Annual Financial Report

RNS Number : 6911Z

easyJet PLC

18 January 2011

 

easyJet plc ("the Company")

Annual Report and Accounts 2010 and Notice of Annual General Meeting

The Company announces that its 2011 Annual General Meeting will be held on 17 February 2011 at 10.00 a.m. at Hangar 89, London Luton Airport, Luton, Bedfordshire, LU2 9PF;

In connection with this, the following documents have been posted to shareholders today:

·        the Annual Report and Accounts for the year ended 30 September 2010;

·        notice of Annual General Meeting;

·        the Form of Proxy in relation to the Annual General Meeting;

The Annual Report and Accounts for the year ended 30 September 2010 and the notice of the 2011 Annual General Meeting are also available on the Company's website, www.easyJet.com.

In accordance with LR 9.6.1, two copies of these documents have also been forwarded to the FSA for publication through the Document Viewing Facility and will be accessible via the National Storage Mechanism website (www.hemscott.com/nsm.do).

In compliance with DTR 6.3.5, the following information is extracted from the Annual Report and Accounts 2010 and should be read together with the Company's Final Results announcement issued on 16 November 2010 which can be found at www.easyJet.com.  Together these constitute the information required to be communicated to the media in unedited full text through a Regulatory Information Service.  This information is not a substitute for reading the full 2010 Annual Report and Accounts.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The following responsibility statement is extracted from the Statement of Directors' Responsibilities on page 53 of the Annual Report and Accounts 2010 and is repeated here solely for the purpose of complying with DTR 6.3.5.  The statement relates to the full Annual Report and not the extracted information presented in this announcement or the Final Results announcement:

The Directors are responsible for preparing the annual report, the Report on Directors' remuneration and the accounts in accordance with applicable law and regulations.

Company law requires the Directors to prepare accounts for each financial year.  Under that law the Directors have prepared the Group and parent company accounts in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.  Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period.  In preparing these accounts, the Directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and accounting estimates that are reasonable and prudent;

·      state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the accounts;

·      prepare the accounts on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the accounts and the Report on Directors' remuneration comply with the Companies Act 2006 and, as regards the Group accounts, Article 4 of the IAS Regulation.  They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company's website.  Legislation in the United Kingdom governing the preparation and dissemination of accounts may differ from legislation in other jurisdictions.

Each of the Directors, whose names and functions are listed on page 35 confirm that, to the best of their knowledge:

·       the Group and the Company accounts, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group and the Company; and

·       the Directors' report includes a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the principal risks and uncertainties that they face.

In the case of each Director in office at the date the Directors' report is approved and in accordance with Section 418 of the Companies Act 2006:

(a)     so far as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and

(b)     he has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

The annual report on pages 1 to 53 was approved by the Board of Directors and authorised for issue on 15 November 2010 and signed on behalf of the Board by:

Carolyn McCall - Chief Executive Officer

Chris Kennedy - Chief Financial Officer

PRINCIPAL RISKS AND UNCERTAINTIES

This section describes the principal risks and uncertainties which may affect easyJet's business, financial results and prospects.

SAFETY AND SECURITY	Safety/security incident Failure to prevent a safety or security incident or deal with it effectively.	Adversely affect our reputation, operational and financial performance.	Our number one priority is the safety of our customers and people. We operate a strong safety management system through: - Fatigue Risk Management System. - Incident reporting. - Safety Review Board. - Safety Action Group. We also have response systems in place and provide training for crisis management.
EXTERNAL  RISKS	Macroeconomic environment easyJet's business can be affected by macroeconomic issues outside of its control such as weakening consumer confidence or inflationary pressure.	Adverse pressure on revenue, load factors and residual values of aircraft.	Regular monitoring of markets and route performance by our network and fleet management teams. A strong balance sheet supports business through fluctuations in the economic conditions for the sector. Appropriate mix of owned and leased aircraft reduces residual value exposure.
	Competition and industry consolidation easyJet operates in competitive marketplaces against both flag carriers and other low-cost airlines. Industry consolidation will affect the competitive environment in a number of markets.	Loss of market share and erosion of revenue.	Regular monitoring of competitor activity and potential impact of any consolidation activity. Rapid response in anticipation of and to changes.
	Regulator intervention The airline industry is currently heavily regulated, with expected increased regulator intervention; this includes environmental, security and airport regulation which have charges levied by regulatory decision rather than by commercial negotiation.   easyJet is exposed to various regulators across our network, which will increase as the Company grows geographically.	Adverse impact to our reputation, cost base and market share.  Lack of adequate knowledge or misinterpretation of local regulations can result in fines or enforcement orders.	easyJet has a key role in influencing the future state of regulations.  Country oversight boards are being established for our main markets.
	Environmental factors Changing consumer attitude to environment factors, e.g. climate change.	Potential impact on consumer demand for the core business.	Environmental Management Group that co-ordinates environmental policy and policy communications.  easyJet operates modern, fuel-efficient aircraft operating at high capacity and flies to conveniently located airports.

REPUTATION	Business Continuity: access to facilities and key IT systems easyJet is dependent on a number of key IT systems and processes operated at the London Luton airport and other key facilities.	A loss of systems and access to facilities could lead to disruption.	A business continuity programme, including disaster recovery is in place. This covers alternative sites being available should there be a need to relocate at short notice due to loss of facilities.
	Event causing wide-spread network disruption A number of factors can lead to wide spread disruption to our networks, including epidemics/pandemics, forces of nature (extreme weather, volcanic ash, etc) and acts of terrorism.	Adversely affect our reputation, operational and financial performance.	Processes in place to adapt to wide-spread disruption.  A business continuity programme is in place.
	IT security and fraud exposure easyJet faces external and internal IT security risk.  The Company receives most of its revenue through credit cards and operates as an e-commerce business.	A security breach could result in a material adverse effect for the business and severe reputational damage.	Systems are secured and monitored against unauthorised access; this will receive continued focus. Scanning software for fraudulent customer activity is monitored and controlled by the Revenue Protection team.
	Brand ownership and brand reputation easyJet does not own its company name or branding which is licensed from easyGroup IP Licensing.	As for all brand licensees, the easyJet brand could be impacted through actions of the easyGroup or other easyGroup licensees.	easyJet works closely with easyGroup to ensure the integrity of the brand.
	Major shareholder easyJet has a major shareholder (easyGroup Holdings Limited) controlling over 25% of ordinary shares.	Shareholder activism could adversely impact the reputation of the Company.	Dedicated investor relations team, utilising a shareholder engagement programme.
PEOPLE	Industrial action Large parts of the easyJet workforce are unionised.  The same applies for our key third-party service providers, where similar issues exist.	Adversely affect our reputation, operational and financial performance.	Employee and union engagement takes place on a regular basis.
	Retention of key management Due to easyJet's lean business model, the Company is reliant on certain key managers.	Loss of key personnel could result in short-term lack of necessary expertise in certain positions.	Bi-annual talent management and succession planning of key positions.
SUPPLIER	Dependence on third-party service providers easyJet has entered into agreements with third-party service providers for services covering a significant proportion of its operation and cost base.	Failure to adequately manage third party performance would affect our reputation, operation and financial performance.  Loss of these contracts, inability to renew or negotiate favourable replacement contracts could have a material adverse effect on future operating costs.	Processes in place to manage third-party service provider performance. Centralised procurement department that negotiates key contracts. Most developed markets have suitable alternative service providers.

FINANCIAL RISKS	Fuel price and currency fluctuations Sudden and significant increases in jet fuel price and movements in foreign exchange rates would significantly impact fuel costs and other foreign currency denominated costs.	If not protected against, this would have a material adverse affect on financial performance.		Policy to hedge within a percentage band for rolling 24 month period. To provide protection, the Group uses a limited range of hedging instruments traded in the over the counter (OTC) markets, principally forward purchases, with a number of approved counterparties.
	Financing and interest rate risk All of the Group's debt is asset related, reflecting the capital intensive nature of the airline industry.	Market conditions could change the cost of finance which may have an adverse effect on the financial performance.		Group interest rate management policy aims to provide certainty in a proportion of its financing. Operating lease rentals are a mix of fixed and floating rates (currently 66% to 34%). All on balance sheet debt floating rate, re-priced up to six months. A portion of US dollar mortgage debt is matched with US dollar money market deposits.
	Liquidity risk The Group continues to hold significant cash or liquid funds as a form of insurance.	Lack of sufficient liquid funds could result in business disruption and have a material adverse effect on financial performance.		Board policy is to maintain an absolute minimum level of free cash and money market deposits. Allows business to ride out downturns in business or temporary curtailment of activities (e.g. fleet grounding, security incident, extended industrial dispute at key supplier). Committed borrowing facilities of US$0.75 billion at 30 September 2010.
	Credit risk Surplus funds are invested in high quality short-term liquid instruments, usually money market funds or bank deposits.	Possibility of material loss arising in the event of non-performance of counterparties.		Cash is placed on deposit with institutions base upon credit rating with a maximum exposure of £100 million for AAA ratings.

RELATED PARTY TRANSACTIONS

The following Related Party Transactions information is extracted from page 94 of the Annual Report and Accounts 2010 and is repeated here solely for the purpose of complying with DTR 6.3.5:

Transactions with subsidiary undertakings, which principally relate to the provision of funding within the Group, are carried out on an arm's-length basis.

Outstanding balances are placed on intercompany accounts with no specified credit period, are unsecured, and bear market rates of interest.

In addition, easyJet has a key relationship with easyGroup IP Licensing, which owns the easyJet brand.

The other information required in compliance with DTR 6.3.5 can be found within the Final Results announcement issued on 16 November 2010.

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18 January 2011

 

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