26th May 2015 09:35
LONDON (Alliance News) - Ryanair Holdings PLC shares surged higher Tuesday morning after the Irish budget carrier said its net profit for the financial year to the end of March beat its upgraded guidance on the back of stronger revenue and higher customer numbers and as its load factor inproved.
Ryanair shares were up 5.5% to EUR11.52 pence on Tuesday.
The airline said its profit after tax for the year to March 31 was EUR867 million, up 66% from the EUR523 million reported a year earlier and ahead of the upgraded guidance it issued in February for net profit of EUR840 million to EUR850 million. That guidance upgrade was the third the group had made since its half-year results were published in November, as it was boosted by falling fuel prices which eventually resulted in its net margin improving to 15% from 10% a year earlier.
Ryanair said its customer numbers rose to 90.6 million in the year, up 11% from 81.7 million in its 2014 financial year, while its load factor improved to 88% from 83%. Those factors helped revenue to rise to EUR5.65 billion from EUR5.04 billion and were complemented by strong ancillary revenue, which increased slightly ahead of traffic growth.
The group said it would not pay any further dividend for the financial year, but already paid a EUR520 million special dividend in February and, the same month, launched a EUR400 million share buyback, which is set to last until August.
Forward bookings for the company are ahead around 4% year-on-year for the summer 2015 period, which Ryanair expects to result in its load factor improving by a further 2 percentage points to 90% for 2016.
Ryanair said its summer 2015 fleet of 320 aircraft will be insufficient to handle demand, meaning it will lease-in six aircraft in the peak period, down from seven a year earlier, in order to meet demand. It expects more than half the growth to occur in primary airports such as Brussels, Lisbon, Rome, Athens, Copenhagen, Berlin, Cologne, Dublin and London Stansted. The growth has been driven by the introduction of its Business Plus and Family Extra services, it said.
Punctuality for the airline was slightly weaker in the year, down to 90% from 92%, due to strike actions and airspace closures and owing to adverse weather conditions in some European regions over the winter.
Ryanair took particular aim in its full-year statement at what is considers "over-regulation" in the European airline industry, claiming this "frequently places producer monopoly protection above the interest of consumers, or growth in tourism and jobs." The airline's ire is specifically targeted at the European Emission Trading System and the European Single Sky airspace regulation project, which it describes as a "shambles", as well as a failure to prohibit air traffic control strikes.
Ryanair also reiterated its continuing push to get the UK's Competition and Markets Authority to reverse its ruling forcing Ryanair to sell down its stake in Irish flag carrier Aer Lingus Group PLC to 5% from 29.8%. In April, the CMA said there had been no material change in circumstances or any special reason to reverse the ruling.
Ryanair initially made the request for the ruling to be reversed in February, arguing that the bid made for Aer Lingus by International Consolidated Airlines Group, the FTSE 100-listed owner of British Airways, and the period of time since the decision was initially made in August 2013, constituted a material change in circumstances and that the competition regulator no longer had the power to impose a divestment remedy on Ryanair.
On Tuesday, Ryanair said it was "amazed" by the CMA's decision not to reverse the ruling and claimed that should it fail to do so in the future, the CMA would be "totally discredited".
On the Aer Lingus deal, Ryanair said its approach to the bid from IAG remains unchanged, saying it would consider any offer from IAG on its merits. Aer Lingus itself, in its first quarter results, said it remains strongly in favour of the IAG's EUR1.36 billion takeover bid, but the offer still needs to gain acceptance from both Ryanair and the Irish government.
Elsewhere, Ryanair expressed its support for additional capacity in the London airport market, arguing the market should be free to build three new runways, one each for Heathrow, Gatwick and Stansted, as this represents the only long-term solution to the capacity problems in the south east.
For the year ahead, Ryanair said that while it expects traffic growth of around 10%, it thinks it would be "foolish" not to expect "some irrational pricing response" from its competitors. As a result, it expects that even with the benefit of lower fuel prices, aircraft and financing costs it may suffer period of fare and yield weakness in the coming financial year, particularly in the winter. As a result, its yield guidance for the year is cautious, but despite that, it still expects net profit to rise to between EUR940 million and EUR970 million in the coming year.
Liberum said the results from Ryanair were in line with consensus and slightly ahead of the broker's own forecasts, but said it would review its Buy recommendation as the valuation on the company is starting to look full.
Analyst Gerald Khoo said Ryanair continues to trade on a deserved premium to the other European airlines, reflecting its strong earnings momentum and superior return on invested capital and margins.
"However, the rating does appear a little full in absolute terms and further share price upside is likely to be reliant upon estimates being revised higher. We shall review our Buy recommendation and EUR10.50 target price as necessary," the analyst added.
By Sam Unsted; [email protected]; @SamUAtAlliance
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