --------- Net cash provided by operating activities 324,531 336,198 --------- --------- Investing activities--------------------Capital expenditure (304,091) (342,161)Financial assets: cash > 3months 114,156 169,458 --------- --------- (189,935) (172,703) --------- ---------Financing activities--------------------Net proceeds from shares issued 28,920 1,618Increase in long debt 120,134 200,405 --------- --------- Net cash used in financing activities 149,055 202,023 --------- --------- Increase in cash and cash equivalents 283,650 365,518 Cash and cash equivalents at beginning of period 872,258 744,605 --------- --------- Cash and cash equivalents at end of period 1,155,908 1,110,123 ========= ========= Page 3 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 •'000 ----- ------- --------- -------- --------- Balance at April 1, 2005 9,675 565,756 1,158,584 488 1,734,503 Issue of ordinary equity 108 28,812 - - 28,920shares Movement in reserves - - - (91,878) (91,878) Profit for the period - - 278,993 - 278,993 ----- ------- --------- -------- --------- Balance at December 31, 2005 9,783 594,568 1,437,577 (91,390) 1,950,538 ===== ======= ========= ======== ========= Reconciliation of adjusted earnings per share(unaudited) Quarter Quarter Period Period ended ended ended ended Dec-31 Dec-31 Dec-31 Dec-31 2005 2004 2005 2004 •'000 •'000 •'000 •'000 ------ ------ ------- -------Profit for the period 36,818 46,690 278,993 247,841under IFRS Adjustments-----------Purchase accounting - (11,925) - (11,925)adjustmentAircraft Insurance Claim - - (5,939) -Taxation adjustment for above - - 742 - ------ ------ ------- -------Adjusted profit under IFRS 36,818 34,765 273,796 235,916 ====== ====== ======= ======= Number of ordinary shares(in 000's) 768,029 759,775 765,831 759,499 773,326 764,438 770,125 764,127 Adusted earnings per ordinary share 4.79 4.58 35.75 31.06 4.76 4.55 35.55 30.87 Page 4 Ryanair Holdings plc and SubsidiariesConsolidated Income Statement in accordancewith US GAAP (unaudited) Quarter Quarter Period Period ended ended ended ended December December December December 2005 2004 2005 2004 •'000 •'000 •'000 •'000 ------ ------- ------- -------Operating revenuesScheduled revenues 311,728 246,712 1,128,508 864,356Ancillary revenues 58,972 45,066 188,352 137,700 ------ ------- ------- -------Total operating revenues-continuing operations 370,700 291,778 1,316,860 1,002,056 ------ ------- ------- -------Operating expensesStaff costs 40,878 34,831 123,955 104,104Depreciation and 29,009 26,857 82,836 72,539amortisationOther operating expenses Fuel & Oil 114,890 72,486 351,763 186,236 Maintenance, 10,289 2,323 35,352 27,221 materials and repairs Marketing and 2,405 2,625 11,134 13,400 distribution costs Aircraft 10,279 7,400 31,016 23,636 rentals Route charges 40,771 33,389 124,704 101,315 Airport and 54,009 44,243 164,048 134,565 Handling charges Other 19,114 19,740 61,047 56,387 ------ ------- ------- -------Total operating expenses 321,644 243,894 985,855 719,403 ------ ------- ------- -------Operating profit before 49,056 47,884 331,005 282,653exceptional items Purchase accounting - 11,925 - 11,925adjustmentAircraft Insurance Claim - - 5,939 - ------ ------- ------- -------Operating profit after 49,056 59,809 336,944 294,578exceptional items ------ ------- ------- -------Other (expenses)/incomeForeign exchange (658) (2,071) (195) (2,820)(losses)Gain on disposal of 911 - 895 6fixed assetsInterest receivable and 9,456 7,379 27,277 20,197similar incomeInterest payable and (16,299) (13,004) (49,262) (35,153)similar charges ------ ------- ------- -------Total other (expenses)/ (6,590) (7,696) (21,285) (17,770)income ------ ------- ------- -------Income before taxation 42,466 52,113 315,659 276,808Taxation (3,876) (4,136) (31,725) (24,987) ------ ------- ------- -------Net income 38,590 47,977 283,934 251,821 ====== ======= ======= =======Net income per ADS -Basic(Euro cent) 25.12 31.57 185.38 165.78 -Diluted(Euro cent) 24.95 31.38 184.34 164.78Adjusted net income per ADS * -Basic(Euro cent) 25.12 23.73 181.98 157.93 -Diluted(Euro cent) 24.95 23.58 180.97 156.97Weighted Average number of shares -Basic 768,029 759,775 765,831 759,499 -Diluted 773,326 764,438 770,125 764,127* Calculated on Net Income before non-recurring items(net of tax).(5 ordinary shares equal 1 ADR) Page 5 Ryanair Holdings plc and SubsidiariesSummary of significant differences between IFRS and US generallyaccepted accounting principles(unaudited) (A) Net income under US GAAP Dec 31, Dec 31, Dec 31, Dec 31, 2005 2004 2005 2004 €000 €000 •'000 •'000 ------ ------ ------- -------Net income in accordance 36,818 46,690 278,993 247,841with IFRS AdjustmentsPension (100) 40 (117) 120Share based payments 293 195 879 195Capitalised interest (netof amortisation) regardingaircraftacquisition programme 1,690 1,298 4,748 4,356Darley Investments Limited 19 22 63 66Taxation- effect of above (130) (268) (632) (757)adjustments ------ ------ ------- ------- Net income in accordance 38,590 47,977 283,934 251,821with US GAAP ====== ====== ======= ======= (B) Consolidated cashflow statement in accordancewith US GAAP Dec 31, Dec 31, 2005 2004 •'000 •'000 ------- -------Cash inflow from operating 324,531 336,198activitiesCash (outflow) from (189,935) (172,703)investing activitiesCash inflow from financing 149,054 202,023activities ------- ------- Increase in cash and cash 283,650 365,518equivalentsCash and cash equivalents 872,258 744,605at beginning of year ------- -------Cash and cash equivalents 1,155,908 1,110,123at end of period ======= ======= Cash and cash equivalents 1,155,908 1,110,123under US GAAPRestricted cash 204,040 204,040Deposits with a maturity 415,251 143,287of between three and six months ------- -------Cash and liquid resources 1,775,199 1,457,450in accordance with IFRS ======= ======= Page 6 Ryanair Holdings plc and Subsidiaries Summary of significant differences between IFRSand US generally accepted accounting principles(unaudited) (C) Shareholders' funds - equity Dec 31, Dec 31, 2005 2004 •'000 •'000 -------- -------Shareholders' equity as reported in theconsolidated balancesheets in accordance with IFRS 1,950,538 1,699,428 Adjustments:Pension 11,620 11,176Capitalised interest( net of amortisation) 27,695 21,858regarding aircraft acquisition programmeDarley Investments Limited - (85)Minimum pension liability(net of tax) (6,496) (2,631)Unrealised losses on derivative financial - (150,700)instruments(net of tax)Tax effect of adjustments( excluding pension & (5,628) (3,345)derivative adjustments) -------- ------- Shareholders' equity as adjusted to accord with US 1,977,729 1,575,701GAAP ======== ======= Opening shareholders' equity under US GAAP 1,629,559 1,356,281 Comprehensive incomeUnrealised gains/(losses) on derivative financial 35,315 (34,019)instruments(net of tax)Net income in accordance with US GAAP 283,934 251,821 -------- -------Total comprehensive income 319,249 217,802 Stock issued for cash 28,921 1,618 -------- ------- Closing shareholders' equity in accordance with US 1,977,729 1,575,701GAAP ======== ======= Page 7 Ryanair Holdings plc Management Discussion and Analysis of Results --------------------------------------------- Introduction For the purposes of the MD&A all figures and comments are by reference to theadjusted income statement excluding exceptional items referred to below. Exceptional items for the nine months ended December 31, 2005 consist of areceipt of €5.2m (net of tax) in quarter 1 arising from the settlement of aninsurance claim for the 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 thequarter ended December 31, 2004 (see note 5). Profit after tax and adjusted profit after tax increased by 6% to €36.8m duringthe quarter compared to last year. The adjusted profit for the nine months endedDecember 31, 2005, excluding exceptional items, increased by 16% to €273.8m. 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 Quarter ended December 31, 2005--------------------------------------- Profit after tax increased by 6% to €36.8m, compared to €34.8m in the previousquarter ended December 31, 2004. These results were achieved by strong growth inpassenger volumes and continued tight cost control, excluding fuel, which wassignificantly higher than in the comparative period. Total operating revenuesincreased by 27% to €370.7m, which is greater than the 26% growth in passengervolumes, as average fares were almost flat and ancillary revenues grew by 31% to€59.0m. Total revenue per passenger as a result increased by 1% whilst PassengerLoad Factor decreased by 1 point to 83% during the period. Total operating expenses increased by 32% to €321.5m, due to the increased levelof activity, and the increased costs, primarily fuel, route charges, maintenancecosts, and airport & handling costs associated with the growth of the airline.Fuel, which represents 36% of total operating costs compared to 30% last year,increased by 59% to €114.9m due to substantial increases in the US$ cost pergallon, partially offset by the strengthening of the Euro to US$ exchange rate.Unit costs excluding fuel declined by 6% as all other major cost items increasedat a slower rate than the growth in passenger volumes. This is despite theimpact on last year's comparative figures of the release of maintenanceprovisions of €5.2m arising from the return of 6 leased Boeing 737-300's to thelessor. Due to the significantly higher fuel costs operating margins declined by4 points to 13%, whilst operating profit increased by 2% to €49.2m. Profit before tax has increased by 5%, higher than the growth in operatingprofit due to the slower rate of growth in net interest charges and a gainarising from the sale of the remaining 737-200 aircraft. Net Margins declined by 2 points to 10% for the reasons outlined above. Adjusted basic earnings per share have risen by 5% to 4.79 cent for the period. Balance Sheet------------- Total Cash increased by €169.5m to €1,775.2m since March 31, 2005 but representsa decline in the quarter of €33.5m due to funding an additional €183.9m incapital expenditure from internal resources. Gross capital expenditure in theperiod amounted to €304.1m as the company took delivery of 12 Boeing 737-800aircraft and funded additional aircraft deposits during the period. Capitalexpenditure was part funded by the drawdown of long term debt, Total debt net ofrepayments increased during the period by €120.1m. The exercise of share optionsduring the period, mainly granted to pilots contributed a further €28.9m in cashduring the period. Shareholders' Funds at Dec 31, 2005 have increased by €216.0mto €1,950.5m, compared to March 31, 2005 reflecting the €279.0m increase inprofitability during the period offset by a reduction of €91.9m resulting fromchanges in the accounting treatment for derivative financial instruments,pensions and stock options following the adoption of IFRS. Detailed Discussion and Analysis quarter year ended Dec 31, 2005---------------------------------------------------------------- Profit after tax, increased by 6% to €36.8m due to a 1% increase in averagerevenue per passenger, and tight cost control which was offset by fuel costsincreasing by 59% to €114.9m during the period. Operating margins, declined by 4points due to higher fuel costs and lower than normal maintenance charges inquarter 3 last year due to the release of €5.2m of maintenance provisions.Operating profit increased by 2% to €49.2m compared to quarter year ended Dec31, 2004. Total operating revenues increased by 27% to €370.7m due to the combination of a26% increase in passengers carried and a 1% improvement in average revenue perpassenger. Scheduled passenger revenues increased by 26% to €311.7m due to a 1% improvementin average fares, increased passenger volumes on existing routes, and thesuccessful launch of new routes and new bases at Liverpool, Luton and Pisa. Loadfactor decreased by 1 point to 83% during the period. Ancillary revenues continue to perform strongly as revenues grew by 31% to€59.0m in the period. This performance reflects the strong growth in on boardsales, non-flight scheduled revenues, and internet income. Ancillary revenuescontinue to grow at a faster rate than passenger volumes and now account for 16%of total revenues compared to 15% last year. Total operating expenses increased by 32% to €321.5m due to the increased levelof activity, and the increased costs primarily fuel, maintenance costs, aircraftrentals, route charges and airport and handling costs associated with the growthof the airline. The comparative maintenance costs for quarter ended December 31,2004 were positively impacted by the release of maintenance provisions of €5.2marising from the return of 6 leased 737-300 aircraft. Total operating costs were also adversely impacted by a 10% increase in theaverage sector length, whilst higher US$ fuel prices were partly offset by thestrength of the Euro exchange rate against the US dollar. Staff costs have increased by 17% to €41.1m. This increase primarily reflects anincrease in average employed and the impact of pay increases of 3% grantedduring the period. Depreciation and amortisation increased by 10% to €28.7m. 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 agreement 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. Fuel costs rose by 59% to €114.9m 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 €8.0m to €10.3m 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. The return of 6 leased 737-300's to ILFC inquarter 3 of last year resulted in the release of €5.2m in maintenanceprovisions. Excluding the impact of the release of these provisions, maintenancecosts would have increased by 37%, in line with the growth of leased aircraftfleet. Marketing and distribution costs decreased by €0.1m to €2.4m due to thereduction in the level of marketing activity and related expenditure compared tothe previous year. Aircraft rental costs increased by 39% to €10.3m reflecting an average of 6additional aircraft on lease during the period partially offset by the savingsarising from the return of 6 leased 737-300 aircraft to ILFC. Route charges increased by 22% to €40.8m 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 €54.0m, which is lower than thegrowth in passenger volumes and reflects the impact of increased costs atcertain existing airports offset by lower costs at new airports and bases. Other expenses declined by 3% to €19.1m, due mainly to savings on variousindirect costs and improved margins and on some new and existing ancillaryrevenue products. Operating margins have declined by 4 points to 13% for the period due to thereasons outlined above, however despite this, operating profits have increasedby 2% to €49.2m. Interest receivable has increased by €2.1m to €9.5m due to the combined impactof a higher cash balance and increases in average deposit rates during theperiod. Interest payable increased by €3.3m due to the drawdown of debt to part fund thepurchase of new aircraft during the period. Gains on disposal of assets were €0.9m arising from the disposal of theremaining 737-200 aircraft during the period. Detailed Discussion and Analysis nine months Ended December 31, 2005-------------------------------------------------------------------- Profit after tax, increased by 16% to €273.8m due to average fares increasing by2% and strong ancillary revenue growth, which was offset by fuel costs whichincreased by 89% to €351.8m reflecting the higher US$ cost per gallon. Operatingmargins, as a result, fell by 3 points to 25%, which in turn resulted inoperating profit increasing by 17% to €331.3m compared to the previous ninemonths ended December 31 2004. Total operating revenues increased by 31% to €1,316.9m whilst passenger volumesincreased by 28% to €26.7m. Total revenue per passenger increased by 3% in thequarter due to a combination of higher average fares and strong ancillaryrevenue growth. Scheduled passenger revenues increased by 31% to €1,128.5m due to a combinationof increased passenger volumes on existing routes, the successful launch of newbases at Liverpool, Luton and Pisa and a 2% increase in average fares. Ancillary revenues increased 37% to €188.4m, a faster growth rate than passengervolumes, reflecting a strong performance in non-flight scheduled revenues,on-board sales and other ancillary products. Total operating expenses increased by 37% to €985.6m 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$. Staff costs have increased by 19% to €124.7m primarily due to a 15% increase inaverage employee numbers to 2,963 and the impact of pay increases of 3% comparedto the previous nine months ended December 31, 2004. Depreciation and amortisation increased by 15% to €81.7m. A higher depreciationcharge arose due to an increase in the size of the 'owned' fleet from 64 to 77,partially offset by, a lower amortisation charge due to the retirement of737-200 aircraft and the positive impact of a new engine maintenance deal on thecost of amortisation of 737-800 aircraft. The strengthening of the Euro to US$also had a positive impact on the depreciation and amortisation charge relatingto new aircraft deliveries. Fuel costs rose by 89% to €351.8m due to an increase in the number of sectorsflown, an 10% 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 30% to €35.4m 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 partially offsetby an increase in the number of leased 737-800 aircraft from 10 to 17. Marketing and distribution costs decreased by 17% to €11.1m due to the reductionin the level of marketing activity and related expenditure compared to theprevious year. Aircraft rental costs increased by 31% to €31.0m reflecting an additional 7aircraft on lease during the period offset by the savings arising from thereturn of 6 737-300's to ILFC. Route charges increased by 23% to €124.7m due to an increase in the number ofsectors flown and an increase of 10% in the average sector length, offset by areduction in enroute charges in certain EU countries. Airport and handling charges increased by 22% to €164.0m, 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 €61.1m, 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 25% due to the reasons outlinedabove whilst operating profits have increased by 17% to €331.3m during theperiod. Interest receivable has increased by €7.1m to €27.3m 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 €14.1m to €55.1m due to the drawdown of debt topart fund the purchase of new aircraft. Foreign exchange losses have decreased during the nine months to €0.2m due tothe positive impact of changes in the Sterling and US Dollar exchange ratesagainst the Euro compared to last year. The Company's Balance Sheet continues to reflect the significant capitalexpenditure programme being undertaken by the group. An additional 11 aircraftwere delivered during the period which in conjunction with the payment ofdeposits on future deliveries accounted for the bulk of €304.1m spent on capitalexpenditure during the last 9 months. During the same period the Companygenerated cash from operating activities of €310.1m. that part funded thecapital expenditure programme with the balance reflected in Total Cash of€1,775.2m. The exercise of share options, primarily by pilots generated afurther €28.9 cash for the Group. Long term Debt, net of repayments increased by€120.1m during the period. Shareholders' Funds at December 31, 2005 have increased by €216.0m to €1,950.5m,compared to March 31, 2005 reflecting the €279.0m increase in profitabilityduring the period offset by a reduction of €91.9m resulting from changes in theaccounting treatment for derivative financial instruments, pensions and stockoptions following the adoption of IFRS. Notes to the Financial Statements --------------------------------- 1. Accounting Policies -------------------This period's financial information has been prepared on the basis of therecognition and measurement requirements of International Financial ReportingStandards ("IFRS") in issue that either are adopted by the EU and effective (oravailable for early adoption) at 31 March 2006 or are expected to be adopted andeffective (or available for early adoption) at 31 March 2006, the Group's firstannual reporting date at which it is required to use accounting standardsadopted by the EU. Based on these recognition and measurement requirements,management has made assumptions about the accounting policies expected to beapplied, when the first annual financial statements are prepared in accordancewith accounting standards adopted by the EU for the financial year ending 31March 2006. These preliminary accounting policies are set out in the documenttitled "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 thequarter year ended December 31, 2005 on 3rd February, 2006. 3. Generally Accepted Accounting Policies --------------------------------------The Management Discussion and Analysis of Results for the quarter ended December31, 2005 and the comparative period are based on the results reported under thegroup's preliminary IFRS accounting policies, as adjusted certain forexceptional items. 4. Ancillary Products and Services -------------------------------In order to more accurately reflect the structure of certain ancillary contractsand to provide more meaningful information to users the Group has taken theopportunity to reclassify certain ancillary revenues and costs (primarily carhire and travel insurance). This has resulted in a reduction in revenues of€24.2 million with a corresponding reduction in costs in the period ended 31December 2005 (31 December 2004: €13.5million). This has resulted in an increasein net margin of 0.4% to 20.4% in the period ended 31 December 2005 (31 December2004 0.3% to 23.4%). Going forward the Group intends to report ancillaryrevenues 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 Ryanairrenegotiated the terms and conditions of onerous aircraft leases and agreed toreturn the aircraft to the lessors in late 2004, thereby releasing Ryanair fromany remaining lease obligations at that time. Irish GAAP permitted that such anadjustment could be made to the provisional value of the assets and liabilitiesacquired as part of the original business combination; provided that theadjustment was made either in the reporting period that the combination tookplace or the first full financial period following the transaction. IFRS 3,however, only allows such an adjustment to be made in the 12 month periodfollowing the acquisition, and accordingly, as the event occurred more than 12months after the acquisition date, under IFRS this adjustment is made to theGroup's income statement instead. This gives rise to a credit of €11.9m to theincome statement in the quarter to 31 December 2004. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RYA.L