Fastjet flies higher after successful cash call

Shares in Fastjet surged on Friday just days after it warned it could go bust, as the low-cost airline successfully raised $10m in a placing and subscription.

The company raised £5.3m in a placing of 66.5m shares at 8p each, which represents a premium of 146% to the closing share price on Thursday.

In addition, the group's largest shareholder, Solenta Aviation, has agreed to subscribe for just under 29 million shares, raising gross proceeds of £2.3m.

The airline also said that Mark Hurst, currently chief executive of Solenta, will join its board from 2 July as a non-executive director, to work closely with the CEO on an ongoing basis. He will also be responsible for the country management of the group's Zimbabwe and Mozambique operations.

Fastjet, whose shares crashed on Wednesday after it cautioned it could go bust unless it managed to secure fresh funding from shareholders, said the funds raised should provide sufficient working capital for the rest of the year.

Chief executive officer Nico Bezuidenhout said: "Today's capital raising will give Fastjet the adequate headroom it needs for the remainder of 2018. Although there were some unexpected headwinds in 2017, the stabilisation plan put in place by the board has significantly reduced the cost base of the company and right-sized the business.

"Trading in the year to date has been in line with market expectations and the company is now well-positioned to capitalise on future growth."

Fastjet also released its results for the year to 31 December 2017. The group's operating loss narrowed to $25.3m from $65.6m in 2016, but revenue dropped to $46.2m from $68.5m.

Revenue per seat was up 30% to $60.9, while the load factor - which measures how full the planes are - ticked up to 71% from 54% and costs fell 48% to $70.7m.

Bezuidenhout said: "In 2017, the successful implementation of our stabilisation plan saw us realign our network, withdraw from loss making routes, reconfigure our fleet, migrate the group's headquarters to Africa, and significantly reduce our cost base. These actions have resulted in a substantially reduced loss for 2017.

"The purchase of the Fastjet brand from easyGroup in the second half of 2017 was an important milestone for the company which has allowed us to explore new avenues for growth and given us greater operational flexibility, particularly in terms of the type of aircraft we operate. As part of our targeted network expansion strategy, the first fastjet branded flight in Mozambique took off last November and over the next 18 months we have a programme of further measured expansion of services in Mozambique and, subject to appropriate fleet expansion, new services in South Africa."

Neil Wilson, chief market analyst at Markets.com, said: "Lower costs in particular should be welcomed by investors, but how they got to this state where they are at risk of running out of cash today is pretty shambolic."

AJ Bell investment director Russ Mould said: "This emergency capital raise should not obscure the fact that this is a business in serious trouble. Since the middle of 2016 it has had to return to the market for cash on five separate occasions and you have to question when investors will run out of patience with the company.

"For now, largest shareholder, South African airline, Solenta Aviation appears willing to provide its support. In a messy set of 2017 results also announced today, the company did provide some cause for hope as it slashed operating costs by nearly 50%."

At 1540 BST, the shares were up 168% to 8.70p.