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easyJet's costs slip on high oil price

Created:
7 May 2008
Written by:
Stephen Gunnion

Passenger numbers and revenues continued to increase, assisted by the recent acquisition of GB Airways and new baggage and speedy boarding charges. However, soaring oil prices have hit easyJet's first-half performance. The price of jet fuel now costs 80 per cent more than it did a year ago, leading to a £67m increase in first-half fuel costs. Chief executive Andy Harrison says that, if such increases are maintained, many of easyJet's smaller competitors are likely to go out of business.

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Excluding GB Airways, which easyJet took over from British Airways at the end of January, revenue per seat on a constant currency basis grew 1.5 per cent, but fuel costs per seat rose 23.8 per cent. However, Mr Harrison says a combination of easyJet's business model, cost advantage (excluding fuel costs) and the strength of its network will help it emerge from the current downturn even stronger. Integration costs of £9.1m following the GB Acquisition added to easyJet's losses in the first-half, which is traditionally a poor period for the airline. Mr Harrison says forward bookings for the summer are slightly ahead of last year.

Numis Securities expects full-year pre-tax profit of £156.7m (191.3m in 2007) and EPS of 27.3p (34.8p).

EASYJET (EZJ)
ORD PRICE: 306p MARKET VALUE: £1.29bn
TOUCH: 305-306p 12-MONTH HIGH: 680p LOW: 288p
DIVIDEND YIELD: nil PE RATIO: 10
NET ASSET VALUE: 276p* NET DEBT: 29%

Half-year to 31 Mar Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2007 719 -17.1 -3.10 nil
2008 892 -57.5 -10.3 nil
% change +24 - +232 -

Ex-div:-

Payment:-

*Includes intangible assets of £432m, or 103p a share

Click here for a guide to the terms used in IC results tables

SHARE TIP UPDATE:

Sell

Passenger numbers have held up and the strong euro will also boost easyJet this year. Still, given the group's exposure to the high oil price, we reiterate our recent sell tip (294p, 25 Apr 2008).

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