British Airways owner IAG (LON:IAG) flew to the top of FTSE 100 as it’s third quarter was impacted by the weak pound but it improved its after tax profit in the three months.
The weakness in sterling cost the group €162m (£145mln) in the quarter of the year and operating profits fell 4%.
Willie Walsh, chief executive, said it had been a tough operating environment but noted that the group’s unit revenue performance was better than in the second quarter and quarterly profit after tax was €970 million before exceptional items – an improvement of 9.9% compared to last year.
The interim dividend was increased 10% at 11 euro cents per share.
City broker Liberum rates shares a ‘hold’.
It said the September quarter were “in line with our forecasts and consensus”.
Operating profit was lower YoY (year-on-year), despite a full contribution from Aer Lingus and a lower fuel bill, it noes.
“Currency was a material headwind in the period, with a net adverse impact on operating profit of €162m. We believe the bulk of this was related to the translation of sterling profits at British Airways.”
On the broker’s estimates, IAG trades on a price -to-earnings ratio of 5.4 times’ on 2016 estimates, rising to 6.2 for 2017.
“These multiples are a material discount to the group’s historic trading range and its European network carrier peers,” it says.
“We struggle to see how a discount valuation is justified.”
Story by ProactiveInvestors