Aéroports de Paris SA: Responsiveness of Groupe ADP in a difficult year in 2016, reflected by the growth in consolidated EBITDA and net result

Financial release
22 February 2017
Aéroports de Paris SA
Responsiveness of Groupe ADP in a difficult year in 2016,
reflected by the growth in consolidated EBITDA and net result
Groupe ADP 2016 full year results^[1]

• Traffic of Groupe ADP: +2.0%^[2], to 147.0 million passengers^[3]
• Traffic at Paris Aéroport (+1.8%, to 97.2 million passengers): strong increase of traffic in Paris-Orly (+5.3%, to 31.3 million passenger) and resilience of traffic in Paris-Charles de Gaulle (+0.3%, at 65.9 million passengers);
• Good resistance of consolidated revenue (+0.4%, to €2,947 million), driven notably by the ancillary fees and the increase in fees from bars and restaurants managed by the joint-venture EPIGO;
• EBITDA in slight increase (+0.4%, to €1,195 million), thanks to the good control over operating expenses, favourable and unfavourable non-recurring items offsetting each other;
• Operating income from ordinary activities (including operating activities of associates) down by 16.1%, at €664 million, due notably to the effect of the decrease in the share of profit from operating associates ;
• Net result attributable to the Group (NRAG) up by 1.2%, at €435 million, unfavourable and favourable extraordinary items offsetting each other;
• Application of 60% dividend payout (proposed dividend of €2.64/shares^[4] for 2016);
• Improvement of Groupe ADP's global extra-financial rating by Ethifinance in 2016: +4 points, to 82/100.

Groupe ADP forecasts^[5] for 2017:

• Traffic in Paris Aéroport: assumption of a traffic growth of between +1.7% and +2.2% in 2017 compared to 2016;
• 2017 consolidated EBITDA: EBITDA in upward trend compared to 2016, impacted favourably by planned-to-date extraordinary incomes;
• Upholding of a 60% payout of NRAG for dividend in 2017, with a minimum dividend of €2.64/share.

Augustin de Romanet, Chairman and CEO of Aéroports de Paris, said:
"2016 results showed the responsiveness of Groupe ADP in a difficult context. Traffic in Paris Aéroport exceeded 97 million passengers, growing by 1.8%, driven by the dynamism of European traffic and the recovery of international traffic at the end of the year. Retail activities resisted in 2016, thanks to the good performance of bars and restaurants and other shops, offsetting the decrease in sales per pax of airside shops. EBITDA grew slightly, to €1,195 million, thanks to the control over operating expenses, unfavorable and favourable non-recurring items offsetting each other. Our stake porfolio is optimised, with the sale of our Mexican stake and with the proposed disposal of TAV Construction. The net result attributable to the Group is consequently slightly growing, to €435 million, and allows to propose the shareholder general meeting a dividend that is slightly higher than in 2015, to €2.64/share.
In 2016, Groupe ADP got closer to its passengers customers with the launch of the new brand universe and the loyalty programme, and with the building of the new head offices in Paris-Charles de Gaulle. 2016 was the year in which new services were set in our airports, as the lounge Instant Paris for all passengers, and the year that saw decisive steps for the launch of CDG Express project.
In 2017, on the basis of a traffic growth assumption of between +1.7% and +2.2% compared to 2016, EBITDA is expected in upward trend, favourably impacted by the planned-to-date extraordinary income. In 2017, Groupe ADP will keep a payout of 60% of the net result attributable to the Group and commit in addition to maintain a dividend by share at least equal to that proposed for 2016, that is to say €2.64 per share."

2016 consolidated revenue

Consolidated revenue of Group ADP was up by 0.4%, at €2,947 million in 2016, mainly thanks to:

• The increase in airport fees (+0.5%, to €1,003 million), driven by passenger traffic dynamics (+1.8%, in Paris Aéroport) combined with the increase in tarrifs between 1 April 2015 and 31 March 2016 (+2.4%);
• The progression of the ancillary fees (+5.8%, to €220 million);
• The good performance of the rents from bars and restaurant (+24.6%, to €39 million) and from landside shops (+21.4%, to €18 million);
• And thanks to the growth in Hub One activities (+5.1%, to €144 million) and in Aéroport de Paris Management activities (+28.1%, to €23 million).

This favourable items are nevertheless offset by

• The decrease in revenue from airport safety and security services (-1.4%, to €480 million), related to the defavourable base effect;
• And by the the decrease in rents from airside shops (-4.0%, to €299 million).

Intersegment eliminations^[6] amounted to €320 million in 2016.

2016 consolidated EBITDA

Operating expenses increased by 3.4%, to €1,807 million over 2016, due to the effect of non-recurring expenses (see below) and due to the increase in local taxes that offsets the decrease in staff costs. The negative impact of identified non-recurring expenses amounted to €44 million (including, in particular, the impact of the launch of the new brand universe and the loyalty programme, of tax provisions and provisions for litigation, and of other non-recurring expenses). The operating expenses of parent-company increased by 2.7% in 2016.

Excluding these non-recurring expenses cited above, the growth of operating expenses for the Group (+0.9%) and of the parent-company (stable) was under control.

The distribution of operating expenses is as follows:

• Consumables were up by 3.1%, at €113 million, mainly due to the increase in Hub One activities (see below).
• The costs related to external services increased by 5.1%, to €707 million, notably due to non-recurring expenses linked with the launch of the new brand universe and the loyalty programme for about €10 million, and due to the increase in costs of maintenance and repairs.
• Staff costs were down by 1.9% and stood at €698 million, thanks to the decrease in indirect staff costs. The average number of employees^[7] stood at 8,947 in 2016, down by 0.7%^[8].
• Taxes other than income taxes were up 10.2%, at €262 million, mainly due to higher local taxes.
• Other operating expenses were up 76.9%, at €27 million, mainly due to a negative base effect linked to a compensation of €4 million received in 2015.

Other income and expenses stood at €56 million, due to favourable non-recurring items, mainly identified during the first half of 2016, for around €38 million, consisting of other products linked to resolution of old litigations and reversals of provisions and of depreciation of receivables.

As a consequence, EBITDA increased slightly (+0.4%, to €1,195 million), thanks to the control over the operating expenses, the favourable and unfavourable non-recurring items offsetting each other.

The gross margin rate^[9] for 2016 is stable compared to 2015, at 40.6%.

2016 net result attributable to the Group

Amortisation and depreciation increased (+4.7%, to €479 million) due to the investment programme, larger in 2016 than in 2015.

Operating income from ordinary activities (including operating activities of associates) was down 16.1%, at €664 million, penalised by the decrease in the share of profit from operating associates (-€52 million compared to €58 million in 2015)after adjustments due to participations.

Operating income is decreasing by only 12.0%, to €696 million, thanks to the capital gain of €31 million^[10] linked to the disposal of the Parisian head offices.

The net finance result was a loss of €115 million, up by 8.7% mainly due to the unfavourable foreign exchange rates for international business.

The net debt/equity ratio decreased slightly and stood at 63% as at 31 December 2016 compared to 64% at the end of 2015^[11]. Groupe ADP net debt was up and stood at €2,709 million as at 31 December 2016, compared to €2,627 million at the end of 2015^[12].

The share of profit of non-operating associates stood at €59 million, due notably to the completion of the sale of Groupe ADP's stake in Mexican airports operator OMA^[13], occurring in October 2016, which generated a capital gain of €58 million before tax (including the share of profit of associates until the date of transfer, for €5 million).

The income tax expense was down by 21.9%, at €202 million in 2016, due, on the one hand to the decrease in theorical or "nominal" tax rate from 38% to 34.43%, for €25 million, and on the other hand, due to the impact on the deferred taxes of the lowering of the income tax rate in 2020 from 34.43% to 28.92%, that generated an income of €29 million in 2016.

The effective tax rate stood at 29.44% as at 31 December 2016, and at 33.7% excluding impact of the revaluation of deferred taxes.

Taking into account all these items, the net result attributable to the Group increased slightly by 1.2%, to €435 million.

Analysis by segment

Aviation

In 2016, aviation segment revenue increased slightly by 0.5% to €1,743 million.

Revenue from airport fees (passenger fees, landing fees and aircraft parking fees) was up slightly by 0.5%, at €1,003 million in 2016, benefiting from the growth in passenger traffic (+1.8%) and the increase in tariffs  between 1 April 2015 and 31 March 2016 (+2.4%).

Ancillary fees are up by 5.8%, at €220 million, mainly thanks to the impact of the implementation, on 1 April 2016, of the fee for the provision of the sorting system for luggage in transfer in Paris-Charles de Gaulle airport (+23.2%, to €43 million) and thanks to the growth in revenue from the fee related to the provision of de-icing facilities (+19.6%, to €19 million).

Revenue from airport safety and security services are down by 1.4%, at €480 million, due to a negative base effect.

Other income, which mostly consists in re-invoicing the French Air Navigation Services Division and leasing associated with the use of terminals, decreased by 5.0% to €40 million.

EBITDA of the aviation segment was up, by 4.1% at €488 million. The gross margin rate increased by 1.0 point, and stood at 28.0%.

Amortisation and depreciation were up (4.9%), at €302 million due to the investment programme, larger in 2016 than in 2015.

As a consequence, the operating income from ordinary activities (including operating activities of associates) was up by 3.0%, at €186 million, in 2016.

Retail and services

In 2016, revenue from retail and services was up by 0.7%, to €941 million.

The revenue from retail (rents received from airside and landside shops, bars and restaurants, banking and foreign exchange activities, car rental companies and revenue from advertising) was almost stable (-0.5%) in 2016, at €449 million.

• In this amount, the rents from airside shops stood at €299 million, down by 4.0%, as a result of the decrease in sales per passenger^[14] (-8.0%, at €18.2),
• These effects are partially offset by the good performance of fees from bars and restaurants, increasing by 24.6% (to €39 million), following the rise in rents related to the takeover of some shops by the joint-venture EPIGO in February 2016, and thanks to the progression of activities of landside shops, up by 21.4% (at €18 million).

Revenue from car parks decreased slightly by 0.7% and stood at €175 million, mainly due to lower hourly earnings.

Revenue from industrial services (the supply of electricity and water) was almost stable (+0.6%), at €133 million.

Rental revenue (leasing of space within terminals) increased by 3.6%, to €146 million.

Other revenue saw an increase of 11.8%, to €38 million.

Media Aéroports de Paris² saw an increase of 4.0% of its revenue, at €54 million, thanks in particular to the positive impact of the Euro football cup. Its EBITDA was up by 12.3%, at €8 million and its net result by 9.7%, at €2 million.

EBITDA decreased by 2.3%, to €527 million. The gross margin rate decreased by 1.7 points, to 56.0%.

The share of profit from operating associates^[15] (Société de Distribution Aéroportuaire, RELAY@ADP and EPIGO) was down by €7 million, to €1 million.

As a consequence, operating income from ordinary activities (including operating activities of associates) decreased by 7.1%, to €409 million.

Real estate

In 2016, real estate revenue decreased slightly, by 0.8%, to €263 million.

External revenue^[16] (€211 million) was down (-1.2%), due mainly to the negative effect of indexing revenue to the cost of construction index (ICC) on 1 January 2016^[17].

Internal revenue was up slightly (+0.9%), at €52 million.

EBITDA was down 9.0%, at €149 million, mainly due to the increase in local taxes. The gross margin rate stood at 56.7%, a decrease of 5.2 points.

Amortisation and depreciation decreased by 7.4%, to €43 million thanks to the review of some assets' lifespan.

The share of profit from operating associates was a loss of €2 million, compared to a loss of €13 million in 2015, related to the depreciation of studies linked to office projects for Coeur d'Orly in 2015.

As a consequence, operating income from ordinary activities (including operating activities of associates) was stable in 2016 compared to 2015, at €105 million.

International and airports developments

In 2016, revenue from International and airport developments increased by 1.0%, to €97 million driven by an increased activity of Aéroport de Paris Management. EBITDA stood at €3 million, up by €11 million in 2016 compared to 2015 which was penalised by provisions from ADP Ingénierie.

ADP Ingénierie's revenue was down 5.1%, at €75 million, due to a slowdown in activity for all the branches. EBITDA and operating income from ordinary activities (including operating activities of associates) posted a gain of €4 million (compared to losses of €5 million in 2015). At the end of December, the backlog for the 2017-2019 period amounted to €57 million.

Aéroports de Paris Management saw its revenue increase by 28.1%, to €23 million, mainly thanks to the Zagred contract and following the takeover of the concession of Santiago de Chile airport. EBITDA was null (stable compared to 2015) and its operating income from ordinary activities (including operating activities of associates) was a profit of €5 million (compared to €1 million in 2015).

Share of profit from operating associates (TAV Airports, TAV Construction and Schiphol) after adjustments related to the acquisition of holdings, was a loss of €51 million in 2016, compared to a gain of €63 million in 2015.

• TAV Airports Group achieved an increase in revenue^[18] of 1%, to €1,092 million. EBITDA was down 9%, at €445 million. The net result attributable to the Group decreased by 39%, to €127 million, following the negative impact of the terrorist attacks in Turkey and the attempt of coup in 2016. The share of profit from TAV Airports stood at €48 million before adjustments related to acquisition of holding, and at -€1 million after adjustments.
• The increase in TAV Construction's exposure to non-airport building projects have led Groupe ADP's management to engage, at the end of December 2016, the sale of its 49%-stake in the holding that owns 100% of TAV Construction. As a consequence, Groupe ADP's stake in TAV Construction has been impaired by €45 million and has been reclassified under "Assets held for sale" as at 31 December 2016. The share of profit from TAV Construction was a loss of €67 million after adjustments related to acquisition of holding.
• Schiphol's revenue was almost stable, at €1,435 million. The net result attributable to the group stood at €306 million, down by 18 % compared to 2015 due to an unfavourable base effect. The share of profit from Schiphol after adjustments related to acquisition of holding stood at €12 million, down by €7 million compared to 2015.

Operating income from ordinary activities (including operating activities of associates) for International and airport developments was consequently a loss of €49 million, compared to a gain of €54 million in 2015.

Other activities

In 2016, revenue from other activities was up by 3.6% at €223 million. EBITDA was up 4.7%, at €29 million.

In 2016, Hub One saw its revenue increase by 5.1%, to €144 million, driven by the increased activity of the Mobility division. EBITDA amounted to €22 million, up by 2.5%. The operating income from ordinary activities increased by 17.7%, to €8 million.

Revenue generated by Hub Safe was slightly up by 0.8%, at €78 million. EBITDA stood at €4 million, up by 9.9% compared to 2015. The operating income from ordinary activities (including operating activities of associates) increased by 8.0%, to €4 million.

The operating income from ordinary activities (including operating activities of associates) of the segment was up strongly by 15.1%, at €14 million.

Change in passenger traffic

• Group stake-weighted traffic^[19][20]:

• At Paris Aéroport

Paris Aéroport handled a total of 97.2 million passengers in 2016, an increase of 1.8% compared to the previous year. Paris-Charles de Gaulle Airport welcomed 65.9 million passengers (+0.3%) and Paris-Orly Airport 31.3 million (+5.3%). Traffic increased by 1.5% over the first half of the year, and by 2.1% over the second half.

Geographical breakdown is as follows: 

• International traffic (excluding Europe) was up slightly (+0.4%), with an increase in the following destinations: the French Overseas Territories (+4.8%), the Middle East (+3.6%), Latin America (+2.0%), Africa (+1.9%) and North America (+0.1%). Only Asia-Pacific was down (-6.7%) due to the decrease in traffic with Japan and Malaysia;
• European traffic (excluding France) was up (+3.4%), driven by the dynamism of low-cost carriers; 
• Traffic within France was up (+1.1%);

The number of connecting passengers rose by 1.2%. The connecting rate stood at 23.9%, down by 0.1 points.

Air traffic movements (707,403) were up by 1.0%.

The connecting rate was up 0.9points, at 83.8%.

Freight and postal activity increased by 1.2%, with 2,243,160 tonnes transported.

Payment of an interim dividend

The Board of Directors of Aéroports de Paris has decided to implement a policy for the payment in cash of an interim dividend up until the financial year ending on 31 December 2020. For the 2016 financial year, this interim dividend amounts to €69 million, i.e. €0.70 per share. The ex-interim dividend date was 7 December 2016 and the interim dividend for 2016 was paid out on 9 December 2016.

Proposed disposal of TAV Construction

The increase in TAV Construction's exposure to non-airport building projects have led Groupe ADP's management to engage, at the end of December 2016, the sale of its 49%-stake in the holding company (TAV Yatirim Holding - TAV Investment) that owns 100% of TAV Construction.

As at 31 December 2016, this sale was considered as highly probable and should occur in 2017, taking into account the progress of the negotiations process with potential buyers. As a consequence, Groupe ADP's stake in TAV Construction has been impaired by €45 million and has been reclassified under "Assets held for sale" as at 31 December 2016.

January 2017 traffic figures

In January 2017, Paris Aéroport welcomed 7.3 million passengers, an increase of 7.2% compared to January 2016. 5.0 million passengers travelled through Paris-Charles de Gaulle (+6.1%) and 2.3 million at Paris-Orly (+9.6%).

Tariffs 2017 approval process completed

On 19 January 2017, Aéroports de Paris SA has taken note of the decision of the Autorité de Supervision Indépendante (ASI, Independent Supervisory Authority) published on 19 January 2017 not to approve the proposed aviation fee tariffs applicable from 1 April 2017. The refusal of approval was primarily motivated by a technical consideration in the fee for the provision of the computerised check-in and boarding system (CREWS).

The regulatory provisions lay down that Aéroports de Paris SA should present a new proposal for 2017 tariffs within one month of the decision of the ASI, and that the latter is invited to issue its decision within 15 days of the new notification of tariffs.

As a consequence, Aéroports de Paris SA proposed a modified tariffs grid (see below) that have been approved by the ASI on 20 February 2017.

Tariffs

As of 1 April 2017, airport and ancillary fees (excluding fees for disabled and reduced-mobility passengers) will increase by 1.51%, except for the CREWS fee that will decrease significantly. Globally, the evolution will amount to +0.97% in average by 1 April 2017.

Dividend distribution policy

During its meeting on 22 February 2017, the Board of Directors approved the social and consolidated financial statements for the year ended 31 December 2016. The Board of Directors decided to propose a dividend payment of €2.64 per share for 2016, reduced by the interim dividend for 2016 of €0.70/share, paid out on 9 December 2016, at the next Annual Shareholders General Meeting, to be held on 11 May 2017. Subject to the approval of the Annual General Meeting, the ex-dividend date would be on 7 June 2017, and payment would be made on 9 June 2017. This dividend corresponds to a payout ratio of 60% of the 2016 net income attributable to the Group. As a reminder, the payout ratio was increased from 50% to 60% in 2013, for the 2012 financial year dividends.

Groupe ADP's 2017 forecasts

The forecasts for 2017 were established using the same accounting methods as those used to prepare the consolidated accounts at 31 December 2016. They are based on assumptions made by the Group. The main assumptions are as follows:

• growth in passenger traffic of between 1.7% and 2.2% in 2017 compared to 2016;
• the absence of any significant events with the potential to decrease passenger traffic growth over the long term;
• the progression of airport fee rates at 1 April 2017 as stated in the 2016-2020 Economic Regulation Agreement signed with the government in August 2015;
• meeting the commitments undertaken in the Economic Regulation Agreement (available on www.groupeadp.fr);
• a minimum capital gain linked to buildings of the cargo hub;
• no significant change in the scope of consolidation.

The 2017 forecasts presented above are based on data, assumptions and estimates that the Group management believes to be reasonable.

The data, hypotheses and estimates summarised above are liable to change or be modified due to uncertainties linked in particular to competition and the economic, financial, regulatory and climatic environment. Moreover, the occurrence of certain risks described in Chapter 4 "Risks linked to the activities of Aéroports de Paris" of the 2015 registration document, may have an impact on the Group's activities and its ability to realise its objectives. In addition, the realisation of its objectives is based on the assumption that Aéroports de Paris successfully implements its commercial strategy described in the "Strategy" paragraph of Chapter 6 of the 2015 registration document. Aéroports de Paris therefore gives no undertaking, nor does it provide any guarantee, with regard to attainment of the objectives and guidance described above in this chapter.

• Thursday 23 February 2017: analysts meeting at 11:00 am Paris time. The presentation is available on our website: finance.groupeadp.fr.
  • Webcast on our website: finance.groupeadp.fr.
  • Conference call (code 5832816):
    • From France : 01 76 77 22 57
    • From international: +44 (0)33 0336 9411
• Next traffic figures publication:
  • Tuesday 14 March 2017: February 2017 traffic figures
• Next financial results publication:
  • Wednesday 26 April 2017: Q1 2017 revenue
• Annual Shareholders General Meetings
  • Thursday 11 May 2017

Investor Relations

Aurélie Cohen: +33 1 74 25 70 64 - invest@adp.fr

Press

Elise Hermant: +33 1 43 35 70 70

Website: www.groupeadp.fr

The financial information presented within this press release comes from Aéroports de Paris' consolidated financial statements. Audit procedures have been carried out and the audit report relating to the certification of Aéroports de Paris consolidated financial statements at 31 December 2016 is in the process of being issued.

Consolidated financial statements at 31 December 2016 and the related report are available on the Group website (www.groupeadp.fr) in the section "Group / Finance / AMF Information".

Forward looking statements

This press release does not constitute an offer of, or an invitation by or on behalf of Aéroports de Paris to subscribe or purchase financial securities within the United States or in any other country. Forward-looking disclosures are included in this press release. These forward-looking disclosures are based on data, assumptions and estimates deemed reasonable by Aéroports de Paris. They include in particular information relating to the financial situation, results and activity of Aéroports de Paris. These data, assumptions and estimates are subject to risks (such as those described within the reference document filed with the French financial markets authority on 31 March 2016 under number D. 16-0248 and uncertainties, many of which are out of the control of Aéroports de Paris and cannot be easily predicted. They may lead to results that are substantially different from those forecasts or suggested within these disclosures.

Investor Relations: Aurélie Cohen, Head of Investor Relations +33 1 74 25 70 64 - invest@adp.fr
Press contact: Elise Hermant, Media and Reputation Department Manager +33 1 43 35 70 70
Groupe ADP builds, develops and manages airports, including Paris-Charles de Gaulle, Paris-Orly and Paris-Le Bourget. In 2016, Paris Aéroport handled more than 97 million passengers and 2.2 million metric tonnes of freight and mail at Paris-Charles de Gaulle and Paris-Orly, and more than 42 million passengers at airports abroad through its subsidiary ADP Management. Boasting an exceptional geographic location and a major catchment area, the Group is pursuing its strategy of adapting and modernising its terminal facilities and upgrading quality of services; the Group also intends to develop its retail and real estate businesses.
In 2016, Group revenue stood at €2,947 million and net income at €435 million.
Registered office: 291, boulevard Raspail, 75014 PARIS
Aéroports de Paris is a public limited company (Société Anonyme) with share capital of €296,881,806.
Registered in the Paris Trade and Company Register under no. 552 016 628 RCS Paris
groupeadp.fr

Restatement of 2015 financial statements for comparison with 2016^[21]

As a reminder, the change of the allocation keys for the regulated assets base, as proposed by ADP in January 2015^[22] and confirmed by the Airport Consultative Committee (Commission Consultative Aéroportuaire), has an impact on the following segments' EBITDA and operating income from ordinary activities, including operating activities of associates for Aviation, Retail and services, and Real Estate segments as of 1^st January 2016. The 2016 full-year accounts take into account this change in allocation keys.

In order to facilitate the reading and understanding of the Group's performance in 2016 compared to 2015, restated financial statements for 2015^[23]  have been prepared and are as follows:

 
Restated consolidated balance sheet as at 31 December 2015

2015 Restated consolidated statement of cash flows

* Restated figures

*end*