Aena Sme S.A Unsp/Adr

Thank you for standing by. My name is Kate and I will be your conference operator today. At this time, I would like to welcome everyone to the ANA 3Q 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 1 again. Thank you. I would now like to turn the call over to Carlos Gallego, Head of Internal Relations. Please go ahead.

Good afternoon, everybody, and welcome to our nine-month 2024 results presentation. This is Carlos Gallego speaking. It's a real pleasure being with all of you today. Our CFO, Ignacio Castejón, will host the call together with myself. We are going to cover the main topics explained in the results presentation that is already available on our website and on the CNMV website, and we'll finish with a Q&A session. Without further ado, I give the floor to Ignacio. Thank you.

Thank you very much, Carlos. Hello, everyone. This is Ignacio speaking. I would like to have my very first words for all the people affected in some areas of Spain because of the extreme weather conditions. I would like to wish them peace and strength as they navigate through these very difficult times that they are suffering. As explained by Carlos, I will touch bases on traffic, P&L, cash flow, and the different business, and the different performance, sorry, of the main business lines of the company. And after that, I will have a Q&A session. So let's start with the key highlight section and on the traffic part. As I'm sure you have read over the first nine months of this year, INA recorded a total volume of passengers of 282.5 million passengers. That's a growth of 8.9% compared to 2023 first nine months. This increase has been particularly remarkable in our Spanish network, which reached 237.8 million passengers. That's a growth of 9.8% compared to 2023. If we look at our international activities, London Luton Airport handled 12.8 million passengers, a 2.7% year-on-year increase. I would also like to highlight the performance in Brazil. Our A&B subsidiary handled 11.7 million passengers, equal to an 8.5% year-on-year growth for that portfolio of airports. And on the other hand, Bloco de Onze Aeropuerto de Brasil, what we call BOAB, has received 20.1 million passengers, being a growth of 3.7%. Looking at our total revenues, our total income, Ignite has delivered solid performance in these first nine months. We have reached 4.4 billion euros of total revenues, which is an increase of 16.3% year-on-year, or 617.6 million euros compared to the first nine months of 2023. This growth was primarily explained or driven by our aeronautical revenues and our commercial revenues, increasing by 14.6% and 16.6% respectively. With respect to our total cost during this period, during these nine months, our total consolidated cost amounted to 2,368.1 million euros. That's an increase of 4.4% compared to the same period of 2023. Removing or excluding some non-recurrent or extraordinary movements, for example, the consolidation of BOEB, the drop in energy prices, impact of construction services and the accounting, sorry, of these construction services, that increase would have gone up to 6.4%. With respect to our EBITDA, Hyena has achieved a consolidated EBITDA of 2.6 billion euros. That's an increase of 26%. If we look at the margin, we have nearly achieved an increase of 500 basis points. So the margin of EBITDA has moved from 55.9% to 60.6% for consolidated EBITDA. Looking at net profit, we are very close to the 1.5 billion number. We have delivered 1,449 million euros, resulting in an increase compared to 2023 of 27.3%. Let's have a look at our commercial activity. We always strength the activity, the commercial activity, looking at the sales, what happens, the amount of sales of our tenants in our airports, and basically the increase in these first nine months of 2024 has been 11.6% higher than traffic, and the increase in sales per passenger is 1.7%. All the main categories of the company, such as duty-free, specialty softs, F&B, car park, car rental, advertising, VIP, in all those activities, sales have increased more than 10%. When we look at the activity, our tender activity, sorry, what we are receiving is very attractive proposals You can see in the materials uploaded by the company that the max related to specialty softs for all the tenders that we have carried out these first nine months have recovered 121%. for 2024 compared to 2023 and up to 133% for 2025 compared to 2023. So a significant increase. A very similar trend. We have seen a very similar trend for food and beverage. We have carried out 33 for tenders. of which 15 tenders have been awarded, and we have seen increases in 2024 and in 2025 compared to 2023 of 126% and 143% respectively. So very promising awards. When we look at the different business lines and the performance from an EBITDA margin standpoint, all the segments of the company from an EBITDA margin standpoint have improved. For example, aeronautical segment EBITDA margin have improved from 47.4% to 51.4%. Commercial segment, we are already at 83.2%. Real estate services, a significant increase to 78.1%. And on our international segment, we are very close to 45% for EBITDA margin. Let's move to traffic after we have covered these key points. With respect to traffic, as I was saying earlier, we have observed a very strong year-on-year growth with an increase in Spain of 9.8%, bringing the total figure to 237.8 million passengers, as I was saying before. Domestic traffic rose by 5.7%, while international traffic increased by 11.8%. International passengers accounted for 68.5% of the total traffic, And European passengers represented 59.3% of this total traffic. These figures from a market share standpoint are very consistent with 2019 and 2023. And if we look at our main markets, you can see the different market share of the UK, Germany, Italy, France, and the Netherlands. You can see the market share of those countries in the slide number 10. I would like to share with all of you the growth that we are seeing in those main markets of Vaina. Growth from the UK has been 8%, Germany 10.1%, Italy 15.1%, France 8.2%, and the Netherlands 8.3%. So very, very sound growth rates for the main markets of Vaina. I would like to touch base on the long haul. Because we are seeing, as I was saying earlier, traffic for international traffic increased by 11.8%. And when we look at South America and North America, we have managed to deliver a growth of 15.7% and 17.3% respectively. So very high growth coming from the Americas, especially North America with 17.3%. in terms of our performance by uh from our airports our main airport madrid barajas had an increase of 10.7 barcelona el prad 11.5 and palma 72 7.2 percent so very very remarkable traffic growth from our three largest uh assets regarding the traffic from our main clients, the airlines. Our top airlines, our top 10 airlines, carry 172 million passengers. That's an increase of 8.3%. These operators, as I'm sure you know, concentrate around 72% of our passengers. The top three being Ryanair, Bolin and Iberia. I would like to highlight the growth coming from Ryanair, 9% in these first nine months of 2024. Moving to the next topic, to the next slide. Basically, I would like to note that in the third quarter of the year, Aina registered a dilution in regulated income amounting to 56.2 million euros. So the accumulated dilution in the first nine months of this year amounts to 124. As you know, this is an amount that according to our regulation, the company will be recovering in two years, in two years' time, being properly capitalized at the applicable WAC. With respect to traffic, and I will finish with this topic. Basically, as you know, we updated our traffic forecast back in June. I think it was June 25th. At that moment in time, we're updated to 306.7 million passengers for 2024. we don't see any need to change uh uh the number that we that we share with with all of you so growth for the year could be 8.3 percent looking at the at the next weeks of the net months we are seeing october delivering still delivering growth uh likely lower than the growth that we have seen through through summer but uh no no no material deviation from the numbers and the assumptions that we use for for this year with respect to the last the last quarter of this year And finally on load factors, very healthy load factors confirming the strong demand with load factors around the same levels of 2023 for these first nine months. Let's move to commercial. If we look at a slide, Twelve, basically the total commercial and real estate revenues for this period increased by 16.2%. That's a figure of very close to 1.4 billion euros. This performance is mainly driven by traffic. but also commercial yields. So if we look at these revenues on a per passenger basis, we have managed to deliver 5.9 euros per passenger in these first nine months of this year. When we exclude the multi-year straight lining and other adjustments that you can see in the last line of this table before the total ordinary revenue, basically the growth is 12.8%, delivering a growth on a per-pax basis of 2.8%. It's still very, very healthy growth rates for our commercial business. So in summary for commercial, during these first nine months, the commercial segment reached 1.1 billion euros of revenues compared to 911, the same period of last year, that's an increase of 20.9%. And with respect to real estate, the segment rose to 67.8 million euros, 67.1 million euros, sorry, that's an increase of 33.1%. So very, very, in absolute terms as well, very healthy results. I'm going to share some info, some details with you on the different business lines of the commercial segment. That's slide 13. I think the very first message with respect to duty-free activity, a very positive performance recording a growth in terms of sales of very circa to 15%, 14.8% year-on-year growth. Ordinary revenue growing at 38% compared to 2023, reaching 394 million euros for these first nine months of the year. With respect to F&B, very similarly. Growth in terms of sales of 11.6%. and delivering a growth of 8.1% in this first nine months of the year. With respect to some activities that we manage internally, VIP services and car parks. VIP services, as you can see in this slide, Keep delivering very material high growth, 30.9%. Basically, the reason for that increase is explained by the activity in the VIP lunges. that are increasing at 27% and is supported by higher customer volumes, around 24%, but also higher prices. We are witnessing higher penetration rates of this activity in our airports. Penetration rates in this activity are around 1.9% for these first nine months of the year. And with respect to car park, that is the other business that we manage, you can see in this slide 13 the increase in our ordinary revenue of, sorry, 13.5%, sorry, that is basically explained by the optimization of available parking spaces, more facilities available in Barcelona, Alicante, Ibiza, but also our improved pricing strategies. Let me finish with two pieces of information on car rental and advertising. With respect to car rental, performance remains very strong. Number of contracts keep growing. From a pricing standpoint, we are seeing some flattening. We are coming back from a situation in which prices were really up. And the main message on the car rental business is, as you know, the new contract, the new 179 licenses that were awarded back in spring of this year, those licenses are starting at the early, basically tomorrow. Tomorrow is the last day of the existing contracts. So we are hopeful that the new terms and conditions of these licenses will deliver more growth for Aina. And let me finish with advertising. Finally, advertising, that was one of the business lines that had, I would say, the most challenging recovery after COVID in this quarter. We have witnessed a very strong recovery delivering in this quarter compared to the very same quarter of last year, an increase of 23.8%. So advertising finally coming back. Let's spend some minutes on OPEX, on total cost. As you can see in slide 16, if I am not wrong, basically at group level operating expenses in the first nine months total 1.7 billion euros, so in an increase of 6.2%. Basically the main drivers behind this increase are related to the consolidation of BOAB, that is contributing 61 million euros, sorry. Higher staff costs across the group, more or less 10% year on year. IFRIC 12 consolidation accounting rules, cost increases in Luton, energy prices evolution helping. and and also some activities uh mainly related to the operations in spain such as security maintenance pmr services that are because of the new contracts and the very uh high levels very high levels of activity of aina through this summer are also increasing at a higher rates than than traffic if we look at uh the in a standalone basis so the activity only in the spanish network operating expenses reached the amount of 1,449 million euros. That's an increase of 7.2% and other operating expenses rose by 8.2% in this quarter, in line with the first half, with other operating expenses on a per-passenger basis decreasing 1.5 year-on-year on the first nine months of this year. When we, all these numbers are excluding, are taking into account the movement of energy prices that I'm sure you have seen in the information that we have had a reduction of almost 21% in our cost. If we exclude this effect, our other operating expenses in the Spanish network would have increased 12.1% in the first nine months of this year. Let's move to cash position, cash generated, sorry, cash position and net financial debt. Very briefly, in terms of cash generation, the group has showed a very robust performance in these first nine months of the year, with net cash generated by operating activities reaching 2.3 billion euros. This is an increase of 23.5%. Regarding the group debt, consolidated net financial debt amounted to 5.7 billion euros in the first nine months of 2024. That's at a decrease of 523 million euros. From a net debt standpoint, you will have seen that there has been a material reduction from 2.06 to 1.6 on our consolidated accounts. Basically all these movements happen on a very similar basis at parent level. I would like to highlight that in the next quarter we have some significant outflows. We have to repay financial liabilities amounted to 932 million euros and also some tax obligations, normal tax obligations, but those payments are happening in the last quarter. So you will see a reduction in our cash position because of those obligations happening in the last quarter of 2024. With respect to our hedging policy, no big changes from last year. Around three quarters of our debt remains as fixed debt and 26% is floating debt. Let's move to our international activities. So I'm referring to Luton, A&B, and BOAB. With respect to Luton, basically I would like to note that this airport delivered a growth of 2.7% in terms of passengers. So we reached the amount of 12.8 million passengers. That's a recovery versus 2019 of 92.3%. Total revenues grew by 16.7, increasing from 226.6 million pounds to 264 million pounds. From an EBITDA standpoint, we deliver also an increase of 10.5% and the margin set at 40.5%. If we cross the ocean and we go to Brazil, Let's start with AMB, the portfolio of airports for the northeast of Brazil, where the traffic reached a level of 113.8% compared to 2019 levels. This year we are seeing a growth of 8.5% in terms of traffic. This strong traffic performance is driving an increase in aeronautical revenues of 19%, and also is helping to deliver an increase in commercial revenues of 30%. EBITDA is growing from 193 million reais to 249 million reais, with a very attractive margin of 45%. If we were excluding all the IFRIC 12 accounting rules, this margin would be very close to 60%. you will see a very strong reduction in the capex uh capex uh that this company is is delivering because basically all the mandatory capex that were part of these concessions uh are are almost are almost finished let's let's move to our newest uh asset that is uh uh boab block the ontario port of brazil that delivered a a traffic growth of 3.7 percent as we were saying earlier total passengers for these first nine months of the year amounted to 20.1 million passengers. So we are already above 2019, 101.4% versus 2019. You will see in slide 23 that the total revenues for this company were R776 million. EBITDA recorded for this company amounted to R427 million. that around in euros we are consolidated 75 million euros so there's a there's an important contribution that is already coming from from this from this company and basically the capex figure is that that low this year because we we are just starting the execution works of some initial uh quick wings from a capex standpoint but the the material part uh of the capex program to refurbish the congonias airport will start will start next year And I think that's all from our side. So we have around 30 minutes left for the Q&A session. Happy to start the Q&A session. I would like to ask all of you that are in the line that just share with us one question per analyst or per person so that everyone has time to raise their question in the next 30 minutes. Thank you very much.

At this time, I would like to remind everyone, in order to ask a question, press star and then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Graham with Jefferies. Please go ahead.

Yeah, thanks very much. I'll just take the one. I was a little bit surprised not see any kind of change in the passenger outlook. Is there anything that we should be thinking about that's driving the slowdown that you're seeing from the summer into Q4 that you mentioned? And then on that, just in terms of your strategic plan and looking beyond 2024, when should we expect an update to that? Do we just wait until the full year or could we expect an update before then? Thank you.

Thank you, Graham. This is Ignacio speaking. With respect to this year, I think my message could be that we are not seeing information data and data points that make us think that we need to update the traffic guidance provided in June for this year. What we are seeing for October is a similar trend that the one that we took into account back in June when we were updating our guidance. And we respect November and December, very similar position. We might end a bit higher than when we were forecasting, but we are not changing the guidance given that we are not seeing material changes. With respect to next year, 2025, we are right now in the middle of all our budgeting exercise. That's a process that hopefully we, that's an internal process, sorry, that we should be done, that should be done, sorry, through November and getting the board approving our budget. in the board of December. So after that date, I think we will think about when is the right moment to share our traffic guidance for next year. Normally, as you know, we like to wait for information related to the next summer season, and that information is not normally available until very late January. So that's what I can say with you, Graham. Thank you.

Your next question comes from Elodie with JP Morgan. Please go ahead.

Hi. I have a question a little bit unrelated to results since I can only ask one. It's about the possible increased taxes on air travel in Spain. We've read about that in the press. I was wondering if you could give us your

inside or if you have any information on that and what could be the potential impact on traffic you think thank you hi elodie this is ignatius uh we don't have much uh information or we don't have different information to the one that is publicly available that uh that I'm sure you have read and we are following so that we are prepared and ready to basically understand the potential changes to the regulation. With respect to impact, I think it's too early. We don't have an estimate with respect to impact. You know that there is always sensitivity to prices. And if because of taxes, flight ticket prices, there is an increase in prices that could affect traffic. In the last two years, we have had a very strong recovery despite the material increases in the flight ticket prices. So let's see how things evolve. But I don't have an estimate to share with you, LOD, unfortunately.

Your next question comes from Satish from Citi. Please go ahead.

Hi, Ignacio. Yeah, thanks again for the presentation. My question is around the commercial activity, like on the tenders, right? If I look at the specialty shops versus the food and beverage, you made a good progress on the specialty shop in terms of signing the available tenders, which is more than 50%, whereas on the food and beverage, it's slightly lagging. Can you, like, help us understand, like, what's actually driving this slightly lag on food and beverage tenders versus the specialty? Yeah, thank you.

Thank you. This is Ignacio again, and I think I had understood your question, but please correct me if I'm not, or just let me know if I'm not providing you the right answer. With respect to F&B, from a performance standpoint, we have delivered, I could say, a very satisfactory performance. If we look at ordinary revenue, this has increased 8.1%. In terms of tendering activity, Basically, we are very satisfied. We have achieved very satisfactory results looking at the max proposed by the bidders. With respect to brands, what we are witnessing is a very significant increase in sales in the F&B activity when the brand is changed in the F&B activity, and especially when the unit is updated. we now have more spaces, more surface in the F&B activity through the network, delivering or accruing minimum and guaranteed rents. In terms of average transaction value, F&B is one of the categories in which we are seeing increases in the average transaction. And with respect to sales per packs, it's also performing better than 2023. So I think in general, we are... satisfied is that there are some units that are still pending to be finalized in Madrid. And we'll see the results in the F&B activity in Madrid when those units are finalized. But I would say that the results are promising. With respect to specialty shops, basically very similar trends. than F&B. I would like to highlight that what we are seeing is a trend in which all the different products offered by the tenants are being mixed between the three main categories. I'm referring to specialty shops, F&B, and duty-free. So we are getting more and more a situation in which all these shops or units are more hybrid And we are seeing more situations in which we have to analyze the results on an aggregate basis because the kind of consumption money spent in these shops, sometimes you get a bottle of water in the duty-free area, but you also got F&B in the duty-free area because we are adding, as I'm sure you have read in the documentation, F&B offers in those shops. So I would encourage you to look at these three categories as a whole because the pattern of our passengers with respect to this area and our tenants and how we are basically allocating our offer to these categories is becoming more and more hybrid. I think that would be my comment.

Thanks, Ignacio. That's very clear.

Your next question comes from Andrew with Barclays. Please go ahead.

Oh, hi. Can you just update us on what your thinking is around external assets? What are the ones of interest? Are you actively pursuing the regional airports available in the UK, or are there other assets on the block that you're chasing at the moment, or investigating at the moment?

Hi, Andrew. This is Ignacio. As I'm sure you will understand, companies don't talk about any project publicly. With respect to our capital allocation, I think we have been very clear on our strategic plan that there is an intention of the company to look at potential opportunities in order to increase a bit our Consolidated EBITDA contribution from 10% to 15%. We have always said this is not mandatory, this is not an obligation, it's just an intention, a soft goal, always subject to finding the right opportunity at the right price. We are the largest airport operator. We look at opportunities globally always with those criteria. Having said all that, we are very busy these days trying to deliver the CAPEX program in Brazil, trying to get all the CAPEX program and the refinancing of the upfront payment in Brazil being accomplished in the next months through early 2025. That's one of, I would say, top one priority when we look at the international activity. That would be my answer to you, Andrew. You know there is an intention to increase, but we will always be subject to finding the right opportunity at the right price, and we will scrutinize any potential transaction that in a very calm way to avoid wrong decisions for our shareholders.

Your next question comes from Marcin with Bank of America. Please go ahead.

Yes, good afternoon. Thank you for taking my question. I wanted to ask you for an update with regards to your airport in Catalonia. Is there anything new on the potential change in the governance model? for these airports. It is a topic that was extensively discussed during the Q2 results call and at the time you were indicating that was a key area of focus for management. So could you perhaps just tell us if there is anything actually happening and what are your expectations? Thank you.

Thank you very much for your question. There is no change with respect to what we stated. back in late July. Thank you, Carlos. Back to late July. No developments on that front, Marcin.

Okay, thank you.

Your next question comes from Harry with Deutsche Bank. Please go ahead.

Yeah, hi, thanks for taking my question. It might be a bit early, but on DORA 3, would you be able to provide any color on how you're thinking about cost inflation for the plant needed and what back you might look to get? Thank you.

I think your question was referring to cost indexation for the next quarter, basically.

Sorry.

Yeah. Okay, Dota 3. Sorry, I didn't hear you well. With respect to cost indexation in Dota 3, what do you mean by that? Sorry.

Sorry, it wasn't indexation. It was more about the cost inflation that you might be seeing for the next plan period and what you might have internally as your expectations on how cost might shape up for Dora 3. Any indications there?

Okay, sorry. I just wanted to clarify to avoid giving you an answer that is not useful for you. We don't have anything different to the current regulation that basically OPEX Regulated OPEX, sorry, will be reset for the next DORA 3. And basically that OPEX will be linked to the tailor-made index that is enforceable under our regulation. That's where we are. No more news. We are right now starting to work in DORA number 3. very preliminary works in a number of fronts. So it's too early to even have a position or feedback in a specific item of the next regulatory period. Thank you, Harry.

Thank you. Thank you. Thank you. Your next question comes from Daria with BNP Paribas. Please go ahead.

Hi. Good afternoon. If I look at the Spanish Air Force, Traffic in Q3 was up 7% year-on-year. OPEX was also up by a similar percentage. And if I exclude the benefit of a lower energy bill, the increase in OPEX was even higher. So basically, there was no operating leverage in the business. Could you explain why?

Hi, Dario. This is Iftathio speaking again. Let me check out what you were referring. When you look at the other operating expenses, let's use slide 17 so that we can talk about specific numbers. When we exclude, I think you were excluding electricity in your assumption, but let me start with you that in the third quarter, when we look at other operating expenses, you will see that in some categories increases were double-digit and increases of 20% or 36%, for example, for professional services. So in this specific quarter, we have had excluding energy and excluding electricity costs, an increase of 15%. We could say that this increase is higher than traffic growth, of course, but there are drivers behind that increase that I'm happy to share with you. As we have been explaining to all of you, in many of our contracts that we are renewing, we are being impacted by increases in cost because of inflation and because of new regulation. And that resulted into higher costs. The negotiations between the unions in many of the sectors between the unions and the companies in many of the sectors that provide to us services are negotiations that are resulting into a label cost being higher, that's affecting, for example, handling PRM services. If you look at the other category, we have there a couple of millions. We have got an increase of 20% in this quarter. That's contributing to the number or to the situation, scenario that you were explaining. There are some items that are explaining that increase. That is a couple of million euros related to a provision that we provided related to the DF7 that we thought that was the right approach. We have had increases in cost because of the activity in our, I would say, hottest months of the year related to passport control and the use of the remote gates by the company. We are experiencing as well increases in our cost related to insurance. Insurance costs are increasing. If you look at professional services, there is another significant increase that we have had this specific quarter, Lario, that is 36%, 4.8 million euros in this quarter. That increase is very atomized, but is spreading many different contracts that I would like to highlight. that every company, and INA is not exception, we are being encouraged and sometimes forced by regulation to invest a lot of money in OPEX related to technology and cybersecurity. So we are updating a lot of our activity on that front, on IT, and we are spending money there. On top of that, we are also using more consultants in order to have the company prep for the next King Canyon. And that's resulting into more cost. As you know, we have had a couple of very significant bids. For example, car rental that I was referring earlier in my opening remarks. And we have been using some health funds and consultants. So we have had some extraordinary items that have driven the other operating costs at a Spanish level a bit higher than in the previous quarter. I think if you look at through the nine months, you will see that we are at 12% increase, excluding electricity, at a very similar rate than the first half for the next month, excluding energy, that is 8%. So, yes, we have had, I would say, a higher increase in other operating expenses this quarter, Darío, but there have been some items there that have been extraordinary, but having said that, Darío, The cost-based, because of regulation, because of inflation, because of labor costs, et cetera, are going up, as we said at the beginning of the year. And that's something that we are trying to mitigate as much as possible. Energy prices are helping, but that's happening. I hope that I have addressed your question, Dario.

Thank you. Thank you for the details.

I will turn the call back over to Carlos Gallego for closing remarks.

Thank you, Kate. There are no any other questions, so I think we can put an end to the results presentation. Thank you very much to all of you. It has been a pleasure having the discussion today with you. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. Thank you so much. We're all clear. Thank you, Carlos and Ignacio. Have a great day.

Thank you, everyone. Thank you, Kate. Bye.

Thank you so much. Bye.