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

 

Sky City : Auckland Convention Centre Cost Jumps By A Fifth

SkyCity Entertainment Group, the casino and hotel operator, is in talks with the government on how to fund the increased cost of as much as $130 million to build an international convention centre in downtown Auckland, with further gambling concessions ruled out. The Auckland-based company has increased its estimate to build the centre to between $470 million and $530 million as the construction boom across the country drives up building costs and design changes add to the bill.
More>>

ALSO:

RMTU: Mediation Between Lyttelton Port And Union Fails

The Rail and Maritime Union (RMTU) has opted to continue its overtime ban indefinitely after mediation with the Lyttelton Port of Christchurch (LPC) failed to progress collective bargaining. More>>

Earlier:

Science Policy: Callaghan, NSC Funding Knocked In Submissions

Callaghan Innovation, which was last year allocated a budget of $566 million over four years to dish out research and development grants, and the National Science Challenges attracted criticism in submissions on the government’s draft national statement of science investment, with science funding largely seen as too fragmented. More>>

ALSO:

Scoop Business: Spark, Voda And Telstra To Lay New Trans-Tasman Cable

Spark New Zealand and Vodafone, New Zealand’s two dominant telecommunications providers, in partnership with Australian provider Telstra, will spend US$70 million building a trans-Tasman submarine cable to bolster broadband traffic between the neighbouring countries and the rest of the world. More>>

ALSO:

More:

Statistics: Current Account Deficit Widens

New Zealand's annual current account deficit was $6.1 billion (2.6 percent of GDP) for the year ended September 2014. This compares with a deficit of $5.8 billion (2.5 percent of GDP) for the year ended June 2014. More>>

ALSO:

Still In The Red: NZ Govt Shunts Out Surplus To 2016

The New Zealand government has pushed out its targeted return to surplus for a year as falling dairy prices and a low inflation environment has kept a lid on its rising tax take, but is still dangling a possible tax cut in 2017, the next election year and promising to try and achieve the surplus pledge on which it campaigned for election in September. More>>

ALSO:

Job Insecurity: Time For Jobs That Count In The Meat Industry

“Meat Workers face it all”, says Graham Cooke, Meat Workers Union National Secretary. “Seasonal work, dangerous jobs, casual and zero hours contracts, and increasing pressure on workers to join non-union individual agreements. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

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