Bamboo Airways forces down FLC's profit

Bamboo Airways has probably been making losses since its recent launch, dragging down FLC Group's performance

Profit falling

FLC Group’s latest financial report pointed out that as of the end of the second quarter the company still recorded rapid growth. Especially, pre-tax profit increased by more than 80 per cent. However, adding the subsidiaries’ business results, the group's profit reduced significantly against the same period last year.

Despite FLC earning VND3.255 trillion ($141.52 million) in combined net sales, up 9 per cent on-year, its loss was nearly VND51 billion ($2.2 million) due toan increase of 25 per cent in expenseswhile in the same period last year, the group reported a profit of VND347 billion ($15.1 million).

Most of its sales and management expenses increased sharply. Especially, the group's loan interest burden doubled to VND173 billion ($7.52 million).

On the other hand, thanks to the VND729 billion ($31.7 million) revenue from financial activities (mainly in interest from selling the group's interest in several projects), the company managed to turn VND102 billion ($4.43 million) of net profit.

As a result, FLC Group's combined pre-tax profit came to VND79 billion ($3.43 million). After discounting corporate income tax, the company only had VND13 billion ($565,200) in net profit, nearly halving over year.

The group’s cumulative revenue in 2019’s first half was VND6.235 trillion ($271.1 million) in integrated revenue, up 19 per cent on-year, but pre-tax profit fell by 23 per cent to VND151 billion ($6.57 million).

Even, the growing corporate income tax reduced FLC's earnings to VND21 billion ($913,000) as of the end of 2019’s second quarter, to only one-fifth of last year's figure.

In addition, the group’s gross margin remained 0.5 per cent, equaling VND33 billion ($1.43 million), while the rate last year exceeded 10.4 per cent.

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Losses from resorts, tourism, golf, and aviation

Selling goods, equipment, and building materials contributed the lion's share of FLC’s revenue, with more than VND3.038 trillion ($132.1 million), up 10 per cent on-year. Meanwhile, revenue from service provision hit VND1.813 trillion ($78.83 million), six times more than last year.

The financial report revealed that the performance of FLC's airline business was calculated under the service business accounts, which include resorts, golf, and tourism. However, different from the previous year, services pulled FLC’s gross margin down.

Specifically, FLC sufferes VND295 billion ($12.83 million) from its services business.

As of the end of June, the group’s debts hit VND18.462 trillion ($802.7 million), twice as much as the owner’s equity. Interest-bearing debts were VND5.789 trillion ($251.7 million), up 13 per cent against early 2019. Accordingly, all increases of debts are loans and current liabilities, increasing the interest burden by millions of US dollars. In addition, the company’s principal payment was VND1.668 trillion ($72.52 million).

Despite not publishing information on Bamboo Airways’ half-year business performance, aviation experts assumed that a newbie like Bamboo Airway would hardly make a profit in the short term, especially as the local aviation market is growing fiercely competitive.

The airline currently has 17 domestic routes and expects to serve 5 million passengers at least in 2019 and has been exploiting international routes (Japan, Singapore, and South Korea) since the second quarter of this year.

According to VNDirect Securities Corporation’s latest report on the aviation market, as of the end of May, FLC’s new airline held 4-5 per cent of the market after four months in operation.