Regional Express (Rex) has reported a double-digit fall in 2014/15 full year net profit and says the future is uncertain amid ongoing weakness in Australia’s resources sector and declining passenger numbers.
The company said on Friday net profit for the 12 months to June 30 2015 tumbled 13.6 per cent to $6.67 million, compared with $7.73 million in the prior corresponding period. It was the third straight year of declining profits at the airline.
Revenue rose 1.1 per cent to $256.2 million, Rex said in its financial results filed to the Australian Securities Exchange (ASX) on Friday.
Rex deputy chairman John Sharp says the “regional headwinds” the airline is facing, comprising not just the downturn in mining investment and weaker commodities prices, but also drought and bushfires, had made life difficult for the regional carrier.
“All of the serious calamities that regional Australia has been faced with have all made it a very difficult economic environment for a company like Rex to operate in,” Sharp said at Rex’s full year results presentation in Sydney on Friday.
“It’s tough going in the bush at the moment.”
Rex said passenger numbers dipped 1.9 per cent in 2014/15 to 1.025 million, 19,500 lower than the prior year. That represented a $3.1 million fall in passenger revenue from Rex’s non-subsidised RPT network.
Meanwhile, capacity measured by available seat kilometres fell 2.2 per cent, while load factors were stable at 54.7 per cent. The figures did not include Rex’s five Queensland government route contracts that began on January 1 2015.
The carrier’s 2014/15 results said trading conditions deteriorated “drastically in the last quarter of the financial year”.
The weaker Australian dollar had also increased US-dollar denominated costs over the past year.
Sharp said while passenger numbers on mining-linked routes had been weaker, load factors on some leisure destinations in Rex’s network such as Merrimbula had been quite stable.
“It’s quite clear from our analysis of the way the passenger numbers are changing that the mining slowdown has had quite an impact on our passenger numbers overall and we are not the airline to experience such a thing,” Sharp said.
On a more positive note (or tailwinds as the company described it), Rex said it expected the first full year of operating Queensland government regulated routes in 2015/16 would help boost profits, while it expected to book a $4.5 million benefit from lower global oil prices in the current year.
Rex said fuel costs fell $1.85 million in 2014/15, while the end of the carbon tax yielded a $2.5 million boost to the bottom line.
The company declined to offer profit guidance for the current year due to the uncertain operating environment.
“We are certainly not confident to predict the net outcome of headwinds and tailwinds,” Sharp said.
Rex shares were down 9.5 cents, or 10 per cent, at 85 cents in afternoon trade on the ASX on Friday.
The company deferred a decision on whether to pay a dividend to November’s annual general meeting.
Meanwhile, Rex also flagged interest in bidding for some government regulated routes Western Australia that were open for tender.
Sharp noted WA and the Northern Territory were the only two states where Rex did not have operations.
“Rex is now giving serious consideration to tendering for some of these licensed routes in Western Australia and to establish a beach head if you like further growth and development of the company in that particular state,” Sharp said.
“That’s another thing we think if we decide to proceed with it will be a boost to the company’s financial performance over the course of the next four months.”
Curiously, Rex’s financial results first appeared on the ASX website at 1154 Sydney time, some 10 minutes after the company’s presentation concluded.
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