Full year revenue was up 42% to £8.2bn, reflecting higher prices, improved capacity, fuller planes and growth in easyJet holidays. Increased capacity and holidays growth, together with higher fuel prices meant costs increased, but slower than revenue. That meant headline profit before tax was £455m, a £633m improvement on last year.
As at 30 September there was net cash of £41m, compared to £670m net debt at the same time last year. This was due to an improvement in cash flows driven by the increased profitability.
easyJet has reinstated the dividend. A payment of 4.5p per share has been announced, equivalent to 10% of profit after tax. The payment is expected to rise to 20% of post-tax profit in the new financial year.
The group said trading in the new year has started well, with households expected to continue prioritising holidays. That said, revenue per seat has been held back by Middle East conflict.
The shares rose 3.2% following the announcement.
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Our view
easyJet's post-pandemic recovery can be labelled mission complete. Profit engines are firing and bookings keep on coming.
It's not just that travel is back on the agenda for easyJet's customers. That's a rising tide that lifts all ships. There are some easyJet-specific elements to the success story. The group is particularly successful at selling extras to existing passengers. So-called ancillary revenues are things like extra baggage, legroom and food. This is a growing, and highly lucrative area, and the growth has been impressive. easyJet is also targeting a higher share of sunseeker's budgets through its holidays division. We're impressed with the step change in profitability here and see potential for more growth.
easyJet's ability to sell these add-ons and encourage strong demand stems from its route strategy. It focuses on profitable Western European routes within major airports. It's also invested heavily in bolstering its presence at these major airports and improving its routes. It's an approach that sets easyJet apart from other low-cost carriers - who trim costs by flying in and out of smaller, less convenient airports.
Plans to buy close to another 160 aircraft in the coming decade is also a way the group's trying to future-proof its best-in-class route strategy. This more aggressive approach increases risk if demand were to take a sharp knock backwards, so we'd like more information on how it's being funded. But overall, we're supportive of the move to put the order in now. And there's still enough financial bandwidth to support the recent reinstatement of the dividends. These should increase in 2024 if all goes to plan, but as always, shareholder returns aren't guaranteed.
It's also worth considering that the cost-of-living crisis is still very much alive and kicking. While easyJet doesn't seem to be suffering from this at present, if the economic backdrop is worse than expected this year, then we could see a reduction in the number of bookings.
Wider industry strikes have the potential to cause havoc across the system too. The broader implications of sweeping cancellations or changes could dent profit momentum in a big way if issues in this arena rear their head again.
The final thing to consider is escalating geopolitical tension, which is weighing on bookings to some destinations. This hasn't dented investor sentiment, but as with any situation like this, that can change at short notice.
We think easyJet is well-placed within its sector and comes with growth opportunities. There are some risks, especially in the short term, so be prepared for ups and downs.
An independent Non-Executive director of Hargreaves Lansdown plc is also an Independent Non-Executive Director of easyJet plc.
easyJet key facts
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