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EasyJet shares gain 6 after shareholders get 175m reward

Article By: ,  Financial Analyst
November 19, 2013 9:14 AM

EasyJet shares gained over 6% in early trading this morning after the budget airline carrier continued to delight shareholders with a strong years performance and a special dividend.

EasyJet reported a 50.9% increase in full year pretax profits to £478m with revenues climbing 10.5%. The carrier had previously upgraded profit forecasts to between £470m and £480m, meaning the final result falls to the top end of those boosted forecasts. The airline also announced plans to return as much as £175m to shareholders in a special dividend of 44.1p.

Changing dynamics lines EasyJet’s pockets

One of the aspects EasyJet has really benefited from is the fact that larger legacy carriers have endured difficulty at certain short-haul flights that have proved unprofitable with load capacity decreasing. Rather than cut flight charges to passengers and – as such – profit margins even further, they’ve simply cut operations there, giving lower budget carriers such as EasyJet an opportunity to increase its own share in that destination.

EasyJet expects to see this trend continue and while its rivals are making similar moves – such as Norwegian, which is starting to expand out of Scandinavia – it feels that it remains in a position of power given it controls key early run-off slots at major airports, increasing its attractiveness to passengers.

The darling of the City of London

The numbers come in stark contrast to the difficulties suffered by its rival, Ryanair, and the fact they continue to perform strongly and are happy to repay investor faith with a generous special dividend means shareholders have reacted positively to these results. Shares are up 80% in the last year and so it’s easy to see why EasyJet has been a favourite of investors and the darling of the City of London.

Forward guidance

Forward bookings for the first half of next year are in line with prior years; however the carrier warned that the first quarter could prove challenging given the tough comparatives with the post-Olympics boost to flights that the firm enjoyed. In addition, Easter falls in the second half of next year, meaning that first-half revenue per seat is expected to be at least 0.7%.

Chart of EasyJet (orange) vs Ryanair (blue)

 

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