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EasyJet keeps costs in control as cheap fuel buoys competitors

Good cost control at the budget airline helped mitigate the impact of a drop in demand following a wave of terror events
May 10, 2016

Just like its cost-conscious customers, a keen eye on its outgoings was important for budget airline easyJet (EZJ) in the first half. The company's revenue per seat fell 4.2 per cent to £52.62 on a constant currency basis, but a 4.3 per cent reduction in cost per seat, including fuel, helped shield the bottom line. At fixed exchange rates, pre-tax profits fell to £5m from £7m in the same period last year, but the group was pushed into the red on a reported basis by a £33m currency hit.

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Terrorist events from Sharm el-Sheikh to Brussels hurt demand, but UK beach holiday bookings and the airline's busiest ever ski season meant passenger numbers rose more than 7 per cent to 31m. Although management expects the more competitive trading environment - driven by the low oil price - to continue, chief executive Carolyn McCall is confident about growing passenger numbers, turnover and profit over the full year. The group also increased the annual dividend payout ratio from 40 per cent to 50 per cent of adjusted post-tax earnings. This is something founder Sir Stelios Haji-Ioannou has demanded, but Ms McCall said the decision was taken because it was "right for the airline".

Analysts at Liberum expect adjusted pre-tax profits of £720m for the year ending September, leading to EPS of 145p (from £686m and 139p in FY2015).

 

EASYJET (EZJ)
ORD PRICE:1,526pMARKET VALUE:£6.06bn
TOUCH:1,525-1,527p12-MONTH HIGH:1,886pLOW: 1,414p
DIVIDEND YIELD:4.3%PE RATIO:11
NET ASSET VALUE:491p*NET CASH:£296m

Half-year to 31 MarTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20151.7771.3045.4
20161.77-24-5.1055.2**
% change---+22

*Includes intangible assets of £501m or 126p a share

**Paid in Mar 2016