Annual Report and Accounts 2018 Worldreginfo - 5348899A-C360-490D-901F-Ea3e05f4676e INVESTMENT CASE
Total Page:16
File Type:pdf, Size:1020Kb
THE WARMEST WELCOME IN THE SKY ANNUAL REPORT AND ACCOUNTS 2018 WorldReginfo - 5348899a-c360-490d-901f-ea3e05f4676e 2018 at easyjet STRATEGIC REPORT 1 Chairman's letter 2 Highlights 3 Investment case 4 At a glance easyJet has a well-established 6 Market review 7 Our business model business model that provides 8 Our strategy 10 Chief Executive's review a strong foundation to drive 10 Overview 13 Strategic progress profitable growth and long- 21 Outlook 28 Key performance indicators term shareholder returns. 30 Financial review 36 Going concern 36 Viability statement During the year easyJet has 37 Key statistics 38 Risk reviewed and refreshed its 49 Corporate responsibility strategic framework which CORPORATE GOVERNANCE 59 Chairman's statement on is now called 'Our Plan'. corporate governance 61 Board of Directors 64 Airline Management Board This plan includes 'Our Purpose', 67 Corporate governance report 87 Directors' remuneration report 'seamlessly connecting Europe 106 Directors' report 110 Statement of Directors' with the warmest welcome in responsibilities ACCOUNTS the sky'. 111 Independent auditors' report to the members of easyJet plc 118 Consolidated accounts 'Our Promise' to ourselves 123 Notes to the accounts 150 Company accounts is that we will be: 153 Notes to the Company accounts 155 Five-year summary • Safe and responsible 156 Glossary • On our customers' side • In it together • Always efficient • Forward thinking VISIT OUR WEBSITE FOR OTHER INVESTOR INFORMATION http://corporate.easyJet.com/investors WorldReginfo - 5348899a-c360-490d-901f-ea3e05f4676e CHAIRMAN’S LETTER Delivering long-term value The 2018 financial year has been a tough but successful one for basic headline earnings per share increasing by 43.4% to easyJet, with industry-wide disruption being more than offset by record 118.3 pence (2017: 82.5 pence). Total profit before tax increased revenues. Uncertainty around Brexit, high oil prices and the wider by £60 million to £445 million. Non-headline costs of £133 million macro-economic environment have led to a recent fall in the share (2017: £23 million) included a £40 million transition cost of Tegel price which is disappointing, but easyJet is well positioned to face and a £65 million charge relating to a change in our approach to current market challenges and take advantage of any opportunities technology development. Basic total earnings per share increased arising. In 2018 the Group has increased the number of passengers by 17.4% to 90.9 pence (2017: 77.4 pence). flown by over 10.2% to 88.5 million passengers (2017: 80.2 million) and revenue has increased to £5,898 million (2017: £5,047 million). DIVIDENDS In the year, we acquired part of Air Berlin’s operations at Tegel, easyJet’s dividend policy is to pay shareholders 50% of headline the integration of which is progressing well. This acquisition is an earnings, reflecting the Board’s confidence in the long-term important strategic move that secures a leading position in one prospects of the business. I am pleased to recommend to of Europe’s biggest markets. shareholders a dividend of 58.6 pence for the 2018 financial year, an increase of 43.3% from the previous year. BOARD Johan Lundgren became Chief Executive on 1 December 2017 BERLIN TEGEL and during his first year has taken the opportunity to meet many As noted above, easyJet acquired part of Air Berlin’s operations at employees, customers, regulatory bodies and other stakeholders Berlin Tegel Airport, completing the transaction in December 2017. to seek their views on, amongst other things, the Group’s strategy This secured a market-leading position across the Berlin market, which and culture. This has culminated in the presentation to the is one of Europe’s biggest, and Berlin is now our second biggest city Board of ‘Our Plan’, which is an evolution of our existing strategy, base after London. The start-up of operations has gone well and incorporating a number of new strategic initiatives. On behalf the total loss before tax this year of £152 million was broadly in of the Board I would like to thank Johan and his team for their line with initial expectations. We will continue to optimise both our contribution during his first year; the Group continues to go from operations and schedule in Berlin to underpin its long-term success. strength to strength under his refreshed and focused leadership. OUR PEOPLE In addition to Johan’s arrival as Chief Executive there have also I would like to thank all of easyJet’s employees and in particular been other changes on the Board. We welcomed Julie Southern the crew who, despite all the disruption experienced this year, on 1 August 2018, who brings extensive experience of the airline ensure easyJet provides the warmest welcome in the sky. We are industry and a background in commercially-oriented finance roles. committed to investing in creating a great place to work, on the Julie will assume the role of Audit Committee Chair on 1 January 2019. ground as well as in the sky. After seven years with easyJet, Adèle Anderson has recently notified During the year we have introduced a number of new people to us of her intention to step down and will be leaving with effect the Airline Management Board (‘AMB’), who have market-leading from the AGM on 7 February 2019. On behalf of the Board, I would expertise and experience that is aligned with the new strategic like to thank Adèle for her important contribution to easyJet and priorities and who will lead the business in its next stage of specifically in her role as Audit Committee Chair. Keith Hamill OBE development. also stepped down from the easyJet Board in December 2017 following completion of nine years on the Board. On behalf of the THE FUTURE Board, I would like to reiterate my thanks to Keith for his important easyJet continues to be well positioned for the future, with a contribution to the easyJet Board and to easyJet’s success. sound business model and strong financial base. Whilst there are some challenges to face in the next 12 months, including RESULTS the impact of Brexit, there are also significant opportunities easyJet’s results this year have been driven in particular by and the business is well set to sustain our leading position in a strong revenue performance, which increased by 16.8% to Europe’s aviation market. £5,898 million (2017: £5,047 million), including £198 million from Tegel routes. This was partially offset by costs, which were negatively affected by severe disruption, an industry-wide issue, combined with inflationary pressures. This resulted in headline JOHN BARTON profit before tax increasing by £170 million to £578 million and Non-Executive Chairman www.easyJet.com 1 WorldReginfo - 5348899a-c360-490d-901f-ea3e05f4676e STRATEGIC REPORT HIGHLIGHTS Strong performance 5,898 TOTAL REVENUE 2013 TO 2018 (£M) 5,047 4,686 4,669 4,527 4,258 2018 TOTAL REVENUE £5,898m 2017: £5,047M HEADLINE PROFIT REPORTED PROFIT BASIC TOTAL BASIC HEADLINE BEFORE TAX BEFORE TAX EARNINGS PER SHARE EARNINGS PER SHARE £578m £445M 90.9P 118.3P 2017: £408M 2017: £385M 2017: 77.4 PENCE 2017: 82.5 PENCE 2013 2014 2015 2016 2017 2018 LOAD FACTOR SEATS FLOWN TOTAL ANCILLARY REVENUE 92.9% 95.2M £1,210M 2017: 92.6% 2017: 86.7M 2017: £986M 2 easyJet plc Annual Report and Accounts 2018 WorldReginfo - 5348899a-c360-490d-901f-ea3e05f4676e INVESTMENT CASE Investing in our strengths We continue to invest in what differentiates us, strengthening our long-term customer offer. UNPARALLELED NETWORK 51 1 979 2 Read more NUMBER ONE OR TWO AIRPORTS ROUTES OPERATED on page 22 2017: 47 2017: 862 Driving LOW- revenue COST growth M MODEL 15% 88.53 PASSENGERS FUEL BURN REDUCTION 2017: 80.2M FROM NEW GENERATION Read more AIRCRAFT4 on page 24 Customer Loyalty OR 66%3,5 NO.1 2 Read more RETURNING CUSTOMERS AIRLINE BRAND IN THE UK, on page 26 2017: 66% FRANCE AND SWITZERLAND2,6 Strong value Balance £396m by 14.4% NET CASH2 HEADLINE ROCE3 Sheet 2017: £357M efficiency 2017: 11.9% (1) As at 30 September 2018 – airports where easyJet is the number one (4) A320neo vs previous generation A320 or number two carrier based on short-haul capacity (5) Percentage of seats booked by customers who made a booking in the (2) As at 30 September 2018 preceding 24 months (3) In the year ended 30 September 2018 (6) Millward Brown brand tracker www.easyJet.com 3 WorldReginfo - 5348899a-c360-490d-901f-ea3e05f4676e STRATEGIC REPORT AT A GLANCE Unparalleled network easyJet continues to go REGIONAL FLOWS – % OF EASYJET’S from strength to strength CURRENT CAPACITY across Europe, adding Other UK EU27 more top destinations to our market-leading 55% 35% network and increasing our presence at slot-constrained 10% Domestic UK primary airports. NO. OF NUMBER ONE NO. OF YEAR-ON- TOTAL YEAR-ON- OR TWO AIRPORTS1 BASED YEAR EASYJET YEAR GROWTH IN COUNTRIES WITH AIRCRAFT2 CAPACITY ON EASYJET’S A BASE GROWTH3 MARKETS3 GBR 14 155 4.4% 0.4% FRA 10 34 6.5% 4.1% ITA 5 37 10.4% 6.2% DE 3 32 50.9% (0.1)% ESP 3 9 8.5% 0.5% SUI 2 26 8.6% 4.1% POR 2 9 6.7% 4.2% NL 1 9 4.0% 2.3% (1) Number one and number two airports defined as easyJet having the largest or second largest capacity at an airport of any carrier on European short-haul route markets (2) As at 30 September 2018 (3) Scheduled country seat capacity growth based on country-touching seats (source: OAG) 4 easyJet plc Annual Report and Accounts 2018 WorldReginfo - 5348899a-c360-490d-901f-ea3e05f4676e 156 979 7 AIRPORTS1 ROUTES NEW NUMBER 2017: 138 OPERATED1 ONE AIRPORTS Bases 2017: 862 IN 2018 Countries with bases Glasgow Edinburgh Newcastle Belfast Liverpool Manchester Berlin TXL UK Amsterdam Stansted netherlands Berlin SXF Our Bristol Luton Southend Gatwick germany Paris CDG bases Paris ORY Basel France Switzerland Geneva Bordeaux Lyon Milan MXP Venice Toulouse Nice italy Porto Barcelona spain Naples portugal Lisbon Palma (1) As at 30 September 2018 www.easyJet.com 5 WorldReginfo - 5348899a-c360-490d-901f-ea3e05f4676e STRATEGIC REPORT MARKET REVIEW Market dynamics easyJet operates in the European short-haul aviation market.