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EasyJet's results reflect the same problems faced by most airlines, notably ongoing oil prices rises. But, despite a slide in profits, the budget airline has had a better recession than some of its grander flag-carrying peers.
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Fuel costs, however, do remain a big problem - these grew 13.9 per cent in the period to £807m. Fuel hedging helped mitigate some of that, with the company paying an average of $951 (£567) per tonne compared with $948 last year. EasyJet is hedged for about 65 per cent of its dollar needs for the next six months, too. Still, the load factor (the proportion of available seats used by passengers) improved 1.4 percentage points in the period to 85.5 per cent, even though that's down since the summer's 86.3 per cent figure. Cost-cutting also helped, with with the closure of 28 underperforming routes - although there was more investment in hubs such as Milan Malpensa and Paris Charles de Gaulle and increased capacity in Europe by 16 per cent. Earnings were also boosted by an £11m profit from selling three A321 planes.
Chief executive Andy Harrison sounds upbeat and forecasts a substantial improvement in profits this year. Indeed, broker Panmure Gordon expects adjusted EPS for 2010 of 28.5p (6.70p: 2009).
EASYJET (EZJ) |
||||
|---|---|---|---|---|
| ORD PRICE: | 383p | MARKET VALUE: | £1.63bn | |
| TOUCH: | 383-384p | 12-MONTH HIGH: | 206p | LOW: 103p |
| DIVIDEND YIELD: | nil | PE RATIO: | 23 | |
| NET ASSET VALUE: | 307p* | NET DEBT: | 3% | |
| Year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 1.34 | 83.0 | 14.8 | nil |
| 2006 | 1.62 | 129 | 23.2 | nil |
| 2007 | 1.80 | 202 | 36.6 | nil |
| 2008 | 2.36 | 110 | 19.8 | nil |
| 2009 | 2.67 | 55 | 16.9 | nil |
| % change | +13 | -50 | -15 | - |
Ex-div:- Payment:- *Includes intangible assets £447m, or 105p a share |
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EasyJet did made the right call on cutting expansion plans, but it still faces plenty of headwinds. Recovery hopes have pushed the shares above our original sell advice (294p, 1 May 2008) - they now trade on a not so cheap 13 times forecast earnings, leaving the possibility of better prospects ahead looking more than priced-in. High enough.
Last IC view: Sell, 272p, 6 July 2009.
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