Air NZ boosts annual profit 45%, signals special dividend

Wednesday 27th August 2014

Air New Zealand, the government-controlled national carrier, boosted annual profit 45 percent as increased passenger numbers and capacity lifted earnings, and will pay a special dividend after reviewing its capital structure.

Net profit rose to $262 million, or 23.6 cents per share, in the 12 months ended June 30, from $181 million, or 16.4 cents, a year earlier, the Auckland-based company said in a statement. That was in line with brokerage First NZ Capital's forecast. Normalised pretax earnings climbed 30 percent to $332 million, as revenue edged up 1 percent to $4.71 billion.

Air NZ has been upgrading its fleet of plans and increasing ties with other airlines, including a code-share agreement inked with Singapore Airlines and increasing its stake in Virgin Australia.

"We have made significant progress on our key strategic initiative," chairman Tony Carter said. "With new aircraft offering better operating economics, an optimised network with the right alliance partners, disciplined cost management and a daily focus on improving the customer experience, we are very well positioned to continue growing."

The board declared a final dividend of 5.5 cents per share, taking the annual payout to 10 cents, and also declared a special dividend of 10 cents, following "a review of the company’s capital structure and consideration of the current and expected medium term liquidity and gearing," Carter said.

The airline expects more earnings growth in 2015 based on forecast market demand and fuel prices, excluding earnings from its stake in Virgin Australia.

Air NZ increased its investment in Australia-based Virgin to 25.99 percent in June, having first sought an alliance with the airline in 2010 after a potential tie-up with Qantas Airways was knocked back in prior years. The New Zealand carrier has also entered into an code share alliance with Singapore Airlines, a fellow investor in Virgin.

The airline increased passenger numbers 2.34 percent to 13.72 million, with a 1.2 percent lift in revenue passenger kilometres to 14.85 million. Short-haul yields improved 0.3 percent to 17.1 cents per revenue passenger kilometre and long-haul yields increased 0.9 percent to 10.7 cents/RPK.

Operating cash flow shrank to $730 million from $750 million a year earlier. Air NZ had cash and equivalents of $1.23 billion as at June 30, and net debt of $384 million.

The shares slipped 0.5 percent to $2.15 yesterday, and have climbed 31 percent this year, outpacing the 6.4 percent gain in the NZX All Index over the same period. The stock is rated an average 'buy' based on six analyst recommendations compiled by Reuters, with a median target price of $2.30.

BusinessDesk.co.nz

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