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easyJet to pay dividends in 2012

RESULTS: easyJet to pay dividends, but that won't come at the expense of aggressive capacity expansion
November 16, 2010

Carolyn McCall, easyJet’s new chief executive, seems determined to have her cake and eat it too. The budget airline had become embroiled in a public battle between its founder and largest shareholder Sir Stelios Haji-Ioannou - who wants dividends - and the previous management, which preferred using cashflow to buy aircraft and sustain growth.

IC TIP: Hold at 453p

Ms McCall, who arrived in July, has now announced that the company will indeed start paying dividends, albeit very well-covered ones and not for another year. But she’s also set capacity growth at 7 per cent a year until 2013 - only a whisker under the 7.5 per cent medium-term target agreed by the previous management.

Luckily, easyJet’s performance during the past year suggests pleasing both camps may be possible, even after a summer of disruption. The well-publicised rostering debacle at Gatwick over the summer and European industrial disputes added £49.8m in emergency leasing and other costs, while snow last winter and the volcanic eruption in April cost £20.8m and £27.3m respectively. But sales continued to climb and the lower oil price luckily wiped out the impact of these disruptions pushing overall profits significantly higher.

Broker Panmure Gordon expects underlying EPS of 49.3p this year (from 27.1p in 2010).

EASYJET (EZJ)

ORD PRICE:453pMARKET VALUE:£1.95bn
TOUCH:452-453p12-MONTH HIGH:500pLOW: 340p
DIVIDEND YIELD:NILPE RATIO:16
NET ASSET VALUE:349p*NET DEBT:3%

Year to 30 SepTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20061.6212923.2nil
20071.8020236.6nil
20082.3611019.8nil
20092.6754.716.9nil
20102.9715428.4nil
% change+11+182+68-

*Includes intangible assets of £452m, or 105p per share

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