Business Irish

Monday 25 September 2017

Rising Ryanair shares still have further to go

THE eurozone may be collapsing all around us, the global economy headed for renewed recession and oil prices stuck in the stratosphere, but that hasn't stopped Ryanair from signalling that it is now expecting a 10 per cent increase in full-year net profits to €440m.

Chief executive Michael O'Leary only agreed to the abandonment of the low-cost airline's previous strategy of 20 per cent annual growth in passenger numbers with great reluctance, but the impact on the Ryanair bottom line has been dramatic.

Ryanair reported its results for the six months to the end of September this week. These showed that passenger numbers grew by 12 per cent to 44 million, average fares were up by 13 per cent to €50 and after-tax profits climbed by 20 per cent to €544m.

The airline also further strengthened its balance sheet with net debt falling from €709m to €372m in the first half of the year.

With Ryanair grounding 80 aircraft this winter, full-year passenger growth will be just four per cent for the financial year ending March 2012 and five per cent in 2013.

This lower growth means that Ryanair can squeeze higher fares from its passengers and throw off tonnes of cash.

Even after the nine per cent share price increase following the results announcement, at €3.65, Ryanair has a market value of just €5.4bn.

With Mr O'Leary holding out the prospect of €500m special dividend in the 2013 financial year, the shares have further to go.

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