|Michael O'Leary, CEO of Ryanair (left) with Ray Conner, Boeing Commercial Airplanes president and CEO, Paris, June 2013. |
Ryanair Holdings Plc today issued a trading
update and cautioned that while it remains comfortable with its H1 guidance, a
recent weakness in forward yields into Q3 suggests that there will be no upgrade
to full year guidance, as the airline now expects the full year outturn will
be at the lower end of its full year net profit range of €570m to €600m.
However if fares and yields continue to weaken over the coming winter there can
be no guarantee that the full year outturn may not finish at or slightly below
the lower end of this range.
Ryanair's Michael O'Leary said: "As indicated during our Q1 results
presentation on July 29, close in late bookings in July had been at weaker than
expected yields due primarily to the heatwave in Northern Europe and weaker
sterling/euro exchange rates. The close in booking pattern returned to some
normality in August, which will ensure that our H1 guidance remains unchanged,
which is for a small increase in H1 profits over the prior year H1 comparable.
However in recent weeks we have noticed a perceptible dip in forward fares and
yields into September, October and November, which is we believe due to a
combination of factors:
- Increased price competition and some
capacity increases in the UK, Scandinavia, Spanish and Irish markets;
- The continuing effect of austerity and weak
economic conditions across Europe;
- Weaker sterling/euro exchange rates.
We will respond to this lower yield outlook by
selectively reducing our winter season capacity, thereby cutting our full year
traffic target from over 81.5m to just under 81m. We are also rolling out a
range of lower fares and aggressive seat sales particularly in those markets
mainly UK, Scandinavia, Spain and Ireland.
Ryanair remains confident that we will continue to hit our revised passenger
targets albeit at lower fares and yields than originally expected. Accordingly
it is prudent to advise shareholders that our full year profit after tax (PAT)
guidance will now be at the lower end of our €570m to €600m range.
However even at or slightly below this full year number of €570m PAT, Ryanair
cash flows and balance sheet remain in rude good health and there is no change
to our recently announced plans to complete share buybacks of at least €400m
(€177m already completed in FY March 2014) and up to €600m via a combination of
dividends and/or buybacks in FY March 2015."
Ryanair shares have plunged 89 cent or 13% to
Ryanair Weak yields see FY14 profit at lower end of guidance:
of Goodbody, comments -- "Ryanair has released a surprise trading update this
morning highlighting; a) increased price
competition in UK, Ireland, Nordics and Spain, b) weak economic conditions in
c) weak £/€. Ryanair had intended to park 50-60 aircraft in the winter, down
from 80 last
year, to allow it to grow to 81.5m passengers for FY14. It now intends to reduce
capacity growth assumption and will park 70 aircraft, which implies capacity
+2.7% in H214 versus the +5% expected to hit just below 81m passengers.
Management remains happy with the outlook for H114 profit, but now expects
profit to come in at the lower end of its €570m to €600m guided range. It has
strength of its balance sheet and said that there will be no change to its
and dividends for FY14 and FY15.
This is a surprise statement from Ryanair and comes contrary to some of the
commentary from the peer group and indeed Ryanair’s own commentary at its June
investor days. Given the markets mentioned, we expect the price competition
be coming from Norwegian, Aer Lingus and IAG (Iberia and Vueling). We expect to
downgrade our forecasts to somewhere in the range of €570-580m from €655m (-
14%) for FY14."
Irish Economy 2013: Services PMI back to 2007 level
boosted by 'fake' exports
Eurozone services returned to growth in August;
French activity shrunk
France like Ireland is run for the benefit of the
SME interest rates dip in Italy and Spain
Irish Economy 2013: Budget deficit at €7.3bn year
to-date in August
August’s survey of UK service providers signalled
continued strong growth of activity and new
business. Activity rose at the sharpest pace since
December 2006, while growth in new work was the
best seen since May 1997.
Capacity continued to be tested, with backlogs of
work rising at the sharpest pace for over 13 years.
However, employment broadly stagnated, in part
due to an inability of service providers to replace
The headline seasonally adjusted Business Activity
Index registered 60.5 in August. Improving on July’s
60.2, the latest reading was the highest in over six and-a-half years. Over a
quarter of the survey panel
registered an increase in activity.
Latest data showed that growth was principally
supported by a rise in new business. There were
many reports of an ongoing strengthening of market
confidence which helped companies convert
enquiries into hard contract wins. Marketing and an
improvement in the housing market were also noted
as reasons for higher sales volumes.
Growth of new business has now been recorded for
eight successive months and the latest increase
was the sharpest seen for over 16 years.
Economic View: Tight expenditure control
means public finances well on track; Dermot O'Leary of
Goodbody comments - - "Unlike in 2012, tight control of public spending
continues to be the main feature of the latest Exchequer Returns, released
yesterday evening. As a result, Ireland looks well on track to hit budget
deficit targets for 2013 overall.
Gross voted spending fell by 3.4% yoy in the
first eight months of the year, coming in some €531m below original government
estimates. It is encouraging to see the restraint in current spending (down 3%
yoy), but not so welcome is the 13% yoy decline in capital spending, putting
spending 14% below expectations in the year to date.
Tax revenues are running modestly below (€57m or
0.2%) expectations. Within this, VAT receipts are the biggest underperformer
(down 0.4% yoy and €245m behind expectations). Corporation tax is the big
outperformer, coming in €242m ahead of expectations.
Excluding one-off items such as bank capital
injections, bank guarantee fees and Central Bank income, we estimate the deficit
fell from €11.6bn in August 2012 to €10.1bn in August 2013. Although Budget 2014
will be subject to a greater degree of uncertainty this year due to its earlier
timing, the government looks on track to beat its 7.5% of GDP budget deficit
target for 2013. See our note this morning for more details."
AIB Group Launches €500m covered bond,
priced at MS+180bps: Eamonn Hughes of Goodbody
comments - - "AIB yesterday announced that it has completed a €500m 5-year ACS
issue at MS+180bps. AIB indicates that the deal was placed with c.90
international investors. Goodbody Capital Markets was co-manager on the
transaction. The issue was part of the bank’s €20bn mortgage covered securities
The deal pricing compares to the 3 year MS+270bps
issue in late November last year and 3.5 year issue in January at MS+185bps. So
the pricing reflects the improvement in recent months for Irish paper, as the
economy stabilises and house prices turned positive for the first time in 5
years on an annual basis in June (was also positive in July).
The Irish banks need to wean themselves from
monetary authority funding in due course. In June, monetary authority drawings
totalled 16% of financial liabilities at AIB compared with 9% at BOI, so the
margin headwinds on normalisation will be higher at the former. Having said
that, Irish banks continue to issue term funding at rates cheaper than we model
into our forecasts (average just under 4%), so supporting our margin
improvements thesis at the banks."
Banks: AIB CEO appears at Oireachtas
Finance Committee hearing: Eamonn Hughes and Colm
Foley comment - - "As flagged yesterday, AIB’s CEO appeared before the
Oireachtas Finance Committee yesterday. BOI and Ulster Bank are pencilled in
today and PTSB for tomorrow. The main focus was the mortgage market and progress
with distressed borrowers.
AIB indicated that it met the Central Bank’s
target of 20% of mortgage customers in arrears receiving a sustainable solution
in Q2. This would require the bank to offer 6,200 solutions in Q2, but the bank
made 8,600 offers. The latter included 5,894 customers that were threatened with
legal action since these customers were typically in arrears for between 2.3-3.0
years and had consistently failed to contact the bank. Since the point of
contact about 20% of these customers had recommenced repayments. He outlined
that 14,000 customers that had slipped into arrears this year are now back on
track but that one-quarter of buy to let customers had made no repayments in the
past 6 months. On the latter, the bank indicated it needs to set up action on
rent receivers. He reiterated the comments that c.20% of customers in arrears
were strategic defaulters and for instance noted that 2,000 customers in arrears
had deposits greater than the amount of their arrears. He wrapped up by
indicating that AIB had agreed permanent solutions with 4,400 accounts and that
a total of 12,500 offers have been made to customers in relation to resolving
arrears. On capital, the CEO indicated that it expected to pass the stress tests
planned for next year.
The CEO indicated that mortgage write-offs in H1
were €38m, already itemised in the H1 results. We estimate that AIB has written
off €161m of residential mortgages over FY10-H113, which equates to just 5% of
the €3.385bn stock of provisions in June. We would anticipate write-offs
ultimately equate to provisions."
In New York Tuesday, the
Dow rose 24 points or 0.16% to 14,834.
The S&P 500 added 0.42% and
the Nasdaq advanced 0.63%.
The MSCI Asia Pacific
Index rose 0.3% Wednesday.
Japan's Nikkei 225 gained
0.54%; China's Shanghai Composite rose 0.21%; Korea's Kospi index slid 0.04%;
Australia's S&P/ASX 200 slipped 0.27% and in Mumbai, the Bombay Stock Exchange
the S&P BSE India Sensex Index climbed 1.76%.
Jones Stoxx Europe 600 fell 0.52%
in mid-morning trade Wednesday.
the ISEQ is down 2.44% because of the Ryanair tumble.
Irish Share Prices
Key Index Performance Statistics
AIB Daily Report
Bank of Ireland Daily Report
The euro is
trading at $1.3175 and at £0.8431.
For live currency updates, check the
right-hand column of the Finfacts
The US dollar
fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.
Dry Index, a
measure of shipping costs for dry commodities, hit
an all-time High of 11,771 on the 21st of May, 2008. From
that time it reversed and on the 5th of December, 2008 it hit a low of 663 - -
close to a 1986 low.
On Thursday, July 15, 2010, the index fell
for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg
the BDI rose 29 points 2.25% to 1,168.
Global rebalancing — the tanker
Crude oil for October 2013 delivery is
currently trading on the Chicago
York Mercantile Exchange (CME/Nymex) at
$107.73 down 81 cents from Tuesday's close. In
London, Brent for October delivery is trading on the International
Commodities Exchange at
$115.02. The North
Sea benchmark accounts for two-thirds of the global market.
Finfacts, July, 15, 2013: US
West Texas Intermediate oil benchmark jumps in July -
- margin between WTI and Brent falls.
Gold spot price
price of an oz of gold is trading on the CME
in Chicago at $1,403.50 down
$8.50 from Tuesday's closing.
Gold had hit
a record high of $1,921.15 a troy ounce on Sept 06, 2011.
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