TIDMEZJ
RNS Number : 0430O
easyJet PLC
15 May 2018
15 May 2018
easyJet plc
Results for the six months ending 31 March 2018
easyJet delivers a strong first half performance and one of its
best winters ever;
unveils focus areas of investment to drive returns and profit
per seat
Strong first half performance
-- The strength of easyJet's network and customer proposition
helped to deliver strong performance in the first six months of the
financial year. This was supported by:
-- A positive trading environment and higher load factors across
easyJet routes
-- Capacity reductions by other airlines in easyJet markets
-- The partial movement of Easter into the first half from the
second half in 2017
-- Passenger numbers for the six months to 31 March 2018
increased by 3.0 million to 36.8 million, including 0.7 million
from easyJet's new Berlin Tegel operations launched in January
-- Capacity increased by 7.8% as easyJet grew its existing
network by 4.6% and added an additional 1.2 million seats at Tegel.
Load factor grew by 0.9 percentage points to 91.1% (91.9% excluding
Tegel)
-- Total revenue increased by 19.5% to GBP2,183 million (H1
2017: GBP1,827 million). Total revenue per seat increased by 10.9%
to GBP54.10 (H1 2017: GBP48.80), with an increase of 8.3% at
constant currency(1) . Ex-Tegel flying revenue per seat increased
by 12% to GBP54.64 and by 9.5% at constant currency, at the upper
end of previous guidance
-- easyJet's business model and strategy are underpinned by
sector leading balance sheet strength, with a net cash position at
31 March 2018 of GBP665m (31 March 2017: GBP353m)
-- Headline cost per seat excluding fuel increased by 2.2% to
GBP43.11 (H1 2017: GBP42.18), and increased by 1.6% at constant
currency (1.3% excluding Tegel), due to increased loads,
inflationary costs and the impact of severe weather, offset by
GBP66 million of cost savings
-- Headline profit before tax excluding Tegel was GBP8 million,
a GBP220 million improvement on H1 2017 (H1 2017 loss GBP212m).
Total headline loss before tax was GBP18 million, an improvement of
GBP194 million. Total loss before tax of GBP68 million for the six
months ended 31 March 2018 (H1 2017 loss GBP236m) principally
reflecting non-headline costs associated with the one-off
integration of Tegel operations and the sale and leaseback of ten
A319 aircraft
Investing in the future
-- Following an update of its strategy, easyJet plans to invest
in enhancing its propositions in holidays, business passengers,
customer loyalty and data. This leverages easyJet's existing strong
business model, network, brand, cost base and data leadership
-- This, combined with easyJet's rigorous approach to underlying
cost control and plans to address increasing disruption cost, is
expected to drive significant profit per seat improvement
-- As a result of its disciplined capital allocation and focus
on maximising shareholder returns easyJet is also targeting to
deliver increasing return on capital employed with a close focus on
cash
Outlook
-- easyJet continues to implement its strategy of profitable
growth to secure leading positions at primary airports and drive
returns over the long term
-- Forward bookings are ahead of last year: at 80% for the third
quarter and 57% for the second half
-- easyJet's ex-Tegel capacity growth in the second half is
forecast at circa 5% and revenue per seat at constant currency
growth in the second half is expected to be slightly positive,
reflecting more disciplined market capacity growth offsetting the
negative impact of the partial movement of Easter into the first
half
-- Full year headline cost per seat excluding fuel at constant
currency (assuming normal levels of disruption in H2) is expected
to increase by c.2%. This includes the impact of severe disruption
incurred in the first half and expected employee incentive payments
due to our strong profit and operational improvement
-- At Tegel we now expect to deliver a combined headline and
non-headline impact that is within the GBP160 million previously
guided. Headline loss before tax is expected to increase to between
GBP75 million and GBP95 million, due to a higher fuel price,
additional regulated security and noise tax charges and lower gauge
wet lease aircraft than planned, as well as the potential risk of
lower revenue from our finalised schedule. One-off non-headline
costs are now expected to be significantly better than previously
guided at around GBP60 million due primarily to savings in aircraft
lease costs and better execution of crew and fleet transition
-- easyJet currently expects headline profit before tax for the
financial year to 30 September 2018, including the impact of the
Headline loss from Tegel, to be in the range of GBP530 million to
GBP580 million
-- Capital expenditure for the financial year to 30 September
2018, including the investment in Tegel, is expected to remain in
line with previous guidance at GBP1.2bn
2018 2017 Change
Favourable/(adverse)
-------------------------------------------- ------ ------- ----------------------------
Capacity (millions of seats) 40.4 37.5 7.8 %
Load factor (%) 91.1 90.2 +0.9 ppts
Passengers (millions) 36.8 33.8 8.8 %
Total revenue (GBP million) 2,183 1,827 19.5 %
Headline profit before tax excluding Tegel
(GBP million) 8 (212) GBP222 m
Headline loss before tax (GBP million) (18) (212) GBP194 m
Total loss before tax (GBP million) (68) (236) GBP168 m
Headline constant currency loss before
tax (GBP million) (32) (212) 180 m
Headline basic loss per share (pence) (3.3) (43.8) 40.5 pence
Constant currency revenue per seat (GBP) 52.86 48.80 8.3 %
Total headline constant currency cost
per seat (GBP) 53.64 54.45 1.5 %
-------------------------------------------- ------ ------- --------------- -----------
Commenting on the results, Johan Lundgren, easyJet Chief
Executive said:
"easyJet has delivered an excellent performance reporting a
profit of GBP8 million, one of our best results ever in the winter
trading period (excluding the one-off impact of the start-up of our
Tegel operation). Total revenue was above GBP2bn for the first
time, up almost 20 per cent year on year. This was driven by a
record number of passengers at 37 million and our highest ever
ancillary sales due to giving passengers more options and lower
prices on hold luggage along with our improved inflight bistro.
"Our performance was helped by the reductions in capacity from
other airlines but was also driven by the strength of the easyJet
brand which is now the most considered airline brand in the UK(2) ,
moving ahead of BA for the first time. We also reached the
milestone of carrying 13 million business travellers a year -
partly supported by the increase in city to city routes as we
successfully started operations in Berlin Tegel.
"Turning to our strategy, I have today announced an increase in
investment in easyJet Holidays to gain a greater share of that
market, showcased a series of initiatives to increase the number of
passengers travelling on business and revealed plans to introduce a
new loyalty programme which will support and reinforce all of these
initiatives and will further increase passenger loyalty to easyJet.
I also outlined new investments to harness the power of our data to
improve our customer proposition, reduce costs and increase
revenue. All of these initiatives will provide higher profit per
seat and higher returns for our shareholders.
"I am also pleased to announce a number of new appointments to
the Airline Management Board with a mix of internal promotions and
new hires to easyJet. This will give the airline the right balance
of skills, experience and diversity to deliver our strategy and
take easyJet from strength to strength."
For further details please contact easyJet plc:
Institutional investors and sell side analysts:
+44 (0) 7989 665
Stuart Morgan Investor Relations 484
+44 (0) 7985 890
Michael Barker Investor Relations 939
Media:
+44 (0) 7985 873
Anna Knowles Corporate Communications 313
+44 (0) 207 251
Dorothy Burwell Finsbury 3801
+44 (0) 7733 294
930
There will be an analyst presentation at 09:30 am GMT on 15 May
2018 at Nomura, One Angel Lane, London, EC4R 3AB
A live webcast of the presentation will be available at
www.easyJet.com
Presentation begins at 9:30am London Time on 15 May 2018
A webcast of the presentation will be available both live and
for replay
(please register on the following link):
http://cache.merchantcantos.com/webcast/webcaster/4000/7464/16532/102990/Lobby/default.htm
or for those who prefer a telephone dial-in the numbers to use
are:
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: 9462784#
Overview
During the six months to 31 March 2018 easyJet delivered strong
revenue and profit growth. This is primarily due to the positive
trading environment developed as a result of the strength of its
network, brand and customer proposition. As the oil price continues
to rise, we expect financial pressure to increase on less efficient
airlines. easyJet will continue to manage its own capacity growth
plans to drive long-term returns.
The airline's strategy will enable it to continue to be a
structural winner within its chosen markets in the European
short-haul market.
Revenue
Total revenue increased by 19.5% to GBP2,183 million (H1 2017:
GBP1,827 million) and total revenue per seat grew by 10.9% to
GBP54.10 (H1 2017: GBP48.80), reflecting a strong underlying
revenue improvement as well as easyJet's acquisition of part of Air
Berlin's operations at Berlin Tegel airport.
Excluding Tegel operations, revenue per seat increased by 12% to
GBP54.64 and by 9.5% at constant currency to GBP53.45. This was
driven by:
-- easyJet's growth in capacity by 4.6%, focused on growth in
the French regions, further consolidating positions in core UK
airports and continuing to grow our number one positions in Basel
and Venice
-- An increase of 1.7 percentage points in load factor to 91.9%
-- The benefit of lower market capacity, with the one-off events
of bankruptcy at Monarch and Air Berlin and the winter withdrawal
of Ryanair from the UK domestic market
-- Seasonality - with the benefit of the partial movement of
Easter to the second quarter of the financial year (an H1 impact of
1.6% on revenue per seat at constant currency)
-- A strong performance on ancillary revenue per seat,
increasing by 14.0% at constant currency, due mainly to further
innovation and conversion uplift supported by digital acceleration.
Specifically easyJet improved its bag proposition, introducing a
new 15kg/23kg offering for our customers, smarter bag yield
algorithms and further benefits from the Hands Free product
-- A foreign currency revenue benefit from a stronger Euro against Sterling
Cost
Total headline cost per seat was broadly flat at GBP54.53 (H1
2017: GBP54.45) as the benefits of easyJet's cost focus and lower
fuel price offset a negative foreign exchange impact. Headline cost
per seat at constant currency improved by 1.5% to GBP53.64.
Excluding Tegel operations easyJet's headline cost per seat
excluding fuel at constant currency increased by 1.3% to GBP42.74,
higher than previously guided due to the impact of severe weather.
This cost performance is driven by:
-- Cost initiatives delivered GBP66 million in savings in the
half, with the majority relating to airport charges, offsetting
underlying inflation
-- Lower navigation charges
-- Up-gauging of fleet with the addition of 23 186-seat A320 aircraft since 31 March 2017
This has helped to offset:
-- Disruption and de-icing costs that increased cost per seat by
0.5% at constant currency, due to prolonged severe weather
throughout the period
-- Inflationary cost pressures, including the impact of
regulated airport charges, previously agreed crew pay deals and
higher ground handling charges in a number of countries
-- Additional ownership and financing costs that were
anticipated following investment in the long-term growth of the
airline and the A319 sale and leaseback transaction
-- Costs associated with higher load factor
-- Investment in resilience, including the hiring of ex-Monarch
crew and the investment in the new ground handling contract at
Gatwick
Tegel operations
On 15 December 2017 easyJet completed the partial acquisition of
Air Berlin's operations at Berlin Tegel airport. Progress to date
has been positive and in line with expectations.
easyJet's Tegel flying programme started on 5 January, operating
a winter schedule with a fleet of mainly wet leased aircraft in
order to retain its slot portfolio. As anticipated, in this
start-up phase Tegel flying has resulted in lower than average load
factors and revenue per seat due to the short lead times to sell
flights and a mainly inherited schedule. Higher than normal cost
per seat reflects the expensive nature of interim wet leasing
arrangements whilst easyJet introduces its own fleet.
H1 2018
Passengers 0.7m
---------
Seats flown 1.2m
---------
Load factor 63.4%
---------
Revenue GBP42m
---------
Revenue per seat GBP35.97
---------
Headline cost excluding fuel GBP48.02
---------
Headline loss -GBP26m
---------
Non-headline cost GBP24m
---------
easyJet is also making good progress with its non-flying
activities related to the transaction, mainly the recruitment and
training of crew and the process of converting ex-Air Berlin
aircraft into easyJet fleet. These costs are reported as
non-headline and totalled GBP24 million in H1 2018. These costs are
one-off in nature and no related costs are anticipated beyond this
financial year.
Non-headline costs
easyJet has incurred GBP50 million in non-headline costs during
the first half of FY 2018. These costs are separately disclosed as
non-headline profit before tax items. The most significant items
were as follows:
-- GBP19 million non-cash charge as a result of the sale and
leaseback of ten A319 aircraft in the first quarter (H1 2017: GBP16
million), which includes a GBP3 million adverse impact from foreign
exchange movements
-- GBP24 million charge associated with the integration costs of
the Berlin Tegel operation (H1 2017: GBPnil), as noted above
Non-headline items are material non-recurring items or are items
which do not reflect the trading performance of the business.
Further detail can be found in the notes to the accounts.
Strategic progress
Building on a strong foundation
easyJet has a well-established business model that provides a
strong foundation to drive profitable growth and long term
shareholder returns. easyJet is delivering its strategy
through:
1. A unique network
2. A structural cost advantage
3. Scale and a strong balance sheet
4. The best people
5. A strong brand
6. Data
A unique network
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.
During H1 2018 easyJet focused its growth on maintaining market
share in the UK and Switzerland and growing in regional France.
This included the opening of a new base in Bordeaux, where easyJet
is now the number one airline. easyJet also invested capacity
growth in its city strategy: in Venice to consolidate its number
one position, 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. In
March we closed our Hamburg base, transferring 85% of the workforce
to other bases. easyJet now has 29 bases across its network.
Building on this network easyJet has seen excellent results from
Worldwide by easyJet, its partnership with airlines and airports.
Bookings to date have included over 2,700 unique origin and
destination routes with Jersey, Chicago and Los Angeles the most
popular origin markets. Volume continues to grow steadily and is
now starting to benefit from the availability of new connections
such as in Venice. Partner connections make up c.55% of Worldwide
bookings with the remainder representing easyJet to easyJet
connections at its primary airports.
A structural cost advantage
easyJet is committed to maintaining its structural cost
advantage in the markets where it operates, primarily against the
legacy airlines. Through its cost focus easyJet continues to
identify both short-term efficiencies and longer term structural
cost savings, leveraging its increasing scale. These savings enable
the airline to offset the effects of underlying inflation, keep
fares low for our customers and address disruption costs.
easyJet achieves this through dedicated work streams covering
areas such as process improvement, supplier relationship
management, use of data, reducing bureaucracy and investment into
future technology. These are combined with a number of strategic
cost initiatives, such as the fleet investment programme including
up-gauging and cost efficiency from A320 and A321 NEOs as well as
our recent organisational review and predictive maintenance.
easyJet has achieved sustainable cost savings of over GBP450
million in the last seven years, with GBP66 million saved in H1
2018.
Scale and a strong balance sheet
easyJet has almost 300 aircraft and is set to carry over 90
million customers this year. As well as being a large airline it is
a relatively simple one - with one aircraft type, one brand, and
one main distribution channel. This means it can leverage scale
across the company. As it grows, easyJet's strategy is to drive out
complexity and keep its focus on simplicity and efficiency.
easyJet's total fleet as at 31 March 2018 comprised 298 aircraft
(30 September 2017: 279 aircraft), which is principally due to the
addition of ex-Air Berlin aircraft. The average age of the fleet
decreased slightly to 7.0 years (30 September 2017: 7.1 years). In
the first half easyJet's asset utilisation across the network
reduced to an average 9.7 block hours per day when compared to H1
2017 (10.0 hours), partly impacted by the severe weather disruption
in March.
Fleet as at 31 March 2018:
% of Changes Unexercised
Finance Operating fleet since Future purchase
Owned leases leases Total Sept 2017 deliveries rights
A319 79 - 55 134 45% (9) - -
A320
180 seat 46 1 28 75 25% 19 - -
A320
186 seat 71 4 9 84 28% 6 9 -
A320
neo 5 - - 5 2% 3 95 100
A321 - - - - - - 30 -
neo
------ ------- ---------- ------ ------- ----------- ------------ ------------
201 5 92 298 19 134 100
67% 2% 31%
easyJet's business model and strategy are underpinned by sector
leading balance sheet strength. easyJet is committed to its
investment grade rating, with a BBB+ rating from Standard &
Poor's and a Baa1 rating from Moody's.
Of the 206 aircraft on easyJet's balance sheet at 31 March 2018,
201 (98%) are unencumbered. At 31 March 2017 easyJet had 193
aircraft on its balance sheet of which 188 were unencumbered.
easyJet's funding position is strong with net cash at 31 March
2018 of GBP665m (31 March 2017: GBP353m). The year on year
improvement is due to an increase in unearned revenue from the
growth and timing of schedule releases, as well as improved
supplier terms.
The best people
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.
easyJet continues to recruit and promote internally to support
its growth. easyJet has today announced the appointment a number of
new Airline Management Board members. easyJet is pleased to
announce the appointment of Garry Wilson as the head of easyJet
Holidays, which is discussed in more detail below. Luca Zuccoli
will join as Chief Data Officer, to lead and coordinate the
management of data across the airline. Flic Howard-Allen has been
appointed to the position of Group Communications Director to
replace Paul Moore and Ella Bennett will become Group People
Director, taking over from our Interim Group People Director Jo
Ferris. Lis Blair has been promoted to become Chief Marketing
Officer, a role that was created in the airline's restructure in
January. Finally, as part of that same restructure Thomas Haagensen
has been appointed to the newly created role of Group Markets
Director, providing a clear voice for Europe within the
business.
easyJet will also continue to invest in its people in order to
drive the brand differentiation that our customers value. We need
to have the right people with the right skills and to provide them
with an environment that supports productivity and efficiency.
The proof of this is delivered every day by easyJet's crew who
prove that you can offer a differentiated service on short haul
flights by caring about your customers. easyJet's crew are hugely
engaged and committed - with only 6% crew turnover. Our customers
feel this as well, as is demonstrated by their satisfaction with
the friendliness and approachability of our crew at 86%. We will
continue to invest in our people in the following ways:
-- Performance management - easyJet will drive through the
planned benefits of the new structure and ways of working in place
following the recent organisational review which has delivered over
GBP12 million of sustainable overhead saving
-- Connected operations - easyJet will use technology to
introduce further efficiency and improvements for our crew
-- Productivity and efficiency - easyJet will invest in
infrastructure and technology to improve productivity across the
business
A strong brand
easyJet's brand is core to attracting customers in the European
short-haul market and is based on its customer proposition of an
attractive network, excellent service and market-leading digital
tools.
For the first time easyJet is the most considered airline brand
in the UK, moving ahead of British Airways and reaching our highest
score to date. In H1 2018 we are ranked number one in terms of
value for money perceptions, now 14 points ahead of BA and 19
points ahead of Ryanair. In Switzerland 4 in 10 consumers consider
easyJet their first choice airline whilst in France and Italy more
than 1 in 5 say the same. This was recently recognised in the
Skyscanner Award for Best Value Airline for European short haul
travel.
Data
easyJet sees data as a source of significant future advantage
and is pleased to announce that Luca Zuccoli has today been
appointed as easyJet's Chief Data Officer.
The airline has the potential to utilise better the billions of
data points it generates each year. easyJet is already using
machine learning and A.I., but only on a limited basis and with a
small team of data scientists. The business will invest in this
capability and platforms to unlock this potential, for example in
its recent creation of an Analytics Data Hub that aggregates data
from multiple sources across the business and provides the
architecture to drive commercial, cost and customer value.
easyJet will focus on three areas to deliver significant
benefits from data:
-- Revenue - opportunities to leverage existing data-based
initiatives, in particular focusing on enhancing the revenue
management system, harnessing customer-related information and
improving easyJet's network and scheduling processes
-- Cost and operations - improving utilisation and productivity,
fuel efficiency and resilience and minimising the impact of
disruption.
-- Customer - both on-board to complement existing demand and
personalisation initiatives, such as food and beverage, and
"off-board" where we will develop our capability to make the most
efficient, effective decisions to the customer's benefit such as in
managing disruption.
Future opportunities to drive margin and profit per seat
easyJet will continue to deliver its core strategy based on its
strong, established business model. easyJet will also now focus on
developing and investing in a number of opportunities where it can
leverage its existing assets and expertise to secure further
profitable growth and increased profit per seat.
This is an evolution of existing capabilities and will focus on
investing in three revenue initiatives, which build on areas of
core strength to drive revenue:
-- Transforming our holidays business
-- A more compelling business passengers proposition
-- Driving easyJet loyalty
To unlock the significant value in these initiatives, easyJet
expects to invest both capital and operational expenditure. The
majority of this investment will occur in Financial Year 2019 and
start to deliver increased profit per seat in FY 2020.
Transforming our holidays business
easyJet sees a significant opportunity to transform its holidays
proposition, based on its existing network of destinations and
frequencies, efficient low cost operations, its unique customer
base and the ability to develop a proposition that is aligned with
the easyJet brand. Currently only 500,000 passengers book a hotel
with us out of an addressable market of 20 million. We see an
opportunity to add significant value by forming a dedicated
business unit offering a clear and attractive proposition, based on
efficient technology and data.
easyJet has a clear vision to offer its customers quality, great
value hotels based on its understanding of their needs. On the
biggest and most attractive flows into the most popular
destinations in Europe easyJet has a market share, a frequency and
most importantly a cost position that no one else can match.
easyJet has a cost advantage of at least 20% over the leading
operators which allows us to offer great value to our
customers.
easyJet will develop closer and strong relationships directly
with selected hotel operators. By combining a quality, great value
hotel offer with the flexibility of multiple frequencies to major
European destinations, easyJet will deliver a better value
proposition for our customers.
easyJet will use its data and digital capability to support the
proposition, driving ancillary revenue through increasing
conversion and attachment rates and the overall average booking
value. easyJet will further develop its website and booking process
and add data-driven customisation to maximise the attraction to
passengers. By combining a quality, great value hotel offer with
the flexibility of multiple frequencies to major European
destinations, we will deliver a better value proposition for our
customers.
We have today announced the appointment of Garry Wilson to lead
easyJet Holidays and he will be a member of the Airline Management
Board and will report directly to the Group CEO.
Compelling business passenger proposition
easyJet has a well-established and attractive business
passengers proposition, based on its network of primary airports,
slot portfolio and high frequency on Europe's major commercial
routes. easyJet has built its business customer base from 10
million in 2012 to a record 13.7 million in the H1 2018. Whilst on
certain routes almost 60% of easyJet's customers are business
passengers, this community is under-represented in other markets.
easyJet will now aim to increase its loyal business customer base
and capturing more of the yield premium these individuals
provide.
easyJet's business customers like to arrive last and leave
first, with an additional on-board bag and an allocated seat.
easyJet can deliver this and more, whilst maintaining its
competitive "lowest fare on the day" that makes it attractive to
corporate buyers. Further improvements to the schedule can add a
business-bias on certain routes and frequencies. easyJet also wants
to make it easier for businesses to do business with us. This will
mostly focus on capabilities such as building a new online portal
to allow small and medium size businesses to book more easily with
us, automating invoicing and more direct contracting with our
corporate customers.
Driving easyJet Loyalty
easyJet continues to benefit from increasingly loyal customers.
In H1 2018, 75% of its seats were booked by returning customers,
representing 63 million passengers which is an increase of 6.7
million compared to H1 2017. easyJet's loyalty scheme Flight Club
is also producing demonstrable revenue benefits, with Flight Club
members increasing by 41% in H1 2018 compared to H1 2017, with over
8.4% of seats booked by Flight Club customers in H1 2018.
The development of innovative schemes in other industries shows
that loyalty does not need to be the expensive, complex structure
at other airlines. easyJet's current proposition to reward and
encourage customers to continue to fly with us is delivered through
the easyJet Plus and Flight Club schemes. Returning customers book
twice as many flights a year as new customers and drive both
passenger and ancillary revenue through increased demand,
conversion and attachment rates. easyJet has increased its number
of returning customers from 37 million in 2010 to over 60 million
but presently 46% of customers only fly with us once a year. This
represents a major opportunity to drive loyalty further and
complement other initiatives in both leisure and business.
Through reward and recognition, easyJet will introduce an
expanded offer to reach more of its customers, and continue to
improve its existing offering. easyJet will deliver a rewards and
recognition programme that will represent high value to our
customers but remain true to the easyJet brand. easyJet is still in
the early stages of how to develop its current proposition further
and will update the market later in the year.
Disruption
Further to our structural cost programme initiatives where we
leverage our scale, easyJet sees opportunities to address the
rising cost of disruption, which will also drive better On Time
Performance and customer satisfaction, as well as reduce overhead
costs.
On Time Performance
In the six months to 31 March 2018, On Time Performance (OTP)
was up one percentage point year on year to 81%. This is despite
the severe weather and regular third party industrial relations
activity during the period, which led to a 39% increase in
cancellations and delays to 4,605 (H1 2017: 3,302). Reflecting the
challenges of operating at scale in London airspace, OTP excluding
the UK reached 84%.
OTP % arrivals within Q1 Q2 H1
15 minutes(3)
------------------------------ ---- ---- ----
2018 Network 81% 82% 81%
Network excluding UK 83% 84% 84%
2017 Network 79% 80% 80%
Network excluding UK 82% 82% 82%
------------------------------ ---- ---- ----
UK AOC
On 14 May, the Civil Aviation Authority confirmed that easyJet
had been awarded a new UK Air Operator Certificate (AOC). easyJet
plans to transfer its UK-based fleet across to this AOC in June
2018 and our Luton-based Group Operations will continue to support
all three standalone AOCs in Austria and Switzerland as well as the
UK.
Targeting higher profit per seat and returns
Combining these opportunities with the strength of easyJet's
core business model and an enhanced Data capability, easyJet's
investment in these initiatives will drive higher profit per seat,
increase the return on capital employed and deliver sustainable
returns to shareholders through the dividend. As a result easyJet
now expects cost per seat excluding fuel at constant currency
(ex-Tegel) to be flat to marginally up in Financial Year 2019.
The focus on profit per seat will drive better decision making
for the long term and ensure the business makes the right level of
investment.
FY 2018 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 ex-Tegel is planned to
grow by around 5% in the second half of Financial Year 2018.
easyJet expects ex-Tegel revenue per seat at constant currency
for the second half of the financial year to be slightly positive,
reflecting on the one hand the negative impact of the move of
Easter and on the other hand an improving yield and capacity
environment, as well as the benefit of ongoing strikes at Air
France. Forward bookings are currently ahead of last year at 79%
for the quarter and 57% for the second half (H1 2017: 77% and 55%
respectively).
easyJet expects the ex-Tegel headline cost per seat at constant
currency excluding fuel to increase by c.2% for the full year
(assuming normal levels of disruption in H2). This additional
increase reflects the severe disruption seen in the first half of
the year and expected higher employee incentive costs due to our
strong profit and operational performance.
At Tegel we now expect to deliver a combined headline and
non-headline one-off impact that is within the GBP160m previously
guided. easyJet is now expecting an increase to the headline loss
to between GBP75 million and GBP95 million. This reflects a GBP15
million adverse impact from the increase in the fuel price in the
period, recent security charge increases in Germany, as well as a
lower average gauge than planned on some of our wet leased
aircraft. In addition this reflects uncertainty regarding summer
revenue whilst easyJet flies the, now finalised, sub-optimal ex-Air
Berlin schedule. This is anticipated to be offset by a combination
of trading benefits from Schönefeld, which benefits from the
improved Berlin customer proposition, and savings in the
non-headline implementation costs which are now expected to be
circa GBP60 million, primarily due to lower than expected lease
costs. easyJet expects Tegel operations to be earnings enhancing in
FY 2019.
It is estimated that at current exchange rates(4) and with jet
fuel remaining within a $680 metric tonne to $740 metric tonne
trading range, easyJet's unit fuel(5) bill excluding Tegel for the
12 months to 30 September 2018 is likely to decrease by between
GBP60 million and GBP70 million compared to the 12 months to 30
September 2017. easyJet's total fuel cost excluding Tegel for the
year to 30 September 2018 is currently estimated to be
approximately GBP1,120 million.
In addition, exchange rate movements are likely to have around a
GBP25 million positive impact on ex-Tegel headline profit before
tax compared to the twelve months to 30 September 2017.
easyJet expects that its reported headline profit before tax for
the 12 months to 30 September 2018 including Tegel will be GBP530
million to GBP580 million.
Capital expenditure for the financial year to 30 September 2018,
including the investment in Tegel, is expected to remain in line
with previous guidance at GBP1.2bn.
Hedging positions
Details of hedging arrangements as at 31 March 2018 are set out
below, which now includes fuel related to our Tegel operations:
Percentage of anticipated Fuel requirement US Dollar Euro surplus CHF surplus
requirement hedged requirement
------------------------------- ----------------- ------------- ------------- -----------
Six months to 30 September
2018 73% 76% 88% 78%
$524 /
Average rate metric tonne $1.36 EUR1.20 CHF 1.28
------------------------------- ----------------- ------------- ------------- -----------
Full year ending 30 September
2018 76% 80% 71% 76%
$519 /
Average rate metric tonne $1.36 EUR1.22 CHF 1.31
------------------------------- ----------------- ------------- ------------- -----------
Full year ending 30 September
2019 56% 59% 65% 58%
$549 /
Average rate metric tonne $1.33 EUR1.13 CHF 1.24
------------------------------- ----------------- ------------- ------------- -----------
(1) Constant currency is calculated by comparing 2018 financial
period performance translated at the 2017 financial period
effective exchange rate to the 2017 financial period reported
performance, excluding foreign exchange gains and losses on balance
sheet revaluations
(2) Source: Millward Brown brand tracker
(3) On-time performance measured by internal easyJet system
(4) US $ to GBP sterling 1.38, euro to GBP sterling 1.14.
Currency, capital expenditure and fuel increases are shown net of
hedging impact
(5) Unit fuel calculated as the difference between latest
estimate of FY'18 fuel costs less FY'17 fuel cost per seat
multiplied by FY'18 seat capacity
OUR FINANCIAL RESULTS
Total headline loss before tax decreased from GBP212 million for
the six months ended 31 March 2017 to GBP18 million for the six
months ended 31 March 2018. At constant currency, headline loss
before tax for the six months ended 31 March 2018 would have been
GBP32 million, giving a favourable foreign exchange impact of GBP14
million compared to last year. Total loss before tax decreased from
GBP236 million for the six months ended 31 March 2017 to GBP68
million for the six months ended 31 March 2018.
On 15 December 2017 easyJet completed the acquisition of part of
Air Berlin's operations at Berlin Tegel airport. Its flying
programme started on 5 January 2018, operating a winter schedule
with a fleet of mainly wet leased aircraft. As anticipated, Tegel
flying resulted in a dilutive impact to overall load performance,
revenue per seat and cost per seat whilst the operation is being
established.
The impact of the Tegel operation has been split out in the
Income Statement as it has a planned dilutive impact on the
performance of the business in year one. Therefore, the
presentation of ex-Tegel flying separately provides a more
appropriate comparator to the prior year.
Tegel headline loss in the period relates to our flying
activities in Tegel including the use of wet lease aircraft with
initially lower loads and yields. Tegel non-headline costs
represent the parallel ramp up of our dry lease operation,
including fleet conversion and staff recruitment and training
costs, as well as transaction costs.
The ex-Tegel result for the six months ended 31 March 2018 was a
headline profit before tax of GBP8 million.
FINANCIAL OVERVIEW
GBPm (Reported) H1 2018 H1 2017 H1 2018 H1 2018 H1 2017
------------------------------- -------- -------- -------- -------- --------
Ex-Tegel Tegel Total
------------------------------- ------------------ -------- ------------------
Revenue 2,141 1,827 42 2,183 1,827
Headline costs excluding fuel (1,683) (1,580) (57) (1,740) (1,580)
Fuel (450) (459) (11) (461) (459)
Headline profit/(loss) before
tax 8 (212) (26) (18) (212)
Headline tax (charge)/credit (2) 40 7 5 40
-------------------------------- -------- -------- -------- -------- --------
Headline profit/(loss) after
tax 6 (172) (19) (13) (172)
Non-headline loss after tax (22) (20) (19) (41) (20)
-------------------------------- -------- -------- --------
Total loss after tax (16) (192) (38) (54) (192)
-------------------------------- -------- -------- -------- -------- --------
GBP per seat (Reported) H1 2018 H1 2017 H1 2018 H1 2018 H1 2017
------------------------------- -------- -------- -------- -------- --------
Ex-Tegel Tegel Total
------------------------------- ------------------ -------- ------------------
Revenue 54.64 48.80 35.97 54.10 48.80
Headline costs excluding fuel (42.96) (42.18) (48.02) (43.11) (42.18)
Fuel (11.48) (12.27) (9.45) (11.42) (12.27)
-------------------------------- -------- -------- -------- -------- --------
Headline profit/(loss) before
tax 0.20 (5.65) (21.50) (0.43) (5.65)
Headline tax (charge)/credit (0.05) 1.06 5.95 0.11 1.06
-------------------------------- -------- -------- -------- -------- --------
Headline profit/(loss) after
tax 0.15 (4.59) (15.55) (0.32) (4.59)
Non-headline loss after tax (0.54) (0.51) (16.73) (1.02) (0.51)
-------------------------------- -------- -------- -------- -------- --------
Total loss after tax (0.39) (5.10) (32.28) (1.34) (5.10)
-------------------------------- -------- -------- -------- -------- --------
The total number of passengers carried increased by 8.8% to 36.8
million, driven by a growth in seats flown of 7.8% to 40.4 million
seats and load factor increasing by 0.9 percentage points to 91.1%.
Ex-Tegel number of passengers increased by 6.6%, seats flown
increased by 4.6% and load factor increased by 1.7 percentage
points.
Total revenue per seat grew by 10.9% to GBP54.10 (H1 2017:
GBP48.80), and increased by 8.3% at constant currency. Ex-Tegel
revenue per seat performance exceeded last year by 9.5% at constant
currency. The increase in revenue per seat is a consequence of the
positive trading environment based on the strength of our network
and customer proposition, capacity reductions and lower growth in
easyJet markets, in particular as a result of the bankruptcies of
Monarch, Air Berlin and Alitalia as well as the impact from
Ryanair's flight cancellations. This was further aided by the
partial movement of Easter into March. Tegel generated GBP42
million of revenue in the period; Tegel revenue per seat was
GBP35.97 which had a dilutive impact on total revenue per seat.
Total headline cost per seat excluding fuel increased by 2.2% to
GBP43.11, and increased by 1.6% at constant currency. Ex-Tegel
headline cost per seat excluding fuel was GBP42.96, exceeding last
year by 1.3% at constant currency. Crew costs were higher than last
year due to agreed inflationary increases in pay. Disruption
charges increased, mainly due to an increase in the number of
events caused by severe weather and industrial action and the
greater level of customer awareness of EU 261, along with
additional de-icing costs due to the higher levels of adverse
winter weather. These were partially offset by unit cost benefits
as we deliver growth at our larger airports, the up-gauging of
fleet to bigger and more efficient aircraft, savings obtained from
airport lean initiatives and navigation price benefits. Tegel
headline costs were GBP68 million in the period and headline cost
per seat was GBP57.47, which had an impact on total cost per
seat.
Fuel costs fell by 6.9% to GBP11.42 per seat (H1 2017: GBP12.27)
and by 12.2% at constant currency. Increases in the market price of
fuel were more than offset by the impact of the operation of
easyJet's fuel and USD hedging policy.
A total non-headline cost before tax of GBP50 million was
recognised in the period, consisting of a GBP19 million charge as a
result of the sale and leaseback of ten A319 aircraft in the
period, a GBP1 million charge associated with the organisational
review, a GBP4 million charge for Brexit-related plans, a GBP24
million charge for the integration of the Berlin Tegel operation
and a GBP2 million charge relating to fair value adjustments
associated with the cross currency interest rate swaps in place for
the Eurobonds issued on February 2016 and October 2016.
Corporate tax has been recognised at an effective rate of 19.8%
(H1 2017: credited at 18.7%) based on rates substantively enacted
as at 31 March 2018, resulting in a tax credit of GBP14 million
during the period.
Loss per share and dividends per share
H1 2018 H1 2017 Change
pence pence pence
per share per share per share
--------------------------------------------- ----------- ----------- -----------
Basic headline loss per share (3.3) (43.8) 40.5
Basic total loss per share (13.7) (48.9) 35.2
Ordinary dividend per share paid during the
period 40.9 53.8 (12.9)
---------------------------------------------- ----------- ----------- -----------
Basic headline loss per share decreased by 40.5 pence as a
consequence of the GBP159 million decrease in the headline loss
after tax in the six months to 31 March 2018 compared 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 40.9
pence per share on 23 March 2018, with a record date of 2 March
2018.
EXCHANGE RATES
The proportion of revenue and costs denominated in currencies
other than sterling remained broadly consistent year-on-year:
Revenue Costs
-------- -------- --------- ---------
H1 2018 H1 2017 H1 2018 H1 2017
--------------------------------- -------- -------- --------- ---------
Sterling 44% 45% 32% 33%
Euro 44% 43% 39% 36%
US dollar 1% 1% 22% 23%
Other (principally Swiss franc) 11% 11% 7% 8%
---------------------------------- -------- -------- --------- ---------
Average exchange rates
H1 2018 H1 2017
--------------------------------- -------- -------- --------- ---------
Euro - revenue EUR1.15 EUR1.21
Euro - costs EUR1.13 EUR1.16
US dollar $1.41 $1.51
Swiss franc CHF 1.28 CHF 1.78
---------------------------------- -------- -------- --------- ---------
The net favourable impact on profit due to the year-on-year
changes in exchange rates was mainly driven by the weakening of
Sterling against the Euro and Swiss Franc, partially offset by the
adverse impact of the Sterling/US Dollar exchange rate movement on
fuel costs:
Headline Euro Swiss US dollar Other Total
franc
Favourable/(adverse) GBP million GBP million GBP million GBP million GBP million
------------------------------------- ------------ ------------ ------------ ------------ ------------
Total revenue 44 6 (1) 1 50
Fuel - - (26) - (26)
Headline costs excluding fuel (18) 8 1 (1) (10)
-------------------------------------- ------------ ------------ ------------ ------------ ------------
Headline loss before tax 26 14 (26) - 14
-------------------------------------- ------------ ------------ ------------ ------------ ------------
Non-headline Euro Swiss US dollar Other Total
franc
Favourable/(adverse) GBP million GBP million GBP million GBP million GBP million
------------------------------------- ------------ ------------ ------------ ------------ ------------
Non-headline costs excluding
prior year balance sheet
revaluations - - (7) - (7)
Prior year balance sheet revaluations 4 - (4) (1) (1)
-------------------------------------- ------------ ------------ ------------ ------------ ------------
Non-headline loss before tax 4 - (11) (1) (8)
-------------------------------------- ------------ ------------ ------------ ------------ ------------
FINANCIAL PERFORMANCE
Ex-Tegel revenue
H1 2018 H1 2017
---------------------- ----------------------
GBP per GBP per
GBP million seat GBP million seat
------------------------ ------------ -------- ------------ --------
Passenger revenue 1,695 43.25 1,461 39.02
Ancillary revenue 446 11.39 366 9.78
------------------------- ------------ -------- ------------ --------
Ex-Tegel total revenue 2,141 54.64 1,827 48.80
------------------------- ------------ -------- ------------ --------
Ex-Tegel revenue per seat increased by 12.0% to GBP54.64 H1
2017: GBP48.80). At constant currency, ex-Tegel revenue per seat
increased by 9.5% to GBP53.45. Ex-Tegel load factor during the
period increased by 1.7 percentage points to 91.9%.
The increase in ex-Tegel revenue and revenue per seat is a
consequence of the positive trading environment based on the
strength of easyJet's network and customer proposition, capacity
reductions and lower growth in easyJet markets, in particular as a
result of the bankruptcies of Monarch, Air Berlin and Alitalia as
well as the impact from Ryanair's flight cancellations. The UK and
Germany have been specifically impacted, where Monarch and Ryanair
capacity reductions have created greater demand for our UK routes,
and Germany has been helped by the exit of Air Berlin. This is
further aided by the partial movement of Easter from April into
March.
Ex-Tegel headline costs excluding fuel
H1 2018 H1 2017
------------ -------- ------------ --------
GBP million GBP per GBP million GBP per
seat seat
----------------------------------- ------------ -------- ------------ --------
Operating costs
Airports and ground handling 650 16.56 624 16.66
Crew 333 8.51 293 7.82
Navigation 163 4.17 159 4.25
Maintenance 138 3.52 127 3.39
Selling and marketing 62 1.59 59 1.57
Other costs 163 4.16 160 4.27
------------------------------------ ------------ -------- ------------ --------
1,509 38.51 1,422 37.96
------------ -------- ------------ --------
Ownership costs
Aircraft dry leasing 65 1.66 55 1.46
Depreciation 94 2.40 85 2.28
Amortisation 7 0.18 7 0.17
Net interest payable 8 0.21 11 0.31
------------------------------------ ------------ -------- ------------ --------
174 4.45 158 4.22
------------ -------- ------------ --------
Ex-Tegel headline costs excluding
fuel 1,683 42.96 1,580 42.18
------------------------------------ ------------ -------- ------------ --------
Ex-Tegel headline cost per seat excluding fuel increased by 1.9%
to GBP42.96, 1.3% at constant currency.
Ex-Tegel headline airports and ground handling cost per seat
decreased by 0.6% and by 1.2% at constant currency. Unit cost
benefits have impacted as we deliver growth at our larger airports,
along with savings obtained from airport lean initiatives. These
have been partially offset by additional de-icing costs, due to the
prolonged adverse winter weather and inflationary increases in
ground handling charges in the UK, Germany and Spain.
Ex-Tegel headline crew cost per seat increased by 8.9% to
GBP8.51, 8.6% at constant currency. This was driven by agreed
inflationary increases in crew and pilot pay. There has been a 12%
growth in crew numbers, due to higher than expected retention over
the winter. High levels of disruption have also contributed to
higher crew costs per seat.
Ex-Tegel headline navigation cost per seat decreased by 2.1% to
GBP4.17 and decreased by 3.6% at constant currency. This was driven
by the annualisation of reduced charges primarily in France and
Germany, and the impact of the change in fleet mix.
Ex-Tegel headline maintenance cost per seat increased by 3.7% to
GBP3.52 and increased by 4.4% at constant currency. This was driven
by higher programme costs from the increased level of lease returns
and additional winter aircraft recovery resilience. These were
somewhat offset by the up-gauging of the fleet and the impact of
maintenance discounting.
Ex-Tegel headline other operating costs per seat decreased by
2.6% to GBP4.16 per seat, 2.7% at constant currency. There were a
high number of disruption events in the period, mainly as a result
of adverse weather conditions, and a greater level of customer
awareness of EU 261. The disruption increase has been offset by
other overhead savings as a result of the organisational
review.
Ex-Tegel headline aircraft dry leasing cost per seat increased
by 13.9% to GBP1.66, 9.9% at constant currency. The adverse
variance was driven by the sale and leaseback of ten aircraft in
December 2016 and ten in October to November 2017.
Ex-Tegel depreciation costs per seat have increased by 5.3% to
GBP2.40, driven by the acquisition of 23 new aircraft last year and
nine new aircraft this year. The average number of owned fleet
increased by 7% year-on-year.
Ex-Tegel headline net interest costs decreased by 32.3% to
GBP0.21, 29.0% at constant currency. The variance was driven by a
dividend received in the period, along with higher interest
receivable from higher cash balances and more favourable rates.
Ex-Tegel fuel costs
H1 2018 H1 2017
------------ -------- ------------ --------
GBP million GBP per GBP million GBP per
seat seat
--------------- ------------ -------- ------------ --------
Ex-Tegel fuel 450 11.48 459 12.27
---------------- ------------ -------- ------------ --------
Ex-Tegel fuel cost per seat decreased by 6.5% and by 11.7% at
constant currency.
During the period the average market fuel price increased by 24%
to $620 per tonne from $500 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 12.5%
to GBP393 per tonne from GBP449 per tonne in the previous year.
Headline Tegel costs
Tegel headline costs excluding fuel for the period were GBP57
million, of which GBP23 million was airports and ground handling
and GBP16 million related to wet leasing, which had an impact on
total cost per seat excluding fuel (GBP48.02 total versus GBP42.96
for ex-Tegel flying) as the operation is being established.
Non-headline items
H1 2018 H1 2017
------------ -------- ------------ --------
GBP million GBP per GBP million GBP per
seat seat
------------------------------------- ------------ -------- ------------ --------
Sale and leaseback charge (19) (0.47) (16) (0.42)
Organisational review (1) (0.04) (2) (0.09)
Brexit-related costs (4) (0.09) (1) (0.02)
Tegel integration (24) (0.60) - -
Balance sheet foreign exchange loss - - (1) (0.01)
Fair value adjustment (2) (0.05) (4) (0.09)
-------------------------------------- ------------ -------- ------------ --------
Non-headline charge before tax (50) (1.25) (24) (0.63)
-------------------------------------- ------------ -------- ------------ --------
Non-headline profit before tax items of GBP50 million
comprise:
-- an GBP11 million loss on disposal and an GBP8 million
maintenance provision catch-up - both one-off charges as a result
of the sale and leaseback of ten A319 aircraft in the period,
arising due to the age of the selected aircraft and maintenance
provision accounting;
-- a GBP1 million charge associated with implementing the organisational review;
-- a GBP4 million charge for our Brexit-related plans;
-- a GBP24 million charge for the costs associated with the
integration of the Tegel operation; and
-- a GBP2 million charge relating to fair value adjustments
associated with the cross currency interest rate swaps in place for
the Eurobonds issued on February 2016 and October 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 31 ended 31
March 2018 March 2017 Change
GBP million GBP million GBP million
------------------------------------------------ ------------ ------------ ------------
Operating loss (58) (220) 162
Depreciation and amortisation 102 92 10
Unearned revenue movement 741 730 11
Other net working capital movement 11 (63) 74
Net tax paid (48) (28) (20)
Net capital expenditure (387) (302) (85)
Net proceeds from sale and operating leaseback
of aircraft 106 115 (9)
Purchase of own shares for employee share
schemes (2) (6) 4
Net decrease in restricted cash 1 - 1
Other (including the effect of exchange
rates) 4 36 (32)
Ordinary dividend paid (162) (214) 52
------------------------------------------------- ------------ ------------ ------------
Net increase in net cash 308 140 168
------------------------------------------------- ------------ ------------ ------------
Net cash at beginning of period 357 213 144
Net cash at end of period 665 353 312
------------------------------------------------- ------------ ------------ ------------
Net cash at 31 March 2018 was GBP665 million (31 March 2017:
GBP353 million) and comprised cash and money market deposits of
GBP1,624 million (31 March 2017: GBP1,308 million) and borrowings
of GBP959 million (31 March 2017: GBP955 million). After allowing
for the impact of aircraft operating leases (seven times operating
lease costs incurred in the 12 months to 31 March 2018), adjusted
net debt at 30 September 2017 of GBP413 million has decreased by
GBP175 million to GBP238 million.
Net capital expenditure includes the acquisition of nine A320
aircraft (31 March 2017: nine 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 252 at 31 March 2017
to 265 at 31 March 2018.
easyJet made net corporation tax payments totalling GBP48
million during the period (2017: GBP28 million).
Summary consolidated statement of financial position
31 March 30 September Change
2018 2017
GBP million GBP million GBP million
------------------------------------------ ------------ ------------- ------------
Goodwill 365 365 -
Property, plant and equipment 3,648 3,525 123
Derivative financial instruments 106 92 14
Unearned revenue (1,468) (727) (741)
Net working capital (458) (543) 85
Restricted cash 6 7 (1)
Net cash 665 357 308
Current and deferred taxation (235) (284) 49
Other non-current assets and liabilities 26 10 16
------------------------------------------- ------------ ------------- ------------
2,655 2,802 (147)
------------ ------------- ------------
Opening shareholders' equity 2,802 2,694
(Loss)/profit for the period (54) 305
Ordinary dividend paid (162) (214)
Change in hedging reserve 64 14
Other movements 5 3
------------------------------------------- ------------ -------------
2,655 2,802
------------ -------------
Since 30 September 2017 net assets have decreased by GBP147
million, due to the payment of the ordinary dividend (GBP162
million) combined with the loss for the period, offset by the
favourable movement of the hedging reserve. The movement of the
hedging reserve was primarily due to a favourable mark-to-market
movement on Jet fuel forward contracts.
The net book value of property, plant and equipment increased by
GBP123 million driven principally by the acquisition of nine A320
family aircraft and pre-delivery payments relating to future
aircraft purchases, offset by depreciation.
Unearned revenue increased by GBP741 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. Unearned revenue is
GBP170 million higher than at 31 March 2017 due to the increased
revenue activity year-on-year, driven by the recent changes in
trading conditions and the competitor landscape.
KEY STATISTICS
Operating measures 2018 2017 Increase/(decrease)
-------------------------------------------- -------------------- -------- ----------------------
Ex-Tegel Total Ex-Tegel Total
-------------------------------------------- ---------- -------- -------- ------------ --------
Seats flown (millions) 39.2 40.4 37.5 4.6% 7.8%
Passengers (millions) 36.0 36.8 33.8 6.6% 8.8%
Load factor 91.9% 91.1% 90.2% 1.7ppt 0.9ppt
Available seat kilometres (ASK) (millions) 42,300 43,215 39,635 6.7% 9.0%
Revenue passenger kilometres (RPK)
(millions) 39,280 39,875 36,190 8.5% 10.2%
Average sector length (kilometres) 1,080 1,071 1,058 2.0% 1.2%
Sectors 231,184 238,359 225,052 2.7% 5.9%
Block hours 444,257 454,781 427,274 4.0% 6.4%
Number of aircraft owned/leased at
end of period 279 298 266 4.9% 12.0%
Average number of aircraft owned/leased
during period 278.7 285.8 260.9 6.8% 9.5%
Number of aircraft operated at end
of period 262 265 252 4.0% 5.2%
Average number of aircraft operated
during period 257.8 258.2 235.4 9.5% 9.7%
Operated aircraft utilisation (hours
per day) 9.5 9.4 10.0 (5.0%) (5.3%)
Owned aircraft utilisation (hours
per day) 8.8 8.5 9.0 (2.2%) (5.1%)
Number of routes operated at end
of period 881 900 837 5.3% 7.5%
Number of airports served at end
of period 149 148 135 10.4% 9.6%
--------------------------------------------- ---------- -------- -------- ------------ --------
Financial measures
-------------------------------------------- ---------- -------- -------- ------------ --------
Total loss before tax per seat (GBP) (0.46) (1.68) (6.28) 92.7% 73.3%
Headline profit/(loss) before tax
per seat (GBP) 0.20 (0.43) (5.65) 103.5% 92.3%
Total loss before tax per ASK (pence) (0.04) (0.16) (0.59) 92.8% 73.6%
Headline profit/(loss) before tax
per ASK (pence) 0.02 (0.04) (0.53) 103.5% 92.4%
Revenue
Revenue per seat (GBP) 54.64 54.10 48.80 12.0% 10.9%
Revenue per seat at constant currency
(GBP) 53.45 52.86 48.80 9.5% 8.3%
Revenue per ASK (pence) 5.06 5.05 4.61 9.8% 9.6%
Revenue per ASK at constant currency
(pence) 4.95 4.94 4.61 7.4% 7.1%
Costs
Per seat measures
Headline cost per seat (GBP) 54.44 54.53 54.45 0.0% 0.2%
Non-headline cost per seat (GBP) 0.66 1.25 0.63 2.2% 96.2%
Headline cost per seat excluding
fuel (GBP) 42.96 43.11 42.18 1.9% 2.2%
Headline cost per seat excluding
fuel at constant currency (GBP) 42.74 42.86 42.18 1.3% 1.6%
Headline operating cost per seat
(GBP) 49.99 50.15 50.23 (0.5%) (0.2%)
Headline operating cost per seat
excluding fuel (GBP) 38.51 38.73 37.96 1.5% 2.0%
Headline operating cost per seat
excluding fuel at constant currency
(GBP) 38.34 38.53 37.96 1.0% 1.5%
Headline ownership cost per seat
(GBP) 4.45 4.38 4.22 5.6% 4.0%
Per ASK measures
Headline cost per ASK (pence) 5.04 5.09 5.14 (2.0%) (1.0%)
Non-headline cost per ASK (pence) 0.06 0.12 0.06 2.2% 93.9%
Headline cost per ASK excluding fuel
(pence) 3.98 4.02 3.98 (0.1%) 1.0%
Headline cost per ASK excluding fuel
at constant currency (pence) 3.96 4.00 3.98 (0.7%) 0.5%
Headline operating cost per ASK (pence) 4.63 4.68 4.75 (2.4%) (1.3%)
Headline operating cost per ASK excluding
fuel (pence) 3.57 3.61 3.59 (0.5%) 0.8%
Headline operating cost per ASK excluding
fuel at constant currency (pence) 3.55 3.60 3.59 (1.0%) 0.3%
Headline ownership cost per ASK (pence) 0.41 0.41 0.39 3.5% 2.8%
--------------------------------------------- ---------- -------- -------- ------------ --------
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 2017 Annual report and accounts and include
the following types of risks:
-- Safety
-- Commercial and Operational
-- Financial
-- Compliance and regulatory
-- Reputational
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 33 to 40 of our Annual report and
accounts for the year to 30 September 2017, which are available on
our website http://corporate.easyjet.com
CONDENSED FINANCIAL INFORMATION
Consolidated income statement (unaudited)
Six months ended 31 March
2018 2018 2018 2017 2017 2017
Non-headline Non-headline
(note (note
Headline 3) Total Headline 3) Total
Notes GBP million GBP million GBP million GBP million GBP million GBP million
----------------- ------ ------------ ------------- ------------ ------------ ------------- ------------
Passenger revenue 1,729 - 1,729 1,461 - 1,461
Ancillary revenue 454 - 454 366 - 366
------------------ ------ ------------ ------------- ------------ ------------ ------------- ------------
Total revenue 2,183 - 2,183 1,827 - 1,827
Fuel (461) - (461) (459) - (459)
Airports and ground
handling (673) - (673) (624) - (624)
Crew (337) (1) (338) (293) - (293)
Navigation (166) - (166) (159) - (159)
Maintenance (139) (18) (157) (127) (6) (133)
Selling and
marketing (67) - (67) (59) - (59)
Other costs (181) (22) (203) (160) (13) (173)
------------------ ------ ------------ ------------- ------------ ------------ ------------- ------------
EBITDAR 159 (41) 118 (54) (19) (73)
Aircraft dry
leasing (67) (7) (74) (55) - (55)
Depreciation 7 (95) - (95) (85) - (85)
Amortisation of
intangible
assets (7) - (7) (7) - (7)
------------------ ------ ------------ ------------- ------------ ------------ ------------- ------------
Operating loss (10) (48) (58) (201) (19) (220)
Interest
receivable
and other
financing
income 7 - 7 3 - 3
Interest payable
and other
financing
charges (15) (2) (17) (14) (5) (19)
------------------ ------ ------------ ------------- ------------ ------------ ------------- ------------
Net finance
charges (8) (2) (10) (11) (5) (16)
Loss before tax (18) (50) (68) (212) (24) (236)
Tax credit 4 5 9 14 40 4 44
Loss for the period (13) (41) (54) (172) (20) (192)
-------------------------- ------------ ------------- ------------ ------------ ------------- ------------
Loss per share,
pence
Basic 5 (13.7) (48.9)
------------------ ------ ------------ ------------- ------------ ------------ ------------- ------------
Consolidated statement of comprehensive income (unaudited)
Six months Six months
ended ended
31 March 31 March
2018 2017
Notes GBP million GBP million
---------------------------------------- ------ ------------ ------------
Loss for the period (54) (192)
Other comprehensive income/(expense)
Cash flow hedges
Fair value gains in the period 138 16
(Gains)/losses transferred to income
statement (46) 66
Gains transferred to property, plant
and equipment (14) (23)
Related tax charge 4 (14) (11)
----------------------------------------- ------ ------------ ------------
64 48
Total comprehensive income/(expense)
for the period 10 (144)
----------------------------------------- ------ ------------ ------------
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
2018 2017
Notes GBP million GBP million
---------------------------------------- ------ ------------ -------------
Non-current assets
Goodwill 365 365
Other intangible assets 224 179
Property, plant and equipment 7 3,648 3,525
Derivative financial instruments 113 87
Restricted cash - 7
Other non-current assets 116 74
----------------------------------------- ------ ------------ -------------
4,466 4,237
Current assets
Trade and other receivables 342 275
Derivative financial instruments 134 131
Current tax assets 11 -
Restricted cash 6 -
Money market deposits 684 617
Cash and cash equivalents 940 711
----------------------------------------- ------ ------------ -------------
2,117 1,734
Current liabilities
Trade and other payables (713) (714)
Unearned revenue (1,468) (727)
Borrowings (8) (8)
Derivative financial instruments (95) (82)
Current tax payable - (35)
Provisions for liabilities and charges (87) (104)
----------------------------------------- ------ ------------ -------------
(2,371) (1,670)
Net current liabilities (254) 64
Non-current liabilities
Borrowings (951) (963)
Derivative financial instruments (46) (44)
Non-current deferred income (23) (25)
Provisions for liabilities and charges (291) (218)
Deferred tax (246) (249)
----------------------------------------- ------ ------------ -------------
(1,557) (1,499)
Net assets 2,655 2,802
----------------------------------------- ------ ------------ -------------
Shareholders' equity
---------------------------------------- ------ ------------ -------------
Share capital 108 108
Share premium 659 659
Hedging reserve 102 38
Translation reserve 1 1
Retained earnings 1,785 1,996
----------------------------------------- ------ ------------ -------------
2,655 2,802
---------------------------------------- ------ ------------ -------------
Consolidated statement of changes in equity (unaudited)
Share Share Hedging Translation Retained
capital premium reserve reserve earnings Total
GBP million GBP million GBP million GBP million GBP million GBP million
------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
At 1 October 2017 108 659 38 1 1,996 2,802
Total comprehensive
(expense)/income - - 64 - (54) 10
Dividends paid (note 6) - - - - (162) (162)
Share incentive schemes
Value of employee services - - - - 7 7
Purchase of own shares - - - - (2) (2)
-------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
At 31 March 2018 108 659 102 1 1,785 2,655
-------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
Share Share Hedging Translation Retained
capital premium reserve reserve earnings Total
(restated)
GBP million GBP million GBP million GBP million GBP million GBP 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
(expense)/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
-------------------------------- ------------ ------------ ------------ ------------ ------------ ------------
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.
Details of the restatement made to the opening retained earnings
as at 1 October 2016 can be found in the Annual Report and Accounts
for the year ended 30 September 2017.
Consolidated statement of cash flows (unaudited)
Six months Six months
ended ended
31 March 31 March
2018 2017
Notes GBP million GBP million
---------------------------------------------- ------ ------------ ------------
Cash flows from operating activities
Cash generated from operations 8 814 560
Ordinary dividends paid 6 (162) (214)
Interest and other financing charges
paid (17) (27)
Interest and other financing income
received 15 3
Net tax paid (48) (28)
----------------------------------------------- ------ ------------ ------------
Net cash generated from operating activities 602 294
Cash flows from investing activities
Purchase of property, plant and equipment 7 (335) (279)
Purchase of intangible assets (52) (23)
Net increase in money market deposits 9 (69) (379)
Net proceeds from sale and operating
leaseback of aircraft 106 115
Net cash used by investing activities (350) (566)
Cash flows from financing activities
Purchase of own shares for employee
share schemes (2) (6)
Proceeds from Eurobond issue 9 - 451
Repayment of bank loans and other borrowings 9 - (219)
Repayment of capital element of finance
leases 9 (3) (3)
Net decrease in restricted cash 1 -
---------------------------------------------- ------ ------------ ------------
Net cash generated from financing activities (4) 223
Effect of exchange rate changes (19) 8
Net increase/(decrease) in cash and
cash equivalents 229 (41)
Cash and cash equivalents at beginning
of period 711 714
Cash and cash equivalents at end of
period 9 940 673
----------------------------------------------- ------ ------------ ------------
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
2017, 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 2017 were approved by the Board of Directors on 20
November 2017, 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 2017.
Changes in disclosures and presentation of performance
measures
Prior to 1 October 2017, easyJet categorised total revenue
earned on the face of the income statement between seat and
non-seat revenue. From 1 October 2017, total revenue is categorised
between passenger and ancillary revenue. This change provides
greater transparency of the ancillary element of revenue and brings
easyJet in line with other airlines.
Ancillary revenue includes revenue from the provision of checked
baggage, allocated seating and change fees, and also includes
non-seat revenue which arises from commissions earned from services
sold on behalf of partners and inflight sales.
New and revised standards and interpretations not applied
A number of new or revised standards and interpretations issued
by the International Accounting Standards Board (IASB) have not
been applied in preparing these interim financial statements as
their effective dates fall in periods beginning on or after 1
October 2017. The Directors have particularly focused on the future
adoption of the following standards and interpretations, which are
due to be adopted in the year ended 30 September 2019:
IFRS 15 'Revenue from Contracts with Customers'
easyJet will adopt IFRS 15 on 1 October 2018 and anticipates
applying the cumulative catch-up ("modified") transition method.
Details of the requirements of IFRS 15 were laid out in our Annual
Report and Accounts for the year ended 30 September 2017.
easyJet has identified three principal areas which will be
impacted on adoption of IFRS 15:
-- Revenue recognition from certain revenue streams, principally
administration and change fees, will be delayed from the date of
booking to the date of flight. This change is expected to result in
a higher proportion of annual revenues being recognised in the
second half of the financial year. The anticipated full year impact
of this change is expected to be immaterial.
-- As IFRS 15 will be applied using the cumulative catch-up
method, a significant one-off adjustment increase to unearned
revenues will be booked (in respect of bookings made in the year
ended 30 September 2018, for flights in the following financial
year). Under current accounting standards, these revenues will be
recognised in the year ended 30 September 2018 (on a booked basis);
on adoption of IFRS 15 these fees are deferred in the statement of
financial position, with a charge recognised in retained earnings,
until the date of the flight at which point the revenues are
recognised. The magnitude of the adjustment required will only be
known at 30 September 2018 but will be disclosed within the Annual
Report and Accounts for the year ended 30 September 2018.
-- A proportion of compensation payments made to customers (in
respect of flight delays), previously recorded wholly within
expenses, will be offset against revenues. This presentational
change will have no impact on the overall profit for the year.
IFRS 9 'Financial Instruments'
easyJet will adopt IFRS 9 on 1 October 2018 and anticipates
applying the standard prospectively with no retrospective
adjustments required. Details of the requirements of IFRS 9 were
laid out in our Annual Report and Accounts for the year ended 30
September 2017. easyJet does not anticipate any material change in
its consolidated financial statements in respect of the
classification or measurement of its financial instruments or in
its hedging activities on adoption of the standard.
IFRS 16 'Leases'
easyJet plans to early adopt IFRS 16 on 1 October 2018, bringing
the timing of adoption in line with that of IFRS 9 and IFRS 15.
easyJet anticipates applying the cumulative catch-up ("modified")
transition method. Details of the changes to accounting for leases
under IFRS 16 were laid out in our Annual Report and Accounts for
the year ended 30 September 2017.
As disclosed in the Annual Report and Accounts for the year
ended 30 September 2017, easyJet anticipates significant levels of
right of use assets and lease liabilities being recognised on
implementation of IFRS 16. During the period ending 31 March 2018,
easyJet has updated its IFRS 16 impact assessment taking into
account new leases entered into in the period resulting from the
recent Air Berlin and sale and leaseback transactions. At 31 March
2018, easyJet anticipates that on adoption of IFRS 16 it will
recognise circa GBP0.5 billion of right of use assets and GBP0.5
billion of lease liabilities. Annual operating lease expenses,
which would have been recognised under existing accounting
standards, will be replaced by anticipated similar levels of
depreciation and interest expense such that no material impact on
profit before tax is expected in the year of transition.
Retained earnings are expected to decrease on adoption of IFRS
16, reflecting the difference in carrying values between right of
use assets and lease liabilities initially recognised. Key
assumptions used to calculate the impacts outlined above:
-- A USD/GBP foreign exchange rate of 1.40/1 throughout the year of initial application; and
-- Based on current aircraft financing incremental borrowing
rate estimates, calculations at the date of initial application use
an average lease discount rate of 3.5 per cent.
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. The excluded items are referred to as 'non-headline'
items.
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 leaseback 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.
An analysis of the amounts presented as 'non-headline' is given
below:
Six months Six months
ended ended
31 March 31 March
2018 2017
GBP million GBP million
-------------------------------------- ------------ ------------
Sale and leaseback charge 19 16
Organisational review 1 2
Brexit-related costs 4 1
Tegel integration 24 -
-------------------------------------- ------------ ------------
Recognised in operating profit 48 19
--------------------------------------- ------------ ------------
Balance sheet foreign exchange loss - 1
Fair value adjustment 2 4
--------------------------------------- ------------ ------------
Total non-headline charge before tax 50 24
--------------------------------------- ------------ ------------
Tax on non-headline items (9) (4)
--------------------------------------- ------------ ------------
Total non-headline charge after tax 41 20
--------------------------------------- ------------ ------------
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 GBP11 million,
recognised within other costs in the income statement, and an GBP8
million maintenance provision catch up charged immediately to the
income statement within maintenance costs.
Organisational review
The continuation of an organisational review has resulted in
costs of GBP1 million for the six months ended 31 March 2018, which
have 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.
Brexit-related costs
Following the UK's referendum vote to leave the European Union
('EU'), the Group is in the process of establishing an AOC in
Austria, an EU member state. For the six months ended 31 March
2018, the Group incurred GBP4 million in costs associated with the
new AOC, principally due to the cost of re-registration of aircraft
in Austria, which have been recognised in other costs within the
income statement.
Tegel integration
The structure of the Air Berlin transaction (an acquisition of
slots and the subsequent, separate integration of ex-Air Berlin
aircraft and crew, as opposed to an 'all-in' business combination)
resulted in GBP24m of one-off integration costs. These comprise
GBP9m of engineering costs to align the technical specification of
ex-Air Berlin aircraft with the rest of the easyJet fleet, GBP7m of
dry lease rental costs incurred prior to these aircraft becoming
operational, and GBP8m of other costs including consultancy and
legal fees.
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 are recognised as non-headline items. For the
six months ended 31 March 2018, the overall impact of balance sheet
revaluations was trivial.
Fair value adjustment
The fair value adjustment arises from the ineffective portion of
the cross currency interest rate swaps elected into hedge
relationships with the Eurobonds issued in February 2016 and
October 2016 (fair value and cash flow hedges respectively). 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 GBP2 million charge 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 2018 31 March 2017
GBP million GBP million
------------------------------------ -------------- --------------
Current tax 2 1
Deferred tax (16) (45)
------------------------------------- -------------- --------------
(14) (44)
------------------------------------ -------------- --------------
Effective tax rate 19.8% 18.7%
------------------------------------- -------------- --------------
The forecast effective tax rate (using currently enacted rates)
is higher than the standard rate of corporation tax in the United
Kingdom (19%) principally due to current tax in Austria and
Switzerland exceeding the UK rate.
Tax on items recognised directly in other comprehensive income
Six months Six months
ended ended
31 March 31 March
2018 2017
GBP million GBP million
----------------------------------------------- ------------ ------------
Charge to other comprehensive income
Deferred tax on fair value movements of cash
flow hedges (14) (11)
------------------------------------------------ ------------ ------------
There was no tax on items recognised directly in shareholders' equity
in the period (2017: GBPnil).
5. Loss per share
2018 2017
GBP
million GBP million
---------------------------------------------------- --------- ------------
Headline loss for the period (13) (172)
Total loss for the period (54) (192)
----------------------------------------------------- --------- ------------
2018 2017
million million
---------------------------------------------------- --------- ------------
Weighted average number of ordinary shares used to
calculate basic loss per share 394 393
----------------------------------------------------- --------- ------------
2018 2017
Basic loss per share pence pence
---------------------------------------------------- --------- ------------
Total (13.7) (48.9)
Adjustment for non-headline 10.4 5.1
----------------------------------------------------- --------- ------------
Headline (3.3) (43.8)
----------------------------------------------------- --------- ------------
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 40.9 pence per share,
or GBP162 million (2017: 53.8 pence per share or GBP214 million).
The dividend was paid on 23 March 2018, with a record date of 2
March 2018.
7. Property, plant and equipment
2018 2017
GBP million GBP million
----------------------------------- ------------ ------------
At 1 October 3,525 3,252
Additions 335 279
Aircraft sold and leased back (117) (125)
Disposals - (1)
Transfer to maintenance provision - (6)
Depreciation (95) (85)
------------------------------------ ------------ ------------
At 31 March 3,648 3,314
------------------------------------ ------------ ------------
Net book value includes GBP317 million (2017: GBP293 million)
relating to advance and option payments for future aircraft
deliveries.
At 31 March 2018 easyJet was contractually committed to the
acquisition of 134 (2017: 157) Airbus A320 family aircraft, with a
total list price of US$13.3 billion (2017: US$14.1 billion) before
escalations and discounts for delivery. This includes deliveries in
the second half of FY'18 (23 aircraft), in 2019 (25 aircraft) and
between 2020 and 2022 (86 aircraft). 125 are new generation
aircraft.
8. Reconciliation of operating loss to cash generated from
operations
Six months Six months
ended ended
31 March 31 March
2018 2017
GBP million GBP million
--------------------------------------------------- ------------ ------------
Operating loss (58) (220)
Adjustments for non-cash items:
Depreciation 95 85
Loss on disposal of property, plant and equipment 11 11
Amortisation of intangible assets 7 7
Share-based payments 7 10
Changes in working capital and other items of
an operating nature:
Increase in trade and other receivables (72) (31)
Increase / (decrease) in trade and other payables - (52)
Increase in unearned revenue 741 730
Increase in provisions 69 19
(Increase) / decrease in other non-current assets (42) 2
Decrease in derivative financial instruments 58 5
Decrease in non-current deferred income (2) (6)
---------------------------------------------------- ------------ ------------
Cash generated from operations 814 560
---------------------------------------------------- ------------ ------------
9. Reconciliation of net cash flow to movement in net cash
Fair value
1 October and foreign Loan issue Net 31 March
2017 exchange costs cash flow 2018
GBP million GBP million GBP million GBP million GBP million
--------------------------- ------------ ------------- ------------ ------------ ------------
Cash and cash equivalents 711 (19) - 248 940
Money market deposits 617 (2) - 69 684
---------------------------- ------------ ------------- ------------ ------------ ------------
1,328 (21) - 317 1,624
--------------------------- ------------ ------------- ------------ ------------ ------------
Eurobonds (870) 6 (1) - (865)
Finance lease obligations (101) 4 - 3 (94)
---------------------------- ------------ ------------- ------------ ------------ ------------
(971) 10 (1) 3 (959)
--------------------------- ------------ ------------- ------------ ------------ ------------
Net cash 357 (11) (1) 320 665
---------------------------- ------------ ------------- ------------ ------------ ------------
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:
31 March 31 March 30 September 30 September
2018 2018 2017 2017
Carrying Fair value Carrying Fair value
value value
GBP million GBP million GBP million GBP million
--------------------------- ------------ ------------ ------------- -------------
Eurobonds 865 903 870 909
Finance lease obligations 94 96 101 105
---------------------------- ------------ ------------ ------------- -------------
The fair values of the Eurobonds are classified as level 1 in
the IFRS 13 'Fair Value Measurement' hierarchy. The remaining
financial instruments for which fair values are disclosed in the
table above, and derivative financial instruments, are classified
as level 2.
The EUR500 million Eurobond issued in February 2016 is held at
fair value. The EUR500 million Eurobond issued in 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 2017 and 31 March
2018.
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
2018 2017
GBP million GBP million
----------------------------------------------------- ------------ ------------
Annual royalty 5.5 4.6
Brand protection (legal fees paid through easyGroup
to third parties) 0.8 0.7
6.3 5.3
----------------------------------------------------- ------------ ------------
At 31 March 2018, GBP0.9 million (2017: GBP1.6 million) of
related party balances were held in trade and other receivables and
payables (net receivable).
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 2018 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 2018 and any material changes in the related-party
transactions described in the last Annual report and accounts
2017.
The Directors of easyJet plc are listed in the Annual report and
accounts 2017. Since publication, Johan Lundgren replaced Carolyn
McCall as Chief Executive Officer on 1 December 2017. Keith Hamill
retired from the Board as Non-Executive Director on 31 December
2017. 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 14 May 2018 and signed on its behalf
by:
Johan Lundgren Andrew Findlay
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 2018.
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 2018;
-- the consolidated income statement and 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,
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
14 May 2018
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KMGMKMDLGRZZ
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