Ryanair posted a stronger-than-expected jump in second-quarter profit yesterday and raised its full-year forecast on a rosier winter outlook, pushing shares in the airline to a record high.
Europe's biggest budget airline said it now expected profit after tax for the year to the end of March 2007 to rise 16 per cent to £234 million compared with previous guidance of an 11 per cent rise to €335 million. "They're very strong results and clearly the outlook is significantly enhanced," said John Sheehan, analyst at NCB Stockbrokers. "Despite high fuel costs they're on track for a strong second half and the results should be well received."
Net profit was €213.4 million in the three months to end-September, up 23.7 per cent on the same period last year and above the average €210 million of six analysts' forecasts.
The company now expects average fares to rise two to three per cent in the third quarter against an earlier forecast for a five per cent decline. For the second half as a whole, yields are seen flat.
Its shares were up 3.2 per cent at €9.25 in Dublin by 9 a.m., outperforming a 0.2 per cent rise in the Irish SE Index, after earlier rising to a new life high of €9.29.
Dublin-based Ryanair plans to seek shareholder approval in December for a two for one share split to improve the marketability and liquidity of its stock, particularly in the United States where its depositary receipts are trading at over $60.
"It has a more appealing look about it when the share price is $25 to $30," Chief financial officer Howard Millar said.
Mr Millar told Reuters in a telephone interview he was upbeat about the company's 2007/2008 business year.
"We have lots of plans for next year and we'd be very confident for the summer," he said.
Regarding Ryanair's hostile bid for fellow Irish carrier Aer Lingus, Mr Millar said he expected Ryanair to extend the offer period beyond next week's deadline after a staff trust launched a ballot on the offer that runs until late November.
"If the ESOT (Employee Share Ownership Trust) don't accept, it most likely won't succeed," he said of the offer that values Aer Lingus at €1.48 billion.
Mr Millar said he expected the process to run until late December and Ryanair's offer was "a good starting point".
"If we don't make it, well then we can continue to be a minority stakeholder and we can hold our position and in a year's time we can make another bid if we so wish," he said later in a radio interview with Irish broadcaster RTE.
Ryanair has again extended its fuel hedging, having already insured 90 per cent of its needs against price rises for the remainder of 2006 at an equivalent oil price of $73 a barrel.
"We have used the recent weakness in forward oil prices to hedge 50 per cent of our requirements for the quarter from October to December 2007 at a cost which is 10 per cent lower than comparable Q3 this year," Ryanair said.
Goodbody stockbrokers analyst Joe Gill said he expected to raise his earnings forecasts for this year and next. "Together with the planned reduction in ex-fuel unit costs next year, it (fuel hedging) provides a powerful platform for price competition and market share expansion," he said.
Ancillary revenues from sources other than ticket sales, such as car hire and in-flight services, rose to €87.7 million from €71 million in the same period last year.
Ryanair said online hotel provider Need a Hotel had ended its partnership with the airline following a change of ownership but the move was not expected to effect earnings this year.