REG - easyJet PLC - Half Yearly Report <Origin Href="QuoteRef">EZJ.L</Origin> - Part 2
16/05/2017 07:06
- Part 2: For the preceding part double click ID:nRSP2004Fa
Euro Swiss franc US dollar Other Total
Favourable/(adverse) £ million £ million £ million £ million £ million
Non-headline costs excluding prior year balance sheet revaluations (6) (1) 23 1 17
Prior year balance sheet revaluations (3) - - 1 (2)
Non-headline loss before tax (9) (1) 23 2 15
FINANCIAL PERFORMANCE
Revenue
2017 2016
£ million £ per seat pence per ASK £ million £ per seat pence per ASK
Seat revenue 1,790 47.82 4.52 1,740 50.39 4.78
Non-seat revenue 37 0.98 0.09 31 0.90 0.09
Total revenue 1,827 48.80 4.61 1,771 51.29 4.87
Revenue per seat decreased by 4.9% to £48.80 (31 March 2016: £51.29). At constant currency, revenue per seat fell by 9.7%
to £46.32. The decrease is a consequence of driving demand through decreased price, reflecting significant capacity growth
in the market associated with low fuel prices and to alleviate the impact of higher holiday costs for UK travellers as a
result of the weakening of the Pound. Additionally the movement of Easter into the second half of the year impacted
performance.
Load factor during the period increased by 0.5 percentage points to 90.2%.
Revenue per ASK decreased by 5.3%, and by 10.1% at constant currency, impacted by a 4.9% decrease in revenue per seat and a
0.4% increase in the average sector length.
Headline costs excluding fuel
2017 2016
(restated)
£ million £ per seat pence per ASK £ million £ per seat pence per ASK
Operating costs
Airports and ground handling 624 16.66 1.57 514 14.88 1.42
Crew 293 7.82 0.74 250 7.25 0.69
Navigation 159 4.25 0.40 135 3.91 0.37
Maintenance 127 3.39 0.32 111 3.22 0.31
Selling and marketing 59 1.57 0.15 51 1.48 0.14
Other costs 160 4.27 0.41 137 3.98 0.37
1,422 37.96 3.59 1,198 34.72 3.30
Ownership costs
Aircraft dry leasing 55 1.46 0.14 48 1.39 0.13
Depreciation 85 2.28 0.21 74 2.15 0.20
Amortisation 7 0.17 0.02 6 0.17 0.02
Net interest payable 11 0.31 0.02 4 0.11 0.01
158 4.22 0.39 132 3.82 0.36
Headline costs excluding fuel 1,580 42.18 3.98 1,330 38.54 3.66
Headline cost per seat excluding fuel increased by 9.5% to £42.18 but remained flat at constant currency.
Headline airports and ground handling cost per seat increased by 12.0% but remained broadly flat at constant currency.
Savings obtained from airport lean initiatives have offset regulatory airport uplifts.
Headline crew cost per seat increased by 7.9% to £7.82, and by 0.5% at constant currency. This was driven by pay increases,
however these were largely offset by efficiencies obtained from the up-gauging of our fleet.
Headline navigation cost per seat increased by 8.8% to £4.25 but decreased by 3.5% at constant currency driven by the
annualisation of reduced charges primarily in France and Germany.
Headline maintenance cost per seat increased by 5.5% to £3.39, but decreased by 4.9% at constant currency. This was driven
by engineering and maintenance savings such as the component supply contract, and the upgauging of fleet as easyJet
continues to move from A319s to A320s.
Headline other operating costs per seat increased by 7.1% to £4.27 per seat, and by 1.9% at constant currency. This was
mainly driven by an increase in disruption costs due to an increased number of events, level of compensation claims and
welfare claims, which had a higher impact in Q1 due to the profile of events.
Headline aircraft dry leasing cost per seat increased by 5.1% to £1.46 but decreased by 5.5% at constant currency. The
favourable variance was driven by the increased capacity in the year and the favourable lease mix.
Depreciation costs have increased by 5.9% on a per seat basis driven by the acquisition of 20 new aircraft last year. The
average owned fleet increased by 10.0% to 187.
An increase in headline net interest costs of £0.20 per seat is attributable to issuance costs of two bonds, as we invest
in the long term growth of the airline.
Fuel
2017 2016
£ million £ per seat pence per ASK £ million £ per seat pence per ASK
Fuel 459 12.27 1.16 462 13.37 1.27
Fuel cost per seat decreased by 8.3% and by 15.9% at constant currency.
During the period the average market fuel price increased by 22.2% to $500 per tonne from $409 per tonne in the previous
year. The operation of easyJet's fuel and US Dollar hedging policy meant that the average effective fuel price movement saw
a decrease of 8.2% to £449 per tonne from £489 per tonne in the previous year.
Non-headline items
2017 2016
£ million £ per seat pence per ASK £ million £ per seat pence per ASK
Sale and leaseback charge (16) (0.42) (0.04) - - -
Organisational review (2) (0.09) (0.01) - - -
EU Air Operator Certificate (1) (0.02) - - - -
Balance sheet foreign exchange (loss)/gain (1) (0.01) - 2 0.07 0.01
Fair value adjustment (4) (0.09) (0.01) 1 0.03 -
Non-headline (charge)/credit before tax (24) (0.63) (0.06) 3 0.10 0.01
Non-headline profit before tax items of £24 million comprise:
· a £10 million loss on disposal and a £6 million maintenance provision - both one-off charges as a result of the sale
and leaseback of 10 A319 aircraft in December 2016, arising due to the age of the selected aircraft and maintenance
provision accounting;
· a £2 million one-off charge associated with implementing the organisational review;
· a £1 million charge in relation to establishing an Air Operator Certificate in another EU member state, to secure the
flying rights of the 30% of our network that remains wholly within and between EU states, excluding the UK, following the
UK's referendum vote to leave the European Union;
· a £1 million non-cash charge relating to balance sheet foreign exchange gains and losses; and
· a £4 million charge relating to fair value adjustments associated with the cross currency interest rate swaps in
place for the bond issued in February 2016.
NET CASH AND FINANCIAL POSITION
Summary net cash reconciliation
The table below presents cash flows on a net cash basis. This presentation has been adopted as it shows more clearly the
capability of the business to generate net cash. This is different to the GAAP presentation of the statement of cash flows
in the condensed financial information.
Six months ended 31 March 2017 Six months ended 31 March 2016 Change
(restated)
£ million £ million £ million
Operating loss (220) (17) (203)
Depreciation and amortisation 92 80 12
Unearned revenue movement 730 461 269
Other net working capital movement (63) (75) 12
Net tax paid (28) (45) 17
Net capital expenditure (302) (314) 12
Net proceeds from sale and operating leaseback of aircraft 115 - 115
Purchase of own shares for employee share schemes (6) (11) 5
Net decrease in restricted cash - 1 (1)
Other (including the effect of exchange rates) 36 - 36
Ordinary dividend paid (214) (219) 5
Net increase/(decrease) in net cash 140 (139) 279
Net cash at beginning of period 213 435 (222)
Net cash at end of period 353 296 57
Net cash at 31 March 2017 was £353 million (31 March 2016: £296 million) and comprised cash and money market deposits of
£1,308 million (31 March 2016: £1,057 million) and borrowings of £ 955 million (31 March 2016: £761 million). After
allowing for the impact of aircraft operating leases (seven times operating lease costs incurred in the 12 months to 31
March 2017), adjusted net debt at 30 September 2016 of £424 million has decreased by £91 million to £333 million.
Net capital expenditure includes the acquisition of nine A320 aircraft (31 March 2016: 10 aircraft), the purchase of
life-limited parts used in engine restoration and pre-delivery payments relating to aircraft purchases. The number of
scheduled aircraft operating in the fleet increased from 249 at 30 September 2016 to 252 at 31 March 2017.
easyJet made net corporation tax payments totalling £28 million during the period (2016: £45 million).
Borrowings as at 31 March 2017 were £955 million, an increase of £194 million from 31 March 2016. Under the £3 billion Euro
Medium Term Note Programme announced in FY'16, on 11 October 2016 easyJet plc issued notes amounting to E500 million for a
seven year term with a fixed annual coupon rate of 1.125%. This increase in borrowings was partially offset by the
repayment of mortgages on aircraft amounting to £219 million in the period.
Summary consolidated statement of financial position
31 March 2017 30 September 2016 Change
(restated)
£ million £ million £ million
Goodwill 365 365 -
Property, plant and equipment 3,314 3,252 62
Derivative financial instruments 123 98 25
Unearned revenue (1,298) (568) (730)
Net working capital (400) (413) 13
Restricted cash 7 7 -
Net cash 353 213 140
Current and deferred taxation (192) (253) 61
Other non-current assets and liabilities 68 (7) 75
2,340 2,694 (354)
Opening shareholders' equity 2,694 2,221
(Loss)/profit for the period (192) 437
Ordinary dividend paid (214) (219)
Change in hedging reserve 48 263
Other movements 4 (8)
2,340 2,694
Since 30 September 2016 net assets decreased by £354 million, due to the payment of the ordinary dividend (£214 million)
combined with the loss for the period, slightly offset by the favourable movement on the hedging reserve. The movement on
the hedging reserve was primarily due to the maturity of out of the money contracts.
The net book value of property, plant and equipment increased by £62 million driven principally by the acquisition of nine
A320 family aircraft, and pre-delivery payments relating to aircraft purchases.
Unearned revenue increased by £730 million. Passengers pay for their flights in full when booking, and due to the seasonal
nature of the industry this leads to significantly more unearned revenue at 31 March compared to 30 September each year.
Compared to March 2016, unearned revenue has increased by £218 million. This increase arises due to differences in the
timing of flight schedule releases and the Easter school holiday schedule.
KEY STATISTICS
Operating measures 2017 2016 Increase/ (decrease)
Seats flown (millions) 37.5 34.5 8.4%
Passengers (millions) 33.8 31.0 9.0%
Load factor 90.2% 89.7% 0.5ppt
Available seat kilometres (ASK) (millions) 39,635 36,393 8.9%
Revenue passenger kilometres (RPK) (millions) 36,190 33,179 9.1%
Average sector length (kilometres) 1,058 1,054 0.4%
Sectors 225,052 208,901 7.7%
Block hours 427,274 394,743 8.2%
Number of aircraft owned/leased at end of period 266 247 7.7%
Average number of aircraft owned/leased during period 260.9 244.5 6.7%
Number of aircraft operated at end of period 252 236 6.8%
Average number of aircraft operated during period 235.4 224.9 4.7%
Operated aircraft utilisation (hours per day) 10.0 9.6 4.0%
Owned aircraft utilisation (hours per day) 9.0 8.8 2.0%
Number of routes operated at end of period 837 753 11.2%
Number of airports served at end of period 135 133 1.5%
Financial measures
Total loss before tax per seat (£) (6.28) (0.52) (1,112.4%)
Headline loss before tax per seat (£) (5.65) (0.62) (815.2%)
Total loss before tax per ASK (pence) (0.59) (0.05) (1,107.1%)
Headline loss before tax per ASK (pence) (0.53) (0.06) (811.2%)
Revenue
Revenue per seat (£) 48.80 51.29 (4.9%)
Revenue per seat at constant currency (£) 46.32 51.29 (9.7%)
Revenue per ASK (pence) 4.61 4.87 (5.3%)
Revenue per ASK at constant currency (pence) 4.38 4.87 (10.1%)
Costs
Per seat measures
Headline cost per seat (£) 54.45 51.91 4.9%
Non-headline cost per seat (£) 0.63 (0.10) 739.6%
Headline cost per seat excluding fuel (£) 42.18 38.54 9.5%
Headline cost per seat excluding fuel at constant currency (£) 38.54 38.54 0.0%
Headline operating cost per seat (£) 50.23 48.09 4.5%
Headline operating cost per seat excluding fuel (£) 37.96 34.72 9.4%
Headline operating cost per seat excluding fuel at constant currency (£) 34.48 34.72 (0.7%)
Headline ownership cost per seat (£) 4.22 3.82 10.4%
Per ASK measures
Headline cost per ASK (pence) 5.14 4.93 4.4%
Non-headline cost per ASK (pence) 0.06 (0.01) 736.8%
Headline cost per ASK excluding fuel (pence) 3.98 3.66 9.0%
Headline cost per ASK excluding fuel at constant currency (pence) 3.65 3.66 (0.4%)
Headline operating cost per ASK (pence) 4.75 4.57 4.0%
Headline operating cost per ASK excluding fuel (pence) 3.59 3.30 8.9%
Headline operating cost per ASK excluding fuel at constant currency (pence) 3.26 3.30 (1.1%)
Headline ownership cost per ASK (pence) 0.39 0.36 9.9%
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 2016 Annual report and accounts and
include the following types of risks:
· Safety
· Commercial
· Operational
· Financial risks
· Reputational
· People
· Compliance and regulatory
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 31 of our Annual report
and accounts for the year to 30 September 2016, which are available on our website http://corporate.easyjet.com
CONDENSED FINANCIAL INFORMATION
Consolidated income statement (unaudited)
Six months ended 31 March
2017 2017 2017 2016 2016 2016
(restated) (restated) (restated)
Headline Non-headline (note 3) Total Headline Non-headline (note 3) Total
Notes £ million £ million £ million £ million £ million £ million
Seat revenue 1,790 - 1,790 1,740 - 1,740
Non-seat revenue 37 - 37 31 - 31
Total revenue 1,827 - 1,827 1,771 - 1,771
Fuel (459) - (459) (462) - (462)
Airports and ground handling (624) - (624) (514) - (514)
Crew (293) - (293) (250) - (250)
Navigation (159) - (159) (135) - (135)
Maintenance (127) (6) (133) (111) - (111)
Selling and marketing (59) - (59) (51) - (51)
Other costs (160) (13) (173) (137) - (137)
EBITDAR (54) (19) (73) 111 - 111
Aircraft dry leasing (55) - (55) (48) - (48)
Depreciation 7 (85) - (85) (74) - (74)
Amortisation of intangible assets (7) - (7) (6) - (6)
Operating loss (201) (19) (220) (17) - (17)
Interest receivable and other financing income 3 - 3 3 2 5
Interest payable and other financing charges (14) (5) (19) (7) 1 (6)
Net finance charges (11) (5) (16) (4) 3 (1)
(Loss)/profit before tax (212) (24) (236) (21) 3 (18)
Tax credit 4 40 4 44 3 - 3
(Loss)/profit for the period (172) (20) (192) (18) 3 (15)
Loss per share, pence
Basic 5 (48.9) (3.8)
Consolidated statement of comprehensive income (unaudited)
Six months ended Six months ended
31 March 2017 31 March 2016
(restated)
Notes £ million £ million
Loss for the period (192) (15)
Other comprehensive income/(expense)
Cash flow hedges
Fair value losses in the period 16 (222)
Losses transferred to income statement 66 161
Gains transferred to property, plant and equipment (23) (3)
Related tax credit 4 (11) 9
48 (55)
Total comprehensive expense for the period (144) (70)
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 reclassified to the income statement.
Consolidated statement of financial position (unaudited)
31 March 30 September 2016
2017
(restated)
Notes £ million £ million
Non-current assets
Goodwill 365 365
Other intangible assets 168 152
Property, plant and equipment 7 3,314 3,252
Derivative financial instruments 96 154
Restricted cash 5 7
Other non-current assets 110 112
4,058 4,042
Current assets
Trade and other receivables 238 205
Derivative financial instruments 243 268
Current tax assets 12 -
Restricted cash 2 -
Money market deposits 635 255
Cash and cash equivalents 673 714
1,803 1,442
Current liabilities
Trade and other payables (511) (565)
Unearned revenue (1,298) (568)
Borrowings (9) (92)
Derivative financial instruments (149) (275)
Current tax payable - (16)
Provisions for liabilities and charges (127) (53)
(2,094) (1,569)
Net current liabilities (291) (127)
Non-current liabilities
Borrowings (946) (664)
Derivative financial instruments (67) (49)
Non-current deferred income (30) (36)
Provisions for liabilities and charges (180) (235)
Deferred tax (204) (237)
(1,427) (1,221)
Net assets 2,340 2,694
Shareholders' equity
Share capital 108 108
Share premium 659 659
Hedging reserve 72 24
Translation reserve 1 1
Retained earnings 1,500 1,902
2,340 2,694
Consolidated statement of changes in equity (unaudited)
Share capital Share premium Hedging reserve Translation reserve Retained earnings Total
(restated)
£ million £ million £ million £ million £ million £ million
At 1 October 2016 108 659 24 1 1,920 2,712
Effect of change in accounting policy - - - - (18) (18)
Restated balance at 1 October 2016 108 659 24 1 1,902 2,694
Total comprehensive income - - 48 - (192) (144)
Dividends paid (note 6) - - - - (214) (214)
Share incentive schemes
Value of employee services - - - - 10 10
Purchase of own shares - - - - (6) (6)
At 31 March 2017 108 659 72 1 1,500 2,340
Share capital Share premium Hedging reserve Translation reserve Retained earnings Total
(restated)
£ million £ million £ million £ million £ million £ million
At 1 October 2015 108 659 (239) 1 1,720 2,249
Effect of change in accounting policy - - - - (28) (28)
Restated balance at 1 October 2015 108 659 (239) 1 1,692 2,221
Total comprehensive (expense)/income - - (55) - (15) (70)
Dividends paid (note 6) - - - - (219) (219)
Share incentive schemes
Value of employee services - - - - 10 10
Related tax (note 4) - - - - (2) (2)
Purchase of own shares - - - - (11) (11)
At 31 March 2016 108 659 (294) 1 1,455 1,929
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 Six months ended
31 March 2017 31 March 2016
(restated)
Notes £ million £ million
Cash flows from operating activities
Cash generated from operations 8 560 461
Ordinary dividends paid 6 (214) (219)
Net interest and other financing charges paid (24) (11)
Net tax paid (28) (45)
Net cash generated from operating activities 294 186
Cash flows from investing activities
Purchase of property, plant and equipment 7 (279) (299)
Purchase of intangible assets (23) (15)
Net increase in money market deposits 9 (379) (129)
Net cash used by investing activities (681) (443)
Cash flows from financing activities
Purchase of own shares for employee share schemes (6) (11)
Proceeds from Eurobond issue 9 451 379
Repayment of bank loans and other borrowings 9 (219) (99)
Repayment of capital element of finance leases 9 (3) (65)
Net proceeds from sale and operating leaseback of aircraft 115 -
Net decrease in restricted cash - 1
Net cash generated from financing activities 338 205
Effect of exchange rate changes 8 37
Net decrease in cash and cash equivalents (41) (15)
Cash and cash equivalents at beginning of period 714 650
Cash and cash equivalents at end of period 9 673 635
Notes to the condensed consolidated interim financial information (unaudited)
1. Significant accounting policies
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 2016, 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 2016 were approved by the Board of Directors on 14
November 2016, 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 easyJet's cash flow forecasts and projections, the Board is satisfied
that easyJet will be able to operate within the level of its available facilities and cash and deposits for the foreseeable
future. For this reason easyJet continues to adopt the going concern basis.
A number of amended standards and interpretations became effective for the current reporting period. However, none of them
had any material impact on the interim financial information.
The accounting policies adopted are consistent with those described in the Annual report and accounts for the year ended 30
September 2016, except for the accounting for the recognition of the initial maintenance provision on sale and leaseback
transactions, as described below.
Changes in accounting policies
Where an aircraft is sold and leased back, other than when first delivered to easyJet, a liability to undertake future
maintenance activities, resulting from past flying activity, arises at the point the lease agreement is signed.
Historically this liability has been treated as part of the surplus or shortfall arising on the sale and leaseback and
recognised in either deferred income or non-current or current assets as appropriate and amortised in the income statement
on a straight-line basis over the expected lease term.
During the period, management made a change to this accounting policy, to recognise the initial maintenance provision on
sale and leasebacks immediately in the income statement. Management believe that the new accounting policy will result in a
more relevant and reliable accounting treatment which better reflects the economics of the lease arrangements.
This change will require a restatement of previous financial statements.
The following table sets out the adjustments made to certain selected line items of the previously reported comparative
amounts as a result of the change to the above accounting policy.
Six months ended 31 March 2016 Year ended 30 September 2016
Impacted lines As reported As restated As reported As restated
£ million £ million £ million £ million
Statement of financial position
Other non-current assets 122 107 121 112
Trade and other receivables 233 227 217 205
Trade and other payables (438) (439) (564) (565)
Current tax payable - - (21) (16)
Non-current deferred income (41) (42) (35) (36)
Net assets 1,952 1,929 2,712 2,694
Shareholders' equity - retained earnings 1,478 1,455 1,920 1,902
Income statement
Aircraft dry leasing (54) (48) (103) (91)
Operating (loss)/profit (23) (17) 498 510
(Loss)/profit before tax (24) (18) 495 507
Tax credit/(charge) 4 3 (68) (70)
Profit/(loss) for the period (20) (15) 427 437
(Loss)/earnings per share (pence)
Basic (5.1) (3.8) 108.4 110.9
Diluted - - 107.6 110.1
Statement of changes in equity
Retained earnings at 1 October 2015 1,720 1,692 1,720 1,692
Total comprehensive (expense) / income (20) (15) 427 437
Retained earnings at the end of period 1,478 1,455 1,920 1,902
Changes in disclosures and presentation of performance measures
From the reporting period ended 31 March 2017, the Group will present its results in the income statement with amounts
relating to non-recurring material items of income or expenses and items which are not considered to be reflective of
trading performance of the business in a separate column, called 'non-headline' items, which is a non-gaap measure.
Management believe these should be highlighted as they are unrepresentative of the underlying trading performance of the
Group.
Non-headline items may include impairments, amounts relating to acquisitions and disposals, expenditure on major
restructuring programmes, litigation and insurance settlements, balance sheet exchange gains or losses, the income or
expense resulting from the initial recognition of sale and lease back transactions, fair value adjustments on financial
instruments and other particularly significant or unusual non-recurring items. Items relating to the normal trading
performance of the business will always be included within the headline performance.
For the full list of non-headline items and their financial impact for the six months ended 31 March 2017, refer to note
3.
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. Headline profit measures
The Group seeks to present a measure of underlying performance which is not impacted by material non-recurring items or
items which are not considered to be reflective of the trading performance of the business. This measure of profit is
described as 'headline' and is used by the Directors to measure and monitor performance. See note 1 for an explanation of
the excluded items. The excluded items are referred to as 'non-headline' items.
An analysis of the amounts presented as "non-headline" is given below:
Six months ended Six months ended
31 March 2017 31 March 2016
£ million £ million
Sale and leaseback charge 16 -
Organisational review 2 -
EU Air Operator Certificate ('AOC') 1 -
Recognised in operating profit 19 -
Balance sheet foreign exchange loss/(gain) 1 (2)
Fair value adjustment 4 (1)
Total non-headline charge/(credit) before tax 24 (3)
Tax on non-headline items (4) -
Total non-headline charge/(credit) after tax 20 (3)
Sale and leaseback charge
The sale and leaseback of the Group's ten oldest A319 aircraft resulted in a loss on disposal of the assets of £10 million,
recognised within other costs in the income statement, and a £6 million maintenance provision charged immediately to the
income statement within maintenance costs.
Organisational review
The implementation of an organisational review has resulted in costs of £2 million which has been recognised in other costs
within the income statement. This programme, which involves redundancy costs and associated third party advisor fees, is
considered a material non-recurring item by virtue of the estimated size of the whole programme. This one-off cost is
expected to total around £10 million over two years, however any costs associated with this programme will be paid back
before its conclusion.
EU Air Operator Certificate ('AOC')
Following the UK's referendum vote to leave the European Union ('EU'), the Group is in the process of establishing an AOC
in another EU member state. For the six months ended 31 March 2017, the Group incurred £1 million in setup costs, which has
been recognised in other costs within the income statement. This one-off cost is expected to total up to £10 million over
three years, mostly driven by the costs to re-register aircraft.
Balance sheet foreign exchange (gain)/loss
Foreign exchange gains or losses arising from the retranslation of monetary assets and liabilities held in the statement of
financial position resulted in a charge of £1 million, recognised within interest payable and other financing charges in
the income statement.
Fair value adjustment
The fair value adjustment arises from the ineffective portion of the cross currency interest rate swaps elected into fair
value hedge relationships with the E500 million Eurobond issued 9 February 2016. This is not considered to be reflective of
the trading performance of the business and causes temporary volatility in the income statement. The adjustment amounted to
a £4 million loss for the period which is recognised within interest payable and other financing charges in the income
statement.
4. Tax (credit)/charge
Tax on loss on ordinary activities
Six months ended Six months ended
31 March 2017 31 March 2016
(restated)
£ million £ million
Current tax 1 3
Deferred tax (45) (6)
(44) (3)
Effective tax rate 18.7% 17.3%
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