The market's reaction to a buoyant set of numbers from International Consolidated Airlines Group (IAG) was curious. The group posted a 65 per cent rise in adjusted operating profit to €2.3bn (£1.8bn) - which excludes the impact of purchasing Aer Lingus - yet the shares dropped 4 per cent, making it the second biggest faller on the FTSE 100 on the day. One explanation could be a 3.7 per cent fall in passenger unit revenue on a constant currency basis (also ex-Aer Lingus), with 1 percentage point attributed to the impact of the Paris terrorist attacks. But this was more than covered by a 3.9 per cent fall in non-fuel unit costs. Add in the lower oil price, and costs were even lower.
The group also announced a final dividend, following the interim announced in October - the first payouts since British Airways and Iberia merged to create IAG in 2011. That's particularly remarkable considering neither British Airways nor Iberia had paid a dividend to their respective shareholders since 2008.
So why the bearishness on investors' part? British Airways could be the reason. While adjusted operating profits here rose by £400m to £1.37bn, good cost management helped deliver this rather than sales. Total revenue for the airline dropped 1 per cent as passenger and cargo revenues fell.
Elsewhere, Iberia posted impressive numbers with a €197m jump in adjusted operating profits to €247m, helped by an 11.6 per cent hike in revenues and by the fact it was the only airline in the group to minimise employee costs, thanks to its 2014 agreement with the unionised workforce to cut pilots' salaries. Meanwhile, low-cost airline Vueling saw adjusted operating profits rise 14 per cent to €160m.
Chief executive Willie Walsh also responded to the news that London City airport had been sold. He said his threat - that the airline would quit the location if price increases made operating there unprofitable - still stood.
Analysts at Liberum now expect EPS of 103¢ in the 2016 financial year, up from 73.5¢ in 2015.
| INTERNATIONAL CONSOLIDATED AIRLINES GROUP (IAG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 549p | MARKET VALUE: | £11.1bn | |
| TOUCH: | 549-550p | 12-MONTH HIGH: | 630p | LOW: 469p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 258¢* | NET DEBT: | 154%** | |
| Year to 31 Dec | Turnover (€bn) | Pre-tax profit (€bn) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 16.3 | 0.50. | 31.1 | nil |
| 2012 | 18.1 | -0.77 | -36.7 | nil |
| 2013 | 18.6 | 0.23 | 6.6 | nil |
| 2014 | 20.2 | 0.83 | 48.2 | 0.0 |
| 2015 | 22.9 | 1.80 | 73.5 | 20.0 |
| % change | +13 | +118 | +52 | - |
Ex-div: 4 Jul Payment: 30 Jun *Includes intangible assets of €3.2bn, or 160¢ a share **Includes £5.7bn in capitalised aircraft lease costs £1= €1.27 | ||||
