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Ryanair’s full year net profit down, but again tops €0.5bn

Ryanair’s full year net profit for the 2013/14 financial year (FY13/14) which ended on 31 March 2014, was €523 million, slightly ahead of previous guidance given, but 8% down compared with the FY12/13 figure of €569 million.

That net profit was achieved despite a 4% fall in average fares, the company noted. Overall FY13/14 revenue was up 3% to €5,037 million from €4,884 million.

Traffic grew 3% to 81.7 million passengers booked (not passengers carried as with refunds rare for no-shows, all bookings are considered as carried) compared with 79.3 million last year. Revenue per passenger was flat, as strong ancillary revenue growth offset a 4% fall in average fares. Excluding fuel, sector length adjusted unit costs fell by 3%.

Ryanair chief executive Michael O’Leary highlighted the major programmes which had been carried over FY13/14, including a new website launched with “fare finder” facility; 121 new routes (though he did not state how many routes were closed); eight new bases; orders for 180 new aircraft with deliveries between 2014 and 2018; and fares launched on GDSs (Galileo & Worldspan) and Google flight search – all leading to a “rapidly improving customer experience”.

The airline also completed a €482 million share buyback during FY13/14.

“While it’s disappointing that profits fell 8%, due mainly to a 4% decline in fares, weaker sterling, and higher fuel costs, we reacted quickly to this weaker environment last September by lowering fares and improving our customer experience which caused H2 traffic to grow 4% as load factors rose 1%,” O’Leary noted. “Ancillary revenues grew 17%, much faster than traffic growth, and now account for 25% of total revenues.

“Forward bookings for summer 2014 are significantly ahead of last year, since we began offering lower fares and released our seasonal schedules earlier, and this should continue to deliver 2% higher load factors, and help us manage fares closer to departure as we have less capacity to sell,” he continued.

“We recently opened four new bases at Athens, Brussels, Lisbon and Rome. These are performing ahead of expectation as customers switch to Ryanair’s lower fares and industry leading customer service. We announced three new bases for winter 2014 in Cologne, Gdansk, and Warsaw. We released our winter 2014 schedule three months earlier than last year, offering our customers lower fares much earlier than our competitors, while we focus on building frequency and capacity on key business city pairs. We expect these new bases will provide significant growth opportunities as we start deliveries (in September 2014) of our new Boeing 737-800s.”

Ryanair is 90% hedged for FY14/15 at a cost of $960 per tonne (around $96 a barrel). This is designed to generate net savings of approximately €70 million compared with FY13/14. In light of recent oil price and US dollar weakness, the company has have hedged about 13% of its FY15/16 fuel (at approximately $94 per barrel), and has also hedged its dollar requirements, which will deliver further savings of up to 4% per passenger, in euro terms, in FY 2016.

“Our balance sheet remains among the strongest in the industry and was a key factor in S&P and Fitch recently awarding BBB+ ratings to Ryanair, making us the highest rated airline in the world,” O’Leary emphasised. “During FY13/14 we completed €482 million of share buybacks, well ahead of our original €400 million target. We remain committed to returning a further €500 million to shareholders in Q4 via a special dividend subject to AGM approval. This will bring the total returns to Ryanair shareholders since 2008 to over €2.5 billion. Our business model remains strongly cash generative and year end cash amounted to €3.2 billion (net cash of €158 million), despite €482m in buybacks, debt repayments of €391 million and capex of €506 million during the year.”

O’Leary expects a strong H1, but a weaker H2 to generate a significant rise in after tax profits to a range of between €580m to €620m, although this guidance is heavily qualified by H2 yield outturn, over which, he says, the company currently “has zero visibility”.

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