GATWICK AIRPORT LIMITED · 3/31/2013 · New airlines attracted to Gatwick, in competition with...

RESULTS FOR THE YEAR ENDED 31 MARCH 2013

GATWICK AIRPORT LIMITED

OPERATIONAL AND FINANCIAL PERFORMANCE

Underlying traffic growth from existing carriers, although some losses too, reflecting real competition in the market

Additional traffic to growth markets increasing London’s connectivity

Investment programme delivering new, improved and innovative facilities

Continuing trend of improvement in operational performance is delivering record levels of customer service

Robust financial performance reflecting passenger growth, increased income per passenger and careful cost management

+ 1.2%

TRAFFIC GROWTH

£(29)m

LOSS FOR THE YEAR

+ 2.5%

EBITDA GROWTH

£227m

CAPITAL EXPENDITURE

£2,392m RAB*

£1,472m

SENIOR NET DEBT*

* All figures are for the year ended 31 March 2013 except RAB, Senior Net Debt and Senior RAR which are shown as at 31 March 2013

HIGHLIGHTS

2

0.62x

SENIOR RAR *

OUR AMBITION & STRATEGY, CONSISTENTLY APPLIED

RECORD SERVICE AND SATISFACTION LEVELS

Record 100% service quality Improved on-‐time departures in summer

Security queuing beats targets

4

55%

60%

65%

70%

75%

07/08 08/09 09/10 10/11 11/12 12/13

Peak summer is June/July/August

50%

60%

70%

80%

90%

100%

08/09 09/10 10/11 11/12 12/13

% Measures Failed % Measures Passed

75%

80%

85%

90%

95%

100%

08/09 09/10 10/11 11/12 12/13

North Terminal Average <5 min South Terminal Average <5 min Target

change of ownership

Passenger ratings at record high

3.9

4.0

4.1

4.2

4.3

Overall QSM Target

4.06 4.07

4.08 4.16

4.23

Average

08/09 09/10 10/11 11/12 12/13

GROWTH FROM INCUMBENT AND NEW AIRLINES

Traffic growth in 2012/13 from existing carriers

European market continues to be Gatwick’s largest and grew by 1.1%

easyJet new route to Moscow; over 15,000 passengers per month

now flying this route

Turkish Airlines flying twice daily to Istanbul

Norwegian based 2 aircraft at Gatwick, rising to 3 in Winter 2013

New airlines attracted to Gatwick, in competition with other

London airports

Garuda 6 per week (from November 2013) to Indonesia – the UK’s only

direct connection

Vueling twice daily service to Barcelona

Air Arabia 3 per week to North Africa

Icelandair 2 per week to Reykjavik (3 in Summer 2013)

However, reflecting the real competition in the market, some

airlines reduced services or ceased to operate at Gatwick

Korean Air consolidated its services to Heathrow

Ryanair withdrew all non-‐Irish routes

Delta withdrew operations from Gatwick

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DELIVERING AIRPORT TRANSFORMATION PROGRAMME

DELIVERY OF INVESTMENT PROGRAMME ON SCHEDULE

£227m invested in 2012/13

£210m planned investment in 2013/14

£1,172m total investment in Q5/Q5+1

PROJECTS COMPLETED DURING 2012/13

Main runway & taxiways resurfacing (£50m)

ST IDL Phase 1 and ‘Walk Through’ WDF store (£43m)

New baggage systems in both terminals (£90m)

A380 Pier Service (£6m)

PROJECTS COMPLETING IN 2013/14

Pier 5 Phase 1 reconfiguration (£45m)

South Terminal IDL Phase 2 (£21m)

New crew reporting facility (£20m)

‘Beyond Q5’ programme development continues (up to £970m over 5 years)

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LARGEST RETAIL DEVELOPMENT IN GATWICK’S HISTORY

SOUTH TERMINAL

11 new stores during 2012/13 and another 11 by December 2013 creating 17% increase in retail space

This includes a large Harrods department store, Ernest Jones and the first airport store for Aspinal of London

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NORTH TERMINAL

7 new stores during 2012/13 and another 8 by October 2013

Further expansion of NT IDL will include a new WDF walk-‐through store. This is planned to deliver improvements in both passenger satisfaction and increases in commercial revenue, as seen in the ST store

FEWER, BUT LARGER AND FULLER PLANES…

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…results in higher capacity from Gatwick’s most limiting resource – a single runway

2011/12 2012/13 Change %

ATMs (k) 242.1 238.3 (1.6)%

Seats per ATM 172.0 174.0 1.1%

Load factors 81.2% 82.6% 1.4% pts

Passengers (m) 33.8 34.2 1.2%

CONTINUED TREND OF STEADY TRAFFIC GROWTH

Recent growth -‐ 2012/13 has slowed +1.2% in 2012/13 +3.0% underlying in 2011/12

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Latest traffic forecasts (submission to CAA) full year 2013/14 is 34.4m passengers growing to 37.0m passengers in 2018/19

GATWICK HEATHROW STANSTED LUTON

TRAFFIC GROWTH IN A COMPETITIVE MARKET

8.5% 7.6%

-‐0.4%

11.9%

4.7% 4.1%

-‐5.3%

3.8%

1.2%

-‐0.9%

-‐4.4%

1.3% 1.3% 1.8% 1.8% 1.0%

-‐5.5%

-‐3.5%

-‐1.5%

0.5%

2.5%

4.5%

6.5%

8.5%

10.5%

12.5%

14.5%

6 mths to Sep11 6 mths to Mar12 6 mths to Sep12 6 mths to Mar13

Targeted business development efforts have resulted in increased volumes despite strong economic headwinds

Market remains competitive with growth opportunities being distributed across rival airports

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SOLID FINANCIAL PERFORMANCE DELIVERING EBITDA TARGET

£m YEAR ENDED 31 MARCH 2012

YEAR ENDED 31 MARCH 2013 CHANGE

Passengers (m) 33.8 34.2 1.2%

Turnover 517.4 538.9 4.2%

Operating costs (excl depreciation and amortisation) (295.9) (311.8) 5.4%

EBITDA (pre-‐exceptionals) 221.5 227.1 2.5%

Depreciation (105.3) (110.7) 5.1%

Interest and other charges (164.8) (144.7) (12.2)%

Loss for the financial year (45.7) (29.1) (36.3)%

Capital expenditure 239.2 226.7 (5.2)%

Net debt* 1,266.5 1,403.5 10.8%

RAB* 2,200.9 2,391.6 8.7% *Net debt and RAB are shown as at 31 March 2012 and 2013

Returns on investment below expectations that were set at time of last regulatory review, largely reflecting lower traffic growth than forecast and ongoing investment commitments

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4.2% INCREASE IN TURNOVER REFLECTING TRAFFIC GROWTH AND HIGHER SPEND PER PASSENGER

Turnover analysis

TOTAL £517.4m £538.9m +4.2%

Aeronautical revenues increased by 4.2%, notwithstanding a reduction of £(15.6)m related to Capital Programme trigger payments

Net retail income per passenger increased by 0.8% to £3.57 despite 2.5% reduction in retail space and ongoing disruption

Flagship WDF store opened in July 2012 Innovative rebranding of WHSmith to London News Company

Gross car parking revenue per passenger increased by 5.7% to £1.70

New premium products, improved website and online marketing providing some offset from highly competitive pricing in core markets

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+4.2%

+1.9%

+7.0%

+5.6% 68.0 71.8

54.3 58.1

120.9 123.2

274.2 285.8

2012 2013

Aeronautical Retail Car parking Other income

5.4% INCREASE IN COSTS TO SUPPORT SERVICE LEVELS AND REGULATORY WORK

Staff costs increase driven by Increase in security staff to support improved service levels Final year of 2 year pay deal for frontline staff Pension costs up £2.5m

General expenses reflects Increased consultancy cost to support Q6 regulatory work Increased NATS costs Additional car parks costs to support revenue growth

Utilities costs fell as ex-‐BAA contract ends

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Operating costs analysis

TOTAL £295.9m £311.8m +5.4%

Note: operating costs excluding depreciation and amortisation

+6.2%

+12.5%

-‐2.1%

-‐1.3% 37.6 37.1

57.0 55.8

81.7 91.9

119.6 127.0

2012 2013

Staff Costs (net) General + Other ExpensesRates + Utilities Maintenance + IT

NET DEBT 31 MARCH 2012 TO 31 MARCH 2013

14

(244.8)

234.7

68.8

75.0

3.3

1,266.5

1,403.5

1,100.0

1,150.0

1,200.0

1,250.0

1,300.0

1,350.0

1,400.0

1,450.0

1,500.0

1,550.0

1,600.0

Opening Capitalexpenditure

Net interest Cash flow fromops

Restrictedpayment

Other Closing

£m

Note: net interest includes £8.6m capitalised interest

FUNDING PLATFORM ESTABLISHED – BANK REFINANCING WITHIN NEXT YEAR

FINANCIAL RATIO

YEAR ENDED 31 MARCH 2012

YEAR ENDED 31 MARCH 2013

Cash flow (per covenant) £157.4m £197.9m Total interest (net) £48.1m £68.8m Senior ICR 3.28x 2.88x Trigger <1.50x <1.50x Senior Net Debt (per covenant) £1,325.8m £1,472.1m RAB £2,200.9m £2,391.6m Senior RAR 0.60x 0.62x Trigger >0.70x >0.70x

DEBT MATURITY PROFILE REDUCES REFINANCING RISK

STRONG LIQUIDITY POSITION TO FUND REMAINING Q5+1 INVESTMENT PROGRAMME OF £210m :

£300m 2041/43 Class A Bond




£228m Dec-‐14 Bank Facilities

Annual cash flow from operations £245m for the year ended 31 March 2013

Undrawn bank commitments £228m as at 31 March 2013

Restricted payment proposed £50m July 2013

15

REGULATORY UPDATE

JUNE 2013 PROPOSAL FOR CONTRACTS & COMMITMENTS

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CAA response in April to Gatwick’s January proposal:

“the CAA would like to implement a flexible regulatory approach that is based upon price and service quality commitments” “underpinned by a licence from the CAA” “airport has not yet made acceptable proposals”

Gatwick has submitted a revised proposal to the CAA, with a framework of Contracts & Commitments as an alternative to RAB based regulation

7 years Increases in average aeronautical yield of RPI +1.5% p.a. (including contract discounts) Service standards set at current levels, but with greater weighting to passenger facing measures

Capital investment programme unchanged, but flexibility in delivery subject to minimum annual investment

THE AIRPORTS COMMISSION: TIMELINE

28 Feb 2013

Notification of intent

15 Mar 2013

Criteria suggestion

15 Mar 2013

Demand forecast

17 May 2013

Short, medium

term measures

17 May 2013

Climate change

19 Apr 2013

Connectivity

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Operating Models

11 Jul

2013

Outline proposals

19 Jul

2013

Draft proposal

Summer

2014

Airports Commission Published interim report

Dec

2013

Final proposal

Quarter 1

2015

Summer

2015

Airports Commission

Final report

Despite the tough economic conditions, particularly in key European markets, traffic growth has continued through incumbent and new airlines and routes, and at a level above other London airports. Modest growth is expected to continue throughout 2013/14 Robust financial performance in line with expectations, reflecting passenger growth, new retail and car parking products delivering increased income per passenger, and careful cost management All service quality measures achieved for every month of this financial year and significant improvements in customer survey scores and on-‐time performance over the summer Investment programme on track, delivering new, improved and innovative facilities Latest proposals submitted to CAA; awaiting outcome of latest regulatory review

Continuing to make submissions to the Airports Commission supporting Gatwick’s unique opportunities in being able to increase airport capacity in the UK

CONCLUSION

Full details of today’s announcement at: gatwickairport.com/investor

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DISCLAIMER

This material contains certain tables and other statistical analyses (the “Statistical Information”) which have been prepared in reliance on publicly available information and may be subject to rounding. Numerous assumptions were used in preparing the Statistical Information, which may or may not be reflected herein. Actual events may differ from those assumed and changes to any assumptions may have a material impact on the position or results shown by the Statistical Information. As such, no assurance can be given as to the Statistical Information’s accuracy, appropriateness or completeness in any particular context; nor as to whether the Statistical Information and/or the assumptions upon which it is based reflect present market conditions or future market performance. The Statistical Information should not be construed as either projections or predictions nor should any information herein be relied upon as legal, tax, financial or accounting advice. Gatwick Airport Limited (“GAL”) does not make any representation or warranty as to the accuracy or completeness of the Statistical Information. These materials contain statements that are not purely historical in nature, but are “forward-‐looking statements”. These include, among other things, projections, forecasts, estimates of income, yield and return, and future performance targets. These forward-‐looking statements are based upon certain assumptions, not all of which are stated. Future events are difficult to predict and are beyond GAL’s control. Actual future events may differ from those assumed. All forward-‐looking statements are based on information available on the date hereof and neither GAL nor any of its affiliates or advisers assumes any duty to update any forward-‐looking statements. Accordingly, there can be no assurance that estimated returns or projections will be realised, that forward-‐looking statements will materialise or that actual returns or results will not be materially lower that those presented. This material should not be construed as an offer or solicitation to buy or sell any securities, or any interest in any securities, and nothing herein should be construed as a recommendation or advice to invest in any securities. This document has been sent to you in electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently neither GAL nor any person who controls it (nor any director, officer, employee not agent of it or affiliate or adviser of such person) accepts any liability or responsibility whatsoever in respect of the difference between the document sent to you in electronic format and the hard copy version available to you upon request from GAL. Any reference to “GAL” will include any of its affiliated associated companies and their respective directors, representatives or employees and/or any persons connected with them.

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