easyJet’s full-year revenue rose 14% to £9.3bn. All business areas saw growth, with the Holidays segment expanding at the fastest pace, up 47%. Increased airline revenue was helped by capacity rising 8%, and planes remained over 89% full on average.
Operating profit rose 25% to £0.6bn, driven by reduced Airline winter losses and strong growth in Holidays.
Free cash flow fell from £0.9bn to £0.7bn due to higher capital expenditure. Net cash, including lease liabilities, was £0.2bn at year-end.
In 2025, capacity is set to grow by 3%, and Holiday customers are expected to grow by around 25% from a base of 2.6mn.
As previously announced, current CEO Johan Lundgren will step down after seven years in the role. Current CFO, Kenton Jarvis will replace him in the new year.
A dividend of 12.1p per share has been announced (2023: 4.5p).
The shares rose 1.9% in early trading.
Our view
easyJet delivered another record-breaking summer to cap off a strong year of growth. Guidance for the new year points to both capacity growth, and the cost outlook, landing better than expected.
Revenue and profits increased at double-digit rates, driven by strong demand from holidaymakers who took advantage of the group’s expanded capacity. This saw around 89% of available seats filled on average. Given the high fixed costs associated with flying planes, keeping them as full as possible is key to profitability.
easyJet has been able to keep revenue per passenger moving in the right direction. That’s in no small part thanks to further success in 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'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. This approach sets easyJet apart from other low-cost carriers - who trim costs by flying in and out of smaller, less convenient airports.
The package holiday arm is also seeing impressive growth. Revenue and profits grew at high double-digit rates and now contribute a significant amount to the group total. Advertising spend in this segment has ramped up to help stimulate demand, which is already driving market share gains. The addressable market for package holidays is huge, and we see a long runway ahead for this segment if it can keep nailing delivery.
The balance sheet is in good shape, with substantial financial bandwidth to support the prospective 2.8% dividend yield. We would hope dividend payments will keep ramping up as the group moves towards its mid-term profit targets, but as always, shareholder returns aren't guaranteed.
While change always brings some level of uncertainty, the retirement of current CEO Johan Lundgren early in the new year shouldn’t affect the outlook. With current CFO Kenton Jarvis set to step up into the role, we’re expecting a relatively smooth transition.
Something to consider is escalating geopolitical tension, which has the potential to escalate and impact bookings. 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, that aren’t baked into the current valuation. But there are some transition and geopolitical risks in the short term, so be prepared for some ups and downs along the way.
Environmental, social and governance (ESG) risk
The transport industry is medium risk in terms of ESG, with European firms managing them better than others. Carbon emissions, product governance, and quality & safety are the biggest risk drivers. Other key areas are emissions, effluents & waste, labour relations, and employee health & safety.
According to Sustainalytics, easyJet’s management of ESG risk is strong.
Its policy addressing environmental issues is very strong and executive remuneration is explicitly linked to sustainability performance targets. An adequate whistleblower policy is also in place. However, easyJets’s overall ESG reporting falls short of best practice.
easyJet key facts
All ratios are sourced from Refinitiv, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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