Last Thursday, Malta International Airport plc issued two company announcements. Early morning, the company published its 2017 interim financial statements and declared an interim dividend to shareholders following a board of directors meeting held the previous day. Meanwhile, in late afternoon, the airport operator issued a further announcement wherein it upgraded its passenger and financial forecasts for 2017.
MIA is the only company currently publishing financial results on a quarterly basis. Moreover, the company also issues its traffic results on a monthly basis. Following the publication of the Q1 financial statements on May 16, coupled with the significant increase in passenger movements on a monthly basis, it should therefore not be a surprise that MIA reported revenue growth of +16.7 per cent during the first six months of 2017 to a record €36.7 million.
Turnover from the airport segment increased by 19.1 per cent to €25.9 million (H1 2016: €21.8 million) reflecting the 20.3 per cent increase in passenger movements during the first six months of 2017 to nearly 2.64 million. Meanwhile, revenues from the retail and property segment increased by 10.7 per cent to €10.5 million (H1 2016: €9.5 million). As a result, the airport segment contributed 71.4 per cent of total revenues (H1 2016: 69.6 per cent) while the retail and property segment accounted for 28.6 per cent (H1 2016: 30.4 per cent).
Despite the notable growth in business, operating costs increased by only 4.3 per cent to €19.1 million, reflecting a marginal rise in staff costs (+1.7 per cent to €3.84 million) and more meaningful increases in other operating costs (+6.9 per cent to €11.9 million). As a result, earnings before interest, tax, depreciation and amortisation (Ebitda) surged by 26.7 per cent to €20.9 million (H1 2016: €16.5 million) and the Ebitda margin improved to 57 per cent from 52.5 per cent in the first half of 2016. Depreciation charges dropped by 1.2 per cent to €3.37 million resulting in an operating profit of €17.6 million (+33.8 per cent).
After accounting for net finance costs of €0.51 million (H1 2016: €0.47 million), MIA reported a pre-tax profit of €17.1 million, representing a 34.6 per cent increase over the previous comparable figure of €12.7 million. The tax charge for the period amounted to €6.11 million, leading to a net profit of €11 million which is 34.8 per cent higher than the net profit registered during the previous comparable six months (€8.16 million).
The statement of financial position as at June 30 shows a 6.2 per cent growth in total assets to €183.1 million while total shareholders’ funds edged 1.8 per cent higher to €86.6 million. The most interesting aspects within the balance sheet are the cash balance of €36.6 million and the overall debt of €44.5 million. As such, the company’s net debt position stands at only €7.9 million.
Is MIA correct in maintaining such a high cash balance ahead of its additional capital expenditure plans when it has such a low level of bank loans and generates Ebitda of well over €40 million per annum?
Despite the significant growth in profits, the interim dividend was unchanged for the 10th consecutive year. It has been the company’s policy so far to declare a consistent interim dividend and then adjust the final dividend accordingly depending on various factors. As such, a net interim dividend of €0.03 per share was declared to all shareholders as at close of trading on August 21 which will be paid by not later than September 22.
MIA held a press conference detailing the mid-year traffic results and providing an upgrade to the passenger and financial forecasts. The 20.3 per cent growth in passenger numbers to a record of just under 2.64 million was as a result of a 19.3 per cent increase in seat capacity as well as a 0.4 percentage point improvement in the seat load factor to 80.4 per cent. MIA’s CEO Alan Borg hailed the positive movement in the seat load factor which normally decreases once seat capacity increases by such a wide margin. However, Borg explained that the positive development in the seat load factor is also evident across European airports.
Additionally, the CEO also claimed that the double-digit passenger growth in each of the first six months of 2017 is a remarkable achievement.
Traffic from the UK increased by 10.3 per cent, partly reflecting the start of the new cruise and fly programme operated by P&O. The UK market remains the largest source market with a share of 26 per cent followed by Italy at 21 per cent. The Italian market registered a 19.4 per cent rise in traffic during the first half of 2017. Traffic from Germany improved by 21.7 per cent while the French market also achieved a 19.4 per cent increase in traffic. The Belgian market reported a significant increase of 204.6 per cent, while growth rates of 63.7 per cent and 26.5 per cent were recorded from the Spanish and Polish markets respectively as new routes were introduced.
Following the 20.3 per cent growth in passenger movements during the first half of 2017 and details of the upcoming airline winter schedule (November 2017-March 2018), MIA now expects passenger movements to reach circa 5.8 million representing a growth rate of between 14 to 16 per cent over last year’s record.
Borg said that during winter 2017/18, Ryanair and EasyJet will be introducing four new routes apart from increased frequencies of various existing routes. Meanwhile, Air Malta, Wizz Air and Aegean Airlines will extend a number of routes they operated during the summer months also into the winter season. Furthermore, SAS, Lufthansa, Vueling and Jet2 will also be increasing flight frequencies on some of their routes.
On January 11, MIA had forecasted a growth of between two to three per cent in passenger numbers to 5.2 million for 2017, so last week’s announcement represents a significant upgrade for the company.
Moreover, last January, the company had also presented a set of financial targets for 2017 showing expected revenues of €73 million, Ebitda of over €40 million and a net profit of over €20 million. Following the sizeable improvement to the forecasted passenger numbers, MIA also upgraded its financial targets. The company is now expecting its overall revenue to exceed €79 million which would represent an increase of at least 8.1 per cent over the 2016 figures. Ebitda is expected to rise to over €45 million (+12.5 per cent) with net profits amounting to over €23 million (+9.6 per cent).
An interesting revelation last week is that the company expects that its net debt position will be nil by the end of 2017 compared to a previous expectation of not more than €14 million and a current level of €7.9 million.
Is MIA correct in maintaining such a high cash balance ahead of its additional capital expenditure plans when it has such a low level of bank loans and generates Ebitda of well over €40 million per annum? This is one of the areas that financial analysts and shareholders should focus upon. Company directors should truly ensure that a company’s financial position is optimised to enhance shareholder returns further.
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