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Investors to scour easyJet's full-year results after it slashes profit guidance

Published 13/11/2016

EasyJet has bases across 11 UK airports
EasyJet has bases across 11 UK airports

Investors will be scouring easyJet's full-year results for signs of improvement on Tuesday, after the company slashed its profit guidance and warned that currency headwinds would hit the balance sheet last month.

Analysts are expecting pre-tax profit to clock in at around £495 million for the full year to September 30, following a difficult 12 months that saw the airline grapple with the fallout of terror attacks, air traffic control strikes in France, political turmoil, and the post-Brexit collapse of the pound.

Graham Spooner, an investment research analyst at The Share Centre, said: "EasyJet's shares have been suffering from turbulence for most of this year so the market will be hoping for some good news in these results.

"There was precious little of that the last time we heard from the company in October."

EasyJet slashed its own pre-tax profit guidance to between £490-495 million last month, down from £721 million which it had predicted during its half-year results in May.

It came after the company revealed that it would be left nursing at least £125 million in lost profit after a combination of terror attacks across Europe, Egypt and Tunisia, air traffic control strikes in France and political turmoil in Turkey.

The company added that currency headwinds linked to the post-Brexit collapse in the pound would cost the company £90 million.

EasyJet has bases across 11 UK airports and flies more than 830 routes on its network across Europe, the Middle East and North Africa.

The airline said it recorded an 8.7% drop in per-seat revenue in the three months to September 30, as it slashed fares amid a price war with budget airlines including Ryanair.

Mr Spooner said: "The market will be especially interested to hear if there is any change in the expectations for a further drop in revenue per seat in the first quarter of the new financial year.

"Rival Ryanair produced some good figures recently but easyJet's latest monthly passenger stats were slightly disappointing."

News that Ryanair's fares would likely drop 15% this winter could put easyJet under further pressure to cut costs.

Ryanair's chief executive last week said fares would likely be reduced, amid uncertainty over Brexit negotiations, which he said was "good news for customers, not so good news for shareholders".

Meanwhile, the boss of British Airways owner International Airlines Group (IAG) said its own ticket prices may have to rise to offset sterling weakness and the effects of industrial action.

Citi equity analyst Andrew Light expects easyJet to "grow capacity aggressively" by around 8% over the next financial year "no matter what".

"We believe easyJet is prepared to risk FY17 earnings in order to build market share in its key airports, especially given the financial weakness of some competitors."

Mr Light said it could lead to a "strong recovery" in 2018, as competitors scale back and as easyJet transitions to larger A320s which will drive fuel efficiency and reduce unit costs.

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