December 2023 Investor Report

Heathrow

15 December 2023

 

15 December 2023

Heathrow Funding Limited

Heathrow Finance plc

Publication of December 2023 Investor Report

On behalf of Heathrow Airport Limited, Heathrow Express Operating Company Limited, Heathrow (AH) Limited and Heathrow (SP) Limited ("Heathrow SP"), LHR Airports Limited (as Security Group Agent) is today distributing its semi-annual Investor Report to various parties pursuant to the terms of the Common Terms Agreement entered into on 18 August 2008 (as amended) (the "CTA").

The Investor Report is also being distributed by Heathrow Finance plc ("Heathrow Finance") to various parties pursuant to Heathrow Finance's £250 million 5.75% Senior Secured Notes dated 16 October 2014 and due 2025 (as amended), £275 million 3.875% Senior Secured Notes dated 8 June 2017 and due 2027 (as amended), £300 million 4.75% Senior Secured Notes dated 7 November 2018 and due 2024 (as amended) and the £300 million 4.125% Senior Secured Notes dated 19 November 2019 and due 2029 (as amended).

The Investor Report contains information relevant to creditors of both Heathrow SP (and its subsidiaries) and Heathrow Finance.

The attention of potential readers of the Investor Report is drawn to page 2 of the document, which contains an Important Notice, including in relation to certain forward-looking statements included in the Investor Report, and contains a description of the basis on which the operational and financial information included in the document has been prepared.

The Investor Report sets out the financial performance and ratios for Heathrow (SP) in 2022 (actual), 2023 (forecast) and 2024 (forecast), together with key business updates. Additional information relating to Heathrow Finance is presented in Appendix 6.

The strong recovery in traffic at Heathrow continued in the first eleven months of 2023, with a total of 72.5 million passengers travelling through the airport. We saw a significant increase in connectivity across various regions, highlighting an impressive recovery, with Heathrow named the most connected airport in the world by OAG. We remain Europe's busiest airport, and in October became the 4th busiest airport globally. 

Passenger service levels have improved as a result of the investment in recruitment and training over the past two years. In the first nine months, 74% of passengers rated their overall satisfaction with Heathrow as 'Excellent' or 'Very good'. We have also seen very strong performance in security, with 90% of passengers now consistently waiting less than 5 minutes and close to 100% less than 10 minutes. On arrivals, punctuality has slightly dropped compared to last year due to air traffic control strikes in Europe, airspace congestion, and adverse weather events. However, departure punctuality has improved, and the gap between both metrics is closing as airline ground handling resources increase.

Decarbonising the aviation sector remains at the centre of our strategy moving forward. We continue to promote Sustainable Aviation Fuel (SAF) at the airport, with major airlines committing to using 10% SAF by 2030. Our incentive scheme will help achieve this. In 2024, 2.5% of Heathrow's fuel will be SAF, and we have seen a clear sign of the growing adoption with the world's first 100% SAF-powered transatlantic flight taking off from Heathrow to New York on 28 November. This was a remarkable day for aviation and marked a historic moment for the industry and its roadmap to decarbonisation. SAF has a fundamental role to play in aviation's pathway to net zero, but currently there's not enough supply. For net zero to be a reality, we need the Government and industry to work together to kickstart a domestic SAF industry.

We now expect 79.1 million passengers to travel through the airport in 2023 (+28.4% vs FY22), in line with the updated guidance provided in our Q3 results announcement. Adjusted EBITDA is forecast to be £2,246 million (+33.4% vs FY22), again in line with Q3 guidance. This is driven by an increase in revenue to £3,673 million (+26.1% vs FY22) on the back of traffic growth, with operating costs expected to increase to £1,428 million (+16.2% vs FY22). The rise in operating costs versus last year is due to the Company's continued investment in growth, resourcing, and the impact of inflation.

Passenger numbers for 2024 are forecast to increase to 81.4 million, an increase of 2.9%. Despite this increase, Adjusted EBITDA is forecast to decline to £1,885 million (-16.1% vs FY23), primarily driven by the reduction in the aeronautical tariff to £26.74 (£31.57 in 2023) in line with the Final Decision of the CAA. Overall revenue is forecast to be £3,450 million (-6.1% vs FY23) with aeronautical revenue decreasing to £2,190 million (-11.3% vs FY23) and non-aeronautical revenue increasing to £1,260 million (+4.5% vs FY23). Operating costs are expected to increase to £1,566 million (+9.7% vs FY23), reflecting lower forecasted inflation and stabilisation of our operating costs. The RAB is forecast to be £20.0 billion at the end of 2023 and £20.4 billion at the end of 2024 as we progress with our investment plans.

Finally, on 18 October, Thomas Woldbye assumed the position of Heathrow's Chief Executive Officer, bringing with him a wealth of experience and strategic vision to lead Heathrow into its next phase of growth.

The Investor Report document is available in pdf format at the following link:

http://www.rns-pdf.londonstockexchange.com/rns/9101W_1-2023-12-14.pdf

The Investor Report is available from today via the Heathrow Investor Centre at https://www.heathrow.com/company/investor-centre/reports/investor-reports

By way of reminder, pursuant to the CTA and the Heathrow Finance Bonds (as appropriate), the following is available on the Heathrow Investor Centre:

-     consolidated financial information of Heathrow (SP) Limited for the six months ended 30 June 2023

-     consolidated financial information of Heathrow Funding Limited for the six months ended 30 June 2023

-     consolidated financial statements of Heathrow Finance plc for the six months ended 30 June 2023

For investor enquiries please contact Tim Allen, Head of Debt Investor Relations and Corporate Finance, [phone]

(1)        Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, and exceptional items

 

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