International Consolidated Airlines Group on Friday posted a narrowed loss for 2021, saying that after the setback caused by Omicron at the end of the year, bookings have rebounded strongly and it expects to fly 85% of its 2019 capacity in 2022.
The British Airways-parent reported a pretax loss of €3.51 billion, halved from a €7.83 billion loss in 2020, this was on total revenue of €8.46 billion, up 8.3% from €7.81 billion.
The carrier posted an operating loss of €2.77 billion in 2021, narrowing from €7.45 billion in 2020. Its operating loss before exceptional items narrowed to €2.97 billion from a €4.39 billion, beating consensus estimates for a loss of €3.03 billion.
IAG said the spread of Omicron, which became apparent in late November, had a negative short-term effect on the 2021 operating result, passenger bookings and cancellations.
As such, IAG expects a significant quarterly operating loss for the first quarter of 2022, due to normal seasonality, the effect of Omicron on near-term bookings, and the operating costs involved in re-building capacity.
However, the airline group, which also include Spain’s Iberia and Ireland’s Aer Lingus, expects operations to be profitable from the second quarter, leading to a significantly positive year for both operating profit and net cash flows from operating activities.
‘Prior to Omicron, long-haul traffic had seen the highest booking activity in October and November at over 80% of 2019 levels. This was driven by the re-opening of the North Atlantic corridor and the strength of long-haul leisure markets and travellers visiting families and friends,’ said Chief Executive Officer Luis Gallego.
‘Demand slowed down for very near-term trips following the emergence of Omicron in late November. However, bookings have remained strong for Easter and summer 2022 having picked up in the New Year. We expect a robust summer with IAG returning to around 85% of its 2019 capacity for the full year,’ added Gallego.
IAG shares were up 1.3% early Friday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 1.1% at 7,286.89
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Hang Seng: down 0.6% at 22,767.18
Nikkei 225: closed up 2.0% at 26,476.50
S&P/ASX 200: closed up 0.1% at 6,997.80
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DJIA: closed up 92.07 points, or 0.3%, at 33,223.83
S&P 500: closed up 1.5% at 4,288.70
Nasdaq Composite: closed up 3.3% at 13,473.59
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EUR: up at $1.1210 ($1.1148)
GBP: up at $1.3415 ($1.3353)
USD: down at JP¥115.30 (JP¥115.43)
Gold: down at $1,918.43 per ounce ($1,924.11)
Oil (Brent): down at $101.50 a barrel ($104.19)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Friday’s key economic events still to come
1100 CET EU business & consumer surveys
0830 EST US advance report on durable goods
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Ukrainian troops are putting up strong resistance to ‘Russian occupiers’ in the Kiev area, according to the Ukrainian general staff of the armed forces. In Dymer and Ivankiv, settlements north-west of the capital, airborne assault troops of the Ukrainian armed forces had reportedly stopped ‘overwhelming enemy forces’ on the border of the Teteriv River. The bridge across the river was destroyed, according to a statement. In addition to the fighting, Russian airstrikes targeted several cities. A dpa reporter said that sirens were wailing again in Kiev as the Russian attack entered its second day. The city administration has called on all citizens to find safe shelter. Many are hunkering down in the metro stations of Kiev, a city of 2.8 million. According to media reports, Russian troops attacked the airport in the western city of Rivne. Fighting was also reported in Sumy in the north-east, near the Russian border. These reports could not be independently verified. Ukraine’s foreign minister said Friday the capital Kiev had suffered ‘horrific’ Russian strikes overnight.
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Car production in the UK fell to its lowest January total in a decade despite an increase in the manufacture of electric vehicles. Almost 68,800 cars left factories in January, down by 20% on a year ago and the worst figure for that month since 2009, said the Society of Motor Manufacturers & Traders. Production for overseas and domestic markets was down by 18% and 31% respectively. Battery electric vehicle production was up a third, with one in 11 cars rolling off factory lines zero emission. Including plug-in hybrids and hybrids, electrified vehicles accounted for more than a quarter of output. The worldwide shortage of semiconductors was still affecting production as well as the changeover of some popular models, said SMMT.
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BROKER RATING CHANGES
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RBC raises BP to ’outperform’ (sector perform) - price target 450 (430) pence
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JPMorgan raises BAE Systems to ’neutral’ (underweight) - price target 630 (555) pence
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COMPANIES - FTSE 100
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Educational materials publisher Pearson launched a share buyback programme, as it said 2021 brought a strong financial performance and it is building growth momentum. Pearson posted pretax profit of £157 million, down from £354 million in 2020, on total sales that rose marginally to £3.43 billion from £3.40 billion. Operating profit was £183 million in 2021, down sharply from £411 million in 2020. Pearson said the decrease in 2021 was mainly due to the gain on sale of its remaining interest in Penguin Random House recognised in 2020 and restructuring costs in 2021. Pearson declared a total dividend of 20.5 pence, up 5.1% from 19.5p in 2020. In addition, the publisher said it intends to start a share buyback of £350 million in 2022. CEO Andy Bird said: ‘Pearson has been reorganised and refocused with a new purpose to ’add life to a lifetime of learning’ at the heart of everything we do. Our direct-to-consumer strategy is being driven by Pearson+, which had 2.75 million registered users at the end of 2021, with a strategy in place to engage more consumers and grow beyond Higher Education. Pearson is a digital first business, with consumer grade products, and the momentum across the company underpins our confidence for further growth in 2022 and beyond.’
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Russian steelmaker Evraz delivered a robust financial performance in 2021 as demand increased, saying it is ‘conscious of the current geopolitical circumstances’. Evraz said steel prices rose to their highest in years in anticipation of more robust demand from the construction and manufacturing sectors. Evraz posted pretax profit of $4.18 billion for 2021, more than three times higher than $1.30 billion in 2020 on total segment revenue of $14.16 billion, up 45% from $9.75 billion. Evraz generated free cash flow of $2.26 billion last year, doubled from $1.02 billion in 2020. The demerger of Evraz’s coal business is expected to complete in late March 2022, the company said. ‘We are conscious of the current geopolitical circumstances. We continue to monitor the situation and will keep you updated regarding any material developments that can influence our business,’ Chief Executive Officer Aleksey Ivanov said.
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Property portal Rightmove said pretax profit nearly doubled last year to £225.6 million from £134.8 million in 2020, as revenue jumped by nearly half to £304.9 million from £205.7 million. Revenue also beat 2019’s total of £289.3 million. Rightmove said it expects the number of property transactions in the UK to return to pre-pandemic levels, but it expects the online property advertising market to continue to grow. The company declared a 4.8 pence final dividend, up from 4.5p a year ago, taking its total payout for 2021 to 7.8p.
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Hikma Pharmaceuticals has instructed Citigroup Global Markets to conduct the $150 million first tranche of the $300 million share buyback that it announced on Thursday. The initial phase will begin on Friday and end by June 25.
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COMPANIES - FTSE 250
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Ferrexpo, which mines for iron in Ukraine, said export activities at the port of Pivdennyi in southwest Ukraine have been suspended. The port is where Ferrexpo’s berth is located for shipping iron ore pellets, so it has issued force majeure notices to customers who were due to receive shipments in the near term. Ferrexpo said its mining and processing operations in Horishni Plavni in central Ukraine continue to operate, and it is able to stockpile pellets there.
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COMPANIES - GLOBAL
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BASF reported a return to profit in 2021 thanks to a significant increase in sales and volumes, but expects sales to slow in 2022. In 2021, the Germany-based chemical company reported net income of €5.52 billion, a sharp improvement on the €1.06 billion loss in 2020. Earnings before interest and taxes advanced to €7.68 billion versus a €1.56 billion loss a year prior. Helping the firm returning to profit was a sharp jump in sales - which rose to €78.60 billion from €59.15 billion. Chemicals sales were up 68%, while Materials were 42% higher, Surface Technologies 36%, Industrial Solutions 16%, Nutrition & Care 7.0% and Agricultural Solutions 6.6%. BASF noted its 2021 Ebit was up 67% compared with the pre-pandemic level in 2019. The company said it has made a ‘very strong’ start to 2022, with its January sales ahead of the year prior. BASF is guiding for 2022 sales between €74 billion and €77 billion, and Ebit before special items between €6.6 billion and €7.2 billion.
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Friday’s shareholder meetings
Caledonian Trust PLC - AGM
GRIT Investment Trust PLC - AGM
Henderson Diversified Income Trust PLC - GM re investment policy
On the Beach Group PLC - AGM
Ruffer Investment Co Ltd - EGM re authority to issue shares
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