Results for the 18 month period to 31 December 2012 - 31 December 2012

31 May 2013

fastjet plc

("fastjet", the “Company” or the “Group”)

Results for the 18 month period to 31 December 2012

Fastjet announces its results for the 18 month period to 31 December 2012, which will also be made available on the Company’s website and posted to shareholders.

 

For media enquiries please contact:

 

UK media - Citigate Dewe Rogerson                                                                     Tel: +44 (0) 20 7638 9571

 

Angharad Couch

Patrick Donovan

Chris Barrie

Eleni Menikou

 

Africa Media - Africa Practice                                                                                     Tel: +254 (0) 20 239 6899

 

Natalie Maule

Anna Riley

Joan Kiambati

Meg Muigai

Evelyn Njoroge

                                               

For investor enquiries please contact:

 

W.H. Ireland Ltd.                                                                                                             Tel: +44 (0) 20 7220 1666

 

James Joyce

Nick Field

 

Chairman’s statement

 

Background

On 18 November 2011, the Company, when it was called Rubicon Diversified Investments Plc, announced its intention to adopt a new investing policy. The Company aimed to seek an acquisition or acquisitions in the global aviation services sector with a focus on Africa.

On 23 February 2012, the Company announced it was in discussions to acquire Lonrho Plc’s aviation businesses operating in Africa. Trading in the existing ordinary shares was suspended on 23 February 2012 until the Company could enter into binding agreements and publish an Admission Document for the enlarged Group.

On 8 May 2012, the Company announced it had entered into a brand licence with Sir Stelios Haji-Ioannou's easyGroup Holdings Limited (“easyGroup”), under which it had agreed to licence the fastjet brand from easyGroup subject to certain conditions including the completion of the Acquisition (the "Brand Licence"). Under the Brand Licence, the Company agreed to issue to easyGroup shares equal to 5% of the Company's diluted share capital and options over a further 10% of the Company's diluted share capital. Sir Stelios and easyGroup also agreed to provide consultancy services to fastjet for the duration of the Brand Licence. easyGroup has the right to appoint two Directors to the Board of fastjet whilst the Brand Licence is in force.

On 13 June 2012, the Company announced that it had entered into an acquisition agreement to acquire the entire issued share capital of Lonrho Aviation (BVI) Limited (“Lonrho Aviation”), the holding company representing Lonrho Plc’s interest in a pan-African airline business operating under the ‘Fly540’ brand, plus a 49.98% economic interest in Five Forty Aviation Limited (“Fly540”). On the same date, the Company published an Admission Document.

On 29 June 2012, at a general meeting of the Company's shareholders, resolutions were passed, approving the Lonrho Aviation acquisition and the acquisition of a further 49.98% economic interest in Fly540 Kenya (together "the Acquisition"). The Acquisition was completed on 2 July 2012.

Directorate

In July 2012, Edward Winter was appointed Chief Executive Officer of fastjet.  Edward has vast experience in the low-cost aviation business, as a founder of Go and former Chief Operating Officer of easyJet, as well as a long history in the broader airline industry as chief pilot and in senior management roles at British Airways. His knowledge and leadership has been a great asset to the Company as we launch and grow fastjet. Edward is one of the two easyGroup nominees to the Board. 

In December 2012, Richard Blakesley resigned from the Board as Finance Director and was replaced by Angus Saunders. Angus has extensive experience in the global aviation industry and was previously Finance Director of British Mediterranean Airways Limited.

fastjet Launch

fastjet launched its new low-cost services on 29 November 2012, with the first aircraft commencing operations from Dar-e-Salaam in Tanzania. In anticipation of the launch, a substantial amount of preparation work had been completed on the operational, sales and marketing, recruiting, IT and regulatory side to ensure the fastjet launch met its stated commitment of supplying an airline that operated to international standards. The head office team has been strengthened with the hiring of key individuals with strong global airline backgrounds from the likes of easyJet and Ryanair.

Current Trading

A review of current trading is provided in the Chief Executive’s Review. Unfortunately, the Fly540 operations have not performed to our expectations and we have made an impairment to goodwill and to investments (see note 3).

Funding

In March 2013, the Company announced that it had entered into a convertible securities deed with Bergen Global Opportunity Fund, LP (“Bergen”), an institutional investment fund managed by Bergen Asset Management, LLC, a New York asset management firm, in connection with zero coupon convertible securities with a nominal amount of up to £15,681,750.

Future Initiatives

The South African market is seen by the fastjet Board as a significant opportunity and essential to fastjet’s pan-African ambitions. In recent months we have been in discussions with a number of South African-based entities to support our market entry strategy.

In April 2013, the Company announced the signing of a Memorandum of Understanding ("MoU") with local South African investment company Blockbuster, with the objective of fastjet operating services in South Africa by the end of May 2013. Blockbuster is associated with a number of high profile South Africans. It is anticipated that the new entity will be 75% owned by Blockbuster, in compliance with South African law, and 25% owned by fastjet. fastjet is targeting early July 2013 to launch the initial Johannesburg to Cape Town route.

A commercial arrangement has also been struck between Blockbuster and local operator Federal Airlines, a company with a 20 year history in South Africa, which will facilitate bringing the fastjet low cost brand to the South African public.

Outlook

The next few months will represent a greater transformation for the Company as we endeavour to further implement and grow the fastjet business model. The Board is confident it has the right strategy and team in place to build a successful and profitable future for our shareholders.

The current Board would like to take this opportunity to thank its staff and our shareholders for their continued support during this initial start-up phase.

David Lenigas

Executive Chairman

31 May 2013

 

Chief Executive’s Review

I am pleased to present my report for the 18 month period to 31 December 2012.

 

Operations review

fastjet operations

Following the acquisition of Lonrho Aviation and Fly540 Kenya in July 2012, management spent considerable time reviewing the Fly540 businesses and activities to determine the appropriate place to initially commence the fastjet low-cost airline model.  East Africa was selected ahead of West Africa due to market economic indicators and potential quantum of capital required. Tanzania was then chosen as the commencing country ahead of Kenya based on a number of factors including:

-    the Tanzania Fly540 operation was relatively new, and as such, was expected to have the least         number of legacy issues;

-    the Tanzanian government and Civil Aviation Authority were very positive and welcoming;

-    the Airbus A319 aircraft had already been approved on the Tanzanian register;

-    the competitive environment was more benign than in Kenya where Kenya Airways dominates the market and has considerable influence over the Kenyan Government and the Civil Aviation Authority.

The Fly540 operation in Tanzania was closed in early November 2012 to allow the introduction of fastjet on 29 November 2012. Operationally it has been a great success with exceptionally high levels of punctuality and regularity and has certainly proved the ability to operate efficiently within African infrastructure constraints. The passenger loads on the two domestic routes between Dar–es-Salaam and Kilimanjaro and Dar-es-Salaam and Mwanza averaged 79% in December, the first month of operations.  Similar loads were achieved in January and February 2013 but fell to 64% in March and 66% in April following the introduction of additional flights on secondary domestic routes from Kilimanjaro. Many of the passengers have been first time flyers, having previously used road transport on these routes.  The ability to stimulate and grow the market using the low-cost airline model has now been proven to work in this part of Africa. The fastjet brand of reliable affordable air travel has been rapidly accepted and endorsed by the Tanzanian consumer. fastjet is now the most “liked” sub Saharan African airline on Facebook, ahead of long established airlines such as Kenya Airways, South African Airways, Ethiopian Airlines and Precision Air.

Prior to commencing operations fastjet was assured by the Tanzanian Government that international route rights from Dar-es-Salaam would be immediately available to the airline. The business plan, local organisation and resources were put in place on that assumption.  Obtaining those route rights has taken much longer than expected through bureaucracy and protectionism in the countries where fastjet wishes to fly. The result has had an adverse effect on the business plan incurring the additional costs of under utilised resources. An operation of purely domestic routes within Tanzania would not be a viable business and therefore gaining international route rights has been a very high priority.  Lobbying in recent months has eventually produced action and we understand that, following constructive talks with the Tanzanian Government, international routes are expected to become operational within the next two months. 

Review of Fly540 operations

The Fly540 businesses acquired from Lonrho Plc have all seriously underperformed relative to expectations with an EBITDA loss due to continued Fly 540 operations being US$17.8m. Management has taken steps to restructure these businesses and remove legacy inefficiencies.   We have reviewed the fair value and the goodwill and impairment of the assets acquired as a result of the Lonrho Aviation and Fly540 acquisitions and made impairments totalling US$15.9m and fair value adjustments of US$19.0m, details of which are set out in the notes.

A summary of activity in all countries of operation during the reporting period follows:

Angola

Angola has the potential to be a profitable and sustainable business but is beset with a number of issues relating to moving money freely due to Angola Central Bank controls and delays in clearing aircraft spares through Angolan Customs. 

Whenever spare parts are required for a grounded aircraft, it can take weeks to import the parts and get the aircraft serviceable. This has meant extended periods with a reduced schedule and consequent reduced revenues. The spares holding in Angola is being increased, but it is not economically viable to hold every conceivable spare part that may be required. 

The Central Bank controls on currency exchange have also created delays in being able to make payments outside of Angola including lease payments and payments for spares and maintenance.  The management team has spent considerable time working with the banking authorities to find ways to overcome the current difficulties.

 

Ghana

Ghana has seen a substantial rise in competition during the period on the key domestic route from Accra to Kumasi, with a large increase in the size of the market but at a significantly decreased yield. The expected upgrade of the Kumasi runway to accommodate jet aircraft has not yet taken place.

Ghana had a fleet of two aircraft, an ATR 72-500 turbo prop and an Embraer E170 jet.  The E170 was used to open international routes from Accra to Abidjan, Cote d’Ivoire and Accra to Freetown, Sierra Leone. Both routes have now been discontinued but remain of interest once a low cost model can be introduced into West Africa.  The E170 aircraft suffered from significant periods of being unserviceable and with the withdrawal from those routes has since been returned to the lessor.

The West Africa market, with a population of more than 300m people is a significant and so far largely untapped market. A key issue for management prior to introducing the fastjet low cost model continues to be lobbying for lower government passenger taxes.  Fly 540 Ghana currently has been granted designation on 5 international routes from Accra – Abidjan, Cote d’Ivoire; Freetown, Sierra Leone; Lagos, Nigeria; Ouagadougou, Burkina Faso; Monrovia, Liberia.  These route rights will be of significant value to fastjet Ghana when the low cost brand is introduced.

 

Kenya

Kenya is the most mature market in East Africa and will eventually be a very significant low-cost operation under the fastjet brand when that is introduced. As previously announced, there has been a legal dispute between the Company and the vendors of the 49.98% economic interest in Fly540 Kenya as to whether the acquisition was completed. On 23 April 2013, fastjet entered into a Memorandum of Understanding (“MoU”) with Don Smith, Chief Executive Officer of Fly540 Kenya which trades in Kenya as Fly540, with a view to resolving these disputes and establishing a way by which the two parties can work together to maximise the value and business prospects of both Fly540 and fastjet. As a result of the disputes, we deemed we did not have the operational or financial control over the business and it has therefore been treated as an investment in the period.  There are significant debts in Fly540 Kenya and for that reason we have impaired the value by US$13,336k. See note 3 for details.

Tanzania

Prior to being closed in November 2012 to make way for the fastjet introduction, Fly540 Tanzania was operating an inefficient model with just one aircraft and creating significant losses despite attempts to make short term changes to the business.

The fastjet operation in Tanzania is covered in other parts of this report.

Fastjet intends to reduce its current 90% equity shareholding in Fly540 Tanzania and is in initial discussions with a number of Tanzanian investors.

 

Further investments

South Africa

As previously announced, fastjet had been in negotiations with the provisional liquidator of airline 1time in Johannesburg, South Africa, for the purchase of 1time.  However, we were unable to reach a compromise agreement with the creditors.

As detailed in the Chairman’s Statement, a commercial arrangement has been struck between local South African investment company Blockbuster, since renamed fastjet Holdings (Pty) Ltd, and Federal Airlines, a company with a 20 year history in South Africa. The agreement will allow fastjet Holdings to leverage Federal Airline's existing licensing infrastructure and deliver its low-cost airline brand to the South African public.

An MoU has been signed to allow the Company to take a 25% shareholding in fastjet Holdings Pty Ltd, with the remaining 75% being held by South African nationals. The South African Civil Aviation Act requires that, unless the Minister of Transport makes an exception, 75% of the voting rights have to be held by South African citizens.  fastjet is targeting early July 2013 to launch the initial Johannesburg to Cape Town route.

South Africa is going to be one of the prime focus areas for fastjet over the coming period, whilst we review and continue to restructure some of the smaller operations we have elsewhere in Africa.

Discussions are also on going in a number of other African countries with a view to launching airlines under the fastjet brand.

 

Marketing and Distribution

High load factors and the high percentage of first time flyers on our initial routes demonstrates the market acceptance of the low cost carrier model in Tanzania. We have also been encouraged by a steady increase in our average yield. Whilst we continue to offer a US$20 fare to stimulate market interest, we now have an average fare in excess of US$70 with some seats commanding rates in excess of US$170.

Ancillary revenue streams are seeing a steady improvement. Over 40% of fastjet’s passengers pay for an additional service of some variety. We would expect to see this figure rise as we offer additional supplementary services over the next year.

Since launch we have built significant brand equity with our African Grey Parrot motif becoming increasingly well known across the Continent. This brand awareness has had a dramatic effect upon our cost per acquisition (CPA) in Tanzania and we continue to manage our marketing expenditure down, inline with our increasing brand reach.  Wider reaction to our brand strategy has resulted in several prestigious marketing awards.

Since launch, we have embraced the strongest possible channel mix. We now dominate the social media aviation environments of Facebook and Twitter in Africa. fastjet  is now sub Saharan Africa’s most “liked” airline. This allows us to instantly communicate with our customer base and has a dramatic effect on reducing marketing expenditure further.

Additionally we have introduced new and innovative payment methods such as the payment of seats using mobile phone accounts (M-Pesa and Tigo) that have manoeuvred us around the low internet penetration and credit card usage figures across Africa.

We have also been working with airlines that fly into Africa but struggle to find suitable partners to transport their passengers intra-country. To that end, we have recently been approved by Tui, Europe’s largest Tour Operator, to fly their passengers to our destinations. We are also in the process of signing similar distribution deals with other large operators.  We have also signed an MOU with Emirates Airlines to link their passengers into the fastjet network.

 

Finance review

Results for the period

Operating loss before impairment charges for the 18 month period to 31 December 2012 amounted to US$30.0 million (12 months to 30 June 2011: US$0.1 million operating loss).

Revenue for the 6 months after the acquisition was US$21.1 million with US$1.5 million attributable to the one month of the fastjet business. In the trading statement dated 26 March 2103 fastjet anticipated revenues in the region of US$32 million. The large difference between this and the reported US$21 million is attributable to the change in accounting treatment for Fly540 Kenya which is now treated as an investment.

Cash at 31 December 2012 amounted to US$7.5 million (30 June 2011: US$0.005 million). 

At 31 December 2012, the Group had net cash amounting to US$5.5 million. Since that date the Group has incurred further losses in its operations. As set out in the Chairman’s Statement, the Group entered into a convertible securities deed with Bergen, a US asset management firm, which has provided up to £15.7 million. As at 30 April 2013 £13.1 million was still undrawn. The Company has also completed share placings since 31 December 2012 amounting to £8 million.

As explained in Note 1, the Directors have reviewed the Going Concern basis which they consider appropriate.  They have referred to a material uncertainty which the auditors have referred to in their report.

Strategic Review

The Company’s strategy is to create a pan-African low-cost airline brand.  Unlike in Europe, where the aviation market is fully liberalised, African aviation remains nationally controlled with route rights dependent on the negotiation of Bilateral Air Services Agreements between governments.

The strategy is therefore to create a series of airlines, all operating under the fastjet brand, and meeting identical international standards of reliability, safety and customer service.  The flights for these airlines will all be sold on one website as a single brand, providing the consumer with a pan-African airline experience, and the airlines with a reputation and sales platform across the Continent.

In order to mitigate many of the issues and delays that we have encountered over the past months, management is pursuing a policy of a creating a shareholding structure in each airline that allows for greater local investment. Management is therefore in on-going discussions with a number of potential local investors and airlines in various African countries.  Where fastjet have a minority holding, control of operational and customer service standards will be achieved through the brand licence and provision of key services.

The management team remains fully convinced by, and committed to developing, the huge aviation market opportunities throughout Africa.

Edward Winter

Chief Executive Officer

31 May 2013

 

Report of the Directors

The Directors present their report together with its audited accounts for the 18 month period from 1 July 2011 to 31 December 2012.

 

Principal activities and investment policy

As at 31 December 2012 the principal activity of the Group was investing in the global aviation and aviation services sector with a particular focus on Africa.

Results and dividends

The income statement is set out on page 33 and has been prepared in US Dollars, the functional and reporting currency of the Company and the Group.

The Group’s net loss after taxation attributable to equity holders of the Company for the period was US$52.4m (2011 – US$0.068 loss).

No dividends have been paid or proposed.

 

Review of the business and future developments

A full review of the Group’s performance, financial position and future prospects is provided in the Chairman’s Statement and Chief Executive’s Review.

 

Post balance sheet events

At the date these financial statements were approved, the Directors were not aware of any significant post balance sheet events other than those set out in the notes to the financial statements.

 

Substantial shareholdings

At 30 May 2013, the following had notified the Company of disclosable interests in 3% or more of the nominal value of the Company’s shares:

 

Shareholder

Number of shares

% of Issued capital

Lonrho Plc

1,160,037,455

49.14

Henderson Global Investors

152,728,147

6.47

easyGroup Holdings Ltd

93,327,995

3.95

 

Directors

The current Directors who served the Company during the period were:

 

Name

Position

Date of appointment

David Lenigas

Executive Chairman

13 December 2011

Edward Winter

Executive Director and Chief Executive Officer

2 July 2012

Angus Saunders

Finance Director

10 December 2012

Geoffrey White

Executive Director

13 December 2011

Robert Burnham

Non-Executive Director

30 June 2006

 

The following Directors resigned during the period:

 

Name

Position

Date of resignation

Richard Blakesley

Finance Director

10 December 2012

Nicklas Blanchard

Executive Director

5 August 2011

Alistair Hancock

Executive Director

5 August 2011

 

Directors’ remuneration

The Company remunerates the Directors at a level commensurate with the size of the Company and the experience of its Directors. The Remuneration Committee has reviewed the Directors’ remuneration and believes it upholds the objectives of the Company with regard to this issue. Details of the Directors’ emoluments and payments made for professional services rendered are set out in Note 5 to the financial statements.

Directors’ interests

The beneficial share interests of the Directors that served during the period are set out below:

 

 

 

 

Name

 

 

31 December 2012

No. Shares

30 June 2011

No. Shares

(or date of

appointment if later)

David Lenigas

200,000

Nil

Edward Winter

500,000

Nil

Angus Saunders

Nil

Nil

Geoffrey White

250,000 

 

Nil

Robert Burnham

1,473,056

1,473,056

Richard Blakesley (resigned 10 December 2012)

 

N/A

11,550,041

Nicklas Blanchard (resigned 5 August 2011)

N/A

100,000

Alistair Hancock¹ (resigned 5 August 2011)

N/A

11,038,572

¹ 9,312,576 shares converted to deferred shares on 5 August 2011 as part of the consideration for the sale of Rubicon Software Limited.

Directors’ Share Options

Share options in the Company’s Unapproved Share Option Scheme were granted to Directors over ordinary shares, as set out below:

 

 Name

No share options held as at 1 July 2011

Exercise Price

Number of share options granted during the period

Exercise price

Date granted

Period during which exercisable

Nicklas Blanchard¹

525,000

 1p

 

 

 20/01/06

20/01/06-20/01/16

Robert Burnham

375,000

6p

 

 

07/06/06

07/06/06-07/06/16

Robert Burnham

 

 

3,000,000

1p

13/06/12

13/06/12-13/06/22

Robert Burnham

 

 

20,000,000

5p

13/06/12

13/06/12-13/06/17

Richard Blakesley

 

 

3,000,000

1p

13/06/12

13/06/12-13/06/22

Richard Blakesley

 

 

20,000,000

5p

13/06/12

13/06/12-13/06/17

David Lenigas

 

 

20,000,000

5p

13/06/12

13/06/12-13/06/17

Geoffrey White

 

 

20,000,000

5p

13/06/12

13/06/12-13/06/17

Edward Winter

 

 

20,000,000

5p

27/07/12

27/07/12-27/07/17

Edward Winter

 

 

5,000,000

5p

27/07/12

27/07/12-27/07/17

Edward Winter

 

 

5,000,000

5p

27/07/12

27/07/12-27/07/17

Edward Winter

 

 

5,000,000

5p

27/07/12

27/07/12-27/07/17

Edward Winter

 

 

5,000,000

5p

27/07/12

27/07/12-27/07/17

¹ Options lapsed on 5 August 2011. Nicklas Blanchard resigned on 5 August 2011.

All share options granted on or after 13 June 2012 are subject to certain performance conditions.

Corporate Governance

A statement on Corporate Governance is set out on pages 16-18.

 

Employees

As at the date of this report, the Group has 458 employees.

The Directors follow a policy of keeping all employees informed of strategic, commercial, financial and human resources matters.

Creditor payment policy

The Group’s policy is to agree terms and conditions with suppliers in advance; payment is then made in accordance with the agreement provided the supplier has met the terms and conditions.

 

Charitable donations

During the period, the Company made no charitable donations (2011 - $Nil).

 

Financial reporting

The Board has ultimate responsibility for the preparation of the annual audited accounts.  A detailed review of the performance of the Company is contained in the Chairman’s Statement.  In the Chairman’s Statement and Report of the Director’s, the Board seeks to present a balanced and understandable assessment of the Company’s position, performance and prospects.

 

Internal control

A key objective of the Directors is to safeguard the value of the business and assets of the Company.  This requires the development of relevant policies and appropriate internal controls to ensure proper management of the Company’s resources and the identification and mitigation of risks which might serve to undermine them.  The Directors are responsible for the Company’s system of internal control and for reviewing its effectiveness.  It should, however, be recognised that such a system can provide only reasonable and not absolute assurance against material misstatement or loss.

 

Risk management

The Directors have in place a process of regularly reviewing risks to the business and monitoring associated controls, actions and contingency plans. 

The Company’s financial risk management policies are set out in Note 24.

 

Auditor’s report

Following the acquisition of Fly 540 Tanzania in June 2012, management reviewed the finance function for Tanzania. The accounting for the 540 operations was carried out in Kenya. The finance function was transferred to Tanzania when the 540 operations were closed down and fastjet commenced operations in Tanzania.

 

Due to the lack of controls prior to the commencement of fastjet operations in Tanzania the Group Finance team have made significant adjustments to amend the acquisition balance sheet and carried out an in-depth review of the 6-month period to satisfy themselves that the revenues are materially correct and with the balance sheet at 31 December 2012. Unfortunately our local auditors have qualified their review report in respect of the opening balance sheet at 30 June 2012 and audit report on the costs in the income statement for the 6 months ended 31 December 2012. Our Group Auditors have therefore had to qualify their audit report in this regard as well. The auditors have given an unqualified audit report on revenue and on the Balance Sheet at 31 December 2012.

 

Going concern

The Directors have considered the appropriateness of the going concern basis of preparation in view of their plans for the Group. They are confident that the Group has access to sufficient finance to continue operating as a going concern for the foreseeable future and, in any event, for a period of at least one year from the date of approval of these financial statements although they acknowledgement a material uncertainty over this.  Therefore, they are satisfied that the going concern basis of preparation is appropriate for these financial statements. (See principal accounting policies).

 

Annual general meeting (“AGM”)

This report and financial statements will be presented to shareholders for their approval at an AGM. The Notice of the AGM will be distributed to shareholders in due course.

 

Provision of information to auditors

So far as each of the Directors is aware at the time this report is approved:

 

·       there is no relevant audit information of which the Company's auditors are unaware; and

·       the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

Auditors

KPMG Audit Plc has signified its willingness to continue in office as auditors, and a resolution that they be re-appointed and to authorise the Directors to fix their remuneration will be proposed at the next annual general meeting with section 489 of the Companies Act 2006.

 

By order of the Board

 

David Lenigas

Executive Chairman


31 May 2013

 

Company registration number: 5701801

 

Corporate Governance Report

The Board is committed to maintaining high standards of corporate governance. The Listing Rules of the Financial Services Authority incorporate the UK Corporate Governance Code, which sets out the principles of Good Governance, and the Code of Best Practice for listed companies. Whilst the Company is not required to comply with the UK Corporate Governance Code, the Company’s corporate governance procedures take due regard of the principles of Good Governance set out in the UK Corporate Governance Code in relation to the size and the stage of development of the Company.

 

Board of Directors

The Board of Directors currently comprises four executive Directors (one of whom is Chairman) and one Non-Executive Director. The Directors are of the opinion that the Board comprises a suitable balance and that the recommendations of the UK Corporate Governance Code have been implemented to an appropriate level.  The Board maintains regular contact with its advisers and public relations consultants in order to ensure that the Board develops an understanding of the views of major shareholders about the Company.

 

Board meetings

The Board meets regularly throughout the year in relation to normal operational matters. The Board is responsible for formulating, reviewing and approving the Company’s strategy, financial activities and operating performance. 

 

All Directors have access to the advice of the Company’s solicitors and the Company Secretary ensures necessary information is supplied to the Directors on a timely basis to enable them to discharge their duties effectively, and all Directors have access to independent professional advice, at the Company’s expense, as and when required. 

 

Board committees

The Board has established the following committees, each of which has its own terms of reference:

Audit Committee

The Audit Committee comprises Robert Burnham (Chairman), Edward Winter and Geoffrey White and determines the terms of engagement of fastjet's auditors and, in consultation with the auditors, the scope of the audit. The Audit Committee will receive and review reports from management and the Company's auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Group. The Audit Committee has unrestricted access to the Company's auditors.

 

Remuneration Committee

The Remuneration Committee comprises Robert Burnham (Chairman), David Lenigas and Edward Winter and reviews the scale and structure of the Executive Directors’ and senior employees’ remuneration and the terms of their service or employment contracts, including share option schemes and other bonus arrangements. The remuneration and terms and conditions of the Non-Executive Directors are set by the entire Board.  Edward Winter does not participate in discussions on his own remuneration.

 

Nomination Committee

The Nomination Committee comprises Robert Burnham (Chairman), Edward Winter and Geoffrey White and is responsible for evaluating the balance of skills, knowledge and experience of the Board, the size, structure and composition of the Board and for identifying candidates to fill vacancies on the Board, as and when they arise. The Nomination Committee will make appropriate recommendations to the Board on such matters.

 

Executive Committee

The Executive Committee comprises the Executive Directors of the Company and senior managers including the Chairman, Chief Executive Officer, Finance Director, Chief Commercial Officer, Operations Director and General Manager - Africa. The Committee’s primary responsibilities are to review the operating performance of each Group company, manage the Group’s strategic planning process and corporate acquisitions and disposal programme, monitor and approve capital expenditure and contracts entered into by the Group and to manage the Group’s HR policies.

 

Safety Committee

The Safety Committee currently comprises Robert Burnham (Chairman), Edward Winter and Robert Bishton (Operations Director), although all Board members are invited to attend meetings. The Safety Committee is responsible for monitoring the governance of safety and security management within the airline, ensuring that safety risks and security threats are adequately monitored and that sufficient resources exist to ensure that management and reporting within the Company is maintained at a suitable level.

 

Internal controls

The Directors acknowledge their responsibility for the Group’s systems of internal controls and for reviewing their effectiveness. These internal controls are designed to safeguard the assets of the Company and to ensure the reliability of financial information for both internal use and external publication. Whilst they are aware that no system can provide absolute assurance against material misstatement or loss, in light of increased activity and further development of the Company, continuing reviews of internal controls will be undertaken to ensure that they are adequate and effective.  In particular, they have invested time and effort in Tanzania.

 

Risk management

The Board considers risk assessment to be important in achieving its strategic objectives. There is a process of evaluation of performance targets through regular reviews by senior management to forecasts.  Project milestones and timelines are regularly reviewed.

 

Risks and uncertainties

The principal risks facing the Company are set out below. Risk assessment and evaluation is an essential part of the Group’s planning and an important aspect of the Group’s internal control system.

 

Financial Risk

Please refer to Note 24 to these financial statements.

 

Going concern

Please refer to The Principle Accounting Policies.

 

Business Risk

The Board regularly evaluates and reviews all business risks when reviewing project timelines. The types of risks reviewed also include:

 

•     Occupational Health, Safety and Environmental requirements

•    Regulatory and compliance obligations

•    Legal risks relating to contracts, licenses and agreements

•    Insurance risks

•    Political risks deemed where appropriate

 

Future Operations

Please refer to the Chief Executives Review for more detail on future operations.

 

Insurance

The Group maintains insurance in respect of its Directors and Officers against liabilities in relation to the Company.

 

Treasury policy

The Group finances its operations through equity and holds its cash as a liquid resource to fund the obligations of the Group. Decisions regarding the management of these assets are approved by the Board.

 

Securities trading

The Board has adopted a Share Dealing Code that applies to Directors, senior management and any employee who is in possession of ‘inside information’.  All such persons are prohibited from trading in the Company’s securities if they are in possession of ‘inside information’.  Subject to this condition and trading prohibitions applying to certain periods, trading can occur provided the relevant individual has received the appropriate prescribed clearance.

 

Relations with shareholders

The Board is committed to providing effective communication with the shareholders of the Company.  Significant developments are disseminated through stock exchange announcements and regular updates of the Company website.  The Board views the AGM as a forum for communication between the Company and its shareholders and encourages their participation in its agenda.

 

 

 

Statement of Directors’ responsibilities in respect of the annual report and the financial statements

 

The Directors are responsible for preparing the Annual Report and the Group and parent company financial statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare Group and parent company financial statements for each financial year. As required by the AIM Rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).

 

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent company and of their profit or loss for that period. In preparing each of the Group and parent company financial statements, the Directors are required to:

 

•    select suitable accounting policies and then apply them consistently;

•    make judgements and estimates that are reasonable and prudent;

•    for the group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;

•    for the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

•    prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue in business.

 

Posted on 31st May 2013