SYDNEY AIRPORT WEIGHS UP CHANCES IN THE WEST

Written on the 18 February 2016 by Nick Nichols

SYDNEY AIRPORT WEIGHS UP CHANCES IN THE WEST

RISING capacity and passenger numbers have boosted Sydney Airport's (ASX:SYD) bottom line in calendar 2015, as the group announced it is likely to start deciding later this year on its prospects of developing the new Badgerys Creek facility.

The listed entity enjoyed gains across all of its business divisions in the 12 months to the end of December, driven by a 3 per cent lift in passenger movements to 39.7 million.

Passenger growth was even stronger through international routes, rising 4.3 per cent thanks to improved capacity stemming from growth in Asian markets and the US. The biggest gains have come from the Philippines and China, followed by Sri Lanka and India.

Sydney Airport posted a bottom-line profit of $283 million for the year, built on a 5.6 per cent lift in EBITDA to $1 billion. The bottom-line result is up from $59.1 million in 2014.Revenue lifted 5.8 per cent to $1.23 billion, with the latest result also benefitting from the T3 acquisition from Qantas.

Sydney Airport took control of the passenger terminal from Qantas for $535 million in September last year and has since replaced what was a fixed-lease return for what it terms incremental aeronautical, retail and property revenues.

It says T3 is performing ahead of expectations.

Meanwhile, Sydney Airport says the federal government has indicated that it may issue it with a notice of intention to operate the new $2.5 billion Western Sydney Airport at Badgerys Creek sometime this year.

The airport would then have between four and nine months to exercise the option to develop and operate the new facility. It says it already has held more than 80 meetings with the government and stakeholders to progress the matter.

"The opportunity continues to be evaluated with the impact on all stakeholders being carefully analysed," it says.

Sydney Airport main concerns are the impact of the venture, which is due to open in 2025, on its credit rating, hurdle rates of return, cashflow and yield, growth potential and downside protections.

The group today announced a five-year capital expenditure program of $1.3 billion, with $400 million of that assigned to 2016. It delivered $339 million of that budget in 2015.

The expenditure program lifted net debt to $7.4 billion by the end of December last year.

Sydney Airport currently boasts total investor returns of 41 per cent, which is 46 percentage points ahead of the ASX100 accumulation index.

"We have delivered another strong result due to the continued growth of international passengers and investment driving yield expansion across all businesses," says Sydney Airport CEO Kerrie Mather.

"We have achieved a number of strategic objectives during the period, including entering new five-year IAAs (international aeronautics agreements), the landmark transaction with Qantas to take control of T3, commencing a major redevelopment of T1, transitioning our duty-free operator, and on-time, on-budget delivery of the $339 million capital investment program," she says.

Maher says these milestones will underpin a projected distribution of 30c per stapled security in 2016. This compares with the 25.5c payout it has announced for 2015.

Maher says the business strategy implemented by Sydney Airport has positioned it to deliver EBITDA and cashflow growth well above passenger growth.

"The macro environment is supportive, and operationally we continue to capitalise on aeronautical and commercial opportunities through investment and innovation.

"We're in excellent financial shape, with a strong balance sheet and financial flexibility to support the ongoing delivery of business expansion and ultimately cashflow growth."


Author: Nick Nichols

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