Aena Sme S.A Unsp/Adr

Thank you very much. Good morning to everybody and welcome to our full year 2021 results presentation. As in other occasions, the presentation will be held by AENA Chairman and CEO, Mr. Mauricio Lucena, and by the CFO, Mr. Jose Leo. We will not go through all the presentations, so Mr. Lucena will start, then we'll go Mr. Leo, and we will then move into the Q&A session. Now, without further ado, I give the floor to Mr. Lucena. Thank you.

Thank you, Emilio. Hello, everybody. I'm really pleased to present AENA's financial results and to share with you other reflections concerning activity and expectations. I will start with slide four, which I think that it pretty well summarizes the evolution of activity and the most relevant economic and financial trends. Of course, I'm referring to 2021. If I start with passenger traffic, as you can see, AENA group passenger traffic increased to 136.3 million passengers, implying a recovery of more than 44% of the traffic in 2019, which, as you know, is, I would say, everywhere the point of reference before the pandemic. Concerning the traffic in Spain, where we have our main network of airports, traffic in 2021 in Spain was equivalent to 43.6% of the traffic in 2019. In London, concerning the Luton Airport, we registered a recovery of only 25.5% of the traffic in 2019. You know that in the United Kingdom, I would say that... movement restrictions have been harder than in other European countries. And finally, in Brazil, the recovery was a good one. In particular, 85.2% of the traffic in 2019. And actually, in the last months of 2021, traffic in Brazil was higher than the traffic equivalent to the same months in 2019. This means that the total consolidated revenue increased in 2021 to almost 2.4 billion euros. EBITDA stood at almost 650 million euros, which reflects a decrease of 9.8% compared to 2020. So here, as you can see, we have an asymmetry in the sense that Traffic has been higher than the traffic in 2020, but financial results have been worse, and you know perfectly well that this is because of the marks and the approval in the Spanish Congress of a final provision that has really had a negative impact in AENA's accounts. In any case, EBITDA margin closed at almost 27% in 2021, which was a little bit lower than EBITDA margin in 2020. As I said, these figures have been clearly affected by the accounting of the MARS due to the application of the seventh final provision. We will call it DF7 and additionally impairments for a net amount of almost 100 million euros. Consolidated net result came to minus 60 million euros, and if we exclude the effect of the impairments, the consolidated net profit would be a positive one, in particular 14.6 million euros. On the other hand, the operating cash flow ended with an increase of almost 92%, up to 280.5 million euros, and I would like to highlight that the cash flow generation in the last quarter of 2021 was a very good one, of 260 million euros. The consolidated net financial debt of the AENA Group has increased to 7.4 billion euros compared to 7 billion euros at the end of 2020. This increase combined with a lower EBITDA has led to an increase in the net financial debt to EBITDA ratio for the consolidated group to 11.5 times. But you know that it's important to underline that the financial ratios included in the contracts with financial covenants are linked to AENA SME. It means not to the consolidated group. In other words, the net debt EBITDA ratio of AENA SME has closed at 10 times compared to 8.1 times in 2020. I would like to make further comments and I will now move to traffic trends. We've witnessed a very good progress of the vaccination rate processes I would say across Europe and this along with the progressive lifting of the restrictions which I think that will continue because I guess now that governments try to let's say, balance the trade-off between health and economy. And I think now that the economic recovery, it's being considered more important than in the first stages of the pandemic. So this clearly leads us to be sanguine about the traffic recovery. We point, as you know, we point to 68% traffic recovery in the current year, in 2022. But, of course, we are very prudent because our forecast doesn't mean that we can be 100% confident that this is going to happen. Because we are, and I would say, I'm saying this very naturally, we are entirely in the hands of the evolution of the pandemic. But again, I'm more confident and more optimistic at present than I was in other stages of the pandemic because, as I said, the combination of the evolution of the pandemic, the intrinsic evolution and COVID, the sector public decisions, I think that make a good or at least a better future scenario than in the past. And I can confirm this with also the expectations of the airlines. You know that we've had a very good signal concerning the airlines. they have put in the market for the summer season 2022 more capacity than in 2019. Of course, I'm now referring to the summer season. And this is a capacity that they put in the market. Then we'll see how this materializes. But if airlines put this capacity in the market, it's because they have good signs potentially concerning the concerning the demand of the market that make them as I said at the beginning sanguine about the evolution of the traffic and I would say that what they detect in the market concerning the behavior of passengers which I think it's really good, and people, I think that they are now clearly happy with the expectations of a good summer season. Okay, you know that in this same direction, Aina has approved, the application during the summer season of the current year of an incentive for passenger traffic recovery. This is, I would say, a very different incentive scheme compared to... the schemes, the incentive schemes that we approved in the last two years because the capacity that the airlines have put in the market is a lot higher than in the past, than in past stages of the pandemic. So now our new incentive scheme, very, in short, What we are trying is that when airlines exceed what they have conveyed to us, the capacity they have conveyed to us concerning particular issues, threshold, we will incentivize them with respect to the seat capacity that they scheduled at the end of January. In other words, At the end of January, airlines conveyed to AENA the capacity that they expect for the summer, and we will give them incentives if they overcome concrete thresholds with respect, in this case, the seats available. within the planes. So, in other words, we will not support them with more planes, but we will support them with more passengers if they are able to bring about more passengers to the planes that they have now scheduled. I now move to regulation. You know that we've been through a tough period in regulation because in the last months we've had good news. Dollar 2 has been approved. I think that this clearly conveys a signal to the market of stability. Now airlines know very well what our airport charges will be, so we are confident that this will help airlines to better structure their forecasts and their seats for the airplanes. for the planes. And on the other hand, last week, you know that the CNMC issued its resolution on the supervision of AENA's airport charges for You know that in this area we have a little bit of complexity because one thing is the IMAP, another thing is the IMAP. The difference between the IMAP and the IMAP has to do with technical adjustments, but these technical adjustments could now be very significant because of the factor K and because of the very, let's say, singular evolution of the traffic in the worst months of the pandemic. The resolution of the CNMC accepts the proposal that AENA conveyed to this institution, which implies that the IMAG will be established at 9.95 euros per passenger. This means a reduction of 3.17% compared to the 2021 IMAG. And you know at the same time that IATA Spain and Ryanair have filled two appeals against this resolution. In particular, they consider that we should not include a part of the COVID expenses, the COVID costs concerning the first months or until September of 2021. We, and I think this is almost, I just suppose this is also the opinion of the CNMC, we consider that... it's a value to have a path of the charges that is not very bumpy. So it's better to have in 2021 decrease in charges because of factor K. But if we had not included more COVID costs, this decrease, I think, would have been a worse one and again we would have faced a higher increase in 2023 which if you can avoid because you value as I said the stability of the path of the future path of chargers I think it makes complete sense In any case, I consider that the charges approved and supervised by the CNMC will not be modified. This is my guess. This is INA's guess. And we'll see. But I'm very confident that the CNMC will confirm its resolution, the last week resolution. Now I move to commercial activity. This will be my final reflection. You know that on the 3rd of October 2021, the DF-7 I mentioned, the set DF-7 that I mentioned at the beginning of my intervention entered into force. As a result, MAG established in the commercial lease agreements for duty-free shops, retail stores and food and beverage activities, accrued from the 15th of March 2020 to the 3rd of October 2021, have been modified. The total amount of the reduction corresponding to Mach affected by DF7 amounts to 727 million euros. Likewise, and this is important, AENA freely, freely agreed to modifications with the operators of RentaCar, advertising and other commercial activities, to reduce the lease payments. The reduction of these rents, that Aena freely agreed, amounts to an additional 68 million euros, so the total reduction in Mach And fixed rents accumulated at the 3rd of October 2021 amounts to 795 million euros. You can see in slide 6 more information. I'm sure that both Emilio Rotondo and José Leo will complement my explanations afterwards or in the Q&A time. In parallel, concerning this legal change, DF7, you perfectly well know that Ayn understands that DF7 is very probably unconstitutional. And AENA is requesting that the judicial body, in all the legal disputes we have now in motion, that the judicial body could raise a question of unconstitutionality. In any case, again, I'm positive... concerning also commercial activity, because the evolution of the commercial activity in the last months has been, I would say, very positive. Despite the ongoing legal disputes, our business relationships, I must say, with the commercial tenants are still working meaningfully. And actually, recent tenders today, Spanish newspapers has published, Spanish newspapers today has published recent tenders, I was saying, for commercial contracts ended with a significant interest and with increases, significant increases in the MAG offered. So, this confirms this. that the expectations in the commercial area are, I would say, also optimistic. Thank you.

Thank you. This is Jose Leo here. I will just spend a little bit of time on the slides that provide numbers, information, more detailed breakdowns about the commercial revenues. I would suggest to go to slide number six. What you can see here is exactly what the chairman and chief executive described minutes ago. We have remembered that the total impact of the DFT, our estimated impact of the DFT in terms of cash over the entire life of the contract affected is something in the region of 1.3 billion euros. So a couple of months ago, we expected a little bit more than that, but it will be there or thereabouts subject to the actual evolution of the traffic over the coming years. But what is absolutely crystal clear is that we have accumulated part of that already in our balance sheet. So we have 795 million euros of accumulated revenues and receivables in the balance sheet until the 3rd of October 2021. Well, we know we will need to take that to P&L. Under IFRS 16, and we mentioned that a number of times, there is no alternative other than to take it to P&L over the remaining life of the contracts on a straight line basis. And this is what you can see here. So regardless the cash impact, the P&L impact will be what you can see in this particular slide. In 2021, in the fourth quarter, obviously, we have taken to P&L 168 million euros, out of which 144 are related to the DF7 implementation. The rest are the result of contract innovations, so they were willingly accepted by IANA. And then over the rest of the life of the contracts, we will be taking the rest of the impact to P&L, so 2022 and 2023, will be by far the most impacted years as you can see here. Without further ado, I will move to slide 11. Slide 11 is showing us the evolution of the ordinary revenue between 2020 and 2021. I mean the commercial ordinary revenue. This is the headline revenue that you know is a mixture of underlying proper business and accounting entries. But it's worthwhile to take a look at it in any case. However, I mean, however meaningless it might be at this stage. So you can see here that from the headline point of view, the 2021 is the worst year than 2020, despite the fact that the number of passengers went up by more than 50%. And this is clearly driven by the accounting entries. But it's worthwhile to take a look at this particular slide just to let's say dwell on it for a while. Then moving on to the slide Number 12, what we try to do here is to show you the real, the actual evolution of the underlying business. And this is what we call total business activity. In this particular slide, we are including everything commercial. So not only the outlets, but also the real estate revenue. All together the total business activity which is from our standpoint made up of two elements. One of them is the fixed and variable rent invoiced and collected on the basis of the actual number of passenger the actual passengers buying or shopping at the airport. This is going up by 40.8% and the max revenue invoiced or to be invoiced to be more precise at the time of closing the accounts is the rest. These are max that are entirely supported by either the DF7 provision or by the contracts we enter into with the number of players. So altogether, the underlying business activity, the proper business activity is going up by 24.1%. The rest is accounting. The first line is the accumulation Max through the year, And the final line is the adjustment, the straight line deferrals of the driven by the IFRS 16 application. You will notice that this is not exactly the same figure I showed you before. The reason for that is I didn't want to create too much confusion, but the receivables, the accumulated max in the balance sheet, part of them were already provided for under the potential credit deterioration parameters in application of IFRS 9. So when we release, when we take to P&L a chunk of the receivables, we also take to P&L a chunk of the provisions. This is the reason why net-net, the impact is 148 million euros. But I didn't want to confuse anymore, so we decided to show you only the asset side of the deterioration in the previous slide. And I will stop here and I think through the Q&A I'm sure you will be able to get more detailed information about all these issues we have discussed. Thank you.