Auckland Airport announces financial results for year ending 30 June 2012

Media Release | 30 August 2012
Auckland Airport announces financial results for year ending 30 June 2012
• Reported profit and underlying profit both up
• Strong passenger growth at all four airports
• Dividend increased to 10.5 cents per share
• Ambitious growth strategy paying off
Overview
Auckland Airport today announced a reported profit after tax of $142.284 million, up 41.2%, while underlying profit after taxation was up 15.0% to $139.025 million.
Auckland Airport’s chair, Joan Withers, said, “Auckland Airport is pleased to have built on last year’s breakout profit result and delivered an even better financial and operational performance for this financial year. This is in spite of difficult global economic conditions and weaknesses in traditional long-haul markets such as Europe that continue to challenge most businesses, including those in tourism, trade and aviation sectors.”
“The improved results were largely fuelled by growth in passenger numbers across our airport interests,” said Mrs Withers.
At Auckland Airport, total international passenger movements, including transits, were up 5.1%, and total domestic passenger movements were up 3.3%.
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Queenstown’s international passenger movements were up 21.2% and domestic passenger movements up 11.6%. At Cairns Airport, international passenger movements were up 3.5% while domestic passenger movements were up 3.2%. Mackay Airport also continued its good growth on the back of the resource sector, with passenger movements up 7.7%.
Mrs Withers said, “While there are clearly more people travelling to and from New Zealand than ever before, a closer look at the statistics reveals a fundamental shift in global travel demographics. Strong growth is occurring out of Australia, China, and many other South-East Asian nations, with declining travel numbers out of the United Kingdom, Europe, Japan and the United States. This reinforces the need to adapt.”
A focus on ‘making journeys better’ was again recognised in the World Skytrax Airport Awards, with Auckland Airport awarded the best airport in Australia Pacific for the 4th year in a row, and named 2nd best in the world for airports with between 10 to 20 million passengers annually.
Mrs Withers said, “The 2012 financial and operational results offer further evidence of the merits and continued momentum of the long-term growth strategy and market focus that has driven our approach over the last few years.
“While airline customers, passengers and New Zealand economic interests have benefited, shareholders have also been rewarded by these efforts, with outstanding FY10, FY11 and FY12 total shareholder returns.
“After careful consideration of the capital structure of the business, and as a signal of confidence in our long term prospects, cash generation and ability to fund our growth aspirations, the Board is changing its dividend policy from paying 90% to paying 100% of net profit after tax (excluding unrealised gains and losses arising from a revaluation of property, or treasury instruments and other one-off items).
“As a result of the lift in financial performance and the change in dividend policy, the total dividends paid to shareholders for the year increases by 20.7% to 10.5 cents per share, with a final dividend of 6.1 cents per share.”
Ambition
Auckland Airport’s acting chief executive, Simon Robertson, said, “Auckland Airport has attained good altitude in the past year, but we cannot risk placing the business in a holding pattern. If we do not remain relentlessly ambitious about growth, we are
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likely to lose ground against the offshore destinations and airports we regard as New Zealand’s natural competition.
“We have set ourselves some long-term ambitious targets to grow international visitor volumes and value. As one of the industry leaders, we must play our part in promoting New Zealand around the world as a travel, trade and tourism destination. We are also focused on building stronger alignment with other industry stakeholders to open more channels and grow markets.
“We will keep working with our airline customers to attract more flights, preferably direct, on new and existing routes from key source travel markets around the world, and by working with the industry to draw a more valuable mix of visitor segments.
“This is all outlined in our programme called Ambition 2020, unveiled at the TRENZ national tourism conference in May this year. Ambition 2020 sets a challenge for the industry of a decade of growth ambitions for New Zealand visitor arrivals and visitor spend. It is underpinned by a programme of strategic activity, with a particular focus on the growth markets of Asia, Americas and Australia.
“The prize is significant. We believe there is potential to grow total international visitor arrivals for the country to 3.5 million by 2020, up from 2.6 million in 2011. More importantly, the value generated by these visitors could grow ahead of official estimates, to at least $8.5 billion ($5.8 billion in 2011).
“We have applied this Ambition 2020 challenge to ourselves as well - It is our call to drive higher business outcomes, improved quality, greater efficiency, and more innovation across our entire business.”
Results in more detail
The profit result has been achieved through a 7.3% increase in total income to $426.813 million. This reflects growth across most revenue sectors, including aeronautical, retail, rental, and car parking.
Operating costs increased by 8.1% to $107.524 million, largely as a result of additional staffing costs, an increase in maintenance and airport operation costs, particularly for the Rugby World Cup 2011, and increased rates and insurance costs.
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Reflecting the continued growth momentum and the sustained improvement in performance, total dividends paid for the 2012 financial year are being increased from 8.7 to 10.5 cents per share.
Associated businesses continued to deliver, with good growth in revenue and operating EBITDAFI at Cairns and Mackay Airports up 17.8% to AU$70.087million, and an increase in the dividend paid to Auckland Airport from AU$6.751 million to AU$10.311 million.
Queenstown Airport also maintained its strong passenger growth momentum and excellent financial performance, with operating EBITDA up 16.7% to $11.529 million.
With the Novotel Auckland Airport hotel completing its first full year of trading, Auckland Airport recorded a share of profit of $2.088 million from its 20% investment in the joint venture, which is operating and trading ahead of expectations.
Mr Robertson said, “Our investment in air-service and market development has also continued to bear fruit during the year, with a number of successes in developing new or expanding existing services to markets in China, Australia, Taiwan, Indonesia, Japan and the United States.”
Other business
Mr Robertson said, “A new five-year aeronautical pricing schedule for Auckland Airport was published in early June 2012 following a full and constructive consultation with airline customers. The new schedule features a reduction in average charges per international passenger in the first year, with subsequent increases broadly in line with the expected rate of inflation.
“This reduction in international charges is the first for Auckland Airport since becoming a listed company, and shows how our focus on developing new air-services is benefiting travellers through lower prices. By increasing the number of passengers passing through Auckland Airport, and by keeping a tight hold on our expenditure and driving operational efficiencies, we are now able to spread airport costs over a larger base, and reduce international charges on a per passenger basis.
“An increase in domestic charges largely reflects the need to invest in high priority modifications over the next 18 months to expand the capacity of the domestic terminal in the shorter-term, so that it can cope with the increasing size of aircraft being used on main domestic routes.
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“We are continuing consultation with airlines on development of a new terminal to replace the existing domestic terminal. The new terminal will be a key part of Auckland Airport, the domestic travel experience, and New Zealand’s tourism and trade infrastructure for many years to come, so we firmly believe it’s worth spending a bit more time now getting the plans right. It remains our intention to have the first stage of a new terminal facility operational in time to accommodate the projected growth in domestic passenger demand and the introduction of new larger domestic aircraft.
“The very long-term realities of airport planning and development mean we must continue to hold land for future airport expansion for extended periods of time. However, the current regulatory framework does not consider it acceptable for airports to reflect the holding costs for such land assets in their charges to airlines, meaning that in many cases this land generates no return to airport shareholders until such time as it becomes operational.
“As New Zealand’s foremost airport, which represents a vital part of the country’s transport, tourism and trade infrastructure, we must ensure we have the capacity to cater for the needs of future generations by retaining this land. This is a national responsibility we cannot, and do not, wish to avoid, but current regulatory settings mean our shareholders are bearing the cost associated with safeguarding future New Zealand aviation capacity.”
Looking ahead
Mrs Withers said, “Replacing Simon Moutter is a key decision to be made by the Board this financial year. Simon left Auckland Airport in early August 2012 to take up the role of chief executive of Telecom. That recruitment process, at the time of writing, is well underway and should be announced within a few months. One thing that the Board is clear about is that whoever is appointed will inherit a sound strategic foundation, and a stable and high-performing leadership team.
“In his four years with the business, Simon has built a top team, refocused the business to customer experience, set a strategically sound and ambitious pathway for growth, opened up more access to a number of key tourism and trade markets, and delivered outstanding results for Auckland Airport and for New Zealand. He departs with our best wishes and our confidence that his good work will continue.”
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Mr Robertson said, “2013 is an important time for Auckland Airport. We intend to confirm, alongside our airline partners, a clear pathway for finalising our master plan for airfield, terminal and property development in order to uncap long-term visitor growth potential.
“Auckland Airport's goal is to enhance our economic contribution as much as possible and to unlock any constraints. With that in mind, we are taking steps to increase productivity, by investing in smart airport infrastructure, in air-service capacity development and, in conjunction with our key stakeholders, initiating and promoting programmes to attract more tourists and trade to New Zealand. We will keep looking for ways to tap into new growth opportunities. We will keep exploring new partnerships, business extensions, information sources and technologies as a means of increasing New Zealand’s share of growth from these expanding markets.”
The board is optimistic about the full 2013 financial year and expects net profit after tax (excluding any fair value changes and other one-off items) to be between $143.0 million to $150.0 million. We note with some caution any potential long-term implications from the prevailing volatility in global economies. As always therefore, this guidance is subject to any other material adverse events, significant one-off expenses, non-cash fair value changes to property and further deterioration due to the global market conditions or other unforeseeable circumstances.
Ends
For further information, please contact:
Simon Robertson
Acting chief executive
+64 9 255 9174
Richard Llewellyn
Corporate relations manager
+64 9 255 9089
+64 27 477 6120
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Refer pdf attachments: Financial Report / Results at a Glance / Company Report / NZX Appendix 1 / PowerPoint presentation
1 Excluding Investment property fair value increases, derivative fair value movements and the tax effect of these adjustments in 2012. Excluding one-off gain
on sale of associate, investment property fair value increase, the component of property plant and equipment revaluation with an impact on the Income
Statement, derivative fair value increase and tax effect of these adjustments in 2011. Refer to Appendix A attached for a reconciliation of these adjustments.
2 Based on the share price as at 30 June 2012 of $2.44.
3 From non-audited FY2012 financial statements and audited FY2011 financial statements of North Queensland Airports and Queenstown Airport. The financial
results have not been apportioned for the level of ownership interest being 24.55% for North Queensland Airports and 24.99% for Queenstown Airport.
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Results at a Glance
30 June 2012 30 June 2011 Movement $m $m % Financial Results Income 426.813 397.723 7.3 Expenses
107.524
99.494
8.1
Earnings before interest, taxation, depreciation, fair value adjustments and investments in associates (EBITDAFI)
319.289
298.229
7.1 Share of profits of associates 9.240 4.755 94.3 Investment property fair value increases 1.350 21.640 -93.8 Property, plant and equipment net downward revaluation movement - (63,465) 100.0 Depreciation 64.483 56.843 13.4 Derivative fair value movement (2.148) 3.503 N.A Interest expense 68.958 70.417 -2.1 Taxation expense 52.006 37.881 37.3 Reported profit after taxation 142.284 100.761 41.2 Earnings per share 10.76 c 7.65 c 40.7 Underlying profit after taxation1 139.025 120.870 15.0 Underlying earnings per share 10.51 c 9.18 c 14.5 Dividends
Total proposed dividend for the year (cents per share) 10.5 c 8.70 c 20.7 Total proposed dividend for the year ($ million) 138.869 114.871 20.9
Financial Position Shareholders' equity 2,472.767 2,467.531 0.2 Total assets
3,875.533
3,866.210
0.2 Debt to debt plus equity
31.0%
30.5%
0.5 Debt to enterprise value2
25.8%
27.2%
-1.4 Capital expenditure
83.141
74.772
11.2 Passenger and aircraft statistics – Auckland Airport
International passenger movements including transits
7,769,207
7,392,045
5.1 Domestic passenger movements 6,236,915 6,040,265 3.3 Maximum certificated take-off weight (tonnes) 5,901,611 5,690,552 3.7 Aircraft movements 155,515 154,290 0.8 North Queensland Airports performance 30 June 2012 30 June 2011 Cairns international passenger movements including transits 775,999 749,488 3.5 Cairns domestic passenger movements 3,284,783 3,184,220 3.2 Mackay domestic passenger movements 1,120,419 1,040,354 7.7 Revenue3 AUD 111.700 AUD 102.726 8.7 EBITDAFI3 AUD 70.087 AUD 59.530 17.7 Profit after taxation3 AUD 18.438 AUD 11.407 61.6
Queenstown Airport performance
International passenger movements
195,249
161,089
21.2 Domestic passenger movements
851,795
763,159
11.6 Revenue3 17.457 15.579 12.1 EBITDAFI3 11.529 9.881 16.7 Profit after taxation3 5.173 4.576 13.0
1 Auckland Airport’s share of the gain on revaluation of investment property held by NQA for the year ended 30 June 2012 was
$1.827 million (2011: $4.339 million). Auckland Airport’s share of the gain on revaluation of investment property held by Novotel
Hotel for the year ended 30 June 2012 was $1.566 million (2011: nil). Auckland Airport’s share of the fair value decrease on the
derivative financial instruments held by Novotel Hotel for the year ended 30 June 2012 was $0.318 million (2011: nil).
2 The sale of Auckland Airport’s joint venture investment in HMSC-AIAL was a one off gain of $1.240 million for the year ended 30
June 2011.
3 Movement on the fair valuation of the derivative financial instruments that do not qualify for hedge accounting put in place in
conjunction with the US Private Placement (USPP) debt issuance in November 2010.
4 The fair value increase of Auckland Airport’s investment property portfolio as a result of the revaluation performed as at 30 June
2012 and 30 June 2011.
5 The net downward movement in the revaluation of property plant and equipment as at 30 June 2011. The upward movement in
the revaluation did not go through the income statement.
6 Taxation adjustments as a result of adjustments 1 to 5 above.
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Results at a Glance Appendix A
20122011Profit after taxReported earnings $000'sAdjustments $000'sUnderlying earnings $000'sReported earnings $000'sAdjustments $000'sUnderlying earnings $000'sEBITDAFI per Income Statement319,289- 319,289298,229- 298,229Share of profit of associates 19,240(3,075)6,1654,755(4,339)416Gain on sale of an associate 2- - - 1,240(1,240)- Derivative fair value increases 3(2,148)2,148 - 3,503(3,503)- Investment property fair value increases 41,350(1,350)- 21,640(21,640)- Property, plant and equipment revaluation 5- - - (63,465)63,465 - Depreciation (64,483)- (64,483)(56,843)- (56,843)Interest expense and other finance costs (68,958)- (68,958)(70,417)- (70,417)Other taxation expense 6(52,006)(982)(52,988)(37,881)(12,634)(50,515)Profit after tax142,284 (3,259)139,025 100,761 20,109120,870

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2012 Preliminary Full Year Report Announcement
Director’s Comments
High performance
Welcome to our company report for the financial year to 30 June 2012.
Auckland Airport is pleased to have built on last year’s breakout profit result and delivered an even better financial and operational performance for this financial year. This is in spite of difficult global economic conditions and weaknesses in traditional long-haul markets such as Europe that continue to challenge most businesses, including those in tourism, trade and aviation sectors.
Total profit after tax was up 41.2% to $142.284 million, while underlying profit after taxation was up 15.0% to $139.025 million.
After careful consideration of the capital structure of the business, and as a signal of our confidence in our long-term prospects, cash generation and ability to fund growth aspirations, the Board is changing its dividend policy from paying 90% to paying 100% of net profit after tax (excluding unrealised gains and losses arising from a revaluation of property, or treasury instruments and other one-off items).
As a result of the lift in financial performance and the change in dividend policy, the total dividends paid to shareholders for the year increases by 20.7% to 10.5 cents per share, with a final dividend of 6.1 cents per share.
The improved financial results were largely fuelled by growth in passenger numbers across our airport interests. At Auckland Airport, total international passenger movements, including transits, were up 5.1%, and total domestic passenger movements were up 3.3%.
Passenger numbers also continued to grow at our other airport interests, with Queenstown’s international passenger movements up an excellent 21.2% and domestic passenger movements up 11.6%. At Cairns Airport, international passenger movements were up 3.5% while domestic passenger movements were up 3.2%. Mackay Airport also continued its good growth on the back of the resource sector, with passenger movements up 7.7%.
While there are clearly more people travelling to and from New Zealand than ever before, a closer look at the statistics reveals a fundamental shift in global travel demographics. Strong growth is occurring out of Australia, China, and many other South-East Asian nations, with declining travel numbers out of the United Kingdom, Europe, Japan and the United States.
Although some of this decline is related to air service capacity, for example on key United States routes, much of it is due to underlying global economic factors that show little sign of reversing in the near term. This reinforces the need to adapt.
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The 2012 financial result offers further evidence of the merits and continued momentum of the long-term growth strategy and market focus that has driven our approach over the last few years.
Looking back, we believe that our 2009 ‘Flight Path for Growth’ strategy set the right foundation from which to build our business. At that time, with the global financial crisis in full swing, we were faced with a stark choice; to either ‘hunker down’ or go for growth. We decided then that to succeed in such turbulent times, we had to strive for growth, and not be constrained by a sole focus on protection against downside risk.
In simple terms, we shifted our focus from an infrastructure builder to a sales-led growth engine for travel, trade and tourism. In essence, we have become a significant market development organisation. Since then, while our strategy has continued to evolve, that underlying principle of ambition for growth – even in turbulent times - has continued to fuel our success.
Today, Auckland Airport’s strategic thinking is informed by six themes that can broadly be described as; volume (growing travel, trade and tourism), yield (maximising the value of our retail and property businesses), smart (developing a ‘smart’ airport to make journeys better), relationships (with travel industry and key stakeholders), partnerships (to achieve superior growth) and leadership (that makes a difference).
Over the latest year, we have continued to sharpen our customer service. With our airport partners, we have delivered further expansion of product and retail choices and travel-processing improvements. We also have a renewed focus on generating innovations and efficiencies in the business.
We remain single-minded about making the journeys of each of our passengers, airlines and partners better across every step of the way. We firmly believe a superior service experience differentiates our business from competing visitor destinations and helps drive repeat travel.
The focus on, and pride in, ‘making journeys better’ was again recognised in the World Skytrax Airport Awards, with Auckland Airport awarded the best airport in Australia Pacific for the 4th year in a row, and named 2nd best in the world for airports with between 10 to 20 million passengers annually.
While airline customers, passengers and New Zealand economic interests have benefited, shareholders have also been rewarded by these efforts, with outstanding FY10, FY11 and FY12 total shareholder returns, and an increase in dividends for the past two financial years.
In reflecting on a successful financial year, we also continue to take pride in the fact that we make a vital contribution to travel, tourism and trade, by strengthening New Zealand’s connections with the world and facilitating thousands of jobs and millions of dollars' worth of tourism and high-value trade activity.
Auckland Airport is also committed to working effectively with our airline customers to support their own growth ambitions, through air-service development and fair airport charges that align more closely on the risk and reward of passenger volume growth. We consulted extensively and constructively with airlines before fixing a new five-year pricing schedule to apply from 1 July 2012.
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We have also worked with the Government on a wide range of policy and regulatory matters, seeking to further align our business activities with the best possible outcomes for consumers and for the New Zealand economy. Government support has helped to seal the deal on air-service wins such as China Southern Airlines.
Government has listened to our proposals on improving visa processes for key markets, and delivered on those improvements. It has negotiated a trebling of the number of potential flights with China allowed under an updated air-service arrangement. It has given us a fair hearing in government processes. All the while, it has sought to balance the economic growth that the airport can and does deliver with the interests of other parts of the economy.
We also have an important and positive relationship with Auckland Council. The Council well understands the airport’s significant role in facilitating regional growth and creating more and better employment opportunities for Aucklanders, especially those living in and around South Auckland. The new Auckland Plan acknowledges that, as Auckland continues to develop as a city, better infrastructure, and improved transport options, will be required to support predicted airport growth and the benefits it can deliver.
Incorporating international airport growth into long-term urban city planning is not always easy. The likes of London and Sydney illustrate the consequences where planners over time have allowed their city to enclose their airports and constrained their capacity for future growth.
This is forcing cities to contemplate spending many billions of ratepayer or taxpayer money on new airports to cope with the inevitable rise in travel and trade demand. For example, recent estimates suggest a proposed new Thames Estuary airport in London could cost the equivalent of NZ$100 billion.
The economic and opportunity cost to Auckland and New Zealand would be massive if aviation capacity was constrained in the same way.
Ambition
Auckland Airport has attained good altitude in the past year, but we cannot risk placing the business in a holding pattern. If we do not remain relentlessly ambitious about growth, we are likely to lose ground against the offshore destinations and airports we regard as New Zealand’s natural competition.
We have set ourselves some long-term ambitious targets to grow international visitor volumes and value. As one of the industry leaders, we must play our part in promoting New Zealand around the world as a travel, trade and tourism destination. We are also focused on building stronger alignment with other industry stakeholders to open more channels and grow markets.
We will keep working with our airline customers to attract more flights, preferably direct, on new and existing routes from key source travel markets around the world, and by working with the industry to draw a more valuable mix of visitor segments.
This is all outlined in our programme called Ambition 2020, unveiled at the TRENZ national tourism conference in May this year. Ambition 2020 sets a challenge for the industry of a decade of growth ambitions for New Zealand visitor arrivals and visitor spend. It is underpinned by a programme of strategic
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activity, with a particular focus on the growth markets of Asia, Americas and Australia.
The prize is significant. We believe there is potential to grow total international visitor arrivals for the country to 3.5 million by 2020, up from 2.6 million in 2011. More importantly, the value generated by these visitors could grow ahead of official estimates, to at least $8.5 billion (from $5.8 billion in 2011).
The prize will not be easy to attain. Succeeding in Asia and other growth markets will rely on a collective ability to move on from yesterday’s tourism and aviation dynamics and develop relevant product and effective channels to market. As a small country with a small share of voice, it is hard to position a quality product through highly fragmented sales channels in a very crowded market like Asia.
Future success requires the collective visitor industry to work together so we can all better understand changing global markets, gain stronger insights into the expectations of the next generation of visitors, and develop the services and products to match. Success will also depend on industry working better with local and central Government, suggesting commercial solutions to help remove more barriers to travel rather than looking to government officials to solve problems that, in many cases, are outside of their control.
We have applied this Ambition 2020 challenge to ourselves as well. It is our call to drive higher business outcomes, improved quality, greater efficiency, and more innovation across our entire business. Auckland Airport’s scale of operations means we are one of the largest corporate stakeholders in New Zealand tourism.
We have the benefit of marketing influence, operational resources, access to industry insights and an ability to invest in long-term market propositions that is beyond the individual capacities of the many small to medium enterprises that are typical of the tourism sector.
As a small, remote country with 'thin' air services, New Zealand has some inherent competitive disadvantages for visitation and trade that can only be overcome by a collective and cohesive effort. We must accept the reality that we are not playing on a ‘level playing field’ and adjust our game plan accordingly, using all factors within our control, including policy settings, planning, funding and coordination of marketing to punch above our weight.
It will also mean back-solving our ambitious national tourism and trade targets for the number of flights needed to physically deliver the people and high-value air-freight we want – and the tourism industry being aligned in support of those airlines willing to have a go.
One thing we know already is that air links, particularly direct services, are a key enabler. Without the available aircraft seats, no amount of brand advertising or trade missions will get the tourists here. For example, Chinese visitor numbers were up over 30 per cent in the 2012 financial year following the significant increase in capacity on direct flights between New Zealand and China.
We also think it is strategically vital to build stronger air service links and distribution networks with the key markets and airports only one direct flight away from New Zealand. Some of these hub airports already have strong direct connections with markets further afield (such as Europe and the Americas), and we can therefore build stronger ‘stepping stones’ to those more distant markets.
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While new visitor markets are important, Auckland Airport also believes there are many more opportunities to deepen existing country markets through connections to relatively untapped regions, for example the Sunshine Coast, Perth and Adelaide in Australia, or Shenzhen, Qingdao, Shenyang and Chengdu in China.
Ambition 2020 has already started. Several Auckland Airport organised education workshops have been held around the country to assist the industry in getting ready for the new generation of visitors. We have also developed several luxury New Zealand programmes, featuring trade development and bespoke websites targeting high net worth individuals in growth markets such as China, Indonesia and Taiwan.
In addition, we have spearheaded social media programmes using visits from celebrities in key markets that have massive social media followings, such as Indonesian celebrity chef, Farrah Quinn, to experience quality tourism products in New Zealand and spread the word to their extensive in-market networks.
Ambition 2020 offers powerful benefits to our own business. Not only will we share in the rewards from overall growth in tourism volumes, but also by working more effectively with airlines, hotels and other tourist service providers, we can offer more tailored products relevant to growth markets and can capture even more of the value across our business.
Fuelling the engine (results in detail)
As reported earlier, total profit after tax was up 41.2% to $142.284 million, while underlying profit after taxation was up 15.0% to $139.025 million.
For several years now, Auckland Airport has reported underlying profits alongside reported results. We believe an underlying profit measurement helps investors to understand what is happening in a business, such as Auckland Airport, where revaluation changes or one-off transactions can make the comparisons of profits between years difficult. The underlying profit also provides a basis for our determination of the dividend payment and compliance with debt covenants.
The profit result has been achieved through a 7.3% increase in total income to $426.813 million. This reflects growth across most revenue sectors, including aeronautical, retail, rental, and car parking.
Operating costs increased by 8.1% to $107.524 million, largely because of additional staffing costs, an increase in maintenance and airport operation costs, particularly for the Rugby World Cup 2011, and increased rates and insurance costs. That said total expenses, despite the increased investment in key opportunity areas, have remained under tight management.
Reflecting the continued growth momentum and the sustained improvement in performance, total dividends paid for the 2012 financial year are being increased from 8.7 to 10.5 cents per share.
Our associated businesses continued to deliver, with good growth in revenue and operating EBITDAFI at Cairns and Mackay Airports up 17.8% to AU$70.087million, and an increase in the dividend paid to Auckland Airport from AU$6.751 million to AU$10.311 million.
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Subsequent to the end of the financial year, Cairns Airport achieved some notable air-service development successes in the China market, with China Eastern announcing a three times per week seasonal Shanghai to Cairns service from October 12, and China Southern announcing a seasonal three times per week Guangzhou-Brisbane-Cairns-Guangzhou service from December 18. These successes help position Cairns well for the future.
Queenstown Airport also maintained its strong passenger growth momentum and excellent financial performance, with operating EBITDA up 16.7% to $11.529 million. The financial year saw Queenstown Airport hitting a milestone of one million passengers in a year for the first time. This stellar growth was supported by the completion of the East Runway Safety Area (ERSA) in October ahead of deadline, which saw the realisation of one of the largest projects ever to be undertaken by the airport. With an eye on the future Queenstown has undertaken several key planning matters and terminal expansions that will allow them to meet anticipated growth.
With the Novotel Auckland Airport hotel completing its first full year of trading, Auckland Airport recorded a share of profit of $2.088 million from its 20% investment in the joint venture, which is operating and trading ahead of expectations.
Investing in the future
A new five-year aeronautical pricing schedule for Auckland Airport was published in early June 2012 following a full and constructive consultation with airline customers. The new schedule features a reduction in average charges per international passenger in the first year, with subsequent increases broadly in line with the expected rate of inflation.
This reduction in international charges is the first for Auckland Airport since becoming a listed company, and shows how our focus on developing new air-services is benefiting travellers through lower prices. By increasing the number of passengers passing through Auckland Airport, and by keeping a tight hold on our expenditure and driving operational efficiencies, we are now able to spread airport costs over a larger base, and reduce international charges on a per passenger basis.
An increase in domestic charges largely reflects the need to invest in high priority modifications over the next 18 months to expand the capacity of the domestic terminal in the shorter-term, so that it can cope with the increasing size of aircraft being used on main domestic routes. We are continuing consultation with airlines on development of a new terminal to replace the existing domestic terminal.
The new terminal will be a key part of Auckland Airport, the domestic travel experience, and New Zealand’s tourism and trade infrastructure for many years to come, so we firmly believe it’s worth spending a bit more time now getting the plans right. It remains our intention to have the first stage of a new terminal facility operational in time to accommodate projected growth in domestic travel demand and the introduction of new larger domestic aircraft.
In May 2012, we submitted our first information disclosure for Auckland Airport under the new Commerce Act regulatory regime. Our information disclosure reflected our service ethos of ‘making journeys better’ for consumers, for airlines,
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and for our business partners. We remain committed to the new information disclosure process and to ensuring that the new regulatory regime is given sufficient time to be fully tested.
In general, airports are one of the few industry sectors in New Zealand that does not have a significant sector-wide infrastructure deficit. That said, airport infrastructure is very capital intensive and long-lived, and it is essential for New Zealand that airports continue to have appropriate incentives to provide the capacity necessary to ensure there are no growth constraints and to facilitate our country’s ambitions to grow trade and tourism.
The nature and large scale of some of the capital investment that will be required to accommodate demand growth at Auckland Airport, coupled with the relatively shallow capital pools available in the country, means that we must also be able to raise capital and attract funding from a wide range of sources. Access to global capital is therefore also critical to our ability to invest.
The very long-term realities of airport planning and development mean we must continue to hold land for future airport expansion for extended periods. However, the current regulatory framework does not consider it acceptable for airports to reflect the holding costs for such land assets in their charges to airlines, meaning that in many cases this land generates no return to airport shareholders until such time as it becomes operational.
As New Zealand’s foremost airport, which represents a vital part of the country’s transport, tourism and trade infrastructure, we must ensure we have the capacity to cater for the needs of future generations by retaining this land. This is a national responsibility we cannot, and do not, wish to avoid, but current regulatory settings mean our shareholders are bearing the cost associated with safeguarding future New Zealand aviation capacity.
Growing air-services
Our investment in air-service and market development has continued to bear fruit, with a number of successes in developing new or expanding existing routes. China Southern Airlines increased their services to daily in November 2011, a key driver of the strong growth of Chinese visitor numbers. Emirates announced a second A380 service via Melbourne, and Air New Zealand commenced new seasonal services to Bali and the Sunshine Coast, and expanded existing international services to Perth and Japan, and domestically, to Queenstown. In April 2012, Auckland Airport signed a memorandum of understanding with Garuda Indonesia, which will see Garuda commencing flights between Indonesia and Auckland sometime in 2013.
On the downside, Aerolineas Argentinas announced that it would be discontinuing its stopover in Auckland. More significantly, Qantas cancelled its Los Angeles service and United Airlines shelved plans to commence a Houston to Auckland service because of a local dispute in Houston regarding a second international airport.
While disappointing, the United Airlines decision in relation to Houston has been offset by other airline commitments to the important United States market. Air New Zealand is increasing its Honolulu capacity during the peak season, and has expanded its Los Angeles service. In July 2012, Hawaiian Airlines announced plans to fly three times a week from Auckland to Honolulu direct from March
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2013, and in the process offering 11 onward connections to mainland United States cities including Las Vegas, San Diego and New York.
Rugby World Cup 2011
As noted in the 2012 half-year report, the October 2011 Rugby World Cup was a major operational success at Auckland Airport. A significant amount of joint planning led by the Auckland Airport team went into this event. Additional resources were brought in to ensure visitors to New Zealand had an outstanding airport experience, and the commitment from all stakeholders on airport was exceptional.
In addition to providing a great first and last impression of New Zealand for fans, players and officials, the event also offered retailers and advertisers at the airport an attractive opportunity to display their products in innovative ways. We also took the opportunity to showcase New Zealand with a new passenger arrivals experience featuring modern sound and light components.
Auckland Airport Business District
While the core of our business always remains the movement of people and goods, the efficient use of land becomes ever more important as the airport grows. Since 2010, we have had a coherent land development vision, centred on an Auckland Airport Business District that provides a framework to maximise land use.
The 2012 financial year saw a number of important property projects progress, including a very positive first year of trading for the new Novotel Auckland Airport, good performance at another Accor-operated hotel (Formule 1), and the opening of Abbeville, a heritage function centre. Other completed projects include a new Toll warehouse, a logistics centre for CEVA logistics, and a training centre for tourism and travel education purposes. In addition, Quad 5, a high-quality office building that now includes the corporate office for Auckland Airport, was completed in July 2012.
However, we do note that a relatively flat Auckland commercial property market has meant that development activity across the region has slowed, in turn slowing the rate of growth at the Auckland Airport Business District.
We have continued to focus on improving the amenities at the Auckland Airport Business District, providing a place and an environment that is more attractive to the many businesses that want to locate close to the massive movement of people and goods that the airport facilitates. New amenities include restaurants, cafes, pubs, a gym and recreational facilities such as paintball and a high ropes course.
Another exciting initiative has been the careful restoration of a number of historic buildings into a heritage function centre. Abbeville Estate is set in a lush, landscaped country setting with views across fields and beautiful country gardens. The venue is an ideal place to host weddings, corporate functions, sales conferences, product launches, celebrations and team building events.
It’s all part of the Auckland Airport strategy to make the Auckland Airport Business District a world-class business location, right next to the biggest travel hub in the country.
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The international terminal retail space that was significantly redeveloped over 18 months ago is continuing to receive great customer feedback and generate excellent results, contributing to an 8.7% increase in total retail revenue on the previous year.
Our retail environment reflects a mix of quality international and New Zealand brands, from luxury to boutique. New Zealand brands include Bennetts Chocolate, and the first New Zealand retail space for the renowned fragrance and body care brand Ecoya, shared with its sister company, New Zealand’s leading skin care brand Trilogy. Passengers have also responded well to some innovative ‘pop-up’ retail offers, including a number of Australasian product launches.
Leadership
Auckland Airport is one of the biggest listed corporations in New Zealand, and the hub through which passes 70 per cent of all international travellers and visitors and 90% of all high-value airfreight.
As such, we feel a strong sense of responsibility to do more than just drive our own business off that enormous movement of people and goods. We also seek to more actively contribute to driving economic growth and assume a leadership role within the tourism and trade sector.
We firmly believe that Auckland Airport needs to help set the tourism and trade growth agenda, challenge the collective industry to be ambitious about its growth targets, and be relentless about how those ambitions can and will be achieved. Leadership will be a key factor in both our own organisational performance and in the success of New Zealand travel, tourism and trade.
Innovation is a key leadership focus. The introduction of new technologies and process innovations to improve departures, arrivals and border initiatives is a continuous initiative that can elevate the propensity to travel and increase the available capacity of existing infrastructure, thus deferring capital expenditure on new infrastructure.
This was the first year we have used smart technology to track passenger-processing times, across both the international arrivals and departure processes. Over the last 12 months, an average of 85.3% of arriving passengers were processed under 25 minutes, and an average of 96.4% of departing passengers were processed under 12 minutes. This compares well with any airport in the world.
One of the key drivers of innovation is destination competition. Being further away from major markets, our airport processing, operations and product offer must be as good, if not better than the likes of Sydney, Melbourne and Brisbane Airports. As Auckland Airport provides the first or last impression for most visitors, these efforts also reflect on the international visitor perception of New Zealand as a destination.
Product innovations include the Auckland Airport Emperor Lounge opened in late 2011, complementing a number of existing airline operated lounges, providing greater choice for partner airlines and for passengers.
Consumers also increasingly expect that organisations meet their responsibilities and obligations and take a lead on caring for the community and the environment.
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Innovation is being used to generate sustainability efficiencies and energy savings. Improvements in water capture technologies have significantly reduced the water use per passenger, while rainwater is collected and recycled for use in the air-conditioning cooling towers. Using a range of energy harnessing or energy saving-related initiatives, we achieved further improvements during the year across all key measures, including CO2 and water use per passenger and total carbon footprint.
Auckland Airport has also gained ‘Silver’ status in the international Earthcheck sustainability-benchmarking programme, and was the only organisation in New Zealand nominated in every category of the Sustainable 60 awards.
Auckland Airport has the largest noise mitigation programme in New Zealand, designed to reduce noise impacts and meet our obligations to the community. The Auckland Airport Community Trust donated $467,000 in its 2012 funding round and has now distributed over $2.0 million in funding to community initiatives within the airport noise contours since its formation in 2003.
Governance
Throughout the year, the Board has focused on ensuring that best practice standards of governance and risk management are met, that management is delivering on performance and value creation targets, and that relationships with key stakeholders are strengthened.
As we did in our half-year report, the Board of Directors and Management team of Auckland Airport, would again like to pay tribute to a fellow Director and an extraordinary New Zealander, Lloyd Morrison, who sadly passed away in early February 2012 following a long illness.
Appointed a Director of the Company in 2007, Lloyd challenged our thinking and inspired debate on many important issues. He was passionate and aspirational about Auckland Airport and its role in New Zealand. He made a significant contribution to Auckland Airport and was an advocate for the strategic shift of the company in recent years that has provided the foundation for our recent strong performance.
In early July 2012, Justine Smyth was appointed as a new director and a member of the Audit and Risk Committee. Justine is currently a director of Telecom, a board member of the Financial Markets Authority and chair of The New Zealand Breast Cancer Foundation. Justine has strong experience in retail, governance, mergers and acquisitions, taxation and financial performance of large corporate enterprises and the acquisition, ownership, management and sale of small and medium enterprises, and the Board believes her experience will positively complement the mix of skills and experience of existing board members.
In accordance with the company’s constitution, Justine will retire and offer herself for election at the annual meeting to be held on 24 October 2012 at the TelstraClear Pacific Events Centre.
Replacing Simon Moutter is a key decision to be made by the Board this financial year. Simon left Auckland Airport in early August 2012 to take up the role of chief executive of Telecom.
That recruitment process, at the time of writing, is well underway and should be announced within a few months. One thing that the Board is clear about is that
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whoever is appointed will inherit a sound strategic foundation, and a stable and high-performing leadership team.
In his four years with the business, Simon has built a top team, refocused the business on customer experience, set a strategically sound and ambitious pathway for growth, opened up more access to a number of key tourism and trade markets, and delivered outstanding results for Auckland Airport and for New Zealand. He departs with our best wishes and our confidence that his good work will continue.
Horizons
2013 is an important period for Auckland Airport. We intend to confirm, alongside our airline partners, a clear pathway for finalising our master plan for airfield and terminal development in order to uncap long-term visitor growth potential.
This will involve resolving some of the timing and location challenges for the delivery of an eventual new terminal facility, particularly for domestic travel. We will also get started on some short-term fixes at the existing domestic terminal to patch up some of its operational constraints and buy ourselves a bit more time to deliver the best long-term solution.
The plan will also involve an organisational response to the rapid pace of technological and behavioural change. In particular, the growing ubiquity of smart mobile devices is driving collaboration between consumers and companies and is influencing behaviour in travel, tourism and trade. We want to be at the forefront of understanding the possibilities these shifts offer and how they can be used to deliver and design smarter airports to make journeys better. The rising prevalence of self-processing technologies, such as Smart Gate, is but one example of the applications and benefits. We believe this trend will only accelerate.
Moreover, we want an even bigger slice of the new global tourism growth action in order to maintain long-term momentum. This is where the thinking behind Ambition 2020 is more relevant than ever. Global markets have shifted. The global architecture of air-travel, as it affects us here in New Zealand, has well and truly tilted towards Asia. Asia is the new global growth engine, closely followed by Australasia and the Americas. It makes sense to focus more effort there.
The prize becomes even greater should New Zealand succeed in leveraging its unique location and becoming the global hub of choice between Asia, Australasia and the Americas, benefiting from the increasing flow of people and goods between these regions. This is an even longer-term ambition, plugging Auckland into the global super connectivity network made up of key hub airports around the world. If we do not do it, chances are that an Australian airport will.
Auckland Airport's goal is to enhance our economic contribution as much as possible and to unlock any constraints. With that in mind, we are taking steps to increase productivity, by investing in smart airport infrastructure, in air-service capacity development and, in conjunction with our key stakeholders, initiating and promoting programmes to attract more tourists and trade to New Zealand. We will keep looking for ways to tap into new growth opportunities. We will keep exploring new partnerships, business extensions, information sources and
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technologies as a means of increasing New Zealand’s share of growth from these expanding markets.
The board is optimistic about the full 2013 financial year and expects net profit after tax (excluding any fair value changes and other one-off items) to be between $143.0 million to $150.0 million. We note with some caution any potential long-term implications from the prevailing volatility in global economies. As always therefore, this guidance is subject to any other material adverse events, significant one-off expenses, non-cash fair value changes to property and further deterioration due to the global market conditions or other unforeseeable circumstances.
Joan Withers
Chair
Simon Robertson
Acting Chief Executive

This annual results presentation dated 30 August 2012 provides additional comment on the media and financial materials released before the market opened on the same date. As such, it should be read in conjunction with, and subject to, the explanations and views provided in that release.
Simon Robertson Acting Chief Executive
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Auckland Airport: Wider Ambition We have a strong leadership team – ambitious for our growth and the growth of businesses that touch New Zealand’s travel, trade & tourism industries
Simon Robertson – Acting Chief Executive
Peter Alexander – GM Property
Adrian Littlewood – GM Retail & Commercial
Judy Nicholl – GM Aeronautical Operations
Charles Spillane – GM Corporate Affairs
Adam Tyrie – GM Master-planning & Terminal Development
Glenn Wedlock – GM Aeronautical Commercial
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High Performance
Outstanding operational and financial performance with revenue up 7.3% and underlying profit up 15.0%.
Performance and healthy cash flow delivers reward for shareholders with full year dividend up 20.7% to 10.50 cps.
Confirmation that strategic direction is delivering results through excellent execution against strategy.
We continue to lift our long-term ambition for what is possible for the airport, tourism, trade volume and value to drive stronger growth.
Ambitious long term growth strategy aimed at providing resilience to global economic uncertainty and to take advantage of reshaping travel markets.
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High Performance: Financial Results Summary
30 June 2012 ($m)
30 June 2011 ($m)
% Change
Income
426.813
397.723
7.3
EBITDAFI*
319.289
298.229
7.1
Reported Profit
142.284
100.761
41.2
Underlying Profit
139.025
120.870
15.0
Profit momentum continues in FY12 with 15.0% growth in underlying profit.
Total aeronautical revenue (Landing charges, PSC and TSC) grew 5.2% in the year, underpinned by 5.1% growth in international passengers and 3.7% growth in MCTOW.
Non-aeronautical revenue saw outstanding growth in the year including property (10.1%), car parking (9.5%) and retail (8.7%).
EBITDAFI grew $21.1 million reflecting excellent revenue growth.
The contribution of profit from associates lifted 94.3% in FY12 to $9.240 million. Underlying profit from associates (excluding fair valuation changes) increased to $6.165 million in FY12 from $0.416 million in FY11.
* EBITDAFI means Earnings before interest, taxation, depreciation, fair value adjustments and investments in associates
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High Performance: Operations
85.3% arriving passengers processed under 25 minutes
96.4% of departing passengers processed under 12 minutes
Successful RWC performance
Best Airport in Australia Pacific 4th year in a row in Skytrax
Constructive pricing engagement and a fair outcome
Range of product and service choices greatly expanded
Operational innovations introduced and efficiencies gained
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Outstanding Financial Performance
30 June 2012 ($m)
30 June 2011 ($m)
% Change
Revenue
426.813
397.723
7.3
Expenses
107.524
99.494
8.1
EBITDAFI
319.289
298.229
7.1
Share of profit of associates
9.240
4.755
94.3
Gain on sale of associates
-
1.240
(100.0)
PPE revaluation movements
-
(63.465)
100.0
Investment property fair value increases
1.350
21.640
(93.8)
Derivative fair value change
(2.148)
3.503
(161.3)
Depreciation
64.483
56.843
13.4
Interest
68.958
70.417
(2.1)
Reported net profit after tax
142.284
100.761
41.2
Underlying Profit
139.025
120.870
15.0
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Underlying Profits: A Reconciliation
8
30 June 2012 ($m)
30 June 2011 ($m)
Reported Earnings ($m)
Adjustments
($m)
Underlying Earnings ($m)
Reported Earnings ($m)
Adjustments
($m)
Underlying Earnings ($m)
EBITDAFI per Income Statement
319.289
-
319.289
298.229
-
298.229
Share of profit of associates
9.240
(3.075)
6.165
4.755
(4.339)
0.416
Gain on sale of an associate
-
-
-
1.240
(1.240)
-
Derivative fair value increases
(2.148)
2.148
-
3.503
(3.503)
-
Investment property fair value increases
1.350
(1.350)
-
21.640
(21.640)
-
Property, plant and equipment revaluation
-
-
-
(63.465)
63.465
-
Depreciation
(64.483)
-
(64.483)
(56.843)
-
(56.843)
Interest expense and other finance costs
(68.958)
-
(68.958)
(70.417)
-
(70.417)
Other taxation expense
(52.006)
(0.982)
(52.988)
(37.881)
(12.634)
(50.515)
Profit after tax
142.284
(3.259)
139.025
100.761
20.109
120.870
Passenger volume growth across all airports
30 June 2012
30 June 2011
% Change
Auckland Airport
International passengers (including transits)
7,769,207
7,392,045
5.1
Domestic passengers
6,236,915
6,040,265
3.3
Total passengers
14,006,122
13,432,310
4.3
Queenstown Airport
International passengers
195,249
161,089
21.2
Domestic passengers
851,795
763,159
11.6
Total passengers
1,047,044
924,248
13.3
NQA - Cairns and Mackay Airports
International passengers – Cairns
775,999
749,488
3.5
Domestic passengers – Cairns
3,284,783
3,184,220
3.2
Domestic passengers – Mackay
1,120,419
1,040,354
7.7
Total passengers
5,181,201
4,974,062
4.2
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Aircraft numbers and MCTOW growth
30 June 2012
30 June 2011
% Change
Auckland Airport
Aircraft Movements
International aircraft movements
45,094
43,782
3.0
Domestic aircraft movements
110,421
110,508
(0.1)
Total aircraft movements
155,515
154,290
0.8
MCTOW (tonnes)
International
4,167,792
4,007,728
4.0
Domestic
1,733,819
1,682,824
3.0
Total
5,901,611
5,690,552
3.7
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Revenue growth across the business
30 June 2012 ($m)
30 June 2011 ($m)
% Change
Airfield income
77.299
72.529
6.6
Passenger Services Charge
83.081
78.760
5.5
Terminal services charge
28.604
28.342
0.9
Retail income
120.863
111.150
8.7
Rental income
54.974
49.927
10.1
Car park income
36.620
33.437
9.5
Interest income
1.570
1.460
7.5
Other income
23.802
22.118
7.6
Total revenue
426.813
397.723
7.3
Non aeronautical revenue saw outstanding growth in the 2012 financial year, including Rental income (10.1%), Car park income (9.5%) and Retail income (8.7%). Retail continued to see improved passenger spend rates in the international terminal after the completion of the development and increased passenger spend rates during the Rugby World Cup, while increased car park capacity and another successful year of the online car parking product contributed to car park growth.
Rental income is showing a return on investments made in prior year including new rental income from NZ Food and Innovation, DSV Air and Sea, Travel Careers and Training and the Novotel ground lease. New leases and positive rent reviews on existing property also contributed to growth in property rental income.
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Expenses driven by rates, insurance and RWC
30 June 2012 ($m)
30 June 2011 ($m)
% Change
Staff
34.326
32.607
5.3
Asset management, maintenance and airport operations
36.717
32.854
11.8
Rates and insurance
9.082
7.829
16.0
Marketing and Promotions
12.207
11.751
3.9
Other
15.192
14.453
5.1
Total operating expenses
107.524
99.494
8.1
Depreciation
64.483
56.843
13.4
Interest
68.958
70.417
(2.1)
Total operating expenses increased 8.1% over 2011, however while we saw a 15.3% increase in operating expenses in the six months to December 2011, the six months to June 2012 only saw an increase of 1.5% over the six months to June 2011, and a decrease of 2.7% over the six months to December 2011.
Asset management, maintenance and airport operations saw an increase in 2012 due to additional repairs, maintenance and cleaning activity around the airport in preparation for and during the Rugby World Cup as well as further outsourcing.
Marketing and promotion expenses increased 58% in the six months to December 2011 compared with 2010, but decreased in the 6 months to June 2012 due to the completion of marketing campaigns resulting in a modest increase of 3.9% for the 2012 financial year.
Rates and insurance increased $1.253 million (16.0%) over 2011, due to increase in insurance premiums from prior year in light of the recent natural disasters in NZ and around the world. Council rates also increased 11.0% from 2011.
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NQA business performing well
30 June 2012
30 June 2011
% Change
Domestic Passenger Volume - Cairns and Mackay Airports
4,405,202
4,224,574
4.3
International Passenger Volume (including transits) - Cairns Airport
775,999
749,488
3.5
Total Passengers
5,181,201
4,974,062
4.2
Operating EBITDAFI
AU$70.087 million
AU$59.485 million
17.8
Dividends received and receivable
AU$10.311 million
AU$6.751 million
52.7
Passenger numbers increased at both Cairns and Mackay, with international passengers (including transits) up 3.5% over 2011 despite continued challenges in the Cairns to Japan market, and very strong domestic passenger growth of 4.3% despite downward trend in domestic air travel in Australia.
Auckland Airport received a total of AU$10.311 million in dividends from its investment in NQA in the 2012 financial year, compared to AU$6.751 million in dividends received in the 2011 financial year.
Auckland Airport sought an independent valuation report on its investment in NQA. This report gives the stake a valuation range of AU$176 to AU$192 million, compared to the carrying value of AU$112 million as at 30 June 2012.
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Queenstown exceptional growth continues
30 June 2012
30 June 2011
% Change
Domestic Passenger Volume
851,795
763,159
11.6
International Passenger Volume
195,249
161,089
21.2
Total Passengers
1,047,044
924,248
13.3
Operating EBITDAFI ($’000)
11,529
9,881
16.7
Dividends received and receivable ($’000)
1,072
-
-
Queenstown Airport had another stellar performance in 2012 with international passenger growth of 21.2% and domestic passenger growth of 11.6%.
Auckland Airport received a dividend for the first time from its investment in Queenstown Airport of $1.072 million in the 2012 financial year.
July 2012 month saw Queenstown exceed Wellington as the third largest port of international visitor arrivals, not far behind Christchurch who were second.
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Strong balance sheet in uncertain times
Debt ratios
30 June 2012
30 June 2011
Average interest rate for the year
6.5%
6.6%
Underlying EBITDAFI Interest cover ratio
4.36
4.16
Average debt maturity
4.46
4.17
Debt/Debt + equity
30.9%
30.5%
Capital expenditure
($m)
($m)
Aeronautical
25.5
14.6
Property
49.3
46.2
Retail and car parking
5.2
11.0
Infrastructure and other
3.1
3.0
Total
83.1
74.8
Credit metrics continue to improve and provide a strong platform to invest in Auckland Airport’s future.
S&P rating remains at A minus and the short-term rating is ‘A2’.
Capital expenditure was within market guidance provided at the 2012 interim results of between $80 and $90 million.
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Investors’ rewards from strong performance are clear
Dividends for the year will total 10.50 cents per share, up 1.8 cents per share, or 20.7%, from the 2011 financial year, with the final dividend of 6.10 cps.
After careful consideration of the capital structure of the business, and as a signal of our confidence in our long term prospects, cash generation and ability to fund our growth aspirations, the Board of Auckland Airport is changing the dividend policy from 90% to 100% of net profit after tax (excluding unrealised gains and losses arising from a revaluation of property, or treasury instruments and other one off items).
The Auckland Airport share price has increased further since the year end to NZ$2.61 as at 29 August 2012.
Share Price Opening (NZ$)
Share Price
Closing (NZ$)
Dividend (cps)
Total return (cps)
Total share
holder return %
1 July 2009 to 30 June 2010
1.61
1.87
8.20
34.20
21.2%
1 July 2010 to 30 June 2011
1.87
2.23
8.70
44.70
23.9%
1 July 2011 to 30 June 2012
2.23
2.44
10.50
31.50
14.1%
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Ambition 2020: - aiming high to continuously lift performance - take advantage of reshaping travel markets
Flight-path for growth launched in 2009.
Strategy evolved as market conditions developed.
Time is right to move from launching a growth strategy to setting a path for long-term growth momentum.
Ambition 2020 – long horizon targets to grow international visitor volumes and value, and in turn grow our business.
Aiming for more quality, efficiency, and innovation across the business.
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Market trends and industry leadership
Current conditions are muted with international passenger volumes down 0.2% from 1 July to 26 August 2012.
China set to become 2nd largest tourism market for New Zealand and volumes up 31.9% in FY12.
Asia, Americas and Australia are our key focus as Europe and UK markets continue to decline.
Need air-services, sales channels and relevant quality product to capture more value.
Further capacity in October 2012 (Emirates A380 to Melbourne, China Airlines to Taipei via Sydney), in March 2013 (Hawaiian to North America) and new and increased services by Air New Zealand to Bali, Perth, Japan, North America and Sunshine Coast will assist with passenger volume growth in FY13.
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Ambition 2020: delivering a smart airport future
DTB capacity enhancement project to commence shortly to allow 2 carriers to remain within the facility to mid-decade, then one carrier will move to phase one of a new terminal leaving a single carrier in DTB until late this decade at which time they will move to phase 2 of a new terminal.
Scope comprises works to forecourt, terminal and apron. Delivery programme is currently being worked through with stakeholders.
Minor works will commence this calendar year with bulk of works being undertaken during 2013.
Total capital expenditure on the DTB enhancement project expected to be between $28 and $30 million in FY13 and FY14.
19
Ambition 2020: delivering a smart airport future
Spatial Masterplanning inception process underway led by Arup (global airport master-planning experience).
Inception process will take 5 weeks.
Full spatial master-plan process concluded within FY13.
New terminal facility planning process being worked through with key stakeholders.
Process in place for a locational decision in 2013 at which time design will commence.
Auckland Airport remains committed to a future terminal solution that delivers on tomorrow’s travel, trade and tourism demands.
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Ambition 2020: growing the Auckland Airport Business District
Rental growth strong in FY2012 after development in FY2010 and FY2011 brings in new rental income.
Current market for new property development is relatively weak.
Recent completed developments include Toll, CEVA and the Quad 5 office building.
Continuing to improve precinct appeal through improving amenities to open the potential of the Auckland Airport Business District.
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Ambition 2020: building on retail success
International Passenger Spend Rate growth of 5.2% in FY12 compared to FY11, although rate of growth slowing.
Retail income per international passenger increased from $15.64 to $16.15.
Car park revenue from online sales increased to 20% in FY12, and 24% for June 2012, up from 14% in FY11.
Average revenue per car park space (ARPS) increased 11% in FY12.
We continue to expand our customer segment focus via new extensions to products and promotions and quick trial methodology to test theories to grow yield.
22
Ambition 2020: accepting a leadership role
The benefits of direct services to fast growing markets are significant.
The industry requires product, channels, promotions and processes to deliver higher value outcomes that maximise the opportunity for New Zealand.
Competition for these high-growth markets requires a New Zealand response that is more attractive than our competitor destinations.
Recent improvements in visa processing (e.g. in China) will be helpful to compete strongly as a destination.
We will play our part in seeking higher value tourism and trade values for New Zealand.
23
Progress against Big Aspirational Targets
In 2011 we established some big business targets for the future.
The targets were not necessarily solved in the plan but established a “heads up, aim high” attitude in the company.
The big goals show our passion for the possibilities of the business and our dedication to aim high in the outcomes we wish to achieve.
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Underlying profit for the year ended 30 June 2012 was $139.025 million, up 15%. This is outstanding progress in FY12 after significant growth in FY11 (up 15%) and we remain focused on the possibility of achieving this goal in FY13.
Auckland Airport won the best airport in Australia/Pacific in the FY12 Skytrax Awards for the fourth year in a row. We remain committed to continuously improving the passenger experience.
Progress against Big Aspirational Targets
Chinese arrivals grew 31.9% in the financial year to June 2012, and 66.9% from base year of FY10. In June 2012, management launched Ambition 2020 to target Australia, Asia and America as key growth markets.
International passenger numbers increased to 7.194 million (excluding transits) in FY12, an 800k (12.5%) increase from FY09. While we remain committed to route development in key markets to drive passenger growth, this goal is now a stretch target and a very ambitious milestone.
Non aeronautical revenue saw a fantastic result in FY12 increasing % of total revenue to 55.7%, from 53.7% in FY10 - nearly reaching this target already.
25
Progress against Big Aspirational Targets
Property rent roll for properties outside the terminal was $41 million for the year to 30 June 2012, 14.1% increase on prior year. An outstanding result, but will take another two outperforming years in FY13 and FY14 to achieve this goal.
Retail segment revenue grew another 9.1% in 2012 to $166 million. A stellar growth performance in FY12 has made achieving this goal in FY13 is a strong possibility.
We are in in-depth consultation with our main airline partners for the existing domestic terminal and a New Terminal Facility. New ideas were brought to the table throughout the pricing consultation and we hope to have an agreed plan by the end of calendar year 2013.
26
Future capital expenditure
Capital expenditure
Forecast FY2013 ($m)
Aeronautical
66
Property
30
Retail and car parking
5
Infrastructure and other
3
Total
104
Capital expenditure is forecast to be between $100m and $110m in FY13, excluding yet to be committed property expenditure and yet to be committed New Terminal Facility expenditure.
Any significant capital expenditure on retail and car parking is also excluded until New Terminal Facility plans and location are finalised.
27
Opportunities exist for long term growth
Despite the challenge of rapidly changing global markets for travel, trade and tourism, we still see opportunities for long term growth:
Designing and developing a Smart Airport future with increased domestic capacity, and improved infrastructure for all stakeholders including airlines and passengers
Maintaining growth momentum through taking a leadership role and focusing on aeronautical development in key growth markets
Despite the challenges, the business growth momentum is expected to deliver net profit after tax (excluding any fair value changes and other one-off items) of between $143 million and $150 million in FY13, subject to any other material adverse events, significant one-off expenses, non-cash fair value changes to property and further deterioration due to the global market conditions or other unforeseeable circumstances.
28