Can easyJet continue to soar? - Trading figures out this week

Low cost airline easyJet reports on first quarter trading on Thursday as it faces the challenge of building on a stellar performance in the previous financial year, when profits rose by 51%

Shares in easyJet soared to a record high yesterday
easyJet will reveal trading figures on Thursday

Budget airline easyJet will provide the latest snapshot from the sector this week, while WH Smith reports Christmas figures as the flurry of festive retail updates draws to a close.

Low cost airline easyJet reports on first quarter trading on Thursday as it faces the challenge of building on a stellar performance in the previous financial year, when profits rose by 51%.

Efforts to attract more business passengers saw the Luton-based carrier fly more than 60m passengers for the first time, helping earnings soar to over £478m in the year to September 30. But easyJet signalled a tougher start to the New Year as it came up against comparisons with a year earlier when pent-up demand after the Olympics drove a leap in business.

The group reported at the time of its annual results that first half bookings were so far flat on a year earlier.

Travel restrictions in Egypt also took their toll, while strikes and a power outage at Gatwick saw 152 more flights cancelled year-on-year on in October alone.

Costs also look likely to prove a headache over the year, with a £50m rise in the carrier’s annual fuel bill pencilled in alongside higher airport charges and maintenance expenses.

The group said in November that it expected to increase seats flown by around 3.5% in the first half and by 5% over the annual period. Passenger statistics covering the first quarter showed a 5.4% increase in October, a 3.4% rise in November and a 3.5% improvement in December.

Cantor Fitzgerald analyst Robin Byde said a slowdown in full-year earnings growth to around 13% looked likely, with big gains from allocated seating, aggressive roll-out on Italy and France and its cost cutting plan likely to have already taken place. In addition, the group would be facing headwinds from higher landing charges and maintenance costs.

Liberum Capital’s Gerald Khoo said that while easyJet had a “powerful business model that can thrive in both good and tough economic conditions” a strong recent share performance gave limited scope for more gains.

Retailer WH Smith will reveal how it performed over Christmas as it publishes latest figures on Wednesday.

It has already said that during the first 10 weeks of the financial year to November 9, like-for-like sales were down 4% compared with the same period in 2012, with high street stores off 6% and travel units down 2%.

But investors have shrugged off the declines, which continue a trend over the previous full year, when sales across its 615 high street locations fell by 6% but profits in the division were 4% higher to £56m.

Overall earnings were up 6% to £108m, enabling the group to promise a £50m return to shareholders.

WH Smith slashed £18m of costs from its high street network during 2012/13 and has said it was targeting a further £22m savings over the following three years.

The chain has weathered the downturn with the help of “impulse” offers such as a free bottle of water with the Telegraph newspaper, while shifting its focus away from lower-margin CDs and DVDs towards books and stationery.

It has said its network of 673 units based at airports, railway stations and motorway service stops is “well-positioned for recovery when the economy improves”.

Cantor Fitzgerald analyst Freddie George said following the latest trading statement that managers had a “very good track record” with strategy that should see earnings continue to grow, but cut the stock from buy to hold after it surged to an all-time high.

Elsewhere in the sector, stationery chain Ryman announced like-for-like sales up 1.7% over the period from November 1 to December 24.

Irn-Bru maker AG Barr will confirm how it fared amid a cut-throat Christmas soft drinks market when it updates on Thursday.

The Scottish firm, which dates back to 1875 and also makes Tizer and Rubicon, revealed last month that sales growth had picked up to 8% in the 18 weeks to December 1, with volumes up 6.4% and the rest made up from price hikes.

But it cautioned the soft drinks market remained “highly competitive” in the run up to Christmas, while festive trading figures from the “big four” supermarkets have shown it was a tough market for grocery sales.

Charles Pick, analyst at Numis Securities, is forecasting Barr to post revenue growth of 7% overall for the second half, which would mark an increase on the 5.8% seen in its first six months.

He said this comes despite a tough comparative from a year earlier, adding the figure could even be higher “despite the known difficulties of the big four grocery multiples over Christmas and the competitive soft drinks market”.

Barr, which is based in Cumbernauld near Glasgow, has been benefiting from increased TV advertising for Irn-Bru and the extra canning capacity provided by its new state-of-the-art factory and distribution site in Milton Keynes, which has been operational since mid-July.

But the group’s half-year figures revealed the ongoing legacy of its failed merger with Robinsons firm Britvic, with costs of the aborted deal contributing to a 10% fall in profits to £13.2m.

The accumulated £4.9m of merger costs included fees for lawyers and other advisers and getting the deal past the Competition Commission.

On an underlying basis, interim profits showed further decent progress - up 12% to £16.6m excluding one-offs.

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