Heathrow’s dividends to shareholders grow, but profits have plunged, pension deficit grows, and net debt grows
Heathrow has released financial figures for the first 9 months of 2016, to the end of September. They show a drop in profits compared to a year earlier. There is a pre-tax loss of £293 million, compared to a £552 million profit in the same period in 2015, due to various exceptional items. Its pre-tax profit before these items — which include fair value gains and losses on property revaluations — showed an 11% increase to £202m. Revenue edged up 1.2% to £2.1bn. Heathrow’s consolidated net debt grew to £12.016 billion which was an increase of 2.3% from the same period last year, when it was £11.745 billion. Heathrow’s pension fund dropped from a surplus of £104 million on December 31st to a deficit of £370 million in just nine months — a £474 million loss. The company attributed this decline to “financial volatility” following the Brexit vote etc. If this size of deficit continues, Heathrow will be required to put more money into its pension scheme. The Sunday Times recently said that Heathrow and Gatwick had each spent about £30 million on advertising and promoting their runway bids. The 9 month accounts show £13 million on “intangible assets” (probably advertising etc) this year, and £11 million in 2015. They also show £32 million of Corporation Tax paid, and dividends paid of £486 million so far this year; £289 million in the same period of 2015; and £380 million in all of £2015.
Heathrow’s profits plunge and pension deficit grows as it awaits decision on third runway
The company’s financial results show a drop in profits just days before the Government is expected to announce its preference for expansion
By Cristina Criddle (Telegraph Business)
20 OCTOBER 2016
Heathrow has reported a plunge in profits and a £474m loss in its pension fund as it its campaign for a third runway reaches a climax.
Prime Minister Theresa May will announce the Government’s preferred choice for airport expansion by the end of the month — opting for either Gatwick or Heathrow.
In its financial results for the nine months to September 30, Heathrow reported a pre-tax loss of £293m, compared to a £552m profit in the same period a year earlier, following a mass of exceptional items.
Its pre-tax profit before these items — which include fair value gains and losses on property revaluations — showed an 11% increase to £202m. Revenue edged up 1.2% to £2.1bn.
Meanwhile, the pension fund of Britain’s largest airport dropped from a surplus of £104m on December 31 to a deficit of £370m in just nine months — a £474m loss. The company attributed this decline to “financial volatility” following the Brexit vote and falling corporate bond yields. [This deficit is partly caused by the current low interest rates – but if such a huge deficit continues, Heathrow should put some money into the fund. The Pensions Regulator will be looking at the issue. Such a large swing from surplus to deficit is unusual. The Heathrow pension fund is managed by the trust company. AW note]
Heathrow’s debt also grew. Consolidated net debt was £12bn, (£2,016 million consolidated net debt) up 2.3% from the same period last year, when it was £11,745 million.
Despite its results, the airport today insisted that expansion on its site was the “right choice to help make Britain stronger and fairer for everyone”.
Chief executive John Holland-Kaye said the airport has “broad support” for its third runway plans and praised the Prime Minister for “showing leadership” after years of uncertainty.
“We stand ready to deliver the runway that will keep Britain a confident, outward looking trading nation as soon as we get the green light from government,” he added.
Mrs May, however, has been warned by her own ministers that she will be “making a huge mistake” if she backs expansion of Heathrow Airport.
Today it emerged that David Cameron was warned by his own policy chief a year ago that the Government was “exposed on Heathrow” because it had no answers to concerns raised over air quality.
A third runway would create up to 180,000 jobs and £211bn of growth across the country, it added.
Heathrow said its energy footprint continued to shrink.
The airport also announced plans to add 25,000 annual flights to existing runways from 2021 to give the UK a “Brexit Boost”.
A record 57.3m passengers used Britain’s biggest airport in the nine months to September 30, up by 0.7pc, but the airport is operating at almost full capacity.
Heathrow Airport pays out £225m to investors while asking for public cash
By NICHOLAS CECIL (Evening Standard)
Heathrow was caught in a financial row today just days before the Government is expected to give the go-ahead for a third runway.
The west London airport faced criticism after it announced it was paying £225 million in dividends to investors for 2016, while also asking for public money to improve the transport system for another runway.
Its pre-tax profit increased 11% to £202 million in the first nine months of the year.
Revenue rose 1.3% to £2.1 billion but overall it posted a £293 million loss due to exceptional items.
Mr Holland-Kaye was grilled on BBC radio on pay-outs to investors of more than £2 billion over the last four years.
Reacting to the figures, Hammersmith Labour MP Andy Slaughter said: “If Heathrow can afford to pay such large sums in dividends to shareholders, why are they offering a fraction of the costs to improve road and rail networks that a third runway would require – and letting the taxpayer pick up the bill?”
The airport defended the dividends, stressing investors had put in £11 billion in past years to pay for Terminal 5 and Terminal 2 to maintain the airport as a global leader.
Part of the dividends were for sales of Stansted and Edinburgh airports, a spokesman added.
Heathrow has pledged to pay an unspecified share of £1 billion for surface access improvements needed for a third runway. [Heathrow CEO John Holland-Kaye told the Environmental Audit Select Committee at its inquiry last year that Heathrow would only be prepared to pay £1.1 billion towards improved road and rail access. AW note]
But Transport for London says the figure could end up being between £10 billion to £20 billion.
The Heathrow 9 month accounts say:
In the nine months ended 30 September 2016, gross restricted payments of £556 million (net restricted payments £461 million) were made by the Group which principally funded the majority of the £225 million in quarterly dividends paid to the Group’s ultimate shareholders …
But the tables have the figures of dividends paid of £486 million so far this year; £289 million in the same period of 2015; and £380 million in all of £2015.