Investment column: BAA sales struggle to take off as shares languish on runway

PITY POOR Mike Hodgkinson, the fresh face in the chief executive's chair at BAA, the country's largest airport operator. The day he was promoted to the post last month, BAA warned that its sales performance had been clobbered by the abolition of intra-EU duty free. The group yesterday posted pre-tax profits down 47 per cent as one-off charges and the end of duty free took their toll.

In the three months to 30 September, profits fell 17 per cent following duty free's abolition on 1 July. The United States operations went into the red in the half year amid increased competition. Meanwhile, the group took a pounds 147m goodwill writedown for the US and the troubled Asian operations. Overall underlying pre-tax profits were flat year-on-year. BAA shares took a 25 per cent drop on the back of the October profits warning, so is all the bad news out now?

Mr Hodgkinson is bullish. He believes BAA will eventually win permission for a fifth terminal at Heathrow. He sees solid passenger growth in the UK, fuelled by the growth of low-cost airlines whose passengers spend their savings in his shops. Indeed, UK passenger numbers rose 5.1 per cent in the half-year. There are plans to add 150,000 sq ft of retail space, boosting the total by 15 per cent. The Heathrow Express is set to post maiden profits in its first full year of operation and full-year results should also benefit from pounds 60m proceeds from disposals, more than twice the expected figure.

However, BAA's real task is to eliminate consumer confusion over the current status of the discounts BAA's European shops offer post-duty free. Although Mr Hodgkinson says that the sales trend is now running in his favour, a full recovery is expected to take 12 to 24 months.

Analysts expect full-year pre-tax profits of pounds 520m, including disposals, or 36.3p per share, putting the shares, up 8.5p at 455p, on a forward price/earnings ratio of 13. Yesterday's assurance that things aren't getting worse may have helped to put a floor under the share price, but investors cannot expect great things for a while. Hold.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Business Development Executive - Affiliates & Partnerships

£20000 - £35000 per annum: Recruitment Genius: This multi-award winning foreig...

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor