Tsunami and start-ups hit Alpha profits - UPDATE

John Rimmer

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The group remains committed to further acquisitions despite a sharp decrease in six-month profits

Alpha Airports Group has reported a decrease in profits for the six months ended July 31, citing business development costs and poor trading at its Asian retail division following the December 26 2004 tsunami. Profit was down 42% to £6.2m ($11.3m), or 34.7% to £6.6m ($12m) when adjusted to exclude new business in the period.

The company achieved revenue growth of 12.4% to £268.8m ($489.2m), which it said reflected 8.4% passenger growth at regional UK airports and 27% growth in its inflight retail division. Recent acquisitions in Turkey, Romania and Bulgaria have performed to expectations, the company reported.

One of the main causes of the fall in profits were staff costs relating to the start-up of Alpha's new catering deal with American Airlines in the UK. The company also cited costs incurred during failed contract bids.

In a statement CEO Kevin Abbott said: "Even though these results are broadly in line with our own expectations, we are disappointed to report a profits decline. We are pleased with the underlying progress made on many of last year's flight services initiatives, and we remain committed both to ongoing active development of our existing strongly-positioned businesses and to further acquisitions. Despite our first-half results and a weakening UK retail environment, we anticipate a strong second-half recovery and are cautiously optimistic for overall progress for the full year."

Talking to RavenFox.com, Abbott highlighted a rise in UK airport retail sales as grounds for optimism, but he warned that the industry must work together to halt the decline in penetration rates. "Most UK retailers able to say that they have posted sales growth of 9% in the current climate would be absolutely delighted," he said. "We're critical of ourselves because although we've enjoyed increases in spend per passenger and transaction, there is a consistent trend of reduced penetration across nearly every airport, whether it caters for EU or non-EU traffic." He argued that airport authorities must strive to reduce congestion and shorten queues in order to increase passengers' dwell time.

For more details and reaction, see DFNI October 1, out shortly.