21-Feb-2020 3:13 AM

Airport groups: large revenue increases for Groupe ADP in 2019

Analysis

Groupe ADP, which operates the two main Paris airports, as well as associated infrastructure in the French capital and airports and terminals around the world, reported a very positive FY2019, with revenue increasing by 17.3% (mainly as a result of acquisitions) and EBITDA by 5.5%.

Revenues increased across the board - from all sources apart from airport safety and security and, intriguingly, from car parking. Given the impact of the 'flight shame' movement in Europe, Groupe ADP will expect there to be an increase in public transport usage.

International divisions made a major contribution to the result, but revenues for the consulting arm ADP Ingénierie decreased slightly, by -1.2%; it has a backlog of work and its role within the group is expected to increase rather than diminish.

Groupe ADP is to be privatised, with organisations such as VINCI Airports looking to increase a current minority shareholding. Together, the two groups, with TAV, would become potentially the largest in the world.

The outcome still remains dependent on a 'shared referendum' on blocking it, which was launched in Jun-2019. (The referendum has reached approximately 22% of votes required to do that, with around one month remaining until the deadline.)

Summary

Groupe ADP reported a 17.3% increase in revenue for FY2019, driven by acquisitions.
Revenue growth was observed across all sources except airport safety and security and car parking.
International divisions, including TAV Airports and Airports International Group, contributed significantly to the positive results.
ADP Ingénierie, the consulting arm of Groupe ADP, experienced a slight decline in revenue but is expected to play a larger role within the group.
Groupe ADP is in the process of privatization, with potential involvement from VINCI Airports.
The outcome of the privatization process depends on a referendum, which has reached approximately 22% of the required votes to block it.

Summary

France's Groupe ADP posts a 17% increase in revenues in FY2019.
EBITDA increased by 5.5% but EBITDA margin fell.
Results have been influenced by the assimilation of AIG (Jordan) and the loss of subsidiary TAV business in Istanbul.
The Paris Aéroport division recorded only slight growth.
Retail activities performed very well as two companies were consolidated, but car parking revenue declined.
The international division is also performing strongly.
Groupe ADP is nearing a crossroads in its future privatisation as a referendum draws to a close.
Breaking news: Groupe ADP takes stake in GMR Airports

Big rise in revenues partly due to 51% stake in AIG and strong TAV Airports' performance

Groupe ADP reported (10-Feb-2020) the following financial highlights for the 12 months ended 31-Dec-2019:

Groupe ADP financial highlights for the 12 months ended 31-Dec-2019

Measure	Amount (EUR million)	Increase/decrease %	Measure	Amount (EUR million)	Increase/decrease %
Revenue	4700	+17.3	International and Airport developments	1081	+14.9
(Aviation)	1929	+2.1	TAV Airports	746	+7.5
(Airport fees)	1160	+4.1	AIG	250	+43.2
(Passenger fees)	726	+4.5	ADP Ingénierie	57	(-1.2)
(Landing fees)	262	+3.0	EBITDA	1772	+5.5
(Parking fees)	172	+4.1	(EBITDA margin 37.7%)	-	-
(Ancillary fees)	250	+4.9	Net profit	558	(-3.3)
Revenue from airport safety and security services	482	(-3.3)	Total assets	16793	-
Retail and services	1505	+50.6	Cash and cash equivalents	1982	-
(Retail activities)	970	+98	Total liabilities	10786	-
(Société de Distribution Aéroportuaire)	628	-	-
(Relay@ADP)	78	-	-
(Other Shops, Bars and restaurants)	166	-	-
Advertising	57	+4.1	-
Car parks and access roads	172	(-0.9)	-
Real estate	274	+3.3	-

The following table is taken from the CAPA Profile on Groupe ADP and is a synopsis of financial results for the financial years 2016 to 2018.

Synopsis of financial results for Groupe ADP: FY2016-FY2018

The EBITDA margin has fallen slightly to 37.7% from 41.4% (2016) and 44.4% (2017/18).

The 2019 figures take into account the 51% stake taken by Groupe ADP in the Jordanian airports' operator Airports International Group (AIG) in Jun-2018 (actually from Apr-2018).

That deal was the first sale of a secondary infrastructure asset in the Middle East. AIG was awarded a 25-year Build-Operate-Transfer (BOT) concession by Jordan's Government in 2006 to rehabilitate, expand and manage Amman Queen Alia International Airport (QAIA), as part of a USD850 million public-private partnership agreement.

While that accounted for a significant revenue increase (QAIA handled close to nine million passengers in 2019), it was offset to some degree by the loss of passenger and cargo traffic at Istanbul's Atatürk Airport following its closure in Apr-2019.

Atatürk was operated by TAV Airports, in which Groupe ADP holds a 46.1% stake in TAV Airports share capital, up from an initial 38%. The closure of the Istanbul airport (the new one has no input from TAV) accounted for much of the 16.7% fall in overall group passenger traffic in 2019.

Otherwise, TAV Airports performed well and is credited with being the major input to the EBITDA growth of 5.5%, along with the full consolidation of AIG, and also the retail companies Société de Distribution Aéroportuaire and Relay@ADP.

Slow growth at Paris-Charles de Gaulle and Paris-Orly Airports

The Paris Aéroport division traffic (Paris-Charles de Gaulle and Paris-Orly) achieved traffic growth of only +2.5% in the period, at 108 million passengers - in line with stalling economies in Europe generally, political unrest in France, and the ubiquitous strikes that plague the country's air traffic control every year.

Particularly impressive is the revenue from retail activities, which is up by 98%. Airside shop revenue per passenger throughout the group increased by 7.3% to EUR19.7.

ADP's car parking revenues fell

It is perhaps not surprising to see revenue from the car parking and access roads profit centre fall, if only slightly, by 0.9%. In common with many other operators, Groupe ADP will expect to see an increase in public transport usage as the 'flight shame' movement continues to impact in Europe (but not so much outside Europe - at least, not yet).

No particularly notable improvements have been made to access at either CDG or ORY airports by rail or road, and the CDG Express from the Gare du Nord to that airport will not open until 2025. Nevertheless, it is likely that more people will opt for public transport when they can.

Groupe ADP is not as evident globally as it was; international revenues increased by 15%

Revenues from 'International and Airport developments' were EUR1081 million - an increase of 14.9%, with TAV airports playing their part (+7.5%), but most of the increase coming from AIG (+43.2%).

Groupe ADP has a wide network of airports under its control by way of a variety of methods and they are shown below (including TAV airports and the QAIA).

Active airports for Groupe ADP

It is fair to say that the company is not so active internationally as it once was, having had a portfolio of airports in Southeast Asia under its management, fully or partially. A deal to privatise a number of airports in Vietnam fell through two years ago.

Possibly Groupe ADP's most interesting venture now outside France is in the consortium that is building the new international terminal at Santiago Airport in Chile, which is scheduled for completion in 2020. However, it has not become involved in the many Brazilian concession tranches and is unlikely to do so now, as the deals on the principal airports have been done.

ADP Ingénierie, the wholly owned subsidiary of Groupe ADP that engages in consulting and architectural projects, experienced a slight decline in its revenues, by -1.2%, but it has a backlog of work and its role within the group is expected to increase rather than diminish.

Groupe ADP's forecasts for 2020 are as follows:

Traffic at Paris Aéroport (CDG and ORY): traffic growth assumption between +2% and +2.5% in 2020 compared to 2019;
Traffic for TAV Airports: traffic growth assumption between +3% and +5% in 2020 compared to 2019 excluding Istanbul Atatürk;
2020 consolidated Group EBITDA: increase between +3.5% and +5.5% in 2020 compared to 2019;
2020 consolidated EBITDA excluding the full consolidation of TAV Airports and AIG: increase between +3% and +4.5% in 2020 compared to 2019.

Groupe ADP's privatisation 'referendum' drawing to a conclusion

Groupe ADP is to be privatised, with organisations such as VINCI Airports, which has become France's biggest overseas investor in the sector, looking to increase a current minority shareholding. Together, the two groups, with TAV, would become potentially the largest in the world.

But the outcome still remains dependent on a 'shared referendum' on blocking it, which was launched in Jun-2019. The referendum has reached approximately 22% of votes required to do that, with around one month remaining until the deadline.

Breaking news, 20-Feb-2020 - Groupe ADP takes 49% stake in GMR Airports

Groupe ADP signed a share purchase agreement for the acquisition of a 49% stake in India's GMR Airports, representing an investment of INR107.8 billion (USD1.5 billion). The operation will be processed in two phases. Phase one will be completed "within the coming days" for a 24.99% stake. The second phase, for 24.01%, is subject to certain regulatory conditions, notably obtaining the customary regulatory approvals, in particular from the Reserve Bank of India, to be concluded in the coming months.

Upon completion, GMR Airports will be jointly owned with GMR Infrastructure Limited, which will hold a 51% stake and retain control over the company. ADP will be granted extended governance rights including the presence of board members at GMR Airports' board equal to that of GMR Infrastructure Limited board members. ADP will also have the right to appoint predetermined key executives within GMR Airports.

Groupe ADP chairman and CEO Augustin de Romanet commented on the acquisition, stating it "fits within Groupe ADP's strategy" and enables it to build a "leading worldwide network of airports" with a "solid industrial expertise" and "strong development capacities".