TBI reaches for sky in airport deal

THE INVESTMENT case for airport operator TBI yesterday focused on its future earnings potential, after the group sold its property business to London and Regional Properties for its pounds 190m book value and said it was about to acquire another airport.

The shares, which have gained 10 per cent in recent weeks on deal rumours, fell 4p to 96.5p following TBI's failure to announce a completed acquisition. Pre-tax profits for the year to 31 March will be at least pounds 20.5m, pounds 2.5m below expectations, because scheduled property sales are to fall in next year's accounts.

TBI is now a pure transport business whose income comes from landing fees and retail activities at its airports, Cardiff International, Belfast International, Stockholm-Skavsta and Orlando Sanford International. Most passengers take domestic flights and earnings come mainly from landing fees. By contrast, 70 per cent of BAA's revenues come from retail activities.

Whilst TBI's passenger numbers are 14 per cent up on last year, its voyagers do not include hoards of high-spending tourists. TBI must persuade airlines of the value of airports' catchment areas. The sluggish property business was a drag on the airports' double-digit earnings growth but TBI must acquire more glamorous sites. It has around pounds 100m firepower for this and a deal in the pipeline.

Housebroker Charterhouse Securities expects earnings of 3.8p this year, giving the shares a p/e of 25. That is not especially cheap and the shares are unlikely to take off before TBI lands those acquisitions.

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