Aena Sme S.A Unsp/Adr

Thank you for standing by. My name is Dee, and I will be your conference operator today. At this time, I would like to welcome everyone to the IUNA first half 2024 results presentation. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Carlos Gallego, Head of Investor Relations. Please go ahead.

Good afternoon, everybody, and welcome to our first half of 2024 resource presentation. This is Carlos Gallego speaking, Head of IR. It's a real pleasure being with all of you today. Our Chairman and Chief Security Officer, Mauricio Lucena, will host the call together with Ignacio Castejón, CFO, and myself. We are going to cover some of the main topics explained in the results presentation that is already available on our website and on the CMD website. And we will finish with a Q&A session. Without any further ado, I give the floor to Marisi Lutena. Thank you.

Thank you very much, Carlos. Good afternoon, ladies and gentlemen, and thank you for joining us to go through our first half 2024 results presentation. Usually I will start commenting the highlights of the financial results, and then I will give the floor to Ignacio Castejón, our CFO, and at the end, as Carlos Gallego mentioned, there will be a Q&A session. I will start with traffic. globally, traffic increased year on year by 10.5%, up to 172.7 million passengers. And in Spain, in the Spanish network, the increase was, I would say, a very considerable 11.4%, reaching 144.2 million passengers. If I move to the UK, London Luton Airport traffic grew year-on-year by 3.2%. In Brazil, our, let's say, first concession, what we call ANB, A-N-B, Its traffic grew by 9.5%. And our second concession around Congonhas, around the airport of Sao Paulo, Boabé, with its 11 airports, grew the first half of the year by 6.1%. if we compare it to the same period of 2023. Let me now please briefly comment on the impact of the very impressive disruption caused by the IT outage that took place the 19th of July. As you know, I think that the Spanish airports We could clearly say that performed in relative terms pretty well. I would even say that they performed in relative terms excellently. Our Spanish airports remain fully operational. Although of course, some activities during that day performed slower than usual. But at the end of the day, We had, let's say, only, of course, it's in relative terms, 400 flights canceled out of more than 8,000. And I must say that these 400 canceled flights, most of them were canceled because of the disruption that the autos cost on the airlines. So all in all, it was a really impressive event. But I'm a CEO of the company. I would say I'm... very satisfied of our response because I think that operationally our response was very robust and fast. Okay, now I will move, if you allow me, to the financials. You know that in the first half of 2024, total revenue grew by 17.7%. Aeronautical revenue increased by 16.4%. Commercial revenue by 17.7%. Real estate revenue by 18% and international activity by 25.6%. And on the side of costs, total operating expenses grew in the first half of the year 3.2%, which is not bad at all, taking into account the impressive increase of our activity. So, in total, the EBITDA for the period came at 1.6 billion euros, and this means that our EBITDA margin stood at 56.6%. The net profit in the first half of the year increased by 33.1%, reaching a total 0.8 billion euros. Okay, now I move to commercial activity. In the commercial activity, we have witnessed robust growth trend and this robust growth trend I think that it simply continues the trend that let's say started back in 2022 and it continued in 2023 and fortunately it has even increased in the current year. Total sales grew by 13.4% year on year, thanks to mainly, of course, the traffic strength. Secondly, the increased spending by EU and UK passengers. And thirdly, due to the introduction of new brands and concepts that are performing very, very well. In addition, we, as you know, we continued our process of renewing the commercial offer. And I would say that the new contracts awarded have resulted in, I don't know if we could again call them impressive, but not very short of impressive in any way. And I will give you some figures that demonstrate how strong our commercial perspectives are considered by the market. The minimum annual guaranteed rents of the contracts awarded in specialty shops exceed exceeds by 21% this minimum annual warranted rents of 2023 in 2024 in the current year and by 35% in the next year in 2025. And if I consider the food and beverage new contracts awarded this year, these increases are 21% if we consider 2024 compared to 2023 and 45%, I repeat it, 45% if we compare the rents in 2025 with the rents in 2023. Now I will refer briefly to our 2025 tariff proposal. Yesterday, the board of directors approved the tariff proposal applicable from March 1st, 2025 at 10.4 euros per passenger. And this represents an increase of 0.54% compared to the current tariffs. And I clearly do not foresee any reason by which this proposal could be modified. In other words, I think that this 0.54% tariff increase will be the one that will effectively take place in March next year. If I now move to Brazil, I would like simply to underline that you know that on the last quarter of 2023, we took full control over the 11 airports included in our second Brazilian concession, what we call Boabé. And in the first half of 2024, The EBITDA contribution of this new concession was 50.4 million euros, which implies an EBITDA margin above 55%. Now I move to dividends. You know that on May 7th the company paid a gross dividend of 7.66 euros per share. And this would be the end of my presentation in ordinary times, but I would like to add a very brief qualitative assessment regarding the announcement that yesterday was made by two political parties, Esquerra Republicana de Catalunya on the one hand and the Partit dels Socialistes de Catalunya, the Catalan Socialist Party, on the other. This agreement mentions the airports that are owned by AENA in Catalonia, and I would like simply to convey at the present time three messages, which I hope that are very clear. The first message I would like to convey concerning this agreement is that AENA had noticed yesterday during the board of directors meeting of the leak of this agreement and the board of directors agreed in real time, it agreed what was later communicated to the market. which is the following. INA is going to carry out a very detailed monitoring of the development and the potential effects that this agreement may have on the company. My second message is the following one. For the above-mentioned purpose, we are going to have the support of the best legal experts, which are going to be hired in the next few days. And thirdly, my third message is probably the most important one. The company will undoubtedly defend its interests and you know that in my period of more than six years as chairman and CEO of the company, I have shown that this defense of the interest of the company has has always been my main driver and the company's main driver. In other words, I think that we have shown in my more than six years period as chairman and CEO of the company, that the defense of the interest of the company will be the unique and the only principle that will guide our future actions in this regard. So having said that, and of course we will have time to analyze this and other issues during the Q&A period, I now end my presentation and give the floor to Ignacio Castejón, IANA CFO. Thank you. Ignacio Castejón Thank you very much, Mauricio. Hello, everyone. This is Ignacio. I will go through some details related to traffic, revenues, cash regeneration, and international footprint of AENA. And after that, we will start the Q&A, as explained by the chairman. Let me start with the updated traffic forecast that the company published some weeks ago. We revised upwards our traffic forecast to 306.7 million passengers. That is a year-on-year increase of 8.3% compared to the previous forecast of 3.8%. Basically, the main drivers for that decision were the traffic performance for the first months of the year, the improved economic conditions, and our views on what was happening from a traffic standpoint and what we think might happen in the following months. With respect to performance so far, if we look at the Spanish network, we have seen a double-digit year-on-year growth, as you have seen through these months, with international traffic growing at 13.5%. If we look at our main markets, market shares and growth rates are very similar to the growth that we have seen previously. And I would like just to highlight the impressive growth coming from our main airlines. Ryanair growing at 10.3 percent, Iberia Express 10.5 percent and ECGF 13.3 percent. So significant growth coming from our main airline customers. I'll move to commercial revenues. If we look deeper into our commercial revenues, first, I would like to emphasize that total commercial revenue growth was 17.4% year on year. We reached 889.2 million euros at the end of this semester. In passenger terms, we reached 6.2 euros per pack in this first semester. That would compare to 5.9 euros in the first semester of the previous year. If we exclude the straight lining and other adjustments of our commercial revenues, the growth was 14% year-on-year. These revenues, as you know, are composed of two main elements, the fixed and the variable rents. with a growth of 10.3% and they accrue that unbilled minimum annual and guaranteed rents. The growth of the minimum annual and guaranteed rents were very strong, reaching 13.2 – 13 – 38.2% year-on-year. That's basically, as you know, the reason for – the reason behind that growth is all the new contract that the company has been signing in the last – in the last months. If we look at some of our commercial business lines, let's start with duty-free. That is our main commercial line. The increase of the sales was 15.4%, and basically the performance is very explained by the tourist airports and by the British passengers. If we look at the growth in Alicante, Tenerife, Lanzarote, Gran Canaria, and Palma de Mallorca, we can see growth, all of them, north of 10% and around 20%. At the variable rents, you will see that variable rents have not grown, have grown less than the minimum and guaranteed rents. The main reason, the main drivers for that is something that we already discussed in the first quarter resource presentation. As you know, we are adding more products to that business line. We are having construction activities around those business lines, and that's diluting a bit the variable rents that we are achieving in that commercial line. the variable rents that are part of the contract that we are working that year are also a bit flattest or lower compared to the variable rents that we had in our previous contracts. If we move into F&B, this segment increase, the sales in this segment increase by circa 13%, one three, with the variable rents fixed and variable rents already growing at almost 16%. We have opened new food and beverage sites in Madrid and Palma and we have had a very active activity with respect to tenders and awards in the first six months of the year involving Tenerife Islands, involving the Madrid airport as well. With respect to specialty shops, the growth is also material and I would like to highlight all the significant activity that the company has had in this first six months of the year. 41 tenders for 54 outlets have been published. And 29 tenders for 43 stores have already been awarded. I would like to highlight all the activity in Malaga Airport, in Barcelona Airport. And with respect to the future, in this next semester, we'll be publishing tenders for the whole Palma de Mallorca Airport in this category. Let me stop one second the business categories that we manage as a company that I'm referring to car parks and VIP services. Car parks, we are seeing an increase of 14.7% year-on-year with new infrastructure being added by the company. We are adding spaces in Alicante, in Barcelona and Ibiza. So more capacity and also prices being updated. All these new facilities are already operational. With respect to VIP services, Total income rose north of 30%. This is basically explained by VIP lounges that represent 82% of those revenues. VIP lounges registered an increase of 25%. This growth is mainly explained by more customers because of more traffic and higher penetration, but also because of higher prices that we are achieving in this business line. With respect to car rental, I would just like to highlight that the new contract awarded by the Board of Directors back in April has not started yet. As you know, it will start the very first days of November. Having said that, with the current contract that we have with existing operators, we have been able to deliver a growth in our income of north of 10 percent. for a while in the OPEX. The chairman already referred to the performance of the OPEX of the total cost of the company in his opening remarks. Basically at group level operating expenses, total 1.2 billion euros, that's an increase of 6% compared to 2023. What are the main drivers behind that increase? Basically the consolidation of our new activities in Brazil, Congonhas and the rest of the airports of that portfolio. Higher staff costs across the group, that's a plus 10%. Cost increases in security, maintenance, P&R. Cost increases in Luton and also the energy prices evolution. If we look at AENA on a standalone basis, the increase in our OPEX amounted to 7.2%. Other operating expenses, the increase taking into account energy costs was 8.1%. Excluding energy costs, the increase would have been 10.2%. What is behind that increase? Basically new contracts that are with some higher cost, more activity, higher cost of our insurance, higher cost in cleaning, security, as we have been discussing for a while with all of you. If we look at the evolution of our other operating expenses on a per-pax basis, these costs are decreasing. We are being able to mitigate those increases through our operational leverage on a per-pax basis. There is an item on the other operating expenses that I would like to highlight, that the company has marked a provision amounting to more of 14 million euros, 1-4, related to all the DS-7 and commercial claims that we have had for a while. That is partially explaining the increase that you will have seen this quarter. From a cash standpoint, the group has performed very strongly, very robustly in this first half of the year. Cash generated by operating activities has been north of 1.4 billion Euros. That's an increase of 33.7% compared to the first six months of the previous years. From ACAR's movement standpoint, I would like to highlight that the main movements are related to the payment of the dividends, 1.1 billion euros, debt repayments amounting to 628 million euros, and CAPEX payments of circa 470 million euros. From a net debt standpoint, we keep working on the reduction of that ratio, and we are already at 1.9 times net debt to EBITDA at group level. With respect to our debt structure, I would like to highlight that we remain with a significant amount of our debt at fixed rates, 74% of our debt is at fixed rate, with only 26% is at variable rate. From a cost standpoint, the cost has increased a bit, but we are still at below 2.6% with respect to the average cost of the Aina parent company debt. Let me finish with some comments on the international business. London Luton Airport traffic keeps recovering. We are already at 93.2% of traffic of 2019. We can increase this year, year on year of 3.2%. All of our airlines with ECJET and Ryanair keep growing with recoveries of 2019 of 105, 85 and 103 respectively. Total revenues of Luton Airport grew by 55.5% compared to 2019, and we are seeing growth in revenues from an aerial and commercial standpoint. Luton managed to deliver an EBITDA of 64.3 million euros. That's an increase of 10% versus previous year. Regarding our Brazilian operations, as mentioned by our chairman and CEO, We are seeing a significant growth not only in Boabé, that's Congonhas, B-O-A-B, but also in A and B. As you know, we finished our construction activities in Recife and the other airports that are part of that portfolio, and we are witnessing a significant increase in the EBITDA of that operation in Brazil. Let me finish just highlighting the contribution of Congonhas and the rest of the airports in that portfolio from an EBITDA standpoint for the whole group amounting to R277 million for the first six months of this year. And that would be all from my side. Thank you very much. Operator, we will be ready to start the Q&A session if that's okay for everyone.

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question or are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue and your first question. comes from the line of Christian Nedoko from UBS. Please go ahead.

Hi, thank you very much. May I ask you maybe the first one on this political agreement last night? Is the separation of Barcelona airport outside of IANA network a realistic possibility at this stage? Maybe just to clarify, I think Barcelona is around 18% of your traffic in Spain. Is the EBITDA from Barcelona significantly more than 18% or not? The second one is on traffic in Spain. So we've seen a more cautious message from several airlines on ticket prices over the last weeks. Just zooming in on the last three weeks or so, when you look at your load factors or when you look at airline capacity revisions, is there any sign that demand is actually softening, that volumes are actually softening going forward versus what you thought a month ago? So that may be my second one. And the last one, if you'll allow me, You've explained earlier the rent per passenger was the reason why they were down a bit year over year in the second quarter. Do you think part of the reason could be also that the European consumer is under pressure and consumer spending is under pressure and that might be part of the reason of the weakness? especially as you go forward looking into the second half, do you believe the rents per passenger can start growing again? You have the benefits from the renovation on duty-free. I guess several other moving parts there, but any comments that you could offer? Thank you.

Thank you. This is Mauricio Lucena. I will answer your first question and I will try to also answer the second one. Okay, regarding the political agreement, I think that, well, it's not that I think, it's that clearly the text of the agreement, as you can clearly read and you can clearly now, you can prove by reading it, it does not at any moment, say anything on ownership or separation of airports. It does not say it at all. This is crystal clear. And that is why I said that at the present time, what the company, AENA, has the duty to do is to carefully follow the potential development of the framework of this agreement. But I would kindly ask you that we do not speculate with concepts or words that the text does not clearly include. And I think that this is very important. At no place the text says anything on ownership or separation of airports, and this is a fact. This, simultaneously, it is compatible with the fact that, of course, the agreement does not have a univocal development. That is why we are going to analyze it in detail with all of the vast resources of INAH and we will also we will hire the support of the best legal experts because this is our duty and this is what I can say so far and on the other hand regarding the financial figures of different airports within the AENA network. You know that we do not disclose airports separated. And it is not only because we are, let's say, very, very careful. It is also because our model, the network model of AENA contained in the law that regulates our functioning, it has very strong operational and financial implications. And as you know, we function financially and operationally as a network. So this is an additional important reason why in our view, it does not make sense to separate and disclose individual financial information. I don't know if the CFO or Carlos Gallego would like to add to this second question anything. And if it's not the case, the CFO, Nacho Ignacio, will answer the other questions you conveyed to us. Thanks. Thank you very much, Mauricio. Hi, Christian. I think there are two questions left with respect to the first one. We haven't witnessed that kind of a reaction from other airlines apart from the one I think you were referring. Having said that, we see that they keep operating according to our plan, that those are the plans that we took into account to revise upwards our traffic guidance for this year. With respect to low factors, the answer is the same. We are not seeing the low factor weakening these weeks. With respect to your question on commercial performance, from a sales standpoint, looking at the different retail business lines of the company, we are not seeing sales getting lighter. sales are still performing very strongly in all those business lines. I think I was trying to refer in my remarks to Beauty Free with sales going up by 1.5, specialty shops 1.8, F&B 1.3. So we are seeing double-digit growth in terms of sales. What you perhaps have seen is that variable rents fixed and variable rent, sorry, in some of our business lines have performed less strongly than in previous quarters. There are some reasons for that. You know the one on duty free. Basically we are hopefully all the construction activities will be done shortly and we'll be able to have the full offer there available to our passengers. Two, we are adding more products to the duty-free offer. Those products are a bit lower on the price point, and that could also be diluting a bit the duty-free, the variable rents coming from that business line on a per-tax basis. With respect to other business lines, we have had some accounting adjustments affecting shops and F&B that have also contributed a bit negatively. And that's why you perhaps are seeing lighter rolls. But we are not seeing a material change in the trend of consumption coming from the passengers going through our facilities. Thank you very much, Christian. We'll move to the next question.

Our next question comes from the line of Luis Prieto from Kepler. Please go ahead.

Good afternoon, Luis Prieto. Thanks a lot for the time and for answering my questions. I have two, if I may. The first one is I'm aware that there's no segregation proposal within the agreement that we're discussing. But given what has been said in the agreement or what I think is all about, How easy would it be to change the regulatory frameworks just to allow the input of regional authorities in the regulatory process? How close is the framework and how malleable is it? And then the second one is regarding electricity, what is the progress on the energy hedging front? If I recall correctly, we were working on a PPA. What have you been able to achieve on this front? Thank you.

Hello again, this is Maurici Lucena. Well, I said it before and I must insist on that. I will not and the company will not enter the very complex terrain of speculations. I think it would be not wise to do that. I think that the text says what it says and nothing else. And that is why I insist on the obvious. The agreement does not have a univocal development. So the duty of the company is to close, to very closely monitorize what it will, the next steps, let's say. And what is more important, you know that in the last more than six years, As chairman and CEO, I think that we have never vacillated in defending what we interpret are IANA's interests and the protection of our shareholders. This is, let's say, a must, and we will and I will not move from this assumption. This is my only guide. This is the only guide of the company. And we will just wait and see. And we will react depending on the specific developments. But again, it is important today that we do not include in the text of agreement what it does not say because this I think introduces a perturbation in what at the present time must be the, in my view, the interpretation of the potential impact of any future development in the company in Aena. Thank you. Thank you, Chairman. Hello, Luis. This is Nacho speaking. On your second question with respect to our strategy on energy, as you know, we have some short-term hedges for this year already in place. That's around 50% of our consumption in total, thanks to those short-term hedges plus the fixed price that we agree with our suppliers for around one-third. And you are aware that we are planning to implement some kind of PPA for the medium to long term. That RFP has already been launched. We should be receiving proposals from different market players in the following weeks. And it's our intention if those proposals are satisfactory. to try to have that PPA close before the end. That's what we are trying to do. Thank you.

You took the PPA?

Yeah. That's correct. We can move to the next question operator.

Our next question comes from the line of Graham Hunt from . Please go ahead.

Thank you for allowing the questions. Just two from me. Maybe on a slightly different political topic, I wondered if I could get your thoughts on the impact of some of the protests that we've seen in Spain in recent months around tourism volumes, particularly in the Spanish islands, which are very important for you. How do you see Aina's role in managing the growth of tourist volumes for the longer term? And then on a shorter term question, just were there any or exceptional costs associated with the recent flooding and heavy rains in Parma airport. Thank you.

Okay. I will take the first question, the one regarding tourism and what we call in Spain or some call in Spain tourism phobia. Well, I think that the role of AENA is just to state very clearly that firstly, when you look carefully to the Spanish economic history, you can clearly conclude that since the decade of the 1950s, well, tourism has been decisive in the economic and social development of our country. You know that currently the relative weight of tourism within the Spanish economy is 13%, 14% and growing. So I think that... the great importance of the tourism activity in Spain is completely assumed and I would say valued by the Spanish citizens in general and the Spanish authorities. And on the other hand, there are specifically many territories in which tourism is a lot more important than this 13%, 14% on average relative weight that I mentioned. If you, for example, think about... the Canary Islands, the Balearic Islands, there the weight is much higher. So I think that this will remain so and tourism will be in general valued in the future as well. And our role as airport owners and operators is try to accommodate the future trends of the tourism flows and passenger flows in what depends on us. And this will continue to be our function. Thank you. Thank you, Mauricio. Hi, Grant. This is Nacho speaking. On your second question, the answer is there is no material or significant impact from a cost standpoint related to the rent in Mallorca. Thank you. Operator, we can move to the next question.

Our next question comes from the line of Elodie Rao from JP Morgan. Please go ahead.

Hi, good afternoon. Thanks for taking my questions. So the first one is on the tariff agreement that you've announced of 0.5% increase. If you could give us a bit of color of the drivers behind this agreement. The second one is on M&A. You're looking, obviously, we saw INR bidding here and there, mostly in the UK. So it'd be helpful if you could give us a bit of color on the pipeline and where you see INR ending up the year with that. And lastly, if I may come back to this political uncertainty around Catalonia, it would be helpful if you could just lay out to us what the agreement says exactly, because For people outside of Spain, we don't really have much visibility or understanding. So is it just a really negative thing? Can it be offset by other things? What are the scenarios and what's the worst case? Thank you.

This is Mauricio Lucena again. I will take two questions, the last one and the second one. I will start with the M&A. I'm completely aware that It must be frustrating for you, our usual answer when you ask for our hypothetical interest in certain airports, because we always, but we cannot do another thing. We always respond. INA is the largest airport company in the world, so we analyze every potential M&A operation or almost every potential M&A operation in the world. I think that you could extend this statement to what we could call the usual suspects. Many of them are our competitors, but I mean, when I, of course, respecting the legal obligations, when I talk with my colleagues that the CEOs of the largest airport operators in the world, I think that it's always the same. Whenever there's an international opportunity, I suspect that we all analyze it and what could be different is, let's say, the depth of this analysis. And this also applies to the case you mentioned in the UK. I think that it's exactly, well, I think no. I know it's exactly the same answer I gave to the previous operation, which was Edinburgh, and I'm almost convinced that it will be the same answer I will give in the future to any other international opportunity that could come. And I really apologize because I can say no other. On the other hand, going back to the political agreement, and now I will choke a little bit. Of course, we could read aloud what the text says. I think this makes no sense, this is why I say I'm just kidding, but the text says what it says, nothing else. That is why I clearly said that it does not say anything on, and this is very important, it does not say anything at all on ownership separation of airports. But the text, I think that it's clear that it admits, let's say, various developments if there's a development because there are many big ifs before potential development could take place. So that is why I go back again to our duty, which I repeated, but I will insist on that the agreement does not have a univocal development. And this is why we are going to analyze it in detail, whatever the potential development is, and not only with our internal vast IANA resources, but also for the specificity of the issue with the support of the best legal experts, which are going to be hired in the next few days. Thank you. Thank you, Mauricio. Hi, this is Maxo. I think you raised a question related to the 2025 IMAG tariffs. Basically, just to confirm to you that the board approved yesterday the tariff proposal for the next year. That is amounting to 10.40 euros. That's an increase of 0.54%. that the increase is I would say 99.9% explained by the P-Index. P-Index was already confirmed, the P-Index calculation, sorry, was already confirmed by the CNMC, I believe back in May, at the end of May. And the evolution of the P-Index compared to the previous year is explained because of the performance, mainly of our energy prices. As you know, the P-Index is a tailor-made index that takes into account around nine items of our cost structure, staff, navigation, security, et cetera. Some of those items are going up, others are going down, and the one that is going down and is material impacting the calculation of the P-index for the tariff of 2025 is energy prices. That's why we have that 0.54. The tariff for this year is not including any COVID-related matters. I hope that addresses your question, Eloy. Operator, we can move to the next question. Thank you.

Our next question comes from a line of Satish Sivakumar from Citigroup. Please ask your question.

Thank you again. I've got two questions here. If I look at your cost items, the security cost per pack is actually up around 6%, and it's basically seen a spike in quarter two. How should we think about the evolution of this cost as you go into quarter three and quarter four? And also, what is the driver that is actually seen an increase of 6% And then the second one is around just going back to the capacity comments. Just now today, I feel as though I was talking about cutting capacity into winter. Are you seeing any initial discussions from airlines talking about taking capacity or optimizing it as you go into the winter schedule? Thank you.

I'll address your questions. With respect to winter capacity, no change to our guidance so far. We took into account information that that we had at the moment in time that we updated our case, our forecast for this year, that took place in June. And so far, that's the guidance for this year. With respect to your first question, I think it was related to cost and security cost, if I understood you well. And basically, what we have, you know that new contracts were signed by the company some months ago. And what you are seeing is basically in our P&L the consequences of those new contracts. And we are having cost increases in absolute terms and also because of the new regulation, training, potentially new staff joining those companies. and more people because of the increasing activity, perhaps also some construction works in order to have the new machines for screening purposes, that's resulting in two cost increases in security. With respect to specific guidance for next quarter and the quarter after that one, We don't provide that guidance, as you know. I think we would stick to the kind of EBITDA margin that we set at the moment in kind of the strategic plan, sorry, back in March with respect to how we see the next years. Thank you, Satish. We can move to the next question.

Our next question comes from the line of Andrew Lovenberg from Barclays. Please go ahead.

Hi there. Thanks for your fine answer on M&A. You look at everything. I understand that. But will your enthusiasm to look at external assets be constrained in any way by the diversion of resources, management resources, potentially financial uncertainty relating to the current political situation will there be any interplay between the politics and your external M&A and then the next question and again forgive me it's going to reflect my great ignorance of the political process in Spain but the agreement that's been announced relates to Catalonia I think but were anything to proceed in terms of actions Would that require passing in the Spanish federal parliament? Would that require passing in the Catalan parliament? Would it require in both? What would be the political steps for anything to actually happen? I appreciate you don't want to speculate, but can you just help us understand from a small island here how the politics works going forward?

Regarding the first question, I will be crystal clear, nothing of, there's no novelty concerning the basic aspects of the company and its strategic objectives, no change at all. So nothing that has recently happened, including yesterday publication of this agreement and nothing else will change our strategy. And this includes the M&A. So not at all the publication, the leak of the agreement yesterday will affect our M&A stages, our M&A decisions. Not at all. And concerning your second question, I think that I will not be of much help because this is why I have insisted and as you can deduce, when I have many times said that the agreement does not have a univocal development, I mean I have thought a little while what the best words to describe the position of the company are and I think univocal means univocal and we are saying that the agreement does not have a univocal development and this includes the aspects you mentioned. we cannot know so far and that's why we have to wait and see and our obligation is to be ready to very fastly have a position of whatever developments if these developments take place, which is a thing that we don't know. As I said, if these developments take place, which we cannot assure. Thank you. Thank you. We can move to the next question.

Our next question comes from the line of Dario Moliani from BNP Paribas. Please ask your question.

Hi, three questions for me. The first one, sorry to go back to this political agreement. I mean, political noise is not something new. There was discussion already a year ago last summer about potentially spinning off the airports in Catalonia. So why, in your view, the board took new actions yesterday following the leak of the political agreement? Is this agreement really increasing the risk for AENA? And if so, why, in your view? Second question is on the commercial revenue, in particular, especially shops, where the fixed and variable rent of passengers in Q2 was down around 2% in a year. Why the drop? Third question on other operating expenses. which were up almost 17% year-on-year in Q2 after reboot Q1. Why there was such a large increase? And does this increase include the provision for the DS7 that you mentioned about?

Thank you. This is Maurizio Lucena again. Well, concerning your first question, I would like to explain our yesterday's reaction in plain words. I think that no member of the board of directors of IENA, including myself, is impulsive. taking into account what we knew, we analyzed it carefully, coldly, and we reacted, and of course with my leadership in this issue, as best as we considered appropriate. So this is what I can say, I mean, Yesterday, Aina's yesterday response was, after a careful reflection, was the best one I and the board considered. Thank you, Mauricio. Hi, this is Ignacio speaking. I think your second question was related to the performance in the business line of SOPs. Let me start just highlighting that category from a sales standpoint. If I remember well, the growth in sales was around So from performance, consumers, passengers, we don't have any concerns. If we look at sales per box, average transaction value or number of transactions, that category is performing well. What has happened on the revenue side is that because of the straight lining, the multi-year straight lining, last year we had a positive adjustment and this year that's new. Two, last year we have some extraordinary revenues there and this year we haven't had any. And also we had an adjustment, a negative adjustment because of some minimum annual guaranteed rents that result into a negative adjustment in this year. So it's not something related to performance so far. more to extraordinary movement last year and some negative adjustments. Even if you look at sales, the performance is very satisfactory. If we look at what the commercial team is doing in the terminals, They are adding space, new concepts, and so far so good. I think your third question, Mario, was related to cost. And at the INA level, I want to think on other operating expenses because you referred to the provision that I explained in my remarks. Thanks. That provision is part of the other category. It's a legal provision and it's basically because we are anticipating in a court proceeding that we are having in one specific category that the result of those court proceedings could be against the company and therefore we decided to mark for that provision of 14.8 million euros. is that there have been other movements going up. We are seeing cost increases in insurance. We are seeing cost increases in some of our contracts. Most of the contracts that we are renewing for similar scopes are resulting into cost increases. That's something that we have said with you in the past, and what has happened this quarter is exactly that, that the result of those new contracts is being seen more in the P&L. than in the previous quarter because of some extraordinary movements and also because of the more traffic intense activity that we have because of the second quarter nature. And that would be my answer, Dario. If that's okay, we can move to the next question. I'm happy to follow up later on. Thank you.

Our next question comes from the line of Jose Arroyo from Santander. Please go ahead.

Good afternoon. Three questions. The first one is for the chairman. I must admit I was a bit surprised with the timing that night, and I understand that your responses so far have been holistic in nature about the whole agreement. But I wanted to understand and ask you, if there is not anything positive in the agreement. And specifically by this, I mean I read that there is an agreement to transform Barcelona into a hub airport, and my understanding would be that that would be good news for AENA, more CAPEX, better airport. So that would be my first question. And my second question is on the regulated CAPEX for AENA in Dora 3. In March, you told us that the regulated CAPEX should be around, or at least, But we have seen several airports reaching their nominal passenger capacity, and I wanted to ask you if these at least 5 million capex may need to be upgraded, given how strong the traffic is performing. And if you can please remind us on when the other three consultations will start next year. And lastly, and sorry if this is just a matter of nuance, but I wanted to ask you about M&A in a different way. We are seeing some M&A transactions in Europe being completed at very high multiples, in some cases up to three times higher than AENA's own multiples. And I wanted to hear from you if this is a good environment for AENA to deploy capital. Thank you very much.

This is Mauricio Lucena. Regarding the first question, yeah, I understand completely your angle. You're right that we have so far concentrated on using the wording or the words of a former Chairman of the Federal Reserve, the unknowns. We have been concentrated on the unknowns. It is true that the last government of Catalonia opposed with its political position the expansion of the Barcelona airport. We don't know so far what the new government will do because we still, we do not have so far a new president of Catalonia. This future president of Catalonia has not appointed its team, so we don't know. We don't know who will be the next president of Catalonia and her team. What is true is that we come from a very, let's say, solid no to the expansion of Barcelona, and this cannot worsen anymore. So, in the future, it's a matter of how you calculate the probabilities, but of course, let's say, the average of the newest scenario for the expansion of Barcelona is at least just using statistics and mathematics is of course on average in the forecast a little bit better at least. And this is true, this is true. I get what you were asking. Thank you. Jose Manuel, with respect to your second question, this is Nacho speaking. We are not saving the information that we provided to the market on CapEx for Dora 3. That was an estimate, an estimate at a rough order of estimate for Dora 3 at that moment in time. That's how we explain it. We are in the middle of Dora 2. Of course, we are working. We are the different CAPEX programs. The team will be working the second part of the year and consultation will start next year. So there is no change with respect to that information provided back in March, Jose Manuel. With respect to your question on M&A and multiples in the private market, I think the result of any transaction that AINA could be involved in a hypothetical transaction will always be subject to the necessary return that the board and that we understand the shareholders will demand. So the multiple will be an output with respect to the potential valuation that AINA could entertain about any potential target. Thank you.

Our next question comes from the line of Fernando Lofvente with Alantra. Please go ahead.

Hello. Good morning to everyone. Just a follow-up for the chairman on the M&A side. If I look at the portfolio of the companies that AENA has acquired in the last few years, it's normally... companies in which the company maintains a controlling stake and that can be operated by IAM. I understand that you look to every single opportunity in the market, but just to confirm, if you decide to buy something, it's important that you control it and that you are the one operating the asset, right? The second one is on the traffic guidance. If I look at the H2 with this 8.3% growth estimate, Basically, what the guidance says, you mean it's a slowdown traffic basically during and after summer. And my question is, what would be the reason for this slowdown? It's basically a more tougher comparable base in 2023. Hence, we are going or we are trending to more normalized growth rates. Or is there anything different or special that we should consider? And lastly, it's on OPEX. If I look at the evolution of the other OPEX in your P&L, the trends in Q1 and Q2, it's basically flatties compared to previous year, with probably these increases in security and these new contracts being offset by energy. I'm not asking for a specific item, but what should be the trends to consider during the second half of the year, and probably also looking into 2025. Thank you so much.

Thank you, Fernando. This is Nacho speaking. With respect to your first question on M&A, what we have always stated as part of our strategic plan is that as an airport operator, we believe that transactions, operations in which we can have a significant stake, therefore controlling stakes, are stakes that make more sense because there are situations in which we can... We can influence the management. We can refer these airports. We can transform the assets. And that's something important for the company. Also from a sizing standpoint, consolidation, et cetera, we prefer investing in airports that are re-controlled and that can become part of our group. Also from that financial standpoint. With respect to your question on OPEX, on other operating expenses, sorry, Fernando. I think the trends that all of you are seeing, most of the items of that cost category related to our normal activities, maintenance, security, PRM, et cetera, that kind of trend is the one that I think we should expect. New contracts have been signed. And that trend taking into account the increase in traffic is something that we believe is what is likely to happen. That's why we said in the first quarter and what we have tried to say today. New contracts and activity and that's resulting into those cost increases partially mitigated as you were stating by energy prices but also negatively affected because of that provision that I was explaining earlier. With respect to traffic, I think your first interpretation is correct. We don't see anything special. It's basically the potential softening because of the very high traffic growth that we have seen in the previous months. We are ahead of other months, the busiest months of the year, and being able to have double-digit growth in those months would be something really, I would say, really challenging, really difficult, highly hypothetical. That would be my reaction, Fernando. Happy to follow up later on, but I would like to move to the next question. Thank you.

Our next question comes from the line of Victor Asitaris with Bernstein. Please go ahead.

Hi, Nacho and Mauricio. Good afternoon. I have two quick questions on Catalonia. The first one is to understand the big picture. Not , but the big picture is that talking about this organic law, , I think that the government needs approval of the 176 seats in the parliament. Okay, is that correct? Because taking in consideration that is going to vote against, that means that you need in order to vote in favor to pass through. This is the first one. And the second is that you view on your timing. You mentioned several times wait and see. What is the timing for the government to be through? and when this government is going to be formed. Thank you.

This is Mauricio Lucena. Concerning your first question, unfortunately, I'm not in a position to answer this question. I might just remind you all that this is the financial results presentation of AENA. So I will not opine on issues that do not have a direct link with AENA. I would, in that case, commit a professional mistake that, of course, I will at any cost avoid. On the other hand, the second question, Yeah, sorry, the timing. I was so much concentrated on the first question that I forgot the second one. Now I have recuperated it. Okay, yeah, I will not be of much help. This is why I said before that the potential development the framework of the agreement has many ifs, many ifs. So, again, I do not feel comfortable to elaborate any forecast on a timetable because I'm not able to do this, even if I wanted to. So I'm sorry because I cannot help you. Thank you, Victor. Operator, can we move to the next question, please?

Our next question comes from the line of Marcin Wotel from Bank of America. Please go ahead.

Yes. Thank you for taking my questions. A couple of technical questions. Could I please ask you about real estate? I appreciate it's a small business, but it's growing double digits. What is actually driving this? Have you actually developed any new properties? Because that business is substantially above pre-COVID. Second, on your capex, I think it was $460 million in H1. It looks to me quite high, actually. What do you expect in the full year? Could it be closer to a billion? And lastly, I can also follow up on Catalonia, if you allow me. Could you talk a little bit about the relationship that you have had with the government of Catalonia over the last years and decades? What is their vision for airports, for the role of tourism, environmental issues, long haul versus short haul? Obviously, we know the story about expansion of Barcelona Airport. That has not been progressing very much. But is your impression that they have a different vision for the role of airports than perhaps the government in Madrid? And I appreciate it's different governments which are changing all the time. But if you could provide some high-level comments on that, it would be highly appreciated.

Well, I will take your last question. Again, it would be a mistake that we speculated on what Catalonia as a whole thinks about any issue. I think that at present the important thing is that there has not been yet elected a new president of Catalonia. When he or she is elected, this person will appoint a new government and then, but not before, then we will know what Catalonia, through its new government, thinks about many issues. So far, the only thing that we can clearly say as AENA is that we considered, along with the Spanish government, and this is very important, that it was the best thing to do to expand the Barcelona airport. This was... the proposal of AENA. This was simultaneously the proposal of the Spanish government. The Catalan government that is coming to an end considered it the other way. They didn't want the expansion of Barcelona. So that is why I said that simply applying a good mathematics to the forecast the average forecast scenario is at least a little bit better for us concerning the expansion of the Barcelona airport. And I can say nothing else. Thank you, Mauricio. Hi, Marcin. This is Nacho speaking. I'll try to address your last few questions on CAPEX. I think what I... Or perhaps we haven't been that clear that that's the capex figure for the total group. So it's not only AENA. So it's the consolidated capex figure for Luton, Brazil, and the whole Spanish network. With respect to your second question, sorry, that was the third. On real estate, the company has been very busy signing many new contracts. is increasing materially, and we have been signing contracts with logistics companies such as DHL, WGFS, Ground Force on Handling, DHL in Barcelona, sorry, DHL in Alicante. All that is resulting into increases versus previous year in the real estate line that is explaining that increase. Also, we are leasing RAM facilities to the handling operators because of the new contract. So the result of that is new activity, new contracts, contracts materially higher than the previous ones, and that would be the reason behind the increase that you are seeing in real estate.

Our next question comes from the line of Nicolas Mora with Morgan Stanley. Please go ahead.

Yes, good afternoon, gentlemen. I'm going to leave Catalonia on the side for now, but two quick ones, one on retail and one on tariffs. On retail, can you just update us on what's the share of the network or the store network, which is already fully renovated on the duty-free side, and what kind of sales uplift you're seeing on the new stores? And number two, on tariffs, I had in mind you were still – under-earning due to traffic mix variations, and you were due for compensation in 25. So is there a reason why you're not getting paid for that target miss distortion in that year, in particular with the 0.05 euro per pax increase? And I will leave it there.

Thank you, Nicolas. This is Max speaking. I'm not 100% sure that I understood your two questions well. I'll try to address them, but feel free to interrupt me if I'm not addressing them. With respect to your second question, I think the dilution that you are seeing in these first six months of 2024 will be recovered according to the end of the interim regime in 2026. So that's basically it. what the regulation establishes for the dilution or on the other side accretion according to the applicable law. The reasons are, as you were referring to, mainly related to traffic mix, growth in different airports, et cetera. So that's also part of what has happened in AENA in previous years, something a bit of a structural from our side.

I'm not sure you were, yeah. You were due for 94 million dilution. Sorry, I couldn't hear you, Nicolas. So you were due for 94 million catch-up on tariff dilution from 2023 to 2025.

Yeah, but we cannot recover. Sorry, now I understood your question better. Thank you for your comment, Nicolas. We cannot recover that dilution in 2025. Okay. That's what is not part of the tariff that we were discussing earlier in the meeting. because adding that dilution to the tariff of this year will go above the cap that is applicable according to the interim regime. With respect to your first question on duty-free, I didn't get your point on the storage.

The new Avolta contract gives them 12 months to refurbish the stores, which were really lacking investment. So you've been undergoing a fair amount of disruption. So I was wondering if you were seeing the first stores coming on stream and the kind of sales uplift results you were getting from the refurbished stores.

Yeah, construction activities, as you were pointing out, from a contractual standpoint, should be done. before the end of October, they are on track, and most of them will be even finished during the summer season. And that will allow us to have more surface, or the retail operators will have more surface, more products, and a better product mix with products with a higher price point that will allow us to have, hopefully, a higher range from that. That's why we have been operating – those contas have been operating, sorry, under minimal and unguaranteed rents for these first six months because of that. Basically, we haven't been able to trigger the available rents because of that situation. Okay. Thank you, Nicolas. Happy to follow up later on. I think that was the last question operator in our list, so I think we could put an end to it. to this results presentation for the first six months. And thank you very much to all of you from the chairman, CEO, the team, and myself. And happy summer break for all of those that are living for that. Thank you very much. Bye.

Ladies and gentlemen, that concludes today's call. Thank you all for joining the Mainland Disconnect.