Final Results for the year ended 31 December 2013 - 26 June 2014

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fastjet plc
("fastjet" or the “Company”)
26th June 2014

Final Results for the year ended 31 December 2013


 

fastjet, the low cost African airline, announces its audited final results for the year ended 31 December 2013 and operational highlights of 2014 to date.

Operational Highlights

·      Establishment of the low cost carrier model in Africa

·      Solid growth of domestic routes in Tanzania   

·      Launch of first international route  between Tanzania and South Africa 

·      Restructuring of the legacy Fly 540 businesses initiated

Financial Highlights

·      Group revenue increased by 154% from $21.0 million to $53.4 million of which $26.0 million is attributable to Tanzania in 2013

·      Operating loss before exceptionals of $47.6 million of which $21.9m is attributable to Tanzania

·      Average load factor for the year of 72%

·      Average 2013 revenue per passenger rose from $46.30 to $95.20; average revenue per passenger  for the year of $71.10

2014 Operational Highlights 

·      Disposal of Fly540 Kenya

·      Second international route launched between Tanzania and Zambia; launch of third route from Tanzania to Zimbabwe imminent

·      Launch of new domestic route in Tanzania; capacity increase on existing routes

·      Board strengthened by new appointments

·      Successful Placing and Open Offer

Ed Winter, Chief Executive commented

"2013 was a very significant year for fastjet with the Company proving the low cost airline model in Tanzania works.  In the first half of 2014 we have built upon that foundation and continued to grow, moving  towards our vision of becoming a true pan African low cost airline."

"Our recent succesful fundraise moves us even closer to that goal,  and I am delighted with the encouraging response we received from the market generally, and fastjet shareholders specifically, demonstrating support for our strategy and vision. "

"The disposal of fly540 Kenya, which was announced yesterday, is a hugely significant step that allows us to fully pursue our expansion in East Africa."

"Our experience to date confirms our long-held view that people across Africa are embracing the opportunities offered by fasjet's reliable, safe and great value air travel."

"The combination of the management team's experience in Africa and fastjet's stronger financial position means that we are now  ready to continue our expansion and leverage our first mover advantage to the benefit of passengers and shareholders alike."

The full Group financial statements is available on the Company's website at www.fastjet.com.

Enquiries

For further information, please contact:

fastjet Plc                                  Tel: +44 (0) 20 3651 6355

Ed Winter

Angus Saunders

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

James Joyce

Nick Field

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

Angharad Couch

Eleni Menikou

 

NOTES TO EDITORS

About fastjet plc

fastjet Plc is the holding company of the low-cost airline fastjet which commenced flight operations in Tanzania in November 2012. The airline operates a fleet of distinctively branded Airbus A319s and since its launch has grown to encompass the key domestic routes within Tanzania and a rapidly increasing number of international destinations. By adhering to international standards of safety, quality, security and reliability, fastjet has brought a new flying experience to the African market at unprecedented low prices.

fastjet is implementing the low-cost carrier model across Africa and its long-term strategy is to become the continent's first low-cost, pan-African airline. fastjet Plc is also the holding company of airline Fly540, which operates in Kenya, Ghana and Angola.

By offering one way fares from as low as $20, fastjet has stimulated a new customer base; the results of a customer survey showed that 38% of fastjet passengers had never flown before. This democratisation of air travel is expected to gather momentum across the final continent to experience the low-cost airline revolution.

fastjet is committed to communicating effectively with its existing and potential customers and has, to date, won a number of marketing awards. With over 140,000 social media followers, it occupies a unique position in African aviation.

fastjet Plc is quoted on the London Stock Exchange's AIM market.

For more information see www.fastjet.com

Chairman and CEO's review

Following launch on 29 November 2012, fastjet rapidly developed a reputation for reliability and punctuality. This reputation led to the low cost model of booking early for the cheapest prices being rapidly adopted by Tanzanian passengers.  Punctuality (arrival with 15 minutes of schedule) has been in excess of 95% and cancellations less than 1%.  This has enabled effective revenue management with early booker paying US$20 plus taxes one way and customers booking on the day paying upwards of US$200.  Yield per passenger grew from US$47 in January 2013 to US$97 in December 2013.  The market has been hugely stimulated with 38% of passengers in the first 5 months being first time flyers.

                                                                               

Although the yield is at a level which could provide a profitable operation, resources are not being utilised fully and capacity needs to increase before fixed cost and overheads can be fully covered.

Higher frequencies and more international routes are being progressively introduced to increase aircraft utilisation from 5.7 hours per day in Q1 2014 up to a planned 11.7 hours per day by end of Q3 2014.

Almost twice the number of seats will be available with virtually the same fixed costs (Aircraft Leases, Insurance, Fixed Maintenance etc.) and overheads, generating a forecast 53% drop in Fixed Cost per Available Seat Kilometre (CASK) and a forecast 27% reduction in Total CASK.

Fly 540

All of the Fly 540 operations inherited from Lonrho Aviation have been disappointing and have not performed as contemplated at the time of the acquisition.

Fly 540 Tanzania. This was a very small operation and was replaced by fastjet Tanzania in November 2012.

Fly 540 Kenya.  Following a thorough and lengthy evaluation of Fly 540 Kenya, the company concluded that converting the business into the fastjet low cost model would not be economically viable.  All legal and financial ties between Fly 540 Kenya and the fastjet group have been removed, and fastjet is fully indemnified against any and all liabilities relating to Fly 540 Kenya.

Disposing of the investment in Fly 540 Kenya, allows fastjet Plc to pursue its priority objective of creating fastjet Kenya as a new entity which will operate to the same low cost model and high standards as fastjet Tanzania and use the same distribution platforms.

Fly 540 Ghana. Operations are currently suspended pending completion of restructuring.  There are infrastructure issues at Ghanaian airports that need rectification prior to the introduction of a fastjet operation.  The country is also currently suffering from adverse economic conditions with the Ghana Cedi / US$ exchange rate deterioration over the past year adding considerable costs to aviation where many costs are US$ denominated.  fastjet Plc remains confident that West Africa and Ghana in particular presents very significant long-term opportunities for the fastjet low cost model. Fly 540 Ghana had an $11.7m adverse impact on the financial results of the group in 2013.    

Fly 540 Angola. Operations are currently suspended pending completion of restructuring.  Although Angola, with its lack of current air capacity and rapid GDP growth, represents an opportunity, the difficulties of remitting currency, government imposed competitive restrictions and the logistical hurdles of importing aircraft spares make this a poor investment opportunity at the current time. Fly 540 Angola had a $22.8m adverse impact on the financial results of the group in 2013.

During 2013 less than $650,000 of fastjet Plc cash was utilised in the legacy Fly540 operations. 

Changes to the board

On 10 June 2013 David Lenigas resigned as Executive Chairman.

Having been Executive Chairman since launch and making an invaluable contribution leading the Company successfully through its first year, David stepped down in order to concentrate on his other business ventures.

On 24 July 2013 Geoffrey White resigned as Executive Director

Following the privatisation of Lonrho, Geoffrey resigned to be able to focus all of his time on the Lonrho core businesses. He had been an Executive Director of fastjet since the beginning and provided the Board with great support with his unrivalled African experience and knowledge.

On 1 June 2014 Krista Bates was appointed as Executive Director and General Counsel

Krista had been providing legal services to fastjet for the previous 20 months through her role as a corporate consultant at a leading Nairobi law firm.  Her appointment deepens fastjet's legal and strategic capabilities across Africa and the UK as the Company expands its operations and continues to develop strategies against Africa's complex legal and political background.  Having Krista as a part of the team will be a huge advantage, given her wealth of experience and knowledge gained in both UK and Africa.

On 1 June 2014 Richard Bodin, Chief Commercial Officer, was appointed as Executive Director

Richard was a part of the team that developed the original fastjet business plan, and as Chief Commercial Officer he played a vital role proving the low cost model can be successful in Africa.  His input will be invaluable at Board level.

On 1 June 2014 Clive Carver was appointed as Non-Executive Director

Clive's appointment adds another dimension to the Board.  Clive adds essential and extensive city experience to the Board as the Company moves forward in this next phase of development. His experience and reputation, gained working in corporate finance both with merchant banks and broker Finncap and his position as a Board member on a range of companies will be a real asset to the Board.

                                                               

Funding 

Bergen Global Opportunity Fund 

On 21 June 2013 the Company made the final conversion of securities issue to Bergen Global Opportunity Fund. In the year ended 31 December 2013 the facility was used to raise $4.2m (£2.6m) 

Darwin Strategic Limited

On 10 April 2014 the Company terminated the Equity Financing Facility ('EFF') with Darwin Strategic Ltd which was originally announced on 13th June 2013 and further extended on 12th March 2014.  This facility has served the Company well, providing capital to allow the Company to successfully reach its current position from where it can now expand, but is no longer required to finance further growth.

In the year ended 31 December 2013 the facility was used to raise $24.9m (£15.9m)

Fund raising in 2014

Having proved the low cost model in fastjet Tanzania the Company was able to complete a very successful fund raising in April 2014.  Gross proceeds of $24.8m (£14.9m) were raised through a placing and an open offer.  The $18.2m (£11m) placing brought a number of key institutional investors, Standard Life, Henderson Global, Majedie and City Financial on to fastjet's share register with management also investing over $1.6m (£1m). Director's shareholdings are now: Edward Winter 31,300,000, Angus Saunders 6,250,000, Richard Bodin 3,125,000 and Robert Burnham 147,305.  

Sir Stelios Haji-Ioannou invested $1.6m (£1m) in the placing and also agreed to terminate the Management Fee in exchange for $2.5m (£1.5m) in shares at the placing price.  This replaces 8 years at 605k euro per year plus inflation. In money of the day terms easyGroup exchanges a receivable of £4.3m in return for equity valued at $2.5m (£1.5m) as another show of confidence.  The rest of the Brand Licence and royalty remain in place unchanged until July 2022 at which time fastjet will own the brand.

The funds raised in April have been allocated to funding fastjet Tanzania until it becomes cash flow positive, funding central services and improving IT capability to support future bases, initial capital to set up licences and approvals for future bases, which at the moment are planned to be in Zambia, Kenya and South Africa with a level of contingency to cover the unpredictable timing of African government approvals.

Once each base is ready to commence operations further capital will be required to launch services. fastjet Plc capital contribution will depend upon the level of local equity raised.

Current trading

Capacity has increased over the past months with total seats flown in May increasing to 60,320 from 54,230 in April, an 11% increase.  Year on year seats increased by 68% and revenue increased by 81% compared to May 2013.

Individual route increases have been Dar es Salaam to Lusaka - 27% (May vs April); Dar es Salaam Mbeya - 43% (May vs April); Dar es Salaam to Mwanza 23% - (April vs March).  Tanzanian domestic routes have come under increased competitive pressure over the past few months with irrational pricing behaviour from both Precision Air and Air Tanzania.  Management do not see this as a long term threat and our increased frequencies are combating that pressure. 

A new international route from Dar es Salaam to Harare, Zimbabwe is now on sale, with first flights scheduled to operate on 2nd August.  More international routes will be announced in the near future.

Regulatory environment

Although there have been many declarations of an intent to liberalise the aviation market in various parts of Africa, there has been very little regulatory freedom put in place.  As a consequence aviation regulation in Africa is very similar to Europe pre 1990s.  Each country has individual regulatory requirements regarding control and ownership for an airline company wishing to operate within or from that country.  Additionally flights between countries are controlled through Bilateral Air Service Agreements which are unique to each pair of countries.  Airlines operating between countries also need to obtain a Foreign Operator Permit giving approval for their crewing and maintenance arrangements.

The Company continues to lobby at the highest level of governments and within the industry to promote relaxation of the regulatory environment regarding route rights.

On the other hand the regulatory environment regarding operating standards and safety within the industry is variable and in some cases well below international standards.  As a consequence, fastjet imposes constraints on its own operations to comply as though the airline was regulated in Europe.  The Company takes every opportunity to lobby for improved safety and operational regulation and oversight by the various civil aviation authorities.

Future developments

The Company has a two phase growth strategy for the next 4 years.

Phase 1: Building up the Tanzanian base

Increased frequency on existing routes (Dar es Salaam to Mbeya, Mwanza, Kilimanjaro, Lusaka, Johannesburg and Harare), and adding new routes including routes to Kenya, Malawi and Uganda to fully utilise current resources.

Phase 2: Rolling-out beyond Tanzania

Tanzania, Kenya, South Africa and Zambia have been identified as major growth opportunities. There are approximately 160m people in the region with currently only 0.21 air seats per head of population per annum.  By 2018, fastjet expects to operate 24 aircraft and carry 6 million passengers.  This represents only a 13% market share of estimated pan African passengers in these markets.

The Company plans to make appropriate commercial and marketing links with third party airlines in particularly inter-continental airlines to increase distribution from outside of Africa.

The Company intends to increase pan-African reach using an Airline Management Service franchise model to develop a pan African fastjet network where appropriate and in particular where we want to de-risk expansion financially or politically.  Negotiations are progressing in a number of countries with interested parties.

Ed Winter

CEO and Interim Chairman

26 June 2014

Our financial results

Key Performance Indicators

fastjet acquired the Lonrho Aviation business in June 2012 and the results for the 18 months to December 2012 therefore only include six months of trading for the aviation business. The amounts included in Central in Note 2 (Segmental reporting) have been excluded from the key performance indicators set out below.

fastjet Tanzania was launched in late November 2012. The results for the prior period include 5 weeks of fastjet Tanzania trading and therefore a year on year comparison is not meaningful however the progress of the core business unit over the past year is more appropriate.

As set out above the Fly540 operations in Ghana and Angola have been suspended whilst these operations are restructured and or exited. The Fly 540 operations do not form part of the core business going forward and this financial review has therefore focussed on the core business being fastjet Tanzania.

fastjet grew group revenue by 154% from $21.1 million in 2012 to $53.4 million of which $26.0 million is attributable to Tanzania in 2013.

The average load factor during the year was 72% .The average revenue per passenger has increased from $46.30 in January 2013 to $95.20 in December 2013 with an average revenue per passenger for the year of $71.10.

The group loss before tax increased from $55.2 million to $82.3 million. The operating loss before exceptionals of $47.6 million for the year was up from the prior period operating loss before exceptionals of $30.0 million. fastjet Tanzania contributed $21.9 million to these losses in 2013.

Operating cost per seat excluding fuel reduced from US$123  or 19.9 cents per available seat kilometre ('ASK') in January 2013 to US$89.0 or 11.6 cents per ASK in December 2013 with an average operating seat cost of US$87.8  or 13.1 cents per ASK.

The average fuel cost per seat was US$24.4 or 3.6 cents per ASK. fastjet Tanzania currently buys all its fuel based on the current market price. This does expose the business to fuel price volatility and any change in the fuel price will have an impact on the cost of operations. Some if not all of any fuel price increase may be recovered from passengers through a change in the fares that they are currently pay. fastjet does not have any fuel hedging in place as the quantity of fuel that it currently uses is too small for counterparties. As fastjet grows and fuel quantities increase fastjet will hedge when quantities are sizable enough for counterparties.

CASH FLOWS AND FINANCIAL POSITION

Summary consolidated statement of cash flows

   
 

Year ended

31 December

2013

18 months ended

31 December 2012

 

US$'000

US$'000

Net cash flow from operating activities

(31,102)

(19,889)

Net cash flow from investing activities

(397)

(686)

Net loan and lease finance repayment

(4,035)

(905)

Interest paid

(2,915)

(1,713)

Proceeds from the issue of shares

36,550

28,607

Net movement in cash and cash equivalents

Foreign currency differences

(1,899)

139

5,414

51

Opening net cash

5,470

5

Closing net cash

3,710

5,470

fastjet raised equity of $36.5m during the year compared to $28.6m in the prior period. The equity raised was primarily used to finance the roll out and expansion of the fastjet low cost model in Tanzania.

Subsequent to the year end the Group has raised in aggregate $27.2m which has substantially improved the Group's cash position.

At the end of the year the amount of customer payments in advance ("sales in advance of carriage") was $1.7m compared to $1.3m the previous year of which $1.4m related to Tanzania at 31 December 2013.

Summary consolidated statement of financial  position 

   
 

31 December 2013

US$'000

31 December 2012

US$'000

Goodwill      

11,324

18,754

Other intangible assets

12,515

23,308

Property, plant and equipment

30,246

37,903

Other investments

-

19,248

Net working capital

(29,026)

(26,243)

Current finance obligations

(3,529)

(5,224)

Deferred taxation

(80)

(1,547)

Cash and cash equivalents

3,710

5,470

Non-current finance obligations

(21,291)

(23,633)

Other non-current assets and liabilities

829

(3,381)

 

4,698

44,655

Ordinary shareholders equity

24,527

60,130

Translation reserve

2,674

516

Non-controlling interests

(22,503)

(15,991)

 

4,698

44,655

Going concern

The financial statements have been prepared on a going concern basis which the directors believe to be appropriate for the following reasons as also set out in note 1.

Whilst the Group has incurred losses during the year, the Directors are confident that the Group has access to sufficient finance to operate 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. 

As noted in the Strategic Report, the Company raised $23.7m net of expenses through a Placing and Open offer subsequent to the year end in April and May 2014.

The Directors have prepared detailed forecasts and projections for the company and its Tanzanian subsidiary for the 5 year period to 31 December 2018 with a particular focus on 2014 and 2015.  These include revenue, profit, cashflow and balance sheet forecasts and detailed sensitivities. For fastjet Tanzania, these are done on a route by route basis.

The Directors have also considered the key risks and opportunities in preparing these forecasts as being:

                ·      Achieving budgeted revenue growth and central to this are:

o  Achieving appropriate load factors and yield;

o  Obtaining permission to fly from Dar es Salaam on new international routes such as Nairobi, Entebbe and Lilongwe; and

o  The competitive position of fastjet not being adversely affected.

                ·      Keeping the cost base under tight control.

As set out in the Strategic Report the Group has severed all ties with Fly 540 Kenya and the Directors have commenced a process to sell or exit the Fly 540 operations in Angola and Ghana. This process is not yet complete and may involve payments in relation to third parties the extent of which depends upon the outcome of negotiations currently underway.

In the event that the Directors' expectations

                ·      on the pace of the increase in passenger revenues prove to be slower than expected

                ·      the costs associated with exiting Fly 540 in Angola and Ghana prove higher than expected

                ·      that the pace of developing new routes is slower than expected

they acknowledge that the Group may need to raise additional finance, which if it were not then available would represent a material uncertainty that would cast doubt upon the Group's and the parent company's ability to continue as a going concern.

Nevertheless, the Directors are confident that the Group and the parent company will have access to adequate resources if required to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual financial statements.

By order of the Board

Edward Winter

Chief Executive Officer and Interim Executive Chairman

26 June 2014

Consolidated income statement

   

Year ended

31 December 2013

18 months ended 31 December 2012

 

Note

US$'000

US$'000

Revenue

2

53,422

21,068

Operating costs

 

(132,501)

(74,634)

Group operating loss

4

(79,079)

(53,566)

Operating loss before exceptionals

 

(47,567)

(30,035)

Impairment of goodwill

11

(7,235)

(2,516)

Impairment of intangibles

12

(8,081)

-

Impairment of aircraft

13

(4,259)

-

Impairment of investments

14

                              (19,248)

(13,366)

Reversal of impairment (impairment) of receivables due from related parties

15

7,311

(7,649)

Operating loss after exceptionals

4

(79,079)

(53,566)

Finance income

7

-

8

Finance charges

7

(3,272)

(1,721)

Loss from continuing activities before tax

 

(82,351)

(55,279)

Tax credit (charge)

8

1,467

(627)

Loss from continuing activities after tax

 

(80,884)

(55,906)

Loss from discontinued activities

3

-

(46)

Loss for the year/period

 

(80,884)

(55,952)

Attributable to:

     

Shareholders of the parent company

 

                             (74,372)

(52,366)

Non-controlling interests

 

                               (6,512)

(3,586)

   

(80,884)

(55,952)

Loss per share (basic and diluted) (US cents)

10

 

restated

From continuing activities
From discontinued activities

 

                                (24.56)

                                          -

(76.92)
(0.07)

Total

 

(24.56)

(76.99)

 

Consolidated statement of comprehensive income

   

Year ended 31 December 2013

18 months ended 31 December 2012

 

Note

US$'000

US$'000

Loss for the year/period

 

(80,884)

(55,952)

Foreign exchange translation differences

 

2,160

503

Other investment impairment

 

(19,248)

(13,366)

Other investment reclassified to profit or loss

 

19,248

13,366 

Total other comprehensive income for the year/period

 

2,160

503

Total comprehensive expense

 

(78,724)

(55,449)

Attributable to:

     

Shareholders of the parent company

 

(72,212)

(51,863)

Non-controlling interests

 

(6,512)

(3,586)

Total comprehensive expense

 

(78,724)

(55,449)

All items in other comprehensive income will be re-classified to the profit or loss.

 

Consolidated balance sheet

 

    Note

31 December 2013

US$'000

31 December 2012

US$'000

Non-current assets

     

Goodwill

11

11,324

18,754

Other intangible assets

12

12,515

23,308

Property, plant and equipment

13

30,246

37,903

Other investments

14

-

19,248

Other non-current trade and other receivables

15

10,981

7,177

   

65,066

106,390

Current assets

     

Inventories

16

931

783

Cash and cash equivalents

 

7,580

7,488

Trade and other receivables

15

5,768

8,439

   

14,279

16,710

Total assets

 

79,345

123,100

Equity

     

Called up equity share capital

21

51,097

29,284

Share premium account

 

97,392

80,986

Retained earnings

 

(123,962)

(50,140)

Translation reserve

 

2,674

516

Equity attributable to shareholders of the Parent Company

 

27,201

60,646

Non-controlling interests

 

 (22,503)

(15,991)

Total equity

 

4,698

44,655

Liabilities

     

Non-current liabilities

     

Obligations under finance leases

20

21,291

23,633

Deferred tax

18

80

1,547

Trade and other payables

17

10,152

10,558

   

31,523

35,738

Current liabilities

     

Bank overdrafts

 

3,870

2,018

Loans and borrowings

19

-

1,998

Obligations under finance leases

20

3,529

3,226

Trade and other payables

17

35,725

35,397

Other financial liabilities

 

-

68

   

43,124

42,707

Total liabilities

 

74,647

78,445

Total liabilities and equity

 

79,345

123,100


These financial statements were approved and authorised for issue by the Directors on 26 June 2014 and are signed on their behalf by:

Edward Winter

Chief Executive Officer and Interim Executive Chairman

Consolidate cash flow statement

 

Year ended

31 December

2013

18 months ended

31 December 2012

 

US$'000

US$'000

Operating activities

   

Result for the year/period

(80,884)

(55,952)

Lo

   

Posted on 26th June 2014