Strong UK retail boosts BAA results

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International airports group BAA, today announced an increase in normalised profits of 2.7% and a strong 9% increase in net retail income from UK operations were the highlights of its first quarter results.

Total revenue for the period ended 30 June reduced by 2.5% to £547m ($777m) principally the result of the withdrawal from certain non-core overseas duty-free businesses such as Shanghai Pudong airport. Group operating profit before exceptionals increased by 4.5% as the performance of UK retail operations was sufficient to outweigh consolidation and persistent losses in a tough US market.

The company said, UK airport retailing continued to grow strongly with net retail income for the three months increasing by 9% to £124m ($176m) and net retail income per passenger rising by over 7% to £3.81 ($5.51), maintaining the growth seen in the second half of last year following the major developments in Heathrow terminal 3 and Gatwick South terminal.

BAA group retail director, Brian Collie, emphasised that the performance was achieved in difficult market conditions: "These first quarter results are very positive despite the additional pressures imposed by the foot and mouth crisis. Through a committed and creative approach we are achieving sustainable growth across all of our key product categories," he said.

World Duty Free Europe (WDFE) achieved an overall sales growth of 10% to £86m ($122m) and an operating profit improvement of 25% to £5m ($7.1m). However other World Duty Free businesses recorded an operating loss of £2m ($2.8m) and WDFA in particular faced continuing pressure from uncertainty in the US economy. Border store operations reported a slightly more positive performance, particularly on the southern border, with growth in year-on-year retail sales. WDFA's new flagship border store at San Ysidro, performed well in its first six months, said BAA. The consolidation of WDFA's operations, including the sale of the WDFA Export Division and the withdrawal from a number of relatively minor sectors and areas, has created a more streamlined Americas business, said BAA.

On future prospects BAA said it expects continued heavy investment in Heathrow, Gatwick and Stansted airports to cope with demand. In particular Heathrow terminals 1 and 4 are to be reconfigured to handle both domestic and long-haul traffic. The terminal extension at Stansted, when completed, will double retail space to 60,000sq ft (5,576sq m). The company said it is confident the planning approval for Heathrow terminal 5 will be granted in the second half of 2001.