18th May 2007 07:01
British Airways PLC18 May 2007 STRONG FULL YEAR RESULTS IN CHALLENGING CONDITIONS Financial highlights: • Revenue up 3.4 per cent to £8,492 million (2006: £8,213 million) • Operating profit £602 million despite fuel up £350 million (2006: £694 million) • Pre-tax profit of £611 million (2006: £616 million) • Operating margin 7.1 per cent (2006: 8.5 per cent) • Provision of £350 million for competition investigation • Earnings per share 25.5 pence (2006: 40.4 pence) Operational highlights: • Traffic volumes up 2.9 per cent • Seat factor flat at 76.1 per cent • Capacity up 2.9 per cent • Yield up 2.1 per cent British Airways today (Friday May 18) reported an operating profit of £602million for the year ending March 31, 2007 (2006: £694 million). The operatingmargin was 7.1 per cent (2006: 8.5 per cent). For the quarter, the operatingprofit was £31 million (2006: £98 million) giving an operating margin of 1.6 percent. The pre-tax profit was £611 million (2006: £616 million) for the year and£27 million (2006: £98 million) for the quarter. Group turnover for the year was £8,492 million (2006: £8,213 million), up 3.4per cent on a flying programme up 0.7 per cent, measured in Available TonneKilometres (ATKs). For the quarter, Group turnover was significantly impacted bythe threat of a strike and was down 5.9 per cent to £1,932 million, on a flyingprogramme 1.5 per cent lower in ATKs. Operating cash flow for the year was £756 million (2006: £1,339 million).Including current interest bearing deposits, the cash position at March 31,2007, was £2,355 million, down £85 million compared with March 31, 2006. Net debt was £991 million, a reduction of £650 million since the start of thefinancial year. The second installment of £560 million from the company's £800million cash injection was paid into the New Airways Pensions Scheme (NAPS) onApril 2, 2007. This reduced the cash balances immediately after the balancesheet date to around £1,800 million. Traffic volumes, measured in Revenue Passenger Kilometres (RPKs), were up 2.9per cent for the year and down 1.3 per cent for the quarter. Seat factor wasflat for the year at 76.1 per cent on capacity 2.9 per cent higher in AvailableSeat Kilometres (ASKs) and down 2.0 percentage points in the quarter to 71.4 percent. Yield measured in pence per RPK was up 2.1 per cent for the year and down3.4 per cent for the quarter. Total costs, excluding one off items, were up 5.5per cent, driven mainly by a 22 per cent increase in fuel costs to £1.93billion. Non-fuel costs were up 1.1 per cent. Cargo volumes for the year, measured in Cargo Tonne Kilometres (CTKs) were down4.7 per cent compared with the prior year, with yields up 1.7 per cent. For thequarter, cargo volumes were down 12.4 per cent compared to last year. Cargoperformance during the second half was impacted by operational and securityrelated issues. The results include a £396 million credit as a result of a change to the NewAirways Pension Scheme (NAPS). The investigations by the US Department of Justice, the European Commission andthe UK Office of Fair Trading and others into anti-competitive activity on longhaul passenger and cargo fuel surcharges are continuing. However, BritishAirways has now responded to the subpoenas and other statutory requests forinformation from these authorities. British Airways has a long-standing, clear and comprehensive competitioncompliance policy. This policy requires all staff to comply with the law at alltimes. It has become apparent that there have been breaches of this policy inrelation to discussions about these surcharges with competitors. As a result, itis now appropriate for the company to make a provision, under IAS 37, of £350million in its full year accounts. The provision represents the best estimate ofthe amount to settle all competition authority and civil claims at the BalanceSheet date, but recognises that the final amount is subject to uncertainty. Willie Walsh, British Airways' chief executive, said: "These are strong results despite a challenging year. We know at times it hasbeen a frustrating year for our customers, caused by disruption and overlyrestrictive UK government security measures on hand baggage. "We have taken steps to ensure the fundamentals of our business are strong,laying the foundations to deliver our 10 per cent operating margin target byMarch 2008. We have addressed the £2.1 billion pension deficit and disposed ofthe loss-making regional business, BA Connect. Our total cost control has beengood, with non-fuel costs up just 1.1 per cent. "We are on the threshold of a new era for our customers. Terminal 5 is only 313days away and tickets for flights from T5 are now available for sale. Our newClub World cabin is now on 96 services to New York's JFK airport and we will beinvesting in a fantastic new First cabin. We have made progress on Gatwick,particularly on costs, which has given us the confidence to renew our commitmentto Gatwick and upgrade its fleet. This is a step towards a single shorthaulfleet. "Earlier this year we ordered four new widebodied aircraft for delivery in 2009,and we anticipate making a further major order for 34 replacement and additionalgrowth aircraft in the coming months. Today we have announced an order foreight Airbus A320 family aircraft for the shorthaul fleet. "The 'open skies' air treaty agreed recently between the EU and the US has givenus some new and exciting opportunities. We have filed an application with theUS DoT for permission to operate services between any point in the US and anypoint in the EU to enable us to grow the most profitable part of our business." Martin Broughton, British Airways' chairman, said: "We are pleased with the progress that Willie and his team have made on manyfronts this year despite all the challenges. "In terms of current performance, we have seen some weakness in non-premiumsegments notably on the North Atlantic. To some degree, complete visibility ishampered by the ongoing baggage restrictions which impact all cabins butparticularly premium. Our revenue guidance of 5-6 per cent increase is unchangedbut we now expect to be at the lower of end of this range."Cost control remains a key focus and full year costs, excluding fuel, are stillexpected to be some £50 million higher than the year just reported. "Our goal to achieve a 10 per cent operating margin by March 2008 remains ontrack, although year over year improvements are likely to be deliveredpredominantly in the second half as we cycle against record results in theperiod to August 10 last year." The Board has recommended that no final dividend be paid. ends May 18, 2007 111/KG/07 Note to Editors: • The provision in respect of competition investigations relates to potential Government fines in the following jurisdictions in relation to cargo fuel surcharges: USA, Europe, Australia, Canada, New Zealand and South Africa and, in relation to long haul passenger fuel surcharges: USA and the UK. It also relates to civil claims in the USA, Australia and Canada. Under IAS 37 the provision represents the estimate of the amount to settle competition authority and civil claims at the Balance Sheet date, but recognises that the final amount required to pay all claims and fines is subject to uncertainty. • Under IAS 19 accounting rules a change to the New Airways Pension Scheme (NAPS), capping pensionable pay at RPI, resulted in a one-off credit to the P&L account. • See separate RNS statement on short haul aircraft order. • The current year and prior year results have been restated to reflect the agreement to dispose of the regional business of BA Connect to Flybe. There is an accounting requirement under IFRS 5 to reclassify the financial results between continuing and discontinued operations. British Airways' presentation to city analysts can be accessed via the internetwww.bashares.com at 9am. A webcast of British Airways' conference call to cityanalysts can also be accessed via the internet www.bashares.com at 2pm. This document is the summary financial statement for the year ended March 31,2007 of British Airways Plc, whose details are above. Certain statementsincluded in this edition of Investor may be forward-looking and may involverisks and uncertainties that could cause actual results to differ materiallyfrom those expressed or implied by the forward-looking statements. Forward-looking statements include, without limitation, projections relating to resultsof operations and financial conditions and the company's plans and objectivesfor future operations, including, without limitation, discussions of thecompany's business and financing plans, expected future revenues andexpenditures and divestments. All forward-looking statements in this report arebased upon information known to the company on the date of this report. Thecompany undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events orotherwise. It is not reasonably possible to itemise all of the many factors andspecific events that could cause the company's forward-looking statements to beincorrect or that could otherwise have a material adverse effect on the futureoperations or results of an airline operating in the global economy. Fullerinformation on some of the factors which could result in a material differenceis available in the company's Annual Report and Accounts for the year endedMarch 31, 2007, which is available on www.bashareholders.com. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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