More on BAA
BAA: H1 results
BAA reported a 6.4% increase in revenues (to £1,173m) and a 9.6% increase in operating profits (to £412m) for the half year to September 2005.
Revenue growth was driven by a 2.5% increase in terminal passengers, an increase in aeronautical
tariffs and good retail performance. The better retail performance was due to a combination of higher numbers and increased level of spend per passenger (up 1.2% to £4.08).
Underlying operating costs grew by 4.8% (to £761m) lagging sales growth thus widening margins. The increases were largely in rent, rates and utilities (up 17%). Higher staff costs (+3.5%) were partially offset by increased productivity.
Much of the growth was concentrated in the regulated airports (where profits rose by 9% to £337m), particularly Heathrow (profits up by 13% to £337m).
The company’s plans to cut 700 back office and management jobs as part of its reorganisation programme, is expected to deliver annual savings of £45m from 2008/09 at a one-off cost of £90m could help maintain growth.
The main risk to earnings at BAA is a drop in air travel, which could be triggered by slowing economic conditions. High oil prices could also play a role, both in deterring travel and if they cause the world economy to slow; in the light of which the reorganisation plans announced are both prudent and timely.
The share trades at 614.75p, on a prospective PE (2005 earnings) of 14.6x at the upper end of the sector, with a yield of 3.6%.
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