Flughafen Zürich : Analysts‘ Presentation HY2020 (pdf, 3.29 MB)

Half Year Results 2020

Presentation to Investors & Analysts

Stephan Widrig, Chief Executive Officer

Lukas Brosi, Chief Financial Officer

August 21, 2020

Content

01 Business Update

02 Financial Update

03 Outlook

04 Q&A

05 Appendix

2

Traffic Development ZRH

Significant drop due to COVID-19

	Passengers (in million)
		2.4	2.7	2.7	2.9
2.1	2.0
2.1	2.0
		0.9	0.0	0.0	0.2
January	February	March	April	May	June
		2019	2020

	Air Traffic Movements (in thousands)
21.7		22.1	23.3	24.4	24.7
19.7
20.6	18.7
		11.1	1.9	3.1	5.0
January	February	March	April	May	June
		2019	2020
3

Update Business

		Seat Load Factor			Financial
69%	72%	76%	80%	77%	82%
72%	73%	57%			57%	Update
			20%	35%
					Outlook
January	February	March	April	May	June
		2019	2020
		Freight (in tons)			Q&A
35.1	36.4	42.2	37.5	38.1	36.7
33.3	34.7
		25.5		18.9	19.9
			12.2	Appendix
January	February	March	April	May	June
		2019	2020

Actions Taken

Response to COVID-19

Update Business

Zurich

International

Cash

• Operations: Temporarily closed parts of the airport (i.e. Dock A and E); enhanced safety and hygiene protocols to protect well-being of passengers, visitors and employees
• Operating Costs: Reduced personnel expenses through short time work and other cost reductions, such as maintenance or utility, due to closure of infrastructure; total ZRH cost saving vs. FY2019 of 10 to 15% anticipated (excl. concession accounting)
• Investments: Initial guidance for 2020 of CHF ~350m reduced by CHF ~100m; only projects where no or only minimal restart cost will incur were postponed; mid-term ZRH CAPEX outlook below CHF 300m p.a.
• Going forward: CAPEX and costs in line with traffic recovery, phased reopening of infrastructure, aim to realize sustainable cost reductions where possible
• Operating Costs: OPEX wherever possible reduced until recovery well advanced, mainly in terms of personnel expenses
• Investments: CAPEX for running concession where possible postponed; concession agreement for Delhi Noida International Airport will also be signed with delay
• Going forward: Negotiations with governments ongoing to restore the financial re-equilibrium due to COVID-19
• Bonds: Raised two bonds of CHF 400m (February) and CHF 300m (April)
• Credit facility: Drew credit line fully in March, already partially repaid in June
• Dividend: Suspended dividend payments for FY2019
• Liquidity: Liquidity at end of June above CHF 800m

Outlook Update Financial

Q&A

Appendix

4

Milestones

5

Milestones

Half Year 2020

Airport Charges

Aviation

Commercial

Activities

Real Estate

International

6

• Extension of charges period: Agreement with airports users reached at current levels
• Duration: Flexible mechanism, depending on cumulated return of regulated business
• Regulated return: New regulatory WACCs of 5.0% starting in 2021 (5.9% for 2016-2020)
• SWISS and Edelweiss: Liquidity support by Swiss government helps to resume full operations as soon as borders open and markets recover
• Government aid: Further support for aviation-related businesses, if necessary
• Minimum Annual Guarantees (MAG): Waiving of MAG during governmental imposed lockdown
• Store reopening: Most stores and restaurants on air- and landside are open again

• The Circle: Revenue contribution started in HY2020; pre-letting above 80%; public opening

in November

• Priora assets: CHF ~10m contribution in HY2020 to facility management revenues according to plan
• Brazil: Operational take over of the two new airports Vitória and Macaé at the beginning of 2020
• India: Preparation work progresses well; signing of concession agreement delayed due to COVID-19

Outlook Update Financial Update Business

Q&A

Appendix

Aviation

7

Aviation Business

Heavily impacted by COVID-19

The outbreak of the pandemic depicted unprecedented times in Zurich. Traffic came almost to a standstill; however, Zurich Airport always facilitated cargo services for continuity of supply chains, enabled repatriation flights and transportation of medical staff.

PASSENGERS

• -64.3% reduction in passenger volumes to 5.3m
• • Local passengers of 3.8m (-64.0%)
  • Transfer passengers of 1.5m (-65.3%)
  • Transfer share of 28.6%

AIR TRAFFIC MOVEMENTS

• Decrease in air traffic movements to 60,417 (-55.5%)− whereof line & charter movements 47,689

CARGO

Outlook Update Financial Update Business

Q&A

Appendix

• Cargo -36.1% to 144,526 tons

Flight Operations Charges

Agreement reached with Airport Users

• Start of		• COVID-19		• Negotiations
	hits Europe
negotiations
			completed
March • Regulator	Spring	• Flexible	July
• Signing of
takes part		mechanism
	for tariffs		agreement
as observer
	was needed

Negotiations with
the following	Other	…led to…
parties…
Represen-
	tatives

FOCA1

Observer

9

Key Points of Agreement

• Extension of current regulatory period which started in September 2016
• Airport charges unchanged except for minor structural changes
• 10% 'ramp-up discount' in 2021
• The regulated WACCs will be set at 5.0% starting in January 2021 (previously 5.9%)
• Goal is to implement adjustments of the extension on January 1, 2021
• Negotiation process will start again:
• • when cumulated regulated EVA2 since 2016 will be >=0; or
  • in January 2025

1FOCA = Federal Office of Civil Aviation

2EVA = Economic Added Value

Outlook Update Financial Update Business

Q&A

Appendix

Commercial Business and Real Estate

10

Commercial Business and Real Estate

Resilient Real Estate Business

Fixed contract real estate business is performing in line with expectations and shows only minor shortfalls in rent.

The commercial business, which is typically structured as a revenue share with a Minimum Annual Guarantee (MAG), shows lower rental income. Negotiations are held on a case-by-case basis to find a mutual agreement in terms of MAG.

COMMERCIAL BUSINESS

• Commercial turnover -55.5% to CHF 127.3m
• • Airside -65.7%
  • Landside -40.8%

REAL ESTATE

• Real estate revenues increasing due to acquisition of Priora real estate portfolio in December 2019

Outlook Update Financial Update Business

Q&A

Appendix

The Circle

Tenants are moving in

Pre-letting Development

Financial Update Business

~75%

		>60%	~66%
~60%

>80%

>85%

Outlook Update

August 2018

March 2019

August 2019

March 2020

Currently

Target Year End

New Tenants signed this year

Q&A

Appendix

International

13

International

Concessions also impacted by COVID-19

Significant reduction of traffic starting in mid March due to COVID-19. All majority owned international concessions remained open and operated on minimal capacity.

BRAZIL

• Florianópolis
• • Reduction of workforce by around 30%, hiring freeze
  • Process to request financial re-equilibrium (force majeure) initiated with regulator
• Vitória/Macaé
• • Postponement of capital investment obligation to 2021; successfully secured long-term financing without corporate guarantee; operating on minimum capacity, hiring freeze
  • Process to request financial re-equilibrium (force majeure) initiated with regulator

CHILE

• Terminal expansion in Iquique as planned; completion at end of 2021
• Possible extension of concessions due to variable concession duration

INDIA

• Preparation works ongoing for Delhi Noida International Airport; concession agreement not signed yet

Outlook Update Financial Update Business

Q&A

Appendix

Content

01 Business Update

02 Financial Update

03 Outlook

04 Q&A

05 Appendix

15

Declining Revenue and Profit

Half Year 2020

Revenue (in million CHF)

•	Declining revenue	588
	numbers as a result of	543
	COVID-19	310
• Further lowered by less		307
	international CAPEX
	(concession accounting)
		HY19	HY20

EBITDA (in million CHF)

	Revenue Split (in million CHF)
• Not all revenues correlate	588
directly with traffic	227
development	310
• Decline in non-aviation		177
revenues of 22.3% (excl.	315
concession accounting)	130
Aviation	Non-Aviation	HY19	HY20

Consolidated Result (in million CHF)

Outlook Update Financial Update Business

• Reduction in EBITDA of	304
65.5% due to significant
less revenues
• Cost reductions did not
offset lower revenue		105
figures due to high
portion of fixed costs	HY19	HY20

Concession accounting

16

• Higher depreciation and amortization coming mainly from additional real estate
• High operating leverage with large amount of fixed costs led to a net loss

143

-28

HY19HY20

Q&A

Appendix

Lower Non-Aviation Figures

Half Year 2020

Commercial & Parking (in million CHF)

• As a result of the	121
lockdown, all commercial
revenues are lower		73
• Due to the MAG, drop in
commercial revenue was
less significant than
traffic numbers	HY19	HY20

Revenue from Services (in million CHF)

Facility Management (in million CHF)

•	Higher fixed rental		69
	income due to acquisition
	of additional real estate
	in December 2019	63
•	Initial contribution of The
	Circle
		HY19	HY20

International Revenue (in million CHF)

Outlook Update Financial Update Business

•	While communication	22
	services were almost flat,
	the catering and fuel		15
	charges business
	dropped because of
	COVID-19
		HY19	HY20

• Concession accounting considerably lower since international CAPEX postponed
• Revenue decline mitigated from new airports in Brazil

68

24

2320

HY19HY20

Q&A

Appendix

17

Concession accounting

Cost-Cutting Initiatives Working

Half Year 2020

Personnel Expenses (in million CHF)

• Implementation of short-	106
time working hours in mid
March to receive partial
unemployment insurance
compensation helped to		94
reduce salary costs
	HY19	HY20

Maintenance & Material (in million CHF)

• Because of closure of	19
parts of the airport,
maintenance and		13
material costs have
decreased by 32%
	HY19	HY20

18

Police & Security (in million CHF)

• Reduced orders for the	61
	Canton of Zurich police
		50
	force resulted in lower
	costs
•	Other security costs
	could be reduced as well
		HY19	HY20

Total Operating Expenses (in million CHF)

• Large decrease of total	284
	206
OPEX due to less
concession accounting	239	202
and cost-cutting
initiatives taken in ZRH
as well as internationally
	HY19	HY20

Concession accounting

Outlook Update Financial Update Business

Q&A

Appendix

Financial Key Ratios

Half Year 2020

	Net Financial Debt / EBITDA (excl. noise)
•	Net Financial Debt	2.8x
	stands at CHF 1,225m
	1.3x
	HY19	HY20

Operating Cash Flow (incl. noise, in million CHF)

•	Significantly lower net	201
	profit led to a reduction in
	operating cash flow of
	around 36%		129
		HY19	HY20

Outlook Update Financial Update Business

ROIC (incl. noise, in %)

• Lower profit numbers led	9.3%
	to a drop in LTM* ROIC
	from 9.3% to 4.0%
•	Invested capital higher
	mainly from purchase of	4.0%
	real estate

Free Cash Flow

• Lower cash flow numbers coupled with high investments in ZRH (i.e. The Circle) reduced free cash flow generation in the first half year

(incl. noise, in million CHF)

1

-74

Q&A

Appendix

HY19	HY20
* LTM = Last twelve months

19

HY19HY20

Group CAPEX

Half Year 2020

The Circle ~CHF 72 million

New Baggage Sorting System ~CHF 30 million

Total Group CAPEX of

CHF 211 million

Restoration Maintenance Area ~CHF 14 million

Expansion of Landside Area ~CHF 13 million

20

Outlook Update Financial Update Business

Q&A

Appendix

Content

01 Business Update

02 Financial Update

03 Outlook

04 Q&A

05 Appendix

21

Outlook

Guidance 2020

2019 Actual		2020 Guidance
Passengers ZRH	31.5 million	• Approximately 10 million passengers assuming a recovery mainly in Q4 2020
Revenues	CHF 1,210 million	• Flat tariffs in 2020
		• Commercial revenue based on Minimum Annual Guarantee (MAG), no rents
		collected during lockdown and individual agreements with partners on airside for
		time with low passenger volumes
		• Increasing revenue from facility management
		• Lower car parking and international revenues expected
Operating expenses	CHF 568 million	• Reduction of 10−15% (excl. concession accounting)
Consolidated Result	CHF 309 million	• Expected to be negative
CAPEX ZRH	CHF 360 million	• CHF 250−300m (incl. The Circle)

Guidance reflects a slow but steady recovery and does not take into consideration new border

closures, additional travel restrictions, new quarantine requirements or lockdowns

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Outlook Update Financial Update Business

Q&A

Appendix

Mid-Term CAPEX Roadmap Outlook

Zurich and International

Zurich		• Total CAPEX of CHF 250m to 300m p.a. expected in Zurich going forward
		• Maintenance CAPEX accounts for around CHF 100m to 150m p.a.
		• Regulated CAPEX estimated to account for roughly 60%
		• Mid-term CAPEX is subject to traffic development and economic conditions
Brazil		• Florianópolis: New terminal was opened on October 1, 2019; limited CAPEX expected going forward
		• Vitória and Macaé: Total CAPEX of roughly CHF 80m expected from 2020 to 2024
Chile		• Antofagasta: No notable infrastructure investments are anticipated through to the end of the
		concession
		• Iquique: Total expected investments in airport infrastructure of approximately CHF 40m in 2020 to 2021
India
		• Delhi Noida: Total investments of roughly CHF 650m expected until 2024; peak in 2022 and 2023

Compared to pre-Corona,mid-term CAPEX has been postponed or reduced in Zurich as well as

internationally

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Outlook Update Financial Update Business

Q&A

Appendix

Content

01 Business Update

02 Financial Update

03 Outlook

04 Q&A

05 Appendix

24

Corporate Calendar

Contact Information

• August 25, 2020
  MainFirst Transportation Conference (Virtual)
• September 29/30, 2020
  Santander Infra Conference (Virtual)
• November 24, 2020
  Deutsche Bank BLT Conference (Virtual)
• November 25, 2020 Kempen Conference (Virtual)
• March 12, 2021
  Publication of full year results 2020

Investor Relations Team [phone] [e-mail]

25

Lukas Brosi

Chief Financial Officer

Stefan Weber

Head IR, Treasury & Risk Management

Marcel Heinzer

Senior Financial Analyst

Outlook Update Financial Update Business

Q&A

Appendix

Content

01 Business Update

02 Financial Update

03 Outlook

04 Q&A

05 Appendix

26

Liquidity and Debt Overview

As of June 30, 2020

Liquidity (in CHFm)

Committed Credit Facilities	CHF 160m
Total utilization (incl. guarantees)	CHF	75m
Available short-term credit facilities	CHF	85m
Cash balance (excl. AZNF) at June 30, 2020	CHF	810m
Total liquidity (excl. AZNF) at June 30, 2020	CHF	895m

Debt Composition (in CHFm)

by maturity	by currency	by category
	9%		4%
		9%
19%
81%		91%	87%
Short-termLong-term	CHF	Other	Bonds Bank Loans Other

Bond Maturity Profile (in CHFm)*

	500
CHFm	400
300
In	200
	100
	0

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

Net Debt / LTM EBITDA (excl. noise)

3.0x

EBITDA

2.5x

2.8x

1.5x

1.8x

2.0x

/

1.0x

Debt

0.5x

1.0x

0.9x

0.9x

Net

0.0x

FY2016

FY2017

FY2018

FY2019

HY2020

Outlook Update Financial Update Business

Q&A

Appendix

Aim to reduce debt to levels prevailing before COVID-19

* Only shows bonds denominated in CHF

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Zurich Airport at a Glance

Diversified Airport Operator

Update Business

AVIATION / REGULATED

2019 revenue of CHF 661 million

• "To satisfy the demand for direct connections to

the world's major cities"

• Regulated business with profitability restrictions;

not subsidized

• Premium mid-sized hub with operating license

until 2051

• Land and infrastructure wholly-owned

by Zurich Airport

• Service to 203 airports in 69 countries

• Economic importance: 275,329 air

NON-AVIATION / UNREGULATED

Commercial, Real Estate & Services 2019 revenue of CHF 422 million

• Leading commercial center

• Average concession rate of >22% of total commercial turnover

• Commercial revenues driven by passenger numbers (airside) and commuters, employees, shoppers etc. (landside)

• Revenue contribution ~40%

STRATEGIC GROWTH PROJECTS / UNREGULATED

Outlook Update Financial

	traffic movements and 451,827t freight
•	Passengers: ~31 million/year
•	Revenue contribution ~60%

The Circle

2019 investments of CHF 126 million

• Business and lifestyle center
• Overall CHF 1.2 billion investment, 180,000m2 lettable area and 6,500 jobs
• Co-ownedwith Swiss Life AG (49%)
• Expect knock-on effect on existing commercial business from additional commuters and visitors
• Construction completed; opening of main area in November 2020

International Business

2019 revenue of CHF 127 million

• Long-termgrowth potential in international markets as airport developer and operator
• Diversification of revenues to strengthen future profitability
• Financial capacity for investments with focus on airports in Latin America and Asia
• Profit target contribution ~15%

Q&A

Appendix

28

Group Key Figures YTD
Income Statement
	Including noise	Excluding noise
in million CHF	Jan - Jun 2020	Jan - Jun 2019	Jan - Jun 2020	Jan - Jun 2019
Aviation revenue	130.4	315.4	126.9	309.9
Non-aviation revenue	180.0	272.6	180.0	272.6
Revenue	310.4	588.0	306.9	582.5
EBITDA	104.9	303.7	103.3	299.8
EBITDA margin (in %)	33.8	51.6	33.7	51.5
Depreciation and amortization	(123.3)	(115.9)	(121.5)	(113.8)
EBIT	(18.4)	187.7	(18.2)	186.0
EBIT margin (in %)	(5.9)	31.9	(5.9)	31.9
Finance result (net)	(12.9)	(3.7)	(11.6)	(8.1)
Associated companies	(1.6)	(1.8)	(1.6)	(1.8)
Income tax expense	5.3	(38.8)	5.1	(37.6)
CONSOLIDATED RESULT	(27.5)	143.4	(26.3)	138.5

29

Outlook Update Financial Update Business

Q&A

Appendix

Revenue Breakdown

Aviation Business

in million CHF

Passenger-related operations charges

Landing charges

Aircraft-related noise charges

Emission charges

Parking charges

Freight revenue

Total flight operations charges

Baggage sorting and handling system

De-icing

Check-In

Aircraft energy supply system

Other fees

Total aviation fees

Total other aviation revenue

TOTAL AVIATION REVENUE

Avg. landing charge / movement (in CHF)

30

Jan - Jun 2020	Jan - Jun 2019
73.5	209.1
18.8	42.4
3.5	5.5
0.9	2.0
12.3	13.2
3.3	4.2
112.4	276.5
8.6	21.2
3.2	7.4
1.4	2.8
1.0	1.8
2.2	3.1
16.4	36.4
1.7	2.5
130.4	315.4

623.7624.4

Outlook Update Financial Update Business

Q&A

Appendix

Revenue Breakdown

Non-Aviation Business

in million CHF

Retail, tax & duty-free

Food & beverage operations

Revenue from multi-story car parks

Other commercial revenue

Total commercial revenue

Revenue from rental and leasing agreements Energy and utility cost allocation

Cleaning and other service revenue

Revenue from facility management

Revenue from services

Revenues international

Revenues from construction projects

Total revenues international

TOTAL NON-AVIATION REVENUE

31

Jan - Jun 2020	Jan - Jun 2019
33.9	54.7
5.5	9.1
21.4	39.2
11.7	17.5
72.5	120.5
54.8	45.8
10.8	12.0
3.5	4.8
69.1	62.6
14.8	21.8
20.2	22.6
3.3	45.1
23.6	67.7
180.0	272.6

Outlook Update Financial Update Business

Q&A

Appendix

Cost Overview

Operating Expenses Breakdown

in million CHF

Personnel expenses

Police and security

Energy and waste

Maintenance and material

Other operating expenses

Sales, marketing, administration

Expenses from construction projects

Capitalized expenditure & other income/expenses*

TOTAL OPERATING EXPENSES

Whereof ZRH

Whereof international

32

Jan - Jun 2020	Jan - Jun 2019
94.0	105.8
50.4	61.2
9.5	10.3
12.7	18.8
22.1	27.7
19.4	20.9
3.3	45.1
(5.9)	(5.5)
205.5	284.3
185.9	224.6
19.6	59.7

Outlook Update Financial Update Business

Q&A

Appendix

HY2020 Alliance Share ZRH

Largest Alliances in ZRH

Alliance Share ZRH

Financial Update Business

Lufthansa Group

Star Alliance

Oneworld

Skyteam

Middle East

Carrier

6.7%

5.7%

5.1%

4.8%

4.3%

3.5%

						67.1%
						68.3%
						65.8%
						65.8%
			YTD Passenger Growth
-65.0%						Lufthansa Group
-64.4%					Star Alliance
-57.9%			Oneworld
-62.7%				Skyteam
-56.6%		Middle East Carrier

HY2020 HY2019

Outlook Update

Q&A

Appendix

Source: ZRH data warehouse, 2020

33

Lufthansa Hubs Passenger Development

One Year Hub Comparison (Jul 2019 - Jun 2020)

Lufthansa Hubs Passengers

20%

0%

-20%

-40%

-60%

-80%

-100%

Jul 19

Aug 19

Sep 19

Oct 19

Nov 19

Dec 19

Jan 20

Feb 20

Mar 20

Apr 20

May 20

Jun 20

ZRH

BRU

FRA

VIE

MUC

DUS

Source: ACI & ZRH data warehouse, 2020

34

Outlook Update Financial Update Business

Q&A

Appendix

Traffic Ratios

Seat Load Factor, Passengers per Movement and Take-Off Weight

Traffic Ratios ZRH

	80%
													135
	75%									77%	76%
								75%					Movement per Passengers
													Weight Off-Take Average
						74%	75%	73%		125	125
					74%
				73%				120				120
	70%
Seat Load Factor	71%	71%
							112				114
						109				67%
65%					107
			106						106	105
			103
		98
	60%	96											(tons)	(PAX)
								95	95
									93
								91
												90
	55%			84	85	86	86
		80	81
	50%												75
		HY/2010	HY/2011	HY/2012	HY/2013	HY/2014	HY/2015	HY/2016	HY/2017	HY/2018	HY/2019	HY/2020
				Seat Load Factor	Passengers per Movement	Average Take-Off Weight

Source: ZRH data warehouse, 2020

Outlook Update Financial Update Business

Q&A

Appendix

35

Passengers and Movements Development

Since ZRH Privatization

Historical Traffic Numbers

	35																				370'000
																				31.1	31.5
	30																		29.4
																	27.7			350'000
																	26.3
															24.9	25.5
													24.3	24.8
Total Passengers (in millions)	25
22.6								22.1	21.9	22.9
																330'000
		21.0						20.7
20			17.9			17.9	19.2
		17.0	17.3
																		310'000
15
10																				290'000
																			Movements(ATM)TrafficAir
	5																				270'000
	0																				250'000
		2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
				Local passengers	Transfer passengers	Transit passengers			Total Air Traffic Movements (ATM)

Outlook Update Financial Update Business

Q&A

Appendix

36

Disclaimer

Forward-Looking Statements

This document has been prepared by Flughafen Zürich AG for use in this presentation.

The information contained in this document has not been independently verified. No representation or warranty - whether express or implied - is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained therein. Neither the company nor any of its affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss arising from any use of this document or its content or otherwise arising in connection with this document.

This document does not constitute an offer or invitation to purchase or subscribe for any shares and neither this document nor any part of it shall form the basis of, or be relied upon in connection with, any contract or commitment whatsoever.

This document contains forward-looking statements that are based on current estimates and assumptions made by the management of Flughafen Zürich AG to the best of its knowledge. Such forward-looking statements are subject to risks and uncertainties, the non- occurrence or occurrence of which could cause the actual results - including the financial condition and profitability of Flughafen Zürich AG - to differ materially from or be more negative than those expressed or implied by such forward-looking statements. This also applies to the forward-looking estimates and forecasts derived from third-party studies. Consequently, neither the Company nor its management can give any assurance regarding the future accuracy of the opinions set forth in this document or the actual occurrence of the predicted developments.

By accepting this document, you agree with foregoing.

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