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topend3
24th Jun 2004, 07:43
Skywest not to blame: investors

SEAN SMITH



Major shareholders yesterday defended Skywest in the wake of Monday's shock profit downgrade which has forced the postponement of its long-awaited float.

The investors admitted that they were "less than thrilled" with the profit plunge, but have refused to sheet home blame for the savage downgrade to management and argued it should not overshadow Skywest's financial turnaround.

"This is not a company that is standing on the edge of a precipice looking down into a deep dark hole," said Clive Hartz, one of Skywest's biggest shareholders with 8 per cent.

Mr Hartz, who is also a Skywest director, said the downgrade was clearly "very disappointing" but he insisted that the company "had now been structured with good sound fundamentals".

"In a trading sense, we had a substantial loss last year and it has turned around. We can't get away from the fact that this company is profitable," he said.

Skywest's downgrade has slashed its forecast 2003-04 profit to $700,000 from the $2.4 million flagged a year ago. The board said it had no inkling of the downgrade until May's financial figures were finalised on Thursday.

Skywest has blamed various factors for the earnings slide, including higher fuel costs and a recent payout to former chief executive Bill Meeke.

But his successor, Scott Henderson, also took some of the blame, admitting that he erred in his forecasts related to Skywest's new jet services in WA's North-West.

Nonetheless, another major shareholder, who declined to be named, said that Mr Henderson had "done a pretty good job" in the chief executive's role. "There's always hiccups in growth," he said.

The downgrade forced the company and its lead brokers, Patersons Securities and ABN AMRO Morgans, to delay its float just days out from a roadshow aimed at promoting the company to potential investors.

Both brokers declined to comment yesterday but it is believed the offer, which will seek less than $10 million, will be sidelined for at least several weeks while float valuations for the company are reviewed and Skywest takes a closer look at the circumstances behind the downgrade.

However, insiders close to the proposed listing are adamant that the process has not been derailed. "Like anyone that comes out with a downgrade from left field, you're a bit shocked, but you recover from that and find a way forward," one said.

The downgrade has provided ammunition for Skywest's Singaporean bidder, CaptiveVision Capital, which is seeking to buy the outstand ing 80.4 per cent of the company.

CVC will confront the board when it seeks to dump Skywest chairman Pat Ryan at what could be a fiery shareholders meeting requisitioned for Monday at the Hyatt Regency.

Mr Hartz and other directors have thrown their support behind Mr Ryan. "I don't think people realise the extent of the functions Pat performs in his role as chairman," Mr Hartz said. "The demands on his time are that of a quasi executive."

Icarus2001
24th Jun 2004, 09:00
I smell a very big Singaporean rat. Geoffrey where are you. You must have a theory on this?

What about...Skywest's downgrade has slashed its forecast 2003-04 profit to $700,000 from the $2.4 million flagged a year ago.......Skywest has blamed various factors for the earnings slide, including higher fuel costs and a recent payout to former chief executive Bill Meeke.


A $1.7 million difference!!!!!!!!! Bill must have got some payout.:ok:

cunninglinguist
24th Jun 2004, 12:17
Sounds like they might have realised what Q/link found out a long time ago.............................
running 100 seat jets into PD/KA with 20-30 people is not all that profitable, especially when you don't have the luxury of on-carriage to the eastern seaboard.

GoNorth
25th Jun 2004, 00:24
The old "milk" runs do not work. Skywest seem to love these runs in the 100 for some reason. People want to travel to their destination on the most direct route.

topend3
25th Jun 2004, 05:44
Investors clamour to take up CVC offer for Skywest

SEAN SMITH - BUSINESS EDITOR



Skywest's savage profit downgrade is believed to have triggered a rush to accept Singaporean bidder CaptiveVision Capital's takeover offer.

While CVC has declined to comment, sources close to the $11 million bid said yesterday the company's advisers had been inundated since Tuesday with telephone calls from angry Skywest investors flagging acceptance of the 20¢-a-share offer.

"They expect a lot more," a source said.

The callers are said to have included many shareholders who bought into the unlisted Skywest last July through the regional airline's $2.7 million convertible note issue at 15¢ a note.

Skywest on Monday stunned its 200-plus investors by announcing forecast earnings for the 2003-04 year had collapsed to $700,000 from the $2.4 million flagged last year.

The downgrade was blamed on several factors, including higher fuel costs and errant management forecasts related to the launch of new services in WA's North-West.

Shareholders were taken aback by the severity and the apparent suddeness of the earnings slide, which threatens to derail Skywest's proposed sharemarket float. Skywest has called in an independent expert to examine the reasons behind the drop.

CVC launched its offer for Skywest's ordinary capital as the company's biggest shareholder with nearly 20 per cent. It also had options over another 5 per cent.

While the company prefers not to show its hand, sources said yesterday it had since increased its stake and may even be capable of exercising control if options and convertible notes it now speaks for were also taken into account.

The downgrade is particularly inopportune for Skywest, as it provides an opportunity for CVC to capitalise on the investor anger by accelerating acceptances. The airline also risks further embarrassment at a shareholders meeting requisitioned for Monday by CVC with some investors certain to seek answers from directors on the downturn.

Monday's announcement also threatens to provide momentum for CVC's bid to unseat the airline's chairman, Pat Ryan, at the meeting.

The move is opposed by the Skywest board, but directors are thought to hold less than 8 per cent of the stock, with almost all of that held by Clive Hartz.

Skywest insists the profit revision will only delay rather than kill the float, which has been in the pipeline since late last year. However, at least some shareholders are questioning how Skywest can be taken to the market until it can offer a more reliable earnings picture.

CVC opposes the float plan but has said little publicly about any plans for Skywest should the offer be successful. Privately, however, it has cited the aviation experience of several recently appointed directors and promoted possible expansion plans which would see the airline forge links with Asia.

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judging by this media release, xr execs seem to feel they are headed in the right direction with the new jet services. will be interesting to see what their profit forecast will turn out to be for the following year.

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Media Release 2004-06-21


21 June 2004


2004 Full Year Forecast Update


SKYWEST Limited today announced a revised profit guidance for the 2003-04
financial year.

At the time of the registration of a prospectus for a convertible note issue in July
last year, Skywest forecast a $2.4 million net profit for the 2004 financial year.

However, the forecast has now been revised to $700,000 as a result of fuel price increases and under-estimating costs associated with the May launch of new jet services into Darwin, Karratha and Port Hedland and additional services into Broome with the Company\'s second Fokker100 aircraft.

The profit performance has also been impacted by once off and unforeseen costs associated with the current takeover bid for the Company and last week\'s settlement of the legal action involving Skywest\'s former chief executive.

Skywest Chairman Pat Ryan said the profit downgrade was very disappointing, particularly coming so close to the end of the financial year.

He said the severity of the downgrade was such that the Board had resolved to engage financial advisers to provide an independent report on the issues and events that led to the forecast revision.

"This downgrade comes after a $1.8 million audited profit for the first half of the financial year," he said.

Mr Ryan said the Board had made the strategic decision to expand the airline\'s operations in the second half of the 2004 financial year to take advantage of market opportunities and to construct a platform for strong revenue and earnings growth in 2005 and beyond.

However, it was clear the full impact of that growth strategy in the short term had not been properly anticipated.

"A surprise such as this so close to the end of the financial year in not acceptable, notwithstanding the fact the events and issues driving the revision are very recent," he said.

Mr Ryan said that as a result of the profit downgrade, the Company would review its imminent response to the takeover bid from Singaporean company CaptiveVision Capital (CVC).

"It is clear the directors and the independent expert engaged to provide advice on the CVC bid will need to review this latest information before delivering their final recommendations and opinions," said Mr Ryan.

Mr Ryan said Skywest remained committed to listing on the Australian Stock Exchange, though this was clearly dependent on the outcome of the CVC bid. The profit downgrade would also set back the timetable for this event.

The listing timetable had already been affected by the decision of CVC to requisition a shareholder meeting to consider a number of resolutions, one of which proposed the removal of Mr Ryan from the Board. This proposal has been roundly rejected by all other members of the Skywest Board.

Mr Ryan said that despite the profit downgrade, Skywest was trading positively, with passenger load factor on the new routes moving steadily higher from a low start.

"The launch of the new jet routes was a major undertaking. Clearly, we under-estimated some of the launch expenses," said Mr Ryan.

"That said, passenger numbers are moving steadily in the right direction and we have in place an outstanding regional airline structure and route network.

"The response to the new services from the regions has been outstanding and we are very confident in the viability and profitability of the expanded network."

Mr Ryan said Skywest would shortly issue its Target\'s Statement in response to the CVC bid. The CVC bid is scheduled to expire on 16 July.

The shareholder meeting to consider CVC\'s resolutions will be held on 28 June.