SEPANG – Following the recent acquisitions of Istanbul Sabiha Gökçen Uluslararasi Havalimani Yatirim Yapim Ve Isletme A.S. (“ISG”) and LGM Havalimani Isletmeleri Ticaret ve Turizm A.S. (“LGM”), Malaysia Airports Holdings Berhad ("MAHB" or “the Group”) had registered earnings before interest, tax, depreciation and amortisation (“EBITDA”) of RM403.3 million, representing growth of 56.3% for the three months ended 31 March 2015 (“1Q15”). Revenue also grew by 12.2% to RM876.2 million when compared to the corresponding quarter in 2014 (“1Q14”).
In recording its revenue for the prior periods, MAHB adopts IC Interpretation 12: Service Concession Arrangements (“IC12”). Following this, the Group recognises 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. For 1Q14, MAHB recognised construction revenue and cost of RM121.6 million and RM116.4 million respectively for klia2. There were no construction revenue and cost recognised in the current quarter due to the completion of klia2 in May 2014.
Group Performance
Excluding construction revenue and costs, the Group registered total revenue of RM876.2 million or 32.9% higher in 1Q15, while EBITDA grew by 59.6% to RM403.3 million. Profit before tax (“PBT”) had decreased by 77.4% to RM39.3 million while profit after tax (“PAT”) had also decreased by 74.1% to RM32.0 million. The 32.9% growth in revenue was attributable to improved results from the airport operations segment which grew by 32.3% to RM821.1 million, mainly contributed from MAHB’s Turkish operations in ISG and LGM. Revenue in non-airport operations segment grew by 42.3% to RM55.1 million. However, higher operating, finance, depreciation and amortisation costs curtailed the impact of improved revenues, thus causing a reduction in PBT. The drop was cushioned by an unrealised gain on foreign exchange of RM63.4 million, represented by the translation of an outstanding EUR279.2 million loan due to the weakening of Euro against Ringgit in 1Q15.
Including ISG, the MAHB system of airports handled 26.0 million passengers in the first quarter of 2015, a 2.0% growth over the same period in 2014. Similarly, aircraft movements grew 8.7% to 245,258 movements in 1Q15.
Malaysia Operations
Stripping out ISG & LGM’s results altogether, MAHB recorded revenue of RM694.5 million for 1Q15, which was 5.3% higher than 1Q14. EBITDA improved by 9.7% to RM277.3 million. Revenue growth came from both airport and non-airport operations segments, which grew by 3.5% and 34.9% to RM642.3 million and RM52.2 million respectively. Higher operating costs had caused a reduction in PBT and PAT, which had decreased by 36.7% and 22.2% to RM110.0 million and RM96.1 million respectively. The drop in PBT was mainly due to higher depreciation and amortisation expense, finance costs and operating costs which includes staff and utility costs.
Passenger movements at MAHB’s 39 airports in Malaysiadropped marginally by 1.5% to 20.3 million passengers in 1Q15.Contributing to the drop was the decrease in international passenger movements by 3.7%, offset against an increase indomestic passenger movements by 0.7%. Total aircraft movements grew 7.3% to 204,227 aircrafts.Passenger movements at KLIA decreased by 2.9% while other airports in Malaysia recorded an aggregate growth of 0.7% in 1Q15.
Growth in airport operations was driven by non-aeronautical revenue which had improved by 8.3% to RM309.7 million. This improvement is due to the increase in rental and royalty revenue, in line with the larger commercial space at klia2. Aeronautical revenue decreased slightly by 0.6% to RM332.5 million in line with the reduction in total passengers.
Non-Airports Operations Segment
The non-airport operations segment recorded revenue of RM52.2 million, representing a growth of 34.9% from RM38.7 million recorded in 1Q14. This was mainly due to higher revenue recorded in projects and repair & maintenance segment which registered revenue of RM27.4 million in 1Q15, 132.7% higher mainly due to the new facilities management work won, including for the provision of facilities maintenance services at the new Doha International Airport.
The agriculture & horticulture segment revenue decreased by 15.3% to RM5.9 million contributed by lower price attained for Fresh Fruit Bunches per tonne and production volume (1Q15:RM475.33/12,148MT, 1Q14:RM563.93/12,165MT). Revenue from the hotel segment meanwhile decreased by 5.1% to RM19.0 million, mainly due to lower occupancy rate (1Q15: 73.0%, 1Q14: 83.0%) and higher average room rate (1Q15: RM400.22, 1Q14: RM394.33).
Turkish Operations
ISG passenger movements recorded strong double-digit growth for both domestic and international sectors of 17.9% and 14.6% respectively, achieving an overall growth of 16.7% to 5.6 million passengers in 1Q15. Overall aircraft movements increased by 15.9% to 41,031 movements. ISG’s aeronautical and non-aeronautical revenue grew by 11.1% and 18.3% to RM88.9 million and RM76.0 million respectively in 1Q15.
The increase in revenue was driven by the solid growth in passenger movements resulting in higher PSC and commercial contributions. By the same token, EBITDA grew by 13.8% to RM120.0 million. Revenue from LGM had rose by 41.3% to RM26.3 million while EBITDA grew by 283.3% to RM4.4 million. Collectively, ISG and LGM recorded a loss before tax of RM25.5 million, while owing to the fair valuation exercise on the acquisition of ISG and LGM, a further RM45.2 million loss was recognised primarily due to the amortisation of fair value for the concession rights.
Industry Review
Overall passenger traffic within Malaysia was supported by school holidays travel, the Langkawi International Maritime Exhibition and also the Malaysian Formula 1 event. There has also been a pick-up in passenger movements from China during the quarter as the rate of decline has significantly reduced since the MH370 incident occurred while the Europe sector has continued to register positive growth into 1Q15.
Globally, demand for air travel is expected to grow on the back of robust economic growth. IATA announced that there has been a growth in the global passenger traffic of 5.3% for year-to-date February 2015 compared to the same period in 2014.
Industry Outlook
We remain optimistic to meet our 2015 passenger traffic target of 85.8 million passenger movements for Malaysia. Passenger traffic for March, the third highest monthly movement since January 2014, provides optimism for the next quarter and beyond. The declineof the oil price is expected to be favourable for aviation industry. The return of British Airways in May and All Nippon Airways in September will provide the added dynamism required to the industry.
With adequate incentives and strategic initiatives such as the ASEAN Open Skies policy that will help to stimulate intra-region movements, it is expected that passenger and aircraft movements will continue to improve. Passenger movements at ISG for 1Q15 achieved remarkable growth of 16.7% and we expect the double digit growth trend to continue for 2015 and benefit the Group.