Another record year for MIA

2011 was another record year for Malta International Airport plc with the financial statements published on March 22, 2012 revealing that on the back of the 6.5 per cent increase in passenger movements to a record level of 3.5 million, the airport operator generated record revenue of €52.4 million and a record pre-tax profit of €18.9 million leading to the highest ever dividend distribution to MIA shareholders.

MIA’s equity has always ranked among the highest yielding equities in Malta- Edward Rizzo

In fact, the MIA directors have recommended the payment of a final gross dividend of €0.0615 (€0.04 net) per share. This represents an increase of 14.3 per cent over last year’s final dividend. Following the interim dividend of €0.0462 (€0.03 net) per share paid in September 2011, the total dividend in respect of the 2011 financial year amounts to a record €0.1077 per share. MIA has consistently paid a semi-annual dividend to shareholders since 2003, shortly after the company’s listing on the Malta Stock Exchange in October 2002.

MIA’s equity has always ranked among the highest yielding equities in Malta. The total dividend for 2011 translates into a gross dividend yield of 6.34 per cent per annum (4.12 per cent after tax) based on the current share price of €1.70. The final dividend will be paid on May 25 following approval at the annual general meeting being held on May 10.

Shortly after the publication of the financial statements, MIA convened a meeting with the financial community. The company’s new CEO Markus Klaushofer and CFO Austin Calleja provided a detailed overview of the financial results, the outlook for 2012 and they also delved into the longer-term strategy of the company.

The CEO had presented the detailed traffic statistics for 2011 during a press conference held on January 27. Although the news had already been disseminated across the market through a company announcement also issued on 27 January, the CEO kicked off the presentation to financial analysts by providing an overview of the passenger numbers during the year. Mr Klaushofer immediately commented that the company did not anticipate such higher passenger numbers for 2011 following the drop in the seat capacity. The CEO explained that this was due to higher occupancy on the airplanes (this is referred to as the seat load factor in the airline industry) and especially that of Air Malta which maintained a level of 1.68 million passengers in 2011 despite the reduction in the number of aircrafts from 12 to 11 during the year.

Aviation revenue generated by MIA improved by two per cent to €39.2 million reflecting the higher level of passengers which offset lower ground handling income. Meanwhile, the retail and property segment only reported a slight 1.3 per cent increase in revenue to €12.6 million. CFO Austin Calleja commented that income from the various concessions within the air terminal declined by 2.6 per cent to €6.3 million in part as a result of the cancellations of flights to Libya which impacted overall passenger spend at the airport.

Moreover, the CFO also indicated that the major car traffic diversions in the immediate vicinity of the airport also impacted the visitor flow to the air terminal leading to lower parking fees and also to a reduced contribution from the various outlets at MIA. While acknowledging the need for the major upgrade to the road facilities, Mr Calleja urged the government authorities to expedite the road improvements so as to relieve the major traffic congestion around the airport.

The chief financial officer also provided an overview of the various costs incurred by the airport operator stressing that the company implemented various measures to reduce utility costs. However, utility costs only declined marginally to €2.8 million with more significant declines registered in security costs, repairs and maintenance and charges related to persons with reduced mobility as the company re-negotiated contracts with various suppliers. MIA invested circa €1.5 million in early retirement schemes over the past two financial years and the CFO acknowledged that this is unlikely to be repeated in 2012 and in future years.

The CFO also indicated that the company has a sizeable amount of costs which are fixed and thus the increase in passenger volumes immediately filtered down to higher profitability levels. This led to a record level of profits for the second successive year with profits rising by a further 11.5 per cent to €18.9 million on the back of a 20 per cent jump in 2010.

At the press conference earlier this year, MIA’s CEO indicated that the current forecasts point to a slight decline in passenger traffic for 2012. Mr Klaushofer explained that the performance during the first three months is very much in line with expectations. The CEO also discussed some of the new routes being introduced in the coming weeks by Ryanair which are important new destinations for Malta, most notably those in Scandinavia, Poland and Lithuania. The CEO believes that such destinations could provide additional traffic to Malta in future years. Moreover, Mr Klaushofer also believes that Malta could benefit from the current instability in Greece and North Africa this year although MIA currently aims to maintain the record numbers achieved during the important summer months.

Naturally, the meeting also delved upon the Sky Parks Business Centre which is nearing completion ahead of its launch in June. As reported in the media a few weeks ago, the CEO again indicated that currently 60 per cent of the area has been leased out although this occupancy rate is expected to grow once the building is complete and potential tenants can view “the high standard of the finished product”. In response to questions from the floor regarding the possible relocation of the Air Malta head office to Sky Parks, the CEO said that it is up to Air Malta to comment on such a matter.

Mr Calleja indicated that the business centre will begin to contribute to the overall revenue of the company as from July 1. The property investment was described by the CFO as a “very long-term investment” made by the company in order to diversify its overall revenue mix into another area not primarily related to tourism and passenger traffic.

The CEO also indicated that MIA will shortly be discussing at board level the medium to long-term strategy for the company to achieve further growth and diversification in its operations. Mr Klaushofer revealed that this could include specific marketing focus on certain target markets which are believed to be underserved such as Scandinavia, Russia, Ukraine and other Eastern destinations coupled with possible extensions of the air terminal to cater for even higher passenger numbers. Moreover, the CEO indicated that other investments will be given due consideration to further diversify the company’s revenue stream.

MIA has proved to be a success story for minority shareholders with the share price doubling since the October 2002 IPO reflecting the improving profitability levels and consistent dividend stream to shareholders. The market will await announcements in due course on the new strategic initiatives being undertaken to ensure enhanced financial performances in the years ahead.

Rizzo, Farrugia & Co. (Stockbrokers) Ltd, “RFC”, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the issuer/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. RFC, its directors, the author of this report, other employees or RFC on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results.

Neither RFC, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.

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Mr Rizzo is a director at Rizzo, Farrugia & Co. (Stockbrokers) Ltd.

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