Malta International Airport plc published its 2013 annual financial statements on March 5. The airport operator registered yet another record financial performance reflecting the record passenger numbers during the year. A total of 4.03 million passengers passed through the air terminal in 2013, an increase of 10.5 per cent over the previous year. The recent trend in terms of passenger movements has been very positive indeed with MIA registering a record for the fourth consecutive year and the fifth time in the last six years.
During last week’s board meeting which approved the publication of the annual financial statements, the directors also recommended the payment of a final dividend which will be placed on the agenda of the upcoming general meeting due to be held on May 22. MIA adopts a policy of a semi-annual dividend.
After the interim gross dividend was left unchanged at €0.0462 per share (this was paid out in September 2013), last week the directors recommended the payment of a final gross dividend of €0.06923 per share representing a 12.5 per cent increase over the final dividend in respect of the 2012 financial year.
Shareholders as at the close of trading on Tuesday April 15 will be eligible to receive this final dividend and this is expected to be paid by Monday June 9 at the latest.
MIA’s total gross dividend in respect of the 2013 financial year therefore amounts to €0.1154 per share (net: €0.075) representing a 7.2 per cent increase over the previous year’s total dividend.
Since profits grew by 17.1 per cent and the total dividend increased by 7.2 per cent, the payout ratio dropped to 67.6 per cent in 2013 from 76 per cent in 2012.
In recent years, MIA adopted a more prudent approach and retained an increased level of earnings in order to reduce the gearing ratio and possibly also to internally finance the next property investment and other ongoing capital expenditure plans required by the airport operator. In fact, the payout ratio was gradually reduced from 91.4 per cent in 2008 to the present level of 67.6 per cent. Despite the reduction in the payout ratio, the total gross dividend increased by 28 per cent since 2008 from €0.09 per share to €0.1154 per share.
In a presentation sent to the financial community shortly after the publication of the annual financial statements, it was revealed that MIA is seeking to finalise the Environmental Impact Assessment report to ensure there are no further delays in the approval of the master plan by the Malta Environment and Planning Authority. Once approval is obtained, a discussion on the timing of another property investment is likely to occur. This new property investment had been mentioned by both the chairman and the CEO of MIA over recent years.
Given the success achieved to date by the SkyParks Business Centre, it is likely that the board will positively consider such an initiative.
In fact, the 2013 annual financial statements revealed that almost all the floor space at the Business Centre has been contracted out.
Rental income from SkyParks amounted to €1.3 million in 2013 and this is expected to reach €2 million during the current financial year on a full-year’s income from the entire tenant base.
MIA’s recent financial performance reveals some important achievements in the strategic initiatives undertaken in recent years.
Some years back, the aim of MIA was to increase the contribution of non-aviation income, i.e. the revenue generated from the retail concessions, advertising, car parking and others. The €19 million investment in SkyParks was a major initiative to achieve this objective.
The rental income from SkyParks of €1.3 million generated during 2013 made a strong contribution to the increase in retail and property income in the last financial year. This business segment accounted for 29.1 per cent of overall revenue in 2013 compared to 20 per cent in 2008 before the various investments undertaken to increase this contribution. In fact, the growth in non-aviation income is well within the targets set by the previous CEO of MIA who had originally indicated that the company aims to increase the contribution of retail and property income to circa 30 per cent of total income.
In recent years, MIA adopted a more prudent approach and retained an increased level of earnings
While SkyParks made a revenue contribution of €1.3 million, other rental income of €2.4 million emanated from the leases to Lufthansa Technik and other companies within the aviation park as well as leasing of office space to airlines, ground handlers and other operators within the air terminal.
Besides the rental income, other retail and property revenue items amounted to €13.3 million. This is mostly made up of revenue from the various concessionaires within the air terminal. Concession income grew by 11.7 per cent in 2013 to €7.9 million. This growth is a direct reflection of the higher passenger flow through the airport.
Since MIA’s revenue from some concessionaires is based on turnover achieved at these outlets, higher passenger spend leads to increased revenue for MIA.
The significant increase in income from concessionaires compared to prior years is not only due to the higher passenger flow, but also as a result of another strategic initiative taken some years back when MIA invested €3.25 million to join up the departure and arrivals lounges thereby creating a substantial increase in the rentable area.
Similarly, income from parking surged by 18.7 per cent to €1.8 million also reflecting the higher passenger flow. This was yet another strategic decision by the company which took over management of the car park in March 2008. Other sources of non-aviation income include advertising (-3.9% to €0.65 million); the VIP lounge (+24% to €1.05 million), utility recharges (+33% to €1.3 million) and other charges (-0.7% to €0.52 million).
The largest revenue contributor naturally remains aviation income which grew by 7.8 per cent in 2013 to €41.3 million accounting for 70.2 per cent of overall income.
The growth achieved reflects the higher revenue from the various sources of aviation income as a result of increased passenger as well as aircraft movements.
Aviation income encompasses the passenger service charge, airline landing and parking fees together with ground handling charges and income from airlines due to passengers with reduced mobility. While MIA grew its top-line by 11.3 per cent to €58.8 million, costs rose by 7 per cent to €28.9 million resulting in earnings before interest, tax, depreciation and amortisation (EBITDA) of just under €30 million (+15.9% over the previous year).
A common financial indicator in the industry is the EBITDA margin which improved to a record level of 50.84 per cent in 2013. This is well above the margins achieved by other publicly traded European airports which have an average EBITDA margin of 34 per cent.
After accounting for depreciation (€5.5 million) and net finance costs (€1.9 million), the pre-tax profit figure amounted to €22.7 million (+16.5 per cent over 2012 and a rise of 66 per cent since 2008, equivalent to an average annual increase of 13 per cent). The pre-tax profit margin of 38.6 per cent is also an impressive multiple by any standards.
Another important ratio for financial analysts is the return on equity measuring the profit after tax achieved by the company compared to the capital employed.
This increased to 22.6 per cent in 2013 placing MIA among the top performing local companies in this respect.
In addition to the higher contribution from SkyParks during 2014 (this is expected to rise to €2 million from €1.3 million in 2013), MIA should also register mild growth in other revenue streams given the forecast of a 2 per cent increase in passenger traffic during the year.
This assumption is based on a slight increase in seat capacity while maintaining similar seat load factors experienced in 2013 which were at a high level of 78.5 per cent.
The increased seat capacity arises from the introduction of new airlines operating to Malta (British Airways, flyNiki and Brussels Airlines) together with the commencement of new routes by existing carriers.
These include Vueling to Rome, Transavia to Nantes, Easyjet to Naples and AirMalta to Parma.
This year got off to a bright start with passenger numbers reaching new monthly records for both January and February. Passenger traffic has so far increased by 10.25 per cent during the first two months of the year. However, it is worth highlighting that these are the shoulder months and the crucial months for the airport are July, August and September which generally account for circa 35 per cent of annual passenger traffic. Financial market participants will continue to monitor passenger figures in the coming months to verify whether last year’s numbers are sustainable during the important summer months. MIA normally adjusts its passenger forecast in the summer once there is substantial evidence of expected bookings in the peak months.
MIA shareholders should be very pleased at the initiatives undertaken by the company in recent years as these are evidently yielding the desired results.
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 from 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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Edward Rizzo is a director at Rizzo, Farrugia & Co. (Stockbrokers) Ltd.