SEPANG – Malaysia Airports Holdings Berhad ("MAHB" or "the Group") recorded earnings before interest, tax, depreciation and amortisation ("EBITDA") growth of 99.2% to RM1,291.6 million for the nine month ended 30 September 2015 ("9M15"), when compared against the nine months ended 30 September 2014 ("9M14") of RM648,5 million. This was primarily driven by robust growth from the Group’s operations in Turkey which surpassed its passenger growth forecasts.
In recording its revenue for the prior periods, MAHB had adopted IC Interpretation 12: Service Concession Arrangements ("IC12"). Consequently, MAHB had recognised construction revenue and costs in accordance with FRS 111: Construction Contracts by reference to the stage of completion of the construction works of infrastructure assets. Thus for 9M14, MAHB had recognised construction revenue and cost of RM662.4 million and RM633.9 million respectively for klia2. However, since May 2014, no construction revenue and costs have been recognised in the current period.
Group Performance
Excluding the effects of IC12, the Group’s total revenue of RM2,834.1 million was 43.9% higher in 9M15, while EBITDA grew by 108.3% to RM1,291.6 million. Profit before tax ("PBT") had decreased by 19.1% to RM99.7 million while profit after tax ("PAT") rose by 40.7% to RM80.4 million. The 43.9% growth in revenue was attributable to improved results from the airport operations segment, up 43.2% to RM2,639.9 million, mainly contributed from MAHB’s Turkish operations in Istanbul Sabiha Gökçen Uluslararasi Havalimani Yatirim Yapim Ve Isletme A.S. ("ISG") and LGM Havalimani Isletmeleri Ticaret ve Turizm A.S. ("LGM"). Revenue from the non-airport operations segment also grew by 52.9% to RM194.2 million. However, higher depreciation and amortisation, operating and finance costs curtailed the impact of improved revenues, leading to a reduction in the Group’s PBT. The drop was cushioned by the net gain on disposal of the Delhi International Airport Limited ("DIAL"), amounting to RM22.1 million in May 2015 and a realised gain on foreign exchange of RM63.4 million, represented by the repayment of the EUR279.2 million loan following the weakening of the Euro against Ringgit in April 2015.
With the combined operating performance of ISG, the MAHB system of airports handled 83.7 million passengers in 9M15, a 5.9% growth over the same period in 2014. Similarly, aircraft movements grew 8.3% to 767,160 movements in 1H15.
Malaysia Operations
With ISG & LGM’s results excluded, MAHB recorded revenue of RM1,965.6 million for 9M15, which was 6.7% higher than 9M14. EBITDA improved by 24.2% to RM770.2 million. Both airport and non-airport operations segment revenues grew by 6.7% and 45.8% to RM1,965.6 million and RM185.1 million respectively. MAHB’s Malaysian operations also recorded improved PBT and PAT by 71.5% and 212.6% to RM211.5 million and RM178.6 million respectively. The improvement in PBT and PAT was mainly due to the net gain on disposal of DIAL and the realised foreign exchange gains due to the weakening of the Euro against the Ringgit. The improvement in PBT and PAT has been curtailed by higher depreciation and amortisation, finance and operating costs.
Airport Operations Segment
Passenger movements at MAHB’s 39 airports in Malaysia stood at 62.4 million passengers for 9M15. Domestic and international passenger movements grew by 3.5% and 0.2% to 32.6 million and 29.7 million passengers respectively. Total aircraft movements grew 5.8% to 613,321 aircrafts. Passenger movements at KLIA increased by 0.6% while other airports in Malaysia recorded an aggregate growth of 3.8% in 9M15.
Growth in airport operations was driven primarily by non-aeronautical revenue, which had improved by 8.9% to RM926.9 million in 9M15. This improvement is due to the increase in rental and retail revenue by 8.7% and 9.1% respectively, in line with the larger commercial space at klia2 in 9M15 vis-à-vis 9M14. Aeronautical revenue on the other hand increased by 4.7% to RM1,038.7 million in 9M15, arising from higher aircraft movements and lower airline incentives compared to the previous corresponding period.
Non-Airports Operations Segment
The non-airport operations segment recorded revenue of RM185.1 million, representing a growth of 45.8% from the RM127.0 million achieved in 9M14. The growth was due to the higher revenue recorded in the projects and repair & maintenance segment. Revenue for the segment rose by 128.8% to RM109.3 million in 9M15, mainly due to the new facilities management work won, including for the provision of facilities maintenance and IT services at Hamad International Airport, Doha.
Revenue from the agriculture & horticulture segment had fallen by 5.9% to RM23.6 million, impacted by lower price attained for Fresh Fruit Bunches per tonne despite higher production volumes (9M15: RM437.89/53,147MT vs. 9M14: RM501.62/49,397MT). Meanwhile, revenue from the hotel segment dipped by 3.6% to RM52.2 million, largely due to lower occupancy rate.
Turkish Operations
ISG’s passenger movements recorded strong double-digit growth for both domestic and international sectors by 23.3% and 13.0% respectively, achieving an overall growth of 19.6% to 21.3 million passengers in 9M15. Overall aircraft movements rose 19.4% to 153,839 movements. When excluding revenue from jet fuel farm rental, ISG’s aeronautical and non-aeronautical revenue grew by 14.4% and 18.1% to RM318.0 million and RM288.0 million respectively in 9M15.
The favourable revenue growth was boosted by the robust growth in passenger movements, thus resulting in higher PSC and commercial contributions. By the same token, EBITDA grew by 16.6% to RM492.1 million. Revenue from LGM had risen by 29.7% to RM92.6 million while EBITDA stood at RM23.5 million. ISG and LGM collectively recorded a PBT of RM30.6 million prior to taking into account the loss of RM142.4 million recognised primarily due to the amortisation of fair value for the concession rights.
Industry Review
Third quarter performance was contributed by large increase in movements especially in July and August whereby the international movements were highest. This was contributed both by Raya travel and summer holiday travel. The China and Middle East sector is showing continued signs of recovery. The Europe sector which recorded positive growth in July and August registered a negative in September partly due to the recent Malaysia Airlines frequencies cuts, which have not been taken up by other airlines. Istanbul SGIA’s passenger traffic performance remained robust with a growth of above 20% for the quarter.
Industry Outlook
The IMF in October 2015 has further revised the global economy forecast downward for 2015 to 3.1% from 3.5% projected in April and 3.3% in July. IMF announced slower growth in emerging and developing economies with downside risks due to pressure on commodity prices, currencies and financial market. The Malaysian economy grew by 5.3% in the first half of 2015 and is expected to expand between 4.5% and 5.5% this year despite a slower global growth of 3.1%.
The return of British Airways in May and All Nippon Airways in September provide the added dynamism required by the aviation industry in Malaysia. In addition Air China has returned to KLIA in October after a hiatus of 3 years. Malaysia Airports looks forward to enjoying an even greater level of connectivity for its passengers with the re-introduction of these airlines as they recognise the strong growth opportunities that exist in the Malaysian market. Istanbul Sabiha Gokcen’s traffic performance remains buoyant and is expected to end the year with a high double-digit growth in the range of 20%, exceeding the 15% growth forecast for the year.