Heathrow (SP) Limited Results for year ended 31 December 2015 23 February 2016
2015 highlights John Holland-Kaye, CEO
Excellent progress in 2015 • Highest service quality ever, ahead of European hubs Operational 1 • Record traffic with 75.0 million passengers and strong highlights operational performance • Revenue of £2.8 billion, up 2.7% and EBITDA of £1.6 billion, up 3.0% Financial 2 • Downward trend in costs from strong cost control performance • Over £1.2 billion funding raised globally in 2015 • Giving passengers the best airport service in the world Strategic • Focusing on cost efficiency and revenue development 3 aims • Unequivocal and unanimous recommendation by the Airports Commission See page 23 for notes, sources and defined terms 3
Record passengers from substantially more seat capacity • Significant European seat capacity growth Passenger traffic by market 2015 versus 2014 – 1.5 million more seats on European flights – additional 1.2 million passengers in 2015 UK Europe 5.1m North America • Intercontinental traffic from more flights and 31.2m -2.7% 17.3m +3.9% larger planes +1.7% M. East – Middle East growth from increase in aircraft size Asia Pacific 6.4m 10.5m – Latin America benefits from new Avianca +5.8% +0.3% service to Colombia Africa Latin America – China, Hong Kong, Vietnam drive Asian growth 3.3m 1.2m -6.5% and Garuda Airlines starts in March 2016 +8.3% – 8 airlines operating A380s at Heathrow with 25 daily departures • 75.7 million passengers forecast in 2016 – up 1.0% reflecting modest underlying growth 75.0 million passengers and leap year effect +2.2% 4
Capacity constraints holding back UK growth Top 10 busiest global airports Passenger traffic at European hubs 2015 versus 2005 12 months to 31 December 2015 Global ranking Passengers (m) 101 1st +11.9% Atlanta 86 1st 2nd 90 Beijing 15th 41 78 3rd Dubai 33rd 25 +8.0% 4th 77 Chicago O'Hare 2nd 77 +6.0% 5th 76 Haneda 4th 63 6th 75 Heathrow +3.1% 3rd 68 +2.5% +2.2% 7th 75 Los Angeles 5th 61 68 8th Hong Kong 40 16th 9th 66 Heathrow Frankfurt Charles Schiphol Istanbul Madrid Ch. de Gaulle de Gaulle 7th 54 64 10th Dallas Ft Worth Passengers 75.0 61.0 65.8 58.3 61.3 46.8 59 6th (m) 2015 2005 Runways 2 4 4 6 3 4 See page 23 for notes, sources and defined terms 5
Achieving highest service quality ever Quarterly passenger satisfaction Passenger satisfaction European ranking Q4 2006 – Q4 2015 Q4 2015 4.30 4.20 4.13 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 Q2-15 Q4-15 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 78% 40 78% 80% 30 19 70% 17 63% 20 60% 10 0 50% 2007 2014 2015 2007 2014 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 See page 23 for notes, sources and defined terms 6
Service transformation supported by long-term investment • Faster journeys through Heathrow and improved passenger facilities – 30% more security capacity in Terminal 5 – 5x more new generation eGates in immigration – Terminal 5 dedicated Fast Track entrance • Improving operational resilience and efficiency – 30x A380 stands for larger, quieter, cleaner planes – time-based separation and eILS 25x daily A380 services – more stands and wider taxiways – APOC fully operational • Reducing environmental impact – fewer late running flights and doubling of noise fines – over 70,000 lights replaced with LED lamps – charging infrastructure for electric vehicles – signed Paris Pledge for Action on climate change 7
Financial review Michael Uzielli, CFO
Financial highlights Versus 2014 2015 2014 (£ million) 2,692 Revenue 2,765 +2.7% 1,133 Operating costs 1 1,160 +2.4% EBITDA 1 1,559 1,605 +3.0% Capital expenditure 627 853 -26.5% Change Dec Dec from 2014 2015 Dec 14 Consolidated nominal net debt 11,653 Heathrow (SP) 11,745 +0.8% 12,560 Heathrow Finance 12,670 +0.9% 14,860 RAB 14,921 +0.4% 1 Operating costs and EBITDA are pre-exceptional items and exclude depreciation & amortisation. EBITDA also excludes interest and tax See page 23 for notes, sources and defined terms 9
Strong revenue performance across channels Analysis of revenue (£m) • Aeronautical revenue driven by volume 2,692 2,765 +2.7% – lower passenger charges – nearly £60 million from traffic and tariff changes – net impact of 2014 K factor and capital triggers lowered rate of growth 1,699 1,683 +1.0% • Strong performance in outlets and services – new Terminal 5 luxury stores including Chanel, Louis Vuitton and Hermes 568 524 +8.4% – car parking up 8.1% from additional products and yield management 498 485 +2.7% – demand for Heathrow VIP service growing – 1.2 million Heathrow Rewards members 2014 2015 Aeronautical Retail Other • 2016 revenue growth builds on retail success – modest passenger growth and falling charges – full year benefit of new stores 2014 Change Per passenger (£) 2015 – innovations across revenue streams Aeronautical revenue 22.94 22.67 -1.2% Retail revenue 7.14 7.58 +6.2% 10
Strong cost control in 2015 Analysis of operating costs (£m) • Downward trend in operating costs 1,133 1,160 +2.4% − H2 costs flat, Q4 down 2.2% − full year costs include ~£30 million related to Terminal 2, Terminal 3 Integrated Baggage and 384 -1.5% 390 expansion planning • Performance reflects delivery of efficiencies 242 -6.9% 260 − headcount reduction and increased productivity 187 − improved supplier terms including NATS +7.5% 174 strategic partnership 123 +7.9% 114 − early closure of Terminal 1 on 30 June 224 195 +14.9% • Costs to reduce ~3% in 2016 as efficiencies 2014 2015 flow through Employment Operational Maintenance − defined benefit pension scheme changes Business rates Utilities & Other − workforce initiatives − energy savings Per passenger (£) 2014 2015 Change 15.44 +0.2% Operating costs 15.48 See page 23 for notes, sources and defined terms 11
Driving improvements in service and efficiency Security metrics 2014 2015 Change Departing passengers (m) 36.3 37.0 +1.9% Flow rate (pax/hr) 125 141 +12.8% Service quality (ASQ) 4.04 4.11 +1.7% Cost per passenger ~£5.50 ~£4.80 -12.7% • Significant benefits from: − additional lanes − parallel loading − workforce efficiencies − improved technology − New Fast Track product 12
Operating cash flow covers 95% of total outflows Heathrow (SP) nominal net debt January 2015 – December 2015 13,000 12,750 539 12,500 12,250 (£m) 1,592 12,000 627 46 11,750 398 11,500 11,745 74 11,653 11,250 11,000 Opening Capital Net interest paid Cash flow from Index-linked Dividends/other Other Closing (1 Jan 2015) expenditure on external debt operations accretion restricted (31 Dec 2015) payments See page 23 for notes, sources and defined terms 13
Despite low inflation buffers to triggers and covenants maintained Evolution of gearing ratios 100% 95% HF 2025 Notes covenant 90% HF 2017/2019 Notes covenant 2015 by quarter 85% Class B gearing trigger 85.8% 85.1% 85.4% 84.9% 84.5% 80% 82.4% 81.4% 81.6% 79.4% 75% 79.7% 79.0% 77.7% 78.4% 78.7% 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% 67.5% 66.2% 60% 31 31 31 31 31 31 30 30 31 December December December December December March June September December 2010 2011 2012 2013 2014 2015 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 14
Heathrow financing strengthened in 2015: duration extended, sources of funding diversified and resilience increased • Over £1.2 billion long-term funding raised globally in 2015 − over £800 million raised in two public bonds − long-dated funding raised with £300 million in private placements and £100 million in Heathrow Finance loans − one year extension to maturity of £1.4 billion revolving credit facilities to November 2020 • Funding in 2015 covered over £600 million in Heathrow Funding maturities and a ~£50 million buyback programme of Heathrow Finance notes • ~£400 million raised since the start of 2016 − public markets accessed with successful CHF400 million 8.25 year bond − £125 million Heathrow Finance 7-10 year loan facilities agreed with drawdown in 2017 • Remaining 2016 funding will likely be less than £1 billion • £2.7 billion in liquidity with horizon now extending to January 2018 15
Outlook • 2016 will build on the strong performance of 2015 • Revenue forecast of £2.8 billion (up 1.0%) reflects modest traffic growth and further growth in commercial revenue • Continued cost control is expected to reduce operating costs by ~3% leading to forecast EBITDA for 2016 of £1.67 billion (up 3.0%) 16
Strategic update John Holland-Kaye, CEO
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