21 August 2008
Operating earnings before interest, tax and depreciation (Operating EBITDA) increased 13.7 per cent to $275.8 million (or an increase 7.3 per cent after adjusting for one-off items).
Net profit after tax was $113.0 million, an increase of 3.3 per cent over the previous year after adjusting for one-off items and changes in the fair value of the company's investment property portfolio.
The results for the 2008 financial year support a positive view for the Airport, despite the obvious challenges in the current economic environment and industry conditions. This result was achieved notwithstanding a slight softening in the growth of international passenger numbers, increased capital costs resulting from the company's investment programme and the significant one-off costs and business disruption associated with responding to the ownership interest and takeover activity over the last 12 months. The relative strength of the result can be attributed in part to strong growth in domestic passenger numbers from a more competitive local airline environment, enhancement of the company's retail offering, strong growth in rental and car parking income and the revised aeronautical prices that progressively commenced this year.
Total revenue for the year ended 30 June 2008 was $351.0 million, an increase of 9.0 per cent over the previous year.
Growth capital expenditure phase coming to an end
Auckland Airport chairman, Tony Frankham, said "We have continued to invest sensibly and appropriately into future proofing Auckland Airport. Over the last four years, we have invested nearly $500 million in significantly upgrading and expanding all of the key facilities at Auckland Airport. We are now well on the road to delivering on our vision of becoming New Zealand's Airport.
With the investment we have made, we are now coming to the end of this increased capital expenditure phase and looking to the future. The Airport is in excellent shape to meet the anticipated demand and challenges over the next five years. We have a solid balance sheet and strong operating cash flows. We have a clear vision and strategy for delivering on our growth opportunities as a business. While the current macro-economic conditions, both globally and locally, signal potentially tougher times ahead for New Zealand and other economies in the short-term, Auckland Airport has planned its long-term financial and strategic development programmes well and has the strength and capability to weather inclement conditions."
Growth in total international passengers (excluding transits and transfers) was 2.5 per cent. While this was below the company's long-term average of 5 per cent, international travel by New Zealanders and Australians remained buoyant and there was strong growth from the newer markets such as China and India. Domestic passenger growth was very strong at 13.2 per cent. Competition in the domestic market has driven passenger volumes and this is expected to continue, albeit at lower rates than experienced last year.
Chief executive, Don Huse, said "While the Airport is very well positioned to take advantage of long-term passenger growth conditions, easing global macro-economic conditions in the short-term, the high cost of debt and a slowing domestic economy are together expected to moderate the rate of passenger growth and related business activity. Although growth in domestic passenger volumes has been pleasing, we expect that international passenger growth will remain below the long-term average over the next 12 months. As market and economic cycles inevitably recover, growth opportunities can be expected in coming years.
Masterplan execution progressing well
Our masterplan charts the aeronautical, commercial and land use developments required to meet expected growth in demand for the next 50 years and beyond. Its ongoing execution has progressed smoothly, with several large project milestones reached during the year. These milestones include the opening of a new international arrivals area, completion of the domestic terminal renovation, the commencement of major earthworks on our second runway and the near completion of Stage 1 of Pier B at the international terminal. This new pier, which is due to open in October 2008, will increase international aircraft and passenger handling capacity. With two gates each with twin aerobridges, it will handle the new generation A380 aircraft which we expect to arrive in February next year."
Chief financial officer, Robert Sinclair, said "The company is now coming to an end of its four year investment programme which has touched almost every aspect of the Airport. The company invested $142.9 million this year, primarily in expanding and upgrading the international and domestic terminals. We currently expect capital expenditure to reduce significantly in the 2009 financial year to around $75 million to $85 million. This includes the completion of Stage 1 of Pier B (total of $49.5 million, with $9.1 million to be invested in 2009), the ongoing construction of the second runway and property development projects."
The board has declared a fully imputed final dividend of 2.45 cents per share (amounting to $29.9 million) which will be paid on 24 October 2008 (to those shareholders on the register on 17 October 2008). The final dividend is less than last year's given the increased interim dividend paid in March. Total dividends are the same as last year at 8.20 cents per share.
Senior management changes
Mr Frankham said, "I wish to acknowledge the significant contribution made to Auckland Airport over the last five years by our outgoing chief executive, Don Huse. Don leaves the Airport in a very healthy situation and departs with the board's best wishes and thanks. The board also wishes to thank our chief financial officer, Robert Sinclair, for his service and dedication over the last three and a half years.
The board welcomes the arrival of Simon Moutter as the incoming chief executive. Simon has joined Auckland Airport at a time of great organisational opportunity as we look to the future. He will guide the Airport through the demanding environment currently faced by the aviation, transport and travel industries.
The board is especially pleased with Simon's appointment, which followed a worldwide search for the right combination of skills and experience. His attributes include proven leadership abilities, infrastructural management and shareholder value creation."
In terms of the outlook for the current financial year, the board is of the view that the short-term macro-economic conditions in New Zealand and internationally remain challenging. This is expected to dampen the growth of international passenger volumes in the short-term, particularly from some of the traditional long-haul markets such as the United States and the United Kingdom.
Furthermore, in the short-term the company will continue to be exposed to higher costs reflecting an increasingly complex operating and regulatory environment, capital costs associated with the recently completed infrastructure programme and long-term business expansion strategies aimed particularly at improved service standards, air service development, tourism industry participation and property marketing. Tightly managing discretionary costs will continue to be a key priority.
On a more positive note, we are beginning to see signs of new international seat capacity coming into the Auckland market and we expect there will be more to come in the 2009 year. Competition in the domestic market continues and we are seeing real benefits from our investment in the domestic terminal precinct.
Reflecting on all of these issues, for the 2009 financial year we currently expect growth in Operating EBITDA to be in the range of 4 to 6 per cent and net profit after tax (excluding any fair value changes) to be in the range of $100 million to $110 million.
As always, this view is subject to any material adverse events, significant one-off expenses, any further deterioration due to the current global market conditions, including aviation fuel price volatility, or other unforeseeable circumstances.
Over the next 12 months, the board and management will remain very focussed on achieving a smooth transition to a new management team and tightly managing the core business. This includes positively addressing the current market and regulatory issues and taking a conservative, prudent approach to protect and promote shareholder value in less certain times. In light of this, the board has determined not to proceed with any capital restructuring or any process to introduce a new cornerstone shareholder at this time, albeit remaining open to the possibility that new significant shareholders may add value some time in the future."
View the preliminary Annual Results.