Tight cost control and revenue growth boost profits 24% to £26m for last year

TIGHT cost control and strong growth in revenue helped Ryanair to increase pre-tax profits by 24 per cent to £26 million for the year to end March.

Growth in passenger numbers - Ryanair carried 3 million passengers - and in revenue from other services such as duty-free sales and charter business boosted operating income. These "ancillary services" generated 12 per cent of income and produced profit margins of 40 per cent.

Revenue was 24 per cent ahead at £136.4 million while costs were 25 per cent higher at £112.7 million. Staff costs accounted for just 15 per cent of total operating costs, down from 18 per cent, while airport and handling charges accounted for 15.1 per cent, down from 15.9 per cent. Operating profits rose by 23 per cent last year to £23.7 million and operating margins were steady at 17.4 per cent.

Since 1991, the airline has concentrated on driving down operating costs. The strategy involves negotiating low cost deals for use of airports, tying staff costs to productivity deals and avoiding financing costs by owning its own fleet.

Ryanair's strategy is to stimulate growth in passenger traffic by offering low fares. But to offer low fares the airline must relentlessly drive down its own costs, according to chief executive Mr Michael O'Leary. Last year, 70 per cent of Ryanair seats were sold at the two lowest fares the airline offers, he said. "That is the difference between Ryanair and other airlines we have the availability at the low fares," he said.

The latest results prove that Ryanair's strategy of low fares no frills actually works, he said. For the first five years of its 10-year existence Ryanair suffered heavy losses building accumulated losses of about £20 million before it turned the corner in 1991. Since 1991's modest positive result, profits have grown steadily.

The flotation document shows that profits after tax for the year to end March 1995 were restated from £5 million to £12 million. Finance director, Mr Michael Cawley, said the increase reflected changes in accounting policies for depreciation and maintenance based on the airlines experience since it bought its own aircraft. Changes in policy on maintenance accounted for £6 million of the increase. Ryanair's accounting policies remain conservative by industry standards, he said.