Ryanair airs profit warning for second time in three months

Europe’s largest low-cost carrier now expects profit after tax for its financial year to March 31 of between €1 billion ($1.14bn) and €1.1bn. (Reuters)
Updated 18 January 2019
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Ryanair airs profit warning for second time in three months

  • The Irish airline had originally forecast profits of €1.25bn to €1.35bn
  • Ryanair lay the blame squarely on lower than expected fares in the second half of its financial year

DUBLIN: Ryanair cut its forecast for full-year profit for the second time in three months on Friday, this time blaming lower than expected winter fares, and said it cannot rule out a further downgrade if Brexit causes unexpected developments.
Europe’s largest low-cost carrier now expects profit after tax for its financial year to March 31 — excluding start-up losses at its Laudamotion unit — of between €1 billion ($1.14bn) and €1.1bn, compared to a previous estimate of €1.1bn to €1.2bn.
The Irish airline had originally forecast profits of €1.25bn to €1.35bn before October’s profit warning took account of a series of strikes across Europe during the summer that hit traffic and bookings, but have since subsided.
On Friday, Ryanair lay the blame squarely on lower than expected fares in the second half of its financial year. Those fares were set to fall by 7 percent, rather than the 2 percent previously flagged, due to short-haul overcapacity in Europe, it said.
The lower fares have, however, been partially offset by stronger than expected annual traffic growth — now expected to grow by 9 percent to 142 million passengers — slightly better than expected unit costs and stronger ancillary sales.
Ryanair Chief Executive Michael O’Leary said a further downgrade of the profit outlook was possible given uncertainty about the terms of Britain’s planned departure from the European Union at the end of March.
“While we have reasonable visibility over forward Q4 bookings, we cannot rule out further cuts to air fares and/or slightly lower full year guidance if there are unexpected Brexit or security developments which adversely impact yields between now and the end of March,” O’Leary said in a statement
Still, the better than expected unit cost performance allowed the carrier to cut its projected start-up losses in Lauda to €150 million from €140m.
O’Leary said the fact that the airline was passing on lower air fares to customers would continue to be good for Ryanair’s traffic growth and business over the medium to long term.


Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

Updated 34 min 34 sec ago
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Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

  • The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios
  • SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year

RIYADH: Saudi Real Estate Refinance Co. (SRC), modelled on US mortgage finance firm Fannie Mae, aims to issue up to 4 billion riyals ($1.07 billion) of long-term sukuk this year, its chief executive said on Tuesday.

The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios from mortgage financing companies and banks to boost the Kingdom’s secondary mortgage market.

SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year, Fabrice Susini told Reuters in an interview.

“Our strategy is clearly to tap the market twice this year,” he said. “We are really looking at probably issuing something between ... 2 and 4 billion riyal that we may be issuing in two tranches.

He said SRC was looking at sukuk in the 10 to 15-year range, to help minimize refinancing risks. “Generally speaking we are trying to issue as long as possible,” Susini said.

He said the company was assessing whether it could also issue bonds in currencies other than the local riyal.

In March, SRC completed a 750 million riyal sukuk issue with multiple tenors, under a program that allows it to issue up to 11 billion riyals of local currency denominated Islamic bonds.

“The rule of the game for us is, like many projects across the Kingdom, attract liquidity from foreign investors,” Susini said.

He said SRC had spent 1.2 billion riyals from its balance sheet buying mortgages from local mortgage financing companies and provided liquidity to these firms.

It has also signed initial accords with several commercial banks to acquire housing mortgage portfolios.

Saudi Arabia’s housing ministry is targeting the mortgage market to reach a total value of 502 billion riyals by 2020 from around 300 billion riyals now.

The government wants to increase activity in the real estate market as it moves to revitalize the economy and is taking steps to reform the sector as part of its 2030 reform plan.

It has been working with developers and local banks to counter a shortage of affordable housing — one of the country’s biggest social and economic problems. Saudi Arabia wants 60 percent of its nationals to own homes by 2020, up from 47 percent in 2016.

The size of real estate financing relative to its gross domestic product is 5 percent in Saudi Arabia compared to 69 percent in the United States, 74 percent in the United Kingdom and 43 pct in Canada, the housing ministry has said.

“The goal of SRC in this market was to make sure that we will be able to refinance at least around 10 percent of the market in 2020, and 20 percent of the market by 2028,” Susini told Reuters.