Shares take flight as Flybe confirms it is seeking sale in face of plummeting profits
Flybe's share price soared 28 per cent this morning as the budget airline confirmed it is seeking a sale after revealing plunging profits.
The airline told investors that “it is in discussions with a number of strategic operators about a potential sale of the company”.
Flybe has appointed Evercore as its financial adviser, and the airline warned that there “can be no certainty that an offer will be made, nor as to the terms on which any offer will be made”.
Shares at the airline halved last month when the company issued a full-year profit warning, and it revealed the extent of the damage in its half-year results this morning.
The figures
Profits sank 54 per cent year on year to £7.4m for the six months to the end of September, down from £16.1m, as Flybe paid “onerous” aircraft loans for nine leased Embraer 195 jets it plans to return in 2020.
Revenue also slipped by 2.4 per cent to £409.2m for the period.
Net debt ballooned from £59.1m in March 2018 to £82.1m for the airline’s latest period, while cash flow shrank by almost £25m to £70.6m, with the firm blaming weak sterling.
Basic earnings per share dropped by more than half to 3.5p, and Flybe said it will not pay a dividend.
Why it’s interesting
Investors discovered Flybe’s engine was stuttering in the middle of October when it issued a profit warning, prompting its share price to plummet, knocking £20m off its market cap.
Higher fuel prices and sterling’s weaker value, combined with falling customer demand, have hit the airline, while it is committed to leasing Embraer jets between July and December next year, at a total cost of $114m (£88m).
Flybe also pointed to “major uncertainty” around Brexit and the wider economy as a factor.
“The board believes that an appropriate agreement will be reached, although it is also developing contingency plans including potentially reassigning contracts that could be directly affected,” Flybe said.
What Flybe said
Christine Ourmières-Widener, chief executive, said:
"Continued improvements are being seen into quarter three which demonstrates the popularity of Flybe for our customers.
However there has been a recent softening in growth in the short-haul market, as well as continued headwinds from higher fuel and currency costs. We are responding to this by reviewing every aspect of our business, especially further capacity reduction, cash management and cost savings.
This is already starting to have a positive impact, as shown by the improved first half adjusted profit before tax; however, we must do more in the coming months. We remain confident in the vital role that Flybe plays in UK connectivity.