Announcement
INTERIM: AIA: AIA - 1H20 Interim Results
08:31am
AIA
20/02/2020 08:31
INTERIM
PRICE SENSITIVE
REL: 0831 HRS Auckland International Airport Limited
INTERIM: AIA: AIA - 1H20 Interim Results
Media release | 20 February 2020
Auckland International Airport FY20 Interim Results
Historic period of transformation: $1.2 billion of infrastructure projects
now under construction as Auckland Airport announces a new international
arrivals area and advances plans for the Domestic Jet Hub
Auckland Airport today announced its financial results for the six months to
31 December 2019. Board Chair Patrick Strange said: "Auckland Airport is well
underway with the biggest transformation in our history to modernise and
expand the precinct to become an airport of the future. There is strong
momentum in our infrastructure development programme with construction in
progress on four of our eight key anchor infrastructure projects. Our focus
is on delivering for customers and for New Zealand and it's been a solid
start to the financial year as we continue our work on significant new
aeronautical infrastructure and advance plans for a new Domestic Jet Hub."
Highlights
[Please see attached Media Release PDF for table of Highlights]
o Solid performance delivering earnings before interest expense, taxation,
depreciation, fair value adjustments and investments in associates (EBITDAFI)
of $279.2 million in the first half of the 2020 financial year, a rise of
0.8% on the previous half-year period. Results reflect several factors,
including moderating passenger growth and the impact of the discounts
announced in February last year to the airport's previously published
aeronautical prices.
o Total investment in infrastructure projects now under construction has
reached $1.2 billion as part of a broader $1.5 billion development programme
underway across the precinct.
o Announced the construction of a new $350 million-plus 30,000m2 arrivals
area at the international terminal, with site enabling works underway and
vertical construction to begin mid-2020. It's the fourth of eight key anchor
infrastructure projects to get underway over the past year, alongside an
expansion and redevelopment of the airfield and transport improvements across
the precinct.
o Interim construction alliance negotiated and now formed to accelerate the
delivery of the new Domestic Jet Hub, a $1 billion-plus terminal to be
connected to the international terminal. The alliance is between Auckland
Airport, Hawkins (a Downer company), Fletcher Construction and designers Mott
MacDonald.
o Continued strength in Auckland Airport's property business with $300
million of investment assets under construction in the first half of the 2020
financial year, including a new hotel and an 85,000m2 warehouse and office
facility for Foodstuffs NZ. Additional investment in the new Te Arikinui
Pullman Hotel under a joint venture partnership.
o Strong pipeline of new investment opportunities ahead. New pre-committed
investment property developments of over $60 million for DHL Supply Chain,
Hellman Logistics, and Interwaste - all within The Landing Business Park.
Solid performance in first half of the 2020 financial year
Auckland Airport reported revenue growth of 1.1% on the first half of the
2019 financial year to $374.7 million, while total reported profit after tax
was flat on the prior period at $147.2 million. Underlying net profit, which
excludes unrealised gains and losses arising from revaluation of property or
treasury instruments, increased 2.2% to $139.9 million.
Overall passenger numbers were 10.6 million, down 0.5% on the first half of
the 2019 financial year, reflecting changes in international visitor source
markets and reductions in airline seat capacity as airlines consolidated
their networks. International passenger numbers including transits were up
0.2% to 5.8 million during the period, while domestic passenger numbers were
down 1.2% to 4.7 million due to Jetstar's exit from regional services and
other reductions in airline seat capacity impacting passenger demand.
"Global tourism has experienced rapid expansion in recent years and it's
clear that the market has cycled into a consolidated phase and this is
naturally reflected in our interim results. We are also working closely with
our airline and tourism partners to understand the impact of the Covid-19
outbreak. But we remain confident about our prospects over the medium to
longer term and continue to lay the groundwork for future growth," said Mr
Strange.
Auckland Airport welcomed new services to the network in the first half of
the 2020 financial year, with new international routes to Vancouver and Seoul
commencing along with the announcement of new services to New York and
Dallas/Fort Worth. The Chinese market continued to evolve during the period
and while passenger numbers softened overall, the trend of high-value
independent traveller Chinese nationals flying direct to New Zealand and
staying for longer continued in the first half of the 2020 financial year
with these direct passengers up 5.3% on the prior period.
"Routes between Auckland and mainland China make up 5.9% of total overall
seat capacity and while we are anticipating that the Covid-19 outbreak will
continue to impact the Chinese market and possibly other markets for the
remainder of the current financial year, it's still too early to judge the
final impact.
"With more than 21 million people passing through Auckland Airport every
year, our focus has been on providing a great experience for our customers.
We have worked hard to deliver important terminal improvements and to
streamline processes for travellers and it's great to see these gains
reflected in our customer satisfaction scores," Mr Strange said.
In the first half of the 2020 financial year, Auckland Airport's combined
customer satisfaction rating (Airport Service Quality) for the domestic and
international terminals climbed to its highest annual score in six years:
4.16 out of 5.
The uplift in customer satisfaction reflected improvements delivered as part
of the multi-million-dollar 36,000m2 transformation of Auckland Airport's
international terminal departure area, along with works to upgrade the
existing domestic terminal building, such as expansion of the security
screening area and the food precinct.
Building an airport of the future - International arrivals and Domestic Jet
Hub
The arrival point for more than five million Kiwis returning home and
visitors to New Zealand is set for a $350 million-plus expansion as Auckland
Airport begins work on a new international arrivals area.
"The investment will add more than 30,000m2 of floor space or roughly three
rugby fields to the current footprint of the international terminal, bringing
a significant increase in space for border processing, biosecurity screening,
retail, public dwell and back of house areas," said Auckland Airport Chief
Executive Adrian Littlewood.
"We want everyone stepping off a long flight to feel the warmth of
manaakitanga, a generous and warm welcome that is uniquely Aotearoa New
Zealand, when they arrive into Auckland Airport. The expanded area will also
help to strengthen New Zealand's border to prevent pests and diseases from
entering the country and allow for the automation of many biosecurity
processes. Scheduled for completion in late 2023, the expanded area will also
deliver a 50% capacity increase in Biosecurity New Zealand and New Zealand
Customs processing space, helping to improve peak time capacity."
The arrivals expansion is the fourth of eight key anchor infrastructure
projects to get underway over the past year: large-scale roading; airfield
and terminal infrastructure developments which will deliver greater capacity
and resilience. A highlight will be a more efficient roading system to enable
public transport, to prioritise traffic heading to the terminals and to
ensure safer and reliable journeys.
Roading improvements will also support infrastructure development and
integrate with the improvements Waka Kotahi NZ Transport Agency and Auckland
Transport are making to the airport's southern access point - SH20B.
"Auckland Airport is becoming an increasingly important business hub, with
more than 900 businesses and 20,000 workers based at or near the airport,"
said Mr Littlewood.
"Despite growth leveling off recently, traveller numbers are estimated to
more than double to 40 million-plus per year by 2044. We know that we need to
work fast to progress our transformation plans and our core focus is on
delivering the essential aeronautical infrastructure New Zealand needs to
succeed for the future.
"We are investing heavily in our airfield with $720 million to be spent over
the next four years in renewing, maintaining and expanding the airfield and
associated airfield utilities. We are making good progress with our airfield
expansion: building new taxiways and remote stands, and creating headroom for
the parking and servicing of aircraft as we make way for further
infrastructure development.
"Our team is accelerating progress of the Domestic Jet Hub - a $1
billion-plus development to be connected to the current international
terminal and one of our most important anchor projects.
"It's no secret that the complexity of delivering such a large-scale
vertical development in both a constrained construction market and a 24/7
operating environment has created some challenges for us. However, we have
made significant strides in advancing the design and delivery model for the
project over the period, with enabling works for Domestic Jet Hub now
underway in and around the future building footprint. We have worked closely
with our airline partners to understand their requirements and we are now
moving from preliminary to developed design," Mr Littlewood said.
A project alliance is being formed to build and deliver the Domestic Jet Hub,
with an interim alliance agreement now in place between Auckland Airport,
Hawkins (a Downer company), Fletcher Construction and Mott MacDonald.
Common in horizontal infrastructure developments such as roading or rail, the
vertical construction alliance will be made up of a 150-strong project team,
with an estimated 1,600 contractors at the peak of development to deliver a
new domestic jet-only pier, a retail area, and a new food and beverage
precinct.
"For a build as complex as the Domestic Jet Hub, we need to tackle the
project differently, shifting away from traditional procurement practices to
a delivery model based on shared responsibility and collaboration, in line
with the new Construction Industry Accord. The alliance will also provide the
capacity we need in a constrained construction market to successfully deliver
such a large-scale development," said Mr Littlewood.
Construction for the project is expected to begin in late-2020 with the first
stage of the project due for completion in 2023.
Developing the airport precinct
The scale and pace of development continues to provide new opportunities for
growth and job creation at Auckland Airport, one of the fastest-growing parts
of Auckland city.
Construction is well underway on two new quality hotels, each providing a
complementary offering to appeal to a range of travellers. Built in
partnership between Auckland Airport and Tainui Group Holdings, the luxury Te
Arikinui Pullman Hotel is a 311-room, five-star hotel that is now emerging on
the doorstep of the arrivals area at the international terminal. Generating
200 new jobs once the hotel is open, construction is expected to be complete
in 2022.
Further north across the precinct, construction on the airport's fourth hotel
is also progressing well - a 146-room, four-star property to be operated by
Accor Group under the Mercure Hotel brand. Located near the existing airport
retail centre, the project is generating an estimated 100 jobs during its
construction and will employ around 82 full-time workers on its completion in
2021.
"The performance of our property investment business has been a highlight for
the first half of the 2020 financial year with annualised rent roll of $104.7
million, growth of 11.4% against the first half of the 2019 financial year
and our portfolio achieving 99.4% occupancy for the period. Momentum is
accelerating, with $300 million of investment properties under construction
in the first half of the 2020 financial year.
"In quarter three, the property team will begin the development of almost
40,000m2 of new, pre-leased premium facilities. This includes a new
state-of-the-art 4,000m2 purpose-built facility for Interwaste. This facility
will service waste from Auckland Airport, Ports of Auckland, Port of Tauranga
and the majority of the District Health Boards in the North Island.
"We're also progressing a number of transport-related projects, including a
new 3,200-bay Park & Ride facility south of the airport and enabling works at
the international terminal to allow for the development of a new multi-storey
car park to meet growing customer demand.
"The pipeline of investment property work for the remainder of the 2020
financial year is very positive with more than 65,000m2 and over $100 million
of development under discussion," said Mr Littlewood.
Growing the precinct safely and sustainably with a community focus
As construction ramps up, Auckland Airport is working to connect local people
with local jobs through Ara - Auckland Airport's Jobs and Skills Hub. In
November 2019, hundreds of job seekers and employers took part in Auckland
Airport's first-ever job expo, held in partnership between the Ministry of
Social Development (MSD), Auckland Business Chamber and Ara.
"Thousands of jobs will be created at the airport precinct over the next 30
years, and we are working with our partners to ensure local people can make
the most of the career opportunities that are on their doorstep, while
helping local employers to fill any vacancies they have," said Mr Littlewood.
While pressing ahead with new initiatives to boost local employment, Auckland
Airport continues to seek opportunities to lighten our impact on the
environment.
Auckland Airport is focused on progressing designs that reduce energy, carbon
and waste, drawing on best practice in sustainable design to guide
decision-making through the planning, design and construction phases. This
includes consulting with the New Zealand Green Building Council (NZGB) and
the Infrastructure Sustainability Council of Australia (ISCA), as well as
preparing a sustainable design and construction manual to guide the
activities of Auckland Airport and our suppliers, supporting the delivery of
sustainable outcomes through the design and construction process. An example
of this is the construction of a new 75,000m2 distribution centre for
Foodstuffs NZ with a Green Star rating of 6 stars and a roof to support the
6,000m2 of solar panels now being installed.
"Auckland Airport has a proud history of being a business focused on the long
term and we want to ensure that we are minimising any impact of our
development programme.
"This also extends to workplace safety. With so much development going on at
the airport, we are committed to ensuring the safety and security of everyone
working at and travelling through the precinct. Our strong safety culture
includes a health and safety forum where we collaborate with our construction
partners to ensure we share information, manage safety standards and improve
outcomes for our people and contractors.
"The scale and pace of change at Auckland Airport also means we need to work
hard to keep travellers and local businesses informed about construction work
here, particularly on how it could impact their journey."
Auckland Airport has launched a new campaign called Stay in the Know,
combining a marketing strategy with a series of other communication tools -
including a new website, fortnightly development update newsletters, videos
and the quarterly AKL Update publication - to keep the public and
stakeholders up to date with progress on our construction programme.
"Like many parts of Auckland, there is a significant amount of infrastructure
change happening at Auckland Airport. It's exciting, but we also want to make
sure that we are upfront about the disruption all this construction might
cause on a day-to-day basis, to make sure they can plan ahead and keep safe
on the road," said Mr Littlewood.
Outlook
As we look to the remainder of the financial year we expect underlying profit
after tax (excluding any fair value changes and other one-off items) for the
full year to be between $260 million and $270 million. This is a slight
reduction on the original guidance for the year, reflecting Auckland
Airport's current estimates of the impact of the Covid-19 outbreak. We will
continue to monitor developments and update guidance if actual outcomes
differ materially from current assumptions.
We expect total capital expenditure for the current financial year of between
$450 million and $550 million, and total aeronautical capital expenditure
during PSE3 is still forecast to be broadly consistent with the original PSE3
pricing forecasts.
As always, this guidance is subject to any material adverse events,
significant one-off expenses, non-cash fair value changes to property, and
deterioration as a result of global market conditions or other unforeseen
circumstances.
$2 billion PSE3 infrastructure development programme to provide capacity for
an increase in passenger numbers, forecast to more than double to 40
million-plus by 2044.
Eight key anchor projects
Four underway
-New international arrivals area
-Airfield expansion - stands and taxiways
-Roading upgrade - northern network
-Domestic terminal works
Four in early to advanced stages of planning
-Domestic Jet Hub
-Pick-up and drop-off and multi-storey car park 1
-Northern runway
-Cargo precinct
$1 billion-plus Domestic Jet Hub
-Enabling works now underway
-Moving from preliminary to concept design
-Interim construction alliance now formed for the Domestic Jet Hub
Auckland Airport
-Hawkins (a Downer company)
Fletcher Construction
-Mott MacDonald
Developing the precinct
-$300 million of investment properties under construction in the first half
of the 2020 financial year including the 146-room Mercure Hotel
-Additional investment in the 311-room Te Arikinui Pullman Hotel as part of a
joint venture partnership with Tainui Group Holdings
-Park & Ride South development, providing 3,200 car-parking spaces
-85,000m2 facility for Foodstuffs NZ
-Auckland Airport continues to investigate commercial on-precinct retail
property opportunities to complement existing retail developments
ENDS
To download or view a video about our arrivals project, click here:
https://vimeo.com/392128348
For further information, please contact:
Media:
Head of Communications and External Relations
Libby Middlebrook
+64 21 989 908
libby.middlebrook@aucklandairport.co.nz
Investors:
Investor Relations and Reporting
Suzannah Steele
+64 9 257 7042
suzannah.steele@aucklandairport.co.nz
End CA:00348699 For:AIA Type:INTERIM Time:2020-02-20 08:31:47
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