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Good day, and welcome to the Vienna International Airport Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Judit Helenyi. Please go ahead.
Thank you. Ladies and gentlemen, welcome to the conference call for our first quarter results and thank you for your patience. The presentation will be held by our Board members, Mr. Jäger and Mr. Ofner, and it will be followed by a Q&A session. The slides of the presentation are available on the homepage and there will be a replay available also on the homepage probably by tomorrow noon. And now I would like to hand over to Mr. Ofner. Please go ahead.
Yes. Good afternoon from Vienna or for those who are in the early morning, good morning. We issued today our Q1 results of 2019 and its overall bright and positive results, especially given that passenger growth in the group for the first 3 months was at 19.9%. And in Vienna itself at 24.6%.
This is reflecting the development after the bankruptcy of Air Berlin. And fortunately, we have been able to attract new competitors for Vienna and they are now growing at a very fast speed. And hopefully, we see this continuing as you see in the figures also in April and the effect might continue throughout the year.
We also saw an increase in Malta and not a substantial decline in Kosice. Given that, our revenue increase was at 8.2% to EUR 177.3 million. EBITDA improved by 10.5% to EUR 71.6 million and EBIT is up 15.1% to EUR 38.4 million and net profit is almost at the same level as total passenger growth, it's a plus of 18%. Our net debt has been further reduced to EUR 157 million and is in line with our guidance. Given the recent development and our expectations that we will see a growth of more than 10% in Vienna for the whole year and around 30 million passengers and at group level, a growth between 8% and 10%, we could improve our financial guidance. So revenue expected has been risen to at least EUR 830 million, EBITDA up to more than EUR 375 million and net profit to exceed EUR 170 million.
As we received some questions in advance, I want to add that there is no substantial IFRS 16 effect on our profit and loss and the balance sheet was increased by roughly EUR 40 million and there is also no substantial impact on the cash flow.
If we continue to look at the results, one question was in regard of one-off. So the only substantial one-off this year was the sale of another piece of land in our business park, Fischamend. And there are smaller other effects. They sum up to below EUR 3 million. You asked also in regard of the decision of our general assembly to authorize the Board to put up a share buyback program. I think it has no specific implication that IFM was the one who put all of this motion. It was decided by roughly 90% of our shareholders. So it was a consensus. And it has -- nothing fundamentally changed because we had an authorization already for the last 3 years and this authorization was up to expire. So I think it was a good decision that we have the possibility if we would think it is appropriate to start share buyback program. Also I have to add that no decision has been taken so far in that respect. If we look at our EBITDA margin, its positive that compared to Q1 2018, we could slightly increase from 39.5% to 40.4%.
If we move on to financial results, you see a further improvement that is due to the fact that we have repaid another portion of EIB loan last year and the next EUR 25 million will be repaid this year. In regard of our ongoing negotiations with EIB, what we have achieved is that the cost for the collaterals could be further reduced. This is also part of the improvement of our financial results. The loan itself and also the interest for the loan is unchanged and as we got no support from the supreme civil court, it cannot be expected that there will be a major change in that respect. And EIB itself on a voluntarily basis has not shown any readiness for a compromise so far.
If we move on to our level of costs, what is evident is that we increased the number of employees by roughly 5.4%. This is triggered on the one hand by fully consolidating GetService, but is also reflecting the fact that more than 20% of passenger growth has to be serviced throughout all parts of the service chain. And therefore, it was necessary also to increase the number of employees. And this is reflected in an increase of our personnel expenses. On the other hand, it was possible to negotiate the collective agreement with our trade unions at 2.7% for the 12 months, beginning 1st of May to 30th of April. And I think this is a rather modest wage increase we could reach in the negotiations. Anything else is not very specific and I think we have been overall successful in keeping cost discipline.
Net debt was slightly further reduced and we see that the further reduction will slow down because now additional investments will start. And as you know, we increased the payout ratio for 2018, 55% of the net income. And we will see a further increase of the dividend for '19 to 60% of our net income.
If we look at the cash flow, it's pretty strong and fine. So both the cash flow from operating activities went up from EUR 52 million to EUR 72 million, free cash flow from EUR 13 million to EUR 24.6 million. CapEx, its EUR 25.9 million. This is reflecting that we had the special effect last year of the runway. So equity is going up at 1.9%, equity ratio stays at roughly 60% of what is very comfortable.
In the maturity structure, you see that, more or less, the EIB loan is ledged, nothing else of real importance that should be dealt with. From the cash flow side, everything looks nice and we see an ongoing positive development there. The same is the case with our share price development. We already are very close to 40. And overall, it's a market capitalization of roughly EUR 3.2 billion.
A question that is understandably raised is the progress on the third runway. So on the one hand, the supreme administrative court has decided that we are entitled to build a third runway. And now we are we restarting the project teams. And I think it will take 18 months, at least, to review the decision of the court and to step in, in a detailed planning and a project plan how to move forward and maybe that end of next year, we can publish what the next steps will be.
If you look at the figures of flight movements, you can see that our expectations are not only met, but that the current development is even exceeding what we expected for this time. So the necessity to move forward is very evident. Nevertheless, looking at the hurdles that still have to be overcome for the realization of a third runway, you cannot expect that it will be operational before 2013 -- 2030. And coming to questions from your side, we do not foresee any major impact in investments maybe before 2024. So still some time unless we can really start.
The Airport City is developing very well. We will open the new DHL logistic campus in 2 days and we will announce mid of June a new partnership with one of the oldest and most successful start-up incubators, so to overall create a very attractive and innovative business environment here in our Airport City. And we had already 2 major new companies contracted this year who will come to our airport. One is a helicopter training center and the other one is a company that is active in new media. And both of them will be located in our business park in Fischamend. This means that now 100% of the land there is sold. So the next steps will include our new business park nearby the airport. And we see a very good interest also there.
In regard of real estate, we have a vacancy rate of 2.2%, which is extremely low and reflects the high demand. So we are keen that our new office park will be opened in May 20 and there is a lot of interest to rent the office space there.
We are also now in the final negotiation with the best offer for the third hotel. So in the next days, we will be able to announce who -- the new partner for the third hotel on our airport will be.
So overall, it's a very, very good situation and a very good economic development. Also, we cannot be sure that we will see passenger increases of that dimension in the years to come. It's a very, very good basis for growth and good results also in the upcoming years.
So finally, we can improve our financial guidance for 2019, as mentioned, and you'll find the detailed figures in our presentation. So that's from my side and thank you for your interest. And I hand over to Julian Jäger.
Good afternoon, ladies and gentlemen. Yes. Let me start with the positive points. Vienna Airport has been awarded for the fourth time the Best Airport Staff in Europe from Skytrax. So I think this is a big complement to our staff and I think this gives an idea about the good quality we are offering to our customers despite the significant increase in passenger number.
Let me come to the segments. First of all, the Airport segment showed an extremely strong EBITDA and EBIT growth mainly driven by passenger numbers plus 24.6%, 6.1 million passengers in 2019 Q1. Flight movement are growing as well, plus 15.8%. The main growth drivers were Austrian Airlines, Laudamotion, Wizz Air and Level, but we see growth from long-haul traffic throughout the board as well. We had an increase in external revenue by 11.7%. So we managed roughly to grow the revenue by 50% of passenger growth. And roughly at 66% passenger-related fees, 20% aircraft-related fees and 14% infrastructure.
What we shifted, and then this is something you will see in the retail segment as well to have a better comparison to other airports and to give a more precise picture of aviation and nonaviation revenues is revenues from the launches we are running, which has been the Airport segment for simple organizational reasons, have been shifted to nonaviation. So this is revenue which is now reported in the Retail & Properties segment.
Yes. Coming to the next segment, Handling & Security Services. There we see a slight revenue decline, minus 2.6% to EUR 38.5 million. External revenue and EBITDA of EUR 1.2 million and a negative EBIT of EUR 1.1 million, which is a significant reduction from last year.
To put your mind at rest, we have not started with the change in our processes in Q1 this year. Q1 was still operated on the same regime as last year. So all the operational changes have been in place from 1st of April. And you will see the positive effect of these measures in the rest of the year. It's still our aim to have year-on-year a EUR 10 million better EBIT than 2018, which will be challenging. And to give you a bit of an idea regarding the revenue development, this is not that the work has been less. It's actually the other way around. We have more work than we used to have. But if this is still the effect of the new Austrian Airlines ground handling contract where we, as we told you, we had a negative impact on our revenues in 2018, a second negative impact in 2019. And then from 2020 to 2025, we will grow it by 0.7x the index. So this was a significant cost reduction for Austrian Airlines and this is what we see here.
For the full year, the revenue will look better. We got some new customers. We just recently took over Wizz Air because of our superior quality, vis-à-vis our competition. So this will grow our revenues and our customers, Austrian Airlines, Laudamotion and many others are growing. So the revenue situation should be better as well and this will have a positive impact on the full year results as well. We won China Southern contract. We won an ANA contract. We won an Air Canada contract. So even long-haul, the new long-haul carriers mainly contract with us. So this is still a challenge. But we are still optimistic that we will manage to improve the EBIT situation in the full year significantly.
Coming to Retail & Properties, which shows a significantly better picture. There, I have to explain some changes in the structure of our segment. To be better comparable to other airports, we changed the calculation of the passenger revenue rate. So we have now center management and hospitality together as most other airports, so which concludes -- includes center management, which is retail and advertising and hospitality, which is VIP and lounges. These 3 elements have together 47% share of the whole revenue of the Retail & Properties segment. So parking is 34% and rental is 19%. But I think this gives you a better picture and we are better comparable to other airports.
We saw positive development throughout the segment, parking, plus 12.8%. So again, we managed, as we told you in our last call, which is our target. We have roughly 50% of the passenger growth translating into revenue growth. Rental, 7.4%. Rentals have nothing to do with passenger growth. So I think this is a very positive development in this field. And advertising, plus 8.9%. Shopping and F&B, plus 10.3%, whereby mainly F&B is growing strong, 18.7%. Retail, plus 7.4%. There you have to see that there is an extra effect due to the fact that we're refurbishing plaza, so which is the main shopping area of Terminal 2 right now. That's why retail revenues -- specialty retail, I have to be precise, specialty retail revenues are down. Heinemann manages to take roughly the 50% from passenger growth and F&B is up 18.7%. So on average, it's -- in the first quarter, plus 10.3%. But overall, we expect here a significantly better results for the full year because from midyear on, we will have 700 square meters from our new market brand GastroShop in place. And we are right now negotiating with Heinemann, an extension of the contract where we are optimistic that we will find the solution and this would have -- and this would mean an increase, a significant increase in revenues from 1st of January 2019. We will keep you updated in this, but this will boost our PRR then for the full year as well.
For Q1, PRR was down. The respective number from 2018 of EUR 3.09 in the first quarter. This year, it was EUR 2.81. And to preempt the question you probably might ask, in the full year, we had EUR 2.75 PRR from center management and hospitality. And I expect that this year, it should be somewhere between EUR 2.60 and EUR 2.65. So this is my best guess for the PRR of center management and hospitality for the full year 2019.
Coming to Malta. Malta does extraordinary well. Here, we see a positive effect. Significantly above passenger numbers, passengers were up 2.6%. Revenue was up 11.9%. We had a positive effect in retail from new contracts and mainly the effect that for in the first quarter, we had a new bigger Duty Free shop up and running. So this compares with 2018 where it was not fully opened. And -- so overall, the results are extremely good. Very significant increase in EBIT. And to give you, and I mean, an idea on -- for the full year 2019 on Malta, we can just repeat what our colleagues who are listed on the stock exchange in Malta forecasted this year. It's an increase of 5.8% in passenger number, so up to 7.2 million, roughly. Revenue, EUR 96 million. EBITDA, EUR 59 million and net profit, roughly EUR 31 million. So this is the projection for the full year 2019.
Kosice is unfortunately down in the first quarter this year. But as you know, this -- it doesn't have -- really have an impact. On the one hand, this doesn't really have any impact on their results. We had last year a net profit of EUR 2.6 million. EBITDA margin of 31%. The reduction is mainly driven by the loss of the routes between Bratislava and Kosice. But this will not impact significantly the net profit of Kosice in 2019. We hope that summer will be better as well. And therefore, it does not have a negative impact on our group results.
Yes. Let's talk a bit in more detail on the traffic development. Vienna Airport was up 24.6%, Malta Airport plus 2.6%, Kosice with minus 8.5%. For the full year, in Kosice, we think it will be up -- we will be down 5%, which the situation should improve a bit. We are looking at still a strong April. And now we think the passenger growth in Vienna will slow down a bit. Still over summer, we expect double-digit growth. But in the last quarter, the growth should significantly slow down and that's why we believe we will be -- we'll have growth of more than 10%, but how much exactly is not clear yet.
We are looking at roughly 10% to 11% seat growth in the summer schedule. I understand that OAG is projecting something significantly better, I think they're not calculating all the flights which are not operated in reality. So therefore, I think this is too optimistic. But yes, definitely, we'll be looking at a very strong year here in Vienna.
The only downside is cargo. We are down in Q1 by minus 2%. The trend has not improved so far. I understand that this is a development we see all over Europe, seeing the results from many, many other airports. But yes, overall, this is obviously not a positive development.
Austrian was growing by 8.6% in Q1. Laudamotion has already a share of 8%. Eurowings a share of 7.6%. They reduced capacity a bit. But not they reduced -- did not reduce the number of aircraft, but they reduced the density of their flight plan to improve performance, which worked very well already with Eurowings, that's why they had a reduction in passenger numbers by roughly 10%. Wizz Air is #4 with 6.4%. easyJet is #5 with 4.6% market share plus of 20%. We see now the full year effect of them taking over the Air Berlin operations in Berlin. Lufthansa, slightly down. Turkish, slightly down. Emirates, down. SWISS, down. And newcomers as well, Vueling and Level, with a market share of 1.7% and 1.4%, respectively. So Lufthansa Group has a market share of 53%. Low-cost carriers including Eurowings, so you can't add up the number, so Eurowings is both in Lufthansa Group and in low-cost carriers is roughly 32%. So -- and which surpasses our expectations and I would not be surprised if this would be roughly the level of low-cost carriers for the full year as well.
April was up 26.6% in Vienna. The positive thing is local passengers plus 32%, but even transfer passengers were growing plus 8.2%. Flight movements, plus 16%. Cargo, unfortunately, down significantly. This might have -- there might have been a bit of an Easter effect as well. But as I said, this is a European trend and it affect incoming cargo, outgoing cargo. So this is something, which probably will not change in the short term.
Malta was growing by 10% in April, the positive side of Easter in April, and Kosice was down 6.3%.
Yes. The -- I mean, I think you know that most of the news, I think long haul is important. ANA started in February, Austrian started Montréal in April. Air Canada started Toronto in April. Now from June onwards Guangzhou via Ürümqi will fly to Vienna as well. And then we see a lot of additional low-cost capacity.
You might ask yourself or you might ask us if we think that this is sustainable. I think it will not be sustainable for all of them. So definitely fares has to go up in the future. The current fare level is not sustainable. But I see some very encouraging load factors by some of the new entrants. There are some more disencouraging load factors with other airlines or with other newcomers. So I think there will be a consolidation in the low-cost carrier sector. But I'm sure that there are some of them who will still grow. I think Lauda announced a very aggressive growth path for the next 12 months.
So overall, I don't think that there will be a significant drop in traffic next year. Although it's very early to talk about 2020, but I would not foresee a significant drop in traffic or even a drop in traffic in next year. And as we said already in the past, with the growth we had in 2018 and which we are seeing now in 2019, even if we would have although I don't see today, a drop 2020 would not be a major problem.
We expected the group to have something between 8% and 10% growth, approximately 38 million passengers in Vienna. More than 10% growth. And again, roughly 30 million passengers. I think when we see how summer is going and we got the 1st July figures, we will definitely be in a position to give you a much more clearer updates with our 6 months results in August.
Yes. That's it from our end and we are now happy to take your questions.
[Operator Instructions] We'll take our first question from Bernd Maurer with [ RBC ] (sic) RCB.
I want to address that the Handling segment. And here, especially the contract change that you mentioned. And I ask Mr. Jäger if I understood you correctly that and it was known that contracts with Lufthansa faced some changes with first round taking effect in 2018, second round of various adjustments since the 1st of January this year. Did I understand you correctly that there are no further, let's say, severe steps seen out of these contract negotiations and amendments and that there is between or there is in the years 2021 to 2025 increased by 0.7x the consumer price index?
Yes. You're correct. So the major changes in the contract with Austrian Airlines, which goes into 2025 were in 2018 and are now in 2019, and from next year onwards there will be an increase, as you just mentioned. We've got contracts with Lufthansa and SWISS into 2023. So therefore, there should not be any changes in the conditions in these contracts.
We will take our next question from Stephanie D'Ath.
The first one is on the summer outlook and given strong growth year-to-date, and what created your traffic guidance? And if you could maybe specify how much of your EBITDA growth has been driven by new routes? Second question is regarding the comments you made on share buyback. So my understanding is that you had the opportunity for the last 3 years and this is renewed for the next 3 years. What are the rules regarding remaining list because you have the ability to buy up to 10% of your shares, but that will basically mean all your free flows so as to understand a little bit [ what amount of money ] you are going to invest there -- and then my third on the fee per passenger -- and if you could just where you expect this to be even the dilutive impact from the incentive program?
Yes. Let me start with your questions regarding summer. Yes, I mean, we slightly changed our guidance now to more than 10% passenger growth and roughly 30 million passengers. As I said, we could be above 30 million or I would expect it to be above 30 million. But where we will land exactly will depend on the development mainly in summer. Some of the new entrants are not performing very well. So I would not exclude that there will be measures taken in the course of this year and that's why we are hesitant so far to be a bit more aggressive on improving our passenger guidance. So that's why this is something we are leading up to our midyear results, then we will be in a better position to give you a clearer guidance on traffic and probably this would change a bit, the financial guidance, as well. As I said, summer, we look at roughly 10% capacity growth and then it depends on the load factor what it turns out to be. But definitely, we will not be in a 25% or 20% growth. So this will significantly slow down over summer.
I mean it's difficult to say or let's say now impossible which route are incentivized or not. Essentially, if you look at, obviously, we've got contract with more or less all airlines. So there are very few airlines, which don't have incentives. Austrian Airlines got the volume. This can -- this incentive, which is published and open for everybody, they've got growth incentive as well. So for the growth they are bringing to Vienna, they are getting some incentives as well. The new airlines like Wizz Air, like Lauda, like Level, obviously they've got growth incentives. Some of them might get into the volume discounts, others might not. So it's impossible to break this down to routes and the new long-haul routes, we've got incentives on long-haul on the landing charges. So in the first year, although as you know, the landing charges are not the most important charges for us. But in the first year, they don't pay any landing charges. In the second year, they've got an 80% discount and so on.
So most of the airlines in one or the other way incentivized, but the level of incentification is, obviously, very different.
The one thing you have to be careful now is that the fee per passenger or the calculation of the fee per passenger has changed now as well. Because obviously in the past when we had the launches in the aviation segment, they were part of what you could see in the aviation revenue and this is what we reported always. This was usually something between EUR 0.80 and EUR 1. Now part of this has been taken out. What I'll tell you now is the pure airport charges, fee per passenger. And there we reported then that in 2018, it was EUR 14.50 minus other revenues in the aviation segment. So this was probably roughly EUR 13.50 in 2018. And for the full year, I would expect that this should be somewhere at around EUR 13. So again, and I think this is something I said in our last call as well, if we grow by 10%, we would expect that our revenues in -- from airport charges should grow somewhat between 4% and 5.5%. So that's the rule of thumb. And so far, nothing has changed. So this is what I still would expect for the full year.
Yes. In regard of the share buyback authorization, we will do what we think is appropriate in the right time. And it gives us the opportunity to use the program as we think it is appropriate and to what extent we will do it and when we will do it, we will let you know once we have made the decision upon that. But I mean, we reserve any option and let's see what we do.
But could you maybe let us know if the main shareholders have been pushing you towards that capital allocation? And what would be the impact...
No. I mean, you are right that it was a motion put forward by IFM, but there was no push necessary because as I said, we had the authorization so far. And we are continuing to have this instrument for the next 3 years. To what extent it will be used or if it will be used at all, is not decided so far. And therefore, it's only speculation.
[Operator Instructions] We'll take our next question from Bernd Maurer with [ RBC ] (sic) RCB.
A second clarification from my side. Mr. Jäger you mentioned your PRR target for 2019 before and also mentioned the reported PRR for 2018 given the new classification. I missed this number. Can you please repeat it?
EUR 2.75. It was the PRR in the new set up in 2018 and for this year, we expect it to be somewhere between EUR 2.60 and EUR 2.65.
Okay. Taking EUR 2.75 is the number for 2018?
EUR 2.75 was in -- was the comparable number in 2018.
We will take our next question from Andrew Lobbenberg with HSBC.
Can I get the summer volumes because you said how you saw OAG presenting a higher percentages, but that you believe that some areas are wrong. And can you help us understand where you think OAG is overstating?
No. I mean our experience with OAG is that they take the full schedule which airlines upload in the system. And from our experience, and I think our people or we've got people who do nothing else but checking every flight plan and uploading everything in our system is that this is simply overstated. So on the one hand, there are always mistakes in the OAG system. And secondly, a lot of airlines when the load factor is not high enough, first of all, simply cut flights or put them out. So I think -- and this is something I'm happy to discuss in our call at Q3 in November probably, who was wrong and who was right. But I'm pretty sure that our estimate of something between 10% and 12% passenger growth is more accurate than the 16% or 17% growth OAG is forecasting.
Okay. And you reminded that some of the new entrants are going to blend, but you don't know when and you don't want to say on an open line who. Is that right?
Yes. Absolutely. But this is broadly listed -- we've got a lot of new entrants and the performance is very diverse, I would say. Obviously, which we are not in a position to give you any details in respect to the performance of our customers. But yes, it's possible that there will be some consequences in the one or other area and that's why we are probably not as bullish as we -- as you would assume after our results in -- from January to April.
It appears there are no further questions at this time. So I'd like to turn the conference back over to the presenters for any additional or closing remarks.
Ladies and gentlemen, thank you very much for your attention. Should you have any further questions later on, please feel free and get back to me. Other than this, the presentation will be on the homepage with the replay tomorrow around noon. Thank you very much. Bye-bye.
This concludes today's call. Thank you for your participation. You may now disconnect.