- Sales and profits smashed by Covid-19 travel slowdown
- Earnings forecast to recover by next year
The skies are almost empty, so it is no surprise Jet2 (JET2) saw its sales and earnings plunge in the six months to 30 September. However, investors have continued backing the airline and package holiday operator, which changed its name from Dart Group in September. The share price has recovered to around 70 per cent of its pre-pandemic level, no mean feat when there is little clarity over when leisure travel will return to its previous levels.
Despite some travel happening in the summer, Jet2 saw sales plummet almost 90 per cent in its first half, to just £300m. It registered operating and pre-tax losses of £111m and £119m, respectively, and cancelled the half-year dividend. The company used government furlough schemes as much as possible and cut non-essential spending in an effort to preserve its cash position. Jet2 raised £172m through a share issue in May, and sold off its distribution and logistics business for £98m in June.
Despite the rough year, the company is optimistic about 2021. Seat capacity for summer next year is similar to 2019 levels and a planned expansion to Bristol airport is going ahead. Analysts are expecting a recovery next year. Consensus forecasts have the group moving from an adjusted loss per share of 202p for the year ending 31 March, to earnings per share of 74p in 2022.
Executive chairman Philip Meeson said the company was looking at tough operating conditions in the short term. “We anticipate winter 20/21 seat capacity will be approximately 50 per cent less than winter 19/20…[and] we expect forward bookings to continue to display a pronounced shorter lead time than in previous years,” he said.
Jet2 is in a comfortable net cash position excluding its large lease liabilities – these account for 57 per cent of its gross debt, although that is common within the airline sector. There are still some headwinds before people take to the skies en masse again, which naturally warrants caution towards the shares. Hold.
| Jet2 (JET2) | ||||
| ORD PRICE: | 1,303p | MARKET VALUE: | £2.33bn | |
| TOUCH: | 1,303-1,305p | 12-MONTH HIGH: | 1,950p | LOW: 183p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 420p | NET DEBT: | 12% | |
| Half-year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019 (restated) | 2.53 | 337 | 186 | 3.0 |
| 2020 | 0.30 | -119 | -56.9 | nil |
| % change | -88 | - | - | - |
| Ex-div: | na | |||
| Payment: | na |
Last IC View: Hold, 707p, 15 Jul 2020
