Interim report of Copenhagen Airports A/S (CPH) for the nine months to 30 September 2014
Stock Exchange Announcement 2014
Copenhagen, 4 November 2014
INTERIM REPORT OF COPENHAGEN AIRPORTS A/S (CPH) FOR THE NINE MONTHS TO 30 SEPTEMBER 2014
The Board of Directors today approved the interim report for the period 1 January – 30 September 2014.
Summary for the first nine months of 2014
Copenhagen Airports A/S (CPH) recorded a 7.1% increase in passenger numbers in the nine months to 30 September 2014, which resulted in revenue and pre-tax profit improvements. Performance was particularly strong during the summer months and consequently CPH upgrades its full-year guidance.
In the nine months to 30 September 2014, 19.7 million passengers travelled through Copenhagen Airport. The growth in passenger numbers lifted revenue by 6.9%, while profit before tax was up by 10.9% to DKK 1,035.4 million. In Q3 alone, Copenhagen Airport had more than 7.5 million passengers, which is a record for the quarter.
In spite of the higher activity level, CPH managed to reduce costs per departing passenger by 2.9%, when excluding one-off items. This was achieved through a continuing focus on efficiency improvements and on reducing the total costs of operating at Copenhagen Airport, which helps support CPH's World Class Hub strategy.
Growth in traffic in all segments
Traffic grew in all segments in Q3: the number of international passengers was up by 7.4%, while domestic traffic was up by 4.1%. The number of transfer passengers was up by 14.4%, which strengthens Copenhagen Airport's position as the preferred hub of northern Europe. In addition, the number of long-haul passengers rose by 8.4% – partly due to a significant increase in the number of travellers to the United States.
A strong increase of 40.2% was seen in the traffic of the United States, boosted by Norwegian's three new routes to Fort Lauderdale, New York JFK and Los Angeles, the full-year effect of SAS's route to San Francisco and, not least, the upgrade of the route to New York.
CPH's strategic partnerships with SAS and Norwegian have led to even closer collaboration in areas such as efficiency improvements of the airlines' operating conditions at the airport. That has helped lower the airlines' operating costs, paving the way for growth.
Positive effect from refurbishment
The rise in passenger numbers also generated growth for the non-aeronautical part of the business, including the shopping centre, parking and the hotel operation. Overall, revenue from the shopping centre increased by 4.2% driven by an 11.0% growth in Food & Beverage.
In the spring, CPH received an award for "the world’s best airport gastronomy" at the prestigious FAB Awards, and CPH is pleased to see that passengers are responding favourably to the higher level of quality CPH has successfully introduced in recent years.
Revenue from the specialty shops was up by 6.5%, and revenue from the duty- and tax-free stores was up by 2.3%, indicating that the airport sees a positive full-year effect from the refurbishment of the six duty- and tax-free stores in 2013. Parking revenue increased by 6.8%, primarily driven by a higher average ticket value. Moreover, revenue from the hotel operation was up by 5.5%.
CPH continues its very high level of capital investment to strengthen and expand Copenhagen Airport. In recent years, CPH's capital investment has been in the order of DKK 1 billion per year, and as a result of the steady increase in passenger numbers, CPH is now progressing with plans to expand the central security screening facility. In addition, CPH recently initiated an expansion of Pier C, which is used for long-haul traffic and for non-Schengen traffic. The pier will be extended by 100 metres, adding three new stands with direct access from the gates.
New charges agreement
In August, CPH signed a new charges agreement with the airlines. Under the charges agreement, which covers the period 1 April 2015 – 31 March 2019, the price for using the airport's runways, terminals and services will follow the Danish consumer price index, meaning that the level of charges will remain flat in real terms. This means that Copenhagen Airport will retain its competitive position in the cheapest third of the major European airports, which will help ensure that consumers can enjoy flights at attractive fares to many destinations out of Copenhagen. The charges agreement has been filed with the Danish Transport Authority for approval.
Highlights of results
Passenger numbers at Copenhagen Airport increased by 7.1% during the first nine months of 2014. The number of locally departing passengers increased by 4.8%, and the number of transfer passengers increased by 14.4%
Revenue increased by 6.9% to DKK 2,939.2 million (2013: DKK 2,749.8 million) primarily driven by the increase in international locally departing and transfer passengers. The increase was also positively impacted by the index adjustment of passenger-related charges effective from 1 April 2014
When excluding one-off items, EBITDA grew by 9.2% to DKK 1,675.2 million (2013: DKK 1,534.4 million). Reported EBITDA increased by 9.0% to DKK 1,665.0 million (2013: DKK 1,527.7 million)
When excluding one-off items, EBIT increased by 9.5% to DKK 1,195.5 million (2013: DKK 1,092.1 million). Reported EBIT increased by 9.2% to DKK 1,185.3 million (2013: DKK 1,085.4 million)
Net financing costs were in line with 2013
Profit before tax increased by 11.2% to DKK 1,045.6 million, when excluding one-off items (2013: DKK 940.5 million). Reported profit before tax increased to DKK 1,035.4 million (2013: DKK 933.8 million)
Capital expenditure amounted to DKK 543.3 million in the first nine months of 2014 (2013: DKK 653.0 million). The first nine months were affected by timing differences in the start-up of projects, including the preparation of the Pier C extension and expansion of the central security screening facility
Outlook for 2014
Forecast of profit before tax
Based on the traffic growth throughout the summer program, CPH is upgrading its guidance for 2014.
CPH still expect an increase in the number of passengers, which is expected to have a positive effect on revenue. Operating costs are expected to be higher than in 2013, primarily due to the expected rise in passenger numbers and cost inflation, but this will partly be offset by a continuing focus on operating cost efficiencies.
Depreciation charges and financial costs are expected to be higher in 2014 than in 2013 as a result of the continually high investment level. Overall, profit before tax for 2014 is raised to the DKK 1,200.0 million to DKK 1,300.0 million range, when excluding one-off items. This should be compared to the previous guidance of profit before tax of DKK 1,100.0 million and DKK 1,200.0 million. Operating profit before depreciation is projected to be higher in 2014 than in 2013, when excluding one-off items.
Forecast of capital investment
Under the charges agreement, CPH must invest an average of DKK 500 million annually but, as in previous years, CPH expects to invest at a level significantly higher in 2014 than what it is committed to invest under the charges agreement. CPH will also be investing in non-aeronautical projects for the benefit of airlines and passengers.