TIDMEZJ
RNS Number : 9823Q
easyJet PLC
24 June 2020
24 June 2020
easyJet plc
Results for the six months ending 31 March 2020
easyJet delivers strong first half results in light of
Covid-19
Equity placing further supplements strong liquidity position and
investment grade balance sheet
Decisive action taken to cut costs and capex
Summary
-- easyJet has been decisive in meeting the challenges of Covid-19:
o Driving down costs
o Delivering vastly reduced capex whilst retaining excellent
fleet flexibility
o Secured cGBP1.7bn of funding already with a further
GBP200-350m anticipated from final sale and leaseback
transactions
-- easyJet announces today that its strong liquidity position
and investment grade balance sheet are being further boosted by an
equity placing. As at 22 June our current cash position is
c.GBP2.4bn, before proceeds from the equity placing or the
remaining sale and leaseback transactions
-- easyJet's business model means that we are well positioned for the recovery from Covid-19:
o Delivered strong first half results, with underlying trading
ahead of expectations
o easyJet's brand drives confidence in European travellers, who
are focused on trust, sustainability and value for money
o easyJet's industry-leading network, serving primary airports,
provides a customer offering that cannot be matched by any other
airline
o Cost-out programme to deliver sustainable savings in all areas
of the cost base
-- Passenger numbers for the six months to 31 March 2020
decreased by 3.0 million (7.4%) to 38.6 million due to the impact
of Covid-19
-- Capacity(1) decreased by 7.6% due to the very significant
number of flight cancellations in March related to Covid-19. Load
factor increased by 0.2 percentage points to 90.3%
-- Total Group revenue increased by 1.6% to GBP2,382 million (H1
2019: GBP2,343 million) due to self-help measures such as our late
yields initiative, network optimisation in Germany, the bankruptcy
of Thomas Cook and strong ancillary revenue growth, offset by
national strikes in France, storms Ciara and Dennis and the impact
of Covid-19. Airline revenue per seat(2) increased by 9.6% to
GBP55.60 (H1 2019: GBP50.71), with an increase of 10.2% at constant
currency(3)
-- Airline headline cost per seat excluding fuel increased by
8.2% to GBP47.24 (H1 2019: GBP43.64). Airline headline cost per
seat excluding fuel at constant currency increased by 9.5%
-- Group headline loss before tax was GBP193 million (H1 2019:
loss of GBP275 million) reflecting the above revenue and cost
drivers as well as easyJet's normal seasonality
-- Total Group loss before tax of GBP353 million for the six
months ended 31 March 2020 (H1 2019 loss of GBP272 million)
reflecting a net charge of GBP160 million from non-headline items,
relating principally to the discontinuation and ineffectiveness of
fuel hedges resulting from Covid-19 related flying restrictions
-- Net debt position at 31 March 2020 of GBP467 million (H1 2019: GBP201 million)
Outlook
-- Capacity is expected to build through the summer season, with
Q4 at 30% of planned, pre-Covid-19 capacity
-- Booking numbers for easyJet Holidays are encouraging.
-- easyJet expects to deliver circa flat CPS ex fuel at constant
currency in full year 2021 vs full year 2019
-- At this stage, given the continued level of uncertainty, it
is not possible to provide financial guidance for the remainder of
the FY20 financial year.
H1 2020 H1 2019 Change
Favourable/(adverse)
---------------------------------------------- -------- -------- ----------------------------
Capacity (millions of seats) 42.7 46.2 (7.6) %
Load factor (%) 90.3 90.1 +0.2 ppts
Passengers (millions) 38.6 41.6 (7.4) %
Total Group revenue (GBP million) 2,382 2,343 1.6 %
Headline Group loss before tax (GBP million) (193) (275) +GBP82 m
Total Group loss before tax (GBP million) (353) (272) (GBP81) m
Headline basic loss per share (pence) (49.4) (56.1) 6.7 pence
Airline revenue per seat (GBP) 55.60 50.71 9.6 %
Airline constant currency revenue per
seat (GBP) 55.87 50.71 10.2 %
Total Airline headline cost per seat (GBP) 59.75 56.66 (5.5) %
Headline Airline constant currency cost
per seat excluding fuel (GBP) 47.80 43.64 (9.5) %
---------------------------------------------- -------- -------- --------------- -----------
Commenting on the results, CEO of easyJet Johan Lundgren
said:
"easyJet delivered a strong performance in the first half prior
to the onset of the Covid-19 pandemic, resulting in a 30%
improvement in headline loss before tax versus the same period last
year.
"We have been decisive in meeting the challenges of the pandemic
by cutting costs, vastly reducing our capex while retaining our
industry leading fleet flexibility and having already secured
GBP1.7bn of an expected GBP2.0bn in additional funding.
"After grounding our fleet in March, we successfully resumed
operations on 15 June, incorporating new enhanced bio security
measures to ensure our staff and customers can fly safely. We will
gradually ramp up our flying to around 75% of our routes in August,
albeit with lower frequencies, so our customers can go on summer
holidays.
"We are also continuing to work to strengthen our balance sheet.
Today we have announced plans for an equity placing which will
further enhance easyJet's liquidity position, credit metrics and
already strong balance sheet through the Covid-19 recovery.
"I am extremely proud of all the easyJet team has done to bring
us through this exceptionally challenging period. As Europe emerges
from the Covid-19 crisis, easyJet is well placed to strengthen its
leading position as a trusted brand offering value for money with
an industry-leading network of primary airports."
For further details please contact easyJet plc:
Institutional investors and analysts:
Michael Barker Investor Relations +44 (0)7985 890 939
Holly Grainger Investor Relations +44 (0)7583 101 913
Media:
Anna Knowles Corporate Communications +44 (0)7985 873 313
Edward Simpkins Finsbury +44 (0)7947 740 551 / (0)207 251
3801
Dorothy Burwell Finsbury +44 (0)7733 294 930 / (0)207 251
3801
Conference call
There will be a conference call at 17:30 BST on 24 June
2020.
Telephone dial-in: Replay available for 7 days afterwards:
+44 (0) 20 3003 +44 (0) 203 451
UK & International: 2666 UK & International: 9993
+44 (0) 808 109 +44 (0) 800 633
UK Toll Free: 0700 UK Toll Free: 8453
Password: easyJet PIN: 8027563#
Overview
During the first half of financial year 2020 easyJet was
materially impacted by the Covid-19 pandemic. Government
restrictions on flying during the pandemic caused 18,000 flight
cancellations in March. Passenger numbers during March were halved
compared to the year earlier. Across the first half passenger
numbers decreased by 7.4% to 38.6 million, capacity decreased by
7.6% and total revenue grew by 1.6% to GBP2,382 million.
Revenue
Total revenue increased by 1.6% to GBP2,382 million (H1 2019:
GBP2,343 million). Airline revenue per seat increased by 9.6% to
GBP55.60, and by 10.2% at constant currency to GBP55.87. This was
driven by:
-- Strong underlying trading, driven by self-help measures such
as our late yield initiative, network optimisation, notably in
Germany, market consolidation and route maturity
-- The bankruptcy of Thomas Cook on 23rd September 2019 meant
that through our late yield initiatives we were able to capitalise
on increased demand, particularly during October
-- Continued strength in ancillary revenue, predominantly driven
through first bag, where we annualised the improved bag yield
algorithm, which was launched in April 2019, as well as strong
performance of allocated seating initiatives such as the fourth
seating band and seasonal pricing
Offset by:
-- National strikes in France, which had a significant impact in the first quarter
-- Storms Ciara and Dennis in second quarter
-- The impact of Covid-19, which began with severe disruption
and cancellations in our Italian flying programme, later spreading
to Spain. The fleet was fully grounded on 30 March. Approximately
18,000 flights were cancelled in the period due to Covid-19,
resulting in lost revenue of circa GBP0.2 billion
Cost
easyJet's underlying cost performance has been solid despite
external inflationary pressures. Airline headline cost per seat
including fuel increased by 5.5% to GBP59.75 (H1 2019: GBP56.66).
Airline headline cost per seat at constant currency increased by
7.2% to GBP60.75.
Airline headline cost per seat excluding fuel increased by 9.5%
at constant currency to GBP47.80 (H1 2019: GBP43.64). This cost
increase was driven by:
-- Overheads and other costs comprised mainly Covid-19-related disruption costs
-- Maintenance costs and an expected one-off maintenance charge
-- Ownership costs, reflecting new aircraft year on year
-- Crew costs, namely annualisation of previous pay increases,
higher than expected crew retention and low productivity during
March 2020
-- Inflationary pressure from regulated airports and lower
incentives due to reduced passenger numbers, partially offset by a
continued focus on airport procurement activity
Offset by:
-- Lower navigation charges, due to a reduction in rates from Eurocontrol
Of the 9.5% increase in Airline headline cost per seat excluding
fuel at constant currency, c4.5% was driven by the impact of
Covid-19. This led to:
-- Significant increase in disruption costs
-- Full pilot and crew rosters through to March when many
flights were being cancelled (furlough arrangements only started
after the end of the first half)
-- Lower seat capacity driven by cancellations
Fuel cost per seat decreased by 3.9% to GBP12.51 (H1 2019:
GBP13.02) and by 0.5% at constant currency, driven by favourable
price movements, lower volume requirements due to Covid-19 related
cancellations and continued investment into more fuel efficient
aircraft. The sale of certain carbon assets resulted in a
remeasurement of our EU ETS liability which has reduced H1 2020
fuel costs in the income statement by GBP55 million.
Non-headline items
easyJet had a net GBP160 million non-headline charge during the
first half of financial year 2020 (H1 2019: GBP3 million gain).
These items are separately disclosed as non-headline loss before
tax items. The most significant items were as follows:
-- GBP164 million fair value net charge due to easyJet's
significantly over-hedged position from both a jet fuel and FX
perspective, following the full grounding of the fleet and the
lower capacity expected for several months thereafter (H1 2019:
nil)
-- GBP3 million foreign exchange gain arising from the
retranslation of foreign currency monetary assets and liabilities
held in the statement of financial position (H1 2019: GBP3 million
gain)
-- GBP1 million gain from the sale and leaseback of 10 A319
aircraft resulting in a profit on disposal of the assets (H1 2019:
GBP2 million gain)
There were minimal non-headline charges relating to Brexit (H1
2019: charge of GBP4 million) and no further commercial IT platform
items (H1 2019: GBP2 million release of provision).
Non-headline items are material non-recurring items or are items
which do not reflect the trading performance of the business.
Further detail can be found in the notes to the interim financial
statements.
Strategic progress
Delivering Our Plan
easyJet has a well-established business model that provides a
strong foundation to drive profitable growth and long term
shareholder value. easyJet is delivering its strategy through its
new strategic framework which is called 'Our Plan'. The five
priorities are:
-- Network - number one or number two in primary airports
-- Winning our customers' loyalty
-- Value by efficiency
-- The right people
-- Innovating with data
Progress on a number of our key strategic initiatives has been
unavoidably delayed by the shift of resources to managing the
impact of the Covid-19 pandemic and by the furloughing of a large
proportion of our people. We will return to these initiatives in
due course.
Network - number one or number two in primary airports
Grounding and restart
The easyJet fleet was fully grounded on 30 March 2020 as a
result of the unprecedented travel restrictions imposed by
governments in response to the Covid-19 pandemic and the
implementation of national lockdowns across many European
countries.
easyJet resumed flying on 15 June 2020, servicing a small number
of routes where we predicted sufficient customer demand to support
profitable flying. The initial schedule comprised mainly domestic
flying in the UK, France and Italy with just 10 lines of
flying.
This is expected to ramp up through July, starting with 85
aircraft, building to 100 by mid-month and around 150 during
August. This will include international flying. This reduced
network has been carefully selected following analysis of customer
demand and government restrictions across Europe, in order to
prioritise cash generative flying.
Further routes will be announced as customer demand increases
and government restrictions across Europe are relaxed. We hope to
be able to serve around 75% of our previous route network by the
end of August, albeit on reduced frequencies.
Booking trends on resumed flights have been encouraging, and the
demand indications for summer 2020 are improving, albeit from a low
base. Bookings for winter are well ahead of the equivalent point
last year, which includes customers who are rebooking
Covid-19-disrupted flights for later dates.
easyJet currently expects to fly around 30% of the planned
capacity, on average, for Q4 2020. This will continue to be
evaluated to reflect changing regulations and customer demand. Our
commercial planning and data science teams have built demand
forecasts around various route clusters, as we move through summer
and into winter 2020/21.
In line with IATA projections, easyJet believes that the levels
of market demand seen in 2019 are not likely to be reached again
until 2023. As a low cost airline with a strong network, we believe
we are well placed to benefit from customers seeking great value
during that recovery period.
Network strength
easyJet aims to provide customers with the leading, best value
offer for the destinations they want to fly to. easyJet's strategy
is driving both leisure and business travel by focusing on the key
airports which serve valuable catchment areas and represent
Europe's largest markets by GDP. easyJet has a portfolio of slots
at customer-friendly times in capacity-constrained airports, which
reinforces its competitive advantage against airlines which cannot
match its breadth of destinations and frequencies.
99% of easyJet's seat capacity touches these key, primary
airports, positioning the airline strongly against its competitors.
These are airports where GDP and passenger volumes are high, and
where there is a weak incumbent or fragmented competition, such as
London, Berlin, Milan or Basel. By being number one in key
airports, with the strongest brand and delivering the best value,
we can become the first choice airline for our customers. Legacy
carriers are expected to de-emphasise short-haul flying in the
coming recovery phase and easyJet is well placed to take further
market share.
easyJet regularly reviews its route network in order to maximise
returns and exploit demand opportunities in the market. During this
time of unprecedented change in the aviation market, we are more
focused than ever on profitable flying. Each line of flying
proposed for the restart has been scrutinised by our commercial and
financial teams in order to ensure that we maximise the available
cash returns whilst balancing expected demand and loosening of
government restrictions.
easyJet's network decisions are not driven solely by cost but by
the desire to secure long-term, sustainable and profitable
positions in our customers' favourite airports, which in turn will
drive long-term, sustainable competitive advantage and returns for
shareholders, throughout the cycle.
easyJet's strategy ensures customers continue to choose to fly
with us. This is due to our fantastic staff, our efficiency and our
all-round value proposition in short haul European flights.
As part of the response to Covid-19 we will look at potential
changes to our network, including how we optimise our base
structures. To this effect, in June 2020, easyJet will launch a
progressive employee consultation process and will spend time with
employee representatives over the coming weeks and months to
discuss the appropriate and necessary approach to make this
happen.
In November 2019 easyJet acquired Thomas Cook's slots at Gatwick
Airport (12 summer slot pairs and 8 winter slot pairs) and Bristol
Airport (6 summer slot pairs and one winter slot pair) for GBP36
million. easyJet will consider acting quickly to selectively
acquire attractive slots made available by competitors in locations
where we see opportunities.
Winning our customers' loyalty
Europe with Confidence Pledge
In June 2020 easyJet launched its 'Europe with Confidence
Pledge' in order to reinforce some of our core brand values:
1. Wellbeing
As always, the safety and wellbeing of our customers is our
utmost priority, so we have introduced new measures to help keep
them safe. Our teams are conducting additional deep cleaning and
disinfection of our aircraft every day. All of our customers, crew
and ground staff will be required to wear masks. We'll also have
spare hygiene supplies available on board.
In the initial start-up phase we will be spacing passengers
across the aircraft where possible, and we will temporarily suspend
our on-board Bistro service.
These measures to help keep our customers safe are based on the
latest government, EASA and ICAO Public Health guidance. All our
aircraft are equipped with industry-leading filtration systems to
keep the air in the cabin as clean as possible. These filters are
the same as those used in hospitals and through them the cabin air
gets replaced every 3-4 minutes.
easyJet has been one of the first airlines to commit to EASA's
'Aviation Industry Charter for COVID-19' which includes commitments
to ensuring passengers are aware of measures required for a safe
and healthy environment before they travel; reducing the chance of
people with symptoms arriving at the airport; reducing the risk of
transmission from within the airport and reducing the risk of an
infected passenger boarding the aircraft; and reducing the risk of
transmission on board the aircraft.
2. Sustainability
Even though the way we operate will look different for a while,
we will not be compromising on the promises we have made around the
environment. We recognise that we have a responsibility to minimise
the impact of our flights and are focused on operating efficiently
now, and on the development of electric aircraft in the future. In
the interim, we continue to offset the carbon emissions from the
fuel used for all of our flights on behalf of our customers and
we're proud to be the first major airline in the world to do so.
easyJet is also looking for more ways to take action beyond carbon,
including rapidly reducing our waste and single-use plastic
usage.
3. Value
We believe everyone should have the opportunity to travel, so
for years we've been proud to offer our customers great value
fares. As people begin to reconnect with destinations they've
missed, we promise to continue that commitment.
As ever, booking early tends to give you better prices. In order
to give our customers peace of mind when booking they will be able
to switch their flights up to 14 days before departure without a
change fee, as long as travel restrictions remain.
As the most trusted low cost airline across Europe easyJet is
particularly well-placed for this environment.
Holidays
easyJet Holidays will benefit from the renewed cost focus at
easyJet, since it will lead to lower costs for the 'airlift'
portion of the package. The brand-building work being undertaken,
including the 'Europe with confidence pledge' provides easyJet
Holidays customers with the confidence to travel.
easyJet Holidays enjoys a mostly variable cost base with only
very low fixed costs. There are no financial commitments to hotel
stock which means that risk is low and also means that any hotelier
incentives on rates as part of their restart can be passed directly
into pricing, as we do not have the requirement to recover
financial commitments or prepayments. Relationships with hoteliers
have strengthened through the Covid-19 pandemic, as hotels have
recognised the strength and integrity of the easyJet brand and
balance sheet, as well the increasing weakness of the traditional
exclusive model of distribution through only one tour operator
partner, which has left their businesses exposed - we are working
collaboratively to look for ways in which we can support them in
their restart.
In March 2020 we launched both our Winter '20 and Summer '21
seasons, in order to give disrupted customers more choice when
amending their holidays to future seasons. We recently added
holidays to Egypt, particularly for winter sun. Initial indications
for Summer '21 bookings are positive. By offering a range of
flexible options for customers with disrupted bookings, we expect
to have retained around 65% of these bookings for future
travel.
Value by efficiency
easyJet is committed to maintaining its structural cost
advantage in the markets in which it operates, particularly
compared to the legacy airlines. easyJet is low cost, driving
efficiency and investing only where it matters most to our
customers and our people.
In response to Covid-19 easyJet has launched a major cost out
programme, which aims to drive cash generation in order to pay down
debt and to ensure that easyJet emerges from the pandemic in a more
competitive position.
The programme is targeting to deliver around flat cost per seat
excluding fuel at constant currency in FY21 versus FY19. This is a
stretch target given the likely significant decrease in the number
of seats to be flown. The programme includes rightsizing the
organisation and reducing staff numbers by up to 30%. easyJet
launched an employee consultation process on these proposals to
reduce staff numbers, as well as optimising our network and bases,
improving productivity and promoting more efficient ways of
working.
Other cost restructuring activities include:
-- Seeking lower cost airport deals through simpler handling
-- Bringing some maintenance in-house at lower cost
-- Accelerating lease returns
-- Fuel efficiency programme
Whilst we have also undertaken cost cutting measures within
easyJet Holidays, it maintains a high proportion of variable costs,
which will flex with revenue, and has no inventory risk.
On-Time Performance
In the six months to 31 March 2020, On-Time Performance (OTP)
was up one percentage point year on year to 81%. This reflects
improvements in the UK, Netherlands and Germany, offset by
challenges in France, Spain and Portugal.
OTP % arrivals within Q1 Q2 H1
15 minutes(4)
----------------------- ---- ---- ----
2020 Network 80% 82% 81%
2019 Network 79% 82% 80%
----------------------- ---- ---- ----
The right people
People are at the heart of everything easyJet does. Our
customer-facing employees are the very best in the industry and
provide the warmest welcome in the sky. The positive experience
which they provide for customers leads to increased loyalty and
repeat business.
easyJet remains committed to fostering an inclusive and
energising environment which attracts the right people and inspires
everyone to learn and grow.
Gender diversity
Improving the gender balance in the pilot community has been a
real focus for easyJet and we believe that no other airline has
been doing more on this issue. We are delighted that we achieved
our 2020 ambition to increase the number of female applicants
applying to fly for easyJet, and we have doubled the number of
female pilots flying for us since 2015. Our aim is to continue to
lead the way in helping to break down barriers for women who are
interested in a career in aviation through providing support,
information and role models.
Reshaping the business
Due to the expected reduction in demand and capacity in the
coming years, easyJet anticipates a need to reduce the number of
employees by up to 30% across the business. We will look at
potential changes to our network, including how we optimise our
base structures and will focus on new efficient ways of working, to
ensure the long-term competitive position of our business. To this
effect, in June 2020, easyJet will commence a progressive employee
consultation process and will spend time with employee
representatives over the coming weeks and months to discuss the
appropriate and necessary approach to make this happen.
Management changes
After the end of the period there were a number of changes to
the Airline Management Board. Lis Blair, Chief Marketing Officer,
has left after eight years with the airline. This role has been
removed and Marketing, Customer, Digital and Insight now reports
directly into Chief Commercial Officer, Robert Carey. Flic
Howard-Allen, Chief Communications Officer has decided to take
voluntary redundancy and will be leaving easyJet at the end of
June. The role of Chief Communications Officer will not be replaced
at this time, with internal communications now reporting to Group
People Director, Ella Bennett and external communications and
sustainability functions reporting into Group Markets Director,
Thomas Haagensen.
In May 2020 Chief Financial Officer Andrew Findlay gave notice
that he intends to leave the business. Andrew will continue in his
role whilst the Board searches for his successor, and he is
expected to leave easyJet in May 2021.
Innovating with data
easyJet is aiming to become the world's most data-driven airline
and has built a team of data scientists and data analysts to help
us achieve this goal. We have identified a rich pipeline of
projects to optimise revenues and costs throughout easyJet.
We have been working in a co-ordinated, airline-wide way to
identify improvements across the end-to-end process, from designing
our flying schedules and rosters, managing our fleet, communicating
with and supporting our customers, and using data to make the best
network-wide decisions.
Our data team has been instrumental in planning and managing the
restart of flying. easyJet has a sophisticated revenue management
system which uses historic volumes to forecast performance. However
after three months of full grounding with no fresh sales data, the
historical data driving the model is no longer valid. Instead we
have built a new model to forecast how each route is going to
perform in the current circumstances. The model estimates potential
passengers and revenue based on both our internal data around
search volumes and web traffic, but also booking volumes. We use
external data sources around mobility and web traffic, combined
with existing bookings, to get total revenue forecasts which are
relevant to the new market circumstances as lockdowns ease. Our
teams analyse these forecasts alongside our costs of operation so
that each line of flying can be authorised when it is expected to
be profitable.
Data breach
Following the end of the Half Year, easyJet announced that it
had been the target of a cyber attack from a highly sophisticated
source. As soon as the company became aware of the attack,
immediate steps were taken to respond to and manage the incident
and easyJet engaged leading forensic experts to investigate the
issue. We notified the National Cyber Security Centre and the
Information Commissioner's Office and closed off the unauthorised
access. Our investigation found that the email address and travel
details of approximately 9 million customers were accessed. Other
than as referenced in the following paragraph, passport details and
credit card details of these customers were not accessed.
Our forensic investigation found that, for a very small subset
of customers (2,208), credit card details were accessed. Action was
taken to contact all of these customers and they were offered
support. We take issues of security extremely seriously and
continue to invest to further enhance our security environment.
There is no evidence that any personal information of any nature
has been misused, however, on the recommendation of the ICO, we
communicated with the approximately 9 million customers whose
travel details were accessed to advise them of protective steps to
minimise any risk of potential phishing. We advised customers to
continue to be alert, especially should they receive any
unsolicited communications. We would like to reassure customers
that we take the safety and security of their information very
seriously.
General Meeting
On 22 May 2020 a General Meeting was convened to consider the
resolutions proposed at the direction of Sir Stelios Haji-Ioannou
to remove as directors of the Company: the Chairman John Barton;
the CEO Johan Lundgren; the CFO Andrew Findlay; and Independent
Non-Executive Director Andreas Bierwirth. The Board had unanimously
recommended that shareholders vote against these resolutions. All
four resolutions were defeated, with over 99% of votes cast by
independent shareholders(5) being in support of the Board.
The Board would like to thank shareholders for their support.
The Board seeks a good relationship with all of easyJet's
shareholders and is actively seeking to be able to re-engage
constructively with Sir Stelios.
Brexit
easyJet is well prepared for the UK's departure from the
European Union.
Since March 2019 easyJet has been structured as a pan-European
airline group of three airlines each based in Austria, Switzerland
and the UK. This ensures that easyJet will continue to be able to
operate flights both across the EU and domestically within EU
countries after the UK has left the EU, regardless of the Brexit
outcome.
easyJet has made good progress in meeting the European ownership
requirements and approximately 47% of its equity capital is
currently owned by qualifying nationals (EU member states plus
Switzerland, Norway, Iceland, Liechtenstein, but excluding the UK).
In the event that the UK were to leave the EU without a deal and if
the European ownership of easyJet is below 50% then easyJet could
invoke the provisions within its articles of association which
allow for suspension of rights to attend and vote at shareholder
meetings and/or sale of shares by non-qualifying nationals to
qualifying nationals. Similar powers exist in the articles of
association of other airlines, as well as in the articles of
companies in other sectors which are subject to national share
ownership requirements. Whilst easyJet has no current intention of
exercising these powers, the position will be kept under review
pending the outcome of negotiations between the UK and the EU
during the transition period, along with other options.
Having started our Brexit preparations early and with
contingency plans in place, we are confident that easyJet will keep
flying and that our operations will not be materially affected,
whatever the outcome of the current political situation.
Fleet
easyJet's fleet is a major component of its business model and a
competitive advantage. easyJet's total fleet as at 31 March 2020
comprised 337 aircraft (30 September 2019: 331 aircraft) with the
increase driven by the addition of new A320NEO family deliveries.
The average gauge of the fleet is now 176.4 seats per aircraft, a
slight increase from 174 at 31 March 2019. The average age of the
fleet increased to 7.7 years (30 September 2019: 7.4 years). In the
first half easyJet's asset utilisation across the network decreased
to an average 8.8 block hours per day (H1 2019: 10.0 hours) due to
the Covid-19-related cancellations towards the end of the
period.
Fleet as at 31 March 2020:
Changes Unexercised
% of since Future Purchase purchase
Owned Leased Total fleet Sep-19 deliveries options rights
A319 59 64 123 36% (2) - - -
A320 180 seat 1 13 14 4% (26) - - -
A320 186 seat 125 30 155 46% 26 - - -
A320 neo 34 - 34 10% 3 95 13 58
A321 neo 11 - 11 3% 5 19 - -
----------------- ------ ------- ------ ------- -------- ------------ --------- ------------
230 107 337 6 114 13 58
Percentage
of total fleet 68% 32%
The Airbus single supplier relationship remains a critical
component of easyJet's successful strategy. It has underpinned a
modernised, cost-effective and flexible fleet, ensuring that
easyJet is able to maintain its low operating costs and maintain a
competitive advantage in fleet costs.
Operating a single aircraft type increases efficiency and is
common across low cost airlines. It lowers both operating costs and
supports scale efficiencies in procurement. The scale of the
easyJet fleet also ensures that an in-depth partnership is
maintained with Airbus, supporting order book flexibility,
analytical support capability and access to technical
knowledge.
The Airbus contract does not contain a clause allowing easyJet
to walk away from its obligations or substantially amend its terms
in light of the Covid-19 pandemic, which is standard for long-term
aircraft purchase agreements of this type. Accordingly, easyJet has
no right to unilaterally terminate the Airbus contract because of
the Covid-19 pandemic.
The one-off costs associated with termination would be very
material and taken together with the future value anticipated to be
generated from this very competitive contract, the Board believes
that termination would be hugely detrimental and seriously impact
the Company's ability to operate as a low cost airline.
The Airbus contract entitles easyJet to warranties, required
maintenance, avionics and other technical support which are
critical to the operation of the easyJet fleet. It would be very
difficult (and may well be impossible) to replicate that support on
the open market. Even if that support could be replicated on the
open market it would be at much less competitive rates. Termination
would thus lead to a material increase in the operating cost of the
fleet.
On 9 April easyJet announced that it had reached agreement with
Airbus for the net deferral of 24 aircraft deliveries from
financial years 2020, 2021 and 2022. This will mean that as
compared to our previously disclosed fleet plan the following
aircraft deliveries will be deferred:
o 10 aircraft deliveries in FY20
o 12 aircraft deliveries in FY21
o 2 aircraft deliveries in FY22
As a result easyJet will take no aircraft deliveries in FY21 and
retained the option to defer a further 5 deliveries in FY22.
On 16 June 2020 easyJet and Airbus finalised the exact delivery
dates for the deferred aircraft deferred. In total, 32 aircraft
with original delivery dates between June 2020 and December 2021
were deferred. As 8 aircraft were deferred from FY20 to FY22, the
net number of deferrals from the financial years 2020, 2021 and
2022 was 24 aircraft (being 32 less 8), as announced on 9 April
2020. These 24 aircraft were originally deferred beyond December
2022 and it has now been agreed that these aircraft will be
delivered from FY2025 to FY2027.
All aircraft purchased by easyJet under the terms of the
original 2013 Airbus agreement are subject to a very substantial
discount from the list price which remains unchanged. Within the
2013 agreement a price escalation mechanism is used to reflect
market inflation in labour and material costs(6) . By applying this
inflationary mechanism, the future aggregate cash price of the 32
deferred aircraft, at their future delivery dates, could increase
by up to c.GBP95 million(7) the large majority payable between FY25
and FY27. Any increase would be materially offset by the reduced
cost of borrowing associated with the significant cashflow benefits
in the next 16 months arising from these deferrals (including
consequential changes to the schedule of pre-delivery
payments).
As part of these agreements, easyJet has also secured for nil
consideration an extension to the deadlines for the exercise of
existing deferral and purchase rights.
easyJet now has the flexibility until December 2020 to defer two
aircraft and the option to not take up to seven aircraft currently
scheduled for delivery between FY22 and FY26. easyJet has also
secured additional flexibility with respect to its existing
purchase options of 13 aircraft, by agreeing an extension to the
deadline for the exercise of such options from November 2020 to
November 2021 (in respect of seven aircraft) and to November 2022
(in respect of six aircraft). These changes complement our
pre-existing deferral rights.
These changes maintain our significant discount from list price
whilst enabling further flexibility in relation to deferral rights
and future purchase options. The changes defer capacity in the
medium term while continuing our long-term strategy of replacing
our older fleet with the advanced and lower fuel burning A320neo
family.
Number of aircraft Mar-20 Sep-20 Sep-21 Sep-22 Sep-23
HY FY FY FY FY
--------------------- ------- ------- ------- ------- -------
New plan minimum 337 335* 302 281 272
New plan maximum 337 335* 302 305 327
Current contractual
maximum 337 335* 326 328 350
--------------------- ------- ------- ------- ------- -------
Expected deliveries 8 14 0 8-13 7-29
--------------------- ------- ------- ------- ------- -------
* Assumes sale/exit of 6 old aircraft yet to be transacted.
Within the next 14 months easyJet also has 24 operating leases
due for renewal, providing us with further flexibility, which could
include deferral and cancellation.
As a result of these actions the fleet has the potential to be
substantially lower than our previous plan, whilst also retaining
the flexibility to respond to future demand environments.
Capex
The revised fleet agreement with Airbus has materially reduced
easyJet's capital expenditure requirements. We have also deferred
or cancelled a number of other projects. These measures combined
have enabled us to reduce our projected capex spend by c.GBP1
billion over three years.
Anticipated gross capital cashflows:
H2 20 FY 21 FY 22 FY 23
--------------------- -------- --------- ------------ --------------
Expected gross capex GBP400m cGBP600m GBP600-900m GBP600-1,400m
We also continue to focus on minimising non-essential capex
spending. The majority of the anticipated capital expenditure in
aggregate across H2 20, FY21 and FY22 relates to aircraft purchase
pre-delivery payments, aircraft lease payments treated as capital
cashflows under IFRS16, as well as maintenance expenditure on
existing aircraft and other IT related capital expenditure.
Maintenance expenditure will be subject to the level of FY21 and
FY22 flying and the quantity of operating lease redeliveries to
lessors. A significant level of IT expenditure in FY21 and FY22 is
discretionary and also subject to further review.
Funding
easyJet's funding position is strong with net debt at 31 March
2020 of GBP467 million, which comprised cash and money market
deposits of GBP1,388 million (31 March 2019: GBP1,280 million) and
borrowings of GBP1,855 million (31 March 2019: GBP1,481
million).
Borrowings as at 31 March 2020 include GBP536 million of lease
liabilities.
Liquidity per 100 seats at 31 March 2020 was GBP3.2 million (H1
2019: GBP3.7 million), well in excess of our target of GBP2.6
million.
easyJet has taken decisive action to access additional liquidity
during the Covid-19 pandemic. In addition to the c.GBP1.4 billion
in liquidity as at 31 March 2020, easyJet has arranged the
following:
-- cGBP400 million from having fully drawn down on a previously
undrawn $500 million Revolving Credit Facility, secured against
aircraft assets
-- GBP600 million issuance of Commercial Paper through the UK
Government's Covid Corporate Financing Facility (CCFF). This
facility enables UK companies which had investment grade credit
ratings before 1 March 2020 to issue 12-month, unsecured debt
directly to HM Treasury
-- cGBP400 million proceeds from two term loans, which both
mature in 2022 and are secured against aircraft assets
-- GBP301 million in proceeds secured from sale and leaseback
transactions, with total anticipated proceeds from the current
programme of GBP500-650 million
Thus easyJet will have raised cGBP1.7 billion in additional debt
liquidity since March 2020 with a further GBP200-350m
anticipated.
As at 22 June our current cash position is c.GBP2.4bn, before
proceeds from the equity placing or the remaining planned sale and
leaseback transactions.
In light of the current pressures on the aviation industry from
Covid-19, easyJet's credit ratings have been downgraded by both
Standard & Poor's and Moody's. Nonetheless both rating agencies
have recognised the strength of easyJet's balance sheet and
business strategy and have therefore maintained our ratings at
investment grade, with a BBB- rating from Standard & Poor's and
a Baa3 rating from Moody's.
easyJet is working successfully towards a target range of GBP500
to GBP650 million of proceeds through the sale and leaseback of
some of our aircraft. We have already signed separate binding
contractual agreements with SMBC Aviation, JP Lease and Aero
Capital Solutions, for the sale and leaseback of 15 aircraft with
proceeds of approximately GBP301 million in aggregate. The subject
aircraft consisted of two A321NEOs, three A320NEOs, three A320CEOs,
and seven A319CEOs with age ranges from new to 12 years of age.
easyJet has seen strong interest from the global operating lease
marketplace and is working with preferred suppliers on finalising
the sale of at least a further eight A320NEO family aircraft, which
would see us meet the upper end of our liquidity target range in
FY20.
Of easyJet's 337 aircraft on the balance sheet at 31 March 2020,
the 230 owned aircraft were unencumbered, representing 68% of the
total fleet. The comparable position at 31 March 2019 was 221
unencumbered aircraft, which was 69% of the total fleet. Following
the closing of the various funding initiatives outlined above,
around 50% of the fleet remains unencumbered.
Our scenario planning cash burn analysis has been updated since
published in April. We now assume that under a full grounding
scenario we would use the following amounts of cash:
-- 3 months full grounding - GBP1.0 billion
-- 6 months full grounding - GBP2.1 billion
-- 9 months full grounding - GBP3.0 billion
Current cash burn is slightly better than our April forecast,
principally driven by the proportion of customers choosing to
rebook or take a voucher for future travel, rather than requesting
a cash refund. We have resumed our flying programme after 11 weeks
of full grounding, somewhat ahead of the base case scenario of a 3
month grounding.
On 24 June easyJet launched an equity placing, which will be
conducted by way of a single, accelerated bookbuild of Ordinary
Shares. This bookbuild covers both a firm placing for up to 9.99%
of our issued share capital and up to a further 5% of issued share
capital which is conditional upon shareholder approval, under an
ordinary resolution. This approval will be sought at a General
Meeting to be held on 14 July. Gross proceeds of the equity placing
are expected to be GBP400-450 million. The proceeds will further
enhance easyJet's liquidity position and credit metrics while also
enhancing our already strong balance sheet strength through the
Covid-19 recovery.
Fuel & FX
Due to the full grounding of the fleet on 30 March 2020 and the
lower capacity expected for several months thereafter, easyJet
became significantly over-hedged from both a jet fuel and FX
perspective. This has had an adverse effect on easyJet's income
statement in the first half, due to the recording of hedge
accounting discontinuation and ineffectiveness.
Prior to Covid-19 fuel was 71% hedged at $654 per metric tonne
for FY20 and 51% hedged at $638 per metric tonne for FY21. In the
first half of FY20 there was a net charge of GBP164 million for
fair value adjustment due to easyJet's significantly over-hedged
position from both a jet fuel and FX perspective, following the
full grounding of the fleet and the lower capacity expected for
several months thereafter. There is the potential for further
impact in H2 2020 and over-hedged amounts are likely to cause a
degree of volatility in the income statement until these
instruments mature. This was included as part of our scenario
planning.
To mitigate the effects of over-hedging, a number of actions
have been taken including putting jet fuel hedging on hold for time
periods from April 2020 through to October 2021. Jet fuel hedging
continues for later time periods, in order to take advantage of the
low-price environment. Our expected FY22 jet fuel requirement is
currently around 35% hedged at $513 per metric tonne.
Outlook
Capacity is expected to build through the summer season, to c30%
of planned, pre-Covid-19 capacity for Q4.
Booking numbers for easyJet Holidays are encouraging.
easyJet expects to deliver cost per seat excluding fuel at
constant currency roughly flat in FY21 compared to FY19.
At this stage, given the continued level of uncertainty, it is
not possible to provide financial guidance for the remainder of the
FY20 financial year.
Notes
(1) Represents the number of earned seats flown. Earned seats
include seats that are flown whether or not the passenger turns up
as easyJet is a no-refund airline, and once a flight has departed a
no-show customer is generally not entitled to change flights or
seek a refund. Earned seats also include seats provided for
promotional purposes and to staff for business travel.
(2)Per seat measures are for the airline only. Group measures
are the consolidated results of both the airline and the holidays
business
(3) Constant currency is calculated by comparing 2020 financial
period performance translated at the 2019 financial period
effective exchange rate to the 2019 financial period reported
performance, excluding foreign exchange gains and losses on balance
sheet revaluations
(4) On-time performance measured by internal easyJet system
(5) Independent shareholders exclude the 132,401,427 shares held
by or on behalf of the Haji-Ioannou family concert party
(6) As set out in the circular sent to shareholders prior to
easyJet entering into the 2013 agreement with Airbus.
(7) GBP47 million relating to the original deferral of 8
aircraft to delivery in FY22 and 24 aircraft to delivery beyond
December 2022, and GBP48 million relating to the further deferral
of these 24 aircraft to deliver in FY25 to FY27.
NOTHING IN THIS RELEASE CONSTITUTES AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO SELL ANY SECURITIES IN THE UNITED
STATES OR ANY OTHER JURISDICTION. NO SECURITIES HAVE BEEN OR WILL
BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMED, OR WITH
ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OF THE UNITED
STATES.
OUR FINANCIAL RESULTS
Headline loss before tax decreased from GBP275 million for the
six months ended 31 March 2019 to GBP193 million for the six months
ended 31 March 2020. At constant currency, headline loss before tax
for the six months ended 31 March 2020 would have been GBP224
million, giving a favourable foreign exchange impact of GBP31
million compared to last year.
Total loss before tax increased from GBP272 million for the six
months ended 31 March 2019 to GBP353 million for the six months
ended 31 March 2020. This was mainly driven by a GBP164 million net
charge related to hedge ineffectiveness and the discontinuation of
hedge accounting for jet fuel and foreign exchange derivative
contracts. As a result of the expected reduced flying programme as
at 31 March 2020, the Group's near term exposures for jet fuel and
foreign currency were significantly reduced, causing a proportion
of previously hedge accounted derivative financial instruments to
be recorded as ineffective. These amounts have been recognised as a
non-headline item.
The half year report is based on the financial performance up to
31 March 2020, and therefore excludes information relating to
funding and other Covid-19 management actions which have occurred
since 31 March 2020. The entire easyJet fleet was grounded from 30
March, however prior to this, there were circa 18,000 cancellations
during the month of March as travel restrictions were introduced
across Europe, which has impacted our cost performance in H1
2020.
During November 2019, the easyJet Holidays business was launched
with the first holidays commencing in January 2020. easyJet
Holidays forms a separate operating segment to the Airline.
Therefore, all per seat metrics are for the Airline business only,
as the inclusion of hotel-related revenue and costs from the
Holidays business will distort the RPS and CPS metrics as these are
not directly correlated to the seats flown by the Airline business.
The segmental note within the interim consolidated financial
statements shows the contribution of each operating segment towards
the Group's performance. All seats flown directly relate to the
Airline business and are therefore included in total for the per
seat metrics. The overall contribution of the Holidays segment to
the financial performance of the consolidated Group for the six
months ended 31 March 2020 is insignificant. In presenting the
Airline-only financial performance metrics below this does not
materially distort the financial performance of the Group as a
whole.
FINANCIAL OVERVIEW
GBP million (Reported) -- Group H1 2020 H1 2019
================================= ======== ========
Group revenue 2,382 2,343
Headline costs excluding fuel (2,041) (2,016)
Fuel (534) (602)
Group headline loss before tax (193) (275)
================================== ======== ========
Non-headline items (160) 3
================================== ======== ========
Group total loss before tax (353) (272)
================================== ======== ========
Taxation 29 54
================================== ======== ========
Group total loss after tax (324) (218)
================================== ======== ========
GBP per seat -- Airline only H1 2020 H1 2019
================================= ======== ========
Airline revenue 55.60 50.71
Headline costs excluding fuel (47.24) (43.64)
Fuel (12.51) (13.02)
================================== ======== ========
Airline headline loss before
tax (4.15) (5.95)
================================== ======== ========
Non-headline items (3.77) 0.07
================================== ======== ========
Airline total loss before tax (7.92) (5.88)
================================== ======== ========
Taxation 0.62 1.17
================================== ======== ========
Airline total loss after tax (7.30) (4.71)
================================== ======== ========
The total number of passengers carried decreased by 7.4% to 38.6
million (H1 2019: 41.6 million), which was driven by a reduction in
seats flown of 7.6% to 42.7 million seats (H1 2019: 46.2 million
seats) as a result of the increase in cancellations prior to our
entire fleet being fully grounded on 30 March 2020. Load factor has
increased by 0.2 percentage points to 90.3% (H1 2019: 90.1%).
Total revenue increased by 1.6% to GBP2,382 million (H1 2019:
GBP2,343 million) and increased by 2.2% at constant currency.
Airline revenue per seat increased by 9.6% to GBP55.60 (H1 2019:
GBP50.71) and increased by 10.2% at constant currency. The increase
in Airline revenue per seat is a consequence of a number of
contributors, including our own and market capacity consolidation
from October to February, particularly in the UK and Germany, with
yield initiatives and network optimisations further capitalising on
strong demand for our routes.
Headline Airline cost per seat excluding fuel increased by 8.2%
to GBP47.24 (H1 2019: GBP43.64), and increased by 9.5% at constant
currency.
The Airline cost per seat excluding fuel increase included
inflationary linked increases in ground handling costs, airport
costs and maintenance, high crew retention, and a one-off
maintenance provision catch up. The impact of Covid-19 resulted in
significantly higher disruption costs, full pilot and crew staffing
costs through March when many flights were cancelled, and lower
seat capacity. Cost increases were partially offset by lower staff
incentive costs, and reduced navigation rates.
Airline fuel cost per seat decreased by 3.9% to GBP12.51 (H1
2019: GBP13.02) and by 0.5% at constant currency. There has been an
underlying decrease in the market price of fuel, and there was also
a benefit recognised in the period from settling the 2019 EU ETS
(Emissions Trading System) liability primarily using free credits
received during 2019 and 2020. easyJet participates in the EU
Emissions Trading System (EU ETS) scheme which requires our carbon
footprint to be offset by submitting carbon allowances to the UK
Environment Agency. easyJet receives certain free carbon allowances
from the UK government and purchases others from the market. In
December 2019 easyJet purchased carbon credits with the intention
of using these credits to settle the calendar year 2019 EU ETS
liability. As a result of flying restrictions imposed following
Covid-19, easyJet sold some of these purchased carbon credits in
March 2020 to realise cash, which resulted in an income statement
loss on disposal of GBP12 million, which has been recognised within
Other costs. The sale of the assets resulted in a remeasurement of
the liability which has reduced H1 2020 fuel costs in the income
statement by GBP55 million.
A non-headline loss of GBP160 million (H1 2019: GBP3 million
gain) was recognised in the period, consisting of a GBP164 million
net charge for hedge discontinuation and ineffectiveness, a GBP1
million gain as a result of the sale and leaseback of 10 A319
aircraft in the period and a GBP3 million gain on balance sheet
foreign exchange revaluations.
Corporate tax has been recognised at a statutory effective rate
of 8.3% (H1 2019: 19.7%) based on the anticipated tax rate for the
full year ending 30 September 2020, resulting in a tax credit of
GBP29 million (2019: GBP54 million) during the period.
This effective tax rate is distorted following the cancellation
of the proposed corporate tax rate cut to 17% in April 2020,
resulting in an increase to the deferred tax liability of GBP36
million. Excluding this tax item, the effective rate of tax is
18.6%.
Loss per share and dividends per share
H1 2020 H1 2019 Change
pence pence pence
per share per share per share
============================================= =========== =========== ===========
Basic headline loss per share (49.4) (56.1) 6.7
Basic total loss per share (82.4) (55.3) (27.1)
Ordinary dividend per share paid during the
period 43.9 58.6 (14.7)
============================================== =========== =========== ===========
Basic headline loss per share decreased by 6.7 pence and basic
total loss per share increased by 27.1 pence as a consequence of
the GBP27 million decrease in the headline loss after tax and a
GBP106 million increase in the total loss after tax in the six
months to 31 March 2020 respectively.
easyJet paid a final dividend for the year ended 30 September
2019 of 43.9 pence per share on 20 March 2020. The payment of the
dividend became legally binding following approval by shareholders
at the Annual General Meeting on 6 February 2020, before the
outbreak of Covid-19 in Europe.
EXCHANGE RATES
The proportion of revenue and costs denominated in currencies
other than Sterling remained broadly consistent year-on-year:
Revenue Costs
================== ====================
H1 2020 H1 2019 H1 2020 H1 2019
================================= ======== ======== ========= =========
Sterling 42% 41% 33% 32%
Euro 48% 48% 32% 37%
US dollar 1% 1% 28% 23%
Other (principally Swiss franc) 9% 10% 7% 8%
================================== ======== ======== ========= =========
Average exchange rates H1 2020 H1 2019
================================= ======== ======== ========= =========
Euro - revenue EUR1.14 EUR1.13
Euro - costs EUR1.17 EUR1.14
US dollar $1.32 $1.31
Swiss franc CHF 1.29 CHF 1.15
================================== ======== ======== ========= =========
There was a favourable impact on total loss from the
year-on-year movements in exchange rates of GBP23 million. The
Group's foreign currency risk management policy is aimed at
reducing the impact of a fluctuation in exchange rates on future
cash flows, however the timing of cash flows can be different to
the timing of recognition within the income statement resulting in
foreign exchange movements.
As a result of the full grounding of the fleet and lower
capacity flying expected for several months thereafter, easyJet is
in an over-hedged position on its operating foreign exchange
hedges. Over-hedged derivative amounts determined as at 31 March
2020 have been discontinued from hedge accounting with their full
fair valuation recorded in the income statement.
To minimise the effects of over-hedging going forward, easyJet
has temporarily paused its normal rolling foreign exchange
programme of hedging between 65% to 85% of the next 12 months and
45% to 65% of month's 13-24 forecast cash flows. Once there is
greater certainty on the expected future currency exposures,
easyJet's regular policy is anticipated to resume.
In addition, following an agreement with Airbus to defer
aircraft deliveries, certain foreign exchange contracts used to
hedge these purchases have also becoming ineffective due to the
delay. As the precise phasing of future capex deliveries was
recently agreed on 16 June 2020, the Group will look to re-hedge
these cash flows a minimum of 12 months out in line with existing
hedging policy.
Amounts presented at constant currency are an alternative
performance measure and not determined in accordance with
International Financial Reporting Standards. Constant currency is
calculated by comparing performance for the 2020 half year,
translated at the effective exchange rate for the 2019 half year,
with the 2019 half year reported performance, excluding foreign
exchange gains and losses on balance sheet revaluations.
Headline exchange rate impact Euro Swiss franc US dollar Other Total
Favourable/(adverse) GBP million GBP million GBP million GBP million GBP million
=============================== ============ ============ ============ ============ ============
Total revenue (2) (1) - (10) (13)
Fuel 2 - 17 - 19
Headline costs excluding
fuel 25 (3) 2 1 25
================================ ============ ============ ============ ============ ============
Headline loss before tax 25 (4) 19 (9) 31
================================ ============ ============ ============ ============ ============
Non-Headline exchange rate Euro Swiss franc US dollar Other Total
impact
Favourable/(adverse) GBP million GBP million GBP million GBP million GBP million
=============================== ============ ============ ============ ============ ============
Non-headline items excluding
prior year balance sheet
revaluations (7) - (15) 11 (11)
Prior year balance sheet
revaluations 2 (2) (2) 5 3
================================ ============ ============ ============ ============ ============
Non-headline items before
tax (5) (2) (17) 16 (8)
================================ ============ ============ ============ ============ ============
Financial Performance
Revenue
GBPm Group H1 2020 H1 2019
====================== ======== ========
Passenger revenue 1,833 1,824
Ancillary revenue 549 519
Total revenue 2,382 2,343
======================= ======== ========
GBP Airline per seat H1 2020 H1 2019
====================== ======== ========
Passenger revenue 42.93 39.48
Ancillary revenue 12.67 11.23
Total revenue 55.60 50.71
======================= ======== ========
The total number of passengers carried decreased by 7.4% to 38.6
million (H1 2019: 41.6 million). This was driven by the reduction
in the number of seats flown as a result of a large number of
cancellations in March due to Covid-19 travel restrictions, prior
to the full grounding of the entire fleet on 30 March 2020. Load
factor has increased by 0.2 percentage point to 90.3% (H1 2019:
90.1%).
Total group revenue increased by 1.6% to GBP2,382 million (H1
2019: GBP2,343 million), and increased by 2.2% at constant
currency.
Airline revenue per seat increased by 9.6% to GBP55.60 (H1 2019:
GBP50.71), and increased by 10.2% at constant currency. The
increase in Airline revenue per seat is a consequence of a number
of contributors, including our own and market capacity
consolidation from October to February, particularly in the UK and
Germany, with yield initiatives and network optimisations further
capitalising on strong demand for our routes.
The delivery of self-help initiatives, robust customer demand
and low levels of competitor capacity drove improved performance in
both our passenger and ancillary revenue per seat.
Ancillary revenue continued to perform strongly, predominantly
driven through bag yield initiatives and strong performance from
allocated seating initiatives and the inclusion of revenue from our
Holidays business.
Headline costs excluding fuel
H1 2020 H1 2019
=============================== ========================= =========================
Airline Airline
Cost Cost per
per seat seat
Group GBP per Group GBP per
GBP million seat GBP million seat
=============================== ============= ========== ============= ==========
Operating costs/(income)
Airports, ground handling and
other operating costs 715 16.65 776 16.78
Crew 398 9.32 405 8.77
Navigation 152 3.57 175 3.79
Maintenance 191 4.47 152 3.30
Selling and marketing 78 1.57 72 1.56
Other costs 241 5.45 192 4.19
Other income (15) (0.36) (15) (0.32)
================================ ============= ========== ============= ==========
1,760 40.67 1,757 38.07
============= ========== ============= ==========
Ownership costs
Aircraft dry leasing - - 3 0.07
Depreciation 254 5.95 228 4.94
Amortisation 8 0.17 8 0.17
Net finance charges 19 0.45 20 0.39
================================ ============= ========== ============= ==========
281 6.57 259 5.57
============= ========== ============= ==========
Headline costs excluding fuel 2,041 47.24 2,016 43.64
================================ ============= ========== ============= ==========
Headline cost per seat excluding fuel increased by 8.2% to
GBP47.24 (H1 2019: GBP43.64), and increased by 9.5% at constant
currency.
Operating costs and income
Headline airports, ground handling and other operating costs
cost per seat decreased by 0.8% to GBP16.65, and increased by 0.6%
at constant currency. Airport charges were adversely impacted by
the continued inflationary pressure from regulated airports and
lower incentives due to reduced passenger numbers, partially offset
by a continued focus on airport procurement activity.
Headline crew cost per seat increased by 6.2% to GBP9.32, and by
7.5% at constant currency. This was driven by lower productivity
due to decreased flying in March, agreed increases in crew and
pilot pay and low attrition rates.
Headline navigation cost per seat decreased by 5.9% to GBP3.57
and decreased by 4.1% at constant currency resulting from decreased
rates.
Headline maintenance cost per seat increased by 35.1% to
GBP4.47, and increased by 36.8% at constant currency. A one-off
catch up was recognised to provide for future maintenance events
which are now required on our leased fleet, along with underlying
increases in base maintenance costs.
Headline other cost per seat increased by 30.4% to GBP5.45, and
by 32.2% at constant currency. This is primarily driven by an
increase in disruption costs, mainly as a result of Covid-19
welfare costs provision for passengers impacted by travel
restrictions in March. In addition, a loss on the sale of EU ETS
(Emissions Trading System) allowances was recognised in the period,
as set out in the Financial Overview, and the impact of lower flown
capacity.
Ownership costs
Dry lease costs have decreased from GBP3 million in H1 2019 to
less than GBP1 million in H1 2020, with only those leases which are
exempt under IFRS 16, due to their short duration or low value,
being recognised within this line.
Depreciation costs have increased from GBP228 million in H1 2019
to GBP254 million in H1 2020. This is driven by the additional
depreciation charged as a result of the acquisition of 23 new
aircraft during FY 2019 and eight new aircraft during this
period.
Fuel costs
H1 2020 H1 2019
======================== ========================
Group Airline Group Airline
GBP million GBP per GBP million GBP per
seat seat
====== ============= ========= ============= =========
Fuel 534 12.51 602 13.02
======= ============= ========= ============= =========
Fuel costs of GBP534 million were GBP68 million lower than H1
2019. Fuel cost per seat of GBP12.51 was 3.9% lower than last year,
and decreased by 0.5% at constant currency.
During the period the average market fuel price decreased by 13%
to $563 per tonne from $650 per tonne last year. The operation of
easyJet's fuel and US Dollar hedging meant that the effective fuel
price movement saw a decrease of 3% to GBP476 per tonne from GBP493
per tonne in the previous year.
The impact of the Sterling/US Dollar exchange rate movement on
fuel costs was GBP19 million favourable (H1 2019: GBP37 million
adverse).
The decrease in fuel costs also reflects a remeasurement of our
Emissions Trading System (ETS) permits liability. Further details
are set out in the Financial Overview.
The Group uses jet fuel derivatives to hedge against sudden and
significant increases in jet fuel prices to mitigate volatility in
the income statement in the short-term. In order to manage the risk
exposure, jet fuel derivative contracts are used in line with the
Board approved policy to hedge between 65% and 85% of estimated
exposures up to 12 months in advance, and to hedge between 45% and
65% of estimated exposures from 13 up to 24 months in advance.
As a result of the full grounding of the fleet and lower
capacity flying expected for several months thereafter, easyJet is
in an over-hedged position on its anticipated future jet fuel
exposure. Over-hedged derivative amounts determined as at 31 March
2020 have been discontinued from hedge accounting with their full
fair valuation recorded in the income statement. These amounts are
presented in non-headline and are not included as a headline fuel
cost.
To minimise the effects of over-hedging going forward, easyJet
has temporarily reduced its normal rolling jet fuel hedging
programme to only execute new trades for FY 2022 onwards. As with
foreign exchange hedging, once there is further certainty on future
Jet fuel exposures, easyJet's regular policy is anticipated to
resume.
Non-headline items
H1 2020 H1 2019
GBP million GBP million
===================================== ============ ============
Sale and leaseback gain 1 2
Commercial IT platform - 2
Brexit-related costs - (4)
Balance sheet foreign exchange gain 3 3
Fair value adjustment (164) -
===================================== ============ ============
Non-headline items before tax (160) 3
====================================== ============ ============
Non-headline loss before tax of GBP160 million comprises:
-- A GBP1 million gain as a result of the sale and leaseback of
10 A319 aircraft in the period (H1 2019: GBP2 million charge as a
result of the sale and leaseback of 10 A319 aircraft);
-- There were no Commercial IT platform items classified as
non-headline in H1 2020 (H1 2019: GBP2 million credit);
-- There were GBP0.3 million of Brexit-related costs in H1 2020 (H1 2019: GBP4 million charge);
-- A GBP3 million gain for balance sheet revaluations (H1 2019:
GBP3 million). This relates to foreign exchange gains or losses
arising from the re-translation of monetary assets and liabilities
held on the balance sheet; and
-- A GBP164 million net charge related to discontinued hedges
and hedge ineffectiveness (H1 2019: no gain or loss). Due to the
full grounding of the fleet and the lower capacity expected for
several months thereafter, easyJet is in a significantly
over-hedged position from both a jet fuel and FX perspective.
NET DEBT AND FINANCIAL POSITION
Summary net debt reconciliation
T he table below presents cash flows on a net debt basis. This
is different to the GAAP presentation of the statement of cash
flows in the condensed financial information.
H1 2020 H1 2019 Change
GBP million GBP million GBP million
================================================ ============ ============ ============
Operating loss (173) (255) 82
Depreciation and amortisation 262 236 26
Unearned revenue movement (95) 762 (857)
Other net working capital movement 460 (145) 605
Net tax paid (20) (28) 8
Net capital expenditure (452) (465) 13
Net proceeds from sale and operating leaseback
of aircraft 114 121 (7)
Purchase of own shares for employee share
schemes (6) (2) (4)
Net decrease in restricted cash - 4 (4)
Repayment of capital element of leases (111) (85) (26)
Other (including the effect of exchange
rates) 54 24 30
Ordinary dividend paid (174) (233) 59
================================================= ============ ============ ============
Net increase in net debt (141) (66) (75)
================================================= ============ ============ ============
Net (debt)/cash at closing of the prior
period (326) 396 (722)
IFRS 16 implementation impact at 1 October
2018 - (531) 531
================================================= ============ ============ ============
Net debt at the beginning of the period (326) (135) (191)
================================================= ============ ============ ============
Net debt at the end of the period (467) (201) (266)
================================================= ============ ============ ============
Net debt as at 31 March 2020 was GBP467 million (31 March 2019:
net debt GBP201 million) and comprised cash and money market
deposits of GBP1,388 million (31 March 2019: GBP1,280 million),
borrowings of GBP1,319 million (31 March 2019: GBP858 million) and
lease liabilities of GBP536 million (31 March 2019: GBP623
million).
Unearned revenue decreased by GBP857 million. Due to the
cancellation of flights that were due to take place in April and
May 2020, the unearned revenue balance is lower compared to March
2019. Upon cancellation of a flight, the balance is transferred
from unearned revenue into trade and other payables to be
classified as a financial liability.
Other working capital has increased by GBP605 million as a
result of the increase in trade payables due to the transfer of a
proportion of the unearned revenue balance into trade and other
payables, as explained above, the optimisation of supplier payment
terms and collection of receivables, and movements in the
derivative financial instruments balance.
Net capital expenditure includes final delivery payments for the
acquisition of eight aircraft (H1 2019: 11 aircraft) and
pre-delivery payments relating to aircraft purchases. The sale and
leaseback of 10 aircraft in H1 2020 resulted in a net cash inflow
of GBP114 million (H1 2019: GBP121 million).
easyJet made corporation tax payments totalling GBP20 million
during the period (H1 2019: GBP28 million).
Summary consolidated statement of financial position
31 March 30 September Movement
2020 2019
GBP million GBP million GBP million
========================================== ============ ============= ============
Goodwill and other intangible assets 613 561 52
Property, plant and equipment (excluding
RoU assets) 4,823 4,661 162
Right of use assets 468 502 (34)
Derivative financial instruments (554) 63 (617)
Equity investments 33 48 (15)
Other assets (excluding cash and money
market deposits) 662 542 120
Unearned revenue (974) (1,069) 95
Trade and other payables (1,660) (1,050) (610)
Other liabilities (excluding debt) (852) (947) 95
=========================================== ============ ============= ============
Capital employed 2,559 3,311 (752)
=========================================== ============ ============= ============
Cash and money market deposits* 1,388 1,576 (188)
Debt (excluding lease liabilities) (1,319) (1,324) 5
Lease liabilities (536) (578) 42
Net assets 2,092 2,985 (893)
=========================================== ============ ============= ============
Net debt (467) (326) (141)
=========================================== ============ ============= ============
* excludes restricted cash
Since 30 September 2019 net assets have decreased by GBP893
million, mainly due to the loss for the period, the payment of the
ordinary dividend (GBP174 million), and an adverse movement on the
hedging reserve.
Goodwill and other intangible assets have increase predominately
due to our acquisition of ex-Thomas Cook slots at Gatwick Airport
and Bristol Airport for GBP36 million.
The net book value of property, plant and equipment excluding
right of use assets has increased by GBP162 million as a result of
the acquisition of eight aircraft, pre-delivery payments relating
to future aircraft purchases, aircraft heavy maintenance and three
spare engine purchases, offset by depreciation. The closing balance
for right of use assets was GBP468 million, a decrease of GBP34
million.
Derivative financial instruments as at 31 March 2020 were in a
GBP554 million net liability position, a GBP617 million movement
from the GBP63 million net asset position as at 30 September 2019.
This movement is largely down to mark-to-market losses on jet fuel
contracts, decreases in currency assets and cross currency interest
rate swaps.
Other assets have increased by GBP120 million largely due to
timing differences in trade and other receivables and an increase
within current intangible assets driven by calendar year 2020
carbon credits. Further detail on carbon credits is included in the
Financial Overview section.
Unearned revenue decreased by GBP95 million. Passengers pay for
their flights in full when booking, and due to the seasonal nature
of the industry this usually leads to significantly more unearned
revenue at 31 March compared to 30 September each year. However due
to the cancellation of flights due to depart in April and May 2020,
the unearned revenue balance is lower compared to September 2019.
Upon cancellation of a flight, the balance is moved out of unearned
revenue and into trade and other payables to be classified as a
financial liability.
Trade and other payables have increased by GBP610 million
largely due to the increase in refunds due as a result of
significant cancellations resulting from Covid-19, as well as
timing of invoices.
Other liabilities have increased by GBP95 million primarily due
to deferred tax movements as a result of the cancellation of the
proposed UK corporate tax rate cut to 17% and a one-off catch up to
the maintenance provision of GBP24 million. The 'catch up' is
determined by the flying cycles which had already been incurred to
date for those leased aircraft impacted.
Return on Capital Employed (ROCE)
ROCE Calculation
Reported GBPm H1 2020 H1 2019
======================================= ======== ========
Headline loss before interest and tax (174) (255)
UK corporation tax rate 19% 19%
======================================== ======== ========
Normalised headline operating loss
after tax (NOPAT) (141) (207)
======================================== ======== ========
Average shareholders' equity 2,539 2,849
Average net debt 397 168
======================================== ======== ========
Average adjusted capital employed 2,936 3,017
======================================== ======== ========
Headline Return on capital employed (4.8%) (6.8%)
======================================== ======== ========
Total Return on capital employed (4.8%) (6.8%)
======================================== ======== ========
Headline ROCE for the period was (4.8)%, an improvement of 2.0
percentage points on the prior year, driven by a reduced loss for
the period. Total ROCE for the period was (4.8)%, an improvement of
2.0 percentage points on the prior year.
KEY STATISTICS
OPERATING MEASURES
Increase/
H1 2020 H1 2019 (decrease)
----------------------------------------------- -------- -------- ------------
Seats flown (millions) 42.7 46.2 (7.6%)
Passengers (millions) 38.6 41.6 (7.4%)
Load factor 90.3% 90.1% 0.2ppt
Available seat kilometres (ASK) (millions) 46,753 49,367 (5.3%)
Revenue passenger kilometres (RPK) (millions) 42,920 45,091 (4.8%)
Average sector length (kilometres) 1,095 1,068 2.5%
Sectors 244,235 267,504 (8.7%)
Block hours 474,082 510,403 (7.1%)
Number of aircraft owned/leased at end of
period 337 320 5.3%
Average number of aircraft owned/leased
during period 333.4 317.2 5.1%
Number of aircraft operated at end of period 302 285 6.0%
Average number of aircraft operated during
period 294.7 281.6 4.7%
Operated aircraft utilisation (hours per
day) 8.8 10.0 (12.0%)
Owned aircraft utilisation (hours per day) 7.8 8.7 (10.3%)
Number of routes operated at end of period 1,104 1,009 9.4%
Number of airports served at end of period 161 157 2.5%
------------------------------------------------ -------- -------- ------------
FINANCIAL MEASURES
Increase/
H1 2020 H1 2019 (decrease)
----------------------------------------------- -------- -------- ------------
Total return on capital employed (4.8%) (6.8%) 1.9ppt
Headline return on capital employed (4.8%) (6.8%) 1.9ppt
Liquidity per 100 seats (GBPm) 3.2 3.7 (13.5%)
Total Airline loss before tax per seat (GBP) (7.92) (5.88) 34.7%
Headline Airline loss before tax per seat
(GBP) (4.15) (5.95) (30.3%)
Total Airline loss before tax per ASK (pence) (0.72) (0.55) 36.4%
Headline Airline loss before tax per ASK
(pence) (0.38) (0.56) (32.1%)
------------------------------------------------ -------- -------- ------------
Revenue
----------------------------------------------- -------- -------- ------------
Airline revenue per seat (GBP) 55.60 50.71 9.6%
Airline revenue per seat at constant currency
(GBP) 55.87 50.71 10.2%
Airline revenue per ASK (pence) 5.08 4.75 6.9%
Airline revenue per ASK at constant currency
(pence) 5.17 4.75 8.8%
Airline revenue per passenger (GBP) 61.56 56.26 9.4%
Airline revenue per passenger at constant
currency (GBP) 62.63 56.26 11.3%
------------------------------------------------ -------- -------- ------------
Costs
----------------------------------------------- -------- -------- ------------
Per seat measures
Airline headline cost per seat (GBP) (59.75) (56.66) 5.5%
Airline non-headline per seat (GBP) (3.77) 0.07 --
Airline total cost per seat (GBP) (63.52) (56.59) 12.2%
Airline headline cost per seat excluding
fuel (GBP) (47.24) (43.64) 8.2%
Airline headline cost per seat excluding
fuel at constant currency (GBP) (47.80) (43.64) 9.5%
Airline total cost per seat excluding fuel
(GBP) (51.01) (43.57) 17.0%
Airline total cost per seat excluding fuel
at constant currency (GBP) (51.32) (43.57) 17.8%
Per ASK measures
Airline headline cost per ASK (pence) (5.45) (5.31) 2.6%
Airline non-headline cost per ASK (pence) (0.34) 0.01 --
Airline total cost per ASK (GBP) (5.80) (5.30) 9.4%
Airline headline cost per ASK excluding
fuel (pence) (4.32) (4.09) 5.6%
Airline headline cost per ASK excluding
fuel at constant currency (pence) (4.37) (4.09) 6.8%
Airline total cost per ASK excluding fuel
(pence) (4.66) (4.08) 14.1%
Airline total cost per ASK excluding fuel
at constant currency (pence) (4.69) (4.08) 14.9%
------------------------------------------------ -------- -------- ------------
PRINCIPAL RISKS AND UNCERTAINTIES
The Group faces a number of risks which, if they arise, could
affect its ability to achieve its strategic objectives. As with any
business, risk assessment and the implementation of mitigating
actions and controls are vital to successfully achieving the
Group's strategy. The easyJet Board is responsible for determining
the nature of these risks and ensuring appropriate mitigating
actions are in place to manage them.
easyJet carries out a detailed risk management process to ensure
that risks are identified and mitigated where possible. Whilst
easyJet can monitor risks and prepare for adverse scenarios, the
ability to affect the core drivers of many risks is not within the
Group's control, for example adverse weather, pandemics, acts of
terrorism, changes in government regulation and macroeconomic
issues.
The principal risks and uncertainties faced by the Group remain
those set out in our 2019 Annual report and accounts and include
the following types of risks:
-- Asset Efficiency & Effectiveness
-- Environment & Sustainability
-- Legislative / Regulatory Landscape
-- Macro-economic & Geopolitical
-- People
-- Safety, Security, and Operations
-- Technology & Cyber
The Directors consider that the principal risks and
uncertainties which could have a material impact on the Group's
performance in the second half of the financial year remain
substantially the same as those stated on pages 38 to 47 of our
Annual report and accounts for the year to 30 September 2019, which
are available on our website http://corporate.easyjet.com . The
risk associated with Brexit continues to evolve as the UK left the
European Union on 31 January 2020 and has entered a transition
period. Throughout this period easyJet continues to focus on
ensuring that our network is unaffected by Brexit, and that our
operations are unaffected by any eventual Brexit outcome. Two new,
specific risks and uncertainties, related to the impact of
COVID-19, and the impact of the data breach announced in May 2020,
have been set out below:
IMPACT OF COVID-19
The Covid-19 pandemic has become a worldwide crisis, and at the
date of this report the situation is still evolving. The spread of
Covid-19 precipitated an unprecedented level of travel restrictions
being imposed by governments across our markets. As a result of
these restrictions, easyJet grounded the entire fleet from 30 March
2020. Both the spread of Covid-19 and the associated travel
restrictions have had a significant impact on easyJet. As we
restart our flying programme in June 2020, there remain a number of
risks and uncertainties that are being actively managed:
Ensuring the safety of our passengers and employees is, and
always will be, easyJet's highest priority. Whilst the rate of
transmission of Covid-19 has decreased, there continue to be new
cases of infection, and the measures implemented by easyJet are
therefore based on the latest government, EASA, and ICAO public
health guidance. easyJet has a comprehensive set of biosecurity
standards in place to minimise the risk of transmission of
infectious diseases, and these are overseen by our Biosecurity
Standards Group. These include all of our aircraft having industry
leading filtration systems, to keep the cabin air as clean as
possible. We have also implemented additional daily cleaning and
disinfection of our aircraft. Furthermore all passengers and crew
will be required to wear masks at all times on board our
flights.
Due to the extreme level of uncertainty created by the global
Covid-19 pandemic, there remains a risk that a second wave or
multiple waves of the pandemic could affect our markets, leading to
further travel restrictions being imposed. Accordingly, easyJet has
modelled severe but plausible downside scenarios based on further
extended waves of the pandemic. These downside scenarios include
combinations of a decrease in yield, additional grounding periods,
planned cost initiatives not being achieved to the level forecast,
adverse variations in fuel price, and unfavourable foreign exchange
rate movements. Although these severe downside scenarios are not
considered likely, in the event of some or all of these occurring,
and to ensure the business meets its obligations for the next 12
months, the Group may need to secure additional funding, which is
not contractually committed at 22 June 2020 (See Going Concern in
Note 1).
easyJet has taken a number of measures to preserve cash, reduce
costs and generate liquidity. These include signing two secured
term loans totalling c. GBP400 million, maturing in 2022. We have
also successfully issued GBP600 million of Commercial Paper through
the Covid Corporate Financing Facility (CCFF) as well as fully
drawing down on a $500 million Revolving Credit Facility. This
facility secures against aircraft when it is drawn. Furthermore we
continue to engage with an active lessor market interested in
acquiring aircraft from easyJet's fleet on a sale and leaseback
basis. These negotiations are at an advanced stage with anticipated
proceeds of c. GBP300 million in early July 2020.
easyJet continues to take decisive action to remove cost and
non-critical expenditure from the business at every level. This
includes reaching agreement with Airbus to delay the delivery of 24
aircraft, with easyJet now expecting its year end 2021 fleet size
to be around 302 aircraft. easyJet continues to focus on minimising
non-essential capex, and is actively renegotiating contracts with
key suppliers in order to reduce costs. easyJet utilised Government
support available across its network to furlough employees. To
reflect the reduced fleet, and proposals relating to the
optimisation of our network and bases, easyJet has commenced a
consultation process with its employees on proposals to reduce
staff numbers by up to 30%. During the organisation design process,
the company has considered the critical skills and capabilities
needed to ensure it remains successful in the future. As easyJet
progresses through the consultation process, there is a heightened
risk of industrial action that may disrupt our operations.
In light of the global pandemic, the market for aircraft
transactions has slowed significantly. However, asset recoverable
amounts, based on value in use, exceed the carrying values as at 31
March 2020. Management will continue to keep these valuations under
review.
The significant increase in employees working at home has
increased our IT and information security risks. We have an ongoing
communication and awareness programme to remind all users of the
associated risks, and have issued advice on secure home-working
best practices. We have also upgraded our multi-factor
authentication and password complexity controls to reflect changing
IT Security threats. Furthermore a comprehensive wellbeing support
microsite was launched to support people to work remotely as well
as manage the personal impact of COVID-19.
IMPACT OF DATA BREACH
On 19 May 2020, easyJet announced that it had been the target of
a cyber-attack from a highly sophisticated source. The email
address and travel details of approximately 9 million customers
were accessed and for a very small subset of customers (2,208),
credit card details were accessed. The Information Commissioner's
Office (ICO) has opened an investigation into the cyber-attack, and
a class action law firm has filed a claim against easyJet in the
High Court. The merit, likely outcome and potential impact on
easyJet of both the investigation by the ICO, and the class action
claim are subject to a number of significant uncertainties and,
therefore, any assessment of the likely outcome or quantum cannot
be made at the date of this disclosure.
CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
Consolidated income statement (unaudited)
Six months ended 31 March
2020 2019
---------------------------------------- -----------------------------------------
Non-headline Non-headline
(note (note
Headline 3) Total Headline 3) Total
----------- ------------- ------------ ------------ ------------- ------------
GBP
Notes million GBP million GBP million GBP million GBP million GBP million
----------------- ------- ----------- ------------- ------------ ------------ ------------- ------------
Passenger revenue 1,833 - 1,833 1,824 - 1,824
Ancillary revenue 549 - 549 519 - 519
------------------ ------- ----------- ------------- ------------ ------------ ------------- ------------
Total revenue 2,382 - 2,382 2,343 - 2,343
Fuel (534) - (534) (602) - (602)
Airports, ground handling
and other
operating costs (715) - (715) (776) - (776)
Crew (398) - (398) (405) - (405)
Navigation (152) - (152) (175) - (175)
Maintenance (191) - (191) (152) (1) (153)
Selling and
marketing (78) - (78) (72) - (72)
Other costs (241) 1 (240) (192) 1 (191)
Other income 15 - 15 15 - 15
------------------ ------- ----------- ------------- ------------ ------------ ------------- ------------
EBITDAR 88 1 89 (16) - (16)
Aircraft dry
leasing - - - (3) - (3)
Depreciation 7 (254) - (254) (228) - (228)
Amortisation of
intangible
assets (8) - (8) (8) - (8)
------------------ ------- ----------- ------------- ------------ ------------ ------------- ------------
Operating
(loss)/profit (174) 1 (173) (255) - (255)
Interest receivable and
other financing
income 8 69 77 11 3 14
Interest payable
and other
financing
charges (27) (230) (257) (31) - (31)
------------------ ------- ----------- ------------- ------------ ------------ ------------- ------------
Net finance
(charges)/gain (19) (161) (180) (20) 3 (17)
(Loss)/profit
before tax (193) (160) (353) (275) 3 (272)
Tax
(charge)/credit 4 (1) 30 29 54 - 54
(Loss)/profit for the
period (194) (130) (324) (221) 3 (218)
--------------------------- ----------- ------------- ------------ ------------ ------------- ------------
Loss per share,
pence
Basic 5 (82.4) (55.3)
------------------ ------- ----------- ------------- ------------ ------------ ------------- ------------
Consolidated statement of comprehensive income (unaudited)
Six months Six months
ended ended
31 March 2020 31 March 2019
Notes GBP million GBP million
--------------------------------------------- ------ -------------- --------------
Loss for the period (324) (218)
Other comprehensive expense
Items that may be re classified to the
income statement
Cash flow hedges
Fair value losses in the period (572) (185)
Gains transferred to income statement (66) (86)
Losses transferred to property, plant
and equipment - 5
Related tax credit 4 91 51
Hedge ineffectiveness & discontinuation 163 -
Cost of hedging (4) (2)
Items that will not be re classified
to the income statement
Remeasurement of post-employment benefit
obligations 8 (6)
Related deferred tax charge (1) -
Fair value movement on equity investment (15) -
--------------------------------------------- ------ -------------- --------------
(396) (223)
Total comprehensive expense for the
period (720) (441)
---------------------------------------------- ------ -------------- --------------
Fair valuation losses in the period primarily due to large
decreases in the market price of jet fuel, along with movements in
foreign exchange rates used when valuing derivatives held in the
hedging reserve.
For capital expenditure cash flow hedges, the accumulated gains
and losses recognised in other comprehensive income will be
transferred to the initial carrying amount of the asset acquired,
within property, plant and equipment. All other cash flow hedge
items in other comprehensive income will be reclassified to the
relevant income statement lines.
Consolidated statement of financial position (unaudited)
31 March
30 September
2020 2019*
Notes GBP million GBP million
-------------------------------------------- ------ ------------ -------------
Non-current assets
Goodwill 365 365
Other intangible assets 248 196
Property, plant and equipment 7 5,291 5,163
Derivative financial instruments 10 105 126
Equity investments 33 48
Restricted cash 4 4
Other non-current assets 127 142
--------------------------------------------- ------ ------------ -------------
6,173 6,044
Current assets
Trade and other receivables * 332 302
Intangible assets * 1 156 70
Derivative financial instruments 10 115 147
Current tax assets 43 24
Money market deposits 172 291
Cash and cash equivalents 1,216 1,285
--------------------------------------------- ------ ------------ -------------
2,034 2,119
Current liabilities
Trade and other payables (1,660) (1,050)
Unearned revenue (974) (1,069)
Lease liabilities (264) (219)
Derivative financial instruments 10 (529) (138)
Provisions for liabilities and charges (297) (192)
--------------------------------------------- ------ ------------ -------------
(3,724) (2,668)
Net current liabilities (1,690) (549)
Non-current liabilities
Borrowings (1,319) (1,324)
Lease liabilities (272) (359)
Derivative financial instruments 10 (245) (72)
Non-current deferred income (5) (6)
Post-employment benefit obligations (35) (47)
Provisions for liabilities and charges (331) (397)
Deferred tax (184) (305)
--------------------------------------------- ------ ------------ -------------
(2,391) (2,510)
Net assets 2,092 2,985
--------------------------------------------- ------ ------------ -------------
Shareholders' equity
-------------------------------------------- ------ ------------ -------------
Share capital 108 108
Share premium 659 659
Hedging reserve (388) (4)
Cost of hedging reserve 4 8
Translation reserve (2) (1)
Retained earnings 1,711 2,215
--------------------------------------------- ------ ------------ -------------
2,092 2,985
-------------------------------------------- ------ ------------ -------------
* Please refer to note 1 for further information
on our voluntary change in accounting policy.
Consolidated statement of cash flows (unaudited)
Six months Six months
ended ended
31 March 31 March
2020 2019
Notes GBP million GBP million
---------------------------------------------- ------ ------------ ------------
Cash flows from operating activities
Cash generated from operations 8 472 609
Ordinary dividends paid 6 (174) (233)
Interest and other financing charges
paid (25) (25)
Interest and other financing income received 34 15
Net tax paid (20) (28)
----------------------------------------------- ------ ------------ ------------
Net cash generated from operating activities 287 338
Cash flows from investing activities
Purchase of property, plant and equipment (392) (452)
Purchase of non-current intangible assets (60) (13)
Net increase in money market deposits 9 118 (66)
Proceeds from sale and leaseback of aircraft 114 121
Net cash used by investing activities (220) (410)
Cash flows from financing activities
Purchase of own shares for employee share
schemes (6) (2)
Repayment of capital element of leases 9 (111) (85)
Net decrease in restricted cash - 4
----------------------------------------------- ------ ------------ ------------
Net cash used by financing activities (117) (83)
Effect of exchange rate changes (19) 1
Net decrease in cash and cash equivalents (69) (154)
Cash and cash equivalents at beginning
of period 1,285 1,025
Cash and cash equivalents at end of period 9 1,216 871
----------------------------------------------- ------ ------------ ------------
Consolidated statement of changes in equity (unaudited)
Cost
of
Share Share Hedging hedging Translation Retained
capital premium reserve reserve reserve earnings Total
GBP GBP GBP GBP GBP GBP
million million million million GBP million million million
------------------ ---------- ---------- ---------- ---------- ------------ ----------- -----------
At 1 October 2019 108 659 (4) 8 (1) 2,215 2,985
Loss for the
period - - - - - (324) (324)
Other
comprehensive
expense - - (384) (4) - (8) (396)
Total
comprehensive
expense - - (384) (4) - (332) (720)
Dividends paid
(note
6) - - - - - (174) (174)
Share incentive
schemes
Value of
employee
services - - - - - 8 8
Purchase of own
shares - - - - - (6) (6)
Currency
translation
differences - - - - (1) - (1)
------------------ ---------- ---------- ---------- ---------- ------------ ----------- -----------
At 31 March 2020 108 659 (388) 4 (2) 1,711 2,092
------------------ ---------- ---------- ---------- ---------- ------------ ----------- -----------
Cost
of
Share Share Hedging hedging Translation Retained
capital premium reserve reserve reserve earnings Total
GBP GBP GBP GBP GBP GBP
million million million million GBP million million million
------------------ ---------- ---------- ---------- ---------- ------------ ----------- -----------
At 1 October 2018 108 659 292 4 1 2,117 3,181
Loss for the
period - - - - - (218) (218)
Other
comprehensive
expense - - (215) (2) - (6) (223)
Total
comprehensive
income/(expense) - - (215) (2) - (224) (441)
Dividends paid
(note
6) - - - - - (233) (233)
Share incentive
schemes
Value of
employee
services - - - - - 11 11
Purchase of own
shares - - - - - (2) (2)
------------------ ---------- ---------- ---------- ---------- ------------ ----------- -----------
At 31 March 2019 108 659 77 2 1 1,669 2,516
------------------ ---------- ---------- ---------- ---------- ------------ ----------- -----------
The hedging reserve comprises the effective portion of the
cumulative net change in fair value of cash flow hedging
instruments relating to highly probable transactions that are
forecast to occur after the period end.
Details of the restatement made to the opening retained earnings
as at 1 October 2018 can be found in the Annual Report and Accounts
for the year ended 30 September 2019.
Notes to the condensed consolidated interim financial
information (unaudited)
1. General information
easyJet plc (the Company) is a Company registered in England
(Company no. 03959649) domiciled in the United Kingdom (UK). The
condensed consolidated interim financial information of the Company
as at and for the six months ended 31 March 2020 comprise the
Company and its interest in its subsidiaries (together referred to
as the Group). Its principal business is that of a low-cost airline
carrier operating principally in Europe. The consolidated financial
statements of the Group as at and for the year ended 30 September
2019 are available upon request to the Company Secretary from the
Company's registered office at Hangar 89, London Luton Airport,
Luton, Bedfordshire, LU2 9PF or are available on the corporate
website at corporate.easyJet.com.
BASIS OF PREPARATION
The condensed consolidated interim financial information has
been prepared in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial Conduct Authority and with
International Accounting Standards 34 "Interim Financial Reporting"
as adopted by the European Union. It should be read in conjunction
with the Annual Report and Accounts for the year ended 30 September
2019, which were prepared in accordance with applicable law and
International Financial Reporting Standards as adopted by the
European Union.
The interim financial information does not constitute statutory
accounts within the meaning of sections 434 and 435 of the
Companies Act 2006. Statutory accounts for the year ended 30
September 2019 were approved by the Board of Directors on 18
November 2019, and have been delivered to the Registrar of
Companies. The report of the auditors was unqualified, and did not
contain either an emphasis of matter paragraph or any statement
made under section 498 of the Companies Act 2006.
The Group's financial risk management objectives and policies
are materially consistent with that disclosed in the consolidated
financial statements as at and for the year ended 30 September
2019. However, as a consequence of the fleet grounding along with
current uncertainty on future cash flow and jet fuel exposures,
additional hedging in these areas has been temporarily suspended or
reduced. As a result, during this period the Group expects hedge
levels to be outside of normal risk management policy in these
areas.
Going concern
In adopting the going concern basis for preparing this interim
financial information, the Directors have considered easyJet's
business activities, together with factors likely to affect its
future development and performance, as well as easyJet's principal
risks and uncertainties.
The spread of Covid-19 precipitated an unprecedented level of
travel restrictions being imposed by governments across our
markets. As easyJet restarts its flying programme in June 2020,
there remains significant uncertainty about the future impact of
the Covid-19 pandemic. However, as at 22 June 2020, the
consolidated easyJet plc Group maintains a strong liquidity
position, unencumbered aircraft worth in excess of GBP3.1 billion,
and a large and valuable slot portfolio.
The Directors have reviewed the financial forecasts across a
range of scenarios. easyJet has modelled a base case of how the
business plans to return to operation as travel restrictions are
lifted across Europe, and this assumes a phased return to the
flying schedule, with 30% of Q4 FY19 capacity being forecast in Q4
FY20, increasing to 85% of FY'19 levels of flying by the end of
FY'21. Compensating management actions to reduce forecast capital
expenditure, optimise working capital, and reduce fixed costs have
been included in this scenario.
After reviewing the financial forecasts, testing various
scenarios and considering the uncertainties described below, and
current funding facilities outlined, the Directors have a
reasonable expectation that the Group has sufficient resources to
continue in operational existence for the foreseeable future. For
these reasons they continue to adopt the going concern basis of
accounting in preparing the interim financial statements.
Due to the uncertainty created by the Covid-19 pandemic, there
remains a risk that a second wave or multiple waves of the pandemic
could affect our markets, leading to further travel restrictions
being imposed. Accordingly, easyJet has also modelled severe but
plausible downside scenarios based on further waves of the
pandemic. These downside scenarios include combinations of a
decrease in yield, additional grounding periods, planned cost
initiatives not being fully achieved, significant deterioration of
relationships with card acquirers, adverse variations in fuel
price, and unfavourable foreign exchange rate movements.
Although these severe downside scenarios are not considered
likely, in the event that some or all of these occur the Group may
need to secure additional funding to ensure the business meets its
obligations for the next 12 months, which is not contractually
committed at 22 June 2020. Sources of additional funding are
expected to include sale and leasebacks with proceeds of c.GBP300m
which are at an advanced stage of negotiation with anticipated
proceeds in early July 2020, an extension to March 2022 of the
GBP600m of current COVID Corporate Financing Facility (CCFF)
government funding, and an equity placing which easyJet announced
today.
However, if government funding schemes such as the CCFF are not
renewed or alternative sources of finance, such as sale and
leasebacks are not available, the occurrence of these severe
downside scenarios and easyJet's ability to obtain additional
funding represents a material uncertainty at 22 June 2020 that
could cast significant doubt upon the Group's ability to continue
as a going concern.
The financial statements do not include the adjustments that
would result if the Group were unable to continue as a going
concern.
Accounting policies
The accounting policies adopted are consistent with those
described in the Annual report and accounts for the year ended 30
September 2019, with the exception of the policies below, which
relate to changes to reporting and presentation in the period.
Segment reporting
easyJet previously had one operating segment, being its route
network, under the direction of the Airline Management Board. In
the 2020 financial year easyJet created a Holidays business with a
separate Holidays Management Board. Under the new structure the
Chief Operating Decision Maker has been assessed as the easyJet PLC
Board, which receives regular reporting on the Airline and Holidays
results in order to make resource allocation decisions. The
Holidays business has been identified as a separate operating
segment meaning the Group now has two operating segments, being the
Airline business which operates easyJet's route network and the
Holidays business, which sells holiday packages. Presentation of
separate segmental reporting is included in note 13.
Revenue is allocated to geographic segments on the following
bases:
-- revenue earned from customers is allocated according to the
location of the first departure airport on each booking; and
-- commission revenue earned from partners is allocated
according to the domicile of each partner.
Passenger revenue recognised within the Airline segment includes
intra-segment sales of flights to the Holidays segment. Passenger
revenue is recognised in the Airline segment when the flight takes
place.
Accounting policy for revenue
The revenue recognition policy has been updated to include
revenue generated by the Holidays business. There is no change to
the previous accounting policy in relation to existing Airline
revenues.
easyJet categorises total revenue earned on the face of the
income statement between passenger and ancillary revenue. Passenger
revenue arises from the sale of flight seats and administration
fees and is measured as the price paid by the customer. Passenger
revenue is recognised when the performance obligation has been
completed. This is when the flight takes place. Amounts paid by
'no-show' customers are recognised as passenger revenue when the
booked service is provided, as such customers are not generally
entitled to change flights or seek refunds once a flight has
departed.
Ancillary revenue includes revenue from the provision of checked
baggage, allocated seating and change fees, package holidays
revenue (excluding flights which are recognised as passenger
revenue) and revenue arising from commissions earned from services
sold on behalf of partners and inflight sales. It is measured as
the price paid by the customer for the service booked. Ancillary
revenue is recognised when the performance obligation is complete,
which is generally when the related flight takes place, with the
following exceptions:
-- cancellation fees which are recognised when the cancellation
requested by the customer is processed
-- in the case of commission earned from travel insurance,
revenue is recognised at the time of booking as easyJet acts solely
as appointed representative of the insurance company; and
-- for practical reasons non-flight elements of package holiday
revenue and related costs are recognised at the end of the holiday,
on the inbound flight date as opposed to over time
Unearned revenue from flights not yet flown is held in the
statement of financial position until it is realised in the income
statement when the performance obligation is complete. Unearned
revenue also includes non-flight elements of package holidays for
which the customer has paid but has not yet taken place, and is
held in the statement of financial position until it is realised in
the income statement when the performance obligation is
complete.
If easyJet cancels a flight or holiday, unless a customer
immediately re-books on an alternative flight or holiday, at the
point of the cancellation the amount paid for the flight is
derecognised from unearned revenue and a financial liability is
recognised within Trade and other payables to refund the
customer.
Some of the compensation payments made to customers (in respect
of flight delays) are offset against revenues recognised up to the
amount of the flight, with the excess compensation being recorded
within expenses.
A cost line has been amended in the consolidated income
statement for Airports, ground handling and other operating costs,
which now merges the existing airport and ground handling costs
with Holidays direct operating costs. The Holidays direct operating
costs represent all direct operating costs relating to package
holidays excluding flight costs, which are eliminated on
consolidation. Holidays direct costs are recognised at the end of
the holiday, on the inbound flight date which is consistent with
the non-flight elements of package holiday revenue.
Accounting policy for Carbon offsetting and Verified Emission
Reductions
In November 2019 easyJet announced a voluntary policy to
compensate for every tonne of carbon and carbon equivalents
(collectively 'carbon') emitted from fuel used for all its flights,
by investing in projects which will mean there is one tonne less in
the atmosphere - whether by reducing carbon by physically removing
it from the air or by avoiding the release of additional
carbon.
easyJet purchases Verified Emission Reductions (VERs) arising
from Gold Standard or Verified Carbon Standard (VCS) accredited
projects to offset the carbon emitted from flights. The cost of
purchasing VERs is recognised in the income statement when the
flight occurs with a corresponding carbon offsetting liability.
This is measured using the purchase price of VERs on a First In
First Out basis, then a weighted average of expected future
purchases where all purchased VERs have been allocated. VERs are
recorded as an asset at historic cost when delivery into the
easyJet registry account has taken place. At regular intervals the
VERs are retired to settle the obligation, at which point the VER
asset and carbon offsetting liability are derecognised.
Voluntary change in accounting policy - presentation of carbon
assets
With the introduction of the voluntary carbon offset policy,
easyJet has reviewed the most appropriate presentation for assets
held to settle this liability, and the presentation of assets
purchased and held to settle the requirements under the EU
Emissions Trading System (ETS). It has been concluded that due to
the nature of these assets, they would be more appropriately
presented as current intangible assets in the statement of
financial position. The prior year ETS asset balance of GBP70
million has therefore been reclassified from trade and other
receivables to current intangible assets in the comparative
statement of financial position as at 30 September 2019 to be
consistent with this new presentation.
The cash flows associated with the purchase of carbon credit
assets are classified as operating cash flows, as these are cash
outflows for an activity which is treated as an operating expense
in consolidated income statement. This has resulted in a similar
reclassification of the reconciliation of operating loss to cash
generated from operations seen in note 8. The amount moved from
changes in trade and other receivables to change in current
intangible assets was GBP86 million.
The underlying accounting treatment remains unchanged for carbon
assets. Free allocations received from the government under the EU
ETS scheme are recognised at fair value on the date received with a
corresponding liability. Purchased carbon credits are recognised at
the purchase price and are not subsequently revalued as they are
held for own use. Carbon assets are derecognised when they are used
to offset the corresponding liability.
New and revised standards and interpretations
IFRIC 23 has been adopted as at 1 October 2019 with no material
impact.
There are no standards that are issued but not yet effective
that would be expected to have a material impact on the entity in
the current or future reporting periods and on foreseeable future
transactions.
Estimates and judgements
The preparation of accounts in conformity with generally
accepted accounting principles requires the use of estimates and
assumptions that affect the reported amounts of assets and
liabilities at the date of the accounts and the reported amounts of
income and expenses during the reporting period. Although these
amounts are based on management's best estimates, events or actions
may mean that actual results ultimately differ from those
estimates, and these differences may be material. The estimates and
the underlying assumptions are reviewed regularly.
In preparing these consolidated interim financial statements,
the significant judgements made by management in applying the
Group's accounting policies have been re-evaluated in light of
Covid-19. The key judgements and estimates are the same as those
that applied in the most recent published consolidated financial
statements, together with the following updates.
Hedge ineffectiveness and discontinuation
As a result of the expected reduced flying programme as at 31
March 2020, the Group's near term exposures for jet fuel and
foreign currency were significantly reduced, causing a proportion
of derivatives previously hedge accounted for to become
ineffective. A net charge of GBP164 million has been recognised as
a non-headline item in the income statement primarily due to the
discontinuation of hedge accounting for impacted derivatives.
In assessing whether future exposures are still expected to
occur, easyJet made estimates as at 31 March 2020 regarding our jet
fuel consumption requirements and expected future foreign currency
cash flows. These estimates used assumptions based on the length of
anticipated fleet grounding, the expected recovery of customer
demand and subsequent flying schedule as at that date. Since the
half year date management has revised downwards their forecast of
customer demand and recovery phasing. Based on these current
revised forecasts, a further GBP91 million estimated charge related
to hedge discontinuation is currently expected to be recognised in
the second half of the financial year based on the valuation of
related contracts as at 31 March 2020, in addition to that
recognised in the half year report.
Goodwill and landing rights impairment
The recoverable amount of goodwill and landing rights has been
determined based on value in use calculations. The value in use is
determined by discounting future cash flows to their present value.
When applying this method, easyJet relies on a number of key
estimates including the ability to meet its strategic plans, future
fuel prices and exchange rates, long-term economic growth rates for
the principal countries in which it operates, and its pre-tax
weighted average cost of capital. Fuel price and exchange rates
continue to be volatile in nature, and the assumptions used are
sensitive to significant changes in these rates. In addition,
assumptions over the recovery of customer demand levels could have
a significant effect on the impairment assessment performed. Due to
the uncertainty created by the Covid-19 pandemic, there remains a
risk that a second wave or multiple waves of the pandemic could
affect our markets, leading to further travel restrictions being
imposed. These uncertainties could have a significant effect on
future impairment assessments performed. At the current date no
reasonably foreseeable circumstances would result in
impairment.
Aircraft carrying values
No triggers for the impairment of the carrying values of
aircraft have been identified at 31 March 2020 and the asset
recoverable amounts, based on value in use, exceed the carrying
values as at 31 March 2020. However, in light of the global
pandemic, the longer-term impact on the airline industry is
currently uncertain and the market for aircraft transactions has
also slowed. Should future demand fall significantly below current
expectations there could be a risk that the recoverable amount for
some aircraft assets falls below their current carrying value.
Provisions for customer claims
The staggered travel restrictions which were implemented by
governments across Europe during March 2020 resulted in a large
number of easyJet passengers requiring additional support to be
repatriated. As at 31 March 2020, assumptions were required to
estimate the cost of providing welfare payments for those customers
impacted. These included the number of passengers who would have
eligible claims as well as the estimated expenses that would be
payable under the regulatory framework in place. Reasonable changes
to those assumptions could have a significant impact on the
valuation of the provision recognised.
2. Seasonality
The airline industry is highly seasonal and demand and yields
are significantly higher during the summer. Accordingly revenue and
profitability are usually higher in the second half of the
financial year. Historically, easyJet has reported a loss/low
profit for the first half of the financial year and a profit in the
second half.
3. Non-headline profit measures
The Group seeks to present a measure of underlying performance
which is not impacted by material non-recurring items or items
which are not considered to be reflective of the trading
performance of the business. This measure of profit is described as
'headline' and is used by the Directors to measure and monitor
performance. The excluded items are referred to as 'non-headline'
items.
Non-headline items may include impairments, amounts relating to
acquisitions and disposals, expenditure on major restructuring
programmes, litigation and insurance settlements, balance sheet
exchange gains or losses, the income or expense resulting from the
initial recognition of sale and leaseback transactions, fair value
adjustments on financial instruments and other particularly
significant or unusual non-recurring items. Items relating to the
normal trading performance of the business will always be included
within the headline performance.
An analysis of the amounts presented as 'non-headline' is given
below:
Six months Six months ended
ended
31 March 2020 31 March 2019
GBP million GBP million
----------------------------------------------- -------------- -----------------
Sale and leaseback gain (1) (2)
Brexit-related costs - 4
Commercial IT platform - (2)
------------------------------------------------ -------------- -----------------
Recognised in operating profit (1) -
----------------------------------------------- -------------- -----------------
Balance sheet foreign exchange gain (3) (3)
Fair value adjustment 164 -
----------------------------------------------- -------------- -----------------
Total non-headline charge/(credit) before tax 160 (3)
------------------------------------------------ -------------- -----------------
Tax on non-headline items (30) -
----------------------------------------------- -------------- -----------------
Total non-headline charge/(credit) after tax 130 (3)
------------------------------------------------ -------------- -----------------
Sale and leaseback
The sale and leaseback of the Group's 10 oldest A319 aircraft
resulted in a gain on disposal of the assets of GBP1 million (H1
2019: gain of GBP2 million), recognised within other costs in the
income statement.
Brexit-related costs
Following the UK's referendum vote to leave the European Union
('EU'), the Group has established a multiple Air Operator
Certificate (AOC), post-Brexit structure. This work concluded last
year and resulted in costs of GBP0.3 million for the six months
ended 31 March 2020, which was recognised in other costs within the
income statement.
Commercial IT platform
At the end of FY 2018, a one-off charge of GBP65 million was
recognised in relation to our IT commercial platform. This charge
included a GBP60 million write down of costs previously capitalised
in relation to development, along with an additional GBP5 million
accrual for close down costs. During FY 2019, only GBP3 million of
the close down accrual was utilised, mainly due to anticipated
compromise agreements not being required, and therefore the
remaining GBP2 million was released back to the income
statement.
Balance sheet foreign exchange gain
Foreign exchange gains or losses arising from the retranslation
of monetary assets and liabilities held in the statement of
financial position and foreign exchange derivatives held at fair
value through the income statement are recognised as non-headline
items. For the six months ended 31 March 2020, the overall impact
of balance sheet revaluations was GBP3 million gain (H1 2019: GBP3
million gain).
Fair value adjustment
This relates to hedge accounting ineffectiveness for items
currently held in fair value and cash flow hedge relationships, or
amounts that have been discontinued from a previous hedge
relationship.
In accordance with IFRS 9, hedge effectiveness testing is
performed on a regular, periodic basis. For cash flow hedges this
includes an assessment of highly probable future cash exposures
with the amount compared to the notional of derivatives held in a
hedge relationship. Where derivative contracts exceed the amount of
projected exposures and the forecast is no longer expected to occur
(e.g. for foreign currency or jet fuel), these amounts no longer
qualify for hedge accounting. Fair valuation related to these
ineffective derivatives held in Other Comprehensive Income is then
immediately recorded in the income statement.
Additionally, fair value adjustments may also be recorded
related to hedge relationships that continue to be effective. This
arises as the value of hedged items are adjusted for changes in
fair value attributable to the hedged risks, which are not
perfectly offset by the fair value change on the hedging
instruments due to factors such as in counterparty credit risk,
cash flow timing or amount changes.
Due to the full grounding of the fleet, easyJet is in a
significantly over-hedged position from both a jet fuel and FX
perspective. Primarily as a result of this, a GBP163 million loss
was recognised in the period for fair value adjustments related to
discontinuation of hedge accounting.
In addition, a GBP1m charge for hedge ineffectiveness on Cross
Currency Interest Rate Swaps hedging Eurobond debt in the period
related to currency basis and credit movements. These items
continue in a strong hedge accounting relationship and ineffective
amounts are unrelated to the reduced flying programme.
Total fair value adjustments for the six months ended 31 March
2020 were GBP164m (H1 2019: no gain or loss).
4. Tax credit
Tax on loss on ordinary activities:
Six months ended Six months ended
31 March 2020 31 March 2019
GBP million GBP million
------------------------------------------------- ----------------- -----------------
Current tax 3 3
Deferred tax (32) (57)
-------------------------------------------------- ----------------- -----------------
Total tax credit (29) (54)
-------------------------------------------------- ----------------- -----------------
Effective tax rate 8.3% 19.7%
-------------------------------------------------- ----------------- -----------------
Effective tax rate excluding rate change impact 18.6% 19.7%
-------------------------------------------------- ----------------- -----------------
The forecast effective tax rate (using substantively enacted
rates) is lower than the standard rate of corporation tax in the
United Kingdom (19%) principally due to the movement on the
deferred tax balance due to the cancellation of the rate
reduction.
Tax on items recognised directly in other comprehensive income
Six months Six months
ended ended
31 March 31 March
2020 2019
GBP million GBP million
----------------------------------------------- ------------ ------------
Credit/(charge) to other comprehensive income
Deferred tax charge on defined benefit scheme (1) -
Deferred tax on fair value movements of cash
flow hedges 91 51
------------------------------------------------ ------------ ------------
Total credit to other comprehensive income 90 51
There was no tax on items recognised directly in shareholders' equity
in the period (H1 2019: GBPnil).
5. Loss per share
Six months Six months
ended ended
31 March 31 March
2020 2019
GBP million GBP million
---------------------------------------------------- ------------ ------------
Headline loss for the period (194) (221)
Total loss for the period (324) (218)
----------------------------------------------------- ------------ ------------
Six months Six months
ended ended
31 March 31 March
2020 2019
million million
---------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares used to
calculate basic loss per share 393 394
----------------------------------------------------- ------------ ------------
Six months Six months
ended ended
31 March 31 March
2020 2019
Basic loss per share pence pence
---------------------------------------------------- ------------ ------------
Total (82.4) (55.3)
Adjustment for non-headline 33.0 (0.8)
----------------------------------------------------- ------------ ------------
Headline (49.4) (56.1)
----------------------------------------------------- ------------ ------------
Diluted earnings per share figures are not presented for either
period as the impact of potential ordinary shares is
anti-dilutive.
6. Dividends
easyJet paid a final dividend for the year ended 30 September
2019 of 43.9 pence per share (2019: 58.6 pence per share) on 20
March 2020. The payment of the dividend became legally binding
following approval by shareholders at the Annual General Meeting on
6 February 2020.
7. Property, plant and equipment
Right of use
assets held
under leasing
Owned assets arrangements
--------------------------------- ---------------------
Aircraft Land Aircraft
and and and
spares buildings Other spares Other Total
--------- ----------- -------- ---------- --------- --------
GBP GBP GBP GBP GBP GBP
million million million million million million
--------- ----------- -------- ---------- --------- --------
Cost
At 1 October
2019 5,720 34 76 1,298 34 7,162
Additions 410 - - 39 - 449
Transfer to
intangible
assets - - (6) - - (6)
Aircraft sold
and leased
back (159) - - 54 - (105)
Disposals - - (1) - - (1)
At 31 March
2020 5,971 34 69 1,391 34 7,499
-------------- --------- ---------- -------- --------- --------- --------
Depreciation
At 1 October
2019 1,147 - 18 818 16 1,999
Charge for
the period 128 - 3 121 2 254
Aircraft sold
and leased
back (45) - - - - (45)
At 31 March
2020 1,230 - 21 939 18 2,208
-------------- --------- ---------- -------- --------- --------- --------
Net book
value
-------------- --------- ---------- -------- --------- --------- --------
At 31 March
2020 4,741 34 48 452 16 5,291
-------------- --------- ---------- -------- --------- --------- --------
At 1 October
2019 4,573 34 58 480 18 5,163
-------------- --------- ---------- -------- --------- --------- --------
Assets
held under Right of use assets
IAS 17 held under leasing
finance arrangements under
Owned assets leases IFRS 16
--------------------------------- ------------------------------
Aircraft Land Aircraft Aircraft
and and and and
spares buildings Other spares spares Other Total
--------- ----------- --------- ---------- --------- -------- ---------
GBP GBP GBP GBP GBP GBP GBP
million million million million million million million
-------------- --------- ----------- --------- ---------- --------- -------- ---------
Cost
At 30
September
2018 4,964 - 67 103 - - 5,134
Recognised on
adoption
of IFRS 16 - - - (103) 1,125 32 1,054
At 1 October
2018 4,964 - 67 - 1,125 32 6,188
Additions 905 34 15 - 125 2 1,081
Aircraft sold
and leased
back (149) - - - 48 - (101)
Disposals - - (6) - - - (6)
-------------- --------- ----------- --------- ---------- --------- -------- ---------
At 30
September
2019 5,720 34 76 - 1,298 34 7,162
-------------- --------- ----------- --------- ---------- --------- -------- ---------
Depreciation
At 30
September
2018 946 - 18 30 - - 994
Recognised on
adoption
of IFRS 16 - - - (30) 575 12 557
At 1 October
2018 946 - 18 - 575 12 1,551
Charge for
the period 232 - 5 - 243 4 484
Aircraft sold
and leased
back (31) - - - - - (31)
Disposals - - (5) - - - (5)
-------------- --------- ----------- --------- ---------- --------- -------- ---------
At 30
September
2019 1,147 - 18 - 818 16 1,999
-------------- --------- ----------- --------- ---------- --------- -------- ---------
Net book
value
-------------- --------- ----------- --------- ---------- --------- -------- ---------
At 30
September
2019 4,573 34 58 - 480 18 5,163
-------------- --------- ----------- --------- ---------- --------- -------- ---------
At 1 October
2018 4,018 - 49 - 550 20 4,637
-------------- --------- ----------- --------- ---------- --------- -------- ---------
At 30
September
2018 4,018 - 49 73 - - 4,140
-------------- --------- ----------- --------- ---------- --------- -------- ---------
7. Property, plant and equipment (continued)
Net book value includes GBP300 million (H1 2019: GBP288 million)
relating to advance and option payments for future aircraft
deliveries. This amount is not depreciated.
At 31 March 2020 easyJet was contractually committed to the
acquisition of 107 (H1 2019: 121) Airbus A320 family aircraft, with
a total list price of US$12.9 billion (H1 2019: US$14.2 billion)
before escalations and discounts for delivery. It is expected that
six aircraft will be delivered for the remainder of FY 2020 and no
aircraft will be delivered in FY 2021. See note 14 for further
details.
Included in additions in the period is GBP15 million previously
recognised in prepayments, which has been reclassified to property,
plant and equipment.
During the period GBP6 million has been transferred from PPE to
other intangible assets to reflect their nature.
8. Reconciliation of operating loss to cash generated from
operations
Six months Six months
ended ended
31 March 2020 31 March 2019*
GBP million GBP million
---------------------------------------------------- -------------- ---------------
Operating loss (173) (255)
Adjustments for non-cash items:
Depreciation 254 228
Amortisation of intangible assets 8 8
Loss on disposal of property, plant and
equipment and intangibles 12 2
Gain on sale and leaseback (1) (2)
Share-based payments 7 11
Changes in working capital and other items
of an operating nature:
(Increase)/decrease in trade and other receivables (29) 116
Increase in current intangible assets (86) (46)
Increase/(decrease) in trade and other payables 603 (196)
(Decrease) / increase in unearned revenue (95) 762
Decrease in post-employment benefit contribution (5) (10)
Increase/(decrease) in provisions - (33)
Decrease/(increase) in other non-current
assets 15 (4)
(Decrease)/Increase in derivative financial
instruments (37) 28
Decrease in non-current deferred income (1) -
---------------------------------------------------- -------------- ---------------
Cash generated from operations 472 609
----------------------------------------------------- -------------- ---------------
* Please refer to note 1 for further information on our voluntary
change in accounting policy.
9. Reconciliation of net cash flow to movement in net cash
Fair value
1 October and foreign Net 31 March
2019 exchange Other changes cash flow 2020
GBP million GBP million GBP million GBP million GBP million
--------------------------- ------------ ------------- -------------- ------------ ------------
Cash and cash equivalents 1,285 (19) - (50) 1,216
Money market deposits 291 (1) - (118) 172
---------------------------- ------------ ------------- -------------- ------------ ------------
1,576 (20) - (168) 1,388
--------------------------- ------------ ------------- -------------- ------------ ------------
Eurobonds (1,324) 6 (1) - (1,319)
Lease liabilities (578) 5 (74) 111 (536)
---------------------------- ------------ ------------- -------------- ------------ ------------
(1,902) 11 (75) 111 (1,855)
--------------------------- ------------ ------------- -------------- ------------ ------------
Net cash/(debt) (326) (9) (75) (57) (467)
---------------------------- ------------ ------------- -------------- ------------ ------------
Fair value
1 October and foreign Net 31 March
2018 exchange Other changes cash flow 2019
GBP million GBP million GBP million GBP million GBP million
--------------------------- ------------ ------------- -------------- ------------ ------------
Cash and cash equivalents 1,025 1 - (155) 871
Money market deposits 348 (5) - 66 409
---------------------------- ------------ ------------- -------------- ------------ ------------
1,373 (4) - (89) 1,280
--------------------------- ------------ ------------- -------------- ------------ ------------
Eurobonds (879) 22 (1) - (858)
Lease labilities (629) (1) (78) 85 (623)
(1,508) 21 (79) 85 (1,481)
---------------------------
Net cash/(debt) (135) 17 (79) (4) (201)
---------------------------- ------------ ------------- -------------- ------------ ------------
10. Financial instruments
Carrying value and fair value of financial assets and
liabilities
The fair values of financial assets and liabilities, together
with the carrying value at each reporting date, are as follows:
Amortised
cost Held at fair value
Fair Cash Other
Financial Financial value flow financial Other Carrying Fair
assets liabilities hedges hedges instruments (1) value value
At 31 March GBP GBP GBP GBP GBP GBP GBP
2020 million million million million GBP million million million million
Other
non-current
assets 127 - - - - - 127 127
Trade and
other
receivables 204 - - - - 128 332 332
Trade and
other
payables - (1,497) - - - (163) (1,660) (1,660)
Derivative
financial
instruments - - 67 (468) (153) - (554) (554)
Restricted
cash 4 - - - - - 4 4
Money market
deposits 172 - - - - - 172 172
Cash and
cash
equivalents 715 - - - 501 - 1,216 1,216
Eurobonds
(3), (4)
& (5) - (1,319) - - - - (1,319) (1,013)
Lease
liabilities - (536) - - - - (536) (537)
Equity
Investments
(2) - - - - 33 - 33 33
Amortised cost Held at fair value
Fair Cash Other
Financial Financial value flow financial Other Carrying Fair
assets* liabilities hedges hedges instruments (1) Value* Value*
At 30
September GBP GBP GBP GBP GBP GBP
2019 million GBP million million million GBP million million million million
Other
non-current
assets 141 - - - - 1 142 142
Trade and
other
receivables 139 - - - - 163 302 302
Trade and
other
payables - (919) - - - (131) (1,050) (1,050)
Derivative
financial
instruments - - 73 (30) 20 - 63 63
Restricted
cash 4 - - - - - 4 4
Money market
deposits 291 - - - - - 291 291
Cash and
cash
equivalents 872 - - - 413 - 1,285 1,285
Eurobonds
(3), (4)
& (5) - (1,324) - - - - (1,324) (1,368)
Lease
liabilities - (578) - - - - (578) (580)
Equity
Investments
(2) - - - - 48 - 48 48
* Please refer to note 1 for further information on our voluntary change
in accounting policy.
(1). Amounts disclosed in the 'Other' column are items that do
not meet the definition of a financial instrument. They are
disclosed to facilitate reconciliation of the carrying values of
financial instruments to line items presented in the statement of
financial position.
(2). The equity investment of GBP33 million represents a 13.2%
shareholding in a non--listed entity, The Airline Group Limited
measured with reference to income and market valuation techniques
in line with IFRS 13 'Fair Value Measurement' requirements.
Valuation movements are designated as being fair valued through
other comprehensive income due to the nature of the investment
being held for strategic purposes.
(3). In February 2016, easyJet Plc issued a EUR500 million bond
under the GBP3,000 million Euro Medium Term Note Programme
guaranteed by easyJet Airline Company Limited. The Eurobond pays an
annual fixed coupon of 1.750%. At the same time the Group entered
into three cross-currency interest rate swaps to convert the entire
EUR500 million fixed rate Eurobond to a Sterling floating rate
exposure. All three swaps pay floating interest (three-month LIBOR
plus a margin) quarterly, receive fixed interest annually, and have
maturities matching the Eurobond. The Group designated all three
cross-currency interest rate swaps as a fair value hedge of the
interest rate and currency risks on the EUR500 million Eurobond.
The swaps are measured at fair value through profit or loss with
any gains or losses being taken immediately to the income statement
(except where related to timing differences related to-cross
currency basis amortisation). The carrying value of the Eurobond is
adjusted for changes in fair value attributable to the risks being
hedged. This net carrying value differs to the swap's fair value
depending on movements in the Group's credit risk and
cross-currency basis. The carrying value of the fixed rate Eurobond
net of the cross-currency interest rate swap at 31 March 2020 was
GBP380 million. This value does not include capitalised set-up
costs incurred in the issuing of the bond.
(4). In October 2016 easyJet plc issued EUR500 million bond
under the GBP3,000 million Euro Medium Term Note Programme
guaranteed by easyJet Airline Company Limited. The Eurobond pays an
annual fixed coupon of 1.125%. Shortly after the issuance of the
EUR500 million bond the Group entered into three cross-currency
interest rate swaps to convert the entire EUR500 million fixed rate
Eurobond to a Sterling fixed rate exposure. The cross-currency
interest rate swaps were executed on 8 November 2016 with
settlement and notional exchange occurring on 14 November 2016. All
three swaps pay fixed interest semi-annually, receive fixed
interest annually, and have maturities matching the Eurobond. The
Group designated all three cross-currency interest rate swaps as a
cash flow hedge of the currency risk on the EUR500 million
Eurobond. The cross-currency interest rate swaps are measured at
fair value with the effective portion taken through the statement
of comprehensive income. The element of the fair value generated by
the change
in the spot rate is recycled to the income statement from the
statement of comprehensive income to offset the revaluation of the
Eurobond. The carrying value of the fixed rate Eurobond net of the
cross-currency interest rate swap at 31 March 2020 was GBP450
million. This value does not include capitalised set-up costs
incurred in the issuing of the bond.
(5). In June 2019 easyJet plc issued EUR500 million bond under
the GBP3,000 million Euro Medium Term Note Programme guaranteed by
easyJet Airline Company Limited. The Eurobond pays an annual fixed
coupon of 0.875%. At the same time the Group entered into three
cross-currency interest rate swaps to convert the entire EUR500
million fixed rate Eurobond to a Sterling fixed rate exposure. All
three swaps pay fixed interest semi-annually, receive fixed
interest annually, and have maturities matching the Eurobond. The
Group designated all three cross-currency interest rate swaps as a
cash flow hedge of the currency risk on the EUR500 million
Eurobond. The cross-currency interest rate swaps are measured at
fair value with the effective portion taken through the statement
of comprehensive income. The element of the fair value generated by
the change in the spot rate is recycled to the income statement
from the statement of comprehensive income to offset the
revaluation of the Eurobond. The carrying value of the fixed rate
Eurobond net of the cross-currency interest rate swap at 31 March
2020 was GBP453 million. This value does not include capitalised
set-up costs incurred in the issuing of the bond.
Fair value calculation methodology
The fair value measurement hierarchy levels have been defined as
follows;
-- Level 1, fair value of financial instruments based on quoted
prices (unadjusted) in active markets for identical assets or
liabilities.
-- Level 2, fair value of financial instruments in an active
market (for example, over the counter derivatives) which are
determined using valuation techniques which maximise the use of
observable market data and rely as little as possible on entity
specific estimates.
-- Level 3, fair value of financial instruments that are not
based on observable market data (i.e. unobservable inputs).
Where available the fair values of derivatives and financial
instruments have been determined by reference to observable market
prices where the instruments are traded. Where market prices are
not available, the fair value has been estimated by discounting
expected future cash flows at prevailing interest rates and by
applying year end exchange rates (excluding the Airline Group
Limited equity investment).
The fair values of the three Eurobonds are classified as level 1
of the IFRS 13 Fair Value Measurement hierarchy (valuations taken
as the closing market trade price for each respective Eurobond as
at 31 March 2020). Apart from the equity investment, the remaining
financial instruments for which fair value is disclosed in the
table above, and derivative financial instruments, are classified
as level 2.
The equity investment is classified as level 3 due to the use of
forecast cash flows which are discounted to present value. Though
there are other level 2 inputs to the valuation, the discounted
cash flow is a significant input which is not based on observable
market data. The fair value is assessed at each reporting date
based on the discounted cash flows and two other valuations
calculated using a market approach and level 2 inputs. If the level
3 forecast cash flows were 10% higher or lower the fair value would
not increase/decrease by a significant amount.
11. Contingent liabilities and commitments
easyJet is involved in a number of disputes and litigation which
arose in the normal course of business. The likely outcome of these
disputes and litigation cannot be predicted, and in complex cases
reliable estimates of any potential obligation may not be
possible.
On 19 May 2020, easyJet announced that it had been the target of
a cyber-attack from a highly sophisticated source. The email
address and travel details of approximately 9 million customers
were accessed and for a very small subset of customers (2,208),
credit card details were accessed. Initial discussions have been
held with the Information Commissioner's Office (ICO) and no
provision has currently been recognised. The merit, likely outcome
and potential impact on easyJet is subject to a number of
significant uncertainties and, therefore, any assessment of the
likely outcome or quantum cannot be made at the date of this
disclosure.
As part of the commitment to voluntary carbon offsetting,
easyJet currently has contractual commitments to purchase Verified
Emission Reductions worth GBP29 million in total over the next
three years.
12. Related party transactions
The Company licenses the easyJet brand from easyGroup Ltd
('easyGroup'), a wholly owned subsidiary of easyGroup Holdings
Limited, an entity in which easyJet's founder, Sir Stelios
Haji-Ioannou, holds a beneficial controlling interest. No changes
to the Haji-Ioannou family concert party shareholding have been
disclosed to easyJet in accordance with the Disclosure Guidance and
Transparency Rules DTR 5, between 30 September 2019 and 31 March
2020.
Under the Amended Brand Licence signed in October 2010 and
approved by the shareholders of easyJet plc in December 2010, an
annual royalty of 0.25% of total revenue is payable by easyJet to
easyGroup for a minimum term of 10 years. The full term of the
agreement is 50 years.
easyJet and easyGroup established a fund to meet the annual
costs of protecting the 'easy' (and related marks) and the
'easyJet' brands. easyJet contributes up to GBP1 million per annum
to this fund and easyGroup contributes GBP100,000 per annum. Beyond
the first GBP1.1 million of costs, easyJet can commit up to an
aggregate GBP5.5 million annually to meet brand protection costs,
with easyGroup continuing to meet its share of costs on a 10:1
ratio. easyJet must meet 100% of any brand protection costs it
wishes to incur above this limit.
The amounts included in the income statement for these items
were as follows:
Six months Six months
ended ended
31 March 31 March
2020 2019
GBP million GBP million
------------ ------------
Annual royalty 5.9 5.9
Brand protection (legal fees paid through easyGroup
to third parties) 0.3 0.2
6.2 6.1
-----------------------------------------------------
At 31 March 2020, GBP3.5 million (2019: GBP0.5 million) of
related party balances were held in trade and other receivables and
payables (net receivable).
13. Segmental Reporting
H1 2020
Airline Holidays Eliminations Group
GBP million GBP million GBP million GBP million
Revenue 2,374 11 (3) 2,382
Operating costs excl fuel (1,737) (26) 3 (1,760)
Fuel (534) - - (534)
Ownership costs (280) (1) - (281)
Headline loss before tax (177) (16) - (193)
Non-headline items (161) 1 - (160)
Total loss before tax (338) (15) - (353)
The elimination column represents sales from Airline to Holidays
which are recorded at arm's length and eliminated on consolidation.
Individual cost lines are not reported separately as these are not
key metrics reported to the Chief Operating Decision Maker (CODM).
Assets and liabilities are not allocated to individual segments and
are not separately reported to or reviewed by the CODM, and
therefore these have not been disclosed. Interest income and
expenditure are not allocated to segments as this activity is
driven by the central treasury function which manages the cash
position of the group. Comparative information is not provided as
the Holidays segment was created in the current period.
14. Events after the reporting period
On 6 April 2020 easyJet issued a GBP600 million Commercial Paper
through the Covid Corporate Financing Facility (CCFF). This is an
unsecured, short term paper repayable in March 2021.
On 6 April 2020 easyJet fully drew down its $500 million
Revolving Credit Facility, secured against aircraft assets.
On 9 April 2020 easyJet announced that it had reached agreement
with Airbus for the net deferral of 24 aircraft versus our
previously disclosed fleet plan. On 16 June 2020, the exact
delivery dates were finalised. In total, 32 aircraft with original
delivery dates between June 2020 and December 2021 were deferred.
As 8 aircraft were deferred from FY 2020 to FY 2022, the net number
of deferrals from the Financial Years 2020, 2021 and 2022 was 24
aircraft (being 32 less 8). These 24 aircraft were originally
deferred beyond December 2022 and it has now been agreed that these
aircraft will be delivered from FY 2025 to FY 2027.
On 16 April 2020 easyJet secured two term loans totalling $425
million. Both loans are secured against aircraft assets and mature
in 2022.
On 19 May 2020, easyJet announced that it had been the target of
a cyber-attack from a highly sophisticated source. The email
address and travel details of approximately 9 million customers
were accessed and for a very small subset of customers (2,208),
credit card details were accessed. Initial discussions have been
held with the Information Commissioner's Office (ICO) and no
provision has currently been recognised. The merit, likely outcome
and potential impact on easyJet is subject to a number of
significant uncertainties and, therefore, any assessment of the
likely outcome or quantum cannot be made at the date of this
disclosure.
A General Meeting was convened on 22 May 2020 to consider four
resolutions proposed at the direction of Sir Stelios Haji-Ioannou
to remove as directors of the Company the Chairman, John Barton;
the CEO, Johan Lundgren; the CFO, Andrew Findlay and Independent
Non-Executive Director, Andreas Bierwirth. The Board had
unanimously recommended that shareholders vote against these
resolutions. All four resolutions were defeated.
On 26 May 2020 Andrew Findlay advised the Board of his intention
to leave easyJet. In adherence with his contractual obligations he
is expected to leave easyJet in May 2021.
On 8 June 2020 easyJet announced that Charles Gurassa, Deputy
Chairman and Senior Independent Director, and Andy Martin,
Independent Non-Executive Director and Chair of the Finance
Committee, notified the Board that they intend to step down from
the Board in line with corporate governance best practise having
each served on the Board for nine years. Andy Martin will step down
on 31 August 2020. Charles Gurassa has agreed to stay on until 31
December 2020.
Since 31 March 2020 15 aircraft have been sold and leased back
generating cash of GBP301 million.
Statement of Directors' responsibilities
The Directors are responsible for preparing the interim report
in accordance with applicable law and regulations. The Directors
confirm that the condensed consolidated interim financial
information has been prepared in accordance with International
Accounting Standard 34 ('Interim Financial Reporting') as adopted
by the European Union and the Accounting Standards Board's 2007
statement on half-yearly reports.
The interim management report includes a fair review of the
information required by the Disclosure and Transparency Rules
paragraphs 4.2.7 R and 4.2.8 R, namely:
-- an indication of important events that have occurred during
the six months ended 31 March 2020 and their impact on the
condensed set of financial information, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
-- material related-party transactions during the six months
ended 31 March 2020 and any material changes in the related-party
transactions described in the Annual report and Accounts 2019.
The Directors of easyJet plc are listed in the Annual report and
Accounts 2019. A list of current Directors is maintained on the
easyJet plc website: http://corporate.easyJet.com and includes the
appointment of Catherine Bradley CBE as a non-executive director in
January 2020.
The Directors are responsible for the maintenance and integrity
of, amongst other things, the financial and corporate governance
information as provided on the easyJet website
(http://corporate.easyJet.com). Legislation in the United Kingdom
governing the preparation and dissemination of financial
information may differ from legislation in other jurisdictions.
The interim report was approved by the Board of Directors and
authorised for issue on 24 June 2020 and signed on its behalf
by:
Johan Lundgren Andrew Findlay
Chief Executive Chief Financial Officer
Independent review report to easyJet plc
Report on the consolidated interim financial information
Our conclusion
We have reviewed easyJet plc's consolidated interim financial
information (the "interim financial statements") in the interim
report of easyJet plc for the 6 month period ended 31 March 2020.
Based on our review, nothing has come to our attention that causes
us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Emphasis of matter - Going concern
Without modifying our conclusion on the interim financial
statements, we have considered the adequacy of the disclosure made
in note 1 to the interim financial statements concerning the
Group's ability to continue as a going concern. The Group's
forecast and projections assume a phased return to flying which
represents a significant reduction to historical revenue levels,
along with cost saving measures and reductions in capital
expenditure.
After making enquiries and considering the uncertainties
described in note 1, the directors have a reasonable expectation
that the Group has access to adequate resources to continue in
operational existence for the foreseeable future. For these
reasons, they continue to adopt the going concern basis of
accounting in preparing the interim financial statements.
In the event that there is a second wave or multiple waves of
the pandemic, leading to further travel restrictions being imposed
in the markets easyJet operates in, the Group may require further
financing. As described in note 1, the occurrence of such severe
but plausible events and the availability of additional financing
represents a material uncertainty that could cast significant doubt
upon the Group's ability to continue as a going concern.
The interim financial statements do not include the adjustments
that would result if the Group were unable to continue as a going
concern.
What we have reviewed
The interim financial statements comprise:
the consolidated statement of financial position as at 31 March
2020;
the consolidated income statement and consolidated statement of
comprehensive income for the period then ended;
the consolidated statement of cash flows for the period then
ended;
the consolidated statement of changes in equity for the period
then ended; and
the explanatory notes to the interim financial statements.
The interim financial statements included in the interim report
have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as adopted by the
European Union and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim report, including the interim financial statements,
is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the interim report in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the interim report based on our review.
This report, including the conclusion, has been prepared for and
only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
24 June 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR ZZGZVKDKGGZM
(END) Dow Jones Newswires
June 24, 2020 11:39 ET (15:39 GMT)
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