The Sydney Airport [ASX:SYD] international passengers fell by 91% as net loss after income totalled $97.4 million for the half.
Despite a ‘challenging six months’, Sydney Airport was encouraged by passenger traffic rebounding every time borders were reopened.
Showcasing the forward-looking nature of the market, Sydney Airport [ASX:SYD] share price is up 45% over the last 12 months, despite the impact of the pandemic as Australia’s vaccination efforts improve SYD’s future earnings visibility.
SYD HY21 overview
Let’s take a look at SYD’s performance and analyse how the pandemic affected the business.
Firstly, the number of passengers declined 36.4% on the prior corresponding period (pcp) to total six million passengers for the half year.
Unsurprisingly, international passengers declined 91% on the pcp, with domestic passengers declining by 3.1%.
The reduction in passengers saw Sydney Airport post a 33.2% reduction in revenue, coming in at $341.6 million.
This all led the company to incur a $97.4 million loss after income tax expense.
Earnings before interest, tax, depreciation, and amortisation (EBITDA) fell 29.8% to $210.8 million.
In another substantial drop, Net Operating Receipts (NOR) fell 98.0% to $1.8 million on the pcp.
The bright side was SYD was successful in cost controlling, and operating expenses were down 7.8% to $74.2 million.
Additionally, SYD said it made investments of $65.2 million focused on ‘critical projects’.
Despite the strained macroeconomic environment, SYD still retains a strong balance sheet with $2.9 billion of liquidity as of 30 June 2021.
Sydney Airport Chief Executive Officer, Geoff Culbert, was upbeat about the future:
‘It was a challenging six months, but we were encouraged to see passenger traffic rebound strongly every time borders were open.
‘From January to April, we recovered to 65% of our pre-COVID domestic passengers and in just over two months between late April and June, trans-Tasman traffic recovered to more than 40% of pre-COVID levels.’
SYD revenue breakdown
As mentioned, Sydney Airport delivered revenue of $341.6 million, a decrease of 33.2% compared to the pcp.
There were several contributing factors.
For instance, aeronautical revenue was down 27% to $110.82 million, which reflected the 36.4% drop in passenger volumes.
Retail revenue stood at $87.4 million, or $27.5 million when adjusted for rental abatements and doubtful debts.
This revenue was down 73.4% on an adjusted basis to the pcp.
Lastly, car parking and ground transport revenue was also down 27% on an adjusted basis to the pcp, reaching $28.7 million.
Airport traffic performance highlights
Total passenger traffic in July 2021 was 102,000 passengers, down 67.9% on the pcp.
Moreover, domestic passenger traffic was down 75.1% to 69,000 by July 2021.
International passengers traffic was also down by 20.9% on the pcp, to 33,000.
The primary reason for this drop was the extension of the stay-at-home orders issued by the NSW government on 25 June 2021.
These restrictions have resulted in continued border closures to NSW, limiting interstate travel and suspending trans-Tasman travel.
SYD ASX outlook
Despite a large drop in passengers and revenue, the SYD share price barely budged.
This indicates the market has already factored in the ongoing impact of border and travel restrictions.
Today’s results did not catch investors off guard.
The question is how much of SYD’s recovery has already been priced in.
No doubt the current Delta struggles in NSW and Victoria have re-injected uncertainty about Australia’s short-term recovery.
But the Delta challenge has also kickstarted the country’s vaccination efforts as it is becoming clearer driving cases down to zero is highly unlikely.
Sydney Airport’s CEO shared his views on SYD’s outlook:
‘The pathway to the recovery is clear.
‘Governments at all levels are highly motivated to roll out the vaccine, which has now been tied to the lifting of restrictions.
‘As border restrictions are eased, international and domestic travel will be back, and Sydney Airport will be ready to go.’
If you are looking for investment ideas less hampered by the pandemic, then I suggest checking out the latest small-caps report from our market analysts Murray Dawes and Ryan Clarkson-Ledward.
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