BAA results for the year ended 31 March 2006

A year of strong performance

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 Watch the Annual Results webcast presentation and CEO interview

Underlying performance1:
• UK airports’ passenger traffic up 2.0% to 144.6 million (2004/05:141.7 million) and Naples broadly flat at 4.6 million passengers for the year.  Budapest Airport passenger traffic grew 9% to 1.6 million for the first three months of ownership.
• Revenue up 7.4% to £2,232 million (£2,078 million)
• Operating profit up 8.1% to £710 million (£657 million)
• UK airports’ net retail income grew 4.8% to £616 million (£588 million) and net retail income per passenger rose 2.9% to £4.28 (£4.16)

Statutory results:
• Revenue of £2,275 million (£2,115 million)
• Operating profit £859 million (£1,031 million); excluding certain re-measurements  and exceptional items, operating profit  £710 million (£695 million)
• Profit before tax £757 million (£915 million); excluding certain re-measurements2 and exceptional items, profit before tax £620 million (£608 million)
• Basic earnings per share 49.3 pence (63.0 pence); excluding certain re-measurements2  and exceptional items, adjusted basic earnings per share 40.7 pence (40.2 pence)
• Net debt £5,340 million (£3,064 million) and gearing (net debt:net assets) of 89% (54%)
• Proposed final dividend 15.25 pence (14.30 pence)

Mike Clasper, BAA’s Chief Executive Officer, commented:
“We have again converted passenger growth into stronger underlying operating profit, thanks to our ability to drive retail income, our diligence in controlling costs and rising tariffs at our three London airports.  This achievement is despite difficult operating conditions – the London bombings in July, the Gate Gourmet dispute in August and the slowing economy in the UK.

"These results are a reminder of BAA's core strengths that enable us to consistently generate shareholder value: a unique portfolio in a dynamic sector; strong growth of our London airports; even stronger returns from our other businesses; and a first rate management team creating value. These strengths gave us the confidence to acquire Budapest Airport, a fast growing, commercially underdeveloped airport that is a perfect fit for our management skills. In our short tenure of Budapest we have already made significant progress towards running the airport to the BAA model and integrating it within BAA's portfolio of airports.

"Looking forward, this year we are forecasting a 3.5% rise in passenger numbers and I am confident that we will convert this growth into another good financial performance. There are clear, value-creating opportunities ahead of BAA, such as our plans for Budapest, the transformation of Heathrow and a second runway at Stansted.  Such opportunities, combined with a regulatory regime that is required by law to incentivise investment in airports, means that shareholders have strong reasons for confidence in the value of BAA."

Other highlights:

• On 22 December 2005, BAA completed the acquisition of a 75%, minus 1 share, equity interest in Budapest Airport, together with a 75 year asset management contract and certain assets.  The total consideration was £1,352 million.

Budapest Airport’s operating performance and the implementation of our plans to reorganise and develop the business are ahead of our expectations for the first four months of ownership and operation.

• The Delivering Excellence change programme is on track to realise annual benefits of £45 million from 2008/09. As anticipated, £57 million (£16 million) of related exceptional reorganisation costs were recognised in 2005/06.
• BAA invested £1,517 million in 2005/06 to build capacity and improve facilities at its airports and related businesses. £977 million of this investment was spent on Heathrow Terminal 5 which remains on budget and on schedule to open on 30 March 2008. The first phase (being the main terminal building and Satellite 1) is now nearly 80% complete.
• Excellent performance was achieved by BAA’s 50% joint venture, the Airports Property Partnership (APP).  Since its formation through to 31 December 2005, APP outperformed its independently-measured benchmark by 4%, with annualised returns of 26.4%.  For the year to 31 March 2006, the Group’s share of APP contributed a net profit of £53 million, including a £41 million fair value gain on the revaluation of the property portfolio.

A presentation and live webcast of BAA’s results for analysts and institutional investors will take place at 9:30am today at Bloomberg, City Gate House, 39-45 Finsbury Square, London EC2A 1PQ.

An archived webcast, including speeches and the question and answer session, of this morning’s presentation will be available this afternoon on BAA’s website – www.baa.com/investor.

1Underlying performance reflects the exclusion in 2004/05 of the impact of the Airport Property Partnership (APP) transaction (£37 million reduction in revenue and £38 million reduction in operating profit); exclusion in 2005/06 of the impact of 3 months ownership of Budapest Airport; and exclusion from both years of net exceptional costs before certain re-measurements (2005/06: 39 million; 2004/05: £6 million) and certain re-measurements (see Note 2 below)

2Certain re-measurements (including those of associates and joint ventures) consist of fair value gains and losses on investment property revaluations  and disposals and the gains and losses arising on the re-measurement and disposal of derivative financial instruments, together with the associated fair value gains and losses on any underlying hedged items that are part of a fair value hedging relationship, together with the related tax impact of these items

International Financial Reporting Standards (IFRS)

Prior year results have been restated to comply with the adopted International Financial Reporting Standards.

Disclaimer

This announcement does not constitute an invitation to underwrite, subscribe for, or otherwise acquire or dispose of any BAA plc shares.

This announcement contains certain forward-looking statements and forecasts with respect to the financial condition, results, operations and businesses of BAA plc.  These forward-looking statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future.  There are a number of factors that could or may cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts.  These forward-looking statements and forecasts are based upon current data and historic experience which are not necessarily indicative of future outcomes or the financial performance of BAA plc and should not be considered in isolation.  BAA plc assumes no responsibility to update any of the forward looking statements and forecasts contained herein.

Persons needing advice should consult an independent financial adviser authorised under the Financial Services and Markets Act 2000 if they are in the United Kingdom, or if they are outside the United Kingdom, from an appropriately authorised independent financial adviser.