CAIR: Indicative results 2005
28/2/2006 15:24
The Cyprus Airways Group announces the Indication of Results for the year ended 31 December 2005, which has been approved by the Board of Directors of Cyprus Airways during its Board meeting on the 27 February, 2006. The Indication of Results for the Cyprus Airways Group for the year ended 31 December 2005 is a Net loss after tax of £23,2 million in comparison to a Net loss of £39,4 million in 2004. The Indication of Results has not been audited by the External Auditors.
EXPLANATORY STATEMENT
In accordance with the regulations of the Cyprus Stock Exchange, the Group sets out below the explanatory statement of the Indication of Results which is accompanied by the unaudited consolidated Profit and Loss Account of the Cyprus Airways Group for the year ended 31 December 2005. 1. Revenue
The total revenue of the Group, excluding Cyprus Airways (Duty-Free Shops) Ltd, reached £201,2 million in comparison to £205,0 million in 2004, registering a decrease of £3,8 million or 1,9%.
The drop in Group revenue resulted from a reduction in the fleet size of the Group by one aircraft, the change in the mode of operation of Hellas Jet with effect from 10 May 2005 and the discontinuance in the operations of Cyprair Tours which took place at the end of October 2004.
The changes described above were all in accordance with the Action Plan prepared by Cyprus Airways in order to improve the Group’s financial situation.
Operating Expenditure
The Group’s operating expenditure, which includes cost of sales and administration expenses, recorded a drop of £11,3 million or 4,7% reaching the level of £229,3 million in comparison to £240,6 million in 2004.
The reduction in operating expenditure can be explained by the changes to the Group’s operations described above as well as the cost cutting efforts implemented as part of the Action Plan. The reduction in operating expenditure would have been bigger if it wasn’t for the significant increase in fuel cost which, despite the reduction in operations, added £9,7 million to the Group’s costs for the year. Operating expenditure of 2005 also includes the amount of £3,0 million being compensation paid to the employees made redundant.
3. Other Operating Income
This represents the net profit from the sale of one spare A320 engine, one A320 aircraft as well as A310 aircraft spares effected in January, March and September 2005 respectively.
4. Impairment Loss
The impairment loss represents the final write down of the goodwill arising on the acquisition by the Company of the shares previously held by the other shareholders of Hellas Jet.
Operating Loss
Taking all the above into account the operating loss for 2005 decreased to £24,2 million from £43,3 million in 2004.
Net Finance Cost
The net finance cost for 2005 reached £853 thousand in comparison to net income of £68 thousand in 2004. This is attributed to interest payable on the short-term loan raised by the Company within the framework of the rescue aid approved by the EU in May 2005.
Associated company
The turnover of the associated company Cyprus Airways (Duty-Free Shops) Ltd decreased by £5,1 million to £39,3 million in 2005 from £44,4 million in 2004. The drop is mainly the result of Cyprus’ accession to the European Union on 1 May 2004 and the change this brought about in the company’s operations, but also of the strike action during the first half of the year. The company made a loss before taxation of £124 thousand in 2005 compared to a profit of £3,8 million in 2004, of which 50% was attributable to the Group.
The company is treated as an associate in the consolidated financial statements and accordingly, based on the provisions of the equity method of accounting (International Accounting Standard No. 28), the Group has recognised in its results for the year the amount of £9 thousand only, which is equivalent to its investment in the associated company.
Prospects for 2006
As known the Group has already taken a series of measures to improve its financial position including the arrangement made in respect of Hellas Jet. The results of 2005 which are significantly improved in comparison to 2004, despite the substantial increase in the cost of fuel, are an indication of the effectiveness of the measures already taken.
The effort however is continuing and Cyprus Airways has prepared a complete Restructuring Plan which has been submitted by the Government of the Republic of Cyprus to the European Commission in November 2005 for approval of the requested restructuring aid. This plan has gradually started being implemented from January 2006, in consultation with the staff unions. In this respect it is mentioned that unions have raised various issues relating to essential provisions of the Restructuring Plan which are currently being discussed. Provided the negotiations currently in progress have a positive outcome and the plan is fully implemented it is expected that the Group’s viability will be ensured.
As already mentioned the Company has raised a short-term Government Guaranteed loan which, in conjunction with the intended sale of Eurocypria referred to below, will help the Company to maintain its liquidity at satisfactory levels until the European Union approves the Restructuring Plan. Upon approval of this plan the necessary arrangements will be made for the more permanent financing of the Company through a long-term Government Guaranteed loan and a share capital increase.
It should be mentioned that the Company’ s Board of Directors is negotiating with the Government the sale of Eurocypria to the latter in order to satisfy European Union requirements. The sale of Eurocypria will also have a positive impact on the liquidity of the Group and will enable it to carry out its operations until the more permanent financing referred to above is put in place.
The dangers which may arise from unexpected external factors such as competition, the price of fuel and the higher charges expected to arise from the change of status of the Larnaca Airport cannot be ignored. Provided that the savings included in the Restructuring Plan are achieved, with the sale of Eurocypria and the financial support of the Government of the Republic of Cyprus, within the provisions of EU regulations, the Board of Directors reasonably expect the Group to continue to operate as a going concern.
EXPLANATORY STATEMENT
In accordance with the regulations of the Cyprus Stock Exchange, the Group sets out below the explanatory statement of the Indication of Results which is accompanied by the unaudited consolidated Profit and Loss Account of the Cyprus Airways Group for the year ended 31 December 2005. 1. Revenue
The total revenue of the Group, excluding Cyprus Airways (Duty-Free Shops) Ltd, reached £201,2 million in comparison to £205,0 million in 2004, registering a decrease of £3,8 million or 1,9%.
The drop in Group revenue resulted from a reduction in the fleet size of the Group by one aircraft, the change in the mode of operation of Hellas Jet with effect from 10 May 2005 and the discontinuance in the operations of Cyprair Tours which took place at the end of October 2004.
The changes described above were all in accordance with the Action Plan prepared by Cyprus Airways in order to improve the Group’s financial situation.
Operating Expenditure
The Group’s operating expenditure, which includes cost of sales and administration expenses, recorded a drop of £11,3 million or 4,7% reaching the level of £229,3 million in comparison to £240,6 million in 2004.
The reduction in operating expenditure can be explained by the changes to the Group’s operations described above as well as the cost cutting efforts implemented as part of the Action Plan. The reduction in operating expenditure would have been bigger if it wasn’t for the significant increase in fuel cost which, despite the reduction in operations, added £9,7 million to the Group’s costs for the year. Operating expenditure of 2005 also includes the amount of £3,0 million being compensation paid to the employees made redundant.
3. Other Operating Income
This represents the net profit from the sale of one spare A320 engine, one A320 aircraft as well as A310 aircraft spares effected in January, March and September 2005 respectively.
4. Impairment Loss
The impairment loss represents the final write down of the goodwill arising on the acquisition by the Company of the shares previously held by the other shareholders of Hellas Jet.
Operating Loss
Taking all the above into account the operating loss for 2005 decreased to £24,2 million from £43,3 million in 2004.
Net Finance Cost
The net finance cost for 2005 reached £853 thousand in comparison to net income of £68 thousand in 2004. This is attributed to interest payable on the short-term loan raised by the Company within the framework of the rescue aid approved by the EU in May 2005.
Associated company
The turnover of the associated company Cyprus Airways (Duty-Free Shops) Ltd decreased by £5,1 million to £39,3 million in 2005 from £44,4 million in 2004. The drop is mainly the result of Cyprus’ accession to the European Union on 1 May 2004 and the change this brought about in the company’s operations, but also of the strike action during the first half of the year. The company made a loss before taxation of £124 thousand in 2005 compared to a profit of £3,8 million in 2004, of which 50% was attributable to the Group.
The company is treated as an associate in the consolidated financial statements and accordingly, based on the provisions of the equity method of accounting (International Accounting Standard No. 28), the Group has recognised in its results for the year the amount of £9 thousand only, which is equivalent to its investment in the associated company.
Prospects for 2006
As known the Group has already taken a series of measures to improve its financial position including the arrangement made in respect of Hellas Jet. The results of 2005 which are significantly improved in comparison to 2004, despite the substantial increase in the cost of fuel, are an indication of the effectiveness of the measures already taken.
The effort however is continuing and Cyprus Airways has prepared a complete Restructuring Plan which has been submitted by the Government of the Republic of Cyprus to the European Commission in November 2005 for approval of the requested restructuring aid. This plan has gradually started being implemented from January 2006, in consultation with the staff unions. In this respect it is mentioned that unions have raised various issues relating to essential provisions of the Restructuring Plan which are currently being discussed. Provided the negotiations currently in progress have a positive outcome and the plan is fully implemented it is expected that the Group’s viability will be ensured.
As already mentioned the Company has raised a short-term Government Guaranteed loan which, in conjunction with the intended sale of Eurocypria referred to below, will help the Company to maintain its liquidity at satisfactory levels until the European Union approves the Restructuring Plan. Upon approval of this plan the necessary arrangements will be made for the more permanent financing of the Company through a long-term Government Guaranteed loan and a share capital increase.
It should be mentioned that the Company’ s Board of Directors is negotiating with the Government the sale of Eurocypria to the latter in order to satisfy European Union requirements. The sale of Eurocypria will also have a positive impact on the liquidity of the Group and will enable it to carry out its operations until the more permanent financing referred to above is put in place.
The dangers which may arise from unexpected external factors such as competition, the price of fuel and the higher charges expected to arise from the change of status of the Larnaca Airport cannot be ignored. Provided that the savings included in the Restructuring Plan are achieved, with the sale of Eurocypria and the financial support of the Government of the Republic of Cyprus, within the provisions of EU regulations, the Board of Directors reasonably expect the Group to continue to operate as a going concern.
