Market report: More turbulence for fastjet investors as turnaround faces steep climb ahead

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Every time investors think it can’t get any worse for fastjet, the low-cost African airline proves them wrong.

Today, shares in the ailing AIM-listed company fell a further 4.25p, or 17%, to 21p — an all-time low — as it warned of the scale of the turnaround facing new chief executive Nico Bezuidenhout.

The latest dive came as the company revealed that losses tripled in the first half of the year to $31.3 million (£24 million) from $9.9 million and reported negative cash flow from its continuing operations of $25.6 million.

The airline said ticket sales had been disappointing and added that its planes were less than half full.

It burned through almost all its cash by the end of June, leaving it with only $3.8 million before raising $20 million at 50p per share — double the market price at the time.

Bezuidenhout took over from previous chief executive Ed Winter who departed after bust-ups with outspoken founder and shareholder Sir Stelios Haji-Ioannou.

His cost-cutting plan includes moving fastjet’s headquarters from Gatwick  to Johannesburg and swapping three of its five larger planes with smaller aircraft.

After yesterday’s market surge, investors took the foot off the buying pedal ahead of the all-important two-day Federal Reserve meeting of policymakers who vote on a rate rise tomorrow.

Investors are at present banking on the US central bank keeping the status quo, reflected in the 13.74 point rise for the FTSE 100 to 6827.29.

The market is also waiting on the Bank of Japan’s meeting tomorrow.

Shares in housebuilder Barratt Developments were on weaker ground, down 7p at 472p, after UBS cut its rating from Buy to Neutral after the post-Brexit revival from its shares. It repeated the downgrade for FTSE 250 rival Bovis Homes, which fell 12p to 855.5p, but admitted that the overall market had proved more resilient than it expected after the Leave vote.

Shareholders of SVG Capital, off 3p at 667p, have been urged by Winterflood to hold fire on backing the 650p-a-share HarbourVest bid, valuing it at £1 billion.

“For larger shareholders, even those that have signed letters of intent, we believe that it makes sense to wait and see if a higher bid arises,” said analyst Simon Elliott, who said shareholders should have another month longer than HarbourVest suggests to make their mind up.

HarbourVest claimed it had the backing of more than half of SVG’s investors, but market sources suggest SVG’s management has been discussing the offer with shareholders, including those such as Aviva which signed letters of intent, and they are understood to be in no rush to accept the bid. 

Among the minnows, Crossrider jumped 2.5p to 28p as investors became more confident about its turnaround. First-half revenues fell to $28.7 million in a tough adtech market.

EVR Holdings, whose subsidiary Melody VR allows viewers to watch gigs such as The Who at Wembley through a virtual reality headset, rose 0.19p, or 10%, to 2.07p. The company raised £3.4 million in a placing at 1.7p per share in its bid to crack the US market and team up with record labels.

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September 20, 2016 |
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