Ryanair today announced a fiscal first quarter net profit of €136.5m, a €115.5m (550%) increase over last year’s Q1 figure. Total revenues were flat due to an 11% rise in traffic being offset by a 13% decline in average fares. Unit costs fell by 26% due to lower fuel prices (excluding fuel they fell by 5%) and reductions in staff, airport and handling costs.
Chief executive Michael O'Leary said the results were distorted by a 42% reduction in the airline's fuel bill. Revenue for the quarter to the end of June was flat compared with the same period last year at €775m. Costs excluding fuel fell by 5%.
Passenger numbers in the period rose by 11% to 16.6 million, which O'Leary resulted in a 13% fall in average fares. Ancillary revenues, mainly onboard sales rose by 13% to €165.3m.
Results detail
Goodbody analyst Eamonn Hughes commented:
"Headline numbers: Ryanair has reported its Q1'10 numbers this morning, with Adjusted EPS of 9.3 cent, which was 4% behind our 9.7 cent forecast. Revenues of €775m were flat yoy, compared with our 3% growth forecast. Operating expenses ex-fuel rose 6% yoy (we had a 4% rise), while a 42% fall in fuel costs (-38% expected) led to a 17.5% fall in overall operating expenses (we had -17%). As a result, adjusted pre-tax profit rose 6x to €148.1m, compared to our €158.7m expectation and attributable profit was €136.5m vs our €142.8m expectation. Net debt of €104.8m, was lower than our breakeven estimate, while gross cash came in better at €2.5bn (€2.36bn anticipated). There is also a €13.5m markdown on their Aer Lingus stake.
Outlook: Ryanair indicates it has limited visibility beyond the next two months, but anticipated passengers to remain price sensitive. As such, the main focus this morning will be on fares. It is now anticipating that "Q2 yields will be significantly lower than last year, at or even above the minus 15-20% range previously guided". Based on the H1 performance, Ryanair is now guiding that the full year decline "will be at or slightly more than minus 20%" and are saying its full year net profit will be towards to lower end of the €200-300m range previously guided. On passenger figures, it is sticking with the 15% growth target and on costs is anticipating ex fuel costs fall by 5%. We have a 15% increase in seat capacity built in for FY10, flat load factors and a 14% decline in average fares. We expect a 36% decline in fuel cost per pax for the full year, with a 5% decline in ex-fuel operating costs per pax.
Estimates: While the company was anticipated to highlight the soft yield environment in the Q1 figures, it does appear that yield guidance declines in Q2 are more than we would have envisaged (-13%) and for the full year the "at or slightly more than 20%" figure compares to our 13.8% decline. As a stab, taking a view on the current spot price (slightly better) and stabbing at the midpoint of the Q2 yield guidance in the statement would provisionally have the potential to take c2 cent from our 23.6 cent EPS estimate for the year. There is a conference call at 2.30pm, so we'll gauge the yield debate then before we formalise any adjustments, but at first glance, it would appear our estimates will likely have to nudge back. In our recent note, we have indicated that Ryanair is probably caught in a €3 to €4.20 share price range and we would suspect that remains the case."
