Auckland Airport announces interim results for half-year ending 31 December 2009
Auckland Airport today announced its half-year results. In spite of challenging trading conditions, Auckland Airport maintained a firm strategic focus on driving growth initiatives over the half-year. This focus on growth, while intended to build sustainable long-term success, has already generated momentum and delivered a string of business achievements.
Auckland Airport chairman, Tony Frankham, said, “We are pleased with our strategic and operational progress over the last six months. Our financial results are beginning to show some benefit from our business achievements and from an improving passenger volume trend. Continued tight management of operating and capital expenditure – to be “fighting fit” as part of our growth strategy – is also evident in our half-year results.”
Chief executive, Simon Moutter, said, “At Auckland Airport we have seen signs of a recovery in travel demand, with our October-December quarter in particular showing consistent growth in the Auckland Airport monthly passenger numbers on the back of increased tourism industry activity. As a result, we believe stability and confidence is slowly but surely returning to the New Zealand travel market”.
Financial results
Total revenue decreased 0.6 percent in the six months ended 31 December 2009, to NZ$182.9 million. This decrease was largely as a result of a modest reduction in retail revenue. Total retail earnings were impacted by the reversion to a dual operator model for the duty free business and the disruption due to the construction work in the departures area. Aeronautical revenue in the six months ended 31 December 2009 remained broadly consistent with the prior corresponding period. Reduced aircraft movement and the utilisation of smaller aircraft by the airlines resulted in lower airfield income. The passenger service charge increased due to the scheduled price increase together with the small increase in passenger volumes.
Operating earnings before interest, tax and depreciation (Operating EBITDA) was flat at $138.8 million. Surplus after tax, excluding the investment property devaluation from the prior period, was strong, up 4.7 per cent to $54.0 million compared with $51.6 million for the same period last year.
Capital expenditure was NZ$27.8 million for the six months ended 31 December 2009 and is expected to be in the range of NZ$60 million to NZ$65 million for the full 2010 Financial Year.
Dividend and Dividend Reinvestment Plan
The directors have announced a fully imputed dividend of 3.75 cents per share, compared with last year's interim dividend of 3.75 cents per share. The interim dividend has a record date of 17 March 2010 and will be paid to shareholders on 31 March 2010.
Auckland Airport is pleased to offer shareholders resident in New Zealand or Australia the opportunity to participate in a Dividend Reinvestment Plan. Under this Plan, eligible shareholders may invest all or part of their dividends by taking up additional Auckland Airport shares instead of receiving cash. The Plan provides a convenient way for eligible shareholders to invest their dividends in additional Auckland Airport shares, without incurring brokerage charges or commission. Normally, shares issued under the Plan will be issued at a discount to the trading price of the shares on the NZSX. Eligible shareholders will be sent an offer document containing the terms and conditions of the Plan along with a participation form.
Passenger volumes
In the six months ended 31 December 2009, total passenger volumes rose 2.3 percent to 6,782,242, driven by increases on trans-Tasman routes and growth in domestic travel passenger numbers. Total aircraft movements were down 2.9 percent in the six months ended 31 December 2009, which reflects the decreased frequency of aircraft movements on domestic routes partially offset by increased frequency of aircraft movements on international routes.
International passenger numbers (excluding transits) were up 1.4 percent in the six months ended 31 December 2009. The growth reflects competitive airfares and increased availability of seats. Trans-Tasman growth has been offset by the pressure on long haul travel, which was impacted by the global economic downturn and the legacy of pandemic (swine flu) concerns earlier in 2009.
Domestic passengers increased 6.1 percent in the six months ended 31 December 2009, to 3,046,882, driven by strong competition. Jetstar replaced Qantas as a domestic carrier in July 2009 and the increase in passengers reflects the uptake of the low-cost alternative with a focus on the main trunk routes.
Growth strategy takes flight
Mr Moutter said, “Auckland Airport has had a new growth strategy in place since March 2009. We believe that even in difficult times, growth is an essential airport focus. Growth is about creating value by building stronger air services connections, growing passenger volume, gaining exposure to higher growth markets and influencing travel and customer behaviour. International passenger volume is by far our most important value driver and with each international traveller spending an average of $2,500 during their visit to New Zealand, more volume is good for our shareholders and good for the broader New Zealand economy.”
Driving more travel demand from Asia is crucial to the future growth of both Auckland Airport and New Zealand tourism. While the primary air service development focus remains direct Asian connections with Auckland, an important supporting strategy is to strengthen connections with other strategically located airports.
Mr Moutter added, “In January 2010, we purchased 24.55 per cent of Cairns and Mackay airports in North Queensland. Since indicating in March 2009 that we would pursue opportunistic but carefully selected step-outs, we have looked at a range of opportunities. After considerable assessment, we decided the strategic merits of this particular deal were substantial. Cairns Airport fits the bill in terms of its location, scale, focus on Asian tourism, shared goals to develop leisure travel in partnership with low-cost carriers, and market diversification opportunities. Mackay offers additional diversified exposure to the booming Australian resources sector.”
Mr Moutter added, “The North Queensland investment is relatively modest (around 5 per cent) as a proportion of Auckland Airport’s total assets, and Auckland remains our core business. Our commitment to remaining right up there with the best airports in the world and developing more air services to help grow New Zealand tourism and trade won’t be changing”.
Other achievements
While the business development time-frame for new air-services is quite long, Auckland Airport’s partnering approach is already paying dividends, with new charter services from Japan established for the summer season alongside Air New Zealand, new charter services from Taiwan established with EVA Air, new services between Cairns and Auckland commencing March 2010 with Pacific Blue, increased services from Malaysian Airlines, Pacific Blue and Emirates and a strong pipeline of other opportunities established by the team. These new opportunities are in addition to earlier successes in securing Pacific Blue and Jetstar services at Auckland.
Mr Moutter said, “The major redevelopment of our departures area is on target, with the first stage involving a refreshed dining area and new shopping options now complete and already having a positive impact. JR Duty Free, our second duty-free operator which commenced business in August 2009, has hit the ground running and alongside DFS forms part of what we believe is a world-class airport duty-free offering.”
Several major property development projects are already well underway, including a Warren & Mahoney-designed four-star plus Novotel hotel at the international terminal in partnership with Tainui Group Holdings and Accor, a fully pre-committed 2000 square metre office building, and a major relocation and refit for New Zealand Customs.
Mr Moutter said, “We are also pleased to announce that an agreement has been formed with Accor for the development and operation of a new 120 room Formule 1 Hotel to be built at Auckland Airport in time for the Rugby World Cup in 2011, which will appeal to the budget traveller market and provide more choice to travellers.”
Following the 2009 Skytrax award in which Auckland Airport was named one of the 10 best airports in the world Auckland Airport was voted the best airport in Australasia in the 2009 World Travel Awards in November 2009. Each new award is a testament to the enormous amount of work with airport partners, including airlines, border agencies, and baggage-handlers, to provide a world-class passenger experience.
Looking ahead
In the longer term, the aspirational goal is to grow international passengers at a rate significantly higher than the historical average. In the shorter term, passenger volume expectations are improving but still hard to forecast accurately. However the second quarter for the 2009/10 financial year offered solid evidence of a market recovery and with passenger volumes in the year to date surpassing our previous high case assumption we have good reasons for increased confidence.
For the full 2010 financial year we now expect net profit after tax (excluding any fair value changes and other one-off items) to be in the range of $100 million to $105 million, and capital expenditure to remain in the range of $60 million to $65 million. As always, this guidance is subject to any other material adverse events, significant one-off expenses, non-cash fair value changes to property, and further deterioration due to the global market conditions, or other unforeseeable circumstances.
Mr Frankham said, “Auckland Airport can look forward to a bright future. This positive half-year result represents significant progress as we continue to move out of the downturn and make moves to strategically position the company for increased exposure to higher growth markets. And as we continue to implement our growth strategy and contribute to growth in New Zealand tourism and trade, the work we have done to protect ourselves against downside risks and maximise our leverage to upside opportunities will bring its rewards.”