Ryanair expects to report between €950m and €1,000m in profit for the year ending 31 March 2020. This is at the lower end of previous guidance.
Passenger numbers for March fell 48% due to the pandemic, and full year passengers rose 4% to 149m, instead of 154m expected. Ryanair is currently operating just 20 flights per day, compared with over 2,500 before the COVID-19 outbreak.
The shares were broadly flat following the announcement.
Ryanair is a strong player, but airlines are a tough industry to be in at the best of times, and this feels like it could be the worst of times.
The COVID-19 outbreak has virtually cleared the skies of non-emergency flights. Ryanair is not alone in grounding its planes and looking to every available cost saving measure.
Since forming in the mid-80s it's kept costs in check by offering a no-frills service, but this approach is of little use when the fleet is grounded. Ryanair does have at least one advantage: it owns the majority of its planes outright, so lease payments are relatively limited.
The group also has relatively little debt, and currently has over EUR3.8bn of cash and cash equivalents. This liquidity buffer will be essential as the group deals with the coronavirus outbreak, but we don't know how low cash costs can go. It's therefore difficult to say with any certainty how long the group can sustain a prolonged shutdown for.
This lack of certainty is part of what has driven the group's shares down so far in recent weeks. If the group can weather the storm, then investors brave enough to stick it out might be rewarded, but it's too soon to call what will happen, and the price could fall further if things get worse.
Prior to today's update, the shares changed hands for 1.9 times book value, below the long run average. However, there's a chance book value could be written down in the near future, so investors should exercise caution when using backward looking valuation metrics at such a turbulent time.
Ryanair doesn't distribute a share of the profits through dividends, but has engaged in regular share buybacks. The ongoing EUR700m plan, of which EUR440m has been completed, has been suspended until further notice.
In our opinion, an investment in Ryanair, or any other airline, hinges on the length of the shutdowns and travel restrictions. If the fleet gets back in the air soon, then Ryanair will suffer a really nasty quarter or two. If the disruption persists, then the group may run out of cash and/or need a bailout. Neither of these options will be pleasant for shareholders. We think Ryanair is in a relatively strong position compared to some peers, but even it can't keep the fleet grounded for ever.
As of 31 March, Ryanair had €3.8bn in cash and owned 77% of its fleet outright. To conserve cash Ryanair has frozen all recruitment and capital spending and is suspending share buybacks. In April and May all pay will be cut by 50%, including senior management.
Given the ongoing uncertainty, Ryanair will not be providing guidance for this coming year.
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