Ryanair posts smallest annual profit in four years, says it has "zero" 2H visibility

Ryanair, Europe' largest airline, posted its weakest annual profit for four years at the start of the week and warned that overcapacity, Brexit and delays in taking deliveries of the Boeing 737 MAX might weigh on earnings further still this year.

For the year ending on 31 March, Ryanair saw after tax profits drop from €1.45bn one year ago to €1.02bn. That was towards the lower end of management's own guidance for earnings in a range between €1.0-€1.1bn.

Revenues meanwhile increased by 6% to €7.15bn, with the number of passengers, excluding its recently-acquired operations in Austria, jumping by 7% to 139.1m, while the average fare fell by 6% to €37.

Looking at the company's topline figure in greater detail, ancillary sales posted a rise of 19% to €2.4bn, with Ryanair blaming the absence of Easter in this year's fourth quarter and increased short-haul capacity growth for the decline in fares.

Excluding fuel, unit costs widened 5%, due to a €200m increase in staff costs, including a 20% increase in pilots' s salaries.

However, that was a better turnout than the 6% rise predicted by Ryanair itself.

For the year just started, Ryanair said it was "cautious", projecting group profits, including its recently acquired Austrian Laudamotion arm, in a range of €750m-950m, versus a comparable loss of €880m for the 2019 financial year, depending on whether revenues per passenger grew by 2% or 4%.

Ryanair had "zero visibility" for the second half of the financial year 2020, the company said in a statement.

Excluding fuel, unit costs were likely to rise by 2%, mainly as a result of the appreciation in Sterling and delays in taking deliveries of the Boeing 737 MAX, with the first deliveries of the latter now seen in Winter 2019.

Delays in incorporating the 737 MAX to its fleet meant that Ryanair would not enjoy any "meaningful" reduction in operating costs associated with the new aircraft until financial year 2021.

Management forecast a €460m rise in the company's fuel bill in the financial year 2020.

"This guidance is heavily dependent on close-in peak summer fares, H2 prices, the absence of security events, and no negative Brexit developments," management said.

The company's board approved a €700m share buyback programme which was set to commence during the current week and run over the next nine to 12 months.

Commenting on the company's results, Nel Wilson, chief market analyst at Markets.com, said: "Fares down, traffic up, costs jumping – more of the same kind of themes we’ve been seeing for a number of quarters from Ryanair and for the whole European airline sector. Ryanair has issued a couple of profits warnings in the last year but we have little sense that things are really improving as there still a lot pressure on margins.

"Today's full-year numbers and outlook cement the view that it's a tough space to be in right now – although we would hope that summer 2019 will be the worst of it. The risk is that the downturn in the macroeconomic outlook in Europe worsens as this would further dent airlines' bottom lines."