Aeroports de Paris SA (ADP) Earnings Call Transcript & Summary

Welcome to the Group ADP 2026 9-month revenue presentation. [Operator Instructions] I will now hand the conference over to Cecile Combeau, Head of Investor Relations who will begin today's presentation. Please go ahead.

Good morning, everyone. Thank you for joining us for our 2026 9 months revenue presentation. I'm here with Christelle Robillard, our CFO, who will go through some prepared remarks before the Q&A session. Before we start, and as usual, 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 performance to differ materially. For these, please refer to the disclaimer statement included in our press release and on Slide 26 of our presentation. I will now leave the floor to our CFO, Christelle Robillard.

Thank you, Cecile, and good morning, ladies and gentlemen. Thank you for joining us this morning. Let me first start with the key highlights on Slide 3. The first 9 months of 2026 demonstrated the resilience of our business model. Despite a challenging operating environment with geopolitical tension, software demand and operational disruption Group traffic remained broadly stable at 287 million passengers. In this context, consolidated revenue increased by 1.4% to EUR 5.1 billion. This growth was mainly driven by the strong performance of TAV Airports, and it shows the benefits of our international portfolio, which more than offset a softer traffic environment in Paris. Retail performance showed sign of improvement. Extreme sales per passenger reached EUR 31.1 despite a less favorable traffic mix and a weak luxury environment but with momentum improving during the year. We also achieved an important milestone in the Euro process. Airline consultation in September resulted in a majority positive vote -- following this important step, the draft agreement was submitted to the regulator whose bending opinion is now expected by November 18. Moving on to Slide 4 on profit. we saw varied trends across our platform since the start of the year. Starting with the bottom part of the slide, you can see that airport traffic increased by 2.6% year-on-year. This growth is notably supported by a rebound during the summer in spite of persistent inflationary pressures in Turkey. Conversely, in our other platforms, traffic is down. In Paris, the 0.4% decrease reflects operational disruption and softer demand environment observed in spring. Also, the impact on infrastructure works at Parly leading to capacity reductions. These works are expected to end in December. In Aman, traffic declined by 9.6%, but trends have recently improved compared with earlier in the year. Finally, traffic at GMR Airports was down 0.4% year-on-year, reflecting airline capacity reduction due to local operational constraints and broader global pressure. Overall, Tier ports traffic growth helped mitigate the impact of the challenging operating environment. Turning now to Slide 5. Ex time sales per passenger reached EUR 31.1 over the first 9 months. This remained slightly below last year level, but performance improved progressively throughout the year despite several headwinds. As commented in previous quarters, we faced a vehicle luxury environment works at Terminal 2EK, foreign exchange effects and a less favorable traffic mix. Importantly, we saw a gradual improvement in SPP during the year with the third quarter returning to growth compared with last year. This reflects both the resilience of our XT model and the gradual normalization of some of the headwinds that affected performance earlier in the year. In all, this gives us confidence in our ability to achieve our full year SPP objective of around EUR 32. Turning now to revenue on Slide 6. Looking first at Aviation in Paris, revenue increased by EUR 26 million. As mentioned previously, this reflects traffic trends commented earlier on mainly offset by revenue from higher fees in the first quarter and in PR fees all along the year. Retail & Services revenue was broadly stable, up EUR 3 million. in the hospitality subsidiaries and retail were largely offset by continued growth of regulated services. International revenue increased by EUR 44 million. Saviors growth is supported by its traffic, fee increases in Almaty, Ankara and services companies. AIG revenue remained impacted by the weaker traffic in Aman. Overall, our balanced business model enabled the group to keep delivering revenue growth despite a challenging global operating environment. Now let's go through the outlook on Slide 8. As you know, given the persistent traffic headwinds and based on traffic recorded over the first 9 months, Group ADP revised last week its 2026 traffic assumption for Paris and now we expect a slight decrease compared with 2025. As a result, the group expects recurring EBITDA for 2026 to come in at the lower end of the EUR 2.3 billion to EUR 2.35 billion range announced in July. This incorporates the benefits of the cost saving and efficiency plan, which are expected in the round of EUR 40 million to EUR 60 million. All other 2026 assumption and guidance remains unchanged and are, therefore, confirmed. The outlook we are providing today does not reflect any potential impact from the French finance bill currently under debate as its final provision has yet to be determined. Beyond 2026, let me turn to Slide 9 and the economic regulation agreement project. Following the positive outcome of consultation with airlines in September, the proposed era was submitted by the French state to the regulator on September 18. The regulator is expected to issue its bending opinion by November 18, subject to a favorable opinion and board approval the agreement would be signed thereafter and enter into fourth on January 1, 2027. As you know, the first tariff increase under the new framework would take effect on April 1, 2027. The era is a key milestone for group. It will provide the visibility needed to deliver the investment program and to support the competitiveness of the Parisian platform. When the regulatory framework is finalized, we intend to present in early 2027, our new strategic plan and same road map, setting out how we plan to create sustainable value for our shareholders and stakeholders over the coming years. That's all for our prepared remarks. Let's now open the line for your questions. Thank you.

[Operator Instructions] The next question comes from Dario Maglione from BNP Pariba.

Two questions for me. One on traffic. So this year has been quite weak in Paris. For your ERA proposal, you have proposed traffic growth of 1.9% CAGR over the next 8 years, yet we sit now, and we see no growth in Paris. So is this traffic assumption may be too optimistic given all this going on with jet fuel, geopolitics and so on. My second question is on retail. You mentioned there was some headwind in Q3 2026, like the works on Timok. Are the books like more intense now than last year?

Thank you, Dario, for your question. So regarding the traffic, indeed, we are suffering from some operational disruption and difficult macroeconomic context in 2026. For the rest of the year, we are expecting that the pressure we saw until now will continue. And so that's why we have reassessed our assumption for Paris with a slight decrease compared to 2027. Looking in the mid and long term, indeed, our Era proposal relies on a 1.9% traffic CAGR for the Era until the 2034. This is mainly based on the main factors that underpin this assumption is the commitment we have in terms of sustainable on fuel incorporation and the imports on the over cost, it will still have compared to a traditional fuel. That's why we had a technical debate with the regulator on this over cost. At the end of the day, the assumption we took is 3.5x higher cost for SaaS compared to traditional fuel. So that's why we revised upward compared to the initial proposal in December. It's difficult to know what will be exactly this precise assumption. But that's why we have built our Era proposal with factor adjustment that will enable to share finally a possible over performance or underperformance regarding the traffic compared with the initial trajectory with with airlines. So there is a band around the central scenario in which we share 75% first of the gap in revenue terms before moving to 50% thereafter. And in case of really a substantial deviation with the traffic, so ranging from plus or minus 10%, 2% plus or minus 8%, depending on the year and if 3 years in a row we are below or above this corridor, then it can lead to a revision the contract. So that's why we think there are all the protection needed to have a robust trajectory and and framework. Regarding your second question in terms of SPP. So clearly, we mentioned some headwinds through 2026. Part of those headwinds on the works in Terminal to EO. So this is not something new. We have already commented on that over the past months. So the work will continue through 2026 in 2 dimensions. Continue shifting and operating of the retail areas, leading to temporary closure and displacement of certain shops and areas, which in the at the end of the day, the performance slightly. There are still a milestone with the beauty and cosmetic areas, which is an important part of the performance. At the same time, there are also works on the airside areas that reduce the number of available boarding gates. So rerouting traffic to all hell and all -- it's difficult to quantify precisely the magnitude of this work on the level of SPP as a whole, but clearly, it remains. We are targeting a full normalization beginning of 2028. Thank you.

The next question comes from Eric Lemarie from CIC CIB.

I got 2 questions. First, on the political risk in France. -- in 2027, I was wondering could a new government review amended Council, the economic regulation agreement is supposed to start in January next year. And the second question on TAV, the Financial Times report in mid-October, if I'm not wrong, that Airlines flight has been lending at Antalya Airport and I understand actions prevent companies from Services. And I was wondering what was your take on this and if you see a risk here on that?

Thank you for those 2 questions. So first, regarding the political risk in 2027. So as you know, first of all, we are fully on track on our time line. So that means that we intend to sign the Era before year-end. So before and the presidential election in France. The economic regulation agreement is a contract, so binding both ADP and the French state. So in our view, a change of government next year, would not in itself allow the state to unilaterally amend its turn. So clearly, we are fully confident in the fact that it will have no impact on this -- on the Era once it is signed the main mechanism there are mechanism foreseen to revise or to review the main mechanism for that for potential changes is a 4-year review, which is conducted by the independent regulator and may involve at the same time, user consultation, so not the state. So all in all, once again, we are confident that there will be no impact. Regarding your second question about TAV and what the financial time reported. So you know that Taverport is committed to sanction compliance and maintain rigorous oversight rois entire portfolio of operations in more than 30 countries worldwide, in Turkey, Savara operate passenger terminal and concession agreement and does not have the authority to determine which airline may operate at the airport. So the relevant government and civil aviation authorities alone defined airspace access, traffic rates and slot allocation. So that's why in this context, Airport and its affiliates provide only the minimum level of services as required by local regulations and governmental contractual obligation imposed by civil aviation authorities without rerating in U.S. or EU sanctions with Cam. So that's why we don't -- we are fully compliant, and we don't expect any impact.

The next question comes from Andrew Lobbenberg from Barclays.

And can I come back to the retail, please? And the reiteration of the target of the 32 STP. That looks from our math to suggest that you expect a continuation and slight strengthening of the year-on-year increase that you saw in Q3 going into Q4. Is that a fair understanding? And -- what's driving that improvement as you just described how 2EK challenges continue. So what gives you the confidence that we will see this continuing momentum in 3Q? And can you just explain why we did get that momentum in 3Q. And then can I just ask a question coming back to the traffic, I guess. I think when you previously discussed the closure of Orly, you expected that quite a lot of that traffic would be recaptured by services that were being diverted to as has that not played out in the way you expected? Or looked at another way, how confident are you of the strength of all traffic once you've got full access to the runways.

Thanks. So beginning with the SPP guidance. You're totally right, there has been a sequential and progressive easing of several headwinds, and we have clearly since the beginning of the year, this gradual improvement. You remember that we first -- we first posted a declining of 5.7% in Q1 in terms of SPP, then it was broadly stable in Q2 and before returning to growth in Q3 with an increase of 3%. So this is an encouraging sign for the performance despite -- of course, the challenging environment that we know since we've not seen some event. So this gradual improvement makes us confident in achieving at the end of the day, spent objective of around EUR 32 in 2026. Clearly, part of the several headwinds we mentioned include adverse fixing effect. This was mainly the 1 weighed the more on the performance when we compare Q1 to Q1 2025, weaker long-haul traffic, those ongoing terminal tweak that I mentioned and a software luxury environment. Of course, on the geopolitical context with higher fuel prices also weighed on the performance. But -- all in all, we are confident and indeed to reach our annual objective. The hypothesis is that this growth will continue in Q4, but the usual seasonality of Q4 and the Q3 momentum that we saw clearly support this confidence in achieving our full year objective. Once again, the works in Terminal 2EK, even if it's a headwind, it's not the major one. among all the effects I mentioned. Regarding the traffic and specifically the impact of early work. So indeed, we had embedded in our hypothesis from the beginning of the year, the fact that there would be work in very early, both on only on airside areas in Sabres well as reform since August, which led to significant reduction of flight schedule in 2026. The words regarding on wafer will come to an end in December. Aircraft movements are broadly in line with our expectation. Indeed, load factors were slightly lower than anticipated. And there were also less transfer to CDG compared to what we initially expected. But overall, on the impacts of the work remain broadly consistent with what we have observed during similar infrastructure projects in the past and the latest airline schedule and traffic trends at Parilla fully reflected in our revised traffic outlook, which now I assume, as you know, and as I mentioned, the slight decrease in Paritraffic in 2026 compared with 2025. Thank you.

The next question comes from Cristian Nedelcu from UBS.

Could I ask you in today's environment, it franchises more than 5%. What are the arguments for locking in a 5.8% or around that allowed return for next 8 years? And secondly, if you allow me the early next year at the '27, '31 strategic plan, could you tell us the agenda is what are you going to talk about at that time?

Thank you. So thanks for those 2 questions. ending the first one, in terms of what level and the fact that indeed on the what level will be fixed for the entire period, whereas we are in the context of increasing tax rate. First of all, let me remind you that the range used by the regulator for its binding opinion will be the 1 updated at the time of the submission. So we made the exercise to update this range and compared to what we said at the end of July, it's now a range expected between 5.2% to 6.2%. So indeed, with our proposal at 5.8%, it gives a buffer to comfort our economic proposal. We believe that it would be misleading to assess the relevance and interest of Anera, solely through the length of the level of WACC when we consider the interest of signing an economic regulation agreement, we really believe that we have to consider all the overall framework included a tariff trajectory as you may recall. several protection mechanism, and I can come back and comment them deeper if needed. And lastly, reduce regulatory uncertainty resulting from this framework. Conversely, this framework and the question you are raising should be also assessed against the alternative scenario, what would be the alternative realistic scenario if we don't sign Era. And from that perspective, it will lead to greater regulatory uncertainty, reduced protection against adverse development, less visibility and could lead to suboptimal investment decision. So all in all, we are totally confident on the fact that the proposed agreement provides a robust framework despite the evolution in financing conditions. Regarding the agenda for 2027. So indeed, we have announced our intention to disclose the strategic plan which will be, of course, which will realize, of course, on the Era project on all the regulated activities, but it will be a broader exercise with will encompass all the nonregulated activities. We have not disclosed at this stage a precise agenda. So we are just -- we just intend to present it in early 2027. The plan will clearly focus on reinforcing operational and financial performance to reassess that we want to invest with discipline and create sustainable value across all the groups. But little early to tell more in terms of agenda and content of this plan. Thank you.

The next question comes from Max Dolby from Green Street.

My question is regarding luxury. So the presentation mentioned seeing some encouraging trend although we've seen French luxury stocks fall again this week. So looking beyond the conclusion of the 2EK works, how do you see the luxury business developing? And could you give us an indication of how much luxury contributes to SPP?

Thank you. So clearly, part of the -- in the 2 main elements that the gradual improvement of our SPP in Q3, there is the fact that there was a normalization of FX rate, but also indeed, as you mentioned, a gradual recovery of the French luxury brands, which are an important component of our SPP performance. Clearly, you know that in our part of our X strategy, we want to realize on those luxury brands and to reinforce premiumization of our retail area, but clearly, we do not disclose the precise impact of those luxury brands in the quantification of the SPP improvement.

The next question comes from Marcin Wojtal from Bank of America.

Yes. So 2 questions. You mentioned that your revised guidance for 2026 does not reflect any measures from the French 2027 finance bill. But could you perhaps quantify what could be the impact or at least would be the order of magnitude? And question number two, going forward to 2027 and beyond based on the current draft, can you just remind us, do you expecting the infrastructure tax rate at 4.6% or a higher band could apply to ADP because as we understand, the tax goes up to 2.2%. So comment would be helpful.

Thank you. So coming back indeed to the current news regarding the finance bill, you're totally right. Our guidance regarding EBITDA clearly exclude explicitly any impact in 2026 of measures from the 2027 finance deal. You have totally noticed on the finance deal for 2027 sets out a new mechanism increasing the tax rate regarding long-distance transportation infrastructure with a progressive mechanism, as you mentioned, which will be -- which would be based on the profitability of operators. Based on our understanding of the bill, we anticipate that we would bear an additional charge of approximately EUR 40 million for full year 2026. To be very precise, a more literal reading of the bill can lead to a higher estimate of up to EUR 120 million. We believe that these results from a technical oversight in the wording of the finance bill that will be corrected in the legislative process. Beyond 2026 to answer directly to your second question. Structurally and based here also on our current interpretation of the text and when we exclude exceptional items, we do not expect to fall within the higher tax rent from 2027 onwards and to remain below the threshold of profitability. Clearly, the process is ongoing. You must really keep it in mind, and we can only be definitive and precise in our answer once the finance be elaboration will come at an end. But at this stage, for 2026, our understanding and anticipation is a EUR 40 million additional tax, if the French bill is promegated before the end of the year and beyond 2026, no expected impact above the 4.6% current tax rate. Thank you.

The next question comes from Cristian Nedelcu from UBS.

Could I follow up, please, on the CRS you converted 100 million of shares, and you still have 2.5 million to convert, what dictates the pace at which you're covering more of these shares? And in relation to that, was the minimum economic interest you intend to hold in GMR as per the agreement with the other shareholders. Is there a threshold there that you cannot go below? And the second one, just a technical one, if I may. In retail, in other income, you have this Societe Paris works revenues. Could you help us ballpark understand is the EBITDA margin on these revenues? Is this both similar with the divisional EBITDA margin? Is it dramatically lower or dramatically higher than the retail EBITDA margin?