Auckland Airport raises dividend on 15% profit lift

BUSINESSDESK: Auckland International Airport is raising its dividend policy to pay out 100% of underlying earnings, up from 90%, after a 15% increase in tax-paid underlying profit of $139 million in the year to June 30.

Assisted in part by a surge of arrivals from South Africa and France for the Rugby World Cup and diversion of some traffic away from quake-hit Christchurch, New Zealand's main gateway airport saw improved performance in total passenger numbers, international freight and non-aviation segments.

Performance at its 25%-owned Northern Queensland and Queenstown airports also contributed $6.2 million to the underlying profit, a measure which excludes one-off factors and non-cash movements in the value of financial instruments.

Queenstown was a standout, assisted by growth in Jetstar services from Australian and New Zealand locations, handling more than one million passengers and achieving 21% growth in international passengers to a total of 195,249 last year.

Earnings before interest, tax, depreciation, amortisation and changes in the value of financial instruments was up 7.1% to $319.3 million on 7.3% revenue growth to $426.8 million.

The underlying result was slightly above forecasts by Forsyth Barr and First NZ Capital. AIA shares slipped 0.2% at the open on the NZX this morning, to $2.605.

The company expects underlying earnings of between $143 million and $150 million in the year ahead, although warns that could be affected by the "prevailing volatility in global economies".

After spending some $83.1 million on capital works last year, AIA is forecasting capital expenditure of between $100 million and $110 million in the current financial year, $66 million of which is on airside improvements.

The projection includes no costs for the upgraded domestic terminal, plans for which AIA says it is taking its time to get right.

It continued to complain that Commerce Commission rules discourage the airport from holding surplus land, which it regards as essential to the rational future development of aviation services for the country's largest city.

On dividend policy, chairwoman Joan Withers says the company said the increase to 100% payout of underlying earnings was "a signal of confidence in our long term prospects, cash generation and ability to fund our growth aspirations".

The final dividend for the year of 6.1 cents per share includes a catch-up to bring the half-year dividend up to the new payout rate, giving full year dividends of 10.5 cents per share, an increase on the previous year's dividends of 21%.

Total passenger movements through the airport were up 4.3% and cracked 14 million for the first time, with 5.1% growth in international visitor movements at 7.7 million, and domestic passenger movements up 3.3%,  although total domestic flights were static for year.

The most dramatic changes in arrivals were a 32% increase in visitors from China, at 168,950, a 44% jump in South African arrivals to 376,826, a 66% rise in visitors from France at 32,203 and arrivals from Singapore up 25%, at 27,196.

Arrivals from Australia also increased by 10% to 715,115.

A fundamental shift

Ms Withers says the statistics revealed "a fundamental shift in global travel demographics".

"Asia is the new global growth engine, closely followed by Australasia and the Americas. It makes sense to focus more effort there," she says.

"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.

A long-term ambition is "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", Mr Withers says.

The airport was looking 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".

Passenger processing times continued to compare favourably with international peers, with an average of 85% of arriving passengers being processed in under 25 minutes, and an average of 96% of departing passengers being processed in under 12 minutes.

Ms Withers says the current financial year will see AIA finalise its master plan for airfield and terminal development, including "resolving some of the timing and location challenges for the delivery of an eventual new terminal facility, particularly for domestic travel".

The airport is also planning for the fast uptake of smart mobile devices which are influencing travel, tourism and trade, with implications for "smarter airports".