Posts: 534
Joined: Fri Feb 18, 2000 6:07 pm

SR Press Release Even Before Press Conference!

Mon Apr 02, 2001 3:50 pm

Consolidated results adversely affected by airline investments
Sizable net loss for 2000; change of strategy initiated

Zurich, April 2, 2001 – The SAirGroup’s operating revenue rose 25% to CHF 16 229 million in 2000 but the aviation group recorded a substantial consolidated net loss for the year. A key factor in this far-from-favourable result was the strongly adverse impact of the Group’s airline investments, which required exceptional depreciation and provisions to be effected for the year. Results from the Group’s airline-related divisions were encouraging, but could not offset the adverse influences on the airline side. Thus, earnings before interest and taxes (EBIT) before equity-accounted investments amounted to CHF 603 million (1999: CHF 674 million), corresponding to an operating profit margin of 3.7% (1999: 5.2%). EBIT including equity-accounted investments produced a CHF 2 592 million negative result (1999: plus CHF 643 million). The Group thus incurred a net loss for the year of CHF 2 885 million (which compares to a CHF 273 million net profit recorded for 1999). The Group intends to realign its overall business strategy to lay a sound foundation on which to substantially enhance its revenue and earnings performance.

In financial terms, 2000 was the worst year in the history of Swissair/SAirGroup. Operating revenue was increased by 25%, largely through acquisitions and organic growth. But the earnings targets in the airline sector fell far short of objectives, and the sizable losses incurred by its airline investments, particularly in France, Belgium and Germany, resulted in a substantial net Group loss for the year.

The losses incurred by its airline investments, value adjustments to loans and provisions established for restructuring costs, asset impairments and contractual obligations had a combined negative impact of CHF 3 725 million on the Group’s net consolidated result. The problems were exacerbated by the steep rise in the price of aviation fuel in a market that was already suffering from surplus capacity, making it difficult at best to pass on these costs.

Sabena, while achieving an 11% increase in total traffic volume, incurred a net loss of EUR 325 million for the year. Results for the French airlines AOM, Air Liberté and Air Littoral also fell far short of their objectives: the three carriers reported a combined loss of CHF 600 million before restructuring costs and value adjustments. The LTU group made further progress in its own restructuring activities and, through its strategic partnership with the Rewe trading group, eliminated its previous competitive disadvantage in the distribution field. Despite these actions, however, LTU incurred a net loss of EUR 224 million for the year. On a positive note, LOT Polish Airlines and South African Airways also recorded black-ink results. Despite increasing their operating revenue by between 10 and 15%, the three Swiss airlines all had poor years. Swissair recorded an EBIT loss of CHF 195 million on operating revenue of CHF 5 791 million; Crossair incurred an EBIT near the break-even point (loss of CHF 20 million) on operating revenue of CHF 1 275 million; and Balair recorded a loss of CHF 25 million (EBIT) on operating revenue of CHF 133 million. The steep increase in kerosene prices played a major role in these results: at Swissair alone, fuel costs were CHF 270 million or 56% higher than in 1999. Crossair saw an even higher increase in percentage terms: the CHF 85 million rise was a 75% increase on the prior year.

Including the activities of Flightlease, the Group company that primary serves to finance the aircraft fleets of the Group, the entire SAirLines division concluded the year with an EBIT of CHF 35 million (1999: CHF 188 million). Operating revenue was CHF 7 166 million (1999: CHF 6 414 million).

Airline-related divisions report encouraging results
In stark contrast to the airline business discussed above, the Group’s airline-related divisions recorded encouraging results for the year. SAirLogistics posted record results: its operating revenue of CHF 1 712 million was a 27% improvement on prior-year levels, while EBIT reached CHF 99 million (1999: CHF 6 million). Swisscargo, with an EBIT of CHF 69 million, made the biggest contribution to these results.

SAirServices increased operating revenue by 32% to CHF 3 183 million. The division’s EBIT stagnated somewhat due to the expansion of SR Technics’ activities in the USA and because of additional acquisition-related costs incurred by Swissport. EBIT amounted to CHF 162 million (2% less than the prior year figure). The prime contributor was SR Technics, with an EBIT of CHF 74 million.

Operating revenue for the SAirRelations division amounted to CHF 6 218 million, a 28% increase on 1999. The division’s CHF 300 million EBIT result was also a 12% improvement on the prior year. The favourable results were primarily attributable to strong EBIT performances from Gate Gourmet (CHF 187 million), the Nuance Group (CHF 74 million) and Swissôtel (CHF 34 million).

The CHF 2 885 million net loss for the year reduced the Group’s shareholders’ equity to CHF 1 160 million. Suitable measures are therefore being initiated. Group Chairman and CEO Dr. Mario A. Corti emphasises several points that need urgent attention. The company must and will correct the problems it is currently experiencing. The matter of most urgent concern is reducing the risks to which the Group’s airline investments are currently exposed as quickly and as substantially as possible. The Group’s earnings power must be improved by using all available means. These two priorities will be supported by efforts that are already underway to rapidly improve the balance sheet quality through suitable measures.

The SAirGroup employed 71 905 personnel at the end of 2000 (compared to 68 442 at the end of 1999), 21 456 of them in Switzerland. The SAirGroup Board of Directors will propose to its 57 963 shareholders at the Shareholders’ Meeting of April 25, 2001 that no dividend be paid for the 2000 business year.

Key figures.

Financial indications 2000 1999 Change
Operating revenue (CHF million) 16 229 13 002 + 24.8%
Earnings before interest and taxes (EBIT CHF million) (2 592) 643 n.s.
Operating profit / (loss) margin (per cent) (16.0) 4.9 – 20.9% p.
Cash flow from operating activities (CHF million) 1 809 2 196 – 17.6%
Cash flow as a percentage of operating revenue 11.1 16.9 – 5.8% p.
Net profit / (loss) for the year (CHF million) (2 885) 273 n.s.
Net invested capital (CHF million) at 31.12. 7 203 8 360 – 13.8%
Return on invested capital (per cent) (36.0) 7.7 – 43.7% p.
Shareholders’ equity (including net profit for the year, CHF million) 1 160 4 181 – 72.3%
Return on shareholders’ equity (per cent) (71.3) 7.0 – 78.3% p.
Equity per share (CHF) 92 354 – 74.0%
Net profit / (loss) per share (CHF) (235.66) 24.52 n.s.
Cash flow per share (CHF) 143 179 – 20.1%
Balance sheet equity ratio (per cent) 5.7 23.4 – 17.7% p.
Debt/equity ratio 4.68 1.01
n.s.: not significant

Operational indications
Personnel (full-time positions) 71 905 68 442 + 5.1%
Commercial aircraft 161 154
Total flight hours 598 375 568 846 + 5.2%
Available tonne-kilometres (million) 8 900 8 246 + 7.9%
Revenue tonne-kilometres (million) 6 075 5 746 + 5.7%
Point-to-point passengers carried (thousand) 19 220 17 903 + 7.4%
Cargo and mail carried by Swisscargo (tonnes) 791 018 720 409 + 9.8%
Ground handling stations 122 103
Catering facilities 164 165
Nuance sales outlets 349 317
Hotels 20 19

Key figures at a glance.

(CHF million) SAirGroup SAirLines SAirLogistics SAirServices SAirRelations
Operating revenue 16 229 7 166 1 712 3 183 6 218
Change over 1999 in per cent 24.8 11.7 27.2 32.0 28.5
Intragroup 0 428 15 1 315 374
Personnel costs 4 506 1 063 133 1 289 2 021
EBITDAR* 2 292 1 077 106 364 568
EBITDAR margin in per cent* 14.1 15.0 6.2 11.4 9.1
EBIT* 603 35 99 162 300
EBIT margin in per cent* 3.7 0.5 5.8 05.1 4.8
Number of staff 71905 10887 1538 19829 39403
Net invested capital * 9303 4061 304 1650 3077
ROIC in per cent* 6.5 0.9 32.6 9.8 9.8

* before equity investments
EBITDAR: Earnings before interest,taxes,depreciation,amortisation and rentals

Posts: 534
Joined: Fri Feb 18, 2000 6:07 pm

RE: SR Press Release Even Before Press Conference!

Mon Apr 02, 2001 3:53 pm

As you can see, these are only the figures SR will make public today. The press release mentions the fact that measures will be taken and that the strategy will be changed, though it is not clear out of the statements what exactly will happen to Sabena and the French Airlines. We habe to wait for the real press conference later today, to know what will be going on.

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