Where next as Sydney Airport cancels its interim dividend?
We examine the key points and possible implications of Sydney Airport's latest market release.
Sydney Airport share price: a lacklustre reception
The Sydney Airport (SYD) share price opened 3.5% lower today – at $6.060 per share – after the company announced it had secured additional debt funding, was cancelling its interim dividend and that traffic at its airports for the March and April periods had collapsed.
Liquidity, dividends and capital investments
Speaking of these developments, the Sydney Airport CEO, Geoff Culbert nonetheless said:
'We remain confident in the strength of our balance sheet and liquidity position, but we will continue to tightly manage liquidity and operating and capital expenditure to reflect the significant reduction in passenger traffic at the airport.'
On that first point, Sydney does indeed boast a strong balance sheet, with the company today announcing that it had established an additional $850 million worth of bank debt facilities.
All up, with Sydney Airport’s current cash on hand of $430 million, its now $1.75 billion in undrawn bank facilities and $600 million worth of new bond market debt (set to be funded this June) – the company’s total liquidity position stands at an enviable $2.8 billion.
As a result of this, and likely to the relief of many shareholders, the company noted that under the current circumstances, it did not anticipate the need to raise fresh equity.
What investors are likely less pleased about however was SYD noting that it would not be declaring an interim dividend, due to the 'importance of liquidity' and the near-term uncertainty that Covid-19 has created.
Besides culling its interim dividend, the company also noted that it was targeting a 35% reduction in operating costs, at minimum – from 1 April onwards.
‘This will ensure the operating cost base reflects the lower level of activity,' the company elaborated.
There are still costs of course. On the front of capital investments, SYD said it was targeting a capital investment range of between $150 million to $200 million, over the next 12-months, from 1 April onwards. The primary focus here would be on essential investments, though the company 'may consider a range of non-critical projects that would take advantage of the fact that the terminals, facilities and airfields are largely dormant.'
Where next: a dour outlook
In March, Sydney Airport's monthly traffic collapsed 45.1% year-over-year – to ~2 million passengers. For reference, in March 2019, Sydney’s total traffic came in at approximately 3.6 million passengers.
The outlook appears equally dour, with management noting, that ‘We expect to see similar reductions in traffic for so long as current restrictions on travel remain in place. The extent and duration of the downturn in traffic will continue to be dependent to a large extent on the measures taken by Governments in response to COVID-19.'
Indeed, illustrating the severity of this impact, it was noted that during the first 16 days of April, preliminary traffic data suggests a 96.1% decline in international passenger traffic and a 97.4% decline in domestic passenger traffic.
The Sydney Airport share price last traded at $6.14 per share.
How to trade Sydney Airport
What do you make of today’s news: does it represent a bullish or bearish opportunity? Whatever your opinion, you can use CFDs to trade Sydney Airport and other airline and travel stocks – LONG or SHORT through IG’s world-class trading platform now.
For example, to buy (long) or sell (short) Sydney Airport using CFDs, follow these easy steps:
- Create an IG Trading Account or log in to your existing account
- Enter 'SYD’ or 'Sydney Airport' in the search bar and select it
- Choose your position size
- Click on ‘buy’ or ‘sell’ in the deal ticket
- Confirm the trade
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.