Final Results

TBI PLC 10 June 2004 TBI PLC Preliminary Results for the Year ended 31 March 2004 The TBI Group is one of the UK's leading airport operators. It owns and/or operates London Luton, Belfast International and Cardiff International Airports. The Group also owns and/or operates a number of overseas airports and airport-related businesses. SUMMARY â€¢ Group turnover was Â£186.2 million (2003: Â£177.6 million) â€¢ EBITDA* was Â£47.9 million (2003: Â£47.2 million) â€¢ Operating profit was Â£19.2 million (2003: Â£24.3 million) â€¢ Profit before amortisation, tax and exceptional items was Â£23.0 million (2003: Â£23.6 million) â€¢ Profit before tax was Â£6.2 million (2003: Â£11.2 million) â€¢ Earnings per share before amortisation and exceptional items: 2.66 pence (2003: 2.91 pence) â€¢ Earnings per share: (0.17) pence loss (2003: 0.94 pence) â€¢ Proposed final dividend of 1.60 pence, maintaining the total dividend for the year at 2.30 pence â€¢ Terminal passengers rose to 17.5 million during the year, a rise of 15% driven by growth in the low cost sector â€¢ Low cost traffic increased by 31% primarily as a result of easyJet growing out of London Luton and Belfast, Ryanair launching its base at Stockholm Skavsta (April 2003) and a full year's contribution from bmibaby at Cardiff â€¢ London Luton benefited from a number of new easyJet services as well as additional rotations to existing routes; NCP appointed to operate the car parking concession at this location * Operating profit before depreciation, amortisation and exceptional items Keith Brooks, Chief Executive, comments: 'Overall, this has been a year of steady improvement for the Group which has seen us further strengthen our platform for growth. Within the context of a continuingly tough environment, our core European airports remain well placed to take advantage of the continued expansion in low cost travel, in particular, and there is a clear indication of markedly improved trading across our US businesses which is encouraging. We will also continue to focus on driving revenue and managing costs.' 10 June 2004 ENQUIRIES: TBI plc Today: 020 7457 2020 Keith Brooks, Chief Executive Thereafter: 020 7408 7300 Caroline Price, Finance Director College Hill Tel: 020 7457 2020 Justine Warren CHAIRMAN'S STATEMENT This has been a satisfactory year for the Group which saw EBITDA* increase by Â£0.7m, the completion of several important capital projects and the future potential of our UK airports acknowledged in the Government's White Paper on Aviation. While operating profit and profit before tax declined by Â£5.1m and Â£5.0m respectively this is almost entirely due to the increased incidence of exceptional items in the year, notably the Â£5.9m write down of goodwill in our Airport Services business which was charged to profits in the first half of the year. I am pleased with this year's achievements as I believe they signal the beginning of a turn-around in the fortunes of the aviation industry in general and TBI in particular. That said, the ongoing threat of geo-political risk or the impact which a serious rise in oil prices could have on the industry cannot be underestimated. Indeed, at the beginning of this financial year, the industry and TBI felt the impact from the Iraq war and the SARS virus. But, for TBI, I believe that the change in our customer base following the events of the 11th September 2001 and the associated structural changes in the industry is now complete and, consequently, year on year comparisons have a greater validity. The increase in EBITDA includes two components worthy of particular comment: firstly the improved performances of our North American businesses. At Orlando Sanford, EBITDA improved by 125% and Airport Services saw an 87% improvement on the prior year. Secondly, the EBITDA loss of Â£1.7m incurred at Stockholm Skavsta which was largely attributable to the cost of a significant amount of operational transition for that business which saw passenger numbers increase more than three-fold on an annualised-basis. The Board is recommending maintaining the dividend. This represents a final dividend of 1.60p to be paid on 1 October 2004 to shareholders on the register at the close of business on 3 September 2004, bringing the total dividend for the year to 2.30p per share. December 2003 saw the publication of the Government's White Paper on the Future of Aviation in the United Kingdom up to 2030. In that paper, the Government provided the strategic direction for all three of our UK airports to expand. London Luton was effectively given the go-ahead to increase passenger numbers to 31 million and Belfast to eight or nine million from the current year numbers of seven million and four million respectively. In the context of Cardiff, the White Paper was drawn up in conjunction with the Welsh Assembly Government and affirmed Cardiff as the principal airport in Wales, effectively ending speculation regarding new airport developments at Newport or Severnside which was particularly pleasing. Our UK Airports are all well placed to take advantage of the Government's direction and future strategy for aviation. At London Luton, new services have been introduced to Berlin, Dortmund, Budapest and Katovice. To accommodate and facilitate this passenger growth we invested some Â£7m during the year at this location to build a new taxiway and three new aircraft stands capable of accommodating large aircraft. The executive jet market also continues to flourish and in recent months has demonstrated growth considerably in excess of 20%. Passenger numbers at Belfast International exceeded four million for the first time through substantial increases of approximately 20% in both the holiday charter and low cost operations. I am also particularly pleased to record that Belfast International has made significant inroads into the continental European market with scheduled flights to Prague, Paris, Nice, Alicante and Malaga. This means that for the first time passengers from Northern Ireland will be able to take direct flights to continental Europe. Such a facility is long overdue and I am optimistic that there is more to come. Again we have invested, and will be investing in future, to accommodate this growth. During the year impressive new catering facilities were completed and a major refurbishment of the duty free shop, incorporating a 5,000 sq.ft. extension to the terminal, is planned for December 2004. Cardiff also saw growth in activity with passenger numbers increasing to almost two million. This growth was all achieved from low cost services, but significantly the level of charter business was also maintained. Capital improvements included extensions to the departure lounge and the security check area, as well as the construction of a new business lounge. An important development to the growth of the airport will be the opening of a railway station near to the airport in May 2005. When remarking on capital projects, it would be remiss not to make special mention of Stockholm Skavsta. A major extension to the terminal was substantially completed in the year and the airport can now comfortably handle the 1.1m passengers that currently use it, and has the capacity to accommodate three times that number. At Orlando Sanford, the British are returning and UK traffic increased by 21% during the year, but perhaps even more significantly Sanford is making its mark with the American domestic passenger. Almost 600,000 US passengers used the airport last year, an increase of 67%. Overall we have seen a cautious improvement, but one certainly moving in the right direction and with the right platforms in place to take the business forward. In addition to the infrastructure I have mentioned, those springboards, of course, also include the Group's people. We have great teams in each of the business entities and they have again performed very well this year. Thanks to them, the TBI executive team led by Keith Brooks, and also my fellow non-executive directors, including Tim Simon who retired during the year. We are making good progress in finding a replacement. The improvements made this year have encouraged me and that view is supported by activity levels in the first two months of the new financial year where passenger numbers are more than 11% higher than for the corresponding two months in 2003. The growth is apparent, without exception, at all our airports and includes all types of service: low cost by 10%, charter by 13% and full service by 12%. Whilst passenger numbers are holding up well and we are involved in a number of significant route development initiatives, we continue to see pressure on yields. G. Stanley Thomas Chairman 10 June 2004 * Operating profit before depreciation, amortisation and exceptional items. We use EBITDA as a measure of our financial performance rather than operating profit, as we believe it to be the measure most relevant to readers of our financial statements. OPERATIONAL REVIEW Introduction Our strategy remains consistent: to be an operator of regional airports where we can make a difference. To the extent that our existing businesses do not fall within that definition shareholders should expect to see divestments over the next 12 to 18 months. We are also optimistic that opportunities to expand the core airport ownership and operation business, (referred to in the remainder of this review as our core business), will arise over a similar period. Airlines directly generate just over half the turnover of our core business. We term this type of revenue as aeronautical or traffic income as shown in the segmental analysis in Note 1 to the financial information. In absolute terms it represented Â£77.1m (2003: Â£76.5m) to our business, and an average of Â£4.40 per passenger (2003: Â£5.04). This change in average aeronautical earnings per passenger arose from the change in passenger mix between full service, low cost and charter traffic. In the UK airports less than 7% of our traffic is now full service in nature, a 35% decrease in percentage from last year. Yet this reduction has been more than compensated for in terms of the number of passengers carried by the low cost airlines increasing flown passengers at our airports by some 2.6m over prior year levels across the Group. Passengers of low cost airlines represented some 62% of our Group traffic in 2004. Expansion of low cost traffic Our airports exhibited tremendous growth of 31% in low cost traffic during the year, of which some 82% was predominantly generated by three airlines - Ryanair out of Stockholm Skavsta and London Luton, easyJet out of London Luton and Belfast, and bmibaby out of Cardiff and Belfast. Looking at each in turn: In April 2003 Ryanair launched its base at our smallest airport, Stockholm Skavsta, more than trebling the number of passengers it carried to or from the airport. The significant and overnight change of going from one route and no based aircraft to six routes and three based aircraft is vividly apparent in the activity levels of Stockholm Skavsta which increased by over 800,000 passengers, almost 250%, over prior year levels. This development has cemented Stockholm Skavsta's position as Stockholm's second airport. We are also encouraged to see additional operators coming into the airport. In February 2004 Basiq Air established a daily service to Rotterdam and in July 2004 Wizz Air will establish services to Cracow and to Budapest. Stockholm Skavsta has demonstrated that passengers know where it is and that it is definitely open for business. In London Luton, easyJet announced new services between London Luton and Berlin, Dortmund and Budapest. Since some of these services were launched during the latter part of this financial year and some were launched since the end of the financial year, the full benefit is not yet reflected in Luton's numbers. In addition, some existing routes benefited from additional rotations being added. The increase in Ryanair passengers was simply a full year effect of the Bergamo service which was launched in February 2003. Belfast enjoyed over 20% growth in low cost traffic - of which the lion's share was generated by bmibaby services. Since April 2004 easyJet has also announced new international services to Paris, Nice, Alicante and Malaga - direct services to continental Europe which the people of Northern Ireland have welcomed. This continued growth has resulted in greater choice of destinations and frequency which should allow us to claw back many of the 600,000 passengers from our catchment area who currently fly out of Dublin. bmibaby has made a significant difference to Cardiff - an extra 500,000 passengers compared with the previous year being the full year effect of the services launched in November 2002. Whilst the low cost airline passenger numbers went from strength to strength at our airports, the full service traffic declined by a further 230,000 passengers with most of the remaining full service passengers flying from our Bolivian airports. We do not believe this position will change in the foreseeable future. Changes to airport traffic Taken across the Group, charter traffic appears flat which masks the underlying trend of a decline in charter traffic in the South East of England marginally outweighed by almost 20% growth in Belfast. However, the difference in aeronautical revenue per passenger in the South East from charter and low cost is minimal. As we have previously explained, different airlines use our airports in different ways, and as a consequence pay us differently. Low cost airlines at our airports expect, and manage, to turn around aircraft on the stand within 25 minutes. A full service airline may expect to be on stand for an hour or so, and as a result we are able to handle more low cost passengers through a constrained facility than we could handle full service passengers; this increases the effective capacity of a terminal without additional capital expenditure or revenue costs being triggered. Commercial income We earn approximately 40% of the turnover of our core business indirectly from the passengers who travel through our airports - car parking, food and beverages, retail outlets, car hire, foreign exchange outlets and their like all operate at our airports and pay us a turnover based rental, which is usually subject to a minimum guarantee. The average passenger in our UK airports generates revenue of some Â£6.90 on a round trip basis (2003: Â£6.61), a substantial proportion of which is derived from car parking revenue and the remainder from the likes of retail spend, catering and duty free. Whilst the way in which we earn aeronautical revenues is very much driven by the type of airline the passenger is flying on, the way in which we earn the increasingly important commercial revenues is driven by the reason that the passenger is travelling rather than their mode of transport. For example, a business passenger behaves pretty much identically regardless of whether they are flying on a low cost airline or on a full service airline. Retailing and catering Car parking represented some Â£22.3m (2003: Â£19.4m) of our Group turnover. Given its commercial importance we decided to undertake a tendering process for car park operators at London Luton Airport - a Â£14.0m business to us. We were delighted to award the concession to NCP on the basis that they pay us a minimum guarantee per passenger using the airport plus a profit share. This seemed sensible as we take the variable element on passenger generation and NCP earn the variable element of their success in pricing and attracting our passengers into parking. Duty free and duty paid shops are operated by concessionaires at all our airports other than Stockholm Skavsta. These concessionaires, taken with our shop in Sweden, generated rents which are generally based on the turnover of the shop of Â£13.3m in 2003/4 compared with Â£11.5m in 2002/3, an increase of 16%. Since the year end we have renewed some of the existing concessions at London Luton and terminated others. We also expect to add to the retail offer at Belfast during the forthcoming year and, for example, Boots the Chemist is opening a new outlet there within the next month. At Stockholm Skavsta initial signs are encouraging - the enlarged shop and improved passenger flows should help increase penetration and spending levels. Catering activities undertaken by concessionaires within the terminal buildings generate approximately Â£4.9m of turnover. In the main there was little change to catering arrangements or facilities across TBI in 2003/4. However at Stockholm Skavsta catering facilities have been greatly extended and improved with effect from April 2004. Operational activities Our industry continues to operate throughout a period of immense change in the way that people travel and the technology evolves. We see that technology and travelling passengers' increasing sophistication could fundamentally change the way that the industry operates in sales and processing terms. First and foremost we must operate a safe business. Our airports must comply with the regulatory requirements of many bodies and authorities, overlaid with our own in-house standards. Within that structure we must ensure that we meet our airline customers needs for prompt turnaround times, that our passenger customers are cared for, that our asset utilisation is optimised and that we not only work hard but that we work smart and question what may always have been accepted. Again this year we have some tremendous examples of the TBI businesses operating efficiently for all our audiences in sometimes challenging circumstances. In Stockholm Skavsta we, overnight, almost doubled our staff and more than trebled our passengers, and commenced a terminal extension programme which provided a challenging and exciting year for our Swedish colleagues in every sense. We are again proud that we were able to support local teams even with great demands being made from elsewhere within the Group - support and advice being willingly given and received. Our support team for Stockholm Skavsta drew upon people from Cardiff, Luton, Belfast and Orlando - providing help in operational, commercial and administrative areas. Between them all they have delivered a first rate product which operates as a modern regional airport should. Capital expenditure programmes during the year proceeded to plan. Mostly this took the form of normal maintenance and investment - however a number of projects were notable. In Sweden we completed the Â£7.9m project which had straddled 2003 and 2004 - the extension of the old terminal building (with capacity to handle less than 1m passengers) so as to enable it to handle over 2m passengers comfortably. The end result is excellent - efficient and customer-friendly. In London Luton we completed a new taxiway and three new aircraft stands at a cost of some Â£7.0m. These works resulted in the taxiway system at London Luton being tantamount to an enormous roundabout rather than two culs de sac - with all the attendant efficiencies for us and our airline customers. In Belfast the operations control centre was created which consolidates all aspects of the airport management and has resulted in improved costs and efficiencies. White Paper on the Future of Aviation in the UK and 'SERAS' During the year the Government published its White Paper on the Future of Aviation in the United Kingdom up to 2030. All our UK airports had participated vigorously in the debate and had promoted their views. In Wales, the White Paper affirmed Cardiff as the principal airport for Wales, and recommended that surface access improvements should be supported. We are already beginning to see the fruits of that recommendation with the announcement of the opening of a railway station adjacent to the airport in May 2005, and the Welsh Assembly Government publishing a consultant's report to improve road access to the airport. In Northern Ireland, the White Paper recommended that our Belfast International Airport be allowed to expand within its existing (and large) footprint. Perhaps most high profile however was the South East regional study leading to the White Paper - we were delighted that London Luton was effectively given the strategic direction and framework to grow the airport to some 31m passengers a year, roughly the equivalent of Gatwick today. Unless and until additional runway capacity is built then de facto London Luton is the only airport in the South East with capacity to take new traffic. We must ensure that this opportunity is seized. FINANCIAL REVIEW Overall results The trading results for the year ended 31 March 2004 reflect a period of relative stability compared with our recent history. Our business did not change fundamentally although the number of passengers carried did improve and we have established solid foundations for future earnings growth as the new routes mature. Operating profit of Â£19.2m and profit before tax of Â£6.2m have declined by Â£5.1m and Â£5.0m respectively but if exceptional items (see below) are excluded they are broadly flat when compared with the prior year. Given this performance and taking account of market conditions it is pleasing that our cash inflow from operating activities rose to Â£56.1m when compared with last year's Â£42.9m. Further commentary on our financial performance is set out below, where we concentrate on EBITDA rather than operating profit, as the directors believe this is the performance measure most relevant to readers of our financial statements. Turnover Total turnover for the year was Â£186.2m (2003: Â£177.6m); which is analysed segmentally in Note 1 to the financial information. Of the Â£8.6m increase, some 90% was as a result of increases in commercial income - which reflects improvements at almost every single one of our owned and operated airports. This is vital to our future revenue generation - and we note that commercial revenues per passenger (as a proportion of commercial and aeronautical earnings) have increased from 39% to 42% during the year. We believe that more can be done to improve commercial revenues and given that there is almost no overhead cost linked to these revenues we would expect the majority of incremental commercial revenues to convert to profit. Costs Group operating costs, including cost of sales, before depreciation, amortisation and exceptional items increased by some 6% from Â£130.4m to Â£138.3m. Cost of sales are relatively flat and the remaining increase of Â£8.0m is attributable to administrative expenses. The increases that applied to our core business were approximately Â£9.0m and included a Â£2.9m increase in costs at Stockholm Skavsta, a Â£1.5m increase in the concession fee paid at London Luton, a Â£1.3m increase in insurance, security and air traffic control costs and a Â£0.3m increase in pension costs. Costs across the remainder of the Group fell by approximately Â£1.0m. Group EBITDA Our business performed well, increasing from Â£47.2m to Â£47.9m, during the year and we also achieved double digit growth in passenger numbers; which will provide the foundation for profit growth going forward. Of our EBITDA, excluding central costs, 81% is generated by our operations within the UK. EBITDA from our UK airports of Â£42.4m showed a slight improvement over prior year levels of Â£42.1m. EBITDA less net Capital employed EBITDA less net EBITDA less net interest interest as a interest as a percentage of percentage of capital Year ended 31 March capital employed employed 2004 2004 2003 Â£'m Â£'m % % Belfast 10.2 100.1 10 10 Cardiff 10.1 64.6 16 17 London Luton 22.1 160.4 14 13 UK airports 42.4 325.1 13 14 Bolivia 3.0 9.9 30 28 Orlando Sanford 1.8 22.5 8 3 Stockholm Skavsta (1.7) 33.4 n/a n/a Airport Management 2.7 5.1 53 35 Airport Services 1.5 4.8 31 5 Airport total 49.7 400.8 12 12 Other operations 2.6 25.5 10 9 Head office (4.4) (13.3) n/a n/a Net interest*/Net (11.0) (135.4) 8 7 debt Total 36.9 277.6 13 13 Capital employed excludes all net debt, including inter-company debt, but includes all applicable goodwill * This excludes exceptional net interest costs In respect of our overseas operations, major improvements at Orlando Sanford (Â£1.0m improvement) and Airport Services (Â£0.7m improvement) were offset by a decline of Â£1.3m at Stockholm Skavsta which is still in its development stage. The performance of our US dollar denominated businesses in 2004, as compared with 2003, is not clearly demonstrated in these accounts because of the change in average exchange rates during the year. In their own currencies the US dollar denominated businesses delivered EBITDA growth in excess of 32%, as compared with approximately 20% when shown in sterling, which shows a very strong recovery from the Americas. Exceptional items The results include the following exceptional items: â€¢ Operating costs of Â£0.6m principally relating to staff reorganisations (2003 - Â£1.5m) â€¢ A US$10.0m (Â£5.9m) write down of the goodwill associated with the Airport Services business in accordance with FRS11. â€¢ An interest rate swap termination penalty charge of Â£2.0m (after the release of a fair value provision of Â£3.9m) following the refinancing of the project finance debt at London Luton Airport. Net interest excluding the impact of FRS17 Net interest for the year was Â£12.6m (2003: Â£12.5m). Both years include exceptional interest items which if excluded would mean that underlying net interest for 2004 was Â£10.6m (2003 - Â£10.9m). The weighted average interest cost was 5.58% (2003: 5.97%). As at 31 March 2004 net debt was Â£135.4m (2003: Â£149.1m) and average net debt during the year was Â£141.7m (2003: Â£145.2m) Tax The total tax charge for the year was Â£5.5m (2003: Â£4.2m). Due to the utilisation of historical tax losses only Â£2.3m was reflected as a current tax cost (2003: Â£2.6m) - the balance being mainly the reversal of deferred tax assets as we utilise those historical losses. The effective rate of tax as a proportion of profits before tax looks high at 89% but if goodwill amortisation (which is not allowable for tax) is excluded the effective rate is some 27% (2003: 22%). Earnings per share Earnings per share and earnings per share adjusted for goodwill amortisation and exceptional items were (0.17)p loss (2003: 0.94p) and 2.66p (2003: 2.91p) respectively. Dividends The dividend is held and the proposed final dividend is 1.60p, making 2.30p for the full year. The dividend is currently not covered out of profits for the year but is being covered by bought forward reserves. However the dividend is covered out of cash inflows from the operating activities of the Group after allowing for tax, net interest and capital expenditure. Cashflow We generated Â£56.1m of cash (2003: Â£42.9m) from the operating activities of the Group. We incurred capital expenditure of some Â£27.5m during the year of which approximately Â£10.0m was on recurrent capital and maintenance programs. The cash outflow on capital expenditure in the year was Â£20.8m and there are also creditors of a capital nature of some Â£5.0m included on our balance sheet as at 31 March 2004. There were two large projects undertaken during the year at London Luton and Skavsta airports, and these were detailed earlier in this review. The large project at London Luton released some Â£1.7m of cash to that business which was previously restricted and is included in the cash outflow amount of Â£20.8m. Defined benefit pension schemes During the year the Group fully adopted FRS 17 and since this represented a change in accounting policy, the comparatives for 2003 have been restated accordingly. This has resulted in a prior year adjustment of some Â£13.2m to the Group's reserves and a net pension deficit of Â£14.0m has been recognised on the balance sheet as at 31 March 2004. IAS/IFRS We are keeping the imminent introduction and adoption of International Accounting Standards under close review and have identified a number of areas which are likely to have an impact on either the presentation of our financial statements or on the numbers themselves. We believe that the presentation of our accounts is unlikely to change materially as we consider that the current presentation is clear and appropriate. The way that we currently choose to segment our business is likely to remain unchanged although we may provide further analysis. We will revisit in some detail our treatment of investment property. In future goodwill will not be amortised unless there has been an impairment of the asset - we currently bear an annual underlying charge of approximately Â£8m. We have already adopted FRS 17 and consequently the balance sheet treatment of pensions will probably remain unchanged. There are other areas which may or may not have an impact on our accounts - depending upon the content of the standards once they are finally adopted. Accounting policies We have reviewed our accounting policies as set out in the financial statements and we continue to consider them to be most appropriate to our business activities. Consolidated profit and loss account for the year ended 31 March 2004 Restated 2004 2003 Notes Â£'m Â£'m Turnover 1 186.2 177.6 Cost of sales (24.3) (24.4) Gross profit 1 161.9 153.2 Administrative expenses (142.7) (128.9) Operating profit before depreciation, amortisation and 1 47.9 47.2 exceptional items Depreciation 1 (13.9) (13.1) Amortisation of intangible - normal 1 (8.3) (8.3) assets - exceptional 1,2 (5.9) - Exceptional items 2 (0.6) (1.5) Operating profit 1 19.2 24.3 Additional cost on disposal of property business 2 - (1.0) Net interest payable - non exceptional 3 (11.0) (10.5) - exceptional 2,3 (2.0) (1.6) Net interest payable 3 (13.0) (12.1) Profit on ordinary activities before tax 1 6.2 11.2 Tax on profit on ordinary activities 4 (5.5) (4.2) Profit on ordinary activities after tax 0.7 7.0 Equity minority interests (1.5) (1.8) (Loss)/profit for the financial year (0.8) 5.2 Dividends 5 (12.9) (12.9) Retained loss for the financial year (13.7) (7.7) (Loss)/earnings per share 6 (0.17)p 0.94p Diluted (loss)/earnings per share 6 (0.17)p 0.94p Earnings per share (basic and diluted) before amortisation 6 2.66p 2.91p and exceptional items The turnover and operating profit shown above are derived from continuing operations. There is no difference between the profit on ordinary activities before tax and the retained loss for the year stated above and their historical cost equivalents except that investment properties are revalued annually and are not subject to depreciation. As depreciation is only one of the factors reflected in the annual valuation the amount attributable to this factor cannot reasonably be separately identified or quantified. The result for the year ended 31 March 2003 has been restated to reflect the full implementation of FRS 17. Balance sheets 31 March 2004 Restated 2004 2003 2004 2003 Group Group Company Company Â£'m Â£'m Â£'m Â£'m Fixed assets Goodwill 116.2 133.0 - - Other intangible assets 9.3 11.4 - - Intangible assets 125.5 144.4 - - Tangible assets 227.2 217.9 0.9 0.8 Investment properties 135.0 135.0 1.1 1.1 Trade investments 1.8 1.7 - - Investments in subsidiaries - - 216.8 216.8 489.5 499.0 218.8 218.7 Current assets Stock 1.2 1.2 - - Debtors 23.9 26.9 283.6 265.0 Cash at bank and in hand 23.4 27.8 4.5 6.1 48.5 55.9 288.1 271.1 Current liabilities Creditors - amounts falling due within one (64.7) (62.1) (103.0) (87.7) year Net current (liabilities)/assets (16.2) (6.2) 185.1 183.4 Total assets less current liabilities 473.3 492.8 403.9 402.1 Creditors - amounts falling due after more (157.6) (169.8) (65.0) (67.3) than one year Accruals and deferred income (4.1) (4.6) (1.6) (1.9) Provisions for liabilities and charges (20.0) (16.2) - - Net assets excluding pension scheme 291.6 302.2 337.3 332.9 liability Pension scheme liability (14.0) (16.5) - - Net assets 277.6 285.7 337.3 332.9 Capital and reserves Called up share capital 55.9 55.9 55.9 55.9 Share premium account 166.6 166.6 166.6 166.6 Capital reserve 4.6 49.6 25.8 69.6 Revaluation reserve 17.0 16.0 0.1 0.1 Profit and loss account 34.6 0.6 88.9 40.7 Equity shareholders' funds 278.7 288.7 337.3 332.9 Equity minority interests (1.1) (3.0) - - Capital employed 277.6 285.7 337.3 332.9 Consolidated cash flow statement for the year ended 31 March 2004 2004 2004 2003 2003 Â£'m Â£'m Â£'m Â£'m Net cash inflow from operating activities 56.1 42.9 Returns on investments and servicing of finance Interest received 0.7 1.2 Interest paid (11.2) (11.3) Interest element of finance lease and hire (0.7) (0.4) purchase repayments Net cash outflow from returns on investments (11.2) (10.5) and servicing of finance Tax (0.8) (0.2) Capital expenditure and financial investment Additions to tangible fixed assets (18.6) (12.0) Additions to investment properties (2.2) (4.9) Sale of tangible fixed assets 0.2 0.3 Net cash outflow for capital expenditure and (20.6) (16.6) financial investment Acquisitions and disposals Purchase of trade investments (0.3) (0.6) Other acquisitions - (0.4) Net cash outflow for acquisitions and (0.3) (1.0) disposals Equity dividends paid (12.9) (12.9) Management of liquid resources Cash withdrawn from deposit 5.3 4.6 Sale of US securities 0.4 0.1 Net cash inflow from management of liquid 5.7 4.7 resources Financing Proceeds from loan note - 19.0 Bank loans drawn down 83.1 3.5 Repayment of bank loans (91.9) (27.7) Repayment of other loans (2.4) - Capital element of finance lease and hire (2.2) (2.6) purchase repayments Net cash outflow in respect of financing (13.4) (7.8) Increase/(decrease) in net cash in the year 2.6 (1.4) Consolidated statement of total recognised gains and losses for the year ended 31 March 2004 Restated 2004 2003 Â£'m Â£'m (Loss)/profit for the financial year (0.8) 5.2 Unrealised surplus on revaluation of investment properties 1.0 8.8 Exchange differences on overseas investments 1.4 3.4 Actuarial gain/(loss) on pension scheme 2.2 (17.0) Minority interest effect on actuarial gain/(loss) (0.3) 1.7 Other effect on actuarial gain/(loss) 0.1 0.5 Movement in deferred tax on pension scheme (0.7) 4.6 Current tax relating to pension liability - 0.2 Net effect of pension schemes 1.3 (10.0) Total net gain for the year 2.9 7.4 Prior year adjustment in respect of FRS 17 (13.2) - Total (losses)/gains recognised in the year (10.3) 7.4 Notes to the financial statements 31 March 2004 1.Segmental information Business analysis In the segmental information provided below, Airport Ownership relates to airports which are either owned or operated under long term agreements. Turnover is derived from third parties. Restated 2004 2003 Â£'m Â£'m Turnover Airport Ownership Traffic income 77.1 76.5 Commercial income 56.1 48.4 Tenant income 13.4 12.6 Airport Services 25.6 26.3 Airport Management 4.2 4.7 Total airports 176.4 168.5 Other operations 9.8 9.1 186.2 177.6 Gross profit Airport Ownership Traffic income 77.1 76.5 Commercial income 56.1 48.5 Tenant income 13.4 12.6 Airport Services 3.6 3.9 Airport Management 3.8 4.4 Total airports 154.0 145.9 Other operations 7.9 7.3 161.9 153.2 Operating profit before depreciation, amortisation and exceptional items Airport Ownership 45.5 45.7 Airport Services 1.5 0.8 Airport Management 2.7 2.9 Total airports 49.7 49.4 Other operations 2.6 2.4 Head office costs (4.4) (4.6) 47.9 47.2 Depreciation Airports (12.4) (11.5) Other operations (1.3) (1.4) Head office costs (0.2) (0.2) (13.9) (13.1) Amortisation of intangible assets Airports - normal (8.3) (8.3) - exceptional (5.9) - (14.2) (8.3) Operating profit Airports 22.8 28.2 Other operations 1.3 0.9 Head office costs (4.9) (4.8) 19.2 24.3 Profit on ordinary activities before tax Airports 22.8 28.2 Other operations 1.3 0.9 Head office costs (4.9) (4.8) Additional cost on disposal of property business - (1.0) Net interest payable (13.0) (12.1) 6.2 11.2 Restated 2004 2003 Â£'m Â£'m Net assets Airports 400.8 419.0 Other operations 12.2 15.8 Net debt (Note 7) (135.4) (149.1) 277.6 285.7 Other operations include the hotel, aircraft and unallocated head office assets and liabilities. Geographical analysis (origin and destination) Restated 2004 2003 Â£'m Â£'m Turnover United Kingdom 131.3 124.4 Rest of Europe 5.8 3.7 North America 38.4 38.4 South and Central America 10.3 11.1 185.8 177.6 Profit on ordinary activities before United Kingdom 27.4 22.1 tax Rest of Europe (2.8) (1.2) North America (7.6) (0.4) South and Central America 2.2 2.8 Net interest (13.0) (12.1) 6.2 11.2 Net assets United Kingdom 341.8 344.5 Rest of Europe 34.0 28.5 North America 27.3 50.5 South and Central America 9.9 11.3 Net debt (Note 7) (135.4) (149.1) 277.6 285.7 2. Exceptional items Restated 2004 2003 Â£'m Â£'m The exceptional items during the year were as follows: Notes Reorganisation costs (a) 0.4 1.0 Litigation costs (b) 0.2 0.3 Pension curtailment cost - 0.2 0.6 1.5 Write down of intangible assets (c) 5.9 - Additional cost on disposal of property business - 1.0 Forgiveness of accrued interest receivable - 1.6 Interest swap break cost (d) 2.0 - Total exceptional items 8.5 4.1 Notes (a) In 2004 these principally relate to staff redundancy costs at Belfast International Airport. (b) These costs relate to discontinued operations or periods prior to acquisition by the Group. (c) During the year, the directors have reviewed the carrying value of the Group's Airport Services business given the slow recovery in this market sector post 11 September 2001. As a result of this review and in accordance with FRS 11, 'impairment of fixed assets and goodwill', the directors have written down the carrying value of the goodwill attributable to this business by US$10.0m (Â£5.9m). (d) The Group has completed a refinancing of the project finance debt at London Luton with a repayment and cancellation of the previous facility. The interest rate swap attached to the previous facility has also been cancelled resulting in a termination penalty of Â£2.0m after the release of a fair value provision of Â£3.9m. 3. Net interest payable Restated 2004 2003 Â£'m Â£'m Interest payable and similar charges Interest payable on bank and similar loans 9.3 11.0 Interest on finance lease and hire purchase arrangements 0.7 0.4 Bank charges 0.6 0.4 Amortisation of debt issue costs 0.7 0.5 Other finance costs/(income) arising on FRS 17 0.4 (0.4) Interest swap break cost - exceptional (Note 2) 2.0 - Total 13.7 11.9 Interest receivable and similar income Short term deposits and corporate bonds 0.7 1.4 Forgiveness of accrued interest receivable - exceptional - (1.6) Total 0.7 (0.2) Net interest payable 13.0 12.1 4. Tax Restated 2004 2003 Â£'m Â£'m (a) Analysis of charge in the year Current tax UK corporation tax on profits for the year 3.4 1.6 Adjustments in respect of previous periods (1.1) - 2.3 1.6 Foreign tax - 1.0 Total current tax (Note 4(b)) 2.3 2.6 Deferred tax Origination and reversal of timing differences 3.2 1.6 Total deferred tax 3.2 1.6 Total tax on profit on ordinary activities 5.5 4.2 (b) Factors affecting the current tax charge for the year The current tax assessed for the year is different from the standard rate of corporation tax in the UK of 30%. The differences are explained below: Restated 2004 2003 Â£'m Â£'m Profit before tax 6.2 11.2 Profit multiplied by standard rate of corporation tax in the UK of 1.8 3.4 30% (2003: 30%) Accelerated capital allowances (1.3) (1.7) Other timing differences (2.5) (0.5) Tax losses (0.2) (0.4) Adjustments relating to prior year (1.1) - Permanent differences 5.6 1.8 Current tax charge for year (Note 4(a)) 2.3 2.6 5. Dividends 2004 2003 2004 2003 Pence per share Pence per share Â£'m Â£'m Interim dividend - paid 0.70 0.70 3.9 3.9 Final dividend - proposed 1.60 1.60 9.0 9.0 2.30 2.30 12.9 12.9 6. (Loss)/earnings per share (Loss)/earnings per share have been calculated in accordance with FRS 14, ' earnings per share', by dividing the profit for the financial year by the weighted average number of ordinary shares in issue during the year, based on the following information: 2004 2003 (Loss)/profit for the financial year (Â£'m) (0.8) 5.2 Earnings before amortisation and exceptional items (Â£'m) 15.0 16.2 Basic weighted average share capital 559 559 (number of shares, million) Diluted weighted average share capital 560 559 (number of shares, million) The difference between the basic and the diluted weighted average number of shares is wholly attributable to outstanding share options. The calculation of earnings per share before amortisation and exceptional items is based on the following analysis: Restated 2004 2003 Â£'m Â£'m (Loss)/profit for the financial year (0.8) 5.2 Amortisation - normal 8.3 8.3 - exceptional 5.9 - Exceptional items - other 0.6 1.5 Interest swap break cost 2.0 - Additional cost on disposal of property business - 1.0 Forgiveness of accrued interest receivable - 1.6 Effect of tax and equity minority interests (1.0) (1.4) on above adjustments 15.0 16.2 The earnings per share before amortisation and exceptional items have been presented as the directors consider that this provides a more meaningful indication of the Group's underlying financial performance. 7. Analysis of net debt Cash Loan Other bank Sub total Debt due Debt due Finance lease Total note deposits within after one and hire receivable one year year purchase arrangements Â£'m Â£'m Â£'m Â£'m Â£'m Â£'m Â£'m Â£'m At 31 March 2003 2.7 - 25.1 27.8 (8.5) (162.3) (6.1) (149.1) Cashflow 2.6 - (5.7) (3.1) 8.2 3.0 2.2 10.3 Non-cash changes - - - - (1.1) 0.4 (6.2) (6.9) Exchange movements (0.4) - (0.9) (1.3) 0.4 11.1 0.1 10.3 At 31 March 2004 4.9 - 18.5 23.4 (1.0) (147.8) (10.0) (135.4) At 31 March 2002 4.5 20.0 30.7 55.2 (9.1) (191.0) (7.7) (152.6) Cashflow (1.4) (19.0) (4.7) (25.1) 10.7 13.5 2.6 1.7 Non-cash changes - (1.0) - (1.0) (10.2) 9.8 (1.0) (2.4) Exchange movements (0.4) - (0.9) (1.3) 0.1 5.4 - 4.2 At 31 March 2003 2.7 - 25.1 27.8 (8.5) (162.3) (6.1) (149.1) The funding arrangements at London Luton Airport Group Limited impose restrictions on the transferability of net debt items held at London Luton Airport Group Limited to other Group companies without the lender's consent. The funding arrangements at Orlando Sanford International, Inc. impose restrictions on the transferability of net debt items held at Orlando Sanford International, Inc. to other Group companies without the lender's consent. 8. Accounting Policies This preliminary announcement has been prepared on the basis of accounting policies consistent with those set out in the annual report and accounts for the year ended 31 March 2003 except for the full adoption of FRS17. 9. Audit Status The financial information set out in this announcement does not constitute the Group's statutory accounts for the years ended 31 March 2004 or 31 March 2003. The financial information has, however, been extracted from statutory accounts for those years which have been audited. The auditors' reports on those statutory accounts were unqualified. 10. Board approval This preliminary announcement was approved by the Board on 9 June 2004. Airport operational information (unaudited) Airport ownership with a controlling interest At 31 March At 31 At 31 March At 31 March At 31 March At 31 March 2004 March 2003 2004 2003 2004 2003 London Luton Belfast International Cardiff International Airport Airport Airport Total passengers ('m) Charter 0.9 1.0 0.9 0.7 1.0 1.0 Scheduled 0.7 0.6 - 0.4 0.2 0.2 Low cost 5.3 5.0 3.1 2.6 0.8 0.3 Transit - - - - - - Total 6.9 6.6 4.0 3.7 2.0 1.5 Terminal passengers Spend per head Â£4.14 Â£4.05 Â£2.34 Â£2.18 Â£3.13 Â£2.85 Net passenger supplement Â£3.26 Â£3.19 Â£2.15 Â£2.70 Â£4.22 Â£5.60 per head Total Â£7.40 Â£7.24 Â£4.49 Â£4.88 Â£7.35 Â£8.45 Charter services Number of tour operators 24 23 25 22 37 40 Number of seats offered 1.1 1.2 1.0 0.8 1.1 1.1 ('m) New charter destinations - 1 3 1 1 7 Scheduled services Number of major airlines 5 5 1 3 1 3 Number of seats offered 1.1 0.8 - 0.5 0.2 0.5 ('m) New scheduled - 6 1 5 - - destinations Low cost services Number of major airlines 4 3 4 4 3 2 Number of seats offered 6.8 6.4 4.3 3.5 1.4 0.5 ('m) New low cost destinations 3 - 4 - 3 7 Freight tonnage ('000) 25.1 21.3 44.8 45.8 3.4 3.1 Some of the scheduled services from London Luton Airport - Amsterdam, Barcelona, Belfast, Dublin, Edinburgh, Geneva, Glasgow, Malaga, Nice, and Paris. Some of the scheduled services from Belfast International Airport - Amsterdam, Bristol, East Midlands, Edinburgh, Glasgow, Liverpool, London Gatwick, London Luton, London Stansted and Manchester. Some of the scheduled services from Cardiff International Airport - Alicante, Amsterdam, Dublin, Edinburgh, Geneva, Glasgow, Malaga, Paris, Prague and Toulouse. Airport ownership with a controlling interest, shown above, relates to airports which are either owned or operated under long term agreements. Airport operational information (unaudited) Airport ownership with a controlling interest (continued) At 31 March At 31 March At 31 March At 31 March At 31 March At 31 March 2004 2003 2004 2003 2004 2003 Orlando Sanford Stockholm Skavsta Bolivian Airports Airport Total passengers ('m) Charter 0.9 0.9 - - - - Scheduled - - - - 2.1 2.0 Low cost 0.5 0.2 1.1 0.3 - - Transit - 0.1 - - 0.5 0.4 Total 1.4 1.2 1.1 0.3 2.6 2.4 Terminal passengers Spend per head Â£2.90 Â£3.18 Â£1.76 Â£1.95 Â£1.14 Â£1.32 Net passenger supplement Â£0.96 Â£1.16 Â£1.13 Â£0.79 Â£2.08 Â£2.33 per head Total Â£3.86 Â£4.34 Â£2.89 Â£2.74 Â£3.22 Â£3.65 Charter services Number of tour operators 27 26 - - - - Number of seats offered ('m) 1.0 1.2 - - - - New charter destinations 2 2 - - - - Scheduled services Number of major airlines - - - 1 9 9 Number of seats offered ('m) - - - - 3.3 3.5 New scheduled destinations - - - 1 - - Low cost services Number of major airlines 5 2 2 1 - - Number of seats offered ('m) 0.9 0.4 1.7 0.4 - - New low cost destinations 16 4 7 7 - - Freight tonnage ('000) 7.0 6.9 11.5 15.1 4.3 5.4 Some of the services from Orlando Sanford - Allentown, Columbus, London Gatwick, Manchester, Newburgh, Portsmouth, Toledo, Toronto and San Juan. Some of the services from Stockholm Skavsta Airport - Frankfurt Hahn, London Stansted, Paris, Hamburg, Rome, Milan, Brussels, Glasgow and Rotterdam. Some of the services from the Bolivian Airports - Asuncion, Bogota, Buenos Aires, Caracas, Lima, Mexico City, Miami, Panama City, Paris and San Pablo. Airport ownership with a controlling interest, shown above, relates to airports which are either owned or operated under long term agreements. Additional financial information (unaudited) Restated 2004 2003 Â£'m Â£'m Operating profit before depreciation, amortisation and exceptional items London Luton 22.1 21.2 Belfast International 10.2 10.0 Cardiff International 10.1 10.9 Orlando Sanford 1.8 0.8 Stockholm Skavsta (1.7) (0.4) Bolivia 3.0 3.2 Airport Services 1.5 0.8 Airport Management - North America 1.0 1.2 - London Luton Airport 1.4 1.4 - Costa Rica 0.3 0.3 Total - airports division 49.7 49.4 Other operations 2.6 2.4 Head office (4.4) (4.6) Operating profit before depreciation, amortisation and 47.9 47.2 exceptional items Exceptional items (0.6) (1.5) Depreciation (13.9) (13.1) Amortisation - normal (8.3) (8.3) - exceptional (5.9) - Profit before interest, tax and profit on sale of investments 19.2 24.3 Additional cost on disposal of property business - (1.0) Net interest payable excluding exceptional interest (11.0) (10.5) Exceptional interest (2.0) (1.6) Profit on ordinary activities before tax 6.2 11.2 Tax on profit on ordinary activities (5.5) (4.2) Profit for the financial year 0.7 7.0 Profit attributable to shareholders before amortisation and 15.0 16.2 exceptional items Earnings per share before amortisation and exceptional items 2.66p 2.91p Additional financial information (unaudited) Turnover from owned and managed airports 2004 2003 Â£'m Â£'m London Luton 68.7 64.9 Belfast International 28.0 27.0 Cardiff International 22.9 21.9 Orlando Sanford 10.7 9.1 Stockholm Skavsta 6.3 3.9 Bolivia 10.0 10.7 Total 146.6 137.5 Owned and managed airports relate to airports which are either owned or operated under long term agreements. 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