Aena Sme S.A Unsp/Adr

Good afternoon, everyone, and welcome to our results presentations for the first quarter of 2024. It's a real pleasure being with you, all of you, today again. We are going to cover some of the main topics explained in the results presentation that is already available at our website and in the CNFV website, and we'll finish with a Q&A session as explained. So if you have any questions, please send it to our email, ir.aina.es. Our finance director, Ignacio Castejón, and myself will host the call.

Now I'll give the floor to Ignacio. Thank you. Thank you very much, Carlos. Good afternoon, everyone.

This is Ignacio Castejón speaking. I would like to have my very first words and thoughts for José Leo. I swear many of you already know that José passed away 17 days ago. I would like to ask you for 30 seconds of silence in honor of Jose, so all of us can remember and think of all the good interactions that we had with him.

And we can send him our best wishes. Rest in peace, Jose. Hello, this is Ignacio again. Thank you very much for your sympathies.

Well, let's start. I'll begin commenting the key highlights of the first quarter, and then I will proceed to explain some of them in further detail. As explained by Carlos, we'll have a Q&A session afterwards, taking into account all the questions received before and during the call. Well, let's start. Let's go to slide four and five. And basically, we would like to share with you that in the first three months of 2024, the tailwinds that we saw in traffic for most of the 2023 continue. INA group traffic increased versus last year by 11.9%, with passengers reaching 74.6 million passengers. The Spanish network traffic increased by 13.2%, up to 60.8 million passengers. That's a recovery of 115.2% of the traffic in 2019. With respect to total income of the group, this was up by 20.1% to 1.2 billion euros against the first quarter of 2023. We are enjoying higher performance than our traffic growth in all our business lines. Aeronautical plus 21.6%, commercial plus 19.4%, real estate, 18.2%, and international, 19.3%. Aeronautical and commercial revenues per pack also increased versus the first quarter of 2023. This is mainly explained by the increase in the applicable aero charges versus the first quarter of last year and the good performance of all our commercial activities, with total sales going up by 15.8% and per passenger sales by 2.2% compared to the first quarter of last year. Our total costs were nearly flat, 0.8% year-on-year growth. Excluding the effect of the drop in energy costs, the consolidation of BOAB, and the decrease in construction services related to IFRIC-12 in the Brazilian concessions, the total operating expenses would have grown by 2.5%. Every day in the first quarter, stood at 581.1 million euros in comparison to 368.6 million euros for the same quarter of 2023. 25.3 million euros were contributed by BOAB, you know, our Congonhas, our new portfolio of airports in Brazil. The margin was up sharply from 35.9% to 47.1% in this quarter. The net profit was at 261 million euros was nearly double year-on-year. Let me share with you that we held our general shareholder meeting, and the climate action plan update was approved, and also the dividend distribution of 7.66 euros per share was approved against the results for 2023. The dividend payment will happen on May the 7th. That's next week on Tuesday. Let's go into some further detail on traffic. As discussed previously, in Spain, we registered double-digit growth year-on-year in terms of passengers in each month of the quarter. In the Spanish network, the domestic traffic went up by 8.7% and international by 16%. International traffic represents now a set of 65.3% of the total, very similar to 2019 levels. By airports, Madrid, Barcelona, and Palma reached a growth of 10.6%, 14.7%, and 11.1% respectively. Group 1 had the highest growth with 17.3%. The most significant markets in Europe that saw the highest growth were Italy, Switzerland, and Germany. Within the international segment, London Luton Airport traffic grew year-on-year by 3.4%, ending the period with a recovery versus 2019 of 19%. of 91.9%, sorry. With respect to Brazil, AMB saw an increase in traffic of 8.3%, meaning a recovery of 105.7% of the traffic of 2019. And our new portfolio grew at 6.9% against the first quarter of 2023. With respect to traffic in this first quarter, as discussed previously, we have seen a double-digit increase compared to the same period of 2023. Please let me recall and remind everyone that the Easter took place in March this year and the previous year happening in April. On April of this year, we are also seeing a very healthy growth, although a smaller growth than in the first quarter, with a single-digit growth. With respect to our guidance for this year, we are reiterating, we are confirming the traffic ban share in the update of our strategic plan back in March the 7th. Please note that the upper part of the band represents a growth of 7.1% compared to 2023 traffic. In view of existing data, at the end of the second quarter of this year, we'll consider updating that guidance. Let's move to commercial and real estate. Commercial and real estate ordinary income grew by 19.3% in this quarter compared to the first quarter of 2023. This is mainly explained by an increase in our fixed and variable rents of 12.8% and an increase, a material increase in our minimum annual guarantees of 25.1%. I'm going to discuss and I'm going to provide some further color in some of the main commercial business lines. So we can have a discussion later, and then you have more detail. With respect, sorry, to duty-free shops and our activities in this business line, revenues performed very positively in this quarter. The increase was 38.3% compared to the first quarter of 2023. As you know, some of our main duty-free operations are being refurbished, for example, in Madrid. and such construction works are temporarily affecting the duty-free sales and also the average tickets. There are less offer and fewer categories. We expect that all those works are done in summer. We would also like to share with you and highlight the very satisfactory performance we have seen in the canary lots, in which we are already operating under variable rent under the new contract. Finally, let me share with you the significant increase in max that we have seen this quarter that is mainly explained because of the new contracts awarded last year already kicking in this quarter. With respect to VIP services, that has also shown a significant increase of 35.2% this quarter. This growth is mainly the result in the number of users and also the increase in prices on our VIP launches. We are also adding more capacity, and we have increased our capacity for these services, for this product in seven years. of the 18 airports where we offer this service. Let's continue with car park. Car park has also registered a very positive evolution with an increase of 15.2% this quarter compared to the first quarter of 2023. Basically, the main drivers for this growth are related to the optimization of available parking spaces coupled with the improved pricing policies that the company is applying. On car rental, The growth is explained, basically a growth of 11% is explained by higher prices, more contracts, and passenger traffic, of course. Let me stop here one sec so I can share with all of you that today the INA Board of Directors awarded 179 licenses at 30 airports, increasing the number of parking sites to 19,095, This contract is going to be for a period of five years with an option for two additional years. What we are expecting, assuming that the demand in tourist destinations remain as healthy as we have seen in the previous months, this is going to result in a potential increase of about 23% in our car rental revenues. Let's have a look at cost, OPEX. At group level, our operating expenses in the first quarter of 2023 were 659.9 million euros. That was an increase of 2.9%. The evolution of the OPEX at group level can be explained by Spain and our international activities. In Spain, what we have seen is that our operating expenses have reached a level of 560.3 million euros. reflecting an increase of 3.8%. This increase is mainly explained by the increases that we are having in our other operating expenses caption, with an increase of 5.6%, excluding energy. In energy, because of energy cost evolution, the reduction that we have seen in this item has been minus 25.4%. Internationally, in Brazil, OPEX has been affected due to the consolidation of BOAB, and the decrease in the amount of construction services that we have experienced in Brazil, in AMB. In Luton, we have experienced higher operating expenses at a rate of 29.9% increase. Regarding the staff cost of the whole group, the increase has been 10.5%, and in Spain, it has explained 7.1% of this increase. We are satisfied with the performance of the OPEX this quarter, However, we remain vigilant, we remain cautious, considering the continuing effects of inflation, the recent implementation of our very new significant contracts, and the potential need to further increase OPEX to address the needs of our passengers in those airports with the highest growths. From a cash flow standpoint, from a cash flow generated, we have experienced a very robust performance this quarter. Net cash generated by operating activities has reached 723.7 million euros. This is an increase of 43.4% compared to the first quarter of 2023. As a result of this, AENA continues reducing the leverage on our balance sheet while investing and repaying our debt maturities. I would also like to add that we are holding cash and available facilities totaling 5.3 billion euros at group level. Out of that amount, 2.6 billion euros are cash and cash equivalents. At group level, we have managed to reduce our net debt to EBITDA ratio to 1.79 times. Let's have a look at our international portfolio, and I will focus on Brazil, on AMB and BOAB, so that on the performance of those on those two portfolio of airports. Over the first quarter, traffic grew in AMB for 8.1%. This strong traffic performance resulted in an increase in our revenues, commercial and aeronautical, of around 20% compared to the same period of 2023. However, due to the fact that most of the AMB's expansion and improvement projects have already been completed, revenues from construction services decreased significantly by 66.8%. So the total revenues have gone from 390 to 235. With respect to EBITDA, this has moved up from 60.7 million reais to 85.6 million reais. The increasing margin has been material from 15.5% to 36.4%. Excluding the impact of IFRIC 12, the margin would reach a number of 58.7%. With respect to CAPEX at AMB, I would like to share with all of you that most of the mandatory investments have already been completed. And therefore, CAPEX outflows at AMB have dropped from 58.6 million euros in the first quarter of last year to 3.2 million euros in the first quarter of 2024. Let's spend some time in our new portfolio of airports in Brazil, BOAB, because this is the very first quarter in which we are fully consolidating the activity of this new subsidiary. From a traffic standpoint, the traffic recovery compared to 2019 of this portfolio of airports stands at 96.7%. Total revenues for these three months in reais have amounted to 237 million reais. In terms of EBITDA, EBITDA for the first quarter was 133.8 million reais, contributing to our consolidated EBITDA 25 million euros. And the margin stood at 56.4%. Regarding CAPEX, as many of you know, we haven't started the CAPEX program yet at that portfolio of airports. That will start very likely at the end of this year or at the beginning of next year. That's why the investment in CAPEX that you are seeing in this quarter is 2.2 million euros compared to the CAPEX or the investment that took place in the first quarter of last year in which we basically paid for the mandatory investments related to the concession payment of this new portfolio of airports. That's the summary that we're planning to share with all of you. We will start addressing the questions that we have received from you. Let's give us, please, 30 seconds so that we can review all the new questions received, and we will start in 30 seconds, one minute, addressing all those questions.

Please hold with us. Hello, everyone.

We have received some questions from analysts related to our traffic guidance. We are not changing our traffic guidance that was provided as part of our update to the strategic plan. As I have explained in my previous remarks at the beginning of the presentation, What we have seen is a double-digit increase, it's true, in the first quarter of this year. We are seeing healthy growth also in April, but smaller, single digits. And what we are basically planning to do is, in view of the existing data that we'll have at the end of the second quarter, we'll consider our updating guidance. Let me share with you that the PANT that we provided as part of our strategic plan update was included in a scenario in which traffic growth compared to 2023 amounted to 7.1%. So that's the upper part of the range that we provided. Yes, we have received a question with respect to if there are any one-offs in our P&L in particular revenues, aeronautical revenues. There are no one-offs. What is happening is that the tariff that has been applicable this quarter in January, February, and March has been higher. than the tariff that was applicable in the quarter of last year because of different reasons, January and February, because it's the tariff that was applicable in the previous year, but excluding the COVID cost. And in March, because it's the new tariff for this year that was approved at the end of last year. So basically the main deviation with respect to aeronautical revenues is explained by the tariff increase. There are no specific one-offs. With respect to cost, yes, there are some. More than one-offs is that you have to take into account that we are consolidating Congonhas and the other portfolios and the other airports that are part of that portfolio, and that's distorting a bit our cost performance. So if we look at the impact of the new costs that are coming, BOAB is contributing, that would be in euros, around 25 million euros. With respect to energy savings, we are saving around 25.5 million euros related to the drop in energy cost. And IFRIC-12, because of the decrease in the construction activities related to AMB, that's helping us to save around 19.7 million euros. So the cost evolution, total cost evolution of the group, as explained previously, was around 0.8% almost flattest, 6.7 million euros of increase. If we take into account all these one-offs of new costs coming because of the new consolidation in our international portfolio, that would result into an increase of 2.5% of our total cost base for the group.

We have also received some questions related to the recovery of COVID costs.

I would like to confirm that the COVID costs recovered in the first quarter of this year amount to 6.9 million euros compared to 3.5 million euros in the first quarter of 2023. We are also receiving some questions relating to the commercial performance and how much is explained by variable rents, MAC revenues, and the straight lining, and other adjustments related to the accounting treatment in the long term of our commercial contracts. If we look at slide 12 of our presentation, we have there the breakdown of our commercial activity, including real estate. The increase of our total business activity has been 15.6%, that amounts to 54.6 million euros. Of that increase, 34 million euros is explained by the increase in fixed and variable rents, and MAC revenues are explained in 19.2 million euros. The straight lining, as we have discussed in the past, that as related to the MACs being a straight line, sorry, in the long run, taking into account the impact in our books of the long-term contracts that we sign in duty-free and F&B, et cetera, and the allocation of those MACs to our books. That is explaining 14.5 million euros this quarter. So in total, we have experienced an increase of 69 million euros. That is 19.3 million, an increase of 19.3%.

I hope that has addressed the question. We have received a... I'm sorry because we are getting questions as we speak.

We have received a question related to the Luton concession and the potential change to that concession. As you know, we are finishing all the plans in order to have the increase that was recently approved in place, from 18 to 19 million bucks. Simultaneously, our grantor is working in the... in the increase in the capacity of that airport. As all of you know, we are totally supportive of that increase, and we are discussing and helping our grantor in that regard. There are no further news with respect to that process that we can share with you so far, so no change to that concession at this moment in time. We are receiving some questions related to total cost and OPEX, in particular with respect to the increase in staff cost, HR cost at AINA mother company level, so it's the Spanish network. The increase is mainly explained due to two reasons. The first one, the salary increases are applicable because of the three-year agreement between the Spanish government and the unions, that is still applicable in 2024, and also because of the new organization of the company, we are reinforcing some of the different management levels and layers of the organization, and simultaneously we are adding some more headcounts to our company, taking into account the increase in the activity

that we are witnessing with the traffic levels that we are achieving.

We have received a question related to concentration and dilution related to our tariffs. I think the dilution that we have experienced this quarter is the normal dilution that we experience because of the increasing the tariffs applicable for this quarter. With respect to the next quarters, the question was, are we expecting concentration? We don't think that we'll experience concentration in the next quarters. Having said all that, I would like to remind all of you that because the interim regime is finishing at the end of... At the end of 2025, any dilution generated this year will be recovered after two years because the caps that were applicable related to our interim regime will not be applicable any longer.

Okay.

On energy cost, we are receiving some questions as well. Well, we have taken advantage of the evolution of energy prices, and that has resulted in a decrease in our cost of 25 million euros, as explained previously. As you know, we have made some progress heading our exposure to energy prices last year, and In spring, we closed a medium-term agreement for around one-third of our energy consumption, energy consumption measure as of 2019. Simultaneously, we are making some further progress so that we can increase that hedge this year and in 2025, taking into account or trying to take advantage of of the decrease in prices that we have seen this quarter and also in April of this year. So our goal for 2024 and 2025 is having an average hedge in place of around 50% of our energy consumption. Simultaneously, as we explained in the update of our strategic plan, we are working on a financial PPA for the long term that will help us to even... further hedge our exposure to energy prices through that PPA.

The PPA has not been closed yet. We are working in that regard. We are receiving some further questions related to Barcelona CAPEX.

and the expansion of the airport related to the runway. There is no real or material progress or nothing is different to the latest update that we saw with you. With respect to the duty-free activity, we are receiving some questions about the construction or refurbishment of the different units of that activity. If you have traveled through our airports, for example, in Madrid, you will have seen all that renovation. In accordance to the contract signed with the retailer, they have one year to accomplish all those renovations. Having said that, the progress is significant, and we are expecting that around summer, most of the construction works related to renovation of all those spaces will be done, will be completed.

Yeah, with respect to car rental,

some of you are asking for further detail on the new contract and the expected increase of 23% that I was sharing at the beginning of my opening remarks. Well, the current contracts finish at the end of this year, in October of this year. So the new contracts are not going to start until November. That increase is mainly explained by an increase in the fixed rents. As you know, there is a part of this contract, of this business, that is explained by fixed rents. Those fixed rents, the number is basically the result of the bidding that has taken place in the previous weeks, and that's explained in part of that increase. And with respect to the variable rent, that was not part of the awarding criteria because it was an increase from the current contract of 8% to 8.5%. So what we are doing is we are estimating that 23% taking into account the sales that we are achieving in that business line, sorry, that we achieved in that business line last year. So if sales continue increasing, that number might be higher. Of course, That number is an estimate and is subject to having, to maintaining a very healthy traffic growth, a very healthy traffic demand in our touristic destinations, mainly in the islands.

Thank you.

With respect to commercial revenue per tax, you will have seen that number, that ratio is increasing. And what is happening with that number is that the weight of the minimal and unguaranteed rents is important in this quarter. As you know from an accounting standpoint, we don't account for minimal and unguaranteed rents taking into account traffic. It's a straight line. So the contribution of minimum land and guaranteed rents is material this quarter, and that's a fixed number. So the more passengers that we have, from a per-pack standpoint, we may have some dilution that is a natural consequence of the mechanics of the minimum land and guaranteed rents. We really thank you for your time. If we receive some further questions, what we will do is address them in writing. The IRR team will be completely available for all of you, and we will be very kind to respond to all of you. I wish you all the best. Thank you very much for your time, and thank you.