The British low-cost airline easyJet said it expected currency headwinds and measures to mitigate Britain’s vote to leave the EU to hit earnings again in 2017 after reporting its first fall in annual profit in six years.
For the 12-months to the end of September, easyJet, Europe’s second-biggest no-frills carrier behind Ryanair, posted a 28 per cent drop in pretax profit to £495 million (Dh2.27 billion), a first decline since 2009, although at the upper end of a £490m to £495m range given in October.
The weak sterling following the Brexit vote resulted in an £88m hit to easyJet’s profit in its 2015-16 financial year and the carrier said on Tuesday it expected a further impact of £90m in the 12 months to September 2017.
Update:
EasyJet said it is working to streamline operations as the slump in the pound after Britain’s decision to quit the European Union is set to weigh more on earnings next year.
The chief executive Carolyn McCall has ordered a review aimed at producing a “simpler, more efficient organisation” together with “meaningful” savings, the Luton, England-based company said on Tuesday.
Exchange-rate movements will cost easyJet almost £180 million (Dh821.4m) in the 12 months through September 30, 2017, it said.
The June 23 Brexit vote extended a slide in the pound that has inflated easyJet’s euro and dollar-denominated costs and which may discourage Britons from travelling abroad. At the same time terror attacks from France to Turkey have hurt demand and fares amid a capacity glut encouraged by the lower oil price.
“EasyJet achieved a resilient performance in 2016, in the face of significant challenges including a series of external events and foreign exchange headwinds,” Ms McCall said.
EasyJet cut its 12-month dividend payout by 2.5 per cent to 53.8 pence as a result of the profit decline, and did not provide an estimate for fiscal 2017 earnings. While the company will book unspecified charges for the restructuring plan, details of which have yet to be disclosed, it said the measures should begin to bring down costs six to nine months after being implemented.
Ms McCall said easyJet will still boost capacity 9 per cent in fiscal 2017, adding: “In a tougher operating environment strong airlines like easyJet will get stronger, and we will build on our already well-established network.”
Shares of easyJet traded 2.1 per cent higher at 1,054 pence as of 8:10am in London, paring their decline this year to 40 per cent and valuing the company at £4.17 billion.
The stock gained 3 per cent on November 3 after High Court judges said a vote must be held in Parliament before Britain starts the two-year countdown to exiting the EU. The government has said it will appeal that decision.
* Agencies
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
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