TIDMEZJ
RNS Number : 2004F
easyJet PLC
16 May 2017
16 May 2017
easyJet plc
Results for the six months ending 31 March 2017
easyJet delivers strong passenger and revenue growth, rigorous
cost control and a resilient operational performance
Strengthening number one positions
-- Record number of passengers for the first six months of the
2017 financial year at 33.8 million, up 9.0% year-on-year with a
record first half load factor at 90.2% (H1 2016: 89.7%), reflecting
easyJet's attractive network and affordable fares.
-- Capacity increased by 8.4% as easyJet delivered its strategy
of purposeful investment to reinforce and expand its leadership
positions in its core markets.
-- Total revenue up 3.2% to GBP1,827 million with revenue per
seat of GBP48.80 (a decline of 4.9%, and of 9.7% at constant
currency(1) , in line with guidance) reflecting the timing of
Easter and high overall market capacity growth.
Rigorous cost control
-- Headline cost per seat excluding fuel at constant currency
flat at GBP38.54, reflecting strong cost control despite high
levels of disruption. Headline cost per seat increased by 4.9% to
GBP54.45 (a decrease of 4.1% at constant currency) driven by the
weakness of sterling.
-- Headline loss before tax of GBP212 million includes the
estimated impact of the move of Easter into the second half of the
year (circa GBP45 million) and a negative net currency impact of
GBP82 million. Excluding these two items the headline loss before
tax would have been circa GBP85 million. Total loss before tax
after non-headline items was GBP236 million.
Investing in the future
-- easyJet has agreed to purchase 30 A321 NEO aircraft under its
existing agreement with Airbus, with the first arriving in summer
2018. This is a conversion of 30 existing A320 NEO orders and via
increased flexibility within the Airbus agreement will be neutral
to current fleet capex commitments. The A321 NEOs will increase
easyJet's ability to grow in slot constrained airports and manage
costs.
-- easyJet remains on track to confirm possession of a European
Air Operator Certificate (AOC) by the Summer and therefore secure
its future operations within the European Union.
-- easyJet's business model and strategy are underpinned by
sector leading balance sheet strength, with a net cash position at
31 March 2017 of GBP353m. Unencumbered aircraft now represent 71%
of easyJet's total fleet.
Outlook
-- easyJet continues to implement its strategy of purposeful,
profitable growth to secure leading positions at primary airports
and drive returns over the long term.
-- Forward bookings are ahead of last year; at 77% for the third
quarter and 55% for the half year.
-- easyJet's capacity growth in the second half of the 2017
financial year is planned to be at a similar level to the first six
months and RPS in the third quarter is anticipated to decline by
low single digits, a significant improvement from the first six
months.
-- Headline cost per seat excluding fuel at constant currency
for the full year and at normal levels of disruption is expected to
increase by around 1%, which better than initially expected.
easyJet has successfully offset the cost of additional investment
in resilience and in improving its long-term operational
performance within this latest full year guidance.
2017 2016 Change
Favourable/(adverse)
------------------------------------- ------- ------ ----------------------------
Capacity (millions of seats) 37.5 34.5 8.4 %
Load factor (%) 90.2 89.7 0.5 ppts
Passengers (millions) 33.8 31.0 9.0 %
Total revenue (GBP million) 1,827 1,771 3.2 %
Headline loss before tax (GBP
million) (212) (21) GBP(191) m
Total loss before tax (GBP million) (236) (18) GBP(218) m
Headline constant currency loss
before tax (GBP million) (130) (21) (109) m
Headline basic loss per share
(pence) (43.8) (4.6) (39.2) pence
Constant currency revenue per
seat (GBP) 46.32 51.29 (9.7) %
Headline constant currency cost
per seat (GBP) 49.79 51.91 4.1 %
------------------------------------- ------- ------ ---------------- ----------
Commenting on the results, Carolyn McCall, easyJet Chief
Executive said:
"easyJet delivered a resilient performance during the winter
months with strong cost control, improving operational performance
and within guidance for revenue. We grew total revenue by 3.2% year
on year while passenger numbers were up by 2.8 million. The first
half loss is in line with market expectations and reflects the
movement of Easter into the second half as well as currency effects
which together had an estimated impact of circa GBP127m on the
bottom line.
"Our bookings for the summer are ahead of last year showing that
demand to fly remains strong and reflects growing evidence that
consumers are prioritising expenditure on flights and holidays
above other non-essential items.
"Looking ahead, we are seeing an improving revenue per seat
trend as well as the continued reduction of competitor capacity
growth. Cost performance for the full year will continue to be
strong. easyJet is delivering on its strategy of purposeful
investment in securing and building strong positions at Europe's
leading airports which is driving competitive advantage with
sustainable returns. As a result our expectations for the full year
are in line with current consensus market expectations(2) ."
Inside Information
The sections of this announcement relating to the agreement with
Airbus to deliver A321 NEO aircraft, including but not limited to
certain sections under the "Capital allocation and fleet" heading,
contain information which, prior to its disclosure, was considered
inside information for the purposes of Article 7 of Regulation (EU)
No 596/2014 (MAR).
For further details please contact easyJet plc:
Institutional investors and sell side analysts:
+44 (0) 7989
Stuart Morgan Investor Relations 665 484
+44 (0) 7985
Michael Barker Investor Relations 890 939
Media:
+44 (0) 7860
Paul Moore Corporate Communications 794 444
+44 (0) 207
Dorothy Burwell Finsbury 251 3801
+44 (0) 7733
294 930
There will be an analyst presentation at 10:00 am GMT on 16 May
2017 at Nomura, One Angel Lane, London, EC4R 3AB
A live webcast of the presentation will be available at
www.easyJet.com
Conference call dials -
UK & International: +44 (0) 20 3003 2666
UK Toll Free: 0808 109 0700
US toll: +1 212 999 6659
US Toll Free: 1 866 966 5335
Replay available for 7 days
UK & International: +44 (0) 20 8196 1998
UK Toll Free: 0800 633 8453
US Toll Free: 1 866 583 1035
PIN: 2259085#
Overview
easyJet delivered a resilient performance in the first half of
2017. During the period, easyJet made good progress in its strategy
of making disciplined investments to defend, maintain and leverage
its market-leading positions in Europe's primary, slot-constrained
airports. This includes increasing easyJet's share on selected city
routes and existing number one positions in markets with high
volume traffic.
Cost control has been strong as easyJet made further progress
with its lean cost programme, offsetting increasing costs of
disruption. However adverse foreign exchange rates have continued
to have a significant impact on profitability.
The Company's business model and strategy position easyJet to be
a structural winner within its chosen markets in the European
short-haul market. Looking ahead, there is evidence that key
competitors are reducing capacity plans in easyJet's markets (e.g.
Alitalia, Air Berlin, Vueling, Norwegian) and easyJet will continue
to manage its own capacity growth plans to drive long-term
returns.
Total revenue increased by 3.2% to GBP1,827 million (H1 2016:
GBP1,771 million).
Revenue per seat decreased by 4.9% to GBP48.80 due to:
-- easyJet's growth in capacity by 8.4% focused on strengthening
its number one positions at Europe's primary airports and securing
time-sensitive opportunities in newer markets
-- increased overall market capacity, along with low pricing sustained by a low fuel price
-- seasonality, mainly regarding the movement of Easter to the
second half of the financial year (an H1 impact of 2.4% on revenue
per seat at constant currency)
-- increased levels of disruption during the first half (due to
strikes, severe weather, airport issues) which resulted in 3,302
flights (H1 2016: 2,796) being either cancelled, delayed over three
hours or diverted
This was offset by:
-- excellent progress in growing non-seat revenue, which
increased by 18%, driven by customer-focused initiatives such as
improvements to inflight food and drink ranges
-- some recovery in markets after the shock events of last year
-- increased load factor, by 0.5ppts to 90.2%
Headline cost per seat has increased by 4.9% to GBP54.45 driven
by a gross foreign exchange impact of GBP175 million, partially
offset by a lower effective fuel price. At constant currency the
headline cost per seat decreased by 4.1%, with headline cost per
seat excluding fuel remaining flat. The overall cost performance is
driven by:
-- fuel cost reduction of 15.9% at constant currency driven by a
lower hedged fuel price, mitigating market price increases
-- Lean initiatives in:
o airport charges, offsetting underlying inflation
o reduced navigation charges
o engineering and maintenance savings, such as the component
supply contract
o overhead efficiencies in headcount
-- the phasing of project spend
-- up-gauging of fleet with the delivery of additional 186-seat
A320 aircraft and the retro-fitting of 44 existing 180-seat A320s
to a 186-seat gauge
This has helped to offset:
-- a continued increase in disruption charges due to an
increased number of events, level of compensation claims and
welfare claims
-- additional ownership and financing costs that were
anticipated following investment in the long-term growth of the
airline
easyJet remains on track to deliver flat headline cost per seat
excluding fuel at constant currency from the 2015 financial year to
the 2019 financial year, assuming normal levels of disruption.
Market environment
easyJet operates in the European short-haul aviation market,
with a focused business model that has enabled it consistently to
generate higher levels of profitability. As competitors continue to
struggle to restructure their high cost bases or operate with
inadequate financial resources, easyJet is well positioned to
continue to selectively strengthen its market positions. Economic
trends remain favourable across Europe with continued GDP growth
supporting spending in all easyJet's major countries.
The total European short-haul market(3) grew by 6% year-on-year
in the six months ending 31 March 2017 and by 9% in easyJet's
markets, driven by easyJet's own growth and competitor growth
supported primarily by a continued low fuel price, with
particularly strong growth in Spain and Germany.
Strategic progress
easyJet is delivering through its six strategic pillars:
1. Purposeful investment to build strong number one and two network positions
2. A lean cost advantage
3. Customer and operational excellence
4. Data and digital
5. Enhance revenue growth
6. The best people
Purposeful investment to build strong number one and number two
network positions
easyJet's strategy is focused on key airports, serving valuable
catchment areas that represent Europe's top markets by GDP, driving
both leisure and business travel. These are strong, existing
markets, built up over a period of time by legacy carriers.
easyJet's portfolio of peak time slots at airports, where either
total slot availability or availability at customer-friendly times
is constrained, further reinforces its competitive advantage.
easyJet currently holds 18 number one market positions by share
and has identified a number of potential targets for the next five
years where GDP and passenger volumes are high, where there is a
weak incumbent and/or where there is no clear winner today. easyJet
has the opportunity to capture further market share and to grow the
overall market.
easyJet takes a disciplined approach to capital allocation,
balancing its network by deploying aircraft to where it can achieve
the highest returns. easyJet's strategy achieves this through:
1. Building number one positions both at primary airports and on
its routes, which drives significantly greater contribution:
-- 98% of easyJet's capacity touches an airport where it has the
number one or number two position by share
2. Investing in scale:
-- Leading positions, route frequencies and multiple
destinations create flexibility for customers, as well as
reinforcing the easyJet brand to ensure that it is 'top of
mind'
3. Investing with purpose:
-- easyJet has a track record of generating above cost of
capital returns from purposeful investments within a three year
period
In line with guidance given in November 2016, during the first
half of this financial year easyJet has focused its growth on
maintaining market share in the UK and Switzerland and growing in
France. easyJet also invested high capacity growth in its city
strategy: in Venice and Naples to improve its number one position;
maintaining share in the slot-constrained Berlin market and in
Amsterdam where the airport is now at full capacity. Further
capacity growth was deployed in easyJet's lean bases to increase
their scale and leverage their cost advantage.
Having capitalised on time-sensitive opportunities to bolster
its positions in primary airports during this period, such as in
Amsterdam, easyJet capacity is likely to grow at a lower rate in FY
2018 compared to this year. By leveraging its flexible fleet plans,
easyJet is focused on driving returns on its investment.
easyJet is now seeing signs that competitors are reducing their
growth rates or even overall capacity for the forthcoming summer
and in the future:
-- Vueling is expected to reduce its capacity on easyJet markets this Summer by around 5%
-- Norwegian is focusing more on low cost long-haul, reducing its short haul network at Gatwick
-- The combination of Air Berlin and Lufthansa in Germany is
expected to result in a reduction of around 20 aircraft
-- Alitalia is in a state of administration in Italy
-- Flybe is expected to reduce its capacity in 2018
Overall easyJet grew capacity by 8.4% in the period, with
3.5ppts being invested in new routes and 7.3ppts on existing
routes, being offset by 2.4ppts of routes that we have actively
churned. Progress in easyJet's main markets is as follows:
United Kingdom
easyJet has strong market positions in all of the UK's busiest
airports, including 47% share of short-haul capacity at London
Gatwick and 43% share at Luton. At 31 March 2017, 135 aircraft were
based in the UK, with 85 at four London airports. easyJet increased
its capacity in the UK in the first half by 8%, with significant
growth targeted at maintaining its share of the London market
through Luton and Gatwick and increasing capacity at Bristol and
Manchester airports in particular.
France
easyJet currently has a number one position in Nice and Nantes,
with number two positions in Paris, Lyon, Toulouse and Bordeaux. At
31 March 2017, the airline had 28 aircraft based in France. easyJet
increased capacity in the first half by 12%, significantly ahead of
the overall market, to consolidate its presence in Paris and
increase its share in the regions. With an overall market share at
31 March 2017 of 15%, easyJet has increased its share of the market
in France in the last 12 months by 1 percentage point.
Italy
easyJet is the largest operator at Milan Malpensa, Naples and
Venice. At 31 March 2017, the airline had 27 aircraft based in
Italy. easyJet increased capacity in the first half by 6%: further
increasing its investment in Venice, where easyJet now has 28%
share of the airport; Naples (35% share); and securing its position
in Milan Malpensa (40% share).
Switzerland
easyJet has a strong position in Switzerland and is number one
in both Geneva and Basel with 40% and 57% market share
respectively. At 31 March 2017, the airline had 22 aircraft based
in Switzerland. easyJet increased capacity in the first half of the
year by 9% in increasing its share in both Geneva and Basel,
against overall market growth of 8%.
Germany
In Germany, easyJet has two bases, at Berlin Schönefeld, where
it has a number one position, and Hamburg. At 31 March 2017, the
airline had 14 aircraft based in Germany. easyJet increased
capacity by 9% in Germany during the period as it invested in
maintaining its strong market share of the Berlin market.
Netherlands
easyJet holds the number two position behind KLM at Amsterdam
Schiphol airport, which is now at full capacity. At 31 March 2017,
the airline had eight based aircraft with one further to be added
this Summer. This has been built since opening the base in March
2015 and is an increase of three aircraft since 31 March 2016.
easyJet increased capacity by 7% in the first half as it began to
annualise the high growth from the previous two years, focusing on
adding frequencies to existing destinations and capturing first
wave demand from business passengers.
Portugal / Spain
easyJet operates out of all five major airports in Portugal and
flies both international and domestic routes. At 31 March 2017, the
airline had eight aircraft based in Portugal. easyJet increased
capacity by 17% in the first half as it continued to establish its
position in both bases (Lisbon and Oporto) and protect its market
share.
easyJet operates at 20 airports in Spain and serves over 150
routes. At 31 March 2017, the airline had four aircraft based in
Spain. easyJet grew capacity in Spain by 16% in the first half as
it continued to build its presence in Barcelona. In March, easyJet
opened its first seasonal base in Palma de Majorca, a major leisure
destination which will serve over two million passengers this
summer. Three aircraft will be based there during the busy summer
months.
A lean cost advantage
easyJet is committed to maintaining its structural cost
advantage in the markets where it operates, primarily against the
legacy airlines. Through its lean programme, easyJet continues to
review its cost base to identify both short-term efficiencies and
longer term structural cost savings. These savings enable the
airline to offset the effects of underlying inflation and build
flexibility to help mitigate revenue pressure. The lean project is
well established within the organisation and seen as a primary
driver of the business. As a result, easyJet has remained committed
to a target of flat unit headline cost performance between the 2015
financial year and the 2019 financial year, at constant currency
and before the effect of fuel, assuming normal levels of
disruption. Total lean savings in the first half of FY 2017 were
approximately GBP35 million.
Savings will be delivered in the following areas:
Airports and ground handling
-- As easyJet increases in size, the airline can further drive
economies of scale from long-term deals with airports and ground
handling operators. Management continues to work with airports that
will reward easyJet's commitment and growth with attractive
financial packages
-- 20% of all easyJet passengers now travel through an automated
bag drop area with further automation planned to be rolled out
across the network. Automatic gates are also being trialled for
boarding
Maintenance and engineering
-- easyJet is driving further efficiencies from its contract for
maintenance and the provision of spare parts, which started in
October 2015
-- easyJet is using data science and its strong relationship
with Airbus to support predictive maintenance, which will drive
further long-term cost savings
Crew
-- easyJet is investing significant resources to improve
schedule and rostering efficiency, which will improve productivity
and create a more stable working environment for its crew
-- In March the airline opened its first seasonal base in Palma
de Majorca, which will match the fluctuating needs of the market to
supply periods of high customer demand while providing local
easyJet crew with a lifestyle choice of working for eight months
with four months leave
-- Continuing to grow the lean bases in Lisbon, Oporto and Barcelona
Overhead and IT
-- easyJet is implementing its new organisational design that
will bring significant efficiency to the business, as well as the
ability to leverage scale in overhead for future growth
-- Increasing investment into data and digital to increase
simplicity, enhance flexibility and drive efficiency
-- Continuing end-to-end review of the supplier base in all
areas of the business to reduce cost and drive innovative thinking
about the way the airline works in future
Up-gauging and efficient fleet management
-- Moving from 156 seats on an A319 to 186 on an A320 NEO
aircraft is expected to deliver a cost per seat saving of around
13%-14%(4) . This is being achieved by
o Increasing the proportion of higher gauge A320 aircraft in the
fleet
o All new A320 deliveries will be fitted with 186 seats
o Retrofitting the existing fleet of 180 seat A320s
o Introduction of the 186-seat A320 NEO from June 2017
-- The addition of A321 NEO aircraft to the fleet is expected to
deliver an 8% to 9%(4) cost per seat saving compared to an A320
NEO, primarily due to their 235-seat configuration
Fuel
-- easyJet continues to optimise its commercial and logistical
fuel supply arrangements, working closely with its fuel
providers
Non-headline items
As indicated previously, easyJet has incurred a number of
non-headline costs during the first half of the 2017 financial
year. These costs are separately disclosed as non-headline profit
before tax items:
-- easyJet transacted the first sale and leaseback arrangement
for 10 aircraft in December 2016, which is the first of a rolling
programme of approximately 10 per year to 2021 to de-risk the exit
from the business of the ageing A319 fleet. easyJet has incurred a
total one-off, non-cash charge of GBP16 million. Of this, GBP10
million relates to a loss on disposal, which reflects the timing of
the transaction and the specific aircraft sold. It does not
necessarily reflect the outcome of future transactions. A further
GBP6 million relates to a one-off catch up in the maintenance
provision due to the differences in accounting treatment between
owned and leased aircraft. The proceeds of the transaction were
$144 million and are reflected in the cash flow statement
-- as a result of the UK's referendum vote to leave the European
Union, easyJet expects to establish an Air Operator Certificate
(AOC) in another EU member state during this Summer. This will
secure the flying rights of the 30% of the network that remains
wholly within and between EU states, excluding the UK. This one-off
cost, comprised mainly of aircraft registration costs, is expected
to total up to GBP10 million over three years with up to GBP3
million incurred in the 2017 financial year. The cost in the first
half of 2017 has been GBP1 million.
-- expenses associated with implementing the organisational
review in the 2017 financial year totalled GBP2 million to date
-- balance sheet foreign exchange loss of GBP1 million (H1 2016
GBP2m gain). These charges/credits have previously been excluded
from the Cost per Seat at constant currency statistics
-- a GBP4 million non-cash fair value adjustment associated with
the Cross Currency Interest Rate Swap (CCRIS) that was put in place
to hedge the EUR500 million Eurobond issue in February 2016. The
CCRIS movements are non-cash and revert to nil exposure over the
term of the bond. They relate to the different accounting treatment
of the underlying Bond valuation versus the accounting treatment of
the hedge put in place to alleviate cash flow volatility
These Profit and Loss items are material non-recurring items or
are items which do not reflect the trading performance of the
business.
easyJet will continue to relentlessly focus on lean cost
control. The cost saving programme will build on the strong
momentum from 2016, leveraging easyJet's increasing scale and will
review the airline's cost management down to the most granular
level.
Customer and operational excellence
easyJet continues to improve its On Time Performance (OTP) from
a difficult period in Summer 2016. The airline is investing to
provide better customer service and reduce the increasing
associated costs of disruption.
In the six months to 31 March 2017, cancellations and delays
increased by 18% to 3,302 (H1 2016 2,796) and OTP was 80%. The
challenges of working at Gatwick, where easyJet outperforms most of
its direct competitors on OTP, continue to have an impact on the
rest of the network; OTP excluding the UK was two percentage points
higher than the rest of the network at 82%. In particular, easyJet
was affected by a number of external factors:
-- Severe weather at peak times of year (Christmas and Storm Doris at February half term)
-- Strikes around the network - French Air Traffic Control
(ATC), Italian Ground Handling, Berlin Ground Handling
-- Reduced capacity as French ATC perform systems upgrades in
Bordeaux, similar to the Brest upgrades last year
OTP % arrivals within Q1 Q2 H1
15 minutes(5)
--------------------------- ---- ---- ----
2017 Network 79% 80% 80%
Network excluding
UK 82% 82% 82%
2016 Network 82% 82% 82%
Network excluding
UK 83% 84% 83%
--------------------------- ---- ---- ----
easyJet is making good progress on a number of its initiatives
to improve OTP and reduce Disruption:
-- Engineering initiatives to increase aircraft availability:
easyJet has set up an Aircraft On Ground Response Team and will add
another light aircraft at Milan Malpensa to the one at Luton to
ensure engineers can fix aircraft more quickly; spare parts have
also now been distributed around the network to support a faster
response, guided by predictive maintenance analysis; and predictive
maintenance is also being used in scheduled checks and is expected
to reduce technical operational interruptions by up to 20%
-- Gatwick North Terminal consolidation: since January easyJet
has been able to improve operations and customer experience at
Gatwick; and 80% of stands are now dedicated to easyJet aircraft,
enabling more efficient Ground Handling processes and consistent
turn times
-- Customer communications: easyJet has increased its push
notifications to customers, to manage disruption better; technology
is also supporting more consistent communication between Operations
Control, Ground Handling teams and onboard Crew to passengers; and
easyJet has now introduced further automation to compensation
claims to improve customer satisfaction and reduce processing
costs
-- Schedule and Rosters: easyJet has introduced breaks to its
schedule and increasing block times (reducing asset utilisation) to
ensure it can deliver a more robust schedule for its customers. In
addition three aircraft have been wet leased this summer to build
flexibility and a further two spare aircraft made available to add
resilience
As a result of the above recent trends are encouraging, with
improvements to all areas of customer satisfaction at Gatwick in
the first half year and good On Time Performance across the network
at Easter in particular (a 9.0 ppt improvement to 85.3%).
easyJet is also seeing strong customer satisfaction improvements
where it has rolled out Auto Bag Drop, currently in six airports.
With shorter queuing times (over 90% of our customers at Gatwick
waited less than five minutes in last year's peak Summer season)
and as Ground Crew move away from the process and into customer
service, this is driving improving Customer Satisfaction scores. At
Gatwick the Overall Bag Drop satisfaction increased by 7ppts from
second quarter 2016 to second quarter 2017.
Data and digital
easyJet has been at the forefront of digital innovation in the
airline industry and its digital strategy is a core part of
easyJet's wider strategy. Its capability helps to build customer
loyalty, drive revenue growth, secure cost savings and deliver
greater customer satisfaction. easyJet's increasingly sophisticated
use of data will enable the Company to make travel even easier and
more affordable in the long-term.
Mobile is increasingly a channel which we will use to drive
revenue. easyJet is now making 26% of all ecommerce bookings
through mobile platforms, an increase of 4ppts from 31 March 2016,
as functionality and accessibility improve further. The ability to
simplify transactions also continues to improve with technology
such as Apple Pay seeing strong adoption and representing 11% of
all bookings. 21% of passengers now use mobile boarding passes
(6.3ppts increase from H1 2016) and 39 airports support real time
data exchange for gate information and bag drop. easyJet sent 5.5
million "go to gate" push notifications during the period.
Innovation and digital leadership
easyJet has recently started the next phase of its digital
development, with a new booking funnel now live for all customers.
This has already seen increases in target metrics for conversion
and attachment rates as customers find it easier to search for
flights, compare routes, times and fares and see more relevant
information on seats and bags. With the new website rolled out this
provides a platform to release new features and enhancements. The
digital platform remains a key point of differentiation from
competitors and further opportunities for commercial optimisation
are planned.
easyJet has continued to enhance its App capabilities, already
the "most loved airline app in Europe" with 20 million downloads
with a consistent 4.4 star rating on App stores. As well as
functionality that improves the travel experience and drives
loyalty, such as mobile boarding passes and the flight tracker,
easyJet's app is increasingly being used to manage disruption,
combining better communication with the ability for passengers to
self-handle, easily rebooking their flights and securing
pre-approved hotel accommodation.
easyJet has now announced the next step with its first two
Founders Factory portfolio companies. The Company will be
integrating features from both Flio and Lucky Trip into the easyJet
travel app later in the year, delivering customer benefits in the
airport experience and travel inspiration respectively.
Loyalty and data
easyJet continues to benefit from increasingly loyal customers.
In the first six months of financial year 2017 75% of its seats
were booked by returning customers, representing an increase of
four million compared to the first half of 2016. easyJet has seen
significant increases in returning customer loyalty in its core
markets of the UK (+2.3 million customers) and Switzerland (+0.5
million customers), with strong increases also in France and
Germany.
easyJet is also building increasingly strong relationships with
its customers through the use of personalised data. easyJet's CRM
of marketable customers increased by 5% during the first half to
26.7 million. After its first 12 months easyJet's loyalty scheme
Flight Club is also producing demonstrable benefits, driving higher
retention and higher satisfaction than non-members. Over 50% of
Flight Club members fly 20 or more times a year, with over 40%
representing business or commuter customers.
Enhance revenue growth
easyJet has a programme to develop additional revenue streams as
well as enhancing existing revenue streams, leveraging its primary
airport-focused network, cost focus and track record of innovation.
The airline is exploring new distribution channels, partner
agreements and structures such as connectivity with other airlines.
easyJet is also increasingly using data science to support
revenue-enhancing initiatives, for example using customer profiling
on specific sectors and routes.
Business passengers
easyJet's business passenger segment has performed well during
the first half of the financial year. The total number of business
passengers has increased by 6.2%, against a backdrop of capacity
investment weighted towards leisure routes. Business passengers
remained at 19% of easyJet's customer base, reflecting the mix of
routes flown. The business passenger premium has remained steady
year-on-year, helped by the recovery from shock events (which
disproportionately impacted short-term travel) and the move of
Easter from March into April.
With the proposition now well established, easyJet is looking to
evolve the product offering, drive better distribution and reduce
costs. A new organisational structure is now finalised, contracts
with Travel Management companies are being renegotiated and six
major new corporate and Government contracts were signed in the
period, for example with the State of the Netherlands.
Additional revenue streams
In the first six months, easyJet has seen strong growth in its
Ancillary(5) (including Non-Seat) Revenue, offsetting pressure on
ticket yields from the external environment. For example easyJet
has seen excellent early results from new initiatives in its
baggage strategy, reflecting changes to consumer behaviour. easyJet
also has opportunities to build on its partnerships with
industry-leading brands in car rental (Europcar) and hotels
(Booking.com), as well as exploring other value channels. Building
on these, easyJet has a number of projects in the pipeline for the
next 12 months.
Non-seat revenue has increased by 18% in the first half of the
financial year, driven by improvements to inflight food and drink
ranges. easyJet has continued to add premium products that appeal
to its customer base.
The best people
easyJet cares about its people and believes they set the airline
apart. easyJet's customer-facing employees are the very best in the
industry and contribute significantly to the positive experience
that passengers enjoy, leading to increased loyalty and repeat
business.
It is easyJet's people who continue to deliver the business'
strategy and will drive future success. easyJet has invested in a
programme called 'Next Generation' that is focused on driving
efficiency and effectiveness in our overhead structure through the
optimisation of a scaleable organisational design, focused
accountabilities and empowerment, enhanced ways of working that
will support more effective and cost-efficient growth in the future
and faster and more effective decision making that best fits the
easyJet's entrepreneurial culture.
easyJet continues to recruit to support its growth, adding over
281 pilots and 836 cabin crew. During the period 35% of positions
were filled by internal candidates, ahead of easyJet's target of
30%. Retention rates remain good with employee turnover at 7%,
while attendance rates are high at 97%.
easyJet continues to lead the industry in its push to increase
the number of female pilots through the Amy Johnson Flying
Initiative, in partnership with the British Women Pilots
Association. After reaching the initial target to double the
proportion of new female entrants from under 6% in the year ending
30 September 2015 to over 12% within a two year period, easyJet has
set a new, more stretching target for 20% of our new pilot cadets
to be female by 2020.
Capital allocation and fleet
easyJet has a ruthless focus on capital allocation, using its
market-leading fleet flexibility to increase or decrease capacity
deployed. easyJet regularly reviews the opportunities available and
prevailing economic and market conditions to determine the most
effective capital allocation. In the past five years easyJet has
closed bases in Madrid and Rome and redeployed those aircraft to
secure stronger more profitable market positions elsewhere. Every
year the airline churns routes that have not reached their targeted
objectives using the flexibility to move aircraft between routes
and markets to ensure improved utilisation and generate increased
returns.
This industry-leading flexibility is achieved due to a number of
agreements that impact both the timing and scale of capacity
deployment: new aircraft orders can be deferred, leases may be
extended or not renewed, aircraft may be sold or utilisation can be
reduced at times of low demand. As announced in November 2016,
easyJet secured a reduced notice period with Airbus for deferring
deliveries from 24 months to 18 months, giving it a competitive
advantage in its ability to respond to market conditions.
In addition, easyJet has reached an agreement with Airbus to
purchase 30 A321 NEO aircraft in a 235 seat configuration, with the
first deliveries expected in July 2018. This is a conversion of 30
A320 NEO orders under the existing 2014 easyJet Airbus agreement.
This will enable easyJet to continue to deliver growth in slot
constrained airports, as well as securing substantial unit cost
savings, which are estimated to be around 8% to 9% better than a
186-seat A320 NEO. easyJet has also agreed a delivery schedule and
optionality with Airbus making it capex neutral to current plans,
including the deferral of some A320 NEO deliveries. As a result
easyJet has further increased its high degree of flexibility in its
fleet plans to manage its growth, cost and cash flows.
% of Changes
fleet since Unexercised
Finance Operating Sept Future purchase
Owned leases leases Total '16 deliveries rights
A319 89 - 55 144 54% - - -
A320
180
seat 52 1 8 61 23% (44) - -
A320
186
seat 47 4 10 61 23% 53 27 -
A320
neo - - - - - - 100 100
A321 - - - - - - 30 -
neo
------ ------- ---------- ------ ------- -------- ------------ ------------
188 5 73 266 9 157 100
71% 2% 27%
easyJet's total fleet as at 31 March 2017 comprised of 266
aircraft (H1 2016: 247 aircraft), split between 156-seat Airbus
A319s, 180-seat A320s and since May 2016, 186-seat A320s. Alongside
its lean initiatives over the next five years easyJet will reduce
cost by improving the fleet mix and ownership structure. In the six
months to 31 March 2017, easyJet took delivery of nine 186-seat
A320 aircraft, which provide a per seat cost saving of 9% to 10%(3)
compared to the A319 through economies of scale, efficiencies in
crew, ownership, fuel and maintenance. easyJet also completed the
up-gauging of 44 of its existing 180-seat A320s to 186 seats.
During this process easyJet experienced issues with the quality of
the new equipment, leading to aircraft unavailability. Therefore,
the retrofitting programme will be suspended until these problems
are resolved.
The average age of the fleet increased to 7.0 years (H1 2016:
6.7 years). In the first six months easyJet slightly increased its
asset utilisation across the network to an average 10.0 block hours
per day (H1 2016: 9.6 hours).
Based on current plans, including the recently agreed changes to
include A321 NEO aircraft, capital expenditure for the next three
years is as follows:
Year 2017 2018 2019 2020
--------------------------- ----- ------ ----- -----
Gross capital expenditure
(GBP) 700 1,050 800 950
--------------------------- ----- ------ ----- -----
Of the 193 aircraft on easyJet's balance sheet at 31 March 2017,
188 are unencumbered reflecting the strength of easyJet's balance
sheet. At 31 March 2016 easyJet had 177 aircraft on its balance
sheet of which 128 were unencumbered with mortgage financing.
Hedging positions
easyJet operates under a clear set of treasury policies agreed
by the Board. The aim of easyJet's hedging policy is to reduce
short-term earnings volatility. Therefore, easyJet hedges forward,
on a rolling basis, between 65% and 85% of the next 12 months
anticipated fuel and currency exposures and between 45% and 65% of
the following 12 months anticipated requirements. Specific
decisions may require consideration of a longer term approach.
Treasury strategies and actions will be driven by the need to meet
treasury, financial and corporate objectives.
Details of hedging arrangements as at 31 March 2017 are set out
below:
Percentage of anticipated Fuel requirement US Dollar Euro surplus CHF surplus
requirement hedged requirement
--------------------------- ----------------- ------------- ------------- -----------
Six months to 30
September 2017 83% 78% 95% 71%
$577 /
metric
Average rate tonne $1.48 EUR1.34 CHF 1.37
--------------------------- ----------------- ------------- ------------- -----------
Full year ending
30 September 2017 84% 82% 91% 74%
$612 /
metric
Average rate tonne $1.50 EUR1.35 CHF 1.40
--------------------------- ----------------- ------------- ------------- -----------
Full year ending
30 September 2018 60% 59% 66% 61%
$516 /
metric
Average rate tonne $1.40 EUR1.25 CHF1.32
--------------------------- ----------------- ------------- ------------- -----------
Sensitivities
-- A $10 movement in fuel price per metric tonne impacts the FY'17 fuel bill by $2.2 million.
-- A one cent movement in GBP/$ impacts the FY'17 profit before tax by GBP1.0 million.
-- A one cent movement in GBP/EUR impacts the FY'17 profit before tax by GBP0.6 million.
-- A one cent movement in GBP/CHF impacts the FY'17 profit before tax by GBP0.3 million.
Outlook
easyJet is confident in its strategy and will continue its
disciplined investment in reinforcing and expanding number one
positions in its airports and on its routes, with significant
opportunities in its core markets. Capacity is planned to grow by
around 8.5% in the second half of financial year 2017.
easyJet expects revenue per seat at constant currency for the
third quarter of the financial year to decrease by low single
digits, reflecting the move of Easter into April and an improving
yield and capacity environment. Forward bookings are currently
ahead of last year at 77% for the quarter and 55% for the second
half (H1 2016: 72% and 50% respectively).
easyJet is on track to deliver against the expected headline
cost per seat at constant currency excluding fuel increase of
around 1% for the full year, assuming normal levels of disruption.
This is better than guided in November 2016 as easyJet has achieved
further cost savings in its lean programme to offset successfully
the cost of additional investment in resilience and in improving
its long-term operational performance. The majority of expected
non-headline costs have been incurred in the first half of the
financial year. As previously guided we will incur around GBP10
million over three years on the set-up of the European Union AOC
and up to GBP3 million in the current financial year 2017. We also
expect to incur costs of around GBP10 million on the organisational
review in the same three year period and up to GBP6 million this
financial year. easyJet remains committed to delivering a flat
headline cost per seat performance between the 2015 financial year
compared to the 2019 financial year at normal levels of
disruption.
It is estimated that at current exchange rates(7) and with jet
fuel remaining within a $500 metric tonne to $580 metric tonne
trading range, easyJet's unit fuel bill(8) for the second half of
the financial year is likely to decrease by between GBP145 million
and GBP160 million compared to the six months to 30 September 2016.
On a full year basis it is estimated that at current exchange rates
and with jet fuel remaining within a $500 metric tonne to $580
metric tonne trading range, easyJet's unit fuel bill for the 12
months ending 30 September 2017 is likely to decrease by between
GBP225 million and GBP235 million compared to the 12 months to 30
September 2016. easyJet's total fuel cost for the year to 30
September 2017 is currently estimated to be approximately GBP1,060
million.
In addition, exchange rate movements(7) are likely to have
around a GBP20 million adverse impact on headline profit before tax
compared to the six months to 30 September 2016 and are likely to
have around a GBP100 million adverse impact on headline profit
before tax compared to the 12 months to 30 September 2016.
easyJet continues to deliver on its strategy and sees
significant opportunities to grow revenue, profits and shareholder
returns. easyJet expects market demand to remain strong and
easyJet's unique model and strategy are well positioned to capture
significant value from favourable trends in both leisure and
business markets. easyJet's clear structural advantages over both
legacy and low cost competitors in cost, network, customer data and
digital leave the airline well positioned for long-term success.
easyJet remains committed to its full year dividend policy based on
a 50% payout of profit after tax. easyJet expectations for the full
year are in line with current consensus market expectations(2)
.
Footnotes:
(1) Constant currency is calculated by comparing 2017
financial period performance translated at the 2016
financial period effective exchange rate to the 2016
financial period reported performance, excluding
foreign exchange gains and losses on balance sheet
revaluations
(2) Company-compiled consensus headline profit before
tax for financial year 2017 is GBP367 million at
15 May 2017
(3) Capacity and market share figures from OAG. Size
of European market based on internal easyJet definition.
Historical data based on 6 month period from October
2016 to March 2017.
(4) Based on fuel price assumptions in place at the time
of each transaction
(5) On-time performance measured by internal easyJet
system
(6) Ancillary revenue includes revenue from the provision
of checked baggage, administration, allocated seating,
credit card and change fees, and also includes non-seat
revenue which arises from commissions earned from
services sold on behalf of partners and inflight
sales.
(7) US $ to GBP sterling 1.286, euro to GBP sterling
1.184. Currency and fuel increases are shown net
of hedging impact.
(8) Unit fuel calculated as the difference between latest
estimate of FY'17 fuel costs less FY'16 fuel cost
per seat multiplied by FY'17 seat capacity
OUR FINANCIAL RESULTS
easyJet has delivered a headline loss before tax for the six
months to 31 March 2017 of GBP212 million (headline loss of GBP5.65
per seat) an increase of GBP191 million from a headline loss of
GBP21 million (loss of GBP0.62 per seat) last year. The 2017 result
includes an unfavourable GBP82 million movement from foreign
exchange. At constant currency easyJet delivered a headline loss
before tax of GBP130 million during the period.
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 or low profit for the
first half of the financial year and a profit in the second
half.
FINANCIAL OVERVIEW
2017 2016 (restated*)
--------- -------- ------- --------- -------------------
GBP GBP pence GBP GBP pence
million per per million per per
seat ASK seat ASK
---------------------------- --------- -------- ------- --------- ---------- -------
Total revenue 1,827 48.80 4.61 1,771 51.29 4.87
Headline costs excluding
fuel (1,580) (42.18) (3.98) (1,330) (38.54) (3.66)
Fuel (459) (12.27) (1.16) (462) (13.37) (1.27)
----------------------------- --------- -------- ------- --------- ---------- -------
Headline loss before
tax (212) (5.65) (0.53) (21) (0.62) (0.06)
Headline tax credit 40 1.06 0.10 3 0.09 0.01
----------------------------- --------- -------- ------- --------- ---------- -------
Headline loss after
tax (172) (4.59) (0.43) (18) (0.53) (0.05)
Non-headline (loss)/profit
after tax (20) (0.51) (0.05) 3 0.09 0.01
----------------------------- --------- -------- ------- --------- ---------- -------
Total loss after
tax (192) (5.10) (0.48) (15) (0.44) (0.04)
----------------------------- --------- -------- ------- --------- ---------- -------
* For further detail on the restatement
see note 1 to the Condensed Financial
Information.
Seats flown grew by 8.4%. Total revenue per seat fell by 4.9% to
GBP48.80. At constant currency, revenue per seat fell by 9.7% to
GBP46.32. 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.
Headline cost per seat excluding fuel increased by 9.5% to
GBP42.18, but remained flat at constant currency. Savings were
obtained from airport lean initiatives, the annualisation of
reduced navigation charges, engineering and maintenance savings
such as the component supply contract and the upgauging of fleet as
easyJet continues to move from A319s to A320s. These savings have
offset inflation pressures in the period, regulated airport
uplifts, a continued increase in disruption charges due to an
increased number of events, level of compensation claims and
welfare claims and expected additional ownership and financing
costs as we invest in the long term growth of the airline. We
anticipate full year headline cost per seat at constant currency
excluding fuel to increase by 1%, assuming normal levels of
disruption, reflecting additional investment into operational
resilience for the Summer peak given the current level of airport
and airspace congestion, especially at primary airports.
Fuel costs fell by GBP3 million, and from GBP13.37 to GBP12.27
per seat. Despite an increase in the market price of fuel, the
operation of easyJet's fuel and US dollar hedging policy resulted
in a reduction in the effective fuel price.
This resulted in a headline loss before tax per seat increase
from GBP0.62 to GBP5.65 per seat.
Non-headline costs of GBP24 million were recognised in the
period, consisting of a GBP16 million charge as a result of the
sale and leaseback of 10 A319 aircraft in December, a GBP2 million
charge associated with our organisational review, a GBP1 million
charge in relation to the application and set-up of an EU Air
Operator Certificate (AOC), a GBP4 million charge for fair value
adjustments in relation to the cross currency interest rate swaps
in place for the bond issued in February 2016 and a GBP1 million
charge relating to balance sheet foreign exchange gains and
losses.
Corporate tax has been credited at an effective rate of 18.7%
(FY 2016: charged at 13.7%) based on rates substantively enacted as
at 31 March 2017, resulting in a tax credit of GBP44 million during
the period.
Loss per share and dividends per share
2017 2016
(restated) Change
pence pence pence
per per per
share share share
---------------------------------- ------- ----------- -------
Basic headline loss per share (43.8) (4.6) (39.2)
Basic total loss per share (48.9) (3.8) (45.1)
Ordinary dividend per share paid
during the period 53.8 55.2 (1.4)
----------------------------------- ------- ----------- -------
Basic headline loss per share increased by 39.2 pence as a
consequence of the GBP154 million increase in the headline loss
after tax in the six months to 31 March 2017.
In line with the stated dividend policy of a payout ratio of 50%
of profit after tax, easyJet paid an ordinary dividend of 53.8
pence per share in March 2017.
EXCHANGE RATES
The proportion of revenue and costs denominated in currencies
other than sterling remained broadly consistent year-on-year:
Revenue Costs
----- -------- -------- --------
2017 2016 2017 2016
--------------------------------- ----- -------- -------- --------
Sterling 45% 47% 33% 29%
Euro 43% 41% 36% 33%
US dollar 1% 1% 23% 32%
Other (principally Swiss franc) 11% 11% 8% 6%
---------------------------------- ----- -------- -------- --------
Average exchange rates
2017 2016
--------------------------------- ----- -------- -------- --------
Euro - revenue EUR1.21 EUR1.32
Euro - costs EUR1.16 EUR1.34
US dollar $1.51 $1.60
Swiss franc CHF CHF
1.78 1.52
---------------------------------- ----- -------- -------- --------
The net adverse impact on profit due to the year-on-year changes
in exchange rates was mainly driven by the stronger average US
dollar and Euro rate:
Headline Euro Swiss US dollar Other Total
franc
Favourable/(adverse) GBP GBP GBP GBP GBP
million million million million million
------------------------------ --------- --------- ---------- --------- ---------
Total revenue 71 14 3 5 93
Fuel (1) - (37) - (38)
Headline costs excluding
fuel (96) (19) (16) (6) (137)
------------------------------- --------- --------- ---------- --------- ---------
Headline loss before
tax (26) (5) (50) (1) (82)
------------------------------- --------- --------- ---------- --------- ---------
Non-headline Euro Swiss US dollar Other Total
franc
Favourable/(adverse) GBP GBP GBP GBP GBP
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
--------- ------ ------ --------- ------ ------
GBP pence GBP pence
GBP per per GBP per per
million seat ASK million seat 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 GBP48.80 (31 March 2016:
GBP51.29). At constant currency, revenue per seat fell by 9.7% to
GBP46.32. 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)
--------- ------ ------ --------- ------ -----------
GBP GBP pence GBP GBP pence
million per per million per per
seat ASK seat 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
GBP42.18 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 GBP7.82, 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 GBP4.25
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 GBP3.39,
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
GBP4.27 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
GBP1.46 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 GBP0.20 per seat
is attributable to issuance costs of two bonds, as we invest in the
long term growth of the airline.
Fuel
2017 2016
--------- ------ ------ --------- ------ ------
GBP GBP pence GBP GBP pence
million per per million per per
seat ASK seat 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 GBP449 per tonne from GBP489 per tonne in the previous
year.
Non-headline items
2017 2016
--------- ------- ------- --------- ------ ------
GBP GBP pence GBP GBP pence
million per per million per per
seat ASK seat 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 GBP24 million
comprise:
-- a GBP10 million loss on disposal and a GBP6 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 GBP2 million one-off charge associated with implementing the organisational review;
-- a GBP1 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 GBP1 million non-cash charge relating to balance sheet
foreign exchange gains and losses; and
-- a GBP4 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 Six months
ended ended
31 March 31 March
2017 2016 Change
(restated)
GBP million GBP million GBP 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 GBP353 million (31 March 2016:
GBP296 million) and comprised cash and money market deposits of
GBP1,308 million (31 March 2016: GBP1,057 million) and borrowings
of GBP 955 million (31 March 2016: GBP761 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 GBP424 million has decreased by
GBP91 million to GBP333 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 GBP28
million during the period (2016: GBP45 million).
Borrowings as at 31 March 2017 were GBP955 million, an increase
of GBP194 million from 31 March 2016. Under the GBP3 billion Euro
Medium Term Note Programme announced in FY'16, on 11 October 2016
easyJet plc issued notes amounting to EUR500 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 GBP219 million in the period.
Summary consolidated statement of financial position
31 March 30 September Change
2017 2016
(restated)
GBP million GBP million GBP 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 GBP354 million,
due to the payment of the ordinary dividend (GBP214 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
GBP62 million driven principally by the acquisition of nine A320
family aircraft, and pre-delivery payments relating to aircraft
purchases.
Unearned revenue increased by GBP730 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 GBP218 million. This
increase arises due to differences in the timing of flight schedule
releases and the Easter school holiday schedule.
KEY STATISTICS
Increase/
Operating measures 2017 2016 (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
(GBP) (6.28) (0.52) (1,112.4%)
Headline loss before tax per seat
(GBP) (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 (GBP) 48.80 51.29 (4.9%)
Revenue per seat at constant currency
(GBP) 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 (GBP) 54.45 51.91 4.9%
Non-headline cost per seat (GBP) 0.63 (0.10) 739.6%
Headline cost per seat excluding
fuel (GBP) 42.18 38.54 9.5%
Headline cost per seat excluding
fuel at constant currency (GBP) 38.54 38.54 0.0%
Headline operating cost per seat
(GBP) 50.23 48.09 4.5%
Headline operating cost per seat
excluding fuel (GBP) 37.96 34.72 9.4%
Headline operating cost per seat
excluding fuel at constant currency
(GBP) 34.48 34.72 (0.7%)
Headline ownership cost per seat
(GBP) 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)
Non-headline Non-headline
(note (note
Headline 3) Total Headline 3) Total
GBP GBP GBP GBP GBP GBP
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 Six months
ended ended
31 March 31 March
2017 2016
(restated)
Notes GBP million GBP 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
2017 2016
(restated)
Notes GBP million GBP 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 Share Hedging Translation Retained
capital premium reserve reserve earnings Total
(restated)
GBP GBP GBP GBP GBP GBP
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 Share Hedging Translation Retained
capital premium reserve reserve earnings Total
(restated)
GBP GBP GBP GBP GBP GBP
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 Six months
ended ended
31 March 31 March
2017 2016
(restated)
Notes GBP million GBP 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 Year ended 30 September
31 March 2016 2016
Impacted lines As reported As restated As reported As restated
GBP million GBP million GBP million GBP 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 Six months
ended ended
31 March 31 March
2017 2016
GBP million GBP 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 GBP10 million,
recognised within other costs in the income statement, and a GBP6
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 GBP2 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 GBP10 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 GBP1 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 GBP10 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 GBP1 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 EUR500 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 GBP4 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 Six months
ended ended
31 March 31 March
2017 2016
(restated)
GBP million GBP million
------------------------------------ ------------ ------------
Current tax 1 3
Deferred tax (45) (6)
------------------------------------- ------------ ------------
(44) (3)
------------------------------------ ------------ ------------
Effective tax rate 18.7% 17.3%
------------------------------------- ------------ ------------
The effective tax rate is lower than the standard rate of
corporation tax in the United Kingdom (FY'17: 19.5%) 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
Six months Six months
ended ended
31 March 31 March
2017 2016
GBP million GBP million
---------------------------------------- ------------ ------------
(Charge)/credit to other comprehensive
income
Deferred tax on fair value movements
of cash flow hedges (11) 9
----------------------------------------- ------------ ------------
(Charge)/credit to shareholders'
equity
Current tax on share-based payments - 1
Deferred tax on share-based payments - (3)
----------------------------------------- ------------ ------------
- (2)
---------------------------------------- ------------ ------------
5. Loss per share
2017 2016
(restated)
GBP million GBP million
-------------------------------------- ------------ ------------
Headline loss for the period (172) (18)
Total loss for the period (192) (15)
--------------------------------------- ------------ ------------
2017 2016
million million
-------------------------------------- ------------ ------------
Weighted average number of ordinary
shares used to calculate basic loss
per share 393 394
--------------------------------------- ------------ ------------
2017 2016
(restated)
Basic loss per share pence pence
-------------------------------------- ------------ ------------
Total (48.9) (3.8)
Adjustment for non-headline 5.1 (0.8)
--------------------------------------- ------------ ------------
Headline (43.8) (4.6)
--------------------------------------- ------------ ------------
Diluted earnings per share figures are not presented for either
period as the impact of potential ordinary shares is
anti-dilutive.
6. Dividends
The company paid an ordinary dividend of 53.8 pence per share,
or GBP214 million (2016: 55.2 pence per share or GBP219
million).
7. Property, plant and equipment
2017 2016
GBP million GBP million
----------------------------------- ------------ ------------
At 1 October 3,252 2,877
Additions 279 314
Transfer to intangible assets - (15)
Aircraft sold and leased back (125) -
Disposals (1) (2)
Transfer to maintenance provision (6) (11)
Depreciation (85) (74)
------------------------------------ ------------ ------------
At 31 March 3,314 3,089
------------------------------------ ------------ ------------
Net book value includes GBP293 million (2016: GBP293 million)
relating to advance and option payments for future aircraft
deliveries.
At 31 March 2017 easyJet was contractually committed to the
acquisition of 157 (2016: 176) Airbus A320 family aircraft, with a
total list price of US$14.1 billion (2016: US$15.5 billion) before
escalations and discounts for delivery. This includes deliveries in
the second half of FY'17 (14 aircraft), in 2018 (34 aircraft) and
between 2019 and 2022 (109 aircraft). 130 are new generation
aircraft.
8. Reconciliation of operating loss to cash generated from
operations
Six months Six months
ended ended
31 March 31 March
2017 2016
(restated)
GBP million GBP million
----------------------------------------- ------------ ------------
Operating loss (220) (17)
Adjustments for non-cash items:
Depreciation 85 74
Loss on disposal of property, plant
and equipment 11 2
Amortisation of intangible assets 7 6
Share-based payments 10 10
Changes in working capital and other
items of an operating nature:
Increase in trade and other receivables (31) (20)
Decrease in trade and other payables (52) (64)
Increase in unearned revenue 730 461
Increase in provisions 19 16
Decrease in other non-current assets 2 2
Decrease / (increase) in derivative
financial instruments 5 (3)
Decrease in non-current deferred
income (6) (6)
------------------------------------------ ------------ ------------
Cash generated from operations 560 461
------------------------------------------ ------------ ------------
9. Reconciliation of net cash flow to movement in net cash
Fair value
1 October and foreign Loan issue Net 31 March
2016 exchange costs cash flow 2017
GBP million GBP million GBP million GBP million GBP million
--------------- ------------ ------------- ------------ ------------ ------------
Cash and cash
equivalents 714 8 - (49) 673
Money market
deposits 255 1 - 379 635
---------------- ------------ ------------- ------------ ------------ ------------
969 9 - 330 1,308
--------------- ------------ ------------- ------------ ------------ ------------
Eurobonds (435) 36 7 (451) (843)
Bank loans (210) (9) - 219 -
Finance lease
obligations (111) (4) - 3 (112)
---------------- ------------ ------------- ------------ ------------ ------------
(756) 23 7 (229) (955)
--------------- ------------ ------------- ------------ ------------ ------------
Net cash 213 32 7 101 353
---------------- ------------ ------------- ------------ ------------ ------------
On 7 January 2016, the UK Listing Authority approved a
prospectus relating to the establishment of a GBP3,000 million Euro
Medium Term Note programme issued by easyJet plc and guaranteed by
easyJet Airline Company Ltd (subsequently updated on 7 October 2016
and 10 February 2017). Under this programme, on 9 February 2016,
easyJet plc issued notes amounting to EUR500 million for a seven
year term with a fixed annual coupon rate of 1.750%. At the same
time the Group entered into cross currency interest rate swaps to
convert the EUR500 million fixed rate Eurobond to a GBP379 million
floating rate exposure. The Group designated the cross currency
interest rate swaps as a fair value hedge of the interest rate and
currency risks of the EUR500 million Eurobond. The EUR500 million
Eurobond and the cross currency interest rate swaps are measured at
fair value through the income statement.
On 11 October 2016 easyJet plc issued notes amounting to EUR500
million for a seven year term with a fixed annual coupon rate of
1.125% under the GBP3,000 million Euro Medium Term Note programme.
The Group subsequently entered into cross currency interest rate
swaps on 8 November 2016 to convert the EUR500 million fixed rate
Eurobond to a GBP445 million fixed rate sterling exposure. The
Group designated the cross currency interest rate swaps as a cash
flow hedge of the currency risk of the EUR500 million Eurobond. The
EUR500 million Eurobond is held at amortised cost and revalued at
the balance sheet date with the spot GBP/EUR foreign exchange rate
prevailing at the time, with movements being taken through the
income statement. The cross currency interest rate swaps are
measured at fair value with the effective portion taken through the
statement of comprehensive income. The element of the fair value
generated by the change in the spot rate is recycled to the income
statement from the statement of comprehensive income to offset the
revaluation of the Eurobond.
10. Fair value
The fair values of financial assets and liabilities, together
with the carrying value at each reporting date, are as follows:
2017 2017 2016 2016
Carrying Fair value Carrying Fair value
value value
GBP million GBP million GBP million GBP million
--------------------------- ------------ ------------ ------------ ------------
Eurobonds 843 853 435 453
Bank loans - - 210 210
Finance lease obligations 112 118 111 117
---------------------------- ------------ ------------ ------------ ------------
The fair value of the EUR500 million Eurobond issued on 9
February 2016 is classified as level 1 of the IFRS 13 'Fair Value
Measurement' fair value hierarchy.
All derivative financial instruments are classified as level
2.
The EUR500 million Eurobond issued on the 11 October 2016 and
Finance lease obligations are held at amortised cost.
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 referencing 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.
11. 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, management
considers 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.
12. Related party transactions
The Company licenses the easyJet brand from easyGroup Ltd
('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 Guidance and
Transparency Rules DTR 5, between 30 September 2016 and 31 March
2017.
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 the
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 GBP1 million per annum
to this fund and easyGroup contributes GBP100,000 per annum. Beyond
the first GBP1.1 million of costs, easyJet can commit up to an
aggregate GBP5.5 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.
The amounts included in the income statement for these items
were as follows:
Six months Six months
ended ended
31 March 31 March
2017 2016
GBP million GBP million
-------------------------------------- ------------ ------------
Annual royalty 4.6 4.4
Brand protection (legal fees paid
through easyGroup to third parties) 0.7 0.1
5.3 4.5
-------------------------------------- ------------ ------------
At 31 March 2017, GBP1.6 million (2016: GBP2.3 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 2017 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 2017 and any material changes in the related-party
transactions described in the last Annual report and accounts
2016.
The Directors of easyJet plc are listed in the Annual report and
accounts 2016. 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 15 May 2017 and signed on its behalf
by:
Carolyn McCall Andrew Findlay
DBE
Chief Executive Chief Financial
Officer
Independent review report to easyJet plc
Report on the consolidated condensed financial statements
Our conclusion
We have reviewed easyJet plc's consolidated condensed financial
statements (the "interim financial statements") in the interim
report of easyJet plc for the 6 month period ended 31 March 2017.
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
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the consolidated statement of financial position as at 31 March 2017;
-- the consolidated income statement and the consolidated
statement of comprehensive income for the period then ended;
-- the consolidated statement of cash flows for the period then ended;
-- the consolidated 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
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook 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 Guidance and Transparency Rules
sourcebook 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 Guidance
and Transparency Rules sourcebook 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
15 May 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EANSSFLXXEFF
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