GATWICK AIRPORT LIMITED RESULTS FOR THE YEAR ENDED 31 MARCH 2014
OPERATIONAL AND FINANCIAL PERFORMANCE HIGHLIGHTS TRAFFIC GROWTH EBITDA GROWTH PROFIT FOR THE YEAR CAPITAL EXPENDITURE RAB* SENIOR NET DEBT* SENIOR RAR * + 4.8% + 14.2% 58m 201m 2,499m 1,595m 0.64x Record passengers of 35.9m driven by significant growth in existing airlines Increased airport efficiencies through ACDM55 with A380 and Dreamliner services operating daily Q5 investment programme of 1.2 billion completed delivering airport transformation Bond issuance of 350 million completed and new bank facility for next 5 years Contracts and Commitments framework adopted by the CAA Shortlisted by the Airports Commission for a new runway in the South East * All figures are for the year ended 31 March 2014 except RAB, Senior Net Debt and Senior RAR which are shown as at 31 March 2014 2
OUR AMBITION & STRATEGY, CONSISTENTLY APPLIED
HELP OUR AIRLINES GROW easyjet traffic increased by 6.7% in the year, new business routes to Paris, Strasbourg and Brussels from March 2014 plus acquisition of Flybe slots, with 60 based aircraft for summer 2014 New airlines and routes, long & short-haul, business & leisure Introduction of BA hand baggage only fares and route specific marketing increased load factors, 11 th long haul aircraft in summer 2014, representing 14% of traffic Norwegian Air traffic increased in 2014 by 66.6%, 6 aircraft based at Gatwick including a Dreamliner from Summer 2014 with new routes to North America Turkish Airlines expanded service to both Istanbul airports, frequency 4 per day from April 2014 3x777 aircraft daily with additional seat capacity (increase of 25%) to Dubai, daily A380 service commenced in March 2014 Vietnam Airlines offers only direct flight from the UK to Vietnam with increased frequencies Flynas new low cost carrier operating London to Saudi Arabia 4
CONSISTENTLY HIGH SERVICE AND SATISFACTION LEVELS Service Quality Remains the Best in the London System 100% 90% 80% 70% 60% 50% % Measures Failed % Measures Passed Change of ownership 08/09 09/10 10/11 11/12 12/13 13/14 During 2013/14 the Company passed 415 out of 420 SQR measures with a pass rate of 99% Security Clearance Beats Targets for Fourth Year Running Significant Improvements Independently Recognised Benchmarking Q4 2009 5.0 LGW Avg. 4.0 3.0 2.0 1.0 0.0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 5.0 Benchmarking Q1 2014 LGW Avg. 4.0 3.0 2.0 1.0 0.0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Source: The Airport Service Quality (ASQ) - an independent survey run under the auspices of Airports Council International (ACI) Sustained Passenger Ratings at Near 12/13 Record Levels North Terminal Average <5 min South Terminal Average <5 min Target 100% 95% 90% 85% 4.3 Overall QSM 4.2 4.07 4.06 4.1 Average 4.08 4.16 4.23 4.22 80% 75% Change of ownership 4.0 Change of ownership 08/09 09/10 10/11 11/12 12/13 13/14 08/09 09/10 10/11 11/12 12/13 13/14 3.9 5
DELIVERING AIRPORT TRANSFORMATION PROGRAMME Major airport transformation programme delivered Operational redesign using Six Sigma/Lean Techniques 201m investment in 2013/14 1.2bn total investment in 6 years of Q5+1 Projects completed during Q5+1 New baggage systems for both terminals ( 90m) South Terminal IDL and Walkthrough Duty Free ( 64m) Main runway and taxiway resurfacing ( 50m) South Terminal security ( 47m) Pier 5 Phase 1 reconfiguration ( 45m) ACDM55 airfield capacity and operations projects ( 8m) A380 pier service ( 6m) Q5+1 Capital Expenditure ( m) 250 211.0 200 181.4 150 104.0 100 239.2 226.7 201.0 Investment programme for the 7 year period beyond March 2014 developed and being consulted upon, with a number of key projects already commenced Pier 1 redevelopment ( 183m) North Terminal check-in, security and IDL ( 102m) Pier 5 phase 2 reconfiguration ( 37m) 50 0 08/09 09/10 10/11 11/12 12/13 13/14 6
GATWICK RETAIL DEVELOPMENT HIGHLIGHTS FOR FINANCIAL YEAR 2013/14 South Terminal IDL project completed on time & on budget 144 retail outlets across the airport campus 82% of departing passengers made a retail or food & beverage purchase 33 new units opened during the year 21 refurbishments were also completed 3 International awards were won EVER IMPROVING CUSTOMER SATISFACTION Customer satisfaction is at an all time high across both terminals 87.2% of our passengers rated the selection of food & beverage outlets as excellent or good at the end of Q1 2014 85.1% gave the same ratings to the selection of retail outlets Gatwick is ranked No. 1 for its provision of restaurant facilities in the ASQ survey which benchmarks Gatwick against 23 major European Airports 7
GROWTH THROUGH ADDITIONAL TRAFFIC Gatwick s most limiting resource enhanced by ACDM55 55 runway movements an hour declared and taken up for Summer 2014 compared to 53 in Summer 2013 Drive for 58 runway movements an hour 2012/13 2013/14 Change % ATMs (k) 238.3 247.9 4.0% Seats per ATM 174.0 175.0 0.6% Load factors 82.6% 83.0% 0.4% pts Passengers (m) 34.2 35.9 4.8% 8
Rolling Annual Total (millions) CONTINUED TREND OF STEADY TRAFFIC GROWTH 40 Passengers Rolling Annual Total 39 38 37 36 35 34 33 32 31 30 08/09 09/10 10/11 11/12 12/13 13/14 Moving Average Total Recent growth +4.8% in 2013/14 Full year 2013/14 was 35.9m passengers Latest traffic forecasts +5.8% forecast growth for 2014/15 Growing to 38.0m passengers in 2014/15 9
TRAFFIC GROWTH IN A COMPETITIVE MARKET GATWICK HEATHROW STANSTED LUTON Last 12 months +4.8% Last 12 months +3.0% Last 12 months +2.9% Last 12 months +1.0% 6.0% 5.0% 4.0% 5.3% 4.3% 4.3% 4.5% 3.0% 2.0% 1.0% 0.0% 1.3% 1.2% 1.7% 1.8% 1.8% 1.3% 1.8% 0.3% 0.9% 1.3% -1.0% -2.0% -0.9% -3.0% -4.0% -5.0% -4.4% 6 mths to Mar 14 6 mths to Sep 13 6 mths to Mar 13 6 mths to Sep 12 Targeted business development efforts have resulted in increased volumes Market remains competitive with growth opportunities being distributed across rival airports 10
SOLID FINANCIAL PERFORMANCE DELIVERING EBITDA TARGET m YEAR ENDED 31 MARCH 2013 YEAR ENDED 31 MARCH 2014 CHANGE Passengers (m) 34.2 35.9 4.8% Turnover + 538.9 593.7 10.2% Operating costs (excl depreciation and amortisation) (311.8) (334.3) 7.2% EBITDA (pre-exceptionals) 227.1 259.4 14.2% Depreciation (110.7) (112.4) 1.5% EBIT (pre-exceptionals) 116.4 147.0 26.3% Capital expenditure 226.7 201.0 (11.3)% Net debt* 1,403.5 1,507.3 7.4% RAB* 2,391.6 2,498.6 4.5% *Net debt and RAB are shown as at 31 March 2013 and 2014 +Includes a 15.6m reduction due to a capital expenditure trigger payment in the year ended 31 March 2013 11
10.2% INCREASE IN TURNOVER REFLECTING TRAFFIC GROWTH AND HIGHER SPEND PER PASSENGER Aeronautical revenues increased by 11.2%, due to a increase in the allowable yield and 4.8% rise in passengers 15.6m reduction in 2013 due to a capital expenditure trigger Turnover analysis TOTAL 538.9m +10.2% 593.7m Net retail income per passenger increased by 4.2% to 3.72 Flagship WDF store open for a full year 33 new retail units opened this year 285.8 +11.1% 317.4 Net car parking revenue per passenger 123.2 +9.7% 135.1 increased by 10.6% to 1.35 New premium products, improved 58.1 +12.9% 65.6 website and online marketing 71.8 +5.3% 75.6 2013 2014 Aeronautical Retail Car parking Other income 12
7.2% INCREASE IN COSTS TO SUPPORT SERVICE LEVELS AND REGULATORY AND AIRPORTS COMMISSION WORK Staff costs increase driven by Increase in security staff to support service levels and increased passenger volumes First year of 2 year pay deal for all staff Pension costs up 2.5m Increased bonus payments reflecting improvements in business performance General expenses reflects Increased consultancy cost to support Q6 regulatory work Increased R2 marketing and consultancy costs Additional car parks costs to drive revenue per passenger growth Utilities costs remained flat due to energy saving programmes and the mild winter offsetting changes in prices Operating costs analysis TOTAL 311.8m +7.2% 334.3m 127.0 142.1 91.9 +8.2% 99.7 55.8 0.0% 55.8 37.1-1.1% 36.7 2013 2014 Maintenance + IT +11.8% General + Other Expenses Rates + Utilities Staff Costs (net) Note: operating costs excluding depreciation and amortisation 13
NET DEBT 31 MARCH 2013 TO 31 MARCH 2014 m 1,900.0 1,800.0 1,700.0 1,600.0 1,500.0 1,400.0 199.0 71.5 (274.2) 105.0 350.0 (322.4) (25.1) 1,300.0 1,200.0 1,403.5 1,507.3 1,100.0 Opening Capital expenditure Net interest Cash flow from ops Restricted payments Bond issuance Repayment of bank debt Other Closing 14
BANK FACILITIES REFINANCED AND TRANSITION TO TRANSFER RAB DEBT MATURITY PROFILE REDUCES REFINANCING RISK 1,550m Class A Bonds Maturities 2024-2041 300m Bank Facilities March 2019 TRANSITION TO TRANSFER RAB Transfer date 1 April 2014 Relevant Multiple 11.1 STRONG LIQUIDITY POSITION TO FUND ONGOING CAPITAL INVESTMENT PROGRAMME Annual cash flow from operations 274m for the year ended 31 March 2014 Undrawn bank commitments 300m as at 31 March 2014 Restricted payment proposed 125m during 2014/2015 FINANCIAL RATIO YEAR ENDED 31 MARCH 2014 HISTORIC YEAR ENDED 31 MARCH 2014 TRANSFER DATE YEAR ENDING 31 MARCH 2015 YEAR ENDING 31 MARCH 2016 YEAR ENDING 31 MARCH 2017 Cash flow (per covenant) 225.3m 224.2m 227.2m 247.6m 250.8m Total interest (net) 71.5m 71.5m 77.4m 82.0m 89.2m Senior ICR ( trigger <1.50x) 3.15x 3.13x 2.94x 3.02x 2.81x Senior Net Debt (per covenant) 1,595.2m 1,595.2m 1,733.0m 1,766.2m 1,830.6m RAB 2,498.6m 2,622.4m 2,857.6m 3,151.3m 3,426.1m Senior RAR (trigger >0.70x) 0.64x 0.61x 0.61x 0.56x 0.53x 15
REGULATORY UPDATE Contracts & Commitments framework backed by a licence from 1 April 2014. Price Limitation on gross core yield from airport charges: RPI+1.0% p.a. Based on published tariff over 7 years Limitation on net blended yield from airport charges: RPI+0% p.a. Based on published tariff less contract discounts Measured over 7 year term prices may be lower / higher than price path in a given year Represents the yield actually received by Gatwick CAA price monitoring: fair price benchmark using traditional RAB-based building block approach: Net blended yield of RPI-1.6% p.a. Assumed a WACC of 5.7% and significantly higher traffic forecasts Forms part of the monitoring regime and is therefore a benchmark, not a licence price cap Service Based on Q5 service quality regime, but with two additional measures Outbound baggage system performance Security queues <30mins any measurement period on a day Service rebates remain up to 7% of airport charges in aggregate but no bonuses are available Other Terms Investment & consultation commitment Minimum capex requirements - 100m p.a. average with no capital expenditure triggers Information commitment - no separate regulatory accounts Operational and financial resilience commitments No RAB 16
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EXPANSION AT GATWICK WILL DELIVER TWO WORLD-CLASS GATEWAYS FOR LONDON AND THE UK GATWICK WILL PROVIDE More capacity, more traffic and more routes Greater competition and value for money More convenient access for more people with seat capacity on rail services due to double by 2018 and triple by 2035 Greater economic benefits GATWICK WILL DELIVER THIS Quicker with less disruption At less than half the cost and much lower risk With airport charges of nearly onethird an expanded Heathrow With no need for additional tax payer funding With noise impacts affecting only one twentieth of the people affected by Heathrow 19
CONCLUSION Despite the enduring challenges of subdued economic growth, traffic growth has continued through both incumbent and new airlines and routes allowing the airport to achieve record number of passengers. Growth is expected to continue throughout 2014/15 Robust financial performance in line with expectations, reflecting passenger growth, new retail and car parking products delivering increased income per passenger and careful cost management Continued success in service quality measures with Gatwick remaining the best performing London airport Q5 investment programme completed; delivering new, improved and innovative facilities Contracts and Commitments proposal adopted by the CAA tailored offerings to each airline enhancing the customer experience Continuing to make submissions to the Airports Commission supporting Gatwick s unique opportunities in being able to increase airport capacity in the UK Full details of today s announcement at: gatwickairport.com/investor 20
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. 21
QUESTIONS