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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Easyjet Plc | LSE:EZJ | London | Ordinary Share | GB00B7KR2P84 | ORD 27 2/7P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 13.80 | 2.66% | 532.00 | 531.60 | 532.20 | 547.00 | 526.40 | 537.00 | 4,248,994 | 13:12:11 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Air Transport, Scheduled | 8.17B | 324M | 0.4274 | 12.47 | 4.04B |
From Apr 2019 to Apr 2024
TIDMEZJ
RNS Number : 2004F
easyJet PLC
16 May 2017
16 May 2017
easyJet plc
Results for the six months ending 31 March 2017
easyJet delivers strong passenger and revenue growth, rigorous cost control and a resilient operational performance
Strengthening number one positions
-- Record number of passengers for the first six months of the 2017 financial year at 33.8 million, up 9.0% year-on-year with a record first half load factor at 90.2% (H1 2016: 89.7%), reflecting easyJet's attractive network and affordable fares.
-- Capacity increased by 8.4% as easyJet delivered its strategy of purposeful investment to reinforce and expand its leadership positions in its core markets.
-- Total revenue up 3.2% to GBP1,827 million with revenue per seat of GBP48.80 (a decline of 4.9%, and of 9.7% at constant currency(1) , in line with guidance) reflecting the timing of Easter and high overall market capacity growth.
Rigorous cost control
-- Headline cost per seat excluding fuel at constant currency flat at GBP38.54, reflecting strong cost control despite high levels of disruption. Headline cost per seat increased by 4.9% to GBP54.45 (a decrease of 4.1% at constant currency) driven by the weakness of sterling.
-- Headline loss before tax of GBP212 million includes the estimated impact of the move of Easter into the second half of the year (circa GBP45 million) and a negative net currency impact of GBP82 million. Excluding these two items the headline loss before tax would have been circa GBP85 million. Total loss before tax after non-headline items was GBP236 million.
Investing in the future
-- easyJet has agreed to purchase 30 A321 NEO aircraft under its existing agreement with Airbus, with the first arriving in summer 2018. This is a conversion of 30 existing A320 NEO orders and via increased flexibility within the Airbus agreement will be neutral to current fleet capex commitments. The A321 NEOs will increase easyJet's ability to grow in slot constrained airports and manage costs.
-- easyJet remains on track to confirm possession of a European Air Operator Certificate (AOC) by the Summer and therefore secure its future operations within the European Union.
-- easyJet's business model and strategy are underpinned by sector leading balance sheet strength, with a net cash position at 31 March 2017 of GBP353m. Unencumbered aircraft now represent 71% of easyJet's total fleet.
Outlook
-- easyJet continues to implement its strategy of purposeful, profitable growth to secure leading positions at primary airports and drive returns over the long term.
-- Forward bookings are ahead of last year; at 77% for the third quarter and 55% for the half year.
-- easyJet's capacity growth in the second half of the 2017 financial year is planned to be at a similar level to the first six months and RPS in the third quarter is anticipated to decline by low single digits, a significant improvement from the first six months.
-- Headline cost per seat excluding fuel at constant currency for the full year and at normal levels of disruption is expected to increase by around 1%, which better than initially expected. easyJet has successfully offset the cost of additional investment in resilience and in improving its long-term operational performance within this latest full year guidance.
Hot Features
Premium
2017 2016 Change
Favourable/(adverse)
------------------------------------- ------- ------ ----------------------------
Capacity (millions of seats) 37.5 34.5 8.4 %
Load factor (%) 90.2 89.7 0.5 ppts
Passengers (millions) 33.8 31.0 9.0 %
Total revenue (GBP million) 1,827 1,771 3.2 %
Headline loss before tax (GBP
million) (212) (21) GBP(191) m
Total loss before tax (GBP million) (236) (18) GBP(218) m
Headline constant currency loss
before tax (GBP million) (130) (21) (109) m
Headline basic loss per share
(pence) (43.8) (4.6) (39.2) pence
Constant currency revenue per
seat (GBP) 46.32 51.29 (9.7) %
Headline constant currency cost
per seat (GBP) 49.79 51.91 4.1 %
------------------------------------- ------- ------ ---------------- ----------
Commenting on the results, Carolyn McCall, easyJet Chief Executive said:
"easyJet delivered a resilient performance during the winter months with strong cost control, improving operational performance and within guidance for revenue. We grew total revenue by 3.2% year on year while passenger numbers were up by 2.8 million. The first half loss is in line with market expectations and reflects the movement of Easter into the second half as well as currency effects which together had an estimated impact of circa GBP127m on the bottom line.
"Our bookings for the summer are ahead of last year showing that demand to fly remains strong and reflects growing evidence that consumers are prioritising expenditure on flights and holidays above other non-essential items.
"Looking ahead, we are seeing an improving revenue per seat trend as well as the continued reduction of competitor capacity growth. Cost performance for the full year will continue to be strong. easyJet is delivering on its strategy of purposeful investment in securing and building strong positions at Europe's leading airports which is driving competitive advantage with sustainable returns. As a result our expectations for the full year are in line with current consensus market expectations(2) ."
Inside Information
The sections of this announcement relating to the agreement with Airbus to deliver A321 NEO aircraft, including but not limited to certain sections under the "Capital allocation and fleet" heading, contain information which, prior to its disclosure, was considered inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 (MAR).
For further details please contact easyJet plc:
Institutional investors and sell side analysts:
+44 (0) 7989
Stuart Morgan Investor Relations 665 484
+44 (0) 7985
Michael Barker Investor Relations 890 939
Media:
+44 (0) 7860
Paul Moore Corporate Communications 794 444
+44 (0) 207
Dorothy Burwell Finsbury 251 3801
+44 (0) 7733
294 930
There will be an analyst presentation at 10:00 am GMT on 16 May 2017 at Nomura, One Angel Lane, London, EC4R 3AB
A live webcast of the presentation will be available at www.easyJet.com
Conference call dials -
UK & International: +44 (0) 20 3003 2666
UK Toll Free: 0808 109 0700
US toll: +1 212 999 6659
US Toll Free: 1 866 966 5335
Replay available for 7 days
UK & International: +44 (0) 20 8196 1998
UK Toll Free: 0800 633 8453
US Toll Free: 1 866 583 1035
PIN: 2259085#
Overview
easyJet delivered a resilient performance in the first half of 2017. During the period, easyJet made good progress in its strategy of making disciplined investments to defend, maintain and leverage its market-leading positions in Europe's primary, slot-constrained airports. This includes increasing easyJet's share on selected city routes and existing number one positions in markets with high volume traffic.
Cost control has been strong as easyJet made further progress with its lean cost programme, offsetting increasing costs of disruption. However adverse foreign exchange rates have continued to have a significant impact on profitability.
The Company's business model and strategy position easyJet to be a structural winner within its chosen markets in the European short-haul market. Looking ahead, there is evidence that key competitors are reducing capacity plans in easyJet's markets (e.g. Alitalia, Air Berlin, Vueling, Norwegian) and easyJet will continue to manage its own capacity growth plans to drive long-term returns.
Total revenue increased by 3.2% to GBP1,827 million (H1 2016: GBP1,771 million).
Revenue per seat decreased by 4.9% to GBP48.80 due to:
-- easyJet's growth in capacity by 8.4% focused on strengthening its number one positions at Europe's primary airports and securing time-sensitive opportunities in newer markets
-- increased overall market capacity, along with low pricing sustained by a low fuel price
-- seasonality, mainly regarding the movement of Easter to the second half of the financial year (an H1 impact of 2.4% on revenue per seat at constant currency)
-- increased levels of disruption during the first half (due to strikes, severe weather, airport issues) which resulted in 3,302 flights (H1 2016: 2,796) being either cancelled, delayed over three hours or diverted
This was offset by:
-- excellent progress in growing non-seat revenue, which increased by 18%, driven by customer-focused initiatives such as improvements to inflight food and drink ranges
-- some recovery in markets after the shock events of last year -- increased load factor, by 0.5ppts to 90.2%
Headline cost per seat has increased by 4.9% to GBP54.45 driven by a gross foreign exchange impact of GBP175 million, partially offset by a lower effective fuel price. At constant currency the headline cost per seat decreased by 4.1%, with headline cost per seat excluding fuel remaining flat. The overall cost performance is driven by:
-- fuel cost reduction of 15.9% at constant currency driven by a lower hedged fuel price, mitigating market price increases
-- Lean initiatives in:
o airport charges, offsetting underlying inflation
o reduced navigation charges
o engineering and maintenance savings, such as the component supply contract
o overhead efficiencies in headcount
-- the phasing of project spend
-- up-gauging of fleet with the delivery of additional 186-seat A320 aircraft and the retro-fitting of 44 existing 180-seat A320s to a 186-seat gauge
This has helped to offset:
-- a continued increase in disruption charges due to an increased number of events, level of compensation claims and welfare claims
-- additional ownership and financing costs that were anticipated following investment in the long-term growth of the airline
easyJet remains on track to deliver flat headline cost per seat excluding fuel at constant currency from the 2015 financial year to the 2019 financial year, assuming normal levels of disruption.
Market environment
easyJet operates in the European short-haul aviation market, with a focused business model that has enabled it consistently to generate higher levels of profitability. As competitors continue to struggle to restructure their high cost bases or operate with inadequate financial resources, easyJet is well positioned to continue to selectively strengthen its market positions. Economic trends remain favourable across Europe with continued GDP growth supporting spending in all easyJet's major countries.
The total European short-haul market(3) grew by 6% year-on-year in the six months ending 31 March 2017 and by 9% in easyJet's markets, driven by easyJet's own growth and competitor growth supported primarily by a continued low fuel price, with particularly strong growth in Spain and Germany.
Strategic progress
easyJet is delivering through its six strategic pillars:
1. Purposeful investment to build strong number one and two network positions 2. A lean cost advantage 3. Customer and operational excellence 4. Data and digital 5. Enhance revenue growth 6. The best people
Purposeful investment to build strong number one and number two network positions
easyJet's strategy is focused on key airports, serving valuable catchment areas that represent Europe's top markets by GDP, driving both leisure and business travel. These are strong, existing markets, built up over a period of time by legacy carriers. easyJet's portfolio of peak time slots at airports, where either total slot availability or availability at customer-friendly times is constrained, further reinforces its competitive advantage.
easyJet currently holds 18 number one market positions by share and has identified a number of potential targets for the next five years where GDP and passenger volumes are high, where there is a weak incumbent and/or where there is no clear winner today. easyJet has the opportunity to capture further market share and to grow the overall market.
easyJet takes a disciplined approach to capital allocation, balancing its network by deploying aircraft to where it can achieve the highest returns. easyJet's strategy achieves this through:
1. Building number one positions both at primary airports and on its routes, which drives significantly greater contribution:
-- 98% of easyJet's capacity touches an airport where it has the number one or number two position by share
2. Investing in scale:
-- Leading positions, route frequencies and multiple destinations create flexibility for customers, as well as reinforcing the easyJet brand to ensure that it is 'top of mind'
3. Investing with purpose:
-- easyJet has a track record of generating above cost of capital returns from purposeful investments within a three year period
In line with guidance given in November 2016, during the first half of this financial year easyJet has focused its growth on maintaining market share in the UK and Switzerland and growing in France. easyJet also invested high capacity growth in its city strategy: in Venice and Naples to improve its number one position; maintaining share in the slot-constrained Berlin market and in Amsterdam where the airport is now at full capacity. Further capacity growth was deployed in easyJet's lean bases to increase their scale and leverage their cost advantage.
Having capitalised on time-sensitive opportunities to bolster its positions in primary airports during this period, such as in Amsterdam, easyJet capacity is likely to grow at a lower rate in FY 2018 compared to this year. By leveraging its flexible fleet plans, easyJet is focused on driving returns on its investment.
easyJet is now seeing signs that competitors are reducing their growth rates or even overall capacity for the forthcoming summer and in the future:
-- Vueling is expected to reduce its capacity on easyJet markets this Summer by around 5% -- Norwegian is focusing more on low cost long-haul, reducing its short haul network at Gatwick
-- The combination of Air Berlin and Lufthansa in Germany is expected to result in a reduction of around 20 aircraft
-- Alitalia is in a state of administration in Italy -- Flybe is expected to reduce its capacity in 2018
Overall easyJet grew capacity by 8.4% in the period, with 3.5ppts being invested in new routes and 7.3ppts on existing routes, being offset by 2.4ppts of routes that we have actively churned. Progress in easyJet's main markets is as follows:
United Kingdom
easyJet has strong market positions in all of the UK's busiest airports, including 47% share of short-haul capacity at London Gatwick and 43% share at Luton. At 31 March 2017, 135 aircraft were based in the UK, with 85 at four London airports. easyJet increased its capacity in the UK in the first half by 8%, with significant growth targeted at maintaining its share of the London market through Luton and Gatwick and increasing capacity at Bristol and Manchester airports in particular.
France
easyJet currently has a number one position in Nice and Nantes, with number two positions in Paris, Lyon, Toulouse and Bordeaux. At 31 March 2017, the airline had 28 aircraft based in France. easyJet increased capacity in the first half by 12%, significantly ahead of the overall market, to consolidate its presence in Paris and increase its share in the regions. With an overall market share at 31 March 2017 of 15%, easyJet has increased its share of the market in France in the last 12 months by 1 percentage point.
Italy
easyJet is the largest operator at Milan Malpensa, Naples and Venice. At 31 March 2017, the airline had 27 aircraft based in Italy. easyJet increased capacity in the first half by 6%: further increasing its investment in Venice, where easyJet now has 28% share of the airport; Naples (35% share); and securing its position in Milan Malpensa (40% share).
Switzerland
easyJet has a strong position in Switzerland and is number one in both Geneva and Basel with 40% and 57% market share respectively. At 31 March 2017, the airline had 22 aircraft based in Switzerland. easyJet increased capacity in the first half of the year by 9% in increasing its share in both Geneva and Basel, against overall market growth of 8%.
Germany
In Germany, easyJet has two bases, at Berlin Schönefeld, where it has a number one position, and Hamburg. At 31 March 2017, the airline had 14 aircraft based in Germany. easyJet increased capacity by 9% in Germany during the period as it invested in maintaining its strong market share of the Berlin market.
Netherlands
easyJet holds the number two position behind KLM at Amsterdam Schiphol airport, which is now at full capacity. At 31 March 2017, the airline had eight based aircraft with one further to be added this Summer. This has been built since opening the base in March 2015 and is an increase of three aircraft since 31 March 2016. easyJet increased capacity by 7% in the first half as it began to annualise the high growth from the previous two years, focusing on adding frequencies to existing destinations and capturing first wave demand from business passengers.
Portugal / Spain
easyJet operates out of all five major airports in Portugal and flies both international and domestic routes. At 31 March 2017, the airline had eight aircraft based in Portugal. easyJet increased capacity by 17% in the first half as it continued to establish its position in both bases (Lisbon and Oporto) and protect its market share.
easyJet operates at 20 airports in Spain and serves over 150 routes. At 31 March 2017, the airline had four aircraft based in Spain. easyJet grew capacity in Spain by 16% in the first half as it continued to build its presence in Barcelona. In March, easyJet opened its first seasonal base in Palma de Majorca, a major leisure destination which will serve over two million passengers this summer. Three aircraft will be based there during the busy summer months.
A lean cost advantage
easyJet is committed to maintaining its structural cost advantage in the markets where it operates, primarily against the legacy airlines. Through its lean programme, easyJet continues to review its cost base to identify both short-term efficiencies and longer term structural cost savings. These savings enable the airline to offset the effects of underlying inflation and build flexibility to help mitigate revenue pressure. The lean project is well established within the organisation and seen as a primary driver of the business. As a result, easyJet has remained committed to a target of flat unit headline cost performance between the 2015 financial year and the 2019 financial year, at constant currency and before the effect of fuel, assuming normal levels of disruption. Total lean savings in the first half of FY 2017 were approximately GBP35 million.
Savings will be delivered in the following areas:
Airports and ground handling
-- As easyJet increases in size, the airline can further drive economies of scale from long-term deals with airports and ground handling operators. Management continues to work with airports that will reward easyJet's commitment and growth with attractive financial packages
-- 20% of all easyJet passengers now travel through an automated bag drop area with further automation planned to be rolled out across the network. Automatic gates are also being trialled for boarding
Maintenance and engineering
-- easyJet is driving further efficiencies from its contract for maintenance and the provision of spare parts, which started in October 2015
-- easyJet is using data science and its strong relationship with Airbus to support predictive maintenance, which will drive further long-term cost savings
Crew
-- easyJet is investing significant resources to improve schedule and rostering efficiency, which will improve productivity and create a more stable working environment for its crew
-- In March the airline opened its first seasonal base in Palma de Majorca, which will match the fluctuating needs of the market to supply periods of high customer demand while providing local easyJet crew with a lifestyle choice of working for eight months with four months leave
-- Continuing to grow the lean bases in Lisbon, Oporto and Barcelona
Overhead and IT
-- easyJet is implementing its new organisational design that will bring significant efficiency to the business, as well as the ability to leverage scale in overhead for future growth
-- Increasing investment into data and digital to increase simplicity, enhance flexibility and drive efficiency
-- Continuing end-to-end review of the supplier base in all areas of the business to reduce cost and drive innovative thinking about the way the airline works in future
Up-gauging and efficient fleet management
-- Moving from 156 seats on an A319 to 186 on an A320 NEO aircraft is expected to deliver a cost per seat saving of around 13%-14%(4) . This is being achieved by
o Increasing the proportion of higher gauge A320 aircraft in the fleet
o All new A320 deliveries will be fitted with 186 seats
o Retrofitting the existing fleet of 180 seat A320s
o Introduction of the 186-seat A320 NEO from June 2017
-- The addition of A321 NEO aircraft to the fleet is expected to deliver an 8% to 9%(4) cost per seat saving compared to an A320 NEO, primarily due to their 235-seat configuration
Fuel
-- easyJet continues to optimise its commercial and logistical fuel supply arrangements, working closely with its fuel providers
Non-headline items
As indicated previously, easyJet has incurred a number of non-headline costs during the first half of the 2017 financial year. These costs are separately disclosed as non-headline profit before tax items:
-- easyJet transacted the first sale and leaseback arrangement for 10 aircraft in December 2016, which is the first of a rolling programme of approximately 10 per year to 2021 to de-risk the exit from the business of the ageing A319 fleet. easyJet has incurred a total one-off, non-cash charge of GBP16 million. Of this, GBP10 million relates to a loss on disposal, which reflects the timing of the transaction and the specific aircraft sold. It does not necessarily reflect the outcome of future transactions. A further GBP6 million relates to a one-off catch up in the maintenance provision due to the differences in accounting treatment between owned and leased aircraft. The proceeds of the transaction were $144 million and are reflected in the cash flow statement
-- as a result of the UK's referendum vote to leave the European Union, easyJet expects to establish an Air Operator Certificate (AOC) in another EU member state during this Summer. This will secure the flying rights of the 30% of the network that remains wholly within and between EU states, excluding the UK. This one-off cost, comprised mainly of aircraft registration costs, is expected to total up to GBP10 million over three years with up to GBP3 million incurred in the 2017 financial year. The cost in the first half of 2017 has been GBP1 million.
-- expenses associated with implementing the organisational review in the 2017 financial year totalled GBP2 million to date
-- balance sheet foreign exchange loss of GBP1 million (H1 2016 GBP2m gain). These charges/credits have previously been excluded from the Cost per Seat at constant currency statistics
-- a GBP4 million non-cash fair value adjustment associated with the Cross Currency Interest Rate Swap (CCRIS) that was put in place to hedge the EUR500 million Eurobond issue in February 2016. The CCRIS movements are non-cash and revert to nil exposure over the term of the bond. They relate to the different accounting treatment of the underlying Bond valuation versus the accounting treatment of the hedge put in place to alleviate cash flow volatility
These Profit and Loss items are material non-recurring items or are items which do not reflect the trading performance of the business.
easyJet will continue to relentlessly focus on lean cost control. The cost saving programme will build on the strong momentum from 2016, leveraging easyJet's increasing scale and will review the airline's cost management down to the most granular level.
Customer and operational excellence
easyJet continues to improve its On Time Performance (OTP) from a difficult period in Summer 2016. The airline is investing to provide better customer service and reduce the increasing associated costs of disruption.
In the six months to 31 March 2017, cancellations and delays increased by 18% to 3,302 (H1 2016 2,796) and OTP was 80%. The challenges of working at Gatwick, where easyJet outperforms most of its direct competitors on OTP, continue to have an impact on the rest of the network; OTP excluding the UK was two percentage points higher than the rest of the network at 82%. In particular, easyJet was affected by a number of external factors:
-- Severe weather at peak times of year (Christmas and Storm Doris at February half term)
-- Strikes around the network - French Air Traffic Control (ATC), Italian Ground Handling, Berlin Ground Handling
-- Reduced capacity as French ATC perform systems upgrades in Bordeaux, similar to the Brest upgrades last year
OTP % arrivals within Q1 Q2 H1
15 minutes(5)
--------------------------- ---- ---- ----
2017 Network 79% 80% 80%
Network excluding
UK 82% 82% 82%
2016 Network 82% 82% 82%
Network excluding
UK 83% 84% 83%
--------------------------- ---- ---- ----
easyJet is making good progress on a number of its initiatives to improve OTP and reduce Disruption:
-- Engineering initiatives to increase aircraft availability: easyJet has set up an Aircraft On Ground Response Team and will add another light aircraft at Milan Malpensa to the one at Luton to ensure engineers can fix aircraft more quickly; spare parts have also now been distributed around the network to support a faster response, guided by predictive maintenance analysis; and predictive maintenance is also being used in scheduled checks and is expected to reduce technical operational interruptions by up to 20%
-- Gatwick North Terminal consolidation: since January easyJet has been able to improve operations and customer experience at Gatwick; and 80% of stands are now dedicated to easyJet aircraft, enabling more efficient Ground Handling processes and consistent turn times
-- Customer communications: easyJet has increased its push notifications to customers, to manage disruption better; technology is also supporting more consistent communication between Operations Control, Ground Handling teams and onboard Crew to passengers; and easyJet has now introduced further automation to compensation claims to improve customer satisfaction and reduce processing costs
-- Schedule and Rosters: easyJet has introduced breaks to its schedule and increasing block times (reducing asset utilisation) to ensure it can deliver a more robust schedule for its customers. In addition three aircraft have been wet leased this summer to build flexibility and a further two spare aircraft made available to add resilience
As a result of the above recent trends are encouraging, with improvements to all areas of customer satisfaction at Gatwick in the first half year and good On Time Performance across the network at Easter in particular (a 9.0 ppt improvement to 85.3%).
easyJet is also seeing strong customer satisfaction improvements where it has rolled out Auto Bag Drop, currently in six airports. With shorter queuing times (over 90% of our customers at Gatwick waited less than five minutes in last year's peak Summer season) and as Ground Crew move away from the process and into customer service, this is driving improving Customer Satisfaction scores. At Gatwick the Overall Bag Drop satisfaction increased by 7ppts from second quarter 2016 to second quarter 2017.
Data and digital
easyJet has been at the forefront of digital innovation in the airline industry and its digital strategy is a core part of easyJet's wider strategy. Its capability helps to build customer loyalty, drive revenue growth, secure cost savings and deliver greater customer satisfaction. easyJet's increasingly sophisticated use of data will enable the Company to make travel even easier and more affordable in the long-term.
Mobile is increasingly a channel which we will use to drive revenue. easyJet is now making 26% of all ecommerce bookings through mobile platforms, an increase of 4ppts from 31 March 2016, as functionality and accessibility improve further. The ability to simplify transactions also continues to improve with technology such as Apple Pay seeing strong adoption and representing 11% of all bookings. 21% of passengers now use mobile boarding passes (6.3ppts increase from H1 2016) and 39 airports support real time data exchange for gate information and bag drop. easyJet sent 5.5 million "go to gate" push notifications during the period.
Innovation and digital leadership
easyJet has recently started the next phase of its digital development, with a new booking funnel now live for all customers. This has already seen increases in target metrics for conversion and attachment rates as customers find it easier to search for flights, compare routes, times and fares and see more relevant information on seats and bags. With the new website rolled out this provides a platform to release new features and enhancements. The digital platform remains a key point of differentiation from competitors and further opportunities for commercial optimisation are planned.
easyJet has continued to enhance its App capabilities, already the "most loved airline app in Europe" with 20 million downloads with a consistent 4.4 star rating on App stores. As well as functionality that improves the travel experience and drives loyalty, such as mobile boarding passes and the flight tracker, easyJet's app is increasingly being used to manage disruption, combining better communication with the ability for passengers to self-handle, easily rebooking their flights and securing pre-approved hotel accommodation.
easyJet has now announced the next step with its first two Founders Factory portfolio companies. The Company will be integrating features from both Flio and Lucky Trip into the easyJet travel app later in the year, delivering customer benefits in the airport experience and travel inspiration respectively.
Loyalty and data
easyJet continues to benefit from increasingly loyal customers. In the first six months of financial year 2017 75% of its seats were booked by returning customers, representing an increase of four million compared to the first half of 2016. easyJet has seen significant increases in returning customer loyalty in its core markets of the UK (+2.3 million customers) and Switzerland (+0.5 million customers), with strong increases also in France and Germany.
easyJet is also building increasingly strong relationships with its customers through the use of personalised data. easyJet's CRM of marketable customers increased by 5% during the first half to 26.7 million. After its first 12 months easyJet's loyalty scheme Flight Club is also producing demonstrable benefits, driving higher retention and higher satisfaction than non-members. Over 50% of Flight Club members fly 20 or more times a year, with over 40% representing business or commuter customers.
Enhance revenue growth
easyJet has a programme to develop additional revenue streams as well as enhancing existing revenue streams, leveraging its primary airport-focused network, cost focus and track record of innovation. The airline is exploring new distribution channels, partner agreements and structures such as connectivity with other airlines. easyJet is also increasingly using data science to support revenue-enhancing initiatives, for example using customer profiling on specific sectors and routes.
Business passengers
easyJet's business passenger segment has performed well during the first half of the financial year. The total number of business passengers has increased by 6.2%, against a backdrop of capacity investment weighted towards leisure routes. Business passengers remained at 19% of easyJet's customer base, reflecting the mix of routes flown. The business passenger premium has remained steady year-on-year, helped by the recovery from shock events (which disproportionately impacted short-term travel) and the move of Easter from March into April.
With the proposition now well established, easyJet is looking to evolve the product offering, drive better distribution and reduce costs. A new organisational structure is now finalised, contracts with Travel Management companies are being renegotiated and six major new corporate and Government contracts were signed in the period, for example with the State of the Netherlands.
Additional revenue streams
In the first six months, easyJet has seen strong growth in its Ancillary(5) (including Non-Seat) Revenue, offsetting pressure on ticket yields from the external environment. For example easyJet has seen excellent early results from new initiatives in its baggage strategy, reflecting changes to consumer behaviour. easyJet also has opportunities to build on its partnerships with industry-leading brands in car rental (Europcar) and hotels (Booking.com), as well as exploring other value channels. Building on these, easyJet has a number of projects in the pipeline for the next 12 months.
Non-seat revenue has increased by 18% in the first half of the financial year, driven by improvements to inflight food and drink ranges. easyJet has continued to add premium products that appeal to its customer base.
The best people
easyJet cares about its people and believes they set the airline apart. easyJet's customer-facing employees are the very best in the industry and contribute significantly to the positive experience that passengers enjoy, leading to increased loyalty and repeat business.
It is easyJet's people who continue to deliver the business' strategy and will drive future success. easyJet has invested in a programme called 'Next Generation' that is focused on driving efficiency and effectiveness in our overhead structure through the optimisation of a scaleable organisational design, focused accountabilities and empowerment, enhanced ways of working that will support more effective and cost-efficient growth in the future and faster and more effective decision making that best fits the easyJet's entrepreneurial culture.
easyJet continues to recruit to support its growth, adding over 281 pilots and 836 cabin crew. During the period 35% of positions were filled by internal candidates, ahead of easyJet's target of 30%. Retention rates remain good with employee turnover at 7%, while attendance rates are high at 97%.
easyJet continues to lead the industry in its push to increase the number of female pilots through the Amy Johnson Flying Initiative, in partnership with the British Women Pilots Association. After reaching the initial target to double the proportion of new female entrants from under 6% in the year ending 30 September 2015 to over 12% within a two year period, easyJet has set a new, more stretching target for 20% of our new pilot cadets to be female by 2020.
Capital allocation and fleet
easyJet has a ruthless focus on capital allocation, using its market-leading fleet flexibility to increase or decrease capacity deployed. easyJet regularly reviews the opportunities available and prevailing economic and market conditions to determine the most effective capital allocation. In the past five years easyJet has closed bases in Madrid and Rome and redeployed those aircraft to secure stronger more profitable market positions elsewhere. Every year the airline churns routes that have not reached their targeted objectives using the flexibility to move aircraft between routes and markets to ensure improved utilisation and generate increased returns.
This industry-leading flexibility is achieved due to a number of agreements that impact both the timing and scale of capacity deployment: new aircraft orders can be deferred, leases may be extended or not renewed, aircraft may be sold or utilisation can be reduced at times of low demand. As announced in November 2016, easyJet secured a reduced notice period with Airbus for deferring deliveries from 24 months to 18 months, giving it a competitive advantage in its ability to respond to market conditions.
In addition, easyJet has reached an agreement with Airbus to purchase 30 A321 NEO aircraft in a 235 seat configuration, with the first deliveries expected in July 2018. This is a conversion of 30 A320 NEO orders under the existing 2014 easyJet Airbus agreement. This will enable easyJet to continue to deliver growth in slot constrained airports, as well as securing substantial unit cost savings, which are estimated to be around 8% to 9% better than a 186-seat A320 NEO. easyJet has also agreed a delivery schedule and optionality with Airbus making it capex neutral to current plans, including the deferral of some A320 NEO deliveries. As a result easyJet has further increased its high degree of flexibility in its fleet plans to manage its growth, cost and cash flows.
% of Changes
fleet since Unexercised
Finance Operating Sept Future purchase
Owned leases leases Total '16 deliveries rights
A319 89 - 55 144 54% - - -
A320
180
seat 52 1 8 61 23% (44) - -
A320
186
seat 47 4 10 61 23% 53 27 -
A320
neo - - - - - - 100 100
A321 - - - - - - 30 -
neo
------ ------- ---------- ------ ------- -------- ------------ ------------
188 5 73 266 9 157 100
71% 2% 27%
easyJet's total fleet as at 31 March 2017 comprised of 266 aircraft (H1 2016: 247 aircraft), split between 156-seat Airbus A319s, 180-seat A320s and since May 2016, 186-seat A320s. Alongside its lean initiatives over the next five years easyJet will reduce cost by improving the fleet mix and ownership structure. In the six months to 31 March 2017, easyJet took delivery of nine 186-seat A320 aircraft, which provide a per seat cost saving of 9% to 10%(3) compared to the A319 through economies of scale, efficiencies in crew, ownership, fuel and maintenance. easyJet also completed the up-gauging of 44 of its existing 180-seat A320s to 186 seats. During this process easyJet experienced issues with the quality of the new equipment, leading to aircraft unavailability. Therefore, the retrofitting programme will be suspended until these problems are resolved.
The average age of the fleet increased to 7.0 years (H1 2016: 6.7 years). In the first six months easyJet slightly increased its asset utilisation across the network to an average 10.0 block hours per day (H1 2016: 9.6 hours).
Based on current plans, including the recently agreed changes to include A321 NEO aircraft, capital expenditure for the next three years is as follows:
Year 2017 2018 2019 2020 --------------------------- ----- ------ ----- ----- Gross capital expenditure (GBP) 700 1,050 800 950 --------------------------- ----- ------ ----- -----
Of the 193 aircraft on easyJet's balance sheet at 31 March 2017, 188 are unencumbered reflecting the strength of easyJet's balance sheet. At 31 March 2016 easyJet had 177 aircraft on its balance sheet of which 128 were unencumbered with mortgage financing.
Hedging positions
easyJet operates under a clear set of treasury policies agreed by the Board. The aim of easyJet's hedging policy is to reduce short-term earnings volatility. Therefore, easyJet hedges forward, on a rolling basis, between 65% and 85% of the next 12 months anticipated fuel and currency exposures and between 45% and 65% of the following 12 months anticipated requirements. Specific decisions may require consideration of a longer term approach. Treasury strategies and actions will be driven by the need to meet treasury, financial and corporate objectives.
Details of hedging arrangements as at 31 March 2017 are set out below:
Percentage of anticipated Fuel requirement US Dollar Euro surplus CHF surplus
requirement hedged requirement
--------------------------- ----------------- ------------- ------------- -----------
Six months to 30
September 2017 83% 78% 95% 71%
$577 /
metric
Average rate tonne $1.48 EUR1.34 CHF 1.37
--------------------------- ----------------- ------------- ------------- -----------
Full year ending
30 September 2017 84% 82% 91% 74%
$612 /
metric
Average rate tonne $1.50 EUR1.35 CHF 1.40
--------------------------- ----------------- ------------- ------------- -----------
Full year ending
30 September 2018 60% 59% 66% 61%
$516 /
metric
Average rate tonne $1.40 EUR1.25 CHF1.32
--------------------------- ----------------- ------------- ------------- -----------
Sensitivities
-- A $10 movement in fuel price per metric tonne impacts the FY'17 fuel bill by $2.2 million. -- A one cent movement in GBP/$ impacts the FY'17 profit before tax by GBP1.0 million. -- A one cent movement in GBP/EUR impacts the FY'17 profit before tax by GBP0.6 million. -- A one cent movement in GBP/CHF impacts the FY'17 profit before tax by GBP0.3 million.
Outlook
easyJet is confident in its strategy and will continue its disciplined investment in reinforcing and expanding number one positions in its airports and on its routes, with significant opportunities in its core markets. Capacity is planned to grow by around 8.5% in the second half of financial year 2017.
easyJet expects revenue per seat at constant currency for the third quarter of the financial year to decrease by low single digits, reflecting the move of Easter into April and an improving yield and capacity environment. Forward bookings are currently ahead of last year at 77% for the quarter and 55% for the second half (H1 2016: 72% and 50% respectively).
easyJet is on track to deliver against the expected headline cost per seat at constant currency excluding fuel increase of around 1% for the full year, assuming normal levels of disruption. This is better than guided in November 2016 as easyJet has achieved further cost savings in its lean programme to offset successfully the cost of additional investment in resilience and in improving its long-term operational performance. The majority of expected non-headline costs have been incurred in the first half of the financial year. As previously guided we will incur around GBP10 million over three years on the set-up of the European Union AOC and up to GBP3 million in the current financial year 2017. We also expect to incur costs of around GBP10 million on the organisational review in the same three year period and up to GBP6 million this financial year. easyJet remains committed to delivering a flat headline cost per seat performance between the 2015 financial year compared to the 2019 financial year at normal levels of disruption.
It is estimated that at current exchange rates(7) and with jet fuel remaining within a $500 metric tonne to $580 metric tonne trading range, easyJet's unit fuel bill(8) for the second half of the financial year is likely to decrease by between GBP145 million and GBP160 million compared to the six months to 30 September 2016. On a full year basis it is estimated that at current exchange rates and with jet fuel remaining within a $500 metric tonne to $580 metric tonne trading range, easyJet's unit fuel bill for the 12 months ending 30 September 2017 is likely to decrease by between GBP225 million and GBP235 million compared to the 12 months to 30 September 2016. easyJet's total fuel cost for the year to 30 September 2017 is currently estimated to be approximately GBP1,060 million.
In addition, exchange rate movements(7) are likely to have around a GBP20 million adverse impact on headline profit before tax compared to the six months to 30 September 2016 and are likely to have around a GBP100 million adverse impact on headline profit before tax compared to the 12 months to 30 September 2016.
easyJet continues to deliver on its strategy and sees significant opportunities to grow revenue, profits and shareholder returns. easyJet expects market demand to remain strong and easyJet's unique model and strategy are well positioned to capture significant value from favourable trends in both leisure and business markets. easyJet's clear structural advantages over both legacy and low cost competitors in cost, network, customer data and digital leave the airline well positioned for long-term success. easyJet remains committed to its full year dividend policy based on a 50% payout of profit after tax. easyJet expectations for the full year are in line with current consensus market expectations(2) .
Footnotes:
(1) Constant currency is calculated by comparing 2017
financial period performance translated at the 2016
financial period effective exchange rate to the 2016
financial period reported performance, excluding
foreign exchange gains and losses on balance sheet
revaluations
(2) Company-compiled consensus headline profit before
tax for financial year 2017 is GBP367 million at
15 May 2017
(3) Capacity and market share figures from OAG. Size
of European market based on internal easyJet definition.
Historical data based on 6 month period from October
2016 to March 2017.
(4) Based on fuel price assumptions in place at the time
of each transaction
(5) On-time performance measured by internal easyJet
system
(6) Ancillary revenue includes revenue from the provision
of checked baggage, administration, allocated seating,
credit card and change fees, and also includes non-seat
revenue which arises from commissions earned from
services sold on behalf of partners and inflight
sales.
(7) US $ to GBP sterling 1.286, euro to GBP sterling
1.184. Currency and fuel increases are shown net
of hedging impact.
(8) Unit fuel calculated as the difference between latest
estimate of FY'17 fuel costs less FY'16 fuel cost
per seat multiplied by FY'17 seat capacity
OUR FINANCIAL RESULTS
easyJet has delivered a headline loss before tax for the six months to 31 March 2017 of GBP212 million (headline loss of GBP5.65 per seat) an increase of GBP191 million from a headline loss of GBP21 million (loss of GBP0.62 per seat) last year. The 2017 result includes an unfavourable GBP82 million movement from foreign exchange. At constant currency easyJet delivered a headline loss before tax of GBP130 million during the period.
The airline industry is highly seasonal and demand and yields are significantly higher during the summer. Accordingly revenue and profitability are higher in the second half of the financial year. Historically, easyJet has reported a loss or low profit for the first half of the financial year and a profit in the second half.
FINANCIAL OVERVIEW
2017 2016 (restated*)
--------- -------- ------- --------- -------------------
GBP GBP pence GBP GBP pence
million per per million per per
seat ASK seat ASK
---------------------------- --------- -------- ------- --------- ---------- -------
Total revenue 1,827 48.80 4.61 1,771 51.29 4.87
Headline costs excluding
fuel (1,580) (42.18) (3.98) (1,330) (38.54) (3.66)
Fuel (459) (12.27) (1.16) (462) (13.37) (1.27)
----------------------------- --------- -------- ------- --------- ---------- -------
Headline loss before
tax (212) (5.65) (0.53) (21) (0.62) (0.06)
Headline tax credit 40 1.06 0.10 3 0.09 0.01
----------------------------- --------- -------- ------- --------- ---------- -------
Headline loss after
tax (172) (4.59) (0.43) (18) (0.53) (0.05)
Non-headline (loss)/profit
after tax (20) (0.51) (0.05) 3 0.09 0.01
----------------------------- --------- -------- ------- --------- ---------- -------
Total loss after
tax (192) (5.10) (0.48) (15) (0.44) (0.04)
----------------------------- --------- -------- ------- --------- ---------- -------
* For further detail on the restatement
see note 1 to the Condensed Financial
Information.
Seats flown grew by 8.4%. Total revenue per seat fell by 4.9% to GBP48.80. At constant currency, revenue per seat fell by 9.7% to GBP46.32. The decrease is a consequence of driving demand through decreased price, reflecting significant capacity growth in the market associated with low fuel prices and to alleviate the impact of higher holiday costs for UK travellers as a result of the weakening of the Pound. Additionally the movement of Easter into the second half of the year impacted performance.
Headline cost per seat excluding fuel increased by 9.5% to GBP42.18, but remained flat at constant currency. Savings were obtained from airport lean initiatives, the annualisation of reduced navigation charges, engineering and maintenance savings such as the component supply contract and the upgauging of fleet as easyJet continues to move from A319s to A320s. These savings have offset inflation pressures in the period, regulated airport uplifts, a continued increase in disruption charges due to an increased number of events, level of compensation claims and welfare claims and expected additional ownership and financing costs as we invest in the long term growth of the airline. We anticipate full year headline cost per seat at constant currency excluding fuel to increase by 1%, assuming normal levels of disruption, reflecting additional investment into operational resilience for the Summer peak given the current level of airport and airspace congestion, especially at primary airports.
Fuel costs fell by GBP3 million, and from GBP13.37 to GBP12.27 per seat. Despite an increase in the market price of fuel, the operation of easyJet's fuel and US dollar hedging policy resulted in a reduction in the effective fuel price.
This resulted in a headline loss before tax per seat increase from GBP0.62 to GBP5.65 per seat.
Non-headline costs of GBP24 million were recognised in the period, consisting of a GBP16 million charge as a result of the sale and leaseback of 10 A319 aircraft in December, a GBP2 million charge associated with our organisational review, a GBP1 million charge in relation to the application and set-up of an EU Air Operator Certificate (AOC), a GBP4 million charge for fair value adjustments in relation to the cross currency interest rate swaps in place for the bond issued in February 2016 and a GBP1 million charge relating to balance sheet foreign exchange gains and losses.
Corporate tax has been credited at an effective rate of 18.7% (FY 2016: charged at 13.7%) based on rates substantively enacted as at 31 March 2017, resulting in a tax credit of GBP44 million during the period.
Loss per share and dividends per share
2017 2016
(restated) Change
pence pence pence
per per per
share share share
---------------------------------- ------- ----------- -------
Basic headline loss per share (43.8) (4.6) (39.2)
Basic total loss per share (48.9) (3.8) (45.1)
Ordinary dividend per share paid
during the period 53.8 55.2 (1.4)
----------------------------------- ------- ----------- -------
Basic headline loss per share increased by 39.2 pence as a consequence of the GBP154 million increase in the headline loss after tax in the six months to 31 March 2017.
In line with the stated dividend policy of a payout ratio of 50% of profit after tax, easyJet paid an ordinary dividend of 53.8 pence per share in March 2017.
EXCHANGE RATES
The proportion of revenue and costs denominated in currencies other than sterling remained broadly consistent year-on-year:
Revenue Costs
----- -------- -------- --------
2017 2016 2017 2016
--------------------------------- ----- -------- -------- --------
Sterling 45% 47% 33% 29%
Euro 43% 41% 36% 33%
US dollar 1% 1% 23% 32%
Other (principally Swiss franc) 11% 11% 8% 6%
---------------------------------- ----- -------- -------- --------
Average exchange rates
2017 2016
--------------------------------- ----- -------- -------- --------
Euro - revenue EUR1.21 EUR1.32
Euro - costs EUR1.16 EUR1.34
US dollar $1.51 $1.60
Swiss franc CHF CHF
1.78 1.52
---------------------------------- ----- -------- -------- --------
The net adverse impact on profit due to the year-on-year changes in exchange rates was mainly driven by the stronger average US dollar and Euro rate:
Headline Euro Swiss US dollar Other Total
franc
Favourable/(adverse) GBP GBP GBP GBP GBP
million million million million million
------------------------------ --------- --------- ---------- --------- ---------
Total revenue 71 14 3 5 93
Fuel (1) - (37) - (38)
Headline costs excluding
fuel (96) (19) (16) (6) (137)
------------------------------- --------- --------- ---------- --------- ---------
Headline loss before
tax (26) (5) (50) (1) (82)
------------------------------- --------- --------- ---------- --------- ---------
Non-headline Euro Swiss US dollar Other Total
franc
Favourable/(adverse) GBP GBP GBP GBP GBP
million million million million million
------------------------------ --------- --------- ---------- --------- ---------
Non-headline costs excluding
prior year balance sheet
revaluations (6) (1) 23 1 17
Prior year balance sheet
revaluations (3) - - 1 (2)
------------------------------- --------- --------- ---------- --------- ---------
Non-headline loss before
tax (9) (1) 23 2 15
------------------------------- --------- --------- ---------- --------- ---------
FINANCIAL PERFORMANCE
Revenue
2017 2016
--------- ------ ------ --------- ------ ------
GBP pence GBP pence
GBP per per GBP per per
million seat ASK million seat ASK
------------------ --------- ------ ------ --------- ------ ------
Seat revenue 1,790 47.82 4.52 1,740 50.39 4.78
Non-seat revenue 37 0.98 0.09 31 0.90 0.09
------------------- --------- ------ ------ --------- ------ ------
Total revenue 1,827 48.80 4.61 1,771 51.29 4.87
------------------- --------- ------ ------ --------- ------ ------
Revenue per seat decreased by 4.9% to GBP48.80 (31 March 2016: GBP51.29). At constant currency, revenue per seat fell by 9.7% to GBP46.32. The decrease is a consequence of driving demand through decreased price, reflecting significant capacity growth in the market associated with low fuel prices and to alleviate the impact of higher holiday costs for UK travellers as a result of the weakening of the Pound. Additionally the movement of Easter into the second half of the year impacted performance.
Load factor during the period increased by 0.5 percentage points to 90.2%.
Revenue per ASK decreased by 5.3%, and by 10.1% at constant currency, impacted by a 4.9% decrease in revenue per seat and a 0.4% increase in the average sector length.
Headline costs excluding fuel
2017 2016
(restated)
--------- ------ ------ --------- ------ -----------
GBP GBP pence GBP GBP pence
million per per million per per
seat ASK seat ASK
----------------------- --------- ------ ------ --------- ------ -----------
Operating costs
Airports and ground
handling 624 16.66 1.57 514 14.88 1.42
Crew 293 7.82 0.74 250 7.25 0.69
Navigation 159 4.25 0.40 135 3.91 0.37
Maintenance 127 3.39 0.32 111 3.22 0.31
Selling and marketing 59 1.57 0.15 51 1.48 0.14
Other costs 160 4.27 0.41 137 3.98 0.37
------------------------ --------- ------ ------ --------- ------ -----------
1,422 37.96 3.59 1,198 34.72 3.30
--------- ------ ------ --------- ------ -----------
Ownership costs
Aircraft dry leasing 55 1.46 0.14 48 1.39 0.13
Depreciation 85 2.28 0.21 74 2.15 0.20
Amortisation 7 0.17 0.02 6 0.17 0.02
Net interest payable 11 0.31 0.02 4 0.11 0.01
------------------------ --------- ------ ------ --------- ------ -----------
158 4.22 0.39 132 3.82 0.36
--------- ------ ------ --------- ------ -----------
Headline costs
excluding fuel 1,580 42.18 3.98 1,330 38.54 3.66
------------------------ --------- ------ ------ --------- ------ -----------
Headline cost per seat excluding fuel increased by 9.5% to GBP42.18 but remained flat at constant currency.
Headline airports and ground handling cost per seat increased by 12.0% but remained broadly flat at constant currency. Savings obtained from airport lean initiatives have offset regulatory airport uplifts.
Headline crew cost per seat increased by 7.9% to GBP7.82, and by 0.5% at constant currency. This was driven by pay increases, however these were largely offset by efficiencies obtained from the up-gauging of our fleet.
Headline navigation cost per seat increased by 8.8% to GBP4.25 but decreased by 3.5% at constant currency driven by the annualisation of reduced charges primarily in France and Germany.
Headline maintenance cost per seat increased by 5.5% to GBP3.39, but decreased by 4.9% at constant currency. This was driven by engineering and maintenance savings such as the component supply contract, and the upgauging of fleet as easyJet continues to move from A319s to A320s.
Headline other operating costs per seat increased by 7.1% to GBP4.27 per seat, and by 1.9% at constant currency. This was mainly driven by an increase in disruption costs due to an increased number of events, level of compensation claims and welfare claims, which had a higher impact in Q1 due to the profile of events.
Headline aircraft dry leasing cost per seat increased by 5.1% to GBP1.46 but decreased by 5.5% at constant currency. The favourable variance was driven by the increased capacity in the year and the favourable lease mix.
Depreciation costs have increased by 5.9% on a per seat basis driven by the acquisition of 20 new aircraft last year. The average owned fleet increased by 10.0% to 187.
An increase in headline net interest costs of GBP0.20 per seat is attributable to issuance costs of two bonds, as we invest in the long term growth of the airline.
Fuel
2017 2016
--------- ------ ------ --------- ------ ------
GBP GBP pence GBP GBP pence
million per per million per per
seat ASK seat ASK
------ --------- ------ ------ --------- ------ ------
Fuel 459 12.27 1.16 462 13.37 1.27
------- --------- ------ ------ --------- ------ ------
Fuel cost per seat decreased by 8.3% and by 15.9% at constant currency.
During the period the average market fuel price increased by 22.2% to $500 per tonne from $409 per tonne in the previous year. The operation of easyJet's fuel and US Dollar hedging policy meant that the average effective fuel price movement saw a decrease of 8.2% to GBP449 per tonne from GBP489 per tonne in the previous year.
Non-headline items
2017 2016
--------- ------- ------- --------- ------ ------
GBP GBP pence GBP GBP pence
million per per million per per
seat ASK seat ASK
------------------------------ --------- ------- ------- --------- ------ ------
Sale and leaseback
charge (16) (0.42) (0.04) - - -
Organisational
review (2) (0.09) (0.01) - - -
EU Air Operator
Certificate (1) (0.02) - - - -
Balance sheet
foreign exchange
(loss)/gain (1) (0.01) - 2 0.07 0.01
Fair value adjustment (4) (0.09) (0.01) 1 0.03 -
------------------------------- --------- ------- ------- --------- ------ ------
Non-headline (charge)/credit
before tax (24) (0.63) (0.06) 3 0.10 0.01
------------------------------- --------- ------- ------- --------- ------ ------
Non-headline profit before tax items of GBP24 million comprise:
-- a GBP10 million loss on disposal and a GBP6 million maintenance provision - both one-off charges as a result of the sale and leaseback of 10 A319 aircraft in December 2016, arising due to the age of the selected aircraft and maintenance provision accounting;
-- a GBP2 million one-off charge associated with implementing the organisational review;
-- a GBP1 million charge in relation to establishing an Air Operator Certificate in another EU member state, to secure the flying rights of the 30% of our network that remains wholly within and between EU states, excluding the UK, following the UK's referendum vote to leave the European Union;
-- a GBP1 million non-cash charge relating to balance sheet foreign exchange gains and losses; and
-- a GBP4 million charge relating to fair value adjustments associated with the cross currency interest rate swaps in place for the bond issued in February 2016.
NET CASH AND FINANCIAL POSITION
Summary net cash reconciliation
The table below presents cash flows on a net cash basis. This presentation has been adopted as it shows more clearly the capability of the business to generate net cash. This is different to the GAAP presentation of the statement of cash flows in the condensed financial information.
Six months Six months
ended ended
31 March 31 March
2017 2016 Change
(restated)
GBP million GBP million GBP million
-------------------------------------- ------------ ------------ ------------
Operating loss (220) (17) (203)
Depreciation and amortisation 92 80 12
Unearned revenue movement 730 461 269
Other net working capital movement (63) (75) 12
Net tax paid (28) (45) 17
Net capital expenditure (302) (314) 12
Net proceeds from sale and operating
leaseback of aircraft 115 - 115
Purchase of own shares for employee
share schemes (6) (11) 5
Net decrease in restricted cash - 1 (1)
Other (including the effect
of exchange rates) 36 - 36
Ordinary dividend paid (214) (219) 5
--------------------------------------- ------------ ------------ ------------ Net increase/(decrease) in net cash 140 (139) 279 --------------------------------------- ------------ ------------ ------------ Net cash at beginning of period 213 435 (222) Net cash at end of period 353 296 57 --------------------------------------- ------------ ------------ ------------
Net cash at 31 March 2017 was GBP353 million (31 March 2016: GBP296 million) and comprised cash and money market deposits of GBP1,308 million (31 March 2016: GBP1,057 million) and borrowings of GBP 955 million (31 March 2016: GBP761 million). After allowing for the impact of aircraft operating leases (seven times operating lease costs incurred in the 12 months to 31 March 2017), adjusted net debt at 30 September 2016 of GBP424 million has decreased by GBP91 million to GBP333 million.
Net capital expenditure includes the acquisition of nine A320 aircraft (31 March 2016: 10 aircraft), the purchase of life-limited parts used in engine restoration and pre-delivery payments relating to aircraft purchases. The number of scheduled aircraft operating in the fleet increased from 249 at 30 September 2016 to 252 at 31 March 2017.
easyJet made net corporation tax payments totalling GBP28 million during the period (2016: GBP45 million).
Borrowings as at 31 March 2017 were GBP955 million, an increase of GBP194 million from 31 March 2016. Under the GBP3 billion Euro Medium Term Note Programme announced in FY'16, on 11 October 2016 easyJet plc issued notes amounting to EUR500 million for a seven year term with a fixed annual coupon rate of 1.125%. This increase in borrowings was partially offset by the repayment of mortgages on aircraft amounting to GBP219 million in the period.
Summary consolidated statement of financial position
31 March 30 September Change
2017 2016
(restated)
GBP million GBP million GBP million
---------------------------------- ------------ ------------- ------------
Goodwill 365 365 -
Property, plant and equipment 3,314 3,252 62
Derivative financial instruments 123 98 25
Unearned revenue (1,298) (568) (730)
Net working capital (400) (413) 13
Restricted cash 7 7 -
Net cash 353 213 140
Current and deferred taxation (192) (253) 61
Other non-current assets and
liabilities 68 (7) 75
----------------------------------- ------------ ------------- ------------
2,340 2,694 (354)
------------ ------------- ------------
Opening shareholders' equity 2,694 2,221
(Loss)/profit for the period (192) 437
Ordinary dividend paid (214) (219)
Change in hedging reserve 48 263
Other movements 4 (8)
----------------------------------- ------------ -------------
2,340 2,694
------------ -------------
Since 30 September 2016 net assets decreased by GBP354 million, due to the payment of the ordinary dividend (GBP214 million) combined with the loss for the period, slightly offset by the favourable movement on the hedging reserve. The movement on the hedging reserve was primarily due to the maturity of out of the money contracts.
The net book value of property, plant and equipment increased by GBP62 million driven principally by the acquisition of nine A320 family aircraft, and pre-delivery payments relating to aircraft purchases.
Unearned revenue increased by GBP730 million. Passengers pay for their flights in full when booking, and due to the seasonal nature of the industry this leads to significantly more unearned revenue at 31 March compared to 30 September each year. Compared to March 2016, unearned revenue has increased by GBP218 million. This increase arises due to differences in the timing of flight schedule releases and the Easter school holiday schedule.
KEY STATISTICS
Increase/
Operating measures 2017 2016 (decrease)
----------------------------------------- -------- -------- ------------
Seats flown (millions) 37.5 34.5 8.4%
Passengers (millions) 33.8 31.0 9.0%
Load factor 90.2% 89.7% 0.5ppt
Available seat kilometres (ASK)
(millions) 39,635 36,393 8.9%
Revenue passenger kilometres (RPK)
(millions) 36,190 33,179 9.1%
Average sector length (kilometres) 1,058 1,054 0.4%
Sectors 225,052 208,901 7.7%
Block hours 427,274 394,743 8.2%
Number of aircraft owned/leased
at end of period 266 247 7.7%
Average number of aircraft owned/leased
during period 260.9 244.5 6.7%
Number of aircraft operated at
end of period 252 236 6.8%
Average number of aircraft operated
during period 235.4 224.9 4.7%
Operated aircraft utilisation (hours
per day) 10.0 9.6 4.0%
Owned aircraft utilisation (hours
per day) 9.0 8.8 2.0%
Number of routes operated at end
of period 837 753 11.2%
Number of airports served at end
of period 135 133 1.5%
------------------------------------------ -------- -------- ------------
Financial measures
----------------------------------------- -------- -------- ------------
Total loss before tax per seat
(GBP) (6.28) (0.52) (1,112.4%)
Headline loss before tax per seat
(GBP) (5.65) (0.62) (815.2%)
Total loss before tax per ASK (pence) (0.59) (0.05) (1,107.1%)
Headline loss before tax per ASK
(pence) (0.53) (0.06) (811.2%)
Revenue
Revenue per seat (GBP) 48.80 51.29 (4.9%)
Revenue per seat at constant currency
(GBP) 46.32 51.29 (9.7%)
Revenue per ASK (pence) 4.61 4.87 (5.3%)
Revenue per ASK at constant currency
(pence) 4.38 4.87 (10.1%)
Costs
Per seat measures
Headline cost per seat (GBP) 54.45 51.91 4.9%
Non-headline cost per seat (GBP) 0.63 (0.10) 739.6%
Headline cost per seat excluding
fuel (GBP) 42.18 38.54 9.5%
Headline cost per seat excluding
fuel at constant currency (GBP) 38.54 38.54 0.0%
Headline operating cost per seat
(GBP) 50.23 48.09 4.5%
Headline operating cost per seat
excluding fuel (GBP) 37.96 34.72 9.4%
Headline operating cost per seat
excluding fuel at constant currency
(GBP) 34.48 34.72 (0.7%)
Headline ownership cost per seat
(GBP) 4.22 3.82 10.4%
Per ASK measures
Headline cost per ASK (pence) 5.14 4.93 4.4%
Non-headline cost per ASK (pence) 0.06 (0.01) 736.8%
Headline cost per ASK excluding
fuel (pence) 3.98 3.66 9.0%
Headline cost per ASK excluding
fuel at constant currency (pence) 3.65 3.66 (0.4%)
Headline operating cost per ASK
(pence) 4.75 4.57 4.0%
Headline operating cost per ASK
excluding fuel (pence) 3.59 3.30 8.9%
Headline operating cost per ASK
excluding fuel at constant currency
(pence) 3.26 3.30 (1.1%)
Headline ownership cost per ASK
(pence) 0.39 0.36 9.9%
------------------------------------------ -------- -------- ------------
PRINCIPAL RISKS AND UNCERTAINTIES
The Group faces a number of risks which, if they arise, could affect its ability to achieve its strategic objectives. As with any business, risk assessment and the implementation of mitigating actions and controls are vital to successfully achieving the Group's strategy. The easyJet Board is responsible for determining the nature of these risks and ensuring appropriate mitigating actions are in place to manage them.
easyJet carries out a detailed risk management process to ensure that risks are identified and mitigated where possible. Whilst easyJet can monitor risks and prepare for adverse scenarios, the ability to affect the core drivers of many risks is not within the Group's control, for example adverse weather, pandemics, acts of terrorism, changes in government regulation and macroeconomic issues.
The principal risks and uncertainties faced by the Group remain those set out in our 2016 Annual report and accounts and include the following types of risks:
-- Safety -- Commercial -- Operational -- Financial risks -- Reputational -- People -- Compliance and regulatory
The Directors consider that the principal risks and uncertainties which could have a material impact on the Group's performance in the second half of the financial year remain the same as those stated on pages 24 to 31 of our Annual report and accounts for the year to 30 September 2016, which are available on our website http://corporate.easyjet.com
CONDENSED FINANCIAL INFORMATION
Consolidated income statement (unaudited)
Six months ended 31 March
2017 2017 2017 2016 2016 2016
(restated) (restated) (restated)
Non-headline Non-headline
(note (note
Headline 3) Total Headline 3) Total
GBP GBP GBP GBP GBP GBP
Notes million million million million million million
---------------------- ------ --------- ------------- --------- ----------- ------------- -----------
Seat revenue 1,790 - 1,790 1,740 - 1,740
Non-seat revenue 37 - 37 31 - 31
----------------------- ------ --------- ------------- --------- ----------- ------------- -----------
Total revenue 1,827 - 1,827 1,771 - 1,771
Fuel (459) - (459) (462) - (462)
Airports and ground
handling (624) - (624) (514) - (514)
Crew (293) - (293) (250) - (250)
Navigation (159) - (159) (135) - (135)
Maintenance (127) (6) (133) (111) - (111)
Selling and
marketing (59) - (59) (51) - (51)
Other costs (160) (13) (173) (137) - (137)
----------------------- ------ --------- ------------- --------- ----------- ------------- -----------
EBITDAR (54) (19) (73) 111 - 111
Aircraft dry
leasing (55) - (55) (48) - (48)
Depreciation 7 (85) - (85) (74) - (74)
Amortisation
of intangible
assets (7) - (7) (6) - (6)
----------------------- ------ --------- ------------- --------- ----------- ------------- -----------
Operating loss (201) (19) (220) (17) - (17)
Interest receivable
and other financing
income 3 - 3 3 2 5
Interest payable
and other financing
charges (14) (5) (19) (7) 1 (6)
----------------------- ------ --------- ------------- --------- ----------- ------------- -----------
Net finance
charges (11) (5) (16) (4) 3 (1)
(Loss)/profit
before tax (212) (24) (236) (21) 3 (18)
Tax credit 4 40 4 44 3 - 3
(Loss)/profit for
the period (172) (20) (192) (18) 3 (15)
------------------------------- --------- ------------- --------- ----------- ------------- -----------
Loss per share,
pence
Basic 5 (48.9) (3.8)
----------------------- ------ --------- ------------- --------- ----------- ------------- -----------
Consolidated statement of comprehensive income (unaudited)
Six months Six months
ended ended
31 March 31 March
2017 2016
(restated)
Notes GBP million GBP million
-------------------------------------- ------ ------------ ------------
Loss for the period (192) (15)
Other comprehensive income/(expense)
Cash flow hedges
Fair value losses in the
period 16 (222)
Losses transferred to income
statement 66 161
Gains transferred to property,
plant and equipment (23) (3)
Related tax credit 4 (11) 9
--------------------------------------- ------ ------------ ------------
48 (55)
Total comprehensive expense
for the period (144) (70)
--------------------------------------- ------ ------------ ------------
For capital expenditure cash flow hedges, the accumulated gains and losses recognised in other comprehensive income will be transferred to the initial carrying amount of the asset acquired, within property, plant and equipment. All other items in other comprehensive income will be reclassified to the income statement.
Consolidated statement of financial position (unaudited)
31 March
30 September
2017 2016
(restated)
Notes GBP million GBP million
---------------------------------- ------ ------------ -------------
Non-current assets
Goodwill 365 365
Other intangible assets 168 152
Property, plant and equipment 7 3,314 3,252
Derivative financial instruments 96 154
Restricted cash 5 7
Other non-current assets 110 112
----------------------------------- ------ ------------ -------------
4,058 4,042
Current assets
Trade and other receivables 238 205
Derivative financial instruments 243 268
Current tax assets 12 -
Restricted cash 2 -
Money market deposits 635 255
Cash and cash equivalents 673 714
----------------------------------- ------ ------------ -------------
1,803 1,442
Current liabilities
Trade and other payables (511) (565)
Unearned revenue (1,298) (568)
Borrowings (9) (92)
Derivative financial instruments (149) (275)
Current tax payable - (16)
Provisions for liabilities
and charges (127) (53)
----------------------------------- ------ ------------ -------------
(2,094) (1,569)
Net current liabilities (291) (127)
Non-current liabilities
Borrowings (946) (664)
Derivative financial instruments (67) (49)
Non-current deferred income (30) (36)
Provisions for liabilities
and charges (180) (235)
Deferred tax (204) (237)
----------------------------------- ------ ------------ -------------
(1,427) (1,221)
Net assets 2,340 2,694
----------------------------------- ------ ------------ -------------
Shareholders' equity
---------------------------------- ------ ------------ -------------
Share capital 108 108
Share premium 659 659
Hedging reserve 72 24
Translation reserve 1 1
Retained earnings 1,500 1,902
----------------------------------- ------ ------------ -------------
2,340 2,694
---------------------------------- ------ ------------ -------------
Consolidated statement of changes in equity (unaudited)
Share Share Hedging Translation Retained
capital premium reserve reserve earnings Total
(restated)
GBP GBP GBP GBP GBP GBP
million million million million million million
------------------------- --------- --------- --------- ------------ ----------- ---------
At 1 October 2016 108 659 24 1 1,920 2,712
Effect of change
in accounting policy - - - - (18) (18)
Restated balance at
1 October 2016 108 659 24 1 1,902 2,694
Total comprehensive
income - - 48 - (192) (144)
Dividends paid (note
6) - - - - (214) (214)
Share incentive schemes
Value of employee
services - - - - 10 10
Purchase of own
shares - - - - (6) (6)
-------------------------- --------- --------- --------- ------------ ----------- ---------
At 31 March 2017 108 659 72 1 1,500 2,340
-------------------------- --------- --------- --------- ------------ ----------- ---------
Share Share Hedging Translation Retained
capital premium reserve reserve earnings Total
(restated)
GBP GBP GBP GBP GBP GBP
million million million million million million
------------------------- --------- --------- --------- ------------ ----------- ---------
At 1 October 2015 108 659 (239) 1 1,720 2,249
Effect of change
in accounting policy - - - - (28) (28)
Restated balance at
1 October 2015 108 659 (239) 1 1,692 2,221
Total comprehensive
(expense)/income - - (55) - (15) (70)
Dividends paid (note
6) - - - - (219) (219)
Share incentive schemes
Value of employee
services - - - - 10 10
Related tax (note
4) - - - - (2) (2)
Purchase of own
shares - - - - (11) (11)
-------------------------- --------- --------- --------- ------------ ----------- ---------
At 31 March 2016 108 659 (294) 1 1,455 1,929
-------------------------- --------- --------- --------- ------------ ----------- ---------
The hedging reserve comprises the effective portion of the cumulative net change in fair value of cash flow hedging instruments relating to highly probable transactions that are forecast to occur after the period end.
Consolidated statement of cash flows (unaudited)
Six months Six months
ended ended
31 March 31 March
2017 2016
(restated)
Notes GBP million GBP million
-------------------------------------- ------ ------------ ------------
Cash flows from operating activities
Cash generated from operations 8 560 461
Ordinary dividends paid 6 (214) (219)
Net interest and other financing
charges paid (24) (11)
Net tax paid (28) (45)
--------------------------------------- ------ ------------ ------------
Net cash generated from operating
activities 294 186
Cash flows from investing activities
Purchase of property, plant
and equipment 7 (279) (299)
Purchase of intangible assets (23) (15)
Net increase in money market
deposits 9 (379) (129)
Net cash used by investing
activities (681) (443)
Cash flows from financing activities
Purchase of own shares for
employee share schemes (6) (11)
Proceeds from Eurobond issue 9 451 379
Repayment of bank loans and
other borrowings 9 (219) (99)
Repayment of capital element
of finance leases 9 (3) (65)
Net proceeds from sale and
operating leaseback of aircraft 115 -
Net decrease in restricted
cash - 1
--------------------------------------- ------ ------------ ------------
Net cash generated from financing
activities 338 205
Effect of exchange rate changes 8 37
Net decrease in cash and cash
equivalents (41) (15)
Cash and cash equivalents at
beginning of period 714 650
Cash and cash equivalents at
end of period 9 673 635
--------------------------------------- ------ ------------ ------------
Notes to the condensed consolidated interim financial information (unaudited)
1. Significant accounting policies
Basis of preparation
The condensed consolidated interim financial information has been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and with International Accounting Standards 34 "Interim Financial Reporting" as adopted by the European Union. It should be read in conjunction with the Annual report and accounts for the year ended 30 September 2016, which were prepared in accordance with applicable law and International Financial Reporting Standards as adopted by the European Union.
The interim financial information does not constitute statutory accounts within the meaning of sections 434 and 435 of the Companies Act 2006. Statutory accounts for the year ended 30 September 2016 were approved by the Board of Directors on 14 November 2016, and have been delivered to the Registrar of Companies. The report of the auditors was unqualified, and did not contain either an emphasis of matter paragraph or any statement made under section 498 of the Companies Act 2006.
In adopting the going concern basis for preparing this interim financial information, the Directors have considered easyJet's business activities, together with factors likely to affect its future development and performance, as well as easyJet's principal risks and uncertainties. Based on easyJet's cash flow forecasts and projections, the Board is satisfied that easyJet will be able to operate within the level of its available facilities and cash and deposits for the foreseeable future. For this reason easyJet continues to adopt the going concern basis.
A number of amended standards and interpretations became effective for the current reporting period. However, none of them had any material impact on the interim financial information.
The accounting policies adopted are consistent with those described in the Annual report and accounts for the year ended 30 September 2016, except for the accounting for the recognition of the initial maintenance provision on sale and leaseback transactions, as described below.
Changes in accounting policies
Where an aircraft is sold and leased back, other than when first delivered to easyJet, a liability to undertake future maintenance activities, resulting from past flying activity, arises at the point the lease agreement is signed. Historically this liability has been treated as part of the surplus or shortfall arising on the sale and leaseback and recognised in either deferred income or non-current or current assets as appropriate and amortised in the income statement on a straight-line basis over the expected lease term.
During the period, management made a change to this accounting policy, to recognise the initial maintenance provision on sale and leasebacks immediately in the income statement. Management believe that the new accounting policy will result in a more relevant and reliable accounting treatment which better reflects the economics of the lease arrangements.
This change will require a restatement of previous financial statements.
The following table sets out the adjustments made to certain selected line items of the previously reported comparative amounts as a result of the change to the above accounting policy.
Six months ended Year ended 30 September
31 March 2016 2016
Impacted lines As reported As restated As reported As restated
GBP million GBP million GBP million GBP million
----------------------------- ------------ ------------ ------------ ------------
Statement of financial
position
Other non-current
assets 122 107 121 112
Trade and other receivables 233 227 217 205
Trade and other payables (438) (439) (564) (565)
Current tax payable - - (21) (16)
Non-current deferred
income (41) (42) (35) (36)
Net assets 1,952 1,929 2,712 2,694
Shareholders' equity
- retained earnings 1,478 1,455 1,920 1,902
------------------------------ ------------ ------------ ------------ ------------
Income statement
Aircraft dry leasing (54) (48) (103) (91)
Operating (loss)/profit (23) (17) 498 510
(Loss)/profit before
tax (24) (18) 495 507
Tax credit/(charge) 4 3 (68) (70)
Profit/(loss) for
the period (20) (15) 427 437
(Loss)/earnings per
share (pence)
Basic (5.1) (3.8) 108.4 110.9
Diluted - - 107.6 110.1
------------------------------ ------------ ------------ ------------ ------------
Statement of changes
in equity
Retained earnings
at 1 October 2015 1,720 1,692 1,720 1,692
Total comprehensive
(expense) / income (20) (15) 427 437
Retained earnings
at the end of period 1,478 1,455 1,920 1,902
------------------------------ ------------ ------------ ------------ ------------
Changes in disclosures and presentation of performance measures
From the reporting period ended 31 March 2017, the Group will present its results in the income statement with amounts relating to non-recurring material items of income or expenses and items which are not considered to be reflective of trading performance of the business in a separate column, called 'non-headline' items, which is a non-gaap measure. Management believe these should be highlighted as they are unrepresentative of the underlying trading performance of the Group.
Non-headline items may include impairments, amounts relating to acquisitions and disposals, expenditure on major restructuring programmes, litigation and insurance settlements, balance sheet exchange gains or losses, the income or expense resulting from the initial recognition of sale and lease back transactions, fair value adjustments on financial instruments and other particularly significant or unusual non-recurring items. Items relating to the normal trading performance of the business will always be included within the headline performance.
For the full list of non-headline items and their financial impact for the six months ended 31 March 2017, refer to note 3.
2. Seasonality
The airline industry is highly seasonal and demand and yields are significantly higher during the summer. Accordingly revenue and profitability are higher in the second half of the financial year. Historically, easyJet has reported a loss/low profit for the first half of the financial year and a profit in the second half.
3. Headline profit measures
The Group seeks to present a measure of underlying performance which is not impacted by material non-recurring items or items which are not considered to be reflective of the trading performance of the business. This measure of profit is described as 'headline' and is used by the Directors to measure and monitor performance. See note 1 for an explanation of the excluded items. The excluded items are referred to as 'non-headline' items.
An analysis of the amounts presented as "non-headline" is given below:
Six months Six months
ended ended
31 March 31 March
2017 2016
GBP million GBP million
-------------------------------------------- ------------ ------------
Sale and leaseback charge 16 -
Organisational review 2 -
EU Air Operator Certificate ('AOC') 1 -
-------------------------------------------- ------------ ------------
Recognised in operating profit 19 -
-------------------------------------------- ------------ ------------
Balance sheet foreign exchange loss/(gain) 1 (2)
Fair value adjustment 4 (1)
--------------------------------------------- ------------ ------------
Total non-headline charge/(credit)
before tax 24 (3)
--------------------------------------------- ------------ ------------
Tax on non-headline items (4) -
-------------------------------------------- ------------ ------------
Total non-headline charge/(credit)
after tax 20 (3)
--------------------------------------------- ------------ ------------
Sale and leaseback charge
The sale and leaseback of the Group's ten oldest A319 aircraft resulted in a loss on disposal of the assets of GBP10 million, recognised within other costs in the income statement, and a GBP6 million maintenance provision charged immediately to the income statement within maintenance costs.
Organisational review
The implementation of an organisational review has resulted in costs of GBP2 million which has been recognised in other costs within the income statement. This programme, which involves redundancy costs and associated third party advisor fees, is considered a material non-recurring item by virtue of the estimated size of the whole programme. This one-off cost is expected to total around GBP10 million over two years, however any costs associated with this programme will be paid back before its conclusion.
EU Air Operator Certificate ('AOC')
Following the UK's referendum vote to leave the European Union ('EU'), the Group is in the process of establishing an AOC in another EU member state. For the six months ended 31 March 2017, the Group incurred GBP1 million in setup costs, which has been recognised in other costs within the income statement. This one-off cost is expected to total up to GBP10 million over three years, mostly driven by the costs to re-register aircraft.
Balance sheet foreign exchange (gain)/loss
Foreign exchange gains or losses arising from the retranslation of monetary assets and liabilities held in the statement of financial position resulted in a charge of GBP1 million, recognised within interest payable and other financing charges in the income statement.
Fair value adjustment
The fair value adjustment arises from the ineffective portion of the cross currency interest rate swaps elected into fair value hedge relationships with the EUR500 million Eurobond issued 9 February 2016. This is not considered to be reflective of the trading performance of the business and causes temporary volatility in the income statement. The adjustment amounted to a GBP4 million loss for the period which is recognised within interest payable and other financing charges in the income statement.
4. Tax (credit)/charge
Tax on loss on ordinary activities
Six months Six months
ended ended
31 March 31 March
2017 2016
(restated)
GBP million GBP million
------------------------------------ ------------ ------------
Current tax 1 3
Deferred tax (45) (6)
------------------------------------- ------------ ------------
(44) (3)
------------------------------------ ------------ ------------
Effective tax rate 18.7% 17.3%
------------------------------------- ------------ ------------
The effective tax rate is lower than the standard rate of corporation tax in the United Kingdom (FY'17: 19.5%) principally due to deferred tax being provided at lower than the standard rate.
Tax on items recognised directly in other comprehensive
income or shareholders' equity
Six months Six months
ended ended
31 March 31 March
2017 2016
GBP million GBP million
---------------------------------------- ------------ ------------
(Charge)/credit to other comprehensive
income
Deferred tax on fair value movements
of cash flow hedges (11) 9
----------------------------------------- ------------ ------------
(Charge)/credit to shareholders'
equity
Current tax on share-based payments - 1
Deferred tax on share-based payments - (3)
----------------------------------------- ------------ ------------
- (2)
---------------------------------------- ------------ ------------
5. Loss per share
2017 2016
(restated)
GBP million GBP million
-------------------------------------- ------------ ------------
Headline loss for the period (172) (18)
Total loss for the period (192) (15)
--------------------------------------- ------------ ------------
2017 2016
million million
-------------------------------------- ------------ ------------
Weighted average number of ordinary
shares used to calculate basic loss
per share 393 394
--------------------------------------- ------------ ------------
2017 2016
(restated)
Basic loss per share pence pence
-------------------------------------- ------------ ------------
Total (48.9) (3.8)
Adjustment for non-headline 5.1 (0.8)
--------------------------------------- ------------ ------------
Headline (43.8) (4.6)
--------------------------------------- ------------ ------------
Diluted earnings per share figures are not presented for either period as the impact of potential ordinary shares is anti-dilutive.
6. Dividends
The company paid an ordinary dividend of 53.8 pence per share, or GBP214 million (2016: 55.2 pence per share or GBP219 million).
7. Property, plant and equipment
2017 2016
GBP million GBP million
----------------------------------- ------------ ------------
At 1 October 3,252 2,877
Additions 279 314
Transfer to intangible assets - (15)
Aircraft sold and leased back (125) -
Disposals (1) (2)
Transfer to maintenance provision (6) (11)
Depreciation (85) (74)
------------------------------------ ------------ ------------
At 31 March 3,314 3,089
------------------------------------ ------------ ------------
Net book value includes GBP293 million (2016: GBP293 million) relating to advance and option payments for future aircraft deliveries.
At 31 March 2017 easyJet was contractually committed to the acquisition of 157 (2016: 176) Airbus A320 family aircraft, with a total list price of US$14.1 billion (2016: US$15.5 billion) before escalations and discounts for delivery. This includes deliveries in the second half of FY'17 (14 aircraft), in 2018 (34 aircraft) and between 2019 and 2022 (109 aircraft). 130 are new generation aircraft.
8. Reconciliation of operating loss to cash generated from operations
Six months Six months
ended ended
31 March 31 March
2017 2016
(restated)
GBP million GBP million
----------------------------------------- ------------ ------------
Operating loss (220) (17)
Adjustments for non-cash items:
Depreciation 85 74
Loss on disposal of property, plant
and equipment 11 2
Amortisation of intangible assets 7 6
Share-based payments 10 10
Changes in working capital and other
items of an operating nature:
Increase in trade and other receivables (31) (20)
Decrease in trade and other payables (52) (64)
Increase in unearned revenue 730 461
Increase in provisions 19 16
Decrease in other non-current assets 2 2
Decrease / (increase) in derivative
financial instruments 5 (3)
Decrease in non-current deferred
income (6) (6)
------------------------------------------ ------------ ------------
Cash generated from operations 560 461
------------------------------------------ ------------ ------------
9. Reconciliation of net cash flow to movement in net cash
Fair value
1 October and foreign Loan issue Net 31 March
2016 exchange costs cash flow 2017
GBP million GBP million GBP million GBP million GBP million
--------------- ------------ ------------- ------------ ------------ ------------
Cash and cash
equivalents 714 8 - (49) 673
Money market
deposits 255 1 - 379 635
---------------- ------------ ------------- ------------ ------------ ------------
969 9 - 330 1,308
--------------- ------------ ------------- ------------ ------------ ------------
Eurobonds (435) 36 7 (451) (843)
Bank loans (210) (9) - 219 -
Finance lease
obligations (111) (4) - 3 (112)
---------------- ------------ ------------- ------------ ------------ ------------
(756) 23 7 (229) (955)
--------------- ------------ ------------- ------------ ------------ ------------
Net cash 213 32 7 101 353
---------------- ------------ ------------- ------------ ------------ ------------
On 7 January 2016, the UK Listing Authority approved a prospectus relating to the establishment of a GBP3,000 million Euro Medium Term Note programme issued by easyJet plc and guaranteed by easyJet Airline Company Ltd (subsequently updated on 7 October 2016 and 10 February 2017). Under this programme, on 9 February 2016, easyJet plc issued notes amounting to EUR500 million for a seven year term with a fixed annual coupon rate of 1.750%. At the same time the Group entered into cross currency interest rate swaps to convert the EUR500 million fixed rate Eurobond to a GBP379 million floating rate exposure. The Group designated the cross currency interest rate swaps as a fair value hedge of the interest rate and currency risks of the EUR500 million Eurobond. The EUR500 million Eurobond and the cross currency interest rate swaps are measured at fair value through the income statement.
On 11 October 2016 easyJet plc issued notes amounting to EUR500 million for a seven year term with a fixed annual coupon rate of 1.125% under the GBP3,000 million Euro Medium Term Note programme. The Group subsequently entered into cross currency interest rate swaps on 8 November 2016 to convert the EUR500 million fixed rate Eurobond to a GBP445 million fixed rate sterling exposure. The Group designated the cross currency interest rate swaps as a cash flow hedge of the currency risk of the EUR500 million Eurobond. The EUR500 million Eurobond is held at amortised cost and revalued at the balance sheet date with the spot GBP/EUR foreign exchange rate prevailing at the time, with movements being taken through the income statement. The cross currency interest rate swaps are measured at fair value with the effective portion taken through the statement of comprehensive income. The element of the fair value generated by the change in the spot rate is recycled to the income statement from the statement of comprehensive income to offset the revaluation of the Eurobond.
10. Fair value
The fair values of financial assets and liabilities, together with the carrying value at each reporting date, are as follows:
2017 2017 2016 2016
Carrying Fair value Carrying Fair value
value value
GBP million GBP million GBP million GBP million
--------------------------- ------------ ------------ ------------ ------------
Eurobonds 843 853 435 453
Bank loans - - 210 210
Finance lease obligations 112 118 111 117
---------------------------- ------------ ------------ ------------ ------------
The fair value of the EUR500 million Eurobond issued on 9 February 2016 is classified as level 1 of the IFRS 13 'Fair Value Measurement' fair value hierarchy.
All derivative financial instruments are classified as level 2.
The EUR500 million Eurobond issued on the 11 October 2016 and Finance lease obligations are held at amortised cost.
For all financial assets and financial liabilities not disclosed within the table above, the carrying value is a reasonable approximation to fair value.
The fair values of derivatives and financial instruments have been determined by referencing observable market prices where the instruments are traded, where available. Where market prices are not available, the fair value has been calculated by discounting expected future cash flows at prevailing interest rates.
11. Contingent liabilities
easyJet is involved in a number of disputes and litigation which arose in the normal course of business. The likely outcome of these disputes and litigation cannot be predicted, and in complex cases reliable estimates of any potential obligation may not be possible.
Having reviewed the information currently available, management considers that the ultimate resolution of these disputes and litigation is unlikely to have a material adverse effect on easyJet's results, cash flows or financial position.
12. Related party transactions
The Company licenses the easyJet brand from easyGroup Ltd ('easyGroup'), a wholly owned subsidiary of easyGroup Holdings Limited, an entity in which easyJet's founder, Sir Stelios Haji-Ioannou, holds a beneficial controlling interest. No changes to the Haji-Ioannou family concert party shareholding have been disclosed to easyJet in accordance with the Disclosure Guidance and Transparency Rules DTR 5, between 30 September 2016 and 31 March 2017.
Under the Amended Brand Licence signed in October 2010 and approved by the shareholders of easyJet plc in December 2010, an annual royalty of 0.25% of total revenue is payable by easyJet to easyGroup for a minimum term of 10 years. The full term of the agreement is 50 years.
easyJet and easyGroup established a fund to meet the annual costs of protecting the 'easy' (and related marks) and the 'easyJet' brands. easyJet contributes up to GBP1 million per annum to this fund and easyGroup contributes GBP100,000 per annum. Beyond the first GBP1.1 million of costs, easyJet can commit up to an aggregate GBP5.5 million annually to meet brand protection costs, with easyGroup continuing to meet its share of costs on a 10:1 ratio. easyJet must meet 100% of any brand protection costs it wishes to incur above this limit.
The amounts included in the income statement for these items were as follows:
Six months Six months
ended ended
31 March 31 March
2017 2016
GBP million GBP million
-------------------------------------- ------------ ------------
Annual royalty 4.6 4.4
Brand protection (legal fees paid
through easyGroup to third parties) 0.7 0.1
5.3 4.5
-------------------------------------- ------------ ------------
At 31 March 2017, GBP1.6 million (2016: GBP2.3 million) of the above aggregate amount was included in trade and other payables.
Statement of Directors' responsibilities
The Directors are responsible for preparing the interim report in accordance with applicable law and regulations. The Directors confirm that the condensed consolidated interim financial information has been prepared in accordance with International Accounting Standard 34 ('Interim Financial Reporting') as adopted by the European Union.
The interim management report includes a fair review of the information required by the Disclosure and Transparency Rules paragraphs 4.2.7 and 4.2.8, namely:
-- an indication of important events that have occurred during the six months ended 31 March 2017 and their impact on the condensed set of financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
-- material related-party transactions during the six months ended 31 March 2017 and any material changes in the related-party transactions described in the last Annual report and accounts 2016.
The Directors of easyJet plc are listed in the Annual report and accounts 2016. There have been no changes since the date of publication. A list of current Directors is maintained on the easyJet plc website: http://corporate.easyJet.com.
The Directors are responsible for the maintenance and integrity of, amongst other things, the financial and corporate governance information as provided on the easyJet website (http://corporate.easyJet.com). Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.
The interim report was approved by the Board of Directors and authorised for issue on 15 May 2017 and signed on its behalf by:
Carolyn McCall Andrew Findlay
DBE
Chief Executive Chief Financial
Officer
Independent review report to easyJet plc
Report on the consolidated condensed financial statements
Our conclusion
We have reviewed easyJet plc's consolidated condensed financial statements (the "interim financial statements") in the interim report of easyJet plc for the 6 month period ended 31 March 2017. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the consolidated statement of financial position as at 31 March 2017;
-- the consolidated income statement and the consolidated statement of comprehensive income for the period then ended;
-- the consolidated statement of cash flows for the period then ended; -- the consolidated statement of changes in equity for the period then ended; and -- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. Our responsibility is to express a conclusion on the interim financial statements in the interim report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
15 May 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR EANSSFLXXEFF
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