November 27, 2024 10:50 GMT
TRANSPORTATION: easyJet; FY24 (12m to Sept) results
TRANSPORTATION
(EZJLN; Baa2/BBB Pos)
This isn't Ryanair - we do expect a curve to remain with a pick-up in capex ahead that should see net cash outflows. BS is carrying ample cash to manage that (gross leverage is low), dividend bump to 20% pay-out was expected and still insignificant. Margins are nothing to write home about (airline running ~5% EBIT vs. Ryanair 15% at its peak) - increasing contribution from holidays will help (14% on EBIT). Near term catalyst look skewed positive on guidance. On RV 28s may have small room to be brought in, no firm view on new 31s but as we said before airlines decompress sharply - that line was more immune to it in August but has struggled to head back in since.
- 2H passengers +7% but RASK was a weak -1%. That was met by unit costs (ex. fuel) increasing +2%. Fuel down -2%.
- It is guiding to 1H25 growth from cost control; unit revenues to be flat, ex. fuel costs to fall slightly while fuel to fall -10% (it has hedged -7% lower vs. last year). Hedging is high; 80% in 1H25 at $808, 59% in 2H25 at $770 vs. spot in in low $700s; {JET1NECC Index; 725}.
- For the FY airline EBIT is still up double digits but on a similar margin (5.3%, +40bps). Meanwhile holidays grew +47% on revenue and +49% on EBIT and now makes up 12% of group revenues and 27% of EBIT. Net group EBIT grew +25% at a 6.4% margin (+60bps).
- It is guiding to capacity increase of 8% over the FY (1H +12%, 2H +5%) and holidays growth to continue at +25% (no. of customers) - 82% of 1H25 is sold it says.
- Balance sheet has £1.3b of cash, £2.1b in other investments (~£3.4b total) against £3.3b in debt leaving a net cash position of £180m. Gross leverage is at 2.4x (vs. 2.6x last year). Says the €500m June '25 maturity has been pre-funded but we still wouldn't rule out supply.
- Capex which includes fleet purchases, maintenance AND leases is expected to stay flat at £1.2b next year before climbing; £1.7b, £2.3b. £3.3b in the FY26-28. Vs. consensus that is +£0.4b, +£0.1b, -£0.4b, -£1.3b in net of operating cash flows.
- Above before dividends which have been given a expected bump to 20% pay-out ratio (£92m this year) - still fairly insignificant. For reference Ryanair (double in cash flows) is doing ~€1.9b in equity pay-outs this year.
Keep reading...Show less
400 words