UK low-cost carrier, easyJet, has reported a 21.5% hike in profits to £581 million for the 12 months to September 30, 2014. Earnings per share rose by 13% to 114.5pence. Total revenue rose by 6.3% to £4.527bn during the period, with a total revenue per seat up by 1.2% on a reported basis, and by 1.9% on a constant currency basis to £63.31 in a higher capacity environment. easyJet’s pre-tax margin rose by 1.6 percentage points to 12.8%.
The low cost airline attributed the growth in revenue per seat to a number of digital and revenue management initiatives and a continued focus on capital allocation. Seats flown grew by 5.1% to 71.5 million. Load factors increased by 1.3 percentage points to 90.6% and passenger numbers rose by 6.6% to 64.8 million.
easyJet lowered its cost per seat, excluding fuel, by 1.2% on a reported basis however this increased by 0.6% on a constant currency basis to £37.70 driven by increases in charges at regulated airports offset by the continued delivery of easyJet lean initiatives. Second half cost per seat on a constant currency basis increased by 0.7%.
The so-called “easyJet lean” initiatives delivered sustainable savings of £32 million in the year of which £18 million were delivered in the second half.
Return on capital employed grew by 3.1 percentage points to 20.5%.
easyJet ended the financial year with £985 million of cash and money market deposits, a decrease of £252 million against the position at 30 September 2013 which reflects the continued cash generation of the business offset by the payment of a £133 million ordinary dividend and a special dividend of £175 million to shareholders in the year, pre-delivery payments for new aircraft and repayment of borrowings.
The easyJet Board is recommending an increased ordinary dividend to shareholders of £180 million or 45.4 pence a share based on its enhanced ordinary dividend policy of paying out 40% of annual profit after tax.
Commenting on the results, Carolyn McCall easyJet Chief Executive said: “easyJet has continued to execute its strategy, delivering another strong performance and enabling easyJet to deliver record profits for the fourth year in a row. We are also proposing to increase the proportion of our profits after tax paid in dividends from one third to 40%, reflecting our confidence in the future of easyJet.
These results show that easyJet is closing the gap on its great rival Ryanair and the market has confidence in the details released today. However, as Fiona Cincotta, a senior market analyst at www.finspreads.com attests, there are some queries outstanding.
For the first half of the next financial year, revenue per seat is expected to be flat or at best slightly higher excluding currency effects. “This seems to speak of currency and regional (AKA Eurozone) headwinds being faced by EZJ and its sector peers in Europe. With the strength this airline has shown this year however, we expect the full-year 2015 operating performance to be at least as solid as this year’s,” says Cincotta.
“There is potentially more troublesome for the stock today—once again, no mention of the special dividend first mooted in November 2013. This issue is becoming something of an ‘albatross’—EZJ first suggested it would pay a one-off dividend totalling about £175m at that time, but has mentioned little about it since. There’s no doubting EZJ’s dividend policy has been strengthened and its average yield is now ahead of Ryanair, which does not have a pre-set dividend policy, hence increasing the attractiveness of the EZJ investment case versus its rival.
However, pledging a special dividend and not delivering has created a little uncertainty, and perhaps, disappointment.”