June 2024 Investor Report

Heathrow

28 June 2024

 

28 June 2024

Heathrow Funding Limited

Heathrow Finance plc

Publication of June 2024 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 13 October 2014 and due 2025, £275 million 3.875% Senior Secured Notes dated 5 June 2017 and due 2027,  the £300 million 4.125% Senior Secured Notes dated 15 November 2019 and due 2029 and the £400 million 6.625% Senior Secured Notes dated 12 March 2024 and due 2031  (the "Heathrow Finance Bonds"), a note purchase agreement dated 14 September 2018 (the "Note Purchase Agreement") and pursuant to Heathrow Finance's facilities agreements dated 6 July 2017, 22 November 2018, 23 November 2018, 1 February 2019, 8 May 2019, 16 August 2019 and 2 December 2019 (the "Heathrow Finance Facilities Agreements").

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 includes an updated forecast for 2024 for the financial performance of Heathrow SP prepared on a consolidated basis, forecast nominal debt and financial ratios for Heathrow SP and Heathrow Finance. Heathrow SP, through its indirect subsidiary, Heathrow Airport Limited, owns Heathrow Airport.

This report sets out the actual financial performance and ratios for Heathrow (SP) in 2023 and forecast figures for 2024, together with key business updates. Additional information specific to Heathrow Finance is set out in Appendix 6.

Over the first five months of the year, we have seen a strong demand in traffic at Heathrow, with 32.4 million passengers travelling through the airport. For 2024, we are forecasting passenger traffic of 82.8 million (+4.5% vs FY23) - above the guidance included in our Q1 results and 1.4 million higher than our December 2023 Investor Report forecast. This updated traffic forecast reflects the improved economic outlook and a strong passenger demand. Operationally, we have performed well, delivering great service and successfully getting passengers on their way, particularly over the busy half terms, Easter and May public holidays. In the first five months, security performance has been very strong, with over 94% of passengers now waiting less than 5 minutes and departure and arrival punctuality higher than in 2023.

Given the higher traffic outlook, Adjusted EBITDA is forecast to be £1,942 million (-12.8% vs FY23), an increase of £57 million versus the December 2023 Investor Report. Revenue is expected to increase £67 million versus the December 2023 Investor Report to £3,517 million (-4.6% vs FY23), with £2,232 million (-9.7% vs FY23) of aeronautical revenue and £1,285 million (+5.9% vs FY23) of non-aeronautical revenue. The significant decrease in aeronautical revenue versus 2023 is mainly due to a 20% reduction in the regulatory charges from 1 Jan 2024. Operating costs are forecasted to rise to £1,575 million (+7.9% vs FY23), an increase of £9 million versus the December 2023 Investor Report, to accommodate the increased demand. The estimated RAB at the end of 2024 is £20,222 million. At Heathrow (SP) and Heathrow Finance, we have sufficient headroom for our financial covenants in 2024. No dividends are currently forecast for 2024, although it is plausible subject to financial performance. We will continue to review optionality throughout the year.

During the first five months of the year, Heathrow maintained momentum across carbon and sustainability. We became an inaugural adopter of the Taskforce on Nature-related Financial Disclosures (TNFD), allowing us to transparently measure and improve our impact on nature. We successfully issued a £350 million sustainability-linked bond (SLB). It was our debut GBP SLB and the first SLB in the Sterling market to include all scopes of emissions. We have also priced a new Class A and Class B debt through the private placement market, which includes our first use of proceeds green issuance. These transactions reinforce our commitment to a sustainable financing platform.

We have recently responded to two key CAA consultations. First, the consultation on 'Setting future price controls - review of approach', which followed on from the DfT independent review of the CAA published in 2023, that recommended the regulator should review the process, governance and 'mechanics' for conducting economic regulation. Heathrow has outlined where improvements in approach, guidance, and decision-making are needed and expects this consultation to inform an enhanced price review for the next regulatory period (H8). Second, the "H7 Final Issues" consultation addresses matters remitted to the CAA by the CMA related to price control and unresolved issues from the Final Decision. Finalising this is important for providing certainty to stakeholders as we progress in delivering our plans. A decision is needed before Heathrow's 2025 charges consultation.

Investments are underway under our £4.3 billion H7 investment programme, and 2024 capital expenditure remains unchanged at £936 million, 50% higher than in 2023. Good progress has been made in upgrading 146 security lanes as part of our investment in next-generation security equipment, and we have appointed a lead contractor to replace the T2 baggage system.

Finally, we have recently launched our new strategy after almost a decade. This new strategy provides a clear direction for us to align our efforts and ensure collective progress toward our common objective - to be an extraordinary airport fit for the future while renewing our commitment to making every journey better and provide value for all our customers.

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

http://www.rns-pdf.londonstockexchange.com/rns/2506U_1-2024-6-27.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, the Heathrow Finance Bonds, Note Purchase Agreement and the Heathrow Finance Facilities Agreements (as appropriate), the following is available on the Heathrow Investor Centre at https://www.heathrow.com/company/investor-centre/reports/annual-accounts:

-     consolidated financial statements of Heathrow (SP) Limited for the year ended 31 December 2023.

-     consolidated financial statements of Heathrow Funding Limited for the year ended 31 December 2023.

-     consolidated financial statements of Heathrow Finance plc for the year ended 31 December 2023.

-     regulatory accounts for Heathrow Airport Limited for the year ended 31 December 2023.

For investor enquiries please contact Leandro Garcia, Debt Investor Relations Manager, [phone].

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

 

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