FastJet Plc said financial results for 2016 will fall “materially” below analyst estimates after its cash flow turned negative, forcing the African discount carrier to begin slimming down its network. The shares fell more than one-third for their biggest decline since the company was founded in 2012.
The impact of challenging market conditions and currency fluctuations highlighted in December has proved “a lot more prolonged” than originally forecast, the London-based company said Monday in a statement. It plans to respond by paring capacity and rationalizing routes in line with demand.
FastJet, where Chief Executive Officer Ed Winter has said he’s searching for a successor amid pressure to leave from shareholder Stelios Haji-Ioannou, said it has enough cash to meet operational requirements, with $20 million available at the end of February. The board may consider raising further funds this year to provide “additional headroom” and aid future growth, it said.
Analysts had been anticipating a pretax profit of $1 million this year following a loss of $35 million in 2015, for which FastJet has yet to report figures, based on the average of two estimates.
Cash Burn
Shares of FastJet fell as much as 26.25 pence, or 39 percent, to 41 pence, the most since the company was founded via a reverse takeover involving miner Lonrho’s Fly540 arm in 2012.
Stelios, the EasyJet Plc founder who goes by his first name and owns 13 percent of FastJet, is seeking to force a shareholder meeting to oust Winter now rather than wait on an orderly succession. He said on Feb. 29 that the carrier has “burnt” through 80 million pounds ($114 million) in three years and has only six months of cash left.
The entrepreneur has said FastJet’s headquarters should also be moved from London Gatwick airport to Dar es Salaam in Tanzania, its main operating base, and that Winter is an obstacle to cost cuts needed to keep the airline flying.
FastJet, which uses six Airbus Group SE A319 planes, was founded with the ambition of becoming the first discount airline spanning sub-Saharan Africa, betting that improving economies, a growing middle class and bookings via mobile devices would let it survive where the industry has always lost money.
To contact the reporter on this story: Christopher Jasper in London at cjasper@bloomberg.net. To contact the editors responsible for this story: Chris Reiter at creiter2@bloomberg.net.
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