Weekly Outlook: EasyJet full-year and Pennon half-year results

Key events for UK wealth managers for the week starting 27 November



Monday 27 November

  • First-half results from Volex
  • US new homes sales
  • In Europe, quarterly results from SeaDrill
  • In the USA, quarterly results from ZScaler

Tuesday 28 November

  • Full-year results from Greencore, Treatt, Renew and Topps Tiles
  • First-half results from Pets at Home, GB Group, IG Design and Brickability
  • Trading statements from Safestore and Supreme
  • Analysts’ meeting at Rolls-Royce
  • BRC UK shop price index
  • S&P Case-Shiller US house price index
  • In Asia, quarterly results from L’Occitane
  • In the USA, quarterly results from Splunk and HP Enterprises

EasyJet will release its full-year results on 28 November as the company rebounds with post-pandemic travel.

Chief executive Johan Lundgren announced in October record numbers for the second half, generating £850-870m in pre-tax profits. The all-time pre-tax profit for the year in 2015 sat at £686m. While shares in the airline have increased about 10% in the past year, they still sit two-thirds below its high, which occurred pre-pandemic.

Russ Mould, investment director at AJ Bell, and Danni Hewson, head of financial analysis at AJ Bell, said: “Such scepticism may reflect concerns over oil prices (despite November’s weakness), the near-term trajectory of global consumer spending and the economy (in light of higher interest rates) and also worries that airlines are becoming too bullish when it comes to adding capacity, given the very hefty orders placed in 2023 so far across the industry.”

Analysts will be on the lookout for 2024 guidance from Lundgren, who has so far provided outlook for the first quarter.

In 2023, EasyJet sales are estimated to have risen 41% to £8.1bn. 2023 will mark EasyJet’s first year of positive pre-tax profits since the pandemic, helped by its boost in the second half of this year. Analysts estimate a full-year pre-tax profit of £447m, a pivot from last year’s £208m in the red.

“The other key area of focus will be the dividend. EasyJet started paying dividends in fiscal 2012, via one final annual payment (although it did throw in a special back in 2014),” Hewson and Mould said.

“That all ended when the pandemic hit, so this would be the first distribution since fiscal 2019. EasyJet has a goal of paying out 10% of pre-tax income in the year just ended and 20% in the year just begun. Analysts have turned that into forecasts of around 4p and 13p a share respectively.”

EasyJet has placed orders for 159 new aircrafts to 2029, with 157 more to 2034. The purchases would grow the EasyJet fleet by almost 40%. These plans, as well as other expenses, create an estimate of £1bn in capital expenditure for 2023.

Wednesday 29 November

  • First-half results from Halfords
  • UK Nationwide house price index
  • UK mortgage approvals
  • Interest rate decision from the Reserve Bank of New Zealand
  • US oil inventories
  • Federal Reserve Beige Book
  • In the USA, quarterly results from Salesforce, Dollar Tree, Snowflake, FootLocker and Hormel Foods

Utility company Pennon will release its first-half results on Wednesday after a year when shares dropped by a fifth.

Pennon, which owns South West Water, Bristol Water, and Bournemouth Water, struggled this year with public response to sewer flooding and storm water overflows, the ‘collapse’ of Thames Water, higher interest rates, and the incoming regulatory cycle for AMP8, according to Hewson and Mould.

“Unlike Severn Trent, which is boosting its income from outcome delivery incentives for beating its regulatory targets, Pennon is losing income for underperformance and in Ofwat’s autumn review, South West Water was described as an average performer and Bristol Water as lagging (no-one was deemed to be an outperformer),” Hewson and Mould said.

Pennon is feeling the effects of higher interest rates through its £3bn in debt, a third of which is index-linked causing increases in payments as interest rates rise. Hewson and Mould argue that Pennon will also feel the effects through utilities’ link with bonds.

“Stockmarkets tend to treat utilities as bond proxies, since fixed income is also about yield and income rather than capital return – the higher bond yields go, the more attractive fixed income looks relative to utility equities, and vice-versa.”

As results are released, analysts will track the company’s forecasts of 10% sales growth and statutory pre-tax profit of £23m for the year. Last year, the company sat at negative £8.5m for pre-tax profit, dropping consistently from its peak of over £250m in 2019. Pennon is also expected to see an increase in capital expenditure, estimated near £450m.

Despite the higher spend, Pennon is committed to raising its dividend under AMP7 by the CPIH rate of inflation plus 2%,” Hewson and Mould said. “Last year Pennon paid an interim dividend of 12.96p a share on its way to a total distribution for fiscal 2023 of 42.73p. The company has run share buybacks in the past, particularly after the sale of waste treatment business Viridor in 2020, when it also paid out a big special dividend.”

Thursday 30 November

  • Full-year results from Auction Technology
  • First-half results from Dr Martens and Mulberry
  • Analysts’ meeting at Beazley
  • Chinese purchasing managers’ indices (PMIs) for manufacturing and services industries
  • EU inflation
  • US weekly initial unemployment claims
  • US pending homes sales
  • In Europe, quarterly results from Remy Cointreau
  • In the USA, quarterly results from Dell, VMWare, Marvell, Kroger and Frontline

Friday 1 December

  • Purchasing managers’ indices (PMIs) for manufacturing industries from Japan, Asia, Europe, the UK and USA
  • US car sales