Malta International Airport plc published its 2017 financial statements on February 21. However, the main highlight in recent weeks was the company’s announcement confirming that the Planning Authority has approved the master plan for the further upgrading and redevelopment of MIA’s terminal infrastructure and the surrounding area.
The company is currently finishing off the latest terminal reconfiguration project which started in early 2017 and included a new La Valette VIP lounge with panoramic views on level 3, a new public observation deck, the construction of a mezzanine level to increase the floor space, the relocation of the central screening area with a doubling of the footprint and eight additional check-in desks, among others.
The ultimate aim of MIA is to continue transforming “the airport complex into an easily accessible business and leisure hub, in line with the international trend that is seeing airports move away from serving solely as passageways to the world”.
In fact, MIA has now started referring to the ‘airport campus’ which should lead to a significant transformation of the company’s finances in the years ahead.
In view of the company’s long-term vision of transforming their sizeable land area into an ‘airport campus’, the new investment programme will start with the construction of a multi-storey car park at a cost of €15 million, creating an additional 1,396 parking spaces. This project is expected to begin during the last quarter of this year.
In MIA’s company announcement issued on February 22, and also in the new section of its website dedicated to the upcoming investment programme, the company makes reference to a €100 million outlay during the next five years which will be executed in three major phases entailing: (i) the construction of three mixed-used commercial blocks, including a business hotel; (ii) the expansion/extension of the various existing terminal facilities; and (iii) the construction of a multi-storey car park.
MIA held its customary meeting with financial analysts last week during which it discussed the 2017 financial statements, the 2017 traffic statistics as well as the 2018 traffic and financial forecasts, and naturally gave ample coverage to the master plan.
MIA’s CEO Alan Borg did not indicate when works on the construction of SkyParks II will start. Following the success of the SkyParks Business Centre, which opened in 2012, and indications that local as well as international businesses operating in Malta are seeking high-quality office facilities in alternative locations, the company has been eagerly awaiting the approval of the master plan to set in motion the development of SkyParks II.
Borg indicated that the construction of SkyParks II will also include a business hotel of between 80 to 100 rooms, and both buildings will represent an investment of €40 million. MIA’s CEO also explained that this investment will create 21,000 square metres of office space for rent as well as 1,500 square metres of commercial space mainly in the form of showroom facilities on the ground floor of SkyParks II. This would represent a larger rentable area than the current 18,000-square-metre SkyParks Business Centre, which has already been fully leased out for several years.
The ultimate aim of MIA is to continue transforming the airport complexinto an easily accessible business and leisure hub
The various stages of the upcoming investment programme as part of the entire master plan also include an extension of the terminal on to the open-air car park, apart from a further eventual lateral extension to both the departures and arrivals lounges for more check-in desks, gates as well as retail outlets. In this respect, MIA’s CEO said that international designers have been engaged to work on the designs of the two new lateral extensions.
With reference to the extension of the terminal on to the car park, Mr Borg confirmed that this will create 14,000 square metres of rentable area for commercial activities as well as 3,000 square metres for terminal facilities. MIA’s website indicates an additional €40 million investment for the terminal expansion project.
The master plan also envisages the construction of an additional office complex branded SkyParks III. Mr Borg said last week that this development will create a further 11,500 square metres of office facilities and 800 square metres of commercial space.
During the meeting with financial analysts, the company also provided a detailed review of the traffic highlights during 2017 which, as explained in my article on January 25, was another remarkable year with the airport registering a growth of 17.5 per cent in passenger movements to just over six million passengers.
The other notable achievement in 2017 was that double-digit growth in passenger movements was registered in each month during 2017 and this led to a rise of one million passenger movements in only one year.
A review of the 2017 financial performance was also presented at last week’s meeting. MIA’s CFO Karl Dandler highlighted how the strong rise in passenger traffic led to a 12.7 per cent increase in revenue to a record of €82.4 million.
More interesting to investors should be the 21.5 per cent increase in the earnings before interest, tax, depreciation and amortisation (Ebitda) to €48.6 million and especially the jump in the Ebitda margin to 59 per cent compared to 54.7 per cent achieved in the previous financial year.
This is a noteworthy financial indicator especially when compared to the ratios of other airport operators across Europe. It may therefore have surprised many shareholders that the net profit ‘only’ increased by 15 per cent to €24.2 million. The CFO explained that this was mainly due to the €2.8 million penalty incurred related to the voluntary early repayment of an €11 million six per cent per annum fixed interest rate loan.
On January 12, when MIA had published the 2017 traffic statistics, it also announced its 2018 passenger forecast as well as the financial guidance for the current financial year to December 31, 2018. The airport operator had announced that it is projecting a growth in passenger movements of between seven and nine per cent to yet another record figure of around 6.5 million passengers. This was based on the current winter schedule as well as the summer schedule that had been confirmed by then. It is not clear whether this also includes the additional routes being operated by Ryanair starting in October.
On March 8, Ryanair disclosed that it will be operating a further eight routes to and from Malta in their next winter schedule which will lead to a total of 2.5 million passenger movements to Malta. This equates to an increase in 300,000 passenger movements from the 2.2 million registered in 2017. As such, Ryanair alone will therefore contribute to an increase in passenger volume of circa 14 per cent by 2019.
MIA’s financial targets for 2018 show an expected revenue figure in excess of €87 million (+5.6 per cent over the actual figure for 2017 of €82.4 million), Ebitda of more than €52 million (+7 per cent over the actual figure in 2017 of €48.6 million) and net profit in excess of €28 million (+15.7 per cent over the 2017 actual figure of €24.2 million).
The stronger growth in profitability of 15.7 per cent compared to the single-digit growth in revenue and Ebitda shows the benefits that will begin to accrue as from 2018 following the early repayment of the €11 million high interest rate loan in 2017 which led to a one-time penalty in that year.
Despite the remarkable financial performance as well as the ambitious investment programme, the market seems to have been disappointed that the final net dividend was left unchanged at €0.07 per share given the very strong balance sheet of the company with overall debt of only €33 million and cash of €38.4 million. In fact, the share price trended lower in the aftermath of the financial results and dividend announcement on February 21 and has so far failed to regain the €5 level.
Investors and financial analysts must view the dividend policy in the light of the sizeable investment programme being undertaken over the next few years, which could transform the financial model of the airport operator given the addition of circa 50,000 square metres of rentable area on completion of the master plan.
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