Ryanair 2004 Annual Report Download - page 11

Operating Expenses (continued)
Maintenance costs increased by 46% to 43.4m reflecting an
increase in the size of the fleet operated, an increase in the
number of flight hours, and higher mainte n a n ce c h a rg es
relating to the “Buzz” aircraft, offset by maintenance savings
due to improved reliability arising from the higher proportion
of Boeing 737-800 “next generation” aircraft operated as a
percentage of the total fleet. In addition the entry into
operation of ten aircraft by way of operating lease has
resulted in the recognition of contractualprovisions forfuture
overhaul costs of 1.5mbeing recognised within maintenance
costs. This accounting policy contrasts with that adopted for
aircraft owned by the company where such maintenance costs
are capitalised and amortised.
Marketing and distribution costs increased by 10% to 16.1m
due to a higher spend on the promotion of 73 new routes, and
the launch of two new bases at Barcelonaand Rome in the last
quarter.
Ro u te charg es i n c rea sed by 61% to 1 1 0.3m due to an increa se
in the number of se c to rs fl own, an increa se in the ave ra g e
se c tor length and an increa se in the ave rage size of the airc ra ft
o p e ra ted which incur a higher ave rage charge, offset by t h e
impact of a wea ker sterling to euro exc hange ra te.
A i r p o rt and handling charg es i n c rea s ed by 36% to 1 4 7. 2 m
due to an increa se in the number of passe n g e rs fl own, and the
impact of increa sed airport and handling charg es on so m e
ex i sting rou t es, offset by lower charg e s on our new Eu ro p ea n
ro u tes.
Other expenses increased by 31% to 78.0m, which is less
than the growth in ancillary revenues due to improved margins
on some new and existing products, and cost reductions
achieved on other indirect overheads.
Adjusted Operating Profits
Adjusted operating profits have increased by 3% to 270.9m
during the year despite the decline in operating margins to
25% due to the reasons outlined above.
Interest Receivable
Interest receivable decreased by 7.5m to 23.9m reflecting
the strong growth in cash resources arising from the profitable
trading performance, offset by reductions in deposit interest
rates during the year. Interest payable increased by 16.7m
to 47.6m due to the increased level of debt arising from the
purchase of eight Boeing 737-800 ”nextgeneration” aircraft.
Foreign Exchange Gains
Fo r eign exchange gains a rose primarily from the co nve rsion of
sterling and US$ bank balances to euro at the year end, plus the
co nve rsion of fo re i g n cu r re n cy re ce i vable and paya b l e
b a l a n c es.
Taxation
Taxation adjusted for exceptional items has declined by 5%
during the year, in line with the decline in pre tax profits and a
decrease in the headlineIrish corporation tax rate.
Earning per Share (EPS)
Basic EPS (as adjusted for exceptional items and goodwill)
d e c rea sed by 6% to 29.91 euro ce n ts and is based on
757,446,873 shares which represents the weighted average
number of ordinary shares in issue during the year.
Balance Sheet
The group’s balance sheet continues to benefit from the strong
growth in profits generated. The group in turngenerated cash
from operating activities of 462.1m which partly funded the
acquisition of eight Boeing 737-800 “next generation” aircraft
and additionalaircraft deposits. Capital expenditure amounted
to 331.6m, primarily consisting of new aircraft additions
whilst debt funding increased to 953.0m during the same
period.
Capital Expenditure
During the year the group’s capital expenditure amounted to
331.6m. The majority of this related to the purchase of eight
Boeing 737-800 “next genera t i o n” airc ra ft and depos i ts
relating to the future acquisition of additional new Boeing 737-
800s. Ten new Boeing 737-800 “next generation” aircraft
were financed by way of operating lease during the year
bringing the total new aircraft operated to 18. Further details
are given in note 8.
Review of Cash Flow
Cash genera ted from operating activities was 4 62 .1 m ,
reflecting the overall profitability of the group. This has
enabled the group to increase its cash andliquid resources by
197.1m to 1,257.4m despite funding capital expenditure of
144.6m from internal cash resources. The group also made
total acq u i stion pay m e n ts of 32 .7m in respect of the
purchase of Buzz Stansted Limited including provision for
onerous leases.
(Continued)
Operating & Financial Review 11
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