REG - easyJet PLC - Half-year Report <Origin Href="QuoteRef">EZJ.L</Origin> - Part 2
10/05/2016 07:06
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753 699 7.7%
Number of airports served at end of period 133 135 (1.5%)
Financial measures
(Loss) /profit before tax per seat (£) (0.69) 0.21 (0.90)
(Loss) /profit before tax per ASK (pence) (0.07) 0.02 (0.09)
Revenue
Revenue per seat (£) 51.29 54.91 (6.6%)
Revenue per seat at constant currency (£) 52.62 54.91 (4.2%)
Revenue per ASK (pence) 4.87 5.12 (5.0%)
Revenue per ASK at constant currency (pence) 4.99 5.12 (2.5%)
Costs
Per seat measures
Total cost per seat (£) 51.98 54.70 (5.0%)
Total cost per seat at constant currency (£) * 52.46 54.83 (4.3%)
Total cost per seat excluding fuel (£) 38.61 38.66 (0.1%)
Total cost per seat excluding fuel at constant currency (£) * 38.97 38.79 0.5%
Operational cost per seat (£) 48.09 50.87 (5.5%)
Operational cost per seat excluding fuel (£) 34.72 34.83 (0.4%)
Operational cost per seat excluding fuel at constant currency (£) 35.02 34.83 0.5%
Ownership cost per seat (£) 3.89 3.83 1.8%
Per ASK measures
Total cost per ASK (pence) 4.94 5.10 (3.3%)
Total cost per ASK excluding fuel (pence) 3.67 3.60 1.6%
Total cost per ASK excluding fuel at constant currency (pence) * 3.70 3.61 2.3%
Operational cost per ASK (pence) 4.57 4.74 (3.8%)
Operational cost per ASK excluding fuel (pence) 3.30 3.24 1.4%
Operational cost per ASK excluding fuel at constant currency (pence) 3.32 3.24 2.3%
Ownership cost per ASK (pence) 0.37 0.36 3.6%
* Comparators exclude foreign exchange gains and losses on balance sheet
revaluations
G. PRINCIPAL RISKS AND UNCERTAINTIES
The Group faces a number of risks which, if they arise, could affect its
ability to achieve its strategic objectives. As with any business, risk
assessment and the implementation of mitigating actions and controls are vital
to successfully achieving the Group's strategy. The easyJet Board is
responsible for determining the nature of these risks and ensuring appropriate
mitigating actions are in place to manage them.
easyJet carries out a detailed risk management process to ensure that risks
are identified and mitigated where possible. Whilst easyJet can monitor risks
and prepare for adverse scenarios, the ability to affect the core drivers of
many risks is not within the Group's control, for example adverse weather,
pandemics, acts of terrorism, changes in government regulation and
macroeconomic issues.
The principal risks and uncertainties faced by the Group remain those set out
in our 2015 Annual report and accounts and include:
· Safety
· Operational
· Performance
· Financial
· Reputation
· Competition
· Economic, political and regulatory
A key regulatory change that may or may not occur is the outcome of the EU
referendum on 23 June 2016. Dependent on the outcome of the referendum there
could be significant implications for easyJet. The Company has put in place a
mitigation plan in the event of a vote to leave the EU.
The Directors consider that the principal risks and uncertainties which could
have a material impact on the Group's performance in the second half of the
financial year remain the same as those stated on pages 24 to 29 of our Annual
report and accounts for the year to 30 September 2015, which are available on
our website http://corporate.easyjet.com
H. CONDENSED FINANCIAL INFORMATION
Consolidated income statement (unaudited)
Six months ended 31 March 2016 Six months ended 31 March 2015
Notes £ million £ million
Seat revenue 1,740 1,739
Non-seat revenue 31 28
Total revenue 1,771 1,767
Fuel (462) (516)
Airports and ground handling (514) (478)
Crew (250) (238)
Navigation (135) (129)
Maintenance (111) (104)
Selling and marketing (51) (51)
Other costs (137) (121)
EBITDAR 111 130
Aircraft dry leasing (54) (58)
Depreciation 6 (74) (58)
Amortisation of intangible assets (6) (7)
Operating (loss)/profit (23) 7
Interest receivable and other financing income 5 5
Interest payable and other financing charges (6) (5)
Net finance charges (1) -
(Loss)/profit before tax (24) 7
Tax credit/(charge) 3 4 (2)
(Loss)/profit for the period (20) 5
(Loss)/earnings per share, pence
Basic 4 (5.1) 1.3
Diluted 4 - 1.3
Consolidated statement of comprehensive income (unaudited)
Six months ended 31 March 2016 Six months ended 31 March 2015
Notes £million £million
(Loss)/profit for the period (20) 5
Other comprehensive income/(loss)
Cash flow hedges
Fair value losses in the period (222) (330)
Losses transferred to income statement 161 69
Gains transferred to property, plant and equipment (3) -
Related tax credit 3 9 52
(55) (209)
Total comprehensive loss for the period (75) (204)
For capital expenditure cash-flow hedges, the accumulated gains and losses recognised in other comprehensive income will be transferred to the initial carrying amount of the asset acquired, within property, plant and equipment. All other items in other comprehensive income will be re-classified to the income statement.
Consolidated statement of financial position (unaudited)
31 March 2016 30 September 2015
Notes £ million £ million
Non-current assets
Goodwill 365 365
Other intangible assets 136 127
Property, plant and equipment 6 3,089 2,877
Derivative financial instruments 97 44
Restricted cash 6 6
Other non-current assets 122 130
3,815 3,549
Current assets
Trade and other receivables 233 206
Derivative financial instruments 144 128
Restricted cash 6 6
Money market deposits 422 289
Cash and cash equivalents 635 650
1,440 1,279
Current liabilities
Trade and other payables (438) (495)
Unearned revenue (1,080) (619)
Borrowings (114) (182)
Derivative financial instruments (443) (368)
Current tax payable - (43)
Provisions for liabilities and charges (54) (61)
(2,129) (1,768)
Net current liabilities (689) (489)
Non-current liabilities
Borrowings (647) (322)
Derivative financial instruments (136) (101)
Non-current deferred income (41) (47)
Provisions for liabilities and charges (187) (165)
Deferred tax (163) (176)
(1,174) (811)
Net assets 1,952 2,249
Shareholders' equity
Share capital 108 108
Share premium 659 659
Hedging reserve (294) (239)
Translation reserve 1 1
Retained earnings 1,478 1,720
1,952 2,249
Consolidated statement of changes in equity (unaudited)
Share capital Share premium Hedging reserve Translation reserve Retained earnings Total
£ million £ million £ million £ million £ million £ million
At 1 October 2015 108 659 (239) 1 1,720 2,249
Total comprehensive loss - - (55) - (20) (75)
Dividends paid (note 5) - - - - (219) (219)
Share incentive schemes
Value of employee services - - - - 10 10
Related tax (note 3) - - - - (2) (2)
Purchase of own shares - - - - (11) (11)
At 31 March 2016 108 659 (294) 1 1,478 1,952
Share capital Share premium Hedging reserve Translation reserve Retained earnings Total
£ million £ million £ million £ million £ million £ million
At 1 October 2014 108 658 (17) 1 1,422 2,172
Total comprehensive income/(loss) - - (209) - 5 (204)
Dividends paid (note 5) - - - - (180) (180)
Share incentive schemes
Proceeds from shares issued - 1 - - - 1
Value of employee services - - - - 8 8
Related tax (note 3) - - - - 8 8
Purchase of own shares - - - - (66) (66)
At 31 March 2015 108 659 (226) 1 1,197 1,739
The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow hedging instruments relating to highly probable transactions that are forecast to occur after the period end.
Consolidated statement of cash flows (unaudited)
Six months ended 31 March 2016 Six months ended 31 March 2015
Notes £ million £ million
Cash flows from operating activities
Cash generated from operations (excluding dividends) 7 461 539
Ordinary dividends paid 5 (219) (180)
Net interest and other financing income/charges paid (11) (2)
Tax paid (45) (48)
Net cash generated from operating activities 186 309
Cash flows from investing activities
Purchase of property, plant and equipment (299) (266)
Purchase of other intangible assets (15) (5)
Redemption of loan notes - 1
Net cash used by investing activities (314) (270)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital - 1
Purchase of own shares for employee share schemes (11) (66)
Proceeds from drawdown of bank loans and other borrowings 8 379 -
Repayment of bank loans and other borrowings 8 (99) (40)
Repayment of capital elements of finance leases 8 (65) (5)
Net (increase)/decrease in money market deposits 8 (129) 408
Decrease in restricted cash 1 21
Net cash generated from financing activities 76 319
Effect of exchange rate changes 37 32
Net (decrease)/increase in cash and cash equivalents (15) 390
Cash and cash equivalents at beginning of period 650 424
Cash and cash equivalents at end of period 8 635 814
Notes to the condensed consolidated interim financial information (unaudited)
1. Basis of preparation
The condensed consolidated interim financial information has been prepared in
accordance with the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority and with International Accounting Standards 34
"Interim Financial Reporting" as adopted by the European Union. It should be
read in conjunction with the Annual report and accounts for the year ended 30
September 2015, which were prepared in accordance with applicable law and
International Financial Reporting Standards as adopted by the European Union.
The interim financial information does not constitute statutory accounts
within the meaning of sections 434 and 435 of the Companies Act 2006.
Statutory accounts for the year ended 30 September 2015 were approved by the
Board of Directors on 16 November 2015, and have been delivered to the
Registrar of Companies. The report of the auditors was unqualified, and did
not contain either an emphasis of matter paragraph or any statement made under
section 498 of the Companies Act 2006.
In adopting the going concern basis for preparing this interim financial
information, the Directors have considered easyJet's business activities,
together with factors likely to affect its future development and performance,
as well as easyJet's principal risks and uncertainties. Based on this, the
directors considered it appropriate to adopt the going concern basis of
accounting in preparing the interim financial information.
The significant accounting policies adopted are consistent with those
described in the Annual report and accounts for the year ended 30 September
2015.
A number of amended accounting standards and interpretations are effective for
the current financial year, but none of them has had any material impact on
the interim financial information.
2. Seasonality
The airline industry is highly seasonal and demand and yields are
significantly higher during the summer. Accordingly revenue and profitability
are higher in the second half of the financial year. Historically, easyJet has
reported a loss/low profit for the first half of the financial year and a
profit in the second half.
3. Tax (credit)/charge
Tax on (loss)/profit on ordinary activities
2016 2015
£ million £ million
Current tax 3 3
Deferred tax (7) (1)
(4) 2
Effective tax rate 18.1% 20.4%
The effective tax rate is lower than the standard rate of corporation tax in
the United Kingdom (20%) principally due to deferred tax being provided at
lower than the standard rate.
Tax on items recognised directly in other comprehensive income or
shareholders' equity
2016 2015
£ million £ million
Credit to other comprehensive income
Deferred tax on fair value movements of cash flow hedges 9 52
Credit/(charge) to shareholders' equity
Current tax on share-based payments 1 -
Deferred tax on share-based payments (3) 8
(2) 8
4. (Loss)/earnings per share
2016 2015
£ million £ million
(Loss)/profit for the period (20) 5
2016 2015
million million
Weighted average number of ordinary shares used to calculate basic earnings per share 394 394
Weighted average number of dilutive share options 3
Weighted average number of ordinary shares used to calculate diluted earnings per share 397
2016 2015
(Loss)/earnings per share pence pence
Basic (5.1) 1.3
Diluted - 1.3
Diluted earnings per share for the six months to 31 March 2016 is not
presented as the impact of potential ordinary shares is anti-dilutive.
5. Dividends
The company paid an ordinary dividend of 55.2 pence per share or £219 million
(2015: 45.4 pence per share or £180 million).
6. Property, plant and equipment
2016 2015
£ million £ million
At 1 October 2,877 2,542
Additions 314 271
Transfer to intangible assets (15) (5)
Disposals (2) -
Transfer to maintenance provision (11) (30)
Depreciation (74) (58)
At 31 March 3,089 2,720
Net book value includes £293 million (2015: £303 million) relating to advance
and options payments for future aircraft deliveries.
At 31 March 2016 easyJet is contractually committed to the acquisition of 176
(2015: 167) Airbus A320 family aircraft, with a total list price of US$15.5
billion before escalations and discounts for delivery in 2016 (10 aircraft),
between 2017 to 2018 (36 aircraft) and between 2017 to 2022 (130 new
generation aircraft).
7. Reconciliation of operating (loss)/profit to cash generated from
operations
2016 2015
£ million £ million
Operating (loss)/profit (23) 7
Adjustments for non-cash items:
Depreciation 74 58
Loss on disposal of property, plant and equipment 2 -
Amortisation of intangible assets 6 7
Share-based payments 10 8
Changes in working capital and other items of an operating nature:
(Increase) / decrease in trade and other receivables (20) 13
Decrease in trade and other payables (64) (76)
Increase in unearned revenue 461 519
Increase in provisions 16 2
Decrease in other non-current assets 8 11
Increase in derivative financial instruments (3) (1)
Decrease in non-current deferred income (6) (9)
461 539
8. Reconciliation of net cash flow to movement in net cash
1 October 2015 Fair value and foreign exchange movements Netcash flow 31 March 2016
£ million £ million £ million £ million
Cash and cash equivalents 650 37 (52) 635
Money market deposits 289 4 129 422
939 41 77 1,057
Eurobond - (20) (379) (399)
Bank loans (316) (12) 99 (229)
Finance lease obligations (188) (10) 65 (133)
(504) (42) (215) (761)
Net cash 435 (1) (138) 296
On 7 January 2016, the UK Listing Authority approved a prospectus relating to
the establishment of a £3,000 million Euro Medium Term Note Programme of
easyJet plc. Under this programme, on 9 February 2016 easyJet plc issued notes
amounting to E500 million for a seven year term with a fixed annual coupon
rate of 1.750%.
To mitigate the foreign currency exposure on the Eurobond easyJet entered into
cross-currency swap contracts, which are designated as fair value hedges.
Changes in the fair values of derivatives that are designated and qualify as
fair value hedges are recorded in the income statement, together with any
changes in the fair values of the hedged assets or liabilities that are
attributable to the hedged risk.
9. Fair value
The fair values of financial assets and liabilities, together with the
carrying value at each reporting date, are as follows:
2016 2016 2015 2015
Carrying value Fair value Carrying value Fair value
£ million £ million £ million £ million
Eurobond 399 412 - -
Bank loans 229 229 316 316
Finance lease obligations 133 139 188 194
The fair value of the Eurobond is classified as level 1 of the IFRS 13 'Fair
Value Measurement' fair value hierarchy. The remaining financial instruments
for which fair value is disclosed in the table above, and derivative financial
instruments, are classified as level 2.
For all financial assets and financial liabilities not disclosed within the
table above, the carrying value is a reasonable approximation to fair value.
The fair values of derivatives and financial instruments have been determined
by reference to observable market prices where the instruments are traded,
where available. Where market prices are not available, the fair value has
been calculated by discounting expected future cash flows at prevailing
interest rates.
10. Contingent liabilities
easyJet is involved in a number of disputes and litigation which arose in the
normal course of business. The likely outcome of these disputes and litigation
cannot be predicted, and in complex cases reliable estimates of any potential
obligation may not be possible.
Having reviewed the information currently available, the directors consider
that the ultimate resolution of these disputes and litigation is unlikely to
have a material adverse effect on easyJet's results, cash flows or financial
position.
11. Related party transactions
The Company licenses the easyJet brand from easyGroup Limited ('easyGroup'), a
wholly owned subsidiary of easyGroup Holdings Limited, an entity in which
easyJet's founder, Sir Stelios Haji-Ioannou, holds a beneficial controlling
interest. No changes to the Haji-Ioannou family concert party shareholding
have been disclosed to easyJet in accordance with the Disclosure and
Transparency Rules DTR 5, between 30 September 2015 and 30 March 2016.
Under the Amended Brand Licence signed in October 2010 and approved by the
shareholders of easyJet plc in December 2010, an annual royalty of 0.25% of
total revenue is payable by easyJet to easyGroup for a minimum term of 10
years. The full term of agreement is 50 years.
easyJet and easyGroup established a fund to meet the annual costs of
protecting the 'easy' (and related marks) and the 'easyJet' brands. easyJet
contributes up to £1 million per annum to this fund and easyGroup contributes
up to £100,000 per annum. Beyond the first £1.1 million of costs, easyJet can
commit up to an aggregate £5.5 million annually to meet brand protection
costs, with easyGroup continuing to meet its share of costs on a 10:1 ratio.
easyJet must meet 100% of any brand protection costs it wishes to incur above
this limit.
A separate agreement was entered with Sir Stelios ('the Comfort Letter'),
dated 9 October 2010, under which, in return for certain non-compete
obligations, easyJet paid a fee of £300,000, adjusted annually per the UK
Retail Price index, each year for five years (or until the expiry of the
longest subsisting restriction, whichever is later). All of the obligations in
the Comfort Letter have now expired and no further payments will be made under
it.
The amounts included in the income statement for these items were as follows:
2016£ million 2015£ million
Annual royalty 4.4 4.4
Brand protection (legal fees paid through easyGroup to third parties) 0.1 0.3
Comfort letter agreement with Sir Stelios Haji-Ioannou - 0.2
4.5 4.9
As at 31 March 2016, an amount of £2.3 million (2015: £2.3 million) of the
above aggregate amount was included in trade and other payables.
Statement of Directors' responsibilities
The Directors are responsible for preparing the interim report in accordance
with applicable law and regulations.
The Directors confirm that the condensed consolidated interim financial
information has been prepared in accordance with International Accounting
Standard 34 ('Interim Financial Reporting') as adopted by the European Union.
The interim management report includes a fair review of the information
required by the Disclosure and Transparency Rules paragraphs 4.2.7 and 4.2.8,
namely:
· an indication of important events that have occurred during the six
months ended 31 March 2016 and their impact on the condensed set of financial
information, and a description of the principal risks and uncertainties for
the remaining six months of the financial year; and
· material related-party transactions during the six months ended 31
March 2016 and any material changes in the related-party transactions
described in the last Annual report and accounts 2015.
The Directors of easyJet plc are listed in the Annual report and accounts
2015. There have been no changes since the date of publication. A list of
current Directors is maintained on the easyJet plc website:
http://corporate.easyJet.com.
The Directors are responsible for the maintenance and integrity of, amongst
other things, the financial and corporate governance information as provided
on the easyJet website (http://corporate.easyJet.com). Legislation in the
United Kingdom governing the preparation and dissemination of financial
information may differ from legislation in other jurisdictions.
The interim report was approved by the Board of Directors and authorised for
issue on 9 May 2016 and signed on its behalf by:
Carolyn McCall OBE Andrew Findlay
Chief Executive Chief Financial Officer
Independent review report to easyJet plc
Report on the consolidated interim financial statements
Our conclusion
We have reviewed easyJet plc's consolidated interim financial statements (the
"interim financial statements"), in the interim report of easyJet plc for the
six month period ended 31 March 2016. Based on our review, nothing has come to
our attention that causes us to believe that the interim financial statements
are not prepared, in all material respects, in accordance with International
Accounting Standard 34, 'Interim Financial Reportin', as adopted by the
European Union and the Disclosure Rules and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
· the consolidated interim statement of financial position as at 31 March
2016;
· the consolidated interim income statement and the consolidated
statement of comprehensive income for the period then ended;
· the consolidated interim statement of cash flows for the period then
ended;
· the consolidated interim statement of changes in equity for the period
then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the interim report has been
prepared in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the Disclosure
Rules and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 1 to the interim financial statements, the financial
reporting framework that has been applied in the preparation of the full
annual financial statements of the Group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim report, including the interim financial statements, is the
responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the interim report in accordance with the Disclosure
Rules and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Our responsibility is to express a conclusion on the interim financial
statements in the interim report based on our review. This report, including
the conclusion, has been prepared for and only for the company for the purpose
of complying with the Disclosure Rules and Transparency Rules of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and, consequently,
does not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
9 May 2016
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