TIDMEZJ
RNS Number : 9739Y
easyJet PLC
05 December 2014
easyJet plc ("the Company")
Annual report and accounts 2014
The Company announces that a copy of the Annual report and
accounts for the year ended 30 September 2014 has been submitted to
the National Storage Mechanism and will shortly be available for
inspection at: www.hemscott.com/nsm.do.
This document is also available to view on the Company's
website. The direct link to download the 2014 Annual Report and
Accounts is http://2014annualreport.easyjet.com/.
In compliance with DTR 6.3.5, the following information is
extracted from the 2014 Annual report and accounts and should be
read together with the Company's Final Results announcement issued
on 18 November 2014 which can be found at
http://otp.investis.com/clients/uk/easyjet/rns/regulatory-story.aspx?cid=2&newsid=457001.
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 2014 Annual report and
accounts.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The following responsibility statement is extracted from the
Statement of Directors' Responsibilities on page 92 of the 2014
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 2014 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/investors. 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 performance, business model and strategy.
Each of the Directors, whose names and functions are listed on
pages 54 and 55 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 92 was approved by the Board of
Directors and authorised for issue on 17 November 2014 and signed
on its behalf by:
Carolyn McCall Chief Executive
OBE
Chris Kennedy Chief Financial
Officer
PRINCIPAL RISKS AND UNCERTAINTIES
The risks and uncertainties set out below are extracted from the
pages 28 to 35 of the 2014 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 to have the
most significant effect on easyJet's strategic objectives. This
list is not intended to be exhaustive. Many risks, however, remain
outside easyJet's full control, for example adverse weather,
pandemics, acts of terrorism, changes in government regulation and
macroeconomic issues.
Risk description and potential Current mitigation
impact
----------------------------------------------------------- -------------------------------------------------------------
SAFETY FIRST
----------------------------------------------------------- -------------------------------------------------------------
Major safety incident/accident
Failure to prevent a major easyJet's number one
safety incident (such priority is the safety
as a hull loss) or deal and security of its
with it effectively. customers and people.
This could adversely affect easyJet operates a Safety
easyJet's reputation and Management System (SMS)
its operational and financial using a leading software
performance. system (SafetyNet).
This is used to collect
and analyse safety data
and enables learning
from easyJet and industry
events/incidents to
be captured and embedded
into future risk mitigations.
Data collected is also
used to project potential
areas of risk. A robust
incident reporting process
and 'Just Culture' are
in place. The following
also support the SMS:
* a Safety Committee (a committee of the Board)
provides oversight of the management of easyJet's
safety processes and systems (see pages 58 to 59);
* a Safety Review Board (at Executive Management Team
level) is responsible for directing overall safety
policy and governance;
* airline and departmental Safety Action Groups
responsible for the identification, evaluation and
control of safety-related risks; and
* weekly operations meetings, safety reporting and
monitoring of fatigue risk management.
Crew are trained to
current safety guidelines.
easyJet has response
systems in place and
provides training for
crisis management, including
the performance of regular
crisis management exercises.
Hull (all risks) and
liabilities insurance
(including spares) is
held.
easyJet has been working
alongside the Civil
Aviation Authority (CAA)
on the implementation
of the new European
Aviation Safety Agency
(EASA) safety regulations.
easyJet was issued an
EASA Air Operators Certificate
in October 2014.
----------------------------------------------------------- -------------------------------------------------------------
Security and terrorist
threat or attack The Director of Safety
Failure to identify or and Security and the
prevent a major security-related Head of Security work
threat, prevent a terrorist with relevant authorities
attack, or react to either and governments around
immediately and effectively. easyJet's network to
This could adversely affect ensure that security
easyJet's reputation and measures are effective
its operational and financial and in compliance with
performance. all regulatory requirements.
A significant amount
of work is carried out
with the aim of enhancing:
* early identification of developing and emerging
security risks;
* the active management of security risks;
* the reduction of the impact of any security-related
incident; and
* the Group's security culture and awareness.
There is a Security
Decision Making Group,
whose purpose is to
make strategic decisions
on whether easyJet continues
to operate in countries
or areas affected by
security-related incidents.
It is attended by the
Chairman, Chief Executive,
and appropriate members
of the Executive Management
Team and senior management.
Crew are trained to
current security guidelines.
----------------------------------------------------------- -------------------------------------------------------------
OPERATIONAL EXCELLENCE
----------------------------------------------------------- -------------------------------------------------------------
Impact of mass disruption
A number of factors could Processes are in place
lead to widespread disruption to manage mass disruption.
to easyJet's network, Crisis management exercises
including forces of nature are performed regularly
(extreme weather, volcanic and a business continuity
ash, etc.), union activity programme is also in
and strike action, acts place.
of terrorism and epidemics/pandemics. Board policy is to maintain
Any mass disruption could target liquidity at
adversely affect easyJet's GBP4 million per aircraft.
reputation and its operational This allows the business
and financial performance. to manage the impact
Mass disruption has the of downturns in business
potential to have a significant or temporary curtailment
adverse effect on easyJet's of activities better.
financial results, especially In addition, easyJet
if it should occur during has secured business
easyJet's peak summer disruption insurance.
months. In 2014, Gatwick Airport
As the largest number has invested in improved
of easyJet aircraft are resilience to meet the
positioned at Gatwick requirements of the
(the world's busiest single McMillan review.
runway airport) easyJet easyJet and Gatwick
could be disproportionately Airport have developed
affected by the closure joint contingency plans
of that airport for a to provide an effective
significant period of response to disruptive
time. events.
----------------------------------------------------------- -------------------------------------------------------------
Single fleet risk
easyJet is dependent on The efficiencies achieved
Airbus as its sole supplier by operating a single
for aircraft, with two fleet type are considered
aircraft types (A319 and to outweigh the risks
A320). associated with easyJet's
There are significant single fleet strategy.
cost and efficiency advantages The Airbus A320 family
of a single fleet; however, (which includes the
there are two main associated A319) and Boeing 737
risks: family are the two primary
* technical or mechanical issues that could ground the fleets used for short-haul
full fleet, or part of the fleet, which could cause travel. There are approximately
negative perception by the flying public; and 5,000 of each fleet
operating globally with
a proven track record
* valuation risks which crystallise on the ownership for reliability.
exit of the aircraft. The main exposure at this time easyJet operates a rigorous
is with the ageing A319 fleet, where easyJet is established aircraft
reliant on the future demand for second-hand maintenance programme.
aircraft. To mitigate the potential
valuation risks, easyJet
constantly reviews the
second-hand market and
has a number of different
options when looking
at fleet exit strategies.
easyJet targets an owned
to leased split of aircraft
of 80:20. Leasing facilitates
the exit strategy of
older A319s and protects
residual values, as
well as providing flexibility
in managing the fleet
size.
----------------------------------------------------------- -------------------------------------------------------------
IT system failure
easyJet is dependent on Key systems are hosted
a number of key IT systems across two data centres
and processes operated in two distinct locations
at London Luton airport with failover arrangements
and other key facilities. between them. This arrangement
A loss of systems or access is reviewed and tested
to facilities, including regularly to identify
the website, could lead areas for improvement
to significant disruption and resilience.
and could have an adverse An experienced IT team
operational, reputational is in place to respond
and financial impact. rapidly to any unforeseen
incidents that may arise.
Alternative sites are
available should there
be a need to relocate
critical staff at short
notice due to a loss
of facilities.
----------------------------------------------------------- -------------------------------------------------------------
Scalability and flexibility
of key IT systems Enterprise architecture
The rapid growth of easyJet is reviewed and improvements
over recent years, in are made where opportunities
particular through the arise.
introduction of new sales easyJet plans for, and
channels and initiatives, maintains, appropriate
creates additional complexity capacity for key systems,
in IT systems. If not and performs structured
managed effectively, the testing to ensure that
core applications could they are sufficiently
lose their flexibility scaled to meet forecast
and create issues of scalability, growth.
which could increase cost easyJet is a member
and cause delays when of relevant systems
implementing required user groups, which provide
business change. contact with other users
and the ability to share
any issues and review
system assessments.
easyJet holds regular
meetings with key providers
of systems and applications
to discuss performance,
continuous improvements
and future innovation.
easyJet has established
an IT Governance and
Oversight Committee
(a committee of the
Board). The purpose
of this committee is
to provide independent
oversight over the governance
and control relating
to the Group's IT business
area (see page 65 for
further details).
----------------------------------------------------------- -------------------------------------------------------------
Dependence on third-party
service providers easyJet has a centralised
easyJet has entered into procurement team which
agreements with third-party ensures that the Group
service providers for has competitive supply
services covering a significant options or suitable
proportion of its operation alternatives.
and cost base. Failure The procurement process
to adequately manage third-party is then supported by
performance could adversely a supplier management
affect easyJet's reputation framework covering business
and its operational and ownership and accountability.
financial performance. There are alternative
Loss of these contracts service providers within
or inability to renew the major markets in
or negotiate favourable which easyJet operates.
replacement contracts
could have an adverse
effect on future operating
costs.
Industrial action
easyJet, and the aviation Employee and union engagement
industry in general, has takes place on a regular
a significant number of basis.
employees who are members As easyJet operates
of trade unions. Industrial across Europe, there
action taken by easyJet are multiple unions
employees, or by the employees of which crew are members.
of key third-party service Each of the countries
providers, could impact have localised employment
on easyJet's ability to terms and conditions
maintain its flight schedules. which mitigates the
This could adversely affect risk of large-scale
easyJet's reputation and internal industrial
its operational and financial action occurring at
performance. the same time.
Processes are in place
to adapt to disruptions
as a result of industrial
action.
The level of standby
crew cover in place
recognises the external
factors and volatility
that impact the airline
industry.
Senior management succession
and reliance on key personnel Key business roles within
easyJet's current and easyJet, and succession
future success is reliant plans for these, have
on having the right people been identified.
with the right capabilities easyJet's aim is to
in key leadership positions. develop talent from
Failure to develop and within. There are several
grow the capabilities talent development programmes
and behaviours required in place for individuals
of senior management to who have been identified
ensure that all key business for fast-tracking into
roles have clear successors, more senior roles as
could adversely affect vacancies arise. In
easyJet's ability to deliver addition, a management
its strategic objectives. development programme
is in place to develop
people management and
senior leadership capabilities.
These programmes operate
at various levels within
the organisation.
EFFICIENT ASSET UTILISATION
----------------------------------------------------------- -------------------------------------------------------------
Asset allocation
easyJet has a leading A portfolio management
presence on the top 100 strategy is in place
routes in Europe and positions which takes a balanced
at primary airports that approach to the routes
are attractive to time-sensitive that easyJet flies,
consumers. easyJet manages balancing short-term
the performance of its returns with longer-term
network by careful allocation sustainable growth.
of aircraft to routes Route performance is
and optimisation of its monitored on a regular
flying schedules. basis and operating
The competitive environment decisions are made to
is highly dynamic and improve performance
if easyJet does not continue where required.
to optimise its network The fleet framework
and aircraft allocation, arrangements in place,
its competitive advantage together with the Group's
could be weakened and leasing policy, provide
its ability to sustain easyJet with significant
earnings growth would flexibility in respect
be threatened. of scaling the fleet
according to business
requirements.
STRONG BALANCE SHEET
----------------------------------------------------------- -------------------------------------------------------------
Exposure to fuel price
fluctuations and other A Board-approved hedging
macroeconomic shifts policy (fuel and currency)
Sudden and significant is in place that is
increases in jet fuel consistently applied.
price and/or a weakening The policy is to hedge
in the exchange rate relative within a percentage
to the US dollar would band for a rolling 24-month
significantly impact fuel period.
costs. Increases in fuel To provide protection,
costs would have an adverse easyJet uses a limited
effect on the financial range of hedging instruments
performance of easyJet traded in the over-the-counter
if not protected against. markets. These are principally
easyJet's business can forward purchases with
also be affected by macroeconomic a number of approved
issues outside of its counterparties.
control such as weakening A strong balance sheet
consumer confidence, inflationary supports the business
pressure or instability through fluctuations
of the euro. This could in the economic conditions
give rise to adverse pressure for the sector.
on revenue, load factors Regular monitoring of
and residual values of markets and route performance
aircraft. is undertaken by easyJet's
network and fleet management
teams.
----------------------------------------------------------- -------------------------------------------------------------
Financing and interest
rate risk easyJet's interest rate
All of easyJet's debt management policy is
is asset-related, reflecting based on a natural hedge
the capital intensive with cash deposits mirroring
nature of the airline floating debt.
industry. None of the agreements
Market conditions could contain financial covenants.
change the cost of finance A portion of US dollar
which may have an adverse mortgage debt is matched
effect on easyJet's financial with US dollar money
performance. market deposits.
Operating lease rentals
are a mix of fixed and
floating rates.
----------------------------------------------------------- -------------------------------------------------------------
Liquidity risk
A misjudgement in the Board policy is to maintain
level of liquidity required target liquidity at
could result in business GBP4 million per aircraft.
disruption and have an This allows the Group
adverse effect on easyJet's to better manage the
financial performance. impact of downturns
in business or temporary
curtailment of activities.
----------------------------------------------------------- -------------------------------------------------------------
Counterparty risk
Surplus funds are invested Cash is placed on deposit
in high-quality short-term with institutions based
liquid instruments, usually upon their credit rating,
money market funds, bank with a maximum exposure
deposits or tri-party at the time of deposit
repos. of GBP150 million for
There is a possibility any individual AAA rated
of loss arising in the counterparty money market
event of non-performance fund.
of counterparties which Counterparties must
could adversely affect have a minimum credit
easyJet's financial performance. rating of A- and counterparty
credit ratings are monitored
on a daily basis.
Tri-party repos are
collateralised with
a range of high-quality
debt instruments which
are publicly traded.
The collateral basket
is reviewed on a regular
basis.
----------------------------------------------------------- -------------------------------------------------------------
REPUTATIONAL RISKS
----------------------------------------------------------- -------------------------------------------------------------
Major shareholder and
brand owner relationship easyJet has an active
easyJet has two major shareholder engagement
shareholders (easyGroup programme led by its
Holdings Limited and Polys investor relations team.
Holding Limited) which, As part of that programme
as a concert party, control easyJet seeks to engage
34.6% of its ordinary with easyGroup Holdings
shares. Shareholder activism Limited on a regular
could adversely impact basis alongside all
the reputation of easyJet its other major shareholders.
and cause a distraction This is to ensure that
to management. the Board and management
easyJet does not own its team are kept aware
company name or branding of the views of all
which is licensed from shareholders.
easyGroup IP Licensing Representatives from
Limited. The licence includes the Board and senior
certain minimum service management take collective
levels that easyJet must responsibility for addressing
meet in order to retain issues arising from
the right to use the name any activist approach
and brand. The easyJet adopted by the major
brand could also be impacted shareholder. The objective
through the actions of is to address issues
easyGroup or other easyGroup when they arise, as
licensees. effectively as possible.
easyJet's brand licence
with easyGroup IP Licensing
Limited contains terms
agreed between the parties
for the regular meeting
of senior representatives
from both sides to actively
manage brand-related
issues as they arise.
Such meetings occur
on a quarterly basis
and have proven an effective
way of managing brand-related
issues. Separately,
easyJet monitors compliance
with brand licence service
levels and has a right
to take steps to remedy
any instance of non-compliance.
----------------------------------------------------------- -------------------------------------------------------------
Ineffective or non-delivery
of projects supporting A portfolio management
the business strategy office and experienced
During the year, the business project teams are in
has initiated a number place to oversee delivery
of key projects and programmes of a portfolio of projects
to deliver key elements and programmes, and
of the strategy. track budgets and benefits
If these projects and realisation.
programmes do not deliver A steering group, consisting
the benefits and cost of the Executive Management
savings planned, easyJet Team and key senior
could fall short of its management, provides
planned financial results. challenge to project
teams, monitors progress
and ensures that decisions
are made at the appropriate
level.
Strong cost control
is a key behaviour across
the Company. easyJet
lean initiatives drive
cost reduction and efficiency
in targeted areas.
----------------------------------------------------------- -------------------------------------------------------------
Cyber threats and information
security easyJet continues to
easyJet receives most focus on the protection
of its revenue through of information. Controls
credit card transactions are in place to ensure
and operates as an e-commerce customer, employee and
business. It faces both other potentially sensitive
external cyber threats information is collected,
and internal risks to held and processed securely,
its data and systems. including:
A security breach could * monitoring of secure systems against unauthorised
result in an adverse impact access;
for the business and reputational
damage.
* quarterly review of the security of internal systems
and easyJet.com through penetration testing;
* enhanced physical security at head office buildings;
* periodic mandatory employee security training to
maintain staff awareness;
* consideration of information security risks within
procurement processes; and
* monitoring and control of scanning software for
fraudulent customer activity by the Revenue
Protection team.
There is an Information
Security Steering Group,
chaired by the General
Counsel, which oversees
any developments in
data threats and controls.
----------------------------------------------------------- -------------------------------------------------------------
Bribery Act
Non-compliance with the easyJet has a zero tolerance
Bribery Act 2010 could approach to bribery
adversely affect easyJet which is reinforced
financially and reputationally. by a strong ethical
tone from the top.
The adoption of appropriate
anti-bribery controls
has been a key point
of focus for the legal
compliance programme
at easyJet. These include:
* completion of risk assessments to determine specific
compliance needs;
* specific policies, including ethics, anti-bribery and
corruption policy, and gift and hospitality policy;
* online training module and mandatory training for all
managers and administrative employees in the UK and
across the easyJet network;
* targeted face-to-face training for employee groups
perceived as higher risk;
* the adoption of anti-bribery due diligence and
standard anti-bribery clauses for inclusion in
supplier contracts; and
* maintaining awareness of a whistleblowing helpline.
----------------------------------------------------------- -------------------------------------------------------------
EXTERNAL RISKS
----------------------------------------------------------- -------------------------------------------------------------
Competition and industry
consolidation Regular monitoring of
easyJet operates in competitive competitor and consolidation
market places against activity, enabling key
both flag carriers and routes and positions
other low-cost airlines. to be readily defended.
easyJet's key competitive easyJet seeks to have
advantages are its network, a rapid response to
cost base and efficient any such activity that
and robust capital structure. may impact easyJet's
Failure to retain these ability to grow the
advantages could impact business.
its profitability. The Network Development
Industry consolidation Forum, a cross-functional
will also affect the competitive panel of senior executives,
environment in a number approves new routes
of markets. This could and bases and the allocation
cause a loss of market of assets around the
share and erosion of revenue. network.
----------------------------------------------------------- -------------------------------------------------------------
Legislative and regulatory
risks easyJet seeks to have
Legislative decisions, a key role in influencing
particularly at a national future and existing
and European level, can policy and regulations
have a significant impact which affect the airline
on the airline industry, industry. This work
for example increasing is coordinated by the
Air Passenger Duty in Regulatory Affairs Group.
the UK. Country oversight boards
The airline industry is are established for
currently heavily regulated, easyJet's main markets,
with expected increased raising awareness of
regulator intervention. potential changes and
This includes environmental, impacts in the different
security and airport regulation, countries.
which have charges levied
by regulatory decision
rather than by commercial
negotiation.
easyJet is exposed to
regulatory oversight across
its network, which will
increase as easyJet grows
geographically.
An inadequate knowledge
or misinterpretation of
local regulations could
result in fines or enforcement
orders. This could adversely
affect easyJet's reputation,
cost base and market share.
easyJet is required under Tight operational controls,
European law to compensate including availability
passengers for certain of standby aircraft
long flight delays and and crew to minimise
cancellations. The interpretation the potential incidence
of this law varies by of claims. In addition,
jurisdiction. country-specific plans
are in place to address
differing interpretations
of the legislation.
End
5 December 2014
For further details please contact easyJet plc:
Institutional investors and sale side analysts:
+44 (0) 7961 763
Will MacLaren Investor Relations 879
+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
STRQKPDDKBDDNBK
Easyjet (LSE:EZJ)
Historical Stock Chart
From Mar 2024 to Apr 2024
Easyjet (LSE:EZJ)
Historical Stock Chart
From Apr 2023 to Apr 2024