Aer Lingus 2011 Annual Report Download - page 19

OPERATING AND FINANCIAL REVIEW Aer Lingus Group Plc
Annual Report 2011
Finance income of ¤15.4m (2010: ¤22.9m) decreased by 32.7%
reflecting the impact of lower interest rates in 2011 compared to 2010
(i.e. 1.6% in 2011 compared to 2.4% in 2010) and lower average cash
balances which amounted to ¤929m during the year (2010: ¤949m).
Tax charge
There was a tax charge for the year of ¤13.2 million (2010: ¤15.8
million credit) arising from a decrease in deferred tax assets due to
profits incurred during the year and movements in provisions against
deferred tax assets No cash corporation tax is payable in respect of
2011. The tax charge of ¤13.2 million represents an effective tax rate
of 15.6%. The Group’s corporation tax losses carried forward as at 31
December 2011 amounted to ¤424.9 million.
Cash flow, cash and debt
The Group had a free cash outflow in 2011 of ¤24.9 million.
Significant cashflow movements in 2011 included working capital
inflows of ¤11.1 million, net capital expenditure of ¤116.1 million (of
which ¤96.0 million was financed by new finance leases drawn down
in 2011 and a payment of ¤30.0 million to settle the Group’s
obligations in respect of the 2008 “Leave and Return” scheme.
Gross cash (deposits and cash and cash equivalents) increased by ¤9.8
million during 2011 to ¤894.8 million (31 December 2010: ¤885.0
million). In addition to free cashflow discussed above, the Group
obtained new finance lease financing of ¤96.0 million for new aircraft,
made lease repayments totalling ¤62.0 million and received net
interest of ¤3.5 million.
Gross debt increased by ¤42.0 million in 2011. As noted above,
finance lease obligations at 31 December 2011 increased by ¤96.0
million and totalled ¤577.2 million (31 December 2010: ¤535.2
million). This increase was partially reduced by scheduled repayments
of ¤62.0 million, currency movements amounting to ¤2.9 million and
accrued interest of ¤5.1 million.
Aer Lingus’ debt maturity profile extends until 2023 with finance lease
repayments of approximately ¤40 million and ¤42 million expected in
2012 and 2013, respectively.
Fuel, currency and emissions hedging
To achieve greater certainty on costs we manage our exposure to
fluctuations in the prices of fuel and foreign currency through hedging.
At 31 December 2011 our estimated fuel requirements for 2012 and
for 2013 were approximately 436,100 tonnes in each year, which
were hedged as follows:
The Group’s major foreign currency exposure is to the US dollar. At 31
December 2011, the Group’s forward purchases of US dollars
comprised: $206m of the estimated trading requirements for 2012 at
an average rate of ¤1=$1.42 and $63m of the estimated trading
requirements for 2012 at an average rate of ¤1=$1.40. In addition,
the Group has hedged 33% of the cost of six new A350 aircraft due for
delivery in 2015 and 2016 at an average rate of ¤1=$1.39.
The EU emissions trading system (“EU ETS”) became effective for
Airlines from 1 January 2012. Under the EU ETS, all flights departing
from and arriving at EU airports must pay for a portion of their carbon
emissions. Aer Lingus has received free allowances amounting to 80%
of its 2012 requirement under the EU ETS. The Group has purchased
the balance of its 2012 requirements for ¤1.66 million.
Fleet
The Group took delivery of four new A320, finance leased, short haul
aircraft and disposed of one older A330 long haul aircraft during the
year. Aer Lingus also exercised an option with Airbus to defer an order
for three A330 aircraft which were originally scheduled for delivery in
2013 and 2014.to no earlier than 2018. Separately, Aer Lingus
expects to take delivery of 3 A350 aircraft no earlier than 2015. As a
result, the airline faces no short term aircraft capital expenditure peaks.
The Group also intends to introduce two leased A319 aircraft into the
fleet in early 2012 to replace operating leased A320 aircraft exiting the
fleet. The economics associated with the A319 aircraft type are
appropriate for some of the lower demand routes within the Aer
Lingus network and should drive further operating and cost
efficiencies. Aer Lingus has no current plans to significantly change
short haul capacity deployment in 2012.
Basic and diluted profit per share
Basic earnings per share is calculated by dividing the profit attributable
to the owners of the parent by the weighted average number of shares
in issue during the year, excluding shares issued under the Long-Term
Incentive Plan, which are classified as treasury shares. There were no
dilutive potential ordinary shares in existence in 2011 and 2010.
Therefore, there was no difference, in both periods, between basic and
diluted earnings per share.
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2012 2013
%hedged 62% 7%
Average price per tonne (excl. into-plane costs) $972 $991
2011 2010
Profit attributable to owners of the 71.2 43.0
parent (¤million)
Weighted average number of ordinary 529,761 529,593
shares in issue (000s)
Basic and diluted earnings per share 13.4 8.1
(¤ cent per share)