EasyJet profits drop after weathering £101m currency hit but forecasts brighter future after rivals' troubles

 
Rebecca Smith
EasyJet's boss is leaving for ITV in January
EasyJet's boss is leaving for ITV in January (Source: Getty)

Full-year pre-tax profits at EasyJet dropped 17.3 per cent as the airline weathered a currency hit of £101m in Carolyn McCall's final set of results as chief executive.

Headline profit before tax of £408m for the year ending 30 September came in at the upper end of the airline's guidance, which it said demonstrated the "resilience of EasyJet's business model".

The future looks brighter for EasyJet too, after several rivals ran into difficulty in recent months, with the collapse of Monarch, and Alitalia and Air Berlin's troubles. It said revenue trends for the first quarter have been encouraging, "primarily as a result of some capacity leaving the market".

Shares were up five per cent in morning trading.

Read more: EasyJet has a hired a new chief executive

The figures

Revenues rose 8.1 per cent on last year to £5bn, but pre-tax profits dropped 17.3 per cent to £408m. That followed its hint last month that pre-tax profits will be in the range of £405m to £410m.

EasyJet also cut its proposed ordinary dividend per share by nearly a quarter to 40.9p, with total basic earnings per share dropping 30 per cent, saying it was in keeping with the firm's increased payout policy of 50 per cent of headline profit after tax.

The airline flew a record 80m passengers over the year, with a load factor of 92.6 per cent, its highest ever. It said capacity had increased by 8.5 per cent.

Looking ahead, the airline said forward bookings were ahead of last year at 88 per cent for the first quarter, and added it is expecting total headline cost per seat to dip around two per cent over the next year.

Difficulties for rivals Monarch, Air Berlin and Alitalia have boosted EasyJet's revenue trends for the first quarter. It plans to grow capacity by around six per cent for the 2018 financial year, while revenue per seat growth at constant currency in the first half of the year is expected to be positive "by low to mid-single digits".

Why it's interesting

Earlier this month, the carrier announced Tui's Johan Lundgren will take over from McCall when she departs for ITV in December.

EasyJet also recently secured a €40m deal with Air Berlin for 25 aircraft, which it said it will complete in December. This will lead to EasyJet employing up to 1,000 Air Berlin crew members, and taking over other assets, such as slots.

Today, the airline said it expects to incur headline losses of £60m on its activities at Berlin Tegel airport in the 2018 financial year, as it kicks off operations in January.

It is also forecasting £100m in one-off non-headline costs associated with the transaction.

Analysts at Goodbody said: "We think this is an important development for the group as it offers a third higher-cost market in which to operate in, with current growth focused around its operations in France and Switzerland."

What the company said

McCall said:

Our planned approach of achieving number one or two positions at Europe's leading airports, friendly and efficient customer service and a continuous focus on sustainable cost control has put EasyJet at a strategic advantage during a period when there have been bankruptcies and some airlines have struggled operationally.

EasyJet's model is resilient and sustainable and we now have a huge amount of positive momentum which will enable the airline to continue to grow profitably.

Read more: Wizz Air has just announced big expansion plans for London

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