27th Nov 2019 12:56
(Alliance News) - Shares in budget African airline Fastjet PLC slumped Wednesday after saying it was considering selling its Zimbabwe unit in a restructuring deal as profitability remained elusive amid ongoing Mozambique issues.
Shares in London-based Fastjet were 31% lower at 0.38 pence in London on Wednesday.
For the ten months ended October, revenue rose 20% to USD34.1 million from USD28.3 million the year prior.
On October 21, Fastjet announced it suspended flight operations in Mozambique amid "ongoing supply and demand challenges". During the first six months of 2019, revenue from Mozambique had fallen to USD2 million from USD4 million the year prior.
For 2019 as a whole, Fastjet expects to deliver a post-tax loss of between USD7 million and USD8 million. This was an improvement on the USD65 million post-tax loss reported the year before.
"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 said in a statement.
"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%," Fastjet added.
In order to continue trading in its current form, however, Fastjet warned it expects to need further funding by the end of February.
Fastjet is currently in "active discussions" with major shareholders about options for raising equity or restructuring the firm. This restructure would involve Fastjet selling its Zimbabwe business for USD8.0 million to a consortium which includes Solenta Aviation Holdings Ltd, currently a 60% shareholder in Fastjet.
The Zimbabwe sale would also relieve Fastjet of USD5.4 million in debt and USD3.2 million in future aircraft orders. Fastjet would be allowed to buyback the Zimbabwe unit on the same economics between three and five years after the sale.
The proceeds from the potential sale would be used to repay current debt and fund future working capital needs into 2021.
"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," Chief Executive Officer Mark Hurst said.
"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," Hurst added.
By Ahren Lester; [email protected]
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