Shares in Flybe (FLYB) plunged 16 per cent after the regional airline posted an operating loss of £13m, worse than expected. Yet chief executive Saad Hammad’s recovery strategy appears to be taking off: strip out one-off costs and pre-tax profit rose 17 per cent to about £14m.
Passenger numbers fell 6 per cent and capacity shrunk 16 per cent, reflecting a retrenched route network and the closure of most of Flybe’s Gatwick routes, which it sold to Easyjet (EZJ). The airline also parachuted out of a loss-making joint venture in Finland, booking almost £10m in net impairment charges, and made a £6m provision for flight delay compensation after a recent court ruling extended airlines’ liability.
More positively, Flybe’s passenger revenue per seat climbed about 9 per cent to roughly £55, and the company partnered with Avios to introduce a more widely accepted loyalty scheme. Core operating costs fell 10 per cent, supporting the goal of delivering £24m in full-year cost savings. Flybe should also make savings in capital expenditure, having signed a deal to sub-lease cheap, efficient turboprops rather than purchasing pricy new jets.
Having slashed its full-year forecasts, broker Liberum expects a pre-tax loss of £1.3m. It reckons a lack of suitable aircraft and delays in the delivery of sub-leased aircraft will curtail Flybe's capacity growth, depressing earnings next year too.
| FLYBE (FLYB) | ||||
|---|---|---|---|---|
| ORD PRICE: | 111p | MARKET VALUE: | £239m | |
| TOUCH: | 110-111p | 12-MONTH HIGH: | 151p | LOW: 86p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 80p | NET CASH: | £50m* | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 (restated) | 351 | 13.8 | 18.1 | nil |
| 2014 | 308 | -15.3 | -7.1 | nil |
| % change | -12 | - | - | - |
*Excludes £22m in restricted cash | ||||
