Core retail back on track in BAA results

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The contribution of BAA retail operations to sales and profits has continued to grow in the company's first half 2002-2003 results just announced

UK airport retailing, including the operations of World Duty Free Europe, continued to perform strongly, with net retail income increasing by 5% to £274m ($435.7m) and net retail income per passenger rising by 4% to £3.91 ($6.22).

BAA said the improved performance from airside shops, catering and duty-free has been supported by the completion of the latest phase of Heathrow terminal 3's redevelopment and the new duty-free shop at Stansted which opened in August. Income from bureaux de change was unchanged from last year, despite the introduction of the Euro, although this trend is unlikely to continue as the new currency matures.

BAA's investments, joint ventures and management contracts in international airports such as Indianapolis, Naples, Melbourne, Perth and others realised an operating profit of £6m ($9.5m).

In the six months to September 30 2002 passenger traffic had recovered to 1% above last year. This contributed to a 1.4% increase in total revenue at UK airports to £931m ($1,480.3m). Total worldwide group revenues were £1,019m ($1,620.2m), an increase of 1.1%. Operating profit of the UK airports grew by 0.6% to £339m ($539.0m) including the profit of World Duty Free Europe. Total profits (EBITDA) increased by 2.1% to £482m ($766.4m).

BAA chief executive Mike Hodgkinson commented: "We are now focusing entirely on our core airport activities, primarily in the UK, although we will continue to seek further prudent investments in international airport developments. This strategy, which we have followed for the past three years, has delivered good results.

"In this last six months, we have seen continued growth in retail income, offsetting low traffic growth, lower airport charges yield and additional security and insurance costs. Consequently, we have achieved a small increase in operating profit from our continuing activities.

"We have continued to make substantial investment in new and improved facilities, particularly at Heathrow. We completed the new terminal 1 immigration hall. The final phase of the major redevelopment of the terminal 3 departure lounge is in progress. Since receiving approval for terminal 5 we have made excellent progress."

However in a note of caution Hodgkinson said it remains difficult to predict the pace of traffic recovery. BAA has seen good growth in leisure markets at all its airports. But long haul routes continue to be adversely affected.