Prelim Results Part 4 of 4
easyJet PLC
26 November 2002
easyJet plc Preliminary results Part 4 of 4
Consolidated reconciliation of movements in shareholders' funds
for the year ended 30 September
2002 2001
£000 £000
Retained profit for the year 49,009 37,907
Foreign currency translation differences (5,509) (254)
Shares issued by easyJet plc 369,436 215,099
Movement in reserves for employee share (1,723) (1,978)
scheme
Net addition to shareholders' funds 411,213 250,774
Opening shareholders' funds 316,491 65,717
Closing shareholders' funds 727,704 316,491
Consolidated statement of total recognised gains and losses
for the year ended 30 September
2002 2001
£000 £000
Retained profit for the year 49,009 37,907
Foreign currency translation differences (5,509) (254)
Total recognised gains and losses for the 43,500 37,653
year
Notes
1 Accounting policies and presentation
The financial information set out does not constitute the statutory accounts for
easyJet plc (easyJet) for the years ended 30 September 2002 and 2001 but is
derived from those accounts. Statutory accounts for 2001 have been delivered to
the registrar of companies, and those for 2002 will be delivered following
easyJet's annual general meeting. The auditors have reported on those accounts;
their reports were unqualified and did not contain a statement under section 237
(3) of the Companies Act 1985.
The consolidated financial statements comply with applicable accounting
standards (UK GAAP) and have been prepared on the basis of accounting policies
set out on pages 37 and 40 of easyJet's Annual Report and Accounts.
2 Segmental information
All revenues derive from the group's principal activity as an airline and
include scheduled services, in-flight and related sales. Substantially all of
the group's external revenues are earned by companies incorporated in the United
Kingdom.
The geographical analysis of turnover is as follows:
2002 2001
Continuing
operations Acquisitions Total
£000 £000 £000 £000
Within the United Kingdom 106,078 14,375 120,453 86,545
Between the United Kingdom and the 337,263 51,614 388,877 244,764
Rest of Europe
Within the Rest of Europe 42,514 - 42,514 25,550
485,855 65,989 551,844 356,859
All the group's operating profit arises from airline-related activities.
The only revenue earning assets of the group are its aircraft fleet. Since the
group's aircraft fleet is employed flexibly across its route network, there is
no suitable basis of allocating such assets and related liabilities to
geographical segments.
3 Taxation
The taxation charge is made up as follows:
2002 2001
£000 £000
Current taxation:
UK corporation tax 15,155 1,936
Overseas taxation 312 290
15,467 2,226
Deferred taxation 7,101 -
22,568 2,226
Effective tax rate 31.5% 5.5%
The standard rate of current tax for the year, based on the UK standard rate of
corporation tax is 30%. The actual current tax charge for the current and the
previous year differs from the standard rate for the reasons set out in the
following reconciliation:
2002 2001
£000 £000
Profit on ordinary activities before tax 71,577 40,133
Tax charge at 30% 21,473 12,040
Expenses not deductible for tax purposes 2,502 2,324
Lower tax rates in certain overseas jurisdictions (2,137) (1,192)
Movement in share option scheme deduction 2,695 (9,125)
UK losses incurred in previous years used in period (5,647) -
Overseas losses incurred in period not used 73 4
Overseas losses incurred in previous years used in period
- (1,234)
Purchased goodwill not deductible 927 -
Capital allowances in advance of depreciation (2,590) -
Depreciation in advance of capital allowances - 402
Other fixed asset timing differences (1,829) (1,050)
Adjustments in respect of previous periods - 57
15,467 2,226
Deferred tax 7,101 -
22,568 2,226
The following tax losses were estimated to be available to offset against
profits in future periods:
At 30 September At 30 September
2002 2001
£000 £000
United Kingdom - 3,516
Overseas 21 14
21 3,530
Share options
A deduction is available for the difference between the market value of the
shares at the date of exercise of the share option (or the market value at 30
September 2002 if the options remain unexercised) and the option price for UK
employees. This deduction has only been available since 22 November 2000, the
date that easyJet plc's shares were first admitted to the Official List of the
London Stock Exchange.
If the share price increases between 30 September 2002 and the date of exercise
of the outstanding options, then a further tax deduction will be recognised in
subsequent financial years. However, if the share price falls, as it has during
the financial year, then there will be a tax charge. Given the number of
options outstanding, movements in the share price could potentially cause a
significant variation in the tax charge and the effective tax rate in future
years.
For Swiss employees, a similar tax deduction is available, but only when the
stock options have been exercised.
As a result of the rights issues of ordinary shares during the year, the number
options and their exercise price were realigned to reflect the bonus element of
that rights issue. The effect of a one penny movement in the share price is
£0.2 million (2001 - £0.2 million).
The closing price at 30 September 2002 was £2.60 (2001: £2.97 (£3.36 before
adjustment of bonus element of rights issue)).
easyJet Switzerland, a group member, has the benefit of an exemption from
communal and cantonal taxes in Switzerland until 1 January 2008, subject to
meeting certain conditions. The effective tax rate in Switzerland at present is
7.6%, but will rise to 27.5% from 1 January 2008 assuming that tax rates remain
unchanged.
4 Earnings per share
Basic earnings per share has been calculated by dividing the profit for the
period retained for equity shareholders by the weighted average number of shares
in issue during the period after adjusting for changes to the capital structure
of the group. The number of shares used for 2001 has been increased by 12.9% to
allow for the effect of the bonus effect of the rights issue of July 2002.
The calculation for diluted earnings per share uses the weighted average number
of ordinary shares in issue adjusted by the effects of all dilutive potential
ordinary shares. The dilution effect is calculated on the full exercise of all
ordinary share options granted by the group including other share schemes, which
the group consider to have been earned. The calculation compares the difference
between the exercise price of exercisable share options, weighted for the period
over which they were outstanding during the year, with the average daily
mid-market closing price over the period when they were in existence as options.
The earnings per share are based on the following:
Year ended Year ended
30 September 30 September
2002 2001
Profit for the year retained for equity shareholders (£000's) 49,009 37,907
Number Number
Weighted average number of ordinary shares in issue during 335,493 281,485
the year used to calculate basic earnings per share (000's)
Weighted average number of dilutive share options used to 17,232 15,002
calculate dilutive earnings per share (000's)
The derivation of profit for the calculation of EPS before goodwill amortisation
is as follows:
Year ended Year ended
30 September 30 September
2002 2001
£000 £000
Profit for the year retained for equity shareholders 49,009 37,907
Add back: goodwill amortisation 3,091 168
52,100 38,075
Goodwill did not affect the tax charge.
5 Intangible fixed assets
Goodwill
£000
Cost
At 1 October 2001 3,398
Additions - purchase of Newgo1 Limited 349,781
At 30 September 2002 353,179
Amortisation
At 1 October 2001 403
Charge for the year 3,091
At 30 September 2002 3,494
Net book value
At 30 September 2002 349,685
At 30 September 2001 2,995
Goodwill, which arose on the initial investment in easyJet Switzerland SA and
the subsequent acquisition of that undertaking, is amortised to the consolidated
profit and loss account over its estimated useful life of 20 years.
On 31 July 2002, the group acquired Newgo1 Limited, the ultimate holding company
of Go Fly Limited, an operator of low cost airline services between London
Stansted, Bristol, East Midlands and Western Europe and the Czech Republic. The
total consideration payable, including the costs of acquisition, was £387.1
million, which was satisfied by cash. The cash was partly funded by the issue
of 104.4 million ordinary shares of 25 pence at £2.65 each, generating net
proceeds of £271.9 million, plus cash of £116.0 million. Acquisition accounting
has been used as the basis for consolidating the results of Newgo1 Limited
within those of the easyJet group. Goodwill arising from the acquisition has
been included as an intangible fixed asset on the group's balance sheet, and
will be depreciated over a period of 20 years in accordance with the directors'
opinion as to the estimated useful economic life of the goodwill purchased.
6 Tangible fixed assets
At 30 September 2002, aircraft with a net book value of £79.6 million (2001:
£92.0 million) were mortgaged to lenders as security for loans.
7 Investments
2002 2001
£000 £000
The Airline Group - 7,159
Deutsche BA 6,624 -
6,624 7,159
The Airline Group
easyJet Airline Company Limited, a subsidiary of easyJet plc, is one of the
seven shareholders in the Airline Group, which is a consortium of airlines set
up to bid for the partial ownership of the UK air traffic control system (NATS).
Following the success of the bid in March 2001, easyJet invested £7.2 million
(including £0.3 million legal and consultancy fees) as its investment to provide
the Airline Group with the initial capital base needed for the purchase. The
investment included £0.3 million of accrued interest receivable. This
investment has been written off during the year ended 30 September 2002 since,
following the events of 11 September 2001, which caused a substantial reduction
in NATS' revenues, potential returns from NATS' are uncertain. The amount
written off includes loan notes of £6.6 million. The accrued interest on the
loan notes (including that which has been internally capitalised within the
Airline Group) is £0.8 million (2001: £0.3 million). This accrued interest has
not been recognised since its recovery is subject to uncertainty.
Deutsche BA
In August 2002, easyJet and British Airways Plc ('British Airways') entered into
an agreement under which the group was granted an option to acquire from British
Airways its 100 per cent holding in Deutsche BA Holding GmbH ('DBA'). The group
will assist in the conversion of DBA to a low cost airline, and under this
acquisition agreement easyJet has significant influence over the operations of
DBA. Accordingly, DBA is an associated undertaking of the group.
The group contributed e5 million (£3.1 million) to its associate at the time of
entering into the agreement to fund capital expenditure. This amount represents
the group's current investment in DBA. If the option is exercised, the group
will (in addition to the e600,000 monthly sum noted below) pay between e32
million and e39 million (£20.1 million and £24.5 million, respectively) to
British Airways. If the option is not exercised by the group, the e5 million
will be forfeited.
DBA is currently loss-making and under the terms of the agreement the group is
required to pay e600,000 (£0.4 million) to British Airways for each month until
the option is exercised or lapses (the option is exercisable up to 30 April
2003, extendable by the group to August 2003). In the absence of any current
shareholding in DBA, these payments are considered to be the group's share of
the losses of DBA and are charged in the profit and loss account accordingly.
8 Creditors: amounts falling due within one year
2002 2001
£000 £000
Bank loans 21,099 6,992
Trade creditors 26,900 16,709
Other taxes and social security 2,748 1,121
Other creditors 9,793 5,349
Corporation tax 18,053 2,396
Unearned revenue (including Government taxes) 94,266 38,765
Accruals 87,755 42,096
260,614 113,428
9 Creditors: amounts falling due after more than one year
2002 2001
£000 £000
Bank loans:
Due within one to two years 3,842 7,461
Due in two to five years 13,058 29,960
Due after five years 31,700 38,868
48,600 76,289
The bank loans financed the acquisition of certain aircraft by the group. The
aircraft acquired with the loans are provided as security against the
borrowings. The bank loans are subject to certain financial and operating
covenants.
10 Provisions for liabilities and charges
2002 2001
£000 £000
Maintenance liabilities 25,801 1,920
Deferred taxation 2,587 -
28,388 1,920
11 Share capital and reserves
Share Share Profit and Total
capital premium loss account
£000 £000 £000 £000
At 1 October 2001 65,108 196,638 54,745 316,491
Issue of ordinary share capital:
Open Offer 4,883 65,254 - 70,137
Placing 1,625 22,132 - 23,757
Rights Issue 26,107 245,814 - 271,921
Share option schemes 196 3,425 - 3,621
Movement in profit and loss account - - (1,723) (1,723)
for employee share schemes
Retained profit for the year - - 49,009 49,009
Foreign currency translation - - (5,509) (5,509)
differences
At 30 September 2002 97,919 533,263 96,522 727,704
12 Notes to the cash flow statement
Analysis of amounts summarised in the cash flow statement
2002 2001
£000 £000
Returns on investment and servicing of finance
Interest received 15,747 9,932
Interest paid on bank and all other loans (5,044) (8,195)
Net cash inflow from returns on investment and 10,703 1,737
servicing of finance
Capital expenditure and financial investment
Purchase of tangible fixed assets (75,101) (54,148)
Sale of tangible fixed assets 71,709 32,007
Investment in Airline Group - (6,886)
Net cash outflow for capital expenditure (3,392) (29,027)
Acquisitions and disposals
Purchase of subsidiary undertaking (387,140) -
Net cash acquired with subsidiary 126,531 -
Investment in Deutsche BA (6,624) -
Net cash outflow for acquisition (267,233) -
Financing
Decrease in loans (8,293) (37,893)
Issue of share capital (net of issue costs of 367,713 212,154
£8.3 million) (2001: £14.2million)
Net cash inflow from financing 359,420 174,261
This information is provided by RNS
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