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Flybe Group Plc (FLYB)

  Print          Annual reports

Tuesday 19 June, 2018

Flybe Group Plc

Results for Year Ended 31 March 2018

RNS Number : 7882R
Flybe Group PLC
19 June 2018
 

Flybe Group plc

 

19th June 2018

 

Flybe Group plc

 

("Flybe" or "the Group")

 

Revenue strengthens as Results are in line with expectations

 

Flybe today announces its results for the year ended 31st March 2018. The reported loss before tax adjusted for the revaluation of USD aircraft loans of £20.5m is in line with market expectations.

 

The initial stage of the Sustainable Business Improvement Plan ('SBIP') has delivered significantly improved commercial performance, with load factor growing by six percentage points and a 10.1% increase in revenue per seat. As we announced at H1 2017/18, we have invested in improving the performance of our Bombardier Q400s to enhance further our aircraft reliability and on-time performance. We have also commenced our digital transformation to improve the customer experience and bring improved operational efficiency. The additional maintenance costs, onerous IT contract provision, reduced hedging gains and the weather disruption in Q4 have, however, all impacted the adjusted loss before tax figure.

 

Financial highlights - Group

·    6.4% increase in group revenue to £752.6m (2016/17: £707.4m).

·    Loss before tax improved to £9.4m (2016/17: restated to £48.5m) including £11.1m of non-cash revaluation gains on USD aircraft loans (2016/17: losses of £13.2m).

·    Adjusted loss before tax1 increased to £19.2m (2016/17: £6.7m loss).

·    4.3% increase in EBITDAR2 to £140.0m (2016/17: restated to £134.2m).

·    Net assets of £93.1m (31st March 2017: £124.9m restated to include the £28.6m impact of an Embraer E195 onerous lease provision and related impairment of maintenance assets).

·    Net debt (which is all asset backed) decreased to £59.1m (31st March 2017: £64.0m).

 

1.         Adjusted loss before tax is defined as the reported loss before tax adjusted for the revaluation of USD aircraft loans and the net aircraft onerous lease provision and impairment of related assets.

2.         EBITDAR is defined as operating loss after adding back depreciation, amortisation, impairment and aircraft rental charges.

 

Operational highlights

Flybe Limited

·    8.3% increase in revenue to £732.0m (2016/17: £675.6m).

·    9.1% increase in passenger revenue to £675.8m (2016/17: £619.3m).

·    10.1% improvement in passenger revenue per seat to £53.79 (2016/17: £48.84).

·    7.7% increase in passenger volumes to 9.5 million (2016/17: 8.8 million).

·    6.0 percentage points improvement in load factor to 75.6% (2016/17: 69.6%).

·    1.4% growth in passenger yield to £71.15 (2016/17: £70.20).

·    0.9% reduction in seat capacity for the year in line with our strategy in reduce the fleet;

·      5.2% reduction in network capacity in H2, as the strategy gains momentum, compared to an increase of 11.0% for the same period the previous year.

·    10.9% increase in adjusted cost per seat ('CPS') (excluding the impact of the E195 onerous lease provision and related asset impairment) due principally to higher maintenance costs, the lower value of sterling and an onerous IT contract provision. At constant currency this adjusted CPS increased by 7.9%.

 

White Label

·    We continue to provide five ATR72 aircraft for SAS and we commenced a new contract with Stobart Air which started as a wet lease of two E195 aircraft in May 2017, converted to dry lease from November 2017. The Brussels contract ended during the year.

 

 

 

Flybe Aviation Services

·    0.2% decrease in FAS revenue to £50.0m (2016/17: £50.1m).

·    8.8% decrease in profit before tax to £3.1m (2016/17: £3.4m).

·    8.5% decrease in total man-hours, but a 41.2% increase in Flybe maintenance man-hours reflecting the focus on internal maintenance and handbacks.

 

Fleet

As previously stated, we have invested to improve the technical reliability of our Bombardier Q400 aircraft which resulted in higher maintenance costs. Following a review of all options for our fleet configuration we recently confirmed that the Q400 remains the best aircraft for the core of our fleet. It offers a combination of superior fuel economy, greater power and cruise speed compared to other turboprops, and low noise footprint which makes it the optimal aircraft for our needs.

Having concluded previously that our target fleet size is 70 aircraft, we plan to renew Q400 leases on relatively young aircraft to achieve this target in the future. It is anticipated that the new leases will be significantly cheaper than the current contracts. This approach avoids major capital expenditure in purchasing new Q400 aircraft although we will have to invest approximately £11m over the next four years to ensure that the aircraft comply with new EASA regulations and we are separately evaluating further refurbishment investment in Q400 cabin interiors over the coming years to maintain high levels of customer experience.

We plan to retain the Embraer E175 jets for longer and busier routes, reflecting their larger range and bigger size, with attractive economics for us on longer sector times, well ahead of any comparable regional jet.

 

The fleet review in March 2018 reiterated the decision to remove the nine larger E195 jets from our fleet. When in 2015/16 it was forecast that these aircraft would not be profitable for Flybe, various contracts were signed to mitigate losses in cooperation with several airports. However, in March 2017 it was concluded that these aircraft were unavoidably loss making, although substantially less so than the alternative of grounding the aircraft. However, provision was not made at that time.

 

A prior period adjustment has therefore been made to retrospectively reflect the non-cash E195 onerous lease and impairment of the related assets in accordance with IAS 8.  In addition, given the current reassessment of future losses and estimated redelivery obligations, there is a further £1.3m of added non-cash cost impact included in the 2017/18 accounts. There will however be c. £10m of reduced charges in the current year as the provision unwinds. The E195 aircraft will have left the fleet by Q1 2020/21.

 

Outlook

The European aviation market continues to be challenging, with many airlines impacted by excess seat capacity in the short-haul market, a weaker pound, higher fuel prices and both business and consumer uncertainty. Within this market, the Board believes that Flybe offers a differentiated regional business model and has the right strategy to deliver a sustainable profitable future.

 

As at 14th June 2018 forward sales in H1 for 2018/19 have continued to be encouraging in the early weeks of the new financial year:

·   8.6 % expected reduction in seat capacity vs. prior year as the fleet size further reduces;

·   54% of seats sold vs. 49% in the prior year;

·   10.9% increase in revenue per seat; and

·   1.4% increase in passenger revenue vs. prior year.

 

As of 14th June 2018, we had purchased 91% of our anticipated fuel requirements at USD573 and 81% of our anticipated US Dollar requirements at USD 1.3630 for 2018/19.

 

Christine Ourmières-Widener, Chief Executive Officer, commented:

 

"Flybe has made significant progress during my first full year as CEO. With our fleet size under control, we are already delivering improvements to passenger yield, load factors and revenue.  Our Sustainable Business Improvement Plan, launched last year, is enhancing the business in a number of key areas including, network decision-making, revenue management and commercial performance. Profitability has however been impacted by higher maintenance costs, IT investment and the poor weather in the final quarter.

 

"We now have a new senior management team in place, with greater aviation experience, and we are all focused on delivering the business plan through continued improvements to revenue, a renewed focus on cost reduction and therefore achieving profitability.

 

"There is growing awareness of the importance of regional air connectivity, not just to the economy and in connecting people, but also in connecting customers to long-haul services with increased interest from legacy carriers. This is shown by the success of our new routes in Heathrow and the growth in our codeshares. Flybe has a unique position in UK connectivity and in its relationship with 9 million UK passengers.

 

"I look forward to a positive future and would like to thank all Flybe employees for their ongoing support and commitment."

 

A presentation to analysts and investors will be held at 10am at the offices of Bryan Cave Leighton Paisner: Adelaide House, London Bridge, London, EC4R 9HA. The presentation will also be webcast via this link: http://view-w.tv/909-1220-19854/en

 

Enquiries:

Flybe

Ian Milne, Chief Financial Officer

Tel: +44 (0)20 7379 5151

 

Maitland

Neil Bennett

Andy Donald

Tel: +44 (0)20 7379 5151

 

 

 

 

Information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation EU no. 596/2014 ("MAR"). Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

 

 

 

 

 

 

 

Our operational performance

 

During the 2017/18 financial year we have refined the focus of the SBIP to concentrate strategically on:

·               Improving Flybe's network to be the airline of choice for customers;

·               Developing sales and marketing activities to continuously improve revenue;

·               Creating a stable and reliable operation;

·               Ensuring employees are engaged and motivated; and

·               Delivering a sustainable cost base.

Safety remains the underpinning principle of our business plan and culture.

 

Progress has been made in all areas of the business.

 

Airline of choice for customers

 

The network team has focused on optimising our flying schedule including frequency, timing and route. This work, together with our sales and marketing drive, has resulted in an improved commercial performance and going forward we aim to further improve customer satisfaction. In March 2017, we commenced services from Edinburgh and Aberdeen to London Heathrow, which have proved to be more popular than initially forecast.

 

We aim to continue to optimise the network in line with customer demand and to improve revenue per seat ('RPS').

 

Continuously improving revenue

A range of initiatives have been undertaken to improve sales and marketing, including the appointment of a new Commercial Director, Roy Kinnear, who joined on 1 January 2018. He has over three decades of commercial airline experience at airlines including bmi, Gulf Air, Etihad and most recently as Chief Executive of Air Seychelles.

·               A new media agreement was signed with McCann, consolidating activity which was previously spread across seven suppliers into a single supplier. McCann offers a more efficient integrated service for Flybe across advertising, media buying and production, providing better customer focus at a lower cost;

·               We launched a new brand strap line, 'Close to you'; this signals to our customers that we are 'closer to them' than other airlines, because we fly from more UK airports than any other airline. One of our flights is therefore never far away and our smaller aircraft make it easier to deliver a friendly, personalised on-board service; and

·               We have specified ancillary revenue opportunities that will be enabled by the new digital platform, 'e-Fly', including various seat and baggage charging options.

At the same time, we have kept pace with an ever-changing market through a renewed focus on alliances and partnerships. These include:

·               11 codeshares with other airlines, in most cases providing passengers to long-haul airlines such as Air France, Cathay Pacific and Virgin Atlantic;

·               Franchise agreements with Blue Islands, Eastern Airways and Stobart Air whose aircraft operate in Flybe's livery;

·               Airport partnership deals with Doncaster Sheffield Airport, Cardiff Airport, Exeter Airport and Norwich Airport; and

·               Providing White Label flying for SAS, with five ATR aircraft operating in Sweden. 

A stable and reliable operation

We have continued to focus on two key measures of performance: on-time performance ('OTP') and technical despatch reliability ('TDR'). The former is a measure of how punctual Flybe is and the latter of how often our aircraft are available to operate.

OTP (defined as departure within 15 minutes of the scheduled departure time) is highly linked to customer satisfaction and is therefore a key operational focus. We believe that improving OTP will contribute to achieving our operational and financial potential by:

·      Improving customer satisfaction and encouraging repeat business;

·      Enhancing our customer proposition to drive incremental revenue; and

·      Reducing inefficiencies and costs resulting from delays or sub-optimal OTP.

In the 2017/18 financial year, OTP fell to 79.5% from 81.6% (partly as a result of the exceptional adverse weather in February and March 2018).  Nevertheless, we remain ranked the number one UK airline for OTP in an annual survey published by Which? in January 2018.

Over the next three years, a range of initiatives are planned to improve OTP and create an ongoing culture of continual improvement. We expect to see this start to translate into improved performance from this financial year.

TDR was 99.1% during the 2017/18 financial year compared to 99.0% in the prior year. Following a dip in performance in the early part of the year we invested in improving the Q400 TDR. This resulted in an improvement in the Q400 fleet to 99.0% from 98.9% in the prior year. 

 

Engaged and motivated employees

Under new leadership in our People team, we have taken significant steps to improve employee engagement. It is anticipated that this objective will take time to be fully developed but to date we have:

·      Flattened our structure to reduce the employment pyramid to only six levels, from CEO to the most junior roles;

·      Introduced a new absence policy and absence management system;

·      Introduced new values and commenced work on embedding those into the Group's culture; and

·      Reviewed the internal training programmes which included the re-launch of supervisor and manager training, and enhancements to the apprenticeship schemes.

 

Sustainable cost position

Cost increases in recent years have negatively impacted profitability. In light of the decision to reduce the fleet size, we are focusing on reducing both absolute costs and achieving a sustainable cost per seat ('CPS'). In conjunction with driving RPS through a re-invigorated sales and marketing effort, this focus is expected to translate into a lower cost per seat and therefore improve overall group profitability. We aim to also create a culture of ongoing cost reduction, which will help sustain profitability beyond the currently identified initiatives.

 

Flybe's total operating costs are expected to fall as we optimise the network and reduce the number of routes and miles flown. As aircraft leave the fleet associated costs will reduce, particularly the nine Embraer E195 aircraft which are being handed back over the next three years.

 

Since the adoption of the SBIP, we have conducted an extensive review of costs across all areas of the business. The review identified the following main areas of focus:

·               Suppliers: we have commenced discussions with our major partners (including airports, ground handlers and original equipment manufacturers) seeking ways to improve supplier performance at a reduced cost;

·               Fleet: As well as exiting the E195 fleet, we are looking at reducing the monthly rates we pay for each non-owned aircraft and taking advantage of opportunities presented by extensions to operating leases. We have also delayed receipt of three of the four E175s to be received during 2018/19 by several months;

·               Fuel efficiency: we have focussed on effective fuel usage techniques including optimal routing of flights and optimising ground power unit running;

·               Maintenance: in December 2017 a new maintenance software application (AMOS) was introduced to record all maintenance activity (including spare parts and individual job records) in one place to drive greater productivity, lower staff costs and reduce turnaround times to create a more productive fleet and the ability to accommodate further third-party revenue generating work. The transition phase had been challenging, however efficiencies are expected once the system is fully embedded; and

·               Digitalisation of tasks: we are investing in Electronic Flight Bags for our pilots to enable the digital filing of information and reduce the requirement for crew to complete administrative tasks at base, thereby reducing post-flight duty time and improving efficiency.

We are also merging the Flybe Aviation Services ('FAS') engineers into Flybe UK. We will retain FAS to focus on our military third-party requirements at Brize Norton. This change will simplify the planning and delivery of resources supporting both in-house and third-party maintenance work at Exeter; cost savings from removing duplicate work; increase the hangar productivity and reduce costs.

 

Our focus for 2018/19

Our business model remains unchanged. We continue to focus on ensuring our network is the right size to meet demand. Market conditions and a stronger commercial focus will drive solid revenue performance which gives us the opportunity to re-phase our fleet plan while reducing our cost base through renegotiation of operating leases.

 

As part of our development, we are introducing a new balanced scorecard approach for 2018/19 to keep our focus on delivery and to measure the key KPI's behind our business model. With the strong network and commercial performance achieved in 2017/18 as a back drop, for 2018/19 we have narrowed our focus to be on the following key success factors:

 

·   Operational excellence: We are driving an operational excellence programme across all areas of the business, with in-depth analysis to diagnose and understand our challenges and targeted actions to improve performance. Improving OTP will ultimately drive customer loyalty, employee efficiency and therefore improve our financial performance. In addition, to drive maintenance efficiency, we will assess investment in the hangers following an external evaluation.

 

·   Flybe culture: Getting closer to our front-line staff and supporting the delivery of services to our customers is critical to motivating and improving the performance of our employees. We will undertake a company-wide employee survey and launch an appropriate change programme to improve engagement.

 

·   e-Fly: In October 2017, we selected Amadeus, the market-leading provider, as our partner to transform our digital platform. This is a major investment by us in order to improve RPS and customer experience and help drive cost reduction. We aim to transform the entire passenger booking (on-line and mobile) experience. The new system will cover inventory, reservations, ticketing, e-commerce, ancillaries, re-accommodation, payments and departure control and is planned to be operational in the second half of the 2018/19 financial year. We have called this programme 'e-Fly' and it is the cornerstone of our IT transformation, which also extends to a full network refresh as well as the implementation of new customer disruption tools.

 

·   Focus on Costs: There are a series of projects across the Group to either improve revenue or reduce costs. This cross-functional initiative was launched in the late 2017 calendar year and has already both identified and started to deliver benefits. We aim to link this into the culture change so that every employee feels empowered to suggest improvements.

 

The Group has received a number of early stage bid proposals this year, none of which are now active as they failed to meet the value and deliverability requirements of the Board. However, the Board believes that they illustrate the strategic importance of Flybe to UK regional connectivity.

 

 

 

 

 

 

Financial Review

 

As we commenced our fleet reduction in the year, seat capacity has decreased by 0.9% to 12.6 million seats. By focusing on higher demand and profitable routes, passenger numbers have increased by 7.7% to 9.5 million resulting in a load factor increase of six percentage points to 75.6% (2016/17: 69.6%) and a 10.1% increase in passenger revenue per seat ('RPS') to £53.79. Passenger yield (on seats sold) improved by 1.4% to £71.15 (2016/17: £70.20) resulting in a passenger revenue increase of 9.1% to £675.8m (2016/17: £619.3m).

 

Total group revenue increased by 6.4% to £752.6m (2016/17: £707.4m) reflecting the increased passenger revenue offset partly by lower MRO revenue owing to the reduction in third-party work as internal maintenance activity increased.

 

The Sustainable Business Improvement Plan ('SBIP') presented to the Board in March 2017 contained a detailed network strategy and review of the fleet which gave the recommendation to exit the E195 fleet as there were unavoidable losses despite the mitigating actions (i.e. airport agreements) in place. In prior years, the entire fleet had been categorised as one CGU as decisions were made to generate cashflows when working the fleet collectively (as the aircraft were considered to be interchangeable) in order to fulfil network obligations.  The new three-year plan developed in 2017/18 continues to support the March 2017 findings confirming that an error had been made in the previous financial year as an onerous contract on the E195 leases should have been recognised as the unavoidable costs of meeting the lease obligations exceeded the economic benefits expected to be received.

A prior period adjustment has therefore been made to retrospectively reflect the non-cash E195 onerous lease and impairment of the related assets in accordance with IAS 8. The onerous lease provision will be released over the next three years to 2020/21 until the E195 leases expire and all aircraft have been handed back. As a result of this adjustment, we have therefore restated 2016/17 which is reflected throughout the comparative period 2016/17 in the Annual report and financial statements.  

 

Total group operating costs (after the E195 onerous lease provision and impairment of related assets) have increased by 3.9% from £738.4m to £767.4m. Before the E195 onerous lease provision and impairment of related assets entries, total group operating costs have increased by 7.9% from £709.8m to £766.1m as a result of adverse foreign exchange costs as hedging gains reduced; increased investment in fleet reliability and end of lease handbacks; inflation and a number of one-off factors including the £5.2m onerous contract charge relating to the digital platform investment. 

 

Net group financing costs increased by 32.6% to £5.7m (2016/17: £4.3m) as a result of increased aircraft ownership, higher interest rates on floating rate borrowings and reduced interest receivable on lower cash deposits.

 

Before the E195 onerous lease provision and impairment of related assets, the Group made an operating loss of £13.5m (2016/17: £2.4m) which reflects increased maintenance expenses, the IT onerous contract provision, higher disruption costs and the decrease in the value of sterling. The operating loss after the E195 onerous lease provision and impairment of related assets was £14.8m (2016/17: restated from £2.4m to £31.0m).

 

Flybe's loss before tax of £9.4m compares to a restated loss before tax of £48.5m in 2016/17. The loss before tax has been restated from £19.9m to £48.5m for the non-cash E195 onerous lease provision and impairment of related assets totalling £28.6m that has been recognised as a prior period adjustment.

 

The Group's adjusted loss before tax and USD aircraft loans revaluation was £20.5m, excluding USD loan revaluation gains of £11.1m. After adding back the non-cash revaluation movement on USD aircraft loans and the E195 onerous lease provision and impairment of related assets entries, the adjusted loss before tax is £19.2m compared to £6.7m in 2016/17. The 2016/17 measure has been restated from an adjusted loss before tax of £6.7m to an adjusted loss before tax of £35.3m (excluding USD loan revaluation losses of £13.2m) as a result of the non-cash E195 onerous lease provision and impairment of related assets.

 

Net debt at 31st March 2018 has improved to £59.1m (2017: £64.0m) due to contractual loan repayments and foreign exchange revaluation gains on US dollar denominated loans. Net debt includes free cash balances totalling £86.7m at the end of March 2018 (2017: £115.1m) and restricted cash of £8.3m (2017: £9.2m).

 

EBITDAR, a profit measure used for comparisons between airlines, has improved by 4.3% to £140.0m from £134.2m in 2016/17.

 

Adjusted profit measures

 

EBITDAR and adjusted loss before tax measures discussed in this section are non-GAAP measures1.

 

EBITDAR2 is a common airline profit measure which is used for making comparisons between airlines. Set out below is a reconciliation from operating loss to EBITDAR:

 

 

2018

2017

Change

 

 

(restated)3

 

 

£m

£m

%

Operating loss

(14.8)

(31.0)

 

Depreciation, amortisation and impairment

53.1

42.8

 

Aircraft rental charges

101.7

122.4

 

EBITDAR

140.0

134.2

4.3

 

Adjusted profit or loss before tax4 is an alternative profit measure used by Flybe to assess underlying performance. This measure adjusts for USD loan revaluations which result in a non-cash translation impact on USD denominated debt used to fund the acquisition of aircraft which are also dollar denominated. As the USD exchange rate moves, this changes the outstanding loan liability in sterling which is our reporting currency. As this is not a cash transaction, it does not reflect the underlying performance of Flybe and therefore we measure adjusted profit before tax.

 

A second adjusted loss before tax measure has been presented to also adjust for the non-cash E195 onerous lease provision and impairment of related assets entries totalling £28.6m that has been recognised as a prior period adjustment and the movements in subsequent years.

 

The table below sets out a reconciliation from loss before tax to adjusted loss before tax: 

 

 

2018

2017

 

 

(restated)5

 

£m

£m

Unadjusted loss before tax

(9.4)

(48.5)

USD loan revaluations

(11.1)

13.2

Adjusted loss before tax and USD loan revaluations

(20.5)

(35.3)

Aircraft onerous lease and impairment of related assets

1.3

28.6

Adjusted loss before tax, USD loan revaluations and aircraft onerous lease and impairment of related assets

(19.2)

(6.7)

 

1 Alternative (non-GAAP) profit measures exclude amounts that are included in the most directly comparable measure calculated and presented in accordance with IFRS or are calculated using financial measures that are not calculated in accordance with IFRS.  The reconciliations above describe how the alternative profit measures are determined from the most directly comparable measures calculated and presented in accordance with IFRS. The alternative profit measures are not regarded as a substitute for, or to be superior to, the equivalent measures calculated and presented in accordance with IFRS or those calculated using financial measures that are calculated in accordance with IFRS.  The non-GAAP measures described may not be directly comparable with similarly-titled measures used by other companies.

2 EBITDAR is defined as operating loss after adding back depreciation, amortisation, impairment and aircraft rental charges.

3 Although the EBITDAR for 2016/17 remains unchanged at £134.2m, the figures used to calculate this measure have been restated due to the non-cash E195 onerous lease provision and impairment of related assets totalling £28.6m which has been recognised as a prior period adjustment. Operating loss was previously reported as £2.4m, depreciation and amortisation as £39.1m and aircraft rental costs as £97.5m.

4 Adjusted loss before tax is defined as the reported loss before tax adjusted for the revaluation of USD aircraft loans. A second adjusted loss before tax measure has been presented which includes an adjustment for the non-cash aircraft onerous lease provision and impairment of related assets.

5 A non-cash E195 onerous lease provision and impairment of related assets totalling £28.6m has been recognised as a prior period adjustment therefore the 2016/17 loss before tax has been restated from £19.9m to £48.5m.

 

 

Fleet

 

The profile of Flybe's fleet at 31st March 2018 and 2017 is summarised below:

 

 

 

 

Number of aircraft

 

 

Number of
seats

At 31st March

2017

Net movements in period

At 31st March 2018

Bombardier Q400 turboprop

78

58

(3)

55

Embraer E175 regional jet

88

11

-

11

Embraer E195 regional jet

118

9

-

9

ATR72 turboprop (SAS contract)

70

5

-

5

Total

 

83

(3)

80

Held on operating lease

 

56

(3)

53

Owned

 

27

-

27

Total

 

83

(3)

80

Total seats in fleet

 

6,904

 

6,670

Average seats per aircraft

 

83.2

 

83.4

Average age of fleet (years)

 

8.4

 

9.1

 

The final two aircraft from the Nordic Aviation Capital agreement were delivered during the first two months of 2017/18 so the fleet peaked at 85 aircraft in May 2017. Flybe has since started to return end of lease aircraft to its lessors. At 31st March 2018, five end of lease handbacks had been completed resulting in a fleet size of 80 aircraft. The handback of a further Q400 aircraft was completed in April 2018 and the first of the E195 handbacks was completed in June 2018.

 

As at 31st March 2018, Flybe leased five ATR72 aircraft on a wet lease (including staff and retaining maintenance obligations) basis to SAS in Scandinavia and two E195 aircraft to Stobart Air which are now on a dry lease (where Flybe retains only the lease obligations until the aircraft return in late 2018).

 

The mix of owned aircraft as a proportion of the total fleet has increased from 32.5% to 33.8% during the year due to the net movement of leased aircraft.

 

There are four E175 aircraft that are contracted for delivery as at 31st March 2018. These are scheduled for delivery from July onwards in 2019/20.

 

 

Business results

 

Flybe's results before tax, analysed by segment, are summarised below:

 

2018

2017

 

 

(restated)1

 

£m

£m

Business revenues:

 

 

Flybe UK

732.0

675.6

FAS

50.0

50.1

Inter-segment sales

(29.4)

(18.3)

Group revenue

752.6

707.4

 

 

 

Business adjusted loss before tax:

 

 

Flybe UK2

(16.8)

(5.8)

FAS

3.1

3.4

Group costs

(5.5)

(4.3)

Adjusted loss before tax, USD loan revaluation and aircraft onerous lease3

(19.2)

(6.7)

Net expense on aircraft onerous lease and impairment of related assets

(1.3)

(28.6)

Adjusted loss before tax and USD loan revaluation4

(20.5)

(35.3)

USD loan revaluations

11.1

(13.2)

Group loss before tax

(9.4)

(48.5)

 

 

 

1     Due to the £28.6m prior year adjustment for the non-cash E195 onerous lease provision and impairment of related assets, both adjusted loss measures have been restated for 2016/17.

2     Flybe UK adjusted loss before tax reports a segment loss of £16.8m (2016/17: £5.8m) after excluding group costs of £5.5m (2016/17: £4.3m), £1.3m of net E195 onerous lease costs and impairment of related assets (2016/17: £28.6m) and revaluation gains on USD aircraft loans of £11.1m (2016/17: losses of £13.2m).

3     Adjusted loss before tax, USD loan revaluation and aircraft onerous lease and impairment of related assets is defined as the reported loss before tax excluding revaluation gains on USD aircraft loans of £11.1m (2016/17: losses of £13.2m) and £1.3m of net E195 onerous lease costs and impairment of related assets (2016/17: £28.6m).

4     Adjusted loss before tax and USD loan revaluation is defined as the reported loss before tax excluding revaluation gains on USD aircraft loans of £11.1m (2016/17: losses of £13.2m). 

 

 

Flybe UK

 

Operational statistics

 

 

2018

2017

Change

Seat capacity (million)

12.6

12.7

(0.9)%

 

 

 

 

Passengers (million)

9.5

8.8

7.7%

 

 

 

 

  Load factor (%)

75.6

69.6

6.0ppts

 

 

 

 

Passenger yield (£)

71.15

70.20

1.4%

 

Revenue

 

2018

 

2017

 

£m

£ per seat

 

£m

£ per seat

Passenger revenue

675.8

53.79

 

619.3

48.84

White Label flying revenue

36.6

 

 

33.0

 

Other revenue

19.6

 

 

23.3

 

Total revenue

732.0

58.22

 

675.6

53.28

 

Flybe UK's seat capacity decreased by 0.9% to 12.6 million (2016/17: 12.7 million) with scheduled sectors increasing by 1.1% to 153,800 (2016/17: 152,100) reflecting the increased utilisation of the reducing fleet. Flybe served 9.5 million customers on its network, a 7.7% increase year-on-year (2016/17: 8.8 million). The focus on high-demand routes and reduction in less popular flights resulted in a load factor increase from 69.6% to 75.6% and a 10.1% increase in RPS from £48.84 to £53.79.

 

White Label flying revenue increased by 10.9% from £33.0m to £36.6m. The SN Brussels contract, which commenced in March 2012, came to an end in October 2017 reducing revenue year-on-year by £3.0m. However, this was offset by a new contract with Stobart Air which started as a wet lease in May 2017 and then converted to a dry lease from November 2017.

 

Other revenues, which primarily reflect airport partnership agreements, fell by 15.9% to £19.6m on the back of reduced losses being passed back to the airports as the route networks have matured.

 

Operating costs - including E195 onerous lease provision and impairment of related assets

 

Flybe UK operating costs have increased by 5.6% to £749.9m (2016/17: £710.0m). The prior period operating costs have been restated from £681.4 to £710.0m to reflect the £24.9m adjustment for the E195 onerous lease provision and the £3.7m impairment charge in relation to E195 assets.

 

In 2017/18, £10.2m of the onerous E195 lease provision was utilised. The closing provision was reviewed at 31st March 2018 against the new three-year plan which resulted in an additional provision charge of £9.3m. There also was a £2.2m impairment charge relating to E195 assets originally capitalised.

 

 

Cost per seat ('CPS') (including fuel, the E195 onerous lease position and impairment of related assets) increased by 6.6% from £55.99 to £59.69 and on a constant currency basis1 increased by 3.8%.

 

CPS (excluding fuel, the E195 onerous lease position and impairment of related assets) increased by 8.9% from £48.02 to £52.32 and on a constant currency basis1 increased by 5.5%.

 

1 Constant currency is calculated for the 2016/17 financial year by applying the exchange rates that prevailed for reporting the 2017/18 results of $1.40 and €1.14.

 

Operating costs - excluding E195 onerous lease provision and impairment of related assets

 

 

2018

 

2017

 

 

 

(restated)1

 

£m

£ per seat

 

£m

£ per seat

Fuel and aircraft operations

359.8

28.65

 

343.6

27.10

Aircraft ownership and maintenance

224.4

17.86

 

194.0

15.30

Staff costs

103.1

8.21

 

101.2

7.98

Other net operating expenses

61.5

4.88

 

42.6

3.36

Operating costs - excluding aircraft onerous lease and impairment of related assets

748.8

59.60

 

681.4

53.74

 

1 A non-cash E195 onerous lease provision and impairment of related assets totalling £28.6m has been recognised as a prior period adjustment

Flybe UK operating costs - excluding the E195 onerous lease provision and impairment of related assets - have increased by 9.9% to £748.8m (2016/17: £681.4m). By operational cost line, the main variances are summarised below:

 

Fuel and aircraft operations

·      8.4% (£8.5m) reduction in fuel costs mainly due to a large positive swing in hedging impacts, with a gain in the year of £7.9m compared to a loss in the prior year of £13.3m, and £1.4m of fuel burn efficiencies. This gain has been offset by an adverse price movement of c. $90 per tonne resulting in an estimated price increase of fuel and carbon of £15.5m;

·      6.3% (£9.4m) increase in airport and en route charges primarily due to £9.8m of increased costs associated with passenger volumes and mix effect of new airports. In addition, there were adverse currency impacts of £3.3m offset by en route price reductions of £3.7m; and

·      16.2% (£15.3m) increase in ground operations costs due to a £5.5m increase in disruption costs (delay and diversion, EU261 compensation and de-icing) reflecting increasing EU261 claim rates and more severe weather conditions this year. In addition, there were volume increases of £1.8m from higher passenger numbers, price increases of £1.8m, adverse currency impacts of £1.3m and a new FAS cross-charge for line maintenance of £4.7m.

 

Aircraft ownership and maintenance

·      23.5% (£13.6m) increase in maintenance costs largely attributable to a £10.7m increase in investment in the fleet to improve reliability as announced in October 2017. Otherwise, costs increased due to currency fluctuations of £0.7m and £2.2m of added cost mainly attributable to the Q400 handbacks;

·      30.2% (£11.7m) increase in depreciation and amortisation which reflects £9.8m of added depreciation on capitalised maintenance assets as the fleet reached certain trigger points and £1.6m of added amortisation of intangible assets brought into service; and

·      5.2% (£5.1m) increase in aircraft rental charges partly reflecting £1.9m of added costs for those aircraft received last year, £1.6m additional ad hoc aircraft hire charges and £0.7m of higher rentals relating to White Label flying. In addition, there was a £2.1m credit in the prior year from a lessor and adverse currency movements. These were partially offset by £2.4m of saving on end of lease handbacks.

 

Staff costs

·      1.9% (£1.9m) increase in staff costs mainly due to the annual pay award of £2.6m. A £3.1m transfer of Flybe UK line maintenance staff to FAS was offset by a write-back of £0.5m in performance share plans no longer expected to vest and a £2.8m bonus credit in the prior year.

 

Other net operating expenses

·      44.3% (£18.9m) increase in other net operating expenses which was predominantly due to a £5.2m provision for the one-off onerous IT contract and a £13.4m decrease in currency hedging gains.

 

Cost per seat ('CPS') (including fuel but excluding the E195 onerous lease provision and impairment of related assets) increased by 10.9% from £53.74 to £59.60 and on a constant currency basis1 increased by 7.9%.

 

CPS (excluding fuel, the E195 onerous lease provision and impairment of related assets) increased by 14.1% from £45.76 to £52.22 and on a constant currency basis1 increased by 10.4%.

 

1 Constant currency is calculated for the 2016/17 financial year by applying the exchange rates that prevailed for reporting the 2017/18 results of $1.40 and €1.14.

 

Fuel

 

Flybe UK's results are impacted by movements in the price of fuel which forms a significant variable cost for the business. Aviation fuel prices remain capable of large and unpredictable movements due to a variety of external factors, such as changes in supply and demand for oil and oil-related products, and the role of speculators and funds in the futures markets. The following table shows the movement of market fuel prices and subsequent costs for Flybe UK:

 

 

2018

2017

Brent crude, market price per barrel

 

 

High

$71

$58

Low

$45

$37

Average

$58

$50

Jet fuel, market price per tonne

 

 

High

$674

$550

Low

$441

$351

Average

$560

$470

Blended rate, per tonne1

$499

$556

All-in rate, per tonne2,4

$610

$637

Total fuel costs,4

£92.6m

£101.1m

Usage of jet fuel, kilo tonnes3,4

198,092

204,299

Fuel burn per seat3,4

15.8kg

16.1kg

 

1 The blended rate is the average rate paid, net of hedges.

2 The all-in fuel rate includes costs incurred during the process of fuelling the aircraft.

3 The prior year usage and fuel burn per seat have been restated to include scheduled flights only which reflects the definition used in the calculation of CPS and RPS.

 

Flybe UK's hedging policy in relation to fuel is detailed in note 35 'Financial instruments'. The table below sets out Flybe UK's hedging position at 31st March 2018 and the estimated impact of future movements based on forecast fuel requirements:

 

 

2018

2017

Fuel requirement hedged

61.1%

83.2%

Average hedged price, per tonne

$518

$489

 

 

 

Increase in price, per tonne

$50

$50

Reduction to profit

£0.9m

£1.0m

 

 

The table below shows the hedged position at 14th June 2018 for the anticipated fuel requirements for 2018/19 and 2019/20:

 

 

2018/19

2019/20

Percentage hedged

91.3%

26.4%

Hedged rate

$572.7

$727.0

 

 

Net finance income

 

During 2017/18, Flybe's net finance income in the consolidated income statement was £5.4m (2016/17: £17.5m expense) mainly due to an £11.1m non-cash gain on the retranslation of US dollar denominated loans used to fund the acquisition of aircraft (2016/17: £13.2m loss). Under International Financial Reporting Standards, US dollar aircraft are non-monetary assets and are therefore held at the rate as at the date of acquisition, whereas the US dollar liability is a monetary item and is retranslated at each month end and therefore, in accounting terms, Flybe does not have a natural offset. This income statement gain of £11.1m has therefore been removed in arriving at adjusted loss before tax. Other net finance costs increased by £1.4m due to increased interest rates and reduced investment income.

 

Foreign exchange

 

The Group currently has a relatively small exposure to the euro but has significant US dollar costs in relation to fuel, maintenance, aircraft operating leases and loan repayments. The Group's hedging policy in relation to foreign currency is detailed in note 35 'Financial instruments'. The table below sets out the hedging position at 31st March 2018 and the estimated impact of future movements based on forecast US dollar spend:

 

 

2018

2017

USD requirement hedged, %

79.7%

85.8%

Average exchange rate, $/£

1.33

1.42

 

 

 

Weakening of sterling

$0.05

$0.05

Reduction to profit

£1.5m

£1.1m

 

 

The table below shows the hedged position at 14th June 2018 for the anticipated USD requirements for 2018/19 and 2019/20:

 

 

2018/19

2019/20

Percentage hedged

80.5%

27.5%

Hedged rate

1.34

1.37

 

 

Carbon emissions

 

The Group is required to purchase carbon allowances for all flights departing from, and arriving into, the EU to offset its carbon footprint in each calendar year. Flybe UK manages its exposure by purchasing carbon emissions allowances through a forward purchase programme to top up the free allowances awarded to it under the scheme. The table below sets out Flybe UK's emissions and carbon allowances for 2017 and the budget for 2018:

 

Calendar year

2018

2017

 

Budget

Actual

Anticipated carbon allowances required, tonnes

571,430

624,001

Free allowance allocation, tonnes

222,778

222,778

Proportion hedged at beginning of period

39%

100%

Effective carbon rate

€7.52

€4.17

 

Hedged percentages are lower year-on-year because the decision was taken to pause the carbon hedging programmes while Flybe UK assessed how prices were moving given significant volatility.

 

Flybe Aviation Services

 

 

2018

2017

 

£m

£m

Revenue

50.0

50.1

Operating costs

(46.9)

(46.7)

Profit before tax

3.1

3.4

 

Revenue decreased by 0.2% to £50.0m (2016/17: £50.1m), of which £20.6m was for third-party customers (2016/17: £31.8m) representing a 35.2% reduction due to the added investment this year on Flybe UK aircraft reliability and end of lease handbacks. Man-hours reduced by 8.5% from 519,400 in 2016/17 to 475,000 in 2017/18.

 

 

Group costs

 

Group costs of £5.5m (2016/17: £4.3m) include Group Board and Executive Committee salary costs and group-related legal and professional fees. The increase year-on-year is primarily due to increased legal and professional fees and an increase in the number of Executive Committee members.

 

 

Loss before and after tax

 

The Group's reported loss before tax was £9.4m. The reported loss before tax for 2016/17 was restated from £19.9m to £48.5m reflecting the non-cash E195 onerous lease provision and impairment of related assets.

 

The Group's adjusted loss before tax and USD aircraft loans revaluation was £20.5m. The 2016/17 measure has been restated from an adjusted loss before tax £6.7m to an adjusted loss before tax of £35.3m as a result of the non-cash E195 onerous lease provision and impairment of related assets entries.

 

The Group's adjusted loss before tax, USD aircraft loans revaluation and the non-cash aircraft onerous lease provision and impairment of related assets was £19.2m (2016/17: £6.7m).

 

The reported loss after tax was £9.4m (2016/17: restated from £26.7m to £55.3m as a result of the non-cash E195 onerous lease provision and impairment of related assets) with no tax impact to the consolidated income statement (2016/17: £6.8m deferred tax charge). There was a deferred tax credit of £4.4m within other comprehensive income reflecting the movement on financial instruments from an asset to a liability (2016/17: £5.1m credit).

 

 

EPS and dividends

 

The loss per share for the year was 4.5 pence. The loss per share for 2016/17 has been restated from 12.3 pence to 26.3 pence as it has been recalculated following the prior period adjustment for the non-cash E195 onerous lease provision and impairment of related assets.

 

No dividends were paid or proposed in either 2016/17 or 2017/18.

 

 

Cash flow

 

 

 

2017

 

 

2018

(restated)1,2

Change

 

£m

£m

£m

Net cash inflow from operating activities

13.8

18.3

(4.5)

 

 

 

 

Net capital expenditure after disposal proceeds

(15.9)

(123.7)

107.8

Interest received

0.4

0.7

(0.3)

Net cash outflows from investing activities

(15.5)

(123.0)

107.5

 

 

 

 

Net (repayments of)/proceeds from loans

(20.6)

64.5

(85.1)

Interest paid

(6.1)

(5.0)

(1.1)

Cash paid for purchase of shares for employee benefit trust

-

(3.3)

3.3

Net cash (outflows)/inflows from financing activities

(26.7)

56.2

(82.9)

 

 

 

 

Net decrease in cash and cash equivalents

(28.4)

(48.5)

20.1

Cash and cash equivalents at beginning of year

115.1

163.6

(48.5)

Cash and cash equivalents at end of year

86.7

115.1

(28.4)

Restricted cash

8.3

9.2

(0.9)

Total cash

95.0

124.3

(29.3)

Net borrowing

(154.1)

(188.3)

34.2

Net debt

(59.1)

(64.0)

4.9

 

1 The prior period has been restated to reclassify maintenance assets arising as a result of the non-cash accounting transactions. As a result, £16.6m outflow has been reclassified from acquisition of property, plant and equipment within investing activities as a movement in provisions within net cash inflow from operating activities. There was no impact to the consolidated income statement or consolidated balance sheet nor any change in net decrease in cash and cash equivalents.

2 The prior period has been restated following the recognition of the E195 onerous lease provision and impairment of related assets. This is not visible in the summarised cash flow above as the restatements occurred within the operating activities section and therefore had no impact.

 

The Group generated a net cash inflow from operating activities of £13.8m (2017: restated from £34.9m to £18.3m due to the non-cash maintenance reclassification) with the reduction reflecting a lower loss before tax than the previous year. Restricted cash decreased from £9.2m to £8.3m due to adverse foreign exchange rate impacts.

 

Net capital expenditure includes outflows of £11.8m on purchases of property, plant and equipment and £4.5m for intangible software additions offset by £0.3m proceeds received (2017: total capital expenditure of £118.0m plus £5.7m for intangible software additions with no proceeds).

 

Cash outflows on borrowings of £20.6m reflects the repayments of existing loans as there were no new loans during the year (2017: £84.3m of new borrowings was offset by £19.8m of repayments).

 

Total cash was £95.0m at the year-end (2017: £124.3m). 

 

 

Balance sheet

 

 

2018

2017

Change

 

 

(restated)1

 

 

£m

£m

£m

 

 

 

 

Aircraft

286.7

283.6

3.1

Other property, plant and equipment

21.5

21.8

(0.3)

Intangibles

11.8

11.9

(0.1)

Net debt

(59.1)

(64.0)

4.9

Net derivative financial instruments

(0.9)

24.5

(25.4)

Other working capital - net current liabilities

(148.3)

(129.7)

(18.6)

Deferred taxation

3.8

(0.6)

4.4

Defined benefit pension scheme deficit

(18.8)

(20.8)

2.0

Other non-current liabilities

(3.6)

(1.8)

(1.8)

Net assets

93.1

124.9

(31.8)

 

 

 

 

Net current liabilities

(79.0)

(10.6)

(68.4)

Net non-current assets

172.1

135.5

36.6

Net assets

93.1

124.9

(31.8)

1 A non-cash E195 onerous lease provision and impairment of related assets totalling £28.6m has been recognised as a prior period adjustment

 

The £286.7m of net book value of aircraft represents owned aircraft, engines, aircraft modifications and capitalised maintenance assets. The net book value of aircraft at 31st March 2017 has been restated by £3.7m following the impairment of E195 maintenance assets as a result of the prior period adjustment for onerous E195 leases. Otherwise, maintenance assets have increased during the year due to triggering obligations of the ATR fleet and the recognition of £5.2m of amended redelivery cost estimates on the Q400 fleet given the handback experience in 2017/18.

 

Net debt, representing total cash offset by borrowings, has reduced in the year to £59.1m (2017: £64.0m) due mainly to the positive revaluation impacts on USD loans. The net debt position at 31st March 2018 includes restricted cash of £8.3m (2017: £9.2m) which consists of cash deposits held as security in favour of aircraft lessors.

 

The mark-to-market valuation of derivative financial instruments reduced from a net asset of £24.5m at 31st March 2017 to a net liability of £0.9m at 31st March 2018, reflecting the unwinding of the favourable foreign exchange hedges which have matured during the year.

 

A non-cash onerous E195 lease provision of £24.9m has been recognised as a prior period adjustment with £13.3m within current and £11.6m within non-current provisions as at 31st March 2017. In 2017/18, £13.3m of the onerous E195 lease provision was utilised. The closing provision was reviewed at 31st March 2018 against the latest three-year plan which resulted in additional provision being charged of £9.3m. Other working capital (excluding the impact of financial instruments and net debt) has therefore been restated at 31st March 2017 from £116.4m to £129.7m and net other non-current assets and liabilities has been restated from £9.8m asset to a £1.8m liability.

 

Other working capital (excluding the impact of financial instruments and net debt) has seen net current liabilities increase by £18.6m from £129.7m (restated as explained above) to £148.3m mainly as a result of the movement in engine maintenance receivables and maintenance provisions due within one year given the timing of maintenance events.

 

Net other non-current liabilities increased from £1.8m (restated as explained above) to £3.6m as non-current maintenance provisions increased mainly due to the timing of maintenance programmes in 2017/18.

 

The IAS 19 defined benefit pension scheme deficit was £18.8m at 31st March 2018 (2017: £20.8m). The year-on-year reduction in the deficit is primarily due to reduced inflation expectations. In the coming financial year, the Group will pay annual deficit contributions of £0.83m (2017: £0.83m).

 

Net current liabilities at 31st March 2018 were £79.0m (2017: £10.6m) reflecting the fall in cash and cash equivalents and the timing of maintenance events.

 

Covenants

 

The Group has no financial covenants in place and has met all the terms tested at 31st March 2018. Flybe has credit support arrangements in place with most financial counterparties.

 

Country and currency risk

 

Flybe operates in a global marketplace. Most of Flybe's customers are based in the UK and Continental Europe, although the MRO business also has customers from Africa, the Middle East and the central Asian republics. Most of Flybe's revenues are derived from UK-based customers (83.5% of group revenue). Aircraft are bought and sold in US dollars as are other key costs such as fuel, lease costs, maintenance and aviation insurance. Airport and en route charges are payable in a mix of sterling and euros. This will be further outlined in the principal risks and uncertainties section in the 2017/18 Annual Report.

 

 

 

Consolidated income statement

Year ended 31st March 2018

 

 

 

Note

 

2018

Before E195 onerous lease and impairment impacts

£m

2018

E195 onerous lease and impairment impacts1

£m

2018

Total

£m

2017

Before E195 onerous lease and impairment impacts2 (restated)

£m

2017

E195 onerous lease and impairment impacts1

£m

2017

Total

(restated)

£m

Group revenue

5

752.6

-

752.6

707.4

-

707.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

675.8

-

675.8

619.3

-

619.3

 

36.6

-

36.6

33.0

-

33.0

Revenue from other activities

 

40.2

-

40.2

55.1

-

55.1

Group revenue

 

752.6

-

752.6

707.4

-

707.4

 

 

 

 

 

 

 

 

Staff costs

7

(126.6)

-

(126.6)

(120.2)

-

(120.2)

Fuel

 

(92.6)

-

(92.6)

(101.1)

-

(101.1)

Airport and en route charges

 

(157.6)

-

(157.6)

(148.2)

-

(148.2)

Ground operations

 

(105.6)

-

(105.6)

(94.3)

-

(94.3)

Maintenance

 

(64.6)

-

(64.6)

(61.3)

-

(61.3)

Depreciation, amortisation and impairment

 

(50.9)

(2.2)

(53.1)

(39.1)

(3.7)

(42.8)

Aircraft rental charges

 

(102.6)

0.9

(101.7)

(97.5)

(24.9)

(122.4)

Marketing and distribution costs

 

(28.3)

-

(28.3)

(27.1)

-

(27.1)

Other operating gains

 

7.5

-

7.5

18.8

-

18.8

Other operating expenses

 

(44.8)

-

(44.8)

(39.8)

-

(39.8)

Operating loss

6

(13.5)

(1.3)

(14.8)

(2.4)

(28.6)

(31.0)

Investment income

8

0.4

-

0.4

0.7

-

0.7

Finance costs

9

(6.1)

-

(6.1)

(5.0)

-

(5.0)

Gains/(losses) on USD loan revaluations

10

11.1

-

11.1

(13.2)

-

(13.2)

Loss before tax

 

(8.1)

(1.3)

(9.4)

(19.9)

(28.6)

(48.5)

 

 

 

 

 

 

 

 

Tax charge

 11

-

-

-

(6.8)

-

(6.8)

Loss after tax

 

(8.1)

(1.3)

(9.4)

(26.7)

(28.6)

(55.3)

 

 

 

 

 

 

 

 

Loss per share:

 

 

 

 

 

 

 

Basic

                              12 

(3.9)p

 

(4.5)p

(12.7)p

 

(26.3)p

Diluted

12

(3.8)p

 

(4.4)p

(12.4)p

 

(25.8)p

 

Prior year restatement:

1 A non-cash E195 onerous lease provision and impairment of related assets totalling £28.6m has been recognised as a prior period adjustment therefore the consolidated income statement for 2016/17 has been restated to be a loss after tax of £55.3m (2016/17: previously published loss after tax of £26.7m).

2 £21.9m of Flybe Aviation Services Limited's cost of sales have been reclassified from the other operating expenses line to maintenance in the prior period in order to be consistent with a change in internal reporting. There has been no impact to the operating loss for the period. 

 

 

 

Consolidated statement of comprehensive income

Year ended 31st March 2018

 

 

                         2018

                            £m

                          2017

(restated)

                            £m

Loss after tax

(9.4)

(55.3)

 

 

 

Items that will not be reclassified to profit or loss:

 

 

Remeasurement of net defined benefit obligation

2.0

(4.9)

Deferred tax arising on net defined benefit obligation

(0.4)

1.0

 

1.6

(3.9)

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

(Losses)/gains arising during the year on cash flow hedges

(18.7)

48.2

Reclassification of losses on cash flow hedges included in the income statement

(10.6)

(10.3)

Deferred tax arising on cash flow hedges

4.8

(6.1)

 

(24.5)

31.8

 

 

 

Other comprehensive (loss)/income

(22.9)

27.9

Total comprehensive loss

(32.3)

(27.4)

 

Prior year restatement:

A non-cash E195 onerous lease provision and impairment of related assets totalling £28.6m has been recognised as a prior period adjustment therefore the loss after tax for 2016/17 has been restated to be £55.3m (2016/17: previously published loss after tax of £26.7m).

Consolidated statement of changes in equity

Year ended 31st March 2018

 

 

               

 

Share

    capital

          £m

 

Share

premium account

          £m

 

 

Own shares

£m

               

 

Hedging

reserve

             £m

               

 

Merger

reserve

          £m

   Capital

redemp-

        tion

reserve

          £m

               

Retained (deficit)/earning

          £m

 

 

      Total

    equity

(restated)

          £m

Balance at 1st April 2016

2.2

209.3

-

(9.9)

6.7

22.5

(76.6)

154.2

Loss after tax (restated)

-

-

-

-

-

-

(55.3)

(55.3)

Other comprehensive income/(expense)

-

-

-

31.8

-

-

(3.9)

27.9

Equity‑settled share‑based payment transactions

-

-

-

-

-

-

1.4

1.4

Capital reduction

-

-

-

-

-

(22.5)

22.5

-

Purchase of shares for employee benefit trust

-

-

(3.3)

-

-

-

-

(3.3)

Balance at 31st March 2017

2.2

209.3

(3.3)

21.9

6.7

-

(111.9)

124.9

Loss after tax

-

-

-

-

-

-

(9.4)

(9.4)

Other comprehensive (expense)/income

-

-

-

(24.5)

-

-

1.6

(22.9)

Equity‑settled share‑based payment transactions

-

-

-

-

-

-

0.5

0.5

Balance at 31st March 2018

2.2

209.3

(3.3)

(2.6)

6.7

-

(119.2)

93.1

 

Prior year restatement:

A non-cash E195 onerous lease provision and impairment of related assets totalling £28.6m has been recognised as a prior period adjustment therefore the loss after tax for 2016/17 has been restated to be £55.3m (2016/17: previously published loss after tax of £26.7m).

Consolidated balance sheet

As at 31st March 2018

 

 

                         Note

                2018

                £m

                2017

(restated)

                £m

Non-current assets

 

 

 

Intangible assets

13

11.8

11.9

Property, plant and equipment

14

308.2

305.4

Other non-current assets

15

84.0

69.6

Restricted cash

18

8.3

9.2

Deferred tax asset

23

3.8

4.0

Derivative financial instruments

22

0.1

0.4

 

 

416.2

400.5

 

 

 

 

Current assets

 

 

 

Inventories

16

7.6

6.3

Trade and other receivables

17

90.7

108.0

Cash and cash equivalents

18

86.7

115.1

Derivative financial instruments

22

10.5

26.0

 

 

195.5

255.4

Total assets

 

611.7

655.9

 

 

 

 

Current liabilities

 

 

 

Trade and other payables

20

(110.0)

(116.9)

Deferred income

19

(83.8)

(83.5)

Borrowings

21

(17.7)

(20.6)

Provisions

24

(52.8)

(43.7)

Derivative financial instruments

22

(10.2)

(1.3)

 

 

(274.5)

(266.0)

 

 

 

 

Non-current liabilities                                     

 

 

 

Borrowings

21

(136.4)

(167.7)

Deferred tax liabilities

23

-

(4.6)

Provisions

24

(80.1)

(64.5)

Other payables

20

(1.3)

-

Deferred income

19

(6.2)

(6.8)

Retirement benefits

34

(18.8)

(20.8)

Derivative financial instruments

22

(1.3)

(0.6)

 

 

(244.1)

(265.0)

Total liabilities

 

(518.6)

(531.0)

 

 

 

 

Net assets

 

93.1

124.9

 

 

 

 

Equity attributable to owners of the Company

 

 

 

Share capital

25

2.2

2.2

Share premium account

26

209.3

209.3

Own shares

27

(3.3)

(3.3)

Hedging reserve

 

(2.6)

21.9

Merger reserve

28

6.7

6.7

Retained deficit

28

(119.2)

(111.9)

Total equity

 

93.1

124.9

 

Prior year restatement:

A non-cash E195 onerous lease provision and impairment of related assets totalling £28.6m has been recognised as a prior period adjustment (see note 24).
 

Consolidated cash flow statement

Year ended 31st March 2018

 

 

                                 

2018

                            £m

                          2017

(restated)

                            £m

Cash flows from operating activities

 

 

Loss for the year

(9.4)

(55.3)

Adjustments for:

 

 

Depreciation, amortisation and impairment

53.1

42.8

Investment income

(0.4)

(0.7)

Interest expense

6.1

5.0

(Gains)/losses on USD loan revaluations

(11.1)

13.2

Loss on disposal of property, plant and equipment

4.9

2.9

Loss on write-offs of intangible fixed assets

0.2

4.3

Share-based payment expenses

0.5

1.4

Deferred taxation

-

6.8

 

53.3

75.7

 

 

 

Cash paid for defined benefit pension funding

(0.8)

(0.5)

Cash settled on derivatives

(6.3)

4.9

Decrease/(increase) in restricted cash

1.0

(1.4)

Decrease/(increase) in trade and other receivables

2.8

(35.5)

(Increase)/decrease in inventories

(1.3)

0.1

(Decrease)/increase in trade and other payables

(5.8)

10.8

(Decrease)/increase in provisions and retirement benefits

(19.7)

19.5

 

(30.1)

(2.1)

Tax paid

-

-

Net cash flows from operating activities

13.8

18.3

 

 

 

Cash flows from investing activities

 

 

Proceeds of property, plant and equipment             

0.3

-

Interest received

0.4

0.7

Purchases of property, plant and equipment           

(11.7)

(118.0)

Capitalised computer software expenditure

(4.5)

(5.7)

Net cash flows from investing activities

(15.5)

(123.0)

 

 

 

Cash flows from financing activities

 

 

Proceeds from new loans

-

84.3

Cash paid for purchase of shares for Employee Benefit Trust

-

(3.3)

Interest paid

(6.1)

(5.0)

Repayment of borrowings

(20.6)

(19.8)

Net cash flows from financing activities

(26.7)

56.2

 

 

 

Net decrease in cash and cash equivalents

(28.4)

(48.5)

 

 

 

Cash and cash equivalents at beginning of year

115.1

163.6

 

 

 

Cash and cash equivalents at end of year

86.7

115.1

 

Prior year restatement:

 

The prior period has been restated to reclassify maintenance assets arising as a result of non-cash accounting transactions. As a result, £16.6m outflow has been reclassified from acquisition of property, plant and equipment within investing activities as a movement in provisions within net cash outflow from operating activities. There was no impact to the consolidated income statement or consolidated balance sheet nor any change in net decrease in cash and cash equivalents.

 

Items within operating activities have been restated to reflect the prior period non-cash E195 onerous lease and impairment of related assets adjustment. It had no impact to net cash flows from operating activities.

 

General information

The financial information set out above does not constitute the company's statutory accounts for the years ended 31st March 2018 or 2017, but is derived from those accounts.  Statutory accounts for 2017 have been delivered to the Registrar of Companies and those for 2018 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under S498(2) or (3) Companies Act 2006.

 


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