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easyJet prelims – slightly ahead of EPS forecasts
*easyJet FY2014 earnings, £581m are slightly ahead of its guided range of £575m – £580m with strong EU trading helped by disruptive strikes at the national carriers Lufthansa and Air France. The strike actions helped reinforce easyJet’s reputation as a reliable low cost carrier not weighed down by unresolved labour issues.
*easyJet’s new slot / aircraft capacity at Gatwick (Flybe acquisition) from 30 March 2014 and EU hubs helped improve network deliverability and capacity growth.
*easyJet’s 90.6% load factor (+1.3%) and 6.6% growth in passenger numbers to 64.8m are solid results during a year of belt tightening in a number of EU countries.
*We like the renewed dividend commitment the payout ratio has risen to 40%, this looks safe given the company’s stage in the leasing cycle.
*The board cited a number of data/ digital initiatives aimed at targeting the 500m EU customers that have yet to migrate to easyJet.
|Territory||Market share||Aircraft||Capacity Growth||New Routes/ Total Routes|
|Switzerland||(40% Geneva)||23||6.8%||11/ 110|
|France||14%||26||5.0%||24 / 180|
|Spain/ Portugal||8% / 13%||4||NM||NM|
NM- not meaningful; Source: CSS Investments Ltd
|£ million||£ per seat||pence per ASK||£ million||£ per seat||pence per ASK|
|Costs excluding fuel||(2,695)||(37.70)||(3.39)||(2,598)||(38.17)||(3.51)|
|Profit before tax||581||8.12||0.73||478||7.03||0.64|
|Profit after tax||450||6.29||0.57||398||5.85||0.54|
Ahead of FY2015 easyJet has a number of tailwinds:-
*Falling jet fuel costs means savings between £12m-£22m should lift consensus EPS FY2015 from current levels of 127p to c 132p. 2015 EPS growth according to consensus forecasts are seen at 15% however this looks low.
*Assuming FY2014 trends continue (6% revenue growth/ 3.8% expense growth) and fuel costs remain as forecast, it is possible to extrapolate EPS growth to 150p
*Recent EZJ gains are deserved, these results should result in FY2015 EPS upgrades.