Gatwick Airport Limited Results for six months ended 30 September 2012 28 November 2012
Operational and financial performance Highlights Traffic growth + 1.2% EBITDA + 4.8% Capital expenditure 119.1m Despite the continued economic headwinds underlying traffic growth from existing carriers, although some losses too Additional growth from new long haul airlines increasing London s connectivity Investment programme delivering new, improved and innovative facilities, on schedule and on budget RAB * Senior Net Debt * 2,297.2m 1,382.7m Continuous improvement in operational performance, delivering great customer service Senior RAR 0.60x Robust financial performance reflecting passenger growth, increased income per passenger and careful cost management * All figures are for the six months ended 30 September 2012 except Senior Net Debt and RAB which are shown as at 30 September 2012 1
Our ambition & strategy, consistently applied 2
Improved service and passenger satisfaction 100% 90% 80% 70% 60% 50% All service quality targets met 2008/ 09 % of measures failed % of measures passed 2009/ 10 2010/ 11 2011/ 12 Security queuing beat targets 2012/ 13 On-time departures in peak period Peak summer is June, July and August 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% 2007 2008 2009 2010 2011 2012 Passenger ratings at record high 100% 95% Target North Terminal <5 min South Terminal <5 min 4.3 4.2 Target Average QSM score Overall QSM 4.23 4.16 90% 85% 4.1 4.06 4.07 4.08 80% 4.0 75% 2008/ 09 2009/ 10 2010/ 11 2011/ 12 H1 2012/ 13 3.9 2008/ 09 2009/ 10 2010/ 11 2011/ 12 H1 2012/ 13 3
Route development activity delivering growth, although some losses Traffic growth in H1 12/13 largely from existing carriers: - record load factors each month - new routes launched by easyjet, BA, Norwegian - notable strategic win by easyjet on London - Moscow route New airlines and routes starting at Gatwick in Winter 2013, both long and short-haul: - Thomson weekly service to Phuket - Air Arabia 5 per week to North Africa - Gambia Bird 2 per week to Banjul and Freetown - Icelandair 2 per week to Reykjavik (3 in Summer 2013) However, tough economic conditions have also led to some losses; - Hong Kong Airlines left in September, blaming the the continuing weak economic outlook in Europe. - Ryanair withdrew all non-irish routes - Air Berlin stopped the daily service to Nuremberg 4
Delivering airport transformation programme Delivery of investment programme on schedule 119.1m invested in H1 2012/13 Monthly investment over last six months c 20m 332m expected investment over next 1.5 years (includes Q5+1 extension year) Projects completing during 2012/13 Main runway rehabilitation ( 50m) South terminal baggage (Phase 1) ( 49m) North terminal baggage ( 46m) Future projects Imminent programme of works include Pier 5 reconfiguration ( 73m) and Pier 1 replacement ( 183.9m) Beyond Q5 programme development continues through constructive engagement to confirm the level of investment over the next 5-10 years 5
Delivering a better retail offering Brand new walk-through duty free store New walk-through duty and tax-free opened July 2012 Retail space in the South Terminal departure lounge being reconfigured Innovative bookshop rebranding WH Smith stores rebranded as London News Company or London Book Company First rebranded store opened March 2012; all completed during Summer 2012 Improved catering in the North Terminal Two new restaurants opened this year First airport in the world to offer a Jamie Oliver restaurant, opened July 2012 6
Monthly year-on-year traffic growth (%) Traffic growth continuing, although at a more modest rate Moving Average Total (millions) 33% 28% 23% 18% 13% 8% 3% -2% -7% -12% -17% -22% YOY Growth by month (%) Underlying Moving Average Total Moving Average Total 36 35 34 33 32 31 30 29 28 27 26 25 24 23 22 21 Underlying growth through both summer and winter seasons (after accounting for impacts of timing of Easter and Olympics) Latest traffic forecasts are for more modest growth; full year 2012/13 is 34.1m passengers growing to 35.9m passengers in 2018/19 7
Traffic growth reflects business development activity and Gatwick s market position Gatwick Heathrow Manchester Stansted Luton 12.0% 10.0% 8.0% 6.0% 11.9% 4.0% 8.5% 7.6% 8.2% 6.8% 2.0% 0.0% -2.0% 4.7% 4.1% 1.2% -0.9% 6 months growth to Sep11 3.0% -0.4% -4.4% -5.3% 3.8% 1.3% -4.0% 6 months growth to Mar12 6 months growth to Sep12-6.0% Targeted business development efforts have resulted in increased volumes despite strong economic headwinds 8
Robust financial performance, building on traffic growth Figures in m 6 months ended 30 September 2012 6 months ended 30 September 2011 Change Passengers (m) 19.9 19.7 1.2% Turnover 325.8 314.5 3.6% Operating costs (ex D&A and pre-exceptionals) EBITDA (pre-exceptionals) 153.8 150.4 2.3% 172.0 164.1 4.8% Capital expenditure 119.1 134.1-11.2% Net debt * 1,318.2 1,194.7 10.3% RAB * * Net debt and RAB are shown as at 30 September 2012 and 2011 2,297.2 2,119.5 8.4% Returns on investment below expectations at time of last regulatory review, largely reflecting lower traffic and ongoing investment commitments 9
3.6% increase in turnover reflecting traffic growth and higher spend per passenger Aeronautical revenues increased by 3.9%, notwithstanding a reduction of (15.6)m (full year 2012/13) related to Capital programme trigger payments Turnover analysis 2011 2012 Net retail income per passenger increased by 1.7% to 3.50 despite 2.5% reduction in retail space Aero 178.5 +3.9% 185.4 Flagship duty free store opened in ST in July New & exclusive catering options the world s first Jamie Oliver airport restaurant Retail +3.0% 67.7 69.7 Gross car parking revenue per passenger increased by 0.01 to 1.68 New premium products providing some offset from highly competitive pricing in core markets Cark parking Other income 32.9 +1.8% 33.5 35.4 +5.1% 37.2 10
2.3% increase in costs to support service levels, capital projects and regulatory work Staff costs increase driven by: Increase in security staff to support improved service levels and runway resurfacing project Final year of 2 year pay deal for frontline staff Higher staff capitalisation reflecting work on investment programme General expenses reflects Increased consultancy cost to support Q6 regulatory work Additional car parks costs (supporting revenue growth) Utilities costs fall as ex-baa contract ends Staff costs General & other expenses Rates & Utilities Maintenance and IT Operating costs analysis 2011 2012 +6.1% 58.9 62.5 +6.7% 43.5 46.4 27.6 26.7-3.3% 20.4-10.8% 18.2 * Operating costs excluding depreciation and amortisation 11
Net debt 31 March 2012 to 30 September 2012 m 1,450.0 1,400.0 2.5 1,350.0 136.6 164.1 1.7 1,300.0 75.0 1,250.0 1,200.0 1,266.5 1,318.2 1,150.0 1,100.0 Opening Capital expenditure Net interest Cash flow from ops Restricted Payment Other Closing * Cash interest paid in period was 6.7m, of which 4.2m was capitalised and included within capital expenditure 12
Long-term bond/bank funding platform in place Debt maturity profile reduces refinancing risk 300m 2041/43 Class A Bond 300m 2037/39 Class A Bond 300m 2026/28 Class A Bond 300m 2024/26 Class A Bond 106m Dec-14 Bank Facilities Strong liquidity position to fund investment programme of 332m over next 1.5 years from: Undrawn bank commitments ( 310m as at 30 September 2012) Annual cash flow from operations ( 225.1m for the year ended 30 September 2012) Financial ratio Cash flow (per covenant) Year ended 30 September 2011 159.1m Year ended 30 September 2012 180.1m Total interest (net) 28.5m 36.5m Senior ICR 5.59x 4.93x Trigger <1.50x <1.50x Senior Net Debt (per covenant) 1,234.3m 1,382.7m RAB 2,119.5m 2,297.2m Senior RAR 0.58x 0.60x Trigger >0.70x >0.70x 13
Regulatory & Capacity update Royal Assent for Civil Aviation Bill expected shortly General duty on CAA to further interests of passengers Provision for derogations for pre-existing financing arrangements Beyond Q5 preparation Outputs of Constructive Engagement with airlines to inform the Company s business plan to be submitted to CAA in January 2013 CAA considering alternatives to RAB-based regulation, including recognising that Airport Commitments could be a realistic option CAA s next stage of work to be published April 2013 Runway capacity debate Gatwick has now confirmed its intention to look at options for a new runway, whilst honouring its commitment to the 1979 legal agreement with West Sussex County Council Detailed work on runway options to be submitted to the Davies Commission Gatwick still has capacity on the existing footprint to increase passenger numbers by an estimated 11 million and that continues to remain a priority 14
Conclusion Despite the tough economic conditions, particularly in key European markets, traffic growth has continued through incumbent and new airlines and routes. Modest growth is expected to continue throughout the Winter season. Robust financial performance reflecting passenger growth, new retail and car parking products delivering increased income per passenger, and careful cost management All service quality measures achieved for every month of this financial year and significant improvements in customer survey scores and in on-time performance over the Summer Investment programme on track, delivering new, improved and innovative facilities Outcome of regulatory review one of the key issues facing the business Full details of today s announcement at: gatwickairport.com/investor 15
Disclaimer This material contains certain tables and other statistical analyses (the Statistical Information ) which have been prepared in reliance on publicly available information and may be subject to rounding. Numerous assumptions were used in preparing the Statistical Information, which may or may not be reflected herein. Actual events may differ from those assumed and changes to any assumptions may have a material impact on the position or results shown by the Statistical Information. As such, no assurance can be given as to the Statistical Information s accuracy, appropriateness or completeness in any particular context; nor as to whether the Statistical Information and/or the assumptions upon which it is based reflect present market conditions or future market performance. The Statistical Information should not be construed as either projections or predictions nor should any information herein be relied upon as legal, tax, financial or accounting advice. Gatwick Airport Limited ( GAL ) does not make any representation or warranty as to the accuracy or completeness of the Statistical Information. These materials contain statements that are not purely historical in nature, but are forward-looking statements. These include, among other things, projections, forecasts, estimates of income, yield and return, and future performance targets. These forward-looking statements are based upon certain assumptions, not all of which are stated. Future events are difficult to predict and are beyond GAL s control. Actual future events may differ from those assumed. All forward-looking statements are based on information available on the date hereof and neither GAL nor any of its affiliates or advisers assumes any duty to update any forward-looking statements. Accordingly, there can be no assurance that estimated returns or projections will be realised, that forward-looking statements will materialise or that actual returns or results will not be materially lower that those presented. This material should not be construed as an offer or solicitation to buy or sell any securities, or any interest in any securities, and nothing herein should be construed as a recommendation or advice to invest in any securities. This document has been sent to you in electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently neither GAL nor any person who controls it (nor any director, officer, employee not agent of it or affiliate or adviser of such person) accepts any liability or responsibility whatsoever in respect of the difference between the document sent to you in electronic format and the hard copy version available to you upon request from GAL. Any reference to GAL will include any of its affiliated associated companies and their respective directors, representatives or employees and/or any persons connected with them. 16
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