KEY POINTS:
Auckland International Airport delivered a reduced annual profit yesterday as interest, depreciation and a senior management incentive scheme eroded an increase in revenue.
The profit of $92 million for the year to June was 10.8 per cent down on the same period last year. Revenue rose 5.3 per
cent to $322 million. Operating performance has been overshadowed for the past two months by the possibility of a sale to Dubai Aerospace and other potential buyers such as Canada Pension Plan.
Chief executive Don Huse described it as a solid result given the point the company was at in its investment cycle.
The airport is nearing the completion of a four-year, $500 million capital expenditure programme. During the year, $105.4 million was spent on expansion and development and it is expected a further $161 million will be spent in the final year.
So higher depreciation charges and higher interest rates relating to capital expenditure debt were flowing through to the bottom line now, Huse said.
The credit squeeze may have some impact on interest payments for the company going forward as a percentage of its debt is held on a floating basis. Debt levels are now around $920 million, and the weighted average interest rate was 7.46 per cent for the year, compared to 7.18 per cent the previous year.
The airport had wanted to retain flexibility "in term of what may or may not happen with respect to our ownership structures and funding structures".
By full year 2009, the benefits of the capital expenditure were expected to start flowing through to the bottom line, Huse said.
"What you're going to see in FY09 is the first year where the decline in capital expenditure is going to make itself felt."
From 2009, the earnings performance would improve incrementally each year, Huse said.
"That's a story we have told for the last couple of years but now it's very immediately before us. We're going to be very well positioned in the next year or two to absorb the extra volumes that are coming through."
Passenger growth at the airport was just 2.4 per cent for the year - lower than the long-term average, reflecting a slow- down in the tourism sector.
Huse noted that there was a pick-up in the second half of the year, particularly from outbound New Zealanders taking advantage of the higher dollar. He was optimistic that inbound foreign tourist numbers would begin to rise faster as the currency fell.
The airport's aeronautical revenue rose 5.2 per cent and the non-aeronautical - which includes property, retail and carparking - rose 5.3 per cent. The retail business showed the biggest rise with 8 per cent revenue growth.
Forsyth Barr analyst Jeremy Simpson said the result was largely in line with expectations.
The airport gave guidance last month indicating that the rapid share price rise in the last part of the financial year had added about $10 million in costs related to its executive incentive scheme.
Excluding the long-term incentive costs, net profit would have been $101.9m. But the guidance for the 2008 year was also lower than analysts had hoped for, Simpson said.
Chairman John Maasland said he expected growth in revenue and operating profit for the current year to be about 7 per cent. Ultimately the share price wasn't being driven by earnings and it was difficult to say what the structure of the airport might be by 2009, he said.
The shares closed down 3c yesterday at $3.17.
