Good morning!

Fastjet (LON:FJET)

Share price: 43.8p (down 35% today)
No. shares: 66.4m
Market cap: £29.1m

Profit warning - and it's a bad one;

Based on current management forecasts, the Board expects results for 2016 to be materially below market expectations and the Group no longer expects to be cash flow positive for the year.

Did anyone believe the company's assertion in Dec 2015 that it would reach cashflow breakeven? I made it clear in my report here on 22 Dec 2015 that I was highly sceptical about this claim (although if true, then the shares might be worth a closer look).

This really is quite scandalous actually. You can't just tell the market that you're approaching cashflow breakeven, then retract it 3 months later, with some half-baked excuses about poor trading conditions that we've been given today;

Further to the operational update in December 2015, the challenging market conditions affecting much of the African aviation industry have been a lot more prolonged than management originally forecast.

Surely management should have been taking a prudent view in their forecasting, not assuming that market conditions would improve? Why did the NOMAD (Liberum Capital) approve the Dec 2015 RNS which gave an unrealistically rosy view? That will have cost some investors losses - since they will have relied on that upbeat statement to buy shares.

Action is being taken to stem the losses (stable doors spring to mind);

fastjet has already taken action to manage its operating costs and overheads and is implementing further measures including reducing capacity and rationalising the route network to align it with current demand.

It gets worse - the company might need to raise more cash;

The Board monitors the Company's cash position very carefully and with over $20m of cash available at the end of February 2016, and based on current forecasts, it has sufficient funds to meet its operational requirements. The Board may consider raising further funds during the year to provide additional headroom and ensure the Company has the necessary resources to fund future growth as market conditions improve.

So, it's got enough cash, but it hasn't, at the same time.

EGM requisition - Easy Group (12.6% shareholder) has requisitioned an EGM to get rid of the CEO & Company Secretary. That sounds a very sensible proposal to me.

My opinion - this is yet another jam tomorrow company that has gone disastrously wrong. Management clearly…

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