Date: 10 May 2006
ASX RELEASE
Interim Results
for the 6 months ended 31 March, 2006
This release contains an announcement to the ASX regarding Virgin Blue Holdings Ltd’s
interim financial results for the 6 months ended 31 March 2006, in accordance with the
requirement set out in Appendix 4D of the ASX Listing Rules.
Scott Swift
Company Secretary
For further information:
Keith Neate
Chief Financial Officer
07 3295 5046
Heather Jeffery
General Manager Public Affairs
0412 922 122
Virgin Blue Holdings Limited
ACN 100 686 226
and its Controlled Entities
Additional Information Required by
ASX Appendix 4D
Financial Report for the
Half-Year Ended 31 March 2006
ASX Appendix 4D
Final Report
Name of Entity
Virgin Blue Holdings Limited
ACN
100 686 226
Reporting Period
6 months ended 31 March 2006
Previous Corresponding Period
6 months ended 31 March 2005
RESULTS FOR ANNOUNCEMENT TO THE MARKET
Revenue from ordinary activities
Profit from ordinary activities after tax attributable to
members
Net profit from the period attributable to members
up
6.1% to 935.9 million
down
down
8.4% to 68.2 million
8.4% to 68.2 million
DIVIDENDS (cents per share)
Final Dividend
Interim Dividend
Amount per share
Franked Amount per share
25 cents
25 cents
Nil
Nil
The Final Dividend was declared in relation to the 18 month period ended 30 September 2005.
The dividend was paid on 15 December 2005.
This report includes financial statements which have been reviewed.
Date: 10 May, 2006
Virgin Blue Holdings Limited
Interim Results
for the 6 months ended 31 March, 2006
$68.2 million Net Profit after Tax
Virgin Blue Holdings Limited today announced a net profit after tax of $68.2 million for the half-year ended 31
March, 2006.
Virgin Blue Chief Executive Brett Godfrey said that fuel had continued to be a challenge for the airline, and described
the result as “an encouraging performance based on efficiency gains and strong passenger growth.”
“The first half has been a period of investment in new products under our corporate business strategy together with a
4% increase in production, which have contributed to a 6.1% improvement in revenue mitigating a fuel bill which
increased over $49 million compared to the previous period,” he said.
“In addition, the last six months have included two extraordinary factors when compared to the previous yeara $10 million one-off launch cost associated with Velocity, and the key Easter period, which last year fell in March,
and in 2006 fell in April,“ he concluded.
The summary financial results for the first half of the year are as follows:
Revenue
EBITDAR
EBIT
Profit before Tax (PBT)
Net Profit After Tax
Basic earnings per share
Cost per Available Seat Kilometre(CASK)
- including fuel
- excluding fuel
6 months to
31 March 2006
$935.9 million
$209.7million
$104.7 million
$98.9 million
$68.2 million
6 months to
31 March 2005
$882.0 million
$224.9million
$107.3 million
$103.9 million
$74.5 million
Change
+6.1%
-7.5%
-2.4%
-4.8%
-8.5%
6.5 cents
7.2 cents
-9.7%
7.96 cents
5.93 cents
7.72 cents
6.09 cents
+3.1%
-2.6%
OPERATING PERFORMANCE
Capacity (as measured by ASKs*) increased by 4% compared to the 6 months ended 31 March 2005, whereas
passengers carried grew to 7.1 million, up 9.2% on the prior period. The resulting improvement in load factor
was primarily responsible for driving the $53.9 million increase in revenue.
Virgin Blue continues its excellent record of operational integrity as measured by on-time departures. For the
calendar year 2005, Virgin Blue maintained its position as Australia’s number one on-time major airline, and for
the past twelve months to 31 March 2006, with an average of 90% of our departures operating on time we beat
our major competitor each and every single month.
*ASKs – Available Seat Kilometres
** Department of Transport and Regional Services
Revenue
Total revenue increased by 6.1% to $935.9 million, with scheduled revenue up 6.7%, as passengers carried
increased 9.2% to 7.1 million and yield remained steady despite a shorter average stage length. Revenue
passenger kilometres (RPKs) were 8.2 billion and ASKs were 10.4 billion, up 6.5% and 4.0% respectively from
the prior year. Load factor improved to 78.4%, up 2.0 points for the same period in 2005.
Expenditure
The financial performance of the Company was impacted by a single stand-out factor - the rising cost of jet fuel.
Fuel price per barrel during the six months increased by 33.7% pushing Cost per Available Seat Kilometre
(CASK) to 7.96 cents, compared with only a 4.0% increase in production (ASKs) as noted above.
Total operating costs were $831.1 million, 7.3% ahead of the prior period. Despite this increase, Virgin Blue
achieved a 2.6% drop in CASK (excluding fuel) from 6.09 cents to 5.93 cents, through a combination of cost
and productivity initiatives.
Changes in charging regimes and deregulated pricing have seen airport charges to airlines increase
dramatically. Airport charges, navigation and station operations now account for 21.8% of Virgin Blue’s
operating cost base and remain both a serious concern and focus for both the company and the airline
industry.
Balance Sheet and cash flow
Payment of the $259.8 million fully-franked dividend in December 2005 saw cash balances decrease from
$788.1 million to $580.6 million during the period, giving Virgin Blue 127 days operating cash reserves as at 31
March 2006, down 59 days over 2005.
Capital expenditure for the Group for the 6 months to 31 March 2006 was $44.4 million. This included deposits
on nine future aircraft commitments, expenditure on existing aircraft and completion costs associated with the
Brisbane hangar. The Company’s net debt to net debt plus equity ratio was 52% up from 49% at 31 March,
2005.
OUTLOOK
In the first half of our current fiscal period, we brought to fruition a series of projects designed to broaden our
appeal to the business market, including our Velocity frequent flyer programme and branded credit cards with
National Australia Bank; completion of technology products Web Check-In, an Application Programme
Interface facility for corporate accounts, and significant new code-share technology.
By 31 March, 2006 we had completed the majority of these new product investments, and saw signs of
improvement in loads, steady revenue and business efficiencies.
In the past six months commensurate with our new corporate business traveller strategy, Virgin Blue
completed a 40 percent increase in the national sales team which included the new positions of Manager
Corporate Sales - Australia and New Zealand; Manager Travel Industry Sales - Australia and New Zealand;
International Sales Manager; Manager Interline Relationships. In March we appointed the key management
positions General Manager Velocity and General Manager National Sales, and they commenced with us in
May, 2006.
With capacity in the national domestic market currently in line with historic long term demand levels, and in
conjunction with initiatives the airline has introduced over the past six months, management believes Virgin
Blue is now better positioned to counter current fuel price levels, which are expected to remain a challenge for
all airlines in the medium term.
For further information:
Keith Neate
Heather Jeffery
Chief Financial Officer
General Manager Public Affairs
07 3295 5046
0412 922 122
Virgin Blue Holdings Limited
ACN 100 686 226
and its Controlled Entities
Interim Financial Report For the Half-Year
Ended 31 March 2006
Virgin Blue Holdings Limited and its Controlled Entities
31 March 2006 Interim Financial Report
Contents
Corporate Directory
2
Directors’ Report
3
Lead Auditor’s Independence Declaration
5
Consolidated Income Statement
6
Consolidated Balance Sheet
7
Consolidated Statement of Changes in Equity
8
Consolidated Cash Flow Statement
9
Notes to the Financial Statements
10
Directors’ Declaration
40
Independent Review Report
41
This interim financial report does not include all the notes of the type normally included in an annual
financial report. Accordingly, this report is to be read in conjunction with the annual report for the
financial period ended 30 September 2005 and any public announcements made by Virgin Blue
Holdings Limited during the interim reporting period in accordance with the continuous disclosure
requirements of the Corporations Act 2001.
1
Virgin Blue Holdings Limited and its Controlled Entities
Corporate Directory
COMPANY SECRETARY
Mr Scott Swift
PRINCIPAL ADMINISTRATIVE OFFICE
Virgin Blue Holdings Limited
131 Barry Parade
Spring Hill QLD 4006
Australia
Telephone: (07) 3295 3000
REGISTERED OFFICE
Virgin Blue Holdings Limited
Level 7
131 Barry Parade
Fortitude Valley QLD 4006
SHARE REGISTRY
Computershare Investor Services Pty Limited
Level 19
307 Queen Street
Brisbane QLD 4000
STOCK EXCHANGE
The Company is listed on the Australian Stock Exchange. The Home Exchange is Brisbane.
OTHER INFORMATION
Virgin Blue Holdings Limited, incorporated and domiciled in Australia, is a publicly listed company limited
by shares.
2
Virgin Blue Holdings Limited and its Controlled Entities
Directors’ report
The directors present their report together with the consolidated financial report of Virgin Blue Holdings Limited
for the half-year ended 31 March 2006 and the review report thereon.
Directors
The directors of the Company at any time during or since the end of the half-year are:
Name
Position
Period of directorship
Mr Chris Corrigan
Non Executive Chairman
Appointed 27 May 2002 – appointed Chairman 6 November 2003.
Mr Brett Godfrey
Managing Director
Appointed 27 May 2002.
Chief Executive Officer
Mr William Hara
Non Executive Director
Appointed 27 May 2002.
Mr David Knight
Non Executive Director
Appointed 6 November 2003.
Mr Patrick McCall
Non Executive Director
Appointed 27 May 2002.
Mr David Mortimer
Independent Non Executive Director
Appointed 6 November 2003.
Mr David Baxby
Non Executive Director
Appointed 30 September 2004.
Mr Robert Dunn
Non Executive Director
Appointed 6 April 2005.
Mr Stephen Murphy
Alternate Director
Appointed as alternate director for Mr David Baxby and Mr Patrick
McCall on 30 September 2004.
Mr Paul Lewis
Alternate Director
Appointed as alternate director for Mr Robert Dunn on 23 September
2005. Appointed as alternate director for Mr Chris Corrigan, Mr
William Hara and Mr David Knight on 20 October 2005.
Review and results of operations
Net profit after income tax for the six month period ended 31 March 2006 was $68.2 million which reflects an
8.4% decrease compared with the prior six month period ended 31 March 2005.
In the 6 months to 31 March 2006, EBIT (earnings before interest and tax) decreased by 2.4% to $104.7 million.
As shown in the financial statements, basic earnings per share for the six month period ended 31 March 2006 was
6.5 cents per share and on a diluted basis, was also 6.5 cents per share.
3
Lead auditor’s independence declaration under section 307C of the Corporations Act 2001
The Directors have received the Lead Auditor’s Independence Declaration under Section 307C of the Corporations
Act 2001.
The lead auditor’s independence declaration is set out on page 5.
Rounding off
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that
Class Order, amounts in the financial report and Directors’ report have been rounded off to the nearest thousand
dollars, unless otherwise stated.
Dated at Brisbane this 10th day of May 2006.
Signed in accordance with a resolution of the directors:
_________________________
Brett Godfrey
Director
4
PricewaterhouseCoopers
ABN 52 780 433 757
Waterfront Place
1 Eagle Street
BRISBANE QLD 4000
GPO Box 150
BRISBANE QLD 4001
DX 77 Brisbane
Australia
www.pwc.com/au
Telephone +61 7 3257 5000
Facsimile +61 7 3257 5999
Auditor’s Independence Declaration
As lead auditor for review of Virgin Blue Holdings Limited for the half year ended 31 March 2006,
I declare that to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the review; and
b) no contraventions of any applicable code of professional conduct in relation to the review.
This declaration is in respect of Virgin Blue Holdings Limited and the entities it controlled during
the period.
Robert Hubbard
Partner
PricewaterhouseCooper
Liability limited by a scheme approved under Professional Standards Legislation
Brisbane
10 May 2006
5
Virgin Blue Holdings Limited and its Controlled Entities
Consolidated Income Statement
For the half-year ended 31 March 2006
Consolidated
31 March
2006
$’000
31 March
2005
$’000
888,590
832,632
286
-
46,993
49,340
935,869
881,972
74,714
86,424
181,201
173,409
Contract and other maintenance costs
51,802
49,887
Commissions and other marketing and reservations costs
56,467
51,642
Fuel and oil
212,424
163,637
Labour and staff related costs
185,546
178,764
Other expenses from ordinary activities
26,849
28,694
Depreciation and amortisation
42,136
42,217
831,139
774,764
104,730
107,298
Borrowing costs
24,426
22,321
Interest revenue
18,682
18,884
Profit before income tax expense
98,986
103,861
Income tax expense
30,755
29,370
Net profit for the half year attributable to the members of Virgin Blue
Holdings Limited
68,231
74,491
Basic earnings per share:
6.5 cents
7.2 cents
Diluted earnings per share:
6.5 cents
7.1 cents
Operating revenue
Airline passenger ticket revenue
Share of net profits of associate accounted for using the equity method
Other revenue
Operating expenditure
Aircraft operating costs
Airport charges, navigation and station operations
Earnings before interest and tax
Earnings per share for profit attributable to the ordinary equity holders of
the company:
The above Consolidated Income Statement is to be read in conjunction with the accompanying notes.
6
Virgin Blue Holdings Limited and its Controlled Entities
Consolidated Balance Sheet
As at 31 March 2006
Consolidated
31
30
March
September
2006
2005
$’000
$’000
Current assets
Cash and cash equivalents
Receivables
Inventories
Derivatives
Other financial assets
Current tax assets
Other assets
Total current assets
Non-current assets
Investments accounted for using the equity method
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other assets
Total non-current assets
Total assets
Current liabilities
Payables
Derivatives
Interest-bearing liabilities
Provisions
Unearned revenue
Total current liabilities
Non-current liabilities
Payables
Interest-bearing liabilities
Provisions
Deferred tax liabilities
Unearned revenue
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total equity
580,645
64,322
337
23,516
113
668,933
788,071
65,903
298
650
17,193
795
872,910
287
7,864
1,125,171
30,625
48,525
1,212,472
1,881,405
7,864
1,126,092
30,034
48,290
7,720
1,220,000
2,092,910
145,729
10,315
115,887
55,176
219,358
546,465
153,483
111,586
40,618
235,766
541,453
680
667,340
19,346
51,306
3,125
741,797
1,288,262
593,143
1,183
708,894
27,020
37,235
3,436
777,768
1,319,221
773,689
400,778
16,261
176,104
593,143
400,351
5,681
367,657
773,689
The above Consolidated Balance Sheet is to be read in conjunction with the accompanying notes.
7
Virgin Blue Holdings Limited and its Controlled Entities
Consolidated Statement of Changes in Equity
For the half-year ended 31 March 2006
Consolidated
Total equity at the beginning of the half-year
Adjustment to reserves on adoption of AASB 132 and 139, net of tax
31 March
2006
$’000
31 March
2005
$’000
773,689
667,388
(7,663)
-
Restated total equity at the beginning of the half-year
766,026
667,388
Changes in the fair value of cash flow hedges, net of tax
17,070
-
Exchange differences on translation of foreign operations
(572)
(48)
Net income recognised directly in equity
16,498
(48)
Profit for the half-year
68,231
74,491
Total recognised income and expense for the half-year attributable to
members of Virgin Blue Holdings Limited
84,729
74,443
1,745
1,466
Transactions with equity holders in their capacity as equity holders:
Employee share options
Dividends provided for or paid
Contributions of equity, net of transaction costs
(259,785)
478
(257,612)
Total equity at the end of the half-year
593,143
254
1,720
743,551
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying
notes.
8
Virgin Blue Holdings Limited and its Controlled Entities
Consolidated Cash Flow Statement
For the half-year ended 31 March 2006
Consolidated
31 March
2006
$’000
31 March
2005
$’000
Cash flows from operating activities
Cash receipts in the course of operations (inclusive of goods and
services tax)
Cash payments in the course of operations (inclusive of goods and
services tax)
Borrowing costs paid
Income taxes paid
Net cash provided by operating activities
1,015,421
929,766
(882,111)
(786,217)
(24,008)
(23,651)
(4,238)
(7,874)
105,064
112,025
19,637
18,462
-
604
Cash flows from investing activities
Interest received
Receipts from deposits
Payments for property, plant and equipment
(44,410)
(166,769)
Net cash (used in) investing activities
(24,773)
(147,703)
Proceeds from borrowings
10,284
260,197
Repayment of borrowings
(36,480)
(104,190)
Cash flows from financing activities
Dividends paid
Proceeds from issue of shares
(259,785)
-
427
254
Net cash provided by / (used in) financing activities
(285,554)
156,261
Net increase / (decrease) in cash and cash equivalents held
(205,263)
120,583
788,071
667,146
Cash and cash equivalents at the beginning of the financial period
Effects of exchange rate fluctuations on the balances of cash and cash
equivalents held in foreign currencies
Cash and cash equivalents at the end of the financial period
(2,163)
580,645
2,074
789,803
The above Consolidated Cash Flow Statement is to be read in conjunction with the accompanying notes.
9
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies
(a) Basis of preparation
This general purpose financial report for the interim half year reporting period ended 31 March
2006 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial
Reporting and the Corporations Act 2001.
This interim financial report does not include all the notes of the type normally included in an
annual financial report. Accordingly, this report is to be read in conjunction with the annual
report for the financial period ended 30 September 2005 and any public announcements made by
Virgin Blue Holdings Limited during the interim reporting period in accordance with the
continuous disclosure requirements of the Corporations Act 2001.
The principle accounting policies adopted in the preparation of the financial report are set out
below. These policies have been consistently applied to all the periods presented, unless
otherwise stated.
Application of AASB 1 First Time Adoption of Australian Equivalents to International Financial
Reporting Standards
This interim financial report is the first Virgin Blue Holdings Limited interim financial report to
be prepared in accordance with AIFRSs. AASB 1 First time Adoption of Australian Equivalents
to International Financial Reporting Standards has been applied in preparing these financial
statements.
Financial statements of Virgin Blue Holdings Limited until 30 September 2005 had been prepared
in accordance with previous Australian Generally Accepted Accounting Principles (AGAAP).
AGAAP differs in certain respects from AIFRS. When preparing the Virgin Blue Holdings
Limited interim financial report for the half year ended 31 March 2006, management has
amended certain accounting, valuation and consolidation methods applied in the previous
AGAAP financial statements to comply with AIFRS. With the exception of financial
instruments, the comparative figures were restated to reflect these adjustments. The Group has
taken the exemption available under AASB 1 to only apply AASB 132 Financial Instruments:
Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and
Measurement from 1 October 2005.
Reconciliations and descriptions of the effect of transition from previous AGAAP to AIFRSs on
the Group’s equity and its net income are given in note 6.
Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified
by the revaluation of available-for-sale financial assets, financial assets and liabilities (including
derivative instruments) at fair value through profit or loss and investment property.
10
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies
(b)
Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all entities
controlled by Virgin Blue Holdings Limited (“the Company”) as at 31 March 2006 and the
results of controlled entities for the half-year then ended. Virgin Blue Holdings Limited and its
controlled entities together are referred to in this financial report as the Group or the
consolidated entity.
Controlled entities are all those entities (including special purpose entities) over which the
Group has the power to govern the financial and operating policies, generally accompanying a
shareholding of more than one-half of the voting rights. The existence and effect of potential
voting rights that are currently exercisable or convertible are considered when assessing whether
the Group controls another entity.
Controlled entities are fully consolidated from the date on which control is transferred to the
Group. They are de-consolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the
Group.
Intercompany transactions, balances and unrealised gains on transactions between Group
companies are eliminated. Unrealised losses are also eliminated unless the transaction provides
evidence of the impairment of the asset transferred.
(ii) Associates
Associates are all entities over which the Group has significant influence but not control,
generally accompanying a shareholding of between 20% and 50% of the voting rights.
Investments in associates are accounted for in the parent entity financial statements using the
cost method and in the consolidated financial statements using the equity method of accounting,
after initially being recognised at cost. The Group’s investment in associates includes goodwill
(net of any accumulated impairment loss) identified on acquisition.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the
Income Statement, and its share of post-acquisition movements in reserves is recognised in
reserves. The cumulative post-acquisition movements are adjusted against the carrying amount
of the investment. Dividends receivable from associates are recognised in the parent entity’s
Income Statement, while in the consolidated financial statements they reduce the carrying
amount of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate,
including any other unsecured receivables, the Group does not recognise further losses, unless it
has incurred obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the
extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of
associates have been changed where necessary to ensure consistency with the policies adopted
by the Group.
11
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies (continued)
(c)
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Revenue is
recognised for the major business activities as follows:
Scheduled revenue
Scheduled revenue comprises revenue from passenger ticket sales. Revenue is recognised when
carriage (uplift) is performed. Scheduled revenue received in advance, together with any
commission thereon, is carried forward in the Balance Sheet as unearned passenger revenue.
Other revenue
Other revenue comprises revenue earned from the provision of other airline related services, and
government mandated charges. Other revenue is recognised in the Income Statement as it is
earned.
Interest revenue
Interest revenue is recognised in the Income Statement on an effective interest rate basis.
Dividends
Revenue from dividends and distributions from controlled entities are recognised by the parent
entity when they are declared by the controlled entities.
(d)
Government grants
Grants from the government are recognised at their fair value where there is a reasonable
assurance that the grant will be received and the Group will comply with all attached conditions.
Government grants relating to costs are deferred and recognised in the Income Statement over
the period necessary to match them with the costs that they are intended to compensate.
Government grants relating to the purchase of property, plant and equipment are included in
non-current liabilities as deferred income and are credited to the Income Statement on a straight
line basis over the expected lives of the related assets.
(e)
Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax
(GST), except where the amount of GST incurred is not recoverable from the taxation authority.
In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as
part of the expense. Receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the Australian Taxation Office (ATO)
is included as a current asset or liability in the Balance Sheet.
Cash flows are included in the statement of cash flows on a gross basis. The GST components
of cash flows arising from investing and financing activities which are recoverable from, or
payable to, the ATO are classified as operating cash flows.
12
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies (continued)
(f)
Foreign currency
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the
currency of the primary economic environment in which the entity operates (“the functional
currency”). The consolidated financial statements are presented in Australian dollars, which is
Virgin Blue Holdings Limited’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated to the functional currency at the rates of exchange
ruling at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in the Income Statement,
except when deferred in equity as qualifying cash flow hedges.
Translation differences on non-monetary items, such as equities held at fair value through profit
or loss, are reported as part of the fair value gain or loss. Translation differences on nonmonetary items, such as equities classified as available-for-sale financial assets, are included in
the fair value reserve in equity.
(iii) Group companies
The results and financial position of all the Group entities (none of which has the currency of a
hyperinflationary economy) that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
•
assets and liabilities for each balance sheet presented are translated at the closing rate at the
date of that balance sheet;
•
income and expenses for each Income Statement are translated at average exchange rates
(unless that is not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are translated at the
dates of the transactions); and
•
all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of any net investment in
foreign entities, and of borrowings and other currency instruments designated as hedges of such
investments, are taken to shareholders’ equity. When a foreign operation is sold or borrowings
repaid, a proportionate share of such exchange differences are recognised in the Income
Statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as
assets and liabilities of the foreign entity and translated at the closing rate.
13
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies (continued)
(g)
Income Tax
The income tax expense or revenue for the period is the tax payable on the current period’s
taxable income based on the national income tax rate for each jurisdiction adjusted by changes
in deferred tax assets and liabilities attributable to temporary differences between the tax bases
of assets and liabilities and their carrying amounts in the financial statements, and to unused tax
losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates
expected to apply when the assets are recovered or liabilities are settled, based on those tax rates
which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are
applied to the cumulative amounts of deductible and temporary differences to measure the
deferred tax asset or liability. An exception is made for certain temporary differences arising
from the initial recognition of an asset or a liability. No deferred tax asset or liability is
recognised in relation to these temporary differences if they arose in a transaction, other than a
business combination, that at the time of the transaction did not affect either accounting profit or
taxable profit or loss.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses
only if it is probable that future taxable amounts will be available to utilise those temporary
differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the
carrying amount and tax bases of investments in controlled entities where the parent entity is
able to control the timing of the reversal of the temporary differences and it is probable that the
differences will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts recognised directly in equity are also
recognised directly in equity.
Tax consolidation legislation
Virgin Blue Holdings Limited and its wholly-owned Australian controlled entities have
implemented the tax consolidation legislation from an implementation date of 1 April 2003.
The head entity, Virgin Blue Holdings Limited, and the controlled entities in the tax
consolidated group continue to account for their own current and deferred tax amounts. These
tax amounts are measured as if each entity in the tax consolidated group continues to be a standalone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Virgin Blue Holdings Limited also
recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused
tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are
recognised as amounts receivable from or payable to other entities in the group.
Any difference between the amounts assumed and amounts receivable or payable under the tax
funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax
consolidated entities.
14
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies (continued)
(h)
Earnings per share
Basic earnings per share (“EPS”) is calculated by dividing the net profit attributable to members
of the company for the reporting period, after excluding any costs of servicing equity, by the
weighted average number of ordinary shares of the Company, adjusted for any bonus elements
in ordinary shares issued during the half-year.
Diluted EPS adjusts the figures used in the determination of basic EPS to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares and the weighted average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary shares.
(i)
Acquisitions of assets
The purchase method of accounting is used to account for all acquisitions of assets (including
business combinations) regardless of whether equity instruments or other assets are acquired.
Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or
assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity
instruments are issued in an acquisition, the value of the instruments is their published market
price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the
published price at the date of exchange is an unreliable indicator of fair value and that other
evidence and valuation methods provide a more reliable measure of fair value. Transaction
costs arising on the issue of equity instruments are recognised directly in equity.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date, irrespective of the
extent of any minority interest. The excess of the cost of acquisition over the fair value of the
Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of
acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference
is recognised directly in the Income Statement, but only after a reassessment of the
identification and measurement of the net assets acquired.
Where settlement of any part of cash consideration is deferred, the amounts payable in the
future are discounted to their present value as at the date of exchange. The discount rate used is
the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be
obtained from an independent financier under comparable terms and conditions.
(j)
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call within financial
institutions, other short-term, highly liquid investments with original maturities of three months
or less that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
15
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies (continued)
(k)
Receivables
The collectibility of debts is assessed at reporting date and specific provision is made for any
doubtful accounts. The amount of the provision is the difference between the asset’s carrying
amount and the present value of estimated future cash flows, discounted at the effective interest
rate. The amount of the provision is recognised in the Income Statement.
A significant proportion of the consolidated entity’s revenue is derived from credit cards.
Credit card charges are normally settled within seven days and are carried at amounts due. The
remainder of the consolidated entity’s trade debtors are normally settled within 45 days and are
carried at amounts due.
(l)
Inventories
Maintenance spare parts are expected to be consumed in the following financial year and are
carried at the lower of cost and net realisable value.
Catering, consumables, uniforms and merchandise inventory is valued at the lower of cost and
net realisable value.
(m)
Investments and other financial assets
From 1 April 2004 to 30 September 2005
The Group has taken the exemption available under AASB 1 to apply AASB 132 and AASB
139 only from 1 October 2005. The Group has applied previous AGAAP to the comparative
information on financial instruments within the scope of AASB 132 and AASB 139. For
further information on previous AGAAP refer to the annual report for the 18 month period
ended 30 September 2005.
Adjustments on transition date: 1 October 2005
The nature of the main adjustments to make this information comply with AASB 132 and
AASB 139 are that, with the exception of held-to-maturity investments and loans and
receivables which are measured at amortised cost (refer below), fair value is the measurement
basis. Fair value is exclusive of transaction costs. Changes in fair value are either taken to the
Income Statement or an equity reserve (refer below). At the date of transition (1 October 2005)
changes to carrying amounts are taken to retained earnings or reserves.
From 1 October 2005
The Group classifies its investments in the following categories: financial assets at fair value
through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale
financial assets. The classification depends on the purpose for which the investments were
acquired. Management determines the classification of its investments at initial recognition and
re-evaluates this designation at each reporting date.
16
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies (continued)
(m) Investments and other financial assets
(i) Financial assets at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and those designated at
fair value through profit or loss on initial recognition. A financial asset is classified in this
category if acquired principally for the purpose of selling in the short term or if so designated by
management. Derivatives are also categorised as held for trading unless they are designated as
hedges. Assets in this category are classified as current assets if they are either held for trading
or are expected to be realised within 12 months of the balance sheet date.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. They arise when the Group provides money, goods or
services directly to a debtor with no intention of selling the receivable. They are included in
current assets, except for those with maturities greater than 12 month after the balance sheet
date which are classified as non-current assets. Loans and receivables are included in
receivables in the balance sheet.
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable
payments and fixed maturities that the Group’s management has the positive intention and
ability to hold to maturity.
(iv) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category
or not classified in any of the other categories. They are included in non-current assets unless
management intends to dispose of the investment within 12 months of the balance sheet date.
Purchases and sales of investments are recognised on trade-date – the date on which the Group
commits to purchase or sell the asset. Investments are initially recognised at fair value plus
transactions costs for all financial assets not carried at fair value through profit or loss.
Financial assets are derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred substantially all the risks
and rewards of ownership.
Available-for-sale financial assets and financial assets at fair value through profit and loss are
subsequently carried at fair value. Loans and receivables and held-to-maturity investments are
carried at amortised cost using the effective interest method. Realised and unrealised gains and
losses arising from changes in the fair value of the ‘financial assets at fair value through profit
or loss’ category are included in the Income Statement in the period in which they arise.
Unrealised gains and losses arising from change in the fair value of non monetary securities
classified as available-for-sale are recognised in equity in the available-for-sale investment
revaluation reserve. When securities classified as available-for-sale are sold or impaired, the
accumulated fair value adjustments are included in the Income Statement as gains and losses
from investment securities.
17
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies (continued)
(m) Investments and other financial assets (continued)
(iv) Available-for-sale financial assets (continued)
The fair value of quoted financial assets are based on current bid prices. If the market for a
financial asset is not active (and for unlisted securities), the Group establishes the fair value by
using valuation techniques. These include reference to the fair values of recent arm’s length
transactions, involving the same instruments or other instruments that are substantially the same,
discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific
circumstances.
The Group assesses at each balance date whether there is objective evidence that a financial
asset or group of financial assets is impaired. In the case of equity securities classified as
available-for-sale, a significant or prolonged decline in the fair value of a security below its cost
is considered in determining whether the security is impaired. If any such evidence exists for
available-for-sale financial assets, the cumulative loss – measured as the difference between the
acquisition cost and current fair value, less any impairment loss on that financial asset
previously recognised in profit and loss – is removed from equity and recognised in the Income
Statement. Impairment losses recognised in the Income Statement on equity instruments are not
reversed through the Income Statement.
(n)
Derivatives
From 1 April 2004 to 30 September 2005
The Group has taken the exemption available under AASB 1 to apply AASB 132 and AASB
139 from 1 October 2005. The Group has applied previous AGAAP in the comparative
information on financial instruments within the scope of AASB 132 and AASB 139. For
further information on previous AGAAP refer to the annual report for the 18 month period
ended 30 September 2005.
Adjustments on transition date: 1 October 2005
The nature of the main adjustments to make this information comply with AASB 132 and
AASB 139 are that derivatives are measured on a fair value basis. Changes in fair value are
either taken to the Income Statement or an equity reserve (refer below). At the date of transition
(1 October 2005) changes in the carrying amounts of derivatives are taken to retained earnings
or reserves, depending on whether the criteria for hedge accounting are satisfied at the transition
date.
18
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies (continued)
(n)
Derivatives (continued)
From 1 October 2005
Derivatives are initially recognised at fair value on the date a derivative contract is entered into
and are subsequently remeasured to their fair value. The method of recognising the resulting
gain or loss depends on whether the derivative is designated as a hedging instrument, and if so,
the nature of the item being hedged. The Group designates certain derivatives as either; (1)
hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value
hedge); or (2) hedges of highly probable forecast transactions (cash flow hedges).
The Group documents at the inception of the transactions the relationship between hedging
instruments and hedged items, as well as its risk management objective and strategy for
undertaking various hedge transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging
transactions have been and will continue to be highly effective in offsetting changes in fair
values or cash flows of hedged items.
(i) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are
recorded in the Income Statement, together with any changes in the fair value of the hedged
asset or liability that are attributable to the hedged risk.
(ii) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify
as cash flow hedges is recognised in equity in the hedging reserve. The gain or loss relating to
the ineffective portion is recognised immediately in the Income Statement.
Amounts accumulated in equity are recycled in the Income Statement in the periods when the
hedged item will affect profit or loss (for instance when the forecast sale that is hedged takes
place). However, when the forecast transaction that is hedged results in the recognition of a
non-financial asset (for example, inventory) or a non-financial liability, the gains and losses
previously deferred in equity are transferred from equity and included in the measurement of the
initial cost or carrying amount of the asset or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets
the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time
remains in equity and is recognised when the forecast transaction is ultimately recognised in the
Income Statement. When a forecast transaction is no longer expected to occur, the cumulative
gain or loss that was reported in equity is immediately transferred to the Income Statement.
(iii) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of
any derivative instrument that does not qualify for hedge accounting are recognised immediately
in the Income Statement.
19
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies (continued)
(o)
Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and
measurement or for disclosure purposes.
The fair value of financial instruments traded in active markets (such as publicly traded
derivatives, and trading and available-for-sale securities) is based on quoted market prices at the
balance sheet date. The quoted market price used for financial asset held by the Group is the
current bid price; the appropriate quoted market price for financial liabilities is the current ask
price.
The fair value of financial instruments that are not traded in an active market (for example,
over-the-counter derivatives) is determined using valuation techniques. The Group uses a
variety of methods and makes assumptions that are based on market conditions existing at each
balance date. Quoted market prices or dealer quotes for similar instruments are used for longterm debt instruments held. Other techniques, such as estimated discounted cash flows, are used
to determine fair value for the remaining instruments. The fair value of interest-rate swaps is
calculated as the present value of the estimated future cash flows. The fair value of forward
exchange contracts is determined using forward exchange market rates at the balance sheet date.
The nominal value less estimated credit adjustments of trade receivables and trade payables are
assumed to approximate their fair values. The fair value of financial liabilities for disclosure
purposes is estimated by discounting the future contractual cash flows at the current market
interest rate that is available to the Group for similar financial instruments.
(p)
Leased assets
Leases under which the consolidated entity assumes substantially all the risks and benefits of
ownership are classified as finance leases. Other leases are classified as operating leases.
Finance leases
Finance leases are capitalised. A lease asset and a lease liability equal to the present value of
the minimum lease payment or fair value of the asset if lower are recorded at the inception of
the lease. Capitalised lease assets are amortised over the term of the relevant lease, or where it
is likely the consolidated entity will obtain ownership of the asset, the life of the asset.
Repayments of principal reduce lease liabilities. The interest component of the finance lease
payments are expensed.
Operating leases
Payments made under operating leases (net of any incentives received for the lessor) are
expensed on a straight line basis over the term of the lease, except where an alternative basis is
more representative of the time pattern of benefits to be derived from the leased property.
20
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies (continued)
(q)
Goodwill
Goodwill represents the excess of the purchase consideration plus incidental costs over the fair
value of the identifiable net assets of an entity or operation acquired at the date of acquisition.
Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on
acquisition of associates is included in investments in associates. Goodwill acquired in business
combinations is not amortised. Instead, goodwill is tested for impairment annually, or more
frequently if events or changes in circumstances indicate that it might be impaired, and is
carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of
those cash-generating units represents the Group’s investment in each country of operation by
each primary reporting segment.
(r)
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 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).
(s)
Property, plant and equipment
Property, plant and equipment is stated at historical cost less depreciation. Historical cost
includes expenditure that is directly attributable to the acquisition of the items. Cost may also
include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign
currency purchases of property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured reliably. All other repairs and
maintenance are charged to the Income Statement during the financial period in which they are
incurred.
Items of property, plant and equipment are depreciated/amortised using the straight line method
over their estimated useful lives, taking into account estimated residual values, with the
exception of finance lease assets which are amortised over the term of the relevant lease, or
where it is likely the consolidated entity will obtain ownership of the asset, the life of the asset.
Assets are depreciated or amortised from the date of acquisition or, in respect of internally
constructed assets, from the time an asset is completed and held ready for use. Depreciation and
amortisation rates and methods are reviewed annually for appropriateness. The assets’ residual
values and useful lives are reviewed and adjusted if appropriate, at each balance sheet date. An
asset’s carrying amount is written down immediately to its recoverable amount if the asset’s
carrying amount is greater than its estimated recoverable amount.
21
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies (continued)
(s)
Property, plant and equipment (continued)
The depreciation and amortisation rates used for each class of asset are as follows:
2006
Straight line
Buildings
2005
Straight line
11 - 20 years
11 - 20 years
20 – 40%
20 – 40%
7.25%
7.25%
0%
0%
Aircraft and aeronautic related assets:
-
Modifications to leased aircraft
-
Rotables and maintenance parts *
-
Rotables and maintenance parts not yet used
-
Airframe, engines and landing gear
10% – 25%
10%
-
Major cyclical maintenance
10% - 80%
10%
Plant and equipment
20%
20%
Computer equipment
33.3%
33.3%
*
Rotables and maintenance parts are depreciated from the date of installation.
Gains and losses on disposals are determined by comparing proceeds with carrying amount.
These are included in the Income Statement.
Repairs and maintenance – owned aircraft
Routine maintenance costs including annual airframe checks are written off to the Income
Statement as incurred.
Major cyclical maintenance on owned aircraft is capitalised to the carrying value of the aircraft
as incurred and amortised over the period to the next scheduled heavy maintenance.
Repairs and maintenance – leased aircraft
Routine maintenance costs including annual airframe checks are written off to the Income
Statement as incurred.
Provision is made for the estimated future costs of major cyclical maintenance of leased
airframes, engines, landing gear and auxiliary power units by making charges to the Income
Statements, calculated by reference to the number of hours or cycles operated during the period.
The consolidated entity is presently obligated to these aircraft rectification requirements
pursuant to the operating lease agreements. The costs of major cyclical maintenance are written
off against the provision when incurred.
Leasehold improvements
The cost of improvements to or on leasehold properties is amortised over the unexpired period
of the lease or the estimated useful life of the improvement to the consolidated entity, whichever
is the shorter. Leasehold improvements held at the reporting date are being amortised over 3 to
5 years.
22
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies (continued)
(t)
Payables
Liabilities are recognised for amounts to be paid in the future for goods or services received.
Trade accounts payable are normally settled within 60 days.
(u)
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings
are subsequently measured at amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in the Income Statement over the
period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the balance sheet date.
(v)
Borrowing costs
Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying
assets are assets which take more than 12 months to get ready for their intended use or sale. In
these circumstances, borrowing costs are capitalised to the cost of the assets. Where funds are
borrowed specifically for the acquisition, construction or production of a qualifying asset, the
amount of borrowing costs capitalised is those incurred in relation to that borrowing, net of any
interest earned on those borrowings. Where funds are borrowed generally, borrowing costs are
capitalised using a weighted average capitalisation rate.
(w) Employee entitlements
(i) Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to
be settled within 12 months of the reporting date are recognised in other payables in respect of
employee’s services up to the reporting date and are measured at the amounts expected to be
paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised
when the leave is taken and measured at the rates paid or payable.
(ii) Long service leave
The provision for employee benefits to long service leave represents the present value of the
estimated future cash outflows to be made resulting from employees’ services provided to
reporting date.
The provision is calculated using expected future increases in wage and salary rates including
related on-costs and expected settlement dates based on turnover history and is discounted using
the rates attaching to national government bonds at reporting date which most closely match the
terms of maturity of the related liabilities.
23
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies (continued)
(w)
Employee entitlements (continued)
(iii) Employee bonus plans
A liability for employee benefits in the form of bonus plans is recognised in provision for
employee entitlements when there is no realistic alternative but to settle the liability and at least
one of the following conditions is met:
•
there are formal terms in the plan for determining the amount of the benefit
•
the amounts to be paid are determined before the time of completion of the financial report,
or
•
past practice gives clear evidence of the amount of the obligation.
Liabilities for bonus plans are expected to be settled within 12 months and are measured at the
amounts expected to be paid when they are settled.
(iv) Superannuation plan
The consolidated entity is required to make contributions to defined contribution employee
superannuation funds. Such contributions are charged to the Income Statement as they are
made. The consolidated entity has no legal or constructive obligation to fund any deficit.
(v) Share-based payments
The consolidated entity operates a number of employee option plans and share plans.
Share options granted before 7 November and/or vested before 1 January 2005
No expense is recognised in respect of these options. The shares are recognised when the
options are exercised and the proceeds received allocated to share capital.
Share options granted after 7 November 2002 and vested after 1 January 2005
The fair value of options granted are recognised as an employee benefit expense with a
corresponding increase in equity. The fair value is measured at grant date and recognised over
the period during which the employees become unconditionally entitled to the options.
The fair value at grant date is determined using a Black-Scholes option pricing model that takes
into account the exercise price, the term of the option, the vesting and performance criteria, the
impact of dilution, the non-tradable nature of the option, the share price at grant date and
expected price volatility of the underlying share, the expected dividend yield and the risk-free
interest rate for the term of the option.
The fair value of the options granted excludes the impact of any non-market vesting conditions
(for example, profitability and sales growth targets). Non-market vesting conditions are
included in assumptions about the number of options that are expected to become exercisable.
At each balance sheet date, the entity revises its estimate of the number of options that are
expected to become exercisable. The employee benefit expense recognised each period takes
into account the most recent estimates.
24
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1
Statement of significant accounting policies (continued)
(w)
Employee entitlements (continued)
(v) Share-based payments (continued)
Upon exercise of options, the balance of the share-based payments reserve relating to those
options is transferred to share capital.
The market value of shares issued to employees for no cash consideration under the employee
share scheme is recognised as an employee benefits expense with a corresponding increase in
equity when the employees become entitled to the shares.
(x)
Provisions
A provision is recognised when there is a present legal, equitable or constructive obligation as a
result of a past event, it is probable that a future sacrifice of economic benefits will be required
to settle the obligation, the timing or amount of which is uncertain and the amount has been
reliably estimated.
Where there are a number of similar obligations, the likelihood that an outflow will be required
in settlement is determined by considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any one item included in the
same class of obligations may be small.
(y)
Dividends
Provision is made for the amount of any dividend declared, determined or publicly
recommended by the directors on or before the end of the half-year but not distributed at
balance date.
(z)
Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity
as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue
of new shares or options, or for the acquisition of a business, are included in the cost of the
acquisition as part of the purchase consideration.
(aa) Loyalty Program Accounting
The Group receives revenue from the sale to third parties of rights to have Velocity reward
points allocated to members of the Velocity Program. This revenue is deferred and recognised
in the Income Statement when the points are redeemed. Members of the Velocity Program also
accumulate points by travelling on qualifying Group airline services. The obligation to provide
awards to members is accounted for by deferring a portion of the flight ticket sales revenue.
This revenue is recognised in the Income Statement when the points are redeemed.
25
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
1 Statement of significant accounting policies (continued)
(ab) Segment reporting
A business segment is a group of assets and operations engaged in providing products or
services that are subject to risks and returns that are different to those of other business
segments. A geographical segment is engaged in providing products or services within a
particular economic environment and is subject to risks and returns that are different from those
of segments operating in other economic environments.
(ac) Financial instrument transactions costs
The Group has taken the exemption available under AASB 1 to apply AASB 132 and AASB
139 from 1 October 2005. The Group has applied previous Australian GAAP (AGAAP) in the
comparative information on financial instruments within the scope of AASB 132 and AASB
139. Under previous AGAAP transaction costs were excluded from the amounts disclosed in
the financial statements. Under AIFRS such costs are included in the carrying amounts. At the
date of transition to AASB 132 and AASB 139 the adjustment to carrying amounts for the
Group was immaterial.
(ad) Rounding of amounts
The company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities
and Investments Commission, relating to the “rounding off” of amounts in the financial report.
Amounts in the financial report have been rounded off in accordance with that Class Order to
the nearest thousand dollars, or in certain cases, to the nearest dollar.
2
Segment reporting
The consolidated entity operates predominantly in Australia within the airline industry. All revenue,
operating profit and assets relate to operations predominantly in Australia.
26
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
3
Equity securities issued
Half-Year
31 March
31 March
2006
2005
Shares
Shares
Half-Year
31 March
31 March
2006
2005
$’000
$’000
Issues of ordinary shares during the halfyear
Exercise of Executive Share Option Plan
options
-
20,273,580
-
169
750,000
150,000
428
85
750,000
20,423,580
428
254
Exercise of CFO Plan options
4
Dividends
Consolidated
Half-Year
31 March
31 March
2006
2005
$’000
$’000
Ordinary shares
Dividends provided for or paid during the half-year
5
259,785
-
Contingent liabilities and contingent assets
There were no material changes in contingent liabilities or contingent assets since 30 September
2005.
27
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
6
Explanation of transition to Australian Equivalents to IFRSs
(1) Reconciliation of equity reported under previous Australian Generally Accepted
Accounting Principles (AGAAP) to equity under Australian equivalents to IFRSs (AIFRS)
(a) At the date of transition to AIFRS: 1 April 2004
Notes
Current assets
Cash and cash equivalents
Receivables
Inventories
Other financial assets
Current tax assets
Other assets
Total current assets
Non-current assets
Other financial assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Payables
Interest bearing liabilities
Provisions
Current tax liabilities
Unearned revenue
Total current liabilities
Non-current liabilities
Payables
Interest-bearing liabilities
Provisions
Deferred tax liabilities
Unearned revenue
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
(g)
(e)
(g)
(e)
(f)
(f)
(h)
(b)
(h)
(b)
(h)
(a)
(i)
Previous
AGAAP
$’000
Effect of
transition to
AIFRS
$’000
AIFRS
$’000
114,495
56,405
1,688
519,918
9,742
702,248
500,829
9,311
(500,829)
(9,311)
-
615,324
65,716
1,688
19,089
431
702,248
7,676
43,810
678,886
19,839
4,456
754,667
1,456,915
3,688
(3,688)
5,673
5,673
5,673
7,676
47,498
675,198
25,512
4,456
760,340
1,462,588
111,098
112,661
37,409
11,225
161,709
434,102
625
625
111,098
112,661
37,409
11,225
162,334
434,727
2,219
393,653
13,462
12,009
421,343
855,445
601,470
(1,567)
4,375
2,808
3,433
2,240
2,219
393,653
13,462
10,442
4,375
424,151
858,878
603,710
393,005
208,465
601,470
7,092
1,128
(5,980)
2,240
400,097
1,128
202,485
603,710
28
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
6
Explanation of transition to Australian Equivalents to IFRSs (continued)
(b) At the end of the last half-year reporting period under previous AGAAP: 31 March
2005
Notes
Current assets
Cash and cash equivalents
Receivables
Inventories
Other financial assets
Current tax assets
Other assets
Total current assets
Non-current assets
Other financial assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Payables
Interest bearing liabilities
Provisions
Current tax liabilities
Unearned revenue
Total current liabilities
Non-current liabilities
Payables
Interest-bearing liabilities
Provisions
Deferred tax liabilities
Unearned revenue
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
(g)
(e)
(g)
(e)
(c),(f)
(f)
(h)
(b)
(h)
(b)
(g)
(a)
(i)
Previous
AGAAP
$’000
Effect of
transition to
AIFRS
$’000
AIFRS
$’000
124,275
57,398
1,316
673,050
12,397
868,436
665,528
12,397
(665,528)
(12,397)
-
789,803
69,795
1,316
7,522
868,436
7,546
41,326
1,030,472
18,260
7,601
1,105,205
1,973,641
7,277
(4,791)
5,567
8,053
8,053
7,546
48,603
1,025,681
23,827
7,601
1,113,258
1,981,694
153,563
109,619
41,577
1,276
180,811
486,846
625
625
153,563
109,619
41,577
1,276
181,436
487,471
1,538
695,993
24,230
25,427
747,188
1,234,034
739,607
(265)
3,749
3,484
4,109
3,944
1,538
695,993
24,230
25,162
3,749
750,672
1,238,143
743,551
393,259
(254)
346,602
739,607
7,092
4,255
(7,403)
3,944
400,351
4,001
339,199
743,551
29
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
6
Explanation of transition to Australian Equivalents to IFRSs (continued)
(c) At the end of the last reporting period under previous AGAAP: 30 September 2005
Notes
Current assets
Cash and cash equivalents
Receivables
Inventories
Other financial assets
Current tax assets
Other assets
Total current assets
Non-current assets
Other financial assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Payables
Interest bearing liabilities
Provisions
Current tax liabilities
Unearned revenue
Total current liabilities
Non-current liabilities
Payables
Interest-bearing liabilities
Provisions
Deferred tax liabilities
Unearned revenue
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
(g)
(e)
(g)
(e)
(c),(f)
(f)
(h)
(b)
(h)
(b)
(h)
(a)
(i)
Previous
AGAAP
$’000
Effect of
transition to
AIFRS
$’000
AIFRS
$’000
116,415
52,994
298
672,306
17,193
13,704
872,910
671,656
12,909
(671,656)
(12,909)
-
788,071
65,903
298
650
17,193
795
872,910
7,864
40,084
1,130,572
25,270
7,720
1,211,510
2,084,420
8,206
(4,480)
4,764
8,493
8,493
7,864
48,290
1,126,092
30,034
7,720
1,220,000
2,092,910
153,483
111,586
40,618
235,141
540,828
625
625
153,483
111,586
40,618
235,766
541,453
1,183
708,894
27,020
36,693
773,790
1,314,618
769,802
542
3,436
3,978
4,603
3,890
1,183
708,894
27,020
37,235
3,436
777,768
1,319,221
773,689
393,259
(89)
376,632
769,802
7,092
5,770
(8,975)
3,890
400,351
5,681
367,657
773,692
30
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
6
Explanation of transition to Australian Equivalents to IFRSs (continued)
(2) Reconciliation of profit under previous AGAAP to profit under Australian equivalents
to IFRSs (AIFRSs)
(a) Reconciliation of profit for the half-year ended 31 March 2005
Notes
Operating revenue
Airline passenger ticket revenue
Other revenue
Operating expenditure
Aircraft operating costs
Airport charges, navigation and station operations
Contract and other maintenance costs
Commissions and other marketing and reservations
costs
Fuel and oil
Labour and staff related costs
Other expenses from ordinary activities
Depreciation and amortisation
Earnings before interest and tax
Borrowing costs
Interest revenue
Profit/(loss) from ordinary activities before
income tax expense
Income tax expense
Net profit/(loss) attributable to the members of
Virgin Blue Holdings Limited
(b)
(a)
(c)
(f)
Previous
AGAAP
$’000
Effect of
transition to
AIFRS
$’000
AIFRS
$’000
832,632
49,027
881,659
313
313
832,632
49,340
881,972
86,424
173,409
49,887
-
86,424
173,409
49,887
51,642
163,637
177,298
28,694
43,460
774,451
107,208
22,321
18,884
1,466
(1,243)
223
90
-
51,642
163,637
178,764
28,694
42,217
774,674
107,298
22,231
18,884
103,771
28,666
90
704
103,861
29,370
75,105
(614)
74,491
31
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
6
Explanation of transition to Australian Equivalents to IFRSs (continued)
(b) Reconciliation of profit for the 18 month period ended 30 September 2005
Notes
Operating revenue
Airline passenger ticket revenue
Other revenue
Operating expenditure
Aircraft operating costs
Airport charges, navigation and station operations
Contract and other maintenance costs
Commissions and other marketing and reservations
costs
Fuel and oil
Labour and staff related costs
Other expenses from ordinary activities
Depreciation and amortisation
Earnings before interest and tax
Borrowing costs
Interest revenue
Profit/(loss) from ordinary activities before
income tax expense
Income tax expense
Net profit/(loss) attributable to the members of
Virgin Blue Holdings Limited
(b)
(a)
(c)
(f)
Previous
AGAAP
$’000
Effect of
transition to
AIFRS
$’000
AIFRS
$’000
2,415,386
127,639
939
2,415,386
128,578
2,543,025
939
2,543,964
247,845
516,052
171,182
-
247,845
516,052
171,182
158,764
489,661
530,651
72,137
112,306
2,298,598
244,427
62,910
56,957
4,642
(3,726)
913
26
-
158,764
489,661
535,293
72,137
108,580
2,299,514
244,450
62,910
56,957
238,474
70,307
26
3,018
238,497
73,325
168,167
(2,992)
165,172
(3) Reconciliation of cash flow statement for the 18 month period ended 30 September 2005
The adoption of AIFRS has not resulted in any material adjustments to the cash flow statement
for the 18 month period ended 30 September 2005.
32
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
6
Explanation of transition to Australian Equivalents to IFRSs (continued)
(4) Notes to the reconciliations
(a) Share-based payments
Under AASB 2 Share-based Payment from 1 April 2004 the Group is required to recognise an expense for
those options that were issued to employees under the various employee option and share plans after 7
November 2002 but that had not vested by 1 January 2005. The effect of this for the Group is:
Decrease in retained earnings
Increase in reserves
1 April
2004
31 March
2005
30 September
2005
$’000
$’000
$’000
(1,128)
(4,255)
(5,770)
1,128
4,255
5,770
Half-year
ended
31 March
2005
18 months
ended
30 September
2005
$’000
$’000
1,466
4,642
Increase in employee benefits expense
(b) Government grants
Under AASB 120 Accounting for Government Grants and Disclosure of Government Assistance grants for
the acquisition or construction of an asset must initially be deferred on the balance sheet, and recognised as
revenue over the useful life of the asset. The effect of this for the Group is:
Decrease in retained earnings
Increase in other current liabilities
Increase in other non-current liabilities
Increase in other revenue
1 April
2004
31 March
2005
30 September
2005
$’000
$’000
$’000
(5,000)
(4,374)
(4,061)
625
625
625
4,375
3,749
3,436
Half-year
ended
31 March
2005
18 months
ended
30 September
2005
$’000
$’000
313
939
33
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
6
Explanation of transition to Australian Equivalents to IFRSs (continued)
(4) Notes to the reconciliations (continued)
(c) Intangible assets
Under AASB 3 Business Combinations goodwill is not subject to amortisation but instead is tested
annually for impairment, focusing on cash flows of the relevant cash generating unit. This resulted in a
change in accounting policy under AGAAP whereby goodwill was amortised on a straight line basis over
the period during which the benefits were expected to arise and not exceeding 20 years. The effect of this
change in accounting policy for the Group is:
1 April
2004
31 March
2005
30 September
2005
$’000
$’000
$’000
Increase in retained earnings
-
2,486
3,726
Increase in intangible assets
-
2,486
3,726
Half-year
ended
31 March
2005
18 months
ended
30 September
2005
$’000
$’000
(1,243)
(3,726)
Decrease in amortisation expense
(d) Business combinations
The Group has elected to apply the exemption in AASB 1 First-time Adoption of Australian Equivalents to
International Financial Reporting Standards not to apply AASB 3 Business Combinations retrospectively
to business combinations that occurred before 1 April 2004.
(e) Prepayments
Under AASB 101 Presentation of Financial Statements, prepayments are classified as “Receivables”, and
not as “Other Assets”. The effect of this change in classification for the Group is:
1 April
2004
31 March
2005
30 September
2005
$’000
$’000
$’000
Increase in receivables
9,311
12,397
12,909
Decrease in other assets
(9,311)
(12,397)
(12,909)
34
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
6
Explanation of transition to Australian Equivalents to IFRSs (continued)
(4) Notes to the reconciliations (continued)
(f) Intangible assets
Certain assets classified as “Property, plant and equipment” under AGAAP meet the definition of
“intangible asset” under AASB 138 Intangibles. As a result, computer software, patents and trademarks
have been reclassified from “Property, plant and equipment” to “Intangible assets”. The effects on the
Group on the adoption of AIFRS are:
Increase in intangible assets
Decrease in property, plant and equipment
1 April
2004
31 March
2005
30 September
2005
$’000
$’000
$’000
3,688
4,791
4,480
(3,688)
(4,791)
(4,480)
(g) Cash and cash equivalents
Term deposits classified as “Other financial assets” under AGAAP meet the definition of “cash equivalent”
under AASB 107 Cash Flow Statements. This change in definition under AIFRS had the following impact
on the Group:
Increase in cash and cash equivalents
Decrease in other financial assets – current
1 April
2004
31 March
2005
30 September
2005
$’000
$’000
$’000
500,829
665,528
671,656
(500,829)
(665,528)
(671,656)
(h) Deferred tax balances
Under AASB 112 Income Taxes, deferred tax balances are determined using the balance sheet method
which calculates temporary differences based on the carrying amounts of an entity’s assets and liabilities in
the balance sheet and their associated tax bases. In addition, current and deferred taxes attributable to
amounts recognised directly in equity are also recognised directly in equity.
This resulted in a change to the accounting policy under AGAAP, under which deferred tax balances were
determined using the Income Statement method. Items were only tax-effected if they were included in the
determination of pre-tax accounting profit or loss and/or taxable income or loss and current and deferred
taxes could not be recognised directly in equity.
35
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
6
Explanation of transition to Australian Equivalents to IFRSs (continued)
(4) Notes to the reconciliations (continued)
(h) Deferred tax balances (continued)
The effects on the deferred tax asset of the Group of the adoption of AIFRS are as follows (tax rate of
30%):
Notes
Adjustments arising from adoption of AASB
112 **
1 April
2004
31 March
2005
30 September
2005
$’000
$’000
$’000
5,673
4,255
3,546
-
1,312
1,218
5,673
5,567
4,764
Application of AASB 112 to adjustments
arising from adoption of other AASBs:
Government Grants
(b)
Increase in deferred tax asset
The effects on the deferred tax liability of the Group of the adoption of AIFRS are as follows (tax rate of
30%):
Notes
Adjustments arising from adoption of AASB
112
1 April
2004
31 March
2005
30 September
2005
$’000
$’000
$’000
-
-
-
Application of AASB 112 to adjustments
arising from adoption of other AASBs:
Government grants
(b)
(1,500)
Share-based payments
(a)
(67)
(265)
542
(1,567)
(265)
542
Increase / (decrease) in deferred tax liability
-
-
36
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
6
Explanation of transition to Australian Equivalents to IFRSs (continued)
(4) Notes to the reconciliations (continued)
(h) Deferred tax balances (continued)
The effects on income tax expense of the Group of the adoption of AIFRS are as follows (tax rate of 30%):
Notes
Adjustments arising from adoption of AASB
112 **
Half-year
ended
31 March
2005
18 months
ended
30 September
2005
$’000
$’000
709
2,127
Application of AASB 112 to adjustments
arising from adoption of other AASBs:
Government grants
(b)
94
282
Share-based payments
(a)
(99)
609
704
3,018
Increase in income tax expense
** Adjustment to the tax treatment of equity raising costs classified as contributed equity. An offsetting
increase of $7,092,000 was made against contributed equity at 1 April 2004.
(i) Retained Earnings
The effect on retained earnings of the Group of the changes set out above are as follows:
1 April
2004
31 March
2005
30 September
2005
Notes
$’000
$’000
$’000
Share based payments
(a)
(1,128)
(4,255)
(5,770)
Government grants
(b)
(5,000)
(4,374)
(4,061)
Intangible assets
(c)
2,486
3,726
Adjustments arising from adoption of AASB
112
(f)
(1,419)
(2,837)
(3,546)
Application of AASB 112 to adjustments
arising from adoption of other AASBs
(f)
1,567
1,577
676
(5,980)
(7,403)
(8,975)
Total adjustment – attributable to member of
Virgin Blue Holdings Limited
-
37
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
6
Explanation of transition to Australian Equivalents to IFRSs (continued)
(5) Adjustments on transition to AASB 132 Financial Instruments: Disclosure and Presentation and
AASB 139 Financial Instruments: Recognition and Measurement: 1 October 2005
Notes
Current assets
Cash and cash equivalents
Receivables
Inventories
Derivative financial instruments
Other financial assets
Current tax assets
Other assets
Total current assets
Non-current assets
Other financial assets
Intangible assets
Property, plant and equipment
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Payables
Derivatives
Interest bearing liabilities
Provisions
Current tax liabilities
Unearned revenue
Total current liabilities
Non-current liabilities
Payables
Interest-bearing liabilities
Provisions
Deferred tax liabilities
Unearned revenue
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
(i)
(i)
(ii)
(i)
(ii)
(i)
(i)
(ii)
(ii)
(i)
30
September
2005
$’000
Adjustment
$’000
1
October
2005
$’000
788,071
65,903
298
650
17,193
795
872,910
650
(650)
(795)
(795)
788,071
65,903
298
650
17,193
872,115
7,864
48,290
1,126,092
30,034
7,720
1,220,000
2,092,910
3,284
(7,720)
(4,436)
(5,231)
7,864
48,290
1,126,092
33,318
1,215,564
2,087,679
153,483
111,586
40,618
235,766
541,453
(650)
11,597
(795)
10,152
152,833
11,597
110,791
40,618
235,766
551,605
1,183
708,894
27,020
37,235
3,436
777,768
1,319,221
773,689
(7,720)
(7,720)
2,432
(7,663)
1,183
701,174
27,020
37,235
3,436
770,048
1,321,653
766,026
400,351
5,681
367,657
773,692
(7,663)
(7,663)
400,351
(1,982)
367,657
766,026
38
Virgin Blue Holdings Limited and its Controlled Entities
Notes to the financial statements
For the half-year ended 31 March 2006
6
Explanation of transition to Australian Equivalents to IFRSs (continued)
(5) Adjustments on transition to AASB 132 Financial Instruments: Disclosure and Presentation and
AASB 139 Financial Instruments: Recognition and Measurement: 1 October 2005 (continued)
(i)
Derivative financial instruments
As detailed in note 1(n), from 1 October 2005 derivatives are initially recognised on the balance sheet on
the date a derivative contract is entered into and are subsequently remeasured to their fair value, in
accordance with AASB 139 Financial Instruments: Recognition and Measurement. At 1 October 2005, the
Group was party to a number of cash flow hedge derivative contracts. The impact on the Group at 1
October 2005 was:
1 October 2005
$’000
Increase in derivative financial instruments – current assets
Increase in derivative financial instruments – current liabilities
Increase in deferred tax assets
Decrease in reserves
650
11,597
3,284
(7,663)
Decrease in other financial assets
(650)
Decrease in payables – current
(650)
These impacts represent:
•
Reclassfication of the foreign currency hedges under AASB 139 from deferred exchange losses (within
Payables – Current) to reserves of $650,000.
•
Recognition of interest rate hedges under AASB 139 as derivative financial instruments (current
liabilities) and reserves. Also includes reclassification of other financial assets to derivative financial
instruments.
(ii)
Deferred Borrowing Costs
Under AASB 139 Financial Instruments: Recognition and Measurement borrowings are recognised at fair
value, net of transaction costs incurred. This resulted in a change to accounting policy under AGAAP,
whereby borrowings were recorded at their principal amount. This change in accounting policy resulted in
deferred borrowing costs being reclassified from “Other assets” to “Interest bearing liabilities”. The impact
on the Group at 1 October 2005 was:
1 October 2005
$’000
Decrease in other assets – current
Decrease in other assets – non-current
Decrease in interest bearing liabilities – current
Decrease in interest bearing liabilities – non-current
(795)
(7,720)
(795)
(7,720)
39
Virgin Blue Holdings Limited
Directors’ declaration
In the opinion of the directors:
(a)
(b)
the financial statements and notes, set out on pages 6 to 39, are in accordance with the
Corporations Act 2001, including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other
mandatory professional reporting requirements.
(ii)
giving a true and fair view of the consolidated entity’s financial position as at 31 March
2006 and of its performance, as represented by the results of its operations, changes in
equity and its cashflows, for the half-year ended on that date; and
there are reasonable grounds to believe that the Virgin Blue Holdings Limited will be able to
pay its debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the directors.
Dated at Brisbane this 10th day of May 2006.
Signed in accordance with a resolution of the directors:
____________________________
Brett Godfrey
Director
40
PricewaterhouseCoopers
ABN 52 780 433 757
Independent review report to the members of
Virgin Blue Holdings Limited
Waterfront Place
1 Eagle Street
BRISBANE QLD 4000
GPO Box 150
BRISBANE QLD 4001
DX 77 Brisbne
Australia
www.pwc.com/au
Telephone +61 7 3257 5000
Facsimile +61 7 3257 5999
Statement
Based on our review, which is not an audit, we have not become aware of any matter that makes us
believe that the financial report of Virgin Blue Holdings Limited:
•
does not give a true and fair view, as required by the Corporations Act 2001 in Australia, of
the financial position of the Virgin Blue Holdings Group (defined below) as at 31 March
2006 and of its performance for the half-year ended on that date, and
•
is not presented in accordance with the Corporations Act 2001, Accounting Standard AASB
134: Interim Financial Reporting and other mandatory financial reporting requirements in
Australia, and the Corporations Regulations 2001.
This statement must be read in conjunction with the rest of our review report.
Scope
The financial report and directors’ responsibility
The financial report comprises the balance sheet, income statement, statement of changes in equity,
cash flow statement, accompanying notes to the financial statements, and the directors’ declaration
for the Virgin Blue Holdings Group (the consolidated entity), for the half-year ended 31 March
2006. The consolidated entity comprises both Virgin Blue Holdings Limited (the company) and the
entities it controlled during that half-year.
The directors of the company are responsible for the preparation and true and fair presentation of
the financial report in accordance with the Corporations Act 2001. This includes responsibility for
the maintenance of adequate accounting records and internal controls that are designed to prevent
and detect fraud and error, and for the accounting policies and accounting estimates inherent in the
financial report.
Liability limited by a scheme approved under Professional Standards Legislation
41
Independent review report to the members of Virgin Blue Holdings Limited (continued)
Review approach
We conducted an independent review in order for the company to lodge the financial report with the Australian
Securities and Investments Commission. Our review was conducted in accordance with Australian Auditing
Standards applicable to review engagements. For further explanation of a review, visit our website
http://www.pwc.com/au/financialstatementaudit.
We performed procedures in order to state whether, on the basis of the procedures described, anything has come
to our attention that would indicate that the financial report does not present fairly, in accordance with the
Corporations Act 2001, Accounting Standard AASB 134: Interim Financial Reporting and other mandatory
financial reporting requirements in Australia, a view which is consistent with our understanding of the
consolidated entity’s financial position, and its performance as represented by the results of its operations,
changes in equity and cash flows.
We formed our statement on the basis of the review procedures performed, which included:
•
inquiries of company personnel, and
•
analytical procedures applied to financial data.
Our procedures include reading the other information included with the financial report to determine whether it
contains any material inconsistencies with the financial report.
These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance
provided is less than that given in an audit. We have not performed an audit, and accordingly, we do not express
an audit opinion.
While we considered the effectiveness of management’s internal controls over financial reporting when
determining the nature and extent of our procedures, our review was not designed to provide assurance on
internal controls.
Our review did not involve an analysis of the prudence of business decisions made by directors or management.
Independence
In conducting our review, we followed applicable independence requirements of Australian professional ethical
pronouncements and the Corporations Act 2001.
PricewaterhouseCoopers
Robert Hubbard
Partner
Brisbane
10 May 2006
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