Ryanair today reported that H1 profits, in the period April-September 2013, rose by 1% to €602m, as its traffic grew 2% to 49m passengers. Revenue per passenger increased 2% due to a 22% rise in ancillary revenues. Unit costs rose 3% largely due to a 7% increase in fuel prices. Average fares fell by 2% during the half year, and have continued to fall this winter, which will lead to a reduction in Ryanair’s full year profit guidance from €570m to approx. €510m.

Michael O'Leary, Ryanair CEO, commented: "The 2% fall in fares during H1 was impacted by one off events such as the timing of Easter (not in Q1), the summer heatwave in northern Europe, French ATC strikes in June, and weaker sterling. Ryanair has responded to these market conditions by stimulating traffic growth with aggressive fare promotions. This will lay the foundation for traffic growth over the coming years, particularly as our new 175 aircraft deliver from September 2014.

While fares are falling, ancillary revenues grew strongly by 22% to €713m, driven by the successful roll out of reserved seating, priority boarding and higher credit/debit card fees.

Unit costs in H1 rose 3% mainly due to a 7% increase in fuel costs. Excluding fuel, sector length adjusted unit costs fell by 2% as we continued to deliver cost efficiencies, despite higher Eurocontrol charges and the impact of a 2% pay increase from April last."

Results detail [pdf]

Presentation [pdf]

Stephen Furlong and Joshua Goldman of Davy commented - - "Ryanair H1 profits were in line with market expectations (net income €602m, Davy €604m, consensus €605m) with record profits of €523.8m in Q2. The outlook statement is, however, weaker. While forward bookings are running slightly ahead of last year, Ryanair expects Q3 fares to fall by 9% and Q4 to fall by up to 10%. Full year profit guidance has been lowered to €500-520m from the lower end of €570-600m (Davy €575m, consensus €581m).

While clearly this is disappointing, we note that cost discipline continues with sector length adjusted cost per passenger expected to fall by 7% in H2, lower cost airport and aircraft deals in place and a significantly lower fuel hedged position for FY2015. Cash generation continues to support the €1bn in buybacks/special dividend over FY2014-2015. We will likely move to the middle of the guided range (€510m) and this will have a knock-on effect of an estimated high-single-digit percentage on our FY2015 forecasts (currently c.€700m). This will lower our 12-month price target to €7 (from €8), but we retain our ‘Outperform’ rating given the group’s industry- leading model, cash generation and potential for significant margin expansion in FY2015."

See full Davy article.

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