Grass strip basher
5th Jun 2007, 10:13
Interesting commentary from Ryanair this morning saying they expect profit growth to slow to just 5% next year... company's shares are down 7%... saying planes not as full as a year ago... smells like we could be getting close to the top of this current recrutiment cycle.... I guess a bit of a cold shower for those planning on taking on a £100k of debt to get the little blue book! :sad:
Here is a copy of the story from Reuters....
DUBLIN, June 5 (Reuters) - Ryanair posted a 33 percent jump in annual net profit on Tuesday helped by higher ticket prices but said profit growth would slow as higher UK interest rates prompt thrifty travellers to seek cheaper deals.
Europe's biggest low-cost carrier said it expected profit growth of only around 5 percent in the current business year with average ticket prices falling as higher borrowing costs curb consumer spending in Britain, Ryanair's biggest market.
Ryanair shares fell more than 7 percent as a warning for investors to be "cautious and conservative" on the year ahead overshadowed news that Ryanair <RYA.I> would use its growing cash pile to buy back shares.
Once adjusted to exclude one-off items, profit after tax at the airline rose to 401.4 million euros ($540.4 million) in the 12 months to end March versus 301.5 million a year earlier.
The profit was higher than the 393.5 million average of 12 analysts' forecasts compiled by Reuters Estimates.
Ryanair Chief Financial Officer Howard Millar pointed out that, in common with rivals such as EasyJet <EZJ.L> , its planes were not as full as a year ago.
"Interest rate rises in the UK are starting to have an effect on the whole industry, how consumers are spending, they've less money available," he said.
The Bank of England has raised rates four times since August. It is expected to hold interest rates at 5.5 percent this month but most economists believe another increase is only a matter of time.
Ryanair said an expanding route network would mean a 22 percent increase in the number of passengers it carries to over 52 million in its current business year but cautioned average ticket prices, known as yields, were set to fall 5 percent.
CAUTION
"As a result we expect profit growth over the coming year to be more modest and to rise by approximately 5 percent," the company said in a statement. "We believe that the company and our shareholders should remain cautious and conservative."
Stronger than expected ticket prices last year forced Ryanair to revise initially cautious guidance but Millar told Reuters the company was facing the challenge of "a different environment."
"We're generally conservative with our guidance but we think there is something fundamentally changing in the market," Millar said in an interview.
"People will say 'look, they said this last year' but nobody expected this time last year that average fares would rise by nearly 7 percent. We're not seeing anything like that."
John Sheehan, analyst at NCB Stockbrokers, said the ticket price guidance from Ryanair was worse than the 2 percent decline he had been expecting.
"The outlook for Ryanair is cautious," he wrote in a research note. "Summer yields are expected to be soft, primarily driven by a weaker UK environment."
"We expect the stock price to come under downward pressure on the back of this morning's results, however this should be partially offset by the prospective share buy back."
Shares in Dublin-based Ryanair <RYA.L> had already fallen about 15 percent from April's life high of 6.38 euros following a string of downbeat comments from its executives.
The stock was a further 7.8 percent weaker at 5.00 euros by 0829 GMT and at its lowest point since December last year. The broader Irish market <.ISEQ> was down 0.9 percent.
Here is a copy of the story from Reuters....
DUBLIN, June 5 (Reuters) - Ryanair posted a 33 percent jump in annual net profit on Tuesday helped by higher ticket prices but said profit growth would slow as higher UK interest rates prompt thrifty travellers to seek cheaper deals.
Europe's biggest low-cost carrier said it expected profit growth of only around 5 percent in the current business year with average ticket prices falling as higher borrowing costs curb consumer spending in Britain, Ryanair's biggest market.
Ryanair shares fell more than 7 percent as a warning for investors to be "cautious and conservative" on the year ahead overshadowed news that Ryanair <RYA.I> would use its growing cash pile to buy back shares.
Once adjusted to exclude one-off items, profit after tax at the airline rose to 401.4 million euros ($540.4 million) in the 12 months to end March versus 301.5 million a year earlier.
The profit was higher than the 393.5 million average of 12 analysts' forecasts compiled by Reuters Estimates.
Ryanair Chief Financial Officer Howard Millar pointed out that, in common with rivals such as EasyJet <EZJ.L> , its planes were not as full as a year ago.
"Interest rate rises in the UK are starting to have an effect on the whole industry, how consumers are spending, they've less money available," he said.
The Bank of England has raised rates four times since August. It is expected to hold interest rates at 5.5 percent this month but most economists believe another increase is only a matter of time.
Ryanair said an expanding route network would mean a 22 percent increase in the number of passengers it carries to over 52 million in its current business year but cautioned average ticket prices, known as yields, were set to fall 5 percent.
CAUTION
"As a result we expect profit growth over the coming year to be more modest and to rise by approximately 5 percent," the company said in a statement. "We believe that the company and our shareholders should remain cautious and conservative."
Stronger than expected ticket prices last year forced Ryanair to revise initially cautious guidance but Millar told Reuters the company was facing the challenge of "a different environment."
"We're generally conservative with our guidance but we think there is something fundamentally changing in the market," Millar said in an interview.
"People will say 'look, they said this last year' but nobody expected this time last year that average fares would rise by nearly 7 percent. We're not seeing anything like that."
John Sheehan, analyst at NCB Stockbrokers, said the ticket price guidance from Ryanair was worse than the 2 percent decline he had been expecting.
"The outlook for Ryanair is cautious," he wrote in a research note. "Summer yields are expected to be soft, primarily driven by a weaker UK environment."
"We expect the stock price to come under downward pressure on the back of this morning's results, however this should be partially offset by the prospective share buy back."
Shares in Dublin-based Ryanair <RYA.L> had already fallen about 15 percent from April's life high of 6.38 euros following a string of downbeat comments from its executives.
The stock was a further 7.8 percent weaker at 5.00 euros by 0829 GMT and at its lowest point since December last year. The broader Irish market <.ISEQ> was down 0.9 percent.