Groupe Aeroports de Paris (ADP), the French airport operator, presented its 2023 Full Year Results with a positive outlook, demonstrating a significant recovery in traffic levels and financial performance. The company reported a 20% increase in traffic, nearly reaching pre-pandemic levels, with notable growth in international sectors. The new retail concept, Extime, has led to a record spend per passenger in Paris airports. Financially, Groupe ADP has shown resilience with EBITDA exceeding €1.9 billion and net income group share up by 22% to €631 million. The company remains focused on its international expansion, sustainable development, and is preparing for the upcoming 2024 Olympic and Paralympic Games in Paris.
Key Takeaways
- Traffic levels nearly fully recovered, with a 20% increase year-over-year.
- Significant growth in spend per passenger due to the new retail concept, Extime.
- Strong international portfolio development with projects in Kazakhstan, Turkey, and India.
- Decarbonization initiatives progressing, focusing on energy mix and platform electrification.
- Solid financial performance with EBITDA over €1.9 billion and net income group share of €631 million, up 22%.
- Dividend proposal of €3.82 for the next General Assembly.
- Updated guidance for 2024-2025 aiming for pre-COVID growth rates.
Company Outlook
- Groupe ADP aims to reach 40% international operational result by 2030.
- Preparations underway for the 2024 Olympic and Paralympic Games.
- The company plans to fully offset new taxes through tariff increases.
- Focus on sustainable and multi-model platforms development.
Bearish Highlights
- Increase in operating expenses by 17% due to adverse effects.
- Full traffic recovery with China not expected until after 2024.
- Regulatory decisions on cost allocation system not expected before the end of 2025.
Bullish Highlights
- Record retail spend per passenger in Paris airports.
- Strong profit recovery in TAV Airport and GMR due to international traffic growth.
- EBITDA and net income group share showing significant increases.
Misses
- Domestic traffic in Mainland France not fully recovered.
- Detailed international performance not disclosed.
Q&A Highlights
- No significant gap in retail performance between leisure and corporate traffic.
- New airport infrastructure in India not expected to impact current operations significantly.
- Sustainable aviation fuel's potential impact on prices and profitability acknowledged.
- The company is managing increased energy and staff costs.
- Focus on ongoing international projects and opportunities in Montenegro and Manila.
Groupe ADP (ADP.PA) has demonstrated a robust recovery trajectory as it navigates the post-pandemic landscape. The company's strategic focus on retail innovation, international expansion, and sustainability positions it well for future growth. However, challenges such as increased operating expenses and regulatory negotiations remain. Investors and stakeholders can anticipate further developments and detailed plans in the company's next quarterly publication on April 26.
Full transcript - Aeroports de Paris (ADPA) Q4 2023:
Operator: Hello, and welcome to the Groupe ADP 2023 Full Year Results. My name is Caroline and I will be your coordinator for today's event. Please note, this call is being recorded and for the duration of the call your lines will be on listen-only mode. [Operator Instructions] I will now hand over the call to your host, Cecile Combeau, the Head of Investor Relations at Groupe ADP to begin today's conference. Thank you.
Cecile Combeau: Thank you, and good morning, everyone. So I am Cecile Combeau, Head of Investor Relations at Groupe ADP. And with me are Augustin de Romanet, Chairman and CEO; Edward Arkwright, Deputy CEO; and Philippe Pascal, CFO. After going through some prepared remarks about our full year results, we will open the line to Q&A two question each should allow all of you to dialogue with the management. As a reminder, certain information to be discussed on today's call is forward-looking and subject to risks and uncertainties that could cause actual results to differ materially. For these, I refer you to the disclaimer statement included in our press release and on slide 47 of our presentation. And with that let me hand it over to our Chairman and CEO, Augustin de Romanet.
Augustin de Romanet: So, good morning, everybody, ladies and gentlemen, dear friends. Thank you, Cecile. And thanks to everybody to join us to talk about our full year results. So slide 3. You have the highlights of our full year results. So the transformation engaged with 2025 pioneers is progressing well and we are seeing tangible results at all levels. First traffic. Traffic is developing in line with our expectations and we are now very close to full recovery at group level. As you see the recovery is better abroad than in France. We are fully on track with the deployment of our new retail concept Extime and it's already showing promising results for the future, we will develop. Third, we continue to work on reinforcing our photo growth relays with our international portfolio of airport assets. And then we are delivering a robust set of results, while acting on the decarbonization of our activities. So let's take a closer look at these four achievements. First traffic. So in 2023 traffic came up in line with our expectations in Paris and internationally. We see almost full recovery at group level with traffic at 1999 of 2019 level, representing a 20% increase against last year. In Paris, Traffic grew 15% reached close to 100 million passengers or 92% recovery. Last summer in Paris, we had a four pace [ph] of the Olympics with the Para Athletics World Championships followed by the Rugby World Cup during fall. Improving our passenger experience remains a priority in all our airports in Paris and abroad with or without sports events. So all the teams of Groupe ADP are fully mobilized to bring our values of hospitality, to life and welcome all passengers into our airports to our best. And the deployment of Extime, is in this period. So, if you can put the next slide, yes, six Extime slides. So Extime is a part of the range of services, we propose to passengers who travel to our Parisian platforms and our aim is to export this concept. This concept was introduced, with our 2025 Pioneers road map and the past year was really year one of its rollout. We've deployed the new brand in all Parisian goal on all this terminals. The migration to the concept of Boutique Terminal became a reality at Terminal 1 on Terminal 2BD, which are the two pilots in the premium and lifestyle formats. In the next slide, Philippe Pascal, will explain you, how this concept allows us to have with the Terminal 1 the best terminal of the world, if you consider the spend per pax. We also set up the basis for the Extime digital ecosystem. The new Extime reward program has nearly 3 million members exactly 2.7 and the new online marketplace is already operational. This are two key elements to stimulate demand, and increase sales. Extime reward members we spend close to twice as much as nonmembers. Last, we've also set up a new organizational and economic model, with the creation of certified operators and the installation of internal financial flows, linked to the franchise model. All in all, we can see that this strategy is already producing very good results. Spend per pax in Paris reached €30.6 in 2023, which is 12% higher than in 2022 and 30% higher than in 2019. And if I can add, 90% higher than in 2012 because in 2012, we were at €16 per pax. So it's very promising. Now the Paris Olympics challenge. We will open the gate to the games in a few months, which means that during just a few weeks next summer, we will be welcoming thousands of athletes, journalists and officials in our airports, in and out of the gate, with luggage and equipment requiring special care. To handle these [indiscernible] we've been working on adapting our infra. For example, in Paris-CDG we refurbished a boarding launch that will be dedicated to athletes and we have also launched a temporary luggage sorting area. We are also mobilizing our team, within a volunteering program, this special operational organization has also been designed to offer the best possible hospitality to summer tourists. The Olympics are acting as booster to our transformation, as you can see on the next slide. In fact, the Olympics are raising the bar in terms of quality of service and operational resilience. It's also a very good opportunity to introduce some long-lasting transformations, which are fully consistent with our 2025 pioneers by vision. To illustrate that, I will just mention three folds. First one, the remote check-in service at the Olympic village. This large-scale experimentation will provide critical input for our future platform plans. Second, the arrival of Metro Line 14 in our new multi-model station at Orly will allow persons to go from the center of Paris too early by a metro line in 30 minutes with a direct line. Equipment power-ups are 75% complete today and operations in preparation for commissioning are well engaged. It's a contact step towards decarbonization and quality of access to our platform. We consider that we will increase the level of people arriving by collective transportation by 10%, the first year. Last, the Olympics help us making our airports more inclusive. Since October, we've set up a consultative committee for people with disabilities, which are already led to the rollout of developments to improve accessibility. This being said by Paris, let's move to our international activities. So in 2023, we continued to strengthen our international portfolio. To name a few of the progress made this year you can see a dozen of them on this slide. I will mention that works are ongoing to increase the capacity of several of the group airports, notably Almaty in Kazakhstan, Antalya in Turkey and Delhi in India. The latter being already the group's most frequented airport ahead of TAV and GAL. Together with our partner in India, we initiated the first steps towards the merger of Gal into Gil. The new merger company will be a listed airport pure player in which ADP will keep strong governance with an economic interest. We continue to expect the transaction to be completed in the second quarter of this year. Third – third airport issued its first ever bond in the last quarter raising $400 million and showing its ability to finance autonomously its needs and development. It's important in Turkey, because as you know, it's very hard to have a good access to the financial market and TAV showed a very, very good performance in this aspect. Last in India, Gal increased its stake to 70% in very successful Amman Airport a valuable key assets. These achievements fit with our strategy of developing strong growth relays abroad with long maturities. Now decarbonization. In 2023, we continue to work on ways to reduce our internal emissions and contribute to support low-carbon aviation. Improvement of our energy mix is a key lever to reduce internal emissions. In Paris, we have entered into discussions with providers with aim to develop additional solar farms, covering increasing electricity needs of our platform. AIG (NYSE:AIG), in Jordan, inaugurated a solar farm at Amman Airport last December with the generation capacity to close -- of close to 25% of the airport's operational energy requirements. TAV Airports is also moving in this direction and is applying for regulatory approval. Regarding decarbonization of airside activities, I will notably mention the intensive work to accelerate the electrification of our platforms. We are doing what is necessary to meet the new electrical needs, linked to mobility but also electric alternatives to APU. We are also actively supportive to the transition of air transport industry, as illustrated on the bottom part of the slide. More broadly, about our corporate and social responsibility, you can see on slide 10, the recognition of our actions. Groupe ADP was awarded on AA-plus, so 89% per 100 rating by the ESG score, rating agency in December 2023. We responded to the CDP Climate analysis and got B management rating in line with the Europe regional average. On four additional airports of ADP network have joined the airport carbon accreditation program. It is ACI program to decarbonize airports. So our commitment is total. The appreciation of our CSS strategy and actions by these actors brings an additional tool to measure our progress and compare with others. To finish this introduction, I will highlight our strong financial performance on next slide 11. We've recorded an EBITDA above €1.9 billion. Net income group share reached €631 million, up 22% compared to 2022. In line with our distribution policy, we will propose a dividend of €3.82 in the next General Assembly. And now, it's time to give the floor to Philippe Pascal, who will comment more in detail our full year financials. Thank you.
Philippe Pascal: Thank you, Augustin, and good morning, everyone. We start by a focus on traffic in Paris, slide 13, as highlighted by Augustin. Traffic continued to recover in line with our assumption reaching 92% of 2019 levels in our Parisian platform. In detail, we can see that traffic with Mainland France shows a structurally lower recovery at 75% of 2019 traffic, reflecting the closure of several domestic routes as well as the impact from strikes. Traffic with Europe has recovered well to 96% of the 2019 traffic. We saw an acceleration of this trend in the second half. Lastly, international traffic which is the most accretive stands at 95% of 2019. North America reached 100% of 2019 level, while traffic with Africa is largely beyond recovery. Traffic recovery with Asia Pacific is weaker as expected mainly due to the slow but gradual recovery of traffic with China. We nevertheless saw an acceleration in the second half of 2023. There are currently 46 weekly flights with China compared to 79 flights per week in 2019 during the winter schedule. In the month of December, traffic with China was 54% of 2019 level. Moving to slide 13 to look at retail business in Paris. Spend per pax reached a new record of €30.6 in 2023 plus €3.2 above 2022 confirming the structural improvement driven by the deployment of time. As mentioned by Augustin, Terminal 1 has been very contributive. SPP in its international area is now greater than Terminal 2E Hall K, which is also reaching a record level. In 2023, both were above €70 per departing passenger. Looking forward, the reopening of Terminal 2E and 2C in 2024 and the rolling works in the retail area of Terminal 2E Hall K are expected to create some headwinds over the short term. Despite this, we expect continual rollout of time to drive performance and more than offset the negative effects I mentioned. We hence expect SPP to overall continue to grow. Moving on to slide 15 to see strong profit in our two main international assets. On the left side, we can see that TAV Airport has overall fully recovered its 2019 traffic in airports located in Turkey. This growth is driven by strong international traffic. Almaty is recording strong growth with passenger traffic close to 150% of 2019. On the right side you see that GMR part is also been recovering thanks to the strong growth of both domestic and international traffic in India. Goa Airport opened in January 2023 welcome more than 3.7 million passengers for its first year, including international flights since the summer. Moving on to Slide 16, revenue reached €5.5 billion in 2023 driven by the traffic recovery in Paris. The Aviation segment revenue is up 14% year-on-year. The Retail & Services segment is up 23% helped by the solid sales per pax coming in addition to traffic growth. Real Estate segment is up 6% versus 2022. Abroad the growth of TAV Airport revenue has been very strong driven by both in airport asset and its service company. Moving on to Slide 17. With OpEx standing at €3.6 billion up 17%, compared to 2022. This evolution is in line with revenue growth demonstrating the tight cost management from the company. As mentioned on the right side of the table, we had various adverse effects driving our cost base up in 2023, compared to 2022. I will mention in particular infrastructure reopening in Paris, the effect of inflation on some purchasing contract at the mother company, the incremental recruitment made as well as salary increase for the last year and the higher personnel cost of TAV Airport. Regarding the cost linked to the Olympian Games, action implemented in 2023 and 2024 are causing additional expenses. The total envelope is estimated between €40 million to €50 million, along this envelope close to €8 million, have already been committed and accounting for end 2023 OpEx. On top of that, note, as well that we have provisioned around €25 million already in 2023. All-in-all, we delivered €1.9 billion EBITDA, up 15% driven by profit recovery and reflecting good cost control. In 2024, we aim to maintain strict cost management discipline in the context that will remain challenging, as you can see at the bottom part of the slide. That said I'm moving to Slide 18. We have included an additional slide in our presentation. In fact there is a second one of net income to throw further light on our performance. You see here an analysis of our performance excluding elements occurring over a limited period of time which we call one-off items. The list of one-off item for 2022 and 2023 is specified in the bottom part of the slide. Excluding one-offs, 2023 EBITDA is up 18.4% against 2022 and EBITDA margin is up 0.3 point to 36.6%, as you can see on the graph in the middle of the slide. Below EBITDA on Slide 19, there are several items to highlight. The €61 million increase of our share of result is Associates & JVs mainly due to €38 million capital gain on the sale by TAV Airport of the part of its stake in Medina Airport, but also €38 million gain from impair inflation accounting in TAV Airport, JVs and associates. Financial result is broadly stable with several items offsetting each other, notably for €45 million provision reversal on Medina offset by the capital gain of €46 million for the sale of Schiphol in 2022. The income tax expenses is also increasing by €60 million compared to 2022, due to the strong improvement in pre-tax income and despite a €21 million non-cash gain from interim inflation accounting of TAV Airport. Given this and the selling [indiscernible] and EBITDA performance, the net result group share stands at €631 million, up 22%. Slide 20 shows an analysis of the net results excluding one-off ending a very solid underlying results at €552 million in 2023, up 40.5% compared to the underlying result of 2022. Moving on to slide 21. You can see on the bridge main items explaining the evolution in our net debt. In addition to the usual cash outflows, which are the dividend payments and CapEx, which amount to €1 billion. This year we can to -- not too specific cash outflow. First, it's the FCCB for GIL issue for €331 million. And the second it's for €119 million. The upfront payment made by TAV on the Turkish airport authorities, representing 25% of the rent for Ankara concession. At the end of the year, net debt is just below €8 billion standing at 4.1 times EBITDA and actually improvement of 0.3 times EBITDA. Finally on slide 22 for the latest development, our 2024 tariff proposal has been approved by the regulator. It represents an average increase in tariff of 4.5%. As the French regulator validated our tariff proposal, the ability to pass the impact of the new tax through the tariff is being approved. The 4.5% tariff increase allows us to offset not only a part of the OpEx inflation, but also around half of the impact of the portion of the new infrastructure tax falling into the regulated part. On a full year basis, I remind you indeed that tariffs are applied for April, so only nine months of this new tariff in the calendar year. We, therefore, confirm the number we can give you in September of an impact of the tax to around €90 million in 2024. And with that, I will hand back to Augustin to conclude.
Augustin de Romanet: Thank you, Philippe. So I will give you a few comments on our outlook starting with our guidance. So with our 2023 results, we see that we will approach in 2024, 2019 traffic levels in Paris and probably exceeding them at group level. We see as well that we have already surpassed the 2019 consolidated EBITDA level. So two elements leads us to change and to adapt our guidances. First, the new tax applicable for 2024 to major transport in France will impact the group's financial trajectory as reminded by Philippe a minute ago. So it was a reason to change our guidance. How to change them? Now we expect to return to growth rates close to those experienced before COVID. So it seems that that it was convenient for all of you to keep now guidances with level of increase. And we are, therefore, updating our forecast for 2024-2025 in order to take into account these elements and we turn to a selection of indicators that enable a direct reading of the evolution of our performance without reference to 2019. Our updated assumptions and guidance are as follows: first in 2024, group traffic should be up by more than 8% compared to 2023. In Paris, Paris traffic should increase between 3.5% to 5% in 2024 compared to 2023, an increase between 2.5% to 4% in 2025 compared to 2024. EBITDA should grow by more than 4% in 2024 compared to 2023, and by more than 7% in 2025 compared to 2024. The Extime Paris sales per pax should increase between 3% to 5% in 2025 compared to 2023. Last, our net debt-to-EBITDA ratio should stand between 3.5 to four times EBITDA in 2025. The other items of our capital allocation policy are unchanged, meaning our CapEx guidance and dividend distribution policy are confirmed. Looking beyond the next few years, ADP has initiated the first steps to prepare our long-term airport infra development in Paris. Q2 development will be done in accordance with our 2025 Pioneers program of a sustainable and multi-model platform that meets the growing demand for international traffic, because traffic growth in Paris is expected to be moderate, it means 1% to 1.5% long-term average annual growth rate with a mixed traffic shifting in favor of international traffic. In Orly, this vision materializes in the Paris-Orly 2030 plan. This plan will put an emphasis on decarbonization, quality of service for both passengers and airlines, and on developing attractive realistic opportunities. We've decided to present Paris-Orly 2025 program to local stakeholders in a public concertation, starting the 26th of February, in few days, it’s a voluntary under testing from ADP. The plan presented will be indicative and the inputs provided by the contested parties will help adjusting in a second step. In Paris-CDG, the long-term development plan will also be presented to local stakeholders from autumn 2024 onward. So, the last slide shows us that ADP transformation is well underway with 2025 Pioneers. To wrap up this presentation, I would say that we delivered a strong performance in 2023, achieving a good performance. If you look at the 10 last years, I will just give you two figures interesting. The increase of the traffic in Paris has been only 12% for 2012 to 2023. We had 89 million pax in 2012 and 99.7 million pax in 2023, plus 12%. In the same time, the EBITDA grew by 92.3% and the net result grew by 85%. It means that the company develops in retail, the international development. The international part of the operational result was 5% in 2012. It's 25% today. It will be 40% around 2030 without international growth. So this was about performance. Now, we are in the starting blocks for the 2024 Olympic Games and Paralympic games, while continuing to progress on the transformation initiated with '25 pioneers road map. It means that we are preparing the future of our platforms. We continue to develop our international network, allowing for a balanced exposure between moderate growth in Paris and dynamic markets abroad. We also ensure our future is decarbonized because this is how we will earn our license to grow further. So with that, Philippe Pascal, Edward Arkwright and myself, will be happy to answer you for questions. And operator, if you can open the line for Q&A, we are available. Thank you very much.
Operator: Sure. Thank you. [Operator Instructions] We will take the first question from Graham Hunt from Jefferies. The line is open now. Please go ahead.
Graham Hunt: Good morning. Thank you, very much for the questions. Just two from me. Firstly, on pricing. Obviously, see getting 4.5% for this year. Do you have any sense of what you could expect for the 2025 period? Should we expect you to get the other half of the concession tax that you're offsetting with the 3% this year? Do you get another 3% plus any cost inflation in 2025? That's the first question. And then second question just on your CapEx guidance, you came in quite a bit below your 1.3 billion average per year for the group. Just wondered, if looking at your -- you've maintained the average guidance for the next two years, does that -- should we be penciling in closer to 1.5 billion for those two years as would be implied to reach that average? Is that how we should be thinking about it? Thank you.
Philippe Pascal: So thank you for your two questions. So your first question about the pricing. So after annual tariff approval process, we will be submitting 2025 tariff with a view to respect all applicable cuts. So our regulated dose will be impacted by the new tax and the regulator has validating the pass-through in tariff. After that, the 2025 business plan will depend on the usual other factors, growth expectation and OpEx evolution notably. It is quite too early to comment on the proposal we would make for the next year. Our intention remains to fully offset the tax, for its regulated part eventually. So, we will remain cautious, and go for a more moderate incremental increase, and not risk refusal. So globally, for the moment, it is too early to answer this question. For your second question about CapEx. So as you know, we confirm our guidance in term of CapEx. We think, we have enough flexibility to manage our CapEx trajectory to optimize our investment to reach between 3.5 to 4 times EBITDA in 2025. Our target is to control our CapEx not to spend all our targets, but to be comfortable, with this assumption. In fact, it's very important for us to manage our schedule in terms of CapEx, to try to implement our industrial plan in 2024, 2025 to be allowed to welcome all the passenger, in a good condition for the next years. So globally, for the moment, we confirm our guidance, but we are in fact in line to try to optimize our CapEx, if it is possible. And if it is confirmed to our industrial needs. Thank you.
Graham Hunt: Thanks very much.
Operator: Thank you. We will take the next question from the line of Cristian Nedelcu from UBS. Your line is open now. Please go ahead.
Cristian Nedelcu: Hi. Thank you very much.. Maybe, two questions. I guess, the first time coming back on the tariffs next year, the regulator seems to believe that the WACC is 4.5%. And I guess, from your guidance this year, you seem to generate a little bit below around 4.5%. Now when I think at 2025, we have some benefits. So they're trying to pass through further more of the infrastructure tax another €30 million €40 million. You're going to have the non-repeat of the Olympic cost potentially another €25 million €30 million, and you're going to have some passenger growth. So what I'm trying to say is, your regulated EBIT goes up by €50 million €60 million at least from the infrastructure tax and from the nonrecurring of the Olympics cost. Now that €60 million is already 100 basis points, on your regulated asset base. So it means, a regulatory return goes to 5.5%, at least. So I guess my question is in this scenario, isn't a tariff decline, the most probable outcome in 2025? The second question, if I look at your net debt to EBITDA guidance for 2025, the range that you provide, it is suggesting that there's not a lot of free cash flow generation over the next two years. But I guess my question is from 2026, when your CapEx in tariff is likely to go up meaningfully. Is it fair to assume that, you may be into negative free cash flow territory for a few years to reflect that. Thank you.
Philippe Pascal: So, thank you for your, two questions. So your first question about the tariff, and the level of WACC calculation and the different guidelines published by the French regulator. So, to be clear as the French regulator, the first estimation of the French regulator in terms of regulated WACC it's 4.5%. It's the first estimation, in line with the guidelines published by the French Regulator. So we have two points, but we are not comfortable with the estimation of the French Regulator. The first point is the fact that the selection of piers for the beta calculation is not very fair. In fact, the French Regulator is talking into consideration airports that we consider are not comparable to EDP because they are illiquid stocks. The French Regulator compares with Bologna and Vienna airports. And the both airports are low free-float and trading volume. For us, it's not fair to compare EDP with Bologna and Vienna airports. The second point is the non-inclusion of treasury in the cost of capital. That is also not fair. The fact that we need a strong cash position, not only to face our expenses, our CapEx commitments, all our situation, but also to guarantee an attractive credit rating that is fundamental for us to finance our future development. In Paris, we look at CapEx plan, but also abroad. So all in all, the estimation of 4.5, it's not a final position of the French Regulator. It's a first estimation. And for that, we have to work to convince the French Regulator that it's not acceptable at this time. But you have also a good question about the dynamic of the financial trajectory of EDP. So remember that the regulated ROCE is also the level of OpEx, the level of CapEx. It's also the level of traffic through the increase in terms of revenue. We have some one-off effect. We disclosed that for 2022 and 2023. We have also one-off in 2024. But we know that at the end of the day, we assume a slight decrease in terms of regulated ROCE for 2024. In fact, we also, and you can see in our EBITDA target, we expect for 2025 an increase in terms of EBITDA. Our guideline is very clear, plus 7% in 2025. We assume this guideline. In fact, we can and we also we can have more tariff increase, but we assume also the fact that we improve strongly our financial performance through a good cost control. But this is our first step. So it's a little bit early to give you more color about our tariff increase in 2025. But we work hard to stabilize our trajectory, and we are confident of that. The proof is our new guidance. The second question about debt net and the free cash flow. We don't disclose free cash flow, but we can give some color, color about the traffic growth. When you see our guidance, we can see that we change our structural guidance just to focus on the dynamic of the traffic. And we can have a slow dynamic in terms of traffic. We can see that. And we assume a traffic growth lower than the pre-COVID situation. In our press release, we can see that we assume a dynamic in terms of traffic for 2015 between 1% to 1.5%. We can also give you more color about the free cash flow for an important CapEx for the industrial plan in CDG, but also in Orly, we announced a huge consultation about that. But all-in-all, we know that in our industrial CapEx plan that we have some needs, but we have also room of maneuver to finance that. Finally, globally, we're monitoring our trust. And for that we can see that we have some new slides in our presentation to make the proof that, it's manageable. We have a good dynamic in terms of OpEx, but at the same level compared to revenue. And we can accelerate this control. We can see that in our guidance. And we also confirm an improvement of our debt net to EBITDA in short-term with the new guidance for 2025. So thank you for these both questions.
Cristian Nedelcu: Thank you very much.
Operator: Thank you. We will take the next question from the line of Ruxandra Haradau-Döser from HSBC. Your line is open now. Please go ahead.
Ruxandra Haradau-Döser: Yes. Good morning. Three questions please. First could you please talk about the driver for traffic growth this year Leisure versus Corporate traffic growth, short-haul versus long-haul traffic growth? And what is your expectation on traffic from China this year? Second, looking at your long-term traffic expectation of 1% to 1.5% traffic growth, it is lower than other airport operators than other airport operators are indicating a medium to long -- long-term. So how do you expect traffic in Paris to perform relative to the European market in the medium-term? What is your expectation in terms of Leisure and Corporate traffic going forward? And how do you expect the exposure of Paris airports to be to low-cost traffic medium-term? And third there is a significant planned increase in airport infrastructure in India, over the next one, two years and there will be a new airport close to Delhi Airport, short-term Noida, do you see any risk of some airline shifting capacities from the GMR Airports to other airports over the next one to two years? Thank you.
Philippe Pascal: So thank you Ruxandra, for your question. So in terms of mix traffic, so clearly we don't disclose really the mix traffic in terms of Leisure and Corporate. Globally we can see -- but it's not a big question for Airport. It's smaller question for Airlines. Corporate -- The Corporate Traffic is the same aeronautical fees, compared to the Leisure profit for us. And in terms of retail performance, we don't see a significant gap between this element. So for us it's not a big question, what we can see when we have the different elements from the airline, is the fact that in the business class we can see more Leisure than previously. But all-in-all it's not tough question for us. In terms of China, so traffic with China continued to develop gradually in line with our expectation. Weekly frequencies increased at the end of November with currently 46 weekly flights, that as I mentioned in the presentation. In the month of December we reached 54% of 2019. For 2024, we have the same dynamic with recovery increasing slightly at 56% level at the beginning of the day -- the year. But we will still not expect a full recovery in 2024 notably because we have a constraint on demand. The first content it's the hotel pricing and the travel package for the Chinese people with a massive inflation, but it's not very good for us in Paris. And the second constraint on domain is the macroeconomic environment in China, but we have also another factor to consider. So all-in-all we have a gradual recovery in 2024. We don't expect a full recovery of the Chinese traffic in this year. The second question on the lower -- the lower estimation in terms of long-term traffic. For us that is very important. It's not just the level of traffic, but it's also the mix traffic. We know that we expect more international flight and less domestic flight. We can see in the figures in 2024. It's a key point to create value. So in terms of dynamic, when we have an improvement in terms of mix profit and less dynamic of traffic, at the end of the day it's good for our CapEx program. But to be clear in this assumption, it's just globally first assumption, but it's not a guidance, first of all. And it's consistent with the European and French commitment in terms of decarbonization. That is the key point. I don't know if for the other airport we have a perfect link between the assumption of airport and the commitment of the European authority. Why we have this element? Because at the end of the day we know that the integration of the sustainable aviation fuel could have a strong impact in the level of price. And at the end of the day in the growth in terms of profit for all the industry we take account this element and it's a key element for us and it's not a specific element of Parisian airport. It's element for all the airports. But in our expectation we take this element in. I don't know if it's the case for our competitors. So for us the main point to give you the main information at the right moment. For your third question so the project of the new airport in Delhi is for the early of 2025 in terms of opening. So not for the moment. But at the end of the day, it's a good thing for us because it's a far airport compared to the downtown of Delhi, first of all. And the second point, it's that we have enough room of maneuver to have two main airports in Delhi without a huge impact for our current airport. We have a huge population in India and also in Delhi. And at the end of the day with this new airport is a good way to manage and to control our CapEx needs in Delhi. So, in terms of financial view, globally, it's a good thing, because we can manage our CapEx for the next period. And we can also transform the Delhi Airport into an international airport with a strong connection passenger, but it's not currently the case, but it's possible the case with the improvement of Air India, after the acquisition of Tata. So globally, our airports have a good dynamic in terms of traffic, probably good control in terms of OpEx with -- in terms of CapEx with the new airport. And finally, we can improve strongly our mix profit with the internalization of the destination. So, thank you for this three question.
Ruxandra Haradau-Döser: Great. Thank you very much. Thanks.
Operator: Thank you. We will take the next question from Marco Weaver from JPMorgan. The line is open now. Please go ahead.
Elodie Rall: Hi. It's Elodie Rall. So thanks for taking my question. So first of all, could you please give us your expectations for --on OpEx, namely labor costs? What do you expect for next year or this year? And energy costs, if you could also remind us where you are in terms of hedges, in particular, the electricity costs are falling at the moment? Should you benefit for some of them? And second, would you be able to give us a bit more granularity about your international ambitions in terms of acquisitions, what you're looking at, at the moment and where it is in LatAm, in Asia. So if you could give us a little bit of color, and if you're looking at buying a listed airport or not listed? Thanks very much.
Philippe Pascal: So, for your first question -- Elodie, thank you -- the expectation in terms of OpEx and specifically in terms of energy cost. So, as you know, we have an exceptional performance in 2023 due to the hedging, due to also the specific operation to sell a part of our rights that is very good for 2024. Obviously, we expect an increase in terms of energy cost due to the fact that we lose a part of the hedge. We have three elements in our energy costs. The first element is what we developed the PPA with our solar farm, and for that we can manage part of our needs. The second point, it's that, we just now cover for 2024 and 2025 part of our energy needs through specific tools. And finally, we have what we can need and we cover with these three pillar, all our energy costs. But at the end of the day, in term of -- compared to 2023, we have €30 million cost -- additional cost in 2024. So, we doubled our cost between 2023 and 2024. For the other items, the main part of our cost, it's the staff cost. For that we try to balance our needs to operate and to improve the quality of service in Paris, but also in JV. And for that, we just conclude the process of annual negotiation, with employee representative in ADP Motor Company. We negotiate and we have a formal approval of all our unions to increase the salary of 2.6% from the executive function and 1.5% for the management -- excuse me 2.6% for all the employees and 1.5% for the executive function. With this increase we have also the mechanic increase, linked by our roles in ADP that is 2.5. So all in all, we have an increase in our staff cost for around 5% -- between 5% and 6%. It's in line, with our guidance for EBITDA growth, above 4% in 2024 and above 7% in 2025. Remember, that in our staff cost, we have also TAV and for TAV we have a huge increase due to increase in terms of number of people, but also increase in wages due to the inflation context in Turkey, when we see our account for the last year 2023, we can see that the main part of the staff cost is linked by TAV approach. Your second question, about the internalization, Edward?
Edward Arkwright: Good morning, everyone. So about the growth in international ambitions. So as you know, we continue to look to further into geographical radar, with the platform strategy, an area where the growth is important and higher than in Europe. TAV in target -- main projects, sorry. today is in Montenegro but TAV has to deliver the other projects. So it's mainly focused on delivering what is ongoing than in a lot of new development wants. For our colleague of GMR, the main project is Manila project. And as you know, the award is expected in the coming hours or days. And ADP parent company continues to look at some projects, that it is a little bit too early to speak about.
Q – Elodie Rall: Okay. Thanks very much.
Operator: Thank you. We will take the next question from Sathish Sivakumar from Citi. The line is open now. Please go ahead.
Sathish Sivakumar: Yes. Thanks. I got two questions here. So firstly, on the retail spend. Obviously, you have seen connecting passengers percentage top by a couple of points there. How does the spend vary between and say departing passenger is a connecting passenger, what is the delta normally looks like? And the second one is around the mainland France traffic recovery. Is it around 75%. Obviously, some of them are structurally impact -- and with Air France trying to reorganize Paris-Orly base with Transavia. How should we think about the capacity that is being reallocated to some other destinations? So, those slots, how are you trying to relocate them? Thank you.
Philippe Pascal: So, thank you for your question. For the first question about the retail advanced SPP. When you compare departing passenger and connecting passenger, we don't see any difference. It's a key point for the [indiscernible]. It's not the passenger, economic passenger, business passenger or connecting passenger, it's just the destination. So when you have an international destination, it's more accretive than domestic destination. When we go to Africa, to Americas or to China, it's better than when you go in other international destinations for example. So, in fact, it's a key point for us to change our mix profit. And it's a key element for you to answer for you. Second question about the Mainland France recovery. For us, it's a good news that we don't have a full recovery of domestic traffic. It's a good news for the planet, but it's also a good news for financial terms. But at the end of the day, we can switch our traffic and to implement more international flights. It's the case in ORLY when Air France try to implement all this traffic in Paris Charles de Gaulle and give all the slots to Transavia. We don't have the same mix traffic Transavia. It's not just a domestic airlines. It's also European airlines, but it's also a leisure airlines for North Africa. So, at the end of the day, for the same number of plane, for the same number of passenger or a slight number of passenger in terms of -- in a long-term period, we can have a better financial trajectory due to a better aeronautical fees and a better retail SPP. So, thank you for your question.
Sathish Sivakumar: Thank you.
Operator: Thank you. We will take the next question from Nicolas Mora from Morgan Stanley. The line is open now. Please go ahead.
Nicolas Mora: Good morning gentlemen. Quite a few follow-ups. First, on retail. What gives you the confidence to increase the guidance early in the year? I mean, you've talked about China recovery stuttering. I mean, you've got still the renovation works that in the whole K. Nobody is quite sure what the Olympics will give in terms of pattern of traffic and spending. So, I'm curious to see, where you see the big upside from here? That's number one. Number two on the ORLY CapEx, I mean you're rightly so you're putting future traffic growth at around 1%. Does it mean you just not going to build any new capacity? I mean with a bit of digitalization you can make do with the capacity you have. So that would imply a much lower CapEx trend from the back end of the 2020s and early 2030s. And can then be extrapolated as well to Charles de Gaulle? And then third one on international. I struggle a little bit with the numbers you reported, you've got for the year €422 million EBITDA in International and airport development, TAV and Aman make up €465 million EBITDA. So where do you lose €42 million, €43 million. There are reduce overheads? Are you still losing money in ADP engineering? Just wondering where the leftover is going. And last point on costs. You're talking a lot about cost management, but what are you doing? I mean what have you done in 2023? What do you expect in 2024? I mean the only thing we're hearing about is cost increases in wages, step-up in electricity cost. I mean how are you -- and concretely, what are you doing to contain the cost rising?
Philippe Pascal: So, thank you Nicolas for your questions. So the first question about the guidance of retail. When you see our new guidance we can see that, it's a guidance for 2025 compared to 2023. We don't have a specific guidance in 2024. It means that we expect an increase in terms of guidance, but not a progressive increase mote increase in 2024 and 2025. It means that we can confirm that we expect a dilutive impact of the reopening of Terminal 2E and 2C. A slight impact, but we don't know exactly the level of the work in Terminal 3 and K. And globally, we can see also that we have to manage the recovery of mix traffic linked by the Chinese people. So, we are globally in line in terms of retail. And now we can give you more color about the fact that we know exactly -- not exactly but we can have some assumption about the dilutive impact in terms of reopening for Terminal 2E and 2C. And we can have more color about the temporary shops in Terminal 2 or K, and the dynamic of traffic through the increase of net traffic and the good offering in our one. That is the main reason that now we can disclose this guidance. But we have to achieve, now in terms of CapEx. So to be clear, in fact, we disclosed now a trend, but it's not an assumption, that is not a guidance, but in terms of traffic dynamics between 1% and 1.5% in tariffs. So we effectively -- we don't expect the same dynamic in terms of traffic compared to the pre-COVID situation. That is the first point. The second point that we have with this lower traffic trend, probably less need in terms of capacity, that is a key point. But we can see a change in terms of CapEx program through the needs in terms of decarbonation, and a new way to manage the airport. For that we don't need a huge terminal like Terminal 4, but we need some new infrastructure more connected. For example, with the railway station, we've -- so we need to extend the current airport. But it's not -- that is difficult to operate, difficult to implement. And that is probably more expensive in terms of CapEx program compared to a Greenfield project or a new terminal in the [indiscernible]. So globally, we can expect more CapEx in 2026 and the year after. So it's not a limited CapEx program, it's a higher CapEx program with lower traffic but with better mixed traffic. So I cannot give you more color now but we can expect that. In terms of international, we don't disclose our international in detail performance. In fact, you're right, but the question is not the key point for TAV but also for German airport. We have also other small elements, small airport but it's not a good situation. For the management of cost, as an infrastructure company, a large part of our fixed cost is linked by the number of square meters, so the opening of terminals and not really of the volume of traffic. So we have an increase with the reopening of Terminal 1. In this year, we have also an increase due to the reopening of Terminal 2A and 2C. But after that, we don't need a new infrastructure immediately. So mechanically, we have an improvement in our EBITDA due to the fact that we can improve more traffic without a new square meter that is a key point to manage our OpEx level. The second point is a question of the level of staff, staff cost. Now we need staff in terms of number of people to improve the quality, to reopening the infrastructure, to assume the future development of the company. But at the end of the day, we know that in 2025-2026, probably we have just the increase in terms of wages but not a strong increase in terms of number of people. And in terms of wages, we know that we can have a strong discussion with the unions and we make the proof this year that it's possible to have an annual negotiation with all the unions to find a good agreement. So globally, in terms of expenses, for us, it's achievable.
Nicolas Mora: If I may, just two follow-ups. First on China, so what do you expect in 2024? Do you expect a plateauing of the recovery where we are around 55% of capacity throughout the year? That would be the first follow-up. And second too on regulation, we've been talking about the work for a long time. We're talking about the cost allocation for a long time and not much seems to be progressing. What's the stance with the regulator? Why are things taking so long? So we could say in France versus where we see elsewhere? And are we any closer to a multiyear regulatory agreement? Or is it still only 2027, 2028, 2029 whatever? Thank you.
Philippe Pascal: So in terms of Chinese traffic so we continue to see a gradual improvement in terms of traffic. We made for the summer season. So in April a new step in terms of recovery to reach 65% compared to 50% 55% now. And after that we can see that we can assume a slight recovery, but a recovery for the end of this year, but not a full recovery but probably not in 2024 perhaps in 2025, but not in 2026. So now it's a cautious approach but it's very important for us to manage in a good position or expectation. In terms of WACC and cost allocation system. So in fact remember that the only decision of the French regulator it's the homologation of tariff. So we don't have a decision of level of level of cost. We don't have the decision of cost allocation system. We don't have a decision of cost allocation system because the rules is to negotiate with the airlines and to respect the guideline in terms of process with the airlines. And we have three years to do that. So we have a temporary period that 2024 and 2025. So we don't expect final decision of the regulator before the end of 2025 and the homologation of the tariff of 2026. But we manage and we changed our cost allocation system this year. We have some elements that we can see in the decision of the French regulator. We have also a challenge of the French regulator about the cost allocation system but it's -- we have time to manage that. In terms of WACC, we don't have the level of we have an estimation of the WACC for the French regulator, but we don't have a decision of the French regulator due to the fact that -- the only decision what we can expect is yes or no for the tariff. So now due to our trajectory in terms of regulated ROCE we can -- it's difficult to have a final point of view of the reality in by the French regulator. It's -- I know that it's not so evident to follow included for us due to the rules of the French regulator. But for the moment, it's manageable. For the Economic Regulation Agreement, it's usual question. So remember, that we need two years to negotiate an Economic Regulation Agreement -- to negotiate a good Economic Regulation Agreement. We have to stabilize the rules of the game. And the rules, it's a level of regulatory work. It's a cost allocation system. It's also the trajectory. It's also the capacity to manage our regulated OpEx. And the final point, it's to manage the Environmental Authorization in Paris. An Economic Regulation Agreement, it's a commitment in terms of CapEx. So it's difficult to have a commitment for €1billion CapEx, if we don't have a clear view about the fact that we can build or not a new terminal. It's the reason why in our financial communication we have a specific slide about the consultation for the new master plan of Orly and CDG, through this consultation, with the dynamic of this consultation we can have more color about the CapEx plan for the next few years and perhaps to stabilize one of the key elements of the Economic Regulation Agreement.
Nicolas Mora: And on that front you've made a lot of progress at Orly. Is there progress as well at Charles de Gaulle it's a more complex subject on the CapEx?
Philippe Pascal: No. No. We have a clear view -- an internal clear view about CDG and Orly. It's a huge CapEx in the both situation, due to the fact that you have a lot of projects for the master plan that is not so evident to build. It's an expansion of the Joint Terminal. And -- but we have to manage the Political Environment before to launch a huge consultation. So we start by Orly and after we go to the time for CDG.
Nicolas Mora: Thank you very much.
Operator: Sure. Thank you.
Cecile Combeau: I think we will need to yeah, close the presentation now, as time has been passing through and I know that everyone here is very busy with all the presentation results release. So thank you everyone for having up to our conference today. So, next quarterly publication will be on April 26, with the first quarter revenue. And in the meantime, we are here to answer your questions. So feel free to get in touch with us. Thank you very much. Enjoy the rest of the day. Bye.
Operator: Thank you for joining today's call. You may now disconnect.
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