Regional Express releases FY2017 results quadrupling profit

Regional Express (Rex) Group released its Full Year 2017 financial results which included information on profit, passenger traffic and outlook for FY2018. Rex reported it nearly quadrupled operating profit in FY2017, achieving an AUD17.8 million (USD14.1 million) profit before tax, compared to AUD4.3 million (USD3.4 million) in FY2016.

Rex executive chairman Lim Kim Hai FY2017 was “another challenging year for the aviation industry”. The carrier noted Qantas, Air New Zealand and Singapore Airlines all reported “significant” profit before tax declines 17% to 24% while Virgin Australia made losses of close to AUD300 million (USD238 million). Rex was “able to buck the trend to turn in a truly solid performance” said Mr Hai.

Results:

Financial highlights for 12 months ended 30-Jun-2017:

  • Revenue: AUD281.0 million (USD211.8 million), +7.3% year-on-year;
    • Passenger: AUD249.3 million (USD188.0 million), +9.7%;
    • Charter: AUD23.0 million (USD17.3 million), -7.6%;
  • Costs: AUD264.1 million (USD199.1 million), -3.3%;
    • Labour: AUD105.5 million (USD79.6 million), +2.5%;
    • Flight and port operations excl fuel: AUD54.5 million (USD41.1 million), +12.2%;
  • Profit before tax: AUD17.8 million (USD17.8 million), compared to a loss of AUD10.7 million (USD7.8 million) in p-c-p;
  • Net profit: AUD12.6 million (USD9.5 million), compared to a loss of 9.6 million (USD7.0 million) in p-c-p;
  • Passengers: 1.2 million, +9.0%;
  • Passenger load factor: 57.3%, +2.6ppts;
  • Average fare: AUD213.9 (USD161.3), +3.0%;
  • Revenue per ASK: AUD 31.3 cents (USD 23.6 cents), +2.0%;
  • Cost per ASK: AUD29.7 cents (USD 22.4 cents), -2.9%;
  • Total assets: AUD272.8 million (USD205.7 million);
  • Cash and bank balances: AUD26.3 million (USD19.8 million);
  • Total liabilities: AUD76.4 million (USD57.6 million).

*Based on the average conversion rate at AUD1 = USD0.753882 for FY2017
*Based on the average conversion rate at AUD1 = USD0.728459 for FY2016

Rex confirms FY2017 dividend payment, and commitment to FY2018 dividend

The Rex board approved a final, fully franked dividend of AUD0.10 (USD0.079) per share for FY2017. The dividend was paid out on the view that:

  • The decline in passenger numbers seems to have bottomed out;
  • The group is on a modest trajectory of recovery;
  • The group’s capital requirements are contained;
  • Group cash holdings are healthy.

The board also reaffirmed its commitment to a healthy dividend payout ratio if the group achieves its FY2018 profit target.

Rex reports recovery in passenger traffic with stronger Australian economy

Rex executive chairman Lim Kim Hai said he sees a “bottoming out of the declines we experienced in the prior six years with a modest but clear recovery” of passenger numbers in FY2017, up 3% year-on-year. Mr Lim said this “no doubt mirrors what is happening in the Australian economy” and early indications from the first two months of FY2018 “confirm the trend we saw in FY17.” Mr Lim stated that “as long as the Australian economy continues this modest recovery, I have confidence that Rex will continue to perform well”.

Rex forecasts double digit profit growth for FY2018, dependent on traffic

Outlook for FY2018:

  • Headwinds:
    • AUD could revert to “dovish” if US raises rates aggressively;
    • Protectionist measures by the US “could provoke a trade war and stifle global economic growth”;
    • North Korea situation “could easily spiral out of control”;
  • Tailwinds:
    • First two months of FY2018 seem to confirm trend of modest recovery in passenger numbers;
    • Fuel price expected to remain soft;
    • Mining FIFO appears to be firming;
    • Enrolments at the carrier’s Australian Airline Pilot Academy are expected to grow;
  • Profit forecast:
    • Rex board believes the Australian economy will continue on a modest recovery and this will translate to a similar growth in Rex’s passenger numbers;
    • If this growth materialises, Rex sees its profits increasing in the mid teens in percentage compared to FY2017.