TIDMEZJ
RNS Number : 9806Q
easyJet PLC
05 December 2016
easyJet plc ("the Company")
Annual report and accounts 2016
The Company announces that a copy of the Annual report and
accounts for the year ended 30 September 2016 has been submitted to
the National Storage Mechanism and will shortly be available for
inspection at: http://www.morningstar.co.uk/uk/NSM.
This document is also available to view on the Company's
website. The direct link to download the 2016 Annual report and
accounts is http://2016annualreport.easyjet.com/.
In compliance with DTR 6.3.5, the following information is
extracted from the 2016 Annual report and accounts and should be
read together with the Company's Final Results announcement issued
on 15 November 2016 which can be found at
http://otp.investis.com/clients/uk/easyjet/rns/regulatory-story.aspx?cid=2&newsid=817127.
Together these constitute the information required to be
communicated to the media in unedited full text through a
Regulatory Information Service. This information is not a
substitute for reading the full 2016 Annual report and
accounts.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The following responsibility statement is extracted from the
Statement of Directors' Responsibilities on page 79 of the 2016
Annual report and accounts and is repeated here solely for the
purpose of complying with DTR 6.3.5. The statement relates to the
full 2016 Annual report and accounts and not the extracted
information presented in this announcement or the Final Results
announcement:
The Directors are responsible for preparing the Annual report,
the Directors' remuneration report and the accounts in accordance
with applicable law and regulations.
Company law requires the Directors to prepare accounts for each
financial year. Under that law the Directors have prepared the
Group and Company accounts in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union (EU). Under company law the Directors must not approve the
accounts unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of
the profit or loss of the Group and the Company for that period. In
preparing these accounts, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable IFRSs as adopted by the EU have been
followed, subject to any material departures disclosed and
explained in the accounts; and
-- prepare the accounts on the going concern basis unless it is
inappropriate to presume that the Company will continue in
business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's and the
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Group and the Company and enable
them to ensure that the accounts and the Directors' remuneration
report comply with the Companies Act 2006 and, as regards the Group
accounts, Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the Group and the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of, amongst other things, the financial and corporate governance
information provided on the easyJet website
(http://corporate.easyJet.com). Legislation in the United Kingdom
governing the preparation and dissemination of accounts may differ
from legislation in other jurisdictions.
The Directors consider that the Annual report and accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group's
and the Company's position and performance, business model and
strategy.
Each of the Directors, whose names and functions are listed on
pages 44 and 45 confirm that, to the best of their knowledge:
-- the Group and Company accounts, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of
the Group and Company; and
-- the Strategic report, included in the annual report, includes
a fair review of the development and performance of the business
and the position of the Group, together with a description of the
principal risks and uncertainties that it faces.
In accordance with Section 418 of the Companies Act 2006, each
Director in office at the date the Directors' report is approved,
confirms that:
-- so far as the Director is aware, there is no relevant audit
information of which the Company's auditors are unaware; and
-- he/she has taken all the steps that he/she ought to have
taken as a Director in order to make himself/herself aware of any
relevant audit information and to establish that the Company's
auditors are aware of that information.
The annual report on pages 1 to 79 was approved by the Board of
Directors and authorised for issue on 14 November 2016 and signed
on its behalf by:
Carolyn McCall Chief Executive
DBE
Andrew Findlay Chief Financial
Officer
PRINCIPAL RISKS AND UNCERTAINTIES
The risks and uncertainties set out below are extracted from the
pages 25 to 31 of the 2016 Annual report and accounts and are
repeated here solely for the purpose of complying with DTR
6.3.5.
The risks and uncertainties described are considered, at this
point in time, to have the greatest effect on easyJet's strategic
objectives. This list is not intended to be exhaustive. Whilst
easyJet can monitor risks and prepare for adverse weather
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.
Link to strategy:
1 Build number 1 and 2 network
positions
2 A lean cost advantage
3 Customer and operational
experience
4 Data and digital
5 Grow revenue
6 The best people
V Risks impacting the viability
assessment
------------------------------------------------------------ ------------------------------------------------------------
SAFETY FIRST
------------------------------------------------------------ ------------------------------------------------------------
Risk description Mitigation
------------------------------------------------------------ ------------------------------------------------------------
Major safety incident easyJet's number one priority
A major safety is the safety and security
incident (such of its customers and people.
as a hull loss)
could adversely A Safety Committee (a committee
affect easyJet's of the Board) oversees the
reputation and management of easyJet's safety
its operational processes and systems.
and financial performance.
The impact of such Turn to pages: 48-49 [of Annual
an incident would Report] for further details
be heightened if
easyJet failed A Safety Review Board (at
to react promptly Executive Management Team
and deal with it level) is responsible for
effectively. directing overall safety policy
and governance. This is chaired
Link to strategy: by the Chief Executive.
1 2 3 5 6 V
Safety Action Groups from
across the airline are responsible
for the identification, evaluation
and control of safety-related
risks.
easyJet operates a Safety
Management System using a
leading software system (SafetyNet).
This is used to:
* collect and analyse safety data (enabling potential
areas of risk to be projected); and
* enable learning from easyJet and industry
events/incidents to be captured and embedded into
future risk mitigations.
A robust incident reporting
process and "Just Culture"
are in place.
Turn to page: 34 [of Annual
Report] for further details
easyJet has an emergency response
process and performs regular
crisis management exercises.
Hull (all risks) and liabilities
insurance (including spares)
is held.
easyJet has an industry-leading
fatigue risk management system
and has implemented the EASA
Flight Time Limitations regulations.
------------------------------------------------------------ ------------------------------------------------------------
Security threat A Security Decision Group,
or attack comprising the Chairman, Chief
Failure to identify Executive, appropriate members
or prevent a major of the Executive Management
security-related Team and other senior management,
threat or attack, determines whether easyJet
or react immediately should continue to operate
and effectively, in countries or areas affected
could adversely by security-related incidents
affect easyJet's or conflict. As part of that
reputation and process the easyJet security
its operational team work to provide the Security
and financial performance. Decision Group with timely,
credible and reliable information
Such an incident upon which to base operational
has the potential decisions. easyJet adheres
to impact upon to all recommendations and
easyJet's business, guidelines provided by the
regardless of the authorities.
location or target.
The Director of Safety and
The threat of further Security and the Head of Security
security-related work with authorities and
attacks (regardless governments around easyJet's
of where they may network to assess whether
occur) may impact security measures are effective
the future demand and in compliance with regulatory
for air travel. requirements. A significant
amount of work is carried
Link to strategy: out with the aim of enhancing:
1 2 3 5 6 * early identification of developing and emerging
security risks;
* the active management of security risks;
* the methods for reducing the impact of any
security-related incident; and
* the Group's security culture and awareness.
------------------------------------------------------------ ------------------------------------------------------------
COMMERCIAL AND
OPERATIONAL
------------------------------------------------------------ ------------------------------------------------------------
Risk description Mitigation
------------------------------------------------------------ ------------------------------------------------------------
Competition, capacity easyJet seeks to rapidly respond
and industry consolidation to any such activity that
The aviation market may impact its ability to
is highly competitive grow the business.
and easyJet operates
in competition Competitor and consolidation
with both flag activity is monitored, enabling
carriers and other strategic decision making
low-cost airlines. on key routes and positions.
Excess capacity The Network Development Forum,
in the market may a cross-functional panel of
arise due to a senior executives, approves
decrease in demand new bases and the allocation
for air travel of assets around the network.
and/or additional
capacity as a result Fleet framework arrangements,
of low fuel prices. together with the Group's
This could have leasing policy, provide easyJet
an adverse financial with significant flexibility
impact on easyJet. in respect of scaling the
fleet according to business
easyJet's key competitive requirements.
advantages include
its network, cost Strong cost control is a key
base, brand, digital behaviour across the Group,
innovation and with initiatives to drive
efficient and robust cost reduction and improve
capital structure. efficiency in targeted areas.
Failure to retain
these advantages
or react quickly
to competitor changes
could have an adverse
financial impact
on easyJet.
Industry consolidation
could also affect
the competitive
environment in
a number of markets.
This could cause
a loss of market
position and erosion
of revenue.
Link to strategy:
1 2 3 4 5
Significant network There are processes in place,
disruption and clear roles and responsibilities
Widespread disruption within teams across the business,
to easyJet's network to plan for and manage significant
may be caused by disruption.
a single event
or factors that A business disruption team,
occur for a sustained which includes senior management
period. Examples from relevant business areas,
include forces determines and initiates required
of nature (extreme action.
weather, volcanic
ash, etc.), terrorism, Board policy is to maintain
air traffic management a liquidity buffer which allows
issues, epidemics/pandemics the Group to better manage
or the closure the impact of downturns in
of a key airport. business or temporary curtailment
of activities.
Significant disruption
to the network In addition, easyJet holds
could adversely business disruption insurance.
affect easyJet's
reputation and
its operational
and financial performance.
Link to strategy:
1 2 3 4 5 6
Continuity of services Critical systems are hosted
easyJet is dependent either across two data centres
on a number of or within third party provider
key IT systems locations. Recovery arrangements,
and processes. including failover between
the two data centres, are
A loss of critical in place for all locations
systems or access holding critical systems.
to facilities,
including the website, An IT incident management
may lead to significant team is in place to respond
disruption and rapidly to any unforeseen
could have an adverse incidents that may arise.
operational, reputational
and financial impact. IT disaster recovery plans
are tested regularly to identify
Link to strategy: areas for improvement in resilience.
2 3
Business continuity plans
ensure easyJet is prepared
in the event of loss of facilities,
including alternative sites
for the relocation of critical
staff.
------------------------------------------------------------ ------------------------------------------------------------
Third-party service There is a defined procurement
providers process, led by a centralised
easyJet has entered procurement team, which ensures
into agreements a competitive and robust selection
with third party of suppliers. As part of the
service providers process, alternative service
for services covering providers are identified and
a significant proportion assessed against balanced
of its operational evaluation criteria within
and cost base. the major markets in which
easyJet operates.
Failure to manage
third party performance Any specific supplier risks
adequately may are identified and assessed
adversely affect during the procurement process
easyJet's reputation and controls and risk mitigation
and its operational measures are included in the
and financial performance. contracts entered into with
the supplier.
Link to strategy:
2 3 4 5 6 Contracts are managed according
to easyJet's supplier relationship
management framework, with
key principles covering defined
ownership and accountability,
a governance framework and
effective communication. Supplier
performance is monitored through
regular business reviews,
including achievement of service
level agreements and key performance
indicators.
Robust transition plans are
agreed in the event of switching
suppliers to enable an acceptable
level of service to be maintained.
------------------------------------------------------------ ------------------------------------------------------------
Industrial action As easyJet operates across
easyJet, and the Europe there are 19 unions
aviation industry and nine representative bodies
in general, has across eight countries which
a significant number its crew are members of. easyJet
of employees who seeks to maintain positive
are members of working relationships with
trade unions. Industrial all trade unions and other
action taken by representative bodies.
easyJet employees,
or by the employees Each of the countries in which
of key third-party easyJet operates has localised
service providers, employment terms and conditions.
could impact on This mitigates the risk of
easyJet's ability large scale internal industrial
to maintain its action occurring at the same
flight schedules. time.
This could adversely Processes are in place to
affect easyJet's adapt to disruptions as a
reputation and result of industrial action.
its operational
and financial performance.
Link to strategy:
2 3 6
------------------------------------------------------------ ------------------------------------------------------------
Single fleet risk The Board considers that the
easyJet is dependent efficiencies achieved by operating
on Airbus as its a single fleet type outweigh
sole supplier for the risks associated with
aircraft. easyJet's single fleet strategy.
There are significant The Airbus A320 family (which
cost and efficiency includes the A319) is one
advantages of a of the two primary fleets
single fleet, however, used for short-haul travel,
there are two main the other being the Boeing
associated risks: B737 family. There are approximately
* technical or mechanical issues that could ground the 6,800 A320 family aircraft
full fleet, or part of the fleet, which could cause operating with a proven track
negative perception; and record for safety and reliability.
easyJet operates a rigorous
* valuation risks which crystallise when aircraft exit established aircraft maintenance
the fleet. The main exposure at this time is with the programme.
ageing A319 fleet, where easyJet is reliant on the
future demand for second- hand aircraft. To mitigate the potential
valuation risks, easyJet regularly
reviews the second-hand market
and has a number of different
Link to strategy: options when looking at fleet
2 3 V exit strategies. Sale and
leaseback facilitates the
exit of A319 aircraft from
the fleet by transferring
residual value risk, and also
provides flexibility in managing
the fleet size.
------------------------------------------------------------ ------------------------------------------------------------
FINANCIAL
------------------------------------------------------------ ------------------------------------------------------------
Risk description Mitigation
------------------------------------------------------------ ------------------------------------------------------------
Financial risk The Finance Committee (a committee
easyJet is exposed of the Board) oversees the
to various financial Group's treasury and funding
risks which could policies and activities.
give rise to adverse
pressure on the Turn to page: 55 [of the Annual
financial performance Report] for further details
of the Group, e.g.
costs, revenue The role of the Committee
and cash flow. includes:
* maintaining and implementing a treasury policy
* Market risks - easyJet's business model is sensitive setting out Board-approved strategies for foreign
to a sustained significant adverse movement in exchange and fuel hedging, along with liquidity,
foreign currency exchange rates, jet fuel prices or interest rate management, counterparties' limits; and
interest rates, which can't be mitigated.
* reviewing and reporting on compliance with Board
* Counterparty risk - non-performance of counterparties treasury policies.
used for depositing surplus funds (e.g. money market
funds, bank deposits) and hedging.
The policy is to hedge revenue
* Liquidity risk - misjudgement of the level of and costs within a percentage
liquidity resulting in the inability to meet band for a rolling 24-month
contractual/contingent financial obligations or the period.
inability to fund the business when needed.
Board policy is to maintain
a liquidity buffer including
cash and a $500 million five
Link to strategy: year revolving credit facility
2 provided by a group of 12
relationship banks. This allows
the Group to better manage
the impact of downturns in
business or temporary curtailment
of activities. The basis for
the liquidity policy was revised
in 2016 to cover peak unearned
revenue, with a minimum position
of GBP2.6 million per 100
aircraft seats.
A strong balance sheet supports
the business through fluctuations
in the economic conditions
and the Group has access to
diverse sources of funding
to support liquidity requirements.
------------------------------------------------------------ ------------------------------------------------------------
Delivery of projects The Executive Management Team
supporting the meets monthly to review progress
business strategy made on the portfolio of programmes
The business is and solve issues that require
undertaking a number escalation.
of key projects
and programmes Key IT projects or programmes
to deliver key have additional oversight
elements of the through the IT Governance
strategy. and Oversight Committee (a
committee of the Board).
Failure to deliver
the planned business Turn to page: 55 [of the Annual
benefits and cost Report] for further details
savings from these
projects may result Each project or programme
in under achievement has its own steering group
of easyJet's planned which provides challenge to
financial results. the project, monitors progress
and ensures that decisions
Link to strategy: are made at the appropriate
1 2 3 4 5 6 level.
A portfolio management office
is in place to oversee delivery
of projects and
programmes, and track budgets
and realisation of benefits.
A project management framework,
which sets out governance
requirements, key processes
and controls, is followed
by all projects and programmes.
"Lessons learnt" reviews are
undertaken to ensure continuous
improvement to this approach.
------------------------------------------------------------ ------------------------------------------------------------
PEOPLE
------------------------------------------------------------ ------------------------------------------------------------
Risk description Mitigation
------------------------------------------------------------ ------------------------------------------------------------
Attraction and There is a recruitment strategy
retention of talent for pilots and cabin crew.
easyJet's current This includes pilot sponsorship
and future success and the Amy Johnson Flying
is reliant on having Initiative to attract more
the right people female pilots. In addition,
with the right easyJet has developed a coherent
capabilities. employment brand to attract
and retain top talent.
Increased competition
in the recruitment An annual survey is undertaken
market may impact to measure staff engagement
easyJet's ability and identify any areas for
to attract and further management attention.
retain key talent.
This could adversely easyJet's aim is to develop
affect the delivery talent from within. There
of strategic objectives. are several talent development
programmes in place for individuals
Link to strategy: who have been identified for
6 fast-tracking into more senior
roles as vacancies arise.
Alongside this there is an
annual succession planning
process to ensure there are
clear successors for all key
business roles.
------------------------------------------------------------ ------------------------------------------------------------
COMPLIANCE AND
REGULATORY
------------------------------------------------------------ ------------------------------------------------------------
Risk description Mitigation
------------------------------------------------------------ ------------------------------------------------------------
Impact of EU exit An internal working group
Following the outcome has been established to review
of the UK referendum all aspects of easyJet's operations.
to leave the EU,
there remains uncertainty easyJet is actively engaging
as to how this with regulators, the UK Government
will affect easyJet's and the EU to secure European
current market flying rights through the
access rights. continuation of a liberalised
If easyJet is unable and deregulated aviation market
to continue to across Europe.
fly its intra-EU
network this would As a mitigant, easyJet is
have a significant in the process of registering
operational and an Air Operator Certificate
financial impact. in an EU territory to enable
access to the European aviation
Link to strategy: market in as similar a way
1 2 3 4 5 6 V as today in a post-Brexit
landscape.
------------------------------------------------------------ ------------------------------------------------------------
Legislative and easyJet has an in-house legal
regulatory risks team to advise on legal issues
The airline industry and developments, and to monitor
is heavily regulated compliance with formal regulatory
and there is a requirements. It also has
continual need a panel of external legal
to keep well informed advisers both in the UK and
and adapt to (as in key easyJet markets, who
required) any legislative are briefed to keep easyJet
or regulatory changes informed of any changes or
across the jurisdictions new legislation and to assist
in which easyJet easyJet in developing appropriate
operates. responses to such legislation.
Failure to comply In addition, a Head of Compliance
with legislative has recently been appointed
and regulatory to develop and lead internal
requirements (or compliance programmes.
interpretations
thereof), such The Regulatory Affairs Group
as local consumer co-ordinates easyJet's role
laws, legal decisions in influencing future and
or policy changes existing policy and regulations
in relation to that affect the airline industry
passenger compensation, and will work with industry
environmental and bodies to assist in this,
airport regulation, as appropriate.
in the jurisdictions
in which easyJet Country Review Boards are
operates, could established for easyJet's
have an adverse main markets, raising awareness
reputational and of in-country issues, and
financial impact. providing a forum in which
to highlight any potential
Link to strategy: legislative changes and impacts
2 3 5 6 in the different countries.
------------------------------------------------------------ ------------------------------------------------------------
REPUTATIONAL
------------------------------------------------------------ ------------------------------------------------------------
Risk description Mitigation
------------------------------------------------------------ ------------------------------------------------------------
Major shareholder easyJet has an active shareholder
and brand owner engagement programme led by
relationship its investor relations team.
easyJet has two As part of that programme
major shareholders easyJet engages with easyGroup
(easyGroup Holdings Holdings Limited on a regular
Limited and Polys basis alongside its other
Holdings Limited) major shareholders.
which, as a concert
party, control In addition, the Company has
33.73% of its ordinary a relationship agreement with
shares. easyGroup and Polys Holdings
in line with the controlling
Shareholder activism shareholder regime as set
on their part could out in the Financial Conduct
adversely impact Authority's Listing Rules.
the reputation
of easyJet and Representatives from the Board
cause a distraction and senior management take
to management. collective responsibility
for addressing issues arising
easyJet does not from any activist approach
own its company adopted by the major shareholders.
name or branding The objective is to address
which is licensed issues when they arise and
from easyGroup anticipate and plan for potential
Ltd. The licence future activism.
includes certain
minimum service The brand licence agreement
levels that easyJet with easyGroup Ltd provides
must meet in order for the regular meeting of
to retain the right senior representatives from
to use the name both sides to actively manage
and brand. The brand-related issues as they
easyJet brand could arise. Such meetings occur
also be impacted on a quarterly basis and have
through the actions proven effective. easyJet
of easyGroup or also monitors compliance with
other easyGroup brand licence service levels
licensees. and has a right to take steps
to remedy any instance of
Link to strategy: non-compliance.
2 5
------------------------------------------------------------ ------------------------------------------------------------
Cyber threat and An Information Security Steering
information security Group, chaired by the General
easyJet receives Counsel, oversees any developments
most of its revenue in data threats and controls
through credit and determines whether appropriate
card transactions responses are being taken
and operates as to them.
an e-commerce business.
It faces both external There are dedicated information
cyber threats and security teams that monitor
internal risks threats and ensure that the
to its data and design, implementation and
systems. operation of easyJet systems
are secure. This is through
A security breach the following:
could negatively * achieving "secure by design" through a dedicated
impact easyJet's security architecture capability;
reputation and
have an adverse
operational and * monitoring of secure systems against unauthorised
financial impact. access;
Link to strategy:
2 3 4 6 * reviewing the security of external and internal
systems and easyJet.com through periodic
vulnerability scanning;
* considering information security risks within
procurement processes and the introduction of new
systems and IT services;
* reviewing and refreshing information acceptable use
policies; and
* maintaining staff security awareness and education
through a Security Champions network, online traini
ng
materials and periodic awareness campaigns.
Given the nature of this risk
the appropriateness of the
controls is under
continuous review.
------------------------------------------------------------ ------------------------------------------------------------
End
5 December 2016
For further details please contact easyJet plc:
Institutional investors and sale side analysts:
+44 (0) 7989 665
Stuart Morgan Investor Relations 484
+44 (0) 7985 890
Michael Barker Investor Relations 939
Media:
+44 (0) 7860 794
Paul Moore Corporate Communications 444
+44 (0) 207 251
Edward Simpkins RLM Finsbury 3801
+44 (0) 7947 740
551
This information is provided by RNS
The company news service from the London Stock Exchange
END
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