Aéroports de Paris SA: Financial indicators heavily impacted by the crisis linked to the CoVid-19 epidemic

Financial release27 July 2020Aéroports de Paris SA
Financial indicators heavily impacted by the crisis linked to the CoVid-19 epidemicGroupe ADP 2020 half-year results¹Groupe ADP traffic² : decrease by 57.5%³, (excluding traffic at Istanbul Atatürk and excluding GMR Airports platforms in 2019) at 48.2 million passengersParis Aéroport traffic (Paris-Charles de Gaulle and Paris-Orly): -62.2% at 19.8 million passengersConsolidated revenue down by 46.5% at €1,168 million, resulting to the crisis linked to CoVid-19, with an important impact notably on aviation and retail activities at Paris, but on the revenue of TAV Airports and AIG abroad as wellEBITDA⁴ at €39 million, down by €725 million (-94.9%), notably following the sharp decline in revenue and trade receivables depreciations for €63 million, despite the savings plan engaged by the group (decrease by €385 million of the group operating expenses over the 1^st half of 2020)Impairment of assets in France and internationally for an amount of €201 million (in NRAG), of which €191 million of impact on the operating income from ordinary activities (before taxes)Operating income from ordinary activities at -€566 million, down by €1,019 millionNet result attributable to the Group at -€543 million, down by €793 millionThese figures take into account the full consolidation of Société de Distribution Aéroportuaire and of Relay@ADP results since April 2019As of 30 June 2020, Groupe ADP accounts the results of the GMR Airports group using the equity method following the acquisition of an initial 24.99% stake in GMR Airports in March 2020. The results of the GMR Airports group will be accounted by the equity method at 49% from July 2020, following the acquisition by Groupe ADP of a second stake bringing the total stakeholding to 49% of the share capital of GMR Airports (see the press releases of 20 February,  26 February, and 7 July 2020)Augustin de Romanet, Chairman and CEO of Aéroports de Paris SA – Groupe ADP, stated:“Over the 1^sthalf of the year, group traffic fell by 57.5%, with a total of 48.2 million passengers, and that of Paris Aéroport by 62.2%, with 19.8 million passengers. The months of April and May saw almost no traffic and the recovery in traffic was slow in June and July. The entirety of the group’s activities were strongly affected from March onwards: consolidated revenue fells by 46.5% over the 1^sthalf of the year to €1,168 million. EBITDA remains positive at €39 million thanks to the first effects of an optimization plan introduced throughout the group. Net result attributable to the Group stood at -€543 million, due in particular to significant depreciations abroad and in the retail and services impacted by the crisis. In this context, the priority of the group was to ensure the safety of its employees and customers. It has thus played a key role in managing the health crisis. Groupe ADP has succeeded to stabilize its financial situation. Moreover, the group has concluded the acquisition of a stake in the Indian airport group GMR Airports, in downward revised conditions to take into account the pandemic impact, paving the way to a new industrial partnership which will be a growth driver for the future. This is the first time in 50 years that air traffic has experienced a downturn this abrupt and it is established that the recovery will be very gradual: a return to the 2019 traffic level in Paris is anticipated between 2024 and 2027. This crisis brings structural economic effects on air transport with a persistent public health threat. In this new operational and financial environment, Groupe ADP is going to review its strategic orientations in order to provide the company with the capacity to return to profitable and sustainable growth”.
 Update on the situation related to the CoVid-19 epidemicOver the 1^st half of 2020, air transport was abruptly interrupted for several months as a result of the containment measures and borders closures decided by most countries in the world to limit the spread of the CoVid-19 epidemic. Groupe ADP passengers traffic was thus down by 57.5%⁵.Traffic at Paris Aéroport is down by 62.2% over the 1^st half of 2020 compared to the 1^st half of 2019, with 19.8 million passenger welcomed, compared with 52.3 million passengers over the 1^st half of 2019. Aircraft movements at Paris Aéroport are down by 55.9% compared to the 1^st half of 2019. Between the 1 and 20 July 2020, the estimated decline of passenger traffic and aircraft movements at the Parisian platforms reaches -79.0% and -70.7% compared with the period between the 1 and 20 July 2019⁶.At Paris-Charles de Gaulle, passenger traffic amounted to 14 million passengers over the 1^st half of 2020, down by 61.3% (with a decline of commercial traffic of -98.0% in April 2020, -96.8% in May 2020, -90.9% in June 2020 compared to the same period in 2019). At Paris-Charles de Gaulle, only terminals 2E gate K, 2F and 2AC are currently open to handle all commercial passenger traffic.At Paris-Orly, passenger traffic decreased by 64.2% over the 1^st half of 2020 compared to the 1^st half of 2019 (with a decline of commercial traffic of -100% in April and May 2020, 98.3% in June 2020 compared to the same period in 2019). It should be noted that commercial traffic at Paris-Orly was temporarily suspended on 1 April 2020 and resumed on 26 June 2020 from Orly 3 and on 13 July 2020 from Orly 4.Regarding Groupe ADP’s international platforms, many airports have been closed to passenger traffic and many domestic and/or international flights have been suspended between March and June 2020 (see page 14 for more details).u  Situation in Paris
The exemption of the parking fees, implemented on 16 March 2020 for the aircrafts grounded on the Parisian platforms because of the crisis linked to Covid-19, has been renewed from the 1 July 2020 on the basis of different conditions. For the 1^st half of 2020, this represents an amount of around €6.7 million. Regarding the measures for rents and rental charges exemptions, they stand at €16.2 million over the 1^st half of 2020.In Paris, investments planned for 2020 should decrease by around €400M. The major projects (BD link and junction of satellites in terminal 1 at Paris-Charles de Gaulle, international departure area at Paris-Orly) are however maintained given the additional costs that a suspension of works would have incurred. For the investments in 2021 and 2022, they are estimated at between €500M and €600M per year, corresponding to a significant reduction.The environmental authorization regarding the Paris-CDG airport redevelopment project was due to be the subject of a public enquiry in November 2020. Groupe ADP decided to carry out an overhaul of the project in order to draw on the consequences from the current crisis in terms of both health and traffic forecasts, to prepare for the introduction of the hydrogen aircraft and to respond to the recommendations of the Environmental Authority. The aim of this work will be creating the conditions for a public enquiry into the project thus re-adapted in depth.Retail activities have been considerably reduced from mid-March to mid-May by the introduction of sanitary measures, the confinement period and the restriction of authorized businesses. This led to adapt the activity by only operating on a reduced number of terminal. With the end of confinement and the resumption of traffic, a limited number of shops were able to reopen from 20 May, the aim being that the reopening follows the traffic recovery. A depreciation of an intangible asset for an amount of -€51 million has thus been recorded for Société de Distribution Aéroportuaire.u   Adaptation of Groupe ADP’s strategic orientations
In response to the epidemic and the lasting upheavals it will trigger, Groupe ADP must adapt to move from a growth-support model to a model to manage a situation in which activities and investments will be reduced. Thus, the 2016-2020 Economic Regulation Agreement for the Parisian platforms has been terminated with the agreement of the State. The process of drawing up a new regulation agreement has been suspended.In this new operational and financial environment, Groupe ADP will review its strategic orientations in order to provide the company with the opportunity to return to profitable and sustainable growth.
 u  Situation abroad
In the context of the Covid-19 crisis, exceptional impairments on certain fully consolidated or equity-accounted international assets are recorded with an overall impact of €177 million in net result attributable to the Group.The financing contracts related to the concessions operated by AIG, TAV Esenboga, TAV Macedonia, TAV Milas Bodrum, TAV Ege, TAV Tunisia and Havas include early repayment clauses in the case of non-compliance with certain financial ratios. These contracts account for 15.3% of the total bank loans of the group as of 30 June 2020.In certain airport management companies in which Groupe ADP is a shareholder, such covenants may lead to default occurrences supplemented with pre-defined cure rights and remedy procedures. Thus, in case of a sustained breach, lenders may impose default conditions which may result in either limited or no recourse to shareholders. To date, such covenants are respected by the airport management companies, with the exception of TAV Tunisia and AIG (see note 9.4.1 in the appendix of the group consolidated accounts). In both of these projects constructive dialogue is maintained with the lenders and both parties are working to find a consensual solution.u  Solid financial structure and strengthened liquidity
Groupe ADP had a cash position of €2.8 billion as of 30 June 2020, of which €675 million was held by TAV Airports. On 2 April 2020, Aéroports de Paris received the proceeds of a €2.5 billion bond issue⁷.Moreover, Aéroports de Paris received on 2 July 2020, the proceeds of a €1.5 billion bond issue⁸. Finally, on 7 July 2020, Groupe ADP completed the second tranche of the GMR Airports transaction with a payment of €532 million.Given its available cash, the group does not anticipate any short-term cash flow difficulties. Furthermore, given its long-term credit rating (A negative outlook by the Standard and Poor’s agency since 25 March 2020) and the confidence in the strength of its financial model, Groupe ADP does not anticipate any particular medium or long-term financing difficulties.u  Trends for the group
The impact of the decline in activity on the group’s annual results for 2020 cannot be precisely assessed at this stage given the uncertainty of the conditions and timetable for a return to normal traffic in the various geographical areas. European or foreign authorities’ decisions, notably regarding the closing and reopening of some destinations, had and will have a strong impact on the situation of the platforms of the group.The global impact on 2020 will depend both on the duration of the viral episode and its consequences on the economy in general and on air transport in particular. It will also depend on the speed of activity recovery after this episode.Groupe ADP considered a sensitivity analysis based on a decline in traffic at Paris Aéroport and on other platforms operated by Airport International Group and TAV Airports between around –55% and -65% between the months of April and December 2020⁹. Under these conditions, the impact on the group’s consolidated revenue would be from around €2 to €2.5 billion. The assumptions of this sensitivity analysis may be different and are, either way, subject to risks and uncertainties.Groupe ADP furthermore reiterates that it has engaged an important operational and financial optimization plan with an objective of reduction of the group operating expenses for 2020 by approximately €550 million in total. The closure of the Parisian infrastructures should contribute to a €200 million saving.At this stage, it is not possible to apply this sensitivity analysis to the group’s EBITDA in a sufficiently robust manner.To date, the traffic assumption for Paris Aéroport is approximately -63% for 2020 compared to 2019. The recovery in traffic will be slow: traffic could return to the level reached in 2019 between 2024 and 2027. Regarding the group’s international platforms, traffic could return to the level reached in 2019 between 2021 and 2023.Regarding the financial debt, Groupe ADP projects a net debt/EBITDA ratio between 6x and 7x by end of 2022.
 Groupe ADP’s 2020 half-year results2020 half-year consolidated accounts