The Regional Express (Rex) Group has posted a statutory after tax loss of $11.4 million after writing down more than $17 million in assets, goodwill and fuel hedging.
It’s the first time the Australian-based business has posted a loss since its launch in 2002 in the wake of the Ansett collapse.
The business, which runs 50 Saab 340 turboprops to 58 destinations across Australia, posted a $3.3 million operating profit on a turnover of $132.6 million, down $600,000 on the same time the previous year. Half-yearly statutory profit after tax 12 months ago was $3.9 million.
The loss came with a $6.6 million goodwill impairment, a $6.8 million asset impairment and $4.7 million on fuel hedging.
The writedowns end a golden period for the business, which just 18 months ago, was Australia’s most profitable passenger airline group for the third consecutive year. While bigger rivals Qantas and Virgin Australia struggled with mounting losses and cost cutting, executive chairman Lim Kim Hai bragged in 2014 that Rex had “accumulated more PBT than Qantas or Virgin Australia over the last nine years”.
Rex COO Neville Howell said the fundamentals remained sound, with the business adding two new planes to the fleet after winning the tender for two regulated routes in Western Australia last December.
“The new Western Australian routes, which begin on 28 February 2016 are expected to perform well. We are very encouraged by the strong forward bookings to date,” he said.
WA is expected to add 10% of the growth in passenger numbers and the airline also plans to fly from Sydney to the Snowy Mountains this winter.
Passenger revenue was up $6.7 million to $113.2 on 12 months ago and passenger numbers grew modestly, but the average fare grew 5% and load factors also showed a modest increase to 54.8%.
Howell expects underlying business passenger demand to continue to soften in the second half of the financial year due to falling oil prices and a weakening Chinese economy.
Fuel hedging is expected to deliver a $2 million improvement to the end of the financial year.
“The group had to make some non-cash write downs and fair value adjustments which resulted in the first statutory loss Rex has reported since FY02/03,” Howell said. “Despite this, the group’s cash flows remain sound with an operational profit of $3.3 million.”
The Rex business floated in 2005 at $1 a share. The price currently sits at 84 cents.