Fastjet to raise £19.2m to fund new business plans

Tanzania-based budget airline Fastjet announced a placing and open offer to raise £19.2m and said it plans to be in a cash-flow break-even position by the end of next year.

The issue price of 50p represents a significant premium of around 116% to the closing price of the shares on 20 July.

Fastjet said the placing, which is being conducted by way of an accelerated book-building process, will provide the company with funds to execute its new business plans following a challenging 2015.

Last year, the company was hit by difficult macroeconomic conditions in its markets, delays in obtaining flying rights into Kenya, and new international routes performing below expectations, as well as various changes to executive management and the board.

The result was “disappointing financial results and poor cash flow”, Fastjet said.

Following a review of its 2015 performance, the company’s revised business plan includes continuing with the cost reduction programme and ensuring careful management of current cash resources, rationalising routes to match capacity with demand and paring back expansion, with no new routes expected to launch for the remainder of 2016.

In addition, Fastjet said a more flexible approach to the traditional low cost carrier model will also be employed.

FastJet said the plan was likely to include the relocation of the company’s UK head office to Africa.

“Better alignment of the company's infrastructure and fleet to its stage of development and ensuring overheads are appropriate for the size of Fastjet's operations is essential, in the board's opinion, to achieving the desired improvement in cost management.”

At 1400 BST, Fastjet shares were up 47% to 34.05p.