ii view: confident easyJet ascends near to multi-year high

First-half results to 31 March

• Revenue up 8% to £3.53 billion
• Pre-tax loss of £394 million, down from a loss of £350 million the year before
• Group net cash up 124% to £324 million
• No interim dividend

Guidance:

• Continues to expect a full-year pre-tax profit of around £703 million
• Continues to target an annual pre-tax profit of more than £1 billion over the medium-term
• Targeting a fleet of 395 planes by 2028 with an average of 191 seats

Chief executive Kenton Jarvis said: 

"We continue to see strong demand for easyJet's flights and holidays, as we attract more customers through our great fares, friendly service and unrivalled network of destinations.

"We are executing well against our strategy, to drive efficiency and enhance our customer experience both in the sky and on the ground. In addition, our commitment to giving customers an even greater choice of flights and holidays will also see us continuing to grow both in Europe and the UK, where we will be launching a new base in Newcastle from next spring.

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ii round-up:

easyJet (LSE:EZJ) is a short-haul European airline operating a fleet of 355 Airbus aircraft with an average age of 10.4 years and offering an average of 181 seats per plane. Just over half (55%) of its aircraft are owned and the rest leased. 

The Luton headquartered company operates 1,207 routes to 38 countries between 164 airports. 

For a round-up of these latest results announced on 22 May, please click here.

ii view:

Coming to the UK stock market in 2000, easyJet flew 39.5 million passengers during this latest half-year, up from 36.7 million a year ago and supported by a 6% increase in seats flown to 44.9 million. The airline launched over 200 new routes during the period, targeting non-EU and winter beach destinations such as Luxor and Cape Verde, terminating 50 routes, and extending distances flown by 6%

Passenger revenues accounted for 61% of the group total during the six-month period, with onboard Ancillary revenues such as extra bags a further 28%, and holiday packages the balance of 11%. 

For investors, heightened geopolitical tensions and potential for an extension of existing wars in Ukraine and the Middle East cannot be overlooked. A forecast share price-to-net asset value above the three-year average may suggest the shares are not obviously cheap. Concerns about the wider industry’s impact on climate change warrant consideration, while many other factors outside of management’s control such as fuel prices, bad weather, air traffic control strikes, and terrorism all deserve thought. 

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To the upside, a medium-term target of more than £1 billion of pre-tax profit continues to be pursued. Its growing holiday business now offers diversity not seen at other airlines such as Wizz Air Holdings (LSE:WIZZ). Net debt accumulated under the pandemic has turned to net cash, while the shares now sit on a forecast dividend yield of 2.4%, with payment being made as a final dividend only. 

On balance, and while the potential volatility of airline shares should not be forgotten, and while easyJet shares now trade near their highest levels since early 2022, a consensus analyst estimate of fair value above 700p per share points toward continued optimism in the City. 

Positives: 

• Growing holidays business
• Strong focus on costs

Negatives:

• Uncertain geopolitical and economic outlook
• Many factors outside of management’s control can hinder performance

The average rating of stock market analysts:

Buy