DTG.L Regulatory News (DTG)

16 Jun 2005 07:01

Dart Group PLC16 June 2005 For Immediate Release 16 June 2005 DART GROUP PLC PRELIMINARY RESULTS FOR YEAR ENDED 31 MARCH 2005 Dart Group PLC, the aviation services and distribution group, announces itspreliminary results for the year ended 31 March 2005. CHAIRMAN'S STATEMENT I am pleased to report on the Group's trading for the year ended 31 March 2005. Profit before tax, goodwill amortisation and exceptional items, amounted to£14.0m (2004 restated - £9.6m). Profit before tax after goodwill amortisationand exceptional items amounted to £8.5m (2004 restated - £11.3m). Turnover was£268m (2004 - £228.2m). Earnings per share before the amortisation of goodwilland exceptional items were 27.96p (2004 - 19.04p restated). The Board isrecommending a final dividend of 4.70p (2004 - 4.26p), taking the totaldividend for the year to 6.74p (2004 - 6.11p), an increase of 10.3%. Thedividend, if approved, will be payable on 5 August 2005 to shareholders on theregister on 24 June 2005. Capital expenditure for the year amounted to £51.6m (2004 - £28.4m) and mainlyrelated to the acquisition, maintenance and upgrade of the Boeing 737-300 fleet.At 31 March 2005 the Group had net cash on deposit of £2.4m (net borrowingsat 31 March 2004 of £15.0m). In excess of 90% of the 2005/06 Jet2.com fuel requirements have been hedged ataverage rates lower than the current market price. No fuel has yet been hedgedin respect of the 2006/07 requirement. Neither the Aviation ServicesDivision's contract charter operations nor the Distribution Division currentlyhas any material exposure to oil price risk as this is substantially covered inour commercial contracts. In my letter to shareholders, dated 22 March 2005, I indicated that a fullreview of the Group's aircraft intercompany leasing and maintenance arrangementswould be undertaken with KPMG. This exercise has now been completed and hasresulted in some accounting policy changes. In previous years, the Group's policy has been to borrow US dollars to financeUS$ assets, namely Boeing 737-300 aircraft. We have reviewed this policy andthe Board has taken advantage of the relative weakness of the US$ againstSterling and bought US$161m in order to pay off its US$ denominated debt.Accordingly, the Board will now account for all of its aircraft in £ Sterlingand, where necessary, finance them in £ Sterling. This policy change has given rise to a substantial realised currency gain on ourUS$ borrowings which has been offset by additional depreciation charges and animpairment charge on the carrying value of our Boeing 737 fleet, when translatedinto Sterling. A number of detailed changes have also been made to ourinternal aircraft maintenance accounting arrangements. The total financial effect of these changes, including the exceptional gain onthe disposal of our Fokker F27 aircraft and the incremental Boeing 737impairment in 2005, is a cumulative increase in pre-tax profit of £1.3m. Thechanges have resulted in a current year exceptional charge of £5.0m and a prioryear exceptional credit of £2.3m. In addition, the policy changes contributed£0.6m to the "2005 profit before exceptional items" and £0.5m to the "2004profit before exceptional items restated". The balance of £2.9m relates to 2003and earlier years. After careful consideration, the Board has concluded that the interests of theCompany are best served by a move from the Official List to AIM, a marketoperated by the London Stock Exchange. Whilst the Company will continue to besubject to the regulatory and disciplinary controls of the London StockExchange, the Board believes that AIM's less onerous regulatory framework ismore suited to the entrepreneurial style of the Company. The transfer to AIMshould also reduce the Company's annual costs associated with having its sharesquoted and the potential future costs of some capital transactions. Inaddition, shares traded on AIM are deemed to be unlisted for the purpose ofcertain areas of taxation law, which may be of benefit to shareholders. The Board has commenced the process to effect this transfer to AIM. Notice isbeing given of our intention to cancel the listing of the Company's shares onthe Official List and application will be made as soon as practicable for theshares to be admitted to trading on AIM. Cancellation of the listing andadmission to trading on AIM are expected to be effected on 15 August 2005. Onthe transfer to AIM, Collins Stewart Limited will continue to be our stockbrokerand Smith & Williamson Corporate Finance Limited will also continue to advisethe Company, becoming nominated adviser under the AIM Rules. The Group has continued to build its business-to-business services and todevelop Jet2.com - our low cost passenger airline business. The activities ofthe Group's two divisions are more fully described in the Review of Operationsthat follows this statement. Aviation Services The Group currently operates 24 Boeing 737-300 aircraft (20 owned) and threeAirbus A300 "Eurofreighters" (two owned). The recent Boeing 737-300 passenger tofreighter "Quick Change" conversion programme is now complete, with our QuickChange aircraft operating night-time postal flights for Royal Mail and chartersand scheduled passenger services during the day. We are very pleased to be aprime provider of aircraft services to the Royal Mail Postal Air Network andvalue our longstanding contractual relationship. At the same time our AirbusA300 "Eurofreighters" give reliable and economical contract services to theovernight express parcels industry, a business in which the Group has along-standing reputation. Jet2.com (a trading name of Channel Express (Air Services)) continues to developits low cost services from Leeds Bradford International and BelfastInternational Airports. In December 2004 it also commenced operations fromManchester International Airport where seven aircraft now operate 13 UK domesticand European city break, sun and ski routes. Competition at Manchester isconsiderable, however, we believe that there are opportunities for profitabledevelopment. Jet2.com carried over 1.3m passengers in the financial year andmade a useful contribution to the Group's profits. On 16 May, the Group announced the purchase of two Boeing 757-200 aircraft whichwill enter into service this autumn. These aircraft, which will carry 235passengers as opposed to the 148 passenger capacity of the Boeing 737-300, willbe utilised on our most popular routes. Benair Freight International, the Group's freight forwarder experienced anexcellent year of record sales and profits. The company's performance hasbenefited from growth in its air and sea freight business with its key overseaspartners, particularly in the USA, and an increased focus on costs. Thebusiness also continues to develop its niche sectors especially the importationof ornamental and tropical fish and its other time-sensitive services. Distribution After two years of rationalisation and re-organisation by the management team,Fowler Welch-Coolchain, the Group's temperature-controlled transportation anddistribution operation, has during the year gained substantial additionalbusiness from both existing and new customers. The company is particularlypleased to have recently won storage, picking and distribution contracts thatefficiently increase the utilisation of both its temperature-controlled storagefacilities and the distribution network. With a 660 vehicle temperature-controlled fleet and an experienced managementteam and workforce, committed to the provision of quality but cost effectiveservices for its customers, we believe that our Distribution operations are nowwell positioned for future growth. Operations from Maasland (The Netherlands),Portsmouth, Teynham (Kent), Spalding (Lincs) and Gateshead (Tyne & Wear) arestrategically located to provide temperature-controlled internationaltransportation and nationwide storage and distribution services. Opportunitiesare being vigorously pursued and there is reason for considerable optimism forthe future. The Group's Channel Islands' based business, Channel Express (CI), has had asuccessful year but, subsequently, has lost some turnover. However, thecompany has a good base for future development and opportunities for growth arebeing explored. Our Staff The overall growth in the volume and profitability of the Group's activities isa reflection of the enthusiasm and drive of our management and staff. We arefortunate to have the services of excellent employees at every level and aregrateful to each of them for their individual contributions to our success. Outlook Whilst our businesses are generally buoyant, the longer term exposure of our lowcost airline business to the uncertainty of fuel prices is cause for someconcern. However, I am pleased to report that current trading remains in linewith our budgets and expectations. Philip MeesonChairman 16 June 2005 For further information about Dart Group PLC and its subsidiary companies pleasevisit our website, www.dartgroup.co.uk REVIEW OF OPERATIONS Aviation Services The Group now owns 20 Boeing 737-300 aircraft, six of which have been convertedto Quick Change (QC) configuration by the installation of a large cargo door anda floor system that allows their rapid transformation from passenger aircraft tofreighters in under 40 minutes. Our QCs fly at night for the Royal Mail PostalAir Network. During the day, Stansted aircraft operate charter flights for awide range of customers, our Edinburgh aircraft fly scheduled services for alocal airline as well as Jet2.com's Manchester to Edinburgh service whilst theaircraft in Belfast flies services to Prague and Barcelona. The operation of our QC aircraft both by day and by night enables us to give avery competitively priced product to both Royal Mail and our charter andscheduled passenger customers. The company holds a number of further QCconversion options with Israel Aircraft Industries for use in the future. With the growth of the Boeing 737-300 fleet, it was decided to cease operatingthe turboprop Fokker F27s which had traditionally flown our scheduled cargoservices to the Channel Islands and UK domestic night mail services.Arrangements were made for continued services to the Channel Islands by anotherairline who also employed a number of our operating staff. Our last Fokker F27was sold in January 2005 resulting in a book profit on the disposal of thefleet. The company continues its successful operation of its 45 tonne payload AirbusA300 "Eurofreighters" on behalf of international express parcel companies.Four aircraft, two of which are owned by the company have been in servicethroughout the year. However, one aircraft will shortly be returned to itslessor following the termination of a contract. Jet2.com, a trading name of Channel Express (Air Services), expanded its lowcost passenger services during the year. An increased schedule was flown fromLeeds Bradford International Airport with Alicante, Amsterdam, Barcelona,Belfast, Faro, Malaga, Murcia, Nice, Palma, Paris, Prague and Venice beingserved at least daily over the summer. Increases in frequency included threeflights daily to Malaga and two to Alicante, Murcia and Palma this summer. Twonew destinations, Ibiza and Tenerife, have also been introduced with Ibiza whichcommenced in May 2005 and Tenerife due to start in October 2005. Services toLeeds Bradford, Barcelona and Prague are flown from Belfast InternationalAirport, with a daily flight to Bournemouth operating for the summer of 2005. An increased schedule of eight ski flights per week to Geneva was flown betweenDecember 2004 and April 2005 which was well supported. To build on thissuccess, a new ski destination, Chambrey, has been announced for the comingwinter. On 29 September 2004, Jet2.com announced a new base at Manchester InternationalAirport. Over 22 million passengers pass through Manchester International eachyear and, whilst there are established services to many European destinations,we believe there are opportunities for Jet2.com's low cost product. Dailyservices are now being flown to Alicante, Faro, Malaga, Murcia, Nice, Valenciaand Venice with Budapest and Pisa being served at a lesser frequency.Amsterdam, Edinburgh and Gatwick are served either two or three times per day.Geneva was served daily during the ski season and Chambrey has been added forthe coming ski season. In order to publicise the start of services from Manchester, an extensiveadvertising campaign was mounted in the greater Manchester area which hasresulted in an overall load factor of over 70% on the European routes. We areencouraged with the results of our first six months of operation at ManchesterInternational Airport and look forward to developing our services further forthis large catchment area. On 16 May 2005, Dart Group announced the acquisition of two Boeing 757-200aircraft with a 235 passenger capacity which will be brought into service duringthe autumn, initially on the company's flights from Leeds Bradford Internationalto Tenerife. Thereafter, the Boeing 757s will fly on the higher passengervolume sun routes from Leeds Bradford International delivering a lower seat costand increased efficiency of operation. The introduction of the 20 Boeing 737-300s and the start-up of Jet2.com in alittle over two years has been a considerable challenge for the company, withall areas of the operation contributing to its success. There has, of course,been a very large expansion in the numbers of aircrew, cabin crew and engineerstrained and employed and everyone's contribution and hard work has been verymuch appreciated. Our Engineering operation is also greatly assisted by ourParts Trading organisation which is a profit centre in its own right,successfully trading in aircraft parts, as well as efficiently procuring partsfor the airline and selling the airline's surplus equipment, such as the FokkerF27s. Benair Freight International, the Group's freight forwarder, has offices locatedat London Heathrow, Manchester, East Midlands, Newcastle and Singapore airportstogether with a worldwide agency network. Benair, with its expertise in air,sea and road freight enjoyed a second consecutive year of record sales andprofits. Progress was made in both the Singaporean and UK operations and thecompany continued to invest in its Information Technology infrastructure togenerate improved management information which has contributed to the growth inprofits. The business with the USA grew significantly during the year throughthe development of Benair's relationship with its agent who has branches locatedthroughout America. Further growth was also seen in both the Manchester andLondon niche ornamental and tropical fish importing operations and the freightbusiness broadened its customer base with a number of new good quality accounts. Distribution Fowler Welch-Coolchain is one of the UK's leading temperature-controlleddistribution operations. The company has over 280,000 sq ft of refrigeratedcold stores, primarily at its two main sites at Spalding, Lincs and Teynham,Kent. These are supported by satellite operations in Portsmouth and Gateshead,Tyne & Wear. The international operation is based at Maasland, TheNetherlands, adjacent to the Dutch Flower Auctions and Schipol InternationalAirport. Fowler Welch-Coolchain was formed by the amalgamation of the Group's UK producedistribution business and the substantial distribution businesses of FowlerWelch, based in the produce growing area of Spalding, and Coolchain, based inthe fruit growing area of Teynham. These two businesses were acquired by theGroup in 1994 and 1999 respectively. The company has over 750 staff and 660temperature-controlled vehicles distributing over five million pallets oftime-sensitive chilled products annually on behalf of leading supermarkets,growers, importers and manufacturers. Much work has been done over the past two years to fully integrate thedistribution operations of Fowler Welch and Coolchain and to reduce costswherever possible. This has now largely been achieved and the resultingorganisation is very competitively placed in its market. Tesco and suppliers toSafeway (now Wm Morrison) are substantial customers and Tesco, in particular,has rewarded the company's efforts with additional business. We are undertakingincreasing numbers of deliveries both to Tesco distribution centres and totheir stores, whilst also gaining a closer involvement with their inter-depottrunking network, thereby reducing unladen mileage and increasing overallefficiency. A further innovation is the introduction of double-decked trailersable to carry 40 pallets as opposed to the 26 pallets carried by traditionalvehicles. Fowler Welch-Coolchain was very pleased to be awarded Somerfield Stores'national produce and horticulture business. This will entail the collection,consolidation and then delivery of approximately 225,000 pallets to their sevenregional distribution centres. Operations successfully commenced in April2005. The company also won other substantial storage, picking and distributionbusiness, primarily from its Teynham site. This calls for approximately 6million cases to be stored, picked and distributed annually. Fowler Welch-Coolchain is also distributing growing volumes for Kerry Foods -primarily from the Gateshead depot. Kerry Foods manufacture ready preparedmeals at their factory in Durham and have been increasingly using the company'sdistribution network. Significantly, on 25 June 2005, the Spalding depotcommences the storage, picking and delivery of chilled prepared products forBernard Matthews Foods. This is an important contract with another leadingbrand. Further growth has also been experienced in the company's international businessand its ports operations particularly at Southampton and Bristol. Theinternational business, based in Holland, operates a temperature-controlled roadfeeder network between Holland and Heathrow and Gatwick Airports for a leadinginternational airline as well as transporting large volumes of produce andflowers to the UK for domestic distribution on behalf of our supermarketcustomers. Each of these business gains is a reflection of the success of the company'stwo year integration and cost reduction programme. We look forward tocontinued growth in the coming year. Channel Express (CI) provides air and sea transportation links to and from theUK mainland and the Islands of Guernsey and Jersey. Increasing amounts ofhorticultural products, health foods and other goods are exported to the UK andthe company has been successful in gaining a considerable market share of these.Large volumes of temperature-controlled products and general freight aredelivered to the Islands on behalf of manufacturers and retailers. The Channel Islands business has always been much valued by the Group as aconsistent contributor to its profits. Recently, the trading environment hasexperienced a period of some volatility but the longer term outlook for thecompany remains for positive future trading. For further information contact: Dart Group PLC Tel: 01202 597676 Philip Meeson,Group Chairman and Chief Executive Mobile: 07785 258666 Mike Forder,Group Finance Director Mobile: 07721 865850 Group Profit And Loss Account (Unaudited)for the year ended 31 March 2005 Notes 2005 2005 2005 2004 2004 2004 Before Before Exceptional exceptional Exceptional exceptional items items items Total items (note 5) Total (restated) (note 5) (restated) £'000 £,000 £'000 £'000 £'000 £'000Turnover Continuing operations 1 267,996 - 267,996 228,200 - 228,200 Net Operating ExpensesContinuing operations,excluding goodwill amortisation (253,949) (8,206) (262,155) (218,275) (4,385) (222,660)Goodwill amortisation (497) - (497) (497) - (497) Total continuing operations (254,446) (8,206) (262,652) (218,772) (4,385) (223,157) Operating ProfitContinuing operations,excluding goodwill amortisation 14,047 (8,206) 5,841 9,925 (4,385) 5,540Goodwill amortisation (497) - (497) (497) - (497) Total continuing operations 13,550 (8,206) 5,344 9,428 (4,385) 5,043 Profit on disposal of fixedassets - 795 795 - - - (continuing operations)Net interest (includingexchange gains) (78) 2,400 2,322 (353) 6,658 6,305 Profit on ordinary activities before taxation 13,472 (5,011) 8,461 9,075 2,273 11,348Taxation (4,351) 1,503 (2,848) (3,034) (682) (3,716) Profit on ordinary activitiesafter taxation 9,121 (3,508) 5,613 6,041 1,591 7,632Dividends (2,324) - (2,324) (2,099) - (2,099) Retained profit for the year 6,797 (3,508) 3,289 3,942 1,591 5,533 Earnings per share- basic 4 26.52p 16.32p 17.59p 22.22p- basic, excluding the amortisation of goodwill 4 27.96p 17.76p 19.04p 23.67p- diluted 4 26.34p 16.21p 17.56p 22.18p Statement of Total Recognised Gains and Losses 2005 2004 (restated) £'000 £'000 Profit on ordinary activities after taxation 5,613 7,632Exchange gain / (loss) on foreign equity investment 74 (63) Total recognised gains and losses relating to the year 5,687 7,569Prior year adjustments 4,002 Total recognised gains and losses since previous annual report 9,689 Balance Sheet (Unaudited)at 31 March 2005 Group 2005 2004 (restated) £'000 £'000Fixed assets Intangible assets 7,283 7,780Tangible assets 99,292 80,393Investments - - 106,575 88,173Current assets Stock 4,616 2,216Debtors 25,532 31,221Cash at bank and in hand 27,404 13,362 57,552 46,799Current liabilities Creditors: amounts falling duewithin one year (90,417) (59,326) Net current liabilities (32,865) (12,527) Total assets less current liabilities 73,710 75,646 Creditors: amounts falling due aftermore than one year (19,420) (25,093) Provisions for liabilities and charges (5,944) (5,887) (25,364) (30,980) Net assets 48,346 44,666 Capital and reserves Called up share capital 1,727 1,718Share premium account 8,010 7,702Profit and loss account 38,609 35,246 Shareholders' funds - equity interests 2 48,346 44,666 Group Cash Flow Statement (Unaudited)for the year ended 31 March 2005 2005 2004 (restated) Note £'000 £'000 Net cash inflow from operating activities 3 68, 246 36,171 Returns on investment and servicing of finance (97) (551) Taxation (1,365) (506) Capital expenditure and financial investment (49,133) (26,019) Equity dividends paid (2,165) (2,099) Cash inflow before financing 15,486 6,996 Financing (2,200) (2,471) Increase in cash in the year 13,286 4,525 Reconciliation of net cash flow to movement in net cash/(debt) 2005 2004 (restated) £'000 £'000 Increase in cash in the year 13,286 4,525 Cash outflow from decrease in net debt in the year 2,517 2,501 Change in net debt resulting from cash flows 15,803 7,026Exchange differences 1,668 6,109Net debt at 1 April (15,032) (28,167) Net cash / (debt) at 31 March 2,439 (15,032) NOTES 1. Turnover Turnover to third parties by destination is not materially different to that bysource and relates to continuing activities. Analyses of profit before taxation and net assets between the different segmentsof the Group are not given as, in the opinion of the directors, such analyseswould be seriously prejudicial to the commercial interests of the Group. 2005 2004 £'000 £'000 Distribution 100,074 112,076Aviation Services 167,922 116,124 267,996 228,200 Turnover arising within: The United Kingdom and the Channel Islands 261,430 222,804 Mainland Europe 5,555 4,368 The Far East 1,011 1,028 267,996 228,200 2. Reconciliation of movements in shareholders' funds Group 2005 2004 (restated) £'000 £'000 Profit for the year 5,613 7,632Dividends (2,324) (2,099) 3,289 5,533Currency translation differences 74 (63)Issue of shares under share option schemes 317 30 Net addition toshareholders' funds 3,680 5,500 Opening shareholders' funds as previously reported 40,664 37,144Prior year adjustments 4,002 2,022Opening shareholders' funds as restated 44,666 39,166 Closing shareholders' funds 48,346 44,666 3. Reconciliation of operating profit to net cash flow from operating activities (Unaudited) 2005 2004 (restated) £'000 £'000 Operating Profit 5,344 5,043Depreciation and impairment 31,206 22,759Amortisation of goodwill 497 497Profit on disposal of fixed assets (177) (365)(Increase) / Decrease in stock (2,400) 236Decrease / (Increase) in debtors 5,689 (309)Increase in creditors 28,087 8,310 Net cash inflow from operating activities 68,246 36,171 4. Earnings per share The calculation of basic earnings per share is based on earningsbefore exceptional items for the year ended 31 March 2005 of £9,121,000 (2004restated - £6,041,000) and on 34,396,934 shares (2004 - 34,344,692) being theweighted average number of shares in issue for the year. The calculation of basic earnings per share, excluding theamortisation of goodwill, is based on earnings before exceptional items of£9,618,000, as calculated below, for the year ended 31 March 2005 (2004 restated- £6,538,000) and on 34,396,934 shares (2004 - 34,344,692) being the weightedaverage number of shares in issue for the year. 2005 2004 (restated) £'000 £'000 Profit on ordinary activities after taxation (before exceptional items) 9,121 6,041Amortisation of goodwill 497 497 9,618 6,538 The diluted earnings per share is based on earnings beforeexceptional items for the year ended 31 March 2005 of £9,121,000 (2004 restated- £6,041,000) and on 34,628,280 ordinary shares (2004 - 34,403,760) calculatedas follows: 2005 2004 000's 000's Basic weighted average number of shares 34,397 34,345Dilutive potential ordinary share: Employee share options 231 59 34,628 34,404 5. Exceptional Items 2005 2004 £'000 £'000Operating itemsImpairment of fixed assets (8,206) (4,385) Profit on disposal of fixed assetsGain on disposal of F27 fleet 795 - Net interest including exchange gains 2,400 6,658 Net exceptional items before taxation (5,011) 2,273 6. Accounting Policy Changes The Group has undertaken a thorough review of its accountingpolicies in consultation with its new auditors, KPMG Audit Plc and its legaladvisors. As a result of this review the Directors have adopted revisedaccounting policies and restated amounts previously reported as described below. Foreign currency branch The Group has previously treated aircraft purchased in foreigncurrency which are financed by foreign currency financial instruments as aforeign currency branch using the closing rate method. Having reviewed theGroup's foreign currency exposures, the Directors consider that it is now moreappropriate to treat such aircraft as Sterling denominated assets based onhistoric exchange rates. This change has been applied retrospectively withdepreciation being charged based on the historic £ sterling cost and previouscurrency revaluations of the aircraft being eliminated. Where appropriate anaccelerated depreciation/impairment charge has been made to ensure that eachaircraft is carried at a book value which does not exceed the greater of itsvalue in use and its market value at any point in time. Exchange differences on financial instruments used to financesuch aircraft have been included within Net interest and currency gainsreceivable within the Group's profit and loss account rather than being nettedagainst equivalent exchange differences on retranslating fixed assets withinreserves. Aircraft maintenance costs The Group has obtained legal advice to clarify the status of themaintenance arrangements, including intra-group arrangements, which Groupcompanies have entered into. That advice has been taken into account by theDirectors during their review of the Group's accounting policies. Channel Express (Air Services) Limited (CEAS), a wholly-ownedsubsidiary undertaking, has a legal obligation to undertake specific periodicmaintenance on the aircraft it operates whether those aircraft are leased fromits parent company, Dart Group PLC (the Company), or from third party aircraftlessors. These obligations require CEAS to continue to maintain the aircraftand its engines in accordance with the aircraft manufacturer's publishedmaintenance programmes during the term of the lease and to ensure that theaircraft is returned to the lessor in a satisfactory condition. As there is alegal and constructive obligation to return the aircraft in a specifiedcondition, a monthly profit and loss charge is made by CEAS. The Company receives a monthly security deposit from CEAS basedon a monthly usage calculation. The deposit is refunded to CEAS once themaintenance activity has been completed by CEAS. Within the consolidated accounts, expenditure on the maintenanceof aircraft which lends enhancements to future periods is capitalised withinTangible fixed assets irrespective of which Group company incurs suchexpenditure. The amortisation of such expenditure (together with that part ofthe initial cost of the aircraft attributed to prepaid maintenance) closelyequates to the maintenance charge arising on operating leased aircraft. Previously the Company accounted for the above security depositsas Deferred income within Creditors. The Directors consider that it is moreappropriate to classify these balances as Security deposits repayable tosubsidiary companies within Creditors. This change has had no impact on theGroup's financial statements. The monthly security deposit payment is set at a level which isestimated to cover the cost of future maintenance procedures when they occur,matching the initial monthly maintenance charges on operating leased aircraftand the amortisation of capitalised maintenance on owned aircraft. In the pastthe Group has not immediately adjusted such charges to reflect actualmaintenance spend but instead maintained a charge in line with the securitydeposits which are gradually refined over a number of years. The Directorsconsider that it is more appropriate to immediately take into account any knownincreases or reductions in maintenance spend in calculating the Group'smaintenance charge on operating leased aircraft and amortisation of capitalisedmaintenance or owned aircraft. Previously all expenditure on maintenance has been treated in asimilar way, irrespective of the nature of that expenditure. The Directors nowconsider that it is more appropriate to distinguish between short termmaintenance activities (being those which are expected to occur at leastannually) and long term maintenance (relating to less frequent procedures whichlend enhancement to future periods). All short term maintenance is now expensedas incurred rather than being capitalised and depreciated in respect of ownedaircraft or provided for in advance in respect of leased aircraft. Previously the Group has charged additional depreciationfollowing the identification of a potential requirement to perform rectificationwork to address airframe non routine maintenance procedures on its aircraftfleet. The Directors now consider it more appropriate to account for anyexpenditure of this nature as incurred unless it gives rise to a need to make animmediate impairment provision against the carrying value of a particularaircraft. 7. The financial information set out in the announcement does notconstitute the Group's statutory accounts for the financial years ended 31 March2005 or 2004. The financial information for the year ended 31 March 2004 isderived from the statutory accounts for that year, which have been delivered tothe Registrar of Companies. The Group's previous auditors, Ernst & Young LLP,have reported on the accounts for the year ended 31 March 2004; their report wasunqualified and did not contain a statement under section 237(2) or (3) of theCompanies Act 1985. The statutory accounts for the year ended 31 March 2005,which will include restated figures for 2004, are still subject to audit by KPMGAudit Plc, but will be finalised on the basis of the financial informationpresented by the directors in this preliminary announcement, and will bedelivered to the Registrar of Companies following the Group's annual generalmeeting. 8. The proposed final dividend of 4.70 pence per share will, ifapproved, be payable on 5 August 2005 to shareholders on the Company's registerat the close of business on 24 June 2005. 9. The 2005 Annual Report and Accounts (together with the AuditorsReport) will be posted to shareholders on 11 July 2005. The Annual GeneralMeeting will be held on 4 August 2005. This information is provided by RNS The company news service from the London Stock Exchange