Macquarie Airports (MAp) is one of the largest owners and operators of airports in the world, with more than 110 million passengers using the airports in MAp’s portfolio each year.
MAp listed on the Australian stock exchange on 2 April 2002 at an issue price of $2. There are now 1.6 billion securities on issue and approximately 40,200 security holders. The company’s main shareholders include some of the largest pension and superannuation funds in the world.
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MAp’s strategy is to acquire and actively manage airports to improve their financial performance and provide investors with a combination of capital growth and rising cash yields.
Airports have a number of qualities that make them attractive investments: long-term growth with a high degree of resilience, high operating margins and robust earnings growth via strong commercial opportunities. At the same time, they are subject to light-handed regulation. MAp chooses to invest in airports with the following characteristics:
- A dominant market position
- Higher than average earnings growth potential
- Underdeveloped commercial opportunities
- Potential for economies of scale to drive earnings
- Margin growth
- Surplus capacity
- Potential to increase returns to investors by optimising capital structure
ACTIVE APPROACH
MAp is actively involved in the management of its investments to improve security holder value. Having applied its critical investment criteria to buy the right airports on the right terms, Map takes an active role as a shareholder, seeking to leverage each airport’s operational, commercial and financial performance.
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By GlobalDataMAp is focused on positioning each airport for long-term, sustainable growth and delivering increased choice and service quality for passengers.
MAp’s experience in achieving the best outcomes for the broad range of airport stakeholders underpins its ability to add value through improved commercial and financial performance. It does this by attracting new airlines and services, growing the commercial business and managing the airports’ capital structure.
MAp is managed by a specialist team of infrastructure executives who have extensive expert knowledge and experience of international airport ownership and operation.
Its portfolio includes Sydney, Brussels, Rome, Birmingham, Bristol and Copenhagen Airports, where passengers are being offered increased choice, improved facilities and better levels of service as new initiatives take effect.
The strong performance of MAp’s airports has been reflected in the returns to its investors, who have achieved a compound annual return on their investment of 37.0% since listing, and 83.5% over the year to 30 June 2005.
INVEST AND REINVEST
MAp’s strategy of reinvesting in airport infrastructure is reflected in several major projects at Sydney Airport. Work is underway on both runways and terminals to prepare Sydney to receive one of the world’s first A380 aircraft arrivals next year.
Other investments over the last year include the finalisation of expanded retail facilities, improved food and beverage areas to bring high-quality, well-known brands to the airport and the introduction of more foreign exchange booths.
Domestic and long-term car parking capacity at the airport has been expanded by 2,700 new spaces in the past year to meet strong demand, and a number of property initiatives were completed during the year, including the DHL.
Oceania hub facility, the Formule 1 hotel, and multi-storey office facilities housing customs and the Australian Federal Police. Work is advancing well on plans to continue to meet demand for further facilities from airline and airport users.
More than $465m has been spent on capital expenditure since MAp acquired its stake in Sydney Airport, including a substantial investment in security measures.
MAp takes security at all of its airports seriously and is working with the governments of every country in which it holds assets to ensure its airports comply with ever increasing security measures.
The integration of Brussels Airport into the MAp portfolio is now well advanced. Improvements are under way to develop retail facilities, and the company has had early success in its programme to encourage more airlines to use Brussels for long-haul flights to Europe from Asia and the Americas.
Investments to cater for new aircraft and other airside developments require the support of airlines to ensure capital expenditure can be recovered. The growth in investor returns from Sydney Airport has been achieved despite the recoveries from aeronautical charges being stable since privatisation, and the airport under-recovering in terms of allowable revenues as per the ACCC framework established in 2001.
COPENHAGEN AIRPORTS ACQUISITION
On 16 February 2005, MAp announced that it had acquired an 11.3% interest in Copenhagen Airports at a total cost of around $282m. Copenhagen Airports A/S is listed on the Copenhagen stock exchange and owns 100% of Copenhagen Airport at Kastrup (Denmark).
Copenhagen Airports A/S also owns and operates Roskilde Airport (Denmark), as well as international investments that include 49% of Newcastle Airport (UK), 20% of Hainan Meilan Airport (China) and 10% of ASUR (Mexico).
MAps investment in Copenhagen Airports represents a long-term strategic stake in an airport that meets its investment criteria. Specifically, Copenhagen Airport:
- Is a natural hub for Scandinavia, with a large regional catchment area
- Has high-quality facilities and surplus capacity for growth
- Is a strong commercial business
- Benefits from a transparent regulatory regime
BRISTOL AIRPORT REFINANCING
One of MAp’s airports, Bristol Airport, has successfully refinanced its debt facilities and established capital expenditure facilities to fund its future growth. Of the total debt facilities of £510m, £340m has been drawn, including £121m for distribution to equity holders.
This successful refinancing reflects both the substantial improvement in business performance since the previous debt facility was put in place in 2001 and the financial markets’ recognition of the resilience and future growth prospects of the airport business.
It provides Bristol Airport with a stable financial base and additional financial flexibility for future capital expenditure and working capital requirements, reduces its debt margins and improves its maturity profile.
The refinancing also illustrates the benefits of the MAp investment model. Since Bristol Airport was acquired, passengers and EBITDA have doubled. This strong business performance has attracted a high level of interest and appealing offers from the bank market to fund both future growth and increased returns to Bristol Airport shareholders.
The MAp management team is proud that many of its airports consistently rate well in industry and passenger surveys.
It is MAp’s goal to constantly improve how its airports are viewed by the passengers who use them, the communities and countries they serve, and MAp security holders – to repay the confidence they have shown in the company.
