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EasyJet (lon:ezj)
EasyJet – One For A Medium Term Hold?
EasyJet Financials
Item
Current Period
Previous Period
Year
2020
2018
Period
12 Months
12 Months
Revenue
£3009m
£6385m
Earnings
Adjusted Earnings
EBITDA
Adjusted EBITDA
Statutory Profit
(£1273m)
£430m
Adjusted Profit
Total Debt
Net Debt
£1125m
£326m
EasyJet Share Price
Grade:
No grade has been assigned to this company
Title:
EasyJet – One For A Medium Term Hold?
Company:
EZJ - EasyJet
Share Price Then:
741p
Author:
Ian Smith
Date:
Thu 19 Nov 2020
Comments:
Everyone knows that the airlines have been hammered by the travel restrictions, a simplistic view is that the share price will recover as COVID restrictions are removed. A more detailed examination may suggest that these businesses have simply incurred too much debt to be viable.
Certainly Easyjet have been on the borrowing trail and the current price of 741p well within the 5 year range of 500p-1500p makes hope for growth in 2021 seem reasonable.
With a current market cap of around £3.4bn during 2020 they raised around £3.1bn, the loss of £1.2bn 2020 is off course staggering.
The number for the volume of passengers is 48 million in 2020 rather than 96 million for 2019 at an average revenue of £54 per seat down from £61. The cost per seat was £57 ex fuel or £69 including fuel clearly fixed costs are going to account for a large part of the loss for each passenger flown.
Easyjet has a fleet of 342 planes, 125 of which are leased with various terms and there are negotiations under way to reduce this to 302.
Since covid started 43 planes have been subject to sale and leaseback, raising just over £1bn presumably at the expense of increased seat costs in the future. A further 10 sales were announced today raising a further £280m
In a nutshell cash and cash equivalents are £2.3bn (2019: £1.6bn), borrowings is £2.7bn (2019: £1.3bn) and lease liabilities are £710m (2019: £578m).
It is this volume of passengers that give me grounds for hope, depending upon who is left flying when the skies reopen and what sort of pricing strategy they adopt these numbers are not terrifying. With an average ticket price of under £60 there is clearly room for a price increase and £10 per ticket on 98 million passengers goes a long way to removing this debt in one year.
Like Rolls Royce, Easyjet have been hit by jet fuel hedging costs, £311m, which were supposed to protect them from fuel price variations. So there may be more variation in fuel costs in 2021, in 2019 fuel costs were about £1.4bn and in both 2019 and 2020 this was around £13 per seat
This £13 is important as saving fuel by flying slower or carrying a smaller reserve can only ever save a small amount on the ticket price. You may able to save 10% of the fuel used but this is just £1.3 and prices surely aren’t that competitive? Unless airlines abandon load factor concerns, Easyjet reported 87% for 2020 and 91% for 2019, and offer flights they know will be half full.
There may still be room for more plane sale and lease back if needed and there hasn’t been any big share issues so Easyjet clearly hasn’t exhausted all future financing options.
Read Count:
1090
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