EasyJet looks to go green and AO streamlines its business

“The FTSE 100 takes a step forward on Tuesday morning after US indices marked fresh highs on Monday,” says AJ Bell Investment Director Russ Mould.

“The seemingly endless question of US-China trade remains the main influence on markets, with mixed messages coming from Washington and Beijing.

“The Chinese appear to be a bit more pessimistic about a deal based on whispers from a government source overnight."

EasyJet

“Today’s announcement from budget carrier EasyJet that it will offset carbon emissions on all of its flights – with the aim of becoming the first net-zero carbon airline – shows the sector is under real pressure to address its environmental impact.

“Regular fliers often fret about their carbon footprint so EasyJet’s move, at a significant but not unmanageable cost of £25m a year, could pay off. Well, at least if it is seen as a genuine strategy and not just window dressing.

“The news comes hot on the heels of Wizz Air CEO Jozsef Varadi’s call for a ban on business class – the Hungarian-based outfit styles itself as Europe’s greenest airline.

“EasyJet recognises the offsetting move is only an interim measure with the company looking at longer term solutions like sustainable fuel and electric flying.

“Clearly the industry sees itself coming under more pressure in the future and is trying to get one step ahead as climate change becomes an increasingly important issue for politicians, regulators and the public.

“It is reassuring that full year results show profit bang in line with guidance, although the company is unlikely to win too many plaudits given this still represents a 26% drop year-on-year despite record passenger numbers.

“The company will hope its new EasyJet Holidays business, offering beach and city breaks, will help it capitalise on the opportunity created by the collapse of Thomas Cook.”

AO World

“There is a trend developing among UK-based consumer-facing companies where overseas growth plans are being scaled back, either because they were trying to do too much at once or the execution has been so poor that it wasn’t worth the effort.

“AO is the latest to join this bandwagon, abandoning its operations in the Netherlands as it doesn’t have the capacity grow both that business and its interests in Germany.

“B&M recently started a strategic review of its German business after a lengthy spell of disappointing performance. Last month Domino’s Pizza confirmed it would pull out of its international interests, which includes stores in Norway and Switzerland, following weak sales.

“While these moves may hurt management’s pride in the short term as they are an admission of failure, ultimately making such decisions should be a positive as it gets rid of distractions and focuses the business on stronger elements.

“AO’s UK interests continue to grow sales but the group as a whole remains loss-making as the European arm is struggling. However, gross margins are improving in Germany which offers some hope on future performance.

“If AO was only a UK-only business everyone would be applauding its growth and saying how it was doing well in a difficult environment, by finding new sources of customers via Amazon and Ebay as well as directly through its own website.

“Sentiment has been poor towards AO because of its desire to obtain greater scale through having a Continental Europe presence which means group profit continues to be an aspiration rather than a reality.

“However today’s share price rally suggest there are the beginnings of a potential change in sentiment. AO now needs to deliver the goods to truly win the market’s favour.”

These articles are for information purposes only and are not a personal recommendation or advice.