TIDMFJET
RNS Number : 8730U
Fastjet PLC
27 November 2019
fastjet Plc
("fastjet", the "Company" or the "Group")
Trading Update and Restructuring Proposal
27 November 2019
fastjet, the low-cost African airline, is today providing an
update on trading, a proposed restructuring of the Group, and
clarity on the liquidation order of fastjet Airlines Ltd (Tanzania
airline).
Trading Update
Revenue for the ten-month period ended 31 October 2019 is
US$34.1m* (comparative period 2018: US$ 28.3m*). On 21 October
2019, fastjet announced the suspension of flight operations in
Mozambique which due to the ongoing supply and demand challenges in
Mozambique had seen revenue in this country reduce to c.US$2m in H1
2019 (H1 2018: c.US$4m) and had resulted in continued losses of
US$2.4m in H1 2019 (H1 2018: loss of US$2.7m).
Despite significant financial and operational improvements in
performance, the Company continues to be loss making with
management expecting a loss after tax of c.US$7m to US$8m for the
full year 2019 (2018: loss of US$65.0m). While the Group's FedAir
operation remains resilient and is expected to be profitable for
the year, this has been off-set by the continued volatility and
uncertainty in the Zimbabwean market. fastjet Zimbabwe has
increased its year on year revenue despite the difficult trading
conditions following the introduction of a new currency which
effectively devalued the existing currency by up to 15 times its
previous value at official rates and has pushed inflation rates to
above 200%.
*unaudited numbers
Cash Position
As at 21 November 2019, the Group had cash reserves of US$3.0m
with no restricted cash (30 June 2019: US$3.4m). Of the Group's US$
3.0m, US$0.8m is in Zimbabwe and currently unrestricted.
Exchange rates
On 22 February 2019 the Reserve Bank of Zimbabwe formally
announced the introduction of a new domestic currency which
effectively devalued its domestic US dollar denominated assets and
liabilities including cash balances. At the same time, it
introduced an interbank exchange rate of RTGS$ 2.500 = US$1.00.
Since March 2019, due to the above changes, the RTGS$ to US$
exchange rates via interbank market have devalued significantly
from the starting RTGS$2.500 to a current interbank market mid-rate
of RTGS$ 16.11 as of 22 November 2019. This has driven a
significant domestic inflation running to over 200%.
Capital requirements and restructuring proposal
The Board expects further funding will be required by the end of
February 2020 to enable the Group to continue operating in its
current form.
The Group is therefore currently in active discussions with
certain of its major shareholders to explore various options
including raising equity capital and / or a restructuring of the
Company involving the disposal of fastjet Zimbabwe (the
"Disposal"). The Disposal would be made in receipt of a
consideration of approximately US$8m from a consortium that would
be led and underwritten by Solenta Aviation Holdings Limited (c.
60% shareholder in fastjet Plc today) and additionally by other
local investors in Zimbabwe (the "Investor Consortium"). The
Disposal would also relieve the Group of c.US$5.4m of current
liabilities and c.US$3.2m of future aircraft capital expenditure
which will be raised and funded by the new Investor Consortium
directly. In addition, the Group would be granted an option to buy
back its shareholding in fastjet Zimbabwe on the same divestment
economics to which it would be sold, 3 to 5 years after the
effective date of the sale.
The capital received from the Disposal would be utilised to
settle the remaining current Group liabilities and for future
working capital within the Group providing sufficient funding into
FY2021. Upon completion of the restructuring, the Group would then
consist of the FedAir business, the fastjet Brand and fastjet
Africa (which incorporates the fastjet Central Systems business
unit) and which also owns fastjet Mozambique. The Group would be
contracted by fastjet Zimbabwe to continue providing the fastjet
brand and airline management services.
The restructured Group would become a capital light business
operating as a franchise house that would earn revenues through the
fastjet brand and providing airline management solutions, whilst
also continuing to hold its investment in the FedAir business. The
Group's strategy is to focus on franchise and providing airline
management solutions to additional airlines in Africa that are
independently owned, enhancing its overall revenues from these.
Additionally, the Group would aim to only own airlines once they
were cash generative and profitable, so avoiding the initial costs
and significant cash losses through the airline startup phase and
from operating in Africa's sometimes uncertain trading
environment.
Whilst initial discussions with the Investor Consortium and the
Group's major shareholders have been positive about the
restructuring proposal, discussions are ongoing and there can be no
guarantee of a successful outcome.
The Directors believe, based on current financial projections
and funds available and expected to be made available, that the
Group will have sufficient resources to meet its operational needs
until February 2020. Accordingly, the Directors continue to adopt
the going concern basis for the business. However, the headroom of
available cash resources is minimal, and the projections are very
sensitive to any assumptions not being met. If the Group is unable
to carry out the restructuring proposal by the end of February 2020
it would be unable to continue trading as a going concern.
Update on E190 aircraft
One of the E190 aircraft which used to be leased from GECAS has
yet to be deregistered by the Tanzanian authorities. Deregistration
of the aircraft was due to be completed by 28 February 2019 and is
the last remaining condition for the termination of the head lease
agreement with GECAS but has not yet been satisfied. Fastjet
Airlines Ltd applied for the deregistration of the E190 with the
Tanzanian authorities who have yet to deregister the aircraft. In
our opinion the Group has done everything necessary to allow
de-registration of the aircraft.
Fastjet Airlines Ltd - Tanzania airline operation
On 26 November 2018 the Group sold its shares in fastjet Air TZ
(BVI) Limited ("fastjet Air TZ") which held 49% of fastjet Airlines
Ltd ("fastjet Airlines"), the Group's Tanzanian airline operation.
Since that date, fastjet Air TZ (BVI) Limited and its subsidiary,
fastjet Airlines Limited (the airline), no longer form part of the
Group.
fastjet Airlines was recently placed into liquidation following
a creditor application to the Tanzania courts. For clarity, this
liquidation order does not relate to the Company or Group itself
and is restricted to divested fastjet Airlines.
Mark Hurst, fastjet Chief Executive Officer, commented:
"The Disposal, if agreed, approved and implemented, would be
expected to de-risk the significant uncertainty and cash drain that
shareholders have historically suffered and allow the Group to
continue operating under a more stablised and simpler business
model. This revised strategy allows the Group the opportunity to
create a single fastjet brand throughout key markets in Africa,
leverage its key intellectual property of its brand and airline
management solutions and invest in viable, already-established
airlines where it can."
A further update will be made as appropriate.
This announcement is released by fastjet plc and contains inside
information for the purposes of Article 7 of the Market Abuse
Regulation (EU) 596/2014 (MAR), and is disclosed in accordance with
the Company's obligations under Article 17 of MAR.
For the purposes of MAR and Article 2 of Commission Implementing
Regulation (EU) 2016/1055, this announcement is being made on
behalf of the Company by Kris Jaganah, Chief Financial Officer.
fastjet plc Tel: +27 (0) 10 070 5151
Mark Hurst, Group Interim Chief
Executive Officer
Kris Jaganah, Group Chief Financial
Officer
Liberum Capital Limited Tel: +44 (0) 20 3100 2222
Nominated Adviser and Broker
Andrew Godber
Clayton Bush
James Greenwood
William Hall
Citigate Dewe Rogerson Tel: +44 (0) 20 7638 9571
Financial PR
Angharad Couch
Toby Moore
Nick Hayns
NOTES TO EDITORS
About Fastjet Plc
fastjet is a multi-award winning (including Skytrax World
Airline Awards Best Low-Cost Airline in Africa 2017) low-cost
African airline for everyone. It began flight operations in
Tanzania in November 2012, flying passengers from Dar es Salaam to
just two domestic destinations - Kilimanjaro and Mwanza. Today,
fastjet's route network includes operations in Zimbabwe and South
Africa, together with interline arrangements with carriers such as
Emirates and Qatar. The airline has flown over 3.0 million
passengers with an impressive aggregate on-time performance above
90%, establishing itself as a punctual, reliable, and affordable
carrier.
IMPORTANT INFORMATION
This Announcement contains (or may contain) certain
forward-looking statements with respect to certain of the Company's
plans and its current goals and expectations relating to its future
financial condition and performance and which involve a number of
risks and uncertainties. The Company cautions readers that no
forward-looking statement is a guarantee of future performance and
that actual results could differ materially from those contained in
the forward-looking statements. These forward-looking statements
can be identified by the fact that they do not relate only to
historical or current facts. Forward-looking statements sometimes
use words such as "aim", "anticipate", "target", "expect",
"estimate", "intend", "plan", "goal", "believe", or other words of
similar meaning. By their nature, forward-looking statements
involve risk and uncertainty because they relate to future events
and circumstances, including, but not limited to, economic and
business conditions, the effects of continued volatility
in credit markets, market-related risks such as changes in the
price of commodities or changes in interest rates and foreign
exchange rates, the policies and actions of governmental and
regulatory authorities, changes in legislation, the further
development of standards and interpretations under International
Financial Reporting Standards (IFRS) applicable to past, current
and future periods, evolving practices with regard to the
interpretation and application of standards under IFRS, the outcome
of pending and future litigation or regulatory investigations, the
success of future explorations, acquisitions and other strategic
transactions and the impact of competition. A number of these
factors are beyond the Company's control. As a result, the
Company's actual future results may differ materially from the
plans, goals, and expectations set forth in the Company's
forward-looking statements. Any forward-looking statements made in
this Announcement by or on behalf of the Company speak only as of
the date they are made. Except as required by the Financial Conduct
Authority (the FCA), the London Stock Exchange or applicable law,
the Company expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking
statements contained in this Announcement to reflect any changes in
the Company's expectations with regard thereto or any changes in
events, conditions or circumstances on which any such statement is
based.
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END
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