EasyJet Plc, under pressure from its founder to return cash to shareholders, increased the value of its first-ever dividend payment to 190 million pounds ($294
million) after predicting record full-year earnings.
Investors in Europe’s second-biggest discount airline will receive an ordinary dividend of 9 pence a share, equal to 40 million pounds, plus a one-off payment worth 150 million pounds, Luton, England-based EasyJet said in a statement today.
EasyJet boosted returns after predicting pretax earnings of 240 million to 250 million pounds for the year ending September 30, up from previous guidance of 200 million to 230 million pounds. Profit has gained as demand for business and short-break travel lifts second-half revenue per seat by about 6 percent, it said.
“The financial performance is stronger than I’d forecast, particularly given the challenging market environment,” said Gert Zonneveld, an analyst at Panmure Gordon in London who recommends buying EasyJet shares. “EasyJet is well-positioned to outperform its non-low cost competitors on short-haul routes.”
EasyJet rose as much as 7.7 percent to 336.1 pence and was trading 7.2 percent higher as of 11:40 a.m. in London, paring the stock’s decline this year to 24 percent and valuing the company at 1.4 billion pounds.
Chief Executive Officer Carolyn McCall, who had faced calls to return cash from EasyJet founder and No. 1 investor Stelios Haji-Ioannou, said concern about falling share prices and the economy is having an impact on shareholder sentiment. The airline had originally planned to pay a dividend equal to one-fifth of pretax profit. That would indicate a figure of no more than 50 million pounds, based on the top end of the revised earnings guidance for the current year.
“More shareholders are definitely talking about a return of capital in a way they weren’t pre-January,” McCall said on a conference call. “We believe we can afford to pay this extra dividend, and continue to have a very strong balance sheet.”
Stelios, who prefers to be known by his first name, is calling for an extraordinary meeting of shareholders to vote on the dismissal of director Rigas Doganis, who backed the purchase of 35 aircraft from Airbus SAS in January. The entrepreneur, who controls 38 percent of EasyJet stock, has been seeking to curb expansion plans for almost three years and wants management to halt fleet purchases. Deputy Chairman David Michels quit last month following a similar campaign.
Ryanair Holdings Plc, Europe’s No. 1 low-cost carrier, paid its first-ever dividend, a one-time award of 500 million euros ($672 million), in October after failing to tie up a deal to buy more Boeing Co. aircraft. The Irish company aims to make a second payment in 2013 if it hasn’t ordered new planes by then.