Ryanair’s (RYA) share price plunged as much as 13 per cent after the Irish budget airline issued its second profits warning in as many months. Having already lowered expectations in September, chief executive Michael O’Leary now expects full-year net profit of only €500m-520m (£423m-440m) compared with €570m-600m before. More worrying, perhaps, is speculation in the Square Mile that Ryanair’s notoriously unpopular style rather than a wider industry decline is to blame.
If true, it probably explains why Ryanair has just upgraded its website, softened some of its draconian rules and cut charges. It has slashed fares, too, in an effort to pack its planes. Average fares, already down 2 per cent during the first half due to the summer heatwave, French strikes and weak pound, will slump by 9 per cent slump in the third quarter, warns Mr O’Leary and by up to 10 per cent in the last three months of the financial year. Yet Ryanair will continue to rely heavily on charging for reserved seating, priority boarding and higher credit card fees. So-called ancillary revenue generated €713m of revenue during the period, up 22 per cent, and a €5 charge for allocated seating from February will help full-year numbers. So, too, will further cost cuts during the second half.
Broker Deutsche Bank expects full-year pre-tax profit of €659m, giving EPS of 41¢, up from €651m and 39¢ in 2013.
RYANAIR (RYA) | ||||
|---|---|---|---|---|
| ORD PRICE: | €5.38 | MARKET VALUE: | € 7.60bn | |
| TOUCH: | €5.37-5.38 | 12-MONTH HIGH: | €7.51 | Low: €4.44 |
| DIVIDEND YIELD: | nil* | PE RATIO: | 13 | |
| NET ASSET VALUE: | 258¢ | NET CASH: | €175m | |
| Half-year to 30 Sep | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2012 | 3.11 | 679 | 41.3 | nil |
| 2013 | 3.25 | 685 | 42.0 | nil |
| % change | +5 | +1 | +2 | - |
*Does not include special dividends £1 = €1.18 | ||||
