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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Alpha Airports | LSE:AAP | London | Ordinary Share | GB0000281328 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 109.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
RNS Number:6430A Alpha Airports Group PLC 30 March 2006 30 March 2006 Unaudited Alpha Airports Group Plc Preliminary Results for Year Ended 31 January 2006 Alpha Airports Group Plc (Alpha) is one of the world's leading aviation support services companies, providing retailing and catering services for airports and airlines. Alpha's 6,900 staff service over 100 airlines worldwide and operate from over 200 outlets at 77 airports in 15 countries. Financial Highlights 2005/6 2004/5 % Change Sales #550.9m #487.8m +12.9% Profit before tax* #18.5m #17.4m +6.3% Profit before tax #18.4m #13.1m +40.4% Earnings per Share 5.74p 3.78p +51.8% Proposed Final Dividend Per 3.2p 3.0p +6.6% Share *Stated before separately disclosable items and impairment charges, including the post-tax results of associate and joint venture. Operational Highlights * Completion of "One Alpha" strategic review; UK and Ireland reorganisation implemented * #8m investment in IRIS (Integrated Retail Information Systems) now 50% implemented * Major investment and development programme in UK * New store fixtures and #6m investment in airline service facilities at Manchester and Birmingham * Successful launch of Blue Sky Service innovative inflight meals concept * Strong international growth of sales and profits Commenting on the Preliminary Results, Graham Frost, Chairman said: "Trading at the start of the year is slightly ahead of the comparable period. With an ongoing commitment to innovation, tighter operational focus and strong finances in place, the Board believes the current year will see further progress. The UK aviation services market remains highly competitive but we are confident that the new "One Alpha" strategy will improve UK profit margins and deliver our Group target of 5% return on sales in the medium term." Enquiries: Alpha Airports Group Plc 020 8580 3200 Kevin Abbott, Chief Executive Heather McRae, Finance Director College Hill 020 7457 2020 Mark Garraway Stephen Davie www.alpha-group.com Chairman's Statement The year under review was a period of ongoing progress for the Group. It was also a year of significant developments across the airline and airport industries. The inexorable growth of low-cost carriers, despite the sharp rise in oil prices, privatisation of airport assets around the world, bid activity both in the UK and internationally for airport operators and industrial relations strife were all headline news and are factors influencing our thinking on the future shape of the business. Against a backdrop of increasing competitive pressures in the UK, and following a disappointing first half profit, the management team focused on building a stronger performance in our core UK market through a programme of continued innovation. In the latter part of the year, a programme of cost reduction was introduced, the benefits of which are now being seen in an improving margin performance. It is, therefore, particularly pleasing to report that the overall performance for the year benefited from a much improved second half in the UK, alongside ongoing strong growth in our International business. Over the last few months, the management team, led by the Chief Executive, Kevin Abbott, has conducted a thorough review of the business and their conclusions for the Group's future strategic direction - "One Alpha" - have been endorsed by the Board. In his report, he sets out in detail the strategy to both transform the size and scope of the business and to deliver enhanced profitability and shareholder value. A key element of the new strategy is the restructuring of the Group into two distinct business units focusing on our UK and International businesses. Within the UK, the business is being further restructured into two divisions, Alpha Airline Services and Alpha Airport Services. Whilst we will continue to explore further international development opportunities, it is clear that management's main focus must remain on the UK market which accounts for some 82% of Group revenues and which offers the greatest scope for medium term profits growth. Results This is the first set of full year results that the Group is reporting under International Financial Reporting Standards (IFRS). With the balance of earnings weighted towards the second half, underlying pre-tax profit (before separately disclosable items and impairment charges and after including the post-tax results of joint venture and associate) increased 6.3% to #18.5m, on sales 13% ahead of last year at #551m. With significantly lower net separately disclosable items compared to the previous year, profit before tax increased 40% to #18.4m. In the UK and Ireland, operating profit (before separately disclosable items and impairment charges and after including the post-tax results of joint venture and associate) declined 33%, from #13.1m to #8.8m, despite 9% ongoing sales growth. Conversely, our International business generated a significant 98% increase in operating profit from #6.3m to #12.5m on an excellent 34% sales growth partly driven by acquisitions. This was a year of significant investment for the Group:- * #21m in capital expenditure, including our major IT and business transformation project (IRIS); and * #4m in acquisitions in Romania and Bulgaria; and Despite this, with year end net debt of only #37m, the Group remains conservatively financed. During the year we entered into a new #100m five year multi-currency revolving banking facility which gives us substantial headroom to leverage an expansion of the business. It was announced earlier this year that the Group may have been a victim of a fraud by a third party. Further investigation has indicated that the Group has lost up to #2.5m in a fraud across a number of European countries. With our internal investigation still ongoing, and having issued legal proceedings, we are unfortunately unable to provide more detail at this time. Pensions As with many employers, we have had to review our pension provision going forward. We have moved to a "career average" basis, against the present "final salary" provision, so as to maintain an excellent ongoing pension benefit, but at a cost which is affordable to both the employee and the employer. With an employee contribution level of 8% of salary already in place, we knew that our employees were unwilling to pay even more to protect their previous "final salary" benefit. Dividend The Board has recommended a final dividend of 3.2p (2004/5: 3.0p), giving a full year dividend per share of 4.2p (2004/5: 4.0p). Following approval, the dividend would be payable on 22 June 2006 to shareholders on the register as at 2 June 2006. Outlook Trading at the start of the year is slightly ahead of the comparable period. With an ongoing commitment to innovation, tighter operational focus and strong finances in place, the Board believes the current year will see further progress. The UK aviation services market remains highly competitive but we are confident that the new "One Alpha" strategy will improve UK profit margins and deliver our Group target of 5% return on sales in the medium term. Chief Executive's Report Overview A much stronger performance in the second half ensured a #18.5m profit before tax (before separately disclosable items and impairment charges and after including the post-tax results of joint venture and associate) for the year, 6% ahead of last year's #17.4 million level on a comparable IFRS basis. In a highly competitive environment, and after the disappointing first half result, this is an acceptable performance. We are particularly encouraged with our International business which continues to grow from strength to strength. With strong Group finances in place, we will continue to seek out further development opportunities. Strategic Review Against a background of a relatively stable outlook, we have conducted a comprehensive review of our business. Alpha is an internationally recognised, aviation support company. At a recent world-wide industry event, Alpha was acclaimed the "2006 Airport Travel Retailer of the year" as voted for by our global suppliers. In our airline services business, we remain the only top three global player to generate both sales growth and ongoing profitability over the past five years. Across our business, the Group continues to generate high performances for our airline and airport customer partners, and thus enjoys very strong contract retention rates - 97% over the past five years, and we continue to gain new customer partners. Today, Alpha's 6,900 staff service over 100 airlines worldwide and operate from over 200 outlets at 77 airports in 15 countries. Whilst truly a global business, Alpha Airports' UK and Ireland operations remain the bedrock of the business, accounting for some 82% of Group revenues. In a highly competitive environment, we are pleased with the rate of top-line growth but this has not been reflected in our bottom line performance. In the year under review, just 41% of operating profit (before separately disclosable items and impairment charges and after including the post-tax results of joint venture and associate) came from the UK and Ireland markets. This represents an operating profit return on sales of only 2%. Conversely, our International business, representing only 18% of the Group's sales, and 59% of the Group's operating profit, generated an operating profit return on sales of 12%. With competition set to intensify as European competitors seek to expand their presence in the UK and Ireland, improving our domestic return on sales is an absolute priority if we are to retain our market-leading positions in the UK and Ireland. We concluded our review in February 2006 and, following Board approval, are now implementing our new "One Alpha" strategy. "One Alpha" "One Alpha" is a comprehensive, high-level strategy to deploy Alpha's resources more effectively towards achieving long-term growth opportunities. In a growing but highly competitive environment, margin pressure is, and will remain, the norm. Our current margin performance is such that with just a 1% improvement in UK and Ireland return on sales, profitability can be significantly improved. The strategic review identified actions to be taken in the short-term that will deliver benefits in the coming financial year as well as identifying longer-term profit growth opportunities. In conducting the review, we took particular note of the fragmented nature of the market and the likelihood of consolidation in the future. "One Alpha" includes two broad development plans: - Plan For Profit which focuses on our existing UK and Ireland business to ensure it is performing to its maximum potential; and - Plan For Growth which will see the transformation of the size, nature and scope of the business, both organically and by acquisition of new assets To implement Plan For Profit there are three priorities:- 1. To reorganise the business to better reflect our customers' own organisations. We uniquely supply both retail and catering services to airports and airlines. We have recently implemented a major reorganisation of the UK business into two distinct operating units: Alpha Airline Services (trading as Alpha Flight Services) - to provide retailing and catering solutions for airlines, and Alpha Airport Services (trading as Alpha Retail) - to provide retailing and catering solutions for airports. This reorganisation will enable us to reduce costs, leverage synergies between the airport and airline businesses and improve our capacity to lead consolidation in the market. 2. We have identified significant economies of scale and competitive advantage to be available through the establishment of an integrated "One Alpha" UK and Ireland supply chain network. This will deliver enhanced buying power, improve response times, align our logistical capability to our strategic goals, and enable our customers and suppliers to work more effectively both with us, and all together for mutual benefits. 3. We have developed a strong "Alpha culture" amongst our people. This has delivered exceptional benefits to the business, but it can and must be developed further. Through more focused incentivisation and reward, we will ensure that our people are most effectively contributing to overall profit performance. Plan For Growth is an ongoing programme and includes the development of our International operations as well as a more expansive view of the role the Group can play in the consolidation of the industry and in other related markets. 1. The Group has built a significant international presence and now has the platform on which to be more selective in the opportunities it wants to pursue. In future, we will focus on those geographies which allow us to best utilise our core skills and capabilities. Our success in Sri Lanka, where we have developed the best retailing performance in South Asia, and the huge growth potential of the Indian market exemplify a focus on fast emerging markets which are replicating the UK's model of providing retailing and catering services for privatised airports and low-cost carriers. In Australia, having built a network of quality flight kitchens, we are delighted to have been appointed by Malaysian Airlines as their Australian network partner from May 2006. This is a major step, but not the last, in our Australian development plans. With the Malaysian Airlines contract, our international flight kitchens will be operating at 30% capacity utilisation giving us significant potential for future growth. We are currently reviewing the criteria by which we will assess international opportunities. International development will not be restricted to tendering for airport and airline contracts, but will also include a greater emphasis on acquisitions in both the airport and airlines services arena. 2. In building our current scale, we have developed a range of skills and capabilities that would allow us to play a leading role in consolidation of the industry.We have also identified transport related industries, such as rail, where we believe our core retail and catering skills could be deployed. These are early days and much work needs to be done in refining our thoughts in this area.However, we are convinced that there are exciting opportunities to pursue in the future. Our People Creating a great place to work for all our people remains the bedrock of Alpha's continued success. We are absolutely committed to continuing to build a culture of openness and trust. Only then can we deliver Alpha's goal of "People Making Travel Special". Our staff turnover - a key indicator of satisfaction - has continued to decline from 21.9% to 21.6%. This is less than half the level of the UK retail and catering industry. We are delighted that our many Health and Safety initiatives continue to be supported by all our colleagues. Our total accidents across the UK and Ireland reduced by 10%, to a level which is 40% better than other equivalent UK and Ireland retailing and catering employers. We remain committed to the effective delivery of high-quality training for all our staff. We are increasingly delivering this training via our fast developing intranet. We were delighted to have been recognised with a Bronze Award for our "Basic Security Awareness" e-learning training module at the recent Institute of IT Training awards ceremony. After the Sri Lanka tsunami disaster, Alpha's people - supported both by the duty-free retail global industry and Alpha, in terms of matched employee giving - raised over #0.2m, and have successfully built and rehoused 20 families in Kalutara, Southern Sri Lanka. Summary We believe there are good opportunities for the future. "One Alpha", as well as delivering improved performance in the short-term, should enable us to achieve sustainable and growing profits in the longer-term. It will also provide us with the best structure and operational flexibility to grow the business through a combination of organic and acquisitive growth. Operational Review Our unique proposition to our airline and airport customers is that we are both retailers and caterers thus aligning fully with our customers' own management organisations to deliver a rich and enjoyable customer experience, either through the airport or on the aircraft. UK and Ireland Airlines 2005/6 began with the highly successful start-up of catering services to American Airlines at Heathrow and Gatwick. However, the very difficult employment market at Heathrow meant that after start-up, when staff from other Alpha units returned to their bases, we struggled to recruit the specialist skills required, and had to rely on excessive and expensive overtime from our Heathrow staff. We thank our Heathrow staff for their tremendous efforts and support during this period, but we incurred short-term excess labour costs of nearly #1.5m during this period. By late summer, we had achieved the required full employment target at Heathrow. We are delighted to have been reappointed for a further five year term as retailers and caterers for the newly formed and fast growing Excel Airways/Air Atlanta airlines group, and similarly retained the BA CitiExpress contract as they make the transition to BA Connect, with an Alpha-designed retail onboard service. Sadly, we lost the ThomsonFly catering contract from Spring 2006 after 30 years' service at Manchester and Birmingham. This is a major loss to the Group, and with additional regional airport capacity being invested by LSG Skychefs and its partners, it implies increased competition going forward in our core regional airport network. Alpha has again reviewed its organisational structures, and developed a clear plan to deliver ongoing improvements to our commercial offers at a reduced delivery cost. This plan necessitated significant restructuring, with 143 roles made redundant at a cost of #2.1m in 2005/6. Investment in our business is key to our future strategy. We have invested #6m into our Manchester operations, closing two old facilities at the end of their leases, and creating a new world-class bonded warehouse facility, and an expansion and upgrade of our 10 year old flight kitchen. These upgraded facilities will help to provide the lower cost base and flexibility that is essential to underwrite future profitability. Similarly, at Birmingham, we have upgraded and extended our flight kitchen, and converted the previous charter flight kitchen into our Blue Sky Service central assembly unit. In Dublin, with the ongoing growth of our low-cost and charter airline customer base, we have moved to bigger, better premises. Our recently launched Blue Sky Service has been a tremendous success, generating at least 10% enhanced traveller satisfaction onboard. The lower cost benefits of this service have been appreciated by our launch customer MyTravel Airways, and taken up thereafter by Excel Airways and Flyjet, with more customers committed for the 2006 season. Similarly, the quality of our frozen entrees from our dedicated Manchester facility have been increasingly recognised over the past three years, with annual growth of both customers and service, leading to a record year in 2005 with over 11 million meals served. For easyJet, we have helped to deliver ongoing growth in retail sales and profits per passenger, and we have opened new European bases in Basle and more recently in Milan Malpensa. With trials of highly innovative hot and fresh food offers underway, we are confident of further growth in the retail spends and traveller satisfaction onboard our low-cost and charter airline partners. Whilst much progress was made with many customers, the year ended with profit below 2004/5's level, due primarily to the #1.5m excess wage costs associated with the launch of services to American Airlines. Airports Overall, our sales growth of 8% matched the excellent ongoing 8% growth of passengers through the UK and Ireland regional airports. However, profits declined significantly due to a combination of enhanced bonus rents payable and #1m revenue investment cost in new IT systems, IRIS, across our UK Retail estate. This IT investment of circa #8m will lead to a transformation in our supply chain management capabilities, and enhanced supplier sales/order sharing, with a target of increased sales from enhanced stock availability of bestsellers.We are halfway through the implementation programme, with a target of store completion by early May and full supply chain / warehouse completion by June. We have invested significantly in new designs and fixtures across the pink Alpha Airport Shopping tax and duty free stores. The showcase for this is our new #2m store in Birmingham International T1, which opened in January 2006, as the foundation of our new seven year contract. The store design built on the success of recent developments introduced into our Manchester T2 and Newcastle stores - a brightly coloured white spirits wall, a black gloss and dark wood whisky and cognac wall, a tasting bar, and upgraded handbags and sunglasses fixtures. In Manchester T2 alone, the new fixtures - designed to drive consumer interest, hence penetration and sales - has generated 48% plus increases in sales of malt whisky, with deluxe whiskies up 30% and vodka up 21%. Every site in which Alpha has installed new fixtures has provided double digit sales growth, proving that contemporary design is commercially worthwhile. Further developments throughout 2005/6 included a new specialities area in Manchester T1, a new Sunglass Studio in Liverpool John Lennon, new Bijoux Terner accessories sub-stores in Liverpool John Lennon Airport and Newcastle International Airport, our first ever Arrivals store in Manchester T1, and the opening of a wide range of Alpha retail and catering offers at the new Doncaster Robin Hood Airport. Increased congestion at peak times at many of our airport locations means the conversion of passengers into shoppers remains a challenge. In our UK duty-free stores, transaction spend of shoppers increased 5% but we suffered a 7% decline in shopper penetration. Improving upon the 'penetration' challenge remains the key priority for Alpha and our airport partners. Alpha is committed to store expansion and upgrades, based on proven developments, and our airport partners are working with us to enhance the customer experience to generate further dwell-time opportunities in the key post-security airside environment. Our World News landside stores are under pressure due to this drive to move passengers airside promptly. To drive landside penetration and spend, we successfully introduced a hard-hitting promotion, 'Low Flying Prices ', combined with 'exclusive' landside only offers. Innovation continues to be the most important component of our World News brand development, with new concepts such as the introduction of 'World News TV' an in-store media network, plus additional revenue streams generated via SMS text messaging. Glorious Britain's success at its core London Heathrow base continued, with 13% overall sales growth. Glorious Britain was again named 'Souvenir Retailer of the Year' and furthermore, was acclaimed as the 'Greatest of the Greats' at the annual UK Gift Retailing awards ceremony. Glorious Britain further developed its gift consultancy services for St George's Chapel, Windsor and launched a transactional website to enable our regular customers to buy additional gifts from anywhere in the world. We also developed two 'Scottish Presence' stores at Prestwick Airport, offering an extensive range of Scottish themed gifts and souvenirs. 2005/6 was a year of major progress for our airport catering offers. In response to customer demand at Dublin we have expanded our offers and extended into airside catering. New developments include food courts for Nottingham East Midlands and the newly opened Doncaster Robin Hood Airport, a Bar 08 at Eurotunnel, and upgraded offers at Inverness. Our focus on enhanced consumer satisfaction is reflected by an independent consumer survey which identified an improvement in customer service over the year, and a 98% product satisfaction rating at the year end. Of great future potential is our World News Cafe brand, which combines the convenience of our "ctn" (confectionery, tobacco and news) and books offer with a quality, but simple, catering service. From our first unit in Jersey, World News Cafe now extends across the UK and Internationally. In 2005/6 we invested in units at Birmingham (UK), Amman (Jordan), Sofia (Bulgaria) and Bucharest (Romania). The flexibility and scalability of this offer makes it perfect for small scale units in remote satellite areas and gate rooms, as well as for full scale offers. International Our International retailing and catering businesses continued to prosper and grow, generating record sales and profits. By region, performances were as follows:- Asia Despite the tsunami's negative impact on European tourist numbers, sales and profits in Sri Lanka were maintained at the previous year's level. We benefited from moving into expanded and better located stores in both arrivals and departures (as the key opportunity in our extended contract), generating increases in penetration levels. Alpha continued its impressive growth in wine sales to the country's expanding hotel, bar and consumer markets (via supermarkets) with sales up 32%. Our Maldives business was significantly down, reflecting a 36% decline in departing passengers. Conversely, the business we manage in Cochin (India) continued its impressive growth, with sales up 50% on a 15% growth in passengers. We are firmly focused on - and highly qualified for - the exciting development opportunities available in Indian duty free, as airport privatisation develops and the low-cost airline market continues its exponential growth. Middle East Alpha enjoyed another successful year's performance in Amman, Jordan. The year's major development was the move into airport catering, with the successful establishment of four new World News Cafes at Queen Alia International Airport, Amman. Australia After 2004/5's major contract developments and resultant start-up losses, 2005/6 was a year of consolidation. The business is now cash positive and generates only small operating losses. We continue to seek out new international airline customers, and we are delighted to have recently been appointed by Malaysian Airlines, to service them at five airports across Australia. This customer builds on our halal cuisine capabilities. Our global inflight retailing contract with Qantas has performed significantly better after last year's start-up losses. United States of America After last year's 'pink' upgrade to our Orlando Sanford duty free store, we enjoyed a 11% increase in passenger spends. We are currently making a U$2m investment to upgrade our Greater Orlando Aviation Authority, Orlando International duty free stores to the latest Alpha 'pink' design, and anticipate similar sales improvements during our new five year contract extension. Mainland Europe Our European business was expanded with recent acquisitions made in Turkey, Romania and Bulgaria. In its first full year with Alpha, our Turkish operation performed well, with expansion of our upgraded inflight retailing offers to two new charter airlines. In Romania, we implemented significant changes in management after the acquisition, and swiftly applied Alpha policies. This led to increased sales, reduced costs and thus enhanced profit. We won a new World News Cafe concession, further extending our range of catering offers at Henri Coanda International Airport, Bucharest. In Bulgaria, we again implemented significant management restructuring, promoting local professionals to senior roles. Furthermore, with a more proactive relationship with the Sofia Airport Authority, we have been awarded concessions for a World News Cafe and a Deli Sandwich Bar in the soon to be opened international terminal. In Italy, our Servair AirChef airline and airport catering joint venture continued its impressive growth and development, with ten new airline customers now joining our new Rome Fiumicino flight kitchen, and first-time entry into the airline cabin cleaning market in Milan. We are particularly pleased to welcome Continental Airlines in Rome, won as part of a successful pan-European offer by Alpha, Servair and Servair AirChef. Alpha opened its first airport retail outlets in both Rome Fiumicino and Rome Ciampino airports. Our six new speciality shops were 'highly commended' in the industry's media evaluation of the best global watches and jewellery offers. In Belgium, our associate operation with Virgin Express continued to progress, delivering high quality, inflight retailing success. In Holland, our Amsterdam flight kitchen proved the benefits of the significant restructuring undertaken in 2004 and 2005 by delivering high quality services at substantially reduced costs, thus converting significant recent losses into a break even performance. We are targeting further sales and profit progress in 2006/7. In Sweden, our airport catering operations at the fast growing Swedish airport, Stockholm Skavsta, based on continued growth of low-cost passengers, enjoyed an 77% sales growth and generated a worthwhile first full year profit contribution. Across Europe, Alpha's unique offer of retailing and catering services to airlines and airports continues to present exciting development opportunities, both in terms of the growth opportunities available at our existing airport locations and in terms of further European expansion opportunities. Financial Review This is the first set of annual results that the Group is reporting under International Financial Reporting Standards ("IFRS") which as previously indicated have no material impact upon the underlying cashflows or trading activity of the Group. The impact of this change on previously reported results under UK GAAP was to increase profit before tax by #1.4m to #13.1m for the year ended 31 January 2005. Results Group sales at #550.9m were 12.9% ahead of last year (#487.8m). In the UK and Ireland sales increased 9% to #449.7m driven by a strong passenger growth of 8% across our UK regional airports. Internationally, the business benefited from the full year effect of our acquisition in late 2004 in Turkey, the acquisition in Romania and new retail shops opened at the two airports in Rome. International sales expanded 34% to #101.2m. Profit before tax (before separately disclosable items and impairment charges and after including the post-tax results of joint venture and associate) increased #1.1m (6.3%) to #18.5m. In the UK and Ireland, despite the increase in sales, operating profit (before separately disclosable items and impairment charges and after including the post-tax results of joint venture and associate) declined to #8.8m from #13.1m in the previous year due primarily to start up costs in Airline Services combined with business investment costs and higher concession rents within Airport Services. Internationally we had the opposite experience with operating profit (before separately disclosable items and impairment charges and after including the post-tax results of joint venture and associate) growth of over 98% to #12.5m. The turnaround of underperforming businesses in Australia and Amsterdam from 2004 and the international expansion during the year contributed to this excellent performance. Separately Disclosable Items We have incurred a net charge of #0.1m in relation to items which individually require a note of explanation. Following the announcement of the loss of the ThomsonFly contract last November we swiftly carried out a restructuring of the UK and Ireland Airline Services business and made 143 positions redundant at a cost of #2.1m. The Group has suffered a loss in relation to a suspected fraud carried out by a third party advisor to the Group. We continue to investigate this but from the information we have collated to date, the size of the loss is at the upper end of our initial expectations and a provision of #2.5m has been recorded in the results. The planned changes to the Group Pension Scheme have resulted in a reduction of #4.5m in the deficit. This represents a reduction in past service benefits and is credited to the Group income statement. Net interest and finance charge Net interest payable of #2.8m has increased 40% in the year from #2.0m reflecting a higher level of net debt throughout the year following our extensive capital investment programme and overseas acquisitions. The Group negotiated a new #100m five year multi-currency revolving banking facility during the year providing the benefit of lower interest rates from July 2005. Taxation Tax charge for the year was #4.6m representing a tax rate of 25.8% (2004/5: 30%) when compared against profit before tax (before separately disclosable items and impairment charges). This reduction reflects the increase in profits from international locations (Jordan, Romania and Turkey) where the taxation rate is significantly lower than the UK. The tax charge has also benefited from the use of tax losses which had not been previously recognised and the recovery of a prior year tax charge in the UK as the computations for a number of earlier years have now been finalised. Cashflow Net debt at 31 January 2006 increased by #16.6m to #37.1m (2004/5: #20.5m). The last two years have been periods of significant investment in the business with capital expenditure well in excess of depreciation levels. Net cash from operating activities at #17.2m is #9.4m ahead of last year and was improved by an increase in profit (after adjusting for non-cash items) and a #6m benefit from lower working capital absorption compared with the previous year. After paying dividends of #9.0m including minority interests, the remaining cash was approximately #8m.Capital expenditure of #21.3m and an acquisition (#3.9m) thus contributed to the significant (#16.6m) increase in debt. Shareholders' Funds There has been a slight decrease in shareholders' funds during the year to #39.3m (2004/5: #40.0m) the main movement being an increase in the deficit on retained earnings. The profit for the year transferred to reserves of #10m was utilised by the 2004/5 final dividend and the 2005/6 interim of #7m in total. The net increase in the pension deficit of #4.4m was greater than the post-dividend retained earnings resulting in a reduction in shareholders' funds. Capital Investment During the year, we have invested significantly in our business with capital expenditure of #21.3m. Within Airline Services at Manchester we are in the process of consolidating two large facilities into one and incurred expenditure of #1.9m during the year with a similar amount expected to be incurred in 2006/ 7. We also invested in 14 new hi-lift vehicles to service our new American Airlines contract at Heathrow and Excel at Gatwick (#1.4m). Within the Airport Services business, we have continued to invest in our new IT system (IRIS) and have heavily invested in new retail units and upgraded outlets, for example, #1.8m in new outlets at the new Doncaster Robin Hood Airport in 2005. We have upgraded stores at Manchester T2 (#0.5m) and invested in new shops at Birmingham (#2m) with further investment to come. Internationally, our capital mainly comprised hi-lift vehicles in Jordan and Australia where we have recently taken delivery of new hi-lifts which will service the A380s, together with new shop-fittings in the USA and Sri Lanka. Acquisitions In April 2005, we acquired 64.2% of a flight and retail catering business based at Henri Coanda International Airport, Bucharest for consideration of #3.9m. The goodwill on acquisition of this business is #3.5m. The business has traded successfully since its acquisition. Pensions Following the results of our triennial valuation of the Alpha Airports Group Pension and Life Assurance Plan which was conducted as at 6 April 2005, the Group and the Trustees have agreed that the final salary scheme will be changed to a career average scheme with effect from 6 April 2006. These changes have been made to help address the deficit on the Group Pension Scheme. The Group will increase its ongoing contributions by 1% to 11.3% and will pay an amount of #3.8m in 2006 and #3.0m per annum thereafter to fund the past service deficit. This will give an annual cash cost of approximately #6m in 2006. Under IAS19, the net pension fund deficit has increased to #21.3m compared with #19.7m at 31 January 2005. The movement in the deficit reflects an increase in the scheme liabilities of 21% to #98.5m. The liabilities have increased due to changes in longevity and a reduction in the discount rate, offset by a reduction of #4.5m to reflect the changes to a career average pension. The increase in liabilities has been offset by an increase of 28% in the assets to #68.0m. Accounting Policies We have reviewed the accounting policies as set out in the financial statements and continue to consider them the most appropriate to our business activities. Group Income Statement (unaudited) for the year ended 31 January 2006 2006 2005 Before Separately Before Separately Separately Disclosable Separately Disclosable Disclosable Items Disclosable Items Items (Note Total Items (Note Total 3) 3) Notes #m #m #m #m #m #m Continuing and acquired operations Revenue 2 550.9 - 550.9 487.8 - 487.8 Cost of sales (360.1) 0.3 (359.8) (315.6) (2.0) (317.6) Gross profit 190.8 0.3 191.1 172.2 (2.0) 170.2 Administrative expenses (170.2) (0.4) (170.6) (153.5) (2.0) (155.5) Operating profit 2 20.6 (0.1) 20.5 18.7 (4.0) 14.7 Interest payable and (3.2) - (3.2) (2.0) - (2.0) similar charges Interest receivable 0.4 - 0.4 - - - Share of post-tax 0.7 - 0.7 0.4 - 0.4 profits of associated undertaking and joint venture Profit before tax 18.5 (0.1) 18.4 17.1 (4.0) 13.1 Taxation charge on (4.6) - (4.6) (5.1) 0.8 (4.3) ordinary activities Profit for the year 13.9 (0.1) 13.8 12.0 (3.2) 8.8 Attributable to: Equity shareholders 10.0 6.5 Minority interest 3.8 2.3 Profit for the year 13.8 8.8 Earnings per share from continuing and acquired operations (Note 5) - Basic 5.74p 3.78p - Diluted 5.66p 3.73p Group Statement of Recognised Income and Expense (unaudited) Year Year ended ended 31 Jan 31 Jan 2006 2005 #m #m Profit for the year 13.8 8.8 Currency translation differences on 0.3 (0.9) foreign currency net assets Actuarial losses on defined (6.3) (3.2) benefit pension schemes Deferred tax on pension 1.9 0.9 scheme Net losses not (4.1) (3.2) recognized in income statement Total recognised income 9.7 5.6 Attributable to: Equity shareholders 5.9 3.3 Minority interests 3.8 2.3 9.7 5.6 Group Balance Sheet (unaudited) at 31 January 2006 2006 2005 Notes #m #m Assets Non-current assets Goodwill 16.4 12.9 Intangible assets 7.3 2.6 Property, plant and equipment 62.1 56.8 Investments accounted for using equity method 6.9 6.5 Other receivables 2.6 2.1 Deferred taxation 8.5 9.2 103.8 90.1 Current assets Inventories 35.9 32.1 Trade and other receivables 45.0 36.6 Cash and cash equivalents 6 16.0 10.8 Deferred taxation 2.1 - 99.0 79.5 Liabilities Current liabilities Financial liabilities - bank and other borrowings 6 (52.8) (30.6) Trade and other payables (68.2) (61.4) Current tax liabilities (1.3) (3.1) Provisions for liabilities and charges (3.2) (1.5) (125.5) (96.6) Net current liabilities (26.5) (17.1) Non-current liabilities Bank and other borrowings 6 (0.3) (0.7) Other non-current liabilities (0.6) (0.5) Deferred taxation (1.9) (0.9) Retirement benefit obligations (30.4) (28.2) Provisions for liabilities and charges (0.4) (0.3) (33.6) (30.6) Net assets 43.7 42.4 Shareholders' equity Ordinary shares 7 17.4 17.4 Share premium 7 43.9 43.7 Capital redemption reserve 7 0.4 0.4 Other reserves 7 (0.6) (0.9) Retained earnings 7 (21.8) (20.6) Total shareholders' equity 39.3 40.0 Minority interests 7 4.4 2.4 Total equity 43.7 42.4 Group Cash Flow Statement (unaudited) For the year ended 31 January 2006 2006 2005 Notes #m #m Cash flows from operating activities Cash generated from operations 8 23.8 14.1 Interest received 0.4 - Interest paid (2.7) (1.6) Tax paid (4.3) (4.7) Net cash from operating activities 17.2 7.8 Cash flows from investing activities Acquisition of businesses 9 (3.9) (7.1) Cash acquired on purchase of business 0.3 0.4 Part disposal of subsidiary - 1.7 Disposal of associate - 0.5 Proceeds from sale of property, plant and - 0.1 equipment Expenditure on intangible assets (software) (5.2) (1.4) Purchase of property, plant and equipment (16.1) (14.8) Dividends received from associate 0.2 0.2 Dividends received from joint venture 0.1 0.1 Net cash used in investing activities (24.6) (20.3) Cash flows from financing activities Net proceeds from issue of ordinary share capital 0.2 1.3 Repayment of finance leases (0.5) (0.7) Repayment of long term #60m facility (39.9) - Loans from #100m facility 39.9 - Increase in loans 26.4 21.1 Net (decrease)/increase in bank overdrafts (4.1) 2.3 Dividends paid to shareholders (7.0) (6.6) Dividends paid to minority interests (2.0) (2.2) Net cash used in financing activities 13.0 15.2 Effects of exchange rate changes (0.4) (0.5) Net increase in cash and cash equivalents 5.2 2.2 Cash and cash equivalents at 1 February 10.8 8.6 Total cash and cash equivalents at 31 January 16.0 10.8 Notes to the Financial Information 1 Basis of preparation This financial information has been prepared in accordance with International Financial Reporting Standards('IFRS') adopted for use in the EU and the interpretations issued by the International Accounting Standards Board. The comparative figures for the year ended 31 January 2005 are not the Company's statutory accounts for The financial year. Those accounts, which were prepared under UK GAAP, have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain statements under Section 237 (2) or (3) of the Companies Act 1985. The figures for the year ended 31 January 2005 are derived from the accounts for that financial year, as restated to comply with IFRS requirements. A full reconciliation of these adjustments was published in The Interim report 2005/06 and will be provided again in the Annual Report and Accounts to be Published In April 2006. 2 Segment reporting The Group considers that in the future its activities will be more aligned to geographical segments than to business segments. As this is a reversal of assumptions used in previous years, both segment analyses are presented as primary segments this year, but in future geographical segment will be disclosed as the primary segment and business segment will be disclosed as the secondary segment. 2 (a) Geographical segments UK and Ireland International Unallocated Group 2006 2005 2006 2005 2006 2005 2006 2005 #m #m #m #m #m #m #m #m (1) Profit for the year Continuing and acquired operations Revenue 449.7 412.4 101.2 75.4 - - 550.9 487.8 Profit before separately 8.8 13.1 11.8 5.6 - - 20.6 18.7 disclosable items Separately disclosable items - 0.3 (0.9) - (1.4) - - 0.3 (2.3) cost of sales Separately disclosable items - (0.4) - - (2.4) - - (0.4) (2.4) admin expenses Profit on part disposal of - - - 0.3 - - - 0.3 subsidiary undertaking Profit on disposal of - - - 0.4 - - - 0.4 associate Operating profit 8.7 12.2 11.8 2.5 - - 20.5 14.7 Interest payable and similar - - - - (3.2) (2.0) (3.2) (2.0) charges Interest receivable - - - - 0.4 - 0.4 - Income from interests in associated undertaking and joint venture - - 0.7 0.4 - - 0.7 0.4 Profit before tax 8.7 12.2 12.5 2.9 (2.8) (2.0) 18.4 13.1 Taxation charge on ordinary - - - - (4.6) (4.3) (4.6) (4.3) activities Profit for the year 8.7 12.2 12.5 2.9 (7.4) (6.3) 13.8 8.8 There are no material sales between the geographical segments. Interest (payable)/receivable has not been allocated recognising the centre's role and responsibility in allocating financial resources. 2 Segment reporting 2 (b) Business segments Airline Services Airport Services Unallocated Group 2006 2005 2006 2005 2006 2005 2006 2005 #m #m #m #m #m #m #m #m (1) Profit for the year Continuing and acquired operations Revenue 298.5 268.5 252.4 219.3 - - 550.9 487.8 Profit before separately 10.1 7.1 10.5 11.6 - - 20.6 18.7 disclosable items Separately disclosable 0.1 (2.3) 0.2 - - - 0.3 (2.3) items - cost of sales Separately disclosable (1.0) (3.9) 0.6 1.5 - - (0.4) (2.4) items - admin expenses Profit on part disposal of - 0.3 - - - - - 0.3 subsidiary undertaking Profit on disposal of - 0.4 - - - - - 0.4 associate Operating profit 9.2 1.6 11.3 13.1 - - 20.5 14.7 Interest payable and - - - - (3.2) (2.0) (3.2) (2.0) similar charges Interest receivable - - - - 0.4 - 0.4 - Income from interests in associated undertaking and joint venture 0.7 0.4 - - - - 0.7 0.4 Profit before tax 9.9 2.0 11.3 13.1 (2.8) (2.0) 18.4 13.1 Taxation charge on ordinary - - - - (4.6) (4.3) (4.6) (4.3) activities Profit for the year 9.9 2.0 11.3 13.1 (7.4) (6.3) 13.8 8.8 There are no material sales between the business segments. Interest (payable)/receivable has not been allocated recognising the centre's role and responsibility in allocating financial resources. 3 Separately disclosable items 2005/06 Profit before tax for the year ended 31 January 2006 includes net separately disclosable items of #0.1m representing an expense of #4.6m and a credit of #4.5m recognised within operating profit. The #4.6m charge comprises redundancy payments in respect of UK Flight operations (#1.8m) and UK Retail operations (#0.3m) and a charge of #2.5m in respect of the Group's cost of suspected fraudulent activity carried out by a third party service provider which is still being investigated by the Group's management. Following the results of an actuarial valuation on 6 April 2005, the Alpha Airports Group Pension and Life Assurance Plan will change from a final salary pension scheme to a career average based pension provision with effect from 6 April 2006. The effect of this change is to reduce the deficit by #4.5m and this change in past service cost is reflected through the Group income statement. Due to the size and nature of this change in past service cost, the amount is shown as a separately disclosable item. 2004/05 Profit before tax for the year ended 31 January 2005 includes net separately disclosable items of #4.0m charged against operating profit, comprising redundancy payments in respect of UK Flight operations (#0.9m) and the Netherlands Flight operations (#1.4m), an impairment charge in respect of freehold property fixed assets in the Netherlands (#3.9m), partly offset by the release of #1.5m from the remaining onerous contract provision in Orlando, USA where trading performance has been better than forecast and profits on disposals and part-disposals of investments of #0.7m. 4 Equity Dividends 2006 2005 #m #m Final paid in respect of year ending 31 Jan 2005: 3.0p (2003/04: 2.8p) per 10p share 5.2 4.8 Interim paid in respect of year ending 31 Jan 2006: 1.0p (2004/05: 1.0p) per 10p share 1.8 1.8 7.0 6.6 In addition, the Directors are proposing a final dividend in respect of the financial year ending 31 January 2006 of 3.2p per 10p share which will absorb an estimated #5.6m of shareholders' funds. It will be paid on 22 June 2006 to shareholders who are on the register of members on 2 June 2006. 5 Earnings per share (a) Basic and diluted earnings per share in respect of continuing and acquired operations Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. Reconciliations of the earnings and weighted average number of shares used in the calculations are as follows: Weighted average Earnings per Profit for the year number of shares share 2006 2005 2006 2005 2006 2005 #m #m millions millions Pence Pence Basic EPS 10.0 6.5 174.3 172.4 5.74 3.78 Effect to reflect dilutive - - 2.3 2.1 (0.08) (0.05) ordinary shares under options 10.0 6.5 176.6 174.5 5.66 3.73 (b) Underlying earnings per share Underlying profit for the financial year and underlying earnings per share have been calculated to exclude the effect of goodwill impairment and separately disclosable items in order that the effects of these items on reported earnings can be fully appreciated. Reconciliations of the underlying profit for the financial year and underlying earnings per share are as follows: Profit for the Earnings per year share 2006 2005 2006 2005 #m #m Pence Pence Basic EPS 10.0 6.5 5.74 3.78 Adjustments for: - separately disclosable items 0.1 4.0 0.06 2.33 (Note 3) - taxation relating to these - (0.8) - (0.46) items - add back goodwill impairment - 0.3 - 0.17 Underlying EPS 10.1 10.0 5.80 5.82 6 Net debt 2006 2005 #m #m Cash at bank and in hand 16.0 10.8 Bank loans due within one year (50.5) (24.1) - unsecured Bank overdrafts due within one (1.9) (6.0) year - unsecured Finance lease obligations (0.4) (0.5) within one year Finance lease obligations over (0.3) (0.7) one year (37.1) (20.5) 7 Shareholders' funds and statement of changes in shareholders' equity Capital Share Share redemption Other Retained Minority Total capital premium reserve reserves earnings Total Interests equity #m #m #m #m #m #m #m #m At 1 February 2004 17.2 42.6 0.4 - (18.7) 41.5 1.3 42.8 Share options - proceeds from share 0.2 1.1 - - - 1.3 - 1.3 options - value of employee - - - - 0.2 0.2 - 0.2 services Exchange adjustments - - - (0.9) - (0.9) - (0.9) Profit for the year - - - - 6.5 6.5 2.3 8.8 Actuarial losses on - - - - (3.2) (3.2) - (3.2) defined benefit pension scheme Deferred tax on pension - - - - 0.9 0.9 - 0.9 scheme Credit in respect of - - - - 0.2 0.2 - 0.2 long term incentive plan Minority interest share - - - - - - 1.1 1.1 of acquisition Minority interests - - - - - 0.1 0.1 (0.1) - adjustment on part disposal of subsidiary Dividends - - - - (6.6) (6.6) (2.2) (8.8) At 31 January 2005 17.4 43.7 0.4 (0.9) (20.6) 40.0 2.4 42.4 Share options - proceeds from share - 0.2 - - - 0.2 - 0.2 options - value of employee - - - - 0.2 0.2 - 0.2 services Exchange adjustments - - - 0.3 - 0.3 - 0.3 Profit for the year - - - - 10.0 10.0 3.8 13.8 Actuarial losses on - - - - (6.3) (6.3) - (6.3) defined benefit pension scheme Deferred tax on pension - - - - 1.9 1.9 - 1.9 scheme Minority interest share - - - - - - 0.2 0.2 of acquisition Dividends - - - - (7.0) (7.0) (2.0) (9.0) At 31 January 2006 17.4 43.9 0.4 (0.6) (21.8) 39.3 4.4 43.7 8 Net cash from operating activities 2006 2005 #m #m Profit before tax 18.4 13.1 Share of post-tax profit of joint (0.4) (0.1) venture Share of post-tax profit of associated (0.3) (0.3) undertaking Interest payable and similar 3.2 2.0 charges Interest receivable (0.4) - Depreciation and amortization 11.9 10.6 Increase/(decrease) in separately disclosable 1.7 (3.4) provisions (Decrease)/increase in retirement benefit provisions (4.5) 0.4 Profit on part disposal of subsidiary undertaking - - (0.3) continuing operations Profit on disposal of associate - (0.4) Share options - 0.1 Fixed asset impairment - 3.9 Goodwill impairment - 0.3 Long term incentive plan - 0.2 amortisation charge Changes in working capital (excluding effects of acquisitions and disposals of subsidiaries) Increase in inventories (3.2) (7.3) Increase in trade and other (9.0) (10.3) receivables Increase in creditors 6.3 5.6 Decrease in provisions 0.1 - Cash generated from operations 23.8 14.1 9. Acquisition of businesses 9.1 Romania Acquisition of 64.18% of Abela Rocas SA On 12 April 2005, the Group acquired 64.18% of the share capital of Abela Rocas SA, a small flight and retail catering business in Romania. The goodwill arising on the acquisition was #3.5m as follows: Book Fair Value Provisional Value adjustments fair value #m #m #m Investment in associate 0.1 (0.1) - Tangible fixed assets 0.3 - 0.3 Inventories 0.2 - 0.2 Trade receivables 0.6 - 0.6 Creditors (0.6) - (0.6) Cash at bank and in hand 0.2 0.1 0.3 Taxation - (0.2) (0.2) Total net assets at acquisition 0.8 (0.2) 0.6 - Minority Interests (0.2) Total net assets acquired 0.4 Goodwill 3.5 Consideration 3.9 Consideration satisfied by: Cash (including costs of acquisition) 3.9 The book value of the assets and liabilities has been taken from the management accounts of Abela Rocas SA at 12 April 2005 at actual exchange rates on that date. The fair value adjustments contain some provisional amounts, as indicated below, which will be finalized within twelve months of the acquisition date. The provisional fair value adjustments principally comprise #0.1m for the write off of a small investment in an associated company, the results for which had never been consolidated into the results of Abela Rocas SA, an exchange adjustment in respect of cash balances and a provision for dividend taxes in respect of 2004 and 2005. The profit after tax of Abela Rocas SA was #0.2m for the period from 1 January 2005 to 12 April 2005 and #1.0m for the year ending 31 December 2004. 9.2 Bulgaria Acquisition of 100% of Abela Airport Services EOOD On 28 April 2005, the Group acquired 100% of the share capital of Abela Airport Services EOOD, a small flight and retail catering business based in Bulgaria, for a consideration of Euro1 and costs of #15,000. The only assets acquired were fixed assets of #0.3m against which a full impairment was booked on acquisition. As a result there was no goodwill generated on this acquisition. The losses after tax of Abela Airport Services EOOD were #0.1m for the period from 1 January 2005 to 28 April 2005 and #0.3m for the year ending 31 December 2004. 10 Adjusted figures The Group uses adjusted figures as key underlying performance measures. Adjusted figures exclude non-trading items such as the impairment of intangible fixed assets and goodwill, rationalization, restructuring costs and other separately disclosable items, together with any related tax effects. 2006 2005 #m #m Operating profit 20.5 14.7 Adjustments: Share of profit from associate/joint venture 0.7 0.4 Goodwill - 0.3 impairment Separately disclosable items (Note 3) 0.1 4.0 Adjusted operating 21.3 19.4 profit Profit before tax 18.4 13.1 Adjustments: Goodwill - 0.3 impairment Separately disclosable items (Note 3) 0.1 4.0 Adjusted profit 18.5 17.4 before tax Profit attributable to equity shareholders 10.0 6.5 Adjustments: Goodwill - 0.3 impairment Separately disclosable items (Note 3) 0.1 4.0 Taxation on these - (0.8) items Adjusted 10.1 10.0 attributable profit 11. Preliminary announcement The preliminary results for the year ended 31 January 2006 are unaudited. As stated in Note 1, this financial information has been prepared in accordance with International Financial Reporting Standards ('IFRS') adopted for use in the EU and the interpretations issued by the International Accounting Standards Board. The financial information set out above does not constitute the Group's audited statutory accounts within the meaning of section 240 of the Companies Act 1985. The Group accounts for the year ended 31 January 2006 will be finalised on the basis of the financial information presented by the Directors in the preliminary announcement. 12. Issue of annual reports and accounts The Annual Report 2005/06 will be posted to shareholders by 24 April 2006. Copies may be obtained after this date from the Company Secretary, Alpha Airports Group Plc, Europa House, 804 Bath Road, Cranford, Middlesex, TW5 9US. Telephone No. 020 8580 3200. 13. Annual General Meeting The Annual General Meeting of Alpha Airports Group Plc will be held at the Conference Centre, Park Inn, Bath Road, Heathrow on 25 May 2006 at 11am. This preliminary announcement contains certain forward looking statements. These statements are subject to risks and uncertainties because they relate to events that may or will occur in the future and could cause actual results to differ materially from those expressed. Many of these risks and uncertainties relate to factors that are beyond Alpha's ability to control or estimate precisely, such as future market and economic conditions, the actions of competitors, operational problems and the actions of government regulators. Alpha undertakes no obligation to update forward-looking statements. END This information is provided by RNS The company news service from the London Stock Exchange END FR SEMEDUSMSELD
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