Icelandair Group Financials
Net earnings ISK 257 million
EBITDA ISK 5.5 billion
Revenue growth 13%
Total assets ISK 67 billion
Equity ratio 37%
- Net operating cash ISK 3.9 billion
Our net earnings result of ISK 257 million for 2007 is a drastic decrease on the previous year’s result and does not reflect the performance of the core operations of the Company. It does however illustrate the difficulty in financing expansionary and other capital intensive projects, under the current economic conditions of increasing interest rates. A strengthening ISK has also given rise to substantial translation loss on foreign denominated assets and cash flows.
The EBITDA for 2007 amounted to ISK 5.5 billion compared to ISK 6.1 billion in 2006 which, although 10% less than the previous year, was very close to our expectations.
Total revenue for 2007 was ISK 63.5 billion, a healthy 13% revenue increase on the previous year. Transport revenue in 2007 was ISK 35. 9 billion, up 3.4% from last year. While Icelandair did not quite meet expectations in Q2 and Q3 it did outperform in Q4 in light of a new and improved revenue management system and better capacity control. Icelandair also saw an increase in the number of passengers and trips by 4% and 6% respectively. Icelandair Cargo did not perform as well as forecasted, due to low demand mainly attributed to developments in the Icelandic fishing industry. Charter and AC lease amounted to ISK 15.5 billion compared to ISK 10.7 billion in 2006, increasing 45.3%. This was primarily driven by tremendous growth in Latcharter, but was also due to rapid growth in Charter, ACMI and Aircraft Trading. Other operating revenue totaled ISK 12 billion, increasing 14.3% from last year, mainly due to aircraft trading.
Operating expenses in 2007 totaled ISK 58 billion compared to ISK 50.1 billion in 2006, a 16% increase. The increase was primarily due to operating growth from the previous year, caused by the implementation of nine new aircraft in the middle of the year. An 11% year on year increase in average full time equivalent units employed at the group as well as a 59% increase in maintenance expenses which can mostly be attributed to network and cargo operations also contributed to this increase.
FINANCIAL INCOME AND EXPENSES
Rising interest rates have led to an increase in financing cost which, along with a strong ISK, has been the major influence on the disappointing net earnings result. Finance income was lower in 2007 than in 2006 because of a lower cash balance during the year. The reasons for the lower cash balance were primarily the financing of new aircraft and repayment of loans. Finance expense increased by ISK 520 million because of the introduction of new debt at the end of 2006, which has been subject to the previously mentioned rising interest rates.
Icelandair Group’s total assets as of 31 December 2007 totaled ISK 67 billion. Total assets decreased by 13% from ISK 77 billion between years. The largest effect came from the reduction in purchase prepayments (PDP) as five Boeing 737-800 aircraft were sold. Operating assets totaled ISK 22.8 billion and consist mainly of aircraft. Intangible assets were a total of ISK 26.8 billion. Goodwill created through the acquisition of companies, accounted for ISK 20 billion of this figure. Investment in associates was ISK 2.3 billion at year-end 2007, up from ISK 2.1 billion in 2006. The company sold four associates related to Boeing 737-800 aircraft but the acquisition of 50% in Travel Service took place in Q4. Prepaid aircraft acquisitions totaled ISK 249 million at year-end, compared to ISK 9.7 billion at year-end 2006. Six 737-800 were delivered and sold during 2007, bringing the prepaid aircraft acquisitions to a total of ISK 249 million. This was mainly because of an agreement with Boeing to purchase four Boeing 787 Dreamliner aircraft which are to be delivered in the years 2010 and 2012. Cash and cash equivalents totaled ISK 2 billion at year-end 2007 compared to ISK 2.8 billion at year-end 2006 due to repayments of long-term debt and investments in new aircraft.
Icelandair Group’s total loans and borrowings as of 31 December 2007 totaled ISK 25 billion compared to ISK 35 billion at year-end 2006. Total prepaid aircraft acquisitions accounted for ISK 8.5 billion of the decrease during the course of the year. Total non-current loans and borrowings were ISK 14 billion at year-end 2007 compared to ISK 21.6 billion at year-end 2006. Total current loans and borrowing at year-end were ISK 11 billion in 2007 compared to ISK 4.6 billion in 2006. The reason for the change between non-current and current loans and borrowing are new short term bonds which were issued during the year to repay unfavorable longer term bonds.
The Group’s total equity amounted to ISK 25 billion. The equity ratio was 37%. Numbers of shareholders at the end of the year 2007 were 1,271 but were 1,507 at the beginning of the year. Three shareholders owned over 10% of the share capital: Langflug ehf. with 23.8%, Fjárfestingafélagiđ Máttur ehf. with 23.1% and Naust ehf. with 14.8%.