Latest News
HomeAviationBAA reports continued improvement

BAA reports continued improvement

BAA, the international airports group, today reported continued year on year improvement in passenger numbers, revenue and…

BAA, the international airports group, today reported continued year on year improvement in passenger numbers, revenue and  profit in its third quarter and said that it expected this trend to continue.

“Operationally, passenger numbers continued to rise, retail performance has been excellent and operating costs, including increased security and maintenance expenditure, have come in on target”, commented Mike Clasper, Chief Executive of BAA.

“Terminal 5, the centrepiece of the capital programme, continues to make progress and remains on budget and ahead of schedule. The recent White Paper on aviation has provided the framework for long-term growth, including the opportunity for new runways at Stansted and Edinburgh, and at Heathrow provided environmental targets can be met. This combination of factors provides a solid foundation for profitable growth.”

Group revenue was £499 million for the quarter, an increase of 4.2% on the comparable quarter in 2002 (£479 million restated1) while Group operating profit rose 8.0% to £149 million (2002: £138 million). For the nine months, Group revenue increased 3.5% to £1,540 million (2002: £1,488 million restated1) and Group operating profit grew 1.0% to £500 million (2002: £495 million).

At the operating level, the UK airports business, including World Duty Free (WDF), reported a rise of 8.1% in revenue for the three months to £455 million (2002: £421 million restated1) and operating profit of £143 million, an increase of 10.0% (2002: £130 million).

Passenger numbers at the UK airports grew 5.6% in the quarter to 31.8 million (2002: 30.1 million) and rose 3.4% to 103.8 million for the first nine months of the year (2002: 100.4 million). The company is maintaining its forecast of around 4% passenger traffic growth for the current financial year.

The quarter also included a strong performance from UK airport retailing (including WDF), which pushed net retail income2 9.5% higher to £138 million (2002: £126 million). Net retail income per passenger3 rose in the quarter by 3.1% to £4.36 (2002: £4.23). For the nine month period, net retail income increased 6.0% to £424 million (2002: £400 million). Net retail income per passenger grew by 2.5% to £4.10 (2002: £4.00).

Capital expenditure in the quarter was £344 million (2002: £175 million). Total capital investment for the nine months was £947 million (2002: £501 million4), of which £519 million (2002: £181 million4) related to Terminal 5.

Mike Clasper said, “In the quarter we delivered on retail income, cost control and T5 project management. Our management team`s primary focus will continue to be operational excellence and efficiency and on-time, on-budget delivery of our capital investment programme. Only by achieving the highest operational performance and improving infrastructure to grow capacity can we give passengers the best possible airport experience and provide airlines with value for money.”

OPERATING AND FINANCIAL REVIEW

UK airports

Traffic
In the three months to 31 December 2003, traffic at BAA`s UK airports increased 5.6%, to 31.8 million passengers (2002: 30.1 million). Passenger numbers were up at all airports except Aberdeen. Heathrow passenger numbers rose 3.4% to 15.9 million (2002: 15.4 million) reflecting a continued steady recovery in economic conditions and passenger confidence following the Iraq war and SARS epidemic. Growth was strongest at Stansted and Southampton, which recorded increases of 19.5% and 76.7% respectively as a result of the continued growth in low cost services. For the nine month period UK passenger traffic grew by 3.4%.

Total revenue and airport charges UK airport revenue, including WDF, increased by 8.1% to £455 million (2002: £421 million) in the three month period, with
Heathrow revenue growing by 8.7% to £212 million (2002: £195 million). Stansted showed the fastest growth of the South East airports, increasing revenue to £35 million (2002: £30 million) while Southampton doubled its revenue to £6 million.

Underlying this increase in total revenue was a 9.5% increase in airport and other traffic charges (from £158 million, restated, to £173 million). This reflects the 5.6% growth in passenger traffic and the regulatory price increase at Heathrow and Gatwick, partially offset by yield dilution at the other airports.

Retail
UK airport retailing, including the operations of WDF, delivered excellent growth in the third quarter. Strong non-EU departing traffic at Heathrow and the maturing new space within Terminal 3 and Stansted contributed to a rise in net retail income of 9.5% to £138 million (2002: £126 million). Net retail income per passenger grew 3.1% to £4.36 (£4.23).

Net retail income for the nine months to December increased 6.0% to £424 million (2002: £400 million) and net retail income per passenger rose 2.5% to £4.10 (2002: £4.00).

Operating profit
Operating profit for the three months at the UK airports (excluding WDF) grew 9.8% to £135 million (2002: £123 million).

Heathrow`s operating profit increased 13.8%, reflecting both the rise in airport charges yield and the strength of the retail performance, while Stansted`s operating profit was stable at £8 million (2002: £8 million) as operating costs increased to support the airport`s faster than expected traffic growth. Gatwick also reported a flat operating profit of £15 million (2002: £15 million) primarily as a result of the planned increases in security costs. Southampton`s revenue growth led to an operating profit of £2 million (2002: £1 million).

For the nine month period, operating profit of the UK airports, excluding WDF, rose 1.8% to £458 million (2002: £450 million).

During the third quarter, WDF increased its operating profit 14.3% to £8 million (£7 million) and 10.5% to £21 million (2002: £19 million) for the nine month period.

International airports
BAA`s joint venture, management contracts and other interests in 12 international airports generated revenue of £17 million for the quarter (2002: £18 million), however, operating profit increased to £3 million (£1 million). For the nine month period, the international business generated revenue of £57 million (2002: £58 million) and profit of £15 million (2002: £7 million) reflecting continued strong performance across the international airports, notably Naples, Perth and Melbourne (where a £3 million bonus management fee was earned (2002: £nil)). In December BAA invested £29 million in a further 4.72% of Australian Pacific Airports Corporation (APAC), the owner and operator of Melbourne airport. BAA now owns 19.8% of APAC.

Heathrow Express
Quarterly passenger numbers and revenues were steady at 1.3 million (2002: 1.3 million) and £18 million (2002: £18 million) respectively, however operating profit increased to £4 million (2002: £3 million). For the nine month period, Heathrow Express grew its revenue 2.0% to £50 million (2002: £49 million) and advanced operating profit to £9 million (2002: £8 million).

BAA Lynton
Third quarter revenue for BAA Lynton declined to £8 million (2002: £22 million) and operating profit fell to £3 million

(2002: £10 million) due to the disposal of Heathrow South Cargo Centre in the third quarter of 2002/03 and lower rental income following property sales during last year.

Interest and finance charges
The Group`s net interest charge for the nine months, excluding joint ventures but before capitalised interest, was £122 million (2002: £101 million). Capitalised interest was £60 million (2002: £19 million) with Terminal 5 accounting for £43 million (2002: £3 million).

Other finance income of £1 million (2002: £32 million) reflects the significant adverse movement in the FRS 17 pension scheme asset and liability valuations between 31 March 2002 and 31 March 2003.

Profit before tax
For the quarter, the Group achieved profit before tax and exceptional items of £129 million (2002: £122 million), an increase of 5.7%, bringing the profit before tax and exceptional items for the nine month period to £441 million (2002: £448 million), down 1.6% on the same period last year. This reflects the factors noted above and the £6 million share of BAA McArthurGlen`s profit last year (prior to disposal). There were no exceptional items in the nine month period (2002: £13 million).

Taxation
The tax charge for the nine month period was £137 million (2002: £139 million), representing an effective tax rate of 31% (2002: 31%).

Earnings per share
In the quarter earnings per share, pre exceptional items, rose 5.1% to 8.3p (2002: 7.9p). For the nine months, earnings per share pre exceptional items decreased 2.1% to 28.5p (2002: 29.1p).

Balance sheet
At 31 December 2003, BAA had net assets of £4,933 million (31 March 2003: £4,575 million), including tangible fixed assets of £8,622 million (31 March 2003: £7,802 million). Following the continued recovery in equity markets, the deficit on the pension scheme and other post-retirement liabilities, net of deferred tax, as at 31 December 2003 fell to £121 million from £221 million at 31 March 2003.

Capital expenditure
Group capital expenditure in the nine months to 31 December 2003, excluding capitalised interest, was £947 million (2002: £501 million4), of which £344 million (2002: £175 million) was incurred during the third quarter. Expenditure in respect of Terminal 5 during the last three months was £195 million, bringing the total so far this year to £519 million and the total spend on the programme to £1,2134 million. We continue to make good progress on the site and are now 32% of the way through the development. Other current airport projects at Heathrow include Terminal 1 eastern and southern extensions, Terminal 3 pier segregation and the A380 preparatory work. At Gatwick major projects include South Terminal Pier 2 and North Terminal Pier 6.

Borrowings
As expected, the increased capital investment led to net borrowings rising to £2,518 million at 31 December 2003 (31 March 2003: £1,918 million), with the third quarter contributing an increase of £206 million. Gearing was 51% (31 March 2003: 42%).

According to BAA Chief executive, Mike Clasper “Operationally, passenger numbers have continued to rise, retail performance has been excellent and operating costs, including increased security and maintenance expenditure, have come in on target. Terminal 5, the centrepiece of the capital programme, continues to make progress, remains on budget and ahead of schedule. The recent White Paper on aviation has provided the framework for long-term growth, including the opportunity for new runways at Stansted and Edinburgh, and at Heathrow provided environmental targets can be met. This combination of factors provides a solid foundation for profitable growth. Looking forward, we anticipate continued strong traffic, based on growing airline confidence and a solid economy.”

1 Group revenue for period to 31 December 2002 has been restated to classify airline marketing support costs as a reduction in revenue, previously reported as an operating cost.
2 UK airports net retail income is defined as the revenues received directly from third party retail operators, the concession fee paid to the airports by World Duty Free and World Duty Free`s operating profit.
3 Net retail income per passenger is net retail income divided by the number of passengers (excluding helicopter passengers).
4 Excludes capitalised interest and the present value of deferred compensation for purchase of land for Terminal 5 of £170 million (2002: £194 million).

Theodore Koumelis
Co-Founder & Managing Director - Travel Media Applications | Website

Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.

23/07/2024
22/07/2024
19/07/2024
18/07/2024
17/07/2024
16/07/2024