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On Wednesday 27 February 2019, Regional Express Holdings Limited (ASX:REX) released its half-year results of Fiscal 2019 for the six months ended 31 December 2018. The air services provider reported a 7.7% increase in Statutory Profit After Tax to $9.8 million on the total turnover of $163.8 million in 1HFY19.
Passengersâ Revenue of the company has gone up by 9.1% to $145.4 million as the passengers carried increased by 4.8% to 664,832 during the first half of Fiscal 2019. The company stated that the growth in passengersâ numbers was primarily attributable to improvements in load factors and yield in the traditional network and the new Perth-Carnarvon/Monkey Mia route which commenced in July 2018.Â
However, Rexâs profit got impacted by a substantial increase in total costs incurred over the period. It translates an increase of $13.4 million or 9.7% in Groupâs total cost to $151.1 million as the jet fuel prices were touching the sky during the reporting period. It can be seen that fuel cost alone has skyrocketed by 51.3% to $23.0 million in 1HFY19 compared to the previous corresponding period.
Rex Executive Chairman Lim Kim Hai said, âThis period was particularly difficult with fuel prices skyrocketing and with the sharp slowdown of economic activity from December due to the Sino-US trade war. Rex has bucked the worldwide airline trend of steep decline in profitability by turning in a modest 3% improvement in Profit Before Tax.â
Backed by strong cash flow, Rex declared an interim dividend of 4 cents per share, fully franked, to be paid on 1 April 2019 to shareholders registered on 15 March 2019 record date. This dividend was declared on 26 February 2019.
During the reporting period, Rex took delivery of one Saab 340B+ aircraft, bringing the Rex group Saab 340 fleet to 58 aircraft. In September 2018, the Group disposed of Air Link Pty Limited, thereby selling Air Linkâs fleet of 5 piston aircraft. In addition, Rex fully repaid 15 aircraft on the mortgage in November 2018, making its entire fleet of aircraft fully paid for except for two that are on lease.
With respect to FY19 outlook, the company expects a meltdown in business activities ahead of elections. It also predicts headwinds in passenger number if the Sino-US trade talks fail going forward. However, on the positive side, Rex expects its business to follow an uptrend as the fuel cost has been fully hedged below USD60 per barrel. The company has already hedged fuel for 2HFY19 which demonstrates a reduction of $2.3 million compared to 1HFY19.
In the context of the uncertain outcome of the trade talks, the Board was reportedly unable to provide a reliable profit forecast. But still, the Board has put forward its commitment to determine a healthy dividend payout for FY19, provided the financial targets are met.
REX stock price has dipped by 0.645% to stand at $1.540 on 27 February 2019 (2:10 PM AEST). The stock is currently trading at a Price to Earnings multiple of 9.870x with a market capitalisation of $170.74 million.
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