Ryanair today announced an 80% increase in half year net profits to €387m, for the period to Sept 30, 2009. Revenues fell by 2% to €1.8bn, as a 17% decline in average fares was largely offset by a 15% growth in traffic. Unit costs fell 27% due to lower fuel prices (excluding fuel, unit costs fell 5%) and "rigorous cost discipline."
Ryanair's CEO Michael O'Leary commented: "Ryanair's ability to grow both traffic and profits during the half year is a testament to the strength of Ryanair's lowest fare model, and our relentless cost discipline. However these results are heavily distorted by a 42% fall in fuel costs, which has masked a significant 17% decline in average fares. We expect average fares to decline by up to 20% during Quarters 3 and 4, which will result in both these quarters being loss making. Despite this our full year guidance remains unchanged and will be substantially profitable, at a time when many of our competitors are losing money, consolidating or going bust."
Results detail
Goodbody analyst Eamonn Hughes commented: "Ryanair has reported its H110 numbers this morning, with Adjusted EPS of 26.2 cent, which was behind our 28.9 cent forecast. Revenues of €1.767bn were down 2.4% yoy, compared with our forecast of a 1% decline. Operating expenses ex-fuel rose 8.7% yoy (we had an 8.7% rise), while a 42% fall in fuel costs (-43% expected) led to a 16.5% fall in overall operating expenses (we had -17.2%). As a result, adjusted pre-tax profit rose 93% to €433m, compared to our €470.7m expectation and attributable profit was €387m vs our €427.9m expectation (ex exceptionals in Q1). Net debt was €49m versus our estimate of €54m, while gross cash came in at €2.54bn (€2.49bn anticipated).
Revenues: Passenger numbers were up 15% yoy in the half year period to 36.3m (as already disclosed from its monthly traffic stats). Load factors were flat at 85%. Average fares fell 17% yoy to €39.1 for the half year (versus our €39.1 estimate, -17% yoy), split -13% in Q1 and -20% in Q2 (-20% expected). Ancillary revenues were up 8% to €346.3m, lower than anticipated which appears to be from lower excess baggage fees (came in at circa €9.5 per pax and was expected to be flat per pax at €10.3). We estimate that Q2 ancillaries per pax fell by 15% (3% rise in absolute terms, but pax were up 18% yoy).
Outlook: The carrier reaffirmed guidance on expected net profit for the full year at the lower end of the €200-300m range. RYA is now guiding yields "to decline by up to 20% during quarters 3 & 4". While the company notes that guidance is unchanged, we would highlight that previous guidance was for yield compression "at or slightly more than minus 20%" for FY10, bearing in mind it has just done -17% in H1. In terms of the deal with Boeing, Ryanair indicated that "we have made little progress in our discussions" though "we won't continue these discussions indefinitely". It wants to complete them by year end, otherwise it will end its relationship with Boeing and "confirm a series of deferrals and cancellations" as "we see no point in continuing to grow rapidly in a declining yield environment". They say, they would "prefer to grow", but if they don't do a deal then "Ryanair should change course before the end of this fiscal year". So a deadline is looming, but we are probably no further on from the October 2 Investor Day commentary.
Estimates: We have yields down a further 20% in Q3 and 15% in Q4, so for the moment, these figures probably look ballpark. However, having said that, the weak Q2 ancillaries figure will see us having to cut our estimates, which will likely bring us from the high 200s down to the mid-200s, closer to the company guidance. There is a conference call later today, so we'll gauge the yield / oil price / ancillaries debate then, before we formalise any adjustments. At first glance, it would appear our estimates will likely have to come back materially for this year."
