SYDNEY: Sydney International airport has announced its total revenue grew by 11.3% to A$661.9m for the six months ending June 30 2016, driven by international passenger growth, efficient investment, strong retail performance and the incremental contribution of terminal three.
The airport stated all businesses performed well with retail performance in particular reflecting the completion of the duty-free stores operated by Heinemann Asia Pacific, which were unveiled earlier this year, and ongoing store rollout. Retail revenue increased 9.5% to A$142.3m. A total of 20.3 million passengers travelled through the airport in first half 2016, up 6.7% from the previous corresponding period (pcp); international and domestic passengers grew a strong 9.3% and 5.3% respectively.
Aeronautical revenues benefited from the strong international passenger growth and T3 contribution, property growth was underpinned by new leasing transactions (offsetting the reduction in T3 property revenues), and car parking revenues were driven by the significant growth in online bookings. Operating expenses increased by around $19m as flagged by the airport in February, primarily as a result of the step up in service standards agreed in the new international airline agreement, and six months of incremental T3 expenses.
The airport’s EBITDA margin remained broadly unchanged, at 81%. Underlying opex growth was driven by inflation and passenger linked expenses. EBITDA grew a strong 9.5% on the pcp. The second half of 2016 will benefit from a 4.8% aeronautical price increase to reflect the higher service standards and investment.
Sydney Airport managing director and CEO Kerrie Mather stated: “It has now been twelve months since we entered into our new, outcome focused five year Aeronautical Services Agreement and we are really pleased with what has been achieved. We have delivered a significant uplift in the presentation of the terminal, increased capacity and passenger experience improvements from our investment program. Pleasingly, passengers are recognising these changes through improved customer satisfaction scores. The T3 transaction continues to be a success with the terminal running smoothly, passenger numbers growing and the financials outperforming our expectations.
In addition, we successfully raised a 10 year $1.2bn debt facility to refinance all our drawn bank debt in April. Investors have benefited from these initiatives and our operational performance through significant cash flow growth and 20% growth in distributions. In addition, I am delighted to announce our upgraded distribution guidance of 31 cents for 2016, growth of 21.6% on the pcp, subject to aviation industry shocks and material forecast changes.
“International passenger growth, up 9.3% for the half year, continues to be a key business driver. Underpinning our international passenger result was significant additional capacity from new and existing carriers, improving load factors and strong demand from a diverse range of markets including Australia, China, USA, Korea and Japan. The domestic market also performed well this half, growing 5.3%, primarily underpinned by strong load factors across both full service and low cost carriers.
“Currently we have more than 200 business expansion projects underway and are on track to deliver our 2016 capital investment program on time and budget. The program continues to focus on the passenger experience through expansion of terminal and airfield capacity, in addition to improving the efficiency of the airport and facilities for airlines and airport users. A number of our large projects will have material benefits for passengers and their airport experience including: ground access improvements, making it quicker and easier to get to and from the airport; T1 redevelopment, providing direct paths, more seating and better wayfinding; and the baggage system expansion, providing a more streamlined and reliable baggage processing and collection experience.”
Commenting on the airport’s outlook, Mather added: “It’s been a very successful half year, and we are making excellent progress in delivering on our key strategic, operational and financial targets,” Ms Mather said. “We remain focused on improving the passenger experience though investment in innovation and technology, enhancing capacity, and providing quality facilities with the flexibility to grow in line with forecast demand.
“Sydney Airport maintains a strong balance sheet, with the consistent improvement in our credit metrics continuing. We also have access to significant liquidity, which supports financial flexibility and positions Sydney Airport well for future growth and investment. “We are pleased to announce upgraded distribution guidance of 31 cents3 per stapled security for 2016 representing growth of 21.6%. The upgrade reflects our confidence in continued operational and financial performance and growth in free cash flow. “Sydney Airport continues to offer the DRP to eligible security holders.
During the first half, it was announced that the DRP would not be neutralised and securities would be issued to satisfy demand. We were delighted to see a 43% take up resulting in approximately $120m of cash available to partly finance our investment program. This strong take up demonstrates the demand for Sydney Airport securities and investor confidence in our future strategy.”
