European airline Ryanair (RYA) has defied downbeat expectations after the Brexit vote as it posts a 7% increase in first half profit.
Pre-tax profit has risen from €1,088m to €1,168m despite difficult market conditions, including air traffic strikes, terrorism and the material weakening of the pound following the EU referendum.
Investors welcome the news after Ryanair’s fourth quarter earnings were affected by similar conditions earlier this year. The share price has rallied more than 5% to €13.43, staging quite a recovery after slumping to €10.57 directly after the Brexit vote.
Traffic growth is 12% higher at 65 million due to the Always Getting Better programme and lower fares on average of 10% at €50.
Investors are undeterred by lower fares as a cut in unit costs by 10% offset the decline.
Ryanair announced a 7% increase in its first half profit
Analyst Stephen Furlong from asset manager Davy Research is upbeat about Ryanair as its longer-term traffic growth forecast has been raised from 180 million to over 200 million customers by 2024.
Furlong is impressed by improved cost performance and strong traffic momentum, maintaining the ‘outperform rating’ and price target of €16.
Cantor Fitzgerald managing director Robin Byde is maintaining his ‘hold’ recommendation, noting the company’s solid first half and Ryanair’s outperformance of the sector.
Ryanair is undertaking a share buyback of up to €550m until February 2017 and boasts a strong balance sheet with €77m of net cash.
The airline’s medium term guidance for its ancillary sales, the official term for non-ticket income, has been raised from 20% to 30% of revenue over the next four years to March 2020.
