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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
UK 20% 127 5.8% 24/ NM
Switzerland (40% Geneva) 23 6.8% 11/ 110
France 14% 26 5.0% 24 / 180
Italy 25% 27 6.2%
Germany NM 11 6.7%
Spain/ Portugal 8% / 13% 4 NM NM
Netherlands 9% 3 NM NM

NM- not meaningful; Source: CSS Investments Ltd

2014 2013
£ million £ per seat pence per ASK £ million £ per seat pence per ASK
Total revenue 4,527 63.31 5.69 4,258 62.58 5.74
Costs excluding fuel (2,695) (37.70) (3.39) (2,598) (38.17) (3.51)
Fuel (1,251) (17.49) (1.57) (1,182) (17.38) (1.59)
Profit before tax 581 8.12 0.73 478 7.03 0.64
Tax charge (131) (1.83) (0.16) (80) (1.18) (0.10)
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.

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