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Cant see why it’s falling like it has in the last few days. Disposal of Web business looked sound, guidance reiterated as on track for full year, cyber issues prevalent so should be lots of business. Wonder if it’s a spin over from Sophos woes? Very different businesses, in different parts of market, but scribblers may be marking this down due viewing it as “the same”. Or analysts don’t like the new CEO now he has been doing the rounds?!
Think it’s Flybe own seats that are reported. The franchise seats are separate I believe
Good summary re-flection. If, and it’s not a minor if, you can get costs and revenue moving in opposite directions the profitability benefits in the aviation sector, due fixed/semi fixed nature of the majority of its costs, are fantastic. Not meant to be a pop at Flybe, but it doesn’t happen very often though!
No surprises really. A loss for FY 17/18 has been known since November at least, and the weather impact was less than I thought it could have been. Load factor in Q4 is astonishingly good by comparison to historic performance. Early Easter means that the forward sales will potentially have been suppressed due businessmen being on holiday and not booking flights, but still up a bit in volume and significantly in revenue per seat. Fuel hedge good, but USD not so good given USD weakening against £ in recent months, but at least the % hedges has reduced and will unwind more in coming months. FY 18/19 starts with good momentum on load factor, revenue and fleet. Not much more to be said until next update, June I guess, when Q1 can be dissected and extrapolated to Q2 250k shares traded by 8.30, all buys and unchanged share price with Mid Caps down 0.8% after Dow sell off last week/yesterday. Makes a change for Flybe not to have big negative move post trading RNS. Turning corner?
SH was sacked, no question. It was either him or the management team were leaving as they (allegedly) couldn’t work with him any longer. Any argument to the contrary is tripe.
Gino, I guess that's my underlying point, need some certainty about profit/cash flow numbers and hope value for the future. On your analysis of Stobart funding the purchase by selling the maintenance business and owned aircraft.... The value of the Q400 will have depreciated since 2016, and not all the owned aircraft are of the same vintage so the value achieved would be some way less than your figures. In addition leasing the aircraft would increase the cost to the business as the lessor would be wanting a profit. I read somewhere that this c�500k per aircraft pa more expensive than owning the aircraft, so �14m hit to bottom line each year. I don't disagree with the figure for maintenance business, but again there would be an increased annual cost to a Flybe as the purchase would charge commercial rates, which must be more than Flybe's internal rate to itself. I don't disagree it's a viable plan to raise cash for the acquisition, but will only do so at a pretty high annual hit to the P and L
Just asking.....
Morning Gino, thanks for sharing your views on valuation. DCF is also an interesting methodology which I have used on Flybe in the past...it gave some very high numbers, but I have misplaced the model so can't share specifics with you. I guess the general point is that these valuation methods need some underlying stability/signs of sustained turnaround translating to profit before the valuations they show become likely outcomes. Basically net assets get eroded by losses, incurred for whatever reason, which undermines the applicability of these types of model. Undoubtedly there is a strategic value in Flybe which is an unscientific gut feel type calculation, however until the positive profit impact of the turnaround is demonstrably seen then the share price will undervalue the inherent worth of the company. Not saying I disagree with your numbers, it's the timing before a rerating occurs that is crucial.
Sam, just catching up with your 22.15 post last night, "look at the debt" What is your view of the debt maturity profile Flybe have in the context of funding owned aircraft? Also what is your view of the applicability of the default aviation sector methodology to capitalising operating leases in the case of Flybe and in particular to EBITDAR calculations of company value? And in addition what is your view of the scale of depreciation at Flybe and its impact when assessing overall profitability and a measure of Flybe's ability to service its debt? Interested in your views.
Just read it. It's from the PR company, with no Stobart contact details.....either 1) arrogant beyond belief that Brady doesn't want to talk about it, or 2) Stobart adopting what massive PLC's do, if so see 1) above, or, 3) it's Amateur Hour again. When I was PLC director this was certainly not how we did it. Man up Brady!
So Mrs Mayfield has just brought me a cup of tea in bed with the words "Flybe is down 23%" . "Excellent" I say. Well this is a busy board this morning. What can we make of this? 1) Flybe Board have some backbone, Laffin the Chairman has been around the block, and will have been sounding out the big shareholders, there aren't many of them. And the long term holders such as Threadneedle, Aberforth etc were the ones that appointed him in the first place. 2) Stobart didn't match the Institutions estimate of value as shaped by their interaction with Laffin 3) Stobart appear pretty amateurish....trailing the prospect of a deal last Summer, twittering away in the background to try to unsettle shareholders, being forced into a formal bid process, whilst not having bought any shares along the way. Not impressive, but really they are currently a company dominated by big historic asset holdings looking to build a trading company, without much real infrastructure, so not surprising really. 4) Flybe Board will have to deliver on the vision they sold the Institutions FY 18 results will be a loss, the underlying performance improvement is key, this is where the disagreement with Stobart will have been. They have plenty of cash, decent hedges, improving metrics and decreasing fleet size which will help yield and load factor. All in all pretty pleased that a bid that didn't meet the Institutions expectations was rejected. Let's see the recovery crystallise.... and I need another cup of tea!
Excellent!
OK, think I get it now. But as you say the concentration of shareholding’s counters this risk. Would be surprised if COW was offered the job unless it was solely Flybe. If it’s an acquisition vehicle there are others better suited to run that than her.
Hi Gino I’m sorry I don’t understand your point re COW and the JV. Genuine question, no clever clogs intended!
Think the “not wanting control” bit related to the vehicle they may be using to undertake the acquisition. It means that they will have a minority share in that, probably with someone like Invesco who have been long time and supportive 25-40% shareholder in Stobart in its various guises. Buying Flybe into a JV in which Stobart have a minority holding strikes me as a bit odd, but I can see three possible reasons:- 1) it will probably be an unquoted company so won’t have the rigour of plc reporting 2) Stobart will only bring into their accounts their %share of profits/losses rather than all of them which would be the case if they owned 51%+, maybe because they feel there is a big restructuring charge coming so want to isolate that from Stobart’s own accounts 3) maybe the JV will be an aviation sector acquisition vehicle which can be used to raise finance away from Stobarts plc balance sheet when other purchases are made. Less disclosure, more flexibility, less constrained by Stick Exchange documentary requirements If the JV works out for Stobart they can always make an offer to buy out the other participants once the restructuring/acquisitions are complete. I agree that some shares in Stobart might be attractive to Flybe shareholders
Really not bothered if there is no bid. I believe there will be as it is such an obvious fit with Stobart and Brady, and their timing is, annoyingly, spot on. They only have to convince four Institutions to succeed, but if it doesn't materialise then Flybe's improving performance will eventually be translated to the share price. It's a question of how much cash will it take to convince those four to sell now?
Possibly Gino, but the ongoing cost of not having a homogenous fleet of 737’s or Airbuses is huge. Duplication of training, crewing, aircraft purchasing, spares holdings, ground handling etc etc make for very big cost inefficiencies, hence why easyJet for example got rid of 737’s from a mixed fleet of Airbus and Boeing. The only two justifications I can see would be that either Flybe is a good business in its own right and at the right price will be a non integrated bolt on, or secondly buying it and integrating it and potentially supplying feed traffic to Wizz or developing smaller routes than Wizz can justify with its Airbus aircraft into Europe. Personally I would see Wizz having plenty of opportunities within its existing business model in its mainly (more) Eastern European market where it has a bigger presence than the other two European wide LCC’s and a still significant remaining market presence by the likes of Lufthansa, SAS, Finnair, LOT, and the now defunct Air Berlin et al, to be attacked. As I have learned over the years, never say never, but I will say unlikely!
Gino I see that you believe that Wizz are in the background in the bid for Flybe. I hope you are right but I really can’t see it. Wizz is as pure a LCC business as Ryanair, albeit Airbus based rather than the simpler 737-800 model Ryanair have, and much more so than easyJet. True they now have a UK subsidiary that they hope to operate from Luton using ex Monarch slots and facilities, but Flybe would be a major divergence from their model. I think it’s more about getting a UK AOC pre Brexit to go with their other AOC’s .....they do have several other European based subsidiaries already. I hope I am wrong and we have a bidding war, but it looks a bit beyond Wizz’s ambition to my tiny mind.
Unwarranted praise justSayin! My posts result from having been a plc director for a while so knowing how IPO’s, bids, acquisitions etc work, plus some aviation industry knowledge having met quite a few of the current players over the years. Plus having a bob or two invested which focuses the mind, and being retired from age 55 gives me the time to read and think. I do have a vaguely related pair of low key Non Exec jobs but nothing that relates to Flybe! No inside knowledge I promise you!
CEO has had two opportunities to bath tub the results already, FY to 31.3.17. and H1 to 30.9.17. And new CFO looks to have had his penny worth with a profit warning on 18.10.17. just a week after his formal appointment following a period as consultant. So hopefully there is little room for more bath tubbing at FY 18 beyond what is already in the public domain. But do agree the timing is interesting.......one man's opportunistic is another man's shrewd investment.