EasyJet 2009 Annual Report Download - page 27

Annual report and accounts 200925 easyJet plc
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Overview
Business review
Governance
Accounts
Other information
Balance sheet and cash flow
As discussed in the Business Review, the industry has faced challenging
economic conditions in 2009. However, easyJet continued to generate
a strong operating cash ow and ended the year with over £1 billion in
cash and short-term liquid deposits, a strong balance sheet and signicant
undrawn committed nancing to fund future aircraft deliveries.
A clear focus on working capital and balance sheet management has
put easyJet in a strong position to withstand the current economic
climate and to emerge stronger.
Despite a signicant tightening of credit in capital markets, easyJet
has capitalised on the strength of its business model and nancial position
to secure additional debt and lease nancing to add to that agreed in
December 2007.
Summary balance sheet
2009
£ million
2008
(restated)*
£ million
Change
£ million
Goodwill 365.4 365.4 –
Property, plant and equipment 1,612.2 1,102.6 509.6
Other non-current assets 213.2 218.4 (5.2)
2,190.8 1,686.4 504.4
Net working capital (537.3) (306.5) (230.8)
Cash and cash equivalents 788.6 632.2 156.4
Money market deposits 286.3 230.3 56.0
Borrowings (1,120.6) (626.9) (493.7)
Other non-current liabilities (300.5) (337.3) 36.8
Net assets 1,307.3 1,278.2 29.1
Share capital and premium 748.5 745.9 2.6
Reserves 558.8 532.3 26.5
Shareholders’ funds 1,307.3 1,278.2 29.1
*Fair value adjustments in respect of GB Airways, see note 23 to the accounts.
Shareholders’ funds increased by £29.1 million in the year, the prot after tax
being offset by a reduction in the fair value of the Group’s cash ow hedges
net of deferred tax. The strengthening of the US dollar and the euro against
sterling in the year has caused a signicant reduction in the fair value of the
Group’s currency derivative portfolio; this was partially offset by a decrease
in the value of the jet fuel derivative liability as fuel prices fell. These fair value
gains and losses are deferred in equity and recycled to the income statement
in line with the underlying hedged transaction.
Goodwill was £365.4 million at 30 September 2009. Provisional fair values of
assets and liabilities acquired through a business combination may be adjusted
for 12 months following the acquisition date; for GB Airways this period ended
on 31 January 2009. Since 30 September 2008, the fair value of maintenance
provisions has been increased reecting additional liabilities relating to
engines on aircraft held under operating leases. After allowing for tax relief,
goodwill relating to the GB Airways acquisition increased by £5.6 million
to £55.8 million. Comparative balances have been adjusted to reect that
these liabilities were extant at the acquisition date.
The net increase in property, plant and equipment in the year was £509.6
million. Additions in respect of new aircraft delivered, pre-delivery deposits
for future deliveries and non-aircraft xed assets totalled £515.0 million, this
was offset by depreciation charged in the year of £55.4 million and disposals
of £4.9 million. During the year, easyJet took delivery of an additional 20 A319
aircraft and the rst 15 easyJet specication A320 aircraft. Three ex-GB
Airways A321 aircraft were sold generating a prot of £11.0 million.
These assets had been transferred to assets held for sale in 2008. Four A321
aircraft remain as assets held for sale at 30 September 2009. The ve easyJet
specication A319 aircraft disclosed as assets held for sale at 30 September
2008 were taken off the market in the year and returned to property, plant
and equipment at their book value of £54.9 million. Potential purchasers have
found credit hard to obtain in the current market and the Board has agreed to
retain these owned aircraft to support the European expansion plans in 2010.
Net working capital improved by £230.8 million in the year. Assets held
for sale decreased by £121.7 million with three A321s sold and ve A319s
returned to property, plant and equipment. Trade and other payables
increased by £97.7 million as a result of additional unearned income, the
increase in the size of the business and efcient working capital management.
Unearned income increased due to the strength of the euro against sterling
and as a result of the schedule now being on sale out for up to 11 months.
In addition, the fair value of short-term derivative balances decreased
£43.6 million year-on-year as the US dollar and euro strengthened
against sterling.
The total of cash and cash equivalents and money market deposits was
£1,074.9 million at 30 September 2009 up £212.4 million compared to
30 September 2008. Net cash of £134.5 million was generated from
operations as a result of cash received in advance from customers and strong
working capital management. £90.2 million was received from the sale of
three ex-GB A321 aircraft and other xed assets in the year. The purchase
of aircraft in the year was funded predominantly by additional borrowings.
Of the 35 A320 family aircraft delivered in the year, 31 were mortgage
nanced. Money market deposits are held partially in US dollars to provide
a match against US dollar denominated borrowings.
Excluded from the above total is £72.3 million of restricted cash disclosed
in other non-current assets and net working capital. These amounts relate
principally to operating lease deposits and customer payments for holidays.
The total of cash and cash equivalents, money market deposits and restricted
cash at 30 September 2009 was £1,147.2 million (30 September 2008:
£928.7 million).
As detailed above, most aircraft deliveries were funded from additional
borrowings. Total borrowings increased by £493.7 million in the year to
£1,120.6 million as a result of £468.2 million of new draw downs net of
repayments and foreign exchange movements of £25.5 million on the
retranslation of debt. Most borrowings are denominated in US dollars;
however some facilities were drawn in euros for the rst time in the year.
The US dollar rate moved from 1.78 at 30 September 2008 to 1.60
at 30 September 2009.
Other non-current liabilities include maintenance provisions for work due
to be performed in more than one year of £168.6 million, deferred income
relating principally to the excess of sale price over fair value for aircraft subject
to sale and leaseback of £52.6 million, deferred tax liabilities of £76.7 million
and long-term nancial instrument liabilities of £2.6 million.
Maintenance provisions have been impacted by the movement in the
US dollar and euro exchange rates in the year. Deferred tax liabilities have
decreased by £31.1 million since 30 September 2008 as a result of the
reduction in the value of cash ow hedges, reduced accelerated capital
allowances and the recognition of a deferred tax asset on losses; offset
by a charge for increased short-term operating timing differences.