Classification: Public Heathrow (SP) Limited Results for nine months ended 30 September 2018 26 October 2018
Classification: Public Q3 2018 highlights
Classification: Public Continued strong performance in 2018 Operational highlights • Record 60.5 million passengers, up 2.5% 1 • Strong service standards maintained • Prompt payment code champion Financial performance • Revenue up 2.3% to £2,211 million; Adjusted EBITDA up 1.9% to £1,372 million 2 • Cost control and better value for passengers • Close to £1.6 billion raised globally providing strong foundations for expansion Strategic priorities • Raising service standards and operational resilience 3 • Focusing on further cost efficiencies and incremental revenue • Delivering a sustainable, affordable and financeable expansion See page 25 for notes, sources and defined terms 3
Classification: Public Business highlights
Classification: Public Record 60.5 million passengers Passenger traffic by market – 2018 vs. 2017 Passenger traffic at European hubs Year on year growth in traffic for 12 months to 30 September 2018 UK 3.6m +9.8% +1.1% Europe +9.0% North America 25.3m 13.7m +2.2% M. East +3.7% 5.8m +6.3% +0.8% Africa 2.4m +4.7% Asia Pacific +4.0% +4.4% 8.7m +2.6% +2.6% Latin America 1.0m +4.6% Heathrow Charles de Schiphol Madrid Frankfurt Istanbul Gaulle Runways 2 3 4 4 6 4 60.5 million passengers Annual 79.5 71.4 70.4 56.8 68.6 67.8 +2.5% passengers (m) 9M 2017 9M 2018 9M 2017 9M 2018 Passengers ATM 354,675 355,425 Long-haul traffic growth 3.5% 2.9% Short-haul traffic growth 2.6% Seats per ATM 212.0 213.4 2.0% Load factors (%) 78.5 79.8 Qantas: direct flight to Perth New routes Hainan: services to Changsha Cargo tonnage (‘000) 1,246 1,265 China Southern: services to Sanya Tianjin: services to Chongqing 5
Classification: Public Strong service standards complemented by robust operations Quarterly passenger satisfaction Passenger satisfaction European ranking Q3 2008 – Q3 2018 Q3 2018 4.30 4.20 4.12 ASQ score (out of 5) ASQ score (out of 5) 4.10 4.00 3.90 3.80 3.70 3.60 3.43 3.50 3.40 3.20 3.30 Q3-08 Q1-09 Q3-09 Q1-10 Q3-10 Q1-11 Q3-11 Q1-12 Q3-12 Q1-13 Q3-13 Q1-14 Q3-14 Q1-15 Q3-15 Q1-16 Q3-16 Q1-17 Q3-17 Q1-18 Q3-18 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% 98.9% 98.7% 81% 80% 99% 78% 80% 98% 97% 70% 96.0% 63% 96% 60% 95% 94% 50% 2007 2017 9M 2017 9M 2018 2007 2017 9M 2017 9M 2018 Terminal 2 - World’s Best Airport Terminal Best Airport in Western Europe World’s Best Airport Shopping See page 25 for notes, sources and defined terms 6
Classification: Public 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 7
Classification: Public Delivering a sustainable, affordable & financeable expanded Heathrow • Carbon neutral airport by 2020 • Incentives for cleaner, quieter aircraft; 6.5 hour ban on scheduled night flights • SUSTAINABLE Pioneering offsite manufacturing with Logistics Hubs • No additional airport related traffic • Skills Taskforce • SOS challenge to maintain charges close to 2016 levels in real terms’ • 37 companies shortlisted for the Innovation Partners programme from over AFFORDABLE 150 expressions of interest • Preferred masterplan consultation set for June 2019 • Entirely privately funded through mix of debt and equity • Commitment to maintain current investment grade credit ratings • FINANCEABLE ~ £1.6bn raised in 2018 providing strong foundations for expansion • Stable regulatory environment; opportunity for alternative commercial arrangements with airlines 8
Classification: Public Brexit update • Heathrow encouraged by UK Government approach to aviation in negotiations − continued access to European single aviation market • Advocating to maintain efficient flows of people and goods − efficient immigration and cargo processing, access to skills • Heathrow remains in an extremely strong position notwithstanding the outcome of the negotiations − proven track record managing operational change − financial resilience in place − liquidity horizon extends to December 2020 • Reaffirmation of signatory undertakings of the prompt payment code 9
Classification: Public Financial review
Classification: Public Financial highlights 9M 9M (£ million) 2017 2018 % Change 2,161 2,211 Revenue 2.3 Operating costs 814 839 3.1 Adjusted EBITDA 1,347 1,372 1.9 491 Capital expenditure 555 13.0 Dec Sep 2017 2018 % Change Consolidated nominal net debt 12,372 12,749 Heathrow (SP) 3.0 Heathrow Finance 13,674 13,822 1.1 RAB 15,786 16,108 2.0 See page 25 for notes, sources and defined terms 11
Classification: Public Record traffic and continued retail growth drive revenue up Analysis of revenue (£m) • Aeronautical: delivering better value to passengers − up: strong traffic growth 2,161 2,211 2.3% − down: recoverable yield dilution • Continued momentum of retail growth rates 1,307 1,288 1.5% − digital initiatives and luxury proposition drive retail concessions performance − catering upside from outlets redevelopment and 520 492 5.7% grab and go offerings − advertising income drive other retail up 381 0.8% 384 9M 2017 9M 2018 • Modest growth in other revenue Aeronautical Retail Other − higher baggage volumes drove ORCs up 9M 2017 9M 2018 Change % Per passenger (£) − Heathrow Express declined due to softer Aeronautical revenue 21.81 21.59 -1.0 passenger numbers 8.33 3.1 Retail revenue 8.59 12
Classification: Public Strong cost control without compromising passenger experience Analysis of operating costs (£m) • Increased investment in resilience, security, passenger experience and expansion 814 839 3.1% − people costs up 1.5% on higher resilience costs and pension charges 278 1.5% 274 − higher expansion, security and accessibility costs drive operational costs up 9.4% 9.4% 198 181 − over £5m winter resilience costs impact maintenance and other costs 128 5.5% 135 − business rates lower after rates review 95 -4.2% 91 136 137 0.7% • Efficiencies broadly offset additional pressure 9M 2017 9M 2018 from record traffic and inflation Employment Operational Maintenance • Operating costs per passenger continue Rates Utilities & Other declining in real terms Per passenger (£) 9M 2017 9M 2018 Change % 13.78 0.6 Operating costs 13.86 See page 25 for notes, sources and defined terms 13
Classification: Public Strong operating cash flow exceeds capital expenditure and interest payments Heathrow (SP) nominal net debt January 2018 – September 2018 13,500 13,250 476 13,000 (£m) 1,336 12,750 555 356 12,749 12,500 326 12,372 12,250 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 (30 Septmebr 2018) *Funded the majority of £341 million dividends to ultimate shareholders See page 25 for notes, sources and defined terms 14
Classification: Public Substantial gearing headroom retained Evolution of gearing ratios 100% 95% HF 2025/2027 Notes covenant 90% HF 2019 Notes covenant Q3 2017 Q3 2018 85% Class B gearing trigger 86.1% 86.6% 85.8% 84.9% 85.4% 84.5% 80% 75% 79.1% 79.6% 78.4% 78.7% 78.4% 78.2% Class A gearing trigger 70% 70.8% 65% 68.0% 67.9% 67.5% 67.3% 66.7% 60% 31 December 31 December 31 December 31 December 30 September 2017 30 September 2018 2014 2015 2016 2017 Heathrow (SP) Class A gearing Heathrow (SP) Class B gearing Heathrow Finance gearing See page 25 for notes, sources and defined terms 15
Classification: Public 2018 funding plan LIQUIDITY DIVERSIFICATION DURATION - 12.2 year average life of - nearly £1.6bn raised - debut AUD transaction debt for Heathrow SP globally - first export credit agency - longest CAD transaction - liquidity horizon extended financing issued by a UK corporate to December 2020 - longest AUD transaction - £2.2bn in undrawn by a UK corporate in facilities & cash resources EMTN format 16
Classification: Public Outlook • 2018 forecast remains in line with June investor report: − expected traffic : 79 million passengers − expected Adjusted EBITDA: £1,816 million − projected headroom to covenant remains significant See page 25 for notes, sources and defined terms 17
Classification: Public Strategic Update
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