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Flybe's flies in the ointment

The airline's turnaround is progressing, but a safe landing is still out of sight
June 10, 2015

Planes need large turning circles to avert disaster - a fact shareholders in airline Flybe (FLYB) are all too aware of. These full-year results from the budget carrier provide some cheer to those who have patiently stuck with the turnaround story, but a safe landing is not yet in sight.

IC TIP: Hold at 58p

Some metrics are heading in the right direction, though. A decline in revenue was in line with the 8 per cent planned reduction in capacity, but the load factor - the proportion of seats sold - rose 5.7 percentage points to 75.2 per cent as passenger numbers held steady, thereby increasing revenue per seat by 3.3 per cent to £51.35. The restructuring also yielded £27m in costs savings. There was even room for expansion, including the launch of 26 new routes and a series of codeshare agreements with long-haul carriers.

But Flybe remains dogged by 14 surplus E195 jets, half of which are currently grounded and which together cost the company £26m last year. Non-cash revaluations on dollar-denominated loans added £10.2m to the losses. And despite the slump in oil prices over the year, hedges meant that fuel costs per seat only fell 3.9 per cent.

Excluding the surplus aircraft costs, broker Liberum forecasts earnings per share of 0.9p, based on pre-tax profit of £1.1m in the year to March 2016.

FLYBE (FLYB)

ORD PRICE:58pMARKET VALUE:£126m
TOUCH:57.5-58p12-MONTH HIGH:146pLOW: 52p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:65pNET CASH:£76.7m*

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2011596-4.36.4nil
2012615-6.2-8.5nil
2013614-41.1-56.0nil
20146218.89.6nil
2015574-23.6-16.5nil
% change-7---

*Includes £18m restricted cash