LONDON BRIEFING: easyJet sees near-term travel demand dip amid Omicron

(Alliance News) - easyJet on Tuesday said it is too early to call the impact of Omicron on the ...

Alliance News 30 November, 2021 | 8:14AM
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(Alliance News) - easyJet on Tuesday said it is too early to call the impact of Omicron on the travel sector but noted some "softening" in trading for the first quarter.

The Luton Airport-based budget airline said its full-year loss beat market consensus expectations, and it remained confident in a return to pre-virus capacity towards the end of its new financial year, despite Omicron uncertainty.

easyJet shares were up 2.1% early Tuesday following the announcement.

For the financial year that ended September 30, revenue halved to GBP1.46 billion from GBP3.01 billion the year before. easyJet's pretax loss narrowed to GBP1.04 billion from GBP1.27 billion on a reduction in finance charges.

Headline pretax loss widened to GBP1.14 billion from GBP833 million, but it highlighted that this result was ahead of consensus.

"Having delivered FY21 ahead of consensus, we have seen an encouraging start to this year with strong demand returning for peak winter holiday periods, coupled with increasing summer demand with Q422 capacity expected to be close to FY19 levels," said Chief Executive Johan Lundgren.

On the new Covid-19 variant, easyJet said it is too soon to say what impact Omicron will have on European travel, though added it is prepared for "periods of uncertainty". While easyJet has seen some "softening" of trading for the first quarter, it is still seeing solid bookings for the second half.

Capacity in the first quarter is expected to be around 65% of pre-virus levels, with a load factor in excess of 80%. Second-quarter capacity is expected to be increased further, to around 70%, before reaching close to pre-pandemic levels by the final quarter.

"In summary, we remain mindful that many uncertainties remain as we navigate the winter, but we see a unique opportunity for easyJet to win customers and take market share from rivals in this period," said Lundgren.

Commented Allegra Dawes, airlines sector analyst at Third Bridge: "Despite the uncertainty caused by the Omicron variant and weakened booking numbers, easyJet expects capacity to return to 2019 levels next summer."

Dawes added: "Concern over the Omicron variant and the prospect of further restrictions are the last things easyJet would have been hoping for as it reveals losses of more than GBP 1 billion over the past year. Just as leisure travel was becoming more normalised and business travel was taking off again the last week has served to remind everyone how fragile a return to the skies can be."

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: down 0.9% at 7,044.33

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Hang Seng: down 1.5% at 23,492.48

Nikkei 225: closed down 1.6% at 27,821.76

S&P/ASX 200: closed up 0.2% at 7,256.00

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DJIA: closed up 236.60 points, or 0.7%, at 35,135.94

S&P 500: closed up 60.65 points, or 1.3%, at 4,655.27

Nasdaq Composite: closed up 291.18 points, or 1.9%, at 15,782.83

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EUR: up at USD1.1327 (USD1.1270)

GBP: up at USD1.3320 (USD1.3305)

USD: down at JPY113.16 (JPY113.70)

Gold: up at USD1,791.54 per ounce (USD1,783.85)

Oil (Brent): down at USD70.90 a barrel (USD73.88)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Tuesday's key economic events still to come

0955 CET Germany labour market statistics (including unemployment)

1100 CET EU flash estimate euro area inflation

1000 EST US consumer confidence index

1630 EST US API weekly statistical bulletin

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Measures to combat the new Omicron variant of coronavirus come into force in England on Tuesday as Prime Minister Boris Johnson said Covid-19 vaccines and boosters remain the best line of defence. Face coverings are again compulsory in England in shops and settings such as banks, post offices, hairdressers, and public transport, while all travellers returning to the UK must take a PCR test and self-isolate until they receive a negative result. All contacts of suspected Omicron cases must self-isolate, regardless of their age or vaccination status. The Joint Committee on Vaccination & Immunisation is now advising that all adults aged 18 to 39 should be offered a booster dose of the Covid-19 vaccine, in order of descending age groups, to increase their level of protection. Those aged 40 and over are already eligible for a booster vaccine.

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China warned that the fast-spreading Omicron variant of the Covid-19 virus would cause challenges in hosting next February's Winter Olympics in Beijing. "I think it will definitely lead to challenges linked to prevention and control," foreign ministry spokesman Zhao Lijian said, adding that Beijing "appreciates the efforts by South Africa in offering timely information" on the variant.

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BROKER RATING CHANGES

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CITIGROUP RESUMES OCADO WITH 'BUY' - TARGET 2900 PENCE

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JPMORGAN RAISES COCA-COLA HBC TO 'OVERWEIGHT' (NEUTRAL) - PRICE TARGET 3,100 (2,725) PENCE

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CREDIT SUISSE CUTS DRAX TO 'NEUTRAL' (OUTPERFORM) - PRICE TARGET 600 (450) PENCE

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COMPANIES - FTSE 100

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Reliance Industries late Monday said it had no intention of making a bid for BT, denying a report by Indian newspaper the Economic Times. "We categorically deny any intent to bid for the UK telecoms group, BT, formerly British Telecom," the Mumbai-based conglomerate said in statement. "The article is completely speculative and baseless," Reliance added. On Monday, the Economic Times, citing people familiar with the matter, said that Reliance was looking to either make an unsolicited offer to buy into BT or try to take a controlling stake. Alternatively, it would look to partner with BT's fibre optic arm Openreach and fund its expansion plans.

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COMPANIES - FTSE 250

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Magazine publisher Future boosted its dividend and said it now expects results for 2022 to be ahead of current forecasts. For the financial year that ended September 30, revenue jumped 79% on the year before to GBP606.8 million, while pretax profit doubled to GBP107.8 million from GBP52.0 million. Organic revenue grew 23%, with this trend accelerating in the second half. US organic revenue growth was 27% while the UK notched 17% growth. Future, confident in its outlook, proposed a dividend for the year of 2.8p per share, up 75% on the 1.6p paid out the year before. Looking ahead, Future expects growth to accelerate in the second half of its 2022 financial year and now expects adjusted results for the financial year ahead to be "materially above current expectations". "We expect our operating model to drive enhanced scalability and operating leverage, leading to further margin expansion, and we are therefore upgrading our outlook for the full year," said Chief Executive Zillah Byng-Thorne.

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COMPANIES - MAIN MARKET AND AIM

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Payments firm Wise lifted its revenue growth guidance. Revenue for the half-year to September 30 rose 33% to GBP256.3 million from GBP192.2 million year-on-year. However, pretax profit slipped 6.0% to GBP18.8 million from GBP20.0 million as administrative expenses grew. The international money transfers operator now expects annual revenue growth to be in the mid-to-high 20s on a percentage basis, up from guidance of low-to-mid 20s previously. "Over the first half of this year we've improved our products and engineered away substantial points of friction in the payments process, enabling us to sustainably lower prices while continuing to invest in growing the business for the long term," said Co-Founder & Chief Executive Kristo Kaarmann.

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Marston's reported encouraging current trading, but tempted fate by saying it believes "the worst of the pandemic is now behind us". The Wolverhampton-based pub chain looked to put a pandemic-disrupted period behind it and focus on strong trading since the lifting of virus restrictions. Revenue for the year to October 2 from continuing operations dropped to GBP401.7 million from GP515.5 million. Still, Marston's managed to narrow its loss to GBP171.1 million from GBP388.7 million as operating expenses dropped. The full-year result was disrupted by the pandemic, Marston's said, highlighting that like-for-like sales since restrictions lifted in July were up two-fold on 2019. Current trading is encouraging, it added, with total like-for-like sales growth 1.3% versus 2019 despite a reduction in VAT relief. Christmas bookings are in line with 2019 and it has long-term contracts in place to manage 2022 inflation headwinds. "Looking forward, we believe the worst of the pandemic is now behind us, albeit we will have to navigate through the coming winter months if any further government restrictions are put in place," said Marston's.

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Tuesday's shareholder meetings

Advance Energy PLC - AGM

Alternative Income REIT PLC - AGM

Castillo Copper Ltd - AGM

Europa Metals Ltd - AGM

Nanoco Group PLC - AGM

Schroder British Opportunities Trust PLC - AGM

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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
easyJet PLC 599.20 GBX 0.74
Coca-Cola HBC AG 2,489.00 GBX -0.04 -
Ocado Group PLC 1,368.79 GBX 0.76
Drax Group PLC 577.50 GBX 2.48 -

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