RYANAIR’S better-than- expected financial performance, unveiled yesterday, means one of Liverpool John Lennon Airport’s largest operators can pay its first dividend in 13 years, a year ahead of plan.
The Irish airline’s results mark a turnaround in its fortunes. It reported a 341m euro pre-tax profit, compared to a 180m euro loss in the previous year. Part of last year’s loss is accounted for by a 222m euro write- down in the value of the Aer Lingus stake it acquired as part of its unsuccessful bid to buy Ireland’s former state airline. But even stripping out the impact of that cost on the comparative figures, yesterday’s results represent a big improvement in trading performance.
Nor are things likely to stop there. The airline’s chief executive, Michael O’Leary, predicts further profit improvement in the next 12 months at a time when rivals such as BA and AirFrance/KLM are reporting big losses.
So now Ryanair is in a position to pay out a one- off dividend of 500m euros. It had intended to dip into its reserves and make that payout next year, but the strong performance in the 12 months to March has allowed it to bring that plan forward.
The Dublin company may repeat the payout in the following year.
Ryanair’s dividend plan contrasts with the decision taken by rival Easyjet to hold onto its cash to fund expansion. Ryanair, on the other hand, seems to be soft- pedalling on more expansion, albeit after years of frantic growth.
The Irish airline has built its reserves since it was floated in 1997. It’s remarkable that the stock market has allowed it to get away with what appears to be a long-term strategy. On the other hand, the 1bn euros that it is now talking about distributing to shareholders has provided a big buffer against the ravages of the recession. While many rivals have gone bust, there was never any danger Ryanair would do so.
To date, Ryanair’s strategy has worked well, but only time will tell whether the Irish or EasyJet are right about expansion.
DAVID MOORES’S 3,000-word open letter to a national newspaper, expressing his regret at selling Liverpool Football Club to George Gillett and Tom Hicks, is a bit late in the day.
Mr Hicks’s realisation, expressed in an American newspaper last week, that owning a football club was too much of an invasion of privacy, is also a bit late.
The history of our national sport is littered with examples of chairmen’s dreams turning sour. Just ask Peter Johnson, Lord Sugar, Mike Ashley, among many others. Mr Johnson had to sell Everton after it became impossible for him to attend matches at Goodison Park following the sale of Duncan Ferguson. The Glazers face a “Yanks out” campaign at Old Trafford. It can all be very harsh and personal.
Further still, they needed more money than the Americans could spare to buy success on the field and build a new stadium. Nor is the private equity model the best way to finance such a venture because the need to make large interest payments is inimical to competition with clubs that don’t have large debts.
Reading between the lines of last week’s coverage around this issue, it seems that a queue has not formed to buy Liverpool. The market for Premier League football clubs is very thin, and it could be many months before a buyer is found. In the meantime, the temptation to pay the interest bill by selling Steven Gerrard or Fernando Torres must be big. Why spend their own cash when they no longer have an affinity with the club?
