Company result

At the moment, all that really matters is a) the takeover and b) the strength of the balance sheet.

We all know headline numbers look grim, because there’s no travel, as such there’s not a lot of point looking at traffic stats over the past quarter, or prior half, when it is all about the current quarter, and the quarter after that.

On the balance sheet, things aren’t too bad. We’ll start with the cashflows, noting that SYD still made a modest positive operating cash inflow.

However, airport operators are geared beasts, and repayments of debt are significant. As such, you can put the business into hibernation pretty readily, but what matters is the timing and magnitude of any bonds coming due. In the below, SYD repaid a c$500m bond that came due, which was predominantly responsible for the halving of SYD’s cash balance over the period.


You can see that most clearly in the waterfall analysis below.


For the remainder of the year, there’s only a $200m repayment due, which, all else equal, would take cash on hand down to ~$300m.

Next year, the repayments are similar in size. Against that, SYD have ample remaining reserves of debt (access to debt) that they can draw down upon, as required (~$2.4bn), which means that there is little risk (to our mind) of a near term balance sheet solvency issue, or liquidity issue.

That’s a view that’s contingent on things getting a wriggle on, with regard to the vaccine roll-out, and letting lives return to normal. But, for at least the next 6 months, it’s not quite such a crucial issue.

What’s more relevant, to us, is that the risk reward proposition of such a timing debate doesn’t seem especially compelling with SYD holding out for an offer that’s closer to $9/share, compared to the same risk reward proposition at $6/share.

So, although we don’t think that there’s much financial risk, and little operational risk, over the next half, the whole debate is a little uninteresting given the valuation. It’ll get a lot more interesting, mind you, if we are still stuck in largely the same position of rolling lockdowns by March next year.

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