REPORT AND FINANCIAL STATEMENTS
REPORT, CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
C O N T E N T S
Page
Board of Directors, Professional Advisers and Bankers 1
Declaration of the Members of the Board of
Directors and the Company Official Responsible
for the Drafting of the Consolidated and Company’s Separate Financial Statements 2
Board of Directors’ Report 3 - 6
Independent Auditors’ Report 7 - 8
Consolidated Income Statement 9
Income Statement 10
Consolidated Balance Sheet 11
Balance Sheet 12
Consolidated Statement of Changes in Equity 13
Statement of Changes in Equity 14
Consolidated Cash Flow Statement 15
Cash Flow Statement 16
Notes to the Consolidated and Company’s Separate Financial Statements 17 – 73
BOARD OF DIRECTORS, PROFESSIONAL ADVISERS AND BANKERS
|Board of Directors | |
|Kikis N. Lazarides, Chairman and Managing Director (appointed on 30 March 2007) | |
|Charalambos Alexandrou | |
|Michalis Antoniou | |
|Takis Fekkos | |
|George Georgiou | |
|George Kallis | |
|Kikis Lefkaritis | |
|Christos Patsalides (appointed on 30 March 2007) | |
|Andreas Philippou | |
|Pavlos Photiades | |
|Marios Xenophontos (appointed on 30 March 2007) | |
| | |
|Secretary | |
|George Spyrou, Barrister-at-law | |
| | |
|Independent Auditors | |
|KPMG | |
| | |
|Legal Advisers | |
|Chryssafinis & Polyviou | |
| | |
|Bankers in Cyprus | |
|Bank of Cyprus Public Company Limited | |
|Marfin Popular Bank Public Company Limited | |
|Hellenic Bank Public Limited | |
|National Bank of Greece (Cyprus) Limited | |
|Universal Savings Bank Public Limited | |
| | |
|Registered Office | |
|21 Alkeou Street, 2404 Engomi | |
|P.O. Box 21903, Nicosia | |
|Telephone: 22663054 | |
|Telefax: 22663167 | |
DECLARATION OF THE MEMBERS OF THE BOARD OF DIRECTORS AND THE COMPANY OFFICIAL RESPONSIBLE FOR THE DRAFTING OF THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
In accordance with Article 9 sections (3c) and (7) of the Transparency Requirements (Traded Securities in Regulated Markets) Law 2007 we, the members of the Board of Directors and the Company official responsible for the drafting of the consolidated and the Company’s separate financial statements of Cyprus Airways Public Limited for the year ended 31 December 2007, on the basis of our knowledge, declare that:
a) The annual consolidated and Company’s separate financial statements which are presented on pages 9 to 73:
i) have been prepared in accordance with the applicable International Financial Reporting Standards and the provisions of section (4), and
ii) provide a true and fair view of the particulars of assets and liabilities, the financial position and the profit or loss of the consolidated and Company’s separate financial statements as a whole and
b) The Board of Directors’ report provides a fair view of the developments and the performance as well as the position of the Group and the Company, together with α description of the main risks and uncertainties which they face.
Members of the Board
Kikis N. Lazarides – Chairman and Managing Director
Charalambos Alexandrou
Michalis Antoniou
Takis Fekkos
George Georgiou
George Kallis
Kikis Lefkaritis
Christos Patsalides
Andreas Philippou
Pavlos Photiades
Marios Xenophontos
Company Official Responsible for the Preparation of the Consolidated and Company’s Separate Financial Statements
Chief Financial Officer
Eleni Kaloyirou
…………………………………..
Nicosia, 2 April 2008
BOARD OF DIRECTORS’ REPORT
The Board of Directors of Cyprus Airways Public Limited (the “Company”) presents to the members its annual report and the audited consolidated and Company’s separate financial statements for the year ended 31 December 2007.
Principal activities
The principal activities of the Group, as well as of the Company, which have not changed since last year, are the transportation of passengers and cargo and other airline related services.
Results
The results of the Group for the year ended 31 December 2007 are summarised below:
| | |£'000 |
| | | |
|Revenue | |168.845 |
|Operating expenses | |(165.486) |
|Redundancy compensation | |(287) |
|Other income | | 113 |
| | | |
|Operating profit | |3.185 |
|Net finance expense | | (1.905) |
| | | |
|Profit before share of profit from associated company | |1.280 |
|Share of profit from associated company | | 212 |
| | | |
|Profit before tax | |1.492 |
|Tax | | (816) |
| | | |
|Profit for the year | | 676 |
| | | |
|Earnings per share – cent | | 0,25 |
Review of the Group’s current position and performance
The Group made a profit for the year of £0,7 million in comparison to a loss of £4,3 million last year. This improvement in the results of 2007 can be attributed to the significant increase in revenue from continuing operations which was higher than the rise in operating expenses. The results of 2006 included other income and expenses of a non-recurring nature, such as the profit of £10,6 million realised on the sale of Eurocypria’s shares to the Government of the Republic of Cyprus and the redundancy compensation of £10,5 million paid to employees who left the Company’s employment during that year.
The share of profit from the associated company Cyprus Airways (Duty-Free Shops) Ltd arose as a result of an adjustment effected to the concession fee payable by this company to the Government for 2006, through a decision taken by the latter in December 2007.
BOARD OF DIRECTORS’ REPORT (cont.)
Future prospects and development potential
During 2007 the Group has safeguarded its cash-flow through a Government guaranteed long-term loan and has strengthened its capital base through a rights issue, successfully concluded in December 2007. Through these actions the Group has now sufficient liquidity to meet its obligations as they arise and can concentrate on moving forward with the next phases of the Restructuring Plan. These involve the reassessment of the commercial orientation and the operational activities of the Group with a view to updating and improving them in order to be able to operate more effectively and in this way offer better customer service, face competition, maximise income and reduce expenses. In this respect and as already announced the provision of ground handling services to the Group will start being offered by the Joint Venture Company formed with Swissport GAP Vassilopoulos (Cyprus) Ltd, with effect from 22 May 2008, with substantial savings for the Group.
Main risks and uncertainties
The Group is operating in a highly competitive environment which is experiencing and will continue to experience significant structural change. The Group’s future performance is subject to a variety of factors some of which are within and some beyond its control. The successful implementation of the Group’s Restructuring Plan is the main determinant of the airline’s future and this fortunately is largely within the Group’s control. However there are important areas such as the intensity of competition, changes in economic conditions, fluctuations in currencies and interest rates, the price of jet fuel, acts of terrorism or war and upheavals in labour relations all of which are not within the Group’s ability to influence to any great extent and which have the potential to derail the effort to achieve long-term viability for the Group.
Directors’ interest in the share capital of the Company
This is clearly set out in note 39 of the consolidated and Company’s separate financial statements.
Shareholders holding more than 5% of the share capital of the Company
This is clearly set out in note 40 of the consolidated and Company’s separate financial statements.
Events after the balance sheet date
These are clearly set out in note 42 of the consolidated and Company’s separate financial statements.
Dividend
In accordance with Article 110(2) of the Company’s Articles of Association an amount of not less than ten per cent of the Company’s available profits for the year shall be distributed to the shareholders as dividend. Despite this and in accordance with Article 169A(1) of the Companies Law, Cap 113 dividend distribution may not be paid as the net assets of the Company at 31 December 2007 are lower than the total of subscribed share capital and non distributable reserves.
In view of the above the Board of Directors does not recommend the payment of a dividend.
BOARD OF DIRECTORS’ REPORT (cont.)
Share capital
The changes in the Company’s share capital in 2007 were the result of the Special resolutions approved at the Extraordinary General Meeting of the Company’s Shareholders held on 7 February 2007, which are set out below, as well as of the share capital increase through a rights issue to existing shareholders successfully completed in December 2007.
a) That the Company’s authorised share capital, which amounted to £75.000.000 divided into 150.000.000 shares of nominal value of £0,50 each, be reduced to £7.500.000 divided into 150.000.000 shares of £0,05 each.
b That the Company’s issued capital, which amounted to £55.519.750 divided into 111.039.500 shares of nominal value of £0,50 each, be reduced to £5.551.975 divided into 111.039.500 shares of £0,05 each.
c) That the reductions referred to in (a) and (b) above be carried out with the reduction of the nominal value of each share from £0,50 each to £0,05 each, since the amount of £0,45 per issued and fully paid share, that is a total amount of £49.967.775, was part of the capital eroded due to losses.
d) That following Court approval for the reduction mentioned in paragraph (a) above the Company’s authorised share capital be increased to £75.000.000 with the introduction of 1.350.000.000 shares of £0,05 each which will rank pari passu with the existing shares.
Court approval for the above resolutions was obtained on 23 March 2007 and all changes to the Company’s share capital have been duly registered with the Registrar of Companies.
On 14 December 2007 the Company successfully completed the increase of its share capital with the issue of 279.819.540 new ordinary shares through a rights issue. The total capital raised by the Company was £14,7 million. One right was issued for every issued and fully paid share of Cyprus Airways Public Ltd which at its exercise was converted to 2,52 new ordinary shares of a nominal value of £0,05 per share. The rights, exercised by their holders at the exercise price of £0,05 per share, correspond to 263.873.968 shares representing 94,3% of the total shares issued. The Company exercised all rights that were not exercised by their holders and the resulting 15.945.572 (5,7%) shares were sold to investors in Greece and Cyprus at the price of £0,0936 per share through the Book-Building procedure. The profit arising from this procedure of £0,7 million was recognised in equity.
Board of Directors
Mr Kikis N. Lazarides was appointed Chairman of the Board of Directors of the Company on 30 March 2007. On 3 April 2007 he was also appointed as Managing Director.
Messrs Christos Patsalides and Marios Xenophontos were appointed on 30 March 2007 as members of the Board of Directors.
Messrs Lazaros S. Savvides, Frixos Savvides and Andreas Trokkos ceased to be members of the Board of Directors on 30 March 2007.
Messrs George Kallis, Kikis Lefkaritis and Pavlos Photiades were elected as members of the Board at the Special General Meeting of the Private Shareholders, which took place on 11 June 2007. Their term of office expires on the day of the Special General Meeting of the Private Shareholders of the Company, which will be held on the same day as the Annual General Meeting and elections will be held to fill three (3) vacancies in the Board of Directors.
BOARD OF DIRECTORS’ REPORT (cont.)
Corporate Governance
A report on the subject of Corporate Governance is set out in the annual report.
Independent Auditors
The Independent Auditors of the Group, as well as of the Company, Messrs KPMG have expressed their willingness to continue in office. A resolution authorising the Board of Directors to fix their remuneration will be submitted at the next Annual General Meeting.
By order of the Board,
George Spyrou
Secretary
Nicosia, 2 April 2008
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF
CYPRUS AIRWAYS PUBLIC LIMITED
Report on the Consolidated and Company’s Separate Financial Statements
We have audited the consolidated financial statements of Cyprus Airways Public Limited (the “Company”) and its subsidiaries (the “Group”) and the Company’s separate financial statements on pages 9 to 73, which comprise the balance sheets of the Group and the Company as at 31 December 2007, and the income statements, statements of changes in equity and cash flow statements of the Group and the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Board of Directors’ Responsibility for the Financial Statements
The Company’s Board of Directors is responsible for the preparation and fair presentation of these consolidated and Company’s separate financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap 113. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated and Company’s separate financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor΄s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated and the Company’s separate financial statements give a true and fair view of the financial position of the Group and the Company as of 31 December 2007, and of the financial performance and the cash flows of the Group and the Company for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU and the requirements of the Cyprus Companies Law, Cap 113.
Report on Other Legal Requirements
Pursuant to the requirements of the Companies Law, Cap. 113, we report the following:
• We have obtained all the information and explanations we considered necessary for the purposes of our audit.
• In our opinion, proper books of account have been kept by the Company.
• The Company’s financial statements are in agreement with the books of account.
• In our opinion and to the best of the information available to us and according to the explanations given to us, the financial statements of the Group and the Company give the information required by the Companies Law, Cap. 113, in the manner so required.
• In our opinion, the information given in the report of the Board of Directors on pages 3 to 6 is consistent with the consolidated and Company’s separate financial statements.
Other Matter
This report, including the opinion, has been prepared for and only for the Company’s members as a body in accordance with Section 156 of the Companies Law, Cap.113 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to.
KPMG
Chartered Accountants
Nicosia, 2 April 2008
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2007
| | |2007 | |2006 | |
| | |Continuing |Continuing |Discontinued | |
| |Note |operations |operations |operations |Total |
| | |£’000 |£’000 |£’000 |£’000 |
| | | | | | |
|Revenue |4 |168.845 |156.952 |52.864 |209.816 |
|Cost of sales |6 |(158.458) |(151.926) |(50.947) |(202.873) |
| | | | | | |
|Gross profit before redundancy | | | | | |
| compensation | |10.387 |5.026 |1.917 |6.943 |
|Redundancy compensation |7 | (287) | (10.503) | - | (10.503) |
| | | | | | |
|Gross profit/(loss) after | | | | | |
| redundancy compensation | |10.100 |(5.477) |1.917 |(3.560) |
|Other income |8 |113 |12 |- |12 |
|Administration expenses |6 | (7.028) | (7.844) | (2.925) | (10.769) |
| | | | | | |
|Operating profit/(loss) |9 | 3.185 | (13.309) | (1.008) | (14.317) |
| | | | | | |
|Finance income |11 |1.457 |623 |218 |841 |
|Finance expense |11 | (3.362) | (2.919) | (230) | (3.149) |
|Net finance expense | | (1.905) | (2.296) | (12) | (2.308) |
| | | | | | |
|Profit/(loss) before share of profit | | | | | |
| from associated company | |1.280 |(15.605) |(1.020) |(16.625) |
|Share of profit from associated | | | | | |
| company |19 | 212 | - | - | - |
| | | | | | |
|Profit/(loss) before tax | |1.492 |(15.605) |(1.020) |(16.625) |
|Tax |12 | (816) | 1.582 | 149 | 1.731 |
| | | | | | |
|Profit/(loss) after tax but before | | | | | |
| (loss)/profit from discontinued | | | | | |
| operations (net of tax) | |676 |(14.023) |(871) |(14.894) |
| Loss on disposal of Hellas Jet S.A. | |- |- |(59) |(59) |
| Profit on disposal of Eurocypria | | | | | |
| Airlines Ltd | | - | - | 10.627 | 10.627 |
| | | | | | |
|Profit/(loss) for the year | | 676 | (14.023) | 9.697 | (4.326) |
| | | | | | |
| | | | | | |
|Earnings/(loss) per share - cent |13 | 0,25 | (5,24) | 3,62 | (1,62) |
The notes on pages 17 to 73 form an integral part of the consolidated and Company’s separate financial statements.
INCOME STATEMENT
For the year ended 31 December 2007
| | |2007 |2006 |
| |Note |£'000 |£'000 |
| | | | |
|Revenue |4 |167.810 |156.004 |
|Cost of sales |6 |(158.301) |(154.725) |
| | | | |
|Gross profit before redundancy compensation | |9.509 |1.279 |
|Redundancy compensation |7 | (287) | (10.503) |
| | | | |
|Gross profit/(loss) after redundancy compensation | |9.222 |(9.224) |
|Other income |8 |113 |13.432 |
|Administration expenses |6 | (6.146) | (7.080) |
| | | | |
|Operating profit/(loss) |9 | 3.189 | (2.872) |
| | | | |
|Finance income |11 |1.494 |621 |
|Finance expense |11 | (3.356) | (2.922) |
|Net finance expense | | (1.862) | (2.301) |
| | | | |
|Profit/(loss) before tax | |1.327 |(5.173) |
|Tax |12 | (820) | 1.582 |
| | | | |
|Profit/(loss) for the year | | 507 | (3.591) |
| | | | |
|Earnings/(loss) per share – cent |13 | 0,18 | (1,34) |
The notes on pages 17 to 73 form an integral part of the consolidated and Company’s separate financial statements.
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2007
| | |2007 |2006 |
| |Note |£'000 |£'000 |
|Assets | | | |
|Fleet, property and equipment |14 |60.494 |64.205 |
|Intangible assets |15 |326 |496 |
|Investment property |16 |615 |537 |
|Available-for-sale financial assets |17 |116 |116 |
|Associated company |19 |212 |- |
|Deferred tax assets |20 |2.530 |3.130 |
|Receivables |21 | 4.092 | 6.876 |
|Total non-current assets | |68.385 | 75.360 |
| | | | |
|Inventories |22 |1.707 |1.175 |
|Trade and other receivables |23 |20.654 |20.867 |
|Current tax assets | |- |226 |
|Available-for-sale financial assets |17 |1.057 |275 |
|Cash and cash equivalents |34 | 46.707 | 16.679 |
|Total current assets | | 70.125 | 39.222 |
| | | | |
|Total assets | |138.510 |114.582 |
| | | | |
|Equity | | | |
|Share capital |24 |19.543 |55.520 |
|Reserves |25 |9.091 |3.383 |
|Accumulated losses |25 |(20.854) |(72.050) |
|Total equity | | 7.780 |(13.147) |
| | | | |
|Liabilities | | | |
|Loans |28 |35.330 |- |
|Finance lease obligations |29 |17.838 |21.792 |
|Payables |30 | 9.835 | 9.849 |
|Total non-current liabilities | | 63.003 | 31.641 |
| | | | |
|Bank overdrafts |34 |1.204 |1.053 |
|Loans |28 |4.157 |29.575 |
|Finance lease obligations |29 |3.243 |3.353 |
|Trade, other payables and provisions |31 |46.033 |49.363 |
|Current tax liabilities | |46 |60 |
|Revenue received in advance | | 13.044 | 12.684 |
|Total current liabilities | | 67.727 | 96.088 |
|Total liabilities | |130.730 |127.729 |
| | | | |
|Total equity and liabilities | |138.510 |114.582 |
These consolidated financial statements were approved by the Board of Directors on 2 April 2008.
Kikis N. Lazarides – Chairman and Managing Director
Andreas Philippou - Director
The notes on pages 17 to 73 form an integral part of the consolidated and Company’s separate financial statements.
BALANCE SHEET AS AT 31 DECEMBER 2007
| | |2007 |2006 |
| |Note |£'000 |£'000 |
|Assets | | | |
|Fleet, property and equipment |14 |60.352 |64.107 |
|Intangible assets |15 |248 |362 |
|Investment property |16 |615 |537 |
|Available-for-sale financial assets |17 |116 |116 |
|Subsidiary companies |18 |5 |5 |
|Deferred tax assets |20 |2.524 |3.128 |
|Receivables |21 | 4.092 | 6.876 |
|Total non-current assets | | 67.952 | 75.131 |
| | | | |
|Inventories |22 |1.707 |1.175 |
|Trade and other receivables |23 |20.568 |20.871 |
|Current tax assets | |- |226 |
|Available-for-sale financial assets |17 |1.057 |275 |
|Cash and cash equivalents |34 | 46.596 |16.566 |
|Total current assets | | 69.928 | 39.113 |
| | | | |
|Total assets | |137.880 |114.244 |
| | | | |
|Equity | | | |
|Share capital |24 |19.543 |55.520 |
|Reserves |25 |9.091 |3.383 |
|Accumulated losses |25 |(21.079) | (72.106) |
|Total equity | | 7.555 | (13.203) |
| | | | |
|Liabilities | | | |
|Loans |28 |35.330 |- |
|Finance lease obligations |29 |17.838 |21.792 |
|Payables |30 | 9.835 | 9.849 |
|Total non-current liabilities | | 63.003 | 31.641 |
| | | | |
|Bank overdrafts |34 |1.121 |1.022 |
|Loans |28 |4.157 |29.575 |
|Finance lease obligations |29 |3.243 |3.353 |
|Trade, other payables and provisions |31 |45.711 |49.112 |
|Current tax liabilities | |46 |60 |
|Revenue received in advance | | 13.044 | 12.684 |
|Total current liabilities | | 67.322 | 95.806 |
|Total liabilities | |130.325 |127.447 |
| | | | |
|Total equity and liabilities | |137.880 |114.244 |
These Company’s separate financial statements were approved by the Board of Directors on 2 April 2008.
Kikis N. Lazarides - Chairman and Managing Director
Andreas Philippou - Director
The notes on pages 17 to 73 form an integral part of the consolidated and Company’s separate financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2007
| | |Share |Capital |Revaluation |Hedging |Translation |Reserve for|Accumulated |Total |
| | |capital |reserve |reserve |reserve |reserve |own shares |losses | |
| |Note |£'000 |£'000 |£'000 |£'000 |£'000 |£'000 |£'000 |£'000 |
| | | | | | | | | | |
|Balance 1 January 2006 | | 55.520 | 983 | 2.422 | 719 | (68) | -|(67.724) | (8.148) |
| | | | | | | | | | |
|Deconsolidation of subsidiary | |- |- |(250) |484 | 68 |- |- |302 |
| | | | | | | | | | |
|Cash flow hedges: | | | | | | | | | |
| | | | | | | | | | |
|Effective portion of changes in the fair | | | | | | | | | |
| values of derivative financial | | | | | | | | | |
| instruments hedged |27 |- |- |- |(116) |- |- |- |(116) |
| | | | | | | | | | |
|Effective portion of changes in | | | | | | | | | |
| exchange differences from translation | | | | | | | | | |
| of foreign currency loans |27 |- |- |- |(566) |- |- |- |(566) |
| | | | | | | | | | |
|Effective portion of changes in | | | | | | | | | |
|exchange differences from translation | | | | | | | | | |
| of other assets in foreign currencies |27 | -| - | - | (293) | - | -| - | (293) |
| | | | | | | | | | |
|Net income recognised directly | | | | | | | | | |
| in equity | |- |- |(250) | (491) | 68 |- |- |(673) |
| | | | | | | | | | |
|Loss for the year | | - | - | - | - | - | -| (4.326) | (4.326) |
| | | | | | | | | | |
|Total recognised income for 2006 | | - | - | (250) | (491) | 68 | -| (4.326) |(4.999) |
| | | | | | | | | | |
|Balance 31 December 2006 / | | | | | | | | | |
| 1 January 2007 | | 55.520 | 983 | 2.172 | 228 | - | -|(72.050) |(13.147) |
| | | | | | | | | | |
|Available-for-sale financial assets: | | | | | | | | | |
| Fair value gain |26 |- |- |782 |- |- |- |- |782 |
| | | | | | | | | | |
|Freehold property: | | | | | | | | | |
| Fair value gain (net of tax) |26 |- |- |428 |- |- |- |- |428 |
| | | | | | | | | | |
|Aircraft spares: | | | | | | | | | |
| Fair value gain |26 |- |- |3.843 |- |- |- |- |3.843 |
| | | | | | | | | | |
|Cash flow hedges: | | | | | | | | | |
| | | | | | | | | | |
|Effective portion of changes in the | | | | | | | | | |
| fair values of derivative financial | | | | | | | | | |
| instruments hedged |27 |- |- |- |186 |- |- |- |186 |
| | | | | | | | | | |
|Effective portion of changes in | | | | | | | | | |
| exchange differences from | | | | | | | | | |
| translation of foreign currency | | | | | | | | | |
| loans |27 |- |- |- |585 |- |- |- |585 |
| | | | | | | | | | |
|Effective portion of changes in | | | | | | | | | |
| exchange differences from | | | | | | | | | |
|translation of other assets in foreign | | | | | | | | | |
| currencies |27 | - | - | - | (116) | - | -| - | (116) |
| | | | | | | | | | |
|Net expense recognised directly | | | | | | | | | |
| in equity | |- |- |5.053 |655 |- |- |- |5.708 |
| | | | | | | | | | |
|Profit for the year | | - | - | - | - | - | -| 676 | 676 |
| | | | | | | | | | |
|Total recognised income for 2007 | | - | - | 5.053 | 655 | - | -| 676 | 6.384 |
| | | | | | | | | | |
|Acquisition of own shares |24 |- |- |- |- |- |(819) |- |(819) |
|Sale of own shares |24 |- |- |- |- |- |819 |674 |1.493 |
|Issue of share capital |24 |13.991 |- |- |- |- |- | (122) |13.869 |
|Capital erosion |24 |(49.968) | - | - | - | - | -| 49.968 | - |
| | | | | | | | | | |
| | |(35.977) | - | - | - | - | -| 50.520 | 14.543 |
| | | | | | | | | | |
|Balance 31 December 2007 | | 19.543 | 983 | 7.225 | 883 | - | -|(20.854) | 7.780 |
The notes on pages 17 to 73 form an integral part of the consolidated and Company’s separate financial statements.
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2007
| | |Share |Capital |Revalution |Hedging |Reserve for |Accumulated |Total |
| | |Capital |reserve |reserve |reserve |own shares |losses | |
| |Note |£'000 |£'000 |£'000 |£'000 |£'000 |£'000 |£'000 |
| | | | | | | | | |
|Balance 1 January 2006 | | 55.520 | 983 | 2.172 | 1.203 | - |(68.515) | (8.637) |
| | | | | | | | | |
|Cash flow hedges: | | | | | | | | |
| | | | | | | | | |
|Effective portion of changes in the | | | | | | | | |
| fair values of derivative financial | | | | | | | | |
| instruments hedged |27 |- |- |- |(116) |- |- |(116) |
| | | | | | | | | |
|Effective portion of changes in | | | | | | | | |
| exchange differences from | | | | | | | | |
| translation of foreign currency | | | | | | | | |
| loans |27 |- |- |- |(566) |- |- |(566) |
| | | | | | | | | |
|Effective portion of changes in | | | | | | | | |
| exchange differences from | | | | | | | | |
|translation of other assets in |27 |- |- |- |(293) |- |- |(293) |
|foreign currencies | | | | | | | | |
| | | | | | | | | |
|Net income recognised directly | | | | | | | | |
| in equity | |- |- |- | (975) |- |- |(975) |
| | | | | | | | | |
|Loss for the year | | - | - | - | - | - | (3.591) | (3.591) |
| | | | | | | | | |
|Total recognised income for 2006 | | - | - | - | (975) | - |(3.591) |(4.566) |
| | | | | | | | | |
|Balance 31 December 2006 / | | | | | | | | |
| 1 January 2007 | | 55.520 | 983 | 2.172 | 228 | - |(72.106) |(13.203) |
| | | | | | | | | |
|Available-for-sale financial assets: | | | | | | | | |
| Fair value gain |26 |- |- |782 |- |- |- |782 |
| | | | | | | | | |
|Freehold property: | | | | | | | | |
| Fair value gain (net of tax) |26 |- |- |428 |- |- |- |428 |
| | | | | | | | | |
|Aircraft spares: | | | | | | | | |
| Fair value gain |26 |- |- |3.843 |- |- |- |3.843 |
| | | | | | | | | |
|Cash flow hedges: | | | | | | | | |
| | | | | | | | |
|Effective portion of changes in the | | | | | | | | |
| fair values of derivative financial | | | | | | | | |
| instruments hedged |27 |- |- |- |186 |- |- |186 |
| | | | | | | | | |
|Effective portion of changes in | | | | | | | | |
| exchange differences from | | | | | | | | |
| translation of foreign currency | | | | | | | | |
| loans |27 |- |- |- |585 |- |- |585 |
| | | | | | | | | |
|Effective portion of changes in | | | | | | | | |
| exchange differences from translation | | | | | | | | |
| of other assets in foreign currencies |27 | - | - | - | (116) | - | - | (116) |
| | | | | | | | | |
|Net expense recognised directly | | | | | | | | |
| in equity | |- |- |5.053 |655 |- |- |5.708 |
| | | | | | | | | |
|Profit for the year | | - | - | - | - | - | 507 | 507 |
| | | | | | | | | |
|Total recognised income for 2007 | | - | - | 5.053 | 655 | - | 507 | 6.215 |
| | | | | | | | | |
|Acquisition of own shares |24 |- |- |- |- |(819) |- |(819) |
|Sale of own shares |24 |- |- |- |- |819 |674 |1.493 |
|Issue of share capital |24 |13.991 |- |- |- |- | (122) |13.869 |
|Capital erosion |24 |(49.968) | - | - | - | - | 49.968 | - |
| | | | | | | | | |
| | |(35.977) | - | - | - | - | 50.520 | 14.543 |
| | | | | | | | | |
|Balance 31 December 2007 | | 19.543 | 983 | 7.225 | 883 | - |(21.079) | 7.555 |
The notes on pages 17 to 73 form an integral part of the consolidated and Company’s separate financial statements.
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2007
| | |2007 |2006 |
| |Note |£'000 |£'000 |
| | | | |
|Net cash flow from operating activities |32 | 11.589 | 3.367 |
| | | | |
|Cash flow from investing activities | | | |
|Proceeds from sale of fleet, property and equipment | |18 |42 |
|Interest received | |1.328 |826 |
|Dividend received | |- |15 |
|Disposal of Eurocypria Airlines Ltd net of cash | | | |
| disposed of | |- |3.997 |
|Proceeds from disposal of investment in Hellas Jet S.A. | |- |1.138 |
|Acquisition of fleet, property and equipment | |(981) |(1.133) |
|Acquisition of intangible assets | | (29) | (310) |
| | | | |
|Net cash flow from investing activities | | 336 | 4.575 |
| | | | |
|Cash flow from / (for) financing activities | | | |
|Proceeds from rights issue | |14.665 |- |
|Proceeds from loans | |85.991 |- |
|Repayment of loans | |(76.386) |- |
|Repayment of finance lease obligations | |(3.336) |(3.302) |
|Rights issue expense | |(122) |- |
|Interest paid | | (2.860) | (2.872) |
| | | | |
|Net cash flow from / (for) financing activities | | 17.952 | (6.174) |
| | | | |
|Net increase in cash and cash equivalents |33/34 |29.877 |1.768 |
|Cash and cash equivalents at the beginning of the year | | 15.626 | 13.858 |
| | | | |
|Cash and cash equivalents at the end of the year |33/34 | 45.503 | 15.626 |
The notes on pages 17 to 73 form an integral part of the consolidated and Company’s separate financial statements.
CASH FLOW STATEMENT
For the year ended 31 December 2007
| | |2007 |2006 |
| |Note |£'000 |£'000 |
| | | | |
|Net cash flow from / (for) operating activities |32 | 11.497 | (1.346) |
| | | | |
|Cash flow from investing activities | | | |
|Proceeds from sale of fleet, property and equipment | |16 |39 |
|Proceeds from sale of Eurocypria Airlines Limited | |- |13.425 |
|Proceeds from sale of Hellas Jet S.A. | |- |1.138 |
|Interest received | |1.327 |606 |
|Dividend received | |38 |15 |
|Acquisition of fleet, property and equipment | |(878) |(874) |
|Acquisition of intangible assets | | (27) | (228) |
| | | | |
|Net cash flow from investing activities | | 476 | 14.121 |
| | | | |
|Cash flow from / (for) financing activities | | | |
|Proceeds from rights issue | |14.665 |- |
|Proceeds from loans | |85.991 |- |
|Repayment of loans | |(76.386) |- |
|Repayment of finance lease obligations | |(3.336) |(3.302) |
|Rights issue expense | |(122) | |
|Interest paid | | (2.854) | (2.758) |
| | | | |
|Net cash flow from / (for) financing activities | | 17.958 | (6.060) |
| | | | |
|Net increase in cash and cash equivalents |33/34 |29.931 |6.715 |
|Cash and cash equivalents at the beginning of the year | | 15.544 | 8.829 |
| | | | |
|Cash and cash equivalents at the end of the year |33/34 | 45.475 |15.544 |
The notes on pages 17 to 73 form an integral part of the consolidated and Company’s separate financial statements.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
1. INCORPORATION AND PRINCIPAL ACTIVITIES
Cyprus Airways Public Limited, (the “Company”) was established in Nicosia in 1947, as a public company (Reg. Number 314) in accordance with the requirements of the Cyprus Companies Law, Cap.113. The Company is listed on the Cyprus Stock Exchange. Its principal activities are the transportation of passengers and cargo and other airline related services.
The subsidiary companies of Cyprus Airways Public Limited are the following:
(i) Cyprair Tours Limited
It was established on 19 March 1970 in Nicosia and was registered as a tour operator in the United Kingdom. Its main activity was to organise inclusive holidays from large cities in the United Kingdom to Cyprus. The company effectively ceased operations in October 2004 and carried out its last tour in March 2005.
(ii) Zenon NDC Limited
It was established on 28 February 1997 in Nicosia. The company provides access to an international network of electronic reservations and information services, especially designed to facilitate travel agents.
The associated company of Cyprus Airways Public Limited is the following:
Cyprus Airways (Duty-Free Shops) Limited
It started its operations on 1 May 1996 when it took over the operation of the Duty Free Shops at Larnaca and Paphos airports on the basis of an agreement which was signed between the Company and the Government. The company ceased operating on 30 June 2006 when the new airport operator took over the operation of the duty free shops at Larnaca and Paphos airports. The Board of Directors of the company decided during its meeting on 21 December 2007 to proceed with the voluntary liquidation of this company.
2. BASIS OF PRESENTATION
The consolidated and Company’s separate financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union (“EU”) and the requirements of the Cyprus Stock Exchange Laws and Regulations and the Cyprus Companies Law Cap. 113.
The consolidated and Company’s separate financial statements are presented in Cyprus Pounds which was the functional currency of the Group and of the Company until 31 December 2007 and the one that best presents the substance of its financial activities. All financial information has been rounded to the nearest thousand.
The consolidated and Company’s separate income statements, statements of changes in equity, balance sheets and cash flow statements are also presented in Euro for information purposes using the irreversible exchange parity of 1 Euro = 0,585274 Cyprus Pounds (note 43).
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
3. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been consistently applied for all the years presented in these financial statements of the Group and of the Company.
Basis of preparation of the consolidated and Company’s separate financial statements
The consolidated and Company’s separate financial statements have been prepared under the historical cost convention as modified by the revaluation of freehold property, aircraft spares, investment property and available-for-sale financial assets.
Uniform accounting policies have been applied in preparing the financial statements of all the Group companies and, except where a change is stated, these are consistent with the ones applied in the previous year.
The preparation of financial statements in conformity with IFRS’s requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may deviate from such estimates.
The estimates and supporting interpretations are revised on a continuous basis. Revisions to accounting estimates are recognised in the period during which the estimate is revised, if the estimate affects only that period, or in the period of the revision and future periods, if the revision affects the present as well as future periods.
Adoption of new and revised Standards and Interpretations
In the current year, the Group and the Company have adopted all new and revised IFRS that relate to their operations and are effective for accounting periods beginning on 1 January 2007.
At the date of the approval of these financial statements the following Standards or Interpretations were in issue by the IASB but not yet effective.
a) Standards and Interpretations adopted by the EU
• IFRS 8: “Operating Segments” (effective for annual periods beginning on or after 1 January 2009). The application of the Standard is not expected to have an impact on the financial statements of the Group and the Company.
• IFRIC 11: “IFRS 2: Group and Treasury Share Transactions” (effective for annual periods beginning on or after 1 March 2007). The application of the Interpretation is not expected to have an impact on the financial statements of the Group and the Company.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
3. SIGNIFICANT ACCOUNTING POLICIES (cont.)
b) Standards and Interpretations not yet adopted by the EU
• IAS 1 (revised): “Presentation of Financial Statements: A Revised Presentation” (effective for annual periods beginning on or after 1 January 2009). The application of the Standard is not expected to have an impact on the financial statements of the Group and the Company.
• IAS 23 (revised): “Borrowing Costs” (effective for annual periods beginning on or after 1 January 2009). The application of the Standard is not expected to have an impact on the financial statements of the Group and the Company.
• IFRIC 12: “Service Concession Arrangements” (effective for annual periods beginning on or after 1 January 2008). The application of the Interpretation is not expected to have an impact on the financial statements of the Group and the Company.
• IFRIC 13: “Customer Loyalty Programmes” (effective for annual periods beginning on or after 1 July 2008). The application of the Interpretation is not expected to have an impact on the financial statements of the Group and the Company.
• IFRIC 14: “IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction” (effective for annual periods on or after 1 January 2008). The application of the Interpretation is not expected to have an impact on the financial statements of the Group and the Company.
The Board of Directors does not anticipate a material impact on the financial statements of the Group and the Company from the adoption of these Standards or Interpretations.
Basis of consolidation
The Group financial statements consolidate the financial statements of the Company and its wholly owned subsidiaries, Cyprair Tours Limited and Zenon NDC Limited made up to 31 December 2007 and are expressed in Cyprus Pounds. The comparative consolidated financial statements also include the financial results of Eurocypria Airlines Limited until the date control was transferred outside the Group.
The subsidiary companies are consolidated from the date on which control is transferred to the Group and cease to be consolidated when control is transferred outside the Group. Control is effected when the parent company controls directly or indirectly more than 50% of the share capital of the company with voting rights or is in a position to affect its financial and operational decisions or when it controls the appointment or the resignation of the majority of the members of the Board of Directors.
Associated Company
The investment in the associated company is accounted for using the equity method in the consolidated financial statements and on cost less impairment in the Company’s separate financial statements.
Although Cyprus Airways (Duty-Free Shops) Limited is wholly owned by Cyprus Airways Public Limited, the former is treated in accordance with International Accounting Standard 28 “Investments in Associates” as an associate, because the Board of Directors of the company is appointed by the Minister of Finance.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
3. SIGNIFICANT ACCOUNTING POLICIES (cont.)
Basis of consolidation (cont.)
Transactions eliminated on consolidation
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated to the extent of the Group’s interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
Aircraft maintenance
Scheduled aircraft maintenance is the subject of service agreements entered into by the Group and the Company. The costs resulting from such agreements relating to routine annual maintenance are charged to the income statement on the basis of aircraft utilisation. The cost of major aircraft maintenance that is expected to arise in future periods is charged to the income statement using the straight line method.
Engines’ overhaul
Costs relating to the overhaul of engines for all types of aircraft are charged to the income statement on the basis of hours flown.
Foreign currency
Foreign Currency Transactions
Transactions in foreign currencies are translated into Cyprus Pounds at the rates of exchange ruling at the date of the transaction. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Cyprus Pounds using exchange rates ruling at the dates the fair value was determined.
Hedging
The Group and the Company, as a matter of principle, seek to reduce their exposure to fluctuations in the rates of exchange of foreign currencies. For this purpose the Group and the Company try to achieve natural hedging by matching as far as possible the currencies of their borrowings or liabilities with those of future incomes or other future receivables based on contractual agreements.
Exchange gains or losses relating to foreign currency loans or other liabilities which are drawn in foreign currency in order to hedge the exchange risk in relation to revenue receivables or other future receivables based on contractual agreements in the same currency, are treated as follows:
The portion of the exchange gain or loss on the foreign currency loan that is considered to be an effective hedge (effective portion) is transferred to a hedging reserve and is only recognised in the income statement when it crystallises. The portion of such gain or loss that relates to a foreign currency loan that is considered to be an ineffective hedge (ineffective portion) is recognised in the income statement. The balance of the hedging reserve is adjusted in accordance with the loan balances outstanding in foreign currency at the end of each year
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
3. SIGNIFICANT ACCOUNTING POLICIES (cont.)
Employee benefits
The Group and the Company operate a number of Provident Fund schemes for their employees as described in note 37 of the consolidated and Company’s separate financial statements.
Defined contribution plans
Obligations for contributions to defined contribution plans are recognised as an expense in the income statement as incurred.
Defined benefit plans
Amounts included in the income statement are charged in such a way as to spread the Provident Fund costs over the average remaining working life of the employees.
Revenue
Revenue represents amounts charged in respect of services rendered to customers net of Value Added Tax, discounts and commissions. Revenues earned by the Group and the Company are recognised on the following basis:
a) Passenger and cargo revenue
Passenger and cargo revenue are recognised in the accounting period in which the services are rendered i.e. the transportation is provided. Unutilised passenger tickets and air waybills are shown as a liability in the balance sheet under revenue received in advance and are recognised as revenue in the income statement on a systematic basis.
b) Interest income
Interest income is recognised on a time proportion basis using the effective interest method.
c) Rental income
Rental income from the investment property is recognised in the income statement on a straight-line basis over the term of the lease.
d) Dividend income
Dividend income is recognised when the right to receive payment is established.
Fleet, property and equipment
Freehold property is stated at valuation by independent external valuers after deducting accumulated depreciation. Aircraft spares are stated at valuation based on the last available indication of their market value. The remaining fleet, property and equipment are stated at cost less accumulated depreciation.
Surpluses or deficits that result from the revaluation of freehold property and aircraft spares are recognised in the revaluation reserve. If a deficit arises which is not covered by the accumulated surpluses in the revaluation reserve for a specific asset it is written off in the income statement.
Expenditure for major aircraft modifications is capitalised and is depreciated to residual value over the remaining useful economic life of the aircraft.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
3. SIGNIFICANT ACCOUNTING POLICIES (cont.)
Fleet, property and equipment (cont.)
Depreciation is being provided using the straight line method as follows:
|Freehold land |no charge |
|Buildings on freehold property |over 20 years |
|Buildings on leased property and |over the life of the building or the life of |
| improvements on leased property |the lease whichever is shorter |
|A320 aircraft, spares and equipment |over 16 years with 10% residual value |
|A319 aircraft, spares and equipment |over 16 years with 10% residual value |
|Other equipment |over 2 to 6 years |
Depreciation method and useful lives as well as residual values are reassessed annually.
Gains or losses on disposal of fleet, property and equipment are recognised in the income statement in the year of disposal. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings.
Impairment of assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
Leased assets
Finance Leases
The Group and the Company acquired through finance leases two A319 aircraft and in this respect have adopted the accounting policy provisions of the International Accounting Standard 17 “Leases”, as set out below.
Leases in terms of which the Group and the Company assume substantially all the risks and rewards of ownership of the underlying asset are classified as finance leases.
Assets acquired by way of finance leases are capitalised under fleet, property and equipment at the inception of the lease at the lower of the fair value of the leased asset or the present value of the minimum lease payments. At the inception of the finance lease the future lease payments that relate to the capital commitment are recognised as a long term liability. Each lease payment comprises the finance charge and the reduction in the capital commitment. The finance charge is calculated by applying the prevailing floating rate of interest on the outstanding balance of the capital commitment and is recognised in the income statement on an accruals basis.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
3. SIGNIFICANT ACCOUNTING POLICIES (cont.)
Leased assets (cont.)
Finance Leases (cont.)
Depreciation for aircraft acquired through finance leases is being provided using the straight line method over a period of 16 years with 10% residual value, which is consistent with the depreciation policy applied by the Group and the Company to aircraft which are owned.
Operating Leases
The Group and the Company acquired through operating leases two A330 aircraft and in this respect have adopted the accounting policy provisions of the International Accounting Standard 17 “Leases” as set out below.
Leases in terms of which the Group and the Company do not assume substantially all the risks and rewards of ownership of the underlying asset are classified as operating leases.
Operating lease rentals, which are paid on a monthly basis, are charged to the income statement on a straight line basis over the period of the lease.
Intangible assets and amortisation
Intangible assets represent the cost of computer software and are stated at cost less accumulated amortisation.
Amortisation is being provided using the straight-line method over a period of five years.
Investment property
Investment property is held either to earn long term rental income or for capital appreciation or for both and is not occupied by the Group or the Company. Investment property is stated at fair value representing open market value determined annually by external valuers. Changes in fair value are recognised in the income statement.
Financial assets
Financial assets held to maturity
Financial assets are classified as “held to maturity” if the Group and the Company have both the intent and ability to hold them to maturity. Such financial assets that have a fixed maturity are carried at amortised cost using the effective interest rate method and those that do not have a fixed maturity are carried at cost. The Group and the Company did not have any such financial assets during the year.
Available-for-sale financial assets
Financial assets are classified as “available-for-sale” if the Group and the Company intend to hold them for an indefinite period of time, but may sell them in response to needs for liquidity or changes in their prices. After initial recognition these financial assets are re-measured at fair value. The market values prevailing at the balance sheet date are used to determine the fair value for listed securities.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
3. SIGNIFICANT ACCOUNTING POLICIES (cont.)
Financial assets
Available-for-sale financial assets (cont.)
The difference between the revalued and the current value is transferred to the revaluation reserve. In case that the revalued amount is lower than the current value, the difference is written off in the revaluation reserve to the extent that the same financial asset led to an earlier increase in the revaluation reserve. Any additional diminution in value is charged to the income statement. Upon disposal of revalued financial assets any surplus that had arisen on revaluation is transferred to the income statement.
Trade receivables
Trade receivables considered not to be recoverable are written off and in addition provisions are made for specific doubtful trade receivables whenever considered necessary. Trade receivables are stated after deduction of the specific provision for trade receivables, when applicable.
Inventories
Bonded items and catering stocks are valued at average cost. Consumable spares for aircraft are written off over a period of three years.
Frequent Flyer Programme
The Group and the Company operate the Sunmiles Frequent Flyer Programme according to which frequent travellers accumulate kilometre credits, which entitle them to various awards including free travel. The incremental direct cost of providing free travel in exchange for redemption of kilometres earned by members of the Sunmiles scheme is accrued as members accumulate kilometres.
Costs accrued include fuel, catering, insurance and other incremental passenger service charges. These costs are charged to cost of sales.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and short maturity deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s and the Company’s cash management are included as a component of cash and cash equivalents for the purpose of the cash flow statement.
Taxation
The provision for taxation is based on legislation and rates applicable in Cyprus.
Deferred taxation is also provided for using the balance sheet liability method on all temporary differences between the carrying amounts for financial reporting purposes and the amounts used for taxation purposes, except differences relating to the initial recognition of assets or liabilities which affect neither accounting nor taxable profit (or taxable loss). Deferred tax assets are recognised when it is probable that taxable profits will be available against which the deferred tax asset can be utilised.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
3. SIGNIFICANT ACCOUNTING POLICIES (cont.)
Taxation (cont.)
Deferred taxation is estimated using the taxation rates expected to be applicable in the future. The effect on deferred taxation of any changes in the tax rates is included in the income statement except to the extent that it relates to amounts previously charged or credited to reserves.
Dividends
Dividend distribution to the Company’s shareholders is recognised as a liability in the consolidated and Company’s separate financial statements in the year in which the dividends are approved by the shareholders of the Company.
Derivative financial instruments
The Group and the Company, as a matter of principle, seek protection against unanticipated adverse fluctuations in currencies, interest rates and jet fuel prices. To hedge their exposures the Group and the Company use various derivative financial instruments as explained below.
The Group and the Company use forward foreign exchange contracts and currency swap agreements to hedge their foreign currency exposure, single and cross currency interest rate swap agreements to hedge their interest rate exposure and jet fuel price swaps and options to hedge their exposure to jet fuel price fluctuations.
Derivative financial instruments are recognised initially at cost and subsequently are re-measured at fair value.
Where a derivative financial instrument hedges the variability in cash flows of a firm commitment or a forecasted transaction (hedge item), the portion of any resultant gain or loss from changes in the fair value of the derivative financial instrument that is considered to be an effective hedge is transferred to the hedging reserve and is recognised in the income statement as it crystallises. The portion of such gain or loss that relates to a derivative financial instrument that is considered to be an ineffective hedge is recognised in the income statement. If the derivative financial instrument is no longer considered an effective hedge, the cumulative unrealised gain or loss reflected in the hedging reserve is transferred to the income statement immediately.
Fair values are estimated using market prices or discounted cash flow models as appropriate. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.
Hedge accounting is not applied to derivative instruments that economically hedge monetary assets and liabilities denominated in foreign currencies. Changes in the fair value of such derivatives are recognised in the income statement as part of foreign currency gains and losses.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
3. SIGNIFICANT ACCOUNTING POLICIES (cont.)
Loans
Loans are shown on the basis of the balances due on the balance sheet date.
Trade payables
Trade payables represent the amounts due at the balance sheet date and include interest whenever this is applicable.
Provisions
Provisions are recognised when the Group and the Company have a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated.
Segment reporting
A segment is a distinguishable component of the Group or the Company that is engaged either in providing products or services (business segment) or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.
Primary segment - Geographical
The Group and the Company conduct their activities from their base which is Cyprus, to and from Europe and the Middle East. The geographical analysis is given in note 5.
Secondary segment - Business
Due to the fact that the Group’s and the Company’s main activity is the transportation of passengers and to a lesser extent the transportation of cargo, no analysis is given by business segment.
Determination of fair values
A number of the Group’s and the Company’s accounting policies and disclosures require the determination of fair value for both financial and non-financial assets and liabilities. Information regarding the determination of fair values is disclosed in the notes specific to that asset or liability.
Comparative figures
Wherever needed, the comparative figures have been restated to comply with the changes made in the presentation of the current year.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
4. REVENUE
| |2007 |2006 |
|Revenue is analysed as follows: |£'000 |£'000 |
| | | |
|The Group | | |
|Passenger revenue net of commissions |140.121 |176.596 |
|Freight and mail revenue net of commissions |13.362 |12.426 |
|Other revenue | 15.362 | 20.794 |
| | | |
| |168.845 |209.816 |
|The Company | | |
|Passenger revenue net of commissions |140.121 |127.760 |
|Freight and mail revenue net of commissions |13.362 |12.362 |
|Other revenue | 14.327 | 15.882 |
| | | |
| |167.810 |156.004 |
Other revenue includes revenue from duty free sales, third party catering sales, revenue from unused tickets etc.
5. SEGMENT REPORTING
Segment information is presented in respect of the Group’s and the Company’s geographical segments.
|The Group |2007 |2006 |
| |£'000 |£'000 |
|Geographical segments | | |
|(i) Revenue net of commissions | | |
|Europe |156.323 |198.572 |
|Middle East and Gulf | 12.522 | 11.244 |
| | | |
| |168.845 |209.816 |
| | | |
|(ii) Operating profit/(loss) | | |
|Europe |5.942 |(11.922) |
|Middle East and Gulf | (2.757) | (2.395) |
| | | |
| | 3.185 |(14.317) |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
5. SEGMENT REPORTING (cont.)
|The Company |2007 |2006 |
| |£'000 |£'000 |
|Geographical segments | | |
|(i) Revenue net of commissions | | |
|Europe |155.288 |144.802 |
|Middle East and Gulf | 12.522 | 11.202 |
| | | |
| |167.810 |156.004 |
|(ii) Operating profit/(loss) before financial result from | | |
| the sale of Eurocypria Airlines Ltd and Hellas Jet S.A. | | |
|Europe |5.946 |(10.908) |
|Middle East and Gulf | (2.757) | (2.395) |
| | | |
| | 3.189 |(13.303) |
In arriving at the revenue and operating profit/(loss) by geographical area the results of individual routes to/from each of the two areas are aggregated. The revenue contribution of the Middle East and Gulf routes to European routes and vice versa is not reflected in the results shown above and accordingly their stated contribution to the operating profit/(loss) for the year may not be indicative of their true overall impact to the Group’s and the Company’s network results. There is no inter-segment pricing between Europe and Middle East and Gulf.
Due to the fact that the Group’s and Company’s aircraft are used on different routes during the year, it is not possible to prepare an accurate geographical analysis of the Group’s and Company’s operating capital.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
6. OPERATING EXPENDITURE
| |2007 |2006 |
| |£'000 |£'000 |
|The Group | | |
|Staff expenses |39.825 |49.068 |
|Aircraft maintenance |19.425 |24.010 |
|Operating lease of aircraft |6.764 |18.386 |
|Ad hoc lease of aircraft |2.138 |448 |
|Fuel cost |39.905 |54.634 |
|En route charges, landing and handling fees |27.190 |34.546 |
|Aircraft catering and duty free sales costs |3.747 |5.440 |
|Depreciation of fleet, property and equipment |9.012 |9.502 |
|Amortisation of intangible assets |199 |280 |
|Insurance costs |1.402 |1.812 |
|Selling and promotional expenses |4.513 |4.480 |
|Other expenses | 11.366 | 11.036 |
| | | |
|Operating expenditure |165.486 |213.642 |
| | | |
|Operating expenditure is analysed into: | | |
| Cost of sales |158.458 |202.873 |
| Administration expenses | 7.028 | 10.769 |
| | | |
| |165.486 |213.642 |
| | | |
|The Company | | |
|Staff expenses |39.501 |42.079 |
|Aircraft maintenance |19.425 |19.513 |
|Operating lease of aircraft |6.764 |7.323 |
|Ad hoc lease of aircraft |2.138 |448 |
|Fuel cost |39.905 |37.935 |
|En route charges, landing and handling fees |27.190 |24.947 |
|Aircraft catering and duty free sales costs |3.747 |3.372 |
|Depreciation of fleet, property and equipment |8.954 |9.209 |
|Amortisation of intangible assets |141 |201 |
|Insurance costs |1.402 |1.466 |
|Selling and promotional expenses |4.684 |4.496 |
|Other expenses | 10.596 | 10.816 |
| | | |
|Operating expenditure |164.447 |161.805 |
| | | |
|Operating expenditure is analysed into: | | |
| Cost of sales |158.301 |154.725 |
| Administration expenses | 6.146 | 7.080 |
| | | |
| |164.447 |161.805 |
The average number of staff employed by the Group and the Company during the year was 1.525 and 1.513 persons respectively (2006: 1.839 and 1.582 persons respectively).
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
7. REDUNDANCY COMPENSATION
| |2007 |2006 |
|The Group and the Company |£'000 |£'000 |
| | | |
|Redundancy compensation | 287 | 10.503 |
The redundancy compensation represents the compensation paid to employees who have left the Group’s and the Company’s employment as part of the implementation of the Restructuring Plan.
8. OTHER INCOME
| |2007 |2006 |
| |£'000 |£'000 |
|The Group | | |
|Change in fair value of investment property |78 |- |
|Rental income | 35 | 12 |
| | | |
| | 113 | 12 |
| | | |
|The Company | | |
|Change in fair value of investment property |78 |- |
|Rental income | 35 | 12 |
|Profit on disposal of Eurocypria Airlines Ltd | - | 13.420 |
| | | |
| | 113 |13.432 |
9. OPERATING PROFIT/(LOSS)
| |2007 |2006 |
| |£'000 |£'000 |
|The Group | | |
|Operating profit/(loss) is stated after charges in respect | | |
| of the following: | | |
|Independent auditors' remuneration |50 |51 |
|Directors' emoluments (note 10) | | |
| - Non-Executive |30 |41 |
| - Executive | 28 | - |
|Depreciation of fleet, property and equipment |9.012 |9.502 |
|Amortisation of intangible assets |199 |280 |
|Loss on disposal of fleet, property and equipment | 53 | 45 |
| | | |
|The Company | | |
|Operating profit/(loss) is stated after charges in respect | | |
| of the following: | | |
|Independent auditors' remuneration |47 |47 |
|Directors' emoluments (note 10) | | |
| - Non-Executive |27 |31 |
| - Executive | 28 | - |
|Depreciation of fleet, property and equipment |8.954 |9.209 |
|Amortisation of intangible assets |141 |201 |
|Loss on disposal of fleet, property and equipment | 55 | 48 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
10. DIRECTORS’ EMOLUMENTS
| |Executive |Non-executive |
| |2007 |2006 |2007 |2006 |
| |£'000 |£'000 |£'000 |£'000 |
|The Group | | | | |
|Remuneration / fees |26 |- |11 |19 |
|Other benefits | 2 | - | 19 | 22 |
| | 28 | - | 30 | 41 |
|The Company | | | | |
|Remuneration / fees |26 |- |8 |9 |
|Other benefits | 2 | - | 19 | 22 |
| | 28 | - | 27 | 31 |
The remuneration of the Executive Chairman appearing above represents his emoluments from 3 April 2007, the date on which he was appointed to the post, and 31 July 2007, being the last date on which he received any remuneration. With effect from 1 August 2007 the Executive Chairman advised the Company that he no longer wished to receive any emoluments. Out of his emoluments noted above the Executive Chairman donated an amount of approximately £10 thousand to a charitable organisation.
11. NET FINANCE EXPENSE
| |2007 |2006 |
|The Group |£'000 |£'000 |
|Interest income |1.457 |826 |
|Dividend income | - | 15 |
|Finance income | 1.457 | 841 |
| | | |
|Bank charges |(211) |(223) |
|Interest payable on loans |(1.655) |(1.415) |
|Interest payable on bank overdrafts |(13) |(262) |
|Interest payable on finance lease obligations |(1.317) |(1.195) |
|Net foreign exchange loss | (166) | (54) |
|Finance expense |(3.362) |(3.149) |
| | | |
|Net finance expense |(1.905) |(2.308) |
| | | |
|The Company | | |
|Interest income |1.456 |606 |
|Dividend income | 38 | 15 |
|Finance income | 1.494 | 621 |
| | | |
|Bank charges |(211) |(104) |
|Interest payable on loans |(1.655) |(1.415) |
|Interest payable on bank overdrafts |(8) |(148) |
|Interest payable on finance lease obligations |(1.317) |(1.195) |
|Net foreign exchange loss | (165) | (60) |
|Finance expense |(3.356) | (2.922) |
|Net finance expense |(1.862) | (2.301) |
The exchange difference for the years 2007 and 2006 arose from the repayment of foreign currency loans during the year.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
12. TAXATION
| |2007 |2006 |
|The Group |£'000 |£'000 |
| | | |
|(i) Tax charge / (credit) for the year | | |
|Corporation tax – prior years |238 |- |
|Special contribution to the defence fund – prior years |(100) |- |
|Capital gains tax – prior year |53 |- |
|Special contribution to the defence fund – current year | 147 | 83 |
|Tax incurred on sales abroad |- |6 |
|Deferred tax charge / (credit) | 478 | (1.820) |
| | | |
| | 816 | (1.731) |
| | | |
|(ii) Reconciliation of tax charge / (credit) for the year | | |
|Profit / (loss) before tax | 1.280 |(16.625) |
| | | |
|Tax at 10% on the Group’s profit/(loss) before tax |128 |(1.663) |
| | | |
|Tax effect of the following: | | |
|Non-deductible expenditure |936 |1.250 |
|Corporation tax – prior years |238 |- |
|Special contribution to the defence fund – prior years |(100) |- |
|Capital gains tax – prior year |53 |- |
|Special contribution to the defence fund – current year | 147 | 83 |
|Tax incurred on sales abroad |- |6 |
|Deferred tax charge / (credit) on timing differences |60 |(183) |
|Allowances and income not assessable to tax | (646) | (1.224) |
| | | |
|Tax charge / (credit) for the year | 816 | (1.731) |
| | | |
| | | |
| | | |
|The Company | | |
| | | |
|(i) Tax charge / (credit) for the year | | |
| Corporation tax – prior years |238 |- |
| Special contribution to the defence fund – prior years |(100) |- |
| Capital gains tax – prior year |53 |- |
| Special contribution to the defence fund – current year | 147 | 61 |
| Tax incurred on sales abroad |- |6 |
| Deferred tax charge / (credit) | 482 |(1.649) |
| | | |
| | 820 | (1.582) |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
12. TAXATION (cont.)
| |2007 |2006 |
| |£'000 |£'000 |
|(ii) Reconciliation of tax charge / (credit) for the year | | |
| | | |
| Profit / (loss) before tax | 1.327 | (5.173) |
| | | |
| Tax at 10% on the Company’s profit / (loss) before tax |133 |(517) |
| | | |
|Tax effect of the following: | | |
| Non-deductible expenses |926 |1.229 |
| Corporation tax – prior years |238 |- |
| Special contribution to the defence fund – prior years |(100) |- |
| Capital gains tax – prior years |53 |- |
| Special contribution to the defence fund – current year |147 |61 |
| Tax incurred on sales abroad |- |6 |
| Deferred tax charge / (credit) on timing differences |59 |(183) |
| Allowances and income not assessable to tax | (636) | (2.178) |
| | | |
| Tax charge / (credit) for the year | 820 | (1.582) |
The Company and its subsidiaries are subject to corporation tax at the rate of 10%.
Under certain conditions interest may be subject to special contribution to the defence fund at the rate of 10%. In such cases 50% of the same interest will be exempt from corporation tax thus having an effective tax rate burden of 15%.
| |2007 |2006 |
| |£'000 |£'000 |
|Deferred tax recognised directly in equity | | |
| Relating to revaluation of property | 122 | - |
The deferred tax provision as at 31 December 2007 has been calculated using the current corporation tax rate.
(iii) Tax losses
Tax losses can be carried forward without any restriction until their full utilization and can also be set off against taxable profits of other Group companies. The amount of tax losses available for setting off against future tax profits is £49,2 million (2006: £53,1 million). The tax affairs and the tax losses of the Company have been agreed with the Inland Revenue Department until the end of 2006.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
13. EARNINGS/(LOSS) PER SHARE
| |2007 |2006 |
|The Group |£'000 |£'000 |
| | | |
|Profit/(loss) for the year attributable to shareholders | 676 | (4.326) |
| | | |
|Weighted average number of shares |274.470 | 267.504 |
| | | |
|Earnings/(loss) per share – cent | 0,25 | (1,62) |
| | | |
| | | |
|The Company | | |
| | | |
|Profit/(loss) for the year attributable to shareholders | 507 | (3.591) |
| | | |
|Weighted average number of shares |274.470 | 267.504 |
| | | |
|Earnings/(loss) per share – cent | 0,18 | (1,34) |
The weighted average number of shares outstanding during the years 2006 and 2007, adjusted with the bonus element of the rights issue was used for the calculation of the basic and diluted earnings/(loss) per share.
For the Group and the Company the earnings/(loss) per share figures indicated above represent both the basic and the diluted earnings/(loss) per share.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
14. FLEET, PROPERTY AND EQUIPMENT
| |Fleet, | | | | |
|The Group |spare engines |Freehold |Leasehold | | |
| |and spare parts |property |property |Equipment |Total |
|Year 2007 |£'000 |£'000 |£'000 |£'000 |£'000 |
| | | | | | |
|Cost or valuation | | | | | |
|1 January |184.162 |1.550 |4.833 | 9.182 |199.727 |
|Additions |343 |- |- |638 |981 |
|Reclassifications |(7) |- |- |- |(7) |
|Revaluations |292 |550 |- |90 |932 |
|Disposals | (299) | - | - |(1.113) | (1.412) |
| | | | | | |
|31 December |184.491 |2.100 |4.833 | 8.797 |200.221 |
| | | | | | |
|Depreciation | | | | | |
|1 January |123.308 | - |4.339 |7.875 |135.522 |
|Transfers |- |- |16 |(16) |- |
|Charge for the year |8.221 |- |97 |694 |9.012 |
|Reclassifications |(2) |- |- |- |(2) |
|Revaluations |(3.299) |- |- |(162) |(3.461) |
|Disposals | (238) | - | - |(1.106) | (1.344) |
| | | | | | |
|31 December |127.990 | - |4.452 | 7.285 |139.727 |
| | | | | | |
|Net book value 31 December | 56.501 |2.100 | 381 | 1.512 | 60.494 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
14. FLEET, PROPERTY AND EQUIPMENT (cont.)
| |Fleet, | | | | |
|The Group |spare engines |Freehold |Leasehold | | |
| |and spare parts |property |property |Equipment |Total |
|Year 2006 |£'000 |£'000 |£'000 |£'000 |£'000 |
| | | | | | |
|Cost or valuation | | | | | |
|1 January |184.911 |2.494 |5.231 |10.209 |202.845 |
|Additions |282 |- |- |651 |933 |
|Transfers |(26) |- |- |- |(26) |
|Disposals |(159) |- |(84) |(526) |(769) |
|Transfer to investment property |- |(565) |- |- |(565) |
|Deconsolidation of Eurocypria | (846) | (379) | (314) |(1.152) | (2.691) |
| | | | | | |
|31 December |184.162 |1.550 |4.833 | 9.182 |199.727 |
| | | | | | |
|Depreciation | | | | | |
|1 January |115.179 |35 |4.459 |8.502 |128.175 |
|Charge for the year |8.497 |42 |112 |851 |9.502 |
|Transfers |(18) |- |- |- |(18) |
|Disposals |(83) |- |(84) |(522) |(689) |
|Transfer to investment property |- |(28) |- |- |(28) |
|Deconsolidation of Eurocypria | (267) | (49) | (148) | (956) | (1.420) |
| | | | | | |
|31 December |123.308 | - |4.339 |7.875 |135.522 |
| | | | | | |
|Net book value 31 December | 60.854 |1.550 | 494 |1.307 | 64.205 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
14. FLEET, PROPERTY AND EQUIPMENT (cont.)
| |Fleet, | | | | |
|The Company |spare engines |Freehold |Leasehold | | |
| |and spare parts |property |property |Equipment |Total |
|Year 2007 |£'000 |£'000 |£'000 |£'000 |£'000 |
| | | | | | |
|Cost or valuation | | | | | |
|1 January | 184.162 | 1.550 | 4.833 | 8.601 |199.146 |
|Additions |343 |- |- |535 |878 |
|Reclassifications |(7) |- |- |(2) |(9) |
|Revaluations |292 |550 |- |90 |932 |
|Disposals | (299) | - | - |(1.079) | (1.378) |
| | | | | | |
|31 December |184.491 |2.100 |4.833 | 8.145 |199.569 |
| | | | | | |
|Depreciation | | | | | |
|1 January | 123.308 | - | 4.339 | 7.392 |135.039 |
|Charge for the year |8.221 |- |97 |636 |8.954 |
|Reclassifications |(2) |- |16 |(20) |(6) |
|Revaluations |(3.299) |- |- |(162) |(3.461) |
|Disposals | (238) | - | - |(1.071) | (1.309) |
| | | | | | |
|31 December |127.990 | - |4.452 | 6.775 |139.217 |
| | | | | | |
|Net book value 31 December | 56.501 |2.100 | 381 | 1.370 | 60.352 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
14. FLEET, PROPERTY AND EQUIPMENT (cont.)
| |Fleet, | | | | |
|The Company |spare engines |Freehold |Leasehold | | |
| |and spare parts |property |property |Equipment |Total |
|Year 2006 |£'000 |£'000 |£'000 |£'000 |£'000 |
| | | | | | |
|Cost or valuation | | | | | |
|1 January |184.060 |2.115 |4.916 |8.520 |199.611 |
|Additions |282 |- |- |592 |874 |
|Reclassifications |(21) |- |- |- |(21) |
|Transfer to investment property |- |(565) |- |- |(565) |
|Disposals | (159) | - | (83) | (511) | (753) |
| | | | | | |
|31 December | 184.162 | 1.550 | 4.833 | 8.601 |199.146 |
| | | | | | |
|Depreciation | | | | | |
|1 January |114.987 |- |4.342 |7.217 |126.546 |
|Charge for the year |8.420 |28 |96 |665 |9.209 |
|Reclassifications |(16) |- |(15) |20 |(11) |
|Transfer to investment property |- |(28) |- |- |(28) |
|Disposals | (83) | - | (84) | (510) | (677) |
| | | | | | |
|31 December | 123.308 | - | 4.339 | 7.392 |135.039 |
| | | | | | |
|Net book value 31 December | 60.854 | 1.550 | 494 | 1.209 | 64.107 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
14. FLEET, PROPERTY AND EQUIPMENT (cont.)
The last revaluation of the freehold properties held by the Group and the Company, consisting of land and buildings, was carried out at 31 December 2007 by independent valuation experts using the open market value basis. The total revaluation surplus, which amounted to £0,55 million, was credited to the revaluation reserve. The revalued amount of non-depreciable fleet, property and equipment (land) amounts to £2,10 million (2006: £1,55 million). The net book value of land before revaluation amounted to £24 thousand.
Aircraft spares are stated at valuation based on the last available indication of their market value.
The net book value of aircraft acquired through finance leases, which are included under fleet, spare engines and spare parts amounts to £29,9 million (2006: £32,4 million).
15. INTANGIBLE ASSETS
| |COMPUTER |
| |SOFTWARE |
| |2007 |2006 |
|The Group |£'000 |£'000 |
| | | |
|Cost | | |
|1 January |2.644 |2.468 |
|Additions |29 |290 |
|Write-offs | (381) | (3) |
|Deconsolidation of Eurocypria | - | (111) |
| | | |
|31 December |2.292 |2.644 |
| | | |
|Amortisation | | |
|1 January |2.148 |1.928 |
|Charge for the year |199 |280 |
|Write-offs |(381) |(3) |
|Deconsolidation of Eurocypria | - | (57) |
| | | |
|31 December |1.966 |2.148 |
| | | |
|Net book value 31 December | 326 | 496 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
15. INTANGIBLE ASSETS (cont.)
| |COMPUTER |
| |SOFTWARE |
| |2007 |2006 |
|The Company |£'000 |£'000 |
| | | |
|Cost | | |
|1 January |2.189 |1.964 |
|Additions |27 |228 |
|Write-offs | (381) | (3) |
| | | |
|31 December |1.835 |2.189 |
| | | |
|Amortisation | | |
|1 January |1.827 |1.629 |
|Charge for the year |141 |201 |
|Write-offs | (381) | (3) |
| | | |
|31 December |1.587 |1.827 |
| | | |
|Net book value 31 December | 248 | 362 |
16. INVESTMENT PROPERTY
| |2007 |2006 |
|The Group and the Company |£'000 |£'000 |
| | | |
|Investment property | 615 | 537 |
As at 31 December 2007 a revaluation of the freehold building in Athens was carried out by independent valuation experts using the open market value basis. The total revaluation surplus which amounted to £78 thousand was recognised in the income statement.
17. AVAILABLE-FOR-SALE FINANCIAL ASSETS
| |2007 |2006 |
|The Group and the Company |£'000 |£'000 |
| | | |
|Non-current available-for-sale financial assets | 116 | 116 |
| | | |
|Current available-for-sale financial assets |1.057 | 275 |
Non-current available-for-sale financial assets relate to share investment certificates of SITA Inc. These share investment certificates are shown at cost.
Current available-for-sale financial assets relate to the investment in shares of the Cyprus Tourism Development Public Company Limited. These were revalued using the last available indication of their market value as at 31 December 2007 and were disposed of at this price in February 2008. The fair value gain of £782 thousand arising on this revaluation was recognised in the revaluation reserve.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
18. SUBSIDIARY COMPANIES
| |2007 |2006 |
|The Company |£'000 |£'000 |
| | | |
|Cyprair Tours Limited – shares at cost less impairment |- |- |
|Zenon NDC Limited – shares at cost | 5 | 5 |
| | | |
| | 5 | 5 |
The above two companies are wholly owned subsidiaries.
19. ASSOCIATED COMPANY
Cyprus Airways (Duty-Free Shops) Limited ceased operating on 30 June 2006 when the strategic investor, Hermes Airports Ltd, took over the operation of the duty-free shops at Larnaca and Paphos airports.
In the consolidated financial statements the associate is treated using the equity method of accounting (IAS28). The carrying amount of the associate comprises the Group’s share of profit which arose as a result of an adjustment effected to the concession fee payable by this company to the Government for 2006, through a decision taken by the latter in December 2007.
As the Company prepares consolidated as well as Company’s separate financial statements and based on the IAS 27 and IAS 28, equity accounting is not applied in the Company’s separate financial statements. For this reason the investment in the associated as at 31 December 2007 remains at nil value following impairment recognised in previous years. The Board of Directors of the associated company decided during its meeting held on 21 December 2007 to proceed with the voluntary liquidation of the company.
20. DEFERRED TAX ASSETS
| |The Group |The Company |
| |2007 |2006 |2007 |2006 |
| |£'000 |£'000 |£'000 |£'000 |
| | | | | |
|1 January |3.130 |1.651 |3.128 |1.479 |
|Recognised in income statement |(478) |1.413 |(482) |1.649 |
|Recognised in revaluation reserve | (122) | 66 | (122) | - |
| | | | | |
|31 December | 2.530 | 3.130 |2.524 | 3.128 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
20. DEFERRED TAX ASSETS (cont.)
The carrying amount of deferred tax assets as at 31 December are made up as follows:
| |The Group |The Company |
| |2007 |2006 |2007 |2006 |
| |£'000 |£'000 |£'000 |£'000 |
|Temporary timing differences | | | | |
| between depreciation and | | | | |
| capital allowances |(2.055) |(1.995) |(2.051) |(1.992) |
|Revaluation of property |(446) |(324) |(446) |(324) |
|Tax losses |4.981 |5.399 |4.971 |5.394 |
|Other temporary differences | 50 | 50 | 50 | 50 |
| | | | | |
| | 2.530 | 3.130 | 2.524 | 3.128 |
21. RECEIVABLES
| |2007 |2006 |
|The Group and the Company |£'000 |£'000 |
| | | |
|Non-current receivables | 4.092 | 6.876 |
Non-current receivables include aircraft maintenance reserves as well as security deposits on the A330 aircraft leased during the year 2003.
The Group’s and the Company’s exposure to credit risk is disclosed in note 38 of the consolidated and Company’s separate financial statements.
22. INVENTORIES
| |2007 |2006 |
|The Group and the Company |£'000 |£'000 |
| | | |
|Consumable spares |1.471 |900 |
|Main bonded warehouse |82 |110 |
|Other | 154 | 165 |
| | | |
| | 1.707 | 1.175 |
23. TRADE AND OTHER RECEIVABLES
| |2007 |2006 |
| |£'000 |£'000 |
|The Group | | |
|Trade receivables |16.003 |16.843 |
|VAT receivable |1.920 |646 |
|Other receivables, prepayments and accrued income | 2.731 | 3.378 |
| | | |
| |20.654 |20.867 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
23. TRADE AND OTHER RECEIVABLES (cont.)
| |2007 |2006 |
| |£'000 |£'000 |
|The Company | | |
|Trade receivables |15.931 |16.676 |
|Amounts due from related parties (note 41) |580 |541 |
|VAT receivable |1.570 |416 |
|Other receivables, prepayments and accrued income | 2.487 | 3.238 |
| | | |
| |20.568 | 20.871 |
Other receivables include, amongst others, amounts for prepaid expenses and deposits for future services.
The Group’s and the Company’s exposure to credit risk is disclosed in note 38 of the consolidated and Company’s separate financial statements.
24. SHARE CAPITAL
| |2007 |2006 |
|The Group and the Company |£'000 |£'000 |
|Authorised: | | |
|1.500.000.000 (2006: 150.000.000) ordinary shares | | |
| of a nominal value of £0,05 each (2006: £0,50 each) |75.000 |75.000 |
| | | |
|Issued and fully paid: | | |
|390.859.040 (2006: 111.039.500) ordinary shares | | |
| of a nominal value of £0,05 each (2006: £0,50 each) |19.543 |55.520 |
The changes in the Company’s share capital in 2007 were the result of the Special resolutions approved at the Extraordinary General Meeting of the Company’s Shareholders held on 7 February 2007, which are set out below, as well as of the share capital increase through a rights issue to existing shareholders successfully completed in December 2007.
a) That the Company’s authorised share capital, which amounted to £75.000.000 divided into 150.000.000 shares of nominal value of £0,50 each, be reduced to £7.500.000 divided into 150.000.000 shares of £0,05 each.
b That the Company’s issued capital, which amounted to £55.519.750 divided into 111.039.500 shares of nominal value of £0,50 each, be reduced to £5.551.975 divided into 111.039.500 shares of £0,05 each.
c That the reductions referred to in (a) and (b) above be carried out with the reduction of the nominal value of each share from £0,50 each to £0,05 each, since the amount of £0,45 per issued and fully paid share, that is a total amount of £49.967.775, was part of the capital eroded due to losses.
d That following Court approval for the reduction mentioned in paragraph (a) above the Company’s authorised share capital be increased to £75.000.000 with the introduction of 1.350.000.000 shares of £0,05 each which will rank pari passu with the existing shares.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
24. SHARE CAPITAL (cont.)
Court approval for the above resolutions was obtained on 23 March 2007 and all changes to the Company’s share capital have been duly registered with the Registrar of Companies.
On 14 December 2007 the Company successfully completed the increase of its share capital with the issue of 279.819.540 new ordinary shares through a rights issue. The total capital raised by the Company was £14,7 million. One right was issued for every issued and fully paid share of Cyprus Airways Public Ltd which at its exercise was converted to 2,52 new ordinary shares of a nominal value of £0,05 per share. The rights, exercised by their holders at the exercise price of £0,05 per share, correspond to 263.873.968 shares representing 94,3% of the total shares issued. The Company exercised all rights that were not exercised by their holders and the resulting 15.945.572 (5,7%) shares were sold to investors in Greece and Cyprus at the price of £0,0936 per share through a Book-Building procedure. The profit arising from this procedure of £0,7 million was recognised in equity.
25. RESERVES/ACCUMULATED LOSSES
| | |2007 |2006 |
|The Group and the Company |Note |£'000 |£'000 |
| Reserves | | | |
|Capital reserve | |983 |983 |
|Revaluation reserve |26 |7.225 |2.172 |
|Hedging reserve |27 | 883 | 228 |
| | | 9.091 | 3.383 |
| | | | |
|Accumulated losses | | | |
|- The Group | |(20.854) |(72.050) |
|- The Company | |(21.079) |(72.106) |
From 1 January 2003 onwards, companies which do not distribute 70% of their profits after tax, as defined by the relevant tax law, within two years after the end of relevant tax year, will be deemed to have distributed as dividends 70% of these profits. Special contribution for defence at 15% will be payable on such deemed dividends to the extent that the shareholders are Cyprus tax residents. The amount of deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year at any time. This special contribution for defence is payable by the Company for the account of the shareholders.
26. REVALUATION RESERVE
| |2007 |2006 |
|The Group and the Company |£'000 |£'000 |
| | | |
|Available-for-sale financial assets |1.036 | 254 |
|Fleet, property and equipment | | |
| - Property |2.346 |1.918 |
| - Aircraft spares |3.843 | - |
| | | |
|Total revaluation reserve |7.225 |2.172 |
The revaluation reserve is not available for distribution.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
27. HEDGING RESERVE
| |2007 |2006 |
|The Group and the Company |£'000 |£'000 |
| | | |
|Fair value changes of derivative financial | | |
| instruments |(70) |(256) |
|Exchange difference from translation of foreign currency | | |
| loans and finance lease obligations |1.638 |1.053 |
|Exchange difference from translation of other | | |
| assets in foreign currencies | (685) | (569) |
| | | |
|Total hedging reserve | 883 | 228 |
The hedging reserve is not available for distribution.
28. LOANS
The Group and the Company
This note provides information about the contractual terms of the Group’s and the Company’s interest bearing loans which are measured at amortised cost. For more information about the Group’s and the Company’s exposure to interest rate risk, currency risk and liquidity risk refer to note 38 of the consolidated and Company’s separate financial statements.
| |Total |Capital |Interest |
| |Payments |(Carrying |Charge |
| | |amount) | |
|Year 2007 |£'000 |£'000 |£'000 |
| | | | |
|Within one year | 5.984 | 4.157 | 1.827 |
| | | | |
|Between two and five years |22.098 |16.626 |5.472 |
|More than five years |20.982 |18.704 | 2.278 |
| |43.080 |35.330 | 7.750 |
| | | | |
|Total |49.064 |39.487 | 9.577 |
| |Total |Capital |Interest |
| |Payments |(Carrying |Charge |
| | |amount) | |
|Year 2006 |£'000 |£'000 |£'000 |
| | | | |
|Within one year |30.024 |29.575 | 449 |
The interest charge presented for years 2006 and 2007 above has been calculated on the basis of interest rates applicable at the balance sheet date. These interest rates are floating as a result of which the final interest charge may vary according to the fluctuation of the relevant interest rates.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
28. LOANS (cont.)
The carrying amount for 2007 represents the outstanding balance of the long term loan of €78 million entered into on 8 May 2007, which is guaranteed by the Government of the Republic of Cyprus, following the approval of the Restructuring Plan on 7 March 2007 by the European Commission. The loan, unless prepayments are effected, is payable in twenty equal semi-annual instalments until June 2017 and bears interest at EURIBOR plus 0,04%.
The carrying amount for 2006 represents the short term loan from Deutsche Bank AG which was guaranteed by the Government of the Republic of Cyprus following Rescue Aid approval by the European Commission and was repaid in full during 2007 through the proceeds of the loan described above.
29. FINANCE LEASE OBLIGATIONS
The Group and the Company
The finance lease obligations relate to the acquisition of two A319 aircraft effected during 2002.
This note provides information about the contractual terms of the Group’s and the Company’s finance lease obligations which are measured at amortised cost. For more information about the Group’s and the Company’s exposure to interest rate risk, currency risk and liquidity risk refer to note 38 of the consolidated and Company’s separate financial statements.
| |Total |Capital |Finance |
|Year 2007 |Payments |(Carrying |Charge |
| | |amount) | |
| |£'000 |£'000 |£'000 |
| | | | |
|Within one year | 4.570 | 3.243 |1.327 |
| | | | |
|Between two and five years |15.809 |12.973 |2.836 |
|More than five years | 5.148 | 4.865 | 283 |
| | | | |
| |20.957 |17.838 |3.119 |
| | | | |
|Total |25.527 |21.081 |4.446 |
| |Total |Capital |Finance |
|Year 2006 |Payments |(Carrying |Charge |
| | |amount) | |
| |£'000 |£'000 |£'000 |
| | | | |
|Within one year | 4.744 | 3.353 |1.391 |
| | | | |
|Between two and five years |16.721 |13.410 |3.311 |
|More than five years | 9.035 | 8.382 | 653 |
| | | | |
| |25.756 |21.792 |3.964 |
| | | | |
|Total |30.500 |25.145 |5.355 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
29. FINANCE LEASE OBLIGATIONS (cont.)
The finance charge presented above has been calculated on the basis of interest rates applicable at the balance sheet date. These interest rates are floating as a result of which the final finance charge may vary according to the fluctuation of the relevant interest rates.
30. PAYABLES
| |2007 |2006 |
|The Group and the Company |£'000 |£'000 |
| | | |
|Non-current payables | 9.835 | 9.849 |
Non-current payables mainly include provisions for aircraft maintenance and engine overhaul.
31. TRADE, OTHER PAYABLES AND PROVISIONS
| |2007 |2006 |
| |£'000 |£'000 |
|The Group | | |
|Trade payables |11.583 |11.500 |
|Amount due to related parties (note 41) |204 |204 |
|Provision for maintenance of aircraft |11.583 |13.796 |
|Accrued staff related costs |2.789 |2.556 |
|Provision to safeguard the value of the Provident Fund (note 37) |(249) |(342) |
|Derivative liability |58 |244 |
|VAT payable |191 |496 |
|Passenger taxes |8.144 |4.717 |
|Other provisions and accruals |11.730 |16.192 |
| | | |
| |46.033 |49.363 |
| | | |
|The Company | | |
| | | |
|Trade payables |11.286 |11.492 |
|Amount due to related parties (note 41) |204 |204 |
|Provision for maintenance of aircraft |11.583 |13.796 |
|Accrued staff related costs |2.789 |2.556 |
|Provision to safeguard the value of the Provident Fund (note 37) |(249) |(342) |
|Derivative liability |58 |244 |
|VAT payable |191 |496 |
|Passenger taxes |8.144 |4.717 |
|Other provisions and accruals |11.705 |15.949 |
| | | |
| |45.711 |49.112 |
Other payables and provisions include, amongst others, provisions for services not invoiced yet.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
32. RECONCILIATION of PROFIT / (LOSS) FOR THE YEAR to NET cash flow from/(FOr) operating activities
| |2007 |2006 |
|The Group |£'000 |£'000 |
| | | |
|Profit / (loss) for the year |676 |(14.894) |
|Share of profit from associated company |(212) |- |
|Depreciation of fleet, property and equipment |9.012 |9.502 |
|Amortisation of intangible assets |199 |281 |
|Loss on disposal of fleet, property and equipment |53 |45 |
|Change in fair value of investment property |(78) |- |
|Exchange (gain)/loss on foreign currency loans/ leases: | | |
|- on loans |322 |240 |
|- on finance lease obligations |(158) |(179) |
|Interest payable |2.985 |2.872 |
|Interest receivable |(1.457) |(826) |
|Decrease / (increase) in receivables |2.668 |(1.895) |
|Increase in inventories |(532) |(58) |
|Decrease / (increase) in trade and other receivables |340 |(5.073) |
|(Decrease) / increase in payables |(14) |215 |
|(Decrease) / increase in trade, other provisions and accruals |(3.264) |12.190 |
|Increase in revenue received in advance |360 |2.746 |
|Taxation | 816 | (1.731) |
|Dividend received |- | (15) |
|Taxation paid | (127) | (53) |
| | | |
|Net cash flow from operating activities | 11.589 | 3.367 |
| | | |
|The Company | | |
| | | |
|Profit / (loss) for the year |507 |(3.591) |
|Depreciation of fleet, property and equipment |8.954 |9.209 |
|Amortisation of intangible assets |141 |201 |
|Loss on disposal of fleet, property and equipment |55 |48 |
|Change in fair value of investment property |(78) |- |
|Profit from sale of subsidiary |- |(13.420) |
|Exchange (gain)/loss on loans/leases: | | |
|- on loans |322 |240 |
|- on finance lease obligations |(158) |(179) |
|Interest payable |2.980 |2.758 |
|Interest receivable |(1.456) |(606) |
|Decrease / (increase) in receivables |2.668 |(1.230) |
|(Increase) / decrease in inventories |(532) |46 |
|Decrease / (increase) in trade and other receivables |433 |(1.843) |
|(Decrease) / increase in payables |(14) |227 |
|(Decrease) / increase in trade, other payables and provisions |(3.341) |6.403 |
|Increase in revenue received in advance |360 |2.055 |
|Taxation | 820 | (1.582) |
|Dividend receivable |(38) | (15) |
|Taxation paid | (126) | (67) |
| | | |
|Net cash flow from / (for) operating activities | 11.497 | (1.346) |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
33. Analysis of changes in cash and cash equivalents during the year
| |2007 |2006 |
| |£'000 |£'000 |
|The Group | | |
|1 January |15.626 |13.858 |
|Increase in cash and cash equivalents |29.877 | 1.768 |
| | | |
|31 December |45.503 |15.626 |
| | | |
|The Company | | |
|1 January |15.544 |8.829 |
|Increase in cash and cash equivalents |29.931 | 6.715 |
| | | |
|31 December |45.475 |15.544 |
34. Analysis of the balances of cash and cash equivalents as shown in the balance sheet
| | | |Change |
| |2007 |2006 |in year |
|The Group |£'000 |£'000 |£'000 |
| | | | |
|Cash and cash equivalents |46.707 |16.679 |30.028 |
|Bank overdrafts |(1.204) |(1.053) | (151) |
| | | | |
| |45.503 |15.626 |29.877 |
| | | | |
|The Company | | | |
| | | | |
|Cash and cash equivalents |46.596 |16.566 |30.030 |
|Bank overdrafts | (1.121) |(1.022) | (99) |
| | | | |
| |45.475 |15.544 |29.931 |
Bank overdrafts bear interest fluctuating between 4,04% and 6,27% depending on each one’s currency.
The Group’s and the Company’s exposure to interest rate risk and a sensitivity analysis of financial assets and financial liabilities are disclosed in note 38 of the consolidated and Company’s separate financial statements.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
35. CONTINGENT LIABILITIES
| |2007 |2006 |
|The Group and the Company |£'000 |£'000 |
| | | |
|Contingent liabilities | 618 | 730 |
The amount of contingent liabilities includes the following:
i) An amount of £337 thousand (2006: £483 thousand) regarding a bank guarantee given to the Association of Cyprus Travel Agents (ACTA). It may be called upon to satisfy any outstanding obligations towards customers of Cyprair Holidays Inclusive Tours program.
ii) Guarantees amounting to £281 thousand (2006: £247 thousand) given by Cyprus Airways Public Limited to the Customs and Excise Departments of the Republic of Cyprus, Cyprus Tourism Organization and other Civil Aviation Authorities.
Contingent liabilities do not include any amount regarding a number of proceedings/applications that have been instituted before the Labour Disputes Tribunal by employees and former employees of the Company in respect of the Company’s reduction of their salaries, pursuant to the Company’s restructuring plan. None of these applications has as yet been adjudicated upon by the Tribunal. Difficult issues of law are raised. The Company is defending the proceedings vigorously and is determined to take whatever steps may be necessary to ensure that the Restructuring Plan is not jeopardised.
36. CAPITAL AND OTHER COMMITMENTS
Capital commitments
The Group and the Company
There were no capital commitments for which a provision has not been made in the consolidated and Company’s separate financial statements at 31 December 2007 (2006: £16 thousand).
Rental commitments
Commitments resulting from future payments under aircraft lease agreements and rental agreements for immovable property are as follows:
| |2007 |2006 |
| |£'000 |£'000 |
| | | |
|Within one year |8.259 |8.766 |
|Between two and five years | 26.842 | 26.481 |
|More than five years | - | 7.231 |
| | | |
| |35.101 |42.478 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
36. CAPITAL COMMITMENTS (cont.)
Derivatives
a) Forward foreign exchange contracts
The Group and the Company use forward foreign exchange contracts to hedge their foreign currency exposure.
At 31 December 2007 the Group and the Company had outstanding forward foreign exchange contracts for the sale of Great Britain Pounds 5,0 million and Euro 4,5 million for US Dollars (2006: Great Britain Pounds 9,0 million for US Dollars). These contracts mature during 2008.
b) Jet fuel price swaps
The Group and the Company also use jet fuel price swaps to hedge their exposure to jet fuel price fluctuations.
At 31 December 2007 there were no outstanding jet fuel price swaps to hedge jet fuel purchases (2006: nominal amount of purchases was US Dollars 7,5 million).
c) Interest rate swaps
The Group and the Company use interest rate swap agreements in order to hedge their direct exposure to movement in interest rate swaps.
At 31 December 2007 the Group and the Company did not maintain interest rate swap agreements.
37. PROVIDENT FUND SCHEMES
The Group and the Company operate a number of retirement benefit plans for their employees as follows:
1. The Cyprus Airways Public Limited Employees' Provident Fund
All staff of Cyprus Airways Public Limited (excluding pilots) based in Cyprus is eligible to join this defined benefit scheme. The scheme is funded and all its assets are held separately from the funds of the Group and the Company.
Actuarial valuations are carried out on a regular basis. The most recent valuation, as at 31 December 2006, using the Projected Unit method, was completed during 2007. For the purposes of assessing superannuation costs under International Accounting Standard No.19 “Employee benefits” the principal assumption adopted was that the long term return on all investments of the fund would be 3,0% higher than the annual increase in earnings.
As at 31 December 2006, the market value of the scheme's assets was £33,7 million whereas the actuarial value of committed benefits was £27,3 million. In view of the existence of a surplus of £6,4 million the Company, on the recommendation of the actuary, is relieved of the need to pay any additional contributions to safeguard the value of the Provident Fund, over and above those representing current service, to the said scheme until after the next actuarial review.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
37. PROVIDENT FUND SCHEMES (cont.)
1. The Cyprus Airways Public Limited Employees' Provident Fund (cont.)
The funding of the Provident Fund is performed on a discontinuance basis. Any difference between the amount provided for and the amount funded is included in trade, other payables and provisions.
The amount recognised as an expense during the year, which represents current service, is £1,1 million (2006: £1,3 million).
2. Provident Fund of pilots and flight engineers of Cyprus Airways Public Limited
All Cyprus Airways Public Limited pilots are eligible to join this defined contribution scheme. The amount recognised as an expense during the year is £435 thousand (2006: £482 thousand).
3. Cyprus Airways Public Limited – Staff based outside Cyprus
a) Greece and Italy
All Cyprus Airways Public Limited staff based in Greece and in Italy are eligible to join this defined benefit scheme. The scheme is unfunded and provision is made in the Group’s and the Company’s records on a discontinuance basis. The amount recognised as an expense during the year is £94 thousand (2006: £111 thousand). The total amount of the unfunded balance included in creditors amounts to £595 thousand (2006: £501 thousand).
b) All other staff
All Cyprus Airways Public Limited staff based outside Cyprus, other than those based in Greece and Italy, are eligible to join schemes of a defined contribution type. The total amount recognized as an expense during the year is £115 thousand (2006: £121 thousand).
Reconciliation of movement in the net liability recognised in the balance sheet under trade, other payables and provisions, as provision to safeguard the value of the Provident Fund (note 31)
| |2007 |2006 |
| |£'000 |£'000 |
| | | |
|1 January |(342) |(423) |
|Provision for the year |93 |284 |
|Amount paid | - | (203) |
| | | |
|31 December | (249) | (342) |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
38. RISK MANAGEMENT
Overview
The Group’s and the Company’s exposure to risks is stated below:
* Credit risk
* Liquidity risk
* Market risk
* Fuel price risk
* Tourist industry risk
* Competition risk
* Operational risk
* Compliance risk
* Litigation risk
* Reputation risk
* Other risks
This note presents information about the Group’s and the Company’s exposure to each of the above risks, the Group’s and Company’s objectives, policies and processes for measuring and managing risk and about the Company’s management of capital. It also includes further quantitative disclosures.
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s and the Company’s risk management framework.
The Group’s and the Company’s risk management policies are established in order to identify and analyse the risks faced by the Group and the Company, to set appropriate risk limits and controls, and monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s and the Company’s activities.
Credit risk
Credit risk arises when a failure by counter parties to discharge their obligations could reduce the amount of future cash inflows from financial assets. The Group and the Company have no significant concentration of credit risk. The Group and the Company have policies in place to ensure that sales of products and services are made to customers with an appropriate credit history and monitor on a continuous basis the ageing profile of their receivables. Cash balances are held with high credit quality financial institutions and the Group and the Company have policies to limit the amount of credit exposure to any financial institution.
Trade and other receivables
The Group’s and the Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.
The Group and the Company establish an allowance for impairment that represents their estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to identified losses on individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
38. RISK MANAGEMENT (cont.)
Exposure to credit risk
The carrying amount of financial assets in the consolidated and Company’s separate financial statements, net of impairment losses, representing the maximum credit exposure without taking account of the value of any collateral obtained is as follows:
| |2007 |2006 |
|The Group |£'000 |£'000 |
| | | |
|Non current receivables |4.092 |6.876 |
|Trade and other receivables | 20.654 |20.867 |
| | | |
| | 24.746 | 27.743 |
| |2007 |2006 |
|The Company |£'000 |£'000 |
| | | |
|Non current receivables |4.092 |6.876 |
|Trade and other receivables | 20.568 | 20.871 |
| | | |
| |24.660 | 27.747 |
No customer balance represents a significant percentage of the total trade receivables.
The movement in the allowance for impairment in respect of trade and other receivables during the year was as follows:
| |2007 |2006 |
|The Group |£'000 |£'000 |
| | | |
|1 January |1.159 |1.672 |
|Reversal of provisions |(22) |(30) |
|Impairment loss recognised |182 |103 |
|Write-offs | (90) | (586) |
| | | |
| | 1.229 | 1.159 |
| |2007 |2006 |
|The Company |£'000 |£'000 |
| | | |
|1 January |1.159 |1.671 |
|Reversal of provisions |(22) |(30) |
|Impairment loss recognised |176 |103 |
|Write-offs | (87) | (585) |
| | | |
| | 1.226 | 1.159 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
38. RISK MANAGEMENT (cont.)
The ageing of trade receivables at the reporting date was:
| |Gross |Impairment |Carrying |Gross |Impairment |Carrying |
| | | |amount | | |amount |
| |2007 |2007 |2007 |2006 |2006 |2006 |
|The Group |£'000 |£'000 |£'000 |£'000 |£'000 |£'000 |
| | | | | | | |
|Not past due |739 |- |739 |813 |- |813 |
|Past due 0 – 30 days |8.912 |- |8.912 |9.254 |- |9.254 |
|Past due 31 – 120 days |6.018 |- |6.018 |6.326 |- |6.326 |
|Past due 121 – 365 days |1.133 |836 |297 |1.151 |701 |450 |
|More than one year | 430 | 393 | 37 | 458 | 458 | - |
| |17.232 | 1.229 |16.003 |18.002 | 1.159 |16.843 |
| |Gross |Impairment |Carrying |Gross |Impairment |Carrying |
| | | |amount | | |amount |
| |2007 |2007 |2007 |2006 |2006 |2006 |
|The Company |£'000 |£'000 |£'000 |£'000 |£'000 |£'000 |
| | | | | | | |
|Not past due |739 |- |739 |803 |- |803 |
|Past due 0 – 30 days |8.912 |- |8.912 |9.229 |- |9.229 |
|Past due 31 – 120 days |6.011 |- |6.011 |6.302 |- |6.302 |
|Past due 121 – 365 days |1.105 |836 |269 |1.098 |756 |342 |
|More than one year | 390 | 390 | - | 403 | 403 | - |
| |17.157 | 1.226 |15.931 |17.835 | 1.159 |16.676 |
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
| |Carrying amount |
| |2007 |2006 |
|The Group |£'000 |£'000 |
| | | |
|Middle East & Gulf |3.545 |880 |
|Europe |12.116 |15.407 |
|Other regions | 342 | 556 |
| | 16.003 |16.843 |
| |Carrying amount |
| |2007 |2006 |
|The Company |£'000 |£'000 |
| | | |
|Middle East & Gulf |3.545 |880 |
|Europe |12.116 |15.407 |
|Other regions | 270 | 389 |
| | 15.931 |16.676 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
38. RISK MANAGEMENT (cont.)
Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position may mean that the Group and the Company are unable to meet their obligations as and when they become due. The Group and the Company have procedures with the object of managing such risk such as monitoring cash flow on a continuous basis through short and medium term cash planning, maintaining sufficient cash and other highly liquid current assets and by having available a number of credit facilities.
The following are the contractual maturities of financial liabilities, including estimated interest payments:
The Group
| |Carrying amounts|Contractual cash|Up to 1 year |1-2 years |2-5 years |More than 5 |
|31 December 2007 | |flows | | | |years |
| |£’000 |£’000 |£’000 |£’000 |£’000 |£’000 |
| | | | | | | |
|Loans | 39.487 | 49.064 |5.984 |5.827 |16.271 |20.982 |
|Finance lease | | 25.527 |4.570 |4.236 |11.573 |5.148 |
|obligations |21.081 | | | | | |
|Non current | 9.835 | 9.835 |- |5.048 |4.787 |- |
|payables | | | | | | |
|Bank overdrafts |1.204 |1.204 |1.204 |- |- |- |
|Trade, other | 46.033 | 46.033 |46.033 | - | - | - |
|payables and | | | | | | |
|provisions | | | | | | |
| | | | | | | |
|Total |117.640 |131.663 |57.791 |15.111 |32.631 |26.130 |
| |Carrying amounts|Contractual cash|Up to 1 year |1-2 years |2-5 years |More than 5 |
|31 December 2006 | |flows | | | |years |
| |£’000 |£’000 |£’000 |£’000 |£’000 |£’000 |
| | | | | | | |
|Loans | 29.575 |30.024 |30.024 |- |- |- |
|Finance lease | 25.145 | 30.500 |4.744 |4.444 |12.277 |9.035 |
|obligations | | | | | | |
|Non current | 9.849 | 9.849 |- |3.247 |6.379 |223 |
|payables | | | | | | |
|Bank overdrafts |1.053 |1.053 |1.053 |- |- |- |
|Trade, other | 49.363 | 49.363 |49.363 | - | - | - |
|payables and | | | | | | |
|provisions | | | | | | |
| | | | | | | |
|Total |114.985 |120.789 |85.184 | 7.691 |18.656 | 9.258 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
38. RISK MANAGEMENT (cont.)
The Company
| |Carrying amounts|Contractual cash|Up to 1 year |1-2 years |2-5 years |More than 5 |
|31 December 2007 | |flows | | | |years |
| |£’000 |£’000 |£’000 |£’000 |£’000 |£’000 |
| | | | | | | |
|Loans | 39.487 | 49.064 |5.984 |5.827 |16.271 |20.982 |
|Finance lease | 21.081 | 25.527 |4.570 |4.236 |11.573 |5.148 |
|obligations | | | | | | |
|Non current | 9.835 | 9.835 |- |5.048 |4.787 |- |
|payables | | | | | | |
|Bank overdrafts |1.121 |1.121 |1.121 |- |- |- |
|Trade, other | 45.711 | 45.711 |45.711 | - | - | - |
|payables and | | | | | | |
|provisions | | | | | | |
| | | | | | | |
|Total |117.235 |131.258 |57.386 |15.111 |32.631 |26.130 |
| |Carrying amounts|Contractual cash|Up to 1 year |1-2 years |2-5 years |More than 5 |
|31 December 2006 | |flows | | | |years |
| |£’000 |£’000 |£’000 |£’000 |£’000 |£’000 |
| | | | | | | |
|Loans | 29.575 | 30.024 |30.024 |- |- |- |
|Finance lease | | 30.500 |4.744 |4.444 |12.277 |9.035 |
|obligations |25.145 | | | | | |
|Non current | 9.849 | 9.849 |- |3.247 |6.379 |223 |
|payables | | | | | | |
|Bank overdrafts |1.022 |1.022 |1.022 |- |- |- |
|Trade, other | 49.112 | 49.112 |49.112 | - | - | - |
|payables and | | | | | | |
|provisions | | | | | | |
| | | | | | | |
|Total |114.703 |120.507 |84.902 | 7.691 |18.656 | 9.258 |
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rate and equity prices will affect the Group’s and the Company’s income or the value of their holdings of financial instruments.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
38. RISK MANAGEMENT (cont.)
Interest rate risk
Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. Borrowings issued at variable rates expose the Group and the Company to cash flow interest rate risk and may also impact their profitability. Borrowings issued at fixed rates expose the Group and the Company to fair value interest rate risk. The Group’s and the Company's management monitors interest rate fluctuations on a continuous basis and acts accordingly.
The interest rate profile of interest-bearing financial instruments at the reporting date is reported in notes 28, 29 and 34.
| |2007 |2006 |
|The Group |£’000 |£’000 |
|Variable rate financial assets |46.707 |16.679 |
|Variable rate financial liabilities |61.772 |55.773 |
| |2007 |2006 |
|The Company |£’000 |£’000 |
|Variable rate financial assets |46.596 |16.566 |
|Variable rate financial liabilities |61.689 |55.742 |
Interest rate risk - Sensitivity analysis
An increase of 100 basis points in interest rates would have decreased profit for the year 2007 by approximately £300 thousand (2006: £500 thousand). This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant. For a decrease of 100 basis points there would be an equal and opposite impact on the results for the years 2007 and 2006.
Currency risk
Currency risk is the risk that the value of financial assets and liabilities will fluctuate due to changes in foreign currency exchange rates. Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Group’s and the Company's measurement currency. The Group and the Company are exposed to foreign exchange risk arising from various currency exposures primarily with respect to the United States Dollar and the Great Britain Pound. The Group’s and the Company's management monitor exchange rate fluctuations on a continuous basis and act accordingly.
The Group and the Company, as a matter of principle, seek to reduce their exposure to fluctuations in the rates of exchange of foreign currencies. For this purpose the Group and the Company try to achieve natural hedging by matching as far as possible the currencies of their borrowings or liabilities with those of their future incomes or other future receivables based on contractual agreements thus reducing their net exposure in each currency. Such natural hedging includes the following:
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
38. RISK MANAGEMENT (cont.)
Currency risk (cont.)
▪ Finance lease in Great Britain Pounds
The repayments of the finance lease in Great Britain Pounds hedge effectively against forecasted inflows on their contractual payment dates i.e. on 30 April and 31 October of each year until 2014.
▪ Non-current security deposits
The non-current security deposits which are included in non-current receivables relate to the operating lease contracts for the A330 aircraft and hedge against forecasted outflows in US Dollars on the termination of the operating lease contracts.
The Group and the Company also use derivative financial instruments to hedge their exposure to currency risk fluctuations. These instruments include the following:
▪ Forward foreign currency contracts
The forward foreign currency contracts mature in 2008 and the Group and the Company have sufficient forecasted inflows to match their cash outflows on their maturity.
Currency risk - Sensitivity analysis
Given the breakdown of the values of the Group’s and the Company’s assets and liabilities and income and expenditure by currency, strengthening of the Great Britain Pound against the Cyprus Pound by one basis point during 2007 would have increased profit by approximately £220 thousand (2006: £120 thousand) and decreased equity by approximately £112 thousand (2006: £174 thousand). Weakening of the Great Britain Pound against the Cyprus Pound by one basis point would have an equal and opposite effect on the results and on equity for 2007 and 2006.
Similarly, strengthening of the US Dollar against the Cyprus Pound by one basis point during 2007 would have decreased profit by approximately £230 thousand (2006: £185 thousand) and increased equity by approximately £56 thousand (2006: £63 thousand). Weakening of the US Dollar against the Cyprus Pound by one basis point would have an equal and opposite effect on the results and on equity for 2007 and 2006.
This analysis assumes that all other variables, in particular interest rates, remain constant.
Equity price risk
The Group and the Company are not sensitive to changes in equity prices since their available- for-sale financial assets consist of shares in non listed companies.
Fuel price risk
Fuel has become during 2007 the highest single expense category for the Company and the Group. Changes in fuel prices can significantly affect the Group’s and the Company’s results in any particular year. The Group’s and the Company’s management monitor movements in fuel prices on a continuous basis and act accordingly. Efforts are made to pass on to passengers as much of any increases incurred as possible through respective increases in the fuel surcharge imposed. In addition the Group and the Company use fuel hedging instruments to reduce the fluctuation in the cost of fuel.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
38. RISK MANAGEMENT (cont.)
Fuel price risk - Sensitivity Analysis
An increase in the fuel price by US$1 per metric ton would have an adverse effect of approximately US$124 thousand on the results of the Group and the Company (2006: US$117 thousand) to the extent that no recovery of this increase is made through an increase in fuel surcharges payable by passengers.
Hedging Committee
As part of their overall risk management policy the Group and the Company have set up a hedging committee which meets at regular intervals to consider and decide on action to be taken in order to deal with the various types of risk to which they are exposed.
Tourist industry risk
|The political situation in Cyprus may seriously impact the tourist industry. |
|The operations of the Company are characterised by a high degree of seasonality, between the summer and winter months. |
|Specifically, the Group’s and the Company’s high season is in the summer, between April and October, and its low season between |
|the months of November and March. |
|The competitiveness of Cyprus in the international tourist market and the increasing competition between the Cypriot and other |
|regional competing markets may affect the results of the Group and the Company. |
|The economic situation in Europe and the Middle East and the political upheavals in the Middle East may adversely affect the |
|travel industry and consequently the Group’s and the Company’s results due to the fact that these are the main originating |
|markets for the Company and the Group. |
Competition risk
There is stiff competition in the markets in which the Group and the Company operate. The Company faces direct competition from other scheduled and chartered airline companies flying directly to its own destinations, as well as indirectly from companies providing flights through intermediate stops. Some competitors have lower costs than the Company or have other comparative advantages. This competition can lead to a reduction in fares which is likely to negatively affect the financial results of the companies concerned. The possibility of further future reductions in fares cannot be eliminated which is also likely to adversely impact the results of the companies.
Operational risk
Operational risk is the risk that derives from the deficiencies relating to the Group’s and the Company’s information technology and control systems as well as the risk of human error and natural disasters. The Group’s and the Company’s systems are evaluated, maintained and upgraded continuously.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
38. RISK MANAGEMENT (cont.)
Compliance risk
Compliance risk is the risk of financial loss, including fines and other penalties, which arises from non-compliance with laws and regulations of the state and other supervisory authorities. The risk is limited to a significant extent due to the supervision applied by the responsible officials, as well as by the monitoring controls applied by the Group and the Company.
Litigation risk
Litigation risk is the risk of financial loss, interruption of the Group’s and the Company’s operations or any other undesirable situation that arises from the possibility of non-execution or violation of legal contracts and consequentially of lawsuits. The risk is restricted through meticulous vetting of all contractual and legal obligations and the use of sound legal advice on the contracts used by the Group and the Company to execute their operations.
Reputation risk
The risk of loss of reputation arising from the negative publicity relating to the Group’s and the Company’s operations (whether true or false) may result in a reduction of their clientele, reduction in revenue and legal cases against the Group and the Company. The Group and the Company apply procedures to minimize this risk.
Other risks
The general economic environment prevailing in Cyprus and internationally may affect the Group’s and the Company’s operations to a great extent. Concepts such as inflation, unemployment, and development of the gross domestic product are directly linked to the economic course of every country and any variation in these and the economic environment in general may create chain reactions in all areas hence affecting the Group and the Company.
Capital management
The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The Company’s overall strategy remains unchanged from last year.
39. DIRECTORS’ INTEREST IN THE SHARE CAPITAL OF THE COMPANY
As at 31 December 2007 and 30 days prior to the notice for the Annual General Meeting, the beneficial interest in shares of the Company’s directors, their spouses and minor children, as well as companies in which they hold, directly or indirectly at least 20% of the voting rights are set out below:
| |2 March |31 December |
| |2008 |2007 |
| |% |% |
|George Kallis |4,257 |4,257 |
|Pavlos Photiades |2,915 |2,915 |
|Kikis Lefkaritis |0,520 |0,520 |
| |7,692 |7,692 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
40. SHAREHOLDERS HOLDING MORE THAN 5% OF THE SHARE CAPITAL OF THE COMPANY
As at 31 December 2007 as well as 30 days prior to the notice of the Annual General Meeting the shareholders holding more than 5% of the Company’s issued share capital, directly or indirectly, are set out below:
| |2 March |31 December |
| |2008 |2007 |
| |% |% |
| | | |
|Government of the Republic of Cyprus |69,62 |69,62 |
41. RELATED PARTY transactions
a) Year-end balances
| |2007 |2006 |
|The Company |£'000 |£'000 |
| | | |
|Amounts receivable (note 23) | | |
| | | |
|Zenon N.D.C. Limited | 580 | 541 |
| | | |
|The Group and the Company | | |
| | | |
|Amounts payable (note 31) | | |
| | | |
|Cyprus Airways (Duty-Free Shops) Limited | 204 | 204 |
The above balances are unsecured, bear no interest and are repayable on demand.
b) The Group and the Company have transactions with members of Board of Directors and connected persons which are conducted in the normal course of business. The total value of these transactions effected during the year, all of which were at arms length, amounted to £48 thousand (2006: £48 thousand). Connected persons include spouses, minor children and companies in which a director (directly or indirectly) holds at least 20% of the voting shares.
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
42. EVENTS AFTER THE BALANCE SHEET DATE
1. With the introduction of the Euro as the official currency of the Republic of Cyprus as from 1 January 2008, the functional currency of the Group and the Company has changed from Cyprus pounds to Euro. As a result, the financial position of the Group and the Company at 1 January 2008 has been converted into Euro based on the irrevocable fixing of the exchange rate at €1 = £0,585274.
2. On 4th January 2008 Cyprus Airways Public Ltd entered into a Joint Venture Agreement with Swissport G.A.P. Vassilopoulos (Cyprus) Ltd for the provision of ground handling services at Larnaca and Paphos airports and submitted a bid to Hermes Airports Ltd for obtaining the relevant licenses.
3. On 20th February 2008, Hermes Airports Ltd selected the joint venture between Swissport G.A.P. Vassilopoulos (Cyprus) Ltd and Cyprus Airways Public Ltd as one of the two joint
ventures with whom it will enter into a contract for the provision of ground handling services at Larnaca and Paphos airports. The duration of the relevant contract is seven years and the provision of the said services by the above mentioned joint venture is expected to commence on 22nd of May 2008.
4. On 15 February 2008 the Company disposed of its shares in the Cyprus Tourism Development Public Company Limited for £17,61 (€30,10) per share for a total consideration of £1,1 million (€1,8 million).
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
43. SUPPLEMENTARY INFORMATION IN EURO
CONSOLIDATED INCOME STATEMENT
| |2007 | |2006 | |
| |Continuing |Continuing |Discontinued | |
| |operations |operations |operations |Total |
| |€'000 |€'000 |€'000 |€'000 |
| | | | | |
|Revenue |288.489 |268.168 |90.324 |358.492 |
|Cost of sales |(270.742) |(259.581) | (87.048) |(346.629) |
| | | | | |
|Gross profit before redundancy | | | | |
| compensation |17.747 |8.587 |3.276 |11.863 |
|Redundancy compensation | (490) | (17.945) | - | (17.945) |
| | | | | |
|Gross profit / (loss) after redundancy | | | | |
| compensation |17.257 |(9.358) |3.276 |(6.082) |
|Other income |193 |21 |- |21 |
|Administration expenses | (12.008) | (13.402) | (4.998) | (18.400) |
| | | | | |
|Operating profit/(loss) | 5.442 | (22.739) | (1.722) | (24.461) |
| | | | | |
|Finance income |2.489 |1.064 |372 |1.436 |
|Finance expense | (5.744) | (4.987) | (393) | (5.380) |
|Net finance expense | (3.255) | (3.923) | (21) | (3.944) |
| | | | | |
|Profit/(loss) before share of profit | | | | |
| from associated company |2.187 |(26.662) |(1.743) |(28.405) |
|Share of profit from associated | | | | |
| company | 362 | - | - | - |
| | | | | |
|Profit/(loss) before tax |2.549 |(26.662) |(1.743) |(28.405) |
|Tax | (1.394) | 2.703 | 255 | 2.958 |
| | | | | |
|Profit/(loss) after tax but before | | | | |
| (loss)/profit from discontinued | | | | |
| operations (net of income tax) |1.155 |(23.959) |(1.488) |(25.447) |
| Loss on disposal of Hellas Jet S.A. |- |- |(101) |(101) |
| Profit on disposal of Eurocypria | | | | |
| Airlines Ltd | - | - | 18.157 | 18.157 |
| | | | | |
|Profit/(loss) for the year | 1.155 | (23.959) | 16.568 | (7.391) |
| | | | | |
| | | | | |
|Earning/(loss) per share - cent | 0,42 | (8,95) | 6,19 | (2,76) |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
43. SUPPLEMENTARY INFORMATION IN EURO (cont.)
INCOME STATEMENT
| |2007 |2006 |
| |€'000 |€'000 |
| | | |
|Revenue |286.720 |266.548 |
|Cost of sales |(270.473) |(264.363) |
| | | |
|Gross profit before redundancy compensation |16.247 |2.185 |
|Redundancy compensation | (490) | (17.945) |
| | | |
|Gross profit after redundancy compensation |15.757 |(15.760) |
|Other income |193 |22.950 |
|Administration expenses | (10.501) | (12.097) |
| | | |
|Operating profit/(loss) | 5.449 | (4.907) |
| | | |
|Finance income |2.553 |1.061 |
|Finance expense | (5.734) | (4.993) |
|Net finance expense | (3.181) | (3.932) |
| | | |
|Profit/(loss) before tax |2.268 |(8.839) |
|Tax | (1.401) | 2.703 |
| | | |
|Profit/(loss) for the year | 867 | (6.136) |
| | | |
|Earnings/(loss) per share – cent | 0,31 | (2,29) |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
43. SUPPLEMENTARY INFORMATION IN EURO (cont.)
CONSOLIDATED BALANCE SHEET
| |2007 |2006 |
| |€'000 |€'000 |
|Assets | | |
|Fleet, property and equipment |103.360 |109.701 |
|Intangible assets |557 |847 |
|Investment property |1.051 |918 |
|Available-for-sale financial assets |198 |198 |
|Associated company |362 |- |
|Deferred tax assets |4.323 |5.348 |
|Receivables | 6.992 | 11.748 |
|Total non-current assets | 116.843 | 128.760 |
| | | |
|Inventories |2.917 |2.008 |
|Trade and other receivables |35.289 |35.653 |
|Current tax assets |- |386 |
|Available-for-sale financial assets |1.806 |470 |
|Cash and cash equivalents | 79.804 | 28.498 |
|Total current assets | 119.816 | 67.015 |
| | | |
|Total assets | 236.659 | 195.775 |
| | | |
|Equity | | |
|Share capital |33.391 |94.862 |
|Reserves |15.533 |5.780 |
|Accumulated losses | (35.631) | (123.105) |
|Total equity | 13.293 | (22.463) |
| | | |
|Liabilities | | |
|Loans |60.365 |- |
|Finance lease obligations |30.478 |37.234 |
|Payables | 16.804 | 16.828 |
|Total non-current liabilities | 107.647 | 54.062 |
| | | |
|Bank overdrafts |2.057 |1.799 |
|Loans |7.103 |50.532 |
|Finance lease obligations |5.541 |5.729 |
|Trade, other payables and provisions |78.652 |84.342 |
|Current tax liabilities |79 |102 |
|Revenue received in advance | 22.287 | 21.672 |
|Total current liabilities | 115.719 | 164.176 |
|Total liabilities | 223.366 | 218.238 |
| | | |
|Total equity and liabilities | 236.659 | 195.775 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
43. SUPPLEMENTARY INFORMATION IN EURO (cont.)
BALANCE SHEET
| |2007 |2006 |
| |€'000 |€'000 |
|Assets | | |
|Fleet, property and equipment |103.117 |109.533 |
|Intangible assets |423 |619 |
|Investment property |1.051 |918 |
|Available-for-sale financial assets |198 |198 |
|Subsidiary companies |9 |9 |
|Deferred tax assets |4.313 |5.345 |
|Receivables | 6.992 | 11.748 |
|Total non-current assets | 116.103 | 128.370 |
| | | |
|Inventories |2.917 |2.008 |
|Trade and other receivables |35.142 |35.659 |
|Current tax assets |- |386 |
|Available-for-sale financial assets |1.806 |470 |
|Cash and cash equivalents | 79.614 | 28.305 |
|Total current assets | 119.479 | 66.828 |
| | | |
|Total assets | 235.582 | 195.198 |
| | | |
|Equity | | |
|Share capital |33.391 |94.862 |
|Reserves |15.533 |5.780 |
|Accumulated losses | (36.016) |(123.202) |
|Total equity | 12.908 | (22.560) |
| | | |
|Liabilities | | |
|Loans |60.365 |- |
|Finance lease obligations |30.478 |37.234 |
|Payables | 16.804 | 16.828 |
|Total non-current liabilities | 107.647 | 54.062 |
| | | |
|Bank overdrafts |1.915 |1.747 |
|Loans |7.103 |50.532 |
|Finance lease obligations |5.541 |5.729 |
|Trade, other payables and provisions |78.102 |83.914 |
|Current tax liabilities |79 |102 |
|Revenue received in advance | 22.287 | 21.672 |
|Total current liabilities | 115.027 | 163.696 |
|Total liabilities | 222.674 | 217.758 |
| | | |
|Total equity and liabilities | 235.582 | 195.198 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
43. SUPPLEMENTARY INFORMATION IN EURO (cont.)
CONSOLODATED STATEMENT OF CHANGES IN EQUITY
| | |Share |Capital |Revaluation |Hedging |Translation |Reserve for|Accumulated |Total |
| | |Capital |reserve |reserve |reserve |reserve |own shares |losses | |
| | |€'000 |€'000 |€'000 |€'000 |€'000 |€'000 |€'000 |€'000 |
| | | | | | | | | | |
|Balance 1 January 2006 | | 94.862 | 1.680 | 4.138 | 1.228 | (116) | -|(115.714) | (13.922) |
| | | | | | | | | | |
|Deconsolidation of subsidiary | |- |- |(427) |827 |116 |- |- |516 |
| | | | | | | | | | |
|Cash flow hedges: | | | | | | | | | |
| | | | | | | | | | |
|Effective portion of changes in the | | | | | | | | | |
| fair values of derivative financial | | | | | | | | | |
| instruments hedged | |- |- |- |(198) |- |- |- |(198) |
| | | | | | | | | | |
|Effective portion of changes in | | | | | | | | | |
| exchange differences from translation | | | | | | | | | |
| of foreign currency loans | |- |- |- |(967) |- |- |- |(967) |
| | | | | | | | | | |
|Effective portion of changes in | | | | | | | | | |
| exchange differences from translation | | | | | | | | | |
| of other assets in foreign currencies | | -| - | - | (501) | - | -| - | (501) |
| | | | | | | | | | |
|Net income recognised directly | | | | | | | | | |
| in equity | |- |- |(427) | (839) |116 |- |- |(1.150) |
| | | | | | | | | | |
|Loss for the year | | - | - | - | - | - | -| (7.391) | (7.391) |
| | | | | | | | | | |
|Total recognised income for 2006 | | - | - | (427) | (839) | 116 | - | (7.391) |(8.541) |
| | | | | | | | | | |
|Balance 31 December 2006 / | | | | | | | | | |
| 1 January 2007 | | 94.862 | 1.680 | 3.711 | 389 | - | -|(123.105) |(22.463) |
| | | | | | | | | | |
|Available-for-sale financial assets: | | | | | | | | | |
| Fair value gain | |- |- |1.336 |- |- |- |- |1.336 |
| | | | | | | | | | |
|Freehold property: | | | | | | | | | |
| Fair value gain (net of tax) | |- |- |731 |- |- |- |- |731 |
| | | | | | | | | | |
|Aircraft spares: | | | | | | | | | |
| Fair value gain | |- |- |6.566 |- |- |- |- |6.566 |
| | | | | | | | | | |
|Cash flow hedges: | | | | | | | | | |
| | | | | | | | | | |
|Effective portion of changes in the | | | | | | | | | |
| fair values of derivative financial | | | | | | | | | |
| instruments hedged | |- |- |- |318 |- |- |- |318 |
| | | | | | | | | | |
|Effective portion of changes in | | | | | | | | | |
| exchange differences from | | | | | | | | | |
| translation of foreign currency | | | | | | | | | |
| loans | |- |- |- |999 |- |- |- |999 |
| | | | | | | | | | |
|Effective portion of changes in | | | | | | | | | |
| exchange differences from | | | | | | | | | |
|translation of other assets in | | | | | | | | | |
| foreign currencies | | - | - | - | (198) | - | -| - | (198) |
| | | | | | | | | | |
|Net expense recognised directly | | | | | | | | | |
| in equity | |- |- |8.633 |1.119 |- |- |- |9.752 |
| | | | | | | | | | |
|Profit for the year | | - | - | - | - | - | -| 1.155 | 1.155 |
| | | | | | | | | | |
|Total recognised income for 2007 | | - | - | 8.633 | 1.119 | - | -| 1.155 | 10.907 |
| | | | | | | | | | |
|Acquisition of own shares | |- |- |- |- |- |(1.399) |- |(1.399) |
|Sale of own shares | |- |- |- |- |- |1.399 |1.152 |2.551 |
|Issue of share capital | |23.905 |- |- |- |- |- | (208) |23.697 |
|Capital erosion | |(85.375) | - | - | - | - | -| 85.375 | - |
| | | | | | | | | | |
| | |(61.470) | - | - | - | - | -| 86.319 | 24.849 |
| | | | | | | | | | |
|Balance 31 December 2007 | | 33.392 | 1.680 | 12.344 | 1.508 | - | -|(35.631) | 13.293 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
43. SUPPLEMENTARY INFORMATION IN EURO (cont.)
STATEMENT OF CHANGES IN EQUITY
| | |Share |Capital |Revaluation |Hedging |Reserve for|Accumulated |Total |
| | |Capital |reserve |reserve |reserve |own shares |losses | |
| | |€'000 |€'000 |€'000 |€'000 |€'000 |€'000 |€'000 |
| | | | | | | | | |
|Balance 1 January 2006 | | 94.862 | 1.680 | 3.711 | 2.055 | -|(117.066) | (14.758) |
| | | | | | | | | |
|Cash flow hedges: | | | | | | | | |
| | | | | | | | | |
|Effective portion of changes in the | | | | | | | | |
| fair values of derivative financial | | | | | | | | |
| instruments hedged | |- |- |- |(198) |- |- |(198) |
| | | | | | | | | |
|Effective portion of changes in | | | | | | | | |
| exchange differences from translation | | | | | | | | |
| of foreign currency loans | |- |- |- |(967) |- |- |(967) |
| | | | | | | | | |
|Effective portion of changes in | | | | | | | | |
| exchange differences from translation | | | | | | | | |
| of other assets in foreign currencies | | -| - | - | (501) | -| - | (501) |
| | | | | | | | | |
|Net income recognised directly | | | | | | | | |
| in equity | |- |- |- | (1.666) |- |- |(1.666) |
| | | | | | | | | |
|Loss for the year | | - | - | - | - | -| (6.136) | (6.136) |
| | | | | | | | | |
|Total recognised income for 2006 | | - | - | - | (1.666) | -|(6.136) |(7.802) |
| | | | | | | | | |
|Balance 31 December 2006 / | | | | | | | | |
| 1 January 2007 | | 94.862 | 1.680 | 3.711 | 389 | -|(123.202) |(22.560) |
| | | | | | | | | |
|Available-for-sale financial assets: | | | | | | | | |
| Fair value gain | |- |- |1.336 |- |- |- |1.336 |
| | | | | | | | | |
|Freehold property: | | | | | | | | |
| Fair value gain | |- |- |731 |- |- |- |731 |
| | | | | | | | | |
|Aircraft spares: | | | | | | | | |
| Fair value gain | |- |- |6.566 |- |- |- |6.566 |
| | | | | | | | | |
|Cash flow hedges: | | | | | | | | |
| | | | | | | | |
|Effective portion of changes in the | | | | | | | | |
| fair values of derivative financial | | | | | | | | |
| instruments hedged | |- |- |- |318 |- |- |318 |
| | | | | | | | | |
|Effective portion of changes in | | | | | | | | |
| exchange differences from | | | | | | | | |
| translation of foreign currency loans | |- |- |- |999 |- |- |999 |
| | | | | | | | | |
|Effective portion of changes in | | | | | | | | |
| exchange differences from translation | | | | | | | | |
| of other assets in foreign currencies | | - | - | - | (198) | -| - | (198) |
| | | | | | | | | |
|Net expense recognised directly | | | | | | | | |
| in equity | |- |- |8.633 |1.119 |- |- |9.752 |
| | | | | | | | | |
|Profit for the year | | - | - | - | - | -| 867 | 867 |
| | | | | | | | | |
|Total recognised income for 2007 | | - | - | 8.633 | 1.119 | -| 867 | 10.619 |
| | | | | | | | | |
|Acquisition of own shares | |- |- |- |- |(1.399) |- |(1.399) |
|Sale of own shares | |- |- |- |- |1.399 |1.152 |2.551 |
|Issue of share capital | |23.905 |- |- |- |- | (208) |23.697 |
|Capital erosion | |(85.375) | - | - | - | -| 85.375 | - |
| | | | | | | | | |
| | |(61.470) | - | - | - | -| 86.319 | 24.849 |
| | | | | | | | | |
|Balance 31 December 2007 | | 33.392 | 1.680 | 12.344 | 1.508 | -|(36.016) | 12.908 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
43. SUPPLEMENTARY INFORMATION IN EURO (cont.)
CONSOLIDATED CASH FLOW STATEMENT
| |2007 |2006 |
| |€'000 |€'000 |
| | | |
|Net cash flow from operating activities | 19.801 | 5.753 |
| | | |
|Cash flow from investing activities | | |
|Proceeds from sale of fleet, property and equipment |31 |72 |
|Interest received |2.269 |1.412 |
|Dividend received |- |26 |
|Disposal of Eurocypria Airlines Ltd net of cash | | |
| disposed of |- |6.829 |
|Proceeds from disposal of investment in Hellas Jet S.A. |- |1.944 |
|Acquisition of fleet, property and equipment |(1.676) |(1.936) |
|Acquisition of intangible assets | (50) | (530) |
| | | |
|Net cash flow from investing activities | 574 | 7.817 |
| | | |
|Cash flow from / (for) financing activities | | |
|Proceeds from rights issue |25.057 |- |
|Proceeds from loans |146.924 |- |
|Repayment of loans |(130.513) |- |
|Repayment of finance lease obligations |(5.700) |(5.642) |
|Rights issue expense |(208) |- |
|Interest paid | (4.887) | (4.907) |
| | | |
|Net cash flow from / (for) financing activities | 30.673 |(10.549) |
| | | |
|Net increase in cash and cash equivalents |51.048 |3.021 |
|Cash and cash equivalents at the beginning of the year | 26.699 | 23.678 |
| | | |
|Cash and cash equivalents at the end of the year | 77.747 | 26.699 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
43. SUPPLEMENTARY INFORMATION IN EURO (cont.)
CASH FLOW STATEMENT
| |2007 |2006 |
| |€'000 |€'000 |
| | | |
|Net cash flow from / (for) operating activities | 19.644 | (2.300) |
| | | |
|Cash flow from investing activities | | |
|Proceeds from sale of fleet, property and equipment |27 |67 |
|Proceeds from sale of Eurocypria Airlines Limited |- |22.938 |
|Proceeds from sale of Hellas Jet S.A. |- |1.944 |
|Interest received |2.267 |1.035 |
|Dividend received |65 |26 |
|Acquisition of fleet, property and equipment |(1.500) |(1.493) |
|Acquisition of intangible assets | (46) | (390) |
| | | |
|Net cash flow from investing activities | 813 | 24.127 |
| | | |
|Cash flow from / (for) financing activities | | |
|Proceeds from rights issue |25.057 |- |
|Proceeds from loans |146.924 |- |
|Repayment of loans |(130.513) |- |
|Repayment of finance lease obligations |(5.700) |(5.642) |
|Rights issue expense |(208) | |
|Interest paid | (4.876) | (4.712) |
| | | |
|Net cash flow from / (for) financing activities | 30.684 |(10.354) |
| | | |
|Net increase in cash and cash equivalents |51.141 |11.473 |
|Cash and cash equivalents at the beginning of the year | 26.558 | 15.085 |
| | | |
|Cash and cash equivalents at the end of the year | 77.699 | 26.558 |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
43. SUPPLEMENTARY INFORMATION IN EURO (cont.)
RECONCILIATION of PROFIT / (LOSS) FOR THE YEAR to NET cash flow FROM/(for) operating activities
| |2007 |2006 |
|The Group |€'000 |€'000 |
| | | |
|Profit / (loss) after tax but before (loss) / profit from | | |
| discontinued operations |1.155 |(25.447) |
|Share of profit from associated company |(362) |- |
|Depreciation of fleet, property and equipment |15.398 |16.235 |
|Amortisation of intangible assets |340 |480 |
|Loss on disposal of fleet, property and equipment |91 |77 |
|Change in fair value of investment property |(133) |- |
|Exchange (gain)/loss on foreign currency loans/leases: | | |
|- on loans |550 |410 |
|- on finance lease obligations |(270) |(306) |
|Interest payable |5.100 |4.907 |
|Interest receivable |(2.490) |(1.411) |
|Decrease / (increase) in receivables |4.559 |(3.238) |
|Increase in inventories |(909) |(99) |
|Decrease / (increase) in trade and other receivables |581 |(8.667) |
|(Decrease) / increase in payables |(24) |367 |
|(Decrease) / increase in trade, other provisions and accruals |(5.577) |20.828 |
|Increase in revenue received in advance |615 |4.692 |
|Taxation | 1.394 | (2.958) |
|Dividend received |- |(26) |
|Taxation paid | (217) | (91) |
| | | |
|Net cash flow from operating activities | 19.801 | 5.753 |
| | | |
NOTES TO THE CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
43. SUPPLEMENTARY INFORMATION IN EURO (cont.)
RECONCILIATION of PROFIT / (LOSS) FOR THE YEAR to NET cash flow from/(for) operating activities (cont.)
| |2007 |2006 |
|The Company |€'000 |€'000 |
| | | |
|Profit / (loss) for the year |867 |(6.136) |
|Depreciation of fleet, property and equipment |15.299 |15.735 |
|Amortisation of intangible assets |241 |343 |
|Loss on disposal of fleet, property and equipment |94 |82 |
|Change in fair value of investment property |(133) |- |
|Profit from sale of subsidiary |- |(22.929) |
|Exchange (gain)/loss on loans/leases: | | |
|- on loans |550 |410 |
|- on finance lease obligations |(270) |(306) |
|Interest payable |5.091 |4.712 |
|Interest receivable |(2.489) |(1.034) |
|Decrease / (increase) in receivables |4.559 |(2.102) |
|(Increase) / decrease in inventories |(909) |79 |
|Decrease / (increase) in trade and other receivables |740 |(3.149) |
|(Decrease) / increase in payables |(24) |388 |
|(Decrease) / increase in trade, other payables and provisions |(5.708) |10.940 |
|Increase in revenue received in advance |615 |3.511 |
|Taxation | 1.401 | (2.703) |
|Dividend receivable |(65) |(26) |
|Taxation paid | (215) | (115) |
| | | |
|Net cash flow from / (for) operating activities | 19.644 | (2.300) |
REPORT, CONSOLIDATED AND COMPANY’S SEPARATE FINANCIAL STATEMENTS
For the year ended 31 December 2007
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