Aer Lingus 2013 Annual Report Download - page 4

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Use of non-IFRS measures
In discussion of our full year financial results for 2013, we refer to seven non-IFRS financial measures at various points in this annual
report. These non-IFRS measures are set out below along with an accompanying description and reconciliation to the appropriate IFRS
measure. These non-IFRS measures are used to assist an understanding of 2013 performance.
Non-IFRS
measure
Basis of calculation
Reason for use
EBITDAR
Pre-exceptional earnings before
Interest, Tax, Depreciation,
Amortisation and Aircraft operating
lease rental
As EBITDAR is a pre-depreciation and lease rental measure, it is widely
used by airline sector analysts to compare performance of airlines that
have differing fleet ownership models
Operating profit
Operating profit is defined as revenue
less operating costs, before
exceptional items arising within these
captions. It therefore excludes
finance income and expense, the
results of joint ventures and tax.
These items are excluded since they
largely represent the impact of market
conditions on the Group’s investing
and financing activities, as opposed to
the results arising from the operation
of the airline. Exceptional items are
also presented separately to assist in
understanding the Group’s underlying
financial performance. Operating
margin is defined as operating profit
expressed as a percentage of revenue
Operating profit is a commonly used financial measure which is not
defined in IAS 1, Presentation of Financial Statements. The Group uses
operating profit as a key internal measure and this figure is also provided
in the income statement because the directors believe that presenting the
financial result at this level gives users of the financial statements a better
understanding of the Group’s underlying performance
Free cashflow
Cash generated from operating
activities less net capital expenditure
(purchases of fixed assets exclusive of
finance lease debt raised less proceeds
from disposals) plus or minus net
interest received/paid
Free cashflow is used by some airline sector analysts and other
commentators as a measure of the cash generated by a business. It
measures cash flow after capital expenditure to maintain operations but
before “discretionary” spend such as dividends
Gross cash
Cash deposits and formerly available
for sale bonds held by Aer Lingus
Group plc and its subsidiaries
Gross cash is the measure used most commonly by management to
indicate the level of financial resources available to the Group.
Management believe that gross cash rather than net cash is an appropriate
cash metric on the basis that Aer Lingus’ debt comprises long term
financing rather than short term debt or overdrafts
Gross debt
Total finance leases plus any other
debt
Gross debt is the measure used most commonly by management to
indicate the level of indebtedness borne by Aer Lingus
Constant
currency
passenger fare
revenue
Passenger fare revenue generated in
foreign currencies is retranslated at
respective prior year FX rates and
compared to current year foreign
currency derived passenger fare
revenue at respective current year FX
rates
The Group now generates approximately half of passenger bookings
outside Ireland. This results in more of our total passenger fare revenue
being receivable in currencies other than the euro, our reporting currency.
Movements in FX rates cause variances in total passenger fare revenue
outside of normal volume and fare yield. Constant currency calculation
allows for a more informative comparison of passenger fare revenue on
an overall year-on-year basis
Return on equity
Profit before taxation and net
exceptional items expressed as a
percentage of the average opening and
closing book value of equity
Return on equity is the measure used by management to assess returns
generated by the business for shareholders
EBITDAR - € million
2013
2012
Operating profit before net exceptional items
61.1
69.1
Add back:
Depreciation & amortisation
82.9
76.1
Aircraft operating lease costs
45.2
46.1
EBITDAR
189.2
191.3
Free cashflow - € million
2013
2012
Cash generated from operating activities (before FX on deposits)
112.2
118.5
Net capital expenditure
(31.4)
(41.1)
Net interest paid
(4.5)
(2.2)
Free cashflow
76.3
75.2