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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Flybe Grp | LSE:FLYB | London | Ordinary Share | GB00B4QMVR10 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.964 | 0.964 | 0.99 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Feb 2020 to Feb 2025
TIDMFLYB
RNS Number : 0697F
Flybe Group PLC
11 June 2012
Flybe Group plc
Preliminary Results for the Year Ended 31 March 2012
Flybe, Europe's largest regional airline and the UK's number one domestic airline brand, announces results for the year ended 31 March 2012.
Key financials
Flybe's results for the year to 31 March 2012 are in line with expectations.
Hot Features
Premium
2012 2011 Change
GBPm GBPm %
Revenue under management 678.8 595.5 14.0
Group revenue 615.3 595.5 3.3
EBITDAR - underlying * 88.8 113.8 (22.0)
EBITDAR - unadjusted 88.8 95.7 (7.2)
(Loss)/profit before tax - underlying ** (7.1) 22.3 n/m
Loss before tax - unadjusted (6.2) (4.3) (44.2)
(Loss)/profit after tax (6.4) 3.8 n/m
Operating cash inflow 3.0 18.1 (85.6)
Net (debt)/cash *** (29.7) 21.9 n/m
* EBITDAR is defined as operating profit or loss after adding back unrealised gains and losses on fuel and foreign exchange hedges, IPO expenses, depreciation, amortisation and aircraft rental charges. Underlying EBITDAR is EBITDAR after adding back the estimated impact of the disruption caused by volcanic ash and winter weather in 2010/11.
** Underlying (loss)/profit before tax is defined as loss before tax before revaluation gains on USD aircraft loans in 2011/12 and, in 2010/11, the estimated impact of the disruption from volcanic ash and winter weather, unrealised gains and losses on fuel and foreign exchange hedges and IPO expenses.
*** Net (debt)/cash includes restricted cash
Growing in a tough market
-- Revenue under management growth of 14.0% to GBP678.8m (2010/11: GBP595.5m) -- Group revenue growth (excluding joint venture) up 3.3% to GBP615.3m (2010/11: GBP595.5m) -- Passenger numbers under management up 5.8% to 7.6 million (2010/11: 7.2 million)
-- Growing the fleet under management to 83 aircraft with an average age at year end of 4.6 years (2010/11: 69 aircraft with an average age of 4.3 years)
Leading the UK domestic market
-- Leading airline brand in the UK domestic market with 28.0% market share (2010/11: 27.0%)
-- Operating from 14 UK bases and serving 102 airports in total throughout the UK and 17 other European countries
-- Flybe UK's passenger revenue per seat up 3.7% to GBP48.71 (2010/11: GBP46.96) -- Creation of Manchester regional hub
-- Re-positioning Flybe UK to a more customer focussed and transparent pricing model under the strapline 'Making flying better'
Delivering on Flybe's strategic objectives
-- Commencing our development of Continental European based operations through our joint venture with Finnair established in August 2011 and recently expanded to comprise 28 aircraft, 20 of which will be deployed under contract flying arrangements
-- Fleet renewal under way with arrival of first six Embraer E175s, four during the financial year and two subsequently, supported by attractive financing deal from BNDES
Jim French, Chairman and Chief Executive Officer of Flybe, commented:
"Flybe is Europe's largest independent regional airline, flying over 200 routes from more than 100 airports across 18 countries. It has a robust business model and a clear growth strategy. Through a continuing focus on managing costs and capacity we are mitigating the impact of the economic downturn in the UK. We are pleased with the progress we have made with Flybe Finland, underpinning our European expansion plans and the replication of our UK operations. Meanwhile, our fleet substitution programme, along with a de-risking of the business through a significant increase in contract flying, will have a far reaching beneficial impact on the business and one that will benefit the Group for many years to come.
"We will continue to invest in the Group's future ensuring that we maintain our market leading regional position in the UK and, at the same time, seeking to build a similar position across Europe.
"We remain in a challenging environment. However, Flybe today is a business of real scale and substance, and one which has again demonstrated its resilience. Flybe is well placed to take advantage of any improvement in the UK macro environment and has a strong platform in Europe to leverage, leaving the Group strongly placed for the future."
11 June 2012
Enquiries:
Flybe Tel: +44 20 7457 2020 Jim French, Chairman & Chief Executive Officer Andrew Knuckey, Chief Financial Officer Niall Duffy, Director of Communications College Hill Tel: +44 20 7457 2020 Mark Garraway Helen Tarbet
CHAIRMAN AND CHIEF EXECUTIVE OFFICER'S STATEMENT
Overview
The headline result, in line with expectations but disappointing nevertheless, reflects the impact of a challenging operating environment, in particular in the UK, and major investment in our business for future growth.
It is a testament to the Group's business model and its resilience that, despite the continued decline in the UK domestic air travel market, which totals some 20% since 2007, combined with significant cost increases - the annualised price of oil being the highest ever recorded in history, airport infrastructure costs increasing significantly above RPI and also government taxation through APD continuing to increase - the Group's overall operating loss for the year was limited to GBP4.9m.
We continued to invest in the Group's future, making significant progress in the implementation of our three-pronged growth strategy: positioning the Group to capitalise on UK recovery; expansion into Europe; and undertaking a wholesale fleet substitution programme.
Results
Flybe delivered a result for the year in line with expectations. Revenue under management increased 14.0% to GBP678.8m (2010/11: GBP595.5m). Underlying EBITDAR fell 22.0% to GBP88.8m (2010/11: GBP113.8m) with an operating loss of GBP4.9m (2010/11: loss of GBP0.9m) and a loss before tax of GBP6.2m (2010/11: loss of GBP4.3m).
This performance, while disappointing, reflects a resilient business able to weather the combined impact of a 5% underlying decline in its core UK market during the year along with high fuel prices and other inflationary pressures. The results also reflect significant investment in the Group as part of the implementation of a long term growth strategy, specifically representing the first year losses associated with our Flybe Europe division (GBP3.7m) and our new training academy building in Exeter (GBP1.2m). Without these investments, the loss before tax would have been GBP1.3m, or approximately 0.2% of turnover.
The Group's balance sheet had total cash, including restricted funds, of GBP67.6m at 31 March 2012 (2010/11: GBP105.6m), and net debt of GBP29.7m (2011: net funds GBP21.9).
Divisional Review
During the period the business was restructured into three operating divisions: Flybe UK, Flybe Europe and Flybe Aviation Support. The restructuring provides greater focus and drive for the implementation of the Group's growth strategy.
Flybe UK
Flybe UK recorded revenue of GBP588.1m (2010/11: GBP571.5m) and a segment loss before tax of GBP2.2m (2010/11: profit of GBP5.7m). The Flybe UK results include Group costs of GBP2.8m (2010/11: GBP2.5m). Excluding these costs, Flybe UK's profit before tax was GBP0.6m (2010/11: GBP8.2m).
In the UK, trading conditions remained tough throughout the year. The number of UK domestic air passengers has fallen by circa 20% since 2007 but during that time, Flybe UK has grown its total number of passengers by 2.2% to 7.3 million, and its market share to 28.0%, up from 14.1% in 2007.
We have driven the increase in passenger numbers primarily through a relentless focus on providing the high frequency services from convenient regional airports demanded by, and meeting the needs of, our business and leisure customers. As well as increasing passenger numbers, we continue to benefit from a high level of repeat travel with around a quarter of our passengers travelling with the airline 10 or more times a year.
As part of our commitment to continuously improve our product and overall flying experience, Flybe UK recently unveiled a major brand and product repositioning under the strapline 'Making flying better'. The repositioning, based on extensive consumer research, reinforces Flybe's commitment to openness and transparency in pricing and, supported by a television advertising campaign, introduces a range of exciting new product innovations that have been well received by our passengers. The repositioning is designed above all to positively differentiate Flybe from some of the negative perceptions of low fare travel.
New product initiatives already rolled out include:
-- No charges for customers paying by debit card
-- Credit card customers being charged on a per booking basis regardless of the number of passengers in the booking
-- The creation of three new ticket types: -- Essentials -- New Economy -- Plus
This summer will see a Flybe first with trials of inflight TV programming and entertainment available free of charge for its passengers through onboard wi-fi. Additional product and service enhancements are due to follow throughout the year.
We believe that 'Making flying better' is more than a slogan. It is a promise to our passengers that we will make flying better, more straightforward and fair and, as always, with a quality service-led approach.
2011/12 also saw a number of operational initiatives to ensure Flybe UK maintained its competitive advantage.
In February 2012, Flybe UK saw a significant rise in connecting passenger numbers after it launched its Manchester hub concept. By May 2012, the first six Embraer 175 aircraft had been added to Flybe's fleet, all of which are financed from the circa $500m committed loan facility from BNDES, the Brazilian export bank.
The UK business continued to focus on ensuring it matches capacity to demand through disposals of surplus aircraft (seven Bombardier Q400 aircraft were sold during the year to Rand Merchant Bank of South Africa) and a contract flying agreement with Brussels Airlines for two Q400s.
Separately, the Group has moved quickly to exploit the opportunities arising from the demise of bmi baby, announcing several new routes from Flybe's network into East Midlands Airport.
As at 1 June 2012, Flybe UK's forward ticket sales revenue for June to October 2012 was ahead 4.5% year-on-year on broadly flat seat capacity, with the growth being driven by yield improvements. We will continue to monitor closely trends and review our flying programme to ensure that capacity remains optimally matched to demand.
While conditions in the Group's current core UK domestic market remains demanding, Flybe UK's leadership leaves the business well-placed to benefit as and when the wider economy begins to improve. Furthermore, over 25% of passengers are now carried between the UK regions and Europe and we consider that the recent trends in exchange rates may generate an increase in leisure traffic from the UK to Europe.
Flybe Europe
A key driver of the Group's growth strategy, Flybe's expansion into Europe, took a major step forward on 1 July 2011 with the announcement of the acquisition, through joint venture with Finnair, of Finncomm .
The division commenced trading in August 2011. Revenue for the period was GBP63.5m with Flybe's share of loss after tax in the joint venture in the year of acquisition of GBP3.0m.
We are pleased with the progress made in less than a year. Bases have been opened in Helsinki and Stockholm Bromma. Flybe Finland currently operates 25 routes in six countries.
Since the year end, the joint venture signed a Memorandum of Understanding ('MoU') with Finnair for Flybe Finland to fly 12 Embraer E190 regional jets on behalf of Finnair under a contract flying arrangement. This arrangement is scheduled to commence on 28 October 2012 for a number of European short haul routes and take advantage of Flybe Finland's competitive cost base. With this further agreement the number of aircraft flown by Flybe Finland will reach 28, almost double the number flown when the business commenced operations in August 2011, of which 20 will be flying under contract for Finnair.
Once these latest contract flying operations commence, circa 25% of the fleet under Flybe Group's management will be deployed under contract flying arrangements.
The Board believes that there will continue to be consolidation in the European regional aviation industry which will present further opportunities for Flybe. These will be evaluated on a selective basis with a view to further expanding Flybe's growing presence in Europe.
Flybe Aviation Support
This division, which comprises the MRO and Training Academy businesses supporting both Flybe's UK and Europe divisions as well as serving third-party customers, delivered revenue of GBP47.3m (2010/11: GBP39.7m) and a loss before tax of GBP0.3m (2010/11: loss of GBP1.5m).
The MRO business saw improved activity levels with man-hours worked up from 564,000 in 2010/11 to 647,000 in 2011/12. Of these total man hours, some 62.2% were for third party customers in 2011/12 (2010/11: 63.1%) with the balance being work on behalf of Flybe. The MRO business reported a profit before tax of GBP0.9m (2010/11: loss before tax GBP1.1m). We continue to see increasing MRO activity and expect a continued improvement in performance from this division in the current year.
Our Training Academy's building has 26 classrooms, workshop training facilities, cabin crew emergency training facilities and a flight simulator hall which can accommodate up to four flight simulators, saw the commissioning of a second simulator in March of this year. This brought self-sufficiency to the UK operation for training pilots, cabin crew and engineers for the first time. The Training Academy has proved to be an attractive facility with external customers being trained from as far away as the UAE. The year saw total training revenue of GBP3.0m, with most of this activity supporting Flybe's own training programmes, and a loss before tax in its first full year of operation of GBP1.2m. We are confident about the long term prospects for the Training Academy.
Fleet
We have started rebalancing the fleet towards a combination of regional jets and turboprop aircraft by introducing the 88-seat Embraer E175 regional jet aircraft into Flybe UK service. We expect the increased number of regional jets in our fleet to improve the overall customer product and experience for Flybe's passengers, and indeed are encouraged by the early trends which we are experiencing on UK-European routes where we have replaced the Q400 turboprop with the E175 jets. The six arrivals since November 2011 are the first since Flybe announced, in July 2010, the purchase of 35 Embraer E175s (for delivery between 2011 and 2016) together with options and purchase rights over a further 105 E-series regional jets (for delivery up to 2020). As these regional jets are of a modern, fuel-efficient design, the E175 aircraft will have similar economics per flight to the 78-seat Bombardier Q400 turboprops they are replacing and, therefore, lower seat costs. By 2015/16 and based on contracted deliveries and expected retirements, I expect over half of Flybe UK's fleet will be E-series regional jets.
In early 2011, with no immediate recovery in the UK air travel market in sight, Flybe took the decision to de-risk the business by removing any growth aircraft for the UK business in 2011/12. Given there were committed aircraft deliveries scheduled for the year, in order to retain the net base line number of aircraft, Flybe entered into a programme of aircraft disposals. In the year to 31 March 2012, Flybe UK took delivery of four Embraer E175 regional jet aircraft and three Bombardier Q400 turboprops. It also sold seven Q400s to Rand Merchant Bank and handed back two Q400s to lessors at the end of lease periods thereby achieving its goal of ensuring no surplus aircraft in Flybe UK's fleet.
The acquisition of Finncomm as part of Flybe's joint venture with Finnair in August 2011 added a further 14 ATR turboprops and two E170s to our fleet.
Since 1 April 2012, Flybe UK has taken delivery of two E175s and handed back one Q400. As at 1 June 2012, our fleet under management now stands at 84 aircraft with an average age of 4.6 years consisting of 48 Q400 and 14 ATR turboprops, and 22 E-series jets.
For the remainder of 2012/13, Flybe has scheduled deliveries of a further four 88-seat E175s, (in addition to the two described above), and 12 leased E190s under the new contract flying agreement with Finnair. Two Q400 leases expire in the first half of the year (one of which was handed back by 8 June 2012). The Group will continue to act opportunistically to match capacity to demand, particularly in its core UK market, which drives about 87% of revenue under management.
Board and People
Following the restructuring of the Group into three operating divisions, the Board agreed a major management re-organisation:
-- Flybe UK (comprising the UK domestic and UK-Europe airline business): Andrew Strong, previously the Group's Chief Operating Officer, was appointed Managing Director of this division.
-- Flybe Europe (comprising the European airline businesses, including Flybe Finland and any future acquisitions, as well as organic development): Mike Rutter, previously Chief Commercial Officer of Flybe, heads up this division as Managing Director.
-- Flybe Aviation Support (comprising the MRO and Training businesses supporting Flybe's airline divisions and serving third party customers): John Palmer, previously Director of Airline Operations, is Managing Director of Flybe Aviation Support.
As part of the continuing development of Corporate Governance within the Group, in addition to the Audit, Safety, Remuneration and Nominations Committees, a Mergers and Acquisitions ('M&A') Committee has been established to monitor and review all potential acquisitions, and make appropriate recommendations to the Group Board. The M&A Committee is chaired by Alan Smith (Independent Non-Executive Director since 2006).
Mark Chown, previously Deputy Chairman of Flybe and a Trustee of the Walker Trust, one of the Group's major shareholders, has been appointed as Director of Corporate Strategy at Flybe. The Corporate Strategy role will include responsibility for identifying, evaluating and delivering M&A opportunities. Mark has worked with Flybe since 1996 and has been closely involved with significant strategic developments at the Group, including the acquisition and integration of BA Connect, Flybe's IPO in December 2010 and leading the acquisition of Finncomm.
In light of his new executive role, Mark has been replaced as Deputy Chairman by Charlie Scott, Flybe's Senior Independent Director.
In April 2012, I was delighted to confirm the appointment of Lord (Digby) Jones of Birmingham as a Non-Executive Director. Digby is a former Minister of State for Trade & Investment and Director-General of the Confederation of British Industry, a post he held between January 2000 and June 2006. He understands the UK regions perhaps better than anyone in the public arena and shares Flybe's passionate commitment to training and skills development.
Flybe's achievements in the UK and Europe would not have been possible without over 3,400 loyal and motivated employees whose talent, commitment and can-do attitude make Flybe what it is today. On behalf of the whole Board, I would like to thank them for their hard work and continuing support.
Regional Aviation and the UK Economy
Flybe's regional aviation business model is predicated on meeting the transport requirements of our seven million plus passengers who need to get from A to B for reasons of business, visiting family and friends or leisure but who have limited alternative transport options, either because of a lack of road and rail infrastructure both into and within the UK regions or because their journeys take them across large bodies of water.
A combination of practical and political obstacles, compounded by a London-hub driven transport policy, will ensure, for decades to come, no adequate rail infrastructure will be developed in the UK regions. For anyone needing to get from, say, Exeter to Glasgow and back in a day the choice is under 2 hours on an aircraft versus 14 hours on a train.
Flybe, and other regional airlines, therefore play a critical role in facilitating regional economic and business development. Indeed, we are a lifeline to certain regions. As we do our utmost to keep costs and ticket prices down in the face of increasing oil prices and other inflationary pressures (for instance, through a multi-billion pound investment in more fuel-efficient aircraft over the last decade), it is extraordinary that our passengers continue to be hit by continuing increases in APD. The UK APD domestic 'double dip' needs to be addressed. This is where UK domestic passengers pay APD twice, while those flying abroad pay just once because APD only applies to flights that start from the UK. It is inequitable that a return passenger travelling between Glasgow and Belfast City (208 miles) pays double the tax of someone flying between Glasgow and Dalaman in Turkey (4,086 miles).
Flybe has paid GBP64.0m and GBP55.0m respectively to the UK government in respect of APD. This equates to about 11% of the revenue we have generated in Flybe UK. Furthermore over 40% of the 7.3 million passengers carried have been travelling for business to and from the UK regions and consequently Flybe UK's contribution to the regional economies is even more important.
The rise in APD is symptomatic of successive governments failing to lay out an aviation policy which sets out specific goals and objectives to ensure that the UK has a 21(st) century transport infrastructure.
We would hope that the UK government's Aviation Strategy, to be published in the summer, will fully recognise the role that regional aviation plays in the country's international and domestic trade. At a time of economic difficulty, a lack of a coherent and comprehensive transport policy, combined with illogical hikes in stealth taxation on an industry critical to the country's economic prosperity, is having a detrimental impact on airlines such as Flybe and ultimately the economic prosperity of the UK's regions.
Outlook
Flybe is Europe's largest independent regional airline, flying over 200 routes from more than 100 airports across eighteen countries. It has a resilient business model and a clear growth strategy. Through a continuing focus on managing costs and capacity we are mitigating the impact of the economic downturn in the UK. We are pleased with the progress we have made with Flybe Finland, underpinning our European expansion plans and the replication of our UK operations in terms of scale. Meanwhile, our fleet substitution programme, along with a de-risking of the business through a significant increase in contract flying, will have a far reaching beneficial impact on the business and one that will benefit the Group for many years to come.
We will continue to invest in the Group's future ensuring that we maintain our market leading position in the UK regions and, at the same time, building a similar position across Europe.
We remain in a challenging environment. However, Flybe today is a business of real scale and substance, and one which has again demonstrated its resilience. Flybe is well placed to take advantage of any improvement in the UK macro environment and has a strong platform in Europe to leverage, leaving the Group strongly placed for the future.
Jim French CBE
Chairman and Chief Executive Officer
FINANCIAL REVIEW
Summary
Flybe has had a challenging 2011/12 but despite this saw growth in both revenue under management and Group revenue.
-- The core Flybe UK business has experienced a difficult economic backdrop and higher fuel costs. Despite these challenges, the division recorded a profit before tax* of GBP0.6m. We have maintained our position as the leading carrier of UK domestic passengers with a 28.0% market share and our passenger numbers have increased by 2.2% to 7.3 million.
-- The key driver of the overall Group loss arises from the expansion into Europe with Flybe Europe generating a GBP3.7m loss, being its share of loss from its joint venture operations in Finland together with related management costs. This result was broadly in line with expectations. The Flybe Finland joint venture is an important foothold for the Group as it looks to export its regional business model into continental Europe. Flybe Finland already operates more flights in the Finnish domestic market than any other airline, and Flybe and Finnair have ambitions to further expand the joint venture in the Nordic and Baltic regions.
-- Flybe Aviation Support generated a loss for the year of GBP0.3m, comprising a profit of GBP0.9m on the maintenance, repair and overhaul ('MRO') business, and a loss of GBP1.2m in the Training Academy's first full year of trading in its new building.
-- Group costs were GBP2.8m up slightly on last year's GBP2.5m with an increase in salary costs offset by slightly lower advisor and other fees.
* profit before tax is the segment result after adding back Group costs as appropriate
At 31 March 2012, Flybe had net assets of GBP89.4m, total cash of GBP67.6m, unrestricted cash of GBP42.9m and net debt (i.e. total cash less borrowings) of GBP29.7m.
Key financial headlines
2012 2011 (restated) Change
GBPm GBPm %
Revenue under management 678.8 595.5 14.0
Group revenue 615.3 595.5 3.3
Underlying EBITDAR* 88.8 113.8 (22.0)
EBITDAR* 88.8 95.7 (7.2)
Underlying (loss)/profit before tax (7.1) 22.3 n/m
Loss before tax (6.2) (4.3) (44.2)
(Loss)/profit after tax (6.4) 3.8 n/m
* 2010/11 restated to reclassify GBP5.2m of maintenance depreciation to maintenance assets.
Revenue under management has grown 14.0% to GBP678.8m from GBP595.5m largely due to the Group's new joint venture in the Nordic and Baltic region, Flybe Finland. Our partnership with Finnair has got off to a good start with our financial expectations largely being met. The joint venture has contributed GBP63.5m of the GBP83.3m increase in revenue under management seen over the course of the year. The relationship was further strengthened with the announcement post year end, on 22 May 2012, of a Memorandum of Understanding with Finnair to fly 12 Embraer E190 regional jets on behalf of Finnair under a contract flying arrangement, commencing in October 2012 for a five year term.
Group revenue increased by 3.3% to GBP615.3m from GBP595.5m in the previous year, a period that had been affected by disruption caused by the volcanic ash cloud and adverse weather conditions in November and December 2010. This growth in revenue was against a backdrop of a continuing decline in the overall UK domestic market. Flybe has shown considerable resilience over this period, growing its UK domestic market share to 28.0% and overall passenger numbers to 7.3 million.
Underlying EBITDAR declined to GBP88.8m, down 22.0% from the previous year's underlying EBITDAR of GBP113.8m and down 7.2% from the 2010/11 reported EBITDAR of GBP95.7m. The Group's underlying loss before tax was GBP7.1m (2010/11: underlying profit before tax GBP22.3m), and the reported loss before tax increased by GBP1.9m to GBP6.2m.
Set out below is a reconciliation from unadjusted EBITDAR and loss before tax to underlying figures, which adjust the 2012 results for revaluation gains on USD aircraft loans and the 2011 figures for the estimated impact of disruption from volcanic ash and extreme weather, unrealised gains and losses on fuel and foreign exchange hedges and IPO expenses incurred:
2012 2011 (restated) Change
GBPm GBPm %
Operating (loss)/profit before joint venture
results, IPO expenses and unrealised gains
and losses on fuel and foreign exchange
hedges (1.9) 7.6
Depreciation and amortisation* 13.1 10.7
Aircraft rental charges 77.6 77.4
EBITDAR - unadjusted 88.8 95.7 (7.2)
Estimated impact of disruption from volcanic
ash (2011: GBP11.6m) and
weather (2011: GBP6.5m) - 18.1
EBITDAR - underlying* 88.8 113.8 (22.0)
2012 2011 Change
GBPm GBPm %
Loss before tax - unadjusted (6.2) (4.3) (44.2)
Revaluation gain on USD aircraft loans (0.9) -
Estimated impact of disruption from volcanic
ash and weather - 18.1
Unrealised gains and losses on fuel and
foreign exchange hedges - 6.8
IPO expenses - 1.7
(Loss)/profit before tax - underlying (7.1) 22.3 n/m
* Excludes depreciation on maintenance assets set up in accordance with IFRS requirements.
Fleet
Our fleet transition to a two-type, modern, fuel-efficient aircraft fleet in Flybe UK was completed in May 2009, comprising Embraer E-series regional jets and Bombardier Q400 turboprops. The fleet is being rebalanced towards jets with the introduction of E175s to improve the customer experience while retaining fuel-efficient aircraft at its core.
2011/12 has seen considerable activity with the acquisition of operations in Finland though our joint venture with Finnair, and the sale by Flybe UK of seven Q400 turboprop aircraft to Rand Merchant Bank. In addition, the UK operations took delivery of its first four E175 regional jets from Embraer (out of its firm order for 35 E175s, for delivery in the period to October 2016), and three Bombardier Q400 turboprops.
A total of 16 aircraft were acquired with the Finncomm (now Flybe Finland) business on 18 August 2011. Since that date, Flybe Finland has acquired one ATR 72 turboprop and handed back an ATR 42. It is currently intended that the Flybe Finland fleet will continue to comprise of Embraer E-series regional jets and ATR turboprops in the longer term.
The profile of Flybe's fleet under management in the 2011/12 year is summarised below:
Number of aircraft
--------------------------------------
Number At Net movements At
of seats 31 March in period 31 March
2011 2012
Flybe UK
Embraer E195 regional
jet 118 14 - 14
Embraer E175 regional
jet 88 - 4 4
Bombardier Q400 turboprop 78 55 (6) 49
Flybe Europe
ATR 42 turboprop 48 - 3 3
ATR 72 turboprop 68-72 - 11 11
Embraer E170 regional
jet 76 - 2 2
Total 69 14 83
Held on operating lease 59 15 74
Owned and debt financed 10 (1) 9
Total 69 14 83
Total seats in fleet 5,942 6,882
Average seats per aircraft 86.1 82.9
Average age of fleet
(years) 4.3 4.6
Two of the Q400 aircraft are currently being operated on a two-year contract flying agreement with Brussels Airlines that commenced in March 2012.
Divisional results
Flybe's divisional results are summarised below. These results are before tax, other than share of joint venture results.
2012 2011
GBPm GBPm
Divisional revenues:
Flybe UK 588.1 571.5
Flybe Europe 63.5 -
Flybe Aviation Support 47.3 39.7
Inter-segment sales (20.1) (15.7)
Revenue under management 678.8 595.5
Less: Revenue from Flybe Europe joint
venture (63.5) -
Group revenue 615.3 595.5
Divisional results:
Flybe UK (including net finance costs
of GBP1.6m in 2012 and GBP3.4m in 2011) 0.6 8.2
Flybe Europe (including investment income
of GBP0.3m in 2012) (3.7) -
Flybe Aviation Support (0.3) (1.5)
Total divisional results (3.4) 6.7
Other items not allocated:
Group costs (2.8) (2.5)
Unrealised losses on fuel and foreign
exchange hedges - (6.8)
IPO expenses - (1.7)
Loss before tax (6.2) (4.3)
Included with net finance costs for Flybe UK is the revaluation gain on USD dominated aircraft loans of GBP0.9m (2010/11: nil).
Flybe UK
Revenue
2012 2011
GBP per GBP per
GBPm seat GBPm seat
Ticket revenue 461.3 39.73 446.8 38.45
Ancillary revenue 104.3 8.98 98.9 8.51
Passenger revenue 565.6 48.71 545.7 46.96
Other revenue 22.5 25.8
Total revenue - Flybe UK 588.1 571.5
Flybe UK passenger numbers grew slightly to 7.3 million from 7.2 million. Seat capacity was stable at 11.6 million and we flew slightly fewer sectors at 137,400 (138,200 in 2010/11). Capacity management has been a key theme for Flybe in recent years as strenuous efforts have been made to manage the adverse effect of the depressed UK economic environment.
The growth in revenue has largely come from passenger numbers which advanced by 2.2%, coupled with improved ticket and ancillary yields. Total passenger yield was up 1.4% to GBP77.21 from GBP76.15 in 2010/11, comprising a 1.0% increase in ticket yield (from GBP62.35 to GBP62.97) and a 3.2% increase in ancillary yield (from GBP13.80 to GBP14.24). In addition, load factor improved by 1.4 percentage points (from 61.7% to 63.1%), largely reversing the fall in the previous year.
This improvement in yields per passenger and load factor resulted in passenger revenue per seat increasing by 3.7% from GBP46.96 to GBP48.71, and total passenger revenue increasing from GBP545.7m to GBP565.6m.
Other revenue in Flybe UK totalled GBP22.5m, down from GBP25.8m in 2011, a year which had benefitted from the revenue generated under our contract flying arrangement with Olympic Air.
Operating costs
2012 2011
GBPm GBP per GBPm GBP per GBP per
seat seat seat
at constant
currency
and fuel
price*
Staff costs 79.3 6.84 74.8 6.44 6.45
Fuel 106.4 9.17 92.5 7.96 9.32
Net airport costs, en route
charges and
ground operations 204.8 17.66 202.6 17.43 17.52
Aircraft ownership and maintenance
costs 147.5 12.72 140.1 12.05 12.21
Marketing and distribution
costs 24.8 2.14 23.9 2.06 2.07
Other operating costs 25.9 2.22 28.5 2.45 2.46
Operating costs 588.7 50.75 562.4 48.39 50.03
* Constant currency is calculated for the 2010/11 year by applying the effective exchange rates that prevailed for reporting the 2011/12 results of $1.58 and EUR1.16 and constant fuel is calculated for the 2010/11 year by applying the effective blended rate paid for jet fuel per tonne in 2011/12.
Operating costs increased by 4.7% from GBP562.4m to GBP588.7m largely as a result of the increase in the price of jet fuel which went up by GBP1.21 per seat or half the overall rise of GBP2.36 per seat. On a constant currency and fuel basis, underlying operating costs increased from GBP580.4m in 2010/11 to GBP588.7m.
Operating costs per seat increased by 4.9% from GBP48.39 to GBP50.75. On a constant currency and fuel basis, this unit cost measure increased by 1.4% to GBP50.75 (2010/11: GBP50.03).
Fuel
Fuel is a significant variable cost which has a material impact on Flybe UK's results. A variety of external factors, such as changes in supply and demand for oil and oil-related products and the increasing role of speculators and funds in the futures markets, have played their part in making aviation fuel prices highly volatile. During 2011/12, the price of jet fuel remained significantly higher than in 2010/11, peaking at $1,140 per tonne on 11 April 2011.
During the year to 31 March 2012, Flybe UK used some 183,500 tonnes of jet fuel, a reduction on 2010/11 of 0.8%. The average market price during the year was $1,036 per tonne (2010/11: $795), with the Group paying a blended rate (net of hedges) of $853 per tonne (2010/11: $735). Including 'into plane' costs, Flybe's fuel costs in 2011/12 of GBP106.4m (2010/11: GBP92.5m) represent an all-in cost of $916 per tonne for 2011/12 (2010/11: $810). Using constant currency and fuel prices, our fuel costs per seat improved by 1.6% from GBP9.32 to GBP9.17, reflecting a continuing reduction in fuel burn per seat.
Flybe UK operates a policy of managing fuel price volatility by entering into derivative contracts representing a portion (between 60% and 90%) of its aviation fuel requirements up to 12 months forward. The intention of this programme is to provide a significant element of certainty over its fuel costs for any forthcoming IATA season. As at 1 June 2012, 72.4% of the year to 31 March 2013 was hedged at an average price of $1,028 per tonne. Taking into account our hedged position, each $50 increase/decrease in the price of jet fuel reduces/improves Group profits in 2012/13 by GBP0.6m.
Efficiencies have been derived from our fleet replacement programme, operational improvements and careful management of routes and frequencies. The fuel used by the Group was 183,500 tonnes in the year to 31 March 2012 (representing 15.8kg per seat) and 185,000 tonnes in the year to 31 March 2011 (15.9kg per seat). Fuel efficiency in Flybe UK has continued to improve (in 2007/08, our fuel usage was 19.1kg per seat), reflecting our investment in a modern, fuel-efficient two-type aircraft fleet best suited to regional flying.
In the course of 2012/13, a fuel and foreign exchange hedging programme will be introduced into Flybe's joint venture in Finland, following the procedures already being used by Flybe UK. As at 31 March 2012, no hedging was undertaken there, although the exposure is more limited than that for Flybe UK as its leases are denominated in Euros, its main operating currency, leaving fuel and maintenance costs as its primary exposure.
Other operating costs
Staff costs increased by 6.2% of which 3.8% was due to increases in salaries. The remainder was as a result of increased social security and pension costs as well as the more frequent use of temporary labour to meet the peaks and troughs of demand. There have been a number of Group-wide voluntary staff cost saving initiatives in place relating to pensions, extra holidays, sabbaticals, part-time working and delayed recruitment that have helped manage the overall cost base.
Net airport costs, en route charges and ground operations increased by 1.1% largely due to higher charges levied by air traffic control providers partially offset by a small favourable movement in exchange rates. On a constant currency per seat basis, net airport costs, en route charges and ground operations increased by 0.8% to GBP17.66 (2010/11: GBP17.52).
Aircraft ownership and maintenance costs increased by 5.3% primarily due to movements in exchange rates and maintenance rate increases. On a constant currency per seat basis, aircraft ownership and maintenance costs increased by 4.1% to GBP12.72 (2010/11: GBP12.21).
Other operating costs (after adjusting for a net gain of GBP2.5m recognised in 2010/11 on settlement of the Group's claims against the manufacturer of some of the landing gear used on aircraft in the Group's fleet) decreased by GBP5.1m mainly due to savings in overheads and media spend.
Foreign exchange
The Group manages its foreign exchange positions based on its net foreign currency exposure. As regards 'net' foreign currency exposure (i.e. foreign currency expenditure less associated revenue), Flybe UK currently has a relatively small net exposure to the Euro, but has to purchase a significant volume of US dollars to settle expenditure on items such as fuel, maintenance, and aircraft operating leases and loan repayments. Flybe generates no significant US dollar revenue and actively manages its US dollar position through a foreign exchange forward purchase programme similar to that outlined for fuel. As at 1 June 2012, 83.5% of our anticipated US dollar requirements for the year to 31 March 2013 were hedged at an average exchange rate of $1.60. All existing derivative financial instruments are forward swap arrangements.
The table below sets out for each of the periods under review Flybe UK's US dollar requirements, forward derivative instruments taken out and blended exchange rate achieved:
2012 2011
Foreign currency requirement $349m $322m
Proportion hedged at beginning of period 82% 79%
Effective exchange rate $1.58 $1.62
Taking into account our hedged position, each $0.05 reduction/improvement in the US Dollar exchange rate has the effect of reducing/increasing Flybe UK's profits in 2012/13 by approximately GBP2.7m.
In 2011/12, the income statement benefited by GBP0.9m from non-cash movements in the value of the Group's debt denominated in US Dollars that is held to purchase Embraer E-series jets. The movement in this US Dollar liability cannot be naturally offset against the value of the aircraft as the latter are recorded in UK Sterling in order to comply with the requirements of International Financial Reporting Standards. The income statement credit of GBP0.9m has therefore been adjusted in arriving at underlying profit before tax. Flybe UK will continue to be exposed to non-cash revaluation gains/losses on its US Dollar denominated aircraft loans, which will be adjusted in arriving at the Group's underlying results.
Flybe Europe
2012*
Flybe Finland joint venture GBPm GBPm
Revenue
Passenger revenue 19.6
Contract flying 41.3
Other revenue 1.8
62.7
Costs
Fuel (12.3)
Other operating costs (60.0)
(72.3)
Loss before tax (9.6)
Tax credit 4.3
Loss after tax (5.3)
GBPm
60% share of Flybe Finland joint venture loss** (3.2)
Other net costs including interest (0.5)
Segment result - Flybe Europe (3.7)
* For the period from acquisition on 18 August 2011 to 31 March 2012
** Group share of joint venture loss of GBP3.0m comprises Flybe Finland GBP3.2m loss and Finnish Aircraft Maintenance ('FAM') GBP0.2m profit. FAM is included within the Flybe Aviation Support division
With revenue of GBP62.7m and costs of GBP72.3m (GBP12.3m of which was fuel), Flybe Finland generated a loss before tax of GBP9.6m. A tax credit of GBP4.3m relating to deferred tax on the losses generated was also reported, resulting in a loss after tax for Flybe Finland of GBP5.3m.
Flybe Finland passenger numbers for the period from acquisition to 31 March 2012 were 0.3 million with a load factor of 40.4%. In addition, contract flying for Finnair accounted for a further 0.5 million passengers.
Overall, our 60% share from the Flybe Finland joint venture with Finnair was the largest contributor to the division's overall loss of GBP3.7m. In the period since its acquisition in August 2011, the joint venture has traded broadly in line with our expectations.
Flybe Aviation Support
2012 2011 Change
GBPm GBPm %
Revenue
Maintenance, repair and overhaul
('MRO') 44.3 37.5 18.1
Training Academy 3.0 2.2 37.4
47.3 39.7 19.1
Operating costs (47.6) (41.2) (15.5)
Segment result - Flybe Aviation
Support (0.3) (1.5) 80.0
MRO revenue grew by 18.1% in 2011/12 to GBP44.3m (2010/11: GBP37.5m), of which GBP26.4m was for third party customers (2010/11: GBP22.8m). This increase was driven by a 14.8% growth in man hours from 564,000 hours in 2010/11 to 647,000 hours. The MRO business recorded a profit before tax of GBP0.9m (2010/11: loss before tax GBP1.1m).
In its first full year of operation, the Training Academy successfully grew its revenue to GBP3.0m from GBP2.2m. However, Flybe has invested significantly to the future success of this business and as expected the Training Academy reported a loss of GBP1.2m (2010/11: loss of GBP0.4m).
Group costs
Group costs of GBP2.8m (2010/11: GBP2.5m) are included within the Flybe UK segment, and include Group Board salary costs and group related legal and professional fees. The movement is largely the result of the increase in directors' remuneration.
Loss before tax
The Group's operating loss was GBP4.9m (2010/11: loss of GBP0.9m).
After net finance costs of GBP2.5m (2010/11: GBP2.3m) and other gains of GBP1.2m (2010/11: loss of GBP1.1m), the loss before tax was GBP6.2m (2010/11: GBP4.3m loss).
(Loss)/profit after tax
Loss after tax was GBP6.4m (2010/11: profit after tax GBP3.8m). The current year tax charge was GBP0.2m (2010/11: credit of GBP8.1m).
EPS and dividends
Basic loss per share for the year was (8.5)p, compared with earnings per share of 6.4p in 2010/11. Adjusted loss per share was also (8.5)p, compared with adjusted earnings per share of 16.7p for 2010/11.
No dividends were paid or proposed in either the current or prior financial year.
Cash flow
2012 2011 Change
GBPm GBPm GBPm
Net cash inflow from operating activities 3.0 18.1 (15.1)
Net proceeds from IPO - 60.3 (60.3)
Net capital expenditure after disposal
proceeds (40.7) (35.7) (5.0)
Net proceeds from new loans 13.6 1.2 12.4
Acquisition of joint venture interest (18.2) - (18.2)
Net interest paid (2.5) (2.3) (0.2)
Net (decrease)/increase in cash and cash
equivalents (44.8) 41.6 (86.4)
Cash and cash equivalents at beginning
of year 87.7 46.1 41.6
Cash and cash equivalents at end of year 42.9 87.7 (44.8)
Restricted cash 24.7 17.9 6.8
Total cash 67.6 105.6 (38.0)
Despite the losses incurred this year, the Group has remained cash generative from an operating perspective.
The IPO in 2010/11 brought in GBP60.3m of net cash to the Group. As outlined at the time of the IPO, these proceeds are being used to assist in financing the Group's growth plans (via the creation of the joint venture with Finnair and the acquisition of Finncomm) as well as to provide equity deposits on new aircraft.
The largest movements in net capital expenditure were in relation to pre-delivery deposits for new aircraft and the acquisition, during the year, of four Embraer E175 regional jets and three Bombardier Q400 turboprop aircraft, financed by loans from BNDES and EDC respectively. Seven Q400 aircraft were sold to Rand Merchant Bank, and the associated loans repaid.
Balance sheet
2012 2011 Change
GBPm GBPm GBPm
Airport landing slots 8.5 8.5 -
Aircraft 136.9 110.9 26.0
Other property, plant and equipment 25.2 25.4 (0.2)
Interest in joint ventures 16.2 - 16.2
Net (debt)/funds (29.7) 21.9 (51.6)
Derivative financial instruments 3.9 21.2 (17.3)
Other working capital - net (71.8) (77.9) 6.1
Deferred taxation 3.1 (1.7) 4.8
Other non-current assets and liabilities (2.9) (0.4) (2.5)
Net assets 89.4 107.9 (18.5)
The value of airport landing slots remained unchanged, with no additions, disposals or impairments.
The GBP136.9m of net book value of aircraft represents owned aircraft, engines and aircraft modifications, with seven aircraft being acquired (three Bombardier Q400s and four Embraer E175s) and seven Q400s sold during the year.
On 18 August 2011, Flybe and Finnair entered into a 60:40 joint venture which completed the acquisition of Finnish Commuter Airlines Oy ('FCA') and also involved Flybe acquiring a 46.3% stake in Finnish Aircraft Maintenance Oy (collectively, 'Flybe Nordic'). Flybe's share of the total consideration was GBP18.2m (EUR21.0m). Due to the nature of the shareholders' agreement, which requires certain key decisions to be agreed jointly between Flybe and Finnair, these acquisitions have been treated as joint ventures. After Flybe's share of joint venture losses of GBP3.0m in 2011/12, the carrying value of the interest in joint ventures at 31 March 2012 stood at GBP16.2m.
Net debt at 31 March 2012 of GBP29.7m (2011: net funds of GBP21.9m) reflected the capital outflows referred to in the cash flow section above. Borrowings increased by GBP13.6m to GBP97.3m as loans associated with the seven Q400 aircraft sales were repaid and new loans were taken out to finance the four new Embraer E175s and three new Bombardier Q400s delivered during the year. Net debt at 31 March 2012 includes restricted cash of GBP24.7m (GBP17.9m at 31 March 2011) which represents, predominantly, cash held with the Group's bankers to facilitate card acquiring services and guarantee arrangements with suppliers, and cash deposits held in favour of aircraft owners to secure operating lease arrangements.
The mark to market asset of derivative financial instruments reduced from GBP21.2m to GBP3.9m, largely as a result of the significant 'in the money' position at 31 March 2011 of fuel hedges entered into during 2010/11. Net negative other working capital decreased from GBP77.9m to GBP71.8m, largely due to the reductions in short-term maintenance-related provisions; increases in trade and other receivables were largely offset by increases in trade and other payables. Long-term maintenance-related items are largely responsible for the movement in other non-current assets and liabilities.
Shareholders' equity decreased by GBP18.5m driven principally by losses generated in the period of GBP6.4m and the reduction in derivatives fair value (reflected through the hedging reserve) of GBP12.2m. The balance sheet does not include the impact of the defined benefit pension scheme surplus of GBP0.8m. The scheme is closed to future benefit accrual and the surplus has not been recognised as the assets cannot be recovered by the Group.
Covenants
The Group has certain financial performance covenants in relation to some of its aircraft financing agreements. These specify performance, depending on the contractual terms, against a series of tests, which are, performed either quarterly, half yearly or annually. Flybe has met all the terms of these covenants since the inception of the arrangements.
Country and currency risk
Flybe's UK and European businesses operate in a global market place. Most of Flybe's customers are based in Europe, although the MRO business also has customers in Africa and the central Asian republics. Most of Flybe UK's revenues are derived from UK-based customers (about 85% of Group revenue) and the joint venture operations largely from those based in Finland and Sweden. Aircraft are bought and sold in US dollars as are other key costs such as fuel and aviation insurance. Airport and en route charges are payable in a mix of Sterling and Euros and the further development of European operations will mean greater exposure to Euro revenues and costs.
Going concern
Flybe's business activities, together with the factors likely to affect its future development, performance and position, are set out in the Chairman and Chief Executive Officer's statement. The financial position of the Group, its cash flows and liquidity position, and events since the balance sheet date are described in the financial performance section of that statement and in the financial review.
The Directors have considered the sensitivities presented by current economic conditions in the aviation sector in relation to passenger volumes and yields, fuel prices, foreign exchange, route selection and investment in new aircraft and will assess any actions they feel are necessary.
Flybe had free cash balances of GBP42.9m at 31 March 2012, met all of its operating lease commitments and debt repayment obligations as they have fallen due and passed all its financial covenants during the year.
The Directors have prepared a detailed trading budget and cash flow forecast which indicates that Flybe will be able to trade using operating cash flows for at least 12 months from the date of signing these accounts and will be able to meet its operating lease commitments and debt repayments as they become due.
The Directors have a reasonable expectation that Flybe has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
Andrew Knuckey
Chief Financial Officer
Principal risks and uncertainties
This section describes the principal risks and uncertainties which may affect Flybe's business, financial results and prospects.
Risk description Potential impact Inherent risk Mitigation
trend
(Movement
against prior
year)
---------------------------- ------------------------ --------------- ----------------------------------
Safety and security
---------------------------- ------------------------ --------------- ----------------------------------
Failure to prevent Significant Same Safe and secure operation
a safety or security adverse effect is the key priority
related incident on Flybe's reputation, for all of Flybe's management
including terrorist financial results and staff. It operates
threat, or attacks and operational a strong safety management
from either internal performance. system (see page 32).
or external sources
or to respond adequately Flybe has appropriate
to a safety or systems and procedures
security related in place, including
event. trained staff, to respond
effectively to such
incidents.
---------------------------- ------------------------ --------------- ----------------------------------
External risks
---------------------------- ------------------------ --------------- ----------------------------------
Macroeconomic environment
---------------------------- ------------------------ --------------- ----------------------------------
Flybe is exposed Adverse pressure Same Flybe monitors route
to sustained deterioration on revenue and performance within its
in general economic load factors. commercial teams and
conditions. Adverse effect adjusts flying patterns
on Flybe's growth to customer demand.
Flybe is exposed prospects, financial
to a reduction condition and Flybe's fleet planning
in UK and Finnish the value of is designed to provide
domestic air travel. its assets, it with the most fuel--efficient
particularly, aircraft available under
aircraft. a mix of ownership and
lease terms.
Reduced reliance on
the UK domestic market
through the joint venture
with Finnair and increased
contract flying activities.
The management team
continues to seek to
exploit opportunities
to grow its business
outside the UK domestic
market.
---------------------------- ------------------------ --------------- ----------------------------------
Competition
---------------------------- ------------------------ --------------- ----------------------------------
Flybe operates Adverse effect Same Flybe has a strong position
in a highly competitive on market share in the markets where
transport market. leading to reduced it operates and extends
revenue. the reach of its brand
through franchising,
joint ventures and alliances.
Processes are in place
to monitor and report
on route by route performance
and competitor activity
and to react rapidly
where necessary.
Expansion plans outside
existing markets are
well advanced.
---------------------------- ------------------------ --------------- ----------------------------------
Risk description Potential impact Inherent risk Mitigation
trend
(Movement
against prior
year)
--------------------------- -------------------------- --------------- -------------------------------
Regulation
--------------------------- -------------------------- --------------- -------------------------------
Regulatory changes Adverse impact Same Management engages with
in the airline on reputation, governments through
industry may have costs and market direct contact and membership
an adverse impact share coupled of industry organisations.
on an airline's with decline
costs, operational in growth opportunities. Specific regulatory
flexibility, marketing issues arising from
strategy, business Lack of adequate Flybe's market position
model and ability knowledge or and its business development
to expand. misinterpretation are identified and addressed
of local regulations promptly.
Flybe is exposed may result in
to various regulators fines or enforcement
across its network. orders.
This will increase
as Flybe expands
its operations
in other countries.
--------------------------- -------------------------- --------------- -------------------------------
Duties and Taxes
--------------------------- -------------------------- --------------- -------------------------------
Airlines may be Increased costs Same Management monitors
adversely affected and reduced governments' proposals
by increases in demand across with regard to changes
Air Passenger Duty the airline in planned approach
in the UK and its industry which to aviation taxation
equivalent in other may result in and engages with governments
countries. reduced profitability through direct contact
for Flybe. and membership of industry
organisations.
Flybe seeks to pass
on additional duties
to its passengers through
higher yields.
--------------------------- -------------------------- --------------- -------------------------------
Environment
--------------------------- -------------------------- --------------- -------------------------------
Airlines may be Reduced demand Same Flybe continues to be
adversely affected for aviation compliant with the new
by any future amendment across the industry. ETS regime.
with regard to
regulation of emissions Flybe operates fuel-efficient
trading and other aircraft for its flying
environmental laws pattern and seeks to
and regulations. develop further fuel
efficiencies through
Flybe is exposed changes in its practices.
to negative environmental
perception of the
airline industry.
--------------------------- -------------------------- --------------- -------------------------------
Risk description Potential impact Inherent risk Mitigation
trend
(Movement against
prior year)
--------------------------- --------------------------- ------------------- -----------------------------
Implementing growth
strategy
--------------------------- --------------------------- ------------------- -----------------------------
Flybe may not Adverse impact Same The management team
be successful on revenue and successfully integrated
in implementing costs, resulting BA Connect into its
its growth strategy. in reduced profitability. operations after
its acquisition in
Costs will be Increased investment March 2007.
incurred in developing not supported by
new routes, and profit generation. The management team
new routes proposed is experienced in
by Flybe may not identifying business
be profitable. opportunities and
developing them profitably.
--------------------------- --------------------------- ------------------- -----------------------------
Flybe's ongoing Failure of the New Expertise and strength
joint venture Flybe Nordic joint within the Flybe
arrangement is venture may have Joint venture Board and senior
not successful. a material impact commenced in management ensures
on profitability August 2011 the working relationship
for the Flybe Group. between the parties
is strong and driving
towards a common
goal.
--------------------------- --------------------------- ------------------- -----------------------------
Reputation
--------------------------- --------------------------- ------------------- -----------------------------
Flybe is exposed Reduced demand, Same Flybe has a strong
to an event damaging market share and culture of safety
its fleet reputation, revenue any of management and a
company reputation which may adversely positive business
or brand. affect Flybe's culture supported
financial condition. by a code of ethics
and appropriate HR
policies. Flybe has
procedures in place
to respond to events
with the potential
to cause damage to
its reputation or
brand.
--------------------------- --------------------------- ------------------- -----------------------------
Flybe is exposed Adversely affect Same Well-developed contingency
to the effects Flybe's reputation, plans are in place
of extraneous financial results to react to such
events, such as or operational scenarios and communicate
epidemics, natural performance. effectively with
occurrences or passengers and other
disasters (such stakeholders.
as severe weather
or ash cloud disruption).
--------------------------- --------------------------- ------------------- -----------------------------
Risk description Potential impact Inherent risk Mitigation
trend
(Movement
against prior
year)
--------------------------- ----------------------- -------------------- ------------------------------
IT Systems and
the Internet
--------------------------- ----------------------- -------------------- ------------------------------
Flybe is heavily Loss of systems Same A disaster recovery
dependent on its or connectivity plan is in place and
information technology to the internet, includes moving certain
systems, the ongoing as a result operations to other
development of of internal sites.
those systems, or external
and the internet threat, could Flybe has robust security
to operate its lead to disruption procedures in place
business. and lost revenue which are tested and
with an adverse reviewed by independent
impact on Flybe's third parties.
financial condition.
Flybe uses third parties
Breaches in to supplement its own
IT security, resources where possible
or fraud, could and effective to do
adversely affect so.
Flybe's brand
and reputation,
and have an
adverse impact
on revenue.
Inability to
implement successful
development
could lead to
Flybe's business
plans not being
fulfilled.
--------------------------- ----------------------- -------------------- ------------------------------
Flybe operates A security breach Same Flybe has robust security
an e-commerce could lead to procedures in place
business and deals material reputational which are tested and
with a significant damage. reviewed by independent
amount of personal third parties.
and business information.
--------------------------- ----------------------- -------------------- ------------------------------
People
--------------------------- ----------------------- -------------------- ------------------------------
Flybe is dependent Adversely affect Same Flybe has well-developed
on good industrial Flybe's reputation, consultation and negotiation
relations, across financial results processes with its employees
all its regions, or operational and its unions.
with a workforce performance.
that is, in part,
unionised.
--------------------------- ----------------------- -------------------- ------------------------------
Supplier
--------------------------- ----------------------- -------------------- ------------------------------
Flybe is exposed Adversely affect Increase Most suppliers can be
to the failure Flybe's reputation, replaced by an alternate.
or non-performance financial results Due to the Contract negotiation
of commercial or operational general downturn teams are highly experienced
counterparties performance. in economic and knowledgeable of
as well as requiring A loss or adverse conditions, the industry with a
the services of change in the this risk strong track record
key suppliers contractual is considered of developing value
such as airports, relationship to have increased. for Flybe.
air traffic control with key suppliers
systems, and fuel could significantly
supply companies. increase its
future operating
costs.
--------------------------- ----------------------- -------------------- ------------------------------
Risk description Potential impact Inherent risk Mitigation
trend
(Movement
against prior
year)
------------------------ -------------------------- --------------- ----------------------------------
Financial risks
------------------------ -------------------------- --------------- ----------------------------------
Flybe is exposed Adverse movements Same While hedging cannot
to risks associated in these areas guarantee against significant
with fluctuations can adversely long term price changes,
in fuel prices affect both a well-established hedging
and foreign exchange Flybe's profit strategy is in place
rates. and financial that is designed to
position. provide certainty over
a significant proportion
of Flybe's cost base
in the coming 12 months
- see pages 21 and 22.
------------------------ -------------------------- --------------- ----------------------------------
Flybe is exposed Lack of adequate Same Flybe's policy seeks
to the unavailability liquid resources to maintain appropriate
of suitable financing. could result levels of free cash
in business which will be available
disruption and to meet costs in the
adversely affect event that our normal
Flybe's financial activities are temporarily
results. disrupted by, for example,
severe weather, volcanic
ash, extended industrial
dispute or fleet grounding.
This cash is deposited
in order to manage counter-party
risk and to develop
appropriate returns.
Flybe has secured committed
financing for all scheduled
aircraft deliveries
up to August 2014.
------------------------ -------------------------- --------------- ----------------------------------
Flybe is reliant Flybe invests Same Flybe's policy is to
on the continuing its surplus invest surplus funds
performance of funds in money and enter into hedging
its financial market funds agreements only with
counter-parties. or bank deposits financial counter-parties
and hedged its that meet certain credit
fuel, forex rating criteria.
and ETS exposures
with financial
counter-parties.
There is a risk
of material
loss in the
event of non-performance
by a financial
counter-party.
------------------------ -------------------------- --------------- ----------------------------------
The residual value Material differences Same There are rigorous terms
of assets could between the and conditions in place
be materially budgeted residual to protect Flybe interests.
less than budgeted value of an
disposal costs. asset and its Flybe's aircraft fleet
actual disposal remains predominately
value could financed by operating
see a moderate leases, on which there
impact on the is no residual value
Group's income risk for Flybe.
statement.
------------------------ -------------------------- --------------- ----------------------------------
Responsibility statement of the directors on the annual report
The responsibility statement below has been prepared in connection with the company's full annual report for the year ended 31 March 2011. Certain parts thereof are not included within this announcement.
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with International Financial Reporting Standards adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
-- the review of the business, which is incorporated into the Directors' report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
By order of the Board
Jim French CBE Andrew Knuckey
Chairman and Chief Executive Officer Chief Financial Officer
8 June 2012
CONSOLIDATED INCOME STATEMENT
Year ended 31 March 2012
Note 2012 2011 (restated)
GBPm GBPm
Total revenue under management 678.8 595.5
Less: Joint venture revenue (63.5) -
GROUP REVENUE 615.3 595.5
Consisting of:
Ticket revenue 461.3 446.8
Ancillary revenue 104.3 98.9
Maintenance and other revenue 49.7 49.8
615.3 595.5
---------------------------------------------------- ----- -------- ----------------
Staff costs (116.4) (110.3)
Fuel (106.4) (92.5)
Net airport and en route charges (118.1) (113.6)
Ground operations (86.7) (89.0)
Maintenance (37.7) (37.2)
Depreciation and amortisation (13.1) (10.7)
Aircraft rental charges (77.6) (77.4)
Marketing and distribution costs (25.5) (24.5)
Other operating gains 4.2 2.5
Other operating expenses (39.9) (35.2)
Operating (loss) / profit before joint venture
results, Initial Public Offering ('IPO') expenses
and unrealised gains and losses on fuel and
foreign exchange hedges (1.9) 7.6
Share of joint venture loss (3.0) -
IPO expenses incurred 5 - (1.7)
Losses on fuel and foreign exchange hedges - (6.8)
OPERATING LOSS 4 (4.9) (0.9)
Investment income 0.8 0.3
Finance costs (3.3) (2.6)
Other gains and losses 1.2 (1.1)
LOSS BEFORE TAX (6.2) (4.3)
Tax (charge)/credit 6 (0.2) 8.1
(LOSS) / PROFIT FOR THE YEAR (6.4) 3.8
(Loss)/earnings per share:
Basic and diluted 7 (8.5)p 6.4p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 March 2012
2012 2011
GBPm GBPm
(Loss) / profit for the financial year (6.4) 3.8
Gains arising during the year on cash flow
hedges 1.8 22.6
Reclassification of gains on cash flow hedges
included in profit (19.0) (1.4)
Deferred tax arising on cash flow hedges 5.0 (5.5)
Actuarial (loss)/gain on defined benefit pension
scheme (0.4) 6.1
Other comprehensive (expense)/income for the
year (12.6) 21.8
Total comprehensive (expense)/income for the
year (19.0) 25.6
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 March 2012
Capital Retained
Share Share Hedging Other redemption (deficit)/ Total
capital Premium reserve reserves reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at
1 April 2010 - 1.0 - 6.7 22.5 (8.7) 21.5
Profit for
the year - - - - - 3.8 3.8
Other comprehensive
income for
the year - - 15.7 - - 6.1 21.8
Equity--settled
share--based
payment transactions - - - - - 0.5 0.5
Share capital
issued 0.7 65.3 - - - - 66.0
Share issue
expenses - (5.7) - - - - (5.7)
Balance at
31 March 2011 0.7 60.6 15.7 6.7 22.5 1.7 107.9
Loss for the
year - - - - - (6.4) (6.4)
Other comprehensive
expense for
the year - - (12.2) - - (0.4) (12.6)
Equity--settled
share--based
payment transactions - - - - - 0.5 0.5
Balance at
31 March 2012 0.7 60.6 3.5 6.7 22.5 (4.6) 89.4
CONSOLIDATED BALANCE SHEET
At 31 March 2012
Note 2012 2011
GBPm GBPm
NON-CURRENT ASSETS
Intangible assets 10.1 10.4
Property, plant and equipment 162.1 136.3
Interests in joint ventures 16.2 -
Other non-current assets 40.0 32.4
Restricted cash 7.9 8.6
Deferred tax asset 8.6 9.9
Derivative financial instruments - 0.1
244.9 197.7
CURRENT ASSETS
Inventories 6.6 5.8
Trade and other receivables 98.5 88.8
Cash and cash equivalents 42.9 87.7
Restricted cash 16.8 9.3
Derivative financial instruments 5.3 24.4
Assets held for sale 0.3 0.4
170.4 216.4
TOTAL ASSETS 415.3 414.1
CURRENT LIABILITIES
Trade and other payables (89.0) (80.4)
Deferred income (63.2) (64.2)
Borrowings 8 (21.3) (16.9)
Provisions (25.0) (28.3)
Derivative financial instruments (1.3) (3.3)
(199.8) (193.1)
NON-CURRENT LIABILITIES
Borrowings 8 (76.0) (66.8)
Deferred tax liabilities (5.5) (11.6)
Provisions (32.1) (20.4)
Deferred income (12.4) (14.3)
Derivative financial instruments (0.1) -
(126.1) (113.1)
TOTAL LIABILITIES (325.9) (306.2)
NET ASSETS 89.4 107.9
Note 2012 2011
GBPm GBPm
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY
Share capital 0.7 0.7
Share premium account 60.6 60.6
Hedging reserve 3.5 15.7
Other reserves 6.7 6.7
Capital redemption reserve 22.5 22.5
Retained (deficit)/earnings (4.6) 1.7
TOTAL EQUITY 89.4 107.9
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 March 2012
2012 2011
GBPm GBPm
Cash flows from operating activities
(Loss)/profit for the year (6.4) 3.8
Adjustments for:
Unrealised losses on fuel and foreign exchange
hedges - 6.8
Depreciation, amortisation and impairment 16.2 15.9
Investment income (0.8) (0.3)
Finance costs 3.3 2.6
Other (gains)/losses (1.8) 1.1
Gain on sale of property, plant and equipment
and assets held for sale (0.6) (0.4)
Equity-settled share-based payment expenses 0.5 0.5
Joint venture result 3.0 -
Taxation 0.2 (8.1)
13.6 21.9
Increase in restricted cash (6.8) (1.9)
Increase in trade and other receivables (18.3) (3.5)
(Increase)/decrease in inventories (0.8) 0.3
Increase/(decrease) in trade and other payables 4.5 (2.8)
Decrease in assets held for sale 0.1 0.2
Increase in provisions and employee benefits 10.7 3.9
(10.6) (3.8)
Tax paid - -
Net cash flows from operating activities 3.0 18.1
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 72.4 21.7
Decrease/(increase) in pre-delivery deposits 1.0 (13.8)
Interest received 0.8 0.3
Acquisition of property, plant and equipment (113.4) (42.5)
Capitalised computer software expenditure (0.7) (1.1)
Acquisition of joint venture interest (18.2) -
Net cash flows from investing activities (58.1) (35.4)
Cash flows from financing activities
Proceeds from new loans 90.9 17.6
Proceeds on issue of shares - 60.3
Interest paid (3.3) (2.6)
Repayment of borrowings (77.3) (16.4)
Net cash flows from financing activities 10.3 58.9
Net (decrease)/increase in cash and cash equivalents (44.8) 41.6
Cash and cash equivalents at beginning of year 87.7 46.1
Cash and cash equivalents at end of year 42.9 87.7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Year ended 31 March 2012
1. GENERAL INFORMATION
The financial information set out above does not constitute the company's statutory accounts for the years ended 31 March 2012 or 2011, but is derived from those accounts. Statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.
Full financial statements which comply with IFRSs can be found on our website from 11 June 2012 at www.flybe.com/corporate/investors.
2. critical accounting judgements and key sources of estimation uncertainty
Critical accounting judgements and key sources of estimation uncertainty
The Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Critical judgements in applying the Group's accounting policies
The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in financial statements:
Carrying value of aircraft
The Group had a net book value of approximately GBP136.9m for aircraft as at 31 March 2012. Changes to the Group's estimation of useful lives, residual values and potential for impairment would have a material effect on the valuation of the Group's assets and on its operating (loss)/profit.
Useful lives and residual values are reviewed at the end of each reporting period. Estimates of useful lives of aircraft are based on judgements as to expected usage of the aircraft, timing of maintenance events, the Group's route and fleet plans and on changes within the wider aviation industry. Estimates of residual value are based on current market values of aircraft in the same expected age and condition expected at the end of the asset's useful life to the Group.
The carrying value of aircraft, property, equipment and other tangible assets is reviewed for impairment at least annually and when events or changes in circumstances indicate the carrying value may not be recoverable. Factors that would indicate a potential impairment of aircraft would include a significant reduction in market values based on appraisers' data for the aircraft type, a significant change in the physical condition of the aircraft and a reduction in forecast cash flows arising from operating the asset. Carrying value is assessed based on the appraised data and forecast cash flows.
Aircraft maintenance
On acquisition of an aircraft, a proportion of the cost of the aircraft is allocated to engines and other material components with different useful lives to the airframe. Judgement is required to determine the amount of cost to allocate based on the estimated cost of overhauling the component, and the time between maintenance events. This judgement affects the amounts recognised as a depreciation expense given the different useful lives of the components.
For aircraft held under operating leases, the Group has a commitment to return the aircraft in a specific maintenance condition at the end of the lease term. Estimating the provision for maintenance costs requires judgement as to the cost and timing of future maintenance events. This estimate is based on planned usage of the aircraft, contractual obligations under lease agreements, industry experience, manufacturers' guidance and regulations. Any change in these assumptions could potentially result in a significant change to the maintenance provisions and costs in future periods.
Recognition of deferred tax assets
The Group recognises deferred tax assets and liabilities based on the temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities. Deferred tax assets are reviewed regularly to assess potential realisation and the portions of such assets that the Directors believe will not be ultimately realised are not recorded. In performing this review, Flybe makes estimates and assumptions regarding projected future taxable income, the expected timing of the reversals of existing temporary differences and the implementation of tax planning strategies. A change in these assumptions could cause an increase or decrease in the amount recognised resulting in an increase or decrease in the effective tax rate, which could materially impact the results of operations. At 31 March 2012, the Directors had recorded previously unrecorded assets due to changes in the Group's future estimated profitability that were attributable to the Directors' expectation of the Group's future performance.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Employee benefits
The Directors have determined that the surplus of assets over projected liabilities within the defined benefit pension scheme should not be recognised on the basis that there is insufficient certainty that this surplus will be recoverable by the Group when the scheme has eventually settled all of its obligations.
Accounting for pensions and other post-retirement benefits involves judgement about uncertain events including, but not limited to, discount rates, life expectancy, future pay inflation, expected rate of return on plan assets and expected health care cost trend rates. Determination of the projected benefit obligations for the Group's defined benefit schemes and post-retirement plans are important to the recorded amount of benefit expense in the income statement and valuation of the balance sheet.
Any change in these assumptions could potentially result in a significant change to the pension assets, commitments and pension costs in future periods.
3. business and geographical segments
Following the acquisition by Flybe Group plc of a joint venture, the divisional operating structure was organised into three separate operating divisions to support the Group's ongoing delivery of its strategy of European expansion and continued growth in its UK market.
The chief operating decision maker responsible for resource allocation and when assessing performance of operating segments has been identified as the Operating Board. Operating segments are reported in a manner which is consistent with internal reporting provided to the chief operating decision maker:
Flybe UK This business segment comprises the Group's main scheduled UK domestic and UK-Europe passenger operations and revenue ancillary to the provision of those services.
Flybe Europe This business segment comprises the European airline businesses, including Flybe Finland and any future acquisitions, as well as organic development.
Flybe Aviation Support This business segment comprises the MRO and Training businesses supporting Flybe's UK and Europe divisions and serving third party customers, including aircraft maintenance, overhauls and the associated rotables and consumable parts.
Segment revenues and results
The segment result is (loss)/profit before tax, IPO expenses, and unrealised gains and losses on fuel and foreign exchange hedges.
Transfer prices between business segments are set on an arm's length basis.
2012 2011
GBPm GBPm
Segment revenues:
Flybe UK 588.1 571.5
Flybe Europe 63.5 -
Flybe Aviation Support 47.3 39.7
Inter-segment sales (20.1) (15.7)
Revenue under management 678.8 595.5
Less: Revenue from Flybe Europe joint
venture (63.5) -
Group revenue (excluding investment income) 615.3 595.5
Segment results:
Flybe UK (including net finance costs
of GBP1.6m in 2012 and GBP3.4m in 2011) (2.2) 5.7
Flybe Europe (including investment income
of GBP0.3m in 2012) (3.7) -
Flybe Aviation Support (0.3) (1.5)
Total segment results (6.2) 4.2
Other items not allocated:
Unrealised losses on fuel and foreign
exchange hedges - (6.8)
IPO expenses - (1.7)
Loss before tax (6.2) (4.3)
The Flybe UK segment includes group costs of GBP2.8m (2010/11: GBP2.5m) and revaluation gains on USD aircraft loans of GBP0.9m (2010/11: GBPnil).
Flybe Europe results include both appropriate share of joint venture results and other costs of running this division.
For the purposes of monitoring segment performance and allocation of resources between segments, the Operating Board monitors the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments with the exception of revalued open fuel and foreign exchange derivatives and tax assets and liabilities. Assets used jointly by reportable segments are allocated on the basis of the revenue earned by individual reportable segments.
2012 2011
(restated)*
GBPm GBPm
Segment assets:
Flybe UK 351.5 343.5
Flybe Europe 16.4 -
Flybe Aviation Support 33.5 36.1
Total segment assets 401.4 379.6
Unallocated assets 13.9 34.5
Consolidated total assets 415.3 414.1
Segment liabilities:
Flybe UK (300.4) (273.2)
Flybe Europe (1.1) -
Flybe Aviation Support (17.7) (17.8)
Total segment liabilities (319.2) (291.0)
Unallocated liabilities (6.7) (15.2)
Consolidated total liabilities (325.9) (306.2)
* Following the changes in divisional reporting structure it was determined that the maintenance reserves for the Flybe UK Airline operations should be realigned to Flybe UK from Flybe Aviation Support. Segmental assets and liabilities for year ended 31 March 2011 have therefore been restated with GBP47.4m of assets and GBP53.5m of liabilities being moved into Flybe UK from what is now Flybe Aviation Support. No adjustments were required to segment profits.
Other segment information
2012 2011
GBPm GBPm
Depreciation and amortisation:
Flybe UK 15.2 15.0
Flybe Europe - -
Flybe Aviation Support 1.0 0.9
16.2 15.9
Investment income:
Flybe UK 0.5 0.3
Flybe Europe 0.3 -
0.8 0.3
2012 2011
(restated)*
GBPm GBPm
Additions to non--current assets:
Flybe UK 112.2 33.1
Flybe Aviation Support 1.9 10.5
114.1 43.6
* Following the changes in divisional reporting structure it was determined that the maintenance asset for the Flybe UK Airline operations should be realigned to Flybe UK from Flybe Aviation Support. Additions to non-current assets for year ended 31 March 2011 have therefore been restated with GBP17.6m of additions being moved into Flybe UK from what is now Flybe Aviation Support. No adjustments were required to segment profits.
Geographical information
The Group's revenue from external customers by geographical location is detailed below:
2012 2011
GBPm GBPm
Revenue under management from external
customers:
United Kingdom 524.0 521.8
Europe excluding United Kingdom 154.8 73.7
Total revenue under management 678.8 595.5
Less: Joint venture revenue (all categorised
as Europe excluding United Kingdom) (63.5) -
Group revenue 615.3 595.5
No non--current assets were based outside of the United Kingdom for any of the periods presented other than joint venture assets.
Information about major customers
None of the Group's customers exceeded 10% of its revenue.
4. operating (LOSS)/profit
2012 2011
This has been arrived at after charging/(crediting): GBPm GBPm
Depreciation of property, plant and equipment 15.2 14.9
Amortisation of intangible assets 1.0 1.0
Profit on the disposal of property, plant and equipment (0.4) (0.4)
Operating leases:
Land and buildings 3.7 3.2
Plant and machinery 0.2 0.2
Aircraft 77.6 77.4
Foreign exchange (gains)/losses (1.0) 2.6
2012 2011
GBPm GBPm
Auditor's remuneration
The analysis of auditor's remuneration is as follows:
Fees payable to the Company's auditor and its associates
for the audit of the Company's annual financial statements - -
Non--statutory audit of interim financial statements - 0.2
Audit of the financial statements of subsidiaries
pursuant to legislation 0.2 0.2
Total audit fees 0.2 0.4
Tax advisory services 0.2 0.2
Expenses in connection with the IPO and other strategic
projects 0.3 0.8
All other services - 0.1
Total audit and non-audit fees 0.7 1.5
Fees payable to Deloitte LLP and their associates for non-audit services to the Company are not required to be disclosed because the financial statements are required to disclose such fees on a consolidated basis.
5. IPO Expenses
During the year ended 31 March 2011, the Group incurred costs associated with listing on the London Stock Exchange. These costs were sufficiently unusual in nature to be presented separately on the face of the income statement. Costs specific in respect of raising new equity were deducted from share premium. Costs that related equally to the listing process and raising new equity were split between the income statement and the share premium account.
6. TAX on LOSS on ordinary activities
2012 2011
GBPm GBPm
Deferred tax
Origination of temporary differences (0.9) (7.1)
Reversal of tax losses recognised 1.1 (1.0)
Total credit for the year 0.2 (8.1)
The group did not record or pay any current tax in this or the prior year.
The difference between the total tax shown above and the amount calculated by applying the standard rate of United Kingdom corporation tax to the loss before tax is as follows:
2012 2011
GBPm GBPm
Loss on ordinary activities before tax (6.2) (4.3)
Tax on loss on ordinary activities before tax at
26% (2011: 28%) (1.6) (1.2)
Factors affecting charge/(credit) for the year
Items outside the scope of UK taxation 0.1 (1.0)
Effect of tax losses (0.3) (1.2)
Capital allowances in excess of depreciation 2.0 (4.7)
Total tax charge/(credit) for the year 0.2 (8.1)
The reduction in the corporation tax rate to 24%, from 1 April 2012 is not anticipated to materially affect the future tax charge.
7. Earnings per share
The calculation of the basic, diluted, adjusted basic and adjusted diluted earnings per share is based on the following data:
2012 2011
Earnings GBPm GBPm
(Loss)/earnings for the purposes of unadjusted
earnings per share being net profit attributable
to owners of the Group (6.4) 3.8
Add back/(deduct):
IPO expenses incurred - 1.7
Unrealised losses on fuel and foreign exchange
hedges - 6.8
Effect of tax on the above adjustments - (2.4)
(Loss)/earnings for the purposes of adjusted earnings
per share (6.4) 9.9
No. No.
Weighted average number of ordinary shares for
the purposes of basic earnings per share 75,152,881 59,109,256
Effect of dilutive potential ordinary shares:
Share options - 177,159
Weighted average number of ordinary shares for
the purposes of diluted
earnings per share 75,152,881 59,286,415
(Loss)/earnings per ordinary share - basic and
diluted (8.5)p 6.4p
Adjusted (loss)/earnings per share - basic (8.5)p 16.7p
Adjusted (loss)/earnings per share - diluted (8.5)p 16.6p
Diluted earnings per share is the same as basic earnings per share in the year ended 31 March 2012 because the Group recorded a loss and as such none of the potentially issuable shares are dilutive.
Number of shares in issue throughout the prior year ended 31 March 2011 was adjusted to reflect the bonus issue of 24 new shares for each existing share issued as at 25 November 2010.
8. borrowings
This note provides information about the contractual terms of the Group's interest bearing loans and borrowings. For more information about the Group's exposure to interest rate and foreign currency risk, as well as the repayment profiles.
2012 2011
Secured bank loans GBPm GBPm
Amount due for settlement within 12 months 21.3 16.9
Amount due for settlement after 12 months 76.0 66.8
97.3 83.7
Terms
2012 2011
Interest rate Amount Interest rate Amount
% GBPm % GBPm
Floating rate sterling loans 3.2 20.6 2.6 41.6
Floating rate US dollar loans 1.2 65.5 3.6 29.6
Fixed rate sterling loans 7.0 10.4 7.0 11.6
Fixed rate US dollar loans 5.4 0.8 6.1 0.9
97.3 83.7
The interest rate above relates to the weighted average for the year or period. Floating rates are based upon LIBOR with margins of between 0.1% and 3.8%. The loans are repayable over a period to 31 December 2026. All loans are secured on specific aircraft assets or land and buildings. As at 31 March 2012, one of the loans, with GBP3.3m outstanding, contained financial covenants which had been complied with.
At 31 March 2012, the Group had GBP2.2m of unused borrowing facilities in the form of guarantees (2011: unused guarantee and overdraft facilities of GBP7.7m).
9. capital commitments
The Group has, over time, contractually committed to the acquisition of aircraft with a total list price before escalations and discounts as follows:
2012 2011
GBPm GBPm
Aircraft 720.9 858.0
It is intended that these aircraft will be financed partly though cash flow and partly through external financing and leasing arrangements. The number of aircraft covered by these arrangements is as follows:
No. No.
Bombardier Q400 - 3
Embraer E-Series 31 35
Total 31 38
10. RELATED PARTIES
At 31 March 2012, the Group is 48.1% (unchanged from 2011) owned by Rosedale Aviation Holdings Limited, incorporated in Jersey.
Group companies entered into the following transactions with related parties which are not members of the Group:
Sales of services
2012 2011
GBPm GBPm
Preston Travel (CI) Limited 1.3 1.2
Flybe Finland 2.6 -
Amounts owed by related parties
2012 2011
GBPm GBPm
Preston Travel (CI) Limited 0.3 0.1
Flybe Finland 1.5 -
The Group provided services to Preston Travel (CI) Limited which, together with Rosedale Aviation Holdings Limited, is a subsidiary of Rosedale (J.W.) Investments Limited.
The Group also provided services to Flybe Finland of which a 60.0% holding was acquired during the period.
Purchases of services
2012 2011
GBPm GBPm
Edenfield Investments Limited 0.4 0.3
Downham Properties Limited 0.4 0.2
The transactions with Edenfield Investments Limited and Downham Properties Limited are disclosed although there is no holding or subsidiary company relationship between these two companies and Rosedale Aviation Holdings Limited. These two companies are owned and controlled by the EJ Walker 1964 settlement, established by the former wife of the late Mr Jack Walker; this trust is separate for tax purposes from the Jack Walker Settlement which controls Rosedale Aviation Holdings Limited. The Group also purchased property services from Edenfield Investments Limited and from Downham Properties Limited.
No amounts were owed to related parties at years ended 2012 or 2011.
Transactions with key management personnel
Directors of the Company and their immediate relatives control approximately 6.9% of the voting shares of the Company (2011: 6.3%).
The remuneration of the directors, who are the key management personnel of the Group, is set out below. Further information about the remuneration of individual directors is provided in the audited part of the Directors' Remuneration Report and form part of these audited financial statements.
2012 2011
GBPm GBPm
Key management emoluments 1.8 1.6
Company contributions to personal pension schemes 0.2 0.2
A subsidiary of the Group has the following outstanding loans due from Directors, made prior to their appointment as Directors, to enable them to acquire a beneficial interest in shares in Flybe Group plc:
2012 2011
GBP000 GBP000
Mike Rutter 63 63
Andrew Knuckey 20 20
In addition, the following Directors have received loans from the Group's then immediate parent company, Rosedale Aviation Holdings Limited, to enable them to acquire an interest in shares in Flybe Group plc:
2012 2011
GBP000 GBP000
Andrew Knuckey 134 134
Andrew Strong 36 36
David Longbottom 9 9
Charlie Scott 9 9
Alan Smith 9 9
Peter Smith 9 9
The loans made by the Group and Rosedale Aviation Holdings Limited total GBP289,000 at 31 March 2012 (2011: GBP289,000). These loans bear no interest and are repayable out of the proceeds receivable by each Director from a subsequent sale of his respective ordinary shares and at the discretion of Rosedale Aviation Holdings Limited.
There are no other transactions or balances with key management.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GGUGWQUPPUAG
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