Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Air NZ keeps balance sheet plump, holds back on dividends

Air NZ keeps balance sheet plump, holds back on dividends as fleet renewal looms

By Jonathan Underhill

Aug. 30 (BusinessDesk) - Air New Zealand opted to limit dividend payments in its latest year, even as it generated record operating cashflow, piled up cash on its balance sheet and pushed gearing below its target range as a buffer against fleet renewal and volatile fuel costs.

The state-controlled airline will pay a final dividend of 5 cents a share, making 8 cents for the year, up 45 percent from a year earlier. Yet its dividend payout ratio dropped to 49 percent from 85 percent in 2012

Net profit more than doubled to $182 million in the 12 months ended June 30, as the airline lifted passenger revenue, kept costs under control and benefited from favourable foreign exchange movements. Operating cash flow jumped to a record $750 million, allowing it to increase cash holdings by 12 percent to $1.15 billion, while gearing fell to 39.1 percent – below its 45-55 percent target.

The dividend payment “will raise eyebrows,” said Rickey Ward, head of equities at Tyndall Investment Management. “Even taking into account the increased level of debt for new aircraft they appear to remain comfortably inside imposed guidelines.”

Ward has no argument with the latest results, which beat market expectations, saying it is “always refreshing to see a NZ company do well in a highly competitive arena on the global scene.”

Air NZ shares gained 2.2 percent to $1.42 on the NZX today and have gained about 40 percent in the past 12 months, outpacing the NZX 50 Index’s 25 percent gain.

The airline is among companies slated for a selldown by the government, which owns about 74 percent currently, and that overhang may be restraining the stock’s performance, Ward said.

Air NZ shares trade at a relatively modest 2014 price-to-earnings ratio of 5.8 times, once its stake in Virgin Australia is stripped out, according to Craigs Investment Partners analyst Christopher Byrne. Rival Qantas Airways trades at a PE of 17.6 times, according to Reuters data.

“While we acknowledge the volatility of Air New Zealand’s earnings, its multiples are undemanding and the business appears well poised to take advantage of increasing global and domestic travel,” Byrne said in his post-earnings report. He reiterated his ‘buy’ recommendation on the stock and lifted his forecasts for pretax earnings for 2014 and 2015 by 1 percent and 11 percent respectively, after the results.

Still, he says, Air NZ is being “prudent” in not upping its dividend payout ratio, given the historical volatility of earnings, exposure to oil prices and currency movements and capital expenditure of aircraft.

The airline plans to invest $1.8 billion on 21 aircraft over the next three years and total aircraft capital commitments amount to about $2.1 billion by 2017, according to Byrne. That spending is likely to push Air NZ’s gearing back to the middle of its target range at about 50 percent, he said.

The airline’s international services reported the strongest improvement in yield in 2013, rising 4.3 percent to 10.6 cents per revenue passenger kilometre (RPK) after rationalising its network, including suspending the Hong Kong to London route.

On the Tasman and Pacific Island routes, yield rose 1.9 percent as the company added capacity.

Total passenger numbers rose 2.2 percent to 13.4 million, outpacing a 1.7 percent increase in available seat kilometres. The load factor rose 0.8 points to 83.6 percent and yield improved 0.9 percent to 13.6 cents per RPK.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Gareth Morgan: The Government’s Fresh Water Policy – Revisited

Fresh water quality is the latest area to be in the sights of Gareth Morgan and his research organisation The Morgan Foundation... They found that the fresh water policy was a bit murkier than the Environment Minister let on. More>>

ALSO:

Interest Rates: RBNZ Hikes OCR To 3.5%, ‘Period Of Assessment’ Now Needed

Reserve Bank governor Graeme Wheeler raised the official cash rate as expected, while signalling a pause in rate hikes to assess the impact of moves so far this year. The kiwi dollar sank after Wheeler said its strength was “unjustified” and that the currency could have “a significant fall.” More>>

ALSO:

Fonterra: Canpac Site 'Resize' To Focus More On Paediatrics

Fonterra is looking at realigning its packing operations at Canpac, in the Waikato, to focus more on paediatric nutritionals... The proposed changes could mean around 110 roles may not be required at the site which currently employs 330. More>>

ALSO:

Scoop Business: Postie Plus Brand Gets 2nd Chance With Well-Funded Pepkor

The Postie Plus brand is getting a new lease of life after South Africa’s Pepkor bought the failed retailer’s assets out of administration and said it will use its purchasing power to reduce costs of stock and fatten margins. More>>

ALSO:

Warming: Warming Signs From State Of Climate Report

Climate data from air, land, sea and ice in 2013 'reflect trends of a warming planet' -- says the latest State of the Climate report, launched by U.S. and New Zealand scientists. More>>

ALSO:

Scoop Business: Embrace Falling Home Affordability, Says NZIER

Despair over the inability to afford a house is misplaced and should be embraced as an opportunity to invest in more wealth-creating activity, says the principal economist at the New Zealand Institute of Economic Research, Shamubeel Eaqub. More>>

Productivity Commission: NZ Regulation Not Keeping Pace

New Zealand regulators often have to work with out-of-date legislation, quality checks are under strain, and regulatory workers need better training and development. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news