Record financial outcome achieved due to Manila compensation payment – Air-ports in Fraport’ s international profile report mixed results
Fraport AG looks back again on a successful 2016 business yr (ending December 31), which was proclaimed by a record financial result accomplished despite challenging framework conditions for that aviation industry and slightly decreasing traffic at the Group’ s Frankfurt Airport home base.
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Team revenue declined by 0. 5% year-on-year to € 2 . fifty nine billion. Adjusting for changes in the range of consolidation due to the sale of stocks in Fraport Cargo Services (FCS) and the disposal of the Air-Transport THIS Services subsidiary, Group revenue might have risen by € 46. two million or 1 . 8 %. This resulting increase in income (on an adjusted basis) has been stimulated in particular by the ongoing development at the Group’ s airports within Lima (Peru) and Varna plus Burgas (Bulgaria), as well as at the Fraport USA subsidiary, and by revenue obtained from property sales.
The particular Group’ s operating profit or even EBITDA (earnings before interest, fees, depreciation, and amortization) advanced simply by 24. 2 percent, reaching a brand new record high of € 1 . 05 billion. This strong development was supported by the compensation transaction received for the Manila terminal task, which boosted EBITDA by € 198. 8 million. Fraport’ ersus successful sale of a 10. 5 percent reveal in Thalita Trading Ltd., who owns the operating company of Pulkovo Airport in St . Petersburg (Russia), contributed another € 40. one million to EBITDA. Adjusting for people effects and the creation of procedures for a personnel-restructuring program, the Group’ s EBITDA would have remained within the previous year’ s level of regarding € 853 million. Although this particular adjusted EBITDA was curbed simply by previous year’ s weaker visitors performance and a slowdown in FRA’ s retail business, reflecting decrease spending by passengers, the Group’ s external business also a new compensating positive effect on EBITDA.
The Group result (net profit) improved by 34. 8 percent in order to € 400. 3 million. With no aforementioned effects and unscheduled devaluation and amortization, Fraport’ s Team result would only have reached regarding € 296 million. In contrast, working cash flow declined by 10. 6 percent to € 583. 2 million. Likewise, free cashflow contracted by 23. 3 % to € 301. 7 million, also due to ongoing construction of Frankfurt Airport’ s future Terminal 3.
Traffic at the company’ s Frankfurt Airport (FRA) home-base slightly declined by 0. 4 percent to approximately 61 million passengers in 2016. It was, in particular, a result of the relatively weak spring and summer months characterized by markedly restrained travel bookings in the wake of geopolitical uncertainties. In the last quarter of 2016, traffic figures noticeably rebounded, even reaching a new December monthly record. Cargo tonnage expanded by 1 ) 8 percent to some 2 . 1 million metric tons, helped by the economic recovery in summer 2016.
Fraport’ s international portfolio of airports displayed mixed results in 2016. The strong 30. 9 percent decline in traffic at Antalya Airport (AYT) in Turkey – that was impacted by the country’ s geopolitical and security situation – could possibly be largely offset by the traffic performance of Group airports at other locations. Strong growth was recorded in particular at Lima Airport (LIM) in Peru (up 10. 1 percent), Burgas Airport (BOJ) and Varna Airport (VAR) on the Bulgarian Black Sea coast (up 22. 0 percent and 20. 8 percent, respectively), and Xi’ an Airport (XIY) in China (up 12. 2 percent).
On the basis of the Group’ s positive financial performance, a dividend of € 1 . 50 per share will be recommended to the 2017 Annual General Meeting. This corresponds to an increase of € 0. 15 or 11. 1 percent per share and to a payout ratio of 36. 9 percent of the Group result attributable to shareholders.
Commenting on Fraport AG’ s business performance in 2016, executive board chairman Dr . Stefan Schulte stated: “ Despite the challenges of the 2016 business year, we have achieved our best annual result ever. The sale of the 10. 5 percent share in our Pulkovo Airport subsidiary in St. Petersburg has demonstrated that we are able to develop international airport concessions even amid difficult market environments. We will therefore continue to consistently pursue our strategy of operating a broadly diversified international portfolio. ”
For the 2017 business year, Fraport expects traffic at Frankfurt Airport to grow by 2 to 4 percent. Revenue is anticipated to view a noticeable increase up to approximately € 2 . 9 billion, backed by positive traffic growth both at Frankfurt Airport and Fraport’ s international Group airports. Also the expected consolidation of the Group’ s activities in Greece will contribute to a marked rise in revenue. The Group’ s operating profit (or EBITDA) is forecast to reach a level of between approximately € 980 million and € 1, 020 million, while EBIT is expected to be between approximately € 610 million and € 650 million. The Group result is anticipated to reach between € 310 million and € 350 million.
Regarding the Group’ s business outlook for 2017, CEO Schulte said: “ We are optimistic about the current business year and expect Frankfurt Airport’ s traffic to grow both in the low-cost segment and the traditional hub traffic. At the same time, we will continue to strategically develop our international business. By taking within the operation of the 14 Greek airports, we will unleash further growth potential. ”
In view of the expected long-term traffic growth at Frankfurt Airport, construction of the new Terminal 3 is being pushed forward as scheduled, with the very first construction phase expected to be completed by 2023. The focus of Fraport’ s international business is currently on the take-over of operations at the 14 Greek airports, which is expected to take place next few weeks.
Overview of Fraport’ s four business segments:
Revenue in the Aviation business segment declined by 1 . 8 percent to € 910. 2 million in business year 2016. This was largely due to the slight drop in passenger traffic at Frankfurt Airport, the loss of the tender to perform security services in Concourse B, and lower revenue from the re-allocation of infrastructure costs. The creation of provisions for a personnel-restructuring program, higher wages in business year 2016 due to collective agreements, as well as higher non-staff costs let the segment’ s EBITDA decline by 8. 3 percent to € 217. 9 million. Depreciation and amortization increased significantly year-on-year, specially due to the full unscheduled depreciation and amortization of the goodwill in the FraSec GmbH subsidiary in the amount of € 22. 4 million, as a result of the company’ s lower long-term earnings forecast compared to previous years. Correspondingly, the segment’ s EBIT significantly dropped by 39. 5 percent to € 70. 4 million.
Retail & Real Estate:
Revenue in the Retail & Real Estate segment edged up 1 . 2 percent to € 493. 9 million in business year 2016, despite the slowdown in the retail sub-segment. Revenue performance was positively affected by sales of land and the changed presentation of rental income due to changes in the scope of consolidation associated with sale of shares in the Frankfurt Cargo Services (FCS) subsidiary. Net retail revenue per passenger was at € 3. 49 (2015: € 3. 62). The decline was attributable to a lower average spend by passengers from China, Russia and Japan, as well as the impact from the depreciation of various currencies against the euro. With € 368 million, the segment’ s EBITDA was down 2 . 9 % on the previous year, largely because of higher personnel expenses. These were attributable, in particular, to higher demand for manpower, rising wages set by collective agreements, and the creation of provisions for a personnel-restructuring program. With depreciation and amortization nearly flat, the segment’ s EBIT reached € 283. 6 million (down 3. 9 percent).
In the 2016 business year, revenue in the Ground Handling business segment markedly decreased by 6. 3 percent to € 630. 4 million compared to the previous year. This was due, in particular, to the sale of shares in the Fraport Cargo Services (FCS) subsidiary and slightly declining passenger traffic at Frankfurt Airport. Adjusted for the effects from the sale of shares in FCS, segment revenue saw underlying growth of 1. 8 percent. Good reasons for this adjusted increase included a big change in the presentation of personnel expenses as a result of changes in the scope of consolidation related to the sale of shares in the FCS subsidiary, as well as slightly higher revenue from infrastructure charges. The creation of provisions for a personnel-restructuring program and rising wages due to collective agreements resulted in a 25. 2 percent decline in the segment’ s EBITDA to € 34. 7 million. Contracting by € 11. 5 million to minus € 5. 5 million, the segment’ s EBIT reached negative territory due to the provisions for the personnel-restructuring program.
External Activities & Services:
Revenue in the External Activities & Services business segment increased by 8. 1 percent to € 551. 7 million running a business year 2016, supported in particular by the Group companies in Lima, Peru (up € 27. 8 million), Twin Star, Bulgaria (up € 9. 9 million) and Fraport USA Inc. (up € 3. 2 million). Additionally , the compensation payment from the Manila terminal project and revenue gained from the sale of shares in Thalita Trading Ltd. had a markedly positive affect the segment’ s revenue. Due to these effects, also the segment’ s EBITDA more than doubled, reaching € 433. 5 million (2015: € 186. 1 million). The segment’ s EBIT showed similar growth, rising by € 242. 1 million to € 345. 2 million.
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