GATWICK AIRPORTRESULTS FOR THE 9 MONTH PERIOD ENDED 31 DECEMBER 2019* * Consolidated results for Ivy Holdco Limited, the parent of Gatwick Airport Limited, representing the performance of the Gatwick Airport group of companies for the 9 month period ended 31 December 2019 (following change of financial year from 31 March to 31 December)
2019 PERFORMANCE
2019 OPERATIONAL AND FINANCIAL PERFORMANCE (9 MONTHS) HIGHLIGHTS 1 TRAFFIC EBITDA PROFIT FOR CAPITAL SENIOR NET SENIOR SENIOR DEBT 2 RAR 2 ICR 2 GROWTH GROWTH THE PERIOD EXPENDITURE +0.3% +7.9% £170.4m £174.4m £2,931.3m 0.60x 11.78x Overall growth modest , with a 1.5% increase in long haul traffic offset by insolvency of Thomas Cook, the impact on airlines of aircraft delivery/performance issues, and softening of customer demand. Solid financial performance with EBITDA growth at 7.9%, robust revenue increases and careful cost management. Delivered consistently high levels of overall passenger service and satisfaction. On time performance, resilience of air traffic control, and special assistance service are key focus areas for airport and airlines. Efficient capital investment during the period, delivering increased capacity, enhanced resilience of existing facilities and service improvements. In January 2020 Gatwick issued extended commitments with a term from April 2021 to March 2025. The pricing benefit is effective retrospectively from January 2020, bringing pricing benefits to airlines sooner. In direct response to the Government’s recent Aviation Strategy Gatwick set out its intention to take its Standby Runway plans forward through a statutory planning process. 1 For the 9 month period to 31 December 2019 and vs comparable prior period, save as noted. 2 Senior Net Debt, Senior RAR and Senior ICR as per covenant test, 31 December 2019. 3
IMPROVEMENTS TO THE PASSENGER EXPERIENCE AND SERVICE Service Quality Scores Remain High Overall Quality of Service Monitor Scores at a Record High % measures passed % measures failed 100% 4.5 Average 80% Average Average 4.4 4.29 Average 4.29 4.29 Average 4.24 60% 4.21 4.3 40% 4.2 20% 4.1 0% 4.0 15/16 16/17 17/18 18/19 9 mths to 15/16 16/17 17/18 18/19 9 mths to Dec 19 Dec 19 On Time Departure Remains a Key Focus Special Assistance Service is a Key Area of Focus Percentage of flights departing on time 12-month moving average Departing <30 mins Arriving <20 mins 80% 100% 70% 90% 80% 60% 63% 62% 61% 70% Change in 50% 55% 54% service partner % of flights on time 60% June-September average 40% 50% 15/16 16/17 17/18 18/19 9 mths to 15/16 16/17 17/18 18/19 9 mths to Dec 19 Dec 19 4
SOLID FINANCIAL PERFORMANCE FOR GATWICK AIRPORT* 9 MONTH 9 MONTH YEAR ENDED £m PERIOD ENDED PERIOD ENDED CHANGE 31 MAR 2019 31 DEC 2019 31 DEC 2018 Passengers (m) 36.9 36.8 0.3% 46.4 Revenue 719.6 676.8 6.3% 810.8 Other operating income 3.9 - - - Operating costs (excl. depreciation, (291.2) (276.1) 5.5% (369.4) amortisation and exceptional items) EBITDA 432.3 400.7 7.9% 441.4 Depreciation and amortisation (134.9) (125.8) 7.2% (170.0) Exceptional costs (18.7) - - - EBIT 278.7 274.9 1.4% 271.4 Profit after tax 170.4 130.0 31.1% 208.1 Capital expenditure 174.4 173.2 0.7% 249.3 Net debt 2,829.6 2,483.5 13.9% 2,577.8 * Consolidated results for Ivy Holdco Limited, the parent of Gatwick Airport Limited, representing the performance of the Gatwick Airport group of companies 5
IMPACT OF COVID-19
IMPACT OF COVID-19 • Coronavirus is causing widespread disruption to Global, European and UK aviation markets: • Gatwick passengers in Jan & Feb were -3% vs. 2019, but this widened to -54% for March. • Gatwick remains open to flights, but operating at very low volumes. • Current low levels of traffic expected to persist through April & May , ahead of a gradual build up in June & July for Summer season. • Gatwick has been working closely with UK Government (Public Health England, DfT and CAA) to ensure the safety of Gatwick’s staff, passengers and other stakeholders, and to limit the operational disruption. • Gatwick has taken a series of immediate steps to safeguard its business: • Reduced operational footprint : initially, night closure and shutdown of 2 out of 6 piers; now operations limited to a single pier in South Terminal within an 8-hour window (2pm to 10pm). • Actions to limit the operating expenses: including reduced pay rates, “furloughing” of staff, and some permanent reductions in staff to align with revised traffic expectations. • Significant reduction to active capital expenditure. • Improving liquidity with an additional £300m term-loan . • Compliance Certificate: reduced headroom under Financial Covenants 7
TRAFFIC ASSUMPTIONS Coronavirus will have material impact on passenger volume in current year, and the resultant economic uncertainty will weigh on the next few years. But, traffic expected to revert to trend over mid- to long-term. Annual Traffic (2012 – 2022) 50 46.6 46.1 45.6 45 43.3 43.0 40.4 40.2 Passengers (m) 40 38.3 35.6 34.2 35 30 28.9 25 2012(A) 2013(A) 2014(A) 2015(A) 2016(A) 2017(A) 2018(A) 2019(A) 2020(F) 2021(F) 2022(F) Annual Traffic (Fiscal years): 2012/13 – 2022/23 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 Passengers (m) 34.2 36.0 38.8 40.9 44.1 45.7 46.4 44.4 29.7 40.4 43.4 8
FINANCING & LIQUIDITY POSITION • £92m cash held at end of March. • £300m Term Loan • signed 3 April 2020 to replenish headroom under Revolving Credit Facility. • maturity: 12 months extendable to 18, then 24 months at Gatwick’s option. • £300m Revolving Credit Facility • repaid from Term Loan proceeds; headroom fully replenished. • 4 years residual maturity (June 2024). Extendable one year at Gatwick’s option. • £150m Liquidity Facility • to cover bond/bank interest, under specific circumstances. (Net interest c. £130m p.a.). • 4 years residual maturity (June 2024). Annual renewal/rollover to five year maturity. • No bond maturity until 2024 (£300m). • No distributions in 2020 & 2021 assumed in projections, with scope for return to distributions in late 2022 (up to £50m), subject to market conditions and trading performance. • Investment grade rating maintained. Rating agency response: S&P downgrade to BBB negative outlook; Moodys Baa1 placed on ratings review for downgrade; Fitch BBB+ stable outlook, review ongoing. 9
CAPEX – STRATEGIC REDUCTION TO REFLECT MARKET OUTLOOK £136m capital cost reduction for the 10 months March to December 2020, following actions implemented in March: • Half of the 40 projects in delivery have been stopped, descoped or rephased generating a saving of £88m. • 47 out of 49 projects in design phase stopped or delayed generating a saving of £48m . Monthly Investment Profile 30.0 300.0 25.0 250.0 20.0 200.0 £m, cumulative £m 15.0 150.0 10.0 100.0 5.0 50.0 - - Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Planned Post Covid - 19 Planned Cumulative Post Covid - 19 Cumulative 10
OPERATING COSTS – SIGNIFICANT REDUCTION PLAN £67m operating cost reduction vs. budget for the 9 months April to December 2020 following the actions implemented in March: • £42m staffing costs decrease through severance programme and 20% pay reduction. • £25m of other operating cost savings generated by lower utilisation of the infrastructure, the adjustment of subcontractor costs and the shut-down of discretionary costs. Staff costs decrease Contractual costs adjustments • • Severance programme (for c.340 staff) Suppliers resourcing based on new PAX forecast • • c.200 fixed-term contracts ended Suppliers costs reflecting Coronavirus Job • 20% pay-cut, delay pay rise & making use of Retention Scheme • Coronavirus Job Retention Scheme Insurance costs decrease (PAX and CAPEX • Recruitment freeze & eliminate overtime decrease effect) • Bonus cancelled Infrastructure utilisation reduced Discretionary costs “shut - down” • • Temporarily close terminal and piers, and Marketing • consolidate activities Branding • • Close car park capacity Consultancy support • • Limiting runway utilisation, e.g. from 2pm to Business travel 10pm from end of March 11
SUMMARY OF COMPLIANCE CERTIFICATES: HISTORIC 9 MTHS ENDED 12 MTHS ENDED 12 MTHS ENDING 31 DEC 2019 31 DEC 2019 1 31 MAR 2020 1 Annual Passenger Traffic 46.6m 44.4m Cash flow (per covenant) £424.5m £482.8m £466.4m Total Senior interest (net) £24.6m £109.8m £109.1m Senior ICR 11.78x 3.15x 3.03x (trigger <1.50x; default <1.10x) Cash ICR 2 - 4.01x 3.90x Senior Net Debt (per covenant) £2,931m - £3,032m Transfer RAB 3 £4,902m - £4,905m Senior RAR 0.60x 0.60x 0.62x (trigger >0.70x; default >0.85x) Senior Net Debt to EBITDA 4 - 6.20x 6.42x • Following change in financial year end to 31 December, covenants reported for: • 9 months ended 31 December 2019 in line with shortened period, and • 12 months ended 31 March 2020 (one time only). Notes 1 Unaudited. 31 December 2019 figures for comparison only. 2 Cash ICR is net cash flow from operating activities less cash tax divided by Senior interest (net) (i.e. net cash flow not adjusted downwards by 2% of Transfer RAB, unlike Senior ICR). 3 Transfer date 1 April 2014 and Relevant Multiple – 11.1. 4 EBITDA is pre-exceptional costs. 12
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