Ryanair’s gamble on oil prices falling and its decision not to hedge has left it as one of the most exposed large carriers in Europe to the full force of fuel price increases this summer.

The key point in Q1 was the yield figure which fell 8% yoy versus RYA’s
previous expectation of 5% growth in this figure. Yields include revenue
from bag charges and as these have risen yoy consequently we believe
underlying yields fell significantly more than this. Yields also suffered from
a difficult comp (Easter), passengers checking less bags and finally the significant
GBP:EUR currency move yoy.

The latter was also mirrored in the
cost position where ex-fuel unit costs fell by 6%. Overall net income for Q1
excluding exceptionals was €21m, vs. cons €52m and DBe €75m. Exceptional
impairments on airline/aircraft assets were also taken totalling
€111.4m.

Valuation: Our PT is DCF based and remains €3
With no earnings in guidance, we look at the value of the fleet. easyJet is trading at
80% of its fleet value, Ryanair was trading at 115%. We would expect to see
Ryanair’s share price down over 10% today as the market discounts zero earnings
this year. On this basis, we keep our preference of easyJet over Ryanair.

Funding costs drive margin decline — We expect improvements in asset pricing to
have been insufficient to offset higher funding costs in 1H08. As a consequence we
expect the net interest margin to fall from 1.58% in 2H07 to 1.55%.

Credit market losses and lower corporate realisations depress income — HBOS’
structured credit portfolio continues to deteriorate with £1bn mark-to-market losses
estimated in the five months to May. With most of this pain being taken in 1Q08, we
expect the charge to rise to £1.1bn for 1H08. Weak market conditions have
significantly reduced opportunities to realise gains on HBOS’ £4.8bn investment
portfolio. We expect a c80% fall in revenues from this portfolio from a peak of
£543m in 1H07 to be the main driver of a 19% YoY fall in Corporate Banking
income.

It sees prices falling 4.4% in 2008, 2.1% lower in 2009, recovering by 2010 and rising at over 9% in 2012 and 2013.

People living for longer, delaying marriage and getting divorced more were all adding to demand for homes.

While there are questions over how accurate five-year forecasts can be, there is a general concern that new homes being built will not meet demand.

“As soon as the economic outlook improves, house prices will resume their previous upward trajectory,” said the Federation’s chief executive David Orr.

Price trends

However, a number of analysts have been suggesting that house prices will fall by at least 7% in 2008 since the start of the year.

Others have been suggesting bigger drops in prices over the year.

The Federation, which represents housing associations in England, predicts that rising demand and falling supply will push the cost of the average home in England to £274,700 in 2013.

“People are living longer, they’re delaying getting married and they’re more likely to get divorced – meaning that we now have more households than ever,” said Mr Orr.

He said only 75% of the new homes needed were being built each year, which was also hitting the availability of affordable homes.

In any case we believe that the focus today will be on the proposed listing of KKR
which involves merging KPE’s assets with KKR itself; KPE shareholders will end
up owning 21% of the merged entity.

By Pan Kwan Yuk

Published: July 28 2008 00:21

Beer sales in pubs have slumped to their lowest level since the 1930s, as the smoking ban, the consumer slowdown, increases in alcohol duty and heavy price promotions from supermarkets continue to hit sales of the humble pint.

Figures released on Monday by the British Beer and Pub Association showed that total beer sales fell 2.8 per cent to 8.7bn pints for the year to the end of June.

Pubs, restaurants and bars bore the brunt of the loss, suffering an 8.3 per cent drop in sales – equivalent to 1.2m pints every day for the entire year.

By contrast, the off trade – which includes off-licences and supermarkets – saw sales rise 5.3 per cent during this period.

The trading decline has accelerated over the past quarter as consumers have started to tighten their belts and rein in spending.

Beer sales in pubs were down 10.6 per cent in the three months to the end of June, compared with the 3.8 per cent increase seen in the off-trade.

“Beer sales are on the slide and the tax increase in the Budget has made it worse,” said Rob Hayward, BBPA’s chief executive. “This is hitting Britain’s brewers and pubs hard.”

The figures are expected to provide fresh ammunition to the pub industry, which has blamed aggressive supermarket discounts on sales of large packs of beer for the decline in trade.

Whereas the off-trade accounted for just 10 per cent of total beer sales in 1970, its share of the market now stands at 44 per cent. Inversely, pubs have seen their share of the market during the last four decades plummet from 90 per cent to a little over 50 per cent.

Pub operators have had a tough year. Pub closures are now running at a net rate of 27 a week, according to the BBPA.

Neither have the big listed operators been immune. Although many have tried to offset the smoking ban by reinventing themselves as dining-out places to attract a new clientele, their share prices have been battered as investors bet the industry will suffer from the economic downturn.

Last week Ted Tuppen, chief executive of Enterprise Inns – the country’s biggest tenanted pub operator – launched a scathing attack on irresponsible supermarkets for selling cut-price alcohol, and called on the government to intervene.

“We would call into question the strategy of the major supermarkets, some of whom continue to use alcohol as a traffic builder, often selling multipacks at below cost into a market place where consumption is almost entirely unregulated,” he said.“In the absence of responsible retailing, we would expect the government to introduce sensible legislation.”

The slump in beer sales is also bad news for the government’s finances, the industry says. In just three months, the Treasury has collected £88m less in beer duty and VAT than in the same period last year, the BBPA estimates.

“It’s creating a large hole in the chancellor’s pocket with the Treasury’s tax take also down,” Mr Hayward said. “Where’s the logic in taxing more when you’re taking less?”

Our lunch of two courses plus wine came to £145.00 not exactly value for money when the food itself was poor. I had fish which had been ‘pan fried and grilled’ why then was it soggy, undercooked and nasty?

The website has a set menu but when I asked to see it the waiter said there wasn’t a set price option.

If I were to be asked to recommend it I honestly couldn’t .

Results are on 22nd September and we believe that the company will
comfortably meet our forecast of 57% earnings growth. Given the long-term
attraction of the business model we would not rule out a bid in the future.

The company continues to state that given the severe financial problems in the airline
industry the level of enquiries from major airlines is at an unprecedented level. That
said, it is unlikely that AI will take on another large contract(s) in 2008.

For 2008 we expect PBT of $71.8m/EPS103c. Following new contract acquisitions;
principally ACTS,where further stock funding has been required to support growth we
expect debt to be in the region of $375m – within the current asset backed facility of
$500m. We would expect the company to reiterate that the maturing contracts; HAECO and Quantas are now cash positive and that the group will be net cash generative in 2009 with the ability to fund growth from cash flow.

The renegotiation of covenants means that Barratt has waived profitability covenants and swapped it for one focused on cash flow – something several other companies in the sector are yet to renegotiate.

The ability of Barratt to reduce debt over the proceeding two years is significant and we prudently forecast the group can reduce debt to below £1.0bn from £1.7bn. This would be achieved by a reduction in land spend (principally in 2010), and work in progress (partially realigning it to the reduction in volume), the disposal of Wilson Bowden Developments and also small levels of retained income. It is possible Barratt could reduce debt beyond this and we would see this as a positive development.

The Land Registry reported that average house prices in England and Wales fell 1.0% month-on-month in June. Even so, house prices were still up 0.1% year-on-year. This contrasts with the marked year-on-year falls in house prices in June reported by both the Halifax (6.1%) and the Nationwide (6.3%). However, the Land Registry tends to provide lagging evidence on house prices as they are based on when the transaction is actually completed and registered. The Nationwide and Halifax price indices are based on prices at the mortgage approval stage.

Meanwhile, the Hometrack housing market survey for July showed house prices falling for a 10th successive month, and at an increased rate of 1.2%, to be down by 4.4% year-on-year. Furthermore, all the elements of the Hometrack survey pointed to further house price weakness ahead. The number of new buyers registering with estate agents declined by a further 6.4% in July and are now down 58% since last August. The average time taken to sell a house climbed to 11.0 weeks in July, which was the longest period since the survey began in 2001 and was up from 10.3 weeks in June and was almost double the low of 5.8 weeks in May 2007. Meanwhile, sellers on average achieved just 90.9% of their asking price in June. This was the lowest rate since the survey began in 2001, and was down from 91.6% in June, 92.3% in May and a peak of 95.7% in May 2007.

Elevated affordability pressures on potential house buyers stem from high house prices and modest disposable income growth, while very tight credit conditions have led to substantially
fewer and more expensive mortgages being available. Although some fixed rate mortgage rates have been trimmed over the past couple of weeks, they are still up significantly overall in recent months. Furthermore, potential house buyers now have to provide higher deposit levels, which is a particularly major problem for first-time buyers. On top of this, arrangement fees have risen sharply.