Alpha posts healthy sales rise, trims costs

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Alpha Airports Group has announced that underlying trading in the year to 31 January 2002 continues to be in line with expectations following the announcement of the interim results at the end of September 2001.

Following an evaluation of the longer-term effects on the business of the events of 11 September 11 Alpha said it anticipates one-off costs and write-offs in the current year of £23m ($32m).

With a substantial reduction in worldwide airline travel since 11 September Alpha introduced a programme of redundancies across all its businesses which is now complete and has resulted in 923 job losses with a related cost of £3m ($4m). The redundancies have principally been in the UK flight services business with some in the operations in Jordan, Australia and elsewhere in the Group. Alpha said this was a difficult decision but essential to protect its competitiveness going forward.

In the UK retail services division, full-year UK duty-free sales rose 11% on a like-for-like basis. Alpha said the performance in Manchester terminal 1, with a new shop format which opened in April 2001, has been excellent with sales up over 15%.

However, activity at several other UK airports has been hit by changes in airline schedules and passenger mix. As a result certain retail contracts have become loss-making. Internationally, retail trading has been adversely affected in Sri Lanka, Orlando in Florida, and Barbados. In Orlando, a key customer, Britannia Airways, no longer operates from the airport, leading to a further significant loss of international passengers. With a final three years to run on this already loss-making duty-free contract with the Greater Orlando Aviation Authority, it has been necessary to increase the financial provision to cover additional anticipated losses. As previously announced (TRW 2/11/02) Alpha has agreed to sell its Barbados investment in A G Retail, which incurred worsening losses during the year.

In UK flight catering, reduced British Airways' activity and the transfer of many of its long-haul flights from Gatwick to Heathrow has significantly reduced future catering activity and profit at the Gatwick catering operation. Alpha's Australian flight catering business has also faced difficult challenges created by the bankruptcy of Ansett, Australia's second airline. Alpha has been invited to provide catering services to Tesna, the new "Ansett" airline when it commences operation.

Looking ahead, Alpha said the trading outlook continues to become clearer and more encouraging as airline and airport customers redefine their businesses in line with the available opportunities.