Alpha Airports Group (AAG) yesterday announced a ?6.2m ($10.9m) pretax profit for the six months ended July 31, 2005, compared with ?10.7m ($18.8m) for the same period in 2004. Ceo Kevin Abbott said: ‘Even though

these results are broadly in line with our own expectations, we are disappointed to report a profits decline.’
Abbott said that despite the first half result and a weakening UK retail environment, AAG is anticipating a strong second half recovery and is ‘cautiously optimistic’ for overall Group progress for the full year.
He said Alpha was hopeful of a second half recovery in its Flight Services division, but believes that falling consumer confidence in the UK retail sector will make it ‘challenging’ for its UK travel retail operation. However, the company is anticipating significantly improved second half international retail performances.
The company said: ‘UK revenue is 8.9% ahead of the same period last year at ?218.5m ($384.8m) and revenue from international locations is up 30.3% to ?50.3m ($88.5m) benefiting from the acquisitions made during the last 8 months.
‘Overall Flight Services revenue increased 9.8% to ?146.9m ($258.6m). A significant part of the increase arose from the 27% like-for-like ongoing growth of our Inflight Retail business serving UK and European low-fare passengers, which now represents 36% of our total Flight Services business. Adjusted operating profit before interest and tax declined 15.7% to ?4.3m ($7.6m).
‘Inflight Retail maintained its strong growth record in the UK and Europe, despite a difficult and costly start-up to the peak summer trading season, as many vendor partners struggled initially to provide adequate stock coverage. In Australia, the new and extended contract for Qantas’ inflight duty-free programme from March 2005 has generated a small profit contribution compared to last year’s significant start-up costs.
‘After a costly 12 months, during which we have established our Australian operation and upgraded our UK Bond infrastructure and IT support systems, we anticipate strong second half progress throughout our fast growing inflight retail business.
‘Overall retail revenue increased an excellent 15.7% to ?121.9m ($214.6m) but adjusted operating profit declined by 38% to ?3.6m ($6.3m). UK retail revenue was up 9.2%. On a like-for-like basis, Alpha Airport Shopping increased revenue 6.2% on passenger growth of 9.2%, despite last year’s EU expansion reducing the growth in sales of duty free liquor and tobacco. Whilst we have continued to achieve significant growth in average ransaction spend for those passengers visiting our Alpha pink shops, we have experienced a decline in the percentage of passengers shopping in our airport outlets reflecting, we believe, weakening UK consumer confidence.
‘Internationally, our Sri Lankan business, post the devastation caused by the tsunami, has only suffered a 6.6% decline in arrivals passengers. With the benefit of the recently opened and expanded arrivals shop and with an upgraded focus on value offers and promotions, the profit decline has been limited to 7.1%. We anticipate that the better located departures shop which opened in September will help to stabilise both revenue and profit over the next six months.
‘In the USA, revenue was 2.4% ahead of last year. Our major reinvestment in upgraded and expanded Alpha pink duty free shops is currently underway and this will maximise opportunities from our five year contract extension starting in the second half. Our recently acquired Turkish business traded in line with expectations. As we have said, a key strategic ambition across retail is to develop in Europe, and we are pleased to have been awarded our first mainland European retail contract for seven speciality retail boutiques, six of which are now open at Rome Fiumicino and Ciampino airports.
‘Overall, our International Retail businesses registered a 42.5% revenue increase (due primarily to our Turkish acquisition) and a 1.3% increase in profit, which reflects the Asian profit decline and Italian start-up costs offsetting the first time contribution from Turkey. We anticipate stronger second half performances from all our international retail businesses.’