Qantas Airways Limited (ASX:QAN) Outperforms
Australian carrier Qantas Tuesday said first-half net profit soared 234 percent on the back of belt-tightening and lower oil prices as it announced a Aus500 million stock buyback to share the spoils with investors.
The Aus688 million (US497 million) result comes on the heels of a ruthless cost-cutting drive that has seen thousands of jobs axed and aircraft deliveries deferred in recent years to stem mounting losses.
Underlying profit before tax in the six months to December 31 — the airline’s preferred measure of financial performance — was Aus921 million, at the upper end of analyst expectations, while revenue rose five percent.
The result was boosted by Aus448 million in savings through the airline hedging on lower fuel prices.
“This record result reflects a stronger, leaner, more agile Qantas,” said chief executive Alan Joyce.
“Without a focus on revenue, costs and balance sheet strength, today’s result would not have been possible.
“Both globally and domestically, the aviation industry is intensely competitive. That’s why it’s so important that we maintain our cost discipline, invest to grow revenue, and continue innovating with new ventures and technology.”
Despite the buoyant numbers Qantas shares, which have rallied strongly over the past 12 months, dipped four percent to Aus3.83 in morning trade.
The bottom line was boosted by strong performances across almost all of the airline’s divisions, with both domestic and international operations in profit. Freight was the only significant business to go backwards, down 30 percent to Aus38 million.
Domestic earnings improved to Aus387 million, up Aus160 million from the previous corresponding period, while the once-struggling international arm was Aus270 million in the black, helped by a low Australian dollar fuel price and more capacity to Asia and the United States.
The company’s low-fare Jetstar operation also did well, driven by a strong performance in the domestic Australian market.
– Record results –
Jetstar Japan, Jetstar Asia in Singapore, and Jetstar Pacific in Vietnam were collectively profitable in the first half, compared to the previous year, although Indonesian volcano eruptions had a Aus23 million adverse impact.
The turnaround further vindicates Joyce’s strategy two years ago of adopting a more conservative financial framework with an ongoing plan to slash Aus2.0 billion in costs by the end of 2016/17. Savings of Aus1.35 billion have been realised so far.
“Every segment of the group has contributed strongly to today’s results, with each reporting a rate of return above our cost of capital,” Joyce said.
“Qantas domestic, Jetstar and Qantas loyalty all achieved record results for the half, a combined earnings between Qantas domestic and Jetstar domestic rose more than 90 percent to a record 556 million as we continue to evolve the dual brand strategy.
“Cash flows of 770 million, this gives us a very solid platform to invest in the future.”
To reward shareholders, the company announced an on-market share buyback, its second in the past year, which should push up the value of the shares remaining on the market, although no interim dividend was declared.
“The strength of our performance and balance sheet means we can continue to reward our shareholders for their confidence in our business,” Joyce said.
“We’re pleased to be able to build on last year’s 505 million capital return with the buyback we announce today.”
The post Qantas Airways Limited (ASX:QAN) Outperforms appeared first on Live Trading News.