EasyJet plans to grow fast at the airport serving Venice, city of dreams and lovers. Also at Luton, town of industrial estates and Lorraine Chase, where the low-cost airline is headquartered. How will this play with Sir Stelios Haji-Ioannou, shareholder of frosty communiqués and no-confidence votes? Badly, one fears.
EasyJet endured a stinker of a year. Terrorism closed some popular resorts in Muslim countries. Cheap fuel emboldened rivals to expand capacity. Weak sterling, in which easyJet reports, raised costs. Profits before tax crashed 28 per cent to £495m.
Yet the group, helmed by shrewd ex-Guardian boss Dame Carolyn McCall, plans to raise gross capex from £650m next year to more than £1bn in both 2018 and 2019. She wants to increase the fleet of Airbuses from 257 to more than 300. She believes the business, in which founder Sir Stelios controls 34 per cent of shares, will need more seats as legacy European airlines atrophy.
EasyJet has net cash of £213m and would shade into net debt only in 2018, the peak year for investment. The dividend payout is set at 50 per cent of post-tax profits.
Numis forecasts profits before tax of some £400m in 2017, equating to dividends 13.5p lower at 40.3p. The radars of stock market sky scanners are crowded with dangers. Perils include weakening UK confidence, political disruption to airline access agreements and further terrorism.
Dame Carolyn is doing a good job in tough circumstances. Shares trading at only a modest discount to Ryanair, whose business model is stronger, suggest many investors recognise that. There is countercyclical sense in her growth plan. The question is whether Sir Stelios and another 17 per cent of shareholders can still stomach it following such bad results. The run-up to next February’s annual meeting may otherwise resemble an altercation outside a Luton pub rather than a gondola ride along the Grand Canal.
Hourican blows in
Some London bankers joke they will relocate to sunny Cyprus after Brexit to retain access to the single market. Ex-comrade John Hourican is heading the other way, with plans to list Bank of Cyprus on the London Stock Exchange. The move is part of a workout that has made the same process at Royal Bank of Scotland, Mr Hourican’s former employer, look like a nursery picnic.
Bank of Cyprus was left bombed out by the financial crisis. The deposits of savers were converted into equity and diluted by a €1bn capital raise. Chillingly, the Hourican family car was left bombed out too, following an arson attack. This may have been a riposte to criticism of lenient insolvency laws from the BoC chief executive, who once ran RBS’s investment bank.
The proportion of BoC’s loans that are non-performing is an eye-watering 58 per cent. Core tier one equity of 14.6 per cent is creditably close to that of RBS. But City investors will take little interest in the renascent bank until it has swapped the standard listing currently in its sights for the premium listing that guarantees index inclusion.
Investment committees are therefore spared deliberations on the suitability of ex-Deutsche Bank boss Josef Ackermann as chairman or Trump backer Wilbur Ross as vice-chairman. Rumours Fred Goodwin is hiding out in a broom cupboard at BoC’s Nicosia HQ appear apocryphal.
The bank’s slow climb back from the abyss should remind bankers fantasising of a move to sunnier climes that such climes may not want them. Once-bitten Mediterranean nations may be twice shy of new regulatory and bailout risks. You could say the same of Ireland, which is where Mr Hourican aspires to site BoC’s new holding company.
In 2009, Lombard’s Rover 75 was hospitalised at the Midland Impact Repair Centre following a trial of strength with a No 11 bus, leaving its owner beetling around Birmingham in a Tata Nano. The garagiste represented this as an equally pro-Brummie ride, having been built by Jaguar Land Rover’s Indian rescuer.
The 75 was a poor man’s Jag. The Nano was a ride-on lawnmower with a cab. None of the gestures made by drivers who overtook the Nano on the Bristol Road was a thumbs up.
Seven years on, the struggling Nano stands out as one of the odder fruits of proprietorial obsession. Some bosses blow millions on super cars. Ratan Tata, leader of India’s famous business dynasty, opted to back a runabout basic even by the standards of a guy upgrading from a bullock cart.
Much opprobrium now attaches to the patriarch in his spat with Cyrus Mistry, ousted chairman of Tata Sons. But it is curious how quiet critics fall when the issue of JLR is raised. At Tata Motors, where Mr Mistry remains chairman, a first-half profits fall of 12 per cent to $467m would have been far worse without increased earnings at JLR. Not all Mr Tata’s bets have come as unstuck as the Nano.
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