BA owner reports positive Q3 but confirms €162m Brexit hit
Companies: International Consolidated Airlines Group SA
British Airways owner International Airlines Group (LSE: IAG) has released strong results for the nine months to 30 September reporting 6% growth in operating profit, 18% growth in diluted EPS, and raising its dividend 10%, despite facing significant challenges.
IAG's third-quarter operating profit was €1.2bn, a slight decrease on last year (€1.25bn), but it's worth noting that the company took a staggering €162m forex hit after the Brexit vote.
Passenger unit revenue was down 13.7% for Q3 (5.9% constant currency) but was offset slightly by a 6.9% fall in non-fuel costs (1.4% constant currency), and a 25.8% fall in fuel unit costs (22.7% constant currency).
Cash generation was strong, with the company adding €334m year on year to €6.19bn.
The June vote to leave the EU saw the group face economic uncertainty throughout the second and third quarters, with weak trading conditions in June leading up to and following the vote.
IAG say it created volatility in the forex markets, with the weakening sterling having a significant impact on its sterling-based subsidiaries and reducing the Group's profits, assets, and reserves.
According to management, there has been no immediate regulatory impact on the Group's business or structure, as the terms of the UK withdrawal has not yet been negotiated.
Diluted EPS is up 18.3 percent before exceptional items and management confirmed it will pay an interim dividend of 11 euro cents per share, payable on 5 December to shareholders on the register at 2 December.
Chief Exec Willie Walsh said it had been a good quarter, with the firm reporting strong results despite a tough operating environment with a "very significant" negative currency impact of €162m and disruption from air traffic control strikes:
"Despite this, our unit revenue performance was better than in quarter 2 and our quarterly profit after tax was €970 million before exceptional items, an improvement of 9.9 per cent on last year.
In the nine months, we made an operating profit before exceptional items of €1,915 million, up 6.1 per cent versus last year.
We're pleased to announce an interim dividend payment of 11 euro cents per share, a 10 per cent increase on last year. As in 2015, we expect the interim dividend to be around half the full year dividend.”
IAG says it expects operating profit for the year to be €2.5bn, with no significant change in its short-term trading conditions. The company's share price opened up 3% this morning, and currently trades on a PER of 5.75.
