Aeroports De Paris Sa

Good morning and welcome to group ADP2024 nine months revenue conference call. Today's call will be recorded and if you want to ask a question at the end of the presentation, please press star one on your telephone keypad. Please limit yourself to two questions per analyst. I will now enter the call to Cecilia Combo to please go ahead. Thank you.

Cecilia Combo Thank you and good morning everyone. Thank you for being with us this morning for our nine months revenue publication. I am here with Philippe Pascal, Group ADP CFO, and Antoine Crombet, Deputy CFO. Philippe Pascal will first go through some prepared remarks before taking your questions with Antoine. Before we start, I remind you that certain information to be discussed on today's call is forward-looking and is subject to risks and uncertainties that could cause actual results to differ materially. For these, I refer you to the disclaimer statement included in our press release and on slide 28 of our presentation. And with that, I will hand it over to Philippe.

So thank you, Cécile, and good morning, everyone. Let's jump directly to slide three. You can see here the key figures for the first one month, with total revenue standing at 4.6 billion euros, up 11.6%. 7% compared to last year. Two key messages for this publication. First one is that the performance recorded so far fully supports our financial targets which are confirmed even if traffic in Paris this year is now expected in the lower part of the assumption range taken in February and which was 3.5 to 5% growth versus The second message for this publication is that we continue to develop the group as materialized by two Bolton acquisitions concluded recently and which extend extreme hospitality offering. Remember that we have also finalized the completion of the Guillengal merger end of July. Moving on to slide four with overall traffic evolution. Group traffic is 8% higher than last year, driven by continuing strong trends in our international asset. In Paris, traffic has been developing within our assumption range, up 3.8% in the first nine months. But, as you know, summer traffic was slightly less dynamic compared to growth rates recorded in the first part of the year. That was particularly true in July, and Olympic-related traffic did not offset the impact of travellers arriving in Paris. As commented in previous quarters, the comparison basis in the second half of the year is tougher, one notably because traffic with China increased from Q4 last year. Accordingly, we expect traffic growth in Paris this year to be the lower part of the 3.5% to 5% assumption range. Let's move on to slide six with a bit more granularity on Paris traffic. Traffic with mainland France show a decline of 5%, reflecting a structural decline, but with a better Q3. domestic traffic in August was just above that of last year due to the Olympics. International traffic is going by 7.2%. Traffic with the Middle East is down 5.4% due to the deterioration of geopolitical context. But on the opposite, traffic with North America continue to see a strong momentum, up 6.6% driven by both US and Canada Nevertheless, Q3 sees weaker growth compared to previous quarters. Traffic with Asia Pacific is 27.7% higher than last year. This is mostly driven by the recovery of traffic with China, which was still below 25% of pre-COVID level in the first nine months of 2023, and has been now around 60% recovery. Moving on to slide six, with traffic in international assets, which also a solid traffic growth of 9.5% driven by our two main international assets. As you can see on the left side of the slide, traffic growth of TAV airport was strong at 11.7% overall. TAV's international network of airports is the strongest growth with traffic up 19.3% and notably a solid contribution from Almaty where traffic is up 21.2%. TAV's airport in Turkey saw solid growth up 8.1% with international traffic growing 9.1% compared to the first nine months of 2023. On the right side, we can see Gemma Airport traffic. Gemma Airport traffic was solid, as well, up 9.8% compared to the first nine months of 2023. Here, as well, international traffic is seeing the strongest growth. Let's now move on to slide seven, with a focus on Eckstein Paris-Spain Pair Tax. It stands at 31.4%. plus 5.6% higher than in the first nine months of 2023. As expected, Q3 grew at a slower pace in the quarter, reflecting notably the rebasing effect driven by the reopening of Terminal 2A and 2C since May. Our premium terminals continue to deliver strong growth in FPP, sustained by growth in commercial traffic. Media and advertising have been performing particularly well. Revenue is held by close to 50%. This was given by increased advertising campaign ahead and during the Olympics. So, clearly, this outstanding performance will not repeat next year. And going forward, we expect lower revenue from advertising for next year. Travel assumptions also benefit from positive momentum thanks to Olympic merchandising and our expectation of slower roads in Q4 here as well. In terms of outlook, we keep an unchanged cautious tense linked to the internal headwinds which you are well aware of including the works in terminal 2E or K that are already ongoing and will intensify at the beginning of 2025, but also taking into consideration some signs of conjunctural softening. We nevertheless are in a position to confirm our guidance for 2025 of a spend-step-back 3% to 5% higher than in 2023 and continue the deployment and strengthening of the X-Time model to fuel future crowds. Indeed, you can see on slide eight that we are pursuing the development of X-Time with two Bolton acquisitions closed just a few days ago of Paris Experience Group, as was announced last July. And try that switch formally now. First, on Paris Experience Group, with this acquisition, X-Time's value proposition in hospitality is being extended to the entirety of the stay of tourists in Paris, with a strong belief that greater quality of service and greater experience create more value. We see significant potential, driven by notably premiumization and enrichment of the offering, Also driven by the enhancement of clientele from other countries like China or the Emirates by mutualizing with the external networks. But also driven by marketing of VIP hospitality services. Regarding our acquisition of Private Suites, the company operates exclusive terminal for VVIP commercial passengers with a niche market but with a strong potential. Private Suites employs close to 300 people and is present in four airports in the U.S., including Los Angeles and Atlanta, which are in operation, and Dallas and Miami under development. After the opening of the time-exclusive reception lounge in Paris last June, EDP becomes now a key player in luxury airport hospitality. We now operate an international network of exclusive terminals, well-positioned to conquer future opportunities in new geographies. Private suites give us access to an air-large database of qualified clients for VVIP offering and has proven successfully in high-quality operating process. Our short-term priorities to successfully welcome and integrate the Paris Fly-On Group and PrivateStreet team with Group EDP and start together this new growth journey. Moving on to slide nine. Revenue reached 4.6 billion euros in the first nine months of 2024, up 11.7% versus last year. Aviation revenue is up 87 million euros. The segment is growing 6%, reflecting the combination of traffic growth in Paris and the regulated tariff increase of 4.5% on average applied since April this year. The retail and services revenue is growing 137 million euros, driven by both the traffic growth and the solid set-per-pile dynamic. Real estate revenue segment is of 3.7% due to new assets and rent indexation close. Abroad, Tad Airport is growing 252 million euros, bringing the biggest contribution to revenue growth in the first nine months, while Jordan Airport is still impacted by geopolitical conflict. Let's move to slide 10. Here, let's have a focus on the latest budget development in France with the finance bill for 2025. First, on the infrastructure tax. As you know, the tax has been enforced since the beginning of 24. We are now no change introduced in the bill of 25, so no change. The tax impacts are opaque for around 130 million per year. It was 64 million euros in the first half of this year. and this tax going in the same proportion of EDP SA revenue. The regulated part of this OPEX can be offset with the regulated tariff. We consider that the 2024 tariff increase implemented in April plus The proposed tariff increase for 25 will have fully offset regulated portion of the tax. The second item of this slide was the temporary income tax increase. According to the project, this additional contribution of the income tax will apply to 24 and 25 fiscal years only. We estimate the additional tax expense to range between 120 and 130 million euros in 2024, and between 45 and 55 million euros in 2025. I encourage you not to draw any conclusion of extrapolate this number on the group financial because the fiscal result is calculated in French gap and is subject to some accounting adjustments that can be very different from the operational results. So no extrapolation please. Offsetting this full regulated time is only partially possible because it is only a temporary measure and because the increase in the tax rate has a negative impact on the WAC. Therefore, limited the room for a tariff increase in spite of the decrease of the roadshed. So, we have at the same time a decrease in the roadshed and a decrease in the WAC, so the room of manoeuvre. to offset this increase is very light. The third item, the funding of security activities. As you know, the French state currently only cover 94% of the security costs borne by EDP. The finance bill provides that this coverage drops to 90%. It's just a project. It's a bill. The further 4% of costs borne by EDP would have an impact of around 25 million euros, and it's 25 million euros in the non-regulated scope, in the form of lesser revenue from security. So no direct offsetting is possible here. The fourth and last item in the proposed is the proposed increase of tax on plane tickets. This has no direct financial impact on EDP, but we will be sensitive to the potential negative impact on flight demand at the end of the day, and the negative impact on the competitiveness of Paris as an hub, and that our partner, all the airlines. So it is not possible for us to quantify this at this stage because it depends on price elasticity and only of price elasticity. So the finance bill is currently being discussed in the parliament and therefore still subject to modification until the adoption of the finance law at the end of December. And we are fully committed to try to decrease this impact. To conclude this presentation, a word on our outlook on slide 12. Our traffic assumption and financial guidance for 24 and 25 are confirmed. In particular, we expect traffic in Paris to grow this year in the lower part of the range, so very close to 3.5% hypothesis, and conclude to expect the group traffic to grow by more than 8%. Our target to deliver at least 4% growth in EBITDA in 2024 is also confirmed. Our CAPEX guidance is unchanged and confirmed. Investments are expected to ramp up slightly this year in price. We should spend around 900 million euros on average between 2024 and 2025, driven by infrastructure improvement as already outlined. All our other 23 and 25 targets are confirmed. And with that, let's open the line for the Q&A. Thank you.