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Sydney Airport share price falters after half-year profit slides

Kenneth Hall
Qantas, travel, plane,

The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price has fallen 1.91% this morning after reporting a 90% drop in net profit after tax (NPAT) amid an ongoing tax dispute.

What were the Sydney Airport results highlights?

Sydney Airport reported 21.6 million total passengers for the half-year ended 30 June 2019 (1H19), down 0.2% on the prior corresponding period (pcp).

International passenger numbers climbed 1.9% higher for the Aussie airport, which helped to offset softer domestic passenger numbers, which dropped 1.5% on pcp.

Group revenue edged 3.4% higher on pcp to $797.1 million, with Sydney Airport reporting net operating receipts of $431.2 million.

Sydney Airport’s earnings before interest, tax, depreciation and amortisation (EBITDA) excluding other expenses rose 4.1% to $649.2 million while operating expenses fell 1.4% to $101.2 million.

Positively for shareholders, the company’s full-year distribution guidance has climbed 4.0% on 1H18 numbers to 39.0 cents per share.

In terms of the key revenue drivers, the company’s Aeronautical segment contributed $361.3 million (+4.7% on pcp) during the half, while Retail (+4.0% on pcp) and Property (+1.8% on pcp) comprised $184.2 million and $120.3 million, respectively.

The only segment to see negative growth was Sydney Airport’s Parking & Ground Transport business, with the $77.6 million contribution down 1.4% on pcp.

The largest country for the airport’s Australian Destination Departures remains the United States with 7% of total passengers, closely followed by New Zealand (6%) and China (4%).

Sydney Airport provided 3-year capex guidance of $0.9 billion to $1.1 billion for 2019–2021, with 2019 capex guidance of $300 million to $350 million.

These figures represent a downgrade on its planned expenditure announced earlier in the year, which management said reflects “prudent management of the capital investment program.”

In terms of the company’s growth outlook. Sydney Airport’s long-term traffic growth has seen a plateau of sorts in recent periods, particularly driven by international traffic numbers.

On the balance sheet side of the equation, Sydney Airport has maintained its BBB+/Baa1 credit metrics and significant flexibility with more than $1.1 billion in undrawn debt facilities as at 30 June 2019.

Sydney Airport reported its cash flow coverage ratio had increased to 3.2x compared to 3.1x in 1H18, while net debt to EBITDA reduced to 6.6x from 6.7x in 1H18.

Foolish takeaway

Despite a robust earnings result, the Sydney Airport share price has slid lower this morning amid a broader downturn in the S&P/ASX 200 (INDEXASX: XJO) index.

While underlying profit climbed higher, the company did report statutory net profit after tax (NPAT) down 90% to just $17.3 million, largely attributed to a $182 million Danish tax dispute, currently under appeal in the Danish High Court.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Sydney Airport Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019