To rub salt into British Airways' self-inflicted wounds after its Bank Holiday weekend IT collapse led to massive flight delays and cancellations, one of its arch rivals, Ryanair PLC (LON:RYA) this morning reported record annual profits, although some cautious comments from its always outspoken boss caused the Irish carrier's shares to fall early on.
Despite sharp falls in average fares due to overcapacity and Britain's vote to leave the European Union, the Ireland-based discount airline also promised higher profits and lower fares in the current year.
Ryanair - Europe's largest air carrier by passenger numbers - posted net profit of €1.316bn (£1.14bn) for the year ended March 31, up 6% on the previous year’s €1.242bn outcome and in line with analyst forecasts – albeit at the lower end of the company’s €1.3bn to €1.35bn forecast range.
Ryanair had cut those estimates back by 5% in October from an initial range of €1.375bn to €1.425bn due to sterling weakness in the wake of last June’s Brexit vote.
The discount airline said it expected its fares to fall by between 5% and 7% in the year to the end of March 2018, a slowing from a fall of 13% in the previous year.
Ryanair, which flies 1,800 daily flights across 34 countries, carried 120mln passengers in the year to the end of March, up from an initial estimate of 116mln, and 13% growth on the previous year.
Its target of flying 130mln passengers in the year to March 2018 implies growth of around 8% in its current year.
But Ryanair boss still says investors “should be wary”
Michael O'Leary, Ryanair’s chief executive said: "We are pleased to report a 6% increase in profit after tax ... despite difficult trading conditions caused by a series of security events at European cities, a switch of charter capacity from North Africa, Turkey and Egypt to mainland Europe, and a sharp decline in Sterling following the June 2016 Brexit vote.”
But, he added: "Investors should be wary of the risk of negative Brexit developments, or any repeat of last year’s security events at European cities, which could damage consumer confidence, close-in bookings and this FY18 guidance.”
The group – which does not pay shareholders a dividend - unveiled a further €600mln share buyback which will start this week and, subject to market conditions, be completed by the end of October.
In an initial post-results note to clients, Stephen Furlong, an analyst at Irish broker Davys said the buy-back size is “implying that EPS growth will likely be in the double-digits.”
He added: “We will move our net income estimate modestly towards the mid-point of the new range. Given the cash generation and continued strong strategic position, we reiterate our ‘Outperform’ rating and move our 12-month price target to €18.50.”
In opening trades, however, Ryanair shares - listed in London and Dublin - were 6%, or €0.6 lower at €17.4 reflecting the cautious comments from its boss.