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BAA: Full year results
A 6.3% increase in passenger numbers and a 1% increase in average retail passenger spend were the drivers behind BAA’s better than expected performance for the full year to March 2005. BAA reported a 7.4% increase in revenue (to £2,115m) and a 9.1% increase in operating profits to £672m.
Increased operational efficiency kept the rise in the business’s underlying cost base to 5.4%, resulting in improved margins.
Profits on sales of fixed assets (transferred to a 50:50 property joint venture with Morley Fund Management) brought in profits of £112m and a £19m saving in net interest costs boosted pre-tax profits. Profit before tax grew 36% to £733m.
The stronger results reflect a recovery in air travel after a downturn in the first half of last year caused by SARS and the Iraq war. The current concerns are high oil prices and slowing economic growth, both of which could dampen volume growth. BAA forecasts a growth in passenger numbers of 3.5% for the current year. The share trades at 612p, on a prospective PE of 14.6x (2006 earnings). The yield is 3.6%.
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