Low-cost airline Easyjet remains positive about its 2019 outlook as rising profits and revenues for the year to the end of September defied Brexit concerns and rising costs.
Pre-tax profit rose 41.4 per cent to £578m and revenues were up 16.8 per cent to £5.9bn.
The airline raised its dividend to 58.6p subject to shareholder approval, an increase of 43 per cent.
Cost per seat rose from £53.78 to £57.26 while net debt increased by £325m to £738m.
Why it’s interesting
Easyjet’s pre-tax profits of £578m are at the higher end of the predicted £570m – £580m range.
The results show the airline is performing well in spite of concerns about Brexit. It said bookings for next summer looked “promising” and were slightly ahead of summer 2018.
The company said it is well-prepared for Brexit, with 47 per cent of its shares held by non-UK nationals. But it said it wants to increase this to over 50 per cent before Britain leaves the EU on 29 March.
Easyjet’s performance was boosted by the collapse of rival airline Monarch. Easyjet chief executive Johan Lundgren dismissed reports that the company is looking to purchase ailing airline Flybe, but refused to rule out a future deal.
"We have no interest in discussing this particular issue at the moment," he said.
The rising profits come despite the company spending £40m on expansion at Tegel airport in Berlin after taking control of Air Berlin's operations.
It said this expansion, coupled with strikes and crew cost inflation, was behind the cost per seat increase.
Chief executive Lundgren cited disruption as the key challenge facing airlines, saying there were 29 days of strikes over the year.
The 43 per cent increase in dividend shows the airline is confident about its future performance.
However, revenue per seat in the first half is expected to be down by mid-single digits, unchanged from previous forecasts.
The airline’s share price sunk almost two per cent this morning as forecasts remain cautious.
Richard Hunter, head of markets at Interactive Investor, said: “It remains to be seen whether the update provides enough of a fillip to reverse what has been a turbulent time for the shares, which have fallen 8 per cent over the last year, as compared to a 5.3 per cent dip for the wider FTSE 100, and have seen a significant 32 per cent decline just over the last six months.
“The company itself has given an upbeat outlook for the new financial year and if the current operating performance can be maintained, the market consensus of the shares as a cautious buy may become subject to future upgrades.”
Lundgren said the company is roughly 65 per cent hedged for fuel in 2019, but it still expects a headwind of £50m-£100m.
George Salmon, equity analyst at Hargreaves Lansdown, said: “While Easyjet has delivered a strong set of results, attention is likely to focus on what’s happening next.
“The tailwind from cheap fuel is fading fast, and revenue per seat is set to dip. That puts the emphasis on Easyjet to increase operating efficiency over the costs it can control, but the group hasn’t got a great recent record here and looking ahead underlying costs are expected to flatline rather than descend.”
What Easyjet said:
Johan Lundgren, Easyjet chief executive, said: “Easyjet has delivered a great performance during the year, growing headline profit before tax by 41 per cent, once again flying a record number of passengers at our highest ever annual load factor.
“The integration of new operations at Tegel has also progressed well and our brand consideration in Berlin has grown strongly. Our financial success and increasing customer loyalty demonstrate the resilience of our operations, the underlying strength of our business and our unrivalled customer experience.
“Our strategy continues to ensure we are well positioned for the future. We have made considerable progress on our new initiatives in holidays, business and loyalty, which will enable us to grow profitably. While disruption continues to be a major challenge for the industry, we are investing in resilience to help to mitigate the impact on our customers.
“Forward bookings are solid, with 50 per cent of seats sold in the first half, in line with the prior year. We are confident in our positioning for the future and are focused on driving future returns, positive free cash flow over the longer term and maximising our headline profit per seat as we continue to deliver value for our customers and shareholders.”