The City was told last month to expect pre-tax profit of between £310m and £320m, so the earnings figures held few surprises - despite spending an extra £232m on fuel. The size of the dividend, however, was a positive shock, and there's now a commitment to pay out a third of after-tax profits, which should keep noisy shareholders like founder Sir Stelios Haji-Ioannou quiet.
A better load factor, tighter industry capacity, a focus on more profitable routes and a maiden TV advertising campaign helped drive a 5.9 per cent increase in revenue per seat. More than 58m passengers boarded easyJet flights during the 12-month period, 7 per cent higher than last year, and its planes were almost 89 per cent full. Clearly, Brits are saving hard for their summer holiday on the Costa Brava, but easyJet is attracting an army of business travellers, too. Companies are cutting costs where they can, which means trading down to cheaper airlines. easyJet has a number of agreements with corporate finance departments and expects to sign more. It has even tied up a deal to fly MPs and peers abroad.
What's more, around 45 per cent of winter seats are sold and revenue per seat is expected to be up by low- to mid-single digits in the first half. But easyJet also faces stiff headwinds. Costs grew 1.8 per cent on a constant currency basis during the period, driven largely by higher airport charges in Spain and Italy, and cost per seat before any change in fuel and currency is tipped to rise by up to 4 per cent next year. Higher airport charges will likely add another £70m to the bill, fuel an extra £30m and choppy exchange rates about £50m. Any disruption from strikes across Europe could be expensive, too.
Investec Securities expects pre-tax profit of £344.1m in 2013, giving adjusted EPS of 69.1p (61.7p in 2012).
|ORD PRICE:||689p||MARKET VALUE:||£2.73bn|
|TOUCH:||688-689p||12-MONTH HIGH:||700p||LOW: 340p|
|DIVIDEND YIELD:||3.1%||PE RATIO:||11|
|NET ASSET VALUE||453p*||NET DEBT:||4%|
easyJet faces numerous headwinds, including a European recession, although its share price re-rating looks justified and shareholders will welcome a reliable income stream. But with the shares now trading on 10 times forecast earnings, further upside may prove elusive. Hold.
Last IC view: Hold, 546p, 17 Aug 2012