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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 |
Source; www.easyJet.com
Conclusion
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.