P&W engine issue hurts; downgraded outlook

Wizz Air reported a new record H1 net profit, thanks to solid revenue growth as well as meaningful fuel cost reductions. EBITDA was quadrupled relative to last year’s level. However, the company had to cut its capacity and profit outlook due to the operational disruption and macro uncertainty in the Middle East, despite the compensation secured by large carriers. We expect downgrades in the consensus and our estimates.

In-line Q1 and reiterated FY guidance; concerns regarding engine issue-driven capacity cuts

Wizz Air’s quarterly performance was in line with the consensus. Despite the unchanged FY profit guidance, the share price was affected by the H1 capacity reduction caused by some necessary engine inspections and the potential impact extending into H2. Any developments in the related engine issues are worth close monitoring but we do not expect major changes to the consensus and our estimates at this stage.

The CEE leader’s expansion plan now appears more convincing

Despite the slightly weaker-than-expected FY22 results, the market reacted positively to Wizz Air’s encouraging financial guidance for the coming FY. We reconfirm our upbeat stance on the name and will upgrade our estimates to reflect our view of more visibility on the group’s vigorous-looking expansion potential.

Modest Q3; unchanged guidance

The group reported below-consensus results amidst the broad pricing tailwinds and guidance upgrades, mainly explained by the ineffectiveness of both ex-fuel cost management and fuel hedging. We will downgrade our estimates to reflect the weaker-looking margin generation.

Moving forward but still foggy

Wizz Air continues its expansion but at a slower rate. The past HY reported a larger-than-consensus net loss and the H2 forecast looks less ambitious on capacity, pricing and cost. We expect a downgrade to the consensus and our estimates.

Caution on ESG hits

Wizz Air’s 49/51 joint venture based in Abu Dhabi will resume flights from/to Russia. This might raise the issue of reputational damage, and affect the group’s business expansion and investor interest.

Optimistic outlook albeit fuel costs weigh

Wizz Air’s Q1 trading update should be seen as mixed. The significant pressure on fuel costs is likely to remain and the airline had to cut its Q2 capacity schedule due to supply-chain disruptions. Regardless, the group’s expectation of a “material” profit for Q2 and a remarkable capacity schedule for H2 underpin a brighter earnings forecast. We will upgrade our FY23 estimates.

Squeezing profitability

The market reacted adversely to the group’s in-line FY22 underlying figures and no improvement on the low level of fuel hedging given the soaring spot prices. We expect downward adjustments to the consensus and our target price due to an unfavourable forecast for operating costs, despite the still positive-looking fundamentals.

Operating loss target widened

Wizz Air’s Q3 results missed analysts’ expectations and its previous guidance, mainly due to the Omicron-related impacts and weakened pricing. The operating loss for Q4 is guided to be “slightly higher” than in Q3, less optimistic than the consensus.

An eastern winner goes west

We initiate coverage of Wizz Air with a positive recommendation. The near 20% upside reflects our upbeat stance on the group’s forecast for expansion and long-term potential. Wizz Air’s share price has outperformed the budget airline leaders over recent years and has fully recovered to its pre-pandemic level since summer 2020. The Omicron-led disruption offers investors a great entry opportunity.

Well positioned for future success

Strong performance against tough market conditions

LIBERUM: The Liberum Leisure Digest: NLW increase - pricing power is key

Initial Equity Trading Comments - 19 February 2024

Pinewood Technologies (PINE LN) - Driving growth in automotive software

Pinewood’s transition to a pure-play automotive SaaS business is now largely complete. Today we introduce summary forecasts out to FY26 and reiterate the investment case. We see significant opportunity for Pinewood to grow its user base in the UK and internationally whilst generating high EBITDA margins and cash conversion. With a 24.5p special dividend embedded in the current price (payable Q1/Q2), the effective price today is 12.3p. Based on the Group’s FY27 target of £27m EBITDA, we estimate

Domino's Pizza - Growing the base

Domino’s Pizza Group’s (DOM’s) new CEO has set an ambitious long-term growth target, including an acceleration in its net store opening programme. With better alignment between the company and its franchisees, management believes DOM should be capable of generating improved profit growth, versus that achieved in recent years, and potential higher returns.

Marks & Spencer+ (MKS, House Stock at 255p) - 7Y FS HSBC UK tie-up– another brick in the wall

Zeus Top Picks for 2024 - 2023 review and outlook for 2024

On 9 January last year, we set out our ten top stock picks for 2023, for what turned out to be another relatively poor twelve months for UK equities due to two wars, stubbornly high inflation and further tightening of monetary policy. This was even as other major markets, such as the US, largely recovered in the year. In the 2023 calendar year, the AIM All-Share index fell 8.2% and is still 42% off its 2021 high. From the release of our 2023 top picks note, the average total return (assuming div

PROGRESSIVE: Vertu Motors: Traction control

Vertu is the fourth largest automotive retailer in the UK, with 188 sales outlets and a track record of cross-cycle growth, principally through businesses it has acquired, funded by equity, debt and most importantly cash generation. Vertu operates across the entire vehicle lifecycle, including new and used vehicle sales, and vehicle servicing, repair and parts. Service and repair is a 40+% gross margin repeating business. With economic headwinds, the transition to electric vehicles, recent overs

LIBERUM: Safestay: First management contract opens up new revenue stream

Hybridan Small Cap Feast - 17 April 24

17th April 2024 * A corporate client of Hybridan LLP ** Arranged by type of listing and date of announcement *** Alphabetically arranged **** Potential means Intention to Float (ITF) has been announced Dish of the day Admissions: Delistings: What’s baking in the oven? ** Potential**** Initial Public Offerings: Reverse Takeovers: 16 April 2024: Electric Guitar (ELEG.L) Concurrent with its Admission to trading on AIM, Electric Guitar is proposing to acquire the entire issued share capital of 3radi

React Inititation of Coverage

React Group is a well-managed, growing UK services business with a high degree of recurring revenues (c87%).

SSP Group+ (SSPG, House Stock at 218p) - Further progress expected in H1

PROGRESSIVE: Zoo Digital: Recovery underway and a significant contract

Today’s trading statement from ZOO highlights a ramp-up in demand following the end to the industry-wide strikes of last year. ZOO struck a note of caution in its January update regarding the timing of orders. However new productions are starting to translate into a healthy order pipeline, with a good recovery in revenue anticipated in H1 FY25. The update guides to revenue of at least $40m for the year to March 2024, ahead of our estimate at $36.8m. We have improved our adjusted EBITDA loss marg

ME Group - Modernising and growing the estate driving growth

During 2023, ME Group commenced the deployment of its next generation photobooths, which are integrated with the group’s newly developed proprietary software, gained market leadership in the Japanese photobooth market with an acquisition, continued to roll out laundry units with existing and new location partners, commenced a share buyback programme and gained entry into the FTSE 250. 2023 was a year of significant strategic and financial progress, with sales up 15%, EPS up 31% and net cash main