Newspaper says MAG could lose money on Humberside Airport investment
05.05.08
Crain's, the local business newspaper, says that Manchester Airports Group (MAG) could lose money on its planned sale of a majority stake in Humberside Airport. It points out that the Lincolnshire hub has generated a total of £640,000 of retained profit for MAG in 9 years but paid no dividends, and describes it as ‘the airport that failed to take off’.
MAG announced last week that it is considering selling its majority stake in Humberside Airport in order to concentrate on its other, larger airports. However, Crain's says that it is 'far from clear whether it will emerge with much, if any, profit on the investment, the newspaper reports.'
MAG paid £10m for an 87.2% stake in 1999, and a further £7m has been spent on infrastructure improvements. However, although Humberside's turnover has increased from £6.5m in 1999 to £12m in 2007, operating profit has slumped in the last 4 years. In 2004 operating profit was £1.6m but in the year ending March 31, 2007, that fell to £476,000.
Retained profits have fluctuated during MAG's ownership from a high of £3.1m to losses of £1.7m. In 2007, the last year for which accounts are available, the airport made a pre-tax loss of £622,000. The previous year a pre-tax loss of £673,000 was reported.
Humberside's accounts show a negative net asset value of £1.2m, and experts who have spoken to Crain's find it difficult to estimate what the business might be worth. They say finding a buyer may not be easy given the poor financial performance, stagnant passenger numbers and competitive threats.
In addition, the airport is isolated in a sparsely populated area, and faces huge competition from Peel Holdings-owned Robin Hood Airport, near Doncaster - just 28 miles away - and MAG's own East Midlands Airport, 70 miles away.
In the last six years annual passenger numbers have fluctuated at around 500,000 while in 2007 passengers dropped by 10%. Robin Hood by contrast has grown to 1m passengers, according to CAA figures. These, rather than the accounting numbers are the key drivers of the likely sale price. In order to sell the airport, MAG has to confirm a buyer that the airport can grow and achieve consistent profits - something it has failed to achieve.
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