Sydney Airport (SYD)

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12 August 2020

Results 

Half Year 2020

Half Year 2019

Change

Revenue ($m)

511.0

797.1

-35.9%

Bloomberg Consensus ($m)

418.7

 

 

EBITDA ($m)

300.4

465.1

-35.4%

Bloomberg Consensus ($m)

297.3

 

 

Net Profit/(Loss) ($m)

(51.8)

199.8

-126%

Bloomberg Consensus ($m)

(53.6)

 

 

Interim Distribution ($)

0.00

0.195

 

Sydney Airport (SYD) earnings grounded by COVID 19

What happened?

  • The aviation industry has been severely affected by the COVID-19 pandemic. The financial performance of Sydney Airport has reflected a downturn in air travel as a result of border closures, Government mandated quarantine periods and restrictions on domestic and international air travel. 
  • 9.4 million travellers passed through Sydney Airport in the first half of 2020, down 56.6% compared to previous corresponding period (pcp). The severity of the turnaround is well highlighted by the contrast between the March and June quarters. Total passenger traffic in the first quarter of 2020 was 9.0 million, compared to 0.4 million in the second quarter. International and domestic passenger traffic declined 57.3% and 56.1% over the period, relative to the same time last year. 
  • As a result, the group recorded a loss of $51.8 million compared to a profit of $199.8 million in the pcp. EBITDA decreased 35.4% to $300.4 million compared to pcp and Revenue decreased by 35.9%. 
  • SYD will not pay investors an interim distribution. 

Why did it happen?

  • Aeronautical comprises almost half of SYD’s total revenue. The severity of the downturn in passenger traffic, drove aeronautical revenues down by $188 million to $173.0 million for the half year period, a decline of 52% compared to pcp.
  • Retail is the most important driver of revenue outside aeronautical, comprising less than a quarter of the total. Retail revenue fell 20% to $147.2 million for the half year period, down $37.0 million on the prior corresponding period, reflecting declines in rents in addition to rent abatements.
  • Revenue related to property and car rental fell 9.5% on pcp to $108.9 million, driven by a reduction in hotel revenues from lower occupancy and significantly fewer aircraft movements, leading to a reduction in jet fuel usage. Similarly, parking and ground transport revenues fell, reflecting the closure of car parks across the long-term, domestic, and international precincts in addition to free parking for up to three hours at all car parks. Parking and ground transport revenues fell 51% to $38.1 million, reflecting a 62% fall compared to regular capacity.
  • SYD cut costs across its entire operations, with total operating expenses falling by 20.5%, compared to the same time last year. These cost cutting initiatives took effect in the second quarter of the year as passenger traffic plummeted. SYD expects the full benefit to be realised in the second half of 2020, contributing to a 35% reduction in costs for the full year.

Where to now?

  • SYD said it doesn’t have clarity on how long the domestic and international travel restrictions will continue. In turn, the Group’s financial performance will continue to be affected. As a result, the airport operator will keep a close eye on outgoings, with operating costs being targeted for a reduction of least a 35% in the year to next April. Capital expenditure will also be a focus, with capital investment seen in the range of $150-$200 million for the period, compared to a recent historical run rate of approximately $350 million per year.
  • No final distribution for the 2020 year is expected to be paid, while future distributions will depend on the shape and timing of recovery from the COVID-19 pandemic.

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