Profits fall at MAG

MANCHESTER Airport Group has reported a half year operating profit of £68.4m, down 4.7%, but chief executive Geoff Muirhead insists the group is still ahead of budget, and is countering falling passenger numbers.

Turnover for the group declined by 4.3% to £217.3m in the six months to the end of September 2008.

The group attributes the decline to the closure of its baggage handling subsidiary Ringway Handling Services, which had made revenue of £7.8m in the same period last year, and the transition of filling station Airport Petroleum to a concession in the previous financial year.

MAG said that like for like turnover was up 2.2% on the previous year. Pre-tax profit was down to £38.4m, a 41.7% decrease on the same period last year.

The company explained this was because it had written down the value of investment properties by £17m in the period, and added that in the previous period a land disposal had generated £6.4m to pre-tax profit.

But even allowing for those two factors, there is still a £4.1m gap on the pre-tax profit to September 2007.

Mr Muirhead said: “For the half year we are slightly ahead of budget. But we are anticipating a challenging year and looking to a very difficult last half of the year.

“It’s a credible performance given the marketplace – we are expecting traffic to continue to decline.”

The main elements of that decline are consolidation in the charter market and a reduction in domestic traffic to London.

Mr Muirhead is forecasting full year operating profit to be “a bit less” than last year, but still in line with budget.

Overall passenger traffic declined by 369,000 to 16.6 million. But lower figures at Manchester were partially offset by growth in the East Midlands, which has benefited from a growth in low-cost operator routes.

Despite passenger decline, Mr Muirhead said the group was outperforming the market in its retail and catering activities, which he said would sustain profitability for the back end of the year. But there will be some cost cutting.

“We will be cutting back on investment but not customer services or capital cost to maintain, refurbish and renew services,” he said.

The company was hit by a one-off £115.4m tax charge because of changes in tax legislation, including the abolition of industrial buildings allowance. This helped to push the company to a loss of £82.5m after tax, compared with the £60.5m profit it made in the same six months in 2007.

Total borrowings stood at £313.8m, up from £298.3m last year. The group has also secured an additional £75m 20-year loan at a preferential fixed rate, on top of its existing £300m revolving credit facility, on which it has borrowed £50.1m.

Manchester Airport Group includes Manchester, East Midlands, Humberside and Bournemouth airports. It is owned by the ten Greater Manchester councils, with Manchester City Council holding a 55% stake and the remaining councils holding 5% each.