- Net cash pile increases by 46 per cent to £1.82bn
- Bookings slow but full-year guidance unchanged
Jet2 (JET2) is flying a lot more planes than it did prior to the pandemic but, for now at least, is comfortably managing to fill them at higher fare levels.
The company increased seat capacity by 7 per cent on last year to 11.97mn and said ticket yields for flight-only passengers rose by 18 per cent to over £124. It also increased the price of its holidays, and the proportion of passengers who fly with the company on a higher-margin package deal increased by 4.9 percentage points to 70.8 per cent.
As a result, profit before tax and currency movements increased by a third to £665mn even though floods and wildfires in Greece and air traffic disruption in the UK caused profitability to weaken by around £14mn. Cash flow also increased, meaning net cash (excluding leases) grew by 46 per cent to £1.82bn.
The reaction from investors was muted, though. An admission that bookings for winter “have been a little slower in recent weeks” triggered concern about the sustainability of demand, especially given that capacity will be 21 per cent higher than last year. The company maintained full-year guidance of pre-tax profit before currency movements of between £480mn and £520mn, though, and said early-stage bookings for next summer were “encouraging”, with load factors higher despite a 12 per cent capacity increase.
Although holidays are a discretionary spend, Peel Hunt analyst Alexander Paterson argued in a recent note that it's one for which customers are willing to make sacrifices. We concur, and remain of the opinion that with Jet2’s shares trading at 6.5 times the FactSet broker consensus forecast, they will appeal to the bargain-hunter as much as its holidays. Buy.
Last IC View: Buy, 1,116p, 6 Jul 2023
| JET2 (JET2) | ||||
| ORD PRICE: | 1,117p | MARKET VALUE: | £2.4bn | |
| TOUCH: | 1,113-1,120p | 12-MONTH HIGH: | 1,395p | LOW: 858p |
| DIVIDEND YIELD: | 1.1% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 745p | NET DEBT: | 3% | |
| Half-year to 30 Sept | Turnover (£bn) | Pre-tax profit (£mn) | Earnings per share (p) | Dividend per share (p) |
| 2022 | 3.57 | 451 | 166 | 3.0 |
| 2023 | 4.41 | 661 | 231 | 4.0 |
| % change | +24 | +47 | +39 | +33 |
| Ex-div: | 28 Dec | |||
| Payment: | 02 Feb |
