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The Jet2 (LSE:JET) share price plummeted 6% in the first few minutes of trading today (9 July). Investors were responding to the travel group’s results for the year ended 31 March (FY25).
This morning’s market reaction spoils a strong post-‘Liberation Day’ rally. Even so, its shares are now changing hands for 48% more than their April low of £11.59.
The group’s simple offer of “friendly” low fares, carefully selected hotels and a “VIP customer service” seems to be working.
I say this because, compared to FY24, it recorded a 12% increase in pre-tax profit to £593.2m. In fact, in terms of passenger numbers, revenue and profitability, it was a record-breaking year.
To reward shareholders, the final dividend was increased by 13%. This brings the full-year payout to 16.5p. A £250m share buyback programme has also been announced.
It’s a far cry from the dark days of the pandemic when passenger numbers collapsed and losses mounted.
| Financial year | Flown passengers (m) | Pre-exceptional profit before tax (£m) |
|---|---|---|
| 2025 | 19.77 | 577.7 |
| 2024 | 17.72 | 520.1 |
| 2023 | 16.22 | 390.8 |
| 2022 | 4.85 | (376.2) |
| 2021 | 1.32 | (373.8) |
| 2020 | 14.62 | 264.2 |
A complicated picture
In common with other airlines and tour operators, delve a little deeper and it can sometimes be bewildering looking at the Jet2 results.
References to “flight-only ticket yield per passenger sector (excluding taxes)” and “leisure travel pre-exceptional profit before foreign exchange revaluation and taxation” are hard to fathom.
However, one thing that’s easy to see is its potential to generate large amounts of cash. Over the past three years, it’s made £3.1bn from its operations. And like all sensible businesses, it’s been using this to invest for the future and repay some of its borrowings.
During the course of FY25, the group reduced its debt by 22%. And it improved its net cash position by 17% to £2.02bn.
| Cash flows / £m | 2023 | 2024 | 2025 | Combined |
|---|---|---|---|---|
| Generated from operations | 952.1 | 1,093.5 | 1,057.7 | 3,103.3 |
| Used in investing activities | (675.8) | (482.3) | (613.9) | (1,772.0) |
| Used in financing activities | (370.3) | (124.6) | (696.6) | (1,191.5) |
| Net cash inflow / (outflow) | (94.0) | 486.6 | (252.8) | 139.8 |
Looking ahead, the group’s bottom line should benefit from lower fuel costs. Excluding spending on accommodation, these account for around a fifth of all operating expenditure. But it’s hedged 90% of its expected demand for FY26 so most of this benefit should be received next year.
Current trading’s reported to be in line with expectations.
Jet2’s shares appear attractively priced to me. Based on its FY25 earnings per share of 207.2p, they currently trade on a historical price-to-earnings ratio of 8.3. For comparison, easyJet attracts a multiple of 9.1.
All of this makes the reaction of investors a little puzzling. Perhaps some shareholders decided to cash out after the recent rally. Or maybe it was the decline in the operating margin from 6.8% to 6.2% that caused nervousness. Whatever the explanation, in my opinion, the business remains in fundamentally good shape.
Final observations
However, despite reporting a strong set of results, anyone involved with the industry will know how quickly things turned when the pandemic struck. And the sector faces many other challenges. Indeed, its FY24 annual report identified 12 key threats covering everything from operational disruption and variable input costs to data security and government intervention.
Above all, Jet2 operates in a highly-competitive sector of the market where price-conscious consumers often show little brand loyalty.
But with its strong balance sheet and large cash reserves, the group’s better placed than many of its competitors to cope with any unforeseen events. And today’s results demonstrate that it’s good at what it does.
On this basis, investors could consider adding the stock to their portfolios, especially with the unexpected pullback in the group’s share price.
