Wizz Air Holdings on Monday said it expects a ‘material’ profit in the second quarter but cautioned it will trim flight utilisation over the summer to cope with recent travel chaos.
For the first quarter to June 30, Wizz Air said it registered a €285 million operating loss but expects a ‘material’ operational profit in the second quarter on strong summer demand.
For the first quarter, available seat kilometres were 30% higher versus the same period in financial 2020, growing sequentially month-on-month as most Covid restrictions were lifted and as capacity reallocation related to the war in Ukraine started to take effect during the course of the quarter.
Revenue per available seat kilometre for the first quarter was down 10% from financial 2020, with net fares in line with financial 2020. The first-quarter load factor of 85%, down 9 percentage points, reflected the efforts of Wizz Air to ‘pass through higher input cost in its fares’. In addition, ancillary revenue for the quarter was up 14% over financial 2020.
Wizz Air said unrealized foreign exchange losses, the cost of travel disruption and lower utilization, combined with the pricing environment, drove the first quarter loss.
Looking ahead, Wizz Air expects revenue and pricing momentum to continue to improve in its second quarter. Load factors as of July have improved to above 90% and the fare environment remains strong, it added, with industry capacity reducing and consumer demand for the summer looking healthy.
However, it warned: ‘To be able to avoid cancellations and secure a more punctual operation to our customers, we have further improved the agility and resilience of our network including adjusting schedules where we have seen a higher occurrence of issues...In total for the peak summer period we expect to reduce utilization a further 5% versus the plan outlined at the full year results to reduce the impact of ongoing external disruptions. We now expect summer ASK growth to be around 35% versus F20.’
Wizz’s update came as London’s Heathrow Airport warned it will ask airlines to cancel more flights this summer if it does not believe previous schedule reductions will sufficiently reduce disruption.
Carriers were ordered by the UK government and the Civil Aviation Authority last month to make sure their timetables are ‘deliverable’ after the sector was unable to cope with demand during the Platinum Jubilee half-term school holiday period.
Wizz Air shares were down 5.4% in early dealings.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 1.1% at 7,117.64
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Hang Seng: down 3.1% at 21,046.64
Nikkei 225: closed up 1.1% at 26,812.30
S&P/ASX 200: closed down 1.1% at 6,602.20
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DJIA: closed down 46.40 points, or 0.2%, at 31,338.15
S&P 500: closed down 3.24 points, or 0.1%, at 3,899.38
Nasdaq Composite: closed up 13.96 points, or 0.1%, at 11,635.31
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EUR: down at $1.0135 ($1.0185)
GBP: down at $1.1974 ($1.2040)
USD: up at JP¥136.97 (JP¥135.88)
Gold: down at $1,740.42 per ounce ($1,744.88)
Oil (Brent): down at $105.52 a barrel ($106.00)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Monday’s key economic events still to come
10:00 EDT US employment trends index
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UK Foreign Secretary Liz Truss has pledged to reverse the controversial national insurance hike if made Tory leader, as she insisted she can be ‘trusted to deliver’. The senior Cabinet minister, who is widely expected to be a front-runner in the already crowded race, promised to ‘start cutting taxes from day one’ to help with the cost of living. With newly appointed Foreign Office minister Rehman Chishti also declaring his candidacy on Sunday evening, there are now 11 Tories in the running for the top job. Other contenders include former health secretaries Sajid Javid and Jeremy Hunt, ex-chancellor Rishi Sunak, his successor Nadhim Zahawi, Transport Secretary Grant Shapps and trade minister Penny Mordaunt. Former minister Kemi Badenoch and senior backbencher Tom Tugendhat have also thrown their hats into the ring. The PA news agency understands Home Secretary Priti Patel is yet to decide whether to launch her own bid, and will likely make a final decision on Monday.
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China’s consumer inflation climbed up in June to the highest point in two years, official data showed Saturday, following rising food prices as pork costs spiked due to tighter supplies. The world’s second-largest economy has largely been spared the impact of a global surge in food prices caused by Russia’s war in Ukraine, but the relative stability could be upended by the rising cost of pork – a staple meat in the country. In June, the consumer price index, a key gauge of retail inflation, rose 2.5% on-year in line with analyst expectations but stayed flat from May due to a price drop in most foods except pork.
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Japan’s ruling party and partners won enough votes to form a supermajority in an upper house election held just days after the assassination of former prime minister Shinzo Abe, local media said Monday. The ex-premier’s ruling Liberal Democratic Party and its coalition partner Komeito strengthened their hold by winning more than 75 of the 125 upper house seats up for grabs, according to national news outlets. The parties are part of what is now a two-thirds supermajority willing to amend the country’s pacifist constitution, thereby strengthening its military role on the global stage – a longtime Abe goal. Even before the former prime minister’s murder, the LDP and Komeito were expected to cement their majority, though the final number of seats will be scrutinised for signs of whether the attack bolstered support for them.
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BROKER RATING CHANGES
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JPMorgan places Mondi on ’positive catalyst watch’ into H1-results
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Deutsche Bank starts Greggs with ’hold’ - price target 1,950 pence
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Deutsche Bank starts Domino’s Pizza with ’buy’ - price target 355 pence
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COMPANIES - FTSE 100
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Dechra Pharmaceuticals reported annual revenue progress, though it cautioned that growth rates are normalising as pandemic tailwinds ease. The veterinary products firm saw a surge in demand due to larger pet care spending during the Covid-19 lockdowns. Revenue growth is slowing, however, as the effects of the pandemic unwind. For the year ended June 30, revenue increased by 14% at constant exchange rates and 12% at actual exchange rates. In financial 2021, revenue grew 20% at constant currency and 18% on a reported basis to £608.0 million. European Pharmaceuticals revenue growth was 8% at constant currency and 5% at actual exchange rates, while North American Pharmaceuticals revenue growth was 24% at constant currency and 25% at actual exchange rates, Dechra added on Monday. The company also said its supply chain ‘remains robust’. Its cost base has ‘normalised’ as Covid curbs eased, and it has seen a ‘further increase’ in costs due to global inflationary pressures. It is ‘well placed to proactively manage’ inflation, however.
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COMPANIES - FTSE 250
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Domino’s Pizza Group appointed Edward Jamieson as its new chief financial officer, who is set to join the company and the board of directors in October. Jamieson most recently served as UK & Ireland regional finance director at food delivery firm Just Eat Takeaway.com, and will replace current interim CFO David Surdeau, who joined Domino’s in November 2021.
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COMPANIES - SMALL CAP
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Go-Ahead Group said it expects a ‘good performance’ for its recently ended financial year. For the year ended July 2, the public transport operator expects its Regional Bus division to deliver operating profit before exceptional items ‘ahead of that of the prior two years’. The unit has seen a recovery in passenger demand following the lifting of Covid restrictions, with volumes called ‘particularly encouraging’ in recent weeks. The London & International Bus arm should post operating profit before exceptional items at least in line with pre-pandemic underlying profitability levels, of around £51.2 million. UK Rail’s operating profit before exceptional items is set to be within the £25 million to £30 million range previously set out, while International Rail should book a loss between £15 million and £20 million.
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COMPANIES - GLOBAL
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Elon Musk on Friday pulled the plug on his $44 billion deal to buy Twitter, accusing the social media firm of ‘misleading’ statements about the number of fake accounts, a regulatory filing showed. Musk’s effort to terminate the deal that he inked in April sets the stage for an epic court battle over a billion-dollar breakup fee and more. ‘Mr Musk hereby exercises [the] right to terminate the Merger Agreement and abandon the transaction,’ his lawyers said in a letter to Twitter, a copy of which was filed with the Securities & Exchange Commission. Twitter has held firm that no more than 5% of accounts are run by software instead of people, while Musk has said he believes the number to be much higher. Immediately after the news broke, Twitter board Chair Bret Taylor vowed to sue Musk to hold him to the terms of the buyout deal, saying ‘we are confident we will prevail.’
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A leaked cache of confidential files from ride-sharing company Uber illustrates ethically dubious and potentially illegal tactics it used to fuel its frenetic global expansion beginning nearly a decade ago, a joint media investigation showed Sunday. Dubbed the ‘Uber Files,’ the investigation involving dozens of news organizations found that company officials leveraged the sometimes violent backlash from the taxi industry against drivers to garner support and evaded regulatory authorities as it looked to conquer new markets early in its history. Culled from 124,000 documents from 2013-2017 initially obtained by British daily the Guardian and shared with the International Consortium of Investigative Journalists, the revelations are the latest hit for a company dogged by controversy as it exploded into a disruptive force in local transportation.
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Almost 3,000 diesel-powered vehicle owners in Germany have joined a class action against Mercedes-Benz in relation to the long-running scandal over emissions of nitrogen oxides, justice officials have told dpa. Initial hearings are to be held on Tuesday in a court in Stuttgart, the city where the company is based. By the end of June, 2,804 Mercedes-Benz owners had joined the class action brought by consumer groups organized in the national vzbv association. Mercedes-Benz stands accused of deliberately manipulating exhaust emission levels during testing, thereby concealing the level of emissions under actual driving conditions.
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Monday’s shareholder meetings
Downing Strategic Micro-Cap Investment Trust PLC - AGM
National Grid PLC - AGM
Randall & Quilter Investment Holdings Ltd - GM re fundraising
Water Intelligence PLC - AGM
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