Malta International Airport plc - Full-Year Results & Dividend Announcement

On 7 March 2008 Malta International Airport plc published its Preliminary Profits Statement for the year ended 31 December 2007. This is the first full financial year ended on 31 December after the company had changed the accounting reference date from the previous year end of 31 March. As a result, the comparative figures cover a 9-month period from 1 April 2006 to 31 December 2006 and are not easily comparable due to seasonality factors.

The key highlights are:
• Operating income of €44.4 million;
• Passenger movements increase by 10.4%;
• EBITDA of €20.3 million;
• Pre-tax profit amounts to €14.1 million;
• Total assets of €120.5 million including cash of €9.6 million;
• Gross dividend yield of 5.4 per cent per annum.

The Directors are proposing a final gross dividend of €0.0892 per share (net dividend of €0.058) to those shareholders as at close of trading on Tuesday 29 April. The dividend will be put forward for shareholders’ approval during the Annual General Meeting on 24 April and once approved will be paid by not later than 26 May 2008.

During 2007, MIA’s total operating income amounted to €44.4 million, 35.5% higher compared to the revenue generated during the 9-month period to 31 December 2006. The growth in turnover resulted from a 10.4% increase in passenger departures compared to the full 12 months in 2006. Likewise aircraft arrivals increased by 10.7% but the company reported a 3.4% decline in cargo activity. The Directors noted that the strong rise in passenger numbers resulted from an increase in the routes by legacy carriers as well as from additional routes introduced by new airlines, mainly Ryanair, Click Air and Germanwings. MIA also reported a significant increase in commercial revenue to €8.8 million due to the improved performance of the retail outlets within the Air Terminal.

MIA’s operating costs of €28.5 million comprise depreciation of €4.5 million. The Directors reported that total operating costs are slightly higher than the previous 12-month period. Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 30% to €20.3 million with an EBITDA margin of 45.8%.  Income from financial assets was marginally lower while interest payable on the outstanding loan increased to €2.3 million.

The Company’s pre-tax profit for the year ended 31 December 2007 amounted to a record €14.1 million, 23% higher than the profitability during the 9-month period to 31 December 2006. Profit for the year after the tax charge of €5.2 million amounted to €8.9 million giving an earnings per share of €0.1319 (December 2006: €0.1074).

Total assets as at 31 December 2007 amounted to €120.2 million with shareholders’ funds of €51.7 million. Total cash at the balance sheet date increased to €9.6 million from €5.4 million in December 2006. The annualised pre-tax return on equity (profit before tax divided by average shareholders’ funds) increased to 27.7% with annualised return on assets (profit before tax divided by average assets) of 12%. (June 2006: 5.2%). The company’s gearing ratio dipped to 70% from 82.2% as net debt dropped to €36.7 million.

In his address to the media on 24 January 2008, CEO Mr Julian Jaeger explained that MIA expects passenger movements to exceed 3.18 million in 2008 – an estimated increase of 6.5% over the 2007 figures. The CEO stated that new carriers will begin operating to Malta in 2008, namely EasyJet to London Gatwick and Manchester; Vueling to Madrid; Norwegian Air Shuttle to Oslo; and Volare Web to Milan. Moreover, MIA have identified other destinations that are considered underserved but have a good potential to attract new business to Malta, namely Spain and Portugal; France (excluding Paris) and Switzerland (excluding Zurich); Germany (Dortmund, Nuremberg and all former East German cities excluding Berlin); Poland, Czech Republic, Hungary, Ukraine, Slovakia, Bulgaria, Romania and Scandinavia (mainly Oslo and Copenhagen).

In order to improve the facilities within the Air Terminal to accommodate the expected increase in passenger throughput, MIA have commenced a major work programme to improve the security function and increase the retail floor space within the departure area. Improvements to the arrivals area are also planned to take place in the coming months. These works are expected to increase the retail space by circa 950m2, which should lead to an improved contribution from commercial revenue.

The Annual Financial Statements also make reference to an event after the balance sheet date. MIA stated that in March 2008 it successfully negotiated the termination of the car park concession from the previous operator. Subsequently, with effect from 1 March 2008, MIA took over the running of the car park business through its newly set up subsidiary Sky Parks Ltd.

A report issued by Credit Suisse in June 2007 on European airports argues that revenue from retail shops, restaurants, parking as well as real estate development and marketing are becoming among the most important sources of revenues for airports. Credit Suisse anticipates that the developments of retail and real estate business activities should be the focal point of interest and offers enormous opportunities for airport operators. In the same report, Credit Suisse notes that from a relative valuation perspective, the preferred multiple for airports is EV/EBITDA rather than the P/E multiple since price/earnings multiples are very strongly dependent on depreciation charges. Depreciation constitutes a significant cost factor for airports and very much depends on the investment cycle. Consequently, Credit Suisse concludes that the P/E multiple gives a distorted picture. MIA’s equity is currently trading on a P/E of 25.3 times and an EV/EBITDA of 12.9 times.

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