London-listed Fastjet Group has warned in a trading update that it may not be able to continue as a going concern if an ongoing shortage of funds restricts it from carrying out a previously announced restructuring effort by the end of March.
In a stock market filing, the pan African low-fare carrier said it expects additional funding will be needed by the end of February to enable it to continue operating in its current form.
In November, the group said it was in discussions to sell its Fastjet Zimbabwe (FN, Harare International) operations for USD8 million, a deal that would help the holding company stay in business until 2021. It also has operations in South Africa as Fastjet South Africa (Johannesburg O.R. Tambo).
The restructuring would turn the group into a capital-light business operating as a franchise house that would generate revenue through the Fastjet brand as well as providing airline management solutions, while also retaining its investment in Federal Air (7V, Durban Virginia).
"The disposal [of fastjet Zimbabwe], 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 stabilised and simpler business model," Mark Hurst, fastjet Chief Executive Officer, commented. "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."
An investor consortium headed by its biggest shareholder Solenta Aviation Group Holdings Limited (SAHL) is “finalising its due diligence on Fastjet Zimbabwe and securing the required regulatory approvals,” the company said in the update. The final negotiations with the consortium will be concluded once this is completed, but “there can be no guarantee of a successful outcome.”
Fastjet expects it will have sufficient resources to meet its operational needs until the end of March. As at January 23, it had cash reserves of USD3 million, it said.
It assured it was trading in line with management expectations. Revenue, including fastjet Zimbabwe, is expected to be USD42 million for the year ended December 31, 2019, up from 2018's USD39 million, with a loss after tax expected to shrink to between USD7 million and USD8 million from a loss of USD65 million a year earlier.
