Macquarie Airports (MAP) reported a net loss for the six months to 30 June 2008 of $274.3 million, compared to a profit of $939.2 million last year. The company said it would undertake a $1 billion buyback due to declining values for its securities.
Chief executive officer Kerrie Mather said MAp's airports have continued to perform strongly in the first half of 2008.
"Despite the strong performance and excellent positioning of our airports, MAp's boards and management recognise that, despite the recent rally, security price performance has been disappointing so far in 2008," Mr Mather said.
"Whilst this is primarily a consequence of external factors beyond MAp's control, action has nonetheless been taken to address this security price underperformance."
Looking ahead, Mr Mather said the board and management of MAp considered the outlook for the rest of 2008 to be solid.
"Notwithstanding the near term impact of the external environment, a long term traffic growth forecast of 4% to 5% is maintained with an intention to enhance revenue yields through commercial initiatives and deliver further increments to EBITDA via operational efficiencies."
MAp also said it intended to seek security holder approval at an EGM for a buyback of MAp securities up to a total value of $1 billion.
"The intention to buyback MAp securities also reinforces MAp's acquisition discipline and enhances distribution sustainability," the company said.
"A buyback of this scale also aids the quality and sustainability of our distributions and our commitment to achieve broad convergence between our regular distribution and proportionate earnings by 2010."
Mr Mather said to facilitate these initiatives, the company proposed to partially divesting its interests in Copenhagen and Brussels airports to Macquarie European Infrastructure Fund 3.
"These divestments will be conducted at prices that reflect our full directors' valuations, generating substantial premia to the prices for MAp's original investment, of 49% for Copenhagen and 47% for Brussels," Mr Mather said.
Mr Mather said Map had also taken an economic interest in ASUR, the owner and operator of nine airports in south eastern Mexico.
"Their portfolio includes Cancun Airport which is Mexico's second largest airport, located in one of the fastest growing tourism destinations in Mexico and the Caribbean," Mr Mather said.
"ASUR meets MAp's key investment criteria and we expect the returns from this investment to be well above that offered by current and proposed major airport privatisations. We believe this investment demonstrates MAp's continued ability to source attractive growth opportunities."
Mr Mather added that MAp's first half performance confirmed the resilience of its operating model.
"Proportionate EBITDA growth of 9.6% in the face of the current external environment represents an excellent achievement and demonstrates the significant value which has been generated by the aeronautical and commercial initiatives MAp has underway at our airports," he said.
"We recognise that our airline customers face challenging conditions but the first half result is evidence of the importance of investing in airports with attractive characteristics and opportunities across the aviation and commercial businesses."
Mr Mather said the company would apply surplus cash to the repayment of its hybrid capital instrument, TICkETS, which he said would simplify MAp's capital structure.
"Whilst there is no provision for early redemption, we are offering TICkETS holders a withdrawal option, with any remaining balance to be defeased and repaid on 1 January 2010," Mr Mather said.
MAp reaffirmed regular distribution guidance of 27c per stapled security for the 12 months to 31 December 2008, subject to external shocks to the aviation industry or any material changes in forecast assumptions.
This included the interim distribution of 13c per stapled security for the six months to 30 June 2008, which was on par with last year.
At 1051 AEST, Map was trading up 28c or 10% at $3.10.