Classification: Public Heathrow (SP) Limited Results for the year ended 31 December 2018 21 February 2019
Classification: Public Contents Page 1. 2018 highlights 3 2. Business Highlights 5 3. Financial Review 13 4. Strategic Update 21 5. Appendix 24
Classification: Public 2018 Highlights
Classification: Public Continued strong performance in 2018 Operational highlights • Record 80.1 million passengers, up 2.7% 1 • Strong service standards maintained • New domestic and international routes Financial performance • Revenue up 3.0% to £2,970 million; Adjusted EBITDA up 4.4% to £1,837 million 2 • Strong cost control • Building a financing war chest for expansion, with £2.3 billion raised globally Strategic priorities • Better service at a lower cost 3 • On track for a sustainable, affordable and financeable expanded Heathrow • Robust contingencies for Brexit transition Page 4 See page 27 for notes, sources and defined terms Visit us: www.heathrow.com/company/investor-centre
Classification: Public Business Highlights
Classification: Public 80.1 million passengers, 26 consecutive months of record growth Passenger traffic by market – 2018 vs. 2017 Passenger traffic at European hubs Year on year growth in traffic for 12 months to 31 December 2018 UK +8.4% 4.8m (0.1%) Europe +7.8% North America 33.3m 18.1m +2.6% M. East +6.0% +4.3% 7.7m +0.5% Africa +4.0% 3.3m +3.7% Asia Pacific +5.3% +2.7% 11.5m +2.4% Latin America 1.4m +4.4% Heathrow Schiphol Charles de Istanbul Frankfurt Madrid Gaulle Runways 2 6 4 4 4 6 80.1 million passengers Annual 80.1 72.2 71.0 57.9 69.5 68.0 +2.7% passengers (m) 2017 2018 2017 2018 Passengers ATM 471,082 472,744 Long-haul traffic growth 3.6% 3.1% Short-haul traffic growth 2.5% Seats per ATM 212.3 213.4 2.2% Load factors (%) 78.0 79.4 Qantas: direct flight to Perth New routes Hainan: services to Changsha Cargo tonnage (‘000) (1) 1,698 1,685 China Southern: services to Sanya and Wuhan (1) Subject to revision Tianjin: services to Chongqing and Xi’an, Tianjin Page 6 Shenzhen Airlines: services to Shenzhen Visit us: www.heathrow.com/company/investor-centre
Classification: Public Maintaining strong service standards and robust operations Quarterly passenger satisfaction Passenger satisfaction European ranking Q4 2008 – Q4 2018 2018 4.50 4.20 4.30 ASQ score (out of 5) 4.15 ASQ score (out of 5) 4.00 4.10 3.80 3.90 3.60 3.70 3.43 3.40 3.50 3.20 3.30 Q4-08 Q2-09 Q4-09 Q2-10 Q4-10 Q2-11 Q4-11 Q1-12 Q4-12 Q2-13 Q4-13 Q2-14 Q4-14 Q2-15 Q4-15 Q2-16 Q4-16 Q2-17 Q4-17 Q2-18 Q4-18 LHR 2007 LHR 2018 European competitors European comparators Heathrow European top quartile European average Departures Baggage performance within 15 minutes of schedule connection rate per 1,000 passengers 100% 90% 99.0% 98.8% 80% 99% 78% 80% 98% 97% 70% 96.0% 63% 96% 60% 95% 94% 50% 2007 2017 2018 2007 2017 2018 Terminal 2 - World’s Best Airport Terminal Best Airport in Western Europe World’s Best Airport Shopping Page 7 See page 27 for notes, sources and defined terms Visit us: www.heathrow.com/company/investor-centre
Classification: Public Progressing on all Heathrow 2.0 flagship goals • Largest 100 towns • An aspiration to make • 10,000 • We will seek to at and cities in the UK growth from our new apprenticeships by least halve the connected to runway carbon 2030 number of late Heathrow by 2033 neutral running flights on • Reflect local diversity non-disrupted days • Direct supply chain • Establishing the at every level by 2025 colleagues working at Heathrow Centre of • Airside ultra-low Heathrow will be Excellence emissions zone by transitioned to be 2025 paid the London Carbon neutral • Living Wage by the airport by 2020 • 50% airport end of 2020 supported by tangible passenger journeys actions made by public and sustainable transport by 2030 Page 8 Visit us: www.heathrow.com/company/investor-centre
Classification: Public Heathrow expansion on track Completed To come CAA Airspace and Heathrow • CAA Heathrow consultation Future Operations consultation consultations and final report consultation 1 launched Government and policy to Secretary of updates CAA State on airline engagement 2019 2017 2018 2020 2021 • Government Heathrow Government Heathrow NPS Heathrow submits Heathrow consultation on draft statutory decision to ‘designated’ Initial Development Innovation National Policy consultation grant DCO Business by Consent Order Statement (‘NPS’) Partners Plan (‘IBP’) Government (DCO) application short list • NPS consultation 2 • Parliamentary scrutiny Page 9 Visit us: www.heathrow.com/company/investor-centre
Classification: Public Expansion – Airspace & Future Operations Consultation • Consultation launched on 8 January 2019 • Seeking feedback on – How we will operate our three runways in the future – Local factors impacting the design of future flight paths – Airspace change using Independent Parallel Approaches (IPA) • Benefits include: – Planned respite for all communities – Improved punctuality and resilience – End of routine “stacking” – Additional capacity Page 10
Classification: Public Brexit update • Governments are listening to the needs of business − Aviation Contingency Plan safeguards reciprocal air connectivity and access for 2019 (subject to EC Ministers approval) − new Airline Service Agreements being agreed • Advocating to maintain efficient flows of people and goods − efficient immigration and cargo processing, access to skills • Heathrow is in an extremely strong position − proven track record managing operational change − financial resilience in place; liquidity horizon extends to March 2021 • ~£100 million EBITDA contingency incorporated in our 2019 forecast to allow for robust operations in all circumstances − prudent approach given uncertainty Page 11 Visit us: www.heathrow.com/company/investor-centre
Classification: Public Q6 achievements Page 12 See page 27 for notes, sources and defined terms Visit us: www.heathrow.com/company/investor-centre
Classification: Public Financial Review
Classification: Public Financial highlights Versus (£ million) 2017 2018 2017 2,884 Revenue 2,970 +3.0% 1,124 1,133 Operating costs +0.8% Adjusted EBITDA 1,760 1,837 +4.4% Capital expenditure 687 793 +15.4% Change Dec Dec from 2017 2018 31 Dec 17 Consolidated nominal net debt 12,372 Heathrow (SP) 12,407 +0.3% 13,674 13,980 Heathrow Finance +2.2% RAB 15,786 16,200 +2.6% Page 14 See page 27 for notes, sources and defined terms Visit us: www.heathrow.com/company/investor-centre
Classification: Public Record number of passengers, choosing to spend more Analysis of revenue (£m) • Aeronautical: delivering better value to passengers − up: strong growth in passenger numbers 2,884 2,970 3.0% − down: recoverable yield dilution due to cleaner and quieter aircraft 1,745 1,716 1.7% • Continued momentum of retail growth rates − digital initiatives and luxury proposition − catering outlet redevelopment and ‘grab and go’ 716 659 8.6% offerings − strong growth in advertising 509 0.0% 509 2017 2018 • Other revenue stands flat Aeronautical Retail Other − higher baggage volumes 2017 Change % Per passenger (£) 2018 − lower rail revenue as services transfer to TfL Aeronautical revenue 22.00 21.78 (1.0) 8.45 5.8 Retail revenue 8.94 Page 15 Visit us: www.heathrow.com/company/investor-centre
Classification: Public Strong cost control while investing service and resilience Analysis of operating costs (£m) • Increased investment in resilience, security, passenger experience and expansion 1,124 1,133 0.8% − higher pension charges of over £5m − higher expansion, security and accessibility 378 374 1.1% costs − over £5m winter resilience costs 4.8% 252 264 • 176 Efficiencies broadly offset additional pressure 176 0.0% from record traffic and inflation 126 122 (3.2%) 196 193 (1.5%) • Continuing to drive down cost per passenger 2017 2018 Employment Operational Maintenance Rates Utilities & Other Per passenger (£) 2017 2018 Change % 14.41 (1.9) Operating costs 14.14 Page 16 Visit us: www.heathrow.com/company/investor-centre
Classification: Public Strong operating cash flow exceeds capital expenditure and interest payments Heathrow (SP) nominal net debt January 2018 – December 2018 13,500 475 13,250 13,000 793 12,750 1,787 (£m) 12,500 69 12,250 485 12,000 12,407 12,372 11,750 11,500 Opening Capital expenditure Net interest paid on Cash flow from *Dividends to Other (including Closing Net Debt (SP) external debt operations ultimate accretion) Net Debt (SP) (1 January 2018) shareholders (31 December 2018) *Funded the majority of £500 million dividends to ultimate shareholders Page 17 See page 27 for notes, sources and defined terms Visit us: www.heathrow.com/company/investor-centre
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