The preliminary financial statements of Malta International Airport show improved profitability and strict cost control but perhaps failed to live up to the expectations indicated by the interim statements.
For the whole financial year, that is until March 31, 2005, MIA reported an operating profit of Lm5.9 million against the previous year's Lm3.6 million but 80 per cent of this operating profit was already booked by September 30, 2004, in the interims. In bottom line terms, 87 per cent of the Lm3.2 million reported for the financial year was earned in the first six months.
Of course, the first six months cover April to September, which include the peak summer months, so one would expect results for those six months to be substantially better than for the balance of the financial year but MIA notes that although over the whole year the 2.83 million passengers making use of the facilities were 5.6 per cent higher than during the previous year, most of the increase came in the June to October period, with the peak at 14 per cent in October. Between November last year and March the average increase was only two per cent over the equivalent period the previous year. MIA earned 60 per cent of its operating income during the first six months of the financial year.
Passenger traffic is crucial for MIA but the company runs perhaps the major nexus of Malta with the outside world and while it can do many things to stimulate this traffic, as it is, travelling to and from Malta depends on various factors outside the company's control, including Malta's attractiveness and competitiveness, which are hardly at their best.
I still believe there is lots of scope in developing Malta as a hub but this is something which must be actively developed, not merely passively awaited, and not enough has been done, at least certainly not as much as we were expecting back, say, 15 years ago. There is a lot of marketing and coordination to be done. Look at what The Netherlands did over generations, and now Dubai.
MIA is doing its share, trying to develop on four fronts. First, it is trying to encourage airlines to operate to and from Malta. It states that substantially the increase in passenger traffic achieved was the result of these efforts. Attracting new airlines to Malta is very important but, of course, it is very much a chicken-and-egg situation. Airlines want critical mass and critical mass comes from having airlines operating from Malta.
Second, MIA is developing its cargo business and promoting itself as an air cargo hub. Third, there is the development of the cruise-and-fly business and, together with Viset Malta plc, MIA is trying to attract international business; it's a business especially suited for inter-continental operators. MIA says that they had the first operation in May last year and have good prospects for 2006, albeit 2005 is unlikely to reach 2004's levels. MIA has 10.9 per cent shareholding in Viset, the company which is developing the Grand Harbour and operating the cruise liner terminal.
Lastly, MIA is developing its facilities in Luqa in two ways. It has finalised work on the retail outlets which helped compensate for the drop in revenue from the sale of tobacco and alcohol products brought about by the abolition of tax-free sales to EU destinations. Visitors can see a much more active retail area, with more variety of goods on sale, as well as better utilisation of precious space. Increasingly, airports have become high security zones and airport operators have to cope with the constraints security brings about. MIA is also working on utilising the land surrounding the present facilities into a Mediterranean Business Park.
MIA managed to marginally cut operating costs. Depreciation charges were lower than last year's but security costs were higher. Profit was also boosted by lower realised exchange losses and higher income from financial assets. Profit after tax for the year increased from Lm1.6 million in the financial year 2003/2004 to Lm3.2 million in 2004/2005. The shares are currently trading at around Lm1.20 which is 25 times the just reported earnings per share of 4c76. Net asset value per share is 32 cents.
A final dividend of 2c2 net of tax is being proposed, bringing total dividends for the financial year to 4c7 net, compared to the previous two years', when 2c8 net was paid for each.
Last month, MIA announced that it had been informed that the government intended to offer for sale 13.53 million shares (20 per cent of the issued shares) in the company and that it was envisaged that the transaction would be completed by the end of 2005. Nothing else was said and this leaves us all in great suspense!
pvazzopardi@usa.net
Mr Azzopardi is managing director of Azzopardi Investment Management Limited (www.azzopardi.com) which is licensed by the MFSA to provide investment services, including stockbroking. Mr Azzopardi or related parties, including the company and their clients, have an interest in securities mentioned. This article is only meant to provide information, which the writer believes to be accurate at the time of writing, and is not intended to give investment advice and its contents should not be construed as such. The value of securities, and the currencies in which they are denominated, may go down as well as up. Readers are requested to seek professional financial advice tailored to their own personal circumstances.