Interactive Investor

ii view: easyJet navigates a successful 2023

Shares for this FTSE 250 airline are up by around 56% year-to-date. Buy, sell, or hold?

28th December 2023 15:53

Keith Bowman from interactive investor

Full-year results 30 September

  • Revenue up 42% to £8.17 billion
  • Adjusted pre-tax profit of £455 million, up from a loss of £178 million 
  • Net cash of £41 million compared to net debt of £670 million
  • Dividend per share of 4.5p per share

Guidance:

  • Does not currently expect its first-quarter loss to improve year-over-year

Chief executive Johan Lundgren said: Our record summer performance demonstrates the success of our strategy and that demand for easyJet remains strong as customers choose us for our network and value.   

We see a positive outlook for this year with airline and holidays bookings both ahead year on year and recent consumer research highlights that around three-quarters of Britons plan to spend more on their holidays versus last year with travel continuing to be the top priority for household discretionary spending.

We are confident about the future and the opportunity ahead, focusing on capital discipline and driving our low-cost model to achieve our ambitious medium-term targets.

ii round-up:

easyJet (LSE:EZJ) is a short-haul European airline operating a fleet of 336 Airbus aircraft with an average age of 9.9 years. It operates across more than 1,000 routes to 36 countries and from just over 150 airports. 

For a round-up of these latest results announced on 28 November, please click here.

ii view:

Founded in 1995, the Luton-headquartered airline flew 82.8 million passengers during this latest financial year, up from the prior year’s 69.7 million. The UK generates its biggest slug of sales at just over half, followed by southern Europe at close to a fifth, with France, Switzerland and northern Europe all generating around a tenth each. Group strategy includes transforming its revenue streams with an expansion of its easyJet holidays business in partnership with major hotel brands, such as Accor SA (EURONEXT:AC) and InterContinental Hotels Group (LSE:IHG), now being pushed. 

For investors, increased geopolitical tensions such as wars involving Israel and Ukraine cannot be ignored. Elevated borrowing costs pressuring disposal income could yet see some consumers paring back their travel plans. Costs generally remain heightened, while many other factors outside management’s control, such as bad weather, persist.   

More favourably, a recovery in passenger numbers from the pandemic has seen easyJet returning to an adjusted annual profit. Initiatives to raise ancillary or additional revenues such as baggage are seeing success with plans to add further services such as onboard Wi-Fi on the drawing board. Previous net debt has turned to net cash, while a return to dividend payments has been made, leaving the shares sat on an estimated future income yield of just over 2%.  

For now, and while some caution remains sensible given the many variables that can hinder airlines, a consensus analyst estimate of fair value sat at over 600p per share is likely to keep existing long-term fans on board for the ride.  

Positives: 

  • Growing its holidays business
  • Strong focus on costs

Negatives:

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

The average rating of stock market analysts:

Cautious buy

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