Virgin (VAH) is going to lose money for the December half, and almost certainly for 2013-14. It will therefore join Qantas (QAN) in revealing a surge in red ink across its accounts.
But it’s a disgrace that it took a query from the ASX, after Wednesday’s price drop in the shares to drag that news from the airline yesterday morning.
On Wednesday, Virgin shares closed 2c lower at 31.5c on Wednesday after falling as low as 28c earlier in the day.
But yesterday the shares opened at 31.5c, and ended at 34.5c, up nearly 8%, as the rumours of the losses were confirmed.
Virgin said it expects its first-half result will be ‘‘materially in line’’ with broker forecasts of a $49 million loss before tax.
Responding to the ‘‘please-explain’’ notice from the ASX, Virgin said it was not aware of any information that had not been announced to the market which could explain the recent slump in its share price.
The airline pointed out that it had not given any guidance for the first half but claimed that because its free float of shares was around 26% of the issued capital, analysts had been slow to update their forecasts for its earnings.
‘‘We understand this is due to the limited availability of stock trading in Virgin,’’ it said in yesterday’s statement.
VAH Vs QAN 1Y – Virgin joins Qantas in the red with $49m loss
But media reports late yesterday and this morning say that quite a few leading brokers have been forecasting a loss with the Commonwealth Bank’s estimate of a loss in the market since last month, and Merrill Lynch adjusting its forecasts this week
Virgin said its result would be in line with the forecast $49 million loss from brokers its result, but would not include losses from Tigerair Australia – in which Virgin has a 60% stake – and other one-off restructuring costs. That means the bottom line will almost certainly be much higher than the $49 million.
Merrill Lynch is now forecasting that Virgin will post an underlying pre-tax loss of $120 million in 2013-14, compared with its earlier estimate of a $68 million loss.
The broker has joined Commonwealth Bank and Bell Potter in reducing their earnings estimates for Virgin.
The shares are tightly held with Singapore Airlines, Air New Zealand, Etihad and Richard Branson’s Virgin Group controlling 74% of the register between them. That makes the share price more volatile.
The airline releases its first-half results on February 28.
