Auckland Airport’s fiscal 2013 result was in line with analyst’s forecasts. Underlying net profit after tax, or NPAT, grew 10.6% to NZD 153.8 million with spectacular 14% growth in the second half. The results were buoyed by respectable growth in passenger numbers in the second half, lower depreciation and interest costs and an outstanding performance from associate companies. The company expects the aviation market to be reasonably buoyant in fiscal 2014 and projects underlying NPAT between NZD 160 and NZD 170 million.
Analysts believe the firm is well placed to capitalise on expected strong growth in tourist arrivals from Asia in the long term. In fiscal 2013, Chinese arrivals were up a whopping 26.5%, fueled by new air services. As a result, China has now overtaken the United Kingdom as the second-largest market source for Auckland Airport. Auckland Airport’s monopoly status and a favourable regulatory environment will enable it to generate reasonably strong returns on capital.. Fiscal 2013 was a creditable performance considering that the firm was lapping a strong performance due to the Rugby World Cup in the prior year. Aeronautical revenue was up 6.8% in 2013, driven essentially by aeronautical price increases, which came into effect in July 2013, and high single-digit domestic passenger growth. International passenger movements, excluding transits, were up 1.7% with the growth accelerating to 3.3% in the second half.
The maximum take-off weight (MCTOW), which determines landing charges, were up slightly, with international down 1.5% offset by 5.2% growth in domestic aircraft landings. International MCTOW was affected by the withdrawal of Qantas on the Auckland-Los Angeles route, offset to some extent by new services, mainly from Asia. Management indicated international passenger growth was off to a strong start this fiscal year, up 8.8% to 18 August 2013. We anticipate aeronautical revenue to increase by 5.5% in fiscal 2014 driven by pricing and approximately 4% growth in passenger movements.
Non-aeronautical revenue, which includes retail, rental and car park income, was up 3.7% with car park being the standout. This essentially reflects the strong growth in domestic passenger numbers last year. The retail business was up slightly despite strong base period comparables due to the Rugby World Cup and the impact of changes to the Australian tobacco allowances (affecting duty-free tobacco retail) from October 2012. However, the retail spend per passenger continued to rise and was up 2.1% in fiscal 2013.
Rental income was flat versus the prior period but this masks the strong performance of the property division which grew 12.5% in 2013. The aeronautical portion of the rental business was impacted because of the aeronautical pricing changes in July 2013. We forecast the non-aeronautical businesses in aggregate to achieve 7% growth in 2014 driven by higher passengers and increased yields in retail, car park and rental businesses.
Associate earnings jumped 31% to NZD 8 million with North Queensland Airport, or NQA, reporting 22.2% growth in underlying earnings due to significantly lower interest and income tax expenses. NQA EBITDA was up 7.1% driven by solid growth in domestic passengers at Cairns. Queenstown’s performance was also noteworthy with total passengers jumping 14.5%, driving revenues and EBITDA by 7.6% and 12% respectively.
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