Regional Express confident of profit growth if economy continues ‘modest’ recovery

Regional Express shares have soared almost 10pc after its deputy chairman said figures for the first four months of year suggested its recovery is on track.

Regional Express, Virgin and Qantas planes at Canberra airport.

Airline Regional Express says that expectations the economy will continue on its “modest” recovery will translate to a continued growth in the number of passengers.

In an address to today’s annual general meeting, Rex deputy chairman John Sharp said the group’s rise in operating profit for the 2016-17 financial year was due to “the modest recovery in passenger revenue from Rex’s (REX) traditional network, contribution from Western Australia routes, lower fuel prices and slight improvement in the USD exchange rate.”

During the 2016-17 financial year, a 3 per cent recovery in passenger numbers helped Rex swing back to after-tax profitability. The airline’s statutory profit after tax was $12.6 million, compared to a loss of $9.6m the year before. Its profit before tax, the carrier’s preferred measure, was $17.8m for the 2017 financial year, a quadrupling of the result the year prior.

Mr Sharp said that the performance of the carrier during the first four months of the financial year — when passenger numbers grew by 4 per cent year-on-year — appeared to confirm this recovery.

“Overall we are confident that Rex Group will continue to perform stronger if the Australian economy continues on its modest recovery,” Mr Sharp said.

In a presentation to investors, the company said there would be a “healthy” dividend payout ratio if the company met its profit targets for the 2017-18 financial year.

For 2016-17, the company paid a final dividend of 10c a share fully franked, the first distribution in five years.

At 2.57pm (AEDT), Rex shares were trading 14 cents, or 9.9 per cent, higher at $1.55.