Regional Express (Rex) says it is bracing for tough times ahead amid a deteriorating global economy after posting a small improvement in net profit for 2018/19.
The regional airline group said net profit for the 12 months to June 30 2019 rose 3.6 per cent to $17.5 million, compared with $16.9 million in the prior corresponding period.
Revenue rose 7.5 per cent to $317.6 million, Rex said in a regulatory filing to the Australian Securities Exchange (ASX) on Friday.
Rex executive chairman Lim Kim Hai said it was a harsh operating environment, as the ongoing trade tensions between China and the United States had hit economic growth in Australia and around the world.
That, in turn, had led to a difficult second half of 2018/19.
“I am pleased that Rex is still able to maintain the same level of profitability as the prior financial year with the strong momentum of the first half just about balancing the downward pressures of the second half,” Lim said in the airline’s annual report.
Rex said it carried 1.27 million passengers in 2018/19, a 3.6 per cent increase on the prior year.
Capacity, measured by available seat kilometres (ASK), rose 2.9 per cent, while load factors improved 1.8 percentage points to 63.1 per cent.
And the average fare was up $5.90 or 2.7 per cent, to $222.3.
However, the airline’s total fuel bill jumped 30 per cent to $42.5 million in 2018/19, from $32.7 million in the prior year.
Looking ahead, the airline group said it expected passenger numbers would be “stagnant” in the current year, based on trading conditions over the past six months.
Further, a weaker Australian dollar was expected to again have a negative impact in the current financial year as it did in 2018/19, Rex said.
As a consequence, Rex has guided the market to expect a lower profit in 2019/20.
“Rex will not be spared the full brunt of the global headwinds in the new financial year, and our profits could be eroded by 15-20 per cent as things stand,” Lim said.
“However, with virtually no debt and very strong foundations, we are confident that Rex will have the wherewithal to wait out this slowdown just as Rex traversed the period following the Global Financial Crisis while still making operational profits every year.”
Despite the gloomy outlook and the “possibility of a technical recession in Australia”, Lim said there were some parts of the market doing well.
“Surprisingly mining activities seem to be re-gaining momentum, and there is a good chance that the group could pick up some additional charter operations,” Lim said.
“Also, pilot training is still facing strong worldwide demand and talks are underway with international partners to train more pilots for international carriers at the Group’s pilot academy, AAPA, based in Wagga Wagga.”
Rex declared a final dividend of eight cents per share, fully franked.
The small improvement in Rex’s bottom line followed Qantas reporting a 6.5 per cent decline in full year net profit on Thursday. Virgin Australia, which was due to hand down its financial results on August 28, has guided the market to expect an underlying loss for 2018/19.