Ryanair 2012 Annual Report Download - page 89

89
Operating profit. As a result of the factors outlined above, operating profit increased 2.5% on a per-
ASM basis in the 2011 fiscal year, and also increased in absolute terms, from €402.1 million in the 2010 fiscal
year to €488.2 million in the 2011 fiscal year.
Finance income. Ryanair‘s interest and similar income increased 15.8%, from €23.5 million in the
2010 fiscal year to €27.2 million in the 2011 fiscal year reflecting the impact of higher market interest rates
which was partially offset by the Company‘s policy of continuing to place its deposits with highly rated and
guaranteed financial institutions which typically provide a lower yield.
Finance expense. Ryanair‘s interest and similar charges increased 30.2%, from €72.1 million in the
2010 fiscal year to €93.9 million in the 2011 fiscal year, primarily due to the drawdown of debt related to the
acquisition of additional Boeing 737-800 aircraft. These costs are expected to increase as Ryanair further
expands its fleet.
Foreign exchange losses/gains. Ryanair recorded foreign exchange losses of €0.6 million in the 2011
fiscal year, as compared with foreign exchange losses of €1.0 million in the 2010 fiscal year, with the different
result being primarily due to the strengthening of the U.K. pound sterling and U.S. dollar against the euro during
the 2011 fiscal year.
Taxation. The effective tax rate for the 2011 fiscal year was 11.0%, as compared to an effective tax rate
of 10.5% in the 2010 fiscal year. The effective tax rate reflects the statutory rate of Irish corporation tax of
12.5%. Ryanair recorded an income tax provision of €46.3 million in the 2011 fiscal year, compared with a tax
provision of €35.7 million in the 2010 fiscal year, with the increase primarily reflecting higher pre-tax profits.
The determination regarding the recoverability of the deferred tax asset was based on future income forecasts,
which demonstrated that it was more likely than not that future profits would be available in order to utilize the
deferred tax asset. A deferred tax asset‘s recoverability is not dependent on material improvements over
historical levels of pre-tax income, material changes in the present relationship between income reported for
financial and tax purposes, or material asset sales or other non-routine transactions.
SEASONAL FLUCTUATIONS
The Company‘s results of operations have varied significantly from quarter to quarter, and
management expects these variations to continue. Among the factors causing these variations are the airline
industry‘s sensitivity to general economic conditions and the seasonal nature of air travel. Ryanair typically
records higher revenues and income in the first half of each fiscal year ended March 31 than the second half of
such year.
RECENTLY ISSUED ACCOUNTING STANDARDS
Please see Note 1 to the consolidated financial statements included in Item 18 for information on
recently issued accounting standards that are material to the Company.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity. The Company finances its working capital requirements through a combination of cash
generated from operations and bank loans for the acquisition of aircraft. See ―Item 3. Key Information—Risk
Factors—Risks Related to the Company—The Company Will Incur Significant Costs Acquiring New Aircraft‖
for more information about risks relating to liquidity and capital resources. The Company had cash and liquid
resources at March 31, 2012 and 2011 of €3,515.6 million and €2,940.6 million, respectively. The increase at
March 31, 2012 primarily reflects cash generated from operating activities of €1,020.3 million offset in part by
the cash used to fund the purchase of property, plant, and equipment – primarily 14 new Boeing 737-800 aircraft
and the purchase of 36.5 million Ordinary Shares via a share buy-back costing €124.6 million. During the 2012
fiscal year, the Company funded its €317.6 million in purchases of property, plant, and equipment out of €292.3
million in loans. Cash and liquid resources included €35.1 million and €42.9 million in ―restricted cash‖ held on
deposit as collateral for certain derivative financial instruments entered into by the Company with respect to its
aircraft financing obligations and other banking arrangements at March 31, 2012 and 2011, respectively. See
―Item 8. Financial Information Other Financial Information Legal Proceedings.‖