Record Ryanair profits but stocks edgy

Ryanair published record profits yesterday but had a rollercoaster day on the stock market, losing 5% of its value before returning to positive territory by the close of trading.

Ryanair reported a net profit of €503m for the year to the end of March, a 25% increase on last year’s €401m.

The company has achieved at least 25% growth in its profits each year since 2009, but the airline’s executives are saying that this growth performance could be interrupted by the eurozone’s perfect economic storm.

Ryanair chief executive Michael O’Leary cited a number of concerns that will impact on the no-frills airline’s ability to grow. “We remain concerned about next winter as we have zero yield visibility but expect recession, austerity, currency concerns, and lower fares at new and growing bases in Hungary, Poland, Provincial UK, and Spain will make it difficult to repeat this year’s record results.”

Despite a warning on short-term future growth prospects, Ryanair confirmed plans to pay its second ever dividend of €483m to shareholders.

Due to Ryanair’s strong balance sheet, the company said that it is set to take advantage of the failure of other European airlines and expand into their routes.

“A number of EU airlines have closed this year, including Malev (Hungary), Spanair (Catalonia), and Cimber Sterling (Denmark). IAG have announced that Bmi Baby will close later this summer if sale negotiations are unsuccessful. Ryanair has responded tactically to these developments by opening a new base in Budapest, expanding bases in Spain, Scandinavia and provincial UK to maximise capacity and minimise airfares for local consumers/visitors,” said Mr O’Leary.

Ryanair chief operating officer Micheal Cawley said that there had never been a better time for Ryanair to expand.

Mr Cawley said that the only thing that was holding Ryanair back was a shortage of planes. Ryanair will receive the last five planes of their current order with Boeing this winter. Mr Cawley is confident they will sign a deal for 200 planes with either Boeing, Airbus or the Chinese firm Comac to facilitate future growth.

Mr Cawley also confirmed that Ryanair’s fares will increase by between 3% and 5% as fuel costs are expected to continue to rise.

Davy’s analysts Stephen Furlong and Joshua Goldman still rated Ryanair as a company that will “outperform”, placing a target price of €5 per share.

“With the continuing competitive weakness (capacity reductions, failures) combined with a falling oil price, incredible cost discipline and cash generation, we continue to see Ryanair as a relative outperformer and maintain our ‘outperform’ rating and €5 price target,” they said in a briefing note.


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