Investing in Africa carries huge risk, and it was with that in mind that we joined easyJet’'s Stelios Haji-Ioannou in backing budget airline FastJet (FJET) last summer. A continent boasting some of the world's fastest-growing economies, expanding middle class and poor roads seemed a recipe for success. Delays, legal wrangling, legacy issues and poor accounting have, however, stunted growth and thrown the future of the business into doubt.
In fact, a lack of controls at FastJet's main hub in Tanzania, a net loss of $56m (£36.6m) and operating cash outflow of $19.9m over the 18-month period worried accountant KPMG. Given that prospects hinge on gaining access to international routes and raising more money, the auditor said there was "significant doubt" about the carrier's "ability to continue as a going concern". In numbers sneaked out after the market closed on Friday, FastJet confirmed an underlying operating loss of $30m, first flagged in March, and a $35m write-down linked mostly to the Fly540 businesses bought from Lonrho last year. The company said all have "seriously underperformed", and the business has kept losing money since December.
Still, chief executive Ed Winter, former boss of Go, does expect overseas routes to begin flying "within the next two months" and the tie-up with Blockbuster in South Africa to launch early July. There's £13.1m of funds available from American company Bergen, too, and FastJet raised £8m in placings since the year-end. Mr Winter reckons greater local investment could make doing business easier.
FASTJET (FJET) | ||||
|---|---|---|---|---|
| ORD PRICE: | 0.94p | MARKET VALUE: | £22.1m | |
| TOUCH: | 0.92-0.95p | 12-MONTH HIGH: | 4.73p | LOW: 0.91p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE | 2.6¢* | NET DEBT: | 53% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | nil | -0.10 | -0.25 | nil |
| 2012† | 21.1 | -55.3 | -7.69 | nil |
| % change | - | - | - | - |
*Includes intangible assets of $42m, or 1.8¢ a share †18-month period £1=$1.53 | ||||
