Sydney Airport (ASX: SYD) is a key driver of tourism, jobs and economic growth in the state of New South Wales, supporting $38bn in economic activity each year. Sydney Airport held its Annual General Meeting (AGM) on 24 May 2019. At the AGM, the chairman highlighted the achievements of Sydney Airport mostly relating to the year 2018.
In 2018, Sydney Airport hosted 44.4 million passengers, 2.5% growth as compared to 2017. During the year, SYD reported strong passenger, revenue and EBITDA growth while the company continued to enjoy the benefits of tightly controlled operating costs. The strong results during the year drove an increase in the company’s Net Operating Receipts of 9.4% and distributions to investors in 2018 of 37.5 cents per stapled security.
2018 Financial Highlights (Source: Company’s Reports)
The Chairman also reaffirmed its 2019 distribution guidance of 39 cents per stapled security, representing 4.0% growth on 2018.
On 24 May 2019, SYD also released an update on SAT1’s Danish tax indemnity for which the chairman has reiterated that, regardless of the outcome of the case, it will have no material impact on the Airport’s NOR and its guidance.
As per the update, SAT1 has assessed that
- some or all of the $119.1 million non-current receivable in the 31 December 2018 Financial Report relating to the indemnity previously paid may need to be expensed
- a future call on its indemnities is possible, up to a maximum of $61 million as at 30 June 2019.
While addressing the shareholders at the AGM, SYD’s CEO highlighted that the company witnessed strong growth across its four business units.
Growth across the business (Source: Company Reports) Aero revenue was up by 7.6% on the back of strong international passenger growth. In 2018, the international passengers increased to 16.7 million, up 700k over 2017, which was a great result. Retail revenue also increased by 7.2% in 2018, growth coming from number of sources: new leasing deals in Terminal 2, favorable lease escalations and strong performance from specialty stores performed. In the Property business SYD witnessed a growth of 7.5%. Moreover, Parking and Ground transport grew by 1.7%, ahead of domestic passenger growth which tends to be the Airport’s benchmark.
In 2018, the company witnessed a 4% increase in Australian passengers off a huge base, which represents around 290,000 additional passengers over the course of the year.
In the expected that the Airport will experience more subdued growth in passengers , as depicted in the first 4 months of 2019. The Airport is confident about the growth profile of the aero business in the medium and longer term, particularly given the world of possibilities that remain.
SYD is currently looking at opportunities in freight, logistics, catering, lounges and advertising. It believes that there are still significant amounts of unutilised land that can support the growth of the airport.
At the time of writing, i.e., on 24 May 2019 AEST 3:19 PM, the stock of the company was trading at a price of A$7.615, up 1.398% during the day’s trade with the market capitalisation of ~A$16.95 Bn. The stock is having a dividend yield of 4.99% and PE multiple of 45.430x.
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