Ryanair Holdings plc — Form 20-F Summary
Reporting period: Fiscal year ended March 31, 2019, filed July 30, 2019, under IFRS. The filing does not provide a clear standalone “2018 Q4” financial statement; the reported period is the full fiscal year, with comparative fiscal year 2018.
Business Context
Ryanair operates a European low-fare, short-haul, point-to-point airline. Fiscal 2019 included the expansion of Ryanair Sun, the acquisition and consolidation of Laudamotion, and preparation for a five-airline group structure. The Group operated 471 aircraft at March 31, 2019, served 219 airports, booked 142.1 million passengers, and had 16,840 employees.
Key Financial Metrics
| Metric | FY2019 | FY2018 | Change |
|---|---|---|---|
| Total operating revenue | €7,697.4m | €7,151.0m | +8% |
| Scheduled revenue | €5,261.1m | €5,134.0m | +2% |
| Ancillary revenue | €2,436.3m | €2,017.0m | +21% |
| Operating profit | €1,016.8m | €1,667.3m | -39% |
| Profit after tax | €885.0m | €1,450.2m | -39% |
| Operating margin | 13% | 23% | -10 percentage points |
| Net margin | 11% | 20% | -9 percentage points |
| Basic EPS | €0.7739 | €1.2151 | -36% |
| Net cash from operating activities | €2,017.5m | €2,233.2m | -10% |
| Capital expenditure | €1,546.7m | €1,470.6m | +5% |
Passenger volume increased 9% to 142.1 million and the booked load factor improved to 96% from 95%. Average fare declined 6% to €37.03, while ancillary revenue per passenger increased 11% to €17.15. Cost per booked passenger increased 12% to €47.02.
Fuel and oil expense increased 28% to €2,427.3m and represented approximately 36% of operating expenses. Staff costs increased 33% to €984.0m, while marketing, distribution and other costs increased 33% to €547.3m, partly reflecting higher EU261 passenger compensation costs. The effective tax rate declined to 6.7% from 10.0%, primarily because of a deferred tax asset recognized for Laudamotion losses.
Balance Sheet, Debt and Liquidity
- Cash and cash equivalents were €1,675.6m, compared with €1,515.0m at March 31, 2018.
- Cash and liquid resources, including cash deposits with maturities over three months and restricted cash, totaled €3,194.9m, down from €3,680.1m.
- Total debt, including current and non-current maturities, was €3,644.4m, down from €3,963.0m.
- Net debt was €449.5m, compared with €282.9m in the prior year.
- Shareholders’ equity increased to €5,214.9m from €4,468.9m, partly due to €634.3m of positive cash-flow hedge movements in other comprehensive income.
- Contractual obligations totaled €16,430.5m, including €12,336.1m of aircraft purchase obligations, €3,447.3m of long-term debt, €290.1m of operating lease obligations and €197.1m of finance lease obligations.
- Ryanair provided €3,796.7m of letters of guarantee for subsidiary financing and other obligations.
Material Changes Versus the Prior Period
- Revenue growth did not offset a sharp increase in operating costs, reducing operating profit by 39% and profit after tax by 39%.
- European short-haul overcapacity and lower fares reduced yields despite higher passenger volumes and load factors.
- Fuel costs increased materially because of higher hedged fuel prices and increased flying activity.
- Staff costs rose due to pilot pay increases, additional engineering headcount, and broader Group expansion.
- Laudamotion contributed €134.5m of revenue and a €172.9m operating loss after consolidation; management identified a €139.5m start-up loss in its discussion of adjusted performance.
- Ryanair repurchased and cancelled 37.8 million ordinary shares for approximately €560.5m, compared with 46.7 million shares for €829.1m in fiscal 2018.
- IFRS 15 was adopted prospectively from April 1, 2018. The transition reduced retained earnings by €249m and reduced fiscal 2019 ancillary revenue by approximately €38m versus the prior recognition approach.
Outlook, Guidance and Management Commentary
- Management planned for approximately 3% traffic growth in fiscal 2020, subject to aircraft deliveries, lease returns and disposals.
- The Group expected approximately 30 Boeing 737-MAX-200 deliveries before summer 2020 and approximately 585 narrow-body aircraft by March 31, 2024, subject to regulatory approvals and Boeing delivery timing.
- At July 25, 2019, fuel hedges covered approximately 90% of estimated fiscal 2020 requirements at approximately $709 per metric ton and 37% of fiscal 2021 requirements at approximately $632 per metric ton.
- In June 2019, the Board amended its treasury policy to target approximately 50% fuel commodity hedging on a 12-to-18-month rolling basis beginning with fiscal 2021.
- Management stated that available working capital was sufficient for anticipated fiscal 2020 capital expenditures and other requirements.
- In May 2019, Ryanair fully drew a new €750m unsecured five-year syndicated bank facility at a margin of 0.65% over cost of funds.
Principal Risks, Contingencies and Unusual Items
- Boeing 737-MAX: Deliveries of the 737-MAX-200 were delayed following the grounding of the 737-MAX family. Regulatory certification, delivery timing, public perception and lost capacity could affect growth and profitability.
- Fuel and currency: Fuel represented approximately 36% of operating expenses. The Group remains exposed to jet-fuel prices, the U.S. dollar and sterling despite hedging.
- Brexit: Approximately 22% of fiscal 2019 revenue came from U.K. operations. The filing warns of risks involving market access, ownership requirements, currency volatility, employment rules and U.K. economic conditions.
- Labor relations: Union recognition and collective labor agreement negotiations may increase labor costs, reduce productivity or cause disruption.
- Legal proceedings: European Commission investigations and appeals concern alleged unlawful state aid at several airports. Prior decisions ordered repayment of approximately €22.5m in alleged aid, with some decisions under appeal. Outcomes could affect airport agreements and the growth strategy.
- U.S. securities litigation: A putative securities class action filed in the United States alleges misleading statements concerning employment data, unionization and related financial impacts; Ryanair and Michael O’Leary moved to dismiss in June 2019.
- Operational and regulatory risks: The filing highlights ATC strikes and shortages, EU261 passenger compensation, cyberattacks, GDPR compliance, environmental taxes and emissions costs, airport access, competition, safety events and dependence on external service providers.
Investor Verification Priorities
- Verify the full-year period versus the requested 2018 Q4 period; the filing does not present a clear standalone quarter.
- Reconcile adjusted management commentary on the Laudamotion start-up loss with the audited consolidated income statement and acquisition note.
- Assess the effect of IFRS 15 on ancillary revenue, unearned revenue and retained earnings, particularly for quarterly comparisons.
- Review Boeing 737-MAX-200 certification, delivery schedules, compensation or other arrangements with Boeing, and the effect on fiscal 2020 capacity.
- Evaluate fuel and foreign-exchange hedge coverage, fair values and the reduced fuel-hedging target beginning in fiscal 2021.
- Review aircraft purchase commitments, debt maturities, operating leases and the €750m post-year-end borrowing facility.
- Monitor Brexit-related ownership and voting restrictions, especially the treatment of U.K. shareholders as non-EU nationals.
- Track state-aid investigations, appeals and potential repayment obligations involving publicly owned airports.
- Consider the sustainability of margins given lower fares, higher fuel and labor costs, EU261 claims, and continued fleet expansion.