(Part 1) easyJet: Interim results for the six months ended 31 March 2002 - First-half Profits Revenues and Passenger Numbers both up by 36%
Kloten (ots)
easyJet plc, the fast growing low cost airline, today announces interim results for the six months ended 31 March 2002.
easyJet plc generated a profit before tax for the six month period of £1.0m. This is the first time in easyJet's history that a profit has been reported for the first half which is traditionally loss making, due to the seasonality of the business. This result is due to strong passenger demand, the timing of Easter and few serious weather related disruptions.
Highlights of the half-year performance include:
- Revenues up 36% to £194m (2001: £143m)
- First half profit before tax of £1.0m (2001: £10.3m loss)
- Passenger numbers up 36% to 4.3m (2001: 3.2m)
- Load factor up 3.6% points to 84.2% (2001: 80.6%)
- Five new routes launched from Gatwick, where easyJet is now
second largest scheduled carrier, after the British Airways
group
- Introduction of five new Boeing 737-700 aircraft
- Successful equity issue raised £93.3mCommenting on the results, Ray Webster, Chief Executive, said:
"These results reflect the continued success and robustness of the easyJet business model. We have been able to benefit from the major changes in the European aviation industry. In the last twelve months 8.3 million passengers flew with easyJet, with around 90% of customers continuing to book through the internet.
"The introduction of five new routes from Gatwick linking existing destinations demonstrates easyJet's continuing strategy of concentrating on network density. Over the summer, easyJet will serve 45 routes from 19 airports.
"The recently-launched services from London Gatwick are proving popular with our customers.
"Since the half-year end, services have been launched from Paris Charles de Gaulle to Liverpool and three further services from the French capital are starting later in the second half. Though demand is anticipated to be strong, yields are expected to be immature and advertising expenditure higher as the market is developed.
"My colleagues and I remain confident of achieving our expectations for the full year."
CHAIRMAN'S STATEMENT
I am pleased to report to shareholders that easyJet's interim results for the six months ended 31 March 2002 reflect the continued success and robustness of the easyJet business model.
Buoyant trading, aided by a mild winter and the timing of Easter has resulted in easyJet reporting a first-half profit before tax of £1.0 million, compared to a loss of £10.3 million over the same period last year.
The European aviation industry has been in a state of major change over the last six months, accelerated by the events of 11 September, with many traditional flag carriers announcing restructuring, capacity reductions and staff redundancies. At the same time the low-cost product offering has been proving popular. easyJet has been taking advantage of the market opportunities which are emerging in Europe and has the opportunity to replace the uneconomic and inappropriate services offered by many flag carrier airlines. As a consequence, easyJet is accelerating its growth to capture these opportunities and in the first half grew capacity by 36% compared to the same period last year.
On 18 April 2002, a restructuring of the easyJet plc board was announced. As a part of this, I intend to resign as Chairman and as a director of easyJet plc at the next Annual General Meeting (to be held in 2003) to be replaced by Sir Colin Chandler who in the meantime has joined the Board as Deputy Chairman. Sir Colin's long experience in the aerospace industry and track-record in running major blue-chip public companies will be invaluable to easyJet as it continues to grow. As a result of these changes, the Chairman will be independent from the major shareholder and the majority of directors will be independent within the meaning of the Combined Code. These changes demonstrate easyJet's commitment to high standards of corporate governance.
easyJet's success over the past six months is in a large part due to our staff. In a period of momentous industry change and stress, they have provided the inspiration and resilience that makes easyJet the success that it is. I would like to thank them for all their efforts.
Stelios Haji-Ioannou, Chairman, 7 May 2002
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CHIEF EXECUTIVE'S REVIEW
Overview
easyJet plc generated a profit before tax of £1.0m for the six months ended 31 March 2002. This is the first time in the company's history that a profit has been reported for the first half. Historically, easyJet's business is seasonal, with losses in the first half of its financial year and profits in the second half. This result is due to strong passenger demand, the timing of Easter and a mild European winter.
The repercussions of the events of 11 September, whilst occurring in the final month of the last financial year, continue to affect many parts of the world economy and the aviation industry in particular. Although many of the traditional carriers have suffered over the last six months, easyJet has been in a position to benefit from the opportunities arising from this industry realignment.
easyJet's revenue increased 36 percent half-year on half-year, to £193.9 million resulting from increased capacity and higher load factors. The number of passengers increased 36 percent half-year on half-year to 4.3 million, driven by the introduction of new aircraft and a 3.6 percentage point increase in average load factor, up to 84.2 percent. The average fare decreased by 2.5 percent, half-year on half-year. In the current market environment, easyJet has sought increased passenger volume to compensate for the softer yields in the marketplace.
Aircraft
Over the first six months of the financial year, easyJet took delivery of five additional new Boeing 737-700s. These were purchased from Boeing and then financed through operating leases. In addition, two aircraft, which had been scheduled to be returned to lessors during the period, were retained on favourable commercial terms. Thus at 31 March 2002, the total fleet comprised 30 aircraft. Over the period, the fleet averaged 27.5 aircraft, an increase of 35 percent compared to the same period last year. At the financial year-end, it is anticipated that the fleet will consist of 36 aircraft.
In January 2002, easyJet announced that it was in discussions with Boeing and Airbus concerning the possible acquisition of approximately seventy-five new Boeing 737-700 or Airbus 319 aircraft and that it was reviewing the benefits of potentially operating a mixed fleet. These discussions and reviews continue.
Routes
In February 2002, easyJet continued its expansion at London Gatwick and commenced five new routes to Barcelona, Edinburgh, Malaga, Mallorca Palma and Zurich. easyJet will commence flying to Athens from Gatwick from 1 July 2002. easyJet will now operate up to 24 daily services from Gatwick and is the second largest scheduled airline at the airport, after the British Airways group.
The introduction of these routes linking existing destinations demonstrates easyJet's continuing concentration on network density and allows us to improve marketing efficiencies and enhance services in our key London market. In the summer, easyJet will serve 19 airports and operates 45 routes.
easyJet has also obtained slots at Paris Charles de Gaulle and Paris Orly airports and will begin four new routes from the French capital in the summer. easyJet will fly from Paris Orly to Geneva and from Paris Charles de Gaulle to Luton, Liverpool and Nice. From mid-June, the airline will have four aircraft operating a total of fifteen flights a day through Paris.
By launching services through Orly and Charles de Gaulle, easyJet has the opportunity to serve the entire city, north and south, as we currently do successfully in London through Luton and Gatwick. I am confident that we will be able to operate our low cost, high utilisation model through both airports and hope to be able to fulfil our ambition of making Paris one of easyJet's major European bases.
External factors affecting the first-half
The timing of Easter has had a major beneficial effect on the reported outcome for the first half of the year, by drawing revenue forward from later in the year. Last year, Easter occurred in the second half of the year, whereas this year it occurred in late March.
During the first half ended 31 March 2002, the average fuel price fell 31 percent to 72 cents per US gallon, compared with an average price of 104 cents for the half-year ended 31 March 2001. This has resulted in a £8.2 million saving in fuel cost for the first half of this year compared with the prices experienced during the same period last year.
Insurance costs rose dramatically after the events of 11 September 2001. Half-year on half-year, easyJet's insurance costs rose by £5.9 million to £6.8 million. During the period, easyJet introduced an insurance surcharge of £1.60 per passenger per sector. The impact of increased insurance was more than offset by the benefit from lower fuel prices over the period. Discussions are ongoing between airlines, governments and the insurance industry over long-term solutions to the problems of aviation insurance. In the short term, the UK Government continues to provide the insurance market with a reinsurance commitment for war and allied perils risks. This cover has recently been extended to 31 May 2002. easyJet expects the full year net insurance cost to remain substantially higher than last year.
Europe's weather has been relatively mild during the first half of this year and as a result easyJet experienced few serious weather related disruptions over the period. In contrast, in the six months ended 31 March 2001, weather disruptions occurred in late December 2000. Our experience is that weather related disruptions do occur each year, however the timings vary considerably. easyJet notes that weather-related disruptions have occurred during the second half of some previous financial years.
Cashflow
In November easyJet successfully raised net proceeds of £93.9 million by the issue of 26 million new shares. This cash has strengthened the balance sheet and has supported the acquisition and financing of new aircraft. As at 31 March 2002 easyJet had £381.9 million of cash and net funds of £300.6 million. The Group continues to generate strong cashflow from its operations. Over the period net cash inflow from operations was £45.2 million. The Directors believe that easyJet's strong balance sheet and cashflow, provides it the flexibility to take advantage of growth opportunities as they emerge.
The Airline Group
easyJet is one of the seven shareholders in The Airline Group (TAG), a consortium of airlines which owns a minority interest in the company which operates the UK air traffic control system (NATS). The investment was made last year for strategic reasons in order to be able to influence the direction of the development of air traffic control services and the level of charges.
However given the long time period before an expected return would be realised, the Board of easyJet has decided to be prudent and to provide for in full its £7.2 million investment in TAG.
easyJet's future growth is critically dependent on the provision of efficient air traffic control services and consequently easyJet remains vitally interested in NATS and has no current intention to sell its stake in, or to cease its involvement with, TAG.
Trading outlook
easyJet continues to see strong demand for low cost airline services.
Paris services began on 2 May 2002 and will be extended during the second half of the financial year and, while demand is anticipated to be strong, the yields are expected to be immature. In addition, as Paris is the first new destination in almost three years and the largest city since easyJet launched in London in 1995, advertising expenditure is expected to be higher as the market is developed.
The recently-launched routes from London Gatwick are proving popular with our customers.
As demonstrated in the first six months, management maintains its ongoing focus on cost control.
The aviation industry in Europe is undergoing major change. Consumer demand is strong and growth opportunities are emerging for easyJet to provide the services and prices that consumers want. However, Europe's politicians must have the strength to allow these long-overdue changes to prevail so as to let the more efficient airlines take advantage of these opportunities and to give Europe's consumers what they want.
My colleagues and I remain confident of achieving our expectations for the full year.
Ray Webster, Chief Executive, 7 May 2002
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Post Balance Sheet Events
The following events have occurred since 31 March 2002:
- in April 2002, the group took delivery of a new Boeing 737-700 aircraft, which will be financed by sale and leaseback;
- easyJet has signed a letter of intent to dry lease an additional new Boeing 737-700 from June 2002;
- easyJet has arranged committed lease financing for six scheduled Boeing 737-700 deliveries, including the delivery in April 2002;
- on 3 May 2002, easyJet announced that it was at an advanced stage in exclusive negotiations with 3i Group plc and Go Fly Ltd, regarding the possible acquisition of Go Fly Ltd. easyJet's intention is to conclude these negotiations only if it believes that the acquisition would be in the interests of shareholders, customers and staff; and
- easyJet has signed Heads of Terms with British Airways, under which easyJet has acquired the option to acquire 100% of Deutsche BA, subject to a number of conditions.
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SELECTED CONSOLIDATED OPERATING DATA
(unaudited)
Period ended Year-on-year
31 March change2002 2001
Number of aircraft owned/leased at end of period 30 22 36 % Average number of aircraft owned/ leased over the first six months 27.5 20.4 35 % Number of routes operated at end of period 40 29 11 routes Number of airports served at end of 17 17 - period Passengers over the first six months 4,338,975 3,199,349 36 % Load factor over the first six months 84.2% 80.6% 3.6% pts Internet sales percentage during final month of financial period 90.9% 86.5% 4.4% pts
Definitions
Number of aircraft owned/leased at end of period
Represents the number of aircraft owned (including those held on lease arrangements of more than one month's duration) at the end of the relevant accounting period.
Passengers
Represents the number of earned seats flown by easyJet. Earned seats include seats that are flown whether or not the passenger turns up, because easyJet is generally a no-refund airline and once a flight has departed a no-show customer is generally not entitled to change flights or seek a refund. Earned seats also include seats provided for promotional purposes and to easyJet staff for business travel.
Load factor
Represents the number of passengers as a proportion of the number of seats available for passengers. No weighting of the load factor is carried out to recognise the effect of varying flight (or "stage") lengths.
Internet sales percentage
Represents the number of seats initially sold over the internet divided by the total number of seats initially sold, during the final month of the relevant financial period. Sales that are originally made via the internet, but are later amended by phone, are included.
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Independent review report to easyJet plc
1 Introduction
We have been instructed by the company to review the financial information for the six months ended 31 March 2002 which comprises a consolidated profit and loss account, balance sheet, cash flow statement, statement of total recognised gains and losses and the related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.
2 Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed.
3 Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information.
4 Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 March 2002.
KPMG Audit Plc Chartered Accountants London EC4Y 8BB
7 May 2002
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Consolidated profit and loss account
(for the 6 months ended 31 March)
Notes Unaudited Unaudited Year ended
Six months Six months 30 Sept.
31/3/2002 31/3/2001 2001£ 000 £ 000 £ 000
Revenue 2 193,942 142,844 356,859
Cost of sales (161,170) (124,939) (265,648)
_______ _______ _______Gross profit 32,772 17,905 91,211
Distribution and marketing expenses (18,478) (17,855) (31,692)
Administrative expenses 4 (10,338) (10,470) (21,396)
_______ _______ _______Operating profit/(loss)
Operating profit/(loss) before exceptional administrative expenses 3,956 (7,141) 41,900
Exceptional administrative expenses - (3,279) (3,777)
Operating profit/(loss) 3,956 (10,420) 38,123
Interest receivable 5,565 4,341 10,205
Interest payable (1,349) (4,207) (8,195)
Amounts written off
investments 5 (7,159) - -
_______ _______ _______Profit/(loss) on ordinary activities before taxation 1,013 (10,286) 40,133
Tax on profit/(loss) on
ordinary activities 6 (235) - (2,226)
_______ _______ _______Retained profit/(loss)
for the period 778 (10,286) 37,907
======= ====== ======Earnings/(loss) per share:
Basic 3 0.3p (4.3p) 15.2p
Diluted 3 0.3p (4.3p) 14.4p
======= ====== ======
(continued on Part 2)Contact:
easy jet plc
Tom Wepfer
Market Manager Eastern Switzerland
phone: +41/78/635-96-00
or
Toby Nicol
Head of Corporate Communications
phone: +44/1582/525-339
Grandfield
Charles Cook / Clare Abbot
phone: +44/20/7417-4170