Key points:
- Sydney Airport results were solid as expected with 2.3% passenger growth and 4.7% international passenger growth over 1H13
- Revenue growth was experienced across the board: Aeronautical revenue up 5.7% to $277.6m; Retail revenue up 7.4% to $125.0m; Car parking revenue up 5.7% to $66.4m; Property revenue up 6.8% to $96.4m
- All bank facilities maturing over 2014-17 have been refinanced, average debt maturity lengthened by 2 years
The Sydney Airport results as expected were generally solid across the board, although EBITDA growth of 6.1% was slightly below analyst expectations of 7%. The results are positive for bondholders with continued natural deleveraging contributing to improvements in the key credit metrics.
Key financial points:
- 2.3% total passenger growth and 4.7% international passenger growth vs 1H13, above long term trend
- Strong growth in international traffic, particularly from low-cost carriers. However, domestic growth of 1.2% was slower amid tough market conditions for Qantas and Virgin Australia
- As a comparison, rival Melbourne Airport on Thursday reported its international passenger numbers had risen by 10% to a record 725,489 in the month of July, although domestic passenger numbers were up only 0.2 per cent
- Total revenue up 5.7% vs 1H13 to $568.4m. Revenue growth experienced across the board
- Aeronautical revenue up 5.7% to $277.6m
- Retail revenue up 7.4% to $125.0m
- Car parking revenue up 5.7% to $66.4m
- Property revenue up 6.8% to $96.4m
- EBITDA up 6.1% vs 1H13 to $459.5m
- NPAT up from $24.0m in 1H13 to $53.9m in 1H14
- Interest Coverage ratio up from 2.19x in HY13 to 2.26x in FY14
- Net Debt / EBITDA down from 7.1x in 1H13 to 6.9x in 1H14
- All bank facilities maturing over 2014-17 have been refinanced, average debt maturity lengthened by 2 years
- Next unfunded maturity in 2H15; 2014 maturities addressed
- $1.2bn of undrawn facilities available to fund current liabilities and growth capex into 2016
- Capex: Guidance of $1.2bn over the next 5 years, approx.. $240m pa which is in line with previous guidance.
- Guidance for FY14 is to deliver a 23.5c distribution; 11.5c distributed in 1H14, so guidance indicates that the result through to FY14 will reflect continuing growth in free cash flow.
- Second Sydney airport: Sydney Airport has been issued a Notice to Consult by the Commonwealth Government on the development and operation of a Western Sydney airport. The nine month consultation period ends on 30 September 2014. Following the end of the formal consultation, the Government may enter a contractual phase where it would set out the commercial terms for development and operation of the second airport. Sydney Airport would have a further 4-9 months to consider the exercise of its options. Sydney Airport expects it would take up to 2 years to develop a business case and evaluate the opportunity.
The results for Sydney Airport represent a positive outcome for bondholders, with continued natural deleveraging contributing to improvements in the key credit metrics. Capex requirements are manageable in the context of available liquidity, and passenger growth was above long term trend, with the outlook for the remainder of FY14 reflecting continuing growth in free cash flow.