BUSINESS LIVE: EasyJet cautious on winter outlook; Rolls-Royce lifted by aerospace; Pets at Home profits fall

Sophie Lund-Yates, chief equity analyst at Hargreaves Lansdown:

‘easyJet has once again demonstrated how its best-in-class operation has delivered success.

‘The group’s measured expansion into high-caliber airports has proven to be a particularly smart move, as has the huge effort to boost easyJet holidays. At a time when cost and convenience are the ultimate precursors to whether or not customers will travel, easyJet has been able to scoop up a large portion of existing demand into its network.

‘Investors are being rewarded for their patience after a few bumpy years with the reintroduction of the dividend. The starting point means there is plenty of room for growth, but allows easyJet to take the leap before diving in, which is the right move in such an uncertain environment.

‘easyJet is confident that households will continue to prioritize travel in the new financial year. There are early indications that this is true, but that could change in the short term if Britain enters a recession.

“The conflict in the Middle East also has the potential to impact performance and will need to be closely monitored. The good news for easyJet is that all its problems are beyond its control, which signals to the market that its proposition is about as good as it can be, and is waiting to launch as soon as conditions allow.”

Saga CEO Euan Sutherland will step down from the helm of the tourism and insurance company for the over-50s at the end of January.

Sutherland, who joined in January 2020 and is credited with steering the group through the pandemic, will be replaced by Mike Hazell, who took over as the group’s CFO a month ago.

Hazell, 50, will take on the new role with immediate effect

Shaftesbury Capital braved the gloom on the High Street and hailed a ‘strong start’ to the crucial Christmas trading period.

The West End landlord reported a ‘high’ number of customers on its estate, including parts of Chinatown and Covent Garden.

The company said sales at shops, bars and other tenant-run businesses so far in the second half of the year were 16 percent higher than in 2019.

Pets at Home Group has achieved like-for-like retail growth of around 4 percent in the early weeks of the third quarter, as Brits gear up for the Christmas period and continue to spend money on their furry friends.

The company has doubled down on its digital offering and increased vet capacity to attract pet owners. It operates stores and a website, which it expanded during the pandemic, and relies on subscriptions for regularly used items as the work-from-home lifestyle boosted demand for pets.

Total group turnover grew by 6.5 per cent to £774.2 million for the 28 weeks to October 28, driven by strong veterinary registrations.

The group, which also offers grooming and veterinary services, said underlying pre-tax profits fell 19.3 per cent to £47.8m as it ramped up investment and grappled with higher logistics costs.

But Pets At Home maintained its full-year profit forecast of £136 million.

Britain is trying to entice Chinese carmakers to set up a global base in Britain in a sign the government is willing to open up to Beijing despite security fears.

Investment Secretary Lord Johnson said the country could take advantage of Brexit freedoms to sell electric cars from Chinese companies to the rest of the world.

“China has a very strong electric car industry, they have a lot of excellent technology and they make great cars,” he said.

Rolls-Royce expects to post an operating profit of £2.8 billion in the medium term by increasing margins on its civil aerospace business to 15 to 17 percent from 2.5 percent last year, bringing the company closer to its rivals appears.

CEO Tufan Erginbilgic’s master plan, almost a year in the making, will dramatically change the company’s margins around 2027, which powers nearly half of the long-haul civilian market.

‘Rolls-Royce is at a crucial point in its history. After a strong start to our transformation programme, today we are laying out a clear vision for the journey we need to take and the areas we need to focus on.

“We are creating a high-performing, competitive, resilient and growing Rolls-Royce that will have the financial power to control and shape its own destiny. We are confident that we can achieve these ambitions and have a clear and detailed plan to achieve our objectives. We have made significant progress and our 2023 profit and cash forecast will be significantly higher than 2022.

“We are setting compelling and achievable medium-term financial targets that will take Rolls-Royce significantly beyond any previous financial performance. This will not only benefit our shareholders, but also our people, customers and partners. We build ‘one Rolls-Royce’. A company that can fully realize its potential and ensure the excellence and innovation that have helped shape the modern world will survive long into the future.”

Andrew Bailey warned yesterday that the outlook for the British economy is among the worst he has ever seen.

In a gloomy assessment, the governor of the Bank of England said Britain’s growth prospects were weaker than for much of his working life.

But the 64-year-old, who joined the central bank in 1985, insisted it was “too early” to even talk about a rate cut because getting inflation back under control remains “hard work”.

EasyJet has warned that its full-year results will take a hit from the ongoing conflict in the Middle East, which has forced the airline to cut flights to much of the region and forecast a loss for the first quarter of 2024.

The British airline reported 2023 earnings before interest and tax of £476 million, in line with analyst expectations, after a strong year of robust travel demand and advance bookings.

But easyJet said: ‘The early winter results for FY24 will show an impact from the conflict in the Middle East, which started on October 7. In our planned winter schedule, flights to Israel, Jordan (both temporarily suspended) and Egypt represented 4% of capacity and 10% of ASKs.

‘In addition, there was a wider impact on short-term flight search and booking across the sector, although this appears to be returning with a recent improvement in trading.

‘Despite positive underlying strength, easyJet currently does not expect its first quarter loss to improve year on year. Current booking strength for summer 2024, combined with supply constraints in Europe, provide a positive outlook for the year as a whole.”