28th Jun 2016 15:21
LONDON (Alliance News) - Carnival PLC shares rose in London Tuesday after the cruise line operator said it expects at least a 20% rise in adjusted earnings during the current financial year, as the company raised its dividend and reported a huge rise in profit in the first half.
Carnival shares were trading up 1.0% to 3,298.00 pence per share on Tuesday afternoon.
Carnival is expecting to deliver adjusted earnings per share in the range of USD3.25 to USD3.35 per share in the financial year to end in November, which if delivered, would be 20% to 24% higher than the USD2.70 per share reported in the previous year.
That new guidance tightens the previous estimate that adjusted EPS would be between USD3.20 to USD3.40 per share this year.
As well as a significant rise in profit and earnings in the first half of the year, Carnival is expecting its earnings to improve in the second half after predicting its adjusted EPS will be in the range of USD1.83 to USD1.87 per share in the third quarter compared to the USD1.75 per share in the second.
That means third quarter earnings are expected to improve by between 4.6% and 5.7% compared to the second. Adjusted EPS in the first half was almost 96% higher year-on-year at USD0.88 from USD0.45.
The anticipated improvement in the second half will be partly driven by Carnival's advance bookings for the remainder of the year, which are "well ahead" of last year at "slightly higher prices", it said.
Carnival is anticipating net revenue yields for the full year to be around 3.5% higher than last year on a constant currency basis, which also replaces the previous guidance that they would be 3.0% higher. Guidance for net cruise costs this year, excluding fuel, has improved, as Carnival forecast a 1.5% year-on-year rise compared to its previous expectation for it to be 2.0% higher.
"This is shaping up to be another strong year for our company as we expect over 20% earnings growth and are approaching a 9% return on invested capital," said Arnold Donald, president and chief executive of the company.
"Our ongoing effort to drive demand for our brands in excess of our measured capacity growth has led to increased revenues and helped maintain the mid-point of our full-year earnings guidance despite the recent currency movements and rises in fuel prices that combined represent a negative USD0.17 per share," he added.
Carnival's pretax profit in the first half of the current year to the end of May was over 2.5 times higher than a year earlier, totalling USD750.0 million compared to USD278.0 million, as revenue increased by 3.3% to USD7.35 billion from USD7.12 billion.
That allowed Carnival to lift its interim dividend for the period by an impressive 30% to 65.0 cents per share from the 50.0 cent dividend paid last year. That will mean the total cost of the interim dividend has risen to USD459.0 million from USD388.0 million.
"We have accelerated progress toward our stated goal of achieving the double digit return threshold and have accelerated distributions to shareholders," said Donald.
"We recently raised our dividend by 17% to over USD1.00 billion per year. Since October, we have repurchased nearly USD1.90 billion in shares under our stock repurchase program. Yesterday, our board of directors approved our third USD1.00 billion share repurchase authorization demonstrating confidence in our outlook and reinforcing our commitment to return value to shareholders," he added.
Passenger tickets sales, the primary driver of revenue, rose almost 3.0% to USD5.41 billion in the half-year from USD5.26 billion a year before, whilst revenue generated on board its liners increased by 4.7% to USD1.90 billion from USD1.81 billion. Other revenue, including from tours, experienced a 4.5% fall to USD42.0 million from USD44.0 million.
Carnival carried over 5.3% more passengers in the first half than last year, cruising 5.3 million people with an improved occupancy rate.
Leveraging the revenue growth was a fall in costs, with operating expenses declining 5.0% to USD4.50 billion from USD4.73 billion. Once small year-on-year rises in selling, administrative, depreciation and amortisation costs are taken into account, overall expenses in the first half came in 1.8% lower at USD6.44 billion from USD6.56 billion.
Fuel costs, one of Carnival's most significant expenses, have reduced dramatically thanks to the fall in world oil prices. Carnival's fuel cost declined 42% to an average of USD236 per metric tonne in the half, from USD408 last year.
Operating income increased by almost two-thirds in the first half compared to a year ago, rising to USD912.0 million from USD554.0 million.
Other expenses, such as interest payments and losses on fuel derivatives, also declined in the period to further boost the significant rise in pretax profit. Other expenses fell 41% to USD162.0 million from USD276.0 million.
Capital expenditure in the first half increased to USD1.96 billion from USD1.38 billion.
"Several major milestones will contribute to the future of the company including the re-mastering of Queen Mary 2, the opening of Holland America's Denali square complex in Alaska and the introduction of AIDA Cruises' AIDAprima, Holland America Line's Koningsdam, and Carnival Cruise Line's Carnival Vista," Carnival Chief Executive Donald said.
"In addition, building on a legacy of pioneering achievements, Carnival Corporation became the first cruise company to begin voyages from the US to Cuba in more than four decades through its Fathom brand - a historic moment that captured worldwide media coverage," he added.
By Joshua Warner; [email protected]; @JoshAlliance
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