Kenya Airways issues profit warning on its expected 2019/2020 earnings


Kenya Airways
Kenya Airways

In Summary

  • In a notice to shareholders, the carrier has attributed the expected deeper loss to stiff competition within its aviation sub-sector with the pressure leading to the rationalization of air-fares to match its peers.
  • In August, Kenya Airways announced a more than doubled loss for the first six months of 2019 with the reported net slide coming in at Ksh.8.6 billion from a flat Ksh.4 billion on the back of higher impairment costs and increased operational costs.
  • Other firms on the queue of the earnings slide include coffee based Eaagads, insurer UAP, the Standard Group and the NSE who combined mirror the depressive state of the economic environment, higher costs and low transactions/market prices.

Kenya Airways (KQ) has issued a profit warning on its expected full year earnings for the period ending December 31, 2019, joining the growing list of firms in distress.

Subsequently, the firm which remains in the red is expected to backslide to a projected loss of Ksh.9.5 billion.

In a notice to shareholders, the carrier has attributed the expected deeper loss to stiff competition within its aviation sub-sector with the pressure leading to the rationalization of air-fares to match its peers.

“Although Kenya Airways realised improved revenue growth in the year, profitability was constrained by increased competition in the airline area of air operations, which in turn, has increased pressure on pricing in order to remain competitive,” KQ Board Chairman Michael Joseph said.

In August, Kenya Airways announced a more than doubled loss for the first six months of 2019 with the reported net slide coming in at Ksh.8.6 billion from a flat Ksh.4 billion on the back of higher impairment costs and increased operational costs.

Operating costs grew ahead of revenues in the period as the company parted with a sum total of Ksh.3.4 billion from increased provisioning and one-off costs even as it struggled to break even on its recent route expansion.

In 2018, the carrier posted an adjusted full year loss of Ksh.9.4 billion with a corresponding full year loss of Ksh.683 billion in spite of a notable increase in revenues to Ksh.114.2 from Ksh.80.8 billion in 2017.

The expected stretch in loss making is expected to end the company’s run of loss cutting since 2015 to put the carrier right back in the darker shade of red.

The profit warning meanwhile comes just days to the interim appointment of Jambo Jet Chief Executive Officer Allan Kilavuka as KQ’s new CEO beginning January following the abrupt exit of Sebastian Mikosz in the aftermath of the company’s proposed joint venture with the Kenya Airports Authority (KAA) on the running of JKIA.

During interview with Citizen TV’s Jeff Koinange in November this year, Mikosz estimated that the airline requires a minimum injection of Ksh.45 billion to fly back into profitability to paint the tough stakes at hand

Further, the warning is barely 24 hours into the issuance of a profit warning by insurer CIC which is too seeking out for a substantive CEO following the unexpected exit of Tom Gitogo in October.

In its notice, CIC quoted adverse claims in some of its business counters after seeing the near depletion of its half year earnings to June 30.

Having posted a full year profit of Ksh.635.3 million, the underwriter is now set for a dip of at least Ksh.156 billion ahead of the annual financial disclosure in March 2020.

Other firms on the queue of the earnings slide include coffee based Eaagads, insurer UAP, the Standard Group and the Nairobi Securities Exchange (NSE) who combined mirror the depressive state of the economic environment, higher costs and low transactions/market prices.

Kenya Power and BOC make for the remainder of firms to declare anticipated lower earnings in expected earnings to date.

A total of 15 firms issued profit warnings in the concluded financial reporting period to mirror the continued trend in job cuts and business optimization under a changing digital work’s landscape.

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Story By Kepha Muiruri
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