African budget airline Fastjet Plc, yesterday has released a business update with regards to raising additional funding of UKBP £11 million.
The announcement made in London also speaks to Fastjet plc senior management and Sir Stelios Haji-Iannou of easyGroup being involved in the fundraising,the termination of the Equity Financing Facility ('EFF') with Darwin Strategic Ltd, and an update on current trading and prospects.
Here below is the full announcement.
fastjet plc - Placing, Open Offer, EFF, Trading & Brand Licence
11
April 2014 - Fastjet Plc. (AIM:FJET) is pleased to announce a placing
with institutional and other investors to raise gross proceeds of £11
million, an amendment to the terms of the Company's brand licence with
easyGroup Holdings Ltd. ("easyGroup"), an open offer to shareholders of
up to £4 million, an update on current trading, and the termination of
the Company's Equity Finance Facility ('EFF') with Darwin Strategic
Limited.
Placing
The
placing involves the issue of 687,500,000 new Ordinary Shares (the
"Placing Shares"), amounting to approximately 112% of the existing
issued share capital of the Company, at a price of 1.6 pence (the "Issue
Price") to raise gross proceeds of £11 million. The Issue Price
represents a discount of 11.1 per cent. to the closing middle market
price of 1.8 pence per Ordinary Shares on 9 April 2014.
Directors & Senior Management Participation
Certain
Directors, specifically Mr. Edward Winter and Mr. Angus Saunders, and
senior managers of the Company have subscribed in the Placing for
Placing Shares with an aggregate value of approximately £1 million,
which constitutes both dealing by individuals concerned and in so far as
these Directors are concerned a related party transaction for the
purposes of the AIM Rules, further details of which are set out in the
section headed 'Directors Dealing & Related Party Transaction'
below.
easyGroup
The
Company has a Brand Licence agreement with easyGroup for the use of the
fastjet brand in return for a royalty payment. easyGroup IP Licensing
Limited has agreed to invest £1 million in the Placing. On the closing
of the Placing easyGroup has also agreed with the Company to terminate
the management consultancy fee under the Brand Licence in exchange for
the receipt of 94,287,227 Ordinary Shares in the Company (the "easyGroup
Shares") with a value of approximately £1.51 million at the Issue
Price, resulting in the cessation of previously agreed cash payments
equating to approximately £4.3 million over the next eight years.
Termination of Darwin EFF
The
Company announces that is has terminated the Equity Financing Facility
('EFF') with Darwin Strategic Ltd. which was originally announced on
13th June 2013 and further extended on 12th March 2014. This facility
has served the Company well over the past year, providing capital to
allow the Company to successfully reach its current position from where
it can now expand, but is no longer required to finance further growth.
Current Trading and Prospects
The
Company expects to publish its financial statements for the year ended
31 December 2013 in June. The Company had continued to trade in line
with management expectations since 30 June 2013. The Company expects,
for the full group including the Fly540 operations,revenue for the year
ended 31 December 2013 to be approximately $53 million and the operating
loss before tax and exceptional items is expected to be approximately
$47 million. Further impairments in relation to the Fly 540 businesses
during the remainder of the year are not expected to exceed $25
million. The restructuring of the Fly540 operations is very well
advanced and will be completed shortly. During 2013 less than $650,000
of fastjet Plc cash was utilised in the legacy Fly540 operations. The
proceeds of the fundraising will provide the Company with the necessary
capital to expand its low cost airline operation in Africa as outlined
in Background to the Fundraising
Open Offer
In
order to provide Shareholders an opportunity to participate in an issue
of new Ordinary Shares on equivalent terms to the Placing an open offer
at the Issue Price of up to 250,000,000 shares raising up to £4 million
is intended to be made to qualifying shareholders. A circular to
shareholders setting out full details of the Open Offer and the actions
to be taken by shareholders in respect of the Open Offer is expected to
be published on or around 16 April 2014. The Open Offer is not being
underwritten and is not conditional on the Placing. The open offer
Circular will be published on the Company's website, www.fastjet.com, and posted to shareholders in due course and a further announcement made at that time.
Ed Winter, CEO and Interim Chairman of fastjet said:
· "I
am pleased that this fund-raising has been completed so successfully.
It is clear that the low cost airline model is now established in
Tanzania, with customer acceptance developing rapidly. Customer feedback
is extremely positive, and ancillary revenue streams continue to see
steady improvement.
· We
now look to move to the next phase of fastjet's expansion with further
international routes, additional aircraft and more bases. Securing the
funding for management to fulfil that plan is a great step forward.
· We
appreciate the support of Sir Stelios Haji-Iannou and easyGroup,
demonstrated both in their subscription to the Placing and their
agreement to terminate the Management Fee in return for shares. I
welcome the fact that the fastjet management team has shown its
confidence in the business by joining me in making a very substantial
personal cash investment in our company. The Darwin Strategic EFF that
we have used for much of our funding to date, vital in bringing us to
this point, has been a great partnership.
· In
response to many comments from shareholders over past months, I am also
pleased that we have been able to offer all shareholders the
opportunity of participating in this fund-raising on the same terms as
the institutional placing.
· I
now look forward to leading the Company through the next phase of its
development, to become the leading pan-African low-cost airline."
Sir Stelios Haji-Iannou of easyGroup said:
· "I
am delighted that Ed Winter and his team at fastjet managed to get such
a successful backing from the City institutions, raising the necessary
funds to get the company to the next level. I am happy to have also
contributed myself in this effort. I looking forward to seeing the
company offer even more people in Africa the same low fares that we all
take for granted now in Europe."
Background to the Fundraising
· fastjet
plc is the holding company of the low cost airline fastjet which
commenced flights under the fastjet brand in Tanzania in November 2012
using a fleet of three Airbus A319 aircraft. By adhering to
international standards of safety, quality, security and reliability;
fastjet has brought a new flying experience to the African market at low
prices. fastjet's long-term strategy is to become the first low-cost,
pan-African airline. fastjet plc is also the holding company of Fly540,
which operates in Kenya, Ghana and Angola.
· The
fastjet low cost airline was launched in Tanzania on 29 November 2012.
fastjet operations in Tanzania carried a total of 31,500 passengers in
February 2014 and achieved a load factor of 76 per cent. The average
yield per passenger was $82, compared to $47 in February 2013.
· fastjet
currently has three domestic routes operating in Tanzania linking Dar
es Salaam with Mwanza, Kilimanjaro and Mbeya and two international
routes to Johannesburg and Lusaka. During 2013, management successfully
secured fastjet's first international route rights and fastjet's first
international route, Dar es Salaam to Johannesburg, commenced operations
on 18 October 2013 and its second international route from Dar es
Salaam to Lusaka, Zambia commenced flights in February 2014. Services
between Lusaka's Kenneth Kaunda International Airport and Dar es
Salaam's Julius Nyerere International Airport operate twice a week with a
third flight scheduled from 15 April 2014. fastjet expects to increase
the frequency of flights on this route in line with consumer demand, as
more people make use of its safe, affordable and on-time service.
· 38
per cent of fastjet's passengers surveyed six months after the
commencement of the fastjet operation were first time fliers and in that
period 34,000 seats were sold to those booking early at the base-price
of only USD$20, so establishing the low cost model in Tanzania. In June
2013 over 1,200 seats were sold for USD$20 each and, importantly, over
300 seats were sold for USD$200 each or higher. It is clear that the
low-cost airline model works in Tanzania and is effective in stimulating
and growing the market with customer acceptance of the model developing
rapidly. The booking window (days between booking and flight) has
increased significantly with customers quickly adopting the "book early
for cheapest seats" model. Due to the chronic unreliability of air
services prior to the arrival of fastjet, the majority of passengers
previously booked tickets on the intended day of travel once they were
assured that the flight would take place.
· Feedback
on customer satisfaction during the period has been extremely positive,
with 98 per cent of fastjet customers surveyed saying that they would
fly with fastjet again and 100 per cent saying that they would recommend
fastjet to friends and business colleagues.
· In
order to offset lower rates of commercial activity on the Internet and
low credit card usage in Africa, management continues to develop
cutting-edge customer communication and facilitation tools. These
include extensive use of social media such as Facebook and Twitter.
Mobile phone penetration throughout Africa is very high and the fastjet
website is optimised for use on smart phones. fastjet customers
increasingly use mobile phone payment methods such as M-Pesa and Tigo to
pay for seats. In December 2013, 19 per cent of ticket revenue was
paid through mobile money.
· Ancillary
revenue streams, predominantly from baggage and flight change fees,
continue to see steady improvement, increasing from USD$2.75 per
passenger in January 2013 to USD$6.95 per passenger in December 2013.
Additional services such as in-flight retail, allocated seating, hotel
and travel insurance services will be introduced with the objective that
ancillary revenue will continue to rise, both in absolute terms and as a
percentage of total revenue.
· fastjet's
Tanzanian operation, which comprises a well-recognised brand name and
both domestic and international routes, means that it is now well placed
to further develop its existing Tanzanian operations. Management plans
a controlled expansion, with all three aircraft fully optimised within
the schedule by Q3 2014 with further international routes including
routes to Kenya introduced by Q3 2014. This will enable fixed overhead
costs to be spread over a larger operation, a key factor in turning the
fastjet operation profitable. fastjet plans to add additional aircraft
in 2015. It also plans to establish bases in Zambia, Kenya and South
Africa. The Group is targeting to have 4 fastjet operational bases
across Africa by 2016 and by 2018 to operate 24 aircraft, carrying
approximately 6 million passengers per year with targeted revenues in
excess of $500m.
Future Initiatives
· Based
on the Company's experience in Tanzania and Zambia it has confidence it
can fulfil the strategy of becoming the pan African Low Cost Airline of
choice. The low cost model has stimulated the Tanzanian market in the
same way other such markets in other areas of the world were stimulated
by its introduction. The Tanzanian consumer has embraced the brand and
model with incredible speed and enthusiasm. Lessons learned whilst
establishing the current operations will be deployed to our advantage
during our expansion into other markets.
· In
some countries, developing the fastjet brand will involve direct
investment (as is the case in Tanzania), while in other countries it is
may be via a licencing agreement. Direct investment is most likely in
larger, more mature markets, such as South Africa, Zambia and Kenya,
with licencing agreements more likely in smaller, less well-developed
markets and those with a difficult investment environment such as
Nigeria. fastjet plans to undertake direct investment in a planned and
orderly way, such that a material portion of the required investment can
be internally funded.
fastjet Airline Management Services
· For
countries where fastjet considers a licencing agreement to be the
appropriate route to establishing the brand, we have developed an
Airline Management Services (AMS) concept. AMS facilitates the delivery
of core elements of the fastjet service, such as, safety, brand,
revenue management and sales and distribution channels, while other
investors provide the capital required to fund the aircraft and start-up
costs. In addition, fastjet AMS would offer other optional commercial,
operational and management services. Discussions are on-going in a
number of African countries, including Nigeria, with a view to launching
airlines in this way under the fastjet brand.
Zambia
· fastjet
plc is in discussions with the Zambian government with the intention of
creating a fastjet operation based in Lusaka. The Board see the
business and political environment in Zambia as very progressive and
fastjet's discussions to date with the Zambian government, Tourist Board
and other stakeholders have been very positive. The Company believes
the establishment of a fastjet operation would bring benefits to the
country and Zambian people through the expansion of trade and tourism,
as well as bringing safety and reliability improvements to the Zambian
aviation industry. The new operation, whilst being distributed and
marketed as a part of the pan-African fastjet network, would be a
Zambian registered company in which fastjet plc will have a substantial
stake. fastjet flights linking Lusaka with Dar es Salaam have proved
an instant success with customers previously enduring 28 hour torturous
road journeys.
Ancillary Revenues
· On
28 February 2014 the Company signed two agreements with partners in the
travel industry, marking the launch of partner ancillary products on fastjet.com. The first, with Rentalcars.com parent company, TravelJigsaw Ltd, will offer low-cost car hire in Africa through fastjet.com,
and the second will deliver competitively priced online parking
services in South Africa in partnership with Looking4Parking.com (L4P).
fastjet expect to announce further ancillary revenue opportunities in
the near future.
Use of Proceeds
The Placing has raised gross proceeds of £11 million. The Directors intend that the net proceeds of the placing will be used:
o as to approximately £3 million for Central services infrastructure;
o as to approximately £2 million for new base costs;
o as to approximately £3 million Tanzania working capital; and
o as to the balance for general working capital.
Intended Open Offer
· In
addition to the Placing, it is intended that a total of up to
250,000,000 new Ordinary Shares at the same price of 1.6 pence per share
as the Placing shares will be made available to qualifying Shareholders
pursuant to an Open Offer to raise up to £4 million before expenses.
· Not
all Shareholders would be qualifying Shareholders. In particular,
Shareholders who are located in, or are citizens of, or have a
registered office in restricted jurisdictions and certain other overseas
jurisdictions would not qualify to participate in the Open Offer.
Details of the definitive terms of the Open Offer, including the offer
timetable and record date, will be set out in the Circular when it is
published.
This announcement is also accessible via the below link to the London Stock Exchange.
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