Air N.Z. in profit fall
Air New Zealand reported a markedly lower total profit in the six months ended September 30.
The New Zealand airline yesterday announced a total profit of $19.091M, down 25.8 per cent on the previous corresponding period, the first result from the group since it was listed on October 24. The abnormal items, included in the latest result, came from the sale of properties and the airline’s DCB freighter aircraft.
tations, it must be said, simply cannot be based on the experiences of those exposed to the real trading environment.” Steps have been taken to contain falling margins, including transferring smaller aircraft to routes that cannot sustain larger capacity aircraft, he says. Good progress is being made in expanding services in the growing Asian markets, both through increased frequency of services to existing markets and introducing services to new markets which have offered satisfactory immediate or mediumterm returns. A satisfactory annual result will depend on the airline business of maintaining loadings and margins and a tight control on trading costs. Except for Jetset Tours Pty, all the group’s subsidiaries and associates will achieve highly satisfactory annual results. The previous interim result was unusually high because of large traffic flows, particularly across the Tasman for Australia’s Bi-centennial celebrations and the World Expo at Brisbane. The 9.9 per cent increase in turnover was made in spite of fare cutting on domestic and several key overseas routes, with the sales
growth coming from international operations, foreign exchange earnings totalling about S4OOM, he says. The group’s Christ-church-based listed subsidiary, Mount Cook Group, continued to strengthen its trading through new marketing initiatives and productivity improvements, but Jetset Holdings (50%) experienced difficulties because of the adverse effects of the Australian domestic pilots’ dispute. An interim divident of 5c a share (5%) has been declared, payable on December 19 carrying an imputation credit of 1.85 c a share. The offer document predicted an annual payment of 11.5 c a share (10c last year), and the directors saw no reason to revise this, Mr Matthews says. • Net cash flows from trading fell 35.5% to SU7M, and there was an outflow on investments of S6BM (down 12.5%) and on financing of $96.9M (down 10.3%). Shareholders’ funds improved $46.7M to $641.1M, including steady paid-up capital of S2BOM. The net current deficit deepened $85.3M to $265M, but term liabilities were down $86.9M to $390.5M. The net asset backing a 100 c ordinary share firmed from 212 c to 229 c.
Company chairman, Mr Bob Matthews, says that long term outlook of the airline is promising, but it will not be easy to achieve profit growth in the short term. He warns shareholders that the full year profit forecast of $95.8M, which was made in July, is not necessarily a certain outcome in the circumstances.
This is because of domestic air travel and cargo market downturns, and cost increases putting pressure on margins in recent months, he says. However, the share offer document of July also predicted that the group usually earned most of its annual profits in the second half, and it is expected to happen again this year, Mr Matthews says. The adverse effects of the long pilots’ dispute in Australia are now being felt by both Air New Zealand and New Zealand’s tourist industry. Trans-Tasman passenger traffic and air traffic into Australia from other regions is down substantially and it will take some time for these markets to recover, he says.
Air New Zealand unaudited result for the six months ended September 30. 1989 1988 Change ($000) ($000) % Gross revenue » 885,770 806,208 <19.9 Abnormal items 7905 — — Pre-tax profit 17,855 26,851 —33.5 Taxation 1750 3350 —5.37 Trading profit 16,105 23,301 —30.9 Minorities 86 442 —80.5 Equity earnings 2900 2000 <045.0 Group profit 19,091 25,743 —25.8 Extraordinaries _ _ _ Total profit 19,091 25,743 —25.8
There are no signs of New Zealand’s economic upturn predicted by commentators, “whose expec-
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Press, 30 November 1989, Page 31
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649Air N.Z. in profit fall Press, 30 November 1989, Page 31
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