Regional Express Holdings Limited (Rex) today announced its results for the Half Year to 31 December 2005 as outlined below.
• Profit before tax of $13.2m (up 238% from $3.9m for the six month period to 31 December 2004)
• Net profit after tax of $9.3m (up 244% from $2.7m for the six month period to 31 December 2004)
• Revenue of $77.9m (up 18%)
• Earnings per share of 10 cents per share (up from 5 cents per share)
Operating Results for the Period
Rex today reported a Net Profit before tax of $13.2m for the six months to 31 December 2005, up from $3.9m for the same period last year. This increase was largely driven by steady growth in existing markets, yield improvement and continued cost efficiencies.
The Chairman of Rex, Mr Lim Kim Hai, said Rex continues to make considerable progress in increasing its profit due to the continuing success of its current strategy for:
(i) increased passenger growth through well adapted schedules, new routes/frequencies combined with effective pricing and revenue management approaches;
(ii) improved operational performance and customer service; and
(iii) increased productivity through cost reductions and improved efficiencies.
Mr Lim said of the first half result, “While the environment remained very challenging with fuel price continuing to rise, Rex was more than able to offset this by its disciplined efforts in productivity gains. Overall cost per Available Seat Kilometre (ASK) actually fell by 5% from 20.2c to 19.1c on average during the period.”
Revenue and Load Factor
Total revenue for the half-year was $77.9m, an increase of $12.1m or 18% on the comparative half year.
Net passenger revenue, including fuel levy recoveries, were $74.2m, an increase of $10.5m or 16% on the comparative half year. During the period Rex passenger numbers increased by 11% with a corresponding increase of 11% in capacity. Load factor increased from 65.6% to 66.3%
The divestment of Hazelton Air Services, a wholly owned subsidiary which had been dormant since November 2003 resulted in an after tax gain on sale of $0.8m which has been included in this first half result. This was essentially a divestment of a superannuation liability that arose in the previous financial year.
Expenditure
Total expenditure, excluding income tax expense was $65.7m , up 6% on the comparative half year. This increase was due to an 11% increase in capacity growth and also higher fuel prices which increased fuel costs by $3.4m. The average fuel price (including supply cost) was more than 30% higher than the comparative half-year — in line with forecast. Without the higher fuel cost overall expenditure actually decreased by 1%. The company confirms that it has no fuel hedging cover in place.
Manpower and employee benefits increased by 8% due to:
• Enterprise Bargaining Agreement (EBA) increase of 3%;
• An increase in 11 full-time equivalent employees for Regional Express Pty Limited;
• The acquisition of Air Link Pty Limited; and
• A provision for share gift and profit share to be disbursed in FY 06/07 as part of a productivity based remuneration scheme which has been adopted by all Regional Express staff, with the exception of those employed under the ASU EBA.
The purchase of previously leased aircraft resulted in a decrease in Aircraft operating lease rental costs of 6%. The average fleet size increased by 2 to 29 compared to the first six months of the previous financial year.
Profit from Associate
Included in this result is the share of net profit in associates of $1.0m reflecting the 50% acquisition in Pel-Air Aviation Pty Limited.
Balance Sheet and Cash Flow
Cash Balances for the Group as at 31 December 2005 were $24.3m compared to $2.3m as at 31 December 2004.
Cash flows from operations totalled $13.9m, an increase of $12.7m on the prior half year, reflecting increased profitability.
Cash flows from investing activities were $23.8m in net outflows, relating to an associate acquisition (50%) of Pel Air Aviation Pty Limited and the purchase of the wholly owned subsidiary of Air Link Pty Limited. Cash flows from investing activities also include capital expenditure of $10.7m related to the acquisition of four aircraft and associated aircraft spares as well as other aircraft rotables.
Cash flows from financing activities totalled $29.7m and included the net proceeds from the Initial Public Offering and the payout of a loan facility for Air Link.
Earnings per share doubled from 5c to 10c per share reflecting the increased earnings of the Rex Group.
Outlook
Mr Lim said “Rex has exceeded its half yearly forecast. Taking the current cost structure and forward bookings profile into account, Rex is on track to provide an annual profit outcome in line with the Directors’ forecast, as set out in the Prospectus”.
Dividend
The Board reviews the Company’s dividend policy on a six monthly basis and, as foreshadowed in the Prospectus, has decided not to declare a dividend for the six months to 31 December 2005.
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Media contact: 0402 438 361 – Sara–Jane Uden
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