Tuesday, 12 May 2015

easyJet - Interim Results

It is 18m since I purchased this FTSE 100 budget airline company for my income portfolio. The purchase price was £14.09. Since this time, the shares have been on a rollercoater ride.

easyJet have today announced results for the half year to end march 2015 (link via Investegate) . Airlines traditionally make losses over the winter months before flying into the black during the lucrative summer season. Last year the airline reported a loss of -£53m, so it is welcome news to see profits for the half year have come in at £7m

It is over 12 years since the company were in a position to declare a first half-year profit. These came on the back of increased revenues from higher passenger numbers and benefiting from the fall in oil prices combined with an increase in capacity.

Total income rose 3.8% to £1.76bn as revenues per seat increased.

Commenting on these results, CEO Carolyn McCall said :

"easyJet has delivered a record performance in the first half of the year by continuing to deliver its strategy of making travel easy and affordable for passengers.  The profit in the half reflects the delivery of our customer focused revenue initiatives and a strong finish to the ski season as well as the benefit we received from the lower fuel price and favourable foreign exchange movements.

As we enter the important summer season forward bookings are in line with last year and as we predicted passengers are benefitting as fares fall to reflect a more competitive operating environment and lower fuel costs.  easyJet continues to be well positioned to grow revenue and profit this year, delivering sustainable returns to shareholders due to its compelling network, low cost base and strong balance sheet."

Looking to the full year, the air traffic control strike in France during April is expected to knock ~£25m from profits whilst adverse exchange rate will impact a further ~£40m. On the positive side, easyJet's unit fuel bill for the full year is likely to decrease by around ~£100m compared to the previous year.

Net cash as at end march was £416m compared to £449m at 31 March 2014.

The share price has seen a strong run over the past few months but in early trading was down around 7% at £17.00. The shares tend to be a little volatile but I am surprised to see the reaction from the markets - as far as I can see, these results were pretty much in line with expectations.

More following the full year results later in the year.


  1. EasyJet has often caught my eye when I have been running my eye over transport companies (I group EasyJet and IAG with the likes of Stagecoach, First Group etc). I think I just find the huge cash required to operate and the extremely volatile profit history too risky for my taste. Fundamentally it seems a very sound business and is by far my favourite choice in that sector. But I have still not been moved to buy into them yet!

    I think you're right though. Today's sell off is overdone. Probably very significantly impacted by the weak sentiment in the market in general.

    1. DD,

      I think there is quite a lot going for the company - fall in fuel prices, weakness in euro means potential for more UK travel to European destinations etc. The sp volatility provides frequent buying opportunities - like today!

      I do however find this volatility difficult at times - I mean 10% down by noon!! - and I must admit, there may be a case for exchanging EZJ for a more diversified fund at some point down the line.

    2. I agree. The long term looks pretty good as well with growing population and passenger numbers.

      However, I think you're also right that it is such a volatile business (and thus share price) and it sometimes makes it hard to watch! As such, I do wonder whether a better--or rather more consistent--play would be on a picks and shovels approach to air travel. Investing in engine makers like Rolls Royce or GE, for instance.

      Of course, I suppose your shift in focus within your portfolio would make companies like easyJet stand out even more!

    3. DD, you certainly make a good point with the 'picks & shovels' suggestion although I seem to recall RR saw a sharp fall in sp - 20% in a week? - quite recently. I guess no share is immune from the cut and thrust of Mr Market when he's in a mischievous mood.

      Also, you are correct - the shift of strategy moving from shares to collectives will involve greater volatility for the remaining individual shares..mmm

  2. It looks like a good time to buy into Easyjet but I may wait and see if the share price falls more before doing so.

    1. Laura, the shares are very up and down so I would not be surprised to see further dips - at the same time, I would not be surprised to see the price over £20 in a few months.

  3. Low cost companies or low cost anything, are far away from my portfolio. The value of a business does not only lie in the financials but also in the manner it reflects perceived value to his customers i.e. I travel with Ryanair/Easyjet because is cheap . With time those companies will struggle to increase in value and will only depends on their operative efficiency which will systematically hit a bottom line. You can see similar issues with Indian airlines with questionable trained pilots but that is another story.
    Anyway this is just my opinion and you might make a few profits in the short run i.e. especially now with low oil prices.