Freight shortfall worries Infratil

By CHRIS DANIELS AND PAULA OLIVER

Strong performances from Trustpower and Wellington Airport have buoyed infrastructure investor Infratil, although a mystery fall in the company's Scottish freight business is causing concern.

Chairman Kevin O'Connor said the drop in the March year after-tax profit to $22.4 million from $28.1 million in 2003 was due to the lack of realisations on investments made during the past year.

Gains from a physical sale or realisation were only $2.2 million, compared with $20 million previously.

Investments in power company Trustpower (35 per cent ownership) and Wellington International Airport (66 per cent) were both performing well for Infratil, with higher electricity prices and a big increase in air travel "vindicating" its decisions, he said.

"The congruence of higher returns from electricity generation and airports is coincidental.

"But both outcomes reflect Infratil's willingness to take a long view and to actively participate in these companies."

During the past year Infratil has moved to become the 100 per cent owner of Glasgow Prestwick Airport in Scotland. This airport is going through a passenger boom, due largely to the growth of Ryanair.

Lloyd Morrison, head of Infratil's investment manager Morrison & Co, and Infratil director, said there were concerns about falling freight business at the airport and it was not clear why this was happening.

"The first half of 2004 was up 7 per cent , the last half was down close to 30 per cent.

"It's been a difficult thing to come to grips with because it doesn't seem to be as closely correlated with economic activity as we would generally feel it would be."

There were four airline freight customers for the airport, with the largest having a good year, the next two having poor years, and the fourth having a good year.

"It's quite anomalous," said Morrison. In March Infratil warned that earnings from Prestwick would be 10 per cent lower than the previous year. This came as shareholders were being asked to approve a plan to buy the last 23 per cent of the airport company that it did not already own.

The price of the remaining stake was accordingly dropped from £11.7 million to £10.3 million ($30 million).

Speaking on the plan to set up a commercial airport at the Whenuapai airbase, Morrison said that despite good arguments in favour of it, the decision was being made on a political basis, and "unfortunately that doesn't make it as objective as we would like".

A Government decision on disposal of the airbase has been delayed until June.

"There's still quite a considerable risk that that opportunity won't arise for us - but it won't be because we haven't put forward a good case," said Morrison.

* Infratil shares finished up nearly 5 per cent, at $3.20. Together with a 7c a share dividend, Infratil yesterday announced a one-for-five pro-rata issue of five-year equity warrants, exercisable at $3.50 a share.