BAA’s group net debt rose by 3.6% from £10.4bn in 2010 to £10.8bn in 2011

BAA’s passenger numbers have recovered since the low point of the credit crunch, but its balance sheet is still in the red.  BAA’s group net debt rose by 3.6% from £10.4bn in 2010 to £10.8bn in 2011. Their first quarter pre-tax loss was £231.4m. The business owes more than £10bn, and so has a large annual interest bill (it paid out £388m last year), and spends £1bn annually on improving its airports. BAA has not made a quarterly profit since it was acquired in 2006.  It has not paid corporation tax in years, has borrowed even more to pay investors who leveraged up to the hilt when they bought the business in the first place. Does paying a sizeable dividend appear wise when you owe £10bn and you haven’t made a profit in years? 

 

BAA’s debt and dividend policy is a turbulent mix

Latest figures for BAA’s main assets – Heathrow and Stansted – contained one interesting admission: group net debt rose by 3.6% from £10.4bn to £10.8bn

25.4.2012 (Guardian business)

by Dan Milmo

BAA‘s passenger numbers have recovered since the low point of the credit crunch, but its balance sheet appears to be permanently coated in red ink. Britain’s largest airport owner reported a first quarter pre-tax loss of £231.4m, by now a regular occurrence for a business that owes more than £10bn, and thus has a large annual interest bill (it paid out £388m last year), and spends £1bn annually on improving its airports. Wednesday morning’s latest figures for BAA’s main assets – Heathrow and Stansted – contained one interesting admission: group net debt rose by 3.6% from £10.4bn to £10.8bn.

As well as reflecting an ongoing capital expenditure programme at Heathrow – including a makeover for Terminal 2 – BAA says the increase is caused by “restricted payments” which include a £60m dividend payment to BAA’s shareholders, led by Spain’s Ferrovial. BAA has not made a quarterly profit since it was acquired in 2006.

Jose Leo, BAA’s chief financial officer, admits that to the untrained eye it could look like BAA, which has not paid corporation tax in years, has borrowed even more to pay investors who leveraged up to the hilt when they bought the business in the first place. “You can take the conclusion that we are paying dividends by leveraging the business. That is not exactly the case,” says Leo. He adds that BAA is like many regulated businesses, such as utilities, in that it has positive cash flow (net cash flow of £250m in the quarter) but a demanding capital expenditure programme that runs at £1bn a year.

It means that in slow periods, such as the fourth and first quarters of the calendar year, it needs to turn to alternative sources of funding when the cash flow is not as vibrant as it is during peak spells. So, the quarterly dividend payment, part of a commitment to pay shareholders £240m a year, comes out of a revolving credit facility – a big overdraft – that allows BAA to borrow up to £2.7bn.

Does paying a sizeable dividend appear wise when you owe £10bn and you haven’t made a profit in years? As one analyst said this morning: “Debt makes you vulnerable to events.” Leo says things will change: “We are making an underlying profit [ie adjusted Ebitda of £231.2m] and at some point in time that will become a headline profit.” In the meantime, that dividend will jar many Heathrow passengers and airlines.

http://www.guardian.co.uk/business/blog/2012/apr/25/baa-debt-dividends

 


 

BAA (SP) Limited Results for the three months ended 31 March 2012

25 April 2012

BAA (SP) Limited, the owner of BAA’s two London airports of Heathrow and Stansted, today announces its results for the year ended 31 March 2012.

  • Passengers at Heathrow up 4.4% to a Q1 record of 15.7 million, with combined passengers at Heathrow and Stansted increasing 2.5% to 19.1 million
  • Revenue up 11.5% reflecting higher tariffs and continued strong retail performance
  • Adjusted EBITDA up 15.1% supporting further increase in Heathrow capital investment
  • Heathrow Terminal 5 voted world’s best airport terminal and Stansted world’s best airport for low cost airlines in the SKYTRAX 2012 World Airport Awards
  • Completed transition to long term capital markets financing platform with over £2.2 billion in new financing raised since the start of 2012
At or for three months ended 31 March(figures in £m unless otherwise stated) 2012 2011 Change (%)
Revenue 537.0 481.5 11.5
Adjusted EBITDA (1) 231.2 200.9 15.1
Cash generated from operations 250.1 231.8 7.9
Adjusted pre-tax loss (2) (80.7) (107.7) (25.1)
Pre-tax loss (231.3) (211.5) 9.4
BAA (SP) Limited consolidated debt (3)(4) 10,821.7 10,442.6 3.6
BAA (SH) plc consolidated net debt (3) (4) 11,368.7 10,992.2 3.4
Regulatory Asset Base(4) 14,063.8 13,849.7 1.5
Passengers (m) (5) 19.1 18.7 2.5
Net retail income per passenger (5) £5.84 £5.51 6.0

(1) Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation and exceptional items
(2) Adjusted pre-tax loss is before exceptional items and fair value adjustments
(3) Nominal net debt for ratio purposes, excluding intra-BAA group loans and including inflation-linked accretion
(4) 2011 net debt and RAB figures are as at 31 December 2011
(5) Changes in passengers and net retail income per passenger are calculated using unrounded data

Colin Matthews, Chief Executive Officer of BAA, said:

“Our first quarter results show that Heathrow remains resilient in a challenging economic environment, while our rising passenger numbers and revenue support our continued investment programme at Heathrow. This is a key driver of the transformational change in passengers’ experience of the airport, most recently reflected in Terminal 5 being voted the world’s best airport terminal. But there is still a huge amount to do. Whilst traditional markets like the US continue to perform well, the UK’s capacity constraints prevent Heathrow from adding new routes to the emerging economies which are so vital for trade and investment.”

Download the full press release including commentary and financial figures

 

http://www.baa.com/media-centre/press-releases/baa-(sp)-limited-results-for-the-three-months-ended-31-march-2012

 


and earlier, the results for the year to 31st December 2011

 

BAA annual results 2011

22 February 2012

 

BAA (SP) Limited, the owner of BAA’s two London airports of Heathrow and Stansted, today announces its results for the year ended 31 December 2011.

  • Heathrow operating at full capacity as it achieves record annual traffic
  • 87.4 million passengers at Heathrow and Stansted with 2% underlying growth at Heathrow
  • Strong service performance with highest ever passenger satisfaction at Heathrow
  • Revenue up 9.9% reflecting higher tariffs and continued strong retail performance
  • Adjusted EBITDA up 17.1% enabling continued significant Heathrow capital investment
  • Further increase in profitability and investment anticipated in 2012
  • Capital structure strengthened with £3 billion in new financing raised in last 12 months
  • New £2 billion Terminal 2 to deliver further state of the art facilities from 2014
At or for year ended 31 December(figures in £m unless otherwise stated) 2011 2010 Change (%)
Revenue 2,280.0 2,074.3 9.9
Adjusted EBITDA (1) 1,132.1 966.9 17.1
Cash generated from operations 1,132.2 918.5 23.3
Adjusted pre-tax loss (2) (166.7) (206.2) (19.2)
Pre-tax loss (255.8) (316.6) (19.2)
BAA (SP) Limited consolidated debt (3) 10,442.6 9,921.2 5.3
BAA (SH) plc consolidated net debt (3) (4) 10,992.2 10,401.1 5.7
Regulatory Asset Base 13,849.7 12,776.0 8.4
Passengers (m) (5) 87.4 84.3 3.7
Net retail income per passenger (5) £5.58 £5.29 5.5

 

Notes

(1) Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation and exceptional items

(2) Adjusted pre-tax loss is before exceptional items, gain on disposal of Gatwick airport, impairment of fixed assets and fair value adjustments

(3) Nominal net debt for ratio purposes, excluding intra-BAA group loans and including inflation-linked accretion

(4) BAA (SH) plc is the immediate parent company of BAA (SP) Limited

(5) Changes in passengers and net retail income per passenger are calculated using unrounded data

Colin Matthews, Chief Executive Officer of BAA, said:

“BAA delivered a strong operational performance in 2011 with record traffic levels and high service standards at Heathrow. Last year saw Heathrow’s best punctuality performance in over a decade and the international Airport Service Quality passenger survey showed that 70% of Heathrow’s passengers rated their experience as ‘Excellent’ or ‘Very Good’, compared with just 41% when the Ferrovial-led consortium bought BAA in 2006. We continued to invest significantly in further improving our airports during 2011, particularly on the new Heathrow Terminal 2.

“The group’s financial position has been strengthened with £3 billion in new financing completed in the last 12 months and we have fully repaid our £4.4 billion bank bridge loan nearly two years early.

“We are pleased that the UK Government recognised the importance of a successful hub airport to UK economic growth in its Autumn statement. All potential solutions to the UK’s lack of hub airport capacity have their pros and cons and all should be on the table to ensure the right solution is found for both the short and long term.”

Download the full press release including commentary and financial figures

Download the presentation

 

http://www.baa.com/media-centre/press-releases/baa-annual-results-2011