The easyJet (LSE: EZJ) share price picked up a few percent in response to full-year figures on 28 November.
We’re still looking at a five-year fall of 62% though. But at least that’s better than the 75% hammering that International Consolidated Airlines shares have taken.
When I look at easyJet shares, I’m torn.
FY 2023
But first, what do these latest final results look like? In short, very good, I’d say.
The budget airline recorded a record second-half profit before tax. That’s in what the update called a “challenging external operating environment“. And I’d say that’s putting it mildly.
We saw a headline profit before tax (PBT) of £455m, compared to a loss of £178m last year.
It comes after revenue grew by 42%. But headline costs were up 30%, and that’s something I think we need to look out for in the coming year.
I’m sure inflation-related rising costs for the airline haven’t ended, and could easily extend well into next year. What leeway easyJet has over its own pricing to cover rising costs is a bit of an unknown.
Outlook
Chief executive Johan Lundgren said: “We see a positive outlook for this year with airline and holidays bookings both ahead year on year and recent consumer research highlights that around three quarters of Britons plan to spend more on their holidays versus last year with travel continuing to be the top priority for household discretionary spending.”
The board is aiming for a PBT target of between £7 and £10 per seat. And it hopes to hit £1bn in total PBT, which sounds great to me if it comes off.
But that per-seat price strikes me as, well, not a lot of money. When I think of airline seat price competition, there can’t be much between a healthy margin and struggling to make ends meet.
Still, at least at this stage in 2023, it looks like the cash situation is a lot better.
Dividends are back
Speaking of a “robust liquidity position,” easyJet revealed a dividend of 4.5p per share.
That’s not a lot just yet. But it represents 10% of after-tax headline profit, and the board hopes to lift it to 20% in 2024.
And speaking of liquidity, what about debt?
A year ago, at 30 September 2022, easyJet had £670m net debt. This year, there’s £41m net cash on the books.
That’s quite a turnaround for the balance sheet.
Two ways
Anyway, what about my talk of being pulled in two directions here?
It’s all about airlines.
I’ve never liked a business model that’s almost entirely based on price competition between essentially indistinguishable services. And it’s a model that faces a multitude of external costs, over which it has little to no control.
The other side is that I really think easyJet shares could be in for a few good years now, and I actually find them tempting.
Should I take the risk? I need to think some more.
