Christchurch Airport reports $18.4M profit

Despite on-going challenges to passenger numbers, Christchurch International Airport Limited (CIAL) has reported a profit of $18.4M (net after tax) for the year ended 30 June 2013.

The reported profit includes a net after tax gain on the revaluation of investment properties of $5.2M and a non-cash deferred tax adjustment on non-depreciable buildings resulting in a $1M reduction in the recorded tax expense.

Chief Executive Jim Boult says the numbers alone do not tell the story and must be considered with an understanding of current circumstances.

"Given the reduction in passenger numbers (almost half a million post quakes), the achievement of $18.4M net profit after tax (last year $19.6M ) is a satisfactory result," Mr Boult says. 

"Comparison of this year's net after-tax profit to last year's is largely irrelevant due to a number of factors.  These include the fact that the full funding cost of the terminal is now accounted for as an expense, rather than capitalised to the project, as was the case prior to completion. In addition, there is a significantly higher depreciation cost now accounted for, as a result of the company's investment in the new terminal.

"The combined depreciation and interests costs in the 2013 financial year are $4.5M higher than the previous year. This will continue into the 2014 financial year."

Mr Boult says the EBITDA level provides a more useful comparison.

"Excluding revaluation of investment properties and earthquake costs, CIAL achieved EBITDA of $64.9M  (last year $63.9M). While passenger numbers continue to impact the result, the company's commercial and property divisions have again performed strongly.   Their performance endorses the company's decision four years ago to diversify revenue streams."

Mr Boult says CIAL's business is very much fixed cost, so the cost of running the airfield and terminal does not materially reduce with lower passenger numbers. He says until passenger numbers increase, CIAL's result will be continue to be constrained, although improving commercial revenues will partially offset this. Core operating costs have continued to increase with the increased terminal footprint and significant investment in wider infrastructure across the campus. However, strong emphasis has been placed on containment of operating costs, which were $1.4M below budget.

"Recent trends are showing some recovery of passenger traffic, especially domestic, and we see that as a positive sign for the future," he says. "Full recovery is not expected until the city's major facilities are rebuilt, in particular the convention centre and associated hotels.

"Significant progress has been made this year within our property division, with completion of two new developments in Dakota Park and the likely commencement of Spitfire Square, our retail development, in the near future. We are pleased with the demand for property on our campus, with three current developments in Dakota Park now well advanced."

Mr Boult says a pleasing development through the year was securing a direct route between Christchurch and Perth airports, with early indications the route will perform strongly. The airport team also continues to work with airlines on long-haul routes, especially into China and the USA.

CIAL's balance sheet continued to show growth following the completion of commercial property developments and the new terminal, with total assets now at $1,086M (last year $1,036M). Total capital expenditure for the year was $47M, of which $26.7M related to the final stages of the new terminal development.  

CIAL currently has sufficient funding facilities in place to fund its three year business plan and remain well within its banking covenant ratios.

Last year CIAL successfully completed a $75M long-term bond issue to replace maturing bank facilities. CIAL continues to focus on extension of its debt maturity profile and funding diversification and is currently considering a further issue into the debt capital markets in the near future.  No money is currently being sought and no applications for securities will be accepted until an investment statement is available.

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