Heathrow (SP) Limited Results for nine months ended 30 September 2015 28 October 2015
2015 nine month highlights Michael Uzielli, CFO
Continued strong performance in 2015 • Busiest ever summer with over quarter of a million Operational passengers on five separate days 1 highlights • Service quality well ahead of European hubs • Revenue up 4.1% to £2.1 billion and EBITDA up 4.4% to £1.2 billion Financial 2 performance • Robust results with good cost control • Over £1.2 billion funding raised globally in 2015 • Giving passengers the best airport service in the world Strategic 3 • Delivery of cost efficiency and revenue initiatives aims • Strong momentum for expansion See page 23 for notes, sources and defined terms 3
Traffic growth from increased seat capacity • Significant European seat capacity growth Passenger traffic by market 9M 2015 versus 9M 2014 – over one million more seats on European flights – nearly 0.6 million more passengers in Q3 alone UK Europe 4.0m North America • Intercontinental traffic from more flights and 23.7m +0.8% 13.1m +4.0% larger planes +1.4% M. East – Middle East growth from continued increase in Asia Pacific 4.8m aircraft size 7.9m +5.5% -0.4% – North America passenger growth stable Africa Latin America – Latin America benefits from new Avianca 2.5m 0.9m -6.6% service to Colombia +8.9% – 8 airlines operating A380s at Heathrow with 24 daily flights • Given strong summer performance, 2015 56.9 million passengers traffic forecast is around 75 million +2.3% passengers 4
Capacity constraints holding back UK growth Passenger traffic at European hubs 12 months to 30 September 2015 +11.3% +10.0% +5.6% +4.1% +2.9% +2.0% Heathrow Frankfurt Charles de Schiphol Istanbul Madrid Gaulle Passengers (m) 74.6 61.2 57.3 60.9 45.6 65.8 Runways 2 4 4 6 3 4 See page 23 for notes, sources and defined terms 5
Passenger satisfaction well ahead of European hubs Quarterly passenger satisfaction Passenger satisfaction European ranking Q4 2006 – Q3 2015 Q3 2015 4.30 4.20 4.09 ASQ score (out of 5) ASQ score (out of 5) 4.10 4.00 3.80 3.90 3.60 3.70 3.40 3.50 3.20 3.30 Q4-06 Q2-07 Q4-07 Q2-08 Q4-08 Q2-09 Q4-09 Q2-10 Q4-10 Q2-11 Q4-11 Q2-12 Q4-12 Q2-13 Q4-13 Q2-14 Q4-14 Q3-15 LHR European competitors European comparators Heathrow European top quartile European average Departures Baggage performance within 15 minutes of schedule misconnect rate per 1,000 passengers 50 90% 40 79% 40 78% 77% 80% 30 19 70% 19 19 63% 20 60% 10 0 50% 2007 2014 9M 2014 9M 2015 2007 2014 9M 2014 9M 2015 Best Airport in Western Europe 2015 Europe’s Best Airport World’s Best Airport Shopping (over 25 million passengers) Terminal 5 – World’s Best Airport Terminal 2015 Eco-innovation award: Heathrow 6 See page 23 for notes, sources and defined terms
Service transformation supported by long-term investment • Faster journeys through Heathrow and improved passenger facilities – parallel loading security lanes in T4 and T5 – Terminal 3 Integrated Baggage – new generation biometric eGates at Border Control • Improving operational resilience and efficiency – 30x A380 stands for larger, quieter, cleaner planes – time-based separation Terminal 3 Integrated Baggage facility – enhanced Instrument Landing System • Innovation to reduce environmental impact – change operating procedures: single engine taxiing – increasingly quieter aircraft – steeper approach trials began in September 2015 Blueprints for a sustainable Heathrow 7
Financial review
Financial highlights 9M 9M Versus (£ million) 9M 2014 2015 2014 Revenue 2,068 1,986 +4.1% 814 Operating costs 1 844 +3.7% EBITDA 1 1,224 1,172 +4.4% Capital expenditure 474 689 -31.2% Change Dec Sep from 2015 2014 Dec 14 Consolidated nominal net debt Heathrow (SP) 11,720 11,653 +0.6% 12,560 Heathrow Finance 12,720 +1.3% RAB 14,891 14,860 +0.2% 1 Operating costs are pre-exceptional items and exclude depreciation & amortisation. EBITDA is pre-exceptional items and excludes interest, tax, depreciation, amortisation and certain re-measurements. See page 23 for notes, sources and defined terms 9
Solid revenue performance • Aeronautical revenue driven by volume Analysis of revenue – £45 million from traffic and tariff changes +4.1% – absence of capital triggers partly largely offsets 2,068 non-recurrence of substantial K factor 1,986 • Strong retail performance. Net retail income per passenger up 5.0% – car parking continues to grow with additional capacity and yield management 1,299 +3.0% 1,261 – T5 luxury retail and World Duty Free expanded Aeronautical – higher catering income in Terminal 2 and Terminal 5 outlets • Revenue growth moderating in second half +5.9% 393 – reflecting concentration of nine months tariff 371 Retail increase into final six months of 2014 +6.2% 376 354 Other 9M 2014 9M 2015 10
Continued focus on cost efficiencies • Downward trend in underlying costs Analysis of operating costs − underlying costs adjust for ~£30 million related +3.7% to Terminal 2, Terminal 3 Integrated Baggage and expansion planning 814 844 • Performance reflects delivery of efficiencies − improved supplier agreements 291 − increased productivity and headcount reduction 286 +1.7% − early closure of Terminal 1 on 30 June Employment costs • Further efficiencies to flow through 226 − 214 voluntary severance programme +5.6% − General expenses DB pension scheme changes − focus on securing remaining cost initiatives 173 168 +3.0% Utilities, rent & rates 154 146 +5.5% Maintenance / other 9M 2014 9M 2015 See page 23 for notes, sources and defined terms 11
Operating cash flow significantly exceeds capital expenditure and interest payments Heathrow (SP) net debt bridge January 2015 – September 2015 12,750 12,500 440 12,250 (£m) 12,000 1,156 474 31 11,750 229 49 11,500 11,720 11,653 11,250 Opening nominal Capital Net interest paid Cash flow from Index-linked Dividends/other Other Closing nominal net debt expenditure on external debt operations accretion restricted net debt (1 Jan 2015) payments (30 Sep 2015) See page 23 for notes, sources and defined terms 12
Buffer to triggers and covenants maintained Evolution of gearing ratios 100% 95% Heathrow Finance 2025 Notes covenant 90% Heathrow Finance 2017/2019 Notes covenant 85% Class B gearing trigger 85.8% 85.1% 85.4% 84.5% 80% 82.4% 81.4% 81.6% 79.4% 75% 79.7% 79.0% 77.7% 78.4% 78.7% 77.2% 75.4% 76.7% 70% Class A gearing trigger 65% 68.8% 68.7% 68.5% 68.0% 68.0% 67.6% 67.5% 66.2% 60% 31 31 31 31 31 31 30 30 December December December December December March June September 2010 2011 2012 2013 2014 2015 2015 2015 Heathrow (SP) Class A gearing Heathrow (SP) Class B gearing Heathrow Finance gearing See page 23 for notes, sources and defined terms 13
Over £1.2 billion long-term funding raised globally this year, strengthening Heathrow’s financing position • 2015 funding extends duration, diversifies sources of funding and increases resilience • Over £800 million in two public bond issuances • £300 million in long-term private placements • £100 million in Heathrow Finance loans • Over £600 million in Heathrow Funding bonds matured in June • ~£50 million buyback programme of Heathrow Finance notes completed • Liquidity horizon extends to March 2017 14
Strong performance in 2015 • Record passenger satisfaction and strong operational performance with busiest days ever • Robust financial performance, driven by initiatives to ‘beat the plan’ • Substantial investor appetite globally for Heathrow: over £1.2 billion funding raised • Given strong summer, 2015 traffic likely to be around 75 million passengers • 2015 EBITDA forecast of £1.6 billion reflects strong traffic growth, good retail revenue and cost control 15
Strategic update
Giving passengers the best airport service in the world To come Delivered Share in Success saver plan Flexible benefits Mojo 1 Runway marathon Pulse survey Health gateway Duke of Edinburgh Diamond Partnership Smoother T5 transfers Security improvements Transform T3 Integrated Baggage robots e ILS 2 customer service Expanded T5 Fastrack New generation eGates Pensions changes More great stores in T5: Chanel in December T5 independent airport lounge Beat the plan 3 Second T5 independent lounge Security voluntary severance Government response Airports Commission clear and Traffic surveys Win support for unanimous recommendation 4 Continued work with community Initiated supply chain expansion engagement Airline engagement 17
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