Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
Woodstock, I would like to be able to verify your figure. I did look at the accounts, and my conclusions were as set out in my post earlier this evening. I came to a range of 55p to 42p depending on which Balance Sheet date was used. I have some experience in these things but am always keen to learn. Perhaps you can illustrate how you got to your number?
Actually Woodstock it’s £118m NAV at 30.9.18. which is 55p a share. I can’t quite see where your value per share comes from, but the closest I can get is think from March, at £91m NAV which is 42p per share, and since then they have made £7m profit at half year, and had positive movements on reserves from hedging moving “into the money”and a reduced pension deficit totalling c£20m to give £118m. They are expecting £12m loss before tax after benefiting from £10m onerous lease provisions on E195. This will reduce NAV to £96m at 31.3.19. if there are no movements on reserves due pension dedicit, hedges and USD translation on owned aircraft which are denominated in USD. This £96m would be 44p a share. This excludes slot values anywhere and particularly at LHR, which could easily add 25-50p+ per share taking potential underlying NAV to 67-92p per share. I have only included the LHR slots here and discounted from say £15m per pair, total £180m unrestricted slot value, c85p per share and discounted to 25-50p per share due the restricted nature of the slots at LHR that Flybe operate and the 1-3 years before they are grandfathered to Flybe. My assumptions only.
This all excludes synergy benefits another airline could benefit from, such as slashed head office costs, reduced marketing, better airport and ground handling deals and other purchasing benefits. This could easily be £20-30m per annum which at a P/E ratio of 10 is £200-300m value. I assume that Flybe shareholders won’t benefit from this in the sale price but it should ensure that the business when taken over should be profitable once those benefits are released a year or two post acquisition. And the underlying Flybe business is getting better....
How much of the above that can be directed to the Flybe shareholders is down to how good Ecercore are in negotiations and whether Flybe can attract more than one bidder and also credibly portray a no sale outcome as a viable alternative at least for negotiating purposes.
Agreed toastal.
Eastern/Bristow could raise the cash for sure but don’t understand the motivation. Flybe is much much bigger and complex. I do seem to recall that there was some animosity between Flybe and Eastern years ago when they were pushed out of some lucrative routes by Flybe, but don’t know if the individuals are still at Eastern, they certainly aren’t at Flybe.
Seems a long shot to me.
Sorry ironic, much as I would like this to be true I really don’t give this article much credibility.
There is a serious sale/strategic review process going on run by heavy hitters. The information flow will be tied down very tightly. If they want something leaked to suit their negotiating position it will happen, but in credible publications. I am afraid the aeroline.aero site and Jason’s mates in the industry will not feature highly in Evercore’s thinking.
I am a long time holder and have every interest in a sensible bid coming sooner rather than later, but do not believe this article has any credibility other than Jason has mates in Crawley and Jersey who he chats with from time to time.
I would take this article with a pinch of salt. Looks like he has rung his mates in the industry and published their views, but can't realistically see he has an inside track. The sale process is being run by Evercore, a relatively new corporate finance firm who have reached sixth ranking in the world behind Goldmans, JP Morgan etc. The lead is Julian Oakley who is a real hot shot, so at least Flybe have got that right, top notch advisers. Which means that this will be a properly run process and doubt Jason Shaw at aerotime.aero will have access to anyone who really knows what is happening.
Thanks exetrchief. Well what a load of absolute tosh the press have been writing about the Flybe MAEL relationship!
Seeking any form of scheme of arrangement with creditors or insolvency event is always included in any commercial agreement as being an event of default. The fact that MAEL filed their intention to do so on 9.11.18. actually puts the cessation of Flybe’s contract in context and shows that Flybe have actually been very diplomatic and reserved in their public statements re MAEL.
I know it won’t happen but the journalists who were ramping this up as somehow Flybe’s fault should apologise as should the posters on here who added fuel to the fire. Sadly it also shows what poor PR advice Flybe are having and the lack of nous at Board level.
taylot the ST article is here
https://www.thetimes.co.uk/article/flybe-lands-in-engine-row-rrbrtbmm6?shareToken=71273185e6908d4facfcf93e37f36d27
I understand line maintenance, and was making the point clumsily that true engine maintenance is highly specialist and infrequent and line maintenance is mundane in the sense it is an everyday occurrence. No offence intended. MAEL clearly do not do true engine maintenance.
My question was one of whether you could clarify what actually happened......did Flybe cancel the contract due non compliance by MAEL, either poor performance or unilateral changes to terms by MAEL or is there something in the ST story which implies Flybe were not meeting timely payments?
Just trying to get some truth instead of stemming lay endless rumour and innuendo on here
taylot, I would find it helpful if you could elaborate and give an objective outline of the situation. This BB has too many sensationalist and downright untruthful posts, and the MAEL situation has been exploited by some to denigrate Flybe. The ST article yesterday was a disgrace, and even suggested the MAEL contract related to engine maintenance, a highly technical activity rather than the important but much more mundane line maintenance activities in MAN and BHX. Could you set the record straight?
Levante, sorry for delay in reply, dragged my aching bones to the gym!
It seems to me that the main benefit of going to a standard listing is that the necessity of preparing a Class 1 circular for disposals or acquisitions no longer applies. For a business with a market cap c £40m this means any transaction of 25% of that, say £10m ish, needs a full blown Class 1 circular and shareholder approval. For a business where the market cap is so disproportionately small compared to its revenues, profit and asset base (which are other measures which can determine whether a Class 1 is needed) this can become a massive handicap, time delay and cost. And for what? It’s generally a no brainieer for shareholders to approve whatever is the subject of the Class 1. I e. Ever been involved in a contentious one, dating back to the 1980’s.
I have been involved with several listings on London Stock Exchange and also quite a few corporate transactions which required Class 1/2/3/4 circulars and the leg work and distraction from running the business can be severe, and it also takes at least three months from inception of the process to shareholder approval. And don’t get me started on interaction with UK Listing Authority whose deal prevention credentials are second only to the EU and UK Competition Authorities. And then there is the cost.....£0.5m absolute minimum for starters plus management time etc
It makes sense for Flybe directors to get rid of the Class 1/2/3/4 requirements if they can. The obvious concern is reduced shareholder protection in that the decision to sell off or buy assets or merge with another business can be undertaken solely at the Boards discretion. They have indicated that they will be more compliant and disclose more than they strictly need to with a Standard listing. At the end of the day I think given the situation they are in then this is a helpful move. And the Chairman, Laffin, despite my concerns as to some decisions he has participated in at Flybe, such as COW’s appointment, is a well recognised figure in the City and will not want his reputation trashed by being party to underhand transactions at Flybe under his watch. And finally the brokers Numis and Liberum are not going to let Flybe trash their reputation either.
So the next warning sign is a new dodgyChairman and the brokers resigning......then get worried!
Flybe sold a package of six slots previously used for short haul operation on an Air France franchise to Lyon and Toulouse for £40m in 2003. The purchasers, Qantas and Virgin, couldn’t use them immediately so employed others to fly them to ensure rights were not lost. The 12 slots being sold now are not wildly different in terms of timings throughout the day, suggesting £80m in 2003 £’s. On the one hand slot values have rocketed in the last 15 years, on the other hand there is a bit of work to do in order to gain grandfather rights, and in order to get long haul returns there needs to be a slot shuffle with existing unrestricted slots held by the acquiror or its alliance.
On balance I still see these as worth £100m+ to the right buyer.
Virgin is a private company, owned by AF, Delta and Beardie. Not sure how us shareholders would be paid out in a merger. I wouldn’t personally want to have shares in Virgin Atlantic, it is a poorly managed sub scale long haul carrier with ropey financials, albeit better since Delta actually took over running it. Mmmm, on second thoughts maybe with those characteristics a merger with Flybe might suit....!
Showing my age too...”Out of Town” Jack Hargreaves show was just wonderfully gentle and informative, I can remember watching it until the early 1980’s. I managed to find one on Sky about 15 years ago and even my teenage son was charmed by him. Lovely man.
Pianista.....
This is going to be a complicated deal and I see the most difficult part in being the negotiation between AF and Delta on the LHR slot shuffle. In my experience the French will only ever act in their naked self interest....so good luck with getting the “who pays what to whom” sorted out there Delta!
Pianista this is an intriguing question. My feeling is that it will have to be bought in one piece by one airline and then parcelled out if that is what is intended. The LHR slots are the most valuable single group of assets and the continued operation of those by Flybe under their Air Operatirs Certificate is the only way the slots will be grandfathered. So Flybe will have to keep operating. These slots are remedy slots so have specific conditions attached, the most significant are three full IATA years of operation on designated routes and then they can be grandfathered and sold but can still only be used themselves on European routes, but could form part of a shuffle with existing unrestricted slots any acquirer will already hold. If the Virgin bid succeeds it’s going to be “interesting” for Delta who I think will be the driving force and biggest beneficiary due increased TransAtlantic operation where they are currently quite light. But AF I feel hold the key as it is their unrestricted LHR slots currently operated to CDG and AMS that will be shuffled with the restricted Flybe slots, and money paid by Delta to AF for their unrestricted slots. And AF continue to operate AMS and CDG using ex Flybe slots.
The other areas of value are certain routes and slot holdings at MAN, EDI, LCY, AMS, CDG, BHX and other less congested airports where swifter slot transfers can happen due Flybe already having grandfather rights. But there would be value in say the MAN operation as an entity.
The aircraft are either owned with debt or leased. The lease profile is average 3 years so not a long time to get rid of c 25 aircraft. I haven’t looked at the debt profile.
Given all the above I would expect Flybe to continue operation for probably three years pending the carve out, it’s been done before but will be complex
The main analyst at HSBC is Andrew Lobbenburg who likes to see himself as. Bit of a maverick ever since he did. Real hatchet job on BMI (quite rightly) about 10 years ago.
I would take his views with a pinch of salt either way.
NAV c 50p, plus slots at LHR of £100m+ even if then discounted for current year losses and slot grandfathering being 1-4 years away give 60-75p per share, let alone the strategic value at LHR and elsewhere.
Not a ramper, just pointing out salient issues
Welcome to the BB with your first post DDperformed.
I suggest that if you genuinely believe what you have posted that you act accordingly.
I do not share your views and will take my own decisions on what are the motivations and outcomes of this bid situation and the LHR slots in particular.
Good luck
The issue with letting Flybe go bust is that it would mean that the LHR slots they are operating would cease to be operated by them, and until they have been operated for a continuous three year period these “remedy” slots would go back into that pool of slots. The key to the value of the LHR slots is getting them grandfathered into Flybe’s ownership after the minimum three year term, they can then be used on European wide operations not just the specific routes approved by the Trustee of the remedy process. At that stage these slots can be used in a shuffle with fully unencumbered LHR slots to allow increased long haul operation or sale. The slots start to be grandfathered from October ‘19, March ‘20. ( 7 pairs and October ‘21 and March ‘22 ( 5 pairs).
Although the people are different Flybe has a history of dealing profitably in slots. 6 pairs of LHR slots operated in conjunction with AF were sold to Virgin and Qantas for £40m in 2003, a number of LCY slots were sold at £1m + each around the same time and 25 pairs of LGW slots were sold to easyJet for £20m in 2013.
For those who post more than one line the below is the slot portfolio timings
ABZ-LHR
Arr. Dep.
9.00 9.45
17.20 18.05
19.35 20.20
EDI-LHR
Arr. Dep.
8.00. 8.45
10.35. 11.20
17.35 18.20
20.00. 20.45
NQY-LHR
Arr. Dep.
8.30. 9.15
12.05. 12.45
15.40. 16.20
19.55. 20.40
This timetable is set up for short haul operation withc45 minute turnarounds. A buyer with an existing slot portfolio of their own could mix and match to suit a long haul operation which needs 2 1/2 plus hours turnaround. Slots can also be finessed via negotiation with ACL who act as regulators and interface with other airlines, typically moves within the same hour can be accommodated. It’s not a bad set of slots, morning arrivals and later evening departures are pretty attractive.
This set can be improved by an alliance working with its partners....Sky Team-AF, Delta, Virgin; Star-Lufthansa and United and One World IAG, American etc
Suggests to me that Stobart couldn’t offer what Flybe and advisers thought was enough because Stobart couldn’t release the value in LHR slots. It needs an alliance such as Star or Sky Team, to get the value from those LHR slots, which is what we have with Virgin/Delta/AF. And IAG motivates to stop them.
Looks like north of 50p per share to me
The 7 LHR slots currently operated by Flybe on ABZ and EDI had to be made available by IAG due EC competition concerns following IAG/BMI deal. There are 12 remedy slot pairs, assigned to those two routes plus NCE, Cairo Moscow and maybe Riayadh. Flybe started their Scottish operation to LHR March '17. If they operate under usual slot retention rules for three years then they are grandfathered to Flybe and can then be operated or traded, but only for European destinations, proscribed by EC. The three years are up in Oct '19 for the summer season and March '20 for the winter.
In addition to the above an operator flying any of the routes subject to remedy slots can apply to use any slots allocated to other remedy routes, Nice, Cairo, etc if those routes are currently not being flown utilising remedy slots. This is how Flybe got the four daily LHR slots for the NQY route being commenced in March '19.
Flybe have an attractive flow of up to 11 pairs of LHR slots becoming theirs under grandfather rights from Oct '19/March '20 (7 pairs) followed by another 4 pairs from October '21 and March '22. These can then be traded for money or operated, but only for use within Europe, which in itself will probably reduce their value. An operator such as easyJet may be content with that. However, an airline grouping such as Star Alliance, (Lufthansa, United), or sky Team (Delta, AF-KLM, Virgin) can shuffle these restricted Flybe slots for their own unrestricted slots currently used for say FRA, CDG or AMS and use their now freed up unrestricted slots for long haul or sell them for big money.
It is very complicated and the valuation depends on conditionality as to the ultimate achievement of grandfather rights by Flybe and the use to which the slots are ultimately effectively being used, strict short haul or allowing the shuffle for long haul operation. And that is down to the identity of the acquirer, but it's fairly obvious if it a member of one of the alliances above then it's going to be long haul operation and higher values
One thing is for sure is that LHR slots are very valuable and this shuffle will be pursued.
I have not mentioned IAG and One World who could benefit from the shuffle above in theory but I am not clear how the EC would view the close relationship between IAG and American as regards the remedy slots. However if this is deemed too close then IAG still have a motivation to ensure the other alliances do not benefit from these 11 slot pairs and increase competition for Ine World long haul from LHR. Buying Flybe and letting the remedy slot operation lapse would effectively stop anyone else picking up the remedy operation as there are no other credible airlines with the combination of small cheap aircraft and sufficient finance to operate the routes for three years until they can grandfather the slots, as shown by Little Reds capitulation under massive losses on these routes