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Airport Announces Surplus

Airport Announces Surplus

Auckland International Airport Limited (AIAL) today announced a surplus after-tax result of $103.2 million for the year ended 30 June 2006. Revenue was $305.8 million, an increase of 8.2 per cent over the previous year.

Growth in revenues continued across both aeronautical and non-aeronautical sides of the business. Earnings before interest, taxation and depreciation (EBITDA) increased 8.4 per cent to $240.2 million.

The past year has been one of continued investment and expansion of facilities at the airport. Interest and depreciation costs stemming from this programme, along with the interest costs associated with the capital restructuring, means the surplus after-tax result is down 2.4 per cent to $103.2 million.

However, adjusted for the interest costs associated with the capital restructuring and asset sales, the after-tax surplus would be up 3.2 per cent.

“We are pleased with another solid financial result,” said chief executive Don Huse. “It was achieved in the context of a more challenging commercial environment than last year. The rate of passenger growth has slowed, and we had to deal with disruption to our retail operations from construction activity and the impact of higher interest rates.”

Total passenger numbers for the year were up 1.8 per cent to 11,458,553. International passenger movements were up 1.1 per cent to 6,231,647 and domestic passenger movements increased 2.8 per cent to 4,958,786. When transits and transfers are taken out, international passenger movements were up 1.3 per cent.

To comply with mandatory financial reporting standards, AIAL recently commissioned an independent valuation of its property, plant and equipment. This was last done in 2002.

The revaluation resulted in the value of AIAL’s non-current assets increasing $1.4 billion. This value includes $709 million of AIAL’s terminal retail assets which had not previously been incorporated into AIAL’s financial statements on a discounted cash flow basis.

The market value of AIAL’s investment property portfolio increased $16.8 million to $189.6 million. Excluding capital expenditure on new and existing properties, the value of the portfolio increased by $13.6 million. This is recorded through revaluation reserves and is not included in the after-tax surplus.

The company has also been successful in securing $23 million of new design and build property developments for Air New Zealand Cargo, New Zealand Van Lines, Fliway Logistics, Expeditors and Lollipops Childcare. These new investments will contribute additional rental income from the second quarter of this year.

“We remain enthusiastic about the long-term outlook for travel and tourism to and from New Zealand. The recent fall in the value of the New Zealand dollar is expected to stimulate international arrivals, and we are also beginning to see compelling signs of real growth from newer markets such as China and India.”

“While fuel prices are a big concern, all of our major airline customers are upgrading their fleets with more fuel efficient and larger aircraft. We are also very focused on growing our commercial revenue streams. We are seeing improving trends in retail trading, and have committed to a number of new property developments.

“Over the next 18 to 24 months, we will complete the current phase of aeronautical investment and expansion. When that is finished, we will have capacity to accommodate passenger growth for the next three to five years without further need for significant investment on the aeronautical side of the business. The investment we are making now will set the platform for very strong revenue and earnings growth in the future,” said Mr Huse.

Chairman Wayne Boyd said that directors were of the view that passenger growth rates, while positive, were likely to stay subdued throughout the 2007 financial year. In addition, the recently foiled terrorist plots in the Northern Hemisphere and resultant heightened security measures may also impact demand and financial performance in the short-term.

“Combined with the current state of the New Zealand economy, the high interest rate environment and depreciation costs associated with the company’s investment programme, the surplus after-tax result for the 2007 year is expected to be similar to the 2006 result. That said, the stage is set for much improved earnings, particularly when passenger growth rates revert to the long-term trend,” he said.

The directors have declared a fully imputed final dividend of 4.45 cents per share (amounting to $54.313 million). This comes on top of an interim dividend of 3.75 cents per share, paid in March, taking total ordinary dividends this year to 8.20 cents per share, consistent with the previous financial year.


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