Delivering the business model

Passenger
growth
EBITDA
growth
Cash
flow
outcomes
Debt
service
coverage
Investor
returns
2016 41.9 million passengers $1,085.7 million EBITDA $696.0 million1 net operating receipts 2.7x cash flow cover ratio2 $13.5 billion3 equity value
Growth +5.6% from prior year +8.2% from prior year +20.5%1 from prior year +0.2x from prior year (1.1%) total return4
+24.2% five year CAGR
  1. Excludes WSA project costs expensed.
  2. Cash flow cover ratio (CFCR) is calculated using defined terms in the Southern Cross Airports Corporation Holdings Limited (SCACH) group debt documents, summarised by cash flow divided by senior debt interest expense for a rolling 12 month period.
  3. As at 31 December 2016.
  4. Assuming reinvested distributions.

Key performance measures

Key measures of Sydney Airport’s 2016 financial performance are shown in the table below.

Growth over 2015
Passengers 41.9 million 5.6%
Revenue $1,364.6 million 11.0%
Operating expenditure1 $257.8 million 14.3%
EBITDA1 $1,106.7 million 10.3%
Net operating receipts (NOR)1 $696.0 million 20.5%
Distributions per stapled security to investors 31.0c 21.6%
  1. Excludes WSA project costs expensed. EBITDA including WSA project costs expensed for the year ended 31 December 2016 is $1,085.7 million with EBITDA growth of 8.2%. Net operating receipts including WSA project costs expensed is $675.0 million with growth of 16.9%.

Revenue streams

Revenue
$m
Revenue contribution Revenue growth
Aeronautical (excl security recovery) 614.2 45% 17.4%
Retail 295.6 22% 12.2%
Property and Car Rental 204.2 15% 1.5%
Parking and Ground Transport 156.1 11% 3.6%

Distributions and Net Operating Receipts (NOR)

NOR provide a proxy for cash flows available to pay ASX-listed Sydney Airport distributions. As a result, it is a key measure of ASX-listed Sydney Airport’s financial performance. NOR is a non-IFRS measure of cash flow that ASX-listed Sydney Airport can sustainably return to investors while investing in infrastructure and, when appropriate, continue to deleverage the business. NOR is derived from both income statement performance and the cash position of SAL and SAT1.

Reconciliation of NOR

NOR provide a proxy for cash flows available to pay ASX-listed Sydney Airport distributions. The table reconciles the statutory result of ASX-listed Sydney Airport for the year ended 31 December 2016 to its NOR.

Non-IFRS financial information has not been audited by the external auditor, but has been sourced from the financial reports.

2016
$m
2015
$m
Profit before income tax expense1 320.2 286.1
Add back: depreciation and amortisation1 356.5 312.5
Profit before tax, depreciation and amortisation 676.7 598.6
Add/(subtract) non-cash financial expenses
– Capital indexed bonds capitalised2 10.5 15.8
– Amortisation of debt establishment costs2 27.4 23.1
– WSA project costs expensed1 21.0
– Borrowing costs capitalised2 (9.6) (11.0)
– Change in fair value of swaps2 (22.0) (28.3)
Total non-cash financial expenses 27.3 (0.4)
Add/(subtract) other cash movements
Movement in cash balances with restricted use3 12.3 (5.5)
Other (20.3) (14.9)
Total other cash movements (8.0) (20.4)
Net operating receipts excluding WSA 696.0 577.8
Net operating receipts 675.0 577.8
Average stapled securities on issue (m)4 2,237.4 2,221.2
Net operating receipts per stapled security 30.2c 26.0c
Net operating receipts per stapled security excluding WSA 31.1c n/a
Distributions declared per stapled security 31.0c 25.5c
Ratio of net operating receipts to distributions 97% 102%
Ratio of net operating receipts excluding WSA to distributions 100% n/a
  1. Taken from the Consolidated Statements of Comprehensive Income in the Sydney Airport Financial Report for Year Ended 31 December 2016.
  2. Taken from Note 6 in the Sydney Airport Financial Report for Year Ended 31 December 2016.
  3. Taken from Note 3 in the Sydney Airport Financial Report for Year Ended 31 December 2016.
  4. Taken from Note 8 in the Sydney Airport Financial Report for Year Ended 31 December 2016.

Revenue growth at Sydney Airport

Sydney Airport’s revenue growth is driven by four key inputs:

Passenger growth: Passengers travelling through the airport are the major consumers of the services provided by Sydney Airport. A large majority of aeronautical revenues are directly linked to passenger numbers. Charges are generally levied per passenger to the airlines for use of the terminal and airfield infrastructure providing a direct linkage to revenue growth. Where charges are levied on maximum take-off weight they provide linkage as larger or more aircraft are required to transport more passengers. The commercial revenues (comprising Retail, Property and Car Rental, and Parking and Ground Transport) are directly and indirectly linked to passenger volumes. Our international passengers have a greater direct and indirect impact on revenues, because they spend more time at the airport and more often move through the entire end-to-end airport process.

Capital investment: Sydney Airport takes a disciplined approach to investment. It earns a return on aeronautical and commercial infrastructure capital investments. Investment is made to allow more passengers to use the airport, improve the efficiency of the airport and improve the experience of airport customers.

Management initiatives: Management continually reviews the airport’s assets, contracts and operations for opportunities to better utilise assets, increase the value of available space, reduce costs and improve efficiency. These initiatives contribute significantly to increasing real revenues per passenger.

Inflation/fixed escalations: Many of Sydney Airport’s commercial contracts and revenues are directly linked to inflation or fixed escalations. A more detailed analysis of specific growth drivers is provided in the following revenue streams and operating expense sections.