Auckland Airport profit more than halved

Auckland Airport profit more than halved by property revaluations

Aug 28 (BusinessWire) - Auckland International Airport Ltd, operator of New Zealand's gateway airport, reports a 63.1% fall in net profit after tax in the year to June 30, reflecting flat operating earnings and reduced property valuations caused by the global economic and domestic recessions.

Net earnings were NZ$41.7 million, or 3.41 cents per share, down from NZ$113 million in the year to June 2008, or 9.24 cents per share. Total revenue rose 5.2% to NZ$369.2 million. AIA shares were trading at NZ$1.71 immediately after the announcement, up 1.7%.

Non-cash adjustments required under new international accounting rules created a NZ$64.6 million hit to net earnings caused by revaluation of the airport's extensive property portfolio. The company's dividend policy is unchanged, with a fully imputed final dividend of 4.45 cents per share to be paid on October 23, making total distributions for the last financial year of 8.2 cents per share.

"The operating performance was pleasing in a challenging economic environment," said chairman Tony Frankham. "Our underlying net profit after tax (excluding property revaluations) or NZ$105.9 million is within the guidance range forecast last year."

With tough trading conditions expected in the year ahead for world aviation and landing fee increases timed for July deferred for the time being, AIA is lowering its forecast underlying earnings range to between NZ$93 million to NZ$100 million for the June 2010 financial year and is deferring capital works on the airport's northern runway extension.

The company also hinted that it may be considering investment in cruise ship terminal operations, as part of its new strategy to transfer its ability "to move people and goods...to other locations and businesses with similar dynamics". In the short term, such investments will be "modest in scale, carefully assessed ...and must not put our core business at risk".

The company adjusted to changing market conditions in the last financial year by refocusing resource away from engineering and capital works towards retail and passenger movement improvements, leading to reduced capital expenditure at NZ$87.5 million.

With passenger numbers and freight volumes both down slightly over the year "after years of apparently relentless growth", AIA had reviewed its programme for the long-anticipated extension of the northern runway, works for which began during the year.

"We have taken the decision to defer ongoing construction for a period of 12 months to allow demand to catch up", allowing a significant reduction in previous capex forecasts. The company was optimistc that "we will be able to complete the northern runway on schedule following this deferral period, if necessary".

Capex in the current financial year is forecast in the range of NZ$60 million to NZ$65 million.

On regulatory issues, AIA said it was cooperating with the Commerce Commission project to create a new regulatory regime, but complained about the potential for the costly process to "mean fewer funds available to improve the traveller experience or promote New Zealand as a destination".

Chief executive Simon Moutter, appointed last August, reported that a management shake-up had occurred, generating one-off costs of NZ$4.195 million, and a new growth strategy was now being implemented, based on a world-leading "Every Minute Counts" approach to passenger experience.

The airport is targeting a 15 minute international passenger processing time, with 25 minutes as the longest any passenger should spend in arrival. Recently announced changes to trans-Tasman passenger processing were a "brilliant" intiative which would assist this goal, said Moutter.

"The importance and value of time is a single unifying concept for all entities providing service at Auckland Airport," said Moutter. "We expect passengers will begin noticing a significant difference in terms of arrivals processing efficiency within six to 12 months."

Revenues from airfield and passenger service charges were flat, reflecting marginal downturns in traveller and freight totals, while terminal service charges rose 20%, thanks largely to increased rentable space in the international terminal. Retail income also showed solid growth of 7%, at NZ$105.3 million for the year, and retail income per passenger increased to NZ$14.31, from NZ$13.19 a year earlier.

However, revenues from retail will be in the NZ$90 million to NZ$93 million range in the year ahead, reflecting lower renegotiated rates for duty free space and disruption to the departures area by planned refurbishment.

(BusinessWire)

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