These results from British Airways owner International Consolidated Airlines (IAG) were largely what the market wanted to see, although weaker profits in the fourth quarter managed to catch some investors off guard. Fourth-quarter operating profits fell because of higher employee bonus costs, which left group operating profit slightly short of some analysts’ forecasts. Management’s guidance for the current financial year is for a 4 per cent increase in operating profits, consistent with consensus expectations.
Capacity continues to rise across the airline industry, but it seems IAG is managing this well. Overall, capacity rose 2.6 per cent on a reported basis at IAG last year, but passenger revenues rose 1.6 per cent – even accounting for adverse currency movements – which reflected good volume growth and stable load factors. Costs, both on a non-fuel and fuel-inclusive basis were relatively flat, which meant most of this revenue gain dropped straight through to the bottom line. The group also announced a new €500m share buyback, matching last year’s programme.
Analysts at Liberum expect pre-tax profits of €2.92bn (£2.56bn) for the year ending December 2018, giving EPS of 116¢, compared with €2.78bn and 106¢ in 2017.
| INTERNATIONAL CONSOLIDATED AIRLINES (IAG) | ||||
| ORD PRICE: | 597p | MARKET VALUE: | £12.2bn | |
| TOUCH: | 597-597.4p | 12-MONTH HIGH: | 681p | LOW: 498p |
| DIVIDEND YIELD: | 4.0% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 346¢* | NET DEBT: | 105% | |
| Year to 31 Dec | Turnover (€bn) | Pre-tax profit (€bn) | Earnings per share (¢) | Dividend per share (¢) |
| 2013 | 18.60 | 0.23 | 6.6 | nil |
| 2014 | 20.20 | 0.83 | 48.2 | nil |
| 2015 | 22.90 | 1.80 | 73.5 | 20.0 |
| 2016 | 22.57 | 2.36 | 93.0 | 23.5 |
| 2017 | 22.97 | 2.49 | 95.8 | 27.0 |
| % change | +2 | +6 | +3 | +15 |
| Ex-div: | 28 Jun | |||
| Payment: | 2 Jul | |||
| *Includes intangible assets of £3.02bn, or 147¢ a share £1=€1.14 | ||||
