Flughafen Wien Aktiengesellschaft (FLU) Earnings Call Transcript & Summary

Okay, so ladies and gentlemen, welcome to our conference call for the first 9 months of 2022 of Vienna Airport. Today's presentation will be held as usual by our Board members, Mr. Günther Ofner and Mr. Julian Jager. [Operator Instructions] The call will be recorded and will be available on our website shortly. The slides of the presentation that will be held now are also available on our website under Presentations. And now I would like to hand over to our CFO, Mr. Ofner, the floor is yours sir, and I will now also share the slides.

Yes. Good afternoon, and I can report that we have good results after 3 quarters in '22. We saw a significant passenger increase and also a substantial earnings increase compared to 2021. So passenger volumes went up to EUR 22.3 million in the group. And for the whole year, it's roughly 3/4 of the pre-crisis level. But in summer, we almost were at 90%. The financial performance indicators show that we could transfer our additional revenue to a very high degree into EBITDA and net profit. And so we had a very high cost discipline that helped to improve the financial situation of the company. If we look at full year '22, we will see that we have a net profit of at least EUR 150 million. It could be even more if the good development we saw in October will be followed by good results also for November and December. And so far, we had no negative interference neither from the war against Ukraine or new measures due to COVID. So these negative factors, I think, should not negatively affect the rest of the year. So I'm quite sure that our guidance will be not only fulfilled but maybe even we will come out above the net result proposition we had so far. And what we can also confirm is that given the financial health of our company you'll see later that we are more than debt free so that we even had a positive net position at the end of the third quarter. This will allow that we will start to pay dividends again. I recently got the message that Fraport denied to pay a dividend. We can firmly confirm today that given the contents of our general assembly, we will pay at least 60% of net profit after noncontrolling interest as a dividend for '22. If you look at the figures in detail, you see revenue up at EUR 508 million, EBITDA at EUR 256 million, so plus 140%, EBIT at EUR 156.9 million, also a slight improvement in financial results. So earnings before tax at EUR 150 million and net profit for the period, EUR 109.3 million. If you deduct noncontrolling interest, it's EUR 97.8 million. If you look at our expenses, you see that consumables and services used were up 53.8%, which is below passenger and traffic development. Personnel expenses up 40.8%, which is especially attributable to the fact that we only saw support for short time work in the first quarter, and the program was stopped beginning 1st of April for the whole company. Other expenses were up by 111%. This is also reflecting the recent development. You might ask to what degree we are affected by higher energy prices, and the good part of the story is that we bought electricity for '22 already 5 years ago. So we have profited from much lower prices, we fixed in this period for '22 for a considerable part of our consumed electricity. And additionally, we had the advantage that roughly 1/3 of our electricity was produced by our own. So through our big photovoltaic plants, which we will further develop in the coming year. So putting all that together, for '22, we have been substantially shielded against the price hikes on the electricity side. This unfortunately is not the case on the district heating side. There, we are exposed to gas prices. And we have saved a lot of energy also there. But there, we are much more exposed to the hiking market prices. Net liquidity at EUR 61.7 million. It's a debut for our company. So I don't know if anyone remembers when we had last time a net liquidity of EUR 61.7 million. What I can remember, we have been heavily indebted at least for the last 20 years of our company. So that's really a very, very interesting point. And it gives us now, really, a lot of room to maneuver in respect of future activities, investments or even letting our shareholders participate on the financial health of our company. So the gearing is below 0, and we saw a very strong cash flow from operating activities of roughly EUR 234 million. Free cash flow at minus EUR 13 million, CapEx at EUR 38 million. Our equity position was substantially improved and the equity ratio is at comfortable 65.7%. So we saw a good development there. If you ask why free cash flow is on the negative side, this is due to payments for deposits where we are bound for a certain period of time and where we earn higher interest than we had so far. Understandably, CapEx was at a low level for '22. And we will restart some investments in the coming year, especially regarding the South extension project, which should substantially contribute to our profitability further down the road. If you look at the share price development, we are still very far ahead of our main peers of Fraport and Zurich. And I hope we can keep and maintain this position. I already mentioned our guidance. So revenues should be at roughly EUR 670 million or above. EBITDA should be above EUR 290 million. Group net profit at least EUR 115 million, most likely even above. Net debt as we guided, is definitely below EUR 50 million. It will be on the positive side. And CapEx may reach a certain percentage of the EUR 84 million, but might stay somewhere around EUR 70 million at the end of the year. And I think all these developments are now, more or less, on the secure side because we are mid of November, and there are no indications that major actions could stop again via traveling. Very important for us as a company is that we will start CO2 neutral operations at our airport in '23, so all the measures are on the way that are necessary. We have reduced our CO2 emissions compared to 2011 by 60,000 tonnes per year. And we will further prove our electricity production. So from 24 hectares in '22, we will move to roughly 45 hectares in '23. So we will increase the facility on our airport, but we will also add roughly 10 hectares in the air field of Bratislava, which is also owned by us. And I think that it was very wise to start with all these measures already 10 years ago so long before it was discussed in public. And therefore, now we are, I think, substantially ahead of most of our peers and competitors. I also want to stress that you might remember that Austrian reduced their rentals on the airport, especially in office Park 2. And I think it's given the actual situation, a very good news that for 50% of the rentals Austrian reduced. We already found a new partner and 2 floors of office Part 2 will be rented in these days, with the option to take even a third one. So that overall, we see still a very good interest of potential companies coming to the airport, and this will also support our results for '23. So that's from my side, and I hand over to Julian, for your part.

Thank you, Günther. Good afternoon, ladies and gentlemen. I will start with the traffic development. I think most of you followed the traffic results of the first 3 quarters. We saw a very strong third quarter with roughly a level of close to 90% of the pre-COVID 2019 levels. So summer was really, really strong. And overall, we are in Vienna now at roughly 73% of pre-COVID levels with 17.4 million passengers, in Malta at roughly 80% with 4.4 million passengers. And in Kosice, already very close to the 2019 levels with 400,000 passengers. Overall in the group, we are at 22.3 million, minus 25%. Yes, I would not want to go into more details here. I think what is very, very significant is the seat load factor. Although it's still the first 4, 5 months, we're still very much disrupted by the pandemic. But you can see here how strong the third quarter was, and we are, for the full year, already on the same level as the seat load factors in 2019. So I think the good news is that, more or less, all our airline customers had an excellent summer as well and making good money here in Vienna. Let's have a look at the next slide. You can see here that for the first 9 months, Austrian had a market share of 47%; Ryanair, 21%; and Wizz Air ,6.7%. So if you look at the peak in summer, Austrian performed even a bit better with a market share of roughly 50%; Ryanair was at 20%, 21%; and Wizz Air at around 6%. The low-cost carriers overall had a market share of 31% and Lufthansa Group of 52%. You can see here that all airlines amongst the top 15 had a really strong growth versus 2021. Some performed even above 2019 like Turkish, like SunExpress. And you can see that, obviously, Southern Europe did extremely well over summer. Italy, Spain, Turkey, Greece were between plus 20% or plus 30% above the 2019 levels. What's still lagging behind is traffic to Germany to Switzerland to the U.K. Those are the main countries, apart from the obvious complete losses from Russia and Ukraine. But apart from that, Germany is still around 30% below the 2019 level; Switzerland, minus 40% below 2019 levels. So this is an area where there's still room for more capacity and for more passengers in the future. Let's have a look at October. October was still very strong, minus 14% versus 2019, 2.4 million passengers versus 1.6 million in '21 and 2.8 million in 2019. Transfer passengers performing a bit better than the local passengers relative to 2019, flight movements at minus 21%. And this is, again, a very important development for the airport. The planes are significantly bigger and significantly fuller than they used to be, so which is good news for airside and runway capacity. And you can see here that the seat load factor throughout October this year was even 2 percentage points above the 2019 figures. The only negative on this slide, I would say, is cargo. You can see here that we are below the 2021 figures. And I think this is a trend we see definitely throughout Europe, throughout Germany. The cargo is going down versus 2019 and 2021, probably one of the signs of a looming recession in 2023. Let's move on to operations. I think -- and this is something which makes us very proud. I think we had an excellent operation throughout summer, definitely compared to most other European airports. We are very happy that this was widely acknowledged in the industry and from our passengers as well. The Airports Council International Europe rated us as the Best Airport in Europe this year. We recently got an award from Asia, ground handle of the year in Europe. We -- in October, OAG just recently released punctuality figures where we came second after Helsinki in October and from -- for the full year, we are #4. In terms of punctuality, we constantly perform better than the other Lufthansa term airports in terms of punctuality. So I think as an airport and the hub system together with our hub carrier, Austrian Airlines, I think the operational performance throughout the airport was really excellent this summer. And I think this is a good base as well to argue for higher prices and higher charges in the future, because our customers know that we are a reliable airport and that essentially all the processes work really, really well. Let's move on to the next slide. Yes, having a look at winter. I mean, obviously, compared to last winter, this is a very strong development. But overall, my impression is that for the lower season for the season, outside the main holidays, airlines still are a bit cautious. So we expect that we will see a reduction in traffic now vis-a-vis 2019. In the coming months, we saw -- or we already see now a bit of a relief in towards East Asia. So EVA is back, Korean is back, Air China is back. We expect some other long-haul carriers to join this list in the future as well. Canada obviously was already back this summer. I think we have a very strong Middle East portfolio now. And then what is interesting as well that Wizz Air moved away a bit from the Central European destinations and they're concentrating right now a lot on the Middle East, flying to Abu Dhabi, Dubai, 3 destinations in Saudi Arabia. So my impression is that is Wizz Air is very successful to find a niche. A mix of Middle East [indiscernible] destinations within Europe and the one other city destination. Ryanair 8 new destinations, 70 destinations in total. So I think this is a strong sign that they are here to stay. And Austrian, I think the good news is they got 4 new Airbus A320neo. Now the first 2 are already in, the other 2 are coming next year. My best guess would be that Austrian actually will have a bit more capacity here in Vienna than we had this summer, and a total of 80 destinations. So overall, I'm happy with the rate of schedule. And what we see so far from the summer schedule of next year is that our main airlines will have at least the capacity they had this summer. And obviously, there's a lot of room for growth in the first 4 months of next year vis-a-vis 2022. So I'm already cautiously optimistic for next summer and next year, but we will give you, obviously, some more details in our assessment of the full traffic year 2023 then later on in January. In the group, we expect 29 million passengers this year. In Vienna, we expect more than 23 million, probably more 23.5 million than the 23 million, you can see here. So overall, I think a successful year given the rocky start in the first quarter or in the first 4 or 5 months of this year. So a few words regarding the segments. Airport had in Q1 to 3 essentially more than doubling the external revenue and EBITDA of EUR 101 million and, thanks God, a positive EBIT of EUR 42 million compared to the minus EUR 14.3 million of last year. We saw a strong increase in the passenger-related fees as well as an increase in the aircraft-related fees and infrastructure fees. Looking into next year, it's our main aim to increase the net revenues per passenger in the airport segment. We will increase our airport charges by 5.6% with the first of January, covering the inflation until mid-2022. So there will be another increase on the 1st of January 2024, covering then the inflation from mid-2022 until mid-2023. So there's a bit of a delay in terms of the reflection of inflation. But we are about to -- and we have not got approval yet, but we applied for some changes in our incentive scheme. So with the increase of the airport charges by 5.6% plus and a reduction in incentives, we expect a significant increase in the net revenues next year. Let's move on to Handling & Security. Yes, a positive EBIT here as well, EUR 4.5 million, EBITDA of EUR 11 million and external revenue of EUR 91.8 million. So obviously, the personnel expenses increased here as well by EUR 29.9 million. You mustn't forget, and this is something you have to appreciate next year, looking at our figures in the first quarter, we still were in the Kurzarbeit scheme, short working scheme of the Austrian government. So this was still was very supportive in this year's staff costs. Overall, handling is doing well. And I'm, yes, fairly optimistic that we will manage to keep the very high reliability of our handling and security services into next year. And so overall, I think the development is very positive in this area. Retail & Properties. Yes, strong development as well, EUR 52.9 million EBIT versus EUR 20 million in 2021. EBITDA, EUR 67 million, external revenue of EUR 98 million. So I think in parking and center management, the results were excellent. Rental, obviously, you can see here the reduction of rent from Austrian Airlines so that's why there's a slight decrease of 0.9%. But center management and hospitality, plus 130%; parking, plus 118%. So we managed to make more out of each passenger than in 2021. And overall, I have to say, center management and hospitality given the passenger mix, hardly any Chinese, hardly any East Asians, no Russians, no Ukrainians. I'm fairly happy. Duty free is doing very well. F&B is doing very well. Where we feel the pinch is in the area of specialty retail. So I hope that in the future, when the passenger mix changes again in our favor, then we will see here some even better results. But I think given the new mix, and I'm very happy with the results of 2022. And obviously, Günther mentioned already the South extension, this will be a major change in how the Vienna Airport appears to its customers. There will be 12,000 square meters additional F&B and retail space, 18 baskets directly under the commercial area, very comfortable waiting areas, new lounges. So yes, we are all looking forward to this project. Malta. There's one really good news which came in the recent weeks. Malta Airport got a EUR 12 million tax credit from the Maltese government to make up for the losses, which were incurred in the period of the pandemic. This obviously improved -- or will improve the results even further. EBIT was at EUR 33 million, versus EUR 6 million last year. EBITDA, EUR 43 million versus EUR 60 million (sic) [ EUR 16 million ] and external revenue essentially doubled with EUR 66.5 million. Malta was a bit stricter in terms of COVID, which we had in the beginning of the year, but summer was good. And I think looking ahead, Malta will do next time very well as well. Now there's a base of Wizz Air coming to Malta. There's the strong presence of Ryanair. And so I'm still optimistic that we will see growth from Malta airport next year as well. I think that's it from my end, and now we are happy to take your questions and looking forward to the discussion.

Okay. So thank you, gentlemen. [Operator Instructions] The floor is open.

If I may, I would go ahead. It's Bernd speaking from Raiffeisen.

Yes, please go ahead, Bernd.

Three questions, I do have. First, the obvious one on the guidance here. You have a slide showing the development of guidance throughout the financial year in September, then you upgraded, you hiked only the net profit guidance. What does it mean with reference to sales, especially EBITDA and net debt guidance? Is this still in place as it is? Or isn't it? Yes. That's question #1. Question #2, in the annual -- not annual report, quarterly report, you outlined some positive effects on personnel expenses from changes in provisioning from changes of tax rates -- interest rates here would be interested how big this effect -- this positive effect was in the third quarter. And finally, you also outlined the strong relative performance of the passenger development of Vienna Airport versus German airports. Would be interested in your view or your arguments behind this. Is it as simple as a higher share of tourism and the lower share of business activity in general, which especially in 2022 kicked in these characteristics? Or do you see some more developments behind this?

Okay. I would like to start with guidance. I mean, I think you are partly on the right track. So there should be also a further improvement on EBITDA results, but we have not made a specific guidance for the rest of the year for that. But it's obvious that finally a higher net profit also be reflecting the positive deviation of EBITDA versus the figures you see now. The question regarding interest rates, I think we should deliver to you after our call because this needs maybe some deep dive about the figures in detail. But Rita, do you have any detail for that?

Yes, just put it there. The interest is -- the interest plus 1% is a profit -- a result of EUR 4.5 million in the basis of 5.6% additional expense of EUR 1.5 million. So for the whole -- the 3 quarters, it's EUR 3.6 million in total income of EUR 3.6 million.

Okay. So positive effect of EUR 3.6 million you booked in personnel expenses in Q1 to 3.

It's the whole year, so it's from January to September. Sorry, in Q3, it was EUR 0.9 million so roughly EUR 1 million.

Regarding your last question, maybe a few comments. I think there are multiple reasons for this -- yes, for the fact that we are performing better than Germany. And I think to a certain extent, it's already reflected in our passenger figures to Germany as well. There's less capacity than 2019. Just to give you an example, Berlin, there's -- with just 50% of the capacity of 2019. So ticket prices are significantly higher. There's less low-cost traffic within Germany and then out of Germany. And I think there is still an effect that you probably wouldn't travel for an 1 hour or 2 hour meeting to Frankfurt anymore. So I think it's to a certain extent that the business traffic did not come back. I think on the long haul, the business traffic is back. But on short haul, I think there's still the effect of [ teams ]. So I think it's a mix. But one part is definitely that there is less capacity that with this lower capacity, the airlines are making really good money on certain routes. And this obviously is not good for the passenger development. It's good for the airlines, but not necessarily for the airports.

Okay. Are there any other questions in the audience? Please come forward and ask your questions. Okay. Then a final call from my side. Is everybody satisfied with the presentation and the questions?

It seems. It seems.

It seems, yes. So final call, if anybody has a final question, please speak out now or else we will close the call.

Yes. So many thanks for your interest.

Thank you.

Thank you. Have a nice day.

Have a good day.

Have a good day. And maybe as an organizational point to point out, we will have, as Mr. Jager already said, on the 19th of January, we will have our presentation for the full year traffic figures of 2022, and our forecast for 2023. Okay. With this, I wish you nice day until the next time. Bye-bye.

Thank you. Bye.